LITHIA MOTORS INC, S-1, 1996-10-15

LITHIA MOTORS INC
S-1, 1996-10-15

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<PAGE>

As filed with the Securities and Exchange Commission on __________, 1996.
Registration No. 333 -________________

- -------------------------------------------------------------------------------

Securities and Exchange Commission
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

LITHIA MOTORS, INC.
(Exact name of registrant as specified in charter)

OREGON 93-0572810 5511
- ----------------- ------------------------------------ -------------------
(State or other (I.R.S. Employer Identification No.) (Primary Standard
jurisdiction of Industrial
Incorporation or Classification
organization) Code Number)

360 E. Jackson Street, Medford, Oregon 97501
(541) 776-6899
(Address and telephone number of registrant's principal executive offices)

Sidney B. DeBoer, President
360 E. Jackson Street
Medford, Oregon 97501
(541) 776-6899
(Name, address and telephone number of agent for service)

Copies of all communications to:

Kenneth E. Roberts, Esq. Kenneth J. Baronsky, Esq.
Foster Pepper & Shefelman Milbank, Tweed, Hadley & McCloy
101 S.W. Main St., 15th Floor 601 South Figueroa St., 30th Floor
Portland, Oregon 97204 Los Angeles, California 90017
(503) 221-1151 (213) 892-4000
(503) 221-1510 (FAX) (213) 629-5063 (FAX)

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /

If this Form is filed to register additional securities for an offering pursuant
to Rule 464(b) under the Securities Act, check the following box and list the
Securities Act registration number of earlier effective registration statement
for the same offering. / /
------------------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------

If delivery of the prospectus is expected to be made pursuant to the Rule 434,
please check the following box. / /

CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Proposed maximum
Title of each class of aggregate Amount of
securities to be registered offering price (1) registration fee
- --------------------------------------------------------------------------------
Class A Common Stock, no par value $42,137,700 $12,769
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

<PAGE>

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.

<PAGE>

SUBJECT TO COMPLETION, DATED ___________, 1996
PROSPECTUS
___________ SHARES

[LOGO] LITHIA MOTORS, INC.
CLASS A COMMON STOCK
---------------------

All of the shares of Class A Common Stock, no par value (the "Class A
Common Stock"), offered hereby are being sold by Lithia Motors, Inc. ("Lithia
Motors" or the "Company"). Prior to this offering (the "Offering"), there has
been no public market for the Class A Common Stock of the Company. It is
currently anticipated that the initial public offering price will be between
$_____ and $_____ per share. For information which was considered in
determining the initial public offering price, see "Underwriting". Application
has been made to have the Class A Common Stock approved for quotation on the
Nasdaq National Market under the symbol "LITH."

The Company has two classes of authorized Common Stock, Class A Common
Stock, which is offered hereby, and Class B Common Stock, no par value (the
"Class B Common Stock"). Holders of Class A Common Stock are entitled to one
vote per share and holders of Class B Common Stock are entitled to ten votes per
share. Class A Common Stock is not convertible but is freely transferable,
while Class B Common Stock is transferable only to certain limited transferees
and is freely convertible into Class A Common Stock. All of the outstanding
shares of Class B Common Stock, which will represent approximately ___% of the
aggregate voting power of the Company upon completion of this Offering, are
controlled by Sidney B. DeBoer and beneficially owned by Mr. DeBoer, M. L. Dick
Heimann and R. Bradford Gray, each executive officers of the Company, through
Lithia Holding Company, L.L.C. ("Lithia Holding"), the sole shareholder of the
Company immediately prior to this Offering. See "Risk Factors--Concentration of
Voting Power; Anti-takeover Provisions," "Description of Capital Stock--Common
Stock" and "Principal Shareholders."

-------------------------

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK OFFERED HEREBY, SEE "RISK
FACTORS" BEGINNING ON PAGE 8.

--------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Underwriting
Price to Discounts and Proceeds to
Public Commissions (1) Company (2)
- --------------------------------------------------------------------------------
Per Share. . . . . . . . $ $ $
- --------------------------------------------------------------------------------
Total (3). . . . . . . . $ $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $___________.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to ____________ additional shares of Class A Common Stock solely to cover
over-allotments, if any. If such option is exercised, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company will
be $_____, $_______ and $________, respectively. See "Underwriting."

The shares of Class A Common Stock are being offered by the several
Underwriters when, as and if delivered to and accepted by the Underwriters and
subject to various prior conditions, including the right to reject orders in
whole or in part. It is expected that delivery of the certificates representing
the shares will be made against payment therefor at the offices of Furman Selz
LLC in New York, New York or through the facilities of the Depository Trust
Company on or about ______________, 1996.

FURMAN SELZ
DAIN BOSWORTH
INCORPORATED
EVEREN SECURITIES, INC.
-------------------------

The date of this Prospectus is ___________, 1996

<PAGE>

[Photo of Dealerships]

This Prospectus includes statistical data regarding the retail automobile
industry. Unless otherwise indicated herein, such data is taken or derived from
information published by the Industry Analysis Division of the National
Automobile Dealers Association ("NADA") in its INDUSTRY ANALYSIS AND OUTLOOK AND
AUTOMOTIVE EXECUTIVE MAGAZINE publication. This Prospectus includes trademarks
of companies other than Lithia Motors, Inc., which trademarks are the property
of their respective holders.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND
NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, ALL INFORMATION CONTAINED IN THIS PROSPECTUS, (i) ASSUMES THAT THE
UNDERWRITERS' OVER-ALLOTMENT OPTION TO PURCHASE UP TO ____________ ADDITIONAL
SHARES OF CLASS A COMMON STOCK FROM THE COMPANY IS NOT EXERCISED AND (ii) GIVES
EFFECT TO THE CONSUMMATION OF THE RESTRUCTURING, AS DEFINED IN AND DESCRIBED
UNDER "COMPANY RESTRUCTURING AND PRIOR S CORPORATION STATUS" IN THIS PROSPECTUS,
WHICH TRANSACTIONS WILL TAKE PLACE IMMEDIATELY PRIOR TO THE CLOSING OF THE
OFFERING. REFERENCES HEREIN TO "COMMON STOCK" MEAN THE COMPANY'S CLASS A COMMON
STOCK AND CLASS B COMMON STOCK, COLLECTIVELY. UNLESS OTHERWISE INDICATED,
REFERENCES TO THE "COMPANY" MEAN LITHIA MOTORS AND ITS SUBSIDIARIES AFTER THE
RESTRUCTURING.

THE COMPANY

Lithia Motors is the largest retailer of new and used vehicles in Southwest
Oregon, offering 14 domestic and imported makes of new automobiles and light
trucks at five locations. As an integral part of its operations, the Company
also arranges related financing and insurance and sells parts, service and
ancillary products. The Company has grown primarily by successfully acquiring
and integrating dealerships and by obtaining new dealer franchises. Most of the
Company's operations are currently located in Medford, Oregon, where it has a
market share of over 40%. The Company's strategy is to become a leading
acquiror of dealerships in medium-sized markets in the western United States.
The Company has recently entered into agreements to acquire additional
dealerships in Eugene, Oregon and Salinas, California.

The Company's two senior executives, Sidney B. DeBoer and M.L. Dick
Heimann, have managed the Company's operations for over 25 years. During this
time, they have developed and implemented an operating strategy that has enabled
the Company to achieve profitability superior to industry averages. In 1995,
the Company's gross profit margin (on a FIFO basis) was 18.0% and its pre-tax
profit margin before minority interest (on a FIFO basis) was 3.3%, versus 12.9%
and 1.4%, respectively, for the industry.

OPERATING STRATEGY

The Company's operating strategy consists of the following elements:

PROVIDE A BROAD RANGE OF PRODUCTS AND SERVICES. The Company offers a
broad range of products and services including a wide selection of new and used
cars and light trucks, vehicle financing and insurance and replacement parts and
service. In Southwest Oregon, the Company's five locations offer, collectively,
14 makes of new vehicles including Chrysler, Toyota, Plymouth, Dodge,
Jeep/Eagle, Honda, Saturn, Mazda, Pontiac, Lincoln, Mercury, Isuzu, Suzuki and
Volkswagen. In addition, the Company sells a variety of used vehicles at a
broad range of prices. By offering new and used vehicles and an array of
complementary services at each of its locations, the Company seeks to increase
customer traffic and meet specific customer needs. The Company believes that
offering numerous new vehicle brands appeals to a variety of customers,
minimizes dependence on any one manufacturer and reduces its exposure to supply
problems and product cycles.

FOCUS ON USED VEHICLE SALES. A key element of the Company's operating
strategy is to focus on the sale of used vehicles. The Company's goal is to
sell two used vehicles for every new vehicle sold. In 1995, the Company sold
5,144 used vehicles, a 1.83 to one ratio as compared to new vehicles sold. The
Company strives to attract customers and enhance buyer satisfaction by offering
multiple financing options, a 10-day/500-mile "no questions asked" exchange
program and a 60-day/3,000-mile warranty on every used vehicle sold. The
Company believes that a well-managed used vehicle operation at each location
affords an opportunity to (i) generate additional customer traffic from a wide
variety of prospective buyers, (ii) increase new and used vehicle sales by
aggressively pursuing customer trade-ins, (iii) generate incremental revenues
from customers financially unable or unwilling to purchase a new vehicle, and
(iv) improve total vehicle profit margins and ancillary product sales. To
maintain a broad selection of high quality used vehicles and to meet local
demand preferences, the Company acquires used vehicles from trade-ins and a
variety of sources nationwide, including direct purchases and manufacturers' and
independent auctions.

<PAGE>

financing for 59% of its new vehicle sales and 69% of its used vehicle sales, as
compared to 42% and 51%, respectively, for the average automobile dealership in
the United States. The Company also sells extended service coverage and other
vehicle protection packages which the Company believes enhance the value of the
vehicle and provide a higher level of customer satisfaction.

EMPLOY PROFESSIONAL MANAGEMENT TECHNIQUES. The Company employs
professional management practices in all aspects of its operations, including
information technology, employee training, profit-based compensation and a cash
management system. Each dealership is a profit center and is managed by a
trained and experienced general manager who has primary responsibility for
decisions relating to inventory, advertising, pricing and personnel.
Compensation of the general manager is based on dealership profitability and the
compensation of department managers is similarly based upon departmental
profitability. Senior management utilizes computer-based management information
systems to monitor each dealership's sales, profitability and inventory on a
daily basis. The Company believes the application of its professional
management practices provides it a competitive advantage over many dealerships
and is critical to its ability to achieve levels of profitability superior to
industry average.

FOCUS ON CUSTOMER SATISFACTION AND LOYALTY. The Company emphasizes
customer satisfaction throughout its organization and continually seeks to
maintain a reputation for quality and fairness. The Company trains its sales
people to work to identify an appropriate vehicle for each of its customers at
an affordable price. The Company also recently implemented an innovative
marketing program entitled "Priority You." "Priority You" provides the
Company's retail customers six value-added services which the Company believes
are important to overall customer satisfaction, including a commitment to (i)
provide a customer credit check within 10 minutes, (ii) complete a used vehicle
appraisal within 30 minutes, (iii) complete the paper work on a new vehicle
purchase within 90 minutes, (iv) provide a 10-day/500-mile "no questions asked"
right of exchange on any used vehicle, (v) provide a warranty on all used
vehicles for 60 days/3,000 miles and (vi) make a $20 per vehicle donation to a
local charity or educational organization. The Company believes "Priority You"
will help differentiate it from many other dealerships thereby increasing
customer traffic and developing stronger customer loyalty.

GROWTH STRATEGY

The Company's goal is to become a leading acquiror of automobile
dealerships in the western United States. As part of its acquisition strategy,
the Company intends to focus its efforts on acquiring dealerships or dealer
groups that, among other criteria, possess either the sole franchise or a
significant share of new vehicle sales in a targeted market. Additionally, the
Company's evaluation of potential acquisitions takes into account a dealership's
local reputation with its customers, the type and make of vehicles sold by the
dealer and the possibility for the Company to acquire additional franchises
within the market to achieve a larger market share. The Company believes that
the majority of dealerships that fit its acquisition criteria will be located in
medium-sized markets within the nine western states. Upon completing an
acquisition, the Company immediately implements its operating strategy,
including increasing finance and insurance revenues, selling more used vehicles
and enhancing employee training. The Company also installs its management
information system in the acquired dealership as soon as possible after the
acquisition, which allows the Company's executive officers, as well as the
general manager, to carefully monitor each aspect of the dealership's operations
and performance. Whenever possible, the Company assumes the management of a
dealership's operations prior to closing of an acquisition, enabling the Company
to accelerate the implementation of its operating strategy.

To date, a significant percentage of the Company's growth has resulted from
acquisitions and the Company believes that acquisition opportunities will
continue to be available to well-capitalized, experienced dealership
organizations. The Company believes that its management team has considerable
experience in acquiring dealerships and implementing its operating strategy to
improve the performance and profitability of such dealerships following the
acquisition. The Company is continuing its expansion in Oregon and has recently
signed a purchase agreement to acquire the sole Dodge franchise in Eugene,
Oregon. The Company has also begun expansion into selected markets in
California with the signing of a purchase agreement to acquire the sole Honda
franchise in Salinas, California, located near the Monterey Peninsula. See
"Risk Factors -- Dependence on Acquisitions for Growth; Manufacturers' Consent
to Acquisitions" and "Pending Acquisitions."

The Company maintains its principal executive offices at 360 E. Jackson
Street, Medford, Oregon 97501, and its telephone number is (541) 776-6899.

<PAGE>

THE OFFERING

<TABLE>

<S> <C>
Common Stock offered by the Company. . . . . . . . . . . . shares of Class A Common Stock (1)
--------

Common Stock to be outstanding after the Offering. . . . . shares of Class A Common Stock (1)
--------
shares of Class B Common Stock
--------

Use of proceeds . . . . . . . . . . . . . . . . . . . . . Acquisition of additional automobile dealerships, payment of
distributions to existing owners of previously undistributed
earnings, the repayment of debt working capital and general
corporate purposes. See "Use of Proceeds."

Proposed Nasdaq National Market symbol . . . . . . . . . . LITH

</TABLE>

- -----------------------

(1) Does not include and aggregate of _____________ shares of Class A Common
Stock reserved for issuance under the Company's 1996 Stock Incentive Plan,
____________ of which are subject to outstanding options as of the date
hereof. See "Management -- 1996 Stock Incentive Plan."

<PAGE>

SUMMARY COMBINED FINANCIAL AND OPERATING DATA

The following table presents (i) summary historical combined financial and
other data of the Company as of the dates and for the periods indicated and
(ii) summary pro forma financial and other data of the Company as of the dates
and for the periods indicated giving effect to the events described in the Pro
Forma Combined and Condensed Financial Data included elsewhere herein as though
they had occurred on the dates indicated therein. The summary pro forma
financial data are not necessarily indicative of operating results or financial
position that would have been achieved had these events been consummated on the
date indicated and should not be construed as representative of future operating
results or financial position. The summary historical and pro forma financial
data should be read in conjunction with the financial statements and related
notes thereto of the Company, Roberts Dodge, Inc. and Sam Linder, Inc. with the
Pro Forma Combined and Condensed Financial Statements and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.

Six Months Ended
Years Ended December 31, June 30,
------------------------------------------------------------------- -------------------------
Pro Pro
Actual Forma(1) Actual Forma(1)
------------------------------------------------------------------- ----------------- -------
1991 1992 1993 1994 1995 1995 1995 1996 1996
------- ------- ------- ------- ------- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands, except per share data)
COMBINED STATEMENT OF
OPERATIONS DATA:
Total sales. . . . . . . . . $64,087 $79,439 $92,109 $109,322 $114,196 $ $54,396 $69,125 $
Gross profit(2). . . . . . . 11,064 14,022 17,260 18,905 20,943 9,763 11,456
Operating income . . . . . . (499) (102) 2,138 3,731 4,208 1,903 2,142
Income before minority
interest (2) (3). . . . . $ 229 $ 516 $ 1,786 $ 3,972 $ 4,153 $ 1,869 $ 1,903
------- ------- ------- -------- -------- --------- -------
------- ------- ------- -------- -------- --------- -------
PRO FORMA COMBINED AND
CONDENSED STATEMENT OF
OPERATIONS DATA (4):
Income . . . . . . . . . . . _ $ 947 $2,168 $2,076 $ $ 915 $ 968 $
Income per share(5). . . . . $
Weighted average shares
outstanding(5)
OTHER OPERATING DATA:
New automobiles sold . . . . 1,890 2,106 2,464 2,744 2,715 1,303 1,594
Used automobiles sold. . . . 3,403 3,934 4,718 5,206 5,144 2,560 3,202
Gross margin (FIFO basis)(2) 17.8% 18.3% 19.3% 17.9% 18.0% 17.7% 16.9%
Pre-tax margin before
minority interest
(FIFO basis)(2) . . . . . . 1.0% 1.2% 2.5% 4.2% 3.3% 3.1% 3.1%

As of June 30, 1996
-------------------------------------------
As of Pro Forma
December 31, 1995 Actual Pro Forma(4) As Adjusted (6)
------------------- ------ ------------ ---------------
(In thousands)
COMBINED BALANCE SHEET DATA:
Working capital. . . . . . . . . . . . . . . . . $7,764 $ 8,763 $ 6,857 $
Total assets . . . . . . . . . . . . . . . . . . 39,225 32,116 30,210
Total long-term debt . . . . . . . . . . . . . . 12,828 10,469 10,469
Total shareholders' equity . . . . . . . . . . . 854 1,906 --

</TABLE>
- -----------------------

(1) For information regarding the pro forma adjustments made to the Company's
historical financial data, see "Pro Forma Combined and Condensed Financial
Data."
(2) The Company utilizes the LIFO (Last In-First Out) accounting method. See
Note 2 of the Notes to the Company's Combined Financial Statements.
Commencing January 1, 1997, the Company intends to file an election with
the IRS to convert to a FIFO (First In-First Out) accounting method and
report its earnings for tax and financial statements on the industry
standard FIFO method. If the Company had previously utilized the FIFO
method gross profit for the five years ended December 31, 1995 would have
been $11.4 million, $14.5 million, $17.8 million, $19.5 million and $20.5
million, respectively and $9.6 million and $11.7 million for the six months
ended June 30, 1995 and 1996. Income before minority interest for the five
years ended December 31, 1995 would have been $613,000, $955,000, $2.3
million, $4.6 million, and $3.7 million, respectively and $1.7 million and
$2.1 million for the six months ended June 30, 1995 and 1996.

<PAGE>

(3) Prior to 1994, the Company paid cash bonuses to its shareholders and
members in amounts approximating their respective income tax liability on
their undistributed earnings ($532,000 in 1991, $640,000 in 1992, and $1.0
million in 1993), in addition to their normal salaries. These cash bonuses
are reflected in SG&A expenses. In 1994 and subsequent periods, cash to
meet the shareholders' and members' tax liabilities was distributed to the
shareholders and members as dividends. The Company believes that for a
fair evaluation of its historical performance, results for 1991, 1992 and
1993 should be adjusted to eliminate such bonus payments.
(4) The Company was an S Corporation and accordingly was not subject to federal
and state income taxes during the periods indicated. Pro forma net income
reflects federal and state income taxes as if the Company had been a C
Corporation, based on the effective tax rates that would have been in
effect during these periods. See "Company Restructuring and Prior S
Corporation Status" and Notes 1 and 9 of Notes to Company's Combined
Financial Statements.
(5) Historical earnings per share are not presented, as the historical capital
structure of the Company prior to the Restructuring and the Offering is
not comparable with the capital structure that will exist subsequent to
these events. Pro forma earnings per share are based upon the assumption
that ____________ shares of Common Stock are outstanding. This amount
represents the number of shares of Class B Common Stock owned by the
Company's stockholders immediately following the Restructuring but before
the Offering. See Note 1 of the Notes to the Company's Combined Financial
Statements for a calculation of weighted average shares outstanding.
(6) Adjusted to reflect the sale of Class A Common Stock offered hereby by the
Company (at an assumed initial public offering price of $_______ per
share and after deducting the underwriting discounts and estimated offering
expenses payable by the Company) and the application of the net proceeds
therefrom. See "Use of Proceeds."
(7) Does not include ____________ shares of Class A Common Stock subject to
options outstanding, as of the date of this Prospectus, under the Company's
1996 Stock Incentive Plan. See "Management -- 1996 Stock Incentive Plan."

<PAGE>

RISK FACTORS

THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN OF THE RISK FACTORS SET FORTH BELOW AND
ELSEWHERE IN THIS PROSPECTUS. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER
AND EVALUATE ALL OF THE INFORMATION SET FORTH IN THIS PROSPECTUS, INCLUDING THE
RISK FACTORS SET FORTH BELOW. THE COMPANY CAUTIONS THE READER THAT THIS LIST OF
RISK FACTORS MAY NOT BE EXHAUSTIVE.

DEPENDENCE ON ACQUISITIONS FOR GROWTH

The U.S. automobile industry is considered a mature industry in which
minimal growth is expected in unit sales of new vehicles. Sales of new vehicles
by the Company have fluctuated in the past and no assurance can be given that
the Company will be able to increase or maintain unit sales from year to year in
the future. Accordingly, a principal component of the Company's business
strategy is to make additional acquisitions in its existing and new geographic
markets. In 1996, the Company entered into agreements to purchase dealerships
in Eugene, Oregon and Salinas, California.

The Company's future growth and financial success will be dependent upon a
number of factors including, among others, the Company's ability to identify
acceptable acquisition candidates, consummate the acquisition of such
dealerships on terms that are favorable to the Company, obtain the consent of
automobile manufacturers, retain, hire and train professional management and
sales personnel at each such acquired dealership and promptly and profitably
integrate the acquired operations into the Company. No assurance can be given
that the Company will be able to improve the profitability of such acquired
dealerships. The Company may acquire dealerships which have net profit margins
which are materially lower than the Company's historical average net profit
margin. No assurance can be given that the Company will be able to improve the
net profit margins of such acquired dealerships. To manage its expansion, the
Company intends to evaluate on an ongoing basis the adequacy of its existing
systems and procedures, including, among others, its financial and reporting
control systems, data processing systems and management structure. No
assurance, however, can be given that the Company will adequately anticipate all
of the demands its growth will impose on such systems, procedures and structure.
Any failure to adequately anticipate and respond to such demands could have a
material adverse effect on the Company.

Acquisitions of additional dealerships will require substantial capital
investment and could have a significant impact on the Company's financial
position and operating results. Any such acquisitions may involve the use of
cash (including the net proceeds of this Offering) or the issuance of additional
debt or equity securities, which could have a dilutive effect on the
then-outstanding capital stock of the Company. Acquisitions could result in the
accumulation of substantial goodwill and intangible assets, which would result
in amortization charges to the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources," and "Business -- Growth Strategy."

DEPENDENCE ON AUTOMOBILE MANUFACTURERS

The Company is significantly dependent upon its relationships with, and the
success of, certain automobile manufacturers or authorized distributors thereof
(collectively referred to herein as "manufacturers"). For the year ended
December 31, 1995, four manufacturers, Chrysler, Toyota, Honda and Saturn,
collectively accounted for 87% of the Company's new vehicle sales. The Company
may become dependent on additional manufacturers as a result of its acquisition
strategy and changes in the Company's sales mix.

Each of the Company's dealerships operates pursuant to a franchise
agreement with each respective manufacturer. Manufacturers exert significant
control over the Company's dealerships through the terms and conditions of the
franchise agreements, including provisions for termination or non-renewal for a
variety of causes. The Company from time-to-time has failed to comply with
certain provisions of its franchise agreements. These agreements generally
afford the Company a reasonable opportunity to cure such violations and no
manufacturer has terminated or failed to renew any franchise agreement. If a
manufacturer terminated or declined to renew one or more of the Company's
significant franchise agreements, such action could have a material adverse
effect on the Company and its business.

The Company also is dependent upon its manufacturers to provide it with
inventory of new vehicles. The most popular automobiles tend to provide the
Company with the highest profit margins and are the most difficult to obtain
from the manufacturers. In order to obtain sufficient numbers of these
automobiles, the Company may be required to purchase a larger number of less
desirable makes and models than it would otherwise purchase. Sales of less
desirable makes and models may result in lower profit margins than sales of the
more popular vehicles. If the

<PAGE>

Company is unable to obtain sufficient quantities of the most popular makes and
models, its profitability may be adversely affected.

With the exception of the Saturn franchise, the Company's franchise
agreements with the manufacturers do not give the Company the exclusive right to
sell that manufacturer's product within a given geographical area. Accordingly,
a manufacturer could grant another dealer a franchise to start a new dealership
in proximity to one or more of the Company's locations or an existing dealer
could move its dealership to a location which would be directly competitive with
the Company. Such an event could have a material adverse effect on the Company
and its operations.

The success of each of the Company's franchises is dependent to a great
extent on the success of the respective manufacturer. The success of the
Company is therefore linked to the financial condition, marketing, vehicle
demand, production capabilities and management of the manufacturers of which the
Company is a franchisee. Events such as labor strikes or negative publicity
concerning a particular manufacturer may adversely affect the Company. The
Company has attempted to lessen its dependence on any one manufacturer by
acquiring franchise agreements with a number of different domestic and foreign
automotive manufacturers.

MANUFACTURERS' CONSENT TO OFFERING

Each of the Company's franchise agreements requires the consent of the
manufacturer to any change in the ownership of the franchise. Accordingly, the
Company has requested a consent to the proposed Restructuring, of which this
Offering is a part, from each of the manufacturers for which it serves as a
franchised dealer. To date, only Chrysler, Toyota and Honda have indicated that
they will consent to the Restructuring and the Offering but with certain
conditions and limitations. The Company currently believes that certain
manufacturers, such as Ford and Saturn, will not consent to the Restructuring.
There can be no assurance that any manufacturer that does not consent to the
Restructuring, will not attempt to prevent the Restructuring, terminate
franchises, refuse to renew or approve franchises or take other action which
could have a material adverse effect on the Company and its operations.

The franchise laws of the states of Oregon (where most of the Company's
current dealerships are located) and California (where certain of the Company's
pending acquisitions are located) generally make it unlawful for a manufacturer
to unreasonably fail to give effect to, or attempt to prevent unreasonably, any
sale or transfer of the ownership or management of a dealership or the making of
reasonable changes in the capital structure of the dealership, provided that the
dealership meets any reasonable capital requirements of the manufacturer and
certain other conditions. See "Business -- Regulation." Until recently, all
manufacturers have expressed reluctance to permit the public ownership of
dealerships since franchises are awarded to a named individual to whom the
manufacturer looks to have direct control of the franchise and its operations.
In the attempt to address manufacturers' concerns regarding the effects of
public ownership of the Company, the Company's principals have established
Lithia Holding and a dual-class voting structure, designed to ensure that Sidney
B. DeBoer will have voting control of the Company for the foreseeable future.
See "Risk Factors -- Concentration of Voting Power; Anti-takeover Provisions",
"Principal Shareholders" and "Description of Capital Stock."

This Offering is conditioned upon the Company's receipt of consents from
Chrysler, Toyota and Honda, which collectively accounted for 78% of the
Company's new vehicle sales in 1995. There can be no assurance that the Company
will receive any other consents prior to the closing of the Offering or ever.
The Company may have to sell one or more of its franchises in order to avoid
termination by a manufacturer who objects to the Restructuring. In the event of
such a sale, no assurance can be given that the Company will be able to receive
full value for such franchises or favorable sales terms.

MANUFACTURERS' CONSENT TO ACQUISITIONS

The Company is required to obtain a consent from each relevant manufacturer
prior to the acquisition of a dealership franchise. In determining whether to
approve an acquisition, the manufacturers consider many factors, including the
financial condition and ownership structure of the acquiror. Because the
Company will be publicly owned after consummation of the Offering, the Company
believes that certain manufacturers, including Ford and Saturn, will not consent
to new acquisitions of their respective franchises at this time. Further,
manufacturers may impose conditions on granting their approvals for acquisitions
including a limitation on the number of such manufacturers' dealerships that may
be acquired by the Company. In particular, Toyota limits the number of
dealerships which may be owned by any one group to seven Toyota and three Lexus
dealerships and prohibits ownership of contiguous dealerships and the dualing of
the franchise with any other brand without its consent. The Company's ability
to meet manufacturers' requirements for acquisitions in the future will have a
direct bearing on the Company's ability to complete acquisitions and effect its
growth strategy.

<PAGE>

In determining whether to approve an acquisition by the Company, a
manufacturer also consider factors such as the Company's past performance
as measured by the manufacturer's Customer Satisfaction Index ("CSI") scores and
sales performance at the Company's existing franchises. On occasion, certain of
the Company's franchises have had CSI scores and sales performance numbers which
were below the manufacturers' standards. In particular, the Company has
relatively low sales performance numbers and below average CSI scores for its
General Motors (Pontiac) franchise which is currently housed with other brands
at one of its Medford stores. The low performance ratings of the Pontiac
franchise have been cited by General Motors as the reason for its recent denial
of the transfer of two dealerships the Company had contracted to purchase.
Although the Company is still seeking to secure approvals for these
acquisitions, the Company can give no assurance that it will be permitted to
acquire any new General Motors franchise in the future. See "Pending
Acquisitions."

LIMITATION ON STOCK OWNERSHIP; RESTRICTION ON TRANSFER

Certain manufacturers may impose limitations on the amount of the
Company's securities that may be owned by an individual or a group without the
prior approval of such manufacturers. For example, any acquisition of a 20% or
greater ownership share of the Company by any individual or entity without
Toyota's prior approval would be a violation of the Company's agreement with
Toyota. This restriction may discourage certain investors from acquiring an
ownership interest in the Company. Certain manufacturers also may require that
Lithia Holding and/or Sidney B. DeBoer maintain a certain ownership interest in
the Company. These restrictions will limit the Company's ability to raise
additional capital through the issuance of equity securities to the extent that
such issuance dilutes the ownership interest of Lithia Holding or Sidney B.
DeBoer below requisite thresholds. See "Risk Factors -- Availability and Cost
of Capital" below.

COMPETITION

The automobile dealership business is highly competitive and generally
fragmented. The new and used automobile sectors are characterized by a large
number of independent operators. In addition, certain regional and national car
rental companies operate retail used car lots to dispose of their used rental
cars. Private sales of used vehicles by previous owners is an additional source
of competition. Recently, consolidation has begun to accelerate in the new and
used automobile dealership business as national and regional companies have
begun to establish large used automobile "mega-stores." No assurances can be
made with respect to the Company's ability to continue to compete effectively
with other automobile dealers or such mega-stores. Furthermore, certain of the
Company's future competitors may be larger than the Company and have access to
greater financial resources. See "Business --Competition." In addition, no
assurance can be given that automobile manufacturers will not attempt to modify
the historical automobile manufacturer/dealer franchise system in such a way to
increase competition among dealers or market their vehicles through other
distribution channels.

CYCLICAL NATURE OF AUTOMOBILE SALES; CONCENTRATION OF OPERATIONS IN OREGON

The market for automobiles, particularly the new automobile market, is
subject to substantial cyclical variation. An increase in interest or tax
rates, or uncertainties regarding future economic conditions that affect
consumer spending habits, could materially adversely affect the Company's
results of operations. For the past few years, the industry has experienced
growth that may not be sustained in the future. A material decrease in
automobile sales, whether new or used, would be expected to adversely affect
the Company's results of operations.

Although the Company has a pending acquisition of a dealership in
California, all of its current operations are located in Oregon. For at least
the immediately foreseeable future, the Company's results of operations will be
substantially dependent upon general economic conditions, consumer spending
habits and preferences in Oregon and, to a lesser extent, California, as well
as various factors specific to such states such as tax rates and state and
local regulation. The Company's growth strategy is intended to reduce its
dependence on the Oregon economy; however, no assurance can be given that it
will succeed or that geographic expansion will adequately insulate it from the
adverse effects of local or regional economic conditions.

AVAILABILITY AND COST OF CAPITAL

The Company's new and used automobile sales operations require significant
capital resources. The Company's future operating results will be directly
related to the availability and cost of its capital. The principal sources of
financing for the Company's new and used automobile inventories have
historically been lines of credit from United States National Bank of Oregon
("U.S. Bank") and cash generated from operations. No assurance can be given
that the Company will be able to continue to obtain capital for its current or
expanded operations on terms and conditions acceptable to the Company.

<PAGE>

The Company's strategy of growth through the acquisition of additional
dealerships will require substantial capital. The Company anticipates that
approximately $_____ million of the net proceeds from this Offering will be used
to acquire other dealerships. If the Company's acquisition strategy is
successful, this capital will be fully invested within a limited period of time
and the Company will require additional capital in order to continue its
acquisition strategy. Such expansion and new acquisitions may involve using
cash, incurring additional debt or issuing Company's equity securities, which
could have a dilutive effect on the then-outstanding capital stock. The Company
may seek to obtain funds through borrowings from institutions or by the public
or private sale of its securities subsequent to this Offering. No assurance can
be given that the Company will be able to obtain capital to finance its growth
on terms and conditions acceptable to the Company. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

DEPENDENCE ON KEY PERSONNEL

The Company's success will depend largely on the efforts and abilities of
its senior management, particularly Sidney B. DeBoer, the Company's President
and Chief Executive Officer, M. L. Dick Heimann, the Company's Executive Vice
President and Chief Operating Officer, and R. Bradford Gray, the Company's Vice-
President of Acquisitions. Further, as Mr. DeBoer and Mr. Heimann are
identified in each of the Company's dealership franchise agreements as the
individuals who control the franchises and upon whose financial resources and
management expertise the manufacturers have relied on when awarding such
franchises. The loss of either of those individuals could materially adversely
affect the Company's on-going relationship with its vehicle manufacturers. See
"Business -- Relationships with Automobile Manufacturers." In addition, the
Company places substantial responsibility on the general managers of its
dealerships for the profitability of such dealerships. As the Company expands,
it will need to hire additional managers, particularly as it acquires
dealerships in locations which are distant from the Company's headquarters in
Medford, Oregon. The market for qualified employees in the industry,
particularly for general managers, is highly competitive. The loss of the
services of key management personnel or the inability to attract additional
qualified managers could have a material adverse effect on the Company's
business and the execution of its growth strategy. The Company does not have
employment agreements with any of its key management personnel which would
restrict their ability to terminate their employment or compete with the
Company. The Company does not maintain key man insurance on either Messrs.
DeBoer or Heimann.

VARIABILITY OF QUARTERLY OPERATING RESULTS

The Company's business is seasonal with a disproportionate amount of sales
occurring in the second and third quarters. Due to such seasonality, the
Company will likely experience quarter-to-quarter fluctuations in its operating
results. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Selected Quarterly Results of Operations."

CONCENTRATION OF VOTING POWER; ANTI-TAKEOVER PROVISIONS

Upon conclusion of this Offering, Lithia Holding, of which Sidney B.
DeBoer, the Company's President, Chief Executive Officer and Chairman of the
Board, is the sole managing member, will hold all of the shares of outstanding
Class B Common Stock. Holders of Class B Common Stock are entitled to ten votes
for each share held, while holders of Class A Common Stock are entitled to one
vote per share held. Consequently, upon completion of the Offering, Lithia
Holding will control ______% of the aggregate number of votes eligible to be
cast by shareholders for the election of Directors and certain other shareholder
actions. Therefore, Lithia Holding will control the election of the Board of
Directors of the Company and will be in a position to control the policies and
operations of the Company. In addition, because Mr. DeBoer is the managing
member of Lithia Holding, he currently does and will control all of the
outstanding Class B Common Stock, thus allowing him to control the Company. See
"Principal Shareholders." So long as at least 16 2/3% of the total number of
shares outstanding are shares of Class B Common Stock, the holders of Class B
Common Stock will be able to control all matters requiring approval of 66 2/3%
or less of the aggregate number of votes. Absent increases in the number of
shares of Class A Common Stock or conversion of Class B Common Stock into Class
A Common Stock, the holders of shares of Class B Common Stock will be entitled
to elect all members of the Board of Directors and control all matters subject
to shareholder approval that do not require a class vote. See "Description of
Capital Stock."

The formation of Lithia Holding and the creation of the dual classes of
voting stock were undertaken by the principals of the Company to consolidate
voting control of the Company in an attempt to address concerns of manufacturers
who have expressed opposition to public ownership of franchised dealerships.

The Company's Board of Directors will have the authority to issue up to
15,000,000 shares of Preferred Stock and determine the price, rights,
preferences and privileges (including voting rights) of those shares without any
further vote or action by the shareholders. The rights of the holders of Common
Stock will be subject to, and may

<PAGE>

be materially adversely affected by the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. The Company has no
present plans to issue shares of Preferred Stock. The Company's Restated
Articles of Incorporation and Bylaws contain certain other provisions that may
have the effect of discouraging offers to acquire the Company. The Company will
also be subject to certain provisions of the Oregon Business Corporation Act
which may have the effect of discouraging attempts to acquire the Company
without the approval or cooperation of the Company's Board of Directors. See
"Description of Capital Stock."

FOREIGN SUPPLIERS

Certain of the automobiles purchased by the Company are currently imported
into the United States from Japan. In the future, automobiles that the Company
distributes may also be imported from other countries. In 1995, 45% of the
Company's new automobile purchases (net of fleet sales) were imported
automobiles. As a result, the Company's operations are subject to the customary
risks of purchasing merchandise that has been imported from abroad, including
fluctuation in the value of currencies, import duties, restrictions on the
transfer of funds, work stoppages and, in certain parts of the world, political
instability. The United States or the countries from which the Company's
products are or may be imported may, from time to time, impose new quotas,
duties, tariffs or other restrictions, or adjust presently prevailing quotas,
duty or tariff levels, which could affect the Company's operations and its
ability to purchase imported automobiles at current or increased levels.
Imports into the United States are also affected by the cost of transportation
and increased competition from greater production demands abroad.

SUPERVISION AND REGULATION; ENVIRONMENTAL MATTERS

The Company's operations are subject to extensive regulation, supervision
and licensing under various other federal, state and local statutes, ordinances
and regulations. While management believes that it maintains all requisite
licenses and permits and is in substantial compliance with all applicable
federal, state and local regulations, there can be no assurance that the Company
will be able to maintain all requisite licenses and permits, and the failure to
satisfy those and other regulatory requirements could have a material adverse
effect on the operations of the Company. The adoption of additional laws, rules
and regulations could also have a material adverse effect on the Company's
business. See "Business -- Regulation." Various state and regulatory agencies,
such as the Occupational Safety and Health Administration ("OSHA"), the United
States Environmental Protection Agency (the "EPA") and the Oregon Department of
Justice, have jurisdiction over the operation of the Company's dealerships,
repair shops, body shops and other operations, with respect to matters such as
consumer protection, workers' safety and laws regarding clean air and water.

As with automobile dealerships generally, and service, parts and body shop
operations in particular, the Company's business involves the use, handling and
contracting for recycling or disposal of hazardous or toxic substances or
wastes, including environmentally sensitive materials such as motor oil, waste
motor oil and filters, transmission fluid, antifreeze, freon, waste paint and
lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline
and diesel fuels. Accordingly, the Company is subject to regulation by federal,
state and local authorities establishing health and environmental quality
standards, and liability related thereto, and providing penalties for violations
of those standards. The Company is also subject to laws, ordinances and
regulations governing remediation of contamination at facilities it operates or
to which it sends hazardous or toxic substances or wastes for treatment,
recycling or disposal. The Company believes that it does not have any material
environmental liabilities and that compliance with environmental laws,
ordinances and regulations will not, individually or in the aggregate, have a
material adverse effect on the Company's results of operations or financial
condition. However, soil and groundwater contamination has been known to exist
at certain properties leased by the Company. The Company has also been required
to remove aboveground and underground storage tanks containing hazardous
substances or wastes. Environmental laws and regulations are complex and
subject to frequent change. There can be no assurance that compliance with
amended, new or more stringent laws or regulations, stricter interpretations of
existing laws or the future discovery of environmental conditions will not
require additional expenditures by the Company, or that such expenditures would
not be material.

SHARES ELIGIBLE FOR FUTURE SALE

No accurate prediction can be made as to the effect, if any, that future
sales of Class A Common Stock, or the availability of shares for future sales,
will have on the prevailing market price for the Class A Common Stock prevailing
from time to time. Sales of a substantial amount of Class A Common Stock in the
public market following this Offering, or the perception that such sales could
occur, could adversely affect the prevailing market price for the Class A Common
Stock. None of the shares of Common Stock to be held by Lithia Holding
immediately after this Offering will be eligible for sale pursuant to Rule 144
until _____________, 1998. All of

<PAGE>

such shares are subject to a lock-up agreement between the Underwriters and
Lithia Holding for a period of 180 days following the date of this Prospectus.
As of the date of this Prospectus, options to acquire ________ shares of Common
Stock, which were granted at prices between $_______ and $______ per share, are
fully vested and exercisable. See "Management -- 1996 Stock Incentive Plan" and
"Shares Eligible for Future Sale."

NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this Offering, there has been no public market for any of the
Company's securities, and no assurance can be given that an active trading
market will develop after this Offering or that the Class A Common Stock offered
hereby will trade at or above the initial public offering price. The initial
public offering price has been determined by negotiations among the Company and
the Representatives (as defined herein) of the Underwriters. See
"Underwriting." Quarterly and annual operating results of the Company,
variations between such results and the results expected by investors and
analysts, changes in local or general economic conditions or developments
affecting the automobile industry, the Company or its competitors could cause
the market price of the Class A Common Stock to fluctuate substantially. As a
result of these factors, as well as other factors common to initial public
offerings, the market price could fluctuate substantially from the offering
price.

DILUTION; LACK OF DIVIDENDS

The public offering price is substantially higher than the tangible book
value per share of Class A Common Stock. Investors purchasing shares of Class A
Common Stock in this Offering will therefore incur immediate, substantial
dilution. See "Dilution." Further, the Company has no plans to pay any cash
dividends in the immediate future. See "Dividend Policy."

COMPANY RESTRUCTURING AND PRIOR S CORPORATION STATUS

The Company was founded by Walt DeBoer in 1946 as a single Dodge dealership
in Ashland, Oregon. In 1968, upon the death of Walt DeBoer, his son, Sidney B.
DeBoer, assumed ownership and control of the business and incorporated the
Company in Oregon. M. L. Dick Heimann joined the Company in 1970 and serves as
its Executive Vice President and Chief Operating Officer. As the Company
expanded, it formed subsidiaries and affiliated entities to hold certain
dealerships and real property on which the Company operates.

Currently, the Company is an S Corporation which is owned 62.5% by Sidney
D. DeBoer and 37.5% by M. L. Dick Heimann. In addition, there are four other
affiliated S Corporations which are owned 62.5% by Mr. DeBoer and 37.5% by Mr.
Heimann: (i) Lithia Rentals, Inc., (ii) Lithia Leasing, Inc., (iii) Lithia
Chrysler Plymouth Jeep Eagle, Inc. and (iv) Discount Auto & Truck Rental, Inc.
There are also three limited liability companies which are owned as indicated:
(i) Lithia TLM, L.L.C. (80% by Lithia Motors, Inc., 19.99% by Stephen R. Philips
and 0.01% by Mr. DeBoer), (ii) Lithia's Grants Pass Auto Center, L.L.C. (75% by
Lithia Motors, Inc, 24.99% by R. Bradford Gray and 0.01% by Mr. DeBoer) and
(iii) Lithia Dodge, L.L.C. (75% by Lithia Motors, Inc, 24.99% by Mr. Gray and
0.01% by Mr. DeBoer).

Prior to completion of the Offering, the Company and these other affiliated
entities will consummate a restructuring (the "Restructuring") which will result
in each of the Company's dealerships and operating divisions becoming direct or
indirect wholly-owned subsidiaries of the Company with Lithia Holding owning all
of the outstanding Class B Common Stock of the Company. All current
shareholders or members will exchange their interests in the Company and the
affiliated entities for shares of Lithia Holding with the exception of the
interest in Lithia TLM, L.L.C. held by Mr. Philips which will be purchased by
Lithia TLM, L.L.C. for $700,000, the price paid by Mr. Philips for his interest,
through the payment of $135,000 cash and the cancellation of a note in the
remaining principal amount of $565,000.

The Company and the other corporations and limited liability companies
which are parties to the Restructuring have been treated for federal and state
income tax purposes as S Corporations under subchapter S of the Internal Revenue
Code of 1986, as amended (the "Code") or as partnerships. As a result of the
tax status of the Company and these affiliated entities, their stockholders or
members (the "Principal Owners"), rather than the Company and such other
entities, have been taxed directly on the earnings of such entities for federal
and state income tax purposes. In connection with the Restructuring, the tax
status of the Company and these affiliated entities as S Corporations or as
partnerships will terminate and they will thereafter be subject to federal and
state income tax at applicable C Corporation rates.

<PAGE>

The Company has distributed to the Principal Owners promissory notes (the
"Dividend Notes") in the aggregate amount of $3.9 million, representing
approximately all of the previously taxed undistributed earnings of the Company
through December 31, 1995. In 1994, the Company distributed total tax payment
dividends of $2.0 million to the Principal Owners. The Dividend Notes bear
interest at 9% per annum and are payable in ten equal annual installments
beginning one year and ten days after demand by the noteholders. Shortly before
the completion of the Offering, the Company and the other affiliated entities
each intend to declare additional distributions to the Principal Owners in an
aggregate amount equal to the undistributed taxable income of the Company or
such other entities, as the case may be, from January 1, 1996 through the
effective date of the Restructuring. The Company intends to prepay the Dividend
Notes and make the final distribution of earnings from a portion of the proceeds
of the Offering shortly after the closing of the Offering. The total amount to
be paid to the Principal Owners as the result of such distributions is expected
to be approximately $6.0 million, but the final amount may be more or less than
this estimate since it is dependent upon the earnings of the Company and the
other affiliated entities through the effective date of the Restructuring. See
"Use of Proceeds."

<PAGE>

PENDING ACQUISITIONS

In furtherance of the Company's growth strategy, the Company has signed
definitive agreements to purchase two additional dealerships: Roberts Dodge,
Inc., a Dodge dealer in Eugene, Oregon and Sam Linder, Inc., a Honda dealer in
Salinas, California. The consummation of these acquisitions (referred to herein
as the "Pending Acquisitions") is a condition for the consummation of the
Offering.

ROBERTS DODGE, INC. The Company has agreed to pay $2.25 million for
Roberts Dodge, plus an additional amount for the new car and parts inventory
valued at seller's cost estimated to be approximately $_____ million. The
purchase price is payable as (i) $1.75 million plus the cost of the new car and
parts inventory in cash at closing and (ii) a promissory note for $500,000, with
interest at 8.5% per annum, payable in equal monthly installments for five
years. The Company is not assuming any material liabilities as part of the
acquisition. In addition, the Company will purchase the real property on which
the dealership is located for $2.33 million, payable in cash at closing. The
Company may assign its obligation to purchase the real estate to Lithia
Properties which, in such event, would lease the property to the Company or its
subsidiary operating Roberts Dodge. See "Business--Properties" and "Certain
Relationships and Related Transactions." Closing is scheduled to occur on or
before November 1, 1996. The purchase is subject to normal closing conditions
and the approval of Chrysler. The Company expects to obtain such approval in
due course, but no assurances can be made in that regard. Roberts Dodge had
$31.9 million in sales in 1995 and is the sole Dodge dealer in Eugene.

SAM LINDER, INC. The Company has agreed to pay approximately $1.05 million
in cash for Sam Linder Honda, plus an additional amount for the new vehicle and
parts inventory valued at seller's costs and the used vehicle inventory at the
KELLY WHOLESALE BLUE BOOK value less any reconditioning costs estimated to be
approximately $________ million. The Company will also purchase the real
property and improvements utilized for the new vehicle store prior to December
31, 1997 for $2.1 million. The Company may assign its obligation to purchase
the real estate to Lithia Properties which, in such event, would lease the
property to the Company or its subsidiary operating Sam Linder Honda. See
"Business--Properties and "Certain Relationships and Related Transactions."
Closing is scheduled to occur on or before December 2, 1996. The purchase is
subject to normal closing conditions and the approval of Honda Motor Company,
Inc. The Company expects to obtain such approval in due course, but no
assurances can be made in that regard. Sam Linder, Inc. also has a Cadillac and
Oldsmobile dealership franchise at this location which is expected to be sold
and transferred to a third party purchaser. Sam Linder, Inc. had $26.9 million
in sales in 1995 and is the sole Honda dealer in Salinas. Cadillac and
Oldsmobile's new vehicle sales accounted for less than 15% of its 1995 revenues.

Historical financial statements for Roberts Dodge, Inc. and Sam Linder,
Inc. are included in this Prospectus beginning at page F-20. Pro forma
financial statements showing the effect on the Company of all of the above
acquisitions as if they had occurred as of January 1, 1995 and January 1, 1996
are included in this Prospectus beginning at page 21.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Class A Common Stock
offered hereby (after deducting underwriting discounts and commissions and
estimated Offering expenses payable by the Company) are estimated to be
$____________ ($____________ if the Underwriters' over-allotment option is
exercised in full), assuming an initial offering price of $__________ per share.

The Company anticipates that the net proceeds will be used for the
following purposes: (i) up to approximately $ million for the acquisition
of additional automobile dealerships, including approximately $6.0 million to
acquire the dealerships in Eugene, Oregon and Salinas, California, which are
subject to definitive purchase agreements. See "Pending Acquisitions"; and (ii)
approximately $6.0 million to repay the Dividend Notes and notes to other
related parties and to distribute current earnings of the Company to the
Principal Owners. The Dividend Notes bear interest at 9% per annum, payable in
ten equal annual installments beginning one year and ten days after demand by
the noteholders. See "Company Restructuring and Prior S Corporation Status" and
"Certain Relationships and Related Transactions." The balance of the net
proceeds will be used for working capital and general corporate purposes.

Pending utilization of the net proceeds for the purposes set forth herein,
the Company intends to reduce the outstanding balances of existing lines of
credit, including the Company's flooring line of credit (the "Flooring Line")
with U.S. National Bank of Oregon, and its line of credit obtained to close the
acquisitions described herein (the "Capital Line"). The Flooring Line bears
interest at the prime rate. The effective annual interest rate on such
indebtedness was 8.25% at June 30, 1996. The Capital Line bears interest at
prime plus 0.25 percent. See Notes 6 and 12 of Notes to the Company Combined
Financial Statements.

<PAGE>

After completion of this Offering, the Company intends to re-borrow under
the Flooring Line and other lines of credit as necessary from time to time to
fund purchases of new and used automobiles and additional dealerships.

DIVIDEND POLICY

Other than the dividends and distributions paid to the Principal Owners
referred to in "Company Restructuring and Prior S Corporation Status," the
Company has no present intention to declare or pay cash dividends in the
foreseeable future after the Offering. The Company intends to retain any
earnings that it may realize in the future to finance its operations. The
payment of any future dividends will be subject to the discretion of the Board
of Directors of the Company and will depend upon the Company's results of
operations, financial position and capital requirements, general business
conditions, restrictions imposed by financing arrangements, if any, legal
restrictions on the payment of dividends and other factors the Board of
Directors deems relevant.

<PAGE>

CAPITALIZATION

The following table sets forth the short-term debt and total combined
capitalization of the Company at June 30, 1996 (i) on an actual historical
basis, (ii) pro forma to include the effect of the Restructuring and (iii) as
adjusted to reflect the sale of _______ shares of Class A Common Stock pursuant
to the Offering and the application of the estimated net proceeds therefrom.
This table should be read in conjunction with the Combined Financial Statements
and related notes and "Pro Forma Combined and Condensed Financial Data"
appearing elsewhere in this Prospectus. See also, "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

June 30, 1996
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
--------------------------------
(Dollars in thousands)
Flooring notes payable . . . . . . . . . . . $13,723 $13,723 $
Current maturities of long-term debt . . . . 2,207 2,207
------ ------ ------
Total short-term debt. . . . . . . . . . $15,930 $15,930 $
------ ------ ------
------ ------ ------
Long-term debt(2). . . . . . . . . . . . . . $ 8,262 $11,000 $
Minority interest. . . . . . . . . . . . . . 1,029 1,029
Owners' equity . . . . . . . . . . . . . . . 1,906 --- ---
Shareholders' equity:
Preferred Stock, no par value,
15,000,000 shares authorized, none
outstanding . . . . . . . . . . . . . --- --- --
Common Stock
Class A Common Stock, no par value,
100,000,000 shares authorized, none
outstanding, actual and pro forma;
_____, pro forma as adjusted(1) . . --- ---

Class B Common Stock, no par value,
25,000,000 shares authorized,
________ outstanding, actual,
pro forma and pro forma as
adjusted. . . . . . . . . . . . . . 801
Retained earnings (deficit) (3). . . . . --- (1,230)
------ ------ ------
Total shareholders' equity(3)/
owners' equity. . . . . . . . . . . 1,906 (429)

Total capitalization . . . . . . . . . . . . $11,197 $11,600 $
------ ------ ------
------ ------ ------

- -----------------------
(1) Does not include an aggregate of __________ shares of Class A Common Stock
reserved for issuance under the Company's 1996 Stock Incentive Plan,
_______of which are subject to outstanding options as of the date hereof.
See "Management -- 1996 Stock Incentive Plan."
(2) Includes $3.3 million of notes payable to Principal Owners related to S
Corporation distributions.
(3) The Company utilizes the LIFO (Last In-First Out) method of accounting for
financial statement and tax reporting (See Note 2 of the Notes to the
Company's Combined Financial Statements). Commencing January 1, 1997, the
Company intends to file an election with the IRS to convert to a FIFO
(First In-First Out) accounting method and change its method of accounting
to the industry standard, FIFO accounting method for financial statement
and tax reporting. Had the Company used a FIFO method in 1996, total
shareholders' equity at June 30, 1996 would have been $3.2 million higher.

DILUTION

The pro forma net tangible book value of the Company's Common Stock at June
30, 1996, was $________, or $_____ per share. Pro forma net tangible book value
per share of Common Stock represents the Company's total tangible assets less
total liabilities, divided by the number of shares of Common Stock outstanding,
assuming the Restructuring has taken place. Without taking into account any
change in pro forma net tangible book value subsequent to June 30, 1996, other
than to give effect to the Offering by the Company of _________________ shares
of Class A Common Stock to the public at an assumed initial public offering
price of $___ per share and the receipt by the Company of the net proceeds
therefrom (after deducting the Underwriters' discount and estimated expenses of
the public offering payable by the Company), the pro forma net tangible book
value of the Company would have been $_____ per share. This amount represents
an immediate increase in the pro forma net tangible book value of $_____ per
share to the existing shareholders and an immediate dilution of $_____ per share
to new investors purchasing shares of Class A Common Stock at the initial public
offering price. The Company utilizes the LIFO method of accounting (See Note 2
of the Notes to the Company's Combined Financial Statements). Had the Company
used a FIFO method, total shareholders' equity at June 30, 1996 would have been
$3.2 million higher.

<PAGE>

The following table calculates dilution by subtracting net tangible book
value per share after the Offering on both a LIFO and a FIFO basis, from the
initial public Offering price.

LIFO BASIS FIFO BASIS
---------------------------- ------------------------
<S> <C> <C> <C> <C>
Assumed initial public offering price per share. . . . . . $ $
-------- --------
Pro forma net tangible book value
as of June 30, 1996. . . . . . . . . $ $
--------- --------
Increase attributable to
new investors. . . . . . . . . . . . $ $
--------- --------

Pro forma net tangible book value after Offering . . . . . $ $
-------- --------
Dilution per share to new investors. . . . . . . . . . . . $ $
-------- --------

</TABLE>

The following table summarizes, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by the
existing stockholders and by purchasers of the shares offered by the Company
hereby (at an assumed initial public offering price of $_________ per share).

Average
Shares Purchased(1) Cash Paid(2) Price
------------------- ------------------
Number Percent Amount Percent PerShare
-------- --------- -------- --------- --------
Existing shareholders. . . . % $ % $
New investors. . . . . . . . % $ % $

------ ------ ------- ------ -------
Total. . . . . . . . . . 100.0% 100.0%
------ ------ ------- ------ -------
------ ------ ------- ------ -------

- --------------------

(1) Does not include an aggregate of ____________shares of Class A Common Stock
reserved for issuance under the Company's 1996 Stock Incentive Plan,______
of which are subject to options outstanding as of June 30, 1996, with a
weighted average exercise price of $____ per share. If all such options
were deemed to be exercised and proceeds were received therefrom, dilution
per share to new investors would be $_________ (LIFO Basis) or $______ (FIFO
Basis) See "Management -- 1996 Stock Incentive Plan."
(2) Does not reflect deduction of the underwriting discount or estimated
Offering expenses.

SELECTED COMBINED FINANCIAL DATA

The following selected combined financial data presented below under the
captions "Combined Statement of Operations Data" and "Combined Balance Sheet
Data" for and as of the end of each of the years in the four year period ended
December 31, 1995, are derived from the combined financial statements of Lithia
Motors, Inc. and its affiliated companies, which financial statements have been
audited by KPMG Peat Marwick LLP, independent auditors. The following selected
combined historical financial information at or for the six months ended June
30, 1995 and June 30, 1996 has been derived from unaudited financial statements
that, in the opinion of management of the Company, reflect all adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
financial information for such periods and as of such dates. The combined
historical results for the six months ended June 30, 1996 are not necessarily
indicative of results for a full fiscal year. The combined financial statements
as of December 31, 1994 and 1995 and for each of the years in the three year
period then ended, and as of June 30, 1996 and for the six months ended, June
30, 1995 and 1996 and the reports thereon, are included elsewhere in this
Prospectus. The following combined selected financial data should be read in
conjunction with the Combined Financial Statements, including the notes thereto,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," appearing elsewhere herein.

