Exhibit 10.22.1
NISSAN PUBLIC OWNERSHIP ADDENDUM
This Nissan Public Ownership Addendum (the "Addendum") is entered into effective
the date last set forth below by Nissan Motor Corporation in U.S.A. ("Nissan" or
"Seller") and Xxxxxxxx Xxxxxx Nissan, Inc. ("Xxxxxxxx" or "Dealer"]. In
consideration of the agreements and mutual covenants set forth herein, and other
good and valuable consideration, the receipt and sufficiency which is hereby
acknowledged, the parties hereto agree as follows:
1. THE PUBLIC OWNERSHIP ADDENDUM
The Public Ownership Addendum is an addendum to, supplements and modifies the
Nissan Dealer Sales and Service Agreement between Nissan and Dealer (the "Dealer
Agreement"), including the Standard Provisions thereto (the "Standard
Provisions"). To the extent that this Addendum conflicts with the Dealer
Agreement, the Addendum controls and shall govern the relationship between the
parties. The Dealer Agreement, to the extent not modified or amended, remains in
full force and effect.
2. DEFINITIONS
The parties agree that the following terms, as used in the Addendum and the
Dealer Agreement shall be defined exclusively as set forth below.
"Nissan Products" shall mean Nissan Vehicles, Genuine Parts and Accessories,
Nissan Security+Plus and such other products and services offered by Nissan to
Dealer and designated in writing by Nissan as a Nissan Product.
"Dealer Principal" shall mean the person named in the Final Article of the
Dealer Agreement as "Principal Owner" upon whose personal qualifications,
expertise, integrity, experience, ability and representations Nissan has relied
in entering into this Addendum, and any successor approved in writing by Nissan.
For purposes of this Addendum, the terms "Dealer Principal" and "Principal
Owner" are used interchangeably.
"Business Plan" shall mean the written plan meeting Nissan's approval that is
prepared and executed by the Dealer and that contains Dealer's plan and
commitment to develop its business throughout the PMA, including but not limited
to its plan and commitment with respect to organizational, operational,
financial, succession and other issues as well as certain standards on which its
performance hereunder will be evaluated.
3. OWNERSHIP
This Agreement has been entered into by Nissan in reliance upon the commitment,
representation, and agreement of Dealer to provide the personal services of
Dealer Principal and Executive Manager; and in reliance upon the representations
and agreements of Dealer as follows: i) Dealer represents that LITHIA MOTORS,
INC. owns 100% of XXXXXXXX
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XXXXXX NISSAN, INC. , (if applicable) and LITHIA MOTORS, INC. will, at all times
during the term of this Addendum, exercise full management and control of
XXXXXXXX XXXXXX NISSAN, INC. ; ii) Dealer represents that LITHIA MOTORS, INC.
owns 100% of Dealer and will, at all times during the term of this Addendum,
exercise full management and control of Dealer.
In view of the fact that the Dealer Agreement and this Addendum is a personal
services agreement, and in view of its objectives and purposes, this Addendum
and the rights and privileges conferred on Dealer hereunder are not assignable,
transferable or salable; and no property right or interest herein is or shall be
deemed to be sold, conveyed or transferred. Dealer agrees, on behalf of itself
and, LITHIA MOTORS, INC., that any change in the ownership of Dealer other than
specified herein requires the prior written consent of Nissan, if Dealer desires
to remain an Authorized Nissan Dealer. Dealer agrees that, without the prior
written consent of Nissan: i) No sale, pledge, hypothecation or other transfer
of any of the capital stock or ownership interest of Dealer will be made. ii)
Dealer will not be merged with or into, or consolidated with, any other entity
without Nissan's prior written consent, nor will the principal assets necessary
for the performance of Dealer's obligations under this Addendum or the Dealer
Agreement be sold, transferred or assigned without Nissan's prior, written
consent. Dealer represent that no capital stock, or securities convertible into
capital stock, of Dealer will be issued, sold or otherwise transferred by Dealer
directly or indirectly to any automobile manufacturer, automobile distributor,
or potential competitor of Seller, or any affiliate of any of the foregoing.
