EXHIBIT 10.5.1
HONDA
AUTOMOBILE DEALER
SALES AND SERVICE AGREEMENT
A
This is an agreement between the Honda Automobile Division,
American Honda Motor Co., Inc. (American Honda) and Lithia HPI, Inc.
(Dealer), a(n) Oregon corporation doing business as Lithia Honda. By this
agreement, which is made and entered into at Torrance, California, effective
the 14th day of October, 1997, American Honda gives to Dealer the
nonexclusive right to sell and service Honda Products at the Dealership
Location. It is the purpose of this Agreement, including the Honda
Automobile Dealer Sales and Service Agreement Standard Provisions (Standard
Provisions), which are incorporated herein by reference, to set forth the
rights and obligations which Dealer will have as a retail seller of Honda
Products. Achievement of the purposes of this Agreement is premised upon the
mutual understanding and cooperation between American Honda and Dealer.
American Honda and Dealer have each entered into this Agreement in reliance
on the integrity and ability and expressed intention of each to deal fairly
with the consuming public and with each other.
For consistency and clarity, terms which are used frequently in
this Agreement have been defined in Article 12 of the Standard Provisions.
B
American Honda grants to Dealer the nonexclusive right to buy
Honda Products and to identify itself as a Honda dealer at the Dealership
Location. Dealer assumes the obligations specified in this Agreement and
agrees to sell and service effectively Honda Products within Dealer's Primary
Market Area and to maintain premises satisfactory to American Honda.
C
Dealer covenants and agrees that this Agreement is personal to
Dealer, to the Dealer Owner, and to the Dealer Manager, and American Honda
has entered into this Agreement based upon their particular qualifications
and attributes and their continued ownership or participation in Dealership
Operations. The parties therefore recognize that the ability of Dealer to
perform this Agreement satisfactorily and the Agreement itself are both
conditioned upon the continued active involvement in or ownership of Dealer
by either:
(1.) the following person(s) in the percentage(s) shown:
PERCENT OF
NAME ADDRESS TITLE OWNERSHIP
Lithia Motors, Inc. 100%
which is owned by
Lithia Holding, LLC minimum 53.585% and through publicly traded
shares maximum 46.415%
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Lithia Holding, LLC
which is owned by
Sidney B. DeBoer 58.125%
Manfred L. Heimann 34.875%
Bradford Gray 7.00%
(2.) _________________________________________________________, an
individual personally owning an interest in Dealer of at least 25% and who
has presented to American Honda a firm and binding contract giving to him the
right and obligation of acquiring an ownership interest in Dealer in excess
of 50% within five years of the commencement of Dealership Operations and
being designated in that contract as Dealer operator.
D
Dealer represents, and American Honda enters into this Agreement
in reliance upon the representation, that Bryan DeBoer exercises the
functions of Dealer Manager and is in complete charge of Dealership
Operations with authority to make all decisions on behalf of dealer with
respect to Dealership Operations. Dealer agrees that there will be no change
in Dealer Manager without the prior written approval of American Honda.
E
American Honda has approved the following premises as the
location(s) for the display of Honda Trademarks and for Dealership Operations.
HONDA NEW VEHICLE
SALES SHOWROOM PARTS AND SERVICE FACILITY
700 North Central 700 North Central
Medford, Oregon Medford, Oregon
USED VEHICLE DISPLAY
SALES AND GENERAL OFFICES AND SALES FACILITY
360 E. Jackson 700 North Central
Medford, Oregon Medford, Oregon
F
There shall be no voluntary or involuntary change, direct or
indirect, in the legal or beneficial ownership or executive power or
responsibility of Dealer for the dealership Operations, specified in
Paragraphs C and D hereof, without the prior written approval of American
Honda.
G
Dealer agrees to maintain, solely with respect to the Dealership
Operations, minimum net working capital of $1,162,800.00, minimum owner's
equity of $ * , and flooring and a line or lines of credit in the
aggregate amount of $1,325,000.00 with banks or financial institutions
approved by American Honda for use in connection with Dealer's purchases of
and carrying of inventory of Honda Products, all of which American Honda and
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Dealer agree are required to enable Dealer to perform its obligations
pursuant to this Agreement. If Dealer also carries on another business or
sells other products, Dealer's total net working capital, owner's equity and
lines of credit shall be increased by an appropriate amount.
* Long Term Debt, less Real Estate Mortgages, shall not exceed a ratio of
1:1 when compared to Effective Net Worth which is defined as Total Net
Worthless Total Other Assets.
