EXHIBIT 10.5.3
SUPPLEMENTAL AGREEMENT TO
DEALER SALES AND SERVICE AGREEMENT
(PUBLICLY TRADED COMPANY)
THIS SUPPLEMENTAL AGREEMENT (this "Supplemental Agreement"), dated as of
December 27, 1996, is entered into among Lithia HPI, Inc. ("Dealer"). Lithia
Motors, Inc, ("Public Company") and American Isuzu Motors Inc. ("Distributor).
WHEREAS, contemporaneously herewith, Distributor and Dealer are entering
into a Dealer Sales and Service Agreement (the "Dealer Agreement") which
authorizes Dealer to conduct dealership operations from the Dealership
locations identified in the Dealer Agreement;
WHEREAS, the organization and ownership of Dealer is such that the terms
of the Dealer Agreement are not wholly adequate to address the legitimate
business needs and concerns of Distributor and Dealer; and
WHEREAS, Distributor and Dealer have entered into the Dealer Agreement
in consideration for and in reliance upon certain understandings, assurances
and representations which the parties wish to document.
NOW, THEREFORE, in consideration of the premises and mutual covenant
contained herein, the parties hereby agree as follows:
1. LIMITATIONS UPON CHANGE OF EXECUTIVE MANAGER
A. DESIGNATION OF EXECUTIVE MANAGER. As set forth in Section 4
of the Dealer Agreement, Xxxxxx X. XxXxxx shall Executive Manager of Dealer.
Dealer agrees that Executive Manager shall have complete and irrevocable
authority to make all decisions, and enter into any and all necessary
business commitments, required in the normal course of conducting dealership
operations on behalf of Dealer. Dealer shall not revoke, modify or otherwise
impose limitations upon such authority without the prior written consent of
Distributor.
B. CHANGE OF EXECUTIVE MANAGER. Without limiting the
restrictions set forth in the Dealer Agreement, the removal or withdrawal of
Executive Manager with Distributor's prior written consent shall constitute
grounds for termination of the Dealer Agreement, subject to applicable law.
2. LIMITATIONS UPON CHANGES IN OWNERSHIP
A. CHANGE IN OWNERSHIP. Dealer and Public Company hereby
represent and warrant that (i) Dealer is a wholly-owned subsidiary of Public
Company, (ii) at least 55% of the capital stock of Public Company is owned by
Lithia Holding, LLC (Holding Company), and (iii) the membership interests in
Holding Company are held as follows: M.L. Xxxx Xxxxxxx - 34.875%, Xxxxxx X.
XxXxxx -58.125%, and R. Xxxxxxxx Xxxx - 7%. Given the control of Public
Company over Dealer, the control of Holding Company over Public Company, and
the control of the above-named individuals over Holding Company, and
Distributor's strong interest in assuring that those who own and control
Distributor's dealerships have interests consistent with those of
Distributor, Dealer and Public Company agree that (i) any change in the
ownership of Dealer or Holding Company, or (ii) the acquisition by any person
or entity (other than Holding Company) of more then 20% of the issued and
outstanding capital stack of Public. Company, shall be consider a change in
ownership of Dealer under the terms of the Dealer Agreement, and shall be
subject to the provisions of the Dealer Agreement and subparagraph B below.
B. DISTRIBUTOR'S RIGHTS UPON CHANGE IN OWNERSHIP. Upon the
occurrence of any event described in subparagraph A above, if Distributor
reasonably concludes that the transferee or acquiring person or entity does
not have interests compatible with those of Distributor or is otherwise not
qualified to have an ownership interest in the dealerships at the Dealership
Locations, then within 90 days of receipt of written notice from Distributor,
Dealer agrees to: (i) transfer the assets associated with Dealer to a third
party acceptable to the Distributor, (ii) voluntarily terminate the Dealer
Agreement, or (iii) provide evidence to Distributor that such person or
entity no longer has such an ownership interest in Public Company. In the
event that Dealer enters into an agreement to transfer its assets to a third
party as set forth in (i) above, Distributor shall have a right of person or
entity no longer has such an ownership interest in Public Company. In the
event that Dealer enters into an agreement to transfer its assets to a third
party as set forth in (i) above, Distributor shall have a right of
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first refusal to purchase such assets in accordance with the terms and
procedures set forth in subparagraph C below. Dealer and Public Company
agree that if an ownership interest is acquired in Public Company by a person
or entity which notifies Public Company via Schedule 13D filed with the
Securities and Exchange Commission, Dealer shall advise Distributor in
writing, and attach a copy of that Schedule.
C. EXERCISE OF RIGHT OF FIRST REFUSAL. Prior to exercising its
right of first refusal pursuant to subparagraph B above, Distributor shall
have a reasonable opportunity to inspect the assets, including real estate,
before making its decision. If Dealer has entered into a bona fide written
buy/sell agreement, the purchase price and other terms of sale shall be those
set forth in such agreement and any related documents, unless Dealer and
Distributor agree to other terms. Upon Distributor request, Dealer agrees to
provide all documents relating to the proposed transfer. If Dealer refuses
to provide such documentation or states that such documents do not exist, it
will be presumed that the agreement is not bona fide. In the absence of a
bona fide written buy/sell agreement, the purchase price of the dealership
assets will be determined by good faith negotiations by Dealer and
Distributor. If agreement cannot be reached within a reasonable time, the
price and other terms of sale shall be established by arbitration according
to the rules of the American Arbitration Association. Dealer agrees to
transfer the assets by Warranty Deed where possible, conveying marketable
title free and clear of liens and encumbrances. The Deed will be in proper
form for recording and Dealer will deliver complete possession of the assets
when the Deed is delivered. Dealer will also furnish copies of any
easements, licenses or other documents affecting the property and assign any
permit or licenses necessary for the conduct of Dealers operations.