If any person or entity acquires more than 20% of LITHIA MOTORS, INC.'s common
stock issued and outstanding at any time, and Nissan determines that such person
or entity does not have interests compatible with those of Nissan, or is
otherwise not qualified to have an ownership interest in a Nissan dealership (an
"Adverse Person"), Dealer must terminate the Dealer Agreement or transfer
Dealer's principal assets or 100% of the outstanding stock of Dealer to a third
party acceptable to Nissan unless, within 90 days after notification of Nissan's
determination, the Adverse Person's ownership interest is reduced to less than
20%
The parties to this Addendum expressly agree that, while changes in the
ownership of LITHIA MOTORS, INC. may not be entirely within the control of
Dealer, in light of the personal services nature of the Dealer Agreement and
Nissan's substantial interest in the owners of its dealers and distribution
network, and in consideration of Nissan's willingness to enter into this Public
Ownership Addendum with Dealer, any transaction involving the ownership and
stock of LITHIA MOTORS, INC. and XXXXXXXX XXXXXX NISSAN, INC. which violates the
provisions of this Section 3 of this Addendum shall constitute a substantial and
material breach of the Dealer Agreement and this Addendum and grounds for
termination of the Dealer Agreement and this Addendum.
4. MANAGEMENT
The Dealer Agreement and this Addendum have been entered into in reliance on the
following representations and agreements of Dealer that: i) . The Dealer
Principal of Dealer will, subject
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to any other obligations set forth in the Dealer Agreement and this Addendum,
devote his/her professional efforts to the business operations of Dealer and the
entity for which he/she is responsible; ii) Executive Manger will devote his
full time and professional efforts to the affairs of Dealer; iii) The Officers
and Directors of Dealer are set forth in Schedule "A".
Nissan and Dealer agree that the retention by Dealer of qualified management is
of critical importance to the successful operation of Dealer and to the
achievement of their mutual purposes and objectives. The Dealer Agreement and
Addendum have been entered into by Nissan in reliance upon, and in consideration
of, among other things, the following representations and agreements of LITHIA
MOTORS, INC., and Dealer, that: i) The Dealer Principal and the Executive
Manager shall have full and complete control over the Dealership Operations,
subject to the powers of the Board of Directors of Dealer, to manage the
business and affairs of Dealer, and at all times the Dealer Principal shall be a
member of the Board of Directors of Dealer and the Executive Manager shall be an
officer of Dealer; ii) The Board of Directors of Dealer shall delegate the day
to day management of the Dealership Operations to the Executive Manager. The
Board of Directors of Dealer will not exercise any extraordinary powers or
interfere unduly in the day-to-day Dealership Operations; iii) Executive
Manager, subject to any other obligations set forth in the Dealer Agreement,
shall be physically present at the Dealership Facilities on a full-time basis;
iv) Dealer acknowledges and agrees that, in view of the increased
responsibilities of the Dealer Principal of Dealer, Nissan has and will apply
heightened standards with respect to the personal, business and financial
qualifications, expertise, reputation, integrity, experience and ability of a
proposed Dealer Principal;. v) Nissan may from time to time develop standards
and/or procedures for evaluating the performance of Dealer. Nissan may, from
time to time, evaluate the performance of the Dealer and will advise Dealer, the
Dealer Principal and the Executive Manager of the results of such evaluations.
5. TERM
This Addendum and the Dealer Agreement shall have a term commencing on its
effective date and continuing for a term of five years unless sooner terminated
in accordance with the provisions of the Dealer Agreement and this Addendum.
Should Dealer be in full compliance with its obligations under the Dealer
Agreement and this Addendum at the end of this term, Dealer will be offered a
new Dealer Agreement and Public Ownership Addendum, in the form then in use by
Nissan.