H
This Agreement is made for the period beginning October 14, 1997
and ending October 31, 1998, unless sooner terminated. Continued dealings
between American Honda and dealer after the expiration of this Agreement
shall not constitute a renewal of this Agreement for a term, but rather shall
be on a day-to-day basis, unless a new agreement or a renewal of this
Agreement is fully executed by both parties.
I
This Agreement may not be varied, modified or amended except by
an instrument in writing, signed by duly authorized officers of the parties,
referring specifically to this agreement and the provision being modified,
varied or amended.
J
Neither this Agreement, nor any part thereof or interest therein,
may be transferred or assigned by Dealer, directly or indirectly, voluntarily
or by operation of law, without the prior written consent of American Honda.
Lithia HPI, Inc. dba
LITHIA HONDA #207171 By: /s/Sidney B. DeBoer
- ------------------------------------ ----------------------------------
(Corporate or Firm Name) (Dealer)
AMERICAN HONDA MOTOR CO., INC.
HONDA AUTOMOBILE DIVISION
BY: /s/Richard Colliver
-------------------------------
Richard Colliver
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ADDENDUM TO HONDA AUTOMOBILE DEALER
SALES AND SERVICE AGREEMENT
This Addendum (the "Addendum") dated October 14, 1997, is entered
into between Lithia HPI, Inc. ("Dealer"), an Oregon corporation, with its
principal place of business at 700 North Central, Medford Oregon 97501, and
American Honda Motor Co., Inc.. ("American Honda"), a California corporation,
with its principal place of business at 1919 Torrance Boulevard, Torrance,
California 90501.
WHEREAS, Dealer and American Honda are entering into the Honda
Automobile Dealer Sales and Service Agreement including the Standard
Provisions (the "Dealer Agreement"), a copy of which is attached hereto, as
of the date hereof; and
WHEREAS, Dealer and American Honda are entering into the "Agreement
Between
American Honda Motor Co., Inc. and Lithia Motors, Inc. et al."
effective as of December 17, 1996 (the "Lithia Agreement"); and
WHEREAS, Dealer and American Honda desire that this Addendum and the
Lithia Agreement be incorporated into and become part of the Dealer Agreement;
NOW THEREFORE, in consideration of the mutual covenants set forth
herein and in the Dealer Agreement and other good and valuable consideration
the sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Status of the Addendum. This Addendum is hereby incorporated
into and is made part of the Dealer Agreement. The Dealer Agreement and this
Addendum shall, when possible, be read as an integrated document; however, if
there is any conflict between the terms of this Addendum and the Dealer
Agreement, this Addendum shall govern.
2. Incorporation of the Applicable Terms of the Lithia Agreement.
Attached hereto as Schedule A is the Lithia Agreement. Dealer represents and
warrants that it has read the Lithia Agreement and acknowledges that the
Lithia Agreement includes provisions that pertain to Lithia's management,
ownership, and right to acquire and transfer Honda dealerships and other
matters. Dealer has executed the Lithia Agreement and agrees to be bound by
all provisions of the Lithia Agreement that are applicable to or affect it
and/or the actions of any Honda and Acura dealership owned by Dealer. Dealer
and American Honda agree that the terms and conditions of the Lithia
Agreement are hereby incorporated into and made part of the Dealer Agreement.
3. Additional Terms. Dealer shall satisfy the following terms on a
continuing basis during the term of the Dealer Agreement, as well as during
any periods following any renewal or extension of the Dealer Agreement:
a. Exclusive Facilities. As provided in Paragraph 3.1 of the
Lithia Agreement, Dealers non-exclusive Honda Dealership Operations will
by no later than December 31, 1997, be conducting all business in a separate,
freestanding, exclusive new facility built and maintained in full compliance
and conformity with Honda's designs and specifications, including Honda's
minimum land and building requirements, as detailed within the Honda Image
Program. Such new, exclusive Honda dealership facility will be located on a
site acceptable to AHM. Thereafter, Dealer shall maintain separate,
exclusive, freestanding Honda Dealership Operations that are in full and
timely compliance with American Honda standards and guidelines relating to
Honda Dealership Operations, facility design, functionality and capacity,
and enhancements to American Honda's brand image, which standards and
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guidelines American Honda may reasonably modify from time to time, shall
exclusively offer a full range of Honda Products and services and shall not
offer competing products or services from its Dealership Premises. In
addition, Dealer agrees that even though the facilities may exceed AHM's
minimum requirements now or in the future, the separate, exclusive,
freestanding Honda Dealership Operations will remain separate, exclusive and
freestanding for Honda Products and Honda Dealership Operations.
b. Honda Exclusive Minimum Facility Requirements. The
Dealership Premises shall provide the following Honda exclusive minimum
square footage requirements, arranged in a manner conducive to the
reasonable sales and service of Honda Automobiles, Honda Parts and
accessories:
Building
Honda New Vehicle Sales Showroom Display 1,200 Sq. Ft.
