AGREEMENT BETWEEN
TOYOTA MOTOR SALES, U.S.A., INC.
AND
UNITED AUTO GROUP, INC.
Agreement, dated July 24, 1996, entered between United Auto Group, Inc. ("UAG"),
a Delaware corporation, with its principal place of business at 375 Park Avenue,
22nd Floor, New York, New York 10152, and Toyota Motor Sales, U.S.A., Inc.
("TMS"), a California corporation, with its principal place of business at 19001
South Western Avenue, Torrance, CA, 90509.
WHEREAS, UAG is currently the owner, directly or through its Affiliates (as
defined in Paragraph 1 below) of four Toyota and one Lexus automobile
dealerships; and
WHEREAS, UAG may wish to acquire, directly or through an Affiliate, additional
Toyota and Lexus dealerships; and
WHEREAS, UAG wants to issue stock in a public offering of securities anticipated
to be traded on the New York Exchange; and
WHEREAS, UAG and TMS have agreed that UAG will not use a public ownership
structure for its Toyota and Lexus dealerships without TMS' prior consent, which
shall be given or withheld in TMS' sole discretion; and
WHEREAS, TMS has advised UAG 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) 4% 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 any 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, UAG and TMS are willing to resolve these issues in accordance with the
terms set forth herein,
NOW THEREFORE, UAG and TMS agree as follows:
CHANGE IN OWNERSHIP OF UAG
1. TMS shall have the right to approve any new acquisition in ownership or
voting rights of UAG 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, UAG
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 than 20% of the outstanding shares
of UAG, or does not have 20% of the voting rights in UAG.
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OWNERSHIP OF CONTIGUOUS DEALERSHIPS
2. UAG 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. UAG 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 UAG 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.
APPROVAL OF THE GENERAL MANAGER
6. Whenever UAG 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. UAG 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 UAG who has such authority with respect to each listed category or
specific action, in accordance with Paragraph 8 below.
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IDENTIFICATION OF UAG CONTACT OFFICIAL
8. UAG shall identify, in each Toyota and Lexus Dealer Agreement, the UAG
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 UAG management policies, to resolve issues raised by TMS in
connection with the operation of the dealership.
SELLING TOYOTA PRODUCTS
9. UAG shall make available to the customers at its Toyota and Lexus
dealerships, all Toyota 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 UAG, 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. UAG 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 UAG
12. TMS shall not object to a public offering of securities by United Auto
Group so long as the limitations on ownership of voting control of UAG
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 UAG now have a
majority equity interest.
FINANCIAL DISCLOSURES
13. UAG 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 UAG.
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PROSPECTUS DISCLAIMER AND INDEMNIFICATION AND
HOLD HARMLESS AGREEMENT
14. UAG shall place in its registration statement and its prospectus, as well
as in any other document offering shares in UAG 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.
UAG 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 an any time thereafter, nor shall any
waiver by any party of a breach of any provision herein constitute a
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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. UAG 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 UAG 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.
19001 South Western Avenue
Torrance, California 90509
UNITED AUTO GROUP
375 Park Avenue
22nd Floor
New York, New York 10152
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
UNITED AUTO GROUP, INC.
BY: /s/ Carl Spielvogel
-----------------------------
Carl Spielvogel, Chairman and
Chief Executive Officer
TOYOTA MOTOR SALES, U.S.A., INC.
BY: /s/ Illegible
-----------------------------
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ATTACHMENT 1
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, made this 24th day of July, 1996 between
United Auto Group, Inc., a Delaware corporaton the address of which is 375 Park
Avenue, 22nd Floor, New York, NY 10152, ("UAG") and Toyota Motor Sales, U.S.A.,
Inc., a California corporation the address of which is 19001 S. Western Avenue,
Torrance, CA 90509 ("TMS").
WITNESSETH
WHEREAS, UAG has been formed to own subsidiary corporations which will
own and operate automobile dealerships; and;
WHEREAS, UAG intends to publicly offer and sell shares of stock ("UAG
Stock") in a public offering pursuant to the Securities Act of 1933 (the "Act");
WHEREAS, TMS has consented to the offer and sale of such UAG 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, UAG 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
UAG 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 UAG stock. In addition, UAG hereby agrees to indemnify and hold harmless
TMS from any and all claims of the shareholders of UAG 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 UAG for any expenses
advanced by UAG 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 UAG in writing of the commencement of any such litigation, and UAG 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 UAG 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. UAG shall pay the reasonable fees and expenses of not
more than one additional firm of attorneys for TMS.
(c) UAG agrees promptly to notify TMS of the commencement of any
litigation against UAG in connection with the issue and sale of the UAG stock.
UAG and TMS agree to cooperate with each other in the defense of any litigation.
(d) UAG shall not be obligated to indemnify or reimburse TMS
under this Agreement for any amounts paid in settlement of any litigation
effected without UAG's prior written consent. UAG 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 UAG nor TMS
shall unreasonably withhold its consent to any proposed settlement.
3. PAYMENT OF EXPENSES
UAG agrees that it will pay 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, UAG 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.
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4. ENFORCEMENT
(a) UAG 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 UAG 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, UAG 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, UAG 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 UAG effectively to bring suit to enforce such rights.
(b) UAG 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 UAG 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
UNITED AUTO GROUP TOYOTA MOTOR SALES, U.S.A., INC.
By: /s/Carl Spielvogel By: /s/Illegible
---------------------------- ----------------------------
Carl Spielvogel
Title: Chairman and Chief Executive Title:
----------------------------- --------------------------
Officer
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