6. BUSINESS PLAN
Dealer and Nissan shall periodically execute a Business Plan in the form
specified in Nissan's Business Planning Process Workbook that describes how
Dealer will fulfill its sales, service, customer relations, marketing and other
commitments hereunder. The Business Plan is subject to Nissan's approval, is an
essential part of the Dealer Agreement and Public Ownership addendum and is
hereby incorporated in and made a part of this Addendum and the Dealer
Agreement.
The Business Plan shall include the following elements: i) a statement of
Dealer's legal and financial structure, including capitalization, line of credit
and equity ownership; ii) the sales,
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service, customer relations, marketing and other standards on which Dealer's
performance will be evaluated; iii.) a detailed organizational structure and
staffing plans for the dealer; iv) specific plans for maximizing owner loyalty
and customer satisfaction; v) advertising, merchandising, and marketing plans;
vi) successorship, including the identity of the proposed successors to Dealer,
Dealer Principal (Principal Owner) and/or Executive Manager; and vii) other
standards or plans as agreed by Nissan and dealer. The standards on which
dealer's sales performance will be evaluated will include (i) market share
objectives for Nissan products set by the parties, and (ii) sales penetration
achieved by dealer in each of the various segments in which Nissan vehicles
compete.
Dealer shall review and update its Business Plan annually, or more often if
needed, and submit it to Nissan for review and approval. If Nissan determines
that changes to the proposed Business Plan are necessary, Dealer will make such
changes and resubmit the proposed Business Plan to Nissan. The updated business
plan shall (i) analyze Dealer's performance relative to the objectives,
standards, and plans set forth in the business plan for the preceding year or
other period, (ii) identify any deficiencies in Dealer's performance, and (iii)
specify the steps that Dealer will take to remedy such deficiencies.
If, based on the evaluation thereof made by Nissan, Dealer shall fail to
substantially fulfill its responsibilities with respect to: i) the
implementation of the plans set forth in the Business Plan, including but not
limited to any deviation therefrom; ii) the performance of its sales, service,
customer relations or other obligations based on the standards established
therefor in the Business Plan; or iii) any other material responsibilities
assumed by Dealer, Nissan will notify Dealer of such failure and will review
with Dealer the nature and extent of such failure and the reasons which, in
Nissan's opinion, account for such failure. Thereafter, Nissan will provide
Dealer with a reasonable opportunity to correct the failure. If Dealer fails to
make substantial progress towards remedying such failure before the expiration
of such period, Nissan may terminate the Dealer Agreement, such termination to
be effective at least sixty (60) days after notice is given
7. OTHER DEALER RESPONSIBILITIES
A. Branding and Business Name: Dealer shall actively and effectively promote the
"Nissan" name. Under no circumstances shall the name "Nissan" be subordinated to
or promoted less aggressively than any other name (e.g., "LITHIA MOTORS, INC.")
by Dealer.
B. Financial and Operational Reporting: Dealer shall furnish to Nissan annual
reviewed financial statements and, upon demand, shall furnish annual certified
financial statements, and otherwise disclose to Nissan in a format satisfactory
to Nissan the financial and operational results of Dealer's Nissan business.
C. Examination and Audit: Nissan shall be entitled, at all reasonable times
during regular business hours and upon advance notice, to examine, audit and
make and take copies of all records, accounts and supporting data of Dealer,
XXXXXXXX XXXXXX NISSAN, INC. and
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LITHIA MOTORS, INC. relating to the business, ownership or operations of Dealer.
D. Disclosure of Financial Information to Affiliated Companies: Nissan shall be
entitled to disclose to and receive from affiliated companies, including but not
limited to Nissan Motor Acceptance Corporation, all financial statements and
reports provided by Dealer, XXXXXXXX XXXXXX NISSAN, INC. and/or LITHIA MOTORS,
INC.
