EXHIBIT 10.10.3
AGREEMENT BETWEEN
TOYOTA MOTOR SALES, U.S.A., INC.
AND
LITHIA MOTORS, INC.
Agreement, dated [Sept. 30], 1996, entered between Lithia Motors, Inc.
("Lithia"), an Oregon corporation, with its principal place of business at ▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and Toyota Motor Sales, U.S.A., Inc. ("TMS"), a
California corporation, with its principal place of business at ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇.
WHEREAS, Lithia is currently the owner, directly or through its Affiliates (as
defined in Paragraph 1 below) of one Toyota automobile dealership; and
WHEREAS, Lithia may wish to acquire, directly or through an Affiliate,
additional Toyota and Lexus dealerships; and
WHEREAS, Lithia wants to issue stock in a public offering of securities
anticipated to be traded on the NASDAQ; and
WHEREAS, TMS has advised Lithia of TMS' policy limiting the number of commonly
owned or controlled, directly or through an Affiliate (as defined below),
dealerships by a single entity, which is currently as follows:
A. TOYOTA
A single entity shall not hold an ownership interest, directly or through
an Affiliate, in more than: (a) the greater of one (1) or 20% of the Toyota
dealer count in a "Metro" market ("Metro markets are multiple Toyota
dealership markets as defined by TMS); (b) the lesser of five dealerships
or 5% of the Toyota dealerships in any Toyota Region ("Toyota Region"
currently includes nine TMS Regions, Central Atlantic Toyota, Southeast
Toyota, and Gulf States Toyota); and c) seven (7) Toyota dealerships
nationally.
LEXUS
A single entity shall not hold an ownership interest, directly or through
an Affiliate, in more than: (a) two (2) Lexus dealerships in any Area
("Area" currently includes Eastern, Southern, Central and Western); and (b)
three (3) Lexus dealerships nationally.
"Affiliate" of, or a person or entity "affiliated" with, a specified person
or entity, means a person or entity that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the person or entity specified. For the purpose of this
definition, the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the possession,
directly or indirectly, or the power to direct or cause the direction of
the management and policies of a person or entity, whether through the
ownership of securities, by contract or otherwise.
B. In order for an entity to acquire additional Toyota or Lexus dealerships,
within the limits of this Agreement, each Toyota or Lexus dealership which
it owns, directly or through an Affiliate, must: a) be in full compliance
with all of the terms of its Dealer Agreement; and b) meet all of the
applicable Toyota or Lexus Market Representation and performance policies.
C. If the purchase of any Toyota or Lexus dealership would result in exceeding
the limits set forth in Paragraph 1 above, TMS will reject a dealer's
application for approval of the ownership transfer until such time as the
dealer shall divest itself of the appropriate number of dealerships to
bring it into compliance with the requirements of this Agreement.
WHEREAS, Lithia and TMS are willing to resolve these issues in accordance with
the terms set forth herein,
NOW THEREFORE, Lithia and TMS agree as follows:
CHANGE IN OWNERSHIP OF LITHIA
1. TMS shall have the right to approve any new acquisition in ownership or
voting rights of Lithia of twenty percent (20%) or greater by any individual or
entity; PROVIDED, HOWEVER, that if TMS reasonably determines that such
individual or entity is unqualified to own a Toyota or Lexus dealership, or has
interests incompatible with TMS, and such transfer is effected, Lithia must,
within ninety (90) days from the date of notification by TMS of its
determination, either: a) transfer the assets of its Toyota and Lexus
dealerships to a third party acceptable to TMS; b) voluntarily terminate its
Toyota and Lexus Dealership Agreements; or c) demonstrate that such individual
or entity in fact owns less that 20% of the outstanding shares of Lithia, or
does not have 20% of the voting rights in Lithia.
OWNERSHIP OF CONTIGUOUS DEALERSHIPS
2. Lithia shall not own contiguous dealerships (as that term is defined in the
applicable Toyota or Lexus Dealer Agreement or policy) with common boundaries.