Sales Office 928 Sq. Ft.
General Office 1,619 Sq. Ft.
Honda Service Workshop and Support 2,985 Sq. Ft.
Stall/Lifts 6/4
Honda Parts and Accessories Department 1,965 Sq. Ft.
Total Building 8,697 Sq. Ft.
Land
New Vehicle Display and Storage 10,667 Sq. Ft.
Used Car Display 8,333 Sq. Ft.
Customer and Employee Parking 5,700 Sq. Ft.
Honda Service Parking 1,600 Sq. Ft.
Circulation and Landscaping 19,000 Sq. Ft.
Total Land 45,360 Sq. Ft.
Total Land and Building 54,057 Sq. Ft.
c. Minimum Capital Requirements. Dealer agrees that the Honda
Dealership Operations shall meet American Honda's minimum capital
requirements at all times. The minimum capital requirements shall be
determined by American Honda from time to time and, as of the date hereof,
shall be the amounts specified below:
o American Honda's current minimum working capital requirement is
$1,162,800 for the Honda dealership at the Dealership Premises. The
Honda dealership entity will be capitalized with not less than
$2,597,682 in equity of which $2,597,682 will be in the form of common
stock.
o Dealer's Long Term Debt (excluding Real Estate Mortgages and the current
portion of Long Term Debt) shall not exceed a ratio of 1:1 when compared
to Effective Net Worth (Total Net Worth less Total Other Assets) of
Dealer.
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o A wholesale line of credit is to be established and maintained by Dealer
with a financial institution approved by American Honda for the
exclusive purpose of purchasing and maintaining a representative
inventory of new Honda Automobiles. The current minimum amount of such
line is $1,325,000.
e. Financial Statement Submission. Dealer agrees to continue
to comply with American Honda's dealer financial requirements as specified in
the Dealer Agreement. These specifically provide that Dealer will furnish a
complete, timely and accurate financial statement on a monthly basis,
electronically, on the form required by American Honda.
f. Personnel Minimum Requirements. Dealer agrees to employ
Honda service and parts staff which meets at all times the minimum service
and parts training standards specified by American Honda for its authorized
dealers and whose members are properly licensed.
g. Communications Equipment. Dealer agrees to provide
appropriate data communications equipment, compatible with American Honda's
specifications, which currently must accommodate HondaNet 2000.
4. No Guarantee of Financial Success. Dealer recognizes and
acknowledges that American Honda's approval of Dealer's application and
Dealership Premises does not in any way constitute a representation,
assurance, or guarantee by American Honda that Dealer will achieve any
particular level of sales, operate at a profit, or realize any return on
Dealers investment.
5. Automobile Availability. Dealer recognizes and acknowledges that
American Honda cannot and does not guarantee a specific number of new Honda
Automobiles to be made available for resale by the Dealer. American Honda
assumes no liability in the event of losses incurred during periods of
unavailability, nor does unavailability excuse Dealers performance.
6. Compliance with and Impact of Applicable Laws. Dealer shall
comply at Dealers own expense with all applicable state and federal laws
including those pertaining to vehicle dealerships. Dealer shall secure all
licenses and permissions in accordance with such laws and bear all the cost
related thereto.
7. Assumption of Costs. Dealer will complete the above actions
solely at Dealers own expense and without responsibility on the part of
American Honda.
8. Severability. If any provision of this Addendum should be held
invalid or unenforceable for any reason whatsoever, or conflicts with any
applicable law, this Addendum 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 Dealer Agreement, then it (they) will be deemed deleted from
the Dealer Agreement in such jurisdiction, and in either case, the remainder
of the Dealer Agreement will be valid and binding. notwithstanding the
foregoing, if, as a result of any provision of the Dealer Agreement
(including this Addendum) being held invalid or unenforceable, American
Honda's ability to control the selection of the Dealer Owner, Executive
Manager, or the Dealer Manager or to otherwise maintain its ability to
exercise reasonable discretion over the selection of the actual individual
who is managing Dealer is materially restricted beyond the terms of the
Dealer Agreement or the Lithia Agreement, American Honda shall be permitted
to invoke the repurchase provisions of Section 9.3 of the Lithia Agreement.
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IN WITNESS WHEREOF, the parties have executed this Addendum as of the
date first above written.
LITHIA HPI, INC.
By: /s/Sidney B. DeBoer
AMERICAN HONDA MOTOR CO., INC.
By: /s/Richard Colliver
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