8. DISPUTE RESOLUTION PROCESS
The parties acknowledge that, at the state and federal level,
various courts and agencies would, in the absence of this Paragraph 8, be
available to them to resolve claims or controversies which might arise between
them. The parties agree that it is inconsistent with their relationship for
either to use courts or governmental agencies to resolve such claims or
controversies.
THEREFORE, CONSISTENT WITH THE PROVISIONS OF THE UNITED STATES
ARBITRATION ACT (9 U.S.C. SEC. 1 ET SEQ.), THE PARTIES TO THIS AGREEMENT AGREE
THAT THE DISPUTE RESOLUTION PROCESS OUTLINED IN THIS SECTION, WHICH INCLUDES
BINDING ARBITRATION, SHALL BE THE EXCLUSIVE MECHANISM FOR RESOLVING ANY DISPUTE,
CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING IN ANY WAY TO THIS AGREEMENT OR
TO THE RELATIONSHIP BETWEEN THE PARTIES, INCLUDING BUT NOT LIMITED TO CLAIMS
UNDER ANY STATE OR FEDERAL STATUTES (HEREINAFTER "DISPUTES"). SECTION 16 OF THE
STANDARD PROVISIONS IS DELETED IN ITS ENTIRETY.
There are two steps in the Dispute Resolution Process: Mediation and Binding
Arbitration. All Disputes must first be submitted to Mediation, unless that step
is waived by written agreement of the parties. Mediation is conducted by a panel
consisting of an equal number of representatives of the parties designated by
Nissan and selected by Dealer. The Mediation Panel will evaluate each position
and recommend a solution. This recommended solution is not binding.
If a dispute has not been resolved after Mediation, or if Dealer and Nissan have
agreed in writing to waive Mediation, the Dispute will be settled by Binding
Arbitration. SPECIFICALLY, THE PARTIES AGREE TO RESOLVE ALL SUCH DISPUTES BY
BINDING ARBITRATION CONDUCTED IN ACCORDANCE WITH THE RULES AND PROCEDURES OF
JAMS/ENDISPUTE, WITH THE PREVAILING PARTY TO RECOVER ITS COSTS AND ATTORNEY'S
FEES FROM THE OTHER PARTY. ALL ARBITRATION AWARDS ARE BINDING AND
NON-APPEALABLE, EXCEPT AS OTHERWISE PROVIDED IN THE UNITED STATES ARBITRATION
ACT. JUDGMENT UPON ANY SUCH AWARD MAY BE ENTERED AND ENFORCED IN ANY COURT
HAVING JURISDICTION.
9. RELEASE
Dealer hereby releases Nissan from any and all claims and causes of action that
they or any of them may have against Nissan for money damages or other relief
relating to or arising out of any event occurring prior to the execution of the
Addendum, except for any accounts payable by Nissan to Dealer in connection with
the provision of any services under the Dealer Agreement
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and any claim described in Section 11.A.1 of the Standard Provisions. In
connection with this release, Dealer expressly acknowledges and waive their
respective rights under California Civil Code, Section 1542, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
10. EXCLUSIVITY AND RIGHT OF FIRST REFUSAL
A. Exclusivity: The additional provisions set forth in Attachment "A" --
"Exclusivity Provisions" -- are hereby incorporated in and made a part of this
Addendum and Dealer Agreement.
B. Right of First Refusal: The additional provisions set forth in Attachment "B"
-- "Right of First Refusal" -- are hereby incorporated in and made a part of
this Addendum and Dealer Agreement.
11. SPECIAL CONDITIONS
WITNESS WHEREOF, the parties have executed this Nissan Addendum in triplicate as
of __________________, _______, at Carson, California.