SEPARATE LEGAL ENTITIES FOR EACH TOYOTA AND LEXUS DEALERSHIP
3. Lithia shall create separate legal entities for each Toyota and Lexus
dealership which it owns, directly or through an Affiliate, shall obtain a
separate motor vehicle license for each dealership, and shall maintain separate
financial statements for each such dealership. Consistent with TMS policy, the
name "Toyota" or "Lexus," as applicable shall appear in the d/b/a of each
dealership.
FACILITY STANDARDS
4. In no instance shall a Toyota or Lexus dealership or any department(s)
thereof be dualled with any other brand without TMS' prior written approval.
GENERAL MANAGERS
5. Each Toyota and Lexus dealership owned or controlled by Lithia shall have a
qualified, approved (subject to the exception noted in Paragraph 6 below)
General Manager. Each General Manager shall work at the Toyota or Lexus
dealership premises, shall devote all of his/her efforts to the management of
the dealership and shall have no other business interests or management
responsibilities. Lithia shall obtain TMS' prior approval for any General
Manager to also manage any dealership that is dualled with the Toyota or
Lexus facility.
APPROVAL OF THE GENERAL MANAGER
6. Whenever Lithia nominates a new General Manager candidate for a Toyota or
Lexus dealership, TMS shall have the right to withhold a decision concerning
approval or rejection of the candidate for a period of up to one year, at its
sole discretion; PROVIDED, HOWEVER, that the candidate may operate in the
capacity of General Manager until TMS has approved or rejected him/her.
LIMITATIONS ON THE AUTHORITY OF THE GENERAL MANAGER
7. Lithia shall advise TMS of the limitations, by category and, where
applicable, by specific action, on the authority of the General Manager
regarding the operation of the dealership, and shall provide the name of the
individual at Lithia who has such authority with respect to each listed category
or specific action, in accordance with Paragraph 8 below.
IDENTIFICATION OF LITHIA CONTACT OFFICIAL
8. Lithia shall identify, in each Toyota and Lexus Dealer Agreement, the
Lithia executive (other than the General Manager of the dealership) who will
respond directly to any Toyota or Lexus concerns regarding the operation or
performance of the dealership, which executive will have full authority, in
accordance with Lithia management policies, to resolve issues raised by TMS in
connection with the operation of the dealership.
SELLING TOYOTA AND LEXUS PRODUCTS
9. Lithia shall make available to the customers at its Toyota and Lexus
dealerships, all Toyota and Lexus products, including vehicles, Genuine Parts
and Accessories, retail financing (whether for purchases or leases) and extended
service contracts.
REPRESENTATION ON TOYOTA AND LEXUS DEALER ORGANIZATIONS
10. No more than one representative each from the Toyota, and, separately,
Lexus, dealerships owned, directly or through an Affiliate, by Lithia, may serve
on the National Dealer Council or any future Toyota or Lexus national board(s)
which may be established, and no more than one representative each may serve on
either a Regional or Area Dealer Council, or Toyota or Lexus Dealer Association
Board of Directors.
DEALERSHIP PERSONNEL TRAINING
11. Lithia shall not substitute training courses or certification programs of
its own for those provided or sponsored by TMS without the prior approval of
TMS.
PUBLIC OFFERING OF SECURITIES BY LITHIA
12. TMS shall not object to a public offering of securities by Lithia so long
as the limitations on ownership of voting control of Lithia contained in this
agreement are not exceeded or breached in any way. In addition, TMS hereby
approves the increase to 100% in equity interest in each Toyota and Lexus
dealership in which subsidiaries of Lithia now have a majority equity interest.
FINANCIAL DISCLOSURES
13. Lithia shall provide TMS with copies of all information and materials filed
with the Securities Exchange Commission, including, but not limited to,
quarterly and annual financial statement filings, prospectuses and other
materials related to Lithia.
