AGREEMENT BETWEEN
TOYOTA MOTOR SALES, U.S.A., INC.
AND
SONIC AUTOMOTIVE, INC.
Agreement, dated September 23, 1997, entered between Sonic Automotive, Inc.,
("Sonic"), a Delaware corporation, with its principal place of business at ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇, and Toyota Motor Sales, U.S.A.,
Inc.("TMS"), a California corporation, with its principal place of business at
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇.
WHEREAS, Sonic is currently the owner, directly or through its Affiliates (as
defined in Paragraph 1 below) of Town & Country Toyota; and
WHEREAS, Sonic may wish to acquire, directly or through an Affiliate, additional
Toyota and Lexus dealerships; and
WHEREAS, Sonic 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 Sonic 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
Distributors, Inc., 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 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, Sonic and TMS are willing to resolve these issues in accordance with
the terms set forth herein,
NOW THEREFORE, Sonic and TMS agree as follows:
1. CHANGE IN OWNERSHIP OF SONIC
TMS shall have the right to approve any ownership or voting rights of Sonic
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, Sonic 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 Sonic, or
does not have 20% of the voting rights in Sonic.
2. OWNERSHIP OF CONTIGUOUS DEALERSHIPS
Sonic shall not own contiguous dealerships (as that term is defined in the
applicable Toyota or Lexus Dealer Agreement or policy) with common
boundaries.
3. SEPARATE ENTITIES FOR EACH TOYOTA AND LEXUS DEALERSHIP
Sonic 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.
4. FACILITY STANDARDS
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.
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5. GENERAL MANAGERS
Each Toyota and Lexus dealership owned or controlled by Sonic 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.
6. APPROVAL OF THE GENERAL MANAGER
Whenever Sonic 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.
7. LIMITATIONS ON THE AUTHORITY OF THE GENERAL MANAGER
Sonic 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 Sonic who has such authority with respect to each listed
category or specific action, in accordance with Paragraph 8 below.
8. IDENTIFICATION OF SONIC CONTACT OFFICIAL
Sonic shall identify, in each Toyota and Lexus Dealer Agreement, the Sonic
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 Sonic management policies, to resolve issues raised by TMS
in connection with the operation of the dealership.
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9. SELLING TOYOTA AND LEXUS PRODUCTS
Sonic 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.
10. REPRESENTATION ON TOYOTA AND LEXUS DEALER ORGANIZATIONS
No more than one representative each from the Toyota, and, separately,
Lexus, dealerships owned, directly or through an Affiliate, by Sonic, 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.
11. DEALERSHIP PERSONNEL TRAINING
Sonic shall not substitute training courses or certification programs of
its own for those provided or sponsored by TMS without the prior approval
of TMS.
12. PUBLIC OFFERING OF SECURITIES BY SONIC
TMS shall not object to a public offering of securities by Sonic so long as
the limitations on ownership of voting control of Sonic 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 Sonic now have a majority equity
interest.
13. FINANCIAL DISCLOSURES
Sonic 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 Sonic.
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14. PROSPECTUS DISCLAIMER AND INDEMNIFICATION AND HOLD HARMLESS AGREEMENT
Sonic shall place in its registration statement and its prospectus, as well
as in any other document offering shares in Sonic 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.
Sonic 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.
15. SOLE AGREEMENT OF THE PARTIES
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.
16. SEVERABILITY
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
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deleted from this Agreement in such jurisdiction, and in either case, the
remainder of the Agreement will be valid and binding.
17. NO IMPLIED WAIVERS
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.
18. TMS POLICIES
This Agreement refers to certain policies and standards. Sonic 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
19. APPLICABLE LAW
This Agreement shall be governed by and construed according to the laws of
California.
20. BENEFIT
This Agreement is entered into by and between TMS and Sonic 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.
21. NOTICE TO THE PARTIES
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:
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TOYOTA MOTOR SALES, U.S.A., INC.
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SONIC AUTOMOTIVE, INC.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
SONIC AUTOMOTIVE, INC.
BY: /s/ O. ▇▇▇▇▇▇ ▇▇▇▇▇
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ITS: Chief Executive Officer
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TOYOTA MOTOR SALES, U.S.A., INC.
BY:
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ITS:
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