[DEALER]: NISSAN:
By: By:
-------------------------- ---------------------------------
Xxxxxx X. XxXxxx Xxxxxxx X. Xxxxxx
Title: President Vice President
-----------------------
Title: General Manager,
Nissan Division
--------------------------
By:
---------------------------------
Xxxx Xxxxxxx
Title: Regional Vice President
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ATTACHMENT "A"
PUBLIC OWNERSHIP ADDENDUM
Exclusivity Provisions
In order for Dealer to maintain competitive Dealership Facilities to
effectively market NMC Products, Dealer hereby agrees to abide by and never
challenge the following provisions (hereinafter "Exclusivity Provisions"). These
Exclusivity Provisions shall be effective on or before __________________, 1998
and continue in effect thereafter so long as Dealer (or its principals) are
authorized NMC dealers and these provisions shall be binding on any
successors-in-interest, assigns or purchasers of "Xxxxxxxx".
a) The only line-make of new, unused motor vehicles which Dealer
shall display and sell at the Approved Site shall be the NMC line and make of
motor vehicles. Dealer shall not conduct any dealership operations for any other
make or line of vehicles from the Approved Site.
b) Dealer shall sell and maintain a full line of Genuine NMC Parts
and Accessories at the Approved Site and shall provide a full range of
automotive servicing for NMC vehicles at the Approved Site pursuant to Section 5
of the Standard Provisions to the Agreement. Nothing contained herein, however,
shall preclude Dealer from offering parts, accessories or servicing for vehicles
of other lines or makes so long as such products or services are incidental to
Dealer's NMC Dealership Operations;
c) Dealer shall not advertise or promote any make or line of new,
unused vehicles from the Approved Site other than the NMC line; and
d) Dealer shall not install or maintain any sign at or near the
Approved Site which would tend to lead the public into believing that any line
or make of vehicles other than the NMC line is sold at the Approved Site.
e) Any failure by Dealer to abide by the foregoing subparts (a)
through (d) shall constitute a material breach of the Agreement warranting its
termination, and shall constitute "good cause" for its termination.
ATTACHMENT "B"
PUBLIC OWNERSHIP ADDENDUM
Seller's Right of First Refusal on Sale of Assets.
In addition to its rights under Articles Third and Fourth and Section 15
of the Standard Provisions, Dealer agrees that, commencing __________________,
1998 and continuing in effect thereafter so long as Dealer (or its principals)
are authorized NMC dealers, and these provisions shall be binding on any
successors-in-interest, assigns or purchasers of "Xxxxxxxx"., whenever there is
a proposal to sell substantially all of the assets necessary to conduct the
Dealership Operations, Seller shall have the additional right and option, but
not the obligation, to purchase the dealership assets or ownership interests
pursuant to this provision.
a) If Seller chooses to exercise its right of first refusal, it must
do so in its response to the proposed sale or transfer pursuant to Section 15.
Dealer agrees not to complete any proposed change or sale prior to the
expiration of the period for exercise of Seller's right of first refusal and
without Seller's prior written consent. Such exercise shall be null and void if
Dealer withdraws its proposal within thirty (30) days following Dealer's receipt
of Seller's notice exercising its right of first refusal.
b) After being exercised, Seller's right to purchase may be assigned
to any party, and Seller hereby agrees to guarantee the full payment of the
purchase price by such assignee. Seller's rights under this provision shall be
binding on and enforceable against any assignee or successor in interest of
Dealer or purchaser of Dealer's assets. Seller shall have no obligation to
exercise its rights hereunder.
c) If Dealer has entered into a bona fide written buy/sell agreement
respecting its NMC dealership, Seller's right under this provision shall be a
right of first refusal, enabling Seller to assume the prospective purchaser's
rights and obligations under such buy/sell agreement. The purchase price and
other terms of sale shall be those set forth in such agreement and any related
documents. Seller may request and Dealer agrees to provide all other documents
relating to Dealer and the proposed transfer, including, but not limited to,
those reflecting any other agreements or understandings between the parties to
the buy/sell agreement. If Dealer refuses either to provide such documentation
or to state in writing that no such documents exists, it shall be conclusively
presumed that the agreement is not bona fide. Seller may also determine by other
means that the buy/sell is not bona fide.