Distributor's rights under this section may be assigned to any third party
and in connection with any such assignment, Distributor will guarantee full
payment of the purchase price by the assignee.
3. LIMITATIONS UPON NUMBER AND LOCATIONS OF DEALERSHIPS
Dealer and Public Company agree to be bound by the provisions of
Distributors standard policies in effect from time to time which limit the
number and locations of Distributor's dealerships which may be owned by
Dealer and/or its parent companies, subsidiary companies and companies under
common control with it. Dealer shall provide such documentation as is
reasonably requested by Distributor regarding the ownership interests of all
such persons and entities in Distributor's dealerships. In the event that
Dealer or Public Company shall acquire ownership or control of more than one
of Distributor's dealerships, then Dealer and/or Public Company shall obtain
separate motor vehicle licenses, and shall maintain separate financial
statements for each dealership.
4. WORKING CAPITAL REQUIREMENTS
Dealer shall maintain, at all times, sufficient working capital to
meet or exceed the minimum net working capital standards for Dealer as
determined from time to time by Distributor consistent with its standard
policies. Dealer shall provide such documentation as is reasonably requested
by Distributor to assure compliance with this requirement. Public Company
agrees to submit an annual consolidated balance sheet for the combined
dealership operations of Public Company. Public Company agrees, upon
Distributor's request, to provide Distributor with copies of the materials
filed by Public Company with the Securities and Exchange Commission.
5. INDEMNITY
Public Company agrees to indemnity and hold Distributor harmless
from and against any and all claims, liabilities, losses, damages, costs and
expenses arising out of or in connection with the sale of stock in Public
Company. Public Company further agrees to indemnify and hold Distributor
harmless from and against any and all claims of the shareholder of Public
Company, and all liabilities, losses, damages, costs and expenses incurred in
connection therewith, unless a final determination is made that Distributor
was in fact liable for such claims, liabilities, losses, damages, costs or
expenses.
6. MISCELLANEOUS
A. EFFECT OF SUPPLEMENTAL AGREEMENT. The parties agree that this
Supplemental Agreement is intended to supplement the terms of the Dealer
Agreement and not to limit the rights and obligations of the parties
contained therein. This Supplemental Agreement is hereby incorporated into
the Dealer Agreement and made a part thereof. In the event that any of the
provisions of this Supplemental Agreement are in actual conflict with other
provisions of the Dealer Agreement, the provisions of contained in this
Supplemental Agreement shall govern. In the event that the policies of
Distributor with regard to the issues
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address herein are hereinafter modified, the parties agree to review such
modifications to determine whether modifications of this Supplemental
Agreement are appropriate.
B. CONSTRUCTION. This Supplemental Agreement shall be governed
by and construed in accordance with the laws of the State of California. The
failure of either party to enforce any of the provisions of this Supplemental
Agreement or the failure to exercise any election provided for herein shall
in no way be considered to be a waiver of such provisions or elections. All
capitalized terms used herein and not defined herein shall have the meanings
set forth in the Dealer Agreement.
C. ALTERNATIVE DISPUTE RESOLUTION. In the event of any dispute
between the parties regarding the Dealer Agreement or this Supplemental
Agreement, Dealer and Public Company agrees to participate in any alterative
dispute resolution procedures specified in the standard policies of
Distributor. Upon final determination through such dispute resolution, each
party shall have recourse to a review de novo by the appropriate state court
or administrative agency consistent with the provisions of state law. The
parties agree that should a party making such appeal lose the issues
presented on appeal, then that party shall pay the reasonable expenses,
including reasonable attorneys' fees, of the other party for the defense of
such de novo review.
D. NO THIRD PARTY BENEFICIARIES. Nothing in this Supplemental
Agreement or the dealer Agreement shall be construed to confer any rights
upon any person not a party hereto or thereto, nor shall it create in any
party an interest as a third party beneficiary of this Supplemental Agreement
or the Dealer Agreement. Dealer and Public Company agree to indemnify and
hold harmless Distributor, its affiliates, subsidiaries, directors, officers,
employees, agents and representatives from and against all claims, actions,
liabilities, damages, costs and expenses (including reasonable attorneys'
fees) arising from or in connection with any action by a third party in its
capacity as a stockholder of Public Company other than through a derivative
stockholder suit authorized by the Board of Directors of Public Company.
E. CONDITION PRECEDENT. Notwithstanding anything to the contrary
contained herein, the parties acknowledge that the provisions of this
Supplemental Agreement shall not be applicable until such time a Public
Company completes a public offering of its stock.
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IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS SUPPLEMENTAL AGREEMENT
EFFECTIVE AS OF THE DATE SET FORTH IN THE INTRODUCTORY PARAGRAPH HEREOF.
AMERICAN ISUZU MOTORS INC. LITHIA HPI, INC.
By: By:
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X.X. Xxxxxxx Xxxxxx X. XxXxxx
Title: Title:
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By:
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Xxxxxxx X. Xxxxxxx
Title:
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LITHIA MOTORS, INC.
By:
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Xxxxxx X. XxXxxx
Title:
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By:
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Xxxxxxx X. Xxxxxxx
Title:
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