PROSPECTUS DISCLAIMER AND INDEMNIFICATION AND HOLD HARMLESS AGREEMENT
14. Lithia shall place in its registration statement and its prospectus, as
well as in any other document offering shares in Lithia to public or private
investors, the following disclaimer:
No Manufacturer (as defined in this Prospectus) has been involved,
directly or indirectly, in the preparation of this Prospectus or in
the Offering being made hereby. No Manufacturer has made any
statements or representations in connection with the Offering or has
provided any information or materials that were used in connection
with the Offering, and no Manufacturer has any responsibility for the
accuracy or completeness of this Prospectus.
Lithia shall indemnify and hold harmless TMS pursuant to the terms of the
Indemnification and Hold Harmless Agreement set forth in Attachment 1 to this
Agreement.
SOLE AGREEMENT OF THE PARTIES
15. There are no prior agreements or understandings, either oral or written,
between the Parties affecting this Agreement, except as otherwise specified or
referred to in this Agreement. No change or addition to, or deletion of any
portion of this Agreement shall be valid or binding upon the parties hereto
unless approved in writing signed by an officer of each of the parties hereto.
SEVERABILITY
16. If any provision of this Agreement should be held invalid or unenforceable
for any reason whatsoever, or conflicts with any applicable law, this Agreement
will be considered divisible as to such provision(s), and such provision(s) will
be deemed amended to comply with such law, or if it (they) cannot be so amended
without materially affecting the tenor of the Agreement, then it (they) will be
deemed deleted from this Agreement in such jurisdiction, and in either case, the
remainder of the Agreement will be valid and binding.
NO IMPLIED WAIVERS
17. The failure of either party at any time to require performance by the other
party of any provision herein shall in no way affect the right of such party to
require such performance at any time thereafter, nor shall any waiver by any
party of a breach of any provision herein constitute a waiver of any succeeding
breach of the same or any other provision, nor constitute a waiver of the
provision itself.
TMS POLICIES
18. This Agreement refers to certain policies and standards. Lithia
acknowledges that these policies and standards are prepared by TMS in its sole
discretion based upon TMS' evaluation of the marketplace. TMS may reasonably
amend its policies and standards from time to time.
APPLICABLE LAW
19. This Agreement shall be governed by and construed according to the laws of
California.
BENEFIT
20. This Agreement is entered into by and between TMS and Lithia for their sole
and mutual benefit. Neither this Agreement nor any specific provision contained
in it is intended or shall be construed to be for the benefit of any third
party.
NOTICE TO THE PARTIES
21. Any notices permitted or required under the terms of this Agreement shall
be directed to the following respective addresses of the parties, or if either
of the parties shall have specified another address by notice in writing to the
other party, then to the address last specified:
TOYOTA MOTOR SALES, U.S.A., INC.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
LITHIA MOTORS, INC.
▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LITHIA MOTORS, INC.
BY:
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TOYOTA MOTOR SALES, U.S.A., INC.
BY:
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ATTACHMENT 1
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, made this [30th] day of [Sept.], 1996 between
Lithia Motors, Inc., an Oregon corporation the address of which is ▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Lithia") and Toyota Motor Sales, U.S.A., Inc., a
California corporation the address of which is ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("TMS").
WITNESSETH
WHEREAS, Lithia has been formed to own subsidiary corporations which will
own and operate automobile dealerships; and
WHEREAS, Lithia intends to publicly offer and sell shares of stock ("Lithia
Stock") in a public offering pursuant to the Securities Act of 1933 (the "Act");
and
WHEREAS, TMS has consented to the offer and sale of such Lithia Stock to
the public; and
WHEREAS, in recognition of TMS' demand for complete protection against
liability and threats of legal action and in order to obtain TMS' consent to the
offer and sale of such shares, Lithia wishes to provide in this Agreement for
the indemnification of and the advancing of expenses to TMS as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
1. INDEMNITY OF TMS
Lithia hereby agrees to indemnify and hold harmless TMS and its affiliates
from and against any and all losses, liabilities, judgments, amounts paid in
settlement, claims, damages and expenses whatsoever (collectively a "Claim"),
including, but not limited to, any and all expenses whatsoever incurred
investigating, preparing or defending against any litigation, commenced or
threatened, to which TMS may become subject under the Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the securities laws of
any state (the "Blue Sky Laws"), any other statute or at common law or otherwise
under the laws of any foreign country, arising in connection with the sale of
the Lithia Stock. In addition, Lithia hereby agrees to indemnify and hold
harmless TMS from any and all claims of the shareholders of Lithia with respect
to any matter, PROVIDED, that if it is ultimately determined, based upon a final
decision of a court, arbitrator or other authorized panel or a settlement
entered into by the parties to the dispute and consented to by TMS that TMS was
liable for such Claim in whole or in part, the indemnification set forth herein
shall be of no force or effect, and TMS shall immediately reimburse Lithia for
any expenses advanced by Lithia pursuant to Paragraph 3 of this Agreement.