<TABLE>
<CAPTION>
Six Months Ended
As of Year Ended December 31, June 30,
---------------------------------------------------------------------- -------------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS DATA:
SALES:
New vehicles . . . . . . . $ 28,946 $ 34,479 $ 42,663 $ 51,154 $ 53,277 $ 25,081 $ 31,482
Used vehicles. . . . . . . 23,369 29,930 34,986 42,381 44,061 20,995 28,395
Other operating revenues . 11,722 15,030 14,460 15,787 16,858 8,320 9,248
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total sales . . . . . . 64,087 79,439 92,109 109,322 114,196 54,396 69,125
Cost of sales. . . . . . . . 53,023 65,417 74,849 90,417 93,253 44,633 57,669
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit(1). . . . . . . 11,064 14,022 17,260 18,905 20,943 9,763 11,456
Selling, general and
administrative(2). . . . . 11,563 14,124 15,122 15,174 16,735 7,860 9,314
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss). . . (499) (102) 2,138 3,731 4,208 1,903 2,142
Interest income. . . . . . . 308 161 216 99 179 65 93
Interest expense . . . . . . (784) (743) (1,375) (955) (1,390) (583) (649)
Other income, net. . . . . . 1,204 1,200 807 1,097 1,156 484 382
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before minority
interest . . . . . . . . . 229 516 1,786 3,972 4,153 1,869 1,903
Minority interest. . . . . . (49) (168) (233) (458) (778) (383) (317)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (1),(2) . . . . . $ 180 $ 348 $ 1,553 $ 3,514 $ 3,375 $ 1,486 $ 1,586
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA:
Income before taxes and
minority interest,
as reported. . . . . . . . $ 1,786 $ 3,972 $ 4,153 $ 1,869 $ 1,903
Pro forma provision
for taxes(3) . . . . . . . 697 1,521 1,598 719 742
Pro forma minority
interest . . . . . . . . . 142 283 479 235 193
---------- ---------- ---------- ---------- ----------
Pro forma net income . . . . $ 947 $ 2,168 $ 2,076 $ 915 $ 968
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>

<TABLE>
<CAPTION>
As of December 31,
---------------------------------------------------------------------- As of
1991 1992 1993 1994 1995 June 30, 1996
---------- ---------- ---------- ---------- ---------- ---------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
COMBINED BALANCE SHEET DATA:
Working capital. . . . . . . . . . $ 2,339 $ 1,369 $ 13 $ 6,034 $ 7,764 $ 8,763
Total assets . . . . . . . . . . . 21,080 24,955 33,381 36,656 39,225 32,116
Total long-term debt . . . . . . . 4,222 5,424 6,153 8,369 12,828 10,469
Total shareholders' equity . . . . 1,628 1,238 1,184 2,800 854 1,906

</TABLE>
- --------------------

(1) The Company utilizes the LIFO (Last In-First Out) accounting method. See
Note 2 of the Notes to the Company's Combined Financial Statements.
Commencing January 1, 1997, the Company intends to file an election with
the IRS to convert to a FIFO (First In-First Out) accounting method for tax
and financial statement reporting and report its earnings on the FIFO
method. If it had previously utilized the FIFO method, gross profit for
the five years ended December 31, 1995 would have been $11.4 million,
$14.5 million, $17.8 million, $19.5 million and $20.5 million, net income
for the five years ended December 31, 1995 would have been $527,000,
$733,000, $2.1 million, $4.1 million, and $3.0 million, respectively and
$1.4 million and $1.8 million for the six months ended June 30, 1995 and
1996.

(2) Prior to 1994, the Company and it affiliated entities paid cash bonuses to
their shareholders and members in amounts approximating their respective
income tax liability on their undistributed earnings ($532,000 in 1991,
$640,000 in 1992, and $1.0 million in 1993), in addition to their normal
salaries. These cash bonuses are reflected in the SG&A expenses above. In
1994 and subsequent periods, cash to meet the shareholders' and members'
tax liabilities was distributed to the shareholders and members as
dividends.

<PAGE>

The Company believes that for a fair evaluation of its historical
performance, results for 1991, 1992 and 1993 should be adjusted to
eliminate such bonus payments.

(3) The Company was an S Corporation and accordingly was not subject to federal
and state income taxes during the periods indicated. Pro forma net income
reflects federal and state income taxes as if the Company had been a
C Corporation, based on the effective tax rates that would have been in
effect during these periods. See "Company Restructuring and Prior
S Corporation Status" and Notes 1 and 9 of Notes to Company's Combined
Financial Statements.

<PAGE>

PRO FORMA COMBINED AND CONDENSED FINANCIAL DATA

The following unaudited pro forma combined and condensed statements of
operations for the year ended December 31, 1995 and for the six months ended
June 30, 1996 reflect the historical accounts of the Company for those periods
adjusted to give pro forma effect to the Pending Acquisitions, the conversion
to the FIFO accounting method (to be effective January 1, 1997), the
Restructuring and the Offering, as if these transactions had occurred at the
beginning of each period presented.

The following unaudited pro forma combined balance sheet as of June 30,
1996 reflects the historical accounts of the Company as of that date adjusted to
give pro forma effect to the Pending Acquisitions, the conversion to the FIFO
accounting method (to be effective January 1, 1997), the Restructuring, and the
Offering, as if they had occurred as of June 30, 1996.

The unaudited pro forma combined and condensed financial data and
accompanying notes should be read in conjunction with the Combined Financial
Statements of the Company and the related notes as well as the combined
financial statements and related notes of Roberts Dodge, Inc. and Sam Linder,
Inc., all of which are included elsewhere in this Prospectus. The Company
believes that the assumptions used in the following statements provide a
reasonable basis on which to present the pro forma financial data. The pro
forma combined financial data is provided for informational purposes only and
should not be construed to be indicative of the Company's financial condition or
results of operations had the transactions and events described above been
consummated on the dates assumed and are not intended to project the Company's
financial condition on any future date or results of operations for any future
period.

PRO FORMA COMBINED AND CONDENSED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
Year Ended December 31, 1995
-----------------------------------------------------------------------------------------------
Actual
---------------------------------------------
Roberts
Dodge, Sam Pro Forma Pro Forma Pro
Company(1) Inc.(1) Linder, Inc. Adjustments Acquisitions Forma
---------- ------- ------------ ----------- ------------ -----
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Sales:
New vehicle. . . . . . . . . $ 53,277 $ 15,848 $ 12,656 $ (3,069) (6) $ 78,712 $
Used vehicle . . . . . . . . 44,061 12,151 10,234 - 66,446
Other operating revenue. . . 16,858 3,895 3,967 (518) (6) 24,202
-------- -------- -------- -------- -------- --------
Total sales . . . . . . . 114,196 31,894 26,857 (3,587) (6) 169,360
Cost of sales. . . . . . . . . 93,253 27,270 22,646 (2,846) (6)(7) 140,323
-------- -------- -------- -------- -------- --------

Gross profit . . . . . . . . . 20,943 4,624 4,211 (741) 29,037
Selling, general and
administrative . . . . . . . 16,735 3,828 3,928 (458) (2)(3)(6) 24,033
-------- -------- -------- -------- -------- --------
Operating income . . . . . . . 4,208 796 283 (283) 5,004
Other income (expense), net. . (55) (527) (347) 1,358 (1)(2)(6) 429
-------- -------- -------- -------- -------- --------

Income before minority
interest and income taxes . 4,153 269 (64) 1,075 5,433
-------- -------- -------- -------- -------- --------

Minority interest. . . . . . . (778) - - - (778)
Income taxes . . . . . . . . . - - - - -
-------- -------- -------- -------- -------- --------
Net income . . . . . . . . . . 3,375 $ 269 $ (64) $ 1,075 $ 4,655 $
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------

Net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Weighted average shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --------
--------
</TABLE>

<PAGE>

PRO FORMA COMBINED AND CONDENSED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
Six Months Ended June 30, 1995
-----------------------------------------------------------------------------------------------
Actual
---------------------------------------------
Roberts
Dodge, Sam Pro Forma Pro Forma Pro
Company(1) Inc.(1) Linder, Inc.(1) Adjustments Acquisitions Forma
---------- ------- -------------- ----------- ------------ -----
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Sales:
New vehicles . . . . . . . . $ 31,482 $ 9,771 $ 6,456 $ (1,013) (6) $ 46,696 $
Used vehicles. . . . . . . . 28,395 5,838 4,519 - 38,752
Other operating
revenues . . . . . . . . . 9,248 2,074 1,893 (242) (6) 12,973
-------- -------- -------- -------- -------- --------
Total sales . . . . . . . 69,125 17,683 12,868 (1,255) (6) 98,421
Cost of sales. . . . . . . . . 57,669 15,196 10,809 (1,321) (7) 82,172
-------- -------- -------- -------- -------- --------
Gross profit . . . . . . . . . 11,456 2,668 2,059 66 16,249
Selling, general and (8)
administrative . . . . . . . 9,314 2,165 1,912 (362) (2)(3)(6) 13,029
-------- -------- -------- -------- --------
Operating income . . . . . . . 2,142 503 147 428 3,220
Other income (expense),
net. . . . . . . . . . . . . (239) (23) (103) 686 (1)(2)(6) 113
-------- -------- -------- -------- -------- --------
Income before minority
interest and income taxes. . 1,903 272 44 1,114 3,333
-------- -------- -------- -------- -------- --------
Minority interest. . . . . . . (317) --- --- --- (317) ---
Income taxes . . . . . . . . . --- --- --- --- --- ---
-------- -------- -------- -------- -------- --------
Net income . . . . . . . . . . $ 1,586 $ 272 $ 44 $ 3,016 $ 3,294 $
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
--------
--------
Weighted average shares outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

</TABLE>

- --------------------

(1) The Company will use the proceeds from the Offering primarily to acquire
dealerships in the future. The pro forma statements of operations shown
above assumes that approximately $6.0 million will be used to acquire the
two new dealerships. Until the remaining proceeds are used to acquire
other dealerships, the Company intends to reduce floor plan debt with its
bank by approximately $14 million [and to invest the remaining proceeds of
approximately $________ million in other cash equivalents]. See "Use of
Proceeds." Partially offsetting the decrease in floor plan financing will
be an increase in floor plan debt to finance the purchase of new vehicle
inventory related to the two new dealerships. See Footnotes 2 and 3 to the
Pro Forma Combined Balance Sheet below. Interest expense associated with
such debt is reflected in the acquired companies' actual results of
operations for each period.

(2) Reflects the Company's estimate of the net deductions from selling, general
and administrative expenses and reductions in interest expense which would
have occurred if the Offering had been effected as of the beginning of each
period and consists of (a) an elimination of certain owners tax payment
bonuses and (b) a net reduction in interest expense reflecting a lower
interest rate on floor plan debt available to the Company on the acquired
companies' flooring debt. The reduction in expenses include:

Year Ended Six Months Ended
December 31, 1995 June 30, 1996
----------------- ----------------
Management compensation. . . . . . $277,000 $292,000
Interest expense . . . . . . . . . $ 97,000 $ 49,000

The net reduction in interest expense was calculated based on an average
floor plan debt of approximately $6.5 million at the interest rate
differential in effect during each respective period.

(3) Reflects amortization as if Roberts Dodge, Inc. and Sam Linder, Inc. had
been acquired as of January 1, 1995. The pro forma amortization for the
year ended December 31, 1995 and the six-month period ended June 30, 1996
reflects additional amortization of approximately $65,000 and $32,500,
respectively, associated with intangible assets, which assets consist
largely of goodwill, resulting from the acquisition of Roberts Dodge, and
Sam Linder, Inc. Such costs are being amortized over a 40-year period.
See Note 3 to Pro Forma Combined and Condensed Balance Sheet

(4) Pro forma earnings per share are based upon the assumption that __________
shares of Common Stock are outstanding for each period. This amount
represents the shares to be issued in the Offering (_________) and the
number of shares of Common Stock owned by the Company's stockholders
immediately following the Restructuring (__________).

<PAGE>

(5) The Company and Pending Acquisitions are S Corporations and accordingly not
subject to federal and state income taxes during the period indicated.
This reflects the federal and state income taxes as if the Company were and
the Pending Acquisitions had been C Corporations based on a 38% effective
rate assumed during the period.

(6) Reflects adjustment to sales, cost of sales, selling, general and
administrative, and other expenses for General Motor products which Sam
Linder, Inc. has not received approval to sell when acquired by the
Company. Amounts total $3.6 million, $3.2 million, $246,000 and $36,000
and $1.3 million, $1.1 million, $103,000, and $24,000 for the year ended
December 31, 1995 and the six month period ended June 30, 1996,
respectively.

(7) Reflects the conversion of the Company and Sam Linder, Inc. from the LIFO
method of inventory accounting to the FIFO method. Under the FIFO method,
cost of sales would have been (lower) higher by $(372,000), and $263,000
for the year ended December 31, 1995 and the six month period ended June
30, 1996, respectively. The Company and Sam Linder, Inc. intend to
convert to the FIFO accounting method effective January 1, 1997.

(8) No adjustments have been made to reflect anticipated savings as a result of
reduced lease costs under the new lease agreements with Lithia Properties
from whom the Company leases substantially all of its facilities.

<PAGE>

PRO FORMA COMBINED AND CONDENSED BALANCE SHEET

<TABLE>
<CAPTION>
As of June 30, 1996
---------------------------------------------
Pro Forma
Actual Adjustments Pro Forma
---------- ----------- ----------
(In thousands)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents . . . . . $ 3,819 $ - $
Receivables . . . . . . . . . . . . 2,472 -
Inventories . . . . . . . . . . . . 16,480 11,705 (4)(5)
Vehicles leased to others . . . . . 3,680 -
Other current assets. . . . . . . . 932 - (6) -
---------- ---------- ----------
Total current assets. . . . . . . . 27,383 11,705
Net property, plant and equipment. . . . 1,278 5,128 (4)
Vehicles leased to other, less current
portion. . . . . . . . . . . . . . . . 1,982 -
Goodwill, net; and other assets. . . . . 1,473 2,600 (4)
---------- ----------
Total assets. . . . . . . . . . . . $ 32,116 $ 19,433 $
---------- ---------- ----------
---------- ---------- ----------

LIABILITIES, MINORITY INTEREST AND OWNERS' SHAREHOLDERS' EQUITY
Current Liabilities:
Flooring notes payable. . . . . . . $ 13,723 $ - $
Current maturities of
long-term debt. . . . . . . . . . 2,207 -
Accounts payable. . . . . . . . . . 1,249 -
Accrued expenses and other
liabilities . . . . . . . . . . . 1,441 -
---------- ---------- ----------
Total current liabilities . . . . . 18,620 -
---------- ---------- ----------
Long-term debt, excluding current
maturities . . . . . . . . . . . . . . 8,262 17,040 (4)(7)
Other long-term liabilities. . . . . . . 2,299 1,950 (5)(6)
---------- ---------- ----------
Total liabilities . . . . . . . . . 29,181 18,990
---------- ---------- ----------
Minority interest. . . . . . . . . . . . 1,029 -
---------- ---------- ----------
Owners'/Shareholders' Equity:
Preferred stock. . . . . . . . . . . . . - -
Common stock . . . . . . . . . . . . . . 801 -
Retained earnings. . . . . . . . . . . . 1,105 443 (5)(6)(7)
---------- ---------- ----------
Total owners'/shareholders'
equity. . . . . . . . . . . . . . 1,906 443
---------- ---------- ----------
Total liabilities and owners'/
shareholders' equity. . . . . . . $ 32,116 $ 19,433 $
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- --------------------

(1) Reflects the application of the estimated net proceeds of the Offering.
Approximately $________ million will be used to reduce acquired floor plan
debt of acquired companies, approximately $_________ million will be
utilized to acquire Roberts Dodge, Inc. and Sam Linder, Inc. See
"Pending Acquisitions" and "Use of Proceeds."

(2) Reflects the issuance of __________ shares of Common Stock at an assumed
initial public offering price of $_________ per share, net of estimated
offering expenses.

(3) Reflects the Restructuring.

(4) Reflects the allocation of the Roberts Dodge, Inc. and Sam Linder, Inc.
purchase price based on the estimated fair value of assets acquired. The
purchase price consists of the following:

Roberts Sam
Dodge, Inc. Linder, Inc.
---------- ------------
Estimated total consideration $8,194,000 $6,108,000
Less estimated fair value of
assets acquired 6,394,000 5,308,000
---------- ----------
Excess of purchase price over
fair value of tangible assets acquired $1,800,000 $ 800,000
---------- ----------
---------- ----------

The Company is purchasing new vehicle and parts inventories, certain real
property and equipment, goodwill and dealer agreements, and may purchase
some or all of the used vehicle inventory. The excess of the purchase
price over the fair value of tangible assets acquired will be allocated to
intangible assets, primarily the dealer agreements and goodwill. Fair
value of assets acquired primarily represents the estimated fair value of
the parts inventory and certain property and equipment. Vehicle inventory,
which at June 30, 1996 approximated $___________, will be financed with
floor plan debt.

<PAGE>

(5) Reflects the conversion of the Company and Sam Linder, Inc. from LIFO
method of inventory accounting to the FIFO method. Under the FIFO method,
shareholders' equity would have been higher by $3.2 million. The Company
and Sam Linder, Inc. intends to convert to the FIFO accounting method
effective January 1, 1997.

(6) Represents the establishment of a deferred income tax asset of $997,000 and
a deferred income tax liability of $594,000 to effect the Company's
conversion to C Corporation status.

(7) Reflects the estimated distribution and payment of $_____ to its current
shareholders of substantially all of the undistributed commutative taxable
income through the date of the termination of the S Corporation election
that has been taxed or is taxable to its current shareholders and payment
of $3.3 million in notes to Principal Owners and other affiliates for all
previously taxed undistributed earning.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following should be read in conjunction with the Combined Financial
Statements of the Company and the notes thereto included elsewhere in this
Prospectus. The following includes a discussion of certain significant business
trends and uncertainties as well as other forward-looking statements. For a
discussion of important factors that could cause actual results to differ
materially from the forward-looking statements, see "Risk Factors."

GENERAL

The Company is the largest retailer of new and used vehicles in Southwest
Oregon, offering 14 domestic and imported makes of new automobiles and light
trucks at five locations. As an integral part of its operations, the Company
also arranges related finance and insurance and sells parts, service and
ancillary products. The Company has successfully acquired and integrated
several new dealer franchises in Southwest Oregon where it has achieved a
dominant market share. The Company is seeking to become a leading acquiror of
dealerships in the western United States. The Company has recently entered into
agreements to acquire an additional dealership in Eugene, Oregon, and Salinas,
California.

The following table sets forth selected condensed financial data expressed
as a percentage of total sales for the periods indicated for the average
automotive dealer in the United States. 1996 data is not available.

AVERAGE U.S. DEALERSHIP

Year ended December 31,
-----------------------------
1993 1994 1995
---- ---- ----
STATEMENT OF OPERATIONS DATA:
Sales:
New vehicles. . . . . . . . . . . . . . 60.0% 60.3% 58.6%
Used vehicles . . . . . . . . . . . . . 26.4 26.9 29.0
Parts and services sales, other . . . . 13.6 12.8 12.4
----- ----- -----
Total sales. . . . . . . . . . . . . 100.0% 100.0% 100.0%
Gross profit . . . . . . . . . . . . . . . . 13.4 13.1 12.9
Total dealership expense . . . . . . . . . . 11.8 11.3 11.5
----- ----- -----
Income before taxes. . . . . . . . . . . . . 1.6% 1.8% 1.4%
----- ----- -----
----- ----- -----
- --------------------
Source: AUTOMOTIVE EXECUTIVE/August 1996; NADA Industry Analysis Division

<PAGE>

The following table sets forth selected condensed financial data for the
Company expressed as a percentage of total sales for the periods indicated
below. Gross profit and pre-tax margins are presented on a FIFO basis and
before minority interest to permit comparisons to U.S. industry data.

LITHIA MOTORS, INC.

<TABLE>
<CAPTION>
Six Months Ended
Year ended December 31, June 30,
------------------------------ ------------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales:
New vehicles. . . . . . . . . . . . . . 46.3% 46.8% 46.7% 46.1% 45.5%
Used vehicles . . . . . . . . . . . . . 38.0 38.8 38.5 38.6 41.1
Parts and service sales . . . . . . . . 9.2 9.1 9.6 9.8 8.9
Finance, insurance and other. . . . . . 6.5 5.3 5.2 5.5 4.5
----- ----- ----- ----- -----

Total sales. . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit(1). . . . . . . . . . . . . . . 19.3 17.9 18.0 17.7 16.9
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . 16.4 13.9 14.7 14.5 13.6
----- ----- ----- ----- -----
Operating income(1). . . . . . . . . . . . . 2.9 4.0 3.3 3.2 3.3
Other income (expense), net. . . . . . . . . (0.4) 0.2 0.0 (0.1) (0.2)
----- ----- ----- ----- -----
Income before taxes and minority
interest(1). . . . . . . . . . . . . . . . 2.5% 4.2% 3.3% 3.1% 3.1%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

- --------------------

(1) Using the FIFO method of accounting for inventory to permit comparisons to
U.S. industry data. The Company currently uses the LIFO method for tax and
financial reporting, purposes but will convert to the FIFO method effective
January 1, 1997.

New vehicle revenues include sales of new vehicles (other than "book only"
fleet sales) at retail. Used vehicle revenues include amounts received for used
vehicles sold to wholesale and retail customers. Finance, insurance and other
includes fees and commissions from finance and insurance ("F&I") transactions,
sales of the Company's extended service contracts for vehicles, and "book only"
fleet sales, net. The Company recognizes revenue attributable to sales of its
service contracts over the term of the contracts for accounting purposes,
although it receives payment in full at the time of the sale. For vehicle
financing contracts, the Company receives either a fee or a spread from the
lender for originating and assigning the loan but is assessed a chargeback fee
by the lender if the contract is cancelled, in most cases, within 120 days of
making the loan. Early cancellation can result from early repayment because of
refinancing the loan, selling or trade-in of the vehicle or default on the loan.

The Company currently utilizes the LIFO method of accounting for inventory,
but will convert to the FIFO method effective January 1, 1997. If the FIFO
method of inventory accounting had been used by the Company in prior periods,
income before taxes and minority interest would have been higher (lower) by
$556,000, $615,000, and ($426,000) for the years ended December 31, 1993, 1994,
and 1995, respectively and $(162,000) and $235,000 for the six months ended June
30, 1995 and 1996, respectively, from the reported results under the LIFO
method. In the analysis of interim and annual results, the Company has
provided a discussion of gross profits on FIFO as well on a LIFO basis because
management believes that in assessing trends and comparing the Company's
performance with prior periods or with industry data, FIFO data should be
considered. Further, commencing January 1, 1997, the Company will utilize the
FIFO method of accounting for both book and tax purposes.

At each of its dealership locations, the Company's management focuses on
maximizing profitability in each area of operations rather than on the volume of
vehicle sales. The key factors affecting the Company profitability are its
dominant market share for the new vehicle brands it sells and its focused
efforts to increase the sales of used vehicles, F&I and ancillary products.

The average gross profit margins obtained by franchised automobile dealers
in the United States on sales of new vehicles have declined from over 7.0% in
1991 to 6.5% in 1995. The Company's gross profit margin (on a FIFO basis) on
new vehicle sales was 12.8% for 1995 and 13.2% for the first six months of 1996.
The Company's gross profit margin on new vehicle sales has consistently been
higher than the industry average.

<PAGE>

The Company's gross profit margin (on a FIFO basis) on used vehicle sales
was 11.4% for 1995 and 10.0% for the first six months of 1996. Excluding sales
to wholesalers (which are frequently at or close to cost), the Company's gross
profit margin on a FIFO basis in 1995 and for the first six months of 1996 on
retail sales of used vehicles were 13.2% and 12.6%, respectively. The industry
average in 1995 was 11.5%. See "Business - Dealership Operations."

The Company's salary expense, employee benefit costs and advertising
expenses comprise the majority of its selling, general and administrative
("SG&A") expense. The Company's interest expense fluctuates based primarily on
the level of debt required to support the inventory of new and used vehicles at
its dealerships and vehicles leased to others.

The Company and its affiliated entities have been treated for federal
income tax purposes as S Corporations or as partnerships under the Internal
Revenue Code since their inception and, as a result, have not been subject to
federal or certain state income taxes. Accordingly, the following discussion of
the Company's historical results of operations does not include a discussion of
income tax expense. Immediately before the completion of this Offering, and in
connection with the Restructuring, the Company and its affiliated entities that
are S Corporations will terminate their status as S Corporations and will
thereafter be subject to federal and state income tax at applicable
C Corporation rates. Prior to 1994, the shareholders and members of the Company
and the affiliated entities each received substantial year-end tax payment
bonuses to provide the cash to pay income taxes on the Company's and affiliated
entities income which was taxable to the principals. Such payments were
reflected in SG&A expense. See "Management--Executive Compensation."

The Company has accounted for each of its acquisitions prior to 1993 by the
purchase method of accounting, and, as a result, does not include in its
financial statements the results of operations of these dealerships prior to the
date they were acquired by the Company. The combined financial statements of
the Company reflect the results of operations, financial position and cash flows
of each of the Company's dealerships and those of its affiliated entities whose
operations will be combined under the Restructuring, using an "as if" pooling of
interest basis of accounting.

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

REVENUES

Revenues increased in each of the Company's operating segments for the
first six months of 1996 as compared to the first six months of 1995, resulting
in total sales increasing 27.1% to $69.1 million. New vehicle sales revenue
increased 25.5% in the first six months of 1996 to $31.5 million, compared with
$25.1 million for the first six months of 1995. The increase in sales was due
primarily to increased unit sales (22.3%) which resulted from higher levels of
promotional activity for certain popular brands and, to a much lesser extent, an
increase in the average per unit sales price (2.6%).

Used vehicle sales increased by 35.2% in the first six months of 1996 to
$28.4 million, compared with $21.0 million in the first six months of 1995. The
increase in sales was due primarily to the availability in the 1996 period of an
increasing number of late-model used vehicles which were in high demand by
consumers. Increased used vehicle revenue was attributable primarily to unit
sales increases (25.1%) and, to a lesser extent, an increase in the average per
unit sales price (8.4%).

The Company's other operating revenue increased 11.2% to $9.2 million in
the first six months of 1996, from $8.3 million in the first six months of 1995,
due to an increased number of F&I transactions and to a lesser extent, increases
in service department maintenance and repairs.

GROSS PROFIT

Gross profit (on a LIFO basis) increased 17.4% for the first six months of
1996 to $11.5 million, compared with $9.8 million for the first six months of
1995, primarily because of the increase in new and used vehicle sales during the
period. Gross profit margin decreased from 17.9% for the first six months in
1995 to 16.8% for the first six months of 1996. The decrease in gross profit
margin was primarily caused by a reduction in profit margins on used vehicle
sales and other operating revenue, partially offset by an increase in gross
profit

<PAGE>

as a percentage of sales on new vehicles. Gross profit margin in 1995 was
favorably impacted by the reduction in new vehicle inventory during the period
which resulted in historically lower vehicle inventory costs flowing through
cost of sales.

Gross profit (on a FIFO basis) increased 21.8% for the first six months of
1996 to $11.7 million, compared with $9.6 million for the first six months of
1995, primarily because of the increase in new and used vehicle sales during the
period. Gross profit margin decreased from 17.7% for the first six months in
1995 to 16.9% for the first six months of 1996. The decrease in gross profit
margin was primarily caused by a reduction in profit margins on used vehicles
sales and other operating revenue, partially offset by an increase in gross
profit margin.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

The Company's SG&A expense increased to $9.3 million in the first six
months of 1996 compared to $7.9 million in the first six months of 1995. SG&A
as a percentage of sales decreased to 13.6% from 14.5%. The increase in SG&A
was due primarily to increased selling, or variable expense related to the
increase in sales, and to a lesser extent, an increase in compensation for
additional personnel and management in preparation for the Pending Acquisitions.
See "Pending Acquisitions."

INTEREST EXPENSE

The Company's interest expense increased by 11.3% to $649,00 for the first
six months of 1996, compared to $583,000 for the first six months of 1995. The
increase was due entirely to an increase in the average balances of flooring and
other notes outstanding for the first six months of 1996, offset partially by a
decrease in interest rates. The increase in the loan balances was due primarily
to additional borrowings to finance additional inventory and notes to Principal
Owners.

OTHER INCOME, NET

Other income, net, which consisted primarily of management fees and equity
in the income of Lithia Properties and other non-dealer service income,
decreased 21.1% from $484,000 to $382,000 for the first six-months of 1996.
This reduction is due to a non reoccurring lawsuit recovery in the prior period.

1995 COMPARED TO 1994

REVENUES

Revenue increased 4.6% to $114.2 million in 1995 from $109.3 million in
1994. New vehicle revenue increased 4.2%, while used vehicle revenue increased
4.0%. The increase in sales was due to per-unit price increases in new and used
vehicles, offset in part by a reduction in unit sales of 1.1%. Industry and
Company unit sales were essentially flat from 1994 to 1995.

The Company's other operating revenue increased 6.8% to $16.9 million 1995
compared to $15.8 million in 1994, primarily due to increases in service
department maintenance and repairs.

GROSS PROFIT

Gross profit (on a LIFO basis) increased 10.8% in 1995 to $20.9 million
from $18.9 million in 1994. Gross profit margin increased from 17.3% to 18.3%
in 1995. Gross profit margin in 1995 was favorably impacted by the reduction
in new vehicle inventory during the period which resulted in historically lower
vehicle inventory costs flowing through costs of goods sold.

Gross profit (on a FIFO basis) increased 5.1% in 1995 to $20.5 million
from $19.5 million in 1994. Gross profit margin, at 18.0%, was essentially
unchanged from 1994. Increases in gross profit margin on new vehicle sales
were offset by a reduction in the gross profit margin on new vehicles and parts
and service sales.

<PAGE>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

The Company's SG&A expense increased 10.3% to $16.7 million or 14.7% of the
Company's revenues, in 1995, from $15.2 million, or 13.9% of the Company's
revenues in 1994. A reserve for workers' compensation claims, expense
associated with compensation, primarily from salaries and bonuses for the
Company's managers and, to a lesser extent, an increase in advertising expense,
accounted for a significant portion of the increase.

INTEREST EXPENSE

The Company's interest expense in 1995 increased 45.5% to $1.4 million from
$955,000 in 1994. The increase was due primarily to an increase in the
Company's average loan balances in 1995 as compared to 1994, and, to a lesser
extent, an increase in interest rates on borrowed funds. Loan balances
increased to support increased flooring of inventory, vehicles leased to others
and notes to Principal Owners incurred during the period.

OTHER INCOME, NET

Other income, net, consisted primarily of management fees derived from the
Company's management of Lithia Properties and equity in the income of Lithia
Properties and other non-dealers service income, increased 5.4% from the prior
year. This increase is attributable to primarily to receipt of a judgment in a
lawsuit brought by the Company.

1994 COMPARED TO 1993

REVENUES

Revenues increased 18.7% to $109.3 million in 1994 as compared with $92.1
million in 1993. New vehicle sales increased 19.9%, while used vehicle sales
increased 21.1% in 1994 compared to 1993. The increase in vehicle sales was due
to increased per unit sales prices and high consumer demand for new vehicles
(unit sales increase of 11.4%) as well as low-mileage, late-model used vehicles
(unit sales increase of 10.3%).

The Company's other operating revenue increased 9.2% to $15.8 million in
1994 compared to $14.5 million in 1993, primarily as a result of increases in
revenues derived from the Company's parts and service operations.

GROSS PROFIT

Gross profit (on a LIFO basis) increased 9.5% to $18.9 million in 1994 from
$17.3 million in 1993. Gross profit margin decreased to 17.3% in 1994 compared
to 18.7% in 1993. The decrease in gross profit margin occurred in all operating
segments.

Gross profit (on a FIFO basis) increased 9.6% to $19.5 million in 1994 from
$17.8 million in 1993. Gross profit margin decreased to 17.9% in 1994 compared
to 19.3% in 1993, occurred in all operating segments and was consistent with
industry trends.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

SG&A expense increased less than 1.0% in 1994. This represents a decline
in SG&A expense as a percentage of sales to 13.9% in 1994 compared to 16.4% in
1993. This decrease was primarily due to an increase in sales volumes and the
effect of special tax payment bonuses ($1.0 million) paid in 1993 to the owners
of the Company to fund personal income tax payments on earnings of the Company.
In 1994 and subsequent periods, such amounts were distributed as dividends or
other distributions and were not reflected as an administrative expense. This
decrease was offset by additional compensation and other benefits provided to
Company management.

<PAGE>

INTEREST EXPENSE

The Company's interest expense decreased 30.5% to $955,000 in 1994 from
$1.4 million in 1993. The decrease in interest expense was primarily due to
lower loan balances and a decrease in the Company's flooring interest rates.

OTHER INCOME, NET

Other income, net, for the period consisted primarily of management fees
derived from Lithia Properties and equity in the income of Lithia Properties and
other non-dealer service income, increased 35.9% to $1.1 million. This increase
is attributable to an increase in equity in the earnings of Lithia Properties,
advertising service income and administrative fees.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal needs for capital resources are to finance
acquisitions, capital expenditures and increased working capital requirements.
Historically, the Company has relied primarily upon internally generated cash
flows from operations, borrowings under its credit facility and borrowings from
its shareholders to finance its operations and expansion.

The Company currently has a credit facility with U.S. Bank, giving the
Company access to an aggregate of approximately $37.2 million of credit for
various purposes. The principal component of the credit facility is a Flooring
Line which permits the Company to borrow up to $27.9 million, based on the level
of the new and used vehicle inventories securing the line. The Flooring Line
bears interest at rates from prime (for new vehicles) to prime plus 0.5% (for
used vehicles). At June 30, 1996, the annualized rates of interest on the
Flooring Line were from 8.25% to 8.75%. The principal payments are due within
five business days of an automobile being sold. The Flooring Line also permits
the Company to borrow at the U.S. Bank's Interbank Offering Rate, which is the
rate offered to U.S. Bank for U.S. dollar deposits in the Eurodollar market
selected by U.S. Bank. These borrowings are available only in increments of
$500,000 and cannot be prepaid before the end of their terms (typically, 60 or
90 days) without substantial penalty. The rate is generally one percentage
point less than the standard rate available under the Flooring Line. The
Flooring Line expires on September 10, 1997. See Note 2 of the Notes to
Company's Combined Financial Statements. Management believes that the Flooring
Line provides the Company with financing at rates less than those available from
manufacturers and other sources.

The credit facility provides a line of credit permitting the Company to
borrow up to $1.0 million for the purpose of in-house financing of vehicle sales
and in-house leases (subject to a maximum amount equal to 75% of the total in-
house vehicle receivables under 60 days past due). See "Business--Dealership
Operations." The borrowings under this line of credit bear interest at prime
plus 1.0% (9.25% at June 30, 1996). See "Note 5 of the Notes to the Company's
Combined Financial Statements." An additional line of credit of $2.15 million
is available for the purchase of equipment, $1.4 million of which is available
for purchasing equipment associated with future or pending acquisitions. The
borrowings under this line of credit bear interest at prime plus 0.5% (8.75% at
June 30, 1996).

The credit facility also includes a Capital Line, a line of credit of $6.0
million to finance acquisitions. The Capital Line bears interest at prime plus
0.75% and is secured by the Company's inventory, receivables, equipment and real
property. During the first year in which the Capital Line is used, interest
only is payable monthly. After the first year, monthly payments are based on a
ten-year amortization, with final payment due five years from the first draw.
As of June 30, 1996, there were no borrowings under the Capital Line.

The Company has also established an additional $5.0 million unsecured line
of credit from Western Bank to finance additional acquisitions. The line bears
interest at prime plus 1.0%. As of June 30, 1996, there were no borrowings
under this line of credit.

<PAGE>

The Company had $24.2 million of debt outstanding at June 30, 1996,
consisting of $3.6 million in notes payable to the Principal Owners and other
affiliated parties, primarily to pay the undistributed Subchapter S earnings,
$1.0 million in term borrowings under fixed-rate notes secured by equipment,
$13.7 million in variable- rate borrowings under its credit facility and
$5.9 million outstanding on vehicles leased to others.

Capital expenditures, exclusive of acquisitions, were $134,000 in 1995 and
$223,000 for the first six months of 1996. The principal capital expenditures
in 1995 and the first six months of 1996 included equipment, building
improvements and computer equipment for use in the Company's dealerships.

The following table sets forth the estimated funds required to complete the
Pending Acquisitions, all anticipated prior to year-end 1996. Acquisition costs
are necessarily estimates as the actual purchase price will depend on inventory
levels at each acquired dealership upon closing. Estimates assumes the purchase
of used vehicles at each store location.

Pending Acquisitions Total Estimated Purchase Price
-------------------- ------------------------------
Roberts Dodge, Inc. $8,200,000
Sam Linder, Inc. $6,100,000

The Company anticipates that it will be able to satisfy its cash
requirements through December 1998, including its expected growth, primarily
with cash flow from operations, borrowings under the Flooring Line and the
Company's other lines of credit and the proceeds of this Offering.

SEASONALITY AND QUARTERLY FLUCTUATIONS

The Company's sales and operating results have historically varied during
each quarter of the year. Historically, sales have been lower in the fourth
quarter of each year largely due to consumer purchasing patterns during the
holiday season, inclement weather and the reduced number of business days during
the holiday season. As a result, financial performance for the Company is
generally lower during the fourth quarter than during the other quarters of each
fiscal year; however, this did not hold true for the year 1995. Management
believes that interest rates, levels of consumer debt, consumer buying patterns
and confidence, as well as general economic conditions, may also contribute to
fluctuations in sales and operating results. The timing of acquisitions may
cause substantial fluctuations of operating results from quarter to quarter.

SELECTED QUARTERLY RESULTS OF OPERATIONS

The following tables set forth the Company's results of operations data (on
a LIFO Basis) for the quarterly periods presented. This presentation should be
read in conjunction with the audited and unaudited financial statements of the
Company and the Notes thereto appearing elsewhere in this Prospectus. Because
of the seasonal nature of the Company's business and based on the Company's past
experience, it expects its operating income for the fourth quarter to be lower
than that of other quarters.

Quarter Ended
------------------------------------------------------------------------------
March 31, June 30, September 30, December 31, March 31, June 30,
1995 1995 1995 1995 1996 1996
-------- -------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Sales:
New vehicles. . . . . . . $12,241 $12,840 $14,743 $13,453 $14,817 $16,665
Used vehicles . . . . . . 10,717 10,278 12,251 10,815 13,239 15,156
Other operating
revenues . . . . . . . 4,160 4,160 4,532 4,006 4,390 4,859
-------- -------- -------- -------- -------- --------
Total sales. . . . . . . . . 27,118 27,278 31,526 28,274 32,446 36,680
Cost of sales. . . . . . . . 22,264 22,369 25,734 22,886 26,965 30,705
-------- -------- -------- -------- -------- --------
Gross profit . . . . . . . . 4,854 4,909 5,792 5,388 5,481 5,975

<PAGE>

Selling, general and
administrative. . . . . . 3,895 3,961 4,309 4,570 4,517 4,797
-------- -------- -------- -------- -------- --------
Operating income . . . . . . 959 948 1,483 818 964 1,178
Other income (expense),
net . . . . . . . . . . . 165 (203) (91) 74 (145) (94)
-------- -------- -------- -------- -------- --------
Income before minority
interest. . . . . . . . . 1,124 745 1,392 892 819 1,084
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>

Total sales. . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales. . . . . . . . 82.1 82.0 81.6 80.9 83.1 83.7
-------- -------- -------- -------- -------- --------
Gross profit . . . . . . . . 17.9 18.0 18.4 19.1 16.9 16.3
Selling, general and
administrative. . . . . . 14.4 14.5 13.7 16.2 13.9 13.1
-------- -------- -------- -------- -------- --------
Operating income . . . . . . 3.5 3.5 4.7 2.9 3.0 3.2
Other income (expense),
net . . . . . . . . . . . 0.6 (0.7) (0.3) 0.3 (0.5) (0.3)
-------- -------- -------- -------- -------- --------
Income before minority
interest. . . . . . . . . 4.1% 2.7% 4.4% 3.2% 2.5% 3.0%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>

INFLATION

The Company believes that the relatively moderate rate of inflation over
the past few years has not had a significant impact on the Company's revenues or
profitability. In the past, the Company has been able to maintain its profit
margins during inflationary periods.

NEW ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," which the Company will adopt for its fiscal year ending
December 31, 1996, will require "that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable." In the opinion of the Company's management, the
adoption of SFAS 121 will not have a material effect on the Company's financial
position or results of operations.

In October 1995, the Financial Accounting Standards Board issued Statement
No. 123 ("SFAS 123"), which establishes a fair value based method of accounting
for stock-based compensation plans. The Company will continue to account for
employee stock options under APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES and therefore believes the statement will have no impact on the
Company's financial statements other than expanded footnote disclosure. SFAS
123 will be effective for fiscal years beginning after December 15, 1995.

<PAGE>

INDUSTRY

Domestic and foreign automobile manufacturers distribute their vehicles
through franchised dealerships. In 1995, franchised automobile dealers in the
United States sold over $290 billion in new cars and light trucks and over $180
billion in used vehicles. New vehicle sales grew at an average rate of 12.5%
from 1991 to 1995, while new vehicle unit sales, after growing at an average
rate of 7.1% each year from 1991 through 1994, declined 2.0% in 1995. From 1991
through 1995 used vehicle units and revenues grew at average rates of 1.8% and
12.3% respectively. See "Risk Factors; Cyclical Nature of Automobile Sales;
Concentration of Operations in Oregon." The following chart provides
information about new and used vehicle unit and dollar sales of U.S. franchised
dealerships for the years 1991 to 1995. Used vehicle sales reflect sales at
retail and wholesale from franchised dealerships and do not include sales by
independent used car and truck retailers. Sales by independent used vehicle
retailers were $77.2, $81.0, $100.3, $134.1 and $129.7 billion, respectively
from 1991 to 1995.

UNITED STATES FRANCHISED DEALERS' VEHICLES SALES
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
(Units in millions; dollars in billions)
<S> <C> <C> <C> <C> <C>
New vehicle unit sales . . . . . . . . . 12.3 12.9 13.9 15.1 14.8
New vehicle sales revenue. . . . . . . . $ 182.9 $ 191.7 $ 225.1 $ 261.8 $ 293.3
Used vehicle unit sales. . . . . . . . . 14.6 14.6 14.8 15.1 15.7
Used vehicle sales revenue . . . . . . . $ 114.1 $ 130.0 $ 146.0 $ 167.8 $ 181.7

</TABLE>

Sources: NADA; CNW Market Research.

- --------------------

Dealerships sell new and used vehicles and offer a range of other services
and products, including repair and warranty work, replacement parts, extended
warranty coverage, financing and credit insurance. In 1995, of the average
dealership's revenue, new vehicles sales constituted 58.6%, used vehicles sales
29.0%, and sales of other products and services 12.4%, of total sales.
Automotive dealership profitability varies widely and depends, in part, on the
effective management of inventory, marketing, competition, quality control and
customer responsiveness. Since 1991, retail automobile dealerships in the
United States have earned on average between 12.9% and 14.1% gross profit margin
and between 1.0% and 1.6% net profit margin, on sales.

In recent years, manufacturers have offered attractive lease terms to
reduce the monthly costs of owning a new automobile, especially on short-term
vehicle leases. This has drawn consumers to such short-term leases, which has
had the effect of bringing the consumer back to the new vehicle market sooner
than if the purchase had been financed through longer-term debt financing. This
also provides new car dealerships with a steady source of late-model, off-lease
vehicles for their used car inventory and enables the parts and service
departments within each dealership to provide repair service under factory
warranty coverage for the term of the lease. Industry-wide, the percentage of
new vehicle retail sales that are leasing transactions has increased from 13.5%
in 1990 to 31.5% in 1995.

Several economic and industry factors have led to a consolidation of the
highly-fragmented vehicle dealership industry. Dealerships typically have been
owned and operated by one individual who controlled a single franchise. After
significant expansion in the number of franchised dealerships in the 1950's,
competitive and economic pressures during the 1970s and 1980s, particularly the
oil embargo of 1973 and the subsequent loss of market share experienced by U.S.
auto manufacturers to imported vehicles, many dealerships were forced to close
or sell to better-capitalized dealer groups. Continued competitive and economic
pressure on dealers, combined with the easing of restrictions against multiple
dealer ownership, has led to a further reduction in the number of franchised
dealerships.

According to industry data, the number of franchised dealerships has
declined from 36,336 dealerships in 1960 to 22,288 in 1996. While the number of
dealerships has decreased, there has been an increase in the formation of larger
dealer groups. Despite this consolidation, however, the Company estimates that
the largest 100 dealer groups generate less than 10% of total industry revenues
and control approximately 5% of all franchised dealerships in the retail
vehicle.

<PAGE>

The Company believes that the franchised automobile dealership industry
will continue to consolidate due to the increased capital required to operate
dealerships, the fact that many dealerships are owned by individuals nearing
retirement age and the desire of certain manufacturers to strengthen their brand
identity by consolidating their franchised dealerships. For example, General
Motors Corporation has announced its Network 2000 Channel Strategy (Project
2000) to close or consolidate 1,500 of its 8,400 franchised dealerships by the
year 2000. The Company believes that an opportunity exists for dealership
groups with significant equity capital and experience in identifying, acquiring
and professionally managing dealerships to acquire additional franchises either
for cash, stock, debt or a combination thereof. Publicly-owned dealership
groups, such as the Company, are able to offer prospective sellers
tax-advantaged transactions through the use of publicly-traded stock which may,
in certain circumstances, make them more attractive acquirors to prospective
sellers.

BUSINESS

GENERAL

OPERATING STRATEGY

The Company's operating strategy consists of the following elements:

<PAGE>

EMPHASIZE SALES OF HIGHER MARGIN PRODUCTS AND SERVICES. The Company
generates substantial incremental revenue and achieves higher profitability
through the sale of certain ancillary products and services such as F&I,
extended service contracts and vehicle maintenance. Employees receive special
training and are compensated on a commission basis to sell such products and
services. The Company arranges competitive financing packages for vehicle
purchases and ancillary products and services. In 1995, the Company arranged
financing for 59% of its new vehicle sales and 69% of its used vehicle sales, as
compared to 42% and 51%, respectively, for the average automobile dealership in
the United States. The Company also sells extended service coverage and other
vehicle protection packages which the Company believes enhance the value of the
vehicle and provide a higher level of customer satisfaction.

GROWTH STRATEGY

To date, a significant percentage of the Company's growth has resulted from
acquisitions and the Company believes that acquisition opportunities will
continue to be available to well-capitalized, experienced dealership
organizations. The Company believes that its management team has considerable
experience in acquiring dealerships and implementing its operating strategy to
improve the performance and profitability of such dealerships following the
acquisition. The Company is continuing its expansion in Oregon and has recently
signed a purchase agreement to acquire the sole Dodge franchise in Eugene,
Oregon. The Company has also begun expansion into selected markets in
California with the signing of a purchase agreement to acquire the sole Honda
franchise in Salinas, California, located near the Monterey Peninsula. See
"Risk Factors - Dependence on Acquisitions for Growth; Manufacturer's Consent to
Acquisitions" and "Pending Acquisitions."

<PAGE>

DEALERSHIP OPERATIONS

The Company owns and operates five dealership locations in southwest
Oregon, four in Medford and one in Grants Pass, Oregon. Each of the Company's
stores sell new and used vehicles and related automotive parts and services.
The Company's primary target market is comprised of middle-income customers
seeking moderately-priced vehicles. The Company offers 14 makes of new
vehicles, including Chrysler, Toyota, Plymouth, Dodge, Jeep/Eagle, Honda,
Saturn, Mazda, Pontiac, Lincoln, Mercury, Isuzu, Suzuki and Volkswagen.

The operations of each of the Company's locations are overseen by a general
manager, who has primary responsibility for all aspects of the operations of the
dealership, including new and used vehicle inventory, advertising and marketing,
and the selection of personnel. Each location is operated as a profit center
and the general manager's compensation is based on dealership profitability.
Each general manager reports directly to the Company's Chief Operating Officer.
In addition, each dealership's general sales manager, used vehicle manager,
parts manager, service manager and F&I managers report directly to the general
manager and are compensated in large part on profitability.

NEW VEHICLE SALES. The Company sells 14 domestic and imported brands
ranging from economy to luxury cars, as well as sport utility vehicles, minivans
and light trucks. In 1995, the Company sold 2,715 new vehicles with total sales
of $53.3 million, which constituted 46% of the Company's total revenues. The
following table sets forth, by manufacturer, the percentage of new vehicles sold
(net of "book only" fleet sales) by the Company during 1995.

1995 Percentage of
Manufacturer New Vehicle Sales
------------ ------------------

Chrysler (Chrysler, Plymouth, Dodge, Jeep/Eagle) . . 43.6%
Toyota . . . . . . . . . . . . . . . . . . . . . . . 23.3
Honda. . . . . . . . . . . . . . . . . . . . . . . . 11.2
Saturn . . . . . . . . . . . . . . . . . . . . . . . 9.0
Ford (Lincoln/Mercury) . . . . . . . . . . . . . . . 5.3
Mazda. . . . . . . . . . . . . . . . . . . . . . . . 2.7
General Motors (Pontiac) . . . . . . . . . . . . . . 2.1
Isuzu. . . . . . . . . . . . . . . . . . . . . . . . 2.0
Suzuki . . . . . . . . . . . . . . . . . . . . . . . 0.9
Volkswagen . . . . . . . . . . . . . . . . . . . . . 0.0 *
---
100.0%

- --------------------
* Franchise acquired in 1996.

The following table sets forth the sales and gross profit margins (on a
FIFO basis) for new vehicle sales for the periods presented.

COMPANY'S NEW VEHICLE SALES
First six
months
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Unit sales . . . . . . . 1,890 2,106 2,464 2,744 2,715 1,594
Sales revenue. . . . . . $28,946 $34,479 $42,663 $51,154 $53,277 $31,482
Gross profit margin* . . 9.6% 12.2% 12.8% 12.5% 12.8% 13.2%

</TABLE>
- --------------------
* On a FIFO basis

The Company purchases substantially all of its new car inventory directly
from manufacturers who allocate new vehicles to dealerships based on the amount
of vehicles sold by the dealership and by the dealership's market area. The
Company will also exchange vehicles with other dealers to accommodate customer
demand and to balance inventory.

<PAGE>

As required by law, the Company posts the manufacturer's suggested retail
price on every new vehicle. As is customary in the automobile industry, the
final sales price of a new vehicle is generally negotiated with the customer.
However, at the Company's Saturn dealership the Company does not deviate from
the posted price. The Company is continually evaluating its pricing practices
and policies in light of changing consumer preferences and competitive factors.

The Company also sells vehicles for delivery directly from the factory to a
fleet purchaser ("book only" fleet sales). The Company realizes substantially
less profit per vehicle than it does through retail sales. Only the net revenue
on "book only" fleet sales is included in the Company's revenue.

USED VEHICLE SALES. The Company offers a variety of makes and models of
used cars and light trucks, of varying model years and prices. Used vehicle
sales are an important part of the Company's overall profitability. In 1995,
the Company sold 5,144 used vehicles with total sales of $44.0 million which
constituted 39% of the Company's total revenue. The Company has made a
strategic commitment to emphasize used vehicle sales by the retention of a full-
time used vehicle manager at each of its locations and the allocation of
additional financing and display space to this effort. The Company also believes
there is substantial consumer demand for quality used vehicles, given the
escalating prices of new vehicles.

The Company sells used vehicles to retail customers and, in the case of
vehicles in poor condition or vehicles which have not sold within a reasonable
period of time, to other dealers and to wholesalers. As the table below
reflects, sales to other dealers and to wholesalers are frequently at or close
to cost and therefore affect the Company's overall gross profit margin on used
vehicle sales. Excluding wholesale transactions, the Company's gross profit
margin (on a FIFO basis) on used vehicle sales was 13.2% in 1995, as compared to
the industry average for 1995 of 11.5%. The following table reflects used
vehicle sale transactions of the Company from 1991 through June 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

COMPANY'S USED VEHICLE SALES
First six
months
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Retail unit sales. . . . . 2,375 2,640 3,076 3,372 3,302 1,839
Retail sales revenue . . . $18,762 $24,228 $29,680 $36,389 $36,997 $21,566
Retail gross margin* . . . 14.9% 16.2% 13.9% 13.5% 13.2% 12.6%

Wholesale unit sales . . . 1,028 1,294 1,642 1,834 1,842 1,363
Wholesale sales revenue. . $4,607 $5,702 $5,306 $5,999 $7,064 $6,829
Wholesale gross margin . . 1.9% 3.7% 3.0% 3.0% 2.4% 1.4%

Total unit sales . . . . . 3,403 3,934 4,718 5,206 5,144 3,202
Total sales revenue. . . . $23,369 $29,930 $34,986 $42,381 $44,061 $28,395
Total gross margin . . . . 12.3% 13.8% 12.3% 12.0% 11.4% 10.0%
</TABLE>
- --------------------
*On a FIFO basis.

The Company acquires the majority of its used vehicles through customer
trade-ins. The Company also acquires its used vehicles at "closed" auctions
which may be attended only by new car dealers and which offer off-lease, rental
and fleet vehicles, and at "open" auctions which offer repossessed vehicles and
vehicles being sold by other dealers.

The Company sells the majority of its used cars to retail purchasers. In
an effort to reach the Company's objective of two used vehicle sales for every
new vehicle sale, the Company employs innovative marketing programs, such as
"Priority You," which offers a 60-day/3,000-mile warranty and a 10-day/500-mile
"no questions asked" exchange program on every used vehicle it sells in order to
generate customer confidence in his or her purchasing decision. Each
dealership's used vehicle manager is responsible for the purchasing and pricing
his used vehicle inventory. The Company strives to sell each of its used
vehicles within 60-days of acquisition and financially motivates its used
vehicle managers to effect such sales within that period.

<PAGE>

VEHICLE FINANCING AND LEASING. The Company believes that its customers'
ability to obtain financing at its dealerships is critical to its ability to
sell new and used vehicles and ancillary products and services. The Company
provides a variety of financing and leasing alternatives in order to meet the
specific needs of each potential customer. The Company believes its ability to
obtain customer-tailored financing on a "same day" basis provides it with an
advantage over many of its competitors, particularly smaller competitors who
lack the resources to offer vehicle financing or who do not generate sufficient
volume to attract the diversity of financing sources that are available to the
Company. The Company's F&I managers have extensive knowledge regarding
available financing alternatives and sources and are specially trained to
determine the customer's financing needs to enable the customer to purchase or
lease an automobile. The Company seeks to finance or arrange financing for
every used vehicle it sells and has financed a larger percentage of its
transactions than the industry average. During 1995, the Company financed or
arranged for financing for over 59% of its new vehicle sales and 69% of its used
vehicle sales, compared to an industry average of 42% and 51%, respectively.

The Company maintains close relationships with a wide variety of financing
sources and arranges financing for its customers with those sources that are
best suited to satisfy its customers' particular needs. The Company also
utilizes financing sources, wherever possible, that maximize the Company's
revenues on the sale of the loan to such source. The interest rates available
and the required down payment, if any, depend to a large extent, upon the bank
or other institution providing the financing and the credit history of the
particular customer. Currently, the Company has relationships with 22 banks and
other financial institutions who are in a position to arrange financing for
automobile purchases or leases by the Company's customers. The Company's
managers have close working relationships with the third-party financing sources
which enables them to quickly determine a customer's credit position and confirm
the type and level of financing that the third party can commit to provide.
This process generally occurs within a matter of minutes while the customer is
still in the store, allowing the sales manager to assist the customer in making
a fully-informed decision regarding the terms of the sale.

In most cases, the Company arranges financing for its customers from third
party sources, which relieves the Company from any credit risk. However, in
certain circumstances where the Company believes the credit risk is manageable
and the risk-weighted income is expected to exceed the earnings available upon
the immediate sale of the finance contract, the Company will directly finance or
lease the automobile to such customer. In these cases, the Company bears the
risk of default by the borrower or lessee. Historically, the Company has
provided direct financing for less than 1.0% of its new and used vehicle sales
and has incurred insignificant losses related to such activities. The Company
intends to continue providing financing to certain of its customers and may
gradually expand its direct financing operations in circumstances where it
believes attractive returns can be achieved or other operational benefits can be
obtained.

ANCILLARY SERVICES AND PRODUCTS. The Company employs two to three F&I
managers at each dealership to market a number of ancillary products and
services to every purchaser of a new or used vehicle. Typically, these products
and services yield high profit margins and contribute significantly to improving
the overall profitability of the Company.

The Company offers extended service contracts which provide that, for a
predetermined and prepaid price, all designated repairs covered by the plan
during its term will be made by the Company at no additional charge above the
deductible. While all new vehicles are sold with the automobile manufacturer's
standard warranty, service plans provide additional coverage beyond the time
frame or scope of the manufacturer's warranty. Purchasers of used vehicles are
offered a similar extended service contract, even if the selected vehicle is no
longer under the manufacturer's warranty.

Substantially all of these contracts sold are written by the Company. The
Company manages the service and warranty obligations that it sells and provides
the parts and service (or pays the cost of others who may provide such parts and
services) for claims made under the contract. Most required services under the
contracts are provided by the Company thereby increasing the Company's sales of
parts and service. The Company's net service contract income has increased from
$575,000 in 1993 to $764,000 in 1995. Claims and cancellations have been less
than 16% of recognized service contract income in each of these years.