d) If Seller determines pursuant to paragraph (c) above that the
buy/sell agreement is not bona fide, Seller will so notify Dealer. Dealer shall
have ten (10) days from its receipt of such notice within which to withdraw its
proposal. Seller's exercise of its rights hereunder shall be null and void if
Dealer withdraws its proposal within such time period. If the proposal is not
withdrawn, Seller shall have the option, but no obligation, under this provision
to purchase the principal assets of Dealer utilized in the Dealership
Operations, including real estate
and leasehold interest, and to terminate all rights granted Dealer hereunder. If
the New Dealership Facilities are leased by Dealer from an affiliated company,
the right to purchase the principal assets of Dealer shall include the right to
lease the New Dealership Facilities. The purchase price of Dealer's assets shall
be at their fair market value as a going concern as negotiated by the parties
and the other terms of sale shall be those agreed by Dealer and Seller. If
Dealer and Seller are unable to reach a negotiated settlement in a reasonable
time, the price and other terms of sale shall be established by arbitration in
accordance with the rules of JAMS/Endispute.
e) In addition to any other rights Seller may have at law, in equity
or hereunder, any conveyance of the dealership or dealership assets in violation
of this right of first refusal shall be voidable by Seller.
Right of First Refusal on Sale or Lease of Property to a Third Party.
a) In addition to its rights under Articles Third and Fourth and
Section 15 of the Standard Provisions, Dealer agrees that, commencing
__________________, 1998 and continuing in effect thereafter so long as Dealer
(or its principals) are authorized NMC dealers, and these provisions shall be
binding on any successors-in-interest, assigns or purchasers of "Xxxxxxxx",
should Dealer seek to sell or lease all or substantially all of the Approved
Site to a third party for use as a NMC New Motor Vehicle Dealership, Seller
shall have the additional right and option, but not the obligation, to purchase
or lease the Approved Site pursuant to this provision. A sale or lease for use
other than a NMC New Motor Vehicle Dealership is void.
b) If Seller chooses to exercise its right of first refusal, it must
do so by written notice delivered to Dealer within 60 days of Seller's receipt
of notice of the proposed sale or lease by Dealer. Dealer agrees not to complete
any proposed sale or lease prior to the expiration of the period for exercise of
Seller's right of first refusal and without Seller's prior written consent, and
agrees to allow Seller to perform an environmental study of the property. Such
exercise shall be null and void if Dealer withdraws its sale or lease proposal
within thirty (30) days following Dealer's receipt of Seller's notice exercising
its right of first refusal.
c) After being exercised, Seller's right to purchase or lease may be
assigned to any party, and Seller hereby agrees to guarantee the full payment of
the purchase price or the rental payment by such assignee. Seller's rights under
this Article Tenth shall be binding on and enforceable against any assignee or
successor in interest of Dealer or purchaser of Dealer's assets. Seller shall
have no obligation to exercise its rights hereunder, and Seller may rescind its
offer if the property is determined to be contaminated pursuant to an
environmental study.
d) Should Seller actually purchase or lease the facility, Dealer
shall also furnish to Seller copies of any easements, licenses, environmental
studies or other documents affecting the property.
e) Dealer shall transfer the affected property by deed conveying
marketable title free and clear of liens, claims, mortgages, encumbrances,
tenancies and occupancies, or, if applicable, by an assignment of any existing
lease. The Warranty Deed shall be in proper form for recording. Dealer shall
deliver complete possession of the property at the time of delivery of the Deed
or lease assignment. Dealer shall also furnish to Seller copies of any
easements, licenses, or other documents affecting the property and shall assign
any permits or licenses which are necessary for the conduct of the Dealership
Operations.
f) In addition to any other rights Seller may have at law, in equity
or hereunder, any sale or lease of the Approved Site in violation of this right
of first refusal shall be voidable by Seller.