2. NOTIFICATION AND DEFENSE OF CLAIM
(a) If any litigation is commenced against TMS in respect of which
indemnity may be sought pursuant to this Agreement, TMS shall promptly notify
Lithia in writing of the commencement of any such litigation, and Lithia shall
then assume the defense of any such litigation, including the employment and
fees of counsel (reasonably satisfactory to TMS) and the payment of all such
expenses.
(b) TMS shall have the right to employ its own counsel in any such
case to oversee the litigation on behalf of TMS, to consult with the attorneys
engaged by Lithia as to the proper handling of the litigation and to take such
actions in connection with the litigation as are reasonably necessary to protect
TMS' interests. Lithia shall pay the reasonable fees and expenses of not more
than one additional firm of attorneys for TMS.
(c) Lithia agrees promptly to notify TMS of the commencement of any
litigation against Lithia in connection with the issue and sale of the Lithia
Stock. Lithia and TMS agree to cooperate with each other in the defense of any
litigation.
(d) Lithia shall not be obligated to indemnify or reimburse TMS under
this Agreement for any amounts paid in settlement of any litigation effected
without Lithia's prior written consent. Lithia shall not, in the defense of any
such litigation, except with TMS' prior written consent, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to TMS of a release
from all liability in respect to such litigation. Neither Lithia nor TMS shall
unreasonably withhold its consent to any proposed settlement.
3. PAYMENT OF EXPENSES
Lithia agrees that it will pay any and all expenses incurred by TMS in
defending any civil or criminal action, suit or proceeding against TMS in
advance of the time such expenses are due. With respect to legal fees and
disbursements of TMS' attorneys, Lithia will pay such attorneys an advance
retainer of up to $20,000 and will pay additional fees and expenses of such
attorneys in increments of not more than $20,000 periodically in advance of the
dates that such fees and expenses are incurred.
4. ENFORCEMENT
(a) Lithia expressly confirms and agrees that it has entered into
this Agreement and assumes the obligations imposed on it in order to induce TMS
to consent to the offer and sale of Lithia Stock and acknowledges that TMS is
relying upon this Agreement to grant such consent.
(b) In the event TMS is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, Lithia shall reimburse TMS for all of TMS' reasonable fees and expenses
in bringing and pursuing such action.
5. SUBROGATION
(a) In the event of payment under this Agreement, Lithia shall be
subrogated to the extent of such payment to all of the rights of recovery of
TMS, which shall execute all papers required and shall do everything that may be
necessary to secure such rights, including the execution of such document
necessary to enable Lithia effectively to bring suit to enforce such rights.
(b) Lithia shall not be liable under this Agreement to make any
payment in connection with any claim or litigation made against TMS to the
extent TMS has otherwise actually received payment (under any insurance policy
or otherwise) of the amounts otherwise indemnifiable hereunder.
6. MISCELLANEOUS
(a) This Agreement shall be interpreted and construed in accordance
with the laws of the State of California, without giving effect to the conflict
of law rules.
(b) This Agreement shall be binding upon and inure to the benefit of
Lithia and TMS and their respective legal representatives, successors and
assigns.
(c) No amendment, modification or termination of this Agreement shall
be effective unless in writing and signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
LITHIA MOTORS, INC. TOYOTA MOTOR SALES, U.S.A., INC.
By:
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Title:
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