The Company offers its customers credit life, health and accident insurance
when they finance an automobile purchase. The Company receives a commission on
each policy sold. The Company also offers other ancillary products such as
protective coatings and automobile alarms.

<PAGE>

The Company also owns and operates two automobile rental facilities, Avis
Rent-A-Car, and Discount Auto & Truck Rental, Inc. located in Medford, Oregon.

PARTS AND SERVICE, PAINT AND BODY SHOP. The Company considers its parts
and service operations to be an integral part of its customer service program
and an important element of establishing customer loyalty. The Company provides
parts and service primarily for the new vehicle brands sold by the Company's
stores but may also service other vehicles. In 1995, the Company's parts and
service operations generated $11.0 million in revenues, or 10% of total
revenues, at a gross profit margin of 45% (on a FIFO basis). The Company
attributes its profitability in parts and service to its comprehensive
management system, including the use of a variable pricing structure designed to
reflect the difficulty and sophistication of different types of repairs. The
mark-ups on parts is based upon the cost and availability of a particular part.

The service and parts business is relatively stable and provides an
important recurring revenue stream to the Company's dealerships. The Company
also notifies owners of vehicles purchased at its dealerships when their
vehicles are due for periodic service, thereby encouraging preventive
maintenance rather than post-breakdown repairs. To a limited extent, revenues
from this department are countercyclical to new car sales as owners repair
existing vehicles rather than buy new vehicles. The Company believes this helps
mitigate the affects of a downturn in the new vehicle sales cycle.

The Company has in excess of 80 service bays throughout its network of
dealerships. All service facilities are equipped with technologically advanced
tools and diagnostic equipment and are staffed by factory-trained and certified
service technicians. The Company's dealerships feature various combinations of
fully-equipped service facilities capable of handling almost any type of vehicle
repair, from rebuilding engines and transmissions to routine maintenance
functions including oil changes, front-end alignments and inspections. All
dealerships offer lounges where service customers may relax or conduct business
while waiting for service to be performed.

The Company has operated a full-service paint and body shop since 1970.
The body shop services all of the Company's dealerships located in southwest
Oregon, other dealerships in the area that do not have a captive body shop, and
a number of major automotive casualty insurance companies that contract with the
Company to perform insurance repairs. A new 39,480 square-foot body and paint
facility is being constructed in Medford, Oregon, to handle the increased demand
for the Company's body and paint services. The new facility, to be completed in
Spring 1997, will have four paint booths as well as the latest technology, tools
and equipment. The facility will be leased to the Company pursuant to a long-
term lease from Lithia Properties. See "Properties" and "Certain Relationships
and Related Transactions."

SALES AND MARKETING

The Company emphasizes customer satisfaction throughout its organization
and continually seeks to maintain a reputation for quality and fairness. The
Company's sales force works closely with each customer to identify an
appropriate vehicle at a price affordable to that customer. The Company
believes that its "counseling" approach during the sales process increases the
likelihood that a customer will be satisfied with the vehicle purchased over a
longer time period and enables the Company to sell more vehicles at higher gross
profit margins.

The Company recently implemented a marketing program entitled "Priority
You," which provides the Company's retail customers six value-added services
which the Company believes are important to the overall satisfaction of the
customer, including a commitment to (i) provide a customer credit check within
10 minutes, (ii) complete a used vehicle appraisal within 30 minutes, (iii)
complete the paper work on a new vehicle purchase within 90 minutes, (iv)
provide a 10-day/500-mile "no questions asked" right of exchange on any used
vehicle, (v) provide a 60-day/3,000-mile warranty on all used vehicles, and (vi)
make a $20 per vehicle donation to a local charity or educational organization.
The Company believes "Priority You" will help differentiate it from traditional
dealerships and, thereby, increase customer traffic and develop customer
loyalty.

Advertising and marketing play a significant role in the success of the
Company. The competitive environment of the automobile dealership industry
requires that a substantial portion of each sales dollar be allocated to
advertising. However, as is the case with most new automobile dealerships,
approximately 75% of the Company's advertising and marketing expenses are paid
for by the automobile manufacturers. The manufacturers also provide the Company
with the benefit of market research, which assists the Company in developing its
own advertising and marketing campaigns. The Company believes that it receives
significant benefit from manufacturers'

<PAGE>

advertising, particularly in the medium-sized markets in which the Company's
stores are the only franchise representing the manufacturer.

The Company's marketing efforts generally focus on a wide range of
potential buyers. The Company offers a variety of new and used cars and light
trucks with at various prices and financing terms. The Company utilizes most
forms of media in its advertising, including television, newspaper, radio and
direct mail, including periodic mailers to previous customers. The Company
primarily uses advertising that focuses on developing its image as a reputable
dealer, offering quality service, affordable automobiles and financing for all
potential buyers. In addition, the Company's individual dealerships
periodically sponsor price discounts or other promotions designed to attract
additional customers. Each dealership has substantial control over the content
and timing of its promotions, although all advertising is coordinated by the
Company. As the Company owns several dealerships, it realizes cost savings on
its advertising expenses in the Medford, Oregon, market from volume discounts
and other media concessions.

The Company also benefits from a substantial amount of advertising through
cooperatives or associations, such as the Southern Oregon Toyota Dealers
Association. The Company participates as a member of these cooperatives or
associations whose members, among other things, pool their resources and
expertise together with that of the manufacturer to develop advertising aimed at
benefitting all of their members.

MANAGEMENT INFORMATION SYSTEM

The Company's financial information, operational and accounting data and
other related statistical information are consolidated, processed and maintained
at its headquarters in Medford, Oregon, on a network of server computers and
work stations. The flexible nature of the Company's installed network allows
for accumulation, processing and distribution of information using ADP, Inc.
computing programs. ADP, Inc. is a national software provider for many
companies including automotive dealers. All sales and expense information, and
other data related to the operations of each dealership or other Company
facility, are entered at each location. This system allows senior management to
access detailed information on a "real time" basis from all of the Company's
dealerships and other stores regarding, for example, the makes and models of
automobiles in its inventory, the mix of new and used automobile sales, the
number of automobiles being sold or leased, the percentage of vehicles for which
the Company arranged financing or sold ancillary products and services, the
profit margins being obtained on sales, and the relative performances of the
Company's dealerships to each other. Such information is also available to each
dealership's general manager. Reports can be generated that set forth and
compare revenue and expense data by department and by store, allowing management
to quickly analyze the results of operations, identify trends in the business,
and focus on areas that require attention or improvement. The Company believes
that its management information system also allows its general managers to
quickly respond to changes in consumer preferences and purchasing patterns,
thereby maximizing inventory turnover.

The Company believes that its management information system is a key factor
in successfully incorporating newly acquired businesses into the Company.
Following each acquisition, the Company installs its system at the dealership
location, thereby quickly making the financial, accounting and other operational
data easily accessible to senior management at the Company's corporate offices.
With access to such data, senior management can efficiently incorporate the
Company's operating strategy at the newly acquired dealership.

CASH MANAGEMENT

The Company employs cash management systems designed to maximize returns
and minimize interest expense. The Company's new vehicle flooring line is
supplied by the Company's bank, rather than by automobile manufacturers, unlike
many dealerships that do not have the financial condition or results of
operations that would permit them to obtain bank financing on terms more
favorable than those offered by manufacturers. As a result, the Company's
interest rate for flooring financing is 25 to 50 basis points below the rates
currently available to it from most manufacturers. In addition, in order to
minimize the outstanding balance under the Company's Flooring Line, all
available excess cash in the Company's various checking accounts are
automatically transferred at the end of each weekday to a central collateral
account U.S. Bank. These funds are used to pay down the balance under the
Flooring Line, thereby reducing the balance on which the Company is required to
pay interest and decreasing the Company's overall interest expense below what it
otherwise would be. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

41
<PAGE>

RELATIONSHIPS WITH AUTOMOBILE MANUFACTURERS

The Company has, either directly or through its subsidiaries, entered into
franchise or dealer sales and service agreements with each manufacturer of the
new vehicles it sells. The Company currently has agreements with Chrysler
Corporation (Chrysler, Plymouth, Dodge, Jeep/Eagle), American Honda Motor Co.
Inc. (Honda), American Isuzu Motors, Inc. (Isuzu), Ford Motor Company (Lincoln,
Mercury), General Motors Corporation (Pontiac), Mazda Motor of America, Inc.
(Mazda), Saturn Corporation (Saturn), Toyota Motor Distributors, Inc. (Toyota),
American Suzuki Motor Corporation (Suzuki) and Volkswagen of America
(Volkswagen).

The typical automotive franchise agreement specifies the locations at which
the dealer has the right and the obligation to sell vehicles and related parts
and products and to perform certain approved services in order to serve a
specified market area. The designation of such areas and the allocation of new
vehicles among dealerships are subject to the discretion of the manufacturer,
which generally does not guarantee exclusivity within a specified territory. A
franchise agreement may impose requirements on the dealer concerning such
matters as the showroom, the facilities and equipment for servicing vehicles,
the maintenance of inventories of vehicles and parts, the maintenance of minimum
net working capital, the training of personnel and the adherence to certain
performance standards established by the manufacturer regarding sales volume and
customer satisfaction. Compliance with these requirements is closely monitored
by each manufacturer. In addition, manufacturers require each dealership to
submit monthly and annual financial statements of operations. The franchise
agreements also grant the dealer the non-exclusive right to use and display
manufacturers' trademarks, service marks and designs in the form and manner
approved by each manufacturer.

Most franchise agreements expire after a specified period of time, ranging
from one to five years; however, some franchise agreements, including those with
Chrysler, have no termination date. The typical franchise agreement provides for
early termination or non-renewal by the manufacturer under certain circumstances
such as change of management or ownership without manufacturer consent,
insolvency or bankruptcy of the dealership, death or incapacity of the dealer
manager, conviction of a dealer manager or owner of certain crimes,
misrepresentation of certain information by the dealership or dealer manager or
owner to the manufacturer, failure to adequately operate the dealership, failure
to maintain any license, permit or authorization required for the conduct of
business, or material breach of other provisions of the franchise agreement
including the dealership's poor sales performance or low CSI ratings. The
dealer is typically entitled to terminate the franchise agreement at any time
without cause.

Each franchise agreement sets forth the name of the person approved by the
manufacturer to exercise full managerial authority over the dealership's
operations and the names and ownership percentages of the approved owners of the
dealership, and contains provisions requiring the manufacturer's prior approval
of changes in management or transfers of ownership of the dealership.
Accordingly, any significant change in ownership, including the sale of shares
by the Company to the public or the acquisition of a dealership from a third
party, is subject to the consent of the respective manufacturer. Prior to the
Offering, the Company will endeavor to obtain the approval of each relevant
manufacturer to proceed with the Restructuring and to conduct the Offering. The
Company must also request and receive approval from the relevant manufacturer
prior to the closing of an acquisition or the establishment of an automobile
dealership. See "Risk Factors -- Dependence on Automobile Manufacturers; --
Manufacturers' Consent to the Offering; -- Manufacturers' Consent to
Acquisitions."

COMPETITION

The new and used automobile dealership business in which the Company
operates is highly competitive. The automobile dealership industry is fragmented
and characterized by a large number of independent operators, many of whom are
individuals, families and small groups. In the sale of new vehicles, the
Company principally competes with other new automobile dealers in the same
general vicinity of the Company's dealership locations. Such competing
dealerships may offer the same or different models and makes of vehicles that
the Company sells. In the sale of used vehicles, the Company principally
competes with other used automobile dealers and with new automobile dealers that
operate used automobile lots in the same general vicinity of the Company's
dealership locations. The Company believes that there are approximately 14
other new automobile dealerships and 66 other used automobile stores within a
50-mile radius of Medford, Oregon, near which all of the Company's dealerships
are currently located. In addition, certain regional and national car rental
companies operate retail used car lots to dispose of their used rental cars.

<PAGE>

The Company also may face increased competition from certain automobile
"superstores," such as CarMax, a division of Circuit City Stores Inc., United
Auto Group, AutoNation USA and Driver's Mart Worldwide Inc. Such used
automobile superstores have emerged recently in various areas of the United
States and are beginning to expand nationally. However, the Company is not
aware of any of such superstores currently located in any region where the
Company operates dealerships. In addition, the Company competes to a lesser
extent with an increasing number of automobile dealers that sell vehicles
through nontraditional methods, such as through direct mail or via the Internet.

Due to the size and number of the automobile dealerships that the Company
owns, the Company is relatively larger than the independent operators with which
it currently competes. However, as it enters other markets, the Company, may
face competitors that are much larger and that have access to greater financial
resources. Historically, the Company's size has permitted it to attract
experienced and professional sales and service personnel and has provided the
Company the resources to compete effectively. The Company, however, does not
have any cost advantage in purchasing new vehicles from manufacturers and
typically relies on advertising and merchandising, sales expertise, service
reputation and location of its dealerships to sell new vehicles.

REGULATION

The Company's operations are subject to extensive regulation, supervision
and licensing under various federal, state and local statutes, ordinances and
regulations. Various state and regulatory agencies, such as OSHA, the EPA and
the Oregon Department of Justice, have jurisdiction over the operation of the
Company's dealerships, repair shops, body shops and other operations, with
respect to matters such as consumer protection, workers' safety and laws
regarding clean air and water.

The relationship between a franchised automobile dealership and a
manufacturer is governed by various federal and state laws established to
protect dealerships from the generally unequal bargaining power between the
parties. Federal laws, as well as Oregon and California state laws, prohibit a
manufacturer from terminating or failing to renew a franchise without good
cause. Under Oregon and California law, a manufacturer may not require a dealer
to accept any vehicle, part or accessory not voluntarily ordered by the dealer,
to refuse to deliver any new vehicle, part or accessory advertised by the
manufacturer as available, or to require monetary participation in any sales
promotion or advertising campaign. Manufacturers are also prohibited from
preventing or attempting to prevent any reasonable changes in the capital
structure or the manner in which a dealership is financed. Further, Oregon law
prohibits a manufacturer from failing to give effect to, or attempting to
prevent, the sale of the ownership or management, or an interest in the
ownership or management, of a dealership. Under California law, a dealer, or
any officer, partner or stockholder may sell or transfer any interest in the
dealership business provided that the sale or transfer of such interest does not
have the effect of a sale or transfer of the franchise, without the consent of
the manufacturer. Manufacturers are, however, entitled to object to a sale or
change of management where such an objection is related to material reasons
relating to the character, financial ability or business experience of the
proposed transferee. In both Oregon and California, a dealer is entitled to
seek judicial relief to prevent a manufacturer from establishing a competing
dealership of the same vehicle make within the dealer's relevant market area.

Automobile dealers and manufacturers are also subject to various federal
and state laws established to protect consumers, including so-called "Lemon
Laws" which require a manufacturer or the dealer to replace a new vehicle or
accept it for a full refund within one year after initial purchase if the
vehicle does not conform to the manufacturer's express warranties and the dealer
or manufacturer, after a reasonable number of attempts, is unable to correct or
repair the defect. Federal laws require certain written disclosures to be
provided on new vehicles, including mileage and pricing information. In
addition, the financing and insurance activities of the Company are subject to
certain statutes governing credit reporting, debt collection, and insurance
industry regulation.

The imported automobiles purchased by the Company are subject to United
States customs duties and, in the ordinary course of its business, the Company
may, from time to time, be subject to claims for duties, penalties, liquidated
damages, or other charges. Currently, United States customs duties are
generally assessed at 2.5% of the customs value of the automobiles imported, as
classified pursuant to the Harmonized Tariff Schedule of the United States.

As with automobile dealerships generally, and parts, service and body shop
operations in particular, the Company's business involves the use, handling and
contracting for recycling or disposal of hazardous or toxic substances or
wastes, including environmentally sensitive materials such as motor oil, waste
motor oil and filters,

<PAGE>

transmission fluid, antifreeze, freon, waste paint and lacquer thinner,
batteries, solvents, lubricants, degreasing agents, gasoline and diesel fuels.
The Company has also been required to remove aboveground and underground storage
tanks containing such substances or wastes. Accordingly, the Company is subject
to regulation by federal, state and local authorities establishing health and
environmental quality standards, and liability related thereto, and providing
penalties for violations of those standards. The Company is also subject to
laws, ordinances and regulations governing remediation of contamination at
facilities it operates or to which it sends hazardous or toxic substances or
wastes for treatment, recycling or disposal. The Company believes that it does
not have any material environmental liabilities and that compliance with
environmental laws, ordinances and regulations will not, individually or in the
aggregate, have a material adverse effect on the Company's results of operations
or financial condition. See "Risk Factors - Supervision and Regulation;
Environmental Matters."

EMPLOYEES
As of June 30, 1996, the Company employed approximately 340 persons on a
full-time equivalent basis. None of the Company's employees is represented by a
labor union or bound by a collective bargaining agreement. However, the service
department employees at Sam Linder, Inc., a dealership the Company is intending
to purchase later this year, are bound by a collective bargaining agreement.
See "Pending Acquisitions." The Company believes it has a good relationship
with its employees.

PROPERTIES

Substantially all of the Company's facilities currently are leased from
Lithia Properties LLC, an Oregon Limited Liability Company ("Lithia
Properties"), with aggregate monthly lease payments totalling approximately
$170,900. See "Certain Relationships and Related Transactions -- Lease of Real
Estate from Lithia Properties."

The Company's headquarters, which presently occupy approximately 4,700
square feet of space, are located in Medford, Oregon. The Company and its
various dealerships and other facilities occupy an aggregate of approximately 21
acres of land, providing approximately 185,000 square feet of building space.
Such properties consist primarily of automobile showrooms, display lots, service
facilities, two body and paint shops, rental agencies, supply facilities,
automobile storage lots, parking lots and offices. The Company believes its
facilities are currently adequate for its needs and are in good maintenance and
repair.

The following table sets forth each of the Company's facilities, all of
which are leased from Lithia Properties and the approximate square footage at
each facility, the acreage of each location and the annual rental rate for the
current and previous three years together with the rate to be effective January
1, 1997. Company in 1997, the Company will be responsible for all taxes,
insurance and maintenance with respect to the facilities. Previously, Lithia
Properties had been responsible for these payments. All facilities are located
in Medford, Oregon except for the Grants Pass Auto Center, located in Grants
Pass, Oregon. Minor parcels of land and the Avis Rent-A-Car facility are leased
from third parties.

<PAGE>

TOTAL TOTAL
BUILDING LAND-
DEALERSHIP/FACILITY SQUARE FT. ACRES
------------------- ---------- -----

Lithia Motors, Inc. 5,255 0.42
Lithia Honda Pontiac Suzuki
Isuzu Volkswagen 32,978 4.47
Lithia Toyota Lincoln Mercury 35,849 3.75
Lithia Dodge Chrysler Plymouth
Mazda Jeep/Eagle 47,446 4.25
Saturn of Southwest Oregon 11,226 2.33
Grants Pass Auto Center(Dodge)(1) 27,978 3.69
Lithia Body & Paint(2) 20,500 0.95
Lithia Body & Paint(3) 41,729 5.01
Thrift Auto Supply 11,230 0.46
Discount Auto & Truck Rental 2,778 0.31
------------------
(1) Acquired by Lithia Properties from the Company June 1, 1996.

(2) A new facility is under construction. The current facility will
be absorbed and utilized by the Lithia Dodge Chrysler Plymouth
Mazda Jeep/Eagle dealership.

(3) Under construction. To be occupied Spring 1997.

The following table sets forth information regarding the facilities of the
two proposed dealership acquisitions. See "Pending Acquisitions." The Company
may assign its right and obligation to purchase these properties to Lithia
Properties. If the properties are purchased by Lithia Properties it is
anticipated such facilities would be leased to the Company on terms similar to
the Company's other new leases and at an initial monthly rental rate equal to 1%
of the purchase price of such properties.

TOTAL TOTAL
BUILDING LAND- TO BE
DEALERSHIP/FACILITY LOCATION SQUARE FT. ACRES PURCHASED/LEASED
- ------------------- -------- ---------- ----- ----------------
Roberts Dodge Eugene, Oregon 24,996 3.68 Purchased
Linder Honda Salinas, California 17,446 3.24 Lease/Purchase

LITIGATION

The Company is, from time to time, a party to litigation that arises in the
normal course of its business operations. The Company does not believe it is
presently a party to litigation that will have a material adverse effect on its
business or operations.

<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of Lithia are as follows:

Year Elected or
Appointed
Director/Executive
NAME AGE POSITION Officer
- ------------------ --- -------- ------------------
Sidney B. DeBoer 53 Chairman, President, Chief 1968
Executive Officer and Secretary
M. L. Dick Heimann 53 Chief Operating Officer, 1970
Executive Vice President
Brian R. Neill 42 Chief Financial Officer 1995
R. Bradford Gray 45 Vice President- Acquisitions 1995

SIDNEY B. DEBOER. Mr. DeBoer has served as the Chairman, President, Chief
Executive Officer and Secretary of the Company since 1968. He also is a member
of various automobile industry organizations, including the President's Club of
the National Automobile Dealers Association, Oregon Auto Dealers Association,
Medford New Car Dealers Association, Chrysler Dealer Council, Toyota Dealer
Council and Honda Dealer Council.

M. L. DICK HEIMANN. Mr. Heimann has served as the Executive Vice President
and Chief Operating Officer of the Company since 1970. Prior to joining the
Company, he served as a district manager of Chrysler Corporation from 1967 to
1970. He is a member of various automobile industry organizations including the
Oregon Auto Dealers Association, the Jeep Dealer Council and the Medford New Car
Dealers Association, for which he has previously served as president. Mr.
Heimann is a graduate of University of Colorado with a Bachelor of Science in
Biology and Languages.

BRIAN R. NEILL. Mr. Neill has served as the Chief Financial Officer of the
Company since September 1995. Prior to joining the Company at that time, he
served as the Senior Vice President and Chief of Operations of Jackson County
Federal Bank in Medford, Oregon from 1977 to 1991. Mr. Neill, a graduate of
Northwest Christian College with a Bachelor of Science degree in Management, is
graduating from the NADA Dealer Candidate Academy in November 1996.

R. BRADFORD GRAY. Mr. Gray has served as the Vice President-Acquisitions
of the Company since 1995. From 1981 to 1995, he has served in various
capacities with the Company including, most recently, as General Manager of the
Company's Grants Pass (1991-1995) and Lithia Dodge (1989-1991) dealerships.
Since 1975, Mr. Gray has held various positions in the automobile sales
industry, including sales representative, sales manager and general manager.

The Company has committed to seek and elect at least two independent
directors to serve on the Board of Directors no later than 90 days after the
Offering. At this time no candidates have been asked to serve as directors.
All directors hold office until the next annual meeting of shareholders or until
their successors have been duly elected and qualified. Executive officers are
appointed by, and serve at the discretion of, the Board of Directors (the
"Board").

COMMITTEES OF THE BOARD

The Board will establish a Compensation Committee and an Audit Committee,
effective with the election of at least two independent directors. The
Compensation Committee will review and approve salaries for the executive
officers, any grants of stock options and other incentive compensation for
employees of the Company. The Audit Committee will recommend the selection of
auditors for the Company and will review the results of the audit and other
reports and services provided by the Company's independent auditors.

The Company intends to provide competitive compensation to its independent
directors and reimburses all directors for their reasonable out-of-pocket
expenses incurred in connection with their attendance at Board meetings.

<PAGE>

OTHER KEY PERSONNEL

All of the persons listed below have served the Company in these key
positions for over five years.

YEARS WITH CURRENT
NAME AGE THE COMPANY POSITION
- ------------------ --- ----------- --------
Stephen R. Philips 43 19 General Manager -
Toyota/Lincoln Mercury
Burt Frederickson 44 16 General Manager - Saturn
Bryan DeBoer 30 7 General Manager -
Honda/Pontiac/Suzuki/
Isuzu/Volkswagen
Don Jones, Jr. 33 7 General Manager -
Dodge/Chrysler/
Plymouth/Jeep/Eagle
Dorothy Crockett 47 16 Comptroller
Bill Daves 53 15 Vice President - Human
Resources - Training
and Development

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION. The following table shows compensation paid to the
Chief Executive Officer and each of the two other executive officers who had
total compensation during 1995 exceeding $100,000.

All of the persons listed below have served the Company in these key
positions for over five years.

SUMMARY COMPENSATION TABLE

Annual Compensation (1)
-------------------------
All Other
Name and Position Year Salary Bonus (2) Compensation
- ----------------- ---- --------- --------- ------------

Sidney B. DeBoer 1995 $ 331,125 $ 1,500 $ 2,310(3)
M. L. Dick Heimann 1995 $ 277,125 $ 1,500 $ 2,310(3)
R. Bradford Gray 1995 $ 189,060 $ 3,645 $ 5,981(4)

(1) For calendar year 1996, the officers shown in the table receive the
following annual salaries: Mr. DeBoer - $352,800; Mr. Heimann -$273,000;
and Mr. Gray - $192,000.
(2) Includes a "wellness bonus" of $1,500 for each of the named Executive
Officers. All full-time employees are entitled to an annual "wellness
bonus" equal to $150 per year for each year of employment (maximum of
$1,500) for undergoing a physical and other health counseling.
(3) Consists of amounts contributed by the Company to the accounts of Mr.
DeBoer and Mr. Heimann pursuant to the Company's 401(k) and Profit Sharing
Plan.
(4) Includes $2,310 contributed by the Company to the account of Mr. Gray
pursuant to the Company's 401(k) and Profit Sharing Plan, an automobile
allowance of $3,625 and an insurance premium payment of $46.

1996 STOCK INCENTIVE PLAN

In April, 1996, the Board and the Company's shareholders adopted the
Company's 1996 Stock Incentive Plan (the "Plan"). The Plan provides for the
granting of stock-based awards ("Awards") to executive officers (including those
who are directors), to other employees and to non-employee consultants of the
Company. Such Awards may take any form approved by the Board or by a committee
designated by the Board, including stock options, stock bonuses, stock
appreciation rights and restricted stock awards. Stock options granted under
the Plan may be either options that qualify as "incentive stock options", within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
("Incentive Options"), or those that do not qualify as such "incentive stock
options" ("Non-qualified Options"). The Plan, which permits up to __________
shares of the Company's Class A Common Stock to be issued, terminates on April
4, 2006. As of the date hereof, stock options with respect to ___________
shares of Class A Common Stock were outstanding, constituting all of the Awards
granted under the Plan to date. An additional _______________ shares were
available for issuance under the Plan. As of the date of this prospectus,
options with respect to ___________ shares are exercisable.

<PAGE>

Shares of Class A Common Stock may be issued under the Plan for any lawful
consideration. To date, the Company has only granted stock options pursuant to
the Plan. The Plan is administered by the Board or by a Compensation Committee
of the Board. Subject to the terms of the Plan, the Board or the Compensation
Committee determines the persons to whom Awards are granted and the terms and
the number of shares covered by each Award.

The term of each option may not exceed ten years from the date the option
is granted, or five years in the case of an option granted to a holder of more
than 10% of the fully-diluted capital stock of the Company. Options may become
exercisable in whole at grant or in installments over time, as determined by the
Committee.

With respect to the stock options granted by the Company to date, such
options generally expire when the optionee ceases to be affiliated with the
Company. Options may not be transferred other than by will or the laws of
descent and distribution, and during the lifetime of an optionee may be
exercised only by the optionee. Each of the outstanding stock options under the
Plan provide that if the optionee is terminated without cause at any time when
Sidney B. DeBoer is not the chairman, president or chief executive officer of
the Company, then all options held by such optionee shall become fully vested
and exercisable for a period of three months following the termination of
employment.

The Plan provides that any Award may contain, at the discretion of the
Committee, a provision conditioning or accelerating the receipt of benefits
pursuant to such Award upon the occurrence of specified events, including
continued employment by the Company, a change in control, merger, dissolution or
liquidation of the Company, or the sale of substantially all of the Company's
assets. The acceleration of vesting of Awards in the event of a merger or other
similar event may be seen as an anti-takeover provision and may have the effect
of discouraging a proposal for merger, a takeover attempt or other efforts to
gain control of the Company.

Under the terms of the options issued to date, payment upon the exercise of
an option may be in cash, by check or by delivery of shares of Class A Common
Stock with a "fair market value," as defined in the Plan, equal to the aggregate
exercise price.

OPTION GRANTS. No option grants were made during 1995 to any of the
executive officers of the Company. In April 1996, the following grants of
options to acquire Class A Common Stock were made to executive officers:

Name Number of Shares Exercise Price Expiration Date
- ------------ ---------------- -------------- ---------------

Sidney B. DeBoer April 4, 2001
M.L. Dick Heimann April 4, 2001
R. Bradford Gray April 4, 2006
Brian R. Neill April 4, 2006

The options granted to Messrs Gray and Neill have a term of 10 years and
have exercise prices equal to the fair market value of the shares underlying
those options on the date the option was granted, as determined by an
independent valuation. The options granted to Messrs DeBoer and Heimann have a
term of 5 years and have exercise prices at 110% of such fair market value as
provided by the Plan. No other Awards have been made to executive officers
under the Plan.

OPTION EXERCISES. No options were outstanding during 1995 and no options
have been exercised in 1996 by any optionee.

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of June 30, 1996, and as adjusted to
reflect the sale of shares of the Company's Common Stock in this Offering,
certain information with respect to beneficial ownership of the Common Stock by
(i) each person or entity known by the Company to own beneficially more than 5%
of the Common Stock, (ii) each director of the Company, (iii) each executive
officer of the Company named in the summary compensation table, and (iv) all
directors and officers as a group. Except as indicated in footnotes to this
table, each of the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned by
them, subject to community property laws where applicable.

<PAGE>

Shares Beneficially Owned Shares Beneficially Owned
Before the Offering(1) After the Offering(1)
-------------------------------------------- --------------------------------------------------------
Class A Class B Class A Class B Percent of
-------------------- ---------------------- -------------------------------------------- Voting
Name and Address(2) Number Percent Number Percent Number Percent Number Percent Power
- ------------------- ------ ------- ------ ------- ------ ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lithia Holding Company,
LLC (3) --- ---% ---% --- ---% 100% _____%
Sidney B. DeBoer(3) (4) 100% 100% 1.7% 100% ---%
M. L. Dick Heimann(3) (4) 100% --- ---% 1.7% --- ---% ---%
Brian R. Neill (5) 100% --- ---% * --- ---% *
R. Bradford Gray --- ---% --- ---% --- ---% --- ---% ---%
All directors and officers
as a group (4 persons) 100% 100% 4.1% 100% ---%
</TABLE>

* Less than 0.1%

(1) Assumes consummation of the Restructuring. See "Company Restructuring and
Prior S Corporation Status." Also assumes no exercise of the Underwriters'
over-allotment option. See "Underwriting".
(2) All such person can be reached c/o 360 E. Jackson Street, Medford, Oregon
97501.
(3) Lithia Holding's members consists of Messrs DeBoer, Heimann and Gray. Mr.
DeBoer, as the manager of Lithia Holding and pursuant to the terms of its
operating agreement, has the sole voting and investment power with respect
to all of the Class B Common Stock held.
(4) Each of Messrs DeBoer and Heimann hold an option to purchase
shares of Class A Common Stock at a exercise price of $ per
share, of which are exercisable within 60 days of this
Prospectus. See "Executive Compensation" and "1996 Stock Incentive Plan".
(5) Mr. Neill holds an option to acquire shares of Class A
Common Stock at $ per share, all of which are exercisable within
60 days of the date of this Prospectus.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

COMPANY RESTRUCTURING AND INDEBTEDNESS TO EXECUTIVE OFFICERS

The Company is currently owned by Sidney B. DeBoer (62.5%) and M. L. Dick
Heimann (37.5%). Mr. DeBoer and Mr. Heimann also own, with the same ownership
percentages, Lithia Rentals, Lithia Leasing, Lithia Chrysler Plymouth Jeep
Eagle, Inc., and Discount Auto & Truck Rental, Inc. Further, Sidney B. DeBoer
and Stephen R. Phillips have 0.01% and 19.99% interests, respectively, in Lithia
Toyota LLC, which is otherwise owned by the Company. Similarly, Sidney B.
DeBoer and R. Bradford Gray have 0.01% and 24.99% interests, respectively, in
Lithia's Grants Pass Auto Center, L.L.C. and Lithia Dodge, L.L.C.

Contemporaneously with the Offering, and pursuant to an Agreement of
Reorganization, the Company and the foregoing affiliated entities will
consummate a restructuring which will result in each of the Company's
dealerships and operating divisions becoming direct or indirect wholly-owned
subsidiaries of the Company. The Company will continue to be controlled by
Sidney B. DeBoer and M. L. Dick Heimann through their ownership of Lithia
Holding. See "Company Restructuring and Prior S Corporation Status," "Principal
Shareholders" and "Description of Capital Stock."

The Company and its affiliated corporations and limited liability
companies, which together directly or indirectly own and control the Company's
dealerships, are currently treated for federal and state income tax purposes as
subchapter S Corporations or partnerships under the Internal Revenue Code of
1986, as amended. Accordingly, Sidney B. DeBoer, M. L. Dick Heimann, R.
Bradford Gray and Stephen R. Philips, the principal owners of the Company and
the affiliated entities, have been taxed directly on the earnings of those
entities. In December 1995, the Company and the affiliated entities distributed
to these individuals the Dividend Notes in the aggregate amount of $3.9 million,
representing approximately all of the previously taxed undistributed earnings of
those entities. See "Company Restructuring and Prior S Corporation Status."
The Dividend Notes bear interest at 9% per annum, payable in ten equal annual
installments beginning one year and ten days after demand by the noteholders.
Prior to completion of the Offering, the Company and the affiliated entities
intend to distribute additional amounts in the form of additional promissory
notes to these individuals in an aggregate amount equal to the undistributed
taxable income of the Company and the affiliated entities from January 1, 1996,
through the effective date of the Restructuring. Any final distribution of
earnings will be paid at or shortly after the closing of the Offering. Upon
consummation of the Restructuring, the Company will assume the obligations of
the affiliated entities under the Dividend Notes. It is anticipated that the
Company will prepay the Dividend Notes and make distributions of the remaining
undistributed earnings using a portion of the proceeds of the Offering. See
"Use of Proceeds." The total amount to be paid to these individuals, including
prepayment of the Dividend Notes, is expected to be approximately $6.0 million,
with the actual amount being dependent on the actual earnings of the

<PAGE>

Company and the affiliated entities through the date of Restructuring.
Dividends of $2.0 million were paid to those individuals in 1994 with respect to
prior Company and affiliated entity income.

LEASE OF REAL ESTATE FROM LITHIA PROPERTIES

Substantially all of the real property on which the Company's businesses
are located is owned by Lithia Properties, the members of which are the Company
(20%), Sidney B. DeBoer (35%), M.L. Dick Heimann (30%) and three of Mr. DeBoer's
children, who own 5% each. The Company and the affiliated entities paid an
aggregate of $2.1 million, $2.1 million and $2.2 million in lease payments to
Lithia Properties during the years ended December 31, 1993, 1994 and 1995,
respectively. For the years ending December 31, 1996, lease payments will total
$2.3 million of which $2.4 million represents the lease of the Company's
facilities in Grants Pass which were acquired by Lithia Properties on June 1,
1996, from Lithia Dodge, LLC. The Company and Lithia Properties have recently
entered into new lease agreements with respect to each facility, effective
January 1, 1997. The new leases have terms of 30 years and have aggregate
annual payments of $2.0 million. This amount includes approximately $304,000
for the lease of a body and paint facility currently under construction, and
expected to be completed in 1997. Lease payments will commence on such facility
upon completion of construction. Unlike in prior years, and commencing 1997,
the Company will be responsible for property taxes, insurance and maintenance
expenses. The initial payments are determined by a formula based on the fair
market value of the properties according to recent independent appraisals, and
approximate 1% of such fair market value per month. Lease payments are paid
monthly and will be adjusted each year beginning January 1998 to an amount equal
to any increase in the cost of living based on the "Consumer Price Index -
Pacific Cities and U. S. Average" (1967-100) published by the bureau of Labor
Statistics of the U. S. Department of Labor, for the City of Portland, Oregon.
If any improvements are made to the properties at the Company's request or with
its concurrence, then upon completion, the monthly lease payment shall be
adjusted as follows: If the improvements are of such a nature as to cause an
increase in the fair market value of the property, then the monthly lease
payment shall be increased by 1.0% of the increase in fair market value. If the
improvements do not materially increase the fair market value of the property,
then the monthly lease payment shall be increased by the amount which would
amortize the cost of the improvements over a 60-month period at 12% interest per
annum. For a more complete description of the Company's facilities, see
"Business."

MANAGEMENT CONTRACT WITH LITHIA PROPERTIES

The Company provides accounting, property management, and general
administrative services to Lithia Properties in connection with the management
of the facilities owned by Lithia Properties and leased to the Company or
related entities. The Company receives a monthly fee of $36,000 for its
services to Lithia Properties. In 1995, the Company received $288,000 under the
contract. The current Management Contract terminates on December 31, 1996.

GUARANTEE OF LITHIA PROPERTIES, INDEBTEDNESS

The Company guaranteed certain indebtedness of Lithia Properties, incurred
in connection with the purchase or refinancing of real property which secures
the loan. The loans have a total principal amount of $13.1 million with
interest rates from 8.25% to 10.0% and have terms of from 2 years to 12 years.

<PAGE>

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company's authorized capital stock consists of 100,000,000 shares of
Class A Common Stock, no par value, 25,000,000 shares of Class B Common Stock,
no par value, and 15,000,000 shares of Preferred Stock, no par value. The Board
of Directors may, by its own action, decrease the number of authorized shares of
Class B Common Stock. If it does so, the number of shares of Class A Common
Stock will automatically be increased on a share for share basis.

COMMON STOCK

Each share of Common Stock is designated as either Class A Common Stock or
Class B Common Stock. As of the date hereof, there are no shares of Class A
Common Stock outstanding and _______________ shares of Class B Common Stock
outstanding. All of the outstanding Class B Common Stock is held by Lithia
Holding. Upon completion of this Offering, there will be _____________ shares (
_____________ shares if the over-allotment options is exercised) of Class A
Common Stock and _______________ shares of Class B Common Stock outstanding.
The issued and outstanding shares of Class B Common Stock have been, and the
shares of Class A Common Stock offered hereby will be, duly authorized, validly
issued, fully paid and nonassessable.

Without the prior approval of shareholder holding over a majority of all
Class A Common Stock outstanding, no additional shares of Class B Common Stock
can be issued, except in conjunction with stock splits, reverse stock splits,
stock dividends, reclassification and similar transactions and events regarding
the Class A Common Stock that would otherwise have the effect of changing
conversion rights of the Class B Common Stock relative to the Class A Common
Stock (the "Adjustments").

Holders of Common Stock do not have any preemptive rights or rights to
subscribe for additional securities of the Company. Shares of Common Stock are
not redeemable, and there are no sinking fund provisions.

While the shares of Class A Common Stock are not convertible into any other
series or class of the Company's securities, each share of Class B Common Stock
is freely convertible into one share (subject to the Adjustments) of Class A
Common Stock at the option of the holder of the Class B Common Stock. All
shares of Class B Common Stock shall automatically convert to shares of Class A
Common Stock (on a share-for-share basis, subject to the Adjustments) on the
earliest record date for an annual meeting of the Company shareholders on which
the number of shares of Class B Common Stock outstanding is less than 1% of the
total number of shares of Common Stock outstanding. Shares of Class B Common
Stock may not be transferred to third parties (except for transfers to certain
family members and in other limited circumstances). Any purported transfer of
Class B Common Stock to a person who is not a permitted transferee under the
Articles of Incorporation is automatically void.

Subject to the preferences applicable to any Preferred Stock outstanding at
the time, holders of shares of Common Stock are entitled to dividends if, when
and as declared by the Board of Directors from funds legally available therefor,
and are entitled, in the event of liquidation, to share ratably in all assets
remaining after payment of liabilities and Preferred Stock preferences, if any.
Each share of Class A Common Stock and Class B Common Stock will be treated
equally with respect to dividends and distributions.

Holders of Class A Common Stock are entitled to one vote for each share
held of record, and holders of Class B Common Stock are entitled to ten votes
for each share held of record. The Class A Common Stock and Class B Common
Stock vote together as a single class on all matters submitted to a vote of
shareholders (including the election of directors), except that, the Oregon
Business Corporation Act would entitled either the Class A Common Stock or the
Class B Common Stock to vote as a separate voting group on any proposed
amendment of the Company's Articles of Incorporation otherwise requiring
shareholder approval if the proposed amendment would (i) increase or decrease
the aggregate number of authorized shares of the class, (ii) effect an exchange
or reclassification of all or part of the shares of the class into shares of
another class or create a right to do so, (iii) change the shares of all or part
of the class into a different number of shares of the same class, (iv) create a
new class having rights or preferences with respect to distributions or
dissolution that are prior to superior or substantially equal to shares of the
class or (v) otherwise alter the rights, preferences or limitations of all or
part of the shares of the class. In these circumstances, the class of Common
Stock to be altered shall vote on the

<PAGE>

amendment as a separate class. Shares of Common Stock do not have cumulative
voting rights with respect to the election of directors. Immediately after this
Offering, Lithia Holding will hold shares of Class B Common Stock constituting
approximately ___% of the voting power of the outstanding Common Stock, which
will allow it to control all actions to be taken by the shareholders, except as
noted above, including the election of all directors to the Board of Directors.
See "Principal Shareholders" and "Risk Factors--Control by Management."

PREFERRED STOCK

The Board of Directors may, without further action of the shareholders of
the Company, issue shares of Preferred Stock in one or more series and fix the
rights and preferences thereof, including the dividend rights, dividend rates,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), redemption price or prices, liquidation preferences
and the number of shares constituting any series or the designations of such
series, and increase or decrease the number of shares of any such series (but
not below the number of such shares then outstanding). The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of holders of any Preferred Stock that may be issued in the future.
Issuance of Preferred Stock provides desirable flexibility in connection with
possible acquisitions and other corporate purposes. However, the Board of
Directors, without further shareholder approval, can issue Preferred Stock with
voting and conversion rights that would adversely affect the voting power and
other rights of the holders of Common Stock. In addition, the Board of
Directors can issue and sell shares of Preferred Stock to designated persons,
the impact of which could make it more difficult for a holder of a substantial
block of Common Stock to remove incumbent directors or otherwise gain control of
the Company. The Company has no present plans to issue any shares of Preferred
Stock.

CERTAIN PROVISIONS OF THE OREGON BUSINESS CORPORATIONS ACT

Upon completion of the Offering, the Company will become subject to the
Oregon Control Share Act (Oregon Revised Statutes Sections 60.801-60.816). The
Oregon Control Share Act generally provides that a person (the "Acquiring
Person") who acquires voting stock of an Oregon corporation in a transaction
which results in such Acquiring Person holding more than 20%, 33-1/3% or 50% of
the total voting power of such corporation (a "Control Share Acquisition")
cannot vote the shares it acquires in the Control Share Acquisition ("control
shares") unless voting rights are accorded to such control shares by the holders
of a majority of the outstanding voting shares, excluding the control shares
held by the Acquiring Person and shares held by the Company's officers and
inside directors ("interested shares"), and by the holders of a majority of the
outstanding voting shares, including interested shares. This vote would be
required at the time an Acquiring Person's holdings exceed 20% of the total
voting power of a company, and again at the time the Acquiring Person's holdings
exceed 33-1/3% and 50%, respectively. The term "Acquiring Person" is broadly
defined to include persons acting as a group. A transaction in which voting
power is acquired solely by receipt of an immediately revocable proxy does not
constitute a "Control Share Acquisition."

The Acquiring Person may, but is not required to, submit to the Company an
"Acquiring Person Statement" setting forth certain information about the
Acquiring Person and its plans with respect to the Company. The Acquiring
Person Statement may also request that the Company call a special meeting of
shareholders to determine whether the control shares will be allowed to retain
voting rights. If the Acquiring Person does not request a special meeting of
shareholders, the issue of voting rights of control shares will be considered at
the next annual meeting or special meeting of shareholders that is held more
than 60 days after the date of the Control Share Acquisition. If the Acquiring
Person's control shares are accorded voting rights and represent a majority or
more of all voting power, shareholders who do not vote in favor of the
restoration of such voting rights will have the right to receive the appraised
"fair value" of their shares, which may not be less than the highest price paid
per share by the Acquiring Person for the control shares.

Upon completion of the Offering, the Company will also become subject to
the Oregon Business Combination Act (Oregon Revised Statutes Sections 60.825-
60.845). The Oregon Business Combination Act generally provides that in the
event a person or entity acquires 15% or more of the voting stock of an Oregon
corporation (an "Interested Shareholder"), the corporation and the Interested
Shareholder, or any affiliated entity, may not engage in certain business
combination transactions for a period of three years following the date the
person became an Interested Shareholder. Business combination transactions for
this purpose include (a) a merger or plan of share exchange, (b) any sale,
lease, mortgage or other disposition of the assets of the corporation where the
assets have an aggregate market value equal to 10% or more of the aggregate
market value of the corporation's assets or outstanding capital stock, and (c)
certain transactions that result in the issuance of capital stock of the
corporation

<PAGE>

to the Interested Shareholder. These restrictions do not apply if (i) the
Interested Shareholder, as a result of the transaction in which such person
became an Interested Shareholder, owns at least 85% of the outstanding voting
stock of the corporation (disregarding shares owned by directors who are also
officers and certain employee benefit plans), (ii) the Board of Directors
approves the share acquisition or business combination before the Interested
Shareholder acquired 15% or more of the corporation's voting stock, or (iii) the
Board of Directors and the holders of at least two-thirds of the outstanding
voting stock of the corporation (disregarding shares owned by the Interested
Shareholder) approve the transaction after the Interested Shareholder acquires
15% or more of the corporation's voting stock.

The Oregon Control Share Act and the Oregon Business Combination Act will
have the effect of encouraging any potential acquiror to negotiate with the
Company's Board of Directors and will also discourage certain potential
acquirors unwilling to comply with the provisions of these laws. A corporation
may provide in its articles of incorporation or bylaws that the laws described
above do not apply to its shares. The Company has not adopted such a provision
and does not currently intend to do so. These laws may make the Company less
attractive for takeover, and thus shareholders may not benefit from a rise in
the price of the Common Stock that a takeover could cause.

LIMITATION OF LIABILITY AND INDEMNIFICATION

As allowed by the Oregon Business Corporation Act, the Company's Articles
of Incorporation provide that the liability of the directors of the Company for
monetary damages will be eliminated to the fullest extent permissible under
Oregon law. This is intended to eliminate the personal liability of a director
for monetary damages in an action brought by or in the right of the Company for
breach of a director's duties to the Company or its shareholders except for
liability: (1) for any breach of the director's duty of loyalty to the Company
or its shareholders, (2) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; and (3) for any
unlawful distribution to shareholders; or (4) for any transaction from which the
director derived an improper personal benefit. This provision does not limit or
eliminate the rights of the Company or any shareholder to seek non-monetary
relief, such as an injunction or rescission, in the event of a breach of a
director's duty of care. This provision also does not affect the director's
responsibilities under any other laws, such as the federal or state securities
or environmental laws.

The Articles of Incorporation and the Bylaws also provide that the Company
shall indemnify, to the fullest extent permitted under Oregon law, any person
who has been made, or is threatened to be made, a party to an action, suit or
legal proceeding by reason of the fact that the person is or was a director or
officer of the Corporation. The Company has entered into separate
indemnification agreements with each of its directors and executive officers.
These agreements require the Company to indemnify its officers and directors to
the fullest extent permitted by law, including circumstances in which
indemnification would otherwise be discretionary. Among other things, the
agreements require the Company to indemnify directors, officers and such
employee against certain liabilities that may arise by reason of their status or
service as a director, officer or employee and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified.

TRANSFER AGENT

The transfer agent for the Common Stock is ___________________________.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding _______
shares of Class A Common Stock (and any of the __________________ shares sold
which are subject to the over-allotment option) and ______________ shares of
Class B Common Stock. Of these shares, the shares of Class A Common Stock sold
in the Offering, except for any shares purchased by an "affiliate" of the
Company, as that term is defined in the rules and regulations under the
Securities Act of 1933, as amended (the "Securities Act"), will be freely
tradable without restriction or further registration under the Securities Act.
The remaining _____________ shares of Class B Common Stock outstanding were
issued and sold by the Company pursuant to an exemption provided under the
Securities Act and are restricted securities within the meaning of Rule 144
under the Securities Act (the "Restricted Shares"). The Restricted Shares may
be resold only in an Offering registered under the Securities Act, pursuant to
an exemption from such registration such as that provided by Rule 144 under the
Act, or, in certain circumstances, in private transactions outside of any public
trading market.

<PAGE>

In general, under Rule 144 a person (or persons whose shares must be
aggregated for purposes of the volume limitation under the rule), including any
affiliate, who has beneficially owned Restricted Shares for at least two years
would be entitled to sell, within any three-month period, a number of shares
that does not exceed the greater of 1% of the outstanding shares of the
Company's Common Stock (_____________ shares, assuming the issuance of ________
shares of Class A Common Stock in this Offering by the Company) or the reported
average weekly trading volume in the over-the-counter market for the four weeks
preceding the sale. Sales under Rule 144 are also subject to certain manner of
sale restrictions and notice requirements and to the availability of current
public information about the Company. It is not expected that such information
concerning the Company will be available until at least 90 days after the
closing date of the Offering. Future sales of such shares could have a material
adverse effect on the market price of the Company's Common Stock. Persons who
have not been affiliates of the Company for at least three months, and who have
held their shares for more than three years, are entitled to sell such shares
without any volume limitations, in reliance upon paragraph (k) of Rule 144.
Upon completion of the Restructuring, Lithia Holding will be deemed to have held
the ____________ shares of Class B Common Stock for more than three years, but
is an affiliate of the Company. Affiliates of the Company are subject to the
volume and other limitations with respect to all shares held by them, regardless
of whether such shares are Restricted Shares.

In addition, the Company has reserved _________________ shares of Class A
Common Stock for issuance pursuant to the Plan. Of this amount, _______________
shares are subject to outstanding options, ________________ of which are
exercisable as of the date of this Prospectus. The Company intends to file a
registration statement under the Act to register shares to be issued pursuant to
the Plan. Such registration statement is expected to be filed as soon as
practicable after the closing date of the Offering and will become effective
automatically upon filing. Shares issued upon exercise of outstanding stock
options after the effective date of the Plan's registration statement generally
will be eligible for resale in the open market, unless held by affiliates of the
Company.

Lithia Holding and each executive officer and director of the Company have
agreed not to sell or otherwise dispose of shares of Common Stock for a period
of 180 days following the closing date of the Offering without the consent of
Furman Selz LLC, one of the Representatives of the Underwriters. See
"Underwriting." After expiration of the lock-up period, all of such shares will
be eligible for sale in the public market, subject to the provisions of Rule
144, described above.

Prior to the Offering there has been no public trading market for the
Common Stock of the Company and no accurate predictions can be made as to the
effect, if any, that sales of Restricted Shares or shares issued under the Plan
may have on the prevailing market price of the Class A Common Stock from time to
time. See "Principal Shareholders" and "Management -- 1996 Stock Incentive
Plan." Sales of significant numbers of Restricted Shares or shares issued under
the Plan or the "overhang" resulting from the eligibility of such shares for
sale into the public trading markets could adversely affect prevailing market
prices and could impair the ability of the Company to raise additional capital
in the future through an Offering of its equity securities at a price acceptable
to the Company or use its equity securities as consideration in future
acquisitions.

UNDERWRITING

The underwriters named below (the "Underwriters"), for which Furman Selz
LLC, Dain Bosworth Incorporated and EVEREN Securities, Inc. are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions set forth in the Underwriting Agreement, to purchase from
the Company the number of shares of Class A Common Stock indicated below
opposite their respective names:

Number of
Underwriter Shares
----------- ---------
Furman Selz LLC ........................
Dain Bosworth Incorporated .............
EVEREN Securities, Inc. ................
_____________________ ..................
_____________________ ..................
_____________________ ..................
_____________________ ..................
---------
Total .............................
-----------
-----------

<PAGE>

The Underwriting Agreement provides that the obligations of the
Underwriters to purchase the shares of Class A Common Stock listed above are
subject to the approval of certain legal matters by counsel and various other
conditions. The Underwriting Agreement also provides that the Underwriters are
committed to purchase all of the shares of Class A Common Stock offered hereby,
if any are purchased (except for any shares that may be purchased through
exercise of the Underwriters' over-allotment option which may be exercised by
the Underwriters in whole or in part).

The Representatives have advised the Company that the Underwriters propose
to offer the shares of Class A Common Stock to the public at the initial public
offering price set forth on the cover of this Prospectus and to certain dealers
at such price less a concession not in excess of $ per share to certain
other dealers. After the Offering, the public offering price and other selling
terms may be changed by the Representatives. The Class A Common Stock is
offered subject to receipt and acceptance by the Underwriters, and to certain
other conditions, including the right to reject orders in whole or in part.

Prior to this Offering, there has been no public market for the Class A
Common Stock. Accordingly, the initial pubic offering price has been determined
by negotiation between the Company and the Representatives. Among the factors
considered in determining the initial public offering price were the Company's
present and historical results of operations, current financial condition,
estimates of the business potential and prospects of the Company, the condition
of the Company's target market, the experience of the Company's management, the
economics of the industry in general, the general condition of the equities
market at the time of the Offering and other relevant factors. There can be no
assurance that any active trading market will develop for the Class A Common
Stock or as to the price at which the Class A Common Stock may trade in the
public market from time to time subsequent to the Offering.

The Company has granted the Underwriters an option, exercisable during the
30-day period after the date of this Prospectus, to purchase up to _____________
additional shares of Class A Common Stock at the initial public offering price
set forth on the cover page of this Prospectus, less underwriting discounts and
commissions. To the extent the Underwriters exercise the option, each
Underwriter will have a firm commitment, subject to certain conditions, to
purchase such number of additional shares of Class A Common Stock as is
proportionate to such Underwriter's initial commitment to purchase shares from
the Company. The Underwriters may exercise such option solely to cover over-
llotments, if any, incurred in connection with the sale of shares of Class A
Common Stock offered hereby.

The Underwriting Agreement provides that the Company has agreed to
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments that the Underwriters may
be required to make in respect thereof.

All of the Company's executive officers and directors and Lithia Holding
have agreed that, for a period of 180 days after the day on which the
Registration Statement becomes effective by order of the Commission, they will
not, without the prior written consent of Furman Selz LLC, directly or
indirectly, offer for sale, sell, contract to sell, or grant any option to sell
(including, without limitation, any short sale), pledge, establish an open "put
equivalent position" within the meaning of Rule 16a-1(h) under the Exchange Act,
transfer, assign or otherwise dispose of any shares of the Company's Class A
Common Stock or securities exchangeable for or convertible into shares of the
Company's Class A Common Stock, or any option, warrant or other right to acquire
such shares, or publicly announce the intention to do any of the foregoing.

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales of Class A Common Stock offered by this Prospectus made
to any accounts over which they exercise discretionary authority.

The Company has applied for quotation of the Class A Common Stock on the
Nasdaq National Market under the symbol "LITH."

The foregoing is a brief summary of the provisions of the Underwriting
Agreement and does not purport to be a complete statement of its terms and
conditions. A copy of the form of Underwriting Agreement has been filed as an
exhibit to the Registration Statement.

<PAGE>

LEGAL MATTERS

The validity of the Company's Class A Common Stock being offered hereby
will be passed upon for the Company by Foster Pepper & Shefelman. Certain legal
matters will be passed upon for the Underwriters by Milbank, Tweed, Hadley &
McCloy, Los Angeles, California.

EXPERTS

The combined financial statements and schedules of Lithia Motors, Inc. and
affiliates as of December 31, 1994 and 1995, and for each of the years in the
three-year period then ended, and the combined financial statements of Roberts
Dodge, Inc. at December 31, 1995 and for each of the years in the two-year
period then ended included herein and elsewhere in the Registration Statement
have been included herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent auditors appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.

The financial statements of Sam Linder, Inc., included in this Prospectus
and in the Registration Statement, have been audited by Moss Adams LLP,
independent certified public accountants, to the extent and for the periods set
forth in their reports appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such reports given upon the
authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 under the Securities Act,
with respect to the Class A Common Stock offered hereby. This Prospectus, which
is part of the Registration Statement, does not contain all of the information
set forth in the Registration Statement and the exhibits and financial schedules
thereto. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein are not necessarily complete, and
in each instance that a reference is made to a contract or other document filed
as an exhibit to the Registration Statement, each such statement is qualified in
all respects by such reference. A copy of the Registration Statement may be
examined without charge at the Commission's principal offices at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 7 World Trade Center, Suite 1300, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any part thereof may be obtained
from the Public Reference Section of the Commission upon payment of certain fees
prescribed by the Commission. Copies of such materials may also be obtained
from the website that the Commission maintains at http://www.sec.gov.

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.

The Company intends to furnish to its shareholders annual reports
containing consolidated financial statements audited by independent certified
public accountants and quarterly reports containing unaudited consolidated
financial information for the first three quarters of each year.

