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EXHIBIT 10.12
AGREEMENT BETWEEN
TOYOTA MOTOR SALES, U.S.A., INC.
AND
GROUP 1 AUTOMOTIVE, INC.
Agreement, dated _____________,1997, entered between Group Automotive, Inc., a
Delaware corporation, with its principal place of business at 950 Echo Lane,
Houston, TX 77024, ("Group 1") 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, Group 1 is currently the owner, directly or through its Affiliates (as
defined in Paragraph 1 below) of three (3) Toyota and one (1) Lexus automobile
dealerships; and
WHEREAS, Group 1 may wish to acquire, directly or through an Affiliate,
additional Toyota and Lexus dealerships; and
WHEREAS, Group 1 wants to issue stock in a public offering of securities
anticipated to be traded on the New York Stock Exchange; and
WHEREAS, TMS has advised Group 1 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) dealership 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 (5) 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.
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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;
b) meet all of the applicable Toyota or Lexus Market Representation
policies and standards; and c) meet applicable performance criteria
for the most recent twelve (12) month period.
C. In order to allow TMS sufficient time to evaluate performance at its
existing dealerships, an entity may not acquire any additional Toyota
or Lexus dealership within nine (9) months of its prior acquisition of
a similar make dealership.
D. 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, Group 1 and TMS are willing to resolve these issues in accordance with
the terms set forth herein,
NOW THEREFORE, Group 1 and TMS agree as follows:
CHANGE IN OWNERSHIP OF GROUP 1
1. TMS shall have the right to approve any ownership or voting rights of
Group 1 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, Group 1 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 Group 1, or does not
have 20% of the voting rights in Group 1.
OWNERSHIP OF CONTIGUOUS DEALERSHIPS
2. Group 1 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. Group 1 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.
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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 Group 1 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 Group 1 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. Group 1 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 Group 1 who has such authority with
respect to each listed category or specific action, in accordance with
Paragraph 8 below.
IDENTIFICATION OF GROUP 1 CONTACT OFFICIAL
8. Group 1 shall identify, in each Toyota and Lexus Dealer Agreement, the
Group 1 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 Group 1 management policies,
to resolve issues raised by TMS in connection with the operation of
the dealership.
SELLING TOYOTA AND LEXUS PRODUCTS
9. Group 1 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 Group
1, may serve on the National Dealer
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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. Group 1 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 GROUP 1
12. TMS shall not object to a public offering of securities by Group 1 so
long as the limitations on ownership of voting control of Group 1
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
Group 1 now have a majority equity interest.
FINANCIAL DISCLOSURES
13. Group 1 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 Group 1.
PROSPECTUS DISCLAIMER AND INDEMNIFICATION AND HOLD HARMLESS AGREEMENT
14. Group 1 shall place in its registration statement and its prospectus,
as well as in any other document offering shares in Group 1 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.
Group 1 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.
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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 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. Group 1
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 Group 1 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
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GROUP 1 AUTOMOTIVE, INC.
950 Echo Lane
Houston, TX 77024
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
GROUP 1 AUTOMOTIVE INC.
BY:
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ITS:
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TOYOTA MOTOR SALES, U.S.A., INC.
BY:
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ITS:
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ATTACHMENT I
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, made this _____ day of, ____________ 1997 between
Group 1 Automotive, Inc., a Delaware corporation ("Group 1") the address of
which is 950 Echo Lane, Suite 350, Houston, Texas 77024 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, Group 1 has been formed to own subsidiary corporations which
will own and operate automobile dealerships; and
WHEREAS, Group 1 intends to publicly offer and sell shares of stock
("Group 1 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 Group 1 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, Group 1 wishes to provide in this Agreement
for the indemnification of 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
Group 1 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 Group 1 stock. In addition, Group 1 hereby
agrees to indemnify and hold harmless TMS from any and all claims of the
shareholders of Group 1 with respect to the sale of the Group 1 Stock. 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 Group 1 for any expenses advanced by Group
1 pursuant to this Agreement. Group 1 shall reimburse TMS for expenses
incurred by TMS which are covered by the indemnification provisions of this
Agreement within
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thirty (30) days after receipt by Group 1 of the written request for
reimbursement (which shall include detailed information with respect to such
expenses) by TMS.
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 Group 1 in writing of the commencement of any such litigation.
(b) If any litigation referred to in paragraph (a) above
is brought against TMS and it gives notice to Group 1 of the commencement of
such litigation, Group 1 will be entitled to participate in such litigation,
and, to the extent that it wishes (unless (i) Group 1 is also a party to such
proceeding and TMS determines in good faith that joint representation would be
inappropriate, or (ii) Group 1 fails to provide reasonable assurance to TMS of
its financial capacity to defend such proceeding and provide indemnification
with respect to such litigation), to assume the defense of such litigation with
counsel reasonably satisfactory to TMS and, after notice from Group 1 to TMS of
its election to assume the defense of such litigation, Group 1 will not, as
long as it diligently conducts such defense, be liable to TMS under this
Agreement for any fees of other counsel or any expenses with respect to the
defense of such litigation, in each case subsequently incurred by TMS in
connection with the defense of such litigation.
(c) Group 1 agrees promptly to notify TMS of the
commencement of any litigation against Group 1 in connection with the issue and
sale of the Group 1 Stock. Group 1 and TMS agree to cooperate with each other
in the defense of any litigation.
(d) TMS shall not, except with Group 1 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.
3. ENFORCEMENT
(a) Group 1 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 the Group 1 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, Group 1 shall reimburse TMS for all of TMS' reasonable fees and
expenses in bringing and pursuing such action.
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4. SUBROGATION
(a) In the event of payment under this Agreement, Group 1
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 Group 1 effectively to bring suit to
enforce such rights.
(b) Group 1 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.
5. 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 Group 1, 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.
TOYOTA MOTOR SALES, U.S.A., INC.
By:
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GROUP 1 AUTOMOTIVE, INC.
By:
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B.B. Hollingsworth, Jr.
President
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