<PAGE>
LITHIA MOTORS, INC.
AND AFFILIATED COMPANIES

INDEX TO COMBINED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
HISTORICAL FINANCIAL STATEMENTS

Lithia Motors, Inc. and Affiliated Companies

Report of Independent Auditors'.......................................................................... F-1

Combined Balance Sheets.................................................................................. F-2

Combined Statements of Operations........................................................................ F-3

Combined Statements of Changes in Owners' Equity......................................................... F-4

Combined Statements of Cash Flows........................................................................ F-5

Notes to Combined Financial Statements................................................................... F-6

Roberts Dodge, Inc. and Affiliated Company

Independent Auditors' Report............................................................................. F-20

Combined Balance Sheets.................................................................................. F-21

Combined Statements of Operations........................................................................ F-22

Combined Statements of Changes in Owners' Equity......................................................... F-23

Combined Statements of Cash Flows........................................................................ F-24

Notes to Combined Financial Statements................................................................... F-25

Sam Linder, Inc.

Independent Auditors' Report............................................................................. F-31

Balance Sheet............................................................................................ F-32

Statements of Operations and Accumulated Deficit......................................................... F-33

Statement of Cash Flows.................................................................................. F-34

Notes to Financial Statements............................................................................ F-35
</TABLE>

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors
Lithia Motors, Inc. and Affiliated Companies:

We have audited the accompanying combined balance sheets of Lithia Motors,
Inc. and Affiliated Companies as of December 31, 1994 and 1995, and the related
combined statements of operations, changes in owners' equity, and cash flows for
the years in the three-year period ended December 31, 1995. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Lithia Motors, Inc.
and Affiliated Companies as of December 31, 1994 and 1995 and the results of
their operations and their cash flows for the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.

KPMG PEAT MARWICK LLP

Portland, Oregon

March 8, 1996

F-1
<PAGE>
LITHIA MOTORS, INC.
AND AFFILIATED COMPANIES
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
-------------------- ------------------------
1994 1995 ACTUAL PROFORMA
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)

<CAPTION>
(NOTE 9)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 6,952 $ 9,350 $ 3,819 $ 3,819
Trade receivables.............................................. 1,289 1,744 2,322 2,322
Lease receivables, current portion............................. 125 140 150 150
Inventories.................................................... 19,132 17,700 16,480 16,480
Vehicles leased to others, current portion..................... 3,201 3,462 3,680 3,680
Notes receivable............................................... 78 127 14 14
Prepaid expenses and other..................................... 309 273 918 918
Deferred income taxes.......................................... -- -- -- 997
--------- --------- ----------- -----------
Total current assets......................................... 31,086 32,796 27,383 28,380
--------- --------- ----------- -----------
Property, plant and equipment, net............................... 3,070 3,234 1,278 1,278
Vehicles leased to others, less current portion.................. 1,724 1,864 1,982 1,982
Other assets:
Lease receivables, less current portion........................ 88 310 333 333
Notes receivable............................................... 88 146 261 261
Investment in affiliate........................................ 488 569 591 591
Other noncurrent assets........................................ 115 303 288 288
--------- --------- ----------- -----------
779 1,328 1,473 1,473
--------- --------- ----------- -----------
$ 36,659 $ 39,222 $ 32,116 $ 33,113
--------- --------- ----------- -----------
--------- --------- ----------- -----------

LIABILITIES, MINORITY INTEREST AND OWNERS' EQUITY
Current liabilities:
Notes payable.................................................. $ 390 $ 625 $ -- $ --
Flooring notes payable......................................... 21,218 19,590 13,723 13,723
Current maturities of long-term debt........................... 1,621 2,085 2,207 2,207
Trade payables................................................. 846 1,455 1,249 1,249
Accrued liabilities............................................ 974 1,280 1,441 1,441
Deferred income taxes.......................................... -- -- -- 594
--------- --------- ----------- -----------
Total current liabilities.................................... 25,049 25,035 18,620 19,214
Long-term debt, less current maturities........................ 6,748 10,743 8,262 11,000
Deferred revenue............................................... 1,462 1,782 2,238 2,238
Other long-term liabilities.................................... 61 62 61 61
--------- --------- ----------- -----------
Total liabilities............................................ 33,320 37,622 29,181 32,513
--------- --------- ----------- -----------
Commitments and contingency......................................
Minority interest................................................ 536 749 1,029 1,029
Owners' equity:
Common stock................................................... 751 801 801 801
Retained earnings.............................................. 2,052 50 1,105 (1,230)
--------- --------- ----------- -----------
Total owners' equity......................................... 2,803 851 1,906 (429)
--------- --------- ----------- -----------
$ 36,659 $ 39,222 $ 32,116 $ 33,113
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>

See accompanying notes to combined financial statements.

F-2
<PAGE>
LITHIA MOTORS, INC.
AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales:
Vehicle.................................................. $ 77,649 $ 93,535 $ 97,338 $ 46,076 $ 59,877
Service, body, parts and other........................... 14,460 15,787 16,858 8,320 9,248
--------- --------- --------- --------- ---------
Net sales.............................................. 92,109 109,322 114,196 54,396 69,125
--------- --------- --------- --------- ---------
Cost of sales:
Vehicle.................................................. 67,161 81,234 83,487 39,763 52,244
Service, body, parts and other........................... 7,688 9,183 9,766 4,870 5,425
--------- --------- --------- --------- ---------
Cost of sales.......................................... 74,849 90,417 93,253 44,633 57,669
--------- --------- --------- --------- ---------
Gross profit........................................... 17,260 18,905 20,943 9,763 11,456
Selling, general and administrative........................ 15,122 15,174 16,735 7,860 9,379
--------- --------- --------- --------- ---------
Operating income....................................... 2,138 3,731 4,208 1,903 2,077
--------- --------- --------- --------- ---------
Other income (expense):
Equity in income of affiliate............................ 55 77 81 29 22
Interest income.......................................... 216 99 179 65 93
Interest expense......................................... (1,374) (954) (1,390) (583) (649)
Other, net............................................... 751 1,019 1,075 455 360
--------- --------- --------- --------- ---------
(352) 241 (55) (34) (174)
--------- --------- --------- --------- ---------
Income before minority interest........................ 1,786 3,972 4,153 1,869 1,903
Minority interest.......................................... (233) (458) (778) (383) (317)
--------- --------- --------- --------- ---------
Net income............................................. $ 1,553 $ 3,514 $ 3,375 $ 1,486 $ 1,586
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma net income data (unaudited):
Income before income taxes and minority interest, as
reported............................................... $ 1,786 $ 3,972 $ 4,153 $ 1,869 $ 1,903
Proforma income taxes.................................... (697) (1,521) (1,598) (719) (742)
--------- --------- --------- --------- ---------
Proforma net income before minority interest............. 1,089 2,451 2,555 1,150 1,161
Proforma minority interest............................... (142) (283) (479) (235) (193)
--------- --------- --------- --------- ---------
Proforma net income...................................... $ 947 $ 2,168 $ 2,076 $ 915 $ 968
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Proforma net income per share............................ $ 0.65 $ 0.29 $ 0.30
Shares used in computing proforma net income per share... 3,196 3,196 3,196
--------- --------- ---------
--------- --------- ---------
</TABLE>

See accompanying notes to combined financial statements.

F-3
<PAGE>
LITHIA MOTORS, INC.
AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK
------------------------ RETAINED
SHARES AMOUNT EARNINGS TOTAL
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Balance, December 31, 1992................................................ 4,720 $ 799 $ 437 $ 1,236
Net income................................................................ -- -- 1,553 1,553
Issuance of common stock:
Lithia Rentals, Inc..................................................... 1,000 25 -- 25
Dividends................................................................. -- -- (1,630) (1,630)
----- ----- --------- ---------
Balance, December 31, 1993................................................ 5,720 824 360 1,184
Net income................................................................ -- -- 3,514 3,514
Issuance of common stock:
Lithia Rentals, Inc..................................................... 667 50 -- 50
Discount Auto and Truck Rental, Inc..................................... 1,000 20 -- 20
Cancellation of common stock:
Paul Phillips, Inc...................................................... (500) (143) 143 --
Dividends................................................................. -- -- (1,965) (1,965)
----- ----- --------- ---------
Balance, December 31, 1994................................................ 6,887 751 2,052 2,803
Net income................................................................ -- -- 3,375 3,375
Issuance of common stock:
Discount Auto and Truck Rental, Inc..................................... 2,500 50 -- 50
Dividends................................................................. -- -- (5,377) (5,377)
----- ----- --------- ---------
Balance, December 31, 1995................................................ 9,387 801 50 851
Net income (unaudited).................................................... -- -- 1,586 1,586
Dividends (unaudited)..................................................... -- -- (531) (531)
----- ----- --------- ---------
Balance, June 30, 1996 (unaudited)........................................ 9,387 $ 801 $ 1,105 $ 1,906
----- ----- --------- ---------
----- ----- --------- ---------
</TABLE>

See accompanying notes to combined financial statements.

F-4
<PAGE>
LITHIA MOTORS, INC.
AND AFFILIATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX-MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................... $ 1,553 $ 3,514 $ 3,375 $ 1,486 $ 1,586
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization............................. 1,803 1,954 1,832 785 960
(Gain) Loss on sale of assets............................. (184) (146) (305) 18 (142)
Minority interest in income............................... 233 458 778 383 317
Equity in income of Properties............................ (55) (77) (81) (29) (22)
Changes in operating assets and liabilities:
Trade and lease receivables............................. (682) 1,659 (692) (459) (611)
Inventories............................................. (5,177) (2,085) 1,432 3,977 1,220
Other current assets.................................... 13 (116) 27 80 (642)
Deposits to related parties............................. (3) 0 3 3 0
Other noncurrent assets................................. (55) 2 (188) (97) 15
Trade payables.......................................... 561 (1,793) 609 (377) (206)
Accrued liabilities..................................... 6 1,002 306 41 161
Other long-term liabilities............................. 153 358 321 228 455
Proceeds from sale of vehicles leased to others........... 4,254 5,289 4,757 2,056 3,382
Expenditures for vehicles leased to others................ (6,963) (6,764) (6,308) (3,255) (3,647)
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating activities... (4,543) 3,205 5,866 4,840 2,826
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Notes receivable issued....................................... (135) (142) (190) (158) (446)
Principal payments received on notes receivable............... 142 309 83 49 444
Principal payments received on notes-related.................. 201 0 0 0 0
Proceeds from sale of assets.................................. 0 3 10 0 1,286
Capital expenditures.......................................... (108) (164) (524) (134) (223)
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing activities... 100 6 (621) (243) 1,061
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Net borrowings (repayments) on flooring notes payable......... 5,443 2,170 (1,628) (4,337) (5,867)
Net borrowings (repayments) on notes payable.................. 1,527 (2,312) 235 (390) (625)
Principal payments on long-term debt.......................... (3,244) (9,084) (8,070) (3,869) (7,251)
Proceeds from issuance of long-term debt...................... 3,973 11,300 12,529 4,966 4,892
Proceeds from issuance of common stock and minority
interest.................................................... 25 (73) 50 0 0
Principal payments received on notes receivable -- owners'.... 15 144 142 142 149
Dividends and distributions................................... (1,630) (1,965) (5,377) (1,518) (531)
Distribution to minority interest............................. (172) (298) (728) (315) (185)
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities... 5,937 (118) (2,847) (5,321) (9,418)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents.. 1,494 3,093 2,398 (724) (5,531)
Cash and cash equivalents at beginning of period................ 2,365 3,859 6,952 6,952 9,350
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period...................... $ 3,859 $ 6,952 $ 9,350 $ 6,228 $ 3,819
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental disclosures of cash flow information:
Cash paid during the period for interest...................... $ 1,375 $ 955 $ 1,390 $ 583 $ 649
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental schedule of noncash financing activities:
Cancellation of common stock.................................. $ -- $ 143 $ -- $ -- $ --
Issuance of notes receivable -- minority interest............. -- -- 678 678 --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

See accompanying notes to combined financial statements.

F-5
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS

Lithia Motors, Inc. and Affiliated Companies (the Company) operate in
Medford and Grants Pass, Oregon and are primarily dealers in new and used
automobile and light-duty trucks. The Company serves customers located
principally in southern Oregon. In addition, the Company retails and wholesales
replacement parts and provides vehicle servicing, leasing and financing.

PRINCIPLES OF COMBINATION

The accompanying combined financial statements include the accounts of the
following entities who are affiliated through common ownership and management:

<TABLE>
<S> <C>
Lithia Motors, Inc. Subchapter S Corporation
Lithia TLM LLC Limited Liability Corporation
Lithia Dodge LLC Limited Liability Corporation
Lithia Grants Pass Auto Center LLC Limited Liability Corporation
Lithia Leasing, Inc. Subchapter S Corporation
Discount Auto and Truck Rental, Inc. Subchapter S Corporation
Lithia Rentals, Inc. Subchapter S Corporation
</TABLE>

Lithia TLM LLC, Lithia Dodge LLC and Lithia Grants Pass Auto Center LLC are
limited liability corporations majority owned by Lithia Motors, Inc.. The 20%,
25% and 25% minority interests in Lithia TLM LLC, Lithia Dodge LLC and Lithia
Grants Pass Auto Center LLC, respectively have been recorded in the accompanying
financial statements.

All significant intercompany accounts and transactions, consisting
principally of intercompany sales, have been eliminated upon combination.

As stipulated in the Operating Agreements ("the Agreements"), for Lithia TLM
LLC, Lithia Dodge LLC and Lithia's Grants Pass Auto Center LLC the term of the
Companies is for thirty years, terminating in 2025, unless terminated earlier.
In addition, the terms of the agreements limit the transferability of a member's
interest without the consent of the other members. Lithia Motors, Inc. is the
managing member of all Limited Liability Corporations referred to above.

As a limited liability company, each member's liability is limited to
amounts reflected in their respective member accounts.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, the Company considers contracts in
transit and all highly liquid debt instruments with a maturity of three months
or less when purchased to be cash equivalents.

F-6
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES

New vehicle, used vehicle and parts and accessories inventories are stated
at the lower of cost or market. Cost is determined by using the last-in,
first-out (LIFO) method.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and are being depreciated over
their estimated useful lives principally on the straight-line basis.
Expenditures for maintenance, repairs and minor renewals are expensed as
incurred, while significant renewals and betterments are capitalized. When an
asset is retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the account, and any gain or loss is credited or
charged to income.

INCOME TAXES

The Company is currently an S Corporation for federal and state income tax
reporting purposes. Federal and state income taxes on the income of an S
Corporation are generally by the individual stockholders rather than the
corporation.

The Company's S Corporation status will terminate immediately prior to the
effectiveness of the proposed IPO of its common stock discussed in note 12. At
this time the Company will establish its net deferred tax liabilities and record
an accompanying charge to income tax expense. The accompanying statements of
income for the year ended December 31, 1995, and the six-months ended June 30,
1996, reflect provisions for income taxes on an unaudited pro forma basis, using
the asset and liability method, as if the Company had been a C Corporation,
fully subject to federal and state income taxes.

Under the asset and liability method, deferred income tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred income tax assets and liabilities
of changes in tax rates is recognized in income in the period that includes the
enactment date.

ENVIRONMENTAL LIABILITIES AND EXPENDITURES

Accruals for environmental matters, if any, are recorded in operating
expenses when it is probable that a liability has been incurred and the amount
of the liability can be reasonably estimated. Accrued liabilities are exclusive
of claims against third parties and are not discounted.

In general, costs related to environmental remediation are charged to
expense. Environmental costs are capitalized if the costs increase the value of
the property and/or mitigate or prevent contamination from future operations.

F-7
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRO FORMA NET INCOME PER SHARE

Pro forma net income per share is computed using pro forma net income (as
described in note 9) and is based on the weighted average number of shares of
common stock outstanding and common equivalent shares from stock options
outstanding using the treasury stock method. In accordance with certain
Securities and Exchange Commission (SEC) Staff Accounting Bulletins, such
computations include all common and common equivalent shares issued within 12
months of the offering date as if they were outstanding for all periods
presented using the treasury stock method and the anticipated IPO price.

INTERIM FINANCIAL STATEMENTS

The accompanying unaudited financial statements for the six-months ended
June 30, 1996 and 1995 have been prepared on substantially the same basis as the
audited financial statements, and include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
information set forth therein.

FINANCIAL INSTRUMENTS

The carrying amount of cash equivalents, trade receivables, trade payable
and short term borrowing approximate fair value because of the short-term nature
of these instruments. The fair value of long-term debt was estimated by
discounting the future cash flows using market interest rates and does not
differ significantly from that reflected in the financial statements.

Fair value estimates are made at a specific point in time, based on relevant
market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.

ADVERTISING

The Company expenses production and other costs of advertising as incurred.

CONCENTRATIONS OF CREDIT RISK

Concentrations of credit risk with respect to trade receivables are limited
due to the large number of customers comprising the Company's customer base.

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash deposits. The Company
generally limits its exposure to credit risk from balances on deposit in
financial institutions in excess of the FDIC-insured limit.

F-8
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MANAGEMENT ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
December 31, 1995 and 1994 and revenues and expenses during the three-year
period ended December 31, 1995. The actual outcome of the estimates could differ
from the estimates made in the preparation of the financial statements.

REVENUE RECOGNITION

Revenue from service contract insurance sold by the Company is recorded as
deferred revenue upon initial receipt and recognized as income on a prorated
basis over the term of the policy. Income from finance and insurance commissions
is recorded separately on an accrual basis. Revenue from the sale of cars is
recognized upon delivery, when the sales contract is signed and down payment has
been received. Fleet sales of vehicles are shown on a net basis in other
revenue.

(2) INVENTORIES AND RELATED NOTES PAYABLE

The new and used vehicle inventory collateralizing related notes payable and
other inventory were as follows:

<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------
JUNE 30,
1994 1995 1996
---------------------- ---------------------- ----------------------
INVENTORY NOTES INVENTORY NOTES INVENTORY NOTES
COST PAYABLE COST PAYABLE COST PAYABLE
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
New and demonstrator
vehicles.................. $ 16,776 $ 17,172 $ 13,972 $ 15,346 $ 12,549 $ 12,905
Used vehicles.............. 6,847 4,046 7,532 4,244 7,839 818
Parts and accessories...... 831 -- 1,092 -- 1,223 --
----------- --------- ----------- --------- ----------- ---------
Inventories at FIFO........ 24,454 21,218 22,596 19,590 21,611 13,723
Less LIFO reserve for new
and used vehicles and
parts inventories......... 5,322 -- 4,896 -- 5,131 --
----------- --------- ----------- --------- ----------- ---------
Inventories at LIFO........ $ 19,132 $ 21,218 $ 17,700 $ 19,590 $ 16,480 $ 13,723
----------- --------- ----------- --------- ----------- ---------
----------- --------- ----------- --------- ----------- ---------
</TABLE>

If the first-in, first-out (FIFO) method of inventory accounting were used
by the Company, net income would have been higher (lower) by $557, $615 and
$(426) and $235 for the years ended December 31, 1993, 1994 and 1995 and the
six-month period ended June 30, 1996, respectively.

F-9
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(2) INVENTORIES AND RELATED NOTES PAYABLE (CONTINUED)
Flooring notes payable consist of 8.5% to 9% flooring notes secured by new
and used vehicles. The flooring arrangements permit the Company to borrow up to
$21,900 in 1995 and 1994 and $27,900 for the six-month period ended June 30,
1996, restricted by new and used vehicle levels. The notes are due within five
days of the vehicle being sold or after the vehicle has been in inventory for
one year for new vehicles, six months for program vehicles, and on a revolving
basis for used vehicles.

(3) PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
Buildings and improvements...................................... $ 1,373 $ 1,445 $ --
Service and equipment........................................... 1,224 1,431 1,468
Furniture, signs and fixtures................................... 1,634 1,607 1,701
--------- --------- -----------
4,231 4,483 3,169
Less accumulated depreciation................................... 1,587 1,840 1,892
--------- --------- -----------
2,644 2,643 1,277
Land............................................................ 426 591 --
--------- --------- -----------
$ 3,070 $ 3,234 $ 1,277
--------- --------- -----------
--------- --------- -----------
</TABLE>

(4) VEHICLES LEASED TO OTHERS AND RELATED LEASE RECEIVABLES

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Vehicles leased to others..................................... $ 6,201 $ 6,678 $ 6,941
Less accumulated depreciation................................. (1,276) (1,352) (1,279)
--------- --------- ---------
4,925 5,326 5,662
Less current portion, net................................... 3,201 3,462 3,680
--------- --------- ---------
$ 1,724 $ 1,864 $ 1,982
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-10
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(4) VEHICLES LEASED TO OTHERS AND RELATED LEASE RECEIVABLES (CONTINUED)
Lease receivables result from customer leases of vehicles under agreements
which qualify as operating and direct-financing leases. Future minimum lease
income from non-cancelable long-term leases and direct-financing leases are as
follows:

<TABLE>
<CAPTION>
DIRECT-
OPERATING FINANCING
----------- -----------
<S> <C> <C>
Year ending December 31:
1996.................................................................. $ 1,563 $ 140
1997.................................................................. 884 118
1998.................................................................. 220 91
1999.................................................................. 44 51
2000 and thereafter................................................... 8 50
----------- -----
$ 2,719 $ 450
----------- -----
----------- -----
</TABLE>

(5) NOTES PAYABLE

Notes payable consist of a 9.25% credit line with a bank for the in-house
financing of vehicle sales and leases. The Company may borrow up to $1,000 or
75% of the total in-house vehicle receivables under 60 days past due.

F-11
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(6) LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Notes payable to officer and director,
interest at 9%; due in ten equal annual
installments beginning one year and ten
days subsequent to demand by the
note holder................................................. $ 925 $ 3,865 $ 3,262
Notes payable to related parties other than
officer and director, interest at 8.0% to
9.0%; due in ten equal annual installments
beginning at various times subsequent to
demand by the note holder................................... 827 1,234 316
Notes payable in monthly installments, including
interest at 9%; maturing at various dates
through 2000; secured by equipment.......................... 1,092 1,404 1,039
Notes payable in monthly installments, including
interest at 8.75% to 10%; maturing at
various dates through 2000; secured by
vehicles leased to others................................... 4,409 5,466 5,852
Mortgages payable in monthly installments of
$105, including interest at 7.5% to 12%;
maturing at various dates through 2013;
secured by land and buildings............................... 1,092 858 --
Other......................................................... 24 1 --
--------- --------- ---------
8,369 12,828 10,469
Less current maturities....................................... 1,621 2,085 2,207
--------- --------- ---------
$ 6,748 $ 10,743 $ 8,262
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-12
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(6) LONG-TERM DEBT (CONTINUED)
The schedule of future principal payments on long-term debt after December
31, 1995 is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Year ending:
1996.......................................................................... $ 2,085
1997.......................................................................... 4,740
1998.......................................................................... 1,036
1999.......................................................................... 790
2000 and thereafter........................................................... 4,177
------------
$ 12,828
------------
------------
</TABLE>

(7) MINORITY INTEREST

For the years ended December 31, 1994 and 1995 and the six-month period
ended June 30, 1996, the Company held notes receivable of $142, $678 and $565,
respectively, from minority owners' of the Company. These notes are secured by
the minority owners' interest in the Company and bear interest at .5% over prime
rate and 10.5% respectively. The amount of the receivables are shown on the
balance sheet as a reduction to minority interest.

(8) OWNERS' EQUITY

CAPITAL STRUCTURE

The capital structure of the corporations included in the combined balance
sheet at December 31, 1994 is as follows:

<TABLE>
<CAPTION>
NO PAR COMMON STOCK
-------------------------------------
AUTHORIZED ISSUED OUTSTANDING
----------- --------- -------------
<S> <C> <C> <C>
Lithia Motors, Inc.......................................... 1,000 240 120
Lithia Leasing, Inc......................................... 1,000 100 100
Discount Auto and Truck Rental, Inc......................... 10,000 4,000 4,000
Lithia Rentals, Inc......................................... 5,000 2,667 2,667
</TABLE>

The capital structure of the corporations included in the combined balance
sheet at December 31, 1995 is as follows:

<TABLE>
<CAPTION>
NO PAR COMMON STOCK
-------------------------------------
AUTHORIZED ISSUED OUTSTANDING
----------- --------- -------------
<S> <C> <C> <C>
Lithia Motors, Inc.......................................... 1,000 240 120
Lithia Leasing, Inc......................................... 1,000 100 100
Discount Auto and Truck Rental, Inc......................... 10,000 6,500 6,500
Lithia Rentals, Inc......................................... 5,000 2,667 2,667
</TABLE>

F-13
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(9) PRO FORMA INCOME TAXES

The unaudited pro forma amounts included in the accompanying pro forma
balance sheet as of June 30, 1996, reflect the following unaudited pro forma
adjustments:

- Provisions for income taxes as if the Company had been a C Corporation,
fully subject to federal and state income taxes.

- A current deferred income tax asset of $997 and a deferred income tax
liability of $594, established to effect the Company's conversion to C
Corporation status. The net of these amounts will be credited to income
tax expense as a nonrecurring credit upon the Company's conversion to C
Corporation status but have been excluded from the pro forma statement of
income.

- A $2,738 S Corporation distribution payable to the current stockholders.
This amount represents estimated undistributed S Corporation earnings of
the Company from January 1, 1996 through the completion of the proposed
IPO and the amount of the stockholders' S Corporation tax bases.

The pro forma provision for income taxes reflects the income tax expense
that would have been reported if the Company had been a C Corporation. The
components of unaudited pro forma income taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, SIX-MONTHS
------------------------------- ENDED JUNE
1993 1994 1995 30, 1996
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
Pro forma income taxes:
Current:
Federal........................................... $ 490 $ 1,292 $ 1,487 $ 693
State............................................. 102 269 309 144
--------- --------- --------- -----
Total current................................... 592 1,561 1,796 837
--------- --------- --------- -----
Deferred:
Federal........................................... 87 (33) (164) (79)
State............................................. 18 (7) (34) (16)
--------- --------- --------- -----
Total deferred.................................. 105 (40) (198) (95)
--------- --------- --------- -----
Total pro forma income taxes.................... $ 697 $ 1,521 $ 1,598 $ 742
--------- --------- --------- -----
--------- --------- --------- -----
</TABLE>

F-14
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(9) PRO FORMA INCOME TAXES (CONTINUED)
The following tabulation reconciles the expected corporate federal income
tax expense (computed by multiplying the Company's income before minority
interest by 34%) to the Company's unaudited pro forma income tax expense:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, SIX-MONTHS
------------------------------- ENDED JUNE
1993 1994 1995 30, 1996
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
Expected pro forma income tax expense................. $ 607 $ 1,350 $ 1,412 $ 647
State income taxes, net of federal tax effect......... 78 173 181 83
Other, net............................................ 12 (2) 5 12
--------- --------- --------- -----
$ 697 $ 1,521 $ 1,598 $ 742
--------- --------- --------- -----
--------- --------- --------- -----
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the unaudited pro forma deferred income tax assets and liability as
of June 30, 1996, are presented below:

<TABLE>
<CAPTION>
Pro forma deferred income tax assets:
<S> <C>
Allowance and accruals................................................. $ 997
---------
Total deferred income tax assets................................... 997

Pro forma deferred income tax liability:
Property and equipment, principally due to differences in
depreciation......................................................... (594)
---------
Pro forma net deferred income tax liability........................ $ 403
---------
---------
</TABLE>

(10) COMMITMENTS AND CONTINGENCY

RECOURSE PAPER

The Company is contingently liable to banks for recourse paper from the
financing of vehicle sales. The contingent liability at December 31, 1994 and
1995 was approximately $77 and $206, respectively.

OPERATING LEASES

Substantially all of the Companies operations are conducted in leased
facilities under noncancelable operating leases with Lithia Properties, LLC a
related party (note 13). These leases expire at various dates through 1996. At
the end of the lease term, all of the leases are renewable at the then fair
rental value for periods of five to seven years.

F-15
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(10) COMMITMENTS AND CONTINGENCY (CONTINUED)
The minimum rental commitments under operating leases after December 31,
1995 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
-------------
<S> <C>
1996............................................................................ $ 2,265
</TABLE>

Rental expense for all operating leases was $1,849, $1,888 $1,993 and $1,023
for the years ended December 31, 1993, 1994 and 1995 and the six-month period
ended June 30, 1996, respectively.

F-16
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(11) PROFIT SHARING PLAN

The Company has a defined contribution plan and trust (the 401(k) and profit
sharing plan) covering substantially all full-time employees. Effective May 1,
1995, the Plan was amended to include a 401(k) component for eligible employees.
The annual contribution to the plan is at the discretion of the Board of
Directors of Lithia Motors, Inc. Contributions of $100, $100, $84 and $46 were
paid for the years ended December 31, 1993, 1994, 1995 and the six-month period
ended June 30, 1996, respectively. Employees may contribute up to 15% of
compensation to the plan under certain circumstances.

(12) INVESTMENT IN UNCONSOLIDATED AFFILIATE

The Company has an investment in Lithia Properties, LLC, the members of
which are the Company (20%), Sidney DeBoer (35%), M.L. Dick Heimann (30%) and
three of Mr. DeBoer's children (5% each). This investment is accounted for using
the equity method. The following table summarizes activity in the Company's
investment through June 30, 1996:

<TABLE>
<S> <C>
Investment in affiliate, December 31, 1993........................... $ 411
Equity in affiliate.................................................. 77
Distributions from affiliate......................................... --
---------
Investment in affiliate, December 31, 1994........................... 488
Equity in affiliate.................................................. 81
Distributions from affiliate......................................... --
---------
Investment in affiliate, December 31, 1995........................... 569
Equity in affiliate.................................................. 22
Distributions from affiliate......................................... --
---------
Investment in affiliate, June 30, 1996............................... $ 591
---------
---------
</TABLE>

(13) RELATED PARTY TRANSACTIONS

Substantially all of the real property on which the Company's business is
located is owned by Lithia Properties, LLC, (note 12). The Company, leases its
facilities under various lease agreements from Lithia Properties, LLC (note 10).
Rental expense for these operating leases was $1,849, $1,888, $1,993 and $1,023
for the years ended December 31, 1993, 1994 and 1995 and the six-month period
ended June 30, 1996, respectively. Recorded in other assets deposits relating to
these operating leases of $178, $175 and $175 for the years ended December 31,
1994 and 1995 and the six-month period ended June 30, 1996, respectively
relating to these operating leases is recorded in other current assets.

The Company provides management services to Lithia Properties, LLC. Other
income includes management fees of $288 for the years ended December 31, 1993,
1994 and 1995 and $144 for the six-month period ended June 30, 1996,
respectively.

F-17
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(13) RELATED PARTY TRANSACTIONS (CONTINUED)
Lithia Properties, LLC leases certain equipment to the Company. Selling,
general and administrative expense includes equipment rental expense of $27,
$26, $27 and $10 for the years ended December 31, 1993, 1994 and 1995 and the
six-month period ended June 30, 1996, respectively.

The Company has notes payable included in long-term debt of $925, $3,865 and
$3,262 for the years ended December 31, 1994 and 1995 and the six-month period
ended June 30, 1996, respectively, to certain officers and directors. These
notes accrue interest at 9% and are due in ten equal annual installments
beginning one year and ten days subsequent to demand by the noteholder.

The Company has agreed to guarantee certain indebtedness of Lithia
Properties LLC incurred in connection with purchases of real property which
secures the loan. The total indebtedness is approximately $11,917.

(14) SUBSEQUENT EVENTS (UNAUDITED)

STOCK INCENTIVE PLAN

In April, 1996, the Board and the Company's shareholders adopted the
Company's 1996 Stock Incentive Plan (the Plan). The Plan provides for the
granting of stock-based awards to executive officers (including those who are
directors), to other employees and non-employee consultants of the Company.
Either non-qualified or incentive stock options may be issued under this plan
and are exercisable for a period of up to ten years from the date of grant. The
Plan is permitted to issue up to 500 shares of the Company's Class A common
stock. The following table summarizes stock option activity through June 30,
1996:

<TABLE>
<CAPTION>
PRICE
SHARES RANGE
----------- -------------
<S> <C> <C>
Outstanding options at December 31, 1995........................................ -- $ --
Granted......................................................................... 320.5 4.14 - 4.55
Exercised....................................................................... -- --
Canceled........................................................................ -- --
----- -------------
Outstanding options at June 30, 1996............................................ 320.5 $ 4.14 - 4.55
----- -------------
----- -------------
</TABLE>

At June 30, 1996, no outstanding options were exercisable.

STOCKHOLDER DISTRIBUTIONS

As an S Corporation, the Company has made distributions to its stockholders
partially to provide them with funds to pay income taxes on corporate earnings.
Immediately prior to the completion of the proposed IPO, the Company intends to
declare a distribution payable to existing stockholders of the Company. This
distribution represents undistributed S Corporation earnings of the Company
through the completion of the proposed IPO and the amount of the stockholders' S
Corporation tax bases.

F-18
<PAGE>
LITHIA MOTORS, INC.

AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, 1993,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (UNAUDITED)

(14) SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
RESTRUCTURING

On April 5, 1996, Lithia Motors, Inc. authorized 25,000 shares of Series B
common stock and 100,000 shares of Series A common stock of which 3,000 and 0,
respectively are outstanding. On October 8, the Board of Directors approved the
filing of a registration statement with the SEC permitting the Company to sell
shares of its Class A common stock. Prior to completion of the offering, the
Company and other affiliated companies will consummate a restructuring which
will result in each of the Company's dealerships and operating divisions
becoming direct or indirect wholly-owned subsidiaries and Lithia Holdings, LLC
owning all of the outstanding Class B common stock of the Company.

ACQUISITIONS

The Company has signed definitive agreements to purchase two additional
dealerships described below. These purchases are subject to normal closing
conditions and the approval of the appropriate factories.

The Company has agreed to pay $2.25 million plus the new car and parts
inventory at seller's cost for Roberts Dodge, a Dodge dealer in Eugene, Oregon.
In addition, the Company will purchase the real property on which the dealership
is located for $2.3 million.

The Company has agreed to pay $1.05 million plus the new car and parts
inventory at seller's cost for Sam Linder, Inc. a Honda, Cadillac, and
Oldsmobile dealership in Salinas, California. In addition, the Company will
purchase the real property on which the dealership is located for $2.33 million.
Closing is scheduled to occur on or before November 1, 1996.

LINE OF CREDIT

The Company obtained a secured line of credit from a bank in the principal
amount of $6.0 million which will be utilized to fund the cash portion of the
acquisitions described above. The credit line bears interest at prime plus 75
basis points with interest due monthly during the first year "draw down" period,
after which monthly payments are based on a ten-year amortization schedule, with
final payment due five years from the initial advance.

F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors
Roberts Dodge, Inc. and Affiliated Company:

We have audited the accompanying combined balance sheets of Roberts Dodge,
Inc. and Affiliated Company as of December 31, 1995, and the related combined
statements of operations, changes in owners' equity, and cash flows for the
years in the two-year period ended December 31, 1995. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Roberts Dodge, Inc.
and Affiliated Company as of December 31, 1995 and the results of their
operations and their cash flows for the years in the two-year period ended
December 31, 1995, in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

Portland, Oregon
September 17, 1996

F-20
<PAGE>
ROBERTS DODGE, INC.

AND AFFILIATED COMPANY

COMBINED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------- JUNE 30,
1996
-----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 2,220 $ 1,202
Trade receivables, net.............................................................. 555 785
Inventories......................................................................... 4,383 4,766
Prepaid expenses and other.......................................................... 7 42
------ -----------
Total current assets.......................................................... 7,165 6,795
------ -----------
Property, plant and equipment, net.................................................... 1,413 1,452
Other assets:
Goodwill............................................................................ 22 20
Stockholder advances................................................................ -- 178
Other noncurrent assets............................................................. 156 174
------ -----------
178 372
------ -----------
$ 8,756 $ 8,619
------ -----------
------ -----------
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Notes payable....................................................................... $ -- $ 200
Flooring notes payable.............................................................. 4,241 4,149
Current maturities of long-term debt................................................ 1,970 1,470
Trade payables...................................................................... 407 182
Accrued liabilities................................................................. 213 496
------ -----------
Total current liabilities..................................................... 6,831 6,497
Long-term debt, less current maturities............................................... 1,125 1,056
------ -----------
Total liabilities............................................................. 7,956 7,553
------ -----------
Commitments and contingency
Owners' equity:
Common stock, no par value, 10,000 shares authorized, 100 shares issued and
outstanding....................................................................... 250 250
Retained earnings................................................................... 550 816
------ -----------
Total owners' equity.......................................................... 800 1,066
------ -----------
$ 8,756 $ 8,619
------ -----------
------ -----------
</TABLE>

See accompanying notes to combined financial statements.

F-21
<PAGE>
ROBERTS DODGE, INC.

AND AFFILIATED COMPANY

COMBINED STATEMENTS OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------- --------------------
1994 1995 1995 1996
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Sales:
Vehicle............................................................. $ 26,383 $ 27,999 $ 14,233 $ 15,609
Service, parts and other............................................ 3,588 3,895 1,920 2,074
--------- --------- --------- ---------
29,971 31,894 16,153 17,683
--------- --------- --------- ---------
Cost of sales:
Vehicle............................................................. 23,526 25,086 12,602 13,827
Service, parts and other............................................ 2,104 2,184 1,055 1,188
--------- --------- --------- ---------
25,630 27,270 13,657 15,015
--------- --------- --------- ---------
Gross profit.................................................... 4,341 4,624 2,496 2,668
Selling, general and administrative................................... 3,654 3,828 1,946 2,165
--------- --------- --------- ---------
Operating income................................................ 687 796 550 503
--------- --------- --------- ---------
Other income (expense):
Interest income..................................................... 27 101 15 78
Interest expense.................................................... (477) (602) (299) (302)
Other, net.......................................................... (29) (26) (20) (7)
--------- --------- --------- ---------
(479) (527) (304) (231)
--------- --------- --------- ---------
Net income...................................................... $ 208 $ 269 $ 246 $ 272
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

See accompanying notes to combined financial statements.

F-22
<PAGE>
ROBERTS DODGE, INC.

AND AFFILIATED COMPANY

COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK
------------------------ RETAINED
SHARES AMOUNT EARNINGS TOTAL
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Balance, December 31, 1993................................................. 1 $ 250 $ 135 $ 385
Net income................................................................. -- -- 208 208
Distributions.............................................................. -- -- (37) (37)
--
----- ----- ---------
Balance, December 31, 1994................................................. 1 250 306 556
Net income................................................................. -- -- 269 269
Distributions.............................................................. -- -- (24) (24)
--
----- ----- ---------
Balance, December 31, 1995................................................. 1 250 551 801
Net income (unaudited)..................................................... -- -- 272 272
Distributions (unaudited).................................................. -- -- (7) (7)
--
----- ----- ---------
Balance, June 30, 1996 (unaudited)......................................... 1 $ 250 $ 816 $ 1,066
--
--
----- ----- ---------
----- ----- ---------
</TABLE>

See accompanying notes to combined financial statements.

F-23
<PAGE>
ROBERTS DODGE, INC.

AND AFFILIATED COMPANY

COMBINED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------- --------------------
1994 1995 1995 1996
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................................. $ 208 $ 269 $ 246 $ 272
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization....................................... 87 125 50 49
Changes in assets and liabilities:
(Increase) decrease in trade receivables.......................... (10) (73) 142 (230)
(Increase) decrease in inventories................................ (1,139) 239 (54) (383)
(Increase) decrease in other current assets....................... (13) 8 (12) (35)
Increase (decrease) in trade payables............................. 73 153 (26) (224)
Increase (decrease) in accrued liabilities........................ 54 20 293 283
Increase in other non current assets.............................. (130) (50) (177) (196)
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities.......................................... (870) 691 462 (464)
--------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures.................................................... (88) (201) (118) (86)
--------- --------- --------- ---------
Net cash used in investing activities........................... (88) (201) (118) (86)
--------- --------- --------- ---------
Cash flows from financing activities:
Net borrowings (repayments) on flooring
notes payable......................................................... 1,340 (40) (359) (92)
Net borrowings (repayments) on notes payable............................ -- -- 25 200
Principal payments on long-term debt.................................... (151) (135) (62) (569)
Proceeds from issuance of long-term debt................................ -- 1,936 83 --
Distributions........................................................... (37) (24) (22) (7)
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities.......................................... 1,152 1,737 (335) (468)
--------- --------- --------- ---------
Net increase (decrease) in cash........................................... 194 2,227 9 (1,018)
Cash (book overdraft), beginning of period................................ (201) (7) (7) 2,220
--------- --------- --------- ---------
Cash (book overdraft), end of period...................................... $ (7) $ 2,220 $ 2 $ 1,202
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

See accompanying notes to combined financial statements.

F-24
<PAGE>
ROBERTS DODGE, INC. AND AFFILIATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1995 AND 1996 (UNAUDITED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS

Roberts Dodge, Inc. and Affiliated Company's (the Company) is an Oregon
Corporation. Its principal business is the retail sales of new Dodge automobiles
obtained through an exclusive dealer agreement with Chrysler Motors Corporation
(Chrysler) and the sale of used cars. In addition, the Company retails and
wholesales replacement parts and provides vehicle servicing. The Company
operates in the Eugene, Oregon area.

PRINCIPLES OF COMBINATION

The accompanying combined financial statements include the accounts of the
following entities which are affiliated through common ownership:

- Roberts Dodge, Inc.

- Sole proprietorship - real estate

All significant intercompany accounts and transactions, consisting
principally of intercompany sales, have been eliminated upon combination.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, the Company considers contracts in
transit and all highly liquid debt instruments with a maturity of three months
or less when purchased to be cash equivalents.

INVENTORIES

Vehicles are stated at the lower of cost or market, cost being determined on
a specific identification basis. Parts are stated at the lower of cost or
market, cost being determined on the first-in, first-out (FIFO) basis.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and is being depreciated over
their estimated useful lives on the declining balance and straight-line basis.
Expenditures for maintenance, repairs and minor renewals are expensed as
incurred, while significant renewals and betterments are capitalized. When an
asset is retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the account, and any gain or loss is credited or
charged to income.

FEDERAL INCOME TAXES

The Company is organized as a sub-chapter S-Corporation under the Internal
Revenue Code; therefore, the income earned by Roberts Dodge, Inc. is reported on
the personal tax returns of the stockholders. Consequently, no provision for
income taxes has been recorded in the accompanying financial statements.

F-25
<PAGE>
ROBERTS DODGE, INC. AND AFFILIATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1995 AND 1996 (UNAUDITED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MAJOR SUPPLIER AND DEALER AGREEMENT

The Company purchases substantially all of its new vehicles and inventory
from Chrysler at the prevailing prices charged by the automaker to all
franchised dealers. The Company's overall sales could be impacted by the
automaker's ability or unwillingness to supply the dealership with an adequate
supply of popular models.

The Dealer Agreement generally limits the location of the dealership and
retains automaker approval rights over changes in dealership management and
ownership. The automaker is also entitled to terminate the agreement if the
dealership is material breach of the terms.

INTERIM FINANCIAL STATEMENTS

FINANCIAL INSTRUMENTS

ADVERTISING

The Company expenses production and other costs of advertising as incurred.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject Roberts Dodge to
concentrations of credit risk consist principally of cash deposits.
Concentrations of credit risk with respect to customer receivables are limited
primarily to Chrysler Financial Corp. and financial institutions such as
regional banks.

MANAGEMENT ESTIMATES

F-26
<PAGE>
ROBERTS DODGE, INC. AND AFFILIATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1995 AND 1996 (UNAUDITED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
actual outcome of the estimates could differ from the estimates made in the
preparation of the financial statements.

REVENUE RECOGNITION

Revenues from vehicle and parts sales and from service operations are
recognized at the time the vehicle is delivered to the customer or service is
completed.

RECOGNITION OF FINANCE FEES AND INSURANCE COMMISSIONS

The Company arranges financing for its customers' vehicle purchases and
arranges insurance in connection therewith. Financing contracts are reviewed by
the dealership and are forwarded to Chrysler Financial Corp. and other financial
institutions. The Company receives a fee from the financial institution for
arranging the financing and receives a commission for the sale of an insurance
policy. The Company is charged back (chargebacks) for a portion of this fee
should the customer terminate the finance or insurance contract before its'
scheduled term. Finance fees and insurance commissions, net of chargebacks, are
classified with Service, Parts and Other revenue in the accompanying statement
of operations.

(2) INVENTORIES AND RELATED NOTES PAYABLE

The new and used vehicle inventory collateralizing related notes payable and
other inventory were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
---------------------- ----------------------
INVENTORY NOTES INVENTORY NOTES
COST PAYABLE COST PAYABLE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
New and demonstrator vehicles....................... $ 2,899 $ 3,464 $ 3,310 $ 3,562
Used vehicles....................................... 1,180 777 1,203 587
Parts and accessories............................... 304 -- 253 --
----------- --------- ----------- ---------
$ 4,383 $ 4,241 $ 4,766 $ 4,149
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>

The automaker finances new and used vehicle purchases by the Company. Floor
plan financing bears interest at prime plus 1% (approximately 9.25% at June 30,
1996). The notes are collateralized by all of the Company's tangible and
intangible personal property, including but not limited to, substantially all
new, used and demonstrator vehicles, parts and accessories inventory, accounts
receivable, and all machinery and equipment. The notes are generally due within
ten days of the sale of the vehicles or within three days after receiving the
sales proceeds, whichever is sooner. Accordingly, floor plan financing is
classified as current in the accompanying balance sheet.

F-27
<PAGE>
ROBERTS DODGE, INC. AND AFFILIATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1995 AND 1996 (UNAUDITED)

(3) PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------- -----------
<S> <C> <C>
Buildings and improvements........................................... $ 1,047 $ 1,047
Service and equipment................................................ 204 206
Furniture, signs and fixtures........................................ 69 69
Construction-in-progress............................................. -- 84
------ -----------
1,320 1,406
Less accumulated depreciation........................................ 328 375
------ -----------
992 1,031
Land................................................................. 421 421
------ -----------
$ 1,413 $ 1,452
------ -----------
------ -----------
</TABLE>

(4) NOTES PAYABLE

The Company has a $500 revolving line of credit with Chrysler Financial
Corp. which is scheduled to mature on April 15, 1997. Outstanding borrowings by
the Company totaled $200 at June 30, 1996 (unaudited). There were no outstanding
borrowings at December 31, 1995. Advances under the credit line accrue interest
at variable rates (9.5% at June 30, 1996) and are subject to the collateral and
guaranty provisions in the Chrysler credit arrangement described in note 5.

F-28
<PAGE>
ROBERTS DODGE, INC. AND AFFILIATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1995 AND 1996 (UNAUDITED)

(5) LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------- -----------
<S> <C> <C>
Note payable to Chrysler, interest at 11% or if higher, prime plus
1%, monthly installments of $11, maturing in 1997................... $ 74 $ 45
Note payable to Chrysler, due in monthly installments of $1 plus
interest at prime plus 5%........................................... 15 10
Demand notes payable to stockholder, interest at prime less 1.25%.... 1,807 1,318
Note payable to Chrysler, monthly installments of $1 plus interest at
10.25%.............................................................. 46 41
Note payable to Chrysler, due in monthly installments of $15
including interest at 9%............................................ 1,144 1,105
Other................................................................ 9 7
------ -----------
3,095 2,526
Less current maturities.............................................. 1,970 1,470
------ -----------
$ 1,125 $ 1,056
------ -----------
------ -----------
</TABLE>

The schedule of future principal payments on long-term debt after December
31, 1995 is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
-------------
<S> <C>
Year ending:
1996.......................................................................... $ 1,970
1997.......................................................................... 120
1998.......................................................................... 110
1999.......................................................................... 110
2000 and thereafter........................................................... 785
------
$ 3,095
------
------
</TABLE>

The Chrysler notes described above, and the revolving line of credit with
Chrysler are personally guaranteed by the stockholders of the Company.
Substantially all assets of the Company have been pledged as collateral for the
notes. In addition, Chrysler requires guarantees from companies related through
common ownership. The Company has guaranteed certain term notes for Roberts
Ford, Inc. and Frontier Motors, Inc. The combined balances of these obligations
are reflected on the books of the respective companies and totaled $950 at
September 17, 1996.

Interest paid to stockholders totaled $32 and $50 for the year ended
December 31, 1995 and the six-month period ended June 30, 1996 (unaudited),
respectively.

F-29
<PAGE>
ROBERTS DODGE, INC. AND AFFILIATED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1995 AND 1996 (UNAUDITED)

(6) COMMITMENTS AND CONTINGENCY

RECOURSE PAPER

The Company is contingently liable to Chrysler Financial Corp. for recourse
paper from the financing of vehicle sales. The contingent liability at December
31, 1995 and the six-month period ended June 30, 1996 (unaudited) was
approximately $331 and $143, respectively.

(7) PROFIT SHARING PLAN

Effective January 1, 1994, the Company established a 401(k) profit-sharing
plan covering substantially all employees. Contributions to the plan include
elective salary reduction by the employees, and matching contributions up to a
stated percentage and discretionary amounts by the Company. Company
contributions totaled $7, $37, and $22 for the years ended December 31, 1994,
1995 and six-month period ended June 30, 1996 (unaudited), respectively.

(8) SUBSEQUENT EVENTS

Roberts Dodge has executed a purchase and sale agreement whereby it has
agreed to sell substantially all of its assets to Lithia Motors, Inc. The
purchase price will consist of cash consideration of approximately $2.25 million
for fixed assets and intangible assets, plus an additional amount for the new
car and parts inventory valued at the seller's cost. The purchase price is
payable as (i) $1.75 million plus the cost of the new car and parts inventory in
cash at closing and (ii) a promissory note for $500,000, with interest at 8.5%
per annum, payable in equal monthly installments for five years. The Company is
not assuming any material liabilities as part of the acquisition. In addition,
the Company will purchase the real property on which the dealership is located
for $2.33 million, payable in cash at closing.

Closing is scheduled to occur on or before November 1, 1996. The purchase is
subject to normal closing conditions and the approval of Chrysler.

(9) RELATED PARTY TRANSACTIONS

R & R Advertising (R & R) is an advertising agency owned by a stockholder of
the Company. The Company purchases all their television and radio advertising
through this agency. Approximately 50% of total advertising expense is purchased
through R & R. Advertising expense was $527, $463 and $193 for the years ended
December 31, 1994 and 1995 and the six-month period ended June 30, 1996
(unaudited), respectively.

At June 30, 1996, trade receivables included a $200 balance due from
Frontier Motors, Inc., a dealership owned 70% by the stockholder's of the
Company.

F-30
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Stockholder

Sam Linder, Inc.

We have audited the accompanying balance sheet of Sam Linder, Inc. (dba Sam
Linder Cadillac-Honda-Oldsmobile) as of December 31, 1995, and the related
statements of operations and accumulated deficit and cash flows for each of the
years in the two-year period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sam Linder, Inc. as of
December 31, 1995, and the results of its operations and cash flows for each of
the years in the two-year period ended December 31, 1995, in conformity with
generally accepted accounting principles.

Moss Adams LLP

Seattle, Washington

September 17, 1996

F-31
<PAGE>
SAM LINDER, INC.
(DBA SAM LINDER CADILLAC-HONDA-OLDSMOBILE)
BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------ JUNE 30,
1996
------------
(UNAUDITED)
<S> <C> <C>
ASSETS

Current Assets
Cash and cash equivalents............................... $ 1,128,900 $ 537,200
Receivables............................................. 537,300 471,600
Inventories............................................. 2,433,400 2,931,100
Notes receivable........................................ 170,000 129,100
Prepaid expenses and other.............................. 19,000 60,700
------------ ------------
Total current assets.................................. 4,288,600 4,129,700
Property, Plant and Equipment, net........................ 270,600 354,400
Other Assets.............................................. 33,700 32,000
------------ ------------
$ 4,592,900 $ 4,516,100
------------ ------------
------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Flooring notes payable.................................. $ 2,287,100 $ 2,430,600
Current maturities of obligation under capital lease.... -- 21,500
Trade payables.......................................... 468,500 355,400
Accrued liabilities..................................... 209,200 318,600
Advances from stockholder............................... 1,461,500 1,163,000
------------ ------------
Total current liabilities............................. 4,426,300 4,289,100
Obligation Under Capital Lease, less current maturities... -- 104,200
------------ ------------
Total liabilities..................................... 4,426,300 4,393,300
------------ ------------
Stockholders' Equity
Common stock, $2,000 par value, 2,500 shares authorized,
500 shares issued and outstanding..................... 1,000,000 1,000,000
Accumulated deficit..................................... (833,400 ) (877,200)
------------ ------------
Total stockholders' equity............................ 166,600 122,800
------------ ------------
$ 4,592,900 $ 4,516,100
------------ ------------
------------ ------------
</TABLE>

The accompanying notes are an integral
part of these financial statements.

F-32
<PAGE>
SAM LINDER, INC.
(DBA SAM LINDER CADILLAC-HONDA-OLDSMOBILE)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
---------------------------- ---------------------------
1994 1995 1995 1996
------------- ------------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
SALES
Vehicle............................................. $ 16,112,600 $ 22,889,800 $ 9,494,000 $ 10,975,400
Service, body and parts............................. 2,692,300 2,550,600 1,283,500 1,446,700
Finance and lease................................... 620,300 1,417,000 528,800 446,000
------------- ------------- ------------ -------------
19,425,200 26,857,400 11,306,300 12,868,100
------------- ------------- ------------ -------------
COST OF SALES
Vehicle............................................. 14,808,400 20,936,700 8,588,700 9,945,200
Service, body and parts............................. 1,448,600 1,393,500 703,000 669,500
Finance and lease................................... 124,000 315,800 169,600 194,100
------------- ------------- ------------ -------------
16,381,000 22,646,000 9,461,300 10,808,800
------------- ------------- ------------ -------------
Gross profit...................................... 3,044,200 4,211,400 1,845,000 2,059,300

SELLING, GENERAL AND ADMINISTRATIVE 3,038,700 3,928,000 1,824,200 1,912,000
------------- ------------- ------------ -------------
Operating income.................................. 5,500 283,400 20,800 147,300
------------- ------------- ------------ -------------
OTHER INCOME (EXPENSE)
Interest expense.................................... (227,800) (346,700) (183,700) (103,800)
Other, net.......................................... (3,400) (800) 500 200
------------- ------------- ------------ -------------
(231,200) (347,500) (183,200) (103,600)
------------- ------------- ------------ -------------
NET (LOSS) INCOME..................................... (225,700) (64,100) (162,400) 43,700

ACCUMULATED DEFICIT
Beginning of period................................. (542,000) (769,300) (769,300) (833,400)
Dividends........................................... (1,500) -- -- (87,500)
------------- ------------- ------------ -------------
End of period....................................... $ (769,300) $ (833,400) $ (931,700) $ (877,200)
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
</TABLE>

The accompanying notes are an integral
part of these financial statements.

F-33
<PAGE>
SAM LINDER, INC.
(DBA SAM LINDER CADILLAC-HONDA-OLDSMOBILE)
STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------- --------------------
1994 1995 1995 1996
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income................................................. $(225,700) $ (64,100) $(162,400) $ 43,700
Adjustments to reconcile net (loss) income to net cash provided by
(used in) operating activities
Depreciation and amortization................................... 92,700 92,500 51,400 47,600
Change in allowance for doubtful accounts....................... -- 86,000 89,000 (2,000)
Changes in assets and liabilities
(Increase) decrease in receivables.............................. (159,700) (14,900) 94,700 67,700
(Increase) decrease in inventories.............................. 446,500 (235,200) (61,700) (497,700)
(Increase) decrease in other current assets..................... 3,500 (6,200) (113,800) (41,700)
(Increase) decrease in other noncurrent assets.................. 3,600 (4,700) (3,100) 1,700
Increase (decrease) in trade payables........................... (91,500) 261,300 123,300 (113,100)
Increase (decrease) in accrued liabilities...................... 70,500 (40,700) 15,900 109,400
Increase in accrued interest on advances from stockholder....... 103,800 140,200 70,100 140,200
--------- --------- --------- ---------
Net cash provided by (used in) operating activities......... 243,700 214,200 103,400 (244,200)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Net collections (increase) of notes receivable.................... (300) 316,200 161,900 40,900
Acquisition of property and equipment............................. (3,900) (17,800) (8,300) --
--------- --------- --------- ---------
Net cash provided by (used in) investing activities......... (4,200) 298,400 153,600 40,900
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) on flooring notes payable............. 81,500 143,300 (655,300) 143,500
Principal payments on long-term debt.............................. (40,000) (73,300) (64,000) --
Net borrowings (repayments) on advances from stockholder.......... (195,200) 180,000 200,000 (438,700)
Principal payments on obligations under capital lease............. -- -- -- (5,700)
Dividends paid.................................................... (1,500) -- -- (87,500)
--------- --------- --------- ---------
Net cash provided by (used in) financing activities......... (155,200) 250,000 (519,300) (388,400)
--------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ 84,300 762,600 (262,300) (591,700)
CASH AND CASH EQUIVALENTS
Beginning of period............................................... 282,000 366,300 366,300 1,128,900
--------- --------- --------- ---------
End of period..................................................... $ 366,300 $1,128,900 $ 104,000 $ 537,200
--------- --------- --------- ---------
--------- --------- --------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest.......................... $ 124,000 $ 206,500 $ 113,600 $ 103,800
--------- --------- --------- ---------
--------- --------- --------- ---------
Cash paid during the period for income taxes...................... $ 800 $ 800 $ 800 $ 800
--------- --------- --------- ---------
--------- --------- --------- ---------
Non-cash investing and financing activities:
Equipment acquired through capital lease........................ $ -- $ -- $ -- $ 131,400
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

The accompanying notes are an integral
part of these financial statements.

F-34
<PAGE>
SAM LINDER, INC.

(DBA SAM LINDER CADILLAC-HONDA-OLDSMOBILE)

NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND NATURE OF BUSINESS -- Sam Linder, Inc., dba Sam Linder
Cadillac-Honda-Oldsmobile (the Company), was established as a corporation on
November 30, 1989. The purpose of the Company is to engage in retail sales of
new Cadillac, Honda and Oldsmobile vehicles obtained through dealership
agreements, used vehicles, parts and service. The Company sells to individuals
and commercial businesses located primarily in the Salinas, California area.

CASH AND CASH EQUIVALENTS -- For purposes of reporting cash flows, the
Company considers contracts in transit and all highly liquid debt instruments
with a maturity of three months or less when purchased to be cash equivalents.

INVENTORIES -- New vehicle, used vehicle and parts and accessories
inventories are stated at the lower of cost or market. Cost is determined by
using the last-in, first-out (LIFO) method.

PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost and are
being depreciated over their estimated useful lives, principally using the
straight-line method. Expenditures for maintenance, repairs and minor renewals
are expensed as incurred, while significant renewals and betterments are
capitalized. When an asset is retired or otherwise disposed of, the related cost
and accumulated depreciation are removed from the account, and any gain or loss
is credited or charged to income.

INCOME TAXES -- The Company, with the consent of its stockholder, has
elected to be an S Corporation under the Internal Revenue Code and California
Revenue and Taxation Code. In lieu of corporate income taxes, the stockholders
of an S Corporation are taxed on their proportionate share of the Company's
taxable income or receive a deduction for their proportionate share of the
Company's taxable loss. The Company is subject to a 1.5% California franchise
tax on taxable income, with a minimum amount of $800 payable annually.

INTERIM FINANCIAL STATEMENTS -- The accompanying unaudited financial
statements for the six-months ended June 30, 1995 and 1996 have been prepared on
substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein.

ADVERTISING -- The Company expenses production and other costs of
advertising as incurred. Advertising expense for the years ended December 31,
1995 and 1994 were $386,100 and $190,700, respectively. Advertising expense for
the six months ended June 30, 1996 and 1995 were $189,900 (unaudited) and
$150,000 (unaudited), respectively.

CONCENTRATIONS OF CREDIT RISK -- Concentration of credit risk with respect
to trade receivables is limited due to the large number of customers comprising
the Company's customer base. Receivables arising from vehicle sales are secured
by the related vehicle. Receivables arising from all other sales are unsecured
open accounts.

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash deposits. At December
31, 1995, the Company has deposits in excess of amounts insured by the FDIC.

MANAGEMENT ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at December 31, 1995 and June 30, 1996 and revenues and

F-35
<PAGE>
SAM LINDER, INC.

(DBA SAM LINDER CADILLAC-HONDA-OLDSMOBILE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 -- NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
expenses during the years ended December 31, 1994 and 1995 and the six month
periods ended June 30, 1995 and 1996. The actual outcome of the estimates could
differ from the estimates made in the preparation of the financial statements.

REVENUE RECOGNITION -- Revenue from the sale of cars is recognized upon
delivery, when the sales contract is signed and down payment has been received.
Income from finance and insurance commissions is recorded separately on an
accrual basis.

MAJOR SUPPLIER AND DEALER AGREEMENT -- The Company purchases substantially
all of its new vehicles and inventory from automakers at the prevailing prices
charged by the automakers to all franchised dealers. The Company's overall sales
could be impacted by the automaker's ability or unwillingness to supply the
dealership with an adequate supply of popular models. The Dealer Agreement
generally limits the location of the dealership and retains automaker approval
rights over changes in dealership management and ownership. The automaker is
also entitled to terminate the agreement if the dealership is material breach of
the terms.

NOTE 2 -- RECEIVABLES

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------ JUNE 30,
1996
-----------
(UNAUDITED)
<S> <C> <C>
Trade receivables................................................. $ 482,900 $ 373,900
Finance reserves.................................................. 54,700 91,700
Employee receivables.............................................. 26,700 31,000
------------ -----------
564,300 496,600
Less allowance for doubtful accounts.............................. 27,000 25,000
------------ -----------
$ 537,300 $ 471,600
------------ -----------
------------ -----------
</TABLE>

NOTE 3 -- NOTES RECEIVABLE

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------ JUNE 30,
1996
-----------
(UNAUDITED)
<S> <C> <C>
VARIOUS NOTES RECEIVABLE ARISING FROM IN-HOUSE FINANCING OF USED VEHICLE SALES, with
payments of principal and interest required either weekly, semi-monthly, or monthly
and terms range from twelve to twenty-four months. Interest rates range from 8.9% to
19.75%, and the notes are collateralized by the related vehicles.................... $ 272,000 $ 231,100
NOTE RECEIVABLE FROM RELATED PARTY, with interest at .5% above prime plus .50% due
monthly, principal due on demand, unsecured......................................... 50,000 50,000
------------ -----------
322,000 281,100
Less allowance for doubtful accounts.................................................. 152,000 152,000
------------ -----------
$ 170,000 $ 129,100
------------ -----------
------------ -----------
</TABLE>

F-36
<PAGE>
SAM LINDER, INC.

(DBA SAM LINDER CADILLAC-HONDA-OLDSMOBILE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 -- INVENTORIES AND RELATED NOTES PAYABLE

The new and used vehicle inventory collateralizing related notes payable and
other inventory are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
-------------------------- --------------------------
INVENTORY NOTES INVENTORY NOTES
COST PAYABLE COST PAYABLE
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
New and demonstrator vehicles............................ $ 1,800,800 $ 2,287,100 $ 2,297,000 $ 2,430,600
Used vehicles............................................ 1,059,300 -- 1,132,900 --
Parts and accessories.................................... 225,800 -- 181,800 --
------------ ------------ ------------ ------------
Inventories at FIFO...................................... 3,085,900 2,287,100 3,611,700 2,430,600
Less LIFO reserve for new and used vehicles and parts
inventories............................................. 652,500 -- 680,600 --
------------ ------------ ------------ ------------
Inventories at LIFO...................................... $ 2,433,400 $ 2,287,100 $ 2,931,100 $ 2,430,600
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

If the specific identification and the first-in, first-out (FIFO) methods
had been used in the accompanying financial statements, net loss would have
decreased by $65,900 and $122,000 to net income of $1,800 and net loss of
$103,700 for the years ended December 31, 1995 and 1994, respectively. Net
income would have increased by $28,100 and net loss would have decreased by
$32,900 to net income of $71,800 and net loss of $129,500 for the six months
ended June 30, 1996 and 1995, respectively (unaudited). Stockholder's equity
would have increased to $819,100 and $803,400 (unaudited) at December 31, 1995
and June 30, 1996.

Notes payable consist of floor plan notes to Bank of America National Trust
and Savings Association, secured by new and used vehicle inventories. The notes
are payable on specific dates after sale of units, with monthly curtailments
including interest at the bank's reference rate plus .75% (8.75% at December 31,
1995). The floor plan agreement requires the Company to meet certain financial
covenants as defined by the agreement. The Company must maintain a current ratio
of 1.25 to 1.0, working capital of $850,000, tangible net worth of $2,000,000
and a ratio of liabilities to tangible net worth of 2.25 to 1.0, all as defined
in the agreement. Additional restrictions apply to incurring direct or
contingent debt, capital expenditures and changes in ownership. Floor plan notes
payable are guaranteed by the Company's majority stockholder.

The Company recognized manufacturers' floor plan interest expense subsidies
of approximately $82,000 and $51,000 for the years ended December 31, 1995 and
1994, respectively, and $15,000 and $9,000 for the six months ended June 30,
1996 and 1995, respectively (unaudited). These amounts have been offset against
floor plan interest expense in the accompanying statements of operations.

F-37
<PAGE>
SAM LINDER, INC.

(DBA SAM LINDER CADILLAC-HONDA-OLDSMOBILE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
DECEMBER
31, 1995
---------- JUNE 30,
1996
-----------
(UNAUDITED)
<S> <C> <C>
Company vehicles............................. $ 32,500 $ 32,500
Equipment.................................... 206,300 206,300
Furniture and fixtures....................... 299,000 299,000
Leasehold improvements....................... 278,600 278,600
Signs........................................ 13,700 13,700
Equipment under capital lease................ -- 131,400
---------- -----------
830,100 961,500
Less accumulated depreciation and
amortization............................... 559,500 607,100
---------- -----------
$ 270,600 $ 354,400
---------- -----------
---------- -----------
</TABLE>

NOTE 6 -- OBLIGATION UNDER CAPITAL LEASE

At June 30, 1996, future minimum lease payments for equipment under a
capital lease agreement are as follows:

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
- ----------------------------------------------------------------------------------
<S> <C>
1997.............................................................................. $ 33,000
1998.............................................................................. 33,000
1999.............................................................................. 33,000
2000.............................................................................. 33,000
2001.............................................................................. 22,000
----------
Total minimum lease payments...................................................... 154,000
Less imputed interest............................................................. 28,300
----------
Present value of minimum lease payments........................................... 125,700
----------
Less current maturities........................................................... 21,500
----------
$ 104,200
----------
----------
</TABLE>

F-38
<PAGE>
SAM LINDER, INC.

(DBA SAM LINDER CADILLAC-HONDA-OLDSMOBILE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 -- TRANSACTIONS WITH RELATED PARTIES

NOTE RECEIVABLE -- As further discussed in Note 3, a note receivable is due
from an entity owned by the Company's majority stockholder.

ADVANCES -- Advances from the majority stockholder are unsecured and due on
demand after December 31, 1996. Interest on the advances has been accrued at the
rate of 6% per annum. At December 31, 1995 and June 30, 1996, $600,000 of the
advances have been subordinated to Bank of America National Trust and Savings
Association.

MANAGEMENT SERVICES FEE -- In 1996, the Company paid $100,000 to an entity
affiliated through common ownership for management services to be provided
during 1996. The amount paid is being amortized monthly, with $50,000 being
charged to operations for the six months ended June 30, 1996.

LEASE AGREEMENT -- As further discussed in Note 8, the Company leases its
premises from the majority stockholder.

NOTE 8 -- COMMITMENTS AND CONTINGENCY

The Company is obligated under a noncancellable operating lease with the
stockholder for the rental of its facilities through November 1999. The Company
is also obligated under a noncancellable operating sublease for the rental of a
car lot through August 1997. An option exists to extend this lease to August
2000.

The Company leases equipment under noncancellable agreements which expire in
May, 2000. Following is a schedule of the approximate future minimum lease
payments under the above noncancellable operating leases:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, STOCKHOLDER OTHER TOTAL
- ---------------------------------------------------------- ----------- --------- ----------
<S> <C> <C> <C>
1996 (six months)......................................... $ 120,000 $ 15,000 $ 135,000
1997...................................................... 240,000 34,000 274,000
1998...................................................... 240,000 7,000 247,000
1999...................................................... 220,000 2,000 222,000
2000...................................................... -- 2,000 2,000
----------- --------- ----------
$ 820,000 $ 60,000 $ 880,000
----------- --------- ----------
----------- --------- ----------
</TABLE>

F-39
<PAGE>
SAM LINDER, INC.

(DBA SAM LINDER CADILLAC-HONDA-OLDSMOBILE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 8 -- COMMITMENTS AND CONTINGENCY (CONTINUED)
Rental expense incurred on operating leases amounted to approximately
$285,000 and $280,000 for the years ended December 31, 1995 and 1994,
respectively, with $240,000 being attributable to the lease with the stockholder
for each of the years. Rental expense incurred on operating leases amounted to
approximately $136,000 for the six months ended June 30, 1996 and 1995, with
$120,000 being attributable to the lease with the stockholder in each of the six
month periods.

ENVIRONMENTAL -- Substantially all of the Company's facilities are subject
to federal, state and local provisions regulating the discharge of materials
into the environment. Compliance with these provisions has not had, nor does the
Company expect such compliance to have, any material effect upon the capital
expenditures, net income, financial condition or competitive position of the
Company. Management believes that its current practices and procedures for the
control and disposition of such wastes comply with applicable federal and state
requirements.

During the year ended December 31, 1995, the Company removed its underground
gasoline and used motor oil storage tanks and cleaned up minor contamination
surrounding the tanks. The Company does not expect to incur any further
liability related to this clean-up. The Company has no plans to seek
reimbursement from the State of California for the clean-up under SB 2004, the
Underground Storage Tank Clean-up Fund.

Accruals for environmental matters are recorded in operating expenses when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated.

NOTE 9 -- FAIR VALUE OF SIGNIFICANT FINANCIAL INSTRUMENTS

The carrying amount of cash equivalents, trade receivables, trade payables
and flooring notes payable approximate fair value because of the short-term
nature of these instruments.

The carrying amounts and estimated fair values of the Company's significant
financial instruments, none of which are held for trading purposes, are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996 (UNAUDITED)
-------------------------- --------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets
Notes receivable............................. $ 170,000 $ 170,000 $ 129,100 $ 129,100
Financial liabilities
Flooring notes payable....................... $ 2,287,100 $ 2,287,100 $ 2,430,600 $ 2,430,600
</TABLE>

The carrying amounts shown in the above table are included in the balance
sheet under the indicated captions.

F-40
<PAGE>
SAM LINDER, INC.

(DBA SAM LINDER CADILLAC-HONDA-OLDSMOBILE)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 -- FAIR VALUE OF SIGNIFICANT FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:

Notes Receivable -- The fair values are based on the current rates offered
by the Company for loans of the same remaining maturities with similar risks and
collateral requirements.

Flooring Notes Payable -- The carrying amounts approximate fair value
because the interest rate fluctuates with the lender's prime rate.

Advances From Stockholder -- It is not practicable to determine the fair
value of advances from the majority stockholder, as the related party nature of
the transaction impacts the repayment terms.

NOTE 10 -- LABOR AGREEMENT

Mechanics account for approximately 25% of the Company's work force and are
covered by a collective bargaining agreement. This agreement was renewed in June
1996 for a three year period.

NOTE 11 -- SUBSEQUENT EVENT

Sam Linder, Inc. has executed a purchase and sale agreement whereby it has
agreed to sell substantially all if its assets to Lithia Motors, Inc. The
purchase price will consist of cash consideration of approximately $1,049,000
for property, plant and equipment and intangible assets, plus an amount for
parts inventory. In addition, the purchaser will acquire the new vehicle
inventories at the cost paid to the manufacturer and used vehicle inventories at
a negotiated value. The sale is subject to customary closing conditions and
approval of the change in ownership by the franchisers.

F-41
<PAGE>

[Description of "Priority You" Marketing Campaign]

[Inside Back Cover of Prospectus]

<PAGE>

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY ANY
SECURITIES OTHER THAN THE SHARES OF CLASS A COMMON STOCK TO WHICH IT RELATES OR
AN OFFER TO, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE OF THIS PROSPECTUS OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.

----------------------------------------------------

TABLE OF CONTENTS
Page
----

PROSPECTUS SUMMARY........................................................... 3
RISK FACTORS................................................................. 8
COMPANY RESTRUCTURING AND PRIOR S CORPORATION STATUS ........................ 13
PENDING ACQUISITIONS......................................................... 15
USE OF PROCEEDS.............................................................. 15
DIVIDEND POLICY.............................................................. 16
CAPITALIZATION............................................................... 17
DILUTION..................................................................... 17
SELECTED COMBINED FINANCIAL DATA............................................. 19
PRO FORMA COMBINED AND CONDENSED FINANCIAL DATA.............................. 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.......................................... 26
INDUSTRY..................................................................... 34
BUSINESS......................................................................35
MANAGEMENT................................................................... 46
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................... 49
DESCRIPTION OF CAPITAL STOCK................................................. 51
SHARES ELIGIBLE FOR FUTURE SALE.............................................. 53
UNDERWRITING................................................................. 54
LEGAL MATTERS................................................................ 56
EXPERTS...................................................................... 56
ADDITIONAL INFORMATION....................................................... 56

UNTIL ______________, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

_______________ SHARES

[LOGO]

LITHIA MOTORS, INC.

CLASS A COMMON STOCK

PROSPECTUS

FURMAN SELZ

DAIN BOSWORTH INCORPORATED

EVEREN SECURITIES, INC.

_________, 1996

<PAGE>

PART II
(Items not required in Prospectus)

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the fees and expenses incurred by the
Company in connection with the Offering. Except for the SEC registration fees,
NASD filing fees, and Nasdaq initial listing fees, all expenses are estimates:

SEC Registration Fees. . . . . . . . .$12,769
NASD Filing Fees . . . . . . . . . . . .4,203
Nasdaq Initial Listing Fee . . . . . . 20,725
Blue Sky Fees and Expenses
(including legal fees). . . . . . . 15,000
Costs of Printing. . . . . . . . . . .100,000
Accounting Fees and Expenses . . . . .175,000
Legal Fees . . . . . . . . . . . . . .275,000
Miscellaneous Expenses . . . . . . . .192,303
--------

Total Expenses. . . . . . . . . . $795,000
--------
--------

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS

As an Oregon corporation, the Company is subject to the Oregon Business
Corporation Act (the "Business Corporation Act"). Under the Business
Corporation Act, a corporation may provide in its Articles of Incorporation or
in its Bylaws for the indemnification of directors and officers against
liability where the director or officer has acted in good faith and with a
reasonable belief that actions taken were in the best interests of the
corporation or at least not adverse to the corporation's best interests and, if
in a criminal proceeding, the individual had no reasonable cause to believe that
the conduct in question was unlawful. Under the Business Corporation Act, a
corporation may not indemnify an officer or director against liability in
connection with a claim by or in the right of the corporation in which such
officer or director was adjudged liable to the corporation or in connection with
any other proceeding in which the officer or director was adjudged liable for
receiving an improper personal benefit; however, a corporation may indemnify
against the reasonable expenses associated with such proceeding. A corporation
may not indemnify against breaches of the duty of loyalty. The Business
Corporation Act provides for mandatory indemnification of directors against all
reasonable expenses incurred in the successful defense of any claim made or
threatened whether or not such claim was by or in the right of the corporation.
A court may order indemnification if it determines that the director or officer
is fairly and reasonably entitled to indemnification in view of all the relevant
circumstances whether or not the director or officer met the good faith and
reasonable belief standards of conduct set out in the statute. Unless otherwise
stated in the Articles of Incorporation, officers of the corporation are also
entitled to the benefit of the above statutory provisions.

The Business Corporation Act also provides that the corporation may, by so
providing in its Articles of Incorporation, eliminate or limit the personal
liability of a director to the corporation or its shareholders for monetary
damages for conduct as a director, provided that the Articles of Incorporation
may not eliminate or limit liability for any breach of the director's duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, any unlawful distribution, or any
transaction from which the director received an improper personal benefit.

In accordance with Oregon law, the Articles of Incorporation of the Company
provide that directors are not personally liable to the corporation or its
shareholders for monetary damages for conduct as a director, except for (i) any
breach of a director's duty of loyalty to the corporation, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) any distribution to shareholders which is unlawful,
or (iv) any transaction from which the director received an improper personal
benefit.

The Articles of Incorporation also provide for indemnification of any
person who is or was a party, or is threatened to be made a party, to any civil,
administrative or criminal proceeding by reason of the fact that the person is
or was a director or officer of the corporation or any of its subsidiaries, or
is or was serving at the request of the corporation as a director, officer,
partner, agent or employee of another corporation or entity, against

II-1

<PAGE>

expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement, actually and reasonably incurred by that person if (i) the person
acted in good faith and in a manner reasonably believed to not be opposed to the
best interests of the corporation, or (ii) the act or omission giving rise to
such action or proceeding is ratified, adopted or confirmed by the corporation,
or the benefit thereof was received by the corporation. Indemnification is
available under this provision of the Articles of Incorporation in the case of
derivative actions, unless the person is adjudged to be liable for gross
negligence or deliberate misconduct in the performance of the person's duty to
the corporation. To the extent a director, officer, employee or agent
(including an attorney) is successful on the merits or otherwise in defense of
any action to which this provision is applicable, the person is entitled to
indemnification for expenses actually and reasonably incurred by the person in
connection with that defense.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On April 5, 1996, the Company issued __________ shares of Class B Common
Stock pursuant to the terms of a Plan of Recapitalization under which Sidney B.
DeBoer exchanged 75 shares of the Company's Common Stock for __________ shares
of Class B Common Stock and M. L. Dick Heimann exchanged 45 shares of the
Company's Common Stock for __________ shares of Class B Common Stock. The
issuance of these securities was exempt from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits.

The index of exhibits are being filed with this Registration
Statement is attached on page E-1.

(b) Financial Statement Schedules

None.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes that:

(A) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required
by the Underwriter to permit prompt delivery to each purchaser.

(B) For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared it effective.

(C) For the purpose of determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(D) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, (the "Act") may be permitted to
directors, officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of

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<PAGE>

appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.

II-3

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Medford,
state of Oregon, on October 8, 1996.

LITHIA MOTORS, INC.

By /s/Sidney B. DeBoer
------------------------------------------
Sidney B. DeBoer, President

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
Sidney B. DeBoer and Brian R. Neill or either of them as his true and lawful
attorney-in-fact and agents, with full power of substitution for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) and supplements to this Registration
Statement, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
ON OCTOBER 8, 1996

/s/ Sidney B. DeBoer /s/ M. L. Dick Heimann
- ----------------------------------------- -----------------------------------
Sidney B. DeBoer, Chairman, President, M.L. Dick Heimann, Director
Chief Executive Officer and Director
(Principal Executive Officer)

/s/ Brian R. Neill
- -----------------------------------------
Brian R. Neill, Chief Financial Officer
and Secretary
(Principal Financial and Accounting Officer)

<PAGE>

EXHIBIT INDEX

Exhibit
-------
*1.1 Form of Underwriting Agreement

*3.1 Restated Articles of Incorporation of Lithia Motors, Inc.

*3.2 By-Laws of Lithia Motors, Inc.

*4.1 Specimen Common Stock certificate

*5.1 Opinion of Foster Pepper & Shefelman

10.1 1996 Stock Incentive Plan

*10.2 Form of Stock Option Agreements under 1996 Stock Incentive Plan

10.2.1 Incentive Stock Option Agreement

10.2.2 Non-Qualified Stock Option Agreement

10.2.3 Incentive Stock Option Agreement

10.3.1 Chrysler Corporation Chrysler Sales and Service Agreement, dated
January 10, 1994, between Chrysler Corporation and Lithia
Chrysler Plymouth Jeep Eagle, Inc. (standard provisions are in
Exhibit 10.3.2 hereto).(1)

10.3.2 Chrysler Corporation Dealer Agreement Standard Provisions

10.4.1 Honda Automobile Dealer Sales and Service Agreement dated August
11, 1994, between American Honda Motor Company, Inc. and Lithia
Motors, Inc. dba Lithia Honda (standard provisions are in Exhibit
10.4.2 hereto).

10.4.2 American Honda Automobile Dealer's Standard Agreement

*10.5.1 Isuzu Dealer Sales and Service Agreement, dated June 5, 1996
between American Isuzu Motors, Inc. and Lithia Motors, Inc.

10.5.2 Isuzu Dealer Sales and Service Agreement General Provisions

*10.6.1 Mercury Sales and Service Agreement, dated December 28, 1979,
between Ford Motor Company and Lithia Motors, Inc.(2)

*10.6.2 Amendment, dated May 22, 1989, to Mercury Sales and Service
Agreement and Lincoln Sales and Service Agreement

10.6.3 Ford Motor Company Imported Vehicle Sales and Service Agreement,
dated July 2, 1984, between Ford Motor Company and Lithia Motors,
Inc. dba Lithia Toyota, Lincoln-Mercury (General provisions are
in Exhibit 10.6.4 hereto)

10.6.4 Ford Motor Company Imported Vehicle Sales and Service Agreement
General Provisions

E-1

<PAGE>

10.7.1 General Motors Corporation Dealer Sales and Service Agreement,
dated March 12, 1993, between General Motors Corporation Pontiac
Division and Lithia Motors, Inc. dba Lithia Pontiac

10.7.2 General Motors Dealer Sales and Service Agreement Standard
Provisions.

10.8.1 Mazda Dealer Agreement, dated April 11, 1994 between Mazda Motor
of America, Inc. and Lithia Dodge, L.L.C. dba Lithia Mazda

10.8.2 Letter, dated September 29, 1995 extending Mazda Dealer Agreement
between Mazda Motor of America, Inc. and Lithia Dodge, L.L.C. dba
Lithia Mazda

10.9.1 Saturn Distribution Corporation Dealer Agreement, dated September
12, 1991, between Saturn Distribution Corporation and Medford
Dodge dba Saturn of Medford

10.10.1 Toyota Dealer Agreement, dated January 30, 1990, between Toyota
Motor Distributors, Inc. and Lithia Motors, Inc. dba Medford
Toyota

*10.10.2 Toyota Dealer Agreement Standard Provisions.

*10.10.3 Agreement, dated September 30, 1996, between Toyota Motor Sales,
U.S.A., Inc. and Lithia Motors, Inc.

*10.11.1 Suzuki Term Dealer Sales and Service Agreement, dated May 13,
1996, between American Suzuki Motor Corporation and Lithia
Motors, Inc. dba Lithia Suzuki

10.13.1 Asset Purchase Agreement, dated August 2, 1996, between Lithia
Motors, Inc. and Roberts Dodge, Inc.

10.13.2 Land Sale Contract, dated August 2, 1996, between Lithia
Properties, L.L.C. and Milford G. Roberts, Sr. and Sandra L.
Roberts

*10.13.3 Assignment of Land Sale Contract, dated , between
Lithia Properties, LLC and Lithia Motors, Inc.

*10.14.1 Form of Purchase and Sale Agreement between Lithia Motors, Inc.
and Sam Linder, Inc.

*10.15.1 Form of Agreement of Reorganization, dated October 10, 1996, by
and among Lithia Motors, Inc., LGPAC, Inc., Lithia DM, Inc.,
Lithia MTLM, Inc., Lithia HPI, Inc., Lithia SSO, Inc., Lithia
Rentals, Inc., Discount Auto and Truck Rental, Inc., Lithia Auto
Services, Inc., Lithia Holding Company, L.L.C., Sidney B. DeBoer,
Manfred L. (Dick) Heimann, R. Bradford Gray, and Stephen R.
Philips

*10.16.1 Alternative Rate Option Promissory Note by Lithia Motors, Inc.,
Lithia TLM, LLC, Lithia Dodge, L.L.C., and Lithia's Grants Pass
Auto Center, L.L.C., to United States National Bank of Oregon in
the amount of $18 million.(3)

*10.16.2 Promissory Note by Lithia Motors, Inc. to United States National
Bank of Oregon in the amount of $6.0 million.(4)

*10.16.3 Promissory Note by Lithia Leasing, Inc. to United States National
Bank of Oregon in the amount of $1.4 million (5)

E-2

<PAGE>

*10.17.1 Promissory Note between Lithia Motors, Inc. and Sidney B. DeBoer
in the amount of $500,000(6)

*10.17.2 Subordination Agreement between Lithia Motors, Inc., Sidney B.
DeBoer and United States National Bank(7)

*10.18.1 Floor Plan Accommodation Agreement (Security Agreement) between
Lithia Motors, Inc. and United States National Bank of Oregon(8)

*10.18.2 Corporate Resolution to Guarantee of Lithia Motors, Inc. (9)

*10.19.1 Commercial Guaranty under which Sidney B. DeBoer is the guarantor
of obligations of Lithia Motors, Inc. to US National Bank of
Oregon(10)

*10.20.1 Management Contract between Lithia Leasing, Inc. and Lithia
Properties LLC.

*21.1 Subsidiaries of Lithia Motors, Inc.

23.1 Consent of KPMG Peat Marwick LLP relating to Lithia Motors, Inc.

23.2 Consent of KPMG Peat Marwick LLP relating to Roberts Dodge, Inc.

23.3 Consent of Moss Adams LLP

23.4 Consent of Foster Pepper & Shefelman (included in Exhibit 5.1).

24.1 Powers of Attorney (included in the signature pages of this
registration statement).

27.1 Financial Data Schedules.

* To be filed by amendment.

(1) Substantially identical agreements exist between Chrysler
Corporation and Lithia Chrysler Plymouth Jeep Eagle, Inc., and
between Chrysler Corporation and Lithia's Grants Pass Auto Mart,
with respect to Jeep, Eagle, Dodge and Plymouth sales and
service, and between Chrysler Corporation and Medford Dodge with
respect to Dodge sales and service.

(2) A substantially identical agreement exists between the same
parties with respect to Linder Sales and Services.

(3) Substantially identical notes exist between the same parties in
amounts of $2.0 million, $2.5 million, and $5.0 million.

(4) A substantially identical note exists between the same parties in
the amount of 400,000.

(5) Substantially identical notes exist between the same parties in
amounts of 750,000, and $1.0 million.

(6) A substantially identical note exists between Lithia Motors, Inc.
and Manfred L. Heimann in the same amount

(7) A substantially identical agreement exists between Lithia Motors,
Inc. and Manfred L. Heimann

E-3

<PAGE>

(8) Substantially identical agreements exist between United States
National Bank of Oregon and each of Lithia TLM, LLC, Lithia
Dodge, L.L.C., Lithia's Grants Pass Auto Center, L.L.C., and
Lithia Leasing, Inc.

(9) A substantially identical guarantee exists under which Lithia's
Grants Pass Auto Center, L.L.C. is the Guarantor.

(10) A substantially identical guaranty exists under which Manfred L.
Heimann is the Guarantor of Lithia Motors, Inc.

E-4

<PAGE>

EXHIBIT 10.1

LITHIA MOTORS, INC.

1996 STOCK INCENTIVE PLAN

SECTION 1. PURPOSE OF PLAN

The purpose of this 1996 Stock Incentive Plan ("Plan") of Lithia Motors,
Inc., an Oregon corporation (the "Company"), is to enable the Company to
attract, retain and motivate its employees and consultants by providing for
or increasing the proprietary interests of such employees and consultants in
the Company.

SECTION 2. PERSONS ELIGIBLE UNDER PLAN

Each of the following persons (each, a "Participant") shall be eligible
to be considered for the grant of Awards (as hereinafter defined) hereunder:
(1) any employee of the Company or any of its subsidiaries, including any
director who is also such an employee, and (2) any consultant of the Company
or any of its subsidiaries.

SECTION 3. AWARDS

(a) The Committee (as hereinafter defined), on behalf of the Company, is
authorized under this Plan to enter into any type of arrangement with a
Participant that is not inconsistent with the provisions of this Plan and
that, by its terms, involves or might involve the issuance of (i) shares of
Class A Common Stock, no par value, of the Company ("Common Shares") or (ii)
a Derivative Security (as such term is defined in Rule 16a-1 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as such rule may be amended from time to time) with an exercise or conversion
privilege at a price related to the Common Shares or with a value derived
from the value of the Common Shares. The entering into of any such
arrangement is referred to herein as the "grant" of an "Award."

(b) Awards are not restricted to any specified form or structure and may
include, without limitation, sales or bonuses of stock, restricted stock,
stock options, reload stock options, stock purchase warrants, other rights to
acquire stock, securities convertible into or redeemable for stock, stock
appreciation rights, phantom stock, dividend equivalents, performance units
or performance shares, and an Award may consist of one such security or
benefit, or two or more of them in tandem or in the alternative.

(c) Awards may be issued, and Common Shares may be issued, pursuant to
an Award, for any lawful consideration as determined by the Committee,
including, without limitation, services rendered by the recipient of such
Award.

(d) Subject to the provisions of this Plan, the Committee, in its sole
and absolute discretion, shall determine all of the terms and conditions of
each Award granted under this Plan, which terms and conditions may include,
among other things:

(i) a provision permitting the recipient of such Award, including
any recipient who is a director or officer of the Company, to pay the
purchase price of the Common Shares or other

Page 1 of 12
<PAGE>

property issuable pursuant to such Award, or such recipient's tax withholding
obligation with respect to such issuance, in whole or in part, by any one or
more of the following:

(A) the delivery of cash;

(B) the delivery of other property deemed acceptable by the
Committee;

(C) the delivery of previously owned shares of capital stock of
the Company (including "pyramiding") or other property; or

(D) a reduction in the amount of Common Shares or other property
otherwise issuable pursuant to such Award.

(ii) a provision conditioning or accelerating the receipt of
benefits pursuant to such Award, either automatically or in the discretion of
the Committee, upon the occurrence of specified events, including, without
limitation, continued employment by the Company, a change of control of the
Company (as defined by the Committee), an acquisition of a specified
percentage of the voting power of the Company, the dissolution or liquidation
of the Company, a sale of substantially all of the property and assets of the
Company or an event of the type described in Section 7 hereof; or

(iii) a provision required in order for such Award to qualify as
an incentive stock option (an "Incentive Stock Option") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"); PROVIDED,
HOWEVER, that no Award issued to any consultant may qualify as an Incentive
Stock Option.

SECTION 4. STOCK SUBJECT TO PLAN

(a) The aggregate number of Common Shares that may be issued pursuant to
all Incentive Stock Options granted under this Plan shall not exceed 500,000,
subject to adjustment as provided in Section 7 hereof.

(b) At any time, the aggregate number of Common Shares issued and
issuable pursuant to all Awards (including all Incentive Stock Options)
granted under this Plan shall not exceed 500,000, subject to adjustment as
provided in Section 7 hereof.

(c) For purposes of Section 4(b) hereof, the aggregate number of Common
Shares issued and issuable pursuant to Awards granted under this Plan shall
at any time be deemed to be equal to the sum of the following:

(i) the number of Common Shares that were issued prior to such time
pursuant to Awards granted under this Plan, other than Common Shares that
were subsequently reacquired by the Company pursuant to the terms and
conditions of such Awards and with respect to which the holder thereof
received no benefits of ownership such as dividends; plus

(ii) the number of Common Shares that were otherwise issuable prior
to such time pursuant to Awards granted under this Plan, but that were
withheld by the Company as payment of the purchase price of the Common Shares
issued pursuant to such Awards or as payment of the recipient's tax
withholding obligation with respect to such issuance; plus

Page 2 of 12
<PAGE>

(iii) the maximum number of Common Shares that are or may be
issuable at or after such time pursuant to Awards granted under this Plan
prior to such time.

(d) Subject to adjustment as provided in Section 7 hereof, the aggregate
number of Common Shares subject to Awards granted during any calendar year to
any one Participant (including the number of shares involved in Awards having
a value derived from the value of Common Shares) shall not exceed 200,000
shares.

SECTION 5. DURATION OF PLAN

No Awards shall be made under this Plan after April 4, 2006. Although
Common Shares may be issued after April 4, 2006 pursuant to Awards made on or
prior to such date, no Common Shares shall be issued under this Plan after
April 4, 2016.

SECTION 6. ADMINISTRATION OF PLAN

(a) This Plan shall be administered by a committee (the "Committee") of
the Board of Directors of the Company (the "Board") consisting of two or more
directors, each of whom: (i) is a "disinterested person" (as such term is
defined in Rule 16b-3 promulgated under the Exchange Act, as such Rule may be
amended from time to time), and (ii) with respect to any Award that is
intended to give rise to "performance based compensation" within the meaning
of Section 162(m)(4)(C) of the Code, is an "outside director" within the
meaning of Section 162(m)(4)(C)(i) of the Code. Notwithstanding the
foregoing, however, prior to the registration of the Common Shares under
Section 12 of the Exchange Act, this Plan may, in the absence of action by
the Committee, be administered by the entire Board (subject to any
limitations contained in Rule 16b-3 or otherwise).

(b) Subject to the provisions of this Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in
connection with the administration of this Plan, including, without
limitation, the following:

(i) adopt, amend and rescind rules and regulations relating to this
Plan;

(ii) determine which persons are Participants and to which of such
Participants, if any, Awards shall be granted hereunder;

(iii) grant Awards to Participants and determine the terms and
conditions thereof, including the number of Common Shares issuable pursuant
thereto;

(iv) accelerate the exercisability of an Award or extend the period
during which an owner of an Award may exercise his or her rights under such
Award (but not beyond April 4, 2016);

(v) determine whether, and the extent to which adjustments are
required pursuant to Section 7 hereof; and

(vi) interpret and construe this Plan and the terms and conditions
of any Award granted hereunder.

SECTION 7. ADJUSTMENTS

Page 3 of 12
<PAGE>

If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of securities, or if cash, property and/or
securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split or the like, or if substantially all of the property and assets
of the Company are sold, then, unless the terms of such transaction shall
provide otherwise, the Committee shall make appropriate and proportionate
adjustments in (a) the number and type of shares or other securities or cash
or other property that may be acquired pursuant to Incentive Stock Options
and other Awards theretofore granted under this Plan, (b) the maximum number
and type of shares or other securities that may be issued pursuant to
Incentive Stock Options and other Awards thereafter granted under this Plan,
and (c) the maximum number of Common Shares for which Awards may be granted
during any one calendar year; PROVIDED, HOWEVER, that no adjustment shall be
made to the number of Common Shares that may be acquired pursuant to
outstanding Incentive Stock Options or the maximum number of Common Shares
with respect to which Incentive Stock Options may be granted under this Plan
to the extent such adjustment would result in such options being treated as
other than Incentive Stock Options; PROVIDED further that no such adjustment
shall be made to the extent the Committee determines that such adjustment
would result in the disallowance of a federal income tax deduction for
compensation attributable to Awards hereunder by causing such compensation to
be other than "performance-based compensation" within the meaning of Section
162(m)(4)(C) of the Code.

SECTION 8. AMENDMENT AND TERMINATION OF PLAN

The Board may amend or terminate this Plan at any time and in any manner,
subject to the following limitations:

(a) No such amendment or termination shall deprive the recipient of any
Award theretofore granted under this Plan, without the consent of such
recipient, of any of his or her rights thereunder or with respect thereto; and

(b) If an amendment to this Plan would (a) increase the maximum number
of Common Shares that may be issued pursuant to (i) all Awards granted under
this Plan, (ii) all Incentive Stock Options granted under this Plan, or (iii)
Awards granted under this Plan during any calendar year to any one
Participant, (b) change the class of persons eligible to receive Awards under
this Plan, (c) otherwise materially increase the benefits hereunder accruing
to participants who are subject to Section 16 of the Exchange Act in a manner
not specifically contemplated herein, or (d) affect this Plan's compliance
with Rule 16b-3 or applicable provisions of the Code, as amended from time to
time, the amendment shall be subject to approval by the Company's
shareholders to the extent required to comply with Rule 16b-3, Sections 422
and 162(m) of the Code, and other applicable provisions of or rules under the
Code, as amended from time to time.

SECTION 9. EFFECTIVE DATE OF PLAN

This Plan shall be effective as of April 5, 1996, the date upon which it
was approved by the Board; PROVIDED, HOWEVER, that no Common Shares may be
issued under this Plan until it has been approved, directly or indirectly, by
the affirmative votes of the holders of a majority of the securities of the
Company present, or represented, and entitled to vote at a meeting duly held
or, in lieu thereof, by action by written consent, in accordance with the
laws of the State of Oregon.

SECTION 10. DEFINITION OF FAIR MARKET VALUE

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<PAGE>

For purposes of this Plan, "Fair Market Value" shall mean the fair market
value of the Common Shares. If the Common Shares are not publicly traded,
fair market value shall be determined by the Board or the Committee and may
be computed by any method which the Board or the Committee in good faith
believes will reflect the fair market value of the Common Shares on the date
of such determination. If the Common Shares are publicly traded, fair market
value shall be the closing sale price per share of the Common Shares, for
securities listed on a national securities exchange, or the closing bid price
per share of the Common Shares, for securities quoted by NASDAQ, on the day
in question (or, if such day is not a trading day or if no sales of Common
Shares were made on such day, on the nearest preceding trading day on which
sales of Common Shares were made), as reported in The Wall Street Journal or,
if trading in the Common Shares is not then reported in The Wall Street
Journal, at such closing sale or bid price as may then appear in what the
Board or the Committee in its judgment then deems to be the most nearly
comparable listing or reporting service.

Page 5 of 12

<PAGE>

EXHIBIT 10.2.1

LITHIA MOTORS, INC.

1996 STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

This Stock Option Agreement ("Agreement") is made and entered into as of
the Date of Grant indicated below by and between Lithia Motors, Inc., an Oregon
corporation (the "Company"), and the person named below as Grantee.

WHEREAS, Grantee is an employee of the Company; and

WHEREAS, pursuant to the Company's 1996 Stock Incentive Plan (the "Plan"),
the committee of the Board of Directors of the Company administering the Plan
(the "Committee") has approved the grant to Grantee of an option to purchase
shares of the Class A Common Stock of the Company, no par value (the "Common
Stock"), on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:

1. GRANT OF OPTION; CERTAIN TERMS AND CONDITIONS.

(a) The Company hereby grants to Grantee, and Grantee hereby accepts,
as of the Date of Grant, an option to purchase the number of shares of Common
Stock indicated below (the "Option Shares") at the Exercise Price per share
indicated below, which option shall expire at 5:00 o'clock p.m., Oregon time, on
the Expiration Date indicated below and shall be subject to all of the terms and
conditions set forth in this Agreement (the "Option").

Grantee:
-----------------------------------

Date of Grant: , 1996
------------------- ----
Number of shares purchasable:
----------------------------------------

Exercise Price per share: $
---------------------------------------------

Expiration Date: , 2004
------------------- ----

(b) The Option shall become exercisable to purchase, and shall vest
with respect to, all of the Option Shares on the seventh anniversary of the Date
of Grant set forth above. Notwithstanding the foregoing, if the Company closes
an underwritten initial public offering of the Common Stock (the "IPO"), then
the Option shall become exercisable to purchase, and shall vest with respect to,
the Option Shares at the rate of one-fifth of the Option Shares (rounded to the
nearest whole share) on each anniversary of the closing of the IPO until the
fifth anniversary of the closing of the IPO, at which time all of the Option
Shares shall be vested. Grantee hereby agrees that, in the event of an IPO,
Grantee shall enter into any lock-up agreement reasonably requested by the
underwriters of the IPO, which would

<PAGE>

restrict Grantee's ability to sell any Option Shares for a certain period of
time following the IPO (not to exceed 180 days).

(c) The Option is intended to qualify as an incentive stock option
(an "Incentive Stock Option") under Section 422 of the Internal Revenue Code
(the "Code") and consequently, notwithstanding anything herein to the contrary:

(i) the Expiration Date shall not be more than 10 years from the
Date of Grant and the Exercise Price per share shall not be less than the Fair
Market Value (as defined in the Plan) per share on the Date of Grant; PROVIDED,
HOWEVER, that if, on the Date of Grant, Grantee owns (after application of the
family and other attribution rules of Section 424(d) of the Code) more than 10%
of the total combined voting power of all classes of stock of the Company or of
its parent or subsidiary corporations, then the Expiration Date shall not be
more than five years from the Date of Grant and the Exercise Price per share
shall not be less than 110% of the Fair Market Value per share on the Date of
Grant; and

(ii) the aggregate Fair Market Value (determined as of the date
such options are granted) of the shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by Grantee during any
calendar year (under the Plan and all other stock option plans of the Company
and its parent and subsidiary corporations) shall not exceed $100,000.

2. TERMINATION OF OPTION.

(a) TERMINATION OF EMPLOYMENT.

(i) DEFINITION. In the event that Grantee shall cease to be an
employee of the Company or its parent or any of its subsidiaries for any reason,
such event shall be referred to herein as the "Termination" of Grantee's
"Employment," and the Grantee's Employment shall be deemed "Terminated" as of
the last day of the Grantee's Employment with the Company or a parent or
subsidiary of the Company.

(ii) RETIREMENT. If Grantee's Employment is Terminated by reason
of Grantee's retirement in accordance with the Company's then-current retirement
policy ("Retirement"), then (A) the portion of the Option that has not vested on
or prior to the date of such Retirement shall terminate on such date and (B) the
remaining vested portion of the Option shall terminate three months after the
date Grantee's Employment is Terminated.

(iii) WITHOUT CAUSE. If Grantee's Employment is Terminated by the
Company without "Cause" (as defined below), then (A) if Sidney B. DeBoer is the
Chairman, President or Chief Executive Officer of the Company at the time of
such Termination, the Option shall terminate upon the date of such Termination
of Employment, or (B) if Sidney B. DeBoer is not the Chairman, President or
Chief Executive Officer of the Company at the time of such Termination, the
Option shall become exercisable to purchase, and shall vest with respect to, all
of the Option Shares on the date of such Termination of Employment and shall
terminate three months after the date of Termination. For purposes of this
Section 2(a)(iii), "Cause" shall mean Grantee's fraudulent or criminal behavior,
willful misconduct, insubordination or violation of any duty of loyalty if the
Chairman, President, Chief Executive Officer, Board of Directors or Committee
determines, in its sole judgment, that such behavior, misconduct,
insubordination or violation has, or can be expected to have, an adverse effect
on the Company or any of its subsidiaries or any of their respective businesses.

<PAGE>

(iv) DEATH OR PERMANENT DISABILITY. If Grantee's Employment is
Terminated by reason of the death or Permanent Disability (as hereinafter
defined) of Grantee, then (A) the portion of the Option that has not vested on
or prior to the date of such Termination of Employment shall terminate on such
date and (B) the remaining vested portion of the Option shall terminate upon the
earlier of the Expiration Date or the first anniversary of the date of such
Termination of Employment. "Permanent Disability" shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted or can be expected to last for a continuous period of
not less than 12 months. Grantee shall not be deemed to have a Permanent
Disability until proof of the existence thereof shall have been furnished to the
Board in such form and manner, and at such times, as the Board may require. Any
determination by the Board that Grantee does or does not have a Permanent
Disability shall be final and binding upon the Company and Grantee.

(v) OTHER TERMINATION. If Grantee's Employment is Terminated
for Cause, then the Option shall terminate upon the date of such Termination of
Employment. If Grantee's Employment is Terminated for any reason other than (A)
Retirement, (B) without Cause by the Company, (C) death, (D) Permanent
Disability or (E) for Cause, then the Option (including any vested and unvested
portions) shall terminate upon the date of such Termination of Employment,
unless an IPO has occurred, in which case (X) the portion of the Option that has
not vested on or prior to the date of such Termination of Employment shall
terminate on such date and (Y) the remaining vested portion of the Option shall
terminate thirty (30) days after the date of such Termination of Employment.

(b) ACCELERATION OF OPTION. In addition to the provisions of Section
2(a)(iii)(B), the Committee, in its sole discretion, may accelerate the
exercisability of the Option at any time and for any reason.

(c) OTHER EVENT CAUSING TERMINATION OF OPTION. Notwithstanding
anything to the contrary in this Agreement, the Option shall terminate upon the
consummation of any of the following events, or, if later, the thirtieth day
following the first date upon which such event shall have been approved by both
the Board and the stockholders of the Company:

(i) the dissolution or liquidation of the Company; or

(ii) a sale of substantially all of the property and assets of
the Company, unless the terms of such sale shall provide otherwise;

provided that in connection with such transaction the Company shall pay to
Grantee in cash an amount equal to the excess of the Fair Market Value (on the
date of the applicable corporate transaction) of the Option Shares subject to
the then-unexercised vested portion of the Option over the exercise price of
such portion of the Option, unless, in the event of a sale of substantially all
of the property and assets of the Company, the acquiring corporation has granted
substitute options to purchase its shares on such terms and conditions as shall
substantially preserve the rights and economic benefits of the Option.

<PAGE>

terminate pursuant to Section 2(c) hereof or unless the terms of the transaction
shall provide otherwise, the Committee shall make appropriate and proportionate
adjustments in the number and type of shares or other securities or cash or
other property that may thereafter be acquired upon the exercise of the Option;
PROVIDED, HOWEVER, that any such adjustments in the Option shall be made without
changing the aggregate Exercise Price of the then unexercised portion of the
Option; and PROVIDED, FURTHER, that no adjustments under this Section 3 shall be
made in connection with the IPO or transactions contemplated thereby, unless the
Committee shall determine that appropriate adjustments shall be made.

4. EXERCISE.

(a) The Option shall be exercisable during Grantee's lifetime only by
Grantee or by his or her guardian or legal representative, and after Grantee's
death only by the person or entity entitled to do so under Grantee's last will
and testament or applicable intestate law. The Option may only be exercised by
the delivery to the Company of a written notice of such exercise, which notice
shall specify the number of Option Shares to be purchased (the "Purchased
Shares") and the aggregate Exercise Price for such shares (the "Exercise
Notice"), together with payment in full of such aggregate Exercise Price in cash
or by check payable to the Company; PROVIDED, HOWEVER, that payment of such
aggregate Exercise Price may instead be made, in whole or in part, by the
delivery to the Company of a certificate or certificates representing shares of
Common Stock, duly endorsed or accompanied by a duly executed stock powers,
which delivery effectively transfers to the Company good and valid title to such
shares, free and clear of any pledge, commitment, lien, claim or other
encumbrance (such shares to be valued on the basis of the aggregate Fair Market
Value (as defined in the Plan) thereof on the date of such exercise), provided
that the Company is not then prohibited from purchasing or acquiring such shares
of Common Stock.

(b) If required by the Company, at the time of exercise, Grantee
shall give to the Company satisfactory assurance in writing, signed by Grantee
or his or her legal representative, as the case may be, that such shares are
being purchased for investment only and not with a view to the distribution
thereof; provided, however, that such assurance shall be deemed inapplicable to
(i) any sale of such shares by Grantee subject to a registration statement
covering such sale, which has heretofore been (or may hereafter be) filed and
become effective under the Securities Act of 1933, as amended (the "Securities
Act"), and is current and with respect to which no stop order suspending the
effectiveness thereof has been issued, and (ii) any other sale of such shares
with respect to which, in the opinion of counsel for the Company, such assurance
is not required to be given in order to comply with the provisions of the
Securities Act.

5. PAYMENT OF WITHHOLDING TAXES. If the Company becomes obligated to
withhold an amount on account of any tax imposed as a result of the exercise of
the Option, including, without limitation, any federal, state, local or other
income tax, or any F.I.C.A., Medicare, state disability insurance tax or other
employment tax, then Grantee shall, upon request of the Company but no later
than the first day upon which the Company becomes obligated to pay such amount
to the appropriate taxing authority, pay such amount to the Company in cash or
by check payable to the Company. Notwithstanding anything to the contrary in
Section 4, Grantee's rights to exercise any Option, and any transfer of Common
Stock to Grantee pursuant to the exercise of any Option, are conditioned upon
the payment in full by Grantee of the amounts determined by the Company to be
due hereunder.

6. NOTICES. All notices and other communications required or permitted
to be given pursuant to this Agreement shall be in writing and shall be deemed
given if delivered personally or five days after mailing by certified or
registered mail, postage prepaid, return receipt requested, to the Company in
care of its Secretary at the principal executive offices of the Company, or to
Grantee at the address set forth

<PAGE>

beneath his or her signature on the signature page hereto, or at such other
addresses as Grantee may designate by written notice in the manner aforesaid.

7. STOCK EXCHANGE REQUIREMENTS; APPLICABLE LAWS. Notwithstanding
anything to the contrary in this Agreement, no shares of stock purchased upon
exercise of the Option, and no certificate representing all or any part of such
shares, shall be issued or delivered if: (a) such shares have not been admitted
to listing upon official notice of issuance on each stock exchange upon which
shares of that class are then listed; (b) in the opinion of counsel to the
Company, such issuance or delivery would cause the Company to be in violation of
or to incur liability under any federal, state or other securities law, or any
requirement of any stock exchange listing agreement to which the Company is a
party, or any other requirement of law or of any administrative or regulatory
body having jurisdiction over the Company; or (c) at the time of that issuance
or delivery the Company is an electing and qualifying S Corporation, and, in the
opinion of counsel to the Company, such issuance or delivery might reasonably be
expected to cause the termination or revocation of the Company's status as an S
Corporation, and all of the shareholders of the Company have not approved such
issuance or delivery. Notwithstanding the provisions of Section 8, in no event
shall Grantee be permitted to transfer (as defined in Section 8) the Option or
any shares of stock purchased upon exercise of the Option to any person or
entity if, at the time of such proposed transfer, the Company is an electing and
qualifying S Corporation, and, in the opinion of counsel to the Company, such
proposed transfer might reasonably be expected to cause the termination or
revocation of the Company's status as an S Corporation, and all of the
shareholders of the Company have not approved such transfer.

8. NONTRANSFERABILITY. Neither the Option nor any interest therein may
be transferred in any manner by the Grantee to any person or entity other than
by will or the laws of descent and distribution. For purposes of this Paragraph
8, the term "transfer" shall mean and include any form of sale, exchange, gift,
disposition, alienation, assignment, pledge, hypothecation, encumbrance, levy of
attachment, levy of execution, conveyance in connection with bankruptcy
proceedings, conveyance upon divorce, and/or any other conveyance of any kind,
including both voluntary and involuntary conveyances, and also including
conveyances by operation of law. In the event of any attempt by Grantee to
transfer the Option or any right hereunder except as provided for herein, the
Option shall thereupon become null and void and of no effect. Notwithstanding
the foregoing, under such rules and regulations as the Board or the Committee
may establish pursuant to the terms of the Plan, a beneficiary may be designated
with respect to the Option in the event of the death of Grantee.

9. PLAN. The Option is granted pursuant to the Plan, as in effect on the
Date of Grant, and is subject to all the terms and conditions of the Plan, as
the same may be amended from time to time; PROVIDED, HOWEVER, that no such
amendment shall deprive Grantee, without his or her consent, of the Option or of
any of Grantee's rights under this Agreement. The interpretation and
construction by the Committee of the Plan, this Agreement, the Option and such
rules and regulations as may be adopted by the Committee for the purpose of
administering the Plan shall be final and binding upon Grantee. Until the
Option shall expire, terminate or be exercised in full, the Company shall, upon
written request therefor, send a copy of the Plan, in its then-current form, to
Grantee or any other person or entity then entitled to exercise the Option.

10. STOCKHOLDER RIGHTS. No person or entity shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of any Option Shares
until the Option shall have been duly exercised to purchase such Option Shares
in accordance with the provisions of this Agreement.

11. EMPLOYMENT OR CONTRACT RIGHTS. No provision of this Agreement or of
the Option granted hereunder shall (a) confer upon Grantee any right to continue
in the employ of the Company or

<PAGE>

any of its subsidiaries, (b) affect the right of the Company and each of its
subsidiaries to terminate the employment of Grantee, with or without Cause, or
(c) confer upon Grantee any right to participate in any employee welfare or
benefit plan or other program of the Company or any of its subsidiaries other
than the Plan. Nothing herein shall limit Grantee's right to terminate his or
her employment. GRANTEE HEREBY ACKNOWLEDGES AND AGREES THAT THE COMPANY AND
EACH OF ITS SUBSIDIARIES MAY TERMINATE THE EMPLOYMENT OF GRANTEE AT ANY TIME AND
FOR ANY REASON, OR FOR NO REASON, UNLESS GRANTEE AND THE COMPANY OR SUCH
SUBSIDIARY ARE PARTIES TO A WRITTEN EMPLOYMENT AGREEMENT THAT EXPRESSLY PROVIDES
OTHERWISE.

12. PARTICIPATION IN OTHER PLANS. Nothing herein contained shall affect
Grantee's right to participate in and receive benefits from and in accordance
with the then current provisions of any pension, insurance, or other stock
option or employment welfare plan or program of the Company.

13. BINDING EFFECT OF AGREEMENT. Except as set forth in Section 8 hereof,
this Agreement shall be binding upon and inure to the benefit of any successors
or assigns of the Company or Grantee.

14. MISCELLANEOUS.

(a) WAIVER. No waiver of any right or obligation of either party
under this Agreement shall be effective unless in a writing, specifying such
waiver, executed by the party against which such waiver is being enforced. A
waiver by either party hereto of any of its rights under this Agreement on any
occasion shall not be a bar to the exercise of the same right on any subsequent
occasion or of any other right at any time.

(b) AMENDMENT OR MODIFICATION. This Agreement may be amended,
altered, or modified only by a writing, specifying such amendment, alteration or
modification, executed by the party against which it is being enforced.

(c) GOVERNING LAW. This Agreement and the Option granted hereunder
shall be governed by and construed and enforced in accordance with the laws of
the State of Oregon without reference to choice or conflict of law principles.

(d) COMPLETE AGREEMENT. This Agreement, along with the Plan,
constitutes the complete understanding of the parties hereto regarding the
subject matter thereof and supersedes all prior or contemporaneous agreements of
the parties, whether written or oral, with respect to such subject matter.

(e) ATTORNEYS' FEES. In the event a suit, arbitration or other
proceeding is brought to enforce or interpret any provision of this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees to
be fixed in amount by the court or the arbitrator(s) (including without
limitation, costs, expenses and fees on any appeal). The prevailing party will
be entitled to recover its costs of suit, arbitration or other proceeding,
regardless of whether such suit, arbitration or other proceeding proceeds to a
final judgment or award.

IN WITNESS WHEREOF, the Company and Grantee have duly executed this
Agreement as of the Date of Grant.

<PAGE>
LITHIA MOTORS, INC.

By:
----------------------------------------------

Name:
--------------------------------------------

Title:
-------------------------------------------

GRANTEE:

--------------------------------------------------
Signature

--------------------------------------------------
Street Address

--------------------------------------------------
City, State and Zip Code

--------------------------------------------------
Social Security Number

<PAGE>

(Exhibit E)
[Pre-IPO-100%]

LITHIA MOTORS, INC.

1996 STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

WHEREAS, Grantee is an employee of the Company; and

NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:

1. GRANT OF OPTION, CERTAIN TERMS AND CONDITIONS.

Grantee:
-----------------------------------

Date of Grant: , 1996
------------------- ----
Number of shares purchasable:
----------------------------------------

Exercise Price per share: $
---------------------------------------------

Expiration Date: , 2004
------------------- ----

(b) The Option shall become exercisable to purchase, and shall vest
with respect to, all of the Option Shares on the seventh anniversary of the Date
of Grant set forth above. Notwithstanding the foregoing, if the Company closes
an underwritten initial public offering of the Common Stock (the "IPO"), then
the Option shall become exercisable to purchase, and shall vest with respect to,
all of the Option Shares on the date of the closing of the IPO. Grantee hereby
agrees that, in the event of an IPO, Grantee shall enter into any lock-up
agreement reasonably requested by the underwriters of the IPO, which would
restrict Grantee's ability to sell any Option Shares for a certain period of
time following the IPO (not to exceed 180 days).

<PAGE>

2. TERMINATION OF OPTION.

(a) TERMINATION OF EMPLOYMENT.

<PAGE>

terminate on such date and (B) the remaining vested portion of the Option shall
terminate upon the earlier of the Expiration Date or the first anniversary of
the date of such Termination of Employment. "Permanent Disability" shall mean
the inability to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to
result in death or that has lasted or can be expected to last for a continuous
period of not less than 12 months. Grantee shall not be deemed to have a
Permanent Disability until proof of the existence thereof shall have been
furnished to the Board in such form and manner, and at such times, as the Board
may require. Any determination by the Board that Grantee does or does not have
a Permanent Disability shall be final and binding upon the Company and Grantee.

(v) OTHER TERMINATION. If Grantee's Employment is Terminated
for Cause, then the Option shall terminate upon the date of such Termination of
Employment. If Grantee's Employment is Terminated for any reason other than (A)
Retirement, (B) without Cause by the Company, (C) death, (D) Permanent
Disability or (E) for Cause, then the Option (including any vested and unvested
portions) shall terminate upon the date of such Termination of Employment,
unless an IPO has occurred, in which case the vested portion of the Option shall
terminate thirty (30) days after the date of such Termination of Employment.

(c) OTHER EVENTS CAUSING TERMINATION OF OPTION. Notwithstanding
anything to the contrary in this Agreement, the Option shall terminate upon the
consummation of any of the following events, or, if later, the thirtieth day
following the first date upon which such event shall have been approved by both
the Board and the stockholders of the Company:

(i) the dissolution or liquidation of the Company; or

(ii) a sale of substantially all of the property and assets of
the Company, unless the terms of such sale shall provide otherwise;

3. ADJUSTMENTS. Subject to Section 7 of the Plan, in the event that the
outstanding securities of the class then subject to the Option are increased,
decreased or exchanged for or converted into cash, property and/or a different
number or kind of securities, or if cash, property and/or securities are
distributed in respect of such outstanding securities, in either case as a
result of a reorganization, merger, consolidation, recapitalization,
reclassification, dividend (other than a regular, quarterly cash dividend) or
other distribution, stock split, reverse stock split or the like, or in the
event that substantially all of the property and assets of the Company are sold,
then, unless such event shall cause the Option to terminate pursuant to Section
2(c) hereof or unless the terms of the transaction shall provide otherwise, the
Committee shall make appropriate and proportionate adjustments in the number and
type of shares or other securities or cash or other property that may thereafter
be acquired upon the exercise of the Option; PROVIDED, HOWEVER, that any such
adjustments in the Option shall be made without changing the

<PAGE>

aggregate Exercise Price of the then unexercised portion of the Option; and
PROVIDED, FURTHER, that no adjustments under this Section 3 shall be made in
connection with the IPO or transactions contemplated thereby, unless the
Committee shall determine that appropriate adjustments shall be made.

4. EXERCISE.

(b) If required by the Company, at the time of exercise, Grantee
shall give to the Company satisfactory assurance in writing, signed by Grantee
or his or her legal representative, as the case may be, that such shares are
being purchased for investment only and not with a view to the distribution
thereof, provided, however, that such assurance shall be deemed inapplicable to
(i) any sale of such shares by Grantee subject to a registration statement
covering such sale, which has heretofore been (or may hereafter be) filed and
become effective under the Securities Act of 1933, as amended (the "Securities
Act"), and is current and with respect to which no stop order suspending the
effectiveness thereof has been issued, and (ii) any other sale of such shares
with respect to which, in the opinion of counsel for the Company, such assurance
is not required to be given in order to comply with the provisions of the
Securities Act.

<PAGE>

the Plan. Nothing herein shall limit Grantee's right to terminate his or her
employment. GRANTEE HEREBY ACKNOWLEDGES AND AGREES THAT THE COMPANY AND EACH OF
IT'S SUBSIDIARIES MAY TERMINATE THE EMPLOYMENT OF GRANTEE AT ANY TIME AND FOR
ANY REASON, OR FOR NO REASON, UNLESS GRANTEE AND THE COMPANY OR SUCH SUBSIDIARY
ARE PARTIES TO A WRITTEN EMPLOYMENT AGREEMENT THAT EXPRESSLY PROVIDES OTHERWISE.

13. BINDING EFFECT OF AGREEMENT. Except as set forth in Section 8 hereof,
this Agreement shall be binding upon and inure to the benefit of any successors
or assigns of the Company or Grantee.

14. MISCELLANEOUS.

IN WITNESS WHEREOF, the Company and Grantee have duly executed this
Agreement as of the Date of Grant.

LITHIA MOTORS, INC.

By:
----------------------------------------------

Name:
--------------------------------------------

<PAGE>

Title:
-------------------------------------------

GRANTEE:

--------------------------------------------------
Signature

--------------------------------------------------
Street Address

--------------------------------------------------
City, State and Zip Code

--------------------------------------------------
Social Security Number

<PAGE>

EXHIBIT 10.2.2

[POST-IPO]

LITHIA MOTORS, INC.

1996 STOCK INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

WHEREAS, Grantee is an employee or consultant of the Company and/or one or
more of its subsidiaries; and

NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:

1. GRANT OF OPTION; CERTAIN TERMS AND CONDITIONS. The Company hereby
grants to Grantee, and Grantee hereby accepts, as of the Date of Grant, an
option to purchase the number of shares of Common Stock indicated below (the
"Option Shares") at the Exercise Price per share indicated below, which option
shall expire at 5:00 o'clock p.m., Oregon time, on the Expiration Date indicated
below and shall be subject to all of the terms and conditions set forth in this
Agreement (the "Option"). On each anniversary of the Date of Grant, the Option
shall become exercisable to purchase, and shall vest with respect to, that
number of Option Shares (rounded to the nearest whole share) equal to the total
number of Option Shares multiplied by the Annual Vesting Rate indicated below.

Grantee:
-----------------------------------

Date of Grant:
----------------------------------------

Number of shares purchasable:
----------------------------------------

Exercise Price per share:$
---------------------------------------------

Expiration Date:
----------------------------------------

Annual Vesting Rate: %
--------------------------------------------

The Option is NOT intended to qualify as an incentive stock option under Section
422 of the Internal Revenue Code (an "Incentive Stock Option").

<PAGE>

2. ACCELERATION AND TERMINATION OF OPTION.

(a) TERMINATION OF EMPLOYMENT.

(i) TERMINATION WITHIN ONE YEAR AFTER CHANGE OF CONTROL. In the
event that Grantee shall cease to be an employee or independent sales
representative of the Company or any of its subsidiaries (such event shall be
referred to herein as the "Termination" of Grantee's "Employment") for any
reason, or for no reason, within one year after a Change of Control (as
hereinafter defined), then (A) the portion of the Option that has not vested on
or prior to the date of such Termination of Employment shall fully vest on such
date and (B) the Option shall terminate upon the earlier of the Expiration Date
or the first anniversary of the date of such Termination of Employment. "Change
of Control" shall mean the first to occur of the following events:

(A) any date upon which the directors of the Company who
were last nominated by the Board of Directors (the "Board") for election as
directors cease to constitute a majority of the directors of the Company;

(B) the date of the first public announcement that any
person or entity, together with all Affiliates and Associates (as such
capitalized terms are defined in Rule 12b-2 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of such person or entity,
shall have become the Beneficial Owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of voting securities of the Company representing 25% or
more of the voting power of the Company (a "25% Stockholder"), provided,
however, that the terms "person" and "entity," as used in this clause (B), shall
not include (1) the Company or any of its subsidiaries, (2) any employee benefit
plan of the Company or any of its subsidiaries, (3) any entity holding voting
securities of the Company for or pursuant to the terms of any such plan, (4) any
person or entity if the transaction that resulted in such person or entity
becoming a 25% Stockholder was approved in advance by the Board or (5) any
person or entity who was a 25% Stockholder on the date of adoption of the Plan
by the Board; or

(C) a reorganization, merger or consolidation of the
Company (other than a reorganization, merger or consolidation the sole purpose
of which is to change the Company's domicile solely within the United States)
the consummation of which results in the outstanding securities of any class
then subject to the Option being exchanged for or converted into cash, property
and/or a different kind of securities.

(ii) RETIREMENT. If Grantee's Employment is Terminated by reason
of Grantee's retirement in accordance with the@ Company's then-current
retirement policy ("Retirement"), and a Change of Control shall not have
occurred within one year prior thereto, then (A) the portion of the Option that
has not vested on or prior to the date of such Retirement shall terminate on
such date and (B) the remaining vested portion of the Option shall terminate
three months after the date Grantee's Employment is Terminated.

(iii) WITHOUT CAUSE. If Grantee's Employment is Terminated by the
Company without "Cause" as defined below), then (A) if Sidney B. DeBoer is the
Chairman, President or Chief Executive Officer of the Company at the time of
such Termination, the Option shall terminate upon the date of such Termination
of Employment, or (B) if Sidney B. DeBoer is not the Chairman, President or
Chief Executive Officer of the Company at the time of such Termination, the
Option shall become exercisable to purchase, and shall vest with respect to, all
of the Option Shares on the date of such Termination of Employment and shall
terminate three months after the date of Termination. For purposes of this
Section 2(a)(iii), "Cause" shall mean Grantee's fraudulent or criminal behavior,
willful

<PAGE>

misconduct, insubordination or violation of any duty of loyalty if the Chairman,
President, Chief Executive Officer, Board of Directors or Committee determines,
in its sole judgment, that such behavior, misconduct, insubordination or
violation has, or can be expected to have, an adverse effect on the Company or
any of its subsidiaries or any of their respective businesses.

(iv) DEATH OR PERMANENT DISABILITY. If Grantee's Employment is
Terminated by reason of the death or Permanent Disability (as hereinafter
defined) of Grantee, and a Change of Control shall not have occurred within one
year prior thereto, then (A) the portion of the Option that has not vested on or
prior to the date of such Termination of Employment shall terminate on such date
and (B) the remaining vested portion of the Option shall terminate upon the
earlier of the Expiration Date or the first anniversary of the date of such
Termination of Employment. "Permanent Disability" shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted or can be expected to last for a continuous period of
not less than 12 months. Grantee shall not be deemed to have a Permanent
Disability until proof of the existence thereof shall have been furnished to the
Board in such form and manner, and at such times, as the Board may require. Any
determination by the Board that Grantee does or does not have a Permanent
Disability shall be final and binding upon the Company and Grantee.

(v) OTHER TERMINATION. If Grantee's Employment is Terminated
for Cause, then the Option shall terminate upon the date of such Termination of
Employment. If Grantee's Employment is Terminated for any reason other than (A)
Retirement, (B) death, (C) Permanent Disability or (D) for Cause by the Company,
and a Change of Control shall not have occurred within one year prior thereto,
then (X) the portion of the Option that has not vested on or prior to the date
of such Termination of Employment shall terminate on such date and (Y) the
remaining vested portion of the Option shall terminate thirty (30) days after
the date of such Termination of Employment.

(b) OTHER EVENTS CAUSING ACCELERATION OF OPTION.

(i) Notwithstanding the other terms of the Option, the Option
shall become fully exercisable with respect to all Shares covered hereby upon
the first to occur of the following:

(A) the date of dissemination to the stockholders of the
Company of a proxy statement seeking stockholder approval of a reorganization,
merger or consolidation of the Company as a result of which the outstanding
securities of the class then subject to the Plan are exchanged for or converted
into cash, property and/or securities not issued by the Company, unless such
reorganization, merger or consolidation shall have been affirmatively
recommended to the stockholders of the Company by the Board;

(B) the first date upon which the directors of the Company
who were last nominated by the Board for election as directors shall cease to
constitute a majority of the authorized number of directors of the Company; or

(C) the date of dissemination to the stockholders of the
Company of a proxy statement disclosing a change of control (as defined by the
Company) of the Company.

(ii) The Committee, in its sole discretion, may accelerate the
exercisability of the Option at any time and for any reason.

(c) OTHER EVENTS CAUSING TERMINATION OF OPTION. Notwithstanding
anything to the contrary in this Agreement, the Option shall terminate upon the
consummation of any of the following

<PAGE>

events, or, if later, the thirtieth day following the first date upon which such
event shall have been approved by both the Board and the stockholders of the
Company:

(i) the dissolution or liquidation of the Company; or

(ii) a sale of substantially all of the property and assets of
the Company, unless the terms of such sale shall provide otherwise;

3. ADJUSTMENTS. Subject to Section 7 of the Plan, in the event that the
outstanding securities of the class then subject to the Option are increased,
decreased or exchanged for or converted into cash, property and/or a different
number or kind of securities, or if cash, property and/or securities are
distributed in respect of such outstanding securities, in either case as a
result of a reorganization, merger, consolidation, recapitalization,
reclassification, dividend (other than a regular, quarterly cash dividend) or
other distribution, stock split, reverse stock split or the like, or in the
event that substantially all of the property and assets of the Company are sold,
then, unless such event shall cause the Option to terminate pursuant to Section
2(c) hereof or unless the terms of the transaction shall provide otherwise, the
Committee shall make appropriate and proportionate adjustments in the number and
type of shares or other securities or cash or other property that may thereafter
be acquired upon the exercise of the Option; PROVIDED, HOWEVER, that
any such adjustments in the Option shall be made without changing the aggregate
Exercise Price of the then unexercised portion of the Option.

4. EXERCISE.

<PAGE>

of such shares by Grantee subject to a registration statement covering such
sale, which has heretofore been (or may hereafter be) filed and become effective
under the Securities Act of 1933, as amended (the "Securities Act"), and is
current and with respect to which no stop order suspending the effectiveness
thereof has been issued, and (ii) any other sale of such shares with respect to
which, in the opinion of counsel for the Company, such assurance is not required
to be given in order to comply with the provisions of the Securities Act.

<PAGE>

the Committee for the purpose of administering the Plan shall be final and
binding upon Grantee. Until the Option shall expire, terminate or be exercised
in full, the Company shall, upon written request therefor, send a copy of the
Plan, in its then-current form, to Grantee or any other person or entity then
entitled to exercise the Option.

11. EMPLOYMENT OR CONTRACT RIGHTS. No provision of this Agreement or of
the Option granted hereunder shall (a) confer upon Grantee any right to continue
in the employ of or contract with the Company or any of its subsidiaries, (b)
affect the right of the Company and each of its subsidiaries to terminate the
employment or contract of Grantee, with or without cause, or (c) confer upon
Grantee any right to participate in any employee welfare or benefit plan or
other program of the Company or any of its subsidiaries other than the Plan.
Nothing herein shall limit Grantee's right to terminate his or her employment.
GRANTEE HEREBY ACKNOWLEDGES AND AGREES THAT THE COMPANY AND EACH OF IT'S
SUBSIDIARIES MAY TERMINATE THE EMPLOYMENT OR CONTRACT OF GRANTEE AT ANY TIME AND
FOR ANY REASON, OR FOR NO REASON, UNLESS GRANTEE AND THE COMPANY OR SUCH
SUBSIDIARY ARE PARTIES TO A WRITTEN EMPLOYMENT OR INDEPENDENT SALES
REPRESENTATIVE AGREEMENT THAT EXPRESSLY PROVIDES OTHERWISE.

13. BINDING EFFECT OF AGREEMENT. Except as set forth in Section 8 hereof,
this Agreement shall be binding upon and inure to the benefit of any successors
or assigns of the Company or Grantee.

14. MISCELLANEOUS.

(d) COMPLETE AGREEMENT. This Agreement, along with the
Plan, constitutes the complete understanding of the parties hereto regarding the
subject matter thereof and supersedes all prior or contemporaneous agreements of
the parties, whether written or oral, with respect to such subject matter.

(e) ATTORNEYS' FEES. In the event a suit, arbitration or other
proceeding is brought to enforce or interpret any provision of this Agreement,
the prevailing party shall be entitled to recover

<PAGE>

reasonable attorneys' fees to be fixed in amount by the court or the
arbitrator(s) (including without limitation, costs, expenses and fees on any
appeal). The prevailing party will be entitled to recover its costs of suit,
arbitration or other proceeding, regardless of whether such suit, arbitration or
other proceeding proceeds to a final judgment or award.

IN WITNESS WHEREOF, the Company and Grantee have duly executed this
Agreement as of the Date of Grant.

LITHIA MOTORS, INC.

By:
--------------------------------

Name:
------------------------------

Title:
-----------------------------

GRANTEE:

--------------------------------------------------
Signature

--------------------------------------------------
Street Address

--------------------------------------------------
City, State and Zip Code

--------------------------------------------------
Social Security Number

<PAGE>

EXHIBIT 10.2.3

[POST-IPO]

LITHIA MOTORS INC.

1996 STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

WHEREAS, Grantee is an employee of the Company and/or one or more of its
subsidiaries; and

NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:

Grantee:
-------------------------

Date of Grant: , 1996
--------------- ------

Number of shares purchasable:
---------------------------

Exercise Price per share:
----------------------------

Expiration Date: , 2004
--------------- ------

Annual Vesting Rate: %
---------------------------

The Option is intended to qualify as an incentive stock option (an "Incentive
Stock Option") under Section 422 of the Internal Revenue Code (the "Code") and
consequently, notwithstanding anything herein to the contrary:

(a) the Expiration Date shall not be more than 10 years

<PAGE>

from the Date of Grant and the Exercise Price per share shall not be less than
the Fair Market Value (as defined in the Plan) per share on the Date of Grant;
PROVIDED, HOWEVER, that if, on the Date of Grant, Grantee owns (after
application of the family and other attribution rules of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of stock
of the Company or of its parent or subsidiary corporations, then the Expiration
Date shall not be more than five years from the Date of Grant and the Exercise
Price per share shall not be less than 110% of the Fair Market Value per share
on the Date of Grant; and

(b) the aggregate Fair Market Value (determined as of the date such
options are granted) of the shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by Grantee during any
calendar year (under the Plan and all other stock option plans of the Company
and its parent and subsidiary corporations) shall not exceed $100,000.

2. ACCELERATION AND TERMINATION OF OPTION.

(a) TERMINATION OF EMPLOYMENT.

(i) TERMINATION WITHIN ONE YEAR AFTER CHANGE OF CONTROL.
In the event that Grantee shall cease to be an employee of the Company or any of
its subsidiaries (such event shall be referred to herein as the "Termination" of
Grantee's "Employment") for any reason, or for no reason, within one year after
a Change of Control (as hereinafter defined), then (A) the portion of the Option
that has not vested on or prior to the date of such Termination of Employment
shall fully vest on such date and (B) the Option shall terminate upon the
earlier of the Expiration Date or the first anniversary of the date of such
Termination of Employment. "Change of Control" shall mean the first to occur of
the following events:

(B) the date of the first public announcement
that any person or entity, together with all Affiliates and Associates (as such
capitalized terms are defined in Rule 12b-2 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of such person or entity,
shall have become the Beneficial Owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of voting securities of the Company representing 25% or
more of the voting power of the Company (a "25% Stockholder"), provided,
however, that the terms "person" and "entity," as used in this clause (B), shall
not include (1) the Company or any of its subsidiaries, (2) any employee benefit
plan of the Company or any of its subsidiaries, (3) any entity holding voting
securities of the Company for or pursuant to the terms of any such plan, (4) any
person or entity if the transaction that resulted in such person or entity
becoming a 25% Stockholder was approved in advance by the Board or (5) any
person or entity who was a 25% Stockholder on the date of adoption of the Plan
by the Board; or

<PAGE>

(ii) RETIREMENT. If Grantee's Employment is Terminated by reason
of Grantee's retirement in accordance with the Company's then-current retirement
policy ("Retirement"), and a Change of Control shall not have occurred within
one year prior thereto, then (A) the portion of the Option that has not vested
on or prior to the date of such Retirement shall terminate on such date and (B)
the remaining vested portion of the Option shall terminate three months after
the date Grantee's Employment is Terminated.

(iv) DEATH OR PERMANENT DISABILITY. If Grantee's
Employment is Terminated by reason of the death or Permanent Disability (as
hereinafter defined) of Grantee, and a Change of Control shall not have occurred
within one year prior thereto, then (A) the portion of the Option that has not
vested on or prior to the date of such Termination of Employment shall terminate
on such date and (B) the remaining vested portion of the Option shall terminate
upon the earlier of the Expiration Date or the first anniversary of the date of
such Termination of Employment. "Permanent Disability" shall mean the inability
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted or can be expected to last for a continuous period of
not less than 12 months. Grantee shall not be deemed to have a Permanent
Disability until proof of the existence thereof shall have been furnished to the
Board in such form and manner, and at such times, as the Board may require. Any
determination by the Board that Grantee does or does not have a Permanent
Disability shall be final and binding upon the Company and Grantee.

(v) OTHER TERMINATION. If Grantee's Employment is Terminated
for Cause, then the Option shall terminate upon the date of such Termination of
Employment. If Grantee's Employment is Terminated for any reason other than (A)
Retirement, (B) death, (C) Permanent Disability or (D) for Cause by the Company,
and a Change of Control shall not have occurred within one year prior thereto,
then (X) the portion of the Option that has not vested on or prior to the date
of such Termination of Employment shall terminate on such date and (Y) the
remaining vested portion of the Option shall terminate thirty (30) days after
the date of such Termination of Employment.

(b) OTHER EVENTS CAUSING ACCELERATION OF OPTION.

(i) Notwithstanding the other terms of the Option, the Option
shall become fully exercisable with respect to all Shares covered hereby upon
the first to occur of the following:

<PAGE>

exchanged for or converted into cash, property and/or securities not issued by
the Company, unless such reorganization, merger or consolidation shall have been
affirmatively recommended to the stockholders of the Company by the Board;

(C) the date of dissemination to the stockholders of the
Company of a proxy statement disclosing a change of control (as defined by the
Company) of the Company.

(ii) The Committee, in its sole discretion, may accelerate the
exercisability of the Option at any time and for any reason.

(i) the dissolution or liquidation of the Company; or

(ii) a sale of substantially all of the property and assets of
the Company, unless the terms of such sale shall provide otherwise;

3. ADJUSTMENTS. Subject to Section 7 of the Plan, in the event that the
outstanding securities of the class then subject to the Option are increased,
decreased or exchanged for or converted into cash, property and/or a different
number or kind of securities, or if cash, property and/or securities are
distributed in respect of such outstanding securities, in either case as a
result of a reorganization, merger, consolidation, recapitalization,
reclassification, dividend (other than a regular, quarterly cash dividend) or
other distribution, stock split, reverse stock split or the like, or in the
event that substantially all of the property and assets of the Company are sold,
then, unless such event shall cause the Option to terminate pursuant to
Section 2(c) hereof or unless the terms of the transaction shall provide
otherwise, the Committee shall make appropriate and proportionate adjustments in
the, number and type of shares or other securities or cash or other property
that may thereafter be acquired upon the exercise of the Option; PROVIDED,
HOWEVER, that any such adjustments in the Option shall be made without changing
the aggregate Exercise Price of the then unexercised portion of the Option.

4. EXERCISE.

<PAGE>

the number of Option Shares to be purchased (the "Purchased Shares") and the
aggregate Exercise Price for such shares (the "Exercise Notice"), together with
payment in full of such aggregate Exercise Price in cash or by check payable to
the Company; PROVIDED, HOWEVER, that payment of such aggregate Exercise Price
may instead be made, in whole or in part, by the delivery to the Company of a
certificate or certificates representing shares of Common Stock, duly endorsed
or accompanied by a duly executed stock powers, which delivery effectively
transfers to the Company good and valid title to such shares, free and clear of
any pledge, commitment, lien, claim or other encumbrance (such shares to be
valued on the basis of the aggregate Fair Market Value (as defined in the Plan)
thereof on the date of such exercise), provided that the Company is not then
prohibited from purchasing or acquiring such shares of Common Stock.

<PAGE>

and, in the opinion of counsel to the Company, such proposed transfer might
reasonably be expected to cause the termination or revocation of the Company's
status as an S Corporation, and all of the shareholders of the Company have not
approved such transfer.

Notwithstanding the foregoing, under such rules and regulations as the Board or
the Committee may establish pursuant to the terms of the Plan, a beneficiary may
be designated with respect to the Option in the event of the death of Grantee.

11. EMPLOYMENT OR CONTRACT RIGHTS. No provision of this Agreement or of
the Option granted hereunder shall (a) confer upon Grantee any right to continue
in the employ of the Company or any of its subsidiaries, (b) affect the right of
the Company and each of its subsidiaries to terminate the employment of Grantee,
with or without cause, or (c) confer upon Grantee any right to participate in
any employee welfare or benefit plan or other program of the Company or any of
its subsidiaries other than the Plan. Nothing herein shall limit Grantee's
right to terminate his or her employment. GRANTEE HEREBY ACKNOWLEDGES AND
AGREES THAT THE COMPANY AND EACH OF ITS SUBSIDIARIES MAY TERMINATE THE
EMPLOYMENT OF GRANTEE AT ANY TIME AND FOR ANY REASON, OR FOR NO REASON, UNLESS
GRANTEE AND THE COMPANY OR SUCH SUBSIDIARY ARE PARTIES TO A WRITTEN EMPLOYMENT
AGREEMENT THAT EXPRESSLY PROVIDES OTHERWISE.

13. BINDING EFFECT OF AGREEMENT. Except as set forth in Section 8 hereof,
this Agreement shall be binding upon and inure to the benefit of any successors
or assigns of the Company or Grantee.

<PAGE>

14. MISCELLANEOUS.

IN WITNESS WHEREOF, the Company and Grantee have duly executed this
Agreement as of the Date of Grant.

LITHIA MOTORS, INC.

By:
--------------------------------

Name:
------------------------------

Title:
-----------------------------

GRANTEE:

--------------------------------------------------
Signature

--------------------------------------------------
Street Address

--------------------------------------------------
City, State and Zip Code

<PAGE>

--------------------------------------------------
Social Security Number

<PAGE>

EXHIBIT 10.3.1

Chrysler Corporation
Chrysler
SALES AND SERVICE AGREEMENT

Lithia Chrysler Plymouth Jeep Eagle, Inc., located at 315 E. 5th Street,
Medford, Oregon, a(n) Corporation hereinafter called DEALER, and Chrysler
Corporation, a Delaware corporation, hereinafter sometimes referred to as "CC,"
have entered into this Chrysler Corporation Chrysler Sales and Service
Agreement, hereinafter referred to as "Agreement," the terms of which are as
follows:

INTRODUCTION

The purpose of the relationship established by this Agreement is to provide a
means for the sale and service of specified Chrysler vehicles and the sale of CC
vehicle parts and accessories in a manner that will maximize customer
satisfaction and be of benefit to DEALER and CC.

While the following provisions, each of which is material, set forth the
undertakings of this relationship, the success of those undertakings rests on a
recognition of the mutuality of interests of DEALER and CC, and a spirit of
understanding and cooperation by both parties in the day to day performance of
their respective functions. As a result of such considerations, CC has entered
into this Agreement in reliance upon and has placed its trust in the personal
abilities, expertise, knowledge and integrity of DEALER's principal owners and
management personnel, which CC anticipates will enable DEALER to perform the
personal services contemplated by this Agreement.

It is the mutual goal of this relationship to promote the sale and service of
specified CC products by maintaining and advancing their excellence and
reputation by earning, holding and furthering the public regard for CC and all
CC dealers.

1 PRODUCTS COVERED

DEALER has the right to order and purchase from CC and to sell at retail only
those specific models of CC vehicles, sometimes referred to as "specified CC
vehicles," listed on the Motor Vehicle Addendum, attached hereto and
incorporated herein by reference. CC may change the models of CC vehicles
listed on the Motor Vehicle Addendum by furnishing DEALER a superseding Motor
Vehicle Addendum. Such a superseding Motor Vehicle Addendum will not be deemed
or construed to be an amendment to this Agreement.

2 DEALER'S MANAGEMENT

CC has entered into this Agreement relying on the active, substantial and
continuing personal participation in the management of DEALER's organization by:

<PAGE>

NAME POSITION

Sidney B. DeBoer President
R. Bradford Gray General Manager

DEALER represents and warrants that at least one of the above named individuals
will be physically present at the DEALER's facility (sometimes referred to as
"Dealership Facilities") during most of its operating hours and will manage all
of DEALER's business relating to the sale and service of CC products. DEALER
shall not change the personnel holding the above described position(s) or the
nature and extent of his/her/their management participation without the prior
written approval of CC.

3 DEALER'S CAPITAL STOCK OR PARTNERSHIP INTEREST

If DEALER is a corporation or partnership, DEALER represents and agrees that the
persons named below own beneficially the capital stock or partnership interest
of DEALER in the percentages indicated below. DEALER warrants there will be no
change affecting more than 50% of the ownership interest of DEALER nor will
there be any other change in the ownership interest of DEALER which may affect
the managerial control of DEALER without CC's prior written approval.

Non-Voting Partnership Active
Name Voting Stock Stock Interest Yes/No

Sidney B. DeBoer 62.50% % % Yes
Manfred L. Heimann 37.50% % % Yes
% % %
% % %
% % %

Total 100.00% % %

4 SALES LOCALITY

DEALER shall have the non-exclusive right, subject to the provisions of this
Agreement, to purchase from CC those new specified CC vehicles, vehicle parts,
accessories and other CC products for resale at the DEALER's facilities and
location described in the Dealership Facilities and Location Addendum, attached
hereto and incorporated herein by reference. DEALER will actively and
effectively sell and promote the retail sale of CC vehicles, vehicle parts and
accessories in DEALER's Sales Locality. As used herein, "Sales Locality" shall
mean the area designated in writing to DEALER by CC from time to time as the
territory of DEALER's

-17-

<PAGE>

responsibility for the sale of CC vehicles, vehicle parts and accessories,
although DEALER is free to sell said products to customers wherever they may be
located. Said Sales Locality may be shared with other CC dealers of the same
line-make as CC determines to be appropriate.

5 ADDITIONAL TERMS AND PROVISIONS

The additional terms and provisions set forth in the document entitled "Chrysler
Corporation Sales and Service Agreement Additional Terms and Provisions" marked
"Form 91 (C-P-D)," as may hereafter be amended from time to time, constitute a
part of this Agreement with the same force and effect as if set forth at length
herein, and the term "this Agreement" includes said additional terms and
provisions.

6 FORMER AGREEMENTS, REPRESENTATIONS OR STATEMENTS

This Chrysler Corporation Chrysler Sales and Service Agreement and other
documents, (or their successors as specifically provided for herein) which are
specifically incorporated herein by reference constitute the entire agreement
between the parties relating to the purchase by DEALER of those new specified CC
vehicles, parts and accessories from CC for resale; and it cancels and
supersedes all earlier agreements, written or oral, between CC and DEALER
relating to the purchase by DEALER of Chrysler vehicles, parts and accessories,
except for (a) amounts owing by CC to DEALER, such as payments for warranty
service performed and incentive programs, or (b) amounts owing or which may be
determined to be owed, as a result of an audit or investigation, by DEALER to CC
due to DEALER's purchase from CC of vehicles, parts, accessories and other goods
or services, or (c) amounts DEALER owes to CC as a result of other extensions of
credit by CC to DEALER. No representations or statements, other than those
expressly set forth herein or those set forth in the applications for this
Agreement submitted to CC by DEALER or DEALER's representatives, are made or
relied upon by any party hereto in entering into this Agreement.

7 WAIVER AND MODIFICATION

No waiver, modification or change of any of the terms of this Agreement or
change or erasure of any printed part of this Agreement or addition to it
(except the filling in of blank spaces and lines) will be valid or binding on CC
unless approved in writing by the President or a Vice President or the National
Dealer Placement Manager of Chrysler Corporation.

8 AMENDMENT

DEALER and CC recognize that this Agreement does not have an expiration date and
will continue in effect unless terminated under the limited circumstances set
forth in Paragraph 28. DEALER and CC further recognize that the passage of
time, changes in the industry, ways of

-18-

<PAGE>

doing business and other unforeseen circumstances may cause CC to determine that
it should amend all Chrysler Corporation Chrysler Sales and Service Agreements.
Therefore, CC will have the right to amend this Agreement to the extent that CC
deems advisable, provided that CC makes the same amendment in Chrysler
Corporation Chrysler Sales and Service Agreements generally. Each such
amendment will be issued in a notice sent by certified mail or delivered in
person to DEALER and signed by the President or a Vice President or the National
Dealer Placement Manager of Chrysler Corporation. Thirty-five (35) days after
mailing or delivery of such notice to DEALER, this Agreement will be deemed
amended in the manner and to the extent set forth in the notice.

9 ARBITRATION

Any and all disputes arising out of or in connection with the interpretation,
performance or nonperformance of this Agreement or any and all disputes arising
out of or in connection with transactions in any way related to this Agreement
(including, but not limited to, the validity, scope and enforceability of this
arbitration provision, or disputes under rights granted pursuant to the statutes
of the state in which DEALER is licensed) shall be finally and completely
resolved by arbitration pursuant to the arbitration laws of the United States of
America as codified in Title 9 of the United States Code, Sections 1-14, under
the Rules of Commercial Arbitration of the American Arbitration Association
(hereinafter referred to as the "Rules") by a majority vote of a panel of three
arbitrators. One arbitrator will be selected by DEALER (DEALER's arbitrator).
One arbitrator will be selected by CC (CC's arbitrator). These arbitrators must
be selected by the respective parties within ten (10) business days after
receipt by either DEALER or CC of a written notification from the other party of
a decision to arbitrate a dispute pursuant to this Agreement. Should either CC
or DEALER fail to select an arbitrator within said ten-day period, the party who
so fails to select an arbitrator will have its arbitrator selected by the
American Arbitration Association upon the application of the other party. The
third arbitrator must be an individual who is familiar with business
transactions and be a licensed attorney admitted to the practice of law within
the United States of America, or a judge. The third arbitrator will be selected
by DEALER's and CC's arbitrators. If said arbitrators cannot agree on a third
arbitrator within thirty (30) days from the date of the appointment of the last
selected arbitrator, then either DEALER's or CC's arbitrator may apply to the
American Arbitration Association to appoint said third arbitrator pursuant to
the criteria set forth above. The arbitration panel shall conduct the
proceedings pursuant to the then existing Rules.

Notwithstanding the foregoing, to the extent any provision of the Rules conflict
with any provision of this Paragraph 9, the provisions of this Paragraph 9 will
be controlling.

CC and DEALER agree to facilitate the arbitration by: (a) each party paying to
the American Arbitration Association one-half (1/2) of the required deposit
before the proceedings commence; (b) making available to one another and to the
arbitration panel, for inspection and photocopying all documents, books and
records, if determined by the arbitrator to be relevant to the dispute;

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<PAGE>

(c) making available to one another and to the arbitration panel personnel
directly or indirectly under their control, for testimony during hearings and
prehearing proceedings if determined by the arbitration panel to be relevant to
the dispute; (d) conducting arbitration hearings to the greatest extent possible
on consecutive business days; and (e) strictly observing the time periods
established by the Rules or by the arbitration panel for the submission of
evidence and of briefs.

Unless otherwise agreed to by CC and DEALER, a stenographic record of the
arbitration shall be made and a transcript thereof shall be ordered for each
party, with each party paying one-half (1/2) of the total cost of such recording
and transcription. The stenographer shall be state-certified, if certification
is made by the state, and the party to whom it is most convenient shall be
responsible for securing and notifying such stenographer of the time and place
of the arbitration hearing(s).

If the arbitration provision is invoked when the dispute between the parties is
either the legality of terminating this Agreement or of adding a new CC dealer
of the same line-make or relocating an existing CC dealer of the same line-make,
CC will stay the implementation of the decision to terminate this Agreement or
add such new CC dealer or approve the relocation of an existing CC dealer of the
same line-make until the decision of the arbitrator has been announced,
providing DEALER does not in any way attempt to avoid the obligations of this
Paragraph 9, in which case the decision at issue will be immediately
implemented.

Except as limited hereby, the arbitration panel shall have all powers of law and
equity, which it can lawfully assume, necessary to resolve the issues in dispute
including, without limiting the generality of the foregoing, making awards of
compensatory damages, issuing both prohibitory and mandatory orders in the
nature of injunctions and compelling the production of documents and witnesses
for pre-arbitration discovery and/or presentation at the arbitration hearing on
the merits of the case. The arbitration panel shall not have legal or equitable
authority to issue a mandatory or prohibitory order which: (a) extends or has
effect beyond the subject matter of this Agreement, or (b) will govern the
activities of either party for a period of more than two years; nor shall the
arbitration panel have authority to award punitive, consequential or any damages
whatsoever beyond or in addition to the compensatory damages allowed to be
awarded under this Agreement.

The decision of the arbitration panel shall be in written form and shall include
findings of fact and conclusions of law.

It is the intent and desire of DEALER and CC to hereby and forever renounce and
reject any and all recourse to litigation before any judicial or administrative
forum and to accept the award of the arbitration panel as final and binding,
subject to no judicial or administrative review, except on those grounds set
forth in 9 USC Section 10 and Section 11. Judgment on the award and/or orders
may be entered in any court having jurisdiction over the parties or their
assets. In the final award and/or order, the arbitration panel shall divide all
costs (other than attorney fees, which

-20-

<PAGE>

shall be borne by the party incurring such fees and other costs specifically
provided for herein) incurred in conducting the arbitration in accordance with
what the arbitration panel deems just and equitable under the circumstances.
The fees of DEALER's arbitrator shall be paid by DEALER. The fees of CC's
arbitrator shall be paid by CC.

10 SIGNATURE

This Agreement becomes valid only when signed by the President or a Vice
President or the National Dealer Placement Manager of Chrysler Corporation and
by a duly authorized officer or executive of DEALER if a corporation; or by one
of the general partners of DEALER if a partnership; or by DEALER if an
individual.

IN WITNESS WHEREOF, the parties hereto have signed this Agreement which is
finally executed at DETROIT, Michigan, in triplicate, on JAN 10 1994

Lithia Chrysler Plymouth Jeep Eagle, Inc.
(DEALER Firm Name and D/B/A, if applicable)

By [Signature]
(Individual Duly Authorized to Sign)

- ------------------------------------------
(Title)

CHRYSLER CORPORATION

- -----------------------------------------
By [Signature]
[National Dealer Placement Manager]
(Title)

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<PAGE>

EXHIBIT 10.3.2

CHRYSLER CORPORATION
SALES AND SERVICE AGREEMENT
ADDITIONAL TERMS AND PROVISIONS

The following additional terms and provisions apply to and are part of the
Chrysler Corporation Sales and Service Agreement(s) to which DEALER is a
signatory.

11 SELLING, SERVICE, COMPLIANCE, FACILITIES AND LOCATION, FINANCES, PERSONNEL
AND SIGNAGE

(a) SELLING

DEALER shall use its best efforts to promote energetically and sell aggressively
and effectively at retail (which includes lease and rental units) each and every
model of CC vehicles identified in the aforementioned Motor Vehicle Addendum and
CC vehicle parts, accessories and other CC products and services, to private and
fleet customers in DEALER's Sales Locality. DEALER will sell the number of new
CC vehicles necessary to fulfill DEALER's Minimum Sales Responsibility for each
passenger car line or truck line represented by the vehicles listed on the Motor
Vehicle Addendum, as defined below.

DEALER's Minimum Sales Responsibility for each such line will be determined as
follows:

From time to time, but at least once a year for each such line, CC will compute
the ratio of the number of new CC passenger cars and/or trucks registered in the
most recent whole or partial calendar year-to-date period for which registration
figures are available in the CC Sales Zone in which DEALER is located to the
total number of new passenger cars or, if CC deems it appropriate, the total
number of those new passenger cars or trucks which CC, in its sole discretion,
determines to be competitive with any or all of its passenger cars or trucks so
registered in that Zone during the same period. The ratio thus obtained will be
applied to the comparable category of the total number of new passenger cars or
competitive passenger cars and/or trucks, as appropriate, registered during the
same period in Dealer's Sales Locality. The resulting number will be DEALER's
Minimum Sales Responsibility for each of said lines during this same period,
subject to adjustment as described below.

Upon DEALER's written request, CC may adjust DEALER's Minimum Sales
Responsibility, if appropriate in CC's judgment, to take into account
extraordinary local conditions to the extent, in CC's opinion, such conditions
are beyond DEALER's control and have affected DEALER's sales performance
differently from the sales performance of other new vehicle dealers in DEALER's
Sales Locality or other like vehicle line CC dealers in the Sales Zone in which
DEALER is located.

-22-

<PAGE>

If DEALER's Sales Locality is shared by one or more other CC dealer(s) of the
same line, DEALER's Minimum Sales Responsibility for such line will be the
number of new vehicles DEALER must sell in order to achieve DEALER's fair share
of the Minimum Sales Responsibility for all such CC dealers in the Sales
Locality. The Minimum Sales Responsibility for the total CC dealers of the same
line in the Sales Locality will be determined by using the same method described
above in this Paragraph 11(a). CC will determine DEALER's fair share by
assessing the relative importance of DEALER's immediate area of influence as
compared with the Sales Locality as a whole.

This assessment will then be converted to a percentage which will represent
DEALER's fair share of the Minimum Sales Responsibility for the Sales Locality.

Registration figures used in these computations will be new vehicle
registrations as reported by any recognized reporting organization selected by
CC. If vehicle registration data is not reasonably available, CC may use other
records, generally accepted in the industry, for the purpose of determining
motor vehicle purchases and to establish DEALER's Minimum Sales Responsibility.
To the extent that registration figures or other records generally accepted in
the automotive industry for purposes of determining motor vehicle purchases are
not reasonably available for purposes of considering any of the factors
specified herein, CC may rely on other records and data developed by CC that
reasonably depict purchases of motor vehicles in an applicable area to establish
DEALER's Minimum Sales Responsibility.

(b) SERVICE

DEALER shall service CC vehicles actively and effectively and provide and
maintain, for servicing CC vehicles, adequate facilities equipped with the basic
tools common to the trade and with special tools and equipment peculiar to CC
products and necessary for servicing and repairing specified CC vehicles
properly, efficiently and competitively. DEALER shall comply with parts,
service and warranty guides established by CC from time to time, make a sincere
effort to satisfy service customers, and render prompt, efficient and courteous
service to all owners or lessees of all CC vehicles badged Chrysler, Plymouth or
Dodge regardless of where such vehicle was purchased or leased. DEALER shall
perform all predelivery and road-ready services recommended by CC on new CC
vehicles DEALER sells.

After six (6) quarters of operation, including operation under any preceding CC
Dealer Agreement, DEALER shall, at all times during this Agreement, meet its
minimum service satisfaction requirements by maintaining a rating on Chrysler
Corporation's Customer Satisfaction Index, Prep-It-Right and Deliver-It-Right
evaluations (as determined by Chrysler Corporation from time to time, based upon
surveys conducted of DEALER's customers) which is equal to or greater than the
average Customer Satisfaction Index, Prep-lt-Right and Deliver-It-Right ratings
for the national Sales Level Group (as those groups are determined by CC from
time to time) in which DEALER is included within DEALER's Sales Zone (as said
Sales Zone

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is determined by CC from time to time). CC will review, at least once a year,
DEALER's performance under the Customer Satisfaction Index and DEALER's
Prep-It-Right and Deliver-It-Right ratings.

DEALER shall supply to all purchasers from DEALER of new CC vehicles a copy of
CC's appropriate new vehicle warranty; make such certifications and
verifications of odometer readings and maintenance and service performed on
vehicles badged Chrysler, Plymouth or Dodge, or other matters as may be required
under the terms of the CC vehicle warranty and as CC may from time to time
otherwise prescribe; and provide owners of CC vehicles badged Chrysler, Plymouth
or Dodge all warranty service and campaign inspections or corrections to which
they may be entitled in accordance with the policies and procedures set Forth in
Chrysler Corporation's Warranty Policy and Procedure Manual and in bulletins and
documents relating to service that CC may, from time to time, supply to DEALER.
The provisions of said Warranty Policy and Procedure Manual, including any
revisions thereto which shall be furnished to DEALER by CC from time to time,
constitute a part of this Agreement with the same force and effect as if set
forth in its entirety herein.

DEALER shall comply with all policies, procedures, directives and rulings of the
Chrysler Corporation Customer Arbitration Board.

CC has placed its trust and confidence in the integrity and fidelity of DEALER
and, therefore, CC shall compensate DEALER for services claimed to have been
performed by DEALER under CC's warranties or campaign inspections and
corrections if claimed in accordance with CC's then current policies and
procedures described above. DEALER agrees to comply with all such policies and
procedures including, but not limited to, policies and procedures relating to
the keeping of books and records respecting claims DEALER may make for
compensation for service DEALER performs under CC's warranties or campaign
inspections and corrections. DEALER agrees that CC may inspect DEALER's books
and records regarding any warranty service or other claims for compensation
DEALER may submit to CC. CC may charge DEALER's account for claims which have
been disallowed as a result of such inspection.

DEALER shall perform all warranty, pre-delivery, road-ready, campaign
inspections and corrections, and other services hereunder as an independent
contractor and not as the agent of CC and shall assume responsibility for and
hold CC harmless from, all claims (including, but not limited to, claims
resulting from the negligent or willful acts or omissions of DEALER) against CC
arising out of or in connection with DEALER's performance of such service.

If DEALER modifies any CC vehicle or installs on any CC vehicle any equipment,
part or accessory that has not been supplied or approved by CC, or sells any CC
vehicle which has been modified after leaving the possession, custody or control
of CC, or sells a non-Chrysler Corporation service contract in connection with
the sale of any CC vehicle, DEALER shall disclose to the customer in writing
that the modification, equipment, accessory or part is not

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supplied or approved by CC and is not included in warranties furnished by CC or,
in the case of a service contract, the coverage is not provided by Chrysler
Corporation, its parent, subsidiaries or its affiliates. DEALER will write such
disclosure on the purchase order and on the customer's bill of sale.
Notwithstanding the foregoing, DEALER may not use parts which have not been
authorized by CC in performing repairs under CC warranties.

DEALER shall comply with all applicable federal, state and local laws, rules or
regulations in the operation of the dealership.

(d) FACILITIES AND LOCATION

(i) DEALER'S RESPONSIBILITIES

DEALER shall provide facilities for the sale and service of CC products and
related activities ("Dealership Operations") at the location set forth in the
aforementioned Dealership Facilities and Location Addendum. The entire
Dealership Facilities including, but not in limitation of the foregoing, new and
used vehicle display area, sales rooms, service area, parts and accessories
area, building exterior and grounds will be satisfactory to CC as to appearance
and layout, and will be maintained and used as set forth in the Dealership
Facilities and Location Addendum. DEALER shall at all times maintain the
Dealership Facilities so that they are of adequate capacity to accommodate
DEALER's total vehicle sales volume and are relatively equivalent in their
attractiveness, level of maintenance, overall appearance and use to those
facilities maintained by DEALER's principal competitors.

DEALER shall conduct its Dealership Operations only from the dealership location
and dealership facilities above mentioned and in the manner and at least during
the hours usual in the trade in DEALER's Sales Locality. DEALER shall not,
except as provided for in subparagraph 11(d)(ii) hereunder, either directly or
indirectly, establish any place or places of business for the conduct of its
Dealership Operations other than at the Dealership Facilities and Dealership
Operations location as set forth in the Dealership Facilities and Location
Addendum.

If all of the Dealership Facilities are not at the same location, DEALER shall
not utilize any separate portion of the Dealership Facilities for the conduct of
any Dealership Operations other than as specified in the Current Dealership
Facilities and Location Addendum. The Dealership Facilities and Location
Addendum shall identify any other purposes for which the Dealership Facilities
are to be used and the actual space and areas to be allocated for such purposes.

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(ii) CHANGES IN FACILITIES OR LOCATION

DEALER shall not make any change in the location of Dealership Operations or
make any change in the area and use of Dealership Facilities without the prior
written approval of CC. Any written approval of a change in the location or in
the area or use of Dealership Facilities shall be valid only if in the form of a
new Dealership Facilities and Location Addendum or a separate written agreement
signed by DEALER and one of the authorized representatives of CC identified in
Paragraph 10 hereinabove.

(e) FINANCES

DEALER shall maintain and employ in connection with DEALER's business such net
working capital, net worth, and wholesale credit and retail financing
arrangements necessary for DEALER to carry out successfully DEALER's
undertakings pursuant to this Agreement and in accordance with guides therefor
as may be issued by CC from time to time. At no time shall DEALER's net working
capital be less than the amount specified in the Minimum Working Capital
Agreement executed in conjunction with this Agreement and incorporated herein by
reference, or the amount thereafter established by any superseding Minimum
Working Capital Agreement.

(f) PERSONNEL

DEALER shall employ in accordance with the volume of DEALER's business such
number of competent technicians in DEALER's repair shops as may be required to
assure prompt, satisfactory and competitive customer service for all owners of
CC vehicles who may request such service from DEALER. In particular and without
limitation to the generality of the foregoing, DEALER shall cause its service
personnel to receive such training from time to time required by CC to maintain
their technical expertise to render competent customer service, including the
use of improved methods of repair, or the repair of new parts or systems,
developed by CC.

Failure to comply with the service training requirements of the immediately
preceding subparagraph of this Paragraph 11(f) may result in suspension of
deliveries of CC vehicles until DEALER complies with such training requirements.
Protracted failure to comply with such training requirements may result in
termination of this Agreement pursuant to Paragraph 28 hereunder. The
immediately foregoing sentence shall not be construed as in any way limiting the
general applicability of Paragraph 28 to any of the other provisions of this
Paragraph 11.

DEALER shall employ and maintain for its retail business a number of trained and
competent new and used motor vehicle sales, lease, service, parts and general
management personnel that are sufficient for DEALER to carry out successfully
all of DEALER's undertakings in this Agreement. In particular and without
limitation of the generality of the foregoing, DEALER

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shall cause its sales personnel to receive such training from time to time as
may be required by CC to maintain their sales expertise to render satisfactory
sales.

(g) SIGNAGE

DEALER shall display and maintain brand signs, fascia and other signage in
compliance with the policies and guidelines of Chrysler Corporation's Dealership
Identification Program, including any modification or revisions to such policies
and guidelines, which shall from time to time be furnished to DEALER by CC.

12 ADVERTISING

CC, in promoting the sale and lease of its products by DEALER and other CC
dealers, shall seek to advertise in the most effective manner to develop public
interest and confidence in its dealers and products.

DEALER shall engage in advertising and sales promotion programs and shall use
effective showroom displays to help fulfill DEALER's responsibility to promote
CC products and services vigorously and aggressively. In advertising in support
of DEALER's selling, leasing and servicing CC products, DEALER shall advertise
only in a manner that will develop customer confidence in DEALER and CC products
and shall not use any advertising, tending to mislead or deceive the public or
violate any applicable federal, state or local laws, rules or regulations, nor
shall DEALER disparage CC or any company, or products of such company, directly
involved in the manufacture of CC vehicles. DEALER shall discontinue any
advertising that CC may find to be injurious to CC's business or likely to
deceive the public or violative of any applicable federal, state or local laws,
rules or regulations.

DEALER shall at all times be a member in good standing of the Dealer Advertising
Association, for the lines set forth in the Motor Vehicle Addendum, which covers
a geographical area that encompasses, in whole or significant part, DEALER's
Sales Locality and which has been approved by CC.

13 REPORTS, RECORDS AND BUSINESS SYSTEMS

DEALER shall submit to CC for confidential use by CC and its affiliates, in such
manner, in such form, and at such times as CC may reasonably request, complete
and accurate reports of sales and stocks of new and used vehicles on hand and
other reports, including monthly financial statements and operating reports.

DEALER shall use and keep accurate and current at all times a uniform accounting
system and will follow accounting practices, satisfactory to CC, which will
enable CC to develop

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comparative information in order, among other things, to provide business
management assistance to dealers for the mutual benefit of DEALER and CC.
DEALER agrees that CC may at any time for confidential use inspect DEALER's
books and records to determine whether they are kept in such manner that the
data shown in them can be used in CC's business management assistance to
dealers, to assess DEALER's financial condition, and to verify invoices or other
claims DEALER may render to CC. CC may, during the course of such inspection,
make copies of such books and records and retain such copies for CC's
confidential use.

DEALER shall maintain an electronic data storage, transmission and communication
system in the manner and form required from time to time by CC.

CC and its affiliates shall not, without approval of DEALER, disclose the
contents of DEALER's financial records to persons not a party or an affiliate of
a party to this Agreement except when required by compulsory process from a
court, government agency or arbitrator, or when CC, in its discretion, considers
it appropriate to disclose said financial records in an adjudicatory or
arbitration proceeding involving the parties to this Agreement.

14 ORDERS

CC shall ship specified CC vehicles, parts and accessories to DEALER only on
DEALER's order.

DEALER shall Submit to CC, in the manner and form required by CC, current orders
for CC vehicles, parts and accessories, and estimates of DEALER's future vehicle
requirements at such times and for such periods as CC reasonably may request for
the mutual benefit of all CC dealers and CC. All orders are subject to
acceptance by CC, which acceptance may be in whole or in part.

Except as otherwise allowed by this Agreement, CC shall use its best efforts to
fill accepted orders for specified CC vehicles, parts and accessories.
Notwithstanding the foregoing, in the event that demand exceeds supply of
specified CC vehicles, DEALER acknowledges that CC has the right to allocate
such supply in any reasonable manner CC deems fit in any geographical market.

15 DELIVERY

CC may deliver specified CC vehicles by rail, truck, boat or any other means of
transport, or deliver them for driveaway, endeavoring, when exceptional
circumstances arise and the cost is not increased, to meet DEALER's preference
as to mode of transportation. CC may deliver specified CC vehicles to a carrier
that CC selects, for shipment to DEALER at DEALER's place of business or to the
city or town where DEALER's place of business is located (or to the

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nearest practicable unloading point) "to CC's order, notify DEALER," or may
deliver such vehicles at any other point that CC may establish.

CC may deliver parts and accessories to DEALER by delivering them to a carrier
that CC selects for shipment to the city or town where DEALER's place of
business is located, or by delivering them to DEALER at any point that CC may
establish.

16 ACCEPTANCE OF SHIPMENTS

If DEALER requests diversion of CC products shipped to DEALER or if CC is
required to divert any CC products because DEALER fails, refuses or is unable to
accept delivery of such products, or if there is a failure to pay as required
for the products that DEALER has ordered, or a failure to accept C.O.D.
shipments of products DEALER has ordered, CC may divert the shipments and charge
DEALER the demurrage, transport, storage and other expense arising by reason of
any such diversion.

17 OTHER CHARGES

DEALER shall be responsible for and will pay any and all charges for demurrage,
storage or other charges accruing after arrival of shipment at the distribution
point established by CC.

18 DELAY OR FAILURE TO FILL ORDERS

CC shall not be liable for delay or failure to fill orders that have been
accepted, where such delay or failure is the result of any event beyond the
control of CC including, but not in limitation of the generality of the
foregoing, any law, regulation or administrative or judicial order, or any acts
of God, wars, riots, wrecks, fires, strikes, lockouts, other labor troubles,
embargoes, blockades, delay or failure of any other supplier or carrier of CC to
deliver or make delivery of CC products, or any material shortage or curtailment
of production, including those due to economic conditions, or any discontinuance
of manufacture or sale of products by CC or its suppliers. Furthermore, CC will
not be liable for delay or failure to fill orders when such delay or failure is
pursuant to any provision under this Agreement.

19 OPTION TO REPURCHASE DAMAGED VEHICLES

DEALER shall notify CC if any new and unused CC vehicle in DEALER's possession
has sustained major damage as defined in the Warranty Policy and Procedure
Manual. To preserve the quality and value of new CC vehicles ordered for the
public, CC shall have the option to divert such a vehicle prior to delivery to
DEALER or repurchase from DEALER all or any of such vehicles at a price equal to
the net purchase price paid by DEALER to CC. DEALER agrees to assign its rights
under any insurance contract related to the repurchased CC vehicles

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to CC. CC shall make appropriate payment for repurchased CC vehicles directly to
any lien holder or, if there is no lien, directly to DEALER.

20 CLAIMS FOR DAMAGE OR SHORTAGE

CC shall not be liable for loss of or damage to CC products sold hereunder
occurring after delivery thereof to DEALER, DEALER's agent, or a carrier within
the North American Continent for shipment to DEALER, as provided in Paragraph 15
of this Agreement. Should any products sold under this Agreement be delivered
in damaged condition or with shortages, claims for said damages or shortages
shall be made in accordance with CC's then current policies and procedures. To
the extent required by law, DEALER shall notify the purchaser of a vehicle of
any damage sustained by such vehicle prior to sale. DEALER shall indemnify and
hold CC harmless from any liability resulting from DEALER's failure to so notify
such purchasers.

21 PRICES, CHARGES, TERMS OF PURCHASE AND PAYMENT

CC shall notify DEALER from time to time of the prices, charges and terms of
purchase for products sold under this Agreement and shall charge DEALER for such
products according to the prices, charges and terms of purchase in effect at the
date of shipment. CC reserves the right, without prior notice, to change
prices, charges and terms of purchase for any product sold under this Agreement.

DEALER shall pay CC for products sold under this Agreement in lawful money of
the United States of America by such method and/or in such manner as CC may
announce from time to time or approve in writing, with collection charges, if
any, added.

If not included in the price, DEALER shall pay all excise or other taxes which
may be levied on the products purchased hereunder or on the sale, shipment,
ownership or use thereof. Further, DEALER certifies as of the date of each
purchase hereunder that all products purchased hereunder are purchased for
resale, retail lease or demonstration purposes.

22 CHANGE IN PRICE

Should CC reduce the wholesale price at factory of any CC vehicle (not including
accessories and optional equipment) of a particular yearly model, line and body
style then currently in production, CC shall refund to DEALER in cash or by a
credit against DEALER's indebtedness to CC, for each new, unused and unsold CC
vehicle (not including demonstrators) of that particular model, line and body
style that at the time of the reduction is in DEALER's stock or in transit to
DEALER, an amount equal to the difference between the reduced wholesale price
and the wholesale price paid to CC by DEALER.

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If, at the time of the official model introduction date (as determined by CC) of
a new yearly model, CC announces a wholesale price of any CC vehicle (not
including accessories and optional equipment) of any particular body style and
line of the new model which is below the wholesale price of a vehicle of the
same body style and line of the discontinued yearly model, CC shall refund to
DEALER in cash or by credit against DEALER's indebtedness to CC an amount equal
to the difference between the reduced wholesale price and the wholesale price of
the same body style and line of the discontinued yearly model. Such refund will
apply only to new, unused and unsold CC vehicles (not including demonstrators)
of the particular body style and line of the discontinued yearly model that on
the official model introduction date (as determined by CC) of the new yearly
model is in DEALER's stock or in transit to DEALER, unless CC determines that
the line or particular body style of the new yearly model is so changed in size,
design, equipment, specifications or price as, for all practical purposes, to
make the line a new and different line or to make the particular body style a
new and different body style of the discontinued yearly model.

Notwithstanding the provisions of the two paragraphs immediately above, in any
case where items considered standard equipment on a current vehicle or on a
vehicle of the discontinued yearly model are not included as standard equipment
on the corresponding vehicle with a reduced wholesale price or on the
corresponding vehicle of the new model, any wholesale price decrease resulting
from the exclusion of such standard equipment will not be included in any refund
under this paragraph 22.

In order to qualify for a refund in either case set forth above, DEALER must
make a written claim, supported by adequate evidence, within thirty (30) days of
the effective date of the reduction in price or the official model introduction
date of the new yearly model.

Should CC increase the wholesale price of any CC vehicle, said price increase
will not apply to an order submitted to CC by DEALER prior to the date the
notification of such price increase was issued if the order was submitted for
the specific purpose of fulfilling a valid and legitimate purchase agreement
between DEALER and a retail purchaser and if such an order was properly
identified in the manner required by CC and was delivered to the ordering retail
purchaser.

23 SALE AND SUPPLY OF PARTS

DEALER shall not represent, sell, offer for sale or use in repairing CC
vehicles, parts which are represented as new or remanufactured Chrysler
Corporation or Mopar parts or parts which are represented to be manufactured or
produced by any company directly involved in the manufacture of the vehicles
specified in the Motor Vehicle Addendum to this Agreement, unless such parts are
in fact manufactured, remanufactured or designed for or by Chrysler Corporation,
Mopar or a company directly involved in the manufacture of said specified
vehicles and are properly identified as Chrysler Corporation or Mopar parts or
parts of said directly involved companies with the respective consent of each of
the aforementioned organizations.

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DEALER at all times shall keep on hand in DEALER's place of business the number
and assortment of Chrysler Corporation or Mopar parts, that, in CC's judgment,
is necessary to meet the service requirements of DEALER's CC customers and to
meet all of DEALER's obligations under this Agreement.

24 COLLECTION OF INDEBTEDNESS

CC may apply to any amount owed by DEALER to CC or to any of CC's affiliates any
credit owing to DEALER by CC or any of its affiliates. As used in this
Agreement, "affiliate" means Chrysler Corporation and any of its subsidiaries or
their subsidiaries, or any other corporation, partnership or other legal entity
which has an ownership interest in CC or any corporation, partnership or other
legal entity in which CC has an ownership interest, or any subsidiary thereof.

Should DEALER assign its right to amounts owed to DEALER by CC to any third
party, prior to executing such an assignment DEALER shall notify such third
party of CC's first priority right to such credits.

25 TITLE

Title to products CC sells to DEALER hereunder and risk of loss will pass to
DEALER on delivery of the products to DEALER, DEALER's agent, or the carrier,
whichever occurs first. However, CC retains a lien for payment on the products
so sold until paid for in full, in cash. CC will receive negotiable instruments
only as conditional payment.

26 WARRANTY AND INDEMNIFICATION FOR PRODUCT LIABILITY LITIGATION

(a) WARRANTY

CC's warranty on new CC vehicles, as in effect from time to time, will be as set
forth in Chrysler Corporation's Warranty Policy and Procedure Manual. CC shall
supply sufficient copies of CC's then current CC vehicle warranty to DEALER to
permit DEALER, in accordance with DEALER's obligation under Paragraph 11 of this
Agreement, to provide a copy to each purchaser from DEALER of a new CC vehicle.
EXCEPT FOR THE CC WARRANTY, THERE ARE NO OTHER EXPRESS OR IMPLIED WARRANTIES
MADE (OR DEEMED TO HAVE BEEN MADE TO ANY PERSON BY CC APPLICABLE TO PRODUCTS
SOLD UNDER THIS AGREEMENT. THE CC WARRANTY WILL BE EXPRESSLY IN LIEU OF ANY
OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE; AND THE
REMEDIES SET FORTH IN SUCH WARRANTY WILL BE THE ONLY REMEDIES AVAILABLE TO ANY
PERSON WITH RESPECT TO

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PRODUCTS SOLD HEREUNDER. CC neither assumes nor authorizes any other person,
including DEALER, to assume for CC any other obligation or liability in regard
to such products.

(b) INDEMNIFICATION FOR PRODUCT LIABILITY LITIGATION

If a product liability lawsuit is filed naming DEALER as a defendant and it is
determined that the bodily injury or property damage alleged by the plaintiff
was caused solely by a design defect or a defect created by CC in the
manufacture or assembly of a CC vehicle, part or accessory, which latter defect
was not reasonably susceptible of discovery by DEALER in either DEALER's new car
preparation or subsequent servicing during the warranty period, then CC shall
indemnify and hold DEALER harmless from losses, damages and expenses, including
reasonable attorneys' fees, resulting from such product liability lawsuit. As
used in this Paragraph 26(b), a "product liability lawsuit" shall mean a lawsuit
seeking damages for bodily injury or property damage allegedly sustained in a
motor vehicle accident, and which injury or damage is alleged to have been
caused in any part by a defect in the design, manufacture or assembly of a CC
vehicle, part or accessory.

Whenever DEALER intends to request CC to indemnify DEALER with respect to a
product liability lawsuit, DEALER shall file with the court an appropriate
response which will prevent a default judgment from being taken against DEALER,
and DEALER shall, within thirty (30) business days after service of the
complaint, notify CC in writing and shall provide at that time copies of any
pleadings which may have been served, together with all information then
available regarding the circumstances giving rise to such product liability
lawsuit. Any such notices shall be sent by certified mail to the attention of
the Office of the General Counsel, Chrysler Corporation, Post Office Box 1919,
Detroit, Michigan 48288 or such other address as CC may designate in writing to
DEALER. Upon such request for indemnification, CC shall have the option, upon
reasonable notice to DEALER, to retain counsel and assume full control over the
defense of the lawsuit. If CC is prevented by DEALER from exercising this
option, CC's obligation hereunder to indemnify DEALER shall be rendered null and
void and be of no force or effect.

This provision shall apply if DEALER is located in a state which has in effect
or hereafter adopts or enacts any law or regulation imposing liability on a
motor vehicle manufacturer, importer, distributor and/or dealer for sale of a
vehicle presumed under such law or regulation to be defective by reason, inter
alia, of repeated unsuccessful attempts to repair such vehicle within a
specified period of time or by reason of such vehicle being unavailable and out
of service to the purchaser for a specified period of time.

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DEALER shall make a good faith effort to immediately notify CC in writing of the
existence of any vehicle which may become subject to such law or regulation
prior to a presumption of liability arising under such law or regulation from
the inability to repair or correct a nonconformity or condition of a vehicle.

27 CHANGE OF MODELS, PARTS AND ACCESSORIES DECLARED OBSOLETE OR DISCONTINUED

CC at any time may discontinue any or all models, lines or body styles and may
revise, change or modify their construction or classification. All DEALER
orders for specified CC vehicles shall refer to models, lines and body styles in
production at the time CC receives the orders unless DEALER specifies otherwise.
CC at any time may declare obsolete or discontinue any or all parts, accessories
and other merchandise. CC may act under this Paragraph 27 without notice and,
except as set forth in Paragraph 22 of this Agreement, without any obligation to
DEALER by reason of DEALER's previous purchases.

28 TERMINATION

(a) DEALER may terminate this Agreement on not less than thirty (30) days
written notice.

(b) CC may terminate this Agreement on not less than sixty (60) days
written notice for the following reasons:

(i) in accordance with CC's ordinary and customary procedures, upon
the failure of DEALER to fully perform any of DEALER's
undertakings under Paragraph 11(a) of this Agreement or failure
of DEALER to meet its minimum service satisfaction requirements
set forth in Paragraph 11(b) of this Agreement within one hundred
and eighty (180) days after notification by CC that DEALER has
not fully performed the aforementioned undertakings, obligations
or requirements, or

(ii) the failure of DEALER to perform fully any of DEALER's
undertakings or obligations as set forth in this Agreement
including, but without limiting the generality of the foregoing,
the undertakings and obligations set forth in Paragraphs 11(b)
through 11(g) or Paragraphs 12, 13, 14, 23, 26(c) or 35 of this
Agreement, or

(iii) the death of any person listed in Paragraph 2 of this Agreement
(other than the death of DEALER if DEALER is a sole
proprietorship) or the failure of any such person so listed to
continue active and substantial personal participation in the
management of the Dealership Operation as required by Paragraph
2, or

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(iv) a misrepresentation of or change, whether voluntary or by
operation of law, in the ownership if DEALER is an individual, or
of the ownership interests listed in Paragraph 3 of this
Agreement resulting in a transfer of control or majority interest
in the capital stock or partnership interest of DEALER, unless CC
has given prior written approval to such change, or

(v) any material misrepresentation by any of DEALER's owners or
executives as to any fact relied upon by CC in entering into this
Agreement, or

(vi) a disagreement, dispute or controversy between or among
principals, partners, managers, officers or stockholders of
DEALER that, in the opinion of CC, may adversely affect the
operation, management or business of DEALER, or

(vii) the conviction of DEALER or any individual named in Paragraph 2
or 3 herein of any crime that, in CC's opinion, may affect
adversely the operation or business of DEALER or the name,
goodwill or reputation of Chrysler Corporation, CC products, or
DEALER, or

(viii) the failure of DEALER to pay any indebtedness of DEALER to CC in
accordance with the applicable terms and conditions required by
CC, or

(ix) impairment of the reputation or financial standing of DEALER or
any of DEALER's owners or executives or discovery by CC of any
facts existing prior to or at the time of signing this Agreement
which, in CC's opinion, tend to impair such reputation or
financial standing, or

(x) any submission by DEALER to CC of a false or fraudulent
application or claim, or any claim or statements in support
thereof, for payment including, but not limited to, pre-delivery
inspection or adjustments, warranty repairs, special policy or
campaign adjustments or repairs performed by DEALER, sales
incentives, parts compensation, or any other discount, allowance,
refund or credit under any plan, provision or other program
offered by CC, whether or not DEALER offers or makes to CC or CC
seeks or obtains from DEALER restitution of any payments made to
DEALER on the basis of any such false or fraudulent application,
claim or statement, or

(xi) conduct by DEALER which, in DEALER!s dealings with customers or
the public, is fraudulent or constitutes a deceptive or unfair
act or practice, or

(xii) DEALER's failure to comply with requirements set forth in the
National Traffic and Motor Vehicle Safety Act of 1966 or any
other legislation or regulation pertaining to safety, air
pollution or noise control which may be imposed on

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automobile dealers or with reasonable requests of CC made in
conjunction with action being taken on its part to comply with
the aforementioned statutory or regulatory requirements, or

(xiii) the notification of termination or termination, for any reason,
of any other Chrysler Corporation Dealer Agreement(s) which may
be in effect between DEALER and Chrysler Corporation, or

(xiv) the failure of DEALER to comply fully with the policies,
procedures, directives and rulings of the CC Customer Arbitration
Board, or

(xv) CC offers a new Sales and Service Agreement to all of its dealers
selling the line(s) of vehicles set forth on the Motor Vehicle
Addendum.

Termination by CC will not be effective unless the President or a Vice President
or the National Dealer Placement Manager of Chrysler Corporation signs the
notice.

(c) Notwithstanding the provisions above, this Agreement will terminate
automatically without notice from either party on:

(i) the death of DEALER, if DEALER is a sole proprietorship, or

(ii) an attempted or actual assignment or transfer of this Agreement
or an attempted or actual transfer of a substantial portion of
dealership assets by DEALER without the prior written consent of
CC, or

(iii) an assignment by DEALER for the benefit of creditors, or

(iv) the insolvency of DEALER, or the preparation of any petition by
or for DEALER for voluntary institution of any proceeding under
the Bankruptcy Act or under any State insolvency law, whether or
not such petition is ever filed; or the involuntary institution
against DEALER of any proceeding under the Bankruptcy Act or
under any State insolvency law which is not vacated within ten
(10) days from the institution thereof; or the appointment of a
receiver or other officer having similar powers for DEALER or
DEALER's business which is not removed within ten (10) days from
his/her appointment; or any levy under attachment, execution or
similar process which is not within ten (10) days vacated or
removed by payment or bonding, or

(v) the discontinuance by CC of the production or distribution of all
CC vehicles listed on the Motor Vehicle Addendum, or

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(vi) the failure of DEALER to fully conduct its Dealership Operations
for seven (7) consecutive business days, or

(vii) the loss, termination or expiration of any license or permit
required by law for DEALER to perform DEALER's obligations under
this Agreement or otherwise conduct business as a new vehicle
dealer for CC products.

Termination of this Agreement will cancel all unfilled orders for vehicles,
parts and accessories.

The obligations of the parties to this Agreement as set forth in Paragraphs 9,
(or Paragraph 7 in a Term Agreement), [___], 24, 26(a), 26(b), 29, 30, 31 and 35
shall remain in full force and effect after the effective date of termination.

29 REPURCHASE OBLIGATIONS UPON TERMINATION

Except when termination of this Agreement will be followed by CC issuing to
DEALER, or to DEALER's successors, assigns, heirs or devisees, a new agreement
of any sort for the sale and service of CC vehicles, including, but not in
limitation of the generality of the foregoing, such an agreement with a term of
limited duration, CC agrees to buy and DEALER agrees to sell, free and clear of
any liens and encumbrances, within ninety (90) days after the effective date of
any termination under Paragraph 28:

(a) All new, unused and unsold specified CC vehicles (not including
demonstrators), unmodified and in good, undamaged condition, of the yearly model
current at the effective date of termination that were purchased by DEALER from
CC and that are on the effective date of termination the property of and in the
possession, custody and control of DEALER. The repurchase price will be the
dealer net invoice price at the time of DEALER's purchase of each such vehicle
from CC, less any applicable rebates, incentive payments, adjustments or
allowances paid or credited by CC to DEALER. CC shall not be required to
repurchase CC vehicles built on DEALER's special order to other than CC standard
specifications.

(b) All new, unused and undamaged CC parts that are priced and identified
as eligible for return in Chrysler Corporation's then current parts lists and
that were purchased by DEALER from CC and are on the effective date of
termination the property of and in the possession, custody and control of
DEALER, at current listed prices (exclusive of transportation charges). CC
shall add to such current listed prices (exclusive of transportation charges) an
allowance of five percent (5%) of such prices for packing and crating by DEALER
and a credit for transportation charges paid by DEALER to ship such parts to the
destination CC designates. CC shall subtract from such current listed prices
(exclusive of transportation charges) all maximum allowable discounts and the
cost of any necessary refinishing, reconditioning or repacking to restore the
parts to their original saleable condition, and CC's cost of determining whether
such parts are free and clear of all liens and encumbrances. Prior to purchase
by CC,

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DEALER shall deliver the parts (tagged and inventoried in accordance with CC's
instructions) for inspection F.O.B. at any point CC may designate. CC's
determination of the quantity and value of the parts returned will be conclusive
unless DEALER notifies CC in writing within fifteen (15) days of receiving the
check or statement of account for such parts returned of any error made in such
determination.

(c) All new, unused and undamaged CC accessories or accessories packages
for the yearly model current at the effective date of termination, complete as
supplied to and purchased by DEALER from CC during the twelve (12) months
immediately preceding the effective date of termination and that are on the
effective date of termination the property of and in the possession, custody and
control of DEALER at the prices then applicable (less maximum allowable
discounts) and current at the effective date of termination, exclusive of
transportation charges. CC shall add to such currently applicable prices an
allowance of five percent (5%) of such prices (less maximum allowable discounts)
for packing and crating by DEALER and a credit for transportation charges paid
by DEALER in shipping such accessories to the destination CC designates. CC
shall subtract from such currently applicable prices (less maximum allowable
discounts) the cost of necessary refinishing, reconditioning or repackaging of
such accessories or accessories packages to restore them to their once original
salable condition and CC's cost of determining whether such accessories or
accessories packages are free and clear of all liens and encumbrances. Prior to
purchase by CC, DEALER will deliver the accessories or accessories packages,
tagged and inventoried in accordance with CC's instructions, for inspection
F.O.B. at any point CC may designate. CC's determination of the quantity and
value of the accessories or accessories packages returned will be conclusive
unless DEALER notifies CC in writing within fifteen (15) days of receiving the
check or statement of account for such accessories or accessories packages
returned of any error made in such determination.

(d) All signs of a type required by CC belonging to DEALER, showing the
name "Chrysler Corporation" or one of the designated trade names applicable only
to CC products or CC's affiliated companies. CC shall pay to DEALER for such
signs the fair market value or the price for which DEALER purchased such signs,
whichever is lower. CC shall have the right, upon termination of this
Agreement, to enter DEALER's premises peacefully and remove all such signs.

(e) Special tools (in complete sets), of a type recommended by CC, adapted
only to the servicing of CC vehicles and purchased by DEALER during the
thirty-six (36) months immediately preceding the effective date of termination
at a price and under terms and conditions to be agreed upon by CC and DEALER.

CC will pay DEALER for any items purchased pursuant to this Paragraph 29 within
ninety (90) days of CC's receipt and acceptance of said items, subject to
Paragraph 24 of this Agreement.

30 DISPOSITION OF DEALER'S PREMISES

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On termination of this Agreement by CC on sixty (60) days' written notice
pursuant to Paragraph 28 hereof, except when termination results because
DEALER's facilities have been closed for seven (7) consecutive business days or
from a person named in Paragraph 2 of this Agreement ceasing to participate in
the management of DEALER, CC shall take the following action respecting DEALER's
premises as defined below (herein called the Premises), if DEALER so requests,
and provided that DEALER has paid to CC all monies owing to CC:

(a) If, on DEALER's receipt of notice of termination, DEALER owns the
Premises:

CC shall assist DEALER in effecting an orderly and equitable disposition of the
Premises by a sale or lease. If necessary to effect such disposition, CC, at
its option, within a reasonable time shall lease the Premises from DEALER for at
least one (1) year or purchase the Premises, or cause them to be leased or
purchased, on fair and equitable terms. In such event, DEALER and CC shall
agree on the value or rental value of the Premises for the purpose of either a
sale or lease. If DEALER and CC are unable to so agree, each shall appoint a
disinterested qualified real estate appraiser and the two so appointed will
agree on the value or rental value of the Premises, as the case may be. If the
two appraisers are unable to agree, they shall select a third disinterested
qualified real estate appraiser who shall determine such value. The value or
rental value so determined shall be final and binding on both DEALER and CC. If
one or more appraisals are necessary, DEALER and CC shall share equally the cost
of such appraisals.

(b) If, on DEALER's receipt of notice of termination, DEALER is leasing
the Premises:

CC shall assist DEALER in effecting an orderly and equitable disposition of
DEALER's leasehold interest in the Premises. If necessary to effect such
disposition, CC, at its option, within a reasonable time, for the remainder of
the lease or for twelve (12) months, whichever period is shorter, shall (1)
sublet the Premises from DEALER, or (2) take an assignment of the lease of the
Premises from DEALER, or (3) pay DEALER monthly or otherwise, as the parties may
agree, the lower of the rental specified in the lease or the fair rental value
of the Premises determined in the manner provided in (a) above; provided,
however, that DEALER may receive such payments under only one dealer agreement
with Chrysler Corporation or any of their affiliates or subsidiaries.

(c) If DEALER owns part of the Premises and leases part of them, section
(a) above will apply to the part owned and section (b) above to the part leased.

CC shall have no obligation to DEALER under this Paragraph 30 if, after receipt
of notice of termination, (1) DEALER in any way encumbers the Premises or
DEALER's interest in them or takes any other action respecting the Premises that
would adversely affect any of CC's obligations under this Paragraph 30, or
performance thereof, or (2) DEALER receives and refuses a bona fide offer to
purchase, lease or sublet all or substantially all of the Premises at a price
and

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on terms that CC believes are fair, or (3) DEALER's lease of the Premises or
part thereof is continued, renewed or extended by DEALER's act or failure to
act, or (4) DEALER fails or refuses to use DEALER's best efforts to sell, lease
or sublease the Premises or to notify CC of any offer to buy, lease or sublease
the Premises; or if, after the effective date of termination of this agreement,
(a) the Premises or part thereof are used or occupied by anyone for any purpose,
or (b) DEALER, if a proprietor, or any of the persons named in Paragraph 3 of
this agreement is in the business of selling and/or servicing new or used motor
vehicles in the Sales locality referred to in this agreement or the general area
surrounding it, or (c) DEALER, if a proprietor, or any of the persons named in
Paragraph 3 of this agreement occupies or could, in CC's opinion, occupy all or
substantially all of the Premises for any business in which one or more of them
engages.

"Premises" as used in this Paragraph 30 means the place or places of business in
the Sales Locality (1) that DEALER uses exclusively to carry out DEALER's
obligations in selling and servicing new products under this agreement or
jointly under this and any other agreement or agreements with CC on the date of
DEALER's receipt of notice of termination and (2) are set forth in the
Dealership Facilities and Location Addendum (Addenda).

To receive CC's assistance as set forth in this Paragraph 30, DEALER must have
operated continuously as a CC dealer for the twelve (12) months immediately
preceding the effective date of termination and must have given CC a written
request for such assistance within thirty (30) days after DEALER's receipt of
the notice of termination of this Agreement. On receipt of such request from
DEALER, CC will initiate compliance with its obligations under this Paragraph
30. If under section (b) above CC elects to make monthly payments, then DEALER
shall make written application for them on such forms and at such times as CC
reasonably may require. If DEALER requests assistance under this Paragraph 30,
then CC, at all reasonable times, shall have full access to the Premises and
DEALER's books and records pertaining to the Premises.

31 TRANSACTIONS AFTER TERMINATION

After the effective date of termination, if CC, in its discretion, elects to
fill retail orders of DEALER or otherwise transacts business related to the sale
of CC products with DEALER, all such transactions will be governed by the same
terms that this Agreement provides, so far as those terms are applicable.
Notwithstanding any such transactions, CC shall not be deemed to have waived or
rescinded the termination or have renewed this Agreement.

32 SUCCESSORS TO DEALER

On termination of this Agreement by reason of the death of DEALER if an
individual, or on termination by CC because of the death of any of the persons
named in Paragraph 2 of this Agreement if DEALER is a partnership or
corporation:

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(a) If DEALER had so requested in writing (signed by DEALER if an
individual or by those persons representing a majority of the ownership interest
in DEALER if DEALER is a partnership or corporation), delivered to CC during the
lifetime of such decedent, CC shall offer a Chrysler Corporation Sales and
Service Agreement (limited to a two (2) year term) to any person DEALER has
nominated in such written request to CC as the person DEALER desires to continue
DEALER's business after such death, provided that such nominated person has
demonstrated operating qualifications satisfactory to CC in the course of
active, substantial and continuing participation in the management of DEALER's
organization, and possesses or is able to acquire within a reasonable time after
such death, capital and facilities that are satisfactory to CC, and will be able
to exercise as much control over the operations and affairs of the dealership as
the deceased exercised. Such Chrysler Corporation Sales and Service
Agreement(s) shall be limited to a term of two (2) years and subject to earlier
termination as provided therein. At least ninety (90) days before the
expiration of the two (2) year term referred to above, CC shall determine if the
person granted said two (2) year agreement possesses the required capital and
facilities and has satisfactorily performed the obligations under said two (2)
year agreement. This determination will be based on said person's performance
during the aforementioned two (2) year period to qualify for the standard
Chrysler Corporation Sales and Service Agreement then in effect. If CC
determines that said person possesses all such qualifications, then CC shall
offer such standard agreement to said person.

(b) CC shall, if DEALER has not nominated a successor under this Paragraph
32 and has not named a person whose surviving spouse may hold a financial
interest under Paragraph 33, review the qualifications of any remaining person
named in Paragraph 2 of this Agreement. If any such person possesses operating
qualifications satisfactory to CC and possesses or is able to acquire within a
reasonable time facilities and capital necessary to qualify as a CC dealer, CC
shall offer such person a Chrysler Corporation Sales and Service Agreement or
Term Sales and Service Agreement, as CC deems appropriate. If more than one
such person qualifies, CC will select the person or persons to whom an agreement
will be offered.

33 SURVIVING SPOUSE'S FINANCIAL INTEREST

On termination of this Agreement by reason of the death of DEALER, if an
individual, or on termination by CC because of the death of any of the persons
named in Paragraph 2 of this Agreement if DEALER is a partnership or
corporation, the surviving spouse of the person who died may hold a financial
interest in any successor dealership, provided that the following conditions are
met:

(a) Prior to the death referred to above, DEALER had delivered to CC a
notice in writing signed by all the persons named in Paragraph 2 of this
Agreement naming the deceased person (who must also be named in Paragraph 2 of
this Agreement) as the person whose surviving spouse may hold the financial
interest. DEALER may name only one person but may, on written notice to CC,
signed as above, change the person named.

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(b) Within sixty (60) days of the date of such death, the surviving spouse
executes with the person or persons who will be named in Paragraph 2 of the CC
Sales and Service Agreement(s) between CC and the successor dealership a written
agreement in which the surviving spouse agrees not to participate in any way in
the management or operation of the successor dealership. Such agreement shall
be delivered to CC within fifteen (15) days after it has been signed by both
parties. Notwithstanding the immediately foregoing provisions of this Paragraph
33(b), such an agreement not to participate need not be made if CC has approved
the surviving spouse as a person to be named in Paragraph 2 of the CC Sales and
Service Agreement(s) between CC and the successor dealership.

Nothing contained herein will obligate CC to enter into a sales and service
agreement with the surviving spouse or any person not otherwise acceptable to CC
or require CC to continue this or any other agreement with the surviving spouse
or any other person for any period of time beyond the time when CC would have a
right to terminate such an agreement in accordance with the terms thereof.

"Successor dealership" as used in this Paragraph 33 means a dealership (1) that
qualifies for and enters into a Chrysler Corporation Sales and Service Agreement
with CC, (2) that possesses and has the right to use the physical assets and
organization that remain after the death first referred to in this Paragraph 33,
and (3) in which the surviving spouse retains or acquires the financial interest
as referred to above.

34 SALE OF DEALERSHIP ASSETS OR OWNERSHIP INTERESTS

CC acknowledges that DEALER may at any time negotiate for the sale of its
assets, and any of the owners of DEALER may at any time negotiate the sale of
their ownership interests in DEALER, with any purchaser on such terms as may be
agreed upon by them and the prospective purchaser. Any such sale, however, will
not create any obligation of CC to do business with any such purchaser.

DEALER acknowledges that, in connection with any such sale to any such
purchaser, this Agreement is not assignable without the written consent of CC.
If the proposed purchase and sale arrangement contemplates or is conditioned
upon the prospective purchaser being granted by CC an agreement similar to this
Agreement, DEALER shall provide CC written notice thereof prior to any
completion or closing of the transactions contemplated by such purchase and sale
arrangement and the prospective purchaser shall apply to CC, on forms provided
by CC, for such an agreement. In order that CC can determine whether effective
dealership operations will result if the prospective purchaser's application is
approved, CC may, in processing the application, without liability to DEALER or
any such owners, counsel with the prospective purchaser regarding any matters
including, but not limited to, matters relating to the investments in the
proposed dealership operations, the management and the facilities that may be
required by CC.

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If DEALER or such owners have notified CC, and the prospective purchaser has
made application as provided above, CC shall consider and process such
application, together with the applications of any others for such an agreement,
in accordance with its established procedures and CC shall not unreasonably
withhold its approval of such an application. Any such approval shall be
conditioned upon payment in full by DEALER of all of DEALER's obligations to CC,
which payment shall be made at CC's option on or before the sale to the
prospective purchaser. If CC decides not to continue authorized dealership
operations at DEALER's premises, however, no such application will be considered
or processed by CC and CC shall so notify DEALER or such owners and the
prospective purchaser.

Notwithstanding the foregoing provision of this Paragraph 34, even if the
prospective purchaser of DEALER's assets or ownership interests in DEALER meets
CC's qualifications for appointment as a dealer, CC may, at its discretion,
offer to purchase DEALER's assets or ownership interest in DEALER on the same
terms as said qualified prospective purchaser. If CC makes such an offer,
DEALER shall sell the dealership assets to CC on the aforementioned same terms.
However, if CC has not made such an offer within fifteen (15) business days
after CC's receipt of the aforementioned application and all necessary
information, CC shall be deemed to have declined to offer to purchase DEALER's
assets or ownership interests in DEALER. Within fifteen (15) days after CC has
communicated its offer to purchase DEALER's assets or ownership interest in
DEALER, as described above, DEALER may withdraw, by written notification to CC,
its proposal to sell said assets or ownership interest to any purchaser, in
which case CC's aforementioned offer to purchase will be null and void.
Additionally, DEALER may request in writing that CC predetermine whether a
proposed purchaser would be acceptable to CC prior to entering into an agreement
to sell DEALER's assets or ownership interests. If such a request is made, CC
shall make such determination. If CC determines that the proposed purchaser is
acceptable to CC, CC shall decline to make an offer to purchase such assets or
ownership interest. Such determination of acceptability and declination will
not act to deny CC its right not to approve the proposed purchase and sale
arrangement as set forth above.

35 USE OF TRADE NAMES, TRADEMARKS, LOGOS, ETC.

DEALER may use in DEALER's corporate, firm or trade name in a manner CC approves
in writing any trade name applicable to those CC products set forth in the Motor
Vehicle Addendum. DEALER shall discontinue immediately the use of any such
trade names in DEALER's corporate, firm or trade name when CC so requests in
writing and DEALER shall take such steps as may be necessary or appropriate, in
CC's opinion, to change such corporate, firm or trade name so as to eliminate
any trade name of CC products therefrom.

Except as specifically allowed herein, DEALER shall not use, in any manner, the
trademarks, trade names, insignias or the like of CC, its divisions, affiliates
or subsidiaries without CC's explicit and prior written consent. DEALER shall
discontinue immediately any and all use of any such trademark, trade name,
insignias or the like when CC so requests in writing.

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On termination of this Agreement, DEALER shall discontinue immediately using any
trade names applicable to CC vehicles or other products in DEALER's corporate,
firm or trade name or using any trade names, trademarks or insignias adopted or
used by CC or its divisions, affiliates or subsidiaries, and will take such
steps as may be necessary or appropriate, in CC's opinion, to change such
corporate, firm or trade name so as to eliminate any trade names applicable to
CC products therefrom, and will discontinue using any signs, stationery or
advertising containing any such trade names, trademarks or insignias or anything
else that might make it appear that DEALER is an authorized dealer for CC
vehicles or products.

36 DEALER IS NOT AGENT

This Agreement does not create the relationship of principal and agent between
CC and DEALER, and under no circumstances is either party to be considered the
agent of the other.

37 INABILITY TO PERFORM

In addition to any other exemption from liability specifically provided for in
this Agreement, neither DEALER nor CC will be liable for failure to perform its
part of this Agreement when the failure is due to fire, flood, strikes or other
labor disputes, accident, war, riot, insurrection, acts of government,
governmental regulation or other circumstances beyond the control of the
parties.

38 ASSIGNMENT

DEALER may not assign or transfer this Agreement, or any part hereof, or
delegate any duties or obligations under this Agreement without the written
consent of CC, executed by the President or a Vice President or the National
Dealer Placement Manager of Chrysler Corporation.

39 NON-WAIVER

The waiver by either party of any breach or violation of or default under any
provision of this Agreement will not operate as a waiver of such provision or of
any subsequent breach or violation thereof or default thereunder.

40 SEVERABILITY

If any provision of this Agreement should be held invalid or unenforceable for
any reason whatsoever or to violate any law of the United States, the District
of Columbia or any State, this Agreement is to be considered divisible as to
such provision, and such provision is to be deemed deleted from this Agreement
or, in the event that it should be held to violate only the laws of the District
of Columbia or of any State, to be inapplicable within the territory thereof,
and the

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remainder of this Agreement will be valid and binding as if such provision were
not included herein or as if it were included herein only with respect to
territories outside of such District or State, as the case may be.
Notwithstanding the foregoing, when, in the absence of this Paragraph 40,
Federal law would otherwise be deemed to preempt a state law which purports to
limit or prohibit any right, obligation or duty under any provision of this
Agreement, then this Paragraph 40 shall not be construed to delete any such
provision of this Agreement and the parties hereto will be subject to the terms
of such provision as if such a state law did not exist.

41 TITLES

The titles appearing in this Agreement have been inserted for convenient
reference only and do not in any way affect the construction, interpretation or
meaning of the text.

42 INTERPRETATION

In the event of a dispute hereunder, the terms of this Agreement shall be
construed in accordance with the laws of the State of Michigan.

43 NOTICES

Unless otherwise specifically required by the terms of this Agreement, any
notice required or permitted under this Agreement must be in writing and will be
sufficient if delivered personally, or sent through the United States mail
system, postage prepaid, addressed, as appropriate, either to DEALER at the
place of business designated in this Agreement, or at such other address as
DEALER may designate in writing to CC, or to Chrysler Corporation at Post Office
Box 857, Detroit, Michigan 48288 or such other address as CC may designate in
writing to DEALER.

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EXHIBIT 10.4.1

H O N D A

AUTOMOBILE DEALER

SALES AND SERVICE

AGREEMENT

Lithia Motors, Inc. dba
LITHIA HONDA #207171
700 North Central
Medford, Oregon 97501-5817

AMERICAN HONDA MOTOR CO., INC.

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A

This is an agreement between the Honda Automobile Division, American
Honda Motor Co., Inc. [American Honda] and Lithia Motors, 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 11th day of
August, 1994, 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.

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.

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:

Page 1 of 12
<PAGE>

(1.) the following person(s) in the percentage(s) shown:

PERCENT OF
NAME ADDRESS TITLE OWNERSHIP

Sidney B. DeBoer 360 E. Jackson President/ 75 shares
Medford, Oregon Secretary/
Treasurer

Manfred L. Heimann 426 Roundelay Circle Vice President 45 shares
Medford, Oregon

(2.) _______________________________________________________, an individual
personally owning an interest in Dealer or 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.

Dealer represents, and American Honda enters into this Agreement in
reliance upon the representation, that Byran 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.

American Honda has approved the following premise 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

SALES AND GENERAL OFFICES USED VEHICLE DISPLAY
AND SALES FACILITIES

Page 2 of 12
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700 North Central 700 North Central
Medford, Oregon Medford, Oregon

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.

Dealer agrees to maintain, solely with respect to the Dealership
Operations, minimum net working capital of $168,136.00, minimum owner's
equity of $210,045.00, and flooring and a line or lines of credit in the
aggregate amount of $574,140.00 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
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.

This Agreement is made for the period beginning August 11, 1994 and
ending August 31, 1999, 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.

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.

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.

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Lithia Motors, Inc. dba
LITHIA HONDA #207171 By
- ----------------------------------- -------------------------
[Corporate or Firm Name] [Dealer]

AMERICAN HONDA MOTOR CO., INC. [Corporate Seal]
HONDA AUTOMOBILE DIVISION

By
--------------------------------
Richard Colliver
Sr. Vice President

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EXHIBIT 10.4.2

HONDA

CIVIC

AUTOMOBILE DEALER'S STANDARD AGREEMENT

AMERICAN HONDA MOTOR CO., INC.

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TABLE OF CONTENTS

HONDA AUTOMOBILE DEALER'S STANDARD AGREEMENT

ARTICLE I: DEFINITIONS

1. "HONDA MOTOR" . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. "DISTRIBUTOR" . . . . . . . . . . . . . . . . . . . . . . . . . . .1
3. "DEALER". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
4. "HONDA AUTOMOBILES" . . . . . . . . . . . . . . . . . . . . . . . .1
5. "HONDA AUTOMOBILE PARTS". . . . . . . . . . . . . . . . . . . . . .1
6. "HONDA TRADEMARK" . . . . . . . . . . . . . . . . . . . . . . . . .1
7. "HONDA SIGN". . . . . . . . . . . . . . . . . . . . . . . . . . . .1

ARTICLE II: BASIC OBLIGATION

1. SALE AND RESALE OF HONDA AUTOMOBILES AND HONDA AUTOMOBILE PARTS . .1
2. DEALER'S RESPONSIBILITY FOR SALE AND PROMOTION. . . . . . . . . . .2
3. APPOINTMENT OF DEALERS. . . . . . . . . . . . . . . . . . . . . . .2
4. CONDUCT OF DEALER . . . . . . . . . . . . . . . . . . . . . . . . .2
5. DIRECTIVES AND POLICIES OF DISTRIBUTOR. . . . . . . . . . . . . . .2
6. DEALER AS INDEPENDENT BUSINESS. . . . . . . . . . . . . . . . . . .2
7. DEALER'S POWER AND AUTHORITY LIMITATION . . . . . . . . . . . . . .3
8. DISTRIBUTOR'S NON-LIABILITY . . . . . . . . . . . . . . . . . . . .3

ARTICLE III: DEALER'S GENERAL BUSINESS REQUIREMENTS

1. DEALER'S BUSINESS PREMISES. . . . . . . . . . . . . . . . . . . . .3
2. DESCRIPTION AND PLANS OF DEALER'S PREMISES. . . . . . . . . . . . .3
3. EXPANSIONS AND IMPROVEMENTS OF DEALER'S PREMISES. . . . . . . . . .4
4. RELOCATION AND NEW DEALER'S PREMISES. . . . . . . . . . . . . . . .4
5. DEALER'S PERSONNEL. . . . . . . . . . . . . . . . . . . . . . . . .4
6. HOURS OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . .4
7. CAPITAL REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . . . .4
8. ACCOUNTING SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . .5
9. RECORD SUPPORTING CLAIMS. . . . . . . . . . . . . . . . . . . . . .5
10. EXAMINATION OF ACCOUNTS AND RECORDS . . . . . . . . . . . . . . . .6

ARTICLE IV: SALES OF HONDA AUTOMOBILES AND HONDA AUTOMOBILE PARTS

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1. DEALER'S RESPONSIBILITY FOR SALES . . . . . . . . . . . . . . . . .6
2. SALES AND MECHANICAL STAFF. . . . . . . . . . . . . . . . . . . . .6
3. SALES AND SERVICE RECORDS . . . . . . . . . . . . . . . . . . . . .7
4. CUSTOMER'S COMPLAINTS . . . . . . . . . . . . . . . . . . . . . . .7
5. TREATMENT OF PURCHASERS . . . . . . . . . . . . . . . . . . . . . .7

A. DELIVERED PRICES AND ITEMIZED INVOICES . . . . . . . . . . . .7
B. TRUE STATEMENT AS TO SELLING PRICES. . . . . . . . . . . . . .7
C. SUGGESTED RETAIL PRICES. . . . . . . . . . . . . . . . . . . .7
D. SALE WITHOUT OPTIONAL EQUIPMENT OR ACCESSORIES . . . . . . . .7
E. PRE-DELIVERY INSPECTION. . . . . . . . . . . . . . . . . . . .8

ARTICLE V: DEALER'S HONDA AUTOMOBILE PARTS AND SUPPLIES

1. PROMOTION OF HONDA AUTOMOBILE PARTS . . . . . . . . . . . . . . . .8
2. DEALER'S PARTS DEPARTMENT REQUIREMENTS. . . . . . . . . . . . . . .8
3. SALE OF HONDA AUTOMOBILE PARTS. . . . . . . . . . . . . . . . . . .8
4. MINIMUM INVENTORY OF HONDA AUTOMOBILE PARTS . . . . . . . . . . . .9

ARTICLE VI: CUSTOMER'S SERVICE

1. SERVICE TO BE PROVIDED BY DEALER. . . . . . . . . . . . . . . . . .9
2. SERVICE DEPARTMENT. . . . . . . . . . . . . . . . . . . . . . . . .9
3. REPRESENTATION OF HONDA AUTOMOBILE PARTS. . . . . . . . . . . . . .9
4. CONTACT WITH PURCHASERS . . . . . . . . . . . . . . . . . . . . . .9
5. WARRANTY DIRECTIVES AND PROCEDURES. . . . . . . . . . . . . . . . 10

ARTICLE VII: DEALER'S PURCHASES AND INVENTORY

1. PRICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2. ORDER AND ACCEPTANCE. . . . . . . . . . . . . . . . . . . . . . . 10
3. LOCAL TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5. RESERVATION OF TITLE FOR SECURITY . . . . . . . . . . . . . . . . 11
6. PASSING OF TITLE AND RISK . . . . . . . . . . . . . . . . . . . . 12
7. EXTENT OF DISTRIBUTOR'S RESPONSIBILITY FOR DEFECTS AND DAMAGE . . 12
8. CLAIMS FOR INCOMPLETE DELIVERY. . . . . . . . . . . . . . . . . . 12
9. CHANGES OF SPECIFICATIONS . . . . . . . . . . . . . . . . . . . . 12
10. FAILURE OF OR DELAY IN DELIVERY . . . . . . . . . . . . . . . . . 13
11. RETURN OR DIVERSION ON FAILURE TO ACCEPT. . . . . . . . . . . . . 13

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12. INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ARTICLE VIII: WARRANTY TO CUSTOMERS

1. MANUFACTURER'S WARRANTY . . . . . . . . . . . . . . . . . . . . . 14
2. WARRANTY TO CUSTOMERS . . . . . . . . . . . . . . . . . . . . . . 14
3. WARRANTY CLAIM PROCEDURE. . . . . . . . . . . . . . . . . . . . . 14
4. WARRANTY REGISTRATION PROCEDURE . . . . . . . . . . . . . . . . . 15

ARTICLE IX: ESTIMATES AND REPORTS

1. ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2. SALES AND INVENTORY REPORTS . . . . . . . . . . . . . . . . . . . 15

ARTICLE X: SIGNS, TRADEMARKS AND TRADENAMES

1. SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

A. PRODUCT SIGN . . . . . . . . . . . . . . . . . . . . . . . . 16
B. CUSTOMER SERVICE SIGN. . . . . . . . . . . . . . . . . . . . 16
C. OTHER NECESSARY SIGNS. . . . . . . . . . . . . . . . . . . . 16

2. TRADEMARKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

A. EXCLUSIVE OWNERSHIP. . . . . . . . . . . . . . . . . . . . . 16
B. USE BY DEALER. . . . . . . . . . . . . . . . . . . . . . . . 16
C. DISCONTINUANCE OF USE UPON TERMINATION . . . . . . . . . . . 16
D. DEALER'S LIABILITY FOR FAILURE TO DISCONTINUE USE. . . . . . 17

ARTICLE XI: ADVERTISING PROMOTIONAL PROGRAM . . . . . . . . . . . . . . . 17

ARTICLE XII: COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . 17

ARTICLE XIII: TERMINATION OF SALES AGREEMENT

1. TERMINATION BY DEALER . . . . . . . . . . . . . . . . . . . . . . 18
2. TERMINATION FOR CAUSE . . . . . . . . . . . . . . . . . . . . . . 18

ARTICLE XIV: SIGNS, LITERATURE, BUSINESS NAME, ETC. UPON TERMINATION

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1. REMOVAL OF SIGNS. . . . . . . . . . . . . . . . . . . . . . . . . 20
2. LITERATURE, MANUALS, PROMOTIONAL MATERIAL, ETC. . . . . . . . . . 20
3. BUSINESS NAME . . . . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE XV: TERMINATION DELIVERIES

1. CANCELLATION OF ORDERS. . . . . . . . . . . . . . . . . . . . . . 21
2. TERMINATION DELIVERIES. . . . . . . . . . . . . . . . . . . . . . 21
3. EFFECT OF TRANSACTIONS AFTER TERMINATION. . . . . . . . . . . . . 22

ARTICLE XVI: REPURCHASE OF HONDA AUTOMOBILES, HONDA
AUTOMOBILE PARTS, SPECIAL TOOLS AND
EQUIPMENT AFTER TERMINATION

1. HONDA AUTOMOBILES . . . . . . . . . . . . . . . . . . . . . . . . 23
2. HONDA AUTOMOBILE PARTS. . . . . . . . . . . . . . . . . . . . . . 23
3. SPECIAL TOOLS AND EQUIPMENT . . . . . . . . . . . . . . . . . . . 24
4. DELIVERY TO DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . 24
5. INSPECTION OF PROPERTY AT DEALER'S PREMISES . . . . . . . . . . . 24
6. RIGHT OF REJECTION. . . . . . . . . . . . . . . . . . . . . . . . 24
7. LIENS AND ENCUMBRANCES. . . . . . . . . . . . . . . . . . . . . . 25
8. PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9. FREIGHT AND INSURANCE CHARGES . . . . . . . . . . . . . . . . . . 25

ARTICLE XVII: OBLIGATIONS OF DISTRIBUTOR IN CASE OF DEATH . . . . . . . . 25

1. DEATH OF DEALER . . . . . . . . . . . . . . . . . . . . . . . . . 25

ARTICLE XVIII: DISTRIBUTOR'S ASSISTANCE

1. ASSISTANCE IN SALE OF DEALER'S BUSINESS . . . . . . . . . . . . . 26

ARTICLE XIX: GENERAL PROVISIONS

1. AUTHORITY TO SIGN FOR DISTRIBUTOR . . . . . . . . . . . . . . . . 27
2. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 27
3. RELEASE OF CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . 27
4. VARIATIONS, MODIFICATIONS, AMENDMENTS . . . . . . . . . . . . . . 27
5. NO TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7. WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8. DIVISIBILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 28

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HONDA AUTOMOBILE DEALER'S STANDARD AGREEMENT

ARTICLE I

DEFINITIONS

As used herein:

1. "HONDA MOTOR" means Honda Motor Co., Ltd., a Japan corporation.

2. "DISTRIBUTOR" means American Honda Motor Co., Inc., a California
corporation.

3. "DEALER" means the authorized Honda Automobile Dealer.

4. "HONDA AUTOMOBILES" means automobiles of any model and type manufactured in
whole or in part by Honda Motor and supplied to Dealer by Distributor.

5. "HONDA AUTOMOBILE PARTS" means parts, accessories and optional equipment
for Honda Automobiles which are manufactured by or for Honda Motor or
Distributor and title to which passes through Distributor.

6. "HONDA TRADEMARK" means any trademark, service mark, or other identifying
word, emblem, insignia, symbol, slogan, design or indicia now or during
the term of this Agreement claimed or adopted by Honda Motor or Distributor
to distinguish Honda Automobiles, Honda Automobile Parts, or services
related thereto, including but not limited to "HONDA," "H," "HM," "AHM,"
and the wing design.

7. "HONDA SIGN" means any sign displaying any Honda Trademark, including but
not limited to, the standard Customer's Service Sign.

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ARTICLE II

BASIC OBLIGATION

1. SALE AND RESALE OF HONDA AUTOMOBILES AND HONDA AUTOMOBILE PARTS:

Subject to the provisions of this Agreement, Distributor shall sell
and deliver Honda Automobiles and Honda Automobile Parts to Dealer for
resale and assist the Dealer and its operation relating to the resale of
and customers' service for Honda Automobiles and Honda Automobile Parts.

2. DEALER'S RESPONSIBILITY FOR SALE AND PROMOTION:

Dealer assumes the responsibility for the promotion and sale of Honda
Automobiles, Honda Automobile Parts, and rendering customers' service for
Honda Automobiles within an area in which the Dealer's premises are
located, which is herein referred to as "AREA OF RESPONSIBILITY" and agrees
to devote his principal efforts to such area.

3. APPOINTMENT OF DEALERS:

Distributor reserves the right to appoint one or more authorized Honda
Automobile Dealers in the above mentioned "Area of Responsibility" as
Distributor may, from time to time, determine necessary.

4. CONDUCT OF DEALER:

In the operation of its business, Dealer shall protect the reputation
and goodwill of Honda Automobiles, Honda Automobile Parts and other Honda
products, of Honda Motor and Distributor and shall refrain from all conduct
and activities which might be detrimental and reflect adversely upon the
reputation of Honda Automobiles, Honda Automobile Parts and other Honda
products or Honda Motor or Distributor or are contrary to good business
practices or to any laws, statutes, rules and regulations affecting the
operation of a retail automobile business and shall not engage in any
discourteous, deceptive, misleading or unethical practices or activities,
but shall give prompt, efficient and courteous service to its customers and
actively and honestly promote the sale of Honda Automobiles and Honda
Automobile Parts.

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5. DIRECTIVES AND POLICIES OF DISTRIBUTOR:

In the operation of Dealer's business and in the sale and promotion of
Honda Automobiles and Honda Automobile Parts and in rendering customers'
service and in all other activities pursuant to any provisions of this
Agreement, Dealer shall abide by all reasonable directives and policies of
Distributor. Distributor shall periodically evaluate Dealer's business
operation and may require Dealer to make any reasonable adjustments
necessary to uphold and protect the reputation and goodwill of Honda
Automobiles including Honda Automobile Parts.

6. DEALER AS INDEPENDENT BUSINESS:

Dealer represents and shall transact and operate his business in
accordance with the provisions of this Agreement as an independent business
on its own behalf and its own account.

7. DEALER'S POWER AND AUTHORITY LIMITATION:

Dealer has no power or authority or right to act as an agent or
otherwise for the account or on behalf of Honda Motor or Distributor or to
assume or create any obligation or responsibility, expressed or implied,
for or in behalf of Honda Motor or Distributor or to bind Honda Motor or
Distributor in any manner whatsoever.

8. DISTRIBUTOR'S NON-LIABILITY:

Distributor shall not be liable or responsible whatsoever for any
expenditures made or obligations, indebtedness or liability incurred by
Dealer in connection with Dealer's performance of its obligations under
this Agreement.

ARTICLE III

DEALER'S GENERAL BUSINESS REQUIREMENTS

1. DEALER'S BUSINESS PREMISES:

To provide proper Honda Automobile and Honda Automobile Parts
representation commensurate with the reputation and goodwill attached to
the name "Honda" and to facilitate the proper sales and servicing of Honda
Automobiles and Honda Automobile Parts, Dealer will maintain business
premises satisfactory to Distributor with respect to appearance, location,
size of buildings, space allotments and adequate layout as well as
equipment, showroom, office, storage space, used car

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lot, body repair and paint shop, if any, parking facilities, workshop and
service operation; each of which shall comply with the standards, policies
and directives of Distributor as developed in proportion to the number of
Honda Automobiles and Honda Automobile Parts that may reasonably be
expected to be sold and serviced by Dealer.

2. DESCRIPTION AND PLANS OF DEALER'S PREMISES:

For the purpose of identifying the business premises and providing
satisfactory evidence that said business premises are in compliance with
Distributor's standards, policies and directives as specified in
Paragraph 1 of Article III, Dealer will submit to Distributor as Exhibit A
of this Agreement, a complete and full description and plans of the
location, land, building and all other requirements as contained in
Paragraph 1 of Article Ill herein. Such description and/or plans shall be
submitted on a "Description and Plan of Dealer's Premises" form to be
furnished by Distributor and must be approved in writing by Distributor.

3. EXPANSIONS AND IMPROVEMENTS OF DEALER'S PREMISES:

If during the term of this Agreement, expansion of Dealer's premises
is necessary to properly sell and service customers, it is agreed that
Dealer and Distributor will enter into a bona fide and good faith
negotiation to determine the extent of improvements necessary to fulfill
the requirements of such expansion of business. Upon agreement by
Distributor and Dealer of any change of said description and/or plans, a
new "Description and Plans of Dealer's Premises" shall be prepared, signed
by Dealer, and approved by Distributor in writing.

4. RELOCATION AND NEW DEALER'S PREMISES:

Once a Dealer has established its business facilities at a location
mutually satisfactory to Dealer and Distributor, Dealer will not move to or
establish a new or different location, branch sales office, branch service
establishment or any place or business including any used automobiles or
truck lots or location without first obtaining a written approval of
Distributor.

5. DEALER'S PERSONNEL:

Dealer shall at all times employ for its business qualified and
competent personnel for sale of Honda Automobiles and sale of used
automobiles and for sale of Honda Automobile Parts and for servicing Honda
Automobiles in such numbers and in such capacities as required according
to Distributor's standards, policies and directives for Dealer's
satisfactory operation. Dealer, at its cost, shall cause such of

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its qualified personnel, who may come within the scope of any training
courses conducted by Distributor, to attend such training whenever
Distributor specifies that attendance is required and will use such
material and information as may be specified from time to time by
Distributor.

6. HOURS OF BUSINESS:

During the term of this Agreement the Dealer shall operate its
business at its premises during and for not less than the customary
business days and hours of the trade in Dealer's area.

7. CAPITAL REQUIREMENTS:

Dealer and Distributor fully understand that a successful operation of
Dealer's business will to a great extent depend on the amount of net
working capital, owner's equity and line of credit with which Dealer
maintains its business operations, and, therefore, Dealer agrees that it
will at all times maintain as its minimum net working capital, owner's
equity and lines of credit in accordance with the amount set forth in a
separate minimum net working capital agreement to be executed by Dealer
and Distributor at the time of the execution of this Agreement. If due
to changed conditions, Distributor shall deem it necessary to materially
increase or decrease the amount of minimum net working capital, owner's
equity or line or lines of credit for Dealer to properly operate its
business, Dealer agrees to maintain the revised amount of minimum net
working capital, owner's equity, or line or lines of credit, as the case
may be deemed necessary by Distributor, to meet such changed conditions
for the proper operation of Dealer's business and Dealer and Distributor
agree to execute a new Sales Agreement, thereof setting forth such
revised amounts. If the amounts thereof are increased or decreased,
Dealer will meet the new minimum net working requirements within the time
agreed upon by Dealer and Distributor.

8. ACCOUNTING SYSTEM:

In order that Distributor may obtain satisfactory and adequate
financial operation data and information concerning Dealer's business
operation to enable Distributor to formulate policies beneficial to
Dealer's interest and for the promotion and sales of Honda Automobiles
and Honda Automobile Parts, it is agreed Dealer will use and keep
up-to-date an accounting system of the type which will meet the accepted
accounting practices of the accounting profession and satisfactory to
Distributor, and upon request by Distributor, Dealer will furnish to
Distributor by the fifteenth (15th) day of each month, a complete and
accurate financial and operation statement on forms furnished or approved
by Distributor with such supporting data as Distributor might request
covering the period of operation so designated, and showing

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a true and actual account of Dealer's business. In addition, if the
Dealer is, at the time of the execution of this Agreement or thereafter,
engaged in the sale of any other product or service, Dealer shall
maintain and keep separate records and books relating to the sales of
Honda Automobiles and Honda Automobile Parts and servicing of Honda
Automobiles so that Distributor shall be fully advised of all matters
relating to transactions of Dealer pursuant to the terms of this
Agreement; and Dealer shall furnish Distributor with one (1) copy of a
certified profit and loss statement and balance sheet of Honda products
and services consolidated statement for all products and services monthly.

9. RECORD SUPPORTING CLAIMS:

Dealer will prepare, keep up-to-date and retain records in support of
application for reimbursement of warranty policy work performed by Dealer,
and application for discounts, allowances, refunds or credits, in
accordance with the policies, procedures and directions formulated by
Distributor.

10. EXAMINATION OF ACCOUNTS AND RECORDS:

Dealer will permit, at any reasonable business hours, an examination
of its accounts and records to be made by person or persons in the employ
of or acceptable to Distributor.

ARTICLE IV

SALES OF HONDA AUTOMOBILES AND HONDA AUTOMOBILE PARTS

1. DEALER'S RESPONSIBILITY FOR SALES:

Dealer will use its best and principal efforts in promoting sales
performance of Honda Automobiles and Honda Automobile Parts and rendering
service to owners of Honda Automobiles satisfactory to Distributor in
Dealer's Area of Responsibility, and agrees to meet Sales Quotas as may
be determined by Distributor as hereinafter provided. Dealer's sales
performance shall be evaluated, based an such reasonable criteria as
Distributor may determine from time to time, which may include but not be
limited to the relative sales of New Honda Automobiles by Dealer in
comparison with sales of other makes of automobiles in such area, with
the nationwide, statewide or local sales of New Honda Automobiles, with
sales of New Honda Automobiles in comparative trade areas, development of
Dealer's sales performance over reasonable sales time, the availability
and the delivery of Honda Automobiles to Dealer, and local conditions,
including but not limited to geographic location, climate, population,

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transportation facilities and general shopping habits of the buying
public directly affecting such sales performance, and reasonable Sales
Quotas likewise determined by Distributor from time to time. When two or
more Honda Automobile Dealers are located within Dealer's Area of
Responsibility, evaluations of the sales performance of Dealer shall be
based upon Dealer's contribution to the combined sales performance of all
New Honda Automobiles in such area, Dealer's sales participation
experience within such area, and consideration of all the other sales
performance factors hereinabove set forth.

2. SALES AND MECHANICAL STAFF:

Dealer shall at all times maintain a staff of competent salesmen and a
selling and customer relations organization adequate to take care of its
sales potential. Dealer shall employ Distributor-trained and certified
service technicians in such manners and capacities as specified according
to Distributor's standards, policies and directives to service the owners
of Honda Automobiles in Dealer's Area of Responsibility.

3. SALES AND SERVICE RECORDS:

Dealer will keep separate, complete and current records pertaining
to sales and servicing of Honda Automobiles and Honda Automobile Parts
and will permit Distributor or its designee or designees at any
reasonable business hours to inspect such records.

4. CUSTOMER'S COMPLAINTS:

Dealer will receive, investigate and handle all complaints made by
owners of Honda Automobiles promptly, courteously and efficiently in
order to secure and maintain the goodwill of the public toward Dealer,
Distributor and Honda Automobiles, and any complaint received by Dealer
which cannot be readily remedied by Dealer shall be promptly reported in
detail to Distributor.

5. TREATMENT OF PURCHASERS:

A. DELIVERED PRICES AND ITEMIZED INVOICES:

Dealer will inform purchasers of Honda Automobiles and any Parts of
purchasers' delivered prices and give them an itemized invoice covering
the details of their purchases.

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B. TRUE STATEMENT AS TO SELLING PRICES:

Dealer will not make any misleading statements or misrepresentations
as to the items making up the total selling price of a New Honda
Automobile, Honda Automobile Parts, or as to the prices related to
such items.

C. SUGGESTED RETAIL PRICES:

Dealer hereby fully understands that any suggested retail price
which may be issued by Distributor pursuant to applicable laws is
merely a suggested price and no Dealer is required to sell any Honda
Automobiles or Honda Automobile Parts at such suggested retail prices.

D. SALE WITHOUT OPTIONAL EQUIPMENT OR ACCESSORIES:

Dealer recognizes that a retail customer has the right to purchase
New Honda Automobile without being required to purchase any optional
equipment or accessories, which the purchaser does not want unless
such equipment or accessories are required under applicable law or
regulations. Dealer shall remove such optional equipment or accessories
not desired by customer or will immediately order a New Honda
Automobile without such optional equipment or accessories.

E. PRE-DELIVERY INSPECTION:

Dealer will inspect, test and condition each New Honda Automobile
before delivering it to customer in accordance with Distributor's
Pre-Delivery and Inspection Schedule, except wholesale sales to other
authorized Honda Automobile Dealers. Dealer agrees to promptly submit
verification to Distributor, on the forms provided by Distributor, that
the Pre-Deliver Inspection has been properly performed by a
Distributor-trained and certified service technician.

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ARTICLE V

DEALER'S HONDA AUTOMOBILE PARTS SUPPLIES

1. PROMOTION OF HONDA AUTOMOBILE PARTS:

Dealer will use its best efforts to promote the sales of Honda
Automobile Parts in the Dealer's Area of Responsibility including use of
such means as may be specified from time to time by Distributor's
directives and suggestions.

2. DEALER'S PARTS DEPARTMENT REQUIREMENTS:

In the operation of Dealer's Parts Department, Dealer shall comply
with such reasonable standards or requirements as Distributor shall from
time to time define, and Dealer shall at all times employ qualified and
competent parts manager, parts clerk and parts employee and in such
number as may be required to satisfactorily manage and operate such Parts
Department, and use forms prescribed by Distributor, and at all times
give prompt and careful attention to owners of Honda Automobiles.

3. SALE OF HONDA AUTOMOBILE PARTS:

Dealer shall not sell or offer for sale as Honda Automobile Parts,
or as parts approved by Honda Motor or Distributor, any parts which are
not in fact, respectively, Honda Automobile Parts, or parts expressly
approved by Honda Motor or Distributor, and in no event shall Dealer sell
or offer for sale or use in connection with Honda Automobiles any parts
or accessories which are not permitted to be sold under the standard set
forth pursuant to the National Traffic and Motor Vehicle Safety Act of
1966 as amended.

4. MINIMUM INVENTORY OF HONDA AUTOMOBILE PARTS:

Dealer will carry in stock at all times during the term of this
Agreement reasonable inventory of Honda Automobile Parts to render proper
service to owners of Honda Automobiles in Dealer's Area of Responsibility.

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ARTICLE VI

CUSTOMER'S SERVICE

1. SERVICE TO BE PROVIDED BY DEALER:

Dealer shall provide the best possible service to any Honda
Automobile owner who may request such service from Dealer, including
performance of warranty repairs, and shall use its best efforts and
endeavor to promote customer's service.

2. SERVICE DEPARTMENT:

In the operation of Dealer's Service Department, Dealer agrees to
comply with such standards as Distributor may from time to time define;
Dealer shall at all times indicate the location of the Service Department
through a customer service sign in accordance with the directives of
Distributor; shall purchase and maintain all general tools, special tools
and equipment required by Distributor to property service Honda
Automobiles; shall provide Distributor with verification per Exhibit B of
this Agreement, that all required tools and equipment are available on
Dealer's premises and in good operating condition for use on Honda
Automobiles; shall employ qualified and competent service manager,
service writer, shop foreman, experienced, competent and
Distributor-trained technician and other service employee and in such
numbers as may be required by Distributor; shall use Honda service
promotional material and workshop forms prescribed by Distributor; shall
properly execute all service and repair work with respect to Honda
Automobiles; and shall provide prompt and careful service for owners of
Honda Automobiles.

3. REPRESENTATION OF HONDA AUTOMOBILE PARTS:

Dealer shall not represent as New Honda Automobile Parts or as new
parts approved by Honda Motor or Distributor other than New Honda
Automobile Parts or new parts expressly approved by Honda Motor or
Distributor.

4. CONTACT WITH PURCHASERS:

Dealer will furnish owners of Honda Automobiles prompt, courteous and
efficient service and will establish regular contact by correspondence,
or otherwise, with all persons who purchased Honda Automobiles from Dealer.

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5. WARRANTY DIRECTIVES AND PROCEDURES:

Distributor shall from time to time issue directives or policies on
Dealer's warranty procedures and adjustments which will be reviewed
periodically by Distributor to assure the handling of adjustments and
warranty problems properly and efficiently, to maintain maximum benefits
to Dealer and Distributor and to foster goodwill of owners of Honda
Automobiles and good relationship toward Dealer, Distributor and Honda
Automobiles. Any change or modification of such directives or policies
shall become effective three (3) days after mailing of such notice to
Dealer.

ARTICLE VII

DEALER'S PURCHASES AND INVENTORY

1. PRICES:

Distributor shall sell Honda Automobiles and Honda Automobile Parts
to Dealer at such prices and upon such terms as may be established from
time to time by Distributor. Dealer shall pay any and all sales taxes,
use taxes, State excise taxes and other governmental or municipal charges
imposed or levied or based upon the sale of Honda Automobiles or Honda
Automobile Parts by Distributor to Dealer. In the event of any increase
or decrease of the prices established by Distributor, Dealer shall have
the right to cancel all orders for Honda Automobiles affected by such
increase or decrease which are pending and unfilled at the time Dealer
obtains written notice of the increase or decrease from Distributor,
provided that Distributor be notified in writing of such cancellation
within ten (10) days from the time Dealer receives such notice, and
provided that such order or orders have not been shipped by Distributor
to Dealer.

2. ORDER AND ACCEPTANCE:

Dealer shall furnish its orders for Honda Automobiles and Honda
Automobile Parts to Distributor on forms supplied by Distributor at such
time or times and for such period or periods as Distributor reasonably
may require from time to time, and all such orders may be accepted by
Distributor in whole or as to any part thereof. All orders of Dealer
shall be binding upon it unless and until they are rejected in writing by
Distributor, provided, however, that in the event of a partial acceptance
by Distributor, Dealer shall no longer be bound with respect to the parts
of the order not accepted. In the event of shortage or restricted supply,
Dealer gives Distributor the

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right to allocate such supply in any reasonable manner Distributor deems
fit in any geographical market area.

3. LOCAL TAXES:

With each order furnished by Dealer to Distributor, Dealer
represents and warrants, as of the date of the purchase of the Honda
Automobiles or Honda Automobile Parts ordered, that all Honda Automobiles,
Honda Automobile Parts and similar items purchased from Distributor are
purchased by Dealer for resale in the ordinary course of Dealer's
business and that Dealer has complied with all the pertinent provisions
of local law prerequisite to the collection and payment by Dealer of all
sales taxes, use taxes, State excise taxes and other governmental or
municipal charges applicable to all such purchases or resale transactions
and will furnish evidence thereof to Distributor upon request. In the
event that any Honda Automobiles, Honda Automobile Parts or other
tangible property purchased from Distributor are put to a taxable use by
Dealer, or are in fact purchased by Dealer for purposes other than resale
in the ordinary course of Dealer's business, Dealer shall make timely
return and payment to the appropriate taxing authorities, of all
applicable sales taxes, use taxes, State excise taxes and other
governmental or municipal charges imposed or levied or based upon the
sale of such Honda Automobiles or Honda Automobile Parts or other
tangible property by Distributor to Dealer, and shall hold Distributor
free and harmless from any and all claims and demands which may be made
by such taxing authorities with respect thereto.

4. PAYMENTS:

Dealer shall make payment at the time and upon the conditions
specified in Distributor's established terms of payment. Delivery of any
checks or instruments of payment, other than actual cash, shall not
constitute payment until Distributor shall have collected actual cash in
the full amount thereof. Dealer shall pay all collection charges and
costs of exchange, if any, incurred in connection with its payments.

5. RESERVATION OF TITLE FOR SECURITY:

Except where the invoice may show a sale on credit, title to the
Honda Automobiles or Honda Automobile Parts sold by Distributor to Dealer
shall remain with Distributor to secure the payment therefor, and
Distributor shall have the right to stop such shipment in transit and to
repossess, retake and resell said Honda Automobiles or Honda Automobile
Parts and give credit therefor, and Dealer shall bear the cost of
transportation and sale thereof, if any, if Distributor shall elect to sell.

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6. PASSING OF TITLE AND RISK:

Except for reservation of title in Distributor as provided in
Article VII, Paragraph 5 supra, the title to Honda Automobiles and Honda
Automobile Parts sold by Distributor to Dealer, and all risks and peril
thereto shall pass to Dealer at the time of their delivery to Dealer,
Dealer's agent or carrier at the place of delivery specified in
accordance with the Distributor's established terms of delivery and
during all subsequent transportation; and it shall be up to Dealer to
insure such risks for its benefit and at its expense.

7. EXTENT OF DISTRIBUTOR'S RESPONSIBILITY FOR DEFECTS AND DAMAGE:

As between Distributor and Dealer only, Distributor assumes
responsibility for damage of Honda Automobiles and Honda Automobile Parts
caused during storage by Distributor or prior to delivery to Dealer,
Dealer's agent or carrier at the place of delivery specified in
Distributor's terms of delivery, provided Dealer notes nature and extent
of damage on carrier's delivery receipt and notifies Distributor not more
than five (5) days after delivery. Distributor assumes responsibility
for concealed damage provided that carrier and Distributor are properly
notified of the nature and extent of such damage not more than
forty-eight (48) hours after delivery in accordance with the directives
and policies of Distributor.

Dealer shall cause all such defects or damage to be repaired fully in
accordance with the standards, directives and policies of Distributor to a
level not less than the original condition before such damage was incurred.

8. CLAIMS FOR INCOMPLETE DELIVERY:

All claims for incomplete delivery of Honda Automobiles or Honda
Automobile Parts ordered by Dealer must be properly submitted to
Distributor not more than five (5) days after Dealer receives shipment,
provided that, in the case of automobile shipments, all shortages are
noted on the carrier's delivery receipt.

9. CHANGES OF SPECIFICATIONS:

Distributor reserves the right, at any time, to change or modify,
without notice, any specifications, design or model of Honda Automobiles
and Honda Automobile Parts. In the event of any change or modification
with respect to any Honda Automobiles or Honda Automobile Parts, Dealer
shall not be entitled to have such or similar change or modification with
respect to any Honda Automobiles or

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Honda Automobile Parts already ordered or purchased by Dealer and shipped
to Dealer or in Dealer's possession, except as may be required by
applicable law.

10. FAILURE OF OR DELAY IN DELIVERY:

Neither Distributor nor Honda Motor shall be under any liability
whatsoever to Dealer or to its customer for failure to deliver, or for
delay in making delivery pursuant to orders of Dealer accepted by
Distributor if such failure or delay is due, in whole or in part, to the
fact that delivery or timely delivery was rendered impossible or more
burdensome than it would have been in the normal course of business by
any event, whether foreseen or foreseeable or not, including any event in
the nature of acts of God, acts of providence, foreign or civil wars,
riots, interruptions of navigation or transportation, shipwrecks, strikes,
lockout, other labor troubles in place of business of Distributor or its
supplies, embargoes, blockades, fires, explosions, any labor, material,
transportation or utility shortage, failures of Honda Motor or of any
other supplier of Distributor to deliver, or delay of Honda Motor or of
any other supplier in making delivery and any cause beyond control of
Distributor, the foregoing specific events having listed herein only by
way of illustration and not by way of limitation.

11. RETURN OR DIVERSION ON FAILURE TO ACCEPT:

If without fault on part of Distributor, Dealer should fail or
refuse to accept delivery of any Honda Automobiles or Honda Automobile
Parts ordered by Dealer, Dealer shall pay Distributor the amount of all
expenses incurred by Distributor in shipping such Honda Automobiles or
Honda Automobile Parts to Dealer and expenses of returning them to the
original place of shipment or in directing them to another destination,
as determined by Distributor; but in no event shall the cost to Dealer
for returning such non-accepted items be in an amount in excess of the
expenses of returning such Honda Automobiles or Honda Automobile Parts to
their original place of shipment. In the event, such Honda Automobile
Parts be returned to a warehouse of Distributor, Dealer shall pay, in
addition to said expenses, restocking charges of such Honda Automobile
Parts according to terms established by Distributor.

12. INVENTORIES:

Dealer shall acquire and at all times maintain at least such minimum
inventory of Honda Automobiles and Honda Automobile Parts as may be
reasonably determined from time to time by Distributor, but this
obligation shall be subject to the ability of Distributor to supply the
products ordered by Dealer. Dealer also shall have available at all
times for purposes of demonstration the number of Honda Automobiles of
the most current models and types, as reasonably requested by Distributor
in accordance

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with the volume of Dealer's business, and shall keep the same at all
times in first class operating condition. Dealer shall increase from
time to time, as may be reasonably requested by Distributor, its minimum
inventory of Honda Automobiles and Honda Automobile Parts and the number
of Honda Automobiles held by it for the purpose of demonstration.

ARTICLE VIII

WARRANTY TO CUSTOMERS

1. MANUFACTURER'S WARRANTY:

New Honda Automobiles and New Honda Automobile Parts supplied to
Dealer by Distributor will be warranted by Distributor only in accordance
with the manufacturer's or Distributor's written warranty to customers as
may be furnished to Dealer from time to time by Distributor be
distributed to its retail consumers, which warranty may be amended or
modified at any time by Distributor. OTHER THAN THE WARRANTY CONTAINED
IN SAID MANUFACTURER'S OR DISTRIBUTOR'S WRITTEN WARRANTY, NEITHER
DISTRIBUTOR NOR HONDA MOTOR MAKES ANY WARRANTY WHATSOEVER, EXPRESSED OR
IMPLIED, AS TO THE QUALITY OR CONDITION OF HONDA AUTOMOBILES OR HONDA
AUTOMOBILE PARTS TO BE SUPPLIED BY IT TO DEALER, INCLUDING, BUT NOT BY
WAY OF LIMITATION, THE MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSES OF SUCH HONDA AUTOMOBILES OR HONDA AUTOMOBILE PARTS AND ASSUMES
NO LIABILITY WHATSOEVER, WHETHER FOR DIRECT, INDIRECT OR CONSEQUENTIAL
DAMAGES, OR IN ANY OTHER WAY, IN CONNECTION WITH SUCH CONDITION.

2. WARRANTY TO CUSTOMERS:

Dealer shall make all sales of Honda Automobiles and Honda
Automobile Parts in such manner that the customers shall acquire all
rights accorded thereto by the Manufacturer's or Distributor's written
warranty as amended from time to time by Distributor, to the exclusion of
any other, further or different warranty from or on behalf of Honda Motor
or Distributor.

3. WARRANTY CLAIM PROCEDURE:

Procedures for the processing and disposition of warranty claims and
for the return and disposition of Honda Automobile Parts claimed to be
defective, and

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payment and credit therefor shall be established from time to time by
Distributor. Dealer shall comply with all the requests of Distributor
for the performance of services pursuant to warranty claims.

4. WARRANTY REGISTRATION PROCEDURE:

Dealer agrees to notify Distributor of the sale of each New Honda
Automobile, or used Honda Automobile, if still under warranty, on such
forms as prescribed by Distributor in accordance with policies and
procedures established from time to time by Distributor.

ARTICLE IX

ESTIMATES AND REPORTS

1. ESTIMATES:

To enable Distributor to estimate requirements for future delivery,
Dealer will furnish Distributor every month by the time specified by
Distributor with a monthly estimate of Dealer's requirements of New Honda
Automobiles on a form provided by Distributor for a period of time as may
be designated by Distributor.

2. SALES AND INVENTORY REPORTS:

To assist Distributor in the evaluation of current market trends and
adjustments of established current and future shipment schedule, Dealer
will furnish Distributor every month by the time specified by Distributor
with monthly sales and inventory reports of Honda Automobiles, on forms
furnished by Distributor. Such reports shall show separately detail sales
of both new and used Honda Automobiles and new and used automobiles other
than Honda Automobiles made during such period, separate detailed
inventory of both new and used Honda Automobiles and unfilled orders for
Honda Automobiles on hand at the end of each month. Dealer shall also
furnish Distributor with such daily interim sales and inventory reports,
on forms furnished by Distributor, as Distributor may reasonably require
in evaluating Dealer's current sales and inventory. Such daily interim
sales and inventory reports shall be furnished to Distributor within the
time as may be requested by Distributor.

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ARTICLE X

SIGNS, TRADEMARKS AND TRADENAMES

1. SIGNS:

Dealer will purchase, erect and maintain at Dealer's expense the
following signs, except those prohibited by applicable law, statute or
ordinance.

A. PRODUCT SIGN:

A standard Honda electric sign authorized by Distributor in a
conspicuous place outside Dealer's showroom.

B. CUSTOMER SERVICE SIGN:

The standard service sign authorized by Distributor in a suitable
location on the outside of Dealer's place of business. Other service
signs shall be placed in conspicuous locations to direct customers
requiring use of Dealer's servicing facilities.

C. OTHER NECESSARY SIGNS:

Such other signs as Distributor approves in writing and is deemed
necessary to advertise Dealer's business property. All Honda Signs,
other than above described, must be first approved in writing by
Distributor before installation.

2. TRADEMARKS:

A. EXCLUSIVE OWNERSHIP:

Dealer agrees that Honda Motor and/or Distributor are the owners of
and are entitled to the exclusive use of the various Honda Trademarks.

B. USE BY DEALER:

Dealer is granted during the term of this Agreement the non-exclusive
privilege of displaying the Honda Trademarks in connection with the sale,
offering for sale and servicing of Honda Automobiles and Honda
Automobile Parts, of using such trademarks in the business name of Dealer
under which Dealer's Honda Automobile business is conducted, and upon
prior and separate written approval of Distributor, provided, however,
that Dealer shall discontinue the display or use of any Honda Trademark
or change the manner in which any such trademark is displayed or used

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when requested to do so by Distributor. Dealer agrees that any use or
display of the Honda Trademarks inures solely to the benefit of Honda
Motor and/or Distributor, including all goodwill. Dealer agrees that it
shall not use such trademarks in its corporate name.

C. DISCONTINUANCE OF USE UPON TERMINATION:

Dealer agrees that the above granted privilege is automatically
revoked upon termination or expiration without renewal of this Agreement
and that there is no continuing or other right or license to use or
display the Honda Trademarks. Dealer agrees that if any such trademark
is used in Dealer's business name or in signs, advertising or in any
other manner by Dealer, Dealer will, upon termination or expiration
without renewal of this Agreement, immediately discontinue, at is own
expense, all such use and display thereof. See Article XIV, infra.

D. DEALER'S LIABILITY FOR FAILURE TO DISCONTINUE USE:

If dealer shall refuse or neglect to keep and perform the provisions
of Section 2, subsections A, B or C, of this Article X or Sections 1, 2
or 3 of Article XIV, Dealer shall reimburse Honda Motor and/or
Distributor for all costs, attorney's fees and other expenses incurred by
Honda Motor and/or Distributor in connection with legal action to require
Dealer to comply therewith.

ARTICLE XI

ADVERTISING PROMOTIONAL PROGRAM

Dealer agrees to actively advertise Honda Automobiles and Honda
Automobile Parts and to display appropriate signs required by Distributor
and to cooperate to the greatest reasonable extent with all promotional
programs of Distributor and to protect Dealer's customers and the public
and to maintain the goodwill and reputation of Honda Automobiles and
Honda Automobile Parts. Dealer will not advertise or trade in
Distributor's products in such a way as to be injurious or detrimental to
such goodwill and reputation and will not publish, advertise or use any
form of advertising matter or media objectionable to Distributor, and
will discontinue immediately any advertising objected to by Distributor.

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ARTICLE XII

COMPLIANCE WITH LAWS

Dealer shall at all times hereunder operate and conduct its business
in full compliance with all Federal, State, County, or City statutes, laws,
rules, regulations and ordinances, particularly the applicable State
Motor Vehicle Code, the National Traffic and Motor Vehicle Safety Act of
1966 and all amendments thereto, and all federal or state trade
regulation laws. Dealer agrees to fully cooperate and comply immediately
with any directives or instructions of Distributor pertaining to matters
concerning compliance with said National Traffic and Motor Vehicle Act of
1966, or with rules, regulations and standards promulgated by the
Secretary of Transportation or the Traffic Safety Administrator.

ARTICLE XIII

TERMINATION OF SALES AGREEMENT

1. TERMINATION BY DEALER:

Dealer may terminate this Agreement by serving upon Distributor
written notice of termination, by certified or registered mail addressed
to Distributor at its home office. Such termination to be effective
thirty (30) days after actual receipt by Distributor of such Notice.

2. TERMINATION FOR CAUSE:

A. If Dealer breaches, violates or defaults under any obligation of
Dealer set forth in this Agreement or in connection with any conduct or
any transaction between Distributor and Dealer within the scope of this
Agreement, Distributor may terminate this Agreement by giving Dealer
written notice of termination by certified or registered mail addressed
to Dealer at its place of business to be effective sixty (60) days after
receipt of such notice. This provision shall not in any way be construed
to limit or restrict Distributor's rights to cancel this Agreement as
otherwise herein provided.

B. Distributor may, at its option, forthwith terminate this
Agreement for cause by notifying Dealer by certified or registered mail
or telegraph. The following events shall be considered sufficient cause
for the forthwith termination of this Agreement; such causes are
enumerated in this Agreement only by way of illustration and not by way
of limitation.

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1. Failure by Dealer or Distributor to secure and maintain any
license necessary for the conduct of Dealer or Distributor of its business
pursuant to this Agreement or the expiration without renewal, or
suspension, or revocation of any such license.

2. Any transfer or attempted transfer by Dealer of the whole
or any part of this Agreement or any interest therein or any right or
obligation thereunder, without the prior written consent of Distributor
subject to laws of state in which Dealer is located.

3. Insolvency of Dealer or the voluntary commencement by
Dealer or the involuntary commencement against Dealer of any proceedings
under the Bankruptcy Act or under any State insolvency law, which is not
vacated within ten (10) days from the institution thereof; or the
appointment of a receiver or other officer having similar powers for
Dealer or Dealer's business who is not removed within ten (10) days from
appointment thereof; or any levy under attachment, garnishment or
execution or similar process which is not within ten (10) days vacated or
removed by payment or bonding.

4. Any change, whether voluntary or by operation of law, in
the legal or beneficial ownership of or in the executive power or
responsibility in Dealer without the prior written consent of Distributor.

5. Any disagreement or personal difficulty between or among
partners or stockholders of Dealer or in the management of Dealer which
in the Distributor's opinion may adversely affect the conduct of Dealer's
business, or the presence in the management of Dealer or any person who
in the Distributor's opinion does not have or no longer has requisite
qualifications for his position.

6. Impairment of reputation or the financial standings of
Dealer or of any partner, stockholder or officer of Dealer subsequent to
the execution of this Agreement, or the ascertainment by Distributor of
any facts existing at or prior to the time of execution of this Agreement
which tend to impair such reputation or financial standings, or if Dealer
is in default of any obligations or debts due to Distributor or if
Dealer's account with Distributor becomes delinquent.

7. Submission by Dealer of any false or fraudulent application,
report or statement, or false or fraudulent claim for reimbursement,
refund or payment, including, but not by way of limitation, false and
fraudulent warranty claims.

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8. Conviction in any court of competent jurisdiction of
Dealer or of any partner, stockholder, or officer of Dealer for any crime
or violation of law, if in the opinion of Distributor such conviction may
adversely affect the conduct of Dealer's business or tend to be harmful
to the goodwill of Honda Motor or Distributor to the reputation of Honda
Automobiles, Honda Automobile Parts or other Honda products.

9. Should Dealer enter into any agreement, understanding, or
contract, oral or written, with any other Dealer or Dealers with the
purpose of fixing prices of Honda Automobiles or Honda Automobile Parts.

10. Death or incapacity (for reasons of health) of Dealer, if an
individual, or of a partner of Dealer, if a partnership, or dissolution or
liquidation of Dealer, if a partnership or a corporation.

11. Failure of Dealer to maintain dealership operations as a
going business, open during customary business hours, for seven
consecutive business days except if such failure is due to causes beyond
Dealer's control and is without Dealer's fault or negligence.

12. Termination of Distributor's Franchise as a Honda Automobile
Distributor.

13. Failure of Dealer to perform the required pre-delivery
inspection, testing and conditioning services and procedural requirements
relating thereto.

14. Failure of Dealer to make improvements, alterations, or
modifications of its business premises which Dealer has agreed or
represented to Distributor that Dealer shall make or do.

15. Discontinuance of the Automobile Series for which Dealer
holds this Sales Agreement.

C. Termination of this Agreement is subject to state laws and
procedures in which the Dealer is located.

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ARTICLE XIV

SIGNS, LITERATURE, BUSINESS NAME, ETC. UPON TERMINATION

1. REMOVAL OF SIGNS:

Upon termination or expiration without renewal of this Agreement,
Dealer shall forthwith remove, at its own expense, all authorized signs
which are displayed at the premises for which this dealership was granted,
and sell and deliver the same to Distributor at Dealer's place of
business or such other place as may be designated by Distributor,
labelled and packaged in suitable containers for transportation.
Distributor shall pay Dealer such price for such Honda signs as
reasonably shall be determined by Distributor, provided, however, that
such price shall in no event be less than Dealer's cost price for such
signs reduced by straight line depreciation on the basis of a useful life
of five years except Distributor shall not be required to pay for any
signs not purchased by Dealer for use or display at the premises for
which this dealership was granted. Dealer agrees to forthwith destroy
all unauthorized signs.

2. LITERATURE, MANUALS, PROMOTIONAL MATERIAL, ETC.:

Upon termination or expiration without renewal of this Agreement,
Dealer shall deliver to Distributor at Distributor's place of business,
or to a third person designated by Distributor, or destroy upon request
by Distributor, any and all technical or service literature, advertising
and other printed material, then in Dealer's possession or under its
control, which relates to Honda Automobiles or Honda Automobile Parts,
and which was obtained by Dealer from Distributor. Distributor shall pay
Dealer therefor a reasonable amount as determined by Distributor,
provided Dealer was charged therefor by Distributor. Dealer shall at its
own expense destroy all other printed material, including business
stationery, bearing any Honda Trademark or referring to Honda Automobiles
or Honda Automobile Parts in any way which might make it appear that
Dealer is still a Honda Automobile Dealer.

3. BUSINESS NAME:

Upon termination or expiration without renewal of this Agreement,
Dealer shall, at its sole expense, promptly remove all Honda Trademarks
from its business name and any registration thereof, and shall in all
respects cease to hold itself out to the public or trade as a Honda
Automobile Dealer. See also Section 2, subsections C and D of Article X,
supra, re discontinuance of use of Honda Trademarks.

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ARTICLE XV

TERMINATION DELIVERIES

1. CANCELLATION OF ORDERS:

Upon the mailing of the written termination or expiration without
renewal of this Agreement, Distributor shall have the right to cancel all
pending orders of Dealer for Honda Automobiles, Honda Automobile Parts,
and special tools and equipment, whether previously accepted by
Distributor or not, except as provided in Article XV, Paragraph 2, below.

2. TERMINATION DELIVERIES:

In the event of termination of this Agreement or expiration without
renewal thereof, and upon written request by Dealer, Distributor will use
its best efforts to furnish Dealer with Honda Automobiles to fill
Dealer's bona fide orders on hand on the date of termination or
expiration without renewal subject to the following conditions and
limitations:

A. Within ten (10) days following the date of service of the
notice of termination upon Dealer or expiration without renewal of this
Agreement, Dealer shall deliver to Distributor a written schedule of
Dealer's bona fide retail orders on hand on the date of termination
together with a photo-copy of each such order attached. Such schedule
shall show the name and address of each retail customer and the details
with respect to each Honda Automobile ordered, including model, body type,
color and accessories and shall specify each bona fide order against
which Dealer desires Distributor to make delivery and that Dealer does
not have in stock such Honda Automobiles to fill such orders. Such
unfilled retail orders for which delivery is thus specified by Dealer,
when approved by Distributor, shall constitute Dealer's Unfilled Order
Schedule. No change or substitution may be made by Dealer in such
Dealer's Unfilled Order Schedule and Distributor shall not be obligated
to make delivery of any Honda Automobile to Dealer except as specified
therein. In the event Dealer fails to deliver to Distributor the timely
detailed Schedule above required, Dealer shall have no further rights.

B. Honda Automobiles shall be delivered to Dealer by Distributor
hereunder substantially in accordance with the schedules and basis of
delivery in effect with respect to other dealers in the same zone area at
the time of Dealer's termination, and Dealer shall accept any such Honda
Automobiles required to be delivered by Distributor hereunder against
Dealer's Unfilled Order Schedule immediately upon notification by
Distributor of the availability to Dealer of such

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Honda Automobiles and in accordance with the terms and conditions of
sales established by Distributor and in effect at the time of shipment.
In the event of its failure to do so, Dealer shall have no further right
to receive such Honda Automobiles or any other Honda Automobile in lieu
of them.

C. Dealer shall give Distributor notice immediately of any
cancellation for any reason of any retail order set forth in Dealer's
Unfilled Order Schedule and in the event of cancellation of any order
contained in Dealer's Unfilled Order Schedule before delivery by
Distributor of such Honda Automobile against such order, Distributor
shall be released from any obligation to make delivery of such Honda
Automobile.

3. EFFECT OF TRANSACTIONS AFTER TERMINATION:

The acceptance of orders from Dealer or the continuance of sale of
Honda Automobiles and Honda Automobile Parts to Dealer or any other act
of Distributor after termination of this Agreement shall not be construed
as a renewal of this Agreement for any further term nor a waiver of the
termination.

ARTICLE XVI

REPURCHASE OF HONDA AUTOMOBILES, HONDA AUTOMOBILE PARTS, SPECIAL TOOLS AND
EQUIPMENT AFTER TERMINATION

Upon the termination or expiration without renewal of this Agreement,
Distributor shall have the option to purchase from Dealer all or any
part of the properties hereinafter set forth, and Dealer agrees to sell
and deliver the same to Distributor in accordance with the provisions
herein contained. Distributor shall have thirty (30) days after
effective date of termination or expiration without renewal to exercise
its option to repurchase the properties hereinafter described.

1. HONDA AUTOMOBILES:

All new, unused and undamaged Honda Automobiles unsold at the
effective date of termination or expiration of this Agreement in Dealer's
inventory, in its possession or under its control which are in first
class saleable condition and of the then current model and type, and
provided that they were purchased by Dealer from Distributor. The price
for such Honda Automobiles shall be the price at which they were
originally purchased by Dealer from Distributor or the price last
established by Distributor for the sale of identical Honda Automobiles,
whichever shall be lower, in either case less all prior refunds and
allowances made by Distributor with respect

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<PAGE>

thereto, if any. Further Dealer agrees that within ten (10) days after
termination or expiration without renewal of this Agreement, Dealer
shall deliver to Distributor a written inventory, in such form as
Distributor may require, of all Honda Automobiles in its inventory,
possession or control.

2. HONDA AUTOMOBILE PARTS:

All new, unused and undamaged Honda Automobile Parts listed in
"Distributor's Current Parts Price Schedule," then unsold and in Dealer's
inventory, or in its possession or control, which are in first class
saleable condition, provided they were purchased by Dealer from
Distributor. The price for such Honda Automobile Parts shall be the
price then last established by Distributor for the sale of such identical
Honda Automobile Parts, less all prior refunds or allowances made by
Distributor in respect thereto and less restocking charges. Further
Dealer agrees that within thirty (30) days after termination or
expiration without renewal, it will deliver to Distributor a list, in
such form as Distributor may require, of all Honda Automobile Parts in
its inventory, possession or control.

3. SPECIAL TOOLS AND EQUIPMENT:

All special tools and equipment for Honda Automobiles owned by
Dealer and purchased from Distributor by Dealer or pursuant to request of
Distributor. The price for such special tools and equipment shall be a
reasonable price determined by Distributor, but such price shall in no
event be less than Dealer's cost price for such tools and equipment
reduced by a straight line depreciation on the basis of a useful life of
five years. Further Dealer agrees that within thirty (30) days after
termination or expiration without renewal, it will deliver to Distributor
a list of all special tools and equipment in its inventory, possession or
control.

4. DELIVERY TO DISTRIBUTOR:

Dealer agrees to retain such Honda Automobiles, Honda Automobile
Parts, special tools and equipment at Dealer's place of business,
labelled and packaged in suitable containers for transportation until
receipt of shipping instructions from Distributor, and upon receipt of
such shipping instructions, Dealer shall comply therewith.

5. INSPECTION OF PROPERTY AT DEALER'S PREMISES:

Distributor, or its designee or designees, at such reasonable time
and for such reasonable period of time as Distributor may determine,
shall have the right to enter Dealer's premises for the purpose of
checking the list submitted by Dealer or

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<PAGE>

examining and inspecting of any and all items of property therein set
forth to determine the correctness of the list submitted and the
condition of such property.

6. RIGHT OF REJECTION:

Notwithstanding anything to the contrary contained and regardless of
whether the Distributor has exercised his right of inspection under
Paragraph 5, of this Article XVI or not, in the event Distributor
exercises his option to repurchase the properties described in Paragraphs
1, 2 and 3 of Article XVI, Distributor shall have the right, for a period
of thirty (30) days after delivery of such property to Distributor, to
reject any or all of the Honda Automobiles, Honda Automobile Parts or
special tools and equipment to be repurchased by Distributor, if any such
product or property does not meet any of the requirements set forth in
said Paragraphs 1, 2 or 3 of this Article XVI, or if any such products or
property so delivered to Distributor was purchased by Dealer for premises
operated under another and separate Honda Automobile Sales Agreement.

7. LIENS AND ENCUMBRANCES:

All Honda Automobiles, Honda Automobile Parts, Honda Signs, special
tools and equipment to be repurchased by Distributor pursuant to
provisions of Article XIV or Article XVI of this Agreement shall be free
and clear of all liens, encumbrances or attachments, and Distributor may
deduct from the purchase price of such property all indebtedness of
Dealer to Distributor, including any payments made by Distributor to
satisfy any lien, encumbrance or attachment.

8. PAYMENT:

All payment due from Distributor to Dealer pursuant to provisions of
Article XIV or Article XVI of this Agreement or in connection with the
termination of Dealer's Sales Agreement, shall be made by Distributor
within ten (10) days after all matters therein provided shall be finally
determined and all credits and offsets ascertained. In the event it be
found that a balance is due from Dealer to Distributor, Dealer shall pay
such sum to Distributor within ten (10) days of notice of such balance.

9. FREIGHT AND INSURANCE CHARGES:

If Dealer cancels this Agreement, Dealer shall pay all freight and
insurance charges from Dealer's premises to the place of delivery
designated by Distributor on all repurchases of Honda Automobiles, Honda
Automobile Parts, special tools and equipment, Honda Signs, manuals,
literature, promotional material, etc., which

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<PAGE>

Distributor is obligated to, or elects to, repurchase under this Agreement,
provided that Dealer shall not be liable for any amount greater than the
freight and insurance charges from Dealer's premises to Distributor's
closest warehouse.

ARTICLE XVII

OBLIGATIONS OF DISTRIBUTOR IN CASE OF DEATH

1. DEATH OF DEALER:

Notwithstanding the right of Distributor to forthwith terminate this
Agreement pursuant to Paragraph 10 of Article XIII herein upon the death
or incapacitation (for reasons of health) of any person referred to
therein, Distributor shall not so terminate this Agreement pursuant to
said Paragraph 10 before the end of the calendar year during which such
death or incapacitation of any such person occurs, if upon such death or
incapacitation of such person his/her beneficial interest in Dealer's
business passes directly to his/her spouse or children, or any of them,
and if either (1) the person having executive powers and responsibility
in the management of the Dealer's business remains unchanged, or (2)
within sixty (60) days after said death or incapacitation arrangements
are completed for the assumption of executive power and responsibility in
Dealer's business during the remainder of the calendar year by persons
acknowledged by Distributor to be satisfactory to it. However, nothing
in this Article XVII shall affect or waive Distributor's right otherwise
to terminate this Agreement pursuant to any provision of this Agreement
other than said Paragraph 10 and subject to any laws relating thereto in
which the Dealer is located.

ARTICLE XVIII

DISTRIBUTOR'S ASSISTANCE

1. ASSISTANCE IN SALE OF DEALER'S BUSINESS:

To the end that the equities of the Dealer may be protected and its
loss, if any, be minimized, Distributor will assist Dealer in the orderly
disposition of Dealer's business assets in accordance with the following
provisions:

A. If Dealer desires the assistance of Distributor in the
disposition of Dealer's business assets, which at the time of Dealer's
first knowledge of termination of expiration of this Agreement were being
used solely for the performance of Dealer's obligations under this
Agreement and Dealer's Sales Agreement, Dealer may

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<PAGE>

within thirty (30) days from effective date of termination of this
Agreement file with Distributor a written request for assistance in the
disposition of such business assets and shall therein set forth an
itemized statement of all assets and property to be included therein,
excluding therefrom all Honda Automobiles, Honda Automobile Parts,
special tools and equipment and Honda Signs, etc., as may be repurchased
by Distributor under the provisions of Article XIV and Article XVI of
this Agreement. If Dealer fails to make such timely request,
Distributor shall be released from any and all obligations to Dealer
under the section.

B. Upon receipt of such request from Dealer, Distributor shall
endeavor to locate a purchaser who will offer to purchase such business
assets of the Dealer's business used solely for the performance of
Dealer's obligations under this Agreement and Dealer's Sales Agreement at
the price set by Dealer or at a fair and reasonable price. In the event
Distributor is unable to locate a purchaser of such business assets at a
price acceptable to Dealer within thirty (30) days after receipt of such
request from Dealer, then Distributor shall be released from any and all
obligations to locate a purchaser for Dealer pursuant to such request.

ARTICLE XIX

GENERAL PROVISIONS

1. AUTHORITY TO SIGN FOR DISTRIBUTOR:

Dealer acknowledges that only a Vice-President, or Secretary or
Assistant Secretary is authorized on behalf of Distributor to execute
this Agreement or to agree to any variation, modification or amendment of
any of its provisions.

2. ENTIRE AGREEMENT:

This instrument contains the entire Agreement between the parties.
No representations or statements other than those expressly set forth
herein were made or relied upon in entering into this Agreement.

3. RELEASE OF CLAIMS:

This Agreement terminates and supersedes as of the beginning of its
term all prior agreements, if any, with respect to Honda Automobiles and
Honda Automobile Parts between the parties. The parties hereby waive,
abandon and relinquish any and all claims of any kind and nature
whatsoever arising from or out of or in connection with any such prior
agreement, provided, however, that nothing herein contained shall

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<PAGE>

be deemed a waiver of any claims arising out of prior sales of Honda
Automobiles and Honda Automobile Parts by Distributor to Dealer.

4. VARIATIONS, MODIFICATIONS, AMENDMENTS:

This Agreement may not be varied, modified or amended except by an
instrument in writing duly signed by the parties.

5. NO TRANSFER:

Neither this Agreement, nor any part thereof or any interest therein,
may be transferred or assigned by Dealer without the prior written
consent of Distributor except states with law regulating transfers.

6. NOTICES:

All notices under or pursuant to the provisions of this Agreement
shall be directed to the other party at their respective address as
stated herein, or, if either of the parties shall have specified another
address by notice in writing to the other party, to the address thus last
specified. The parties shall advise each other forthwith in writing of
any change of address.

7. WAIVERS:

The waiver by either party of any breach or violation of or default
under any provision of this Agreement shall not be deemed to be a waiver
by such person of any subsequent breach or violation thereof or default
thereunder, or of any other provisions herein.

8. DIVISIBILITY:

This Agreement is to be governed by and construed according to the
laws of the State of California. If any provision of this Agreement
should be held invalid or unenforceable for any reason whatsoever or to
violate any law of the United States, the District of Columbia or any
state this Agreement shall be considered divisible as to such provision,
and such provision shall be deemed deleted from this Agreement in such
jurisdiction or, in the event that it should be held to violate only the
laws of the District of Columbia or of any state, such provision shall be
inapplicable only within the territory thereof, and the remainder of this
Agreement shall be valid and binding as if such provision was not
included herein or as if it were included herein only with respect to
territories outside of such District or state, as the case may be.

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<PAGE>

10.5.2

DEALER SALES

AND

SERVICE AGREEMENT

ISUZU

<PAGE>

AMERICAN ISUZU MOTORS INC.

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<PAGE>

ISUZU DEALER SALES
AND
SERVICE AGREEMENT

ADDITIONAL PROVISIONS

TABLE OF CONTENTS

Page
----

I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

II. SALES TO DEALER . . . . . . . . . . . . . . . . . . . . . . . . . . .3
A. Dealer's Orders. . . . . . . . . . . . . . . . . . . . . . . . .3
B. Shipment and Risk of Loss. . . . . . . . . . . . . . . . . . . .3
C. Passage of Title . . . . . . . . . . . . . . . . . . . . . . . .3
D. Freight. . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
E. Diversions . . . . . . . . . . . . . . . . . . . . . . . . . . .4
F. Changes in and Discontinuance of Isuzu Products. . . . . . . . .4
G. Pricing and Other Terms of Sale. . . . . . . . . . . . . . . . .4
H. Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1. Payment for Vehicles. . . . . . . . . . . . . . . . . . . .4
2. Payment for Parts, Accessories and Other
Products. . . . . . . . . . . . . . . . . . . . . . . . . .5
3. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .5
I. Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . .5
J. Failure or Delay in Filling Orders . . . . . . . . . . . . . . .6
K. Alteration of Isuzu Products . . . . . . . . . . . . . . . . . .6

III. DEALERSHIP OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . .7
A. Dealership Location and Facilities . . . . . . . . . . . . . . .7
1. Dealership Facilities . . . . . . . . . . . . . . . . . . .7
2. Changes in Dealership Location or Facilities. . . . . . . .7
3. Hours of Business . . . . . . . . . . . . . . . . . . . . .7
4. Identification of Dealership Facilities . . . . . . . . . .7
5. Evaluation of Dealer's Performance with
Respect to Dealership Facilities. . . . . . . . . . . . . .7
B. Vehicle Sales Operations . . . . . . . . . . . . . . . . . . . .8
1. Responsibility of Dealer. . . . . . . . . . . . . . . . . .8
2. Sales Personnel . . . . . . . . . . . . . . . . . . . . . .8
3. Inventory . . . . . . . . . . . . . . . . . . . . . . . . .8

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<PAGE>

4. Modification of Isuzu Vehicles. . . . . . . . . . . . . . .8
5. Evaluation of Dealer's Sales Performance. . . . . . . . . .8
6. Evaluation of Sales of Isuzu Trucks . . . . . . . . . . . .9
C. Used Vehicle Sales Operations. . . . . . . . . . . . . . . . . .9
D. Rental and Leasing Operations. . . . . . . . . . . . . . . . . 10
E. Parts and Accessories Sales Operations . . . . . . . . . . . . 10
1. Responsibility of Dealer. . . . . . . . . . . . . . . . . 10
2. Sales Personnel . . . . . . . . . . . . . . . . . . . . . 10
3. Inventory . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Representations Concerning Parts and
Accessories . . . . . . . . . . . . . . . . . . . . . . . 10
5. Evaluation of Dealer's Parts and Accessories
Sales Performance . . . . . . . . . . . . . . . . . . . . 11
F. Service Operations . . . . . . . . . . . . . . . . . . . . . . 11
1. General Service Responsibilities of Dealer. . . . . . . . 11
2. Specific Service Obligations of Dealer. . . . . . . . . . 11
(a) New Vehicle Pre-Delivery Inspections and
Adjustments. . . . . . . . . . . . . . . . . . . . . 11
(b) Complimentary Maintenance Service. . . . . . . . . . 11
(c) Warranty Repairs . . . . . . . . . . . . . . . . . . 12
(d) Campaign Inspections and Corrections . . . . . . . . 12
(e) Disposition of Replaced Parts. . . . . . . . . . . . 12
(f) Maintenance and Repair Service . . . . . . . . . . . 13
(g) Payments by Distributor to Dealer. . . . . . . . . . 13
3. Other Service Responsibilities of Dealer. . . . . . . . . 13
(a) Compliance with Laws Regulating Vehicles
and Other Products . . . . . . . . . . . . . . . . . 13
(b) Service Personnel. . . . . . . . . . . . . . . . . . 13
(c) Service Equipment and Special and
Essential Tools. . . . . . . . . . . . . . . . . . . 14
4. Evaluations of Dealer's Service Performance . . . . . . . 14
G. Advertising, Promotional and Public Relations
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1. Advertising Standards . . . . . . . . . . . . . . . . . . 14
2. Dealer's Advertising Programs . . . . . . . . . . . . . . 14
3. Participation in Distributor's Advertising
Programs. . . . . . . . . . . . . . . . . . . . . . . . . 14
4. Customer Relations. . . . . . . . . . . . . . . . . . . . 14
(a) Informing Customers as to Details of
Charges. . . . . . . . . . . . . . . . . . . . . . . 14
(b) Right of Retail Purchaser to Buy Vehicle
Without Purchasing Optional Equipment or
Accessories. . . . . . . . . . . . . . . . . . . . . 15
(c) Informing Retail Purchasers as to
Optional Equipment or Accessories
Installed by Dealer. . . . . . . . . . . . . . . . . 15
H. Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
I. Accounting System. . . . . . . . . . . . . . . . . . . . . . . 15
J. Records and Reports. . . . . . . . . . . . . . . . . . . . . . 16
1. Financial Statements. . . . . . . . . . . . . . . . . . . 16
2. Ownership and Management Records. . . . . . . . . . . . . 16

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<PAGE>

3. Sales and Service Records and Reports . . . . . . . . . . 16
4. Records Concerning Applications and Claims for
Payments. . . . . . . . . . . . . . . . . . . . . . . . . 16
K. Inspection of Accounts and Records . . . . . . . . . . . . . . 17
L. Trademarks and Service Marks . . . . . . . . . . . . . . . . . 17

IV. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 18
A. Indemnification of Distributor . . . . . . . . . . . . . . . . 18
B. Indemnification of Dealer. . . . . . . . . . . . . . . . . . . 18
C. Exception to Indemnification . . . . . . . . . . . . . . . . . 19

V. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
A. Termination of Agreement . . . . . . . . . . . . . . . . . . . 20
1. Voluntary Termination by Dealer . . . . . . . . . . . . . 20
2. Termination Due to Acts or Events Controlled
by Dealer, Its Owner(s) or Manager(s) . . . . . . . . . . 20
3. Termination by Distributor for Failure of
Performance by Dealer . . . . . . . . . . . . . . . . . . 22
4. Termination Because of Death or Incapacity of
Owner and/or Executive Manager. . . . . . . . . . . . . . 22
5. Termination for Failure of Dealer or
Distributor to be Licensed. . . . . . . . . . . . . . . . 23
6. Termination by Mutual Agreement . . . . . . . . . . . . . 23
7. Right to Rely on Any Applicable Termination
Provision . . . . . . . . . . . . . . . . . . . . . . . . 23
B. Transactions After Termination . . . . . . . . . . . . . . . . 24
1. Effect of Termination on Orders . . . . . . . . . . . . . 24
2. Effect of Transactions After Termination. . . . . . . . . 24
3. Purchases of Eligible Items . . . . . . . . . . . . . . . 24
4. Responsibilities of Dealer. . . . . . . . . . . . . . . . 25
5. Payment by Distributor. . . . . . . . . . . . . . . . . . 26

VI. SUCCEEDING AND NEW AND SUPERSEDING
SALES AND SERVICE AGREEMENTS. . . . . . . . . . . . . 27
A. Succeeding Agreements. . . . . . . . . . . . . . . . . . . . . 27
B. New and Superseding Dealer Agreements. . . . . . . . . . . . . 27
C. Effect of New or Superseding Agreement on
Responsibilities and Obligations under this
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 27

VII. ESTABLISHMENT OF SUCCESSOR DEALER. . . . . . . . . . . . . . . . . 29
A. Because of Death of Owner. . . . . . . . . . . . . . . . . . . 29
B. Because of Death or Incapacity of Executive Manager. . . . . . 29
C. Evaluation of Successor Dealer . . . . . . . . . . . . . . . . 30
D. Termination of Market Representation . . . . . . . . . . . . . 30
E. Termination of Offer . . . . . . . . . . . . . . . . . . . . . 30

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VIII. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 31
A. Dealer Not Made Agent or Legal Representative. . . . . . . . . 31
B. Dealer's Responsibility for Its Operations,
Expenditures, Liabilities and Obligations. . . . . . . . . . . 31
C. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
D. Offsets and Set Offs . . . . . . . . . . . . . . . . . . . . . 31
E. Changes Required by Law. . . . . . . . . . . . . . . . . . . . 32

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<PAGE>

ISUZU DEALER SALES
AND
SERVICE AGREEMENT

ADDITIONAL PROVISIONS

The following Additional Provisions have by reference been incorporated in
and made a part of the ISUZU DEALER SALES AND SERVICE AGREEMENT which they
accompany and which has been executed on behalf of Distributor and Dealer.

ARTICLE I. DEFINITIONS

As used in this Agreement, the following terms shall have the following
meanings:

A. "Authorized Isuzu Dealers" shall mean dealers located in the United
States that are authorized by Distributor to conduct dealership operations in
connection with the sale of Isuzu Products.

B. "Isuzu Cars" shall mean such new passenger cars manufactured by or on
behalf of Manufacturer as are from time to time offered for sale by
Distributor to Dealer for resale.

C. "Isuzu Trucks" shall mean such new light duty trucks and chassis
manufactured by or on behalf of Manufacturer as are from time to time offered
for sale by Distributor to Dealer for resale.

D. "Isuzu Vehicles" shall mean Isuzu Cars and Isuzu Trucks.

E. "Isuzu Parts and Accessories" shall mean such parts and accessories
manufactured by or on behalf of Manufacturer or Distributor as are from time
to time offered for sale by Distributor to Dealer.

F. "Isuzu Products" shall mean Isuzu Vehicles and Isuzu Parts and
Accessories.

G. "Competitive Cars" shall mean those new cars which are designated by
Distributor as directly competitive with Isuzu Cars.

H. "Import Industry Cars" shall mean all new cars manufactured
other than within the United States which are imported into the
United States for sale, to the extent data relating to registration
thereof are reasonably available.

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<PAGE>

I. "Industry Cars" shall mean all new cars of all manufacturers which are
sold and distributed within the United States, to the extent data relating to
registration thereof are reasonably available.

J. "Competitive Trucks" shall mean those new light duty trucks which are
designated by Distributor as directly competitive with Isuzu Trucks.

K. "Import Industry Trucks" shall mean all new light duty trucks
manufactured other than within the United States which are imported into the
United States for sale, to the extent data relating to registration thereof
are reasonably available.

L. "Industry Trucks" shall mean light duty trucks of all manufacturers
which are sold and distributed within the United States, to the extent data
relating to registration thereof are reasonably available.

M. "Dealership Location" shall mean the business location of Dealer
described in the initial paragraph of this Agreement.

N. "Dealership Facilities" shall mean the land areas at the Dealership
Location and the buildings and improvements erected thereon.

0. "Dealer's Market" shall mean the geographical area within which
potential purchasers and owners of Isuzu Products which Dealer can most
readily serve are located. Such area, or portions thereof, may at any time
be a part of the Market of other Authorized Isuzu Dealers as well as Dealer.

P. "Owner(s)" shall mean the person(s) named as Owner(s) in Section 4 of
this Agreement.

Q. "Executive Manager" shall mean the person named as Executive Manager in
Section 4 of this Agreement.

R. "Successor Addendum" shall mean the Successor Addendum, if any, executed
by Distributor and Dealer pursuant to the provisions of Article VII of this
Agreement.

S. "Dealership Standards" shall mean such reasonable standards as may be
established by Distributor for Authorized Isuzu Dealers from time to time
under its standard procedures with respect to such matters as dealership
facilities, tools, equipment, capitalization, inventories and personnel.

T. "Service Policies and Procedures Manual" shall mean the publication or
publications of Distributor, as the same may from time to time be amended,
revised or supplemented,

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<PAGE>

which set forth Distributor's policies and procedures concerning and
administration of Distributor's warranties and related matters.

U. "Manufacturer" shall mean ISUZU MOTORS LIMITED.

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<PAGE>

ARTICLE II. SALES TO DEALER

A. DEALER'S ORDERS

At such times as Distributor may from time to time designate, Dealer shall
submit to Distributor orders for Isuzu Products in such quantities and
varieties as may be reasonably necessary for Dealer to fulfill its
obligations under this Agreement. All orders shall be on forms supplied by
Distributor, shall be subject to acceptance by Distributor, and may be
accepted in whole or in part. Orders may be accepted by written notice to
Dealer or by actual delivery of the products ordered to Dealer or to a
carrier for transportation to Dealer. Except as otherwise provided in this
Agreement, orders shall not be cancellable by Dealer after acceptance by
Distributor. Distributor will process and fill Dealer's orders in accordance
with procedures relating thereto established by Distributor.

Because of the number of factors that affect the distribution of products and
the relevancy thereof at any given time, Distributor necessarily reserves to
itself discretion in applying such factors and in processing orders for Isuzu
Products it receives from Dealer. The judgment and decisions of Distributor
shall be final in all matters relating to the distribution and delivery of
Isuzu Products to Dealer.

B. SHIPMENT AND RISK OF LOSS

Distributor will ship Isuzu Products by whatever mode of transportation, by
whatever route, and from whatever point Distributor may select. Distributor
will, it requested by Dealer in such manner and within such time as
Distributor shall from time to time specify, prosecute claims for loss of or
damage to Isuzu Products during transportation from said point of shipment
against the responsible carrier for and on behalf of Dealer.

C. PASSAGE OF TITLE

Title to Isuzu Products shall pass from Distributor to Dealer, or, if
applicable, to the financial institution designed by Dealer, upon delivery of
said product to Dealer or to a carrier for transportation to Dealer,
whichever occurs first. Distributor shall retain a security interest in, and
the right to repossess, any such product until paid in full therefor.

D. FREIGHT

In addition to the prices and charges otherwise provided for herein, Dealer
will pay Distributor in connection with Isuzu Vehicles delivered to Dealer
the applicable destination charges that are in effect at the time of
shipment. Dealer shall pay such transportation charges for Isuzu Parts and
Accessories as may be in effect at the time of shipment.

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<PAGE>

E. DIVERSIONS

Dealer shall pay all charges accruing after delivery of Isuzu Products to
Dealer or to carrier for transporation to Dealer, including, but not limited
to, charges for demurrage and storage. If diversions of shipments are made
upon Dealer's request or because of Dealer's failure or refusal to accept
delivery thereof, Dealer shall be responsible for and pay any additional
costs or expenses thereby incurred.

F. CHANGES IN AND DISCONTINUANCE OF ISUZU PRODUCTS

Distributor shall have the right in its sole discretion to discontinue the
supply, or make changes in the design or component materials, of any Isuzu
Product at any time. Distributor shall be under no liability to Dealer on
account of any such changes and shall not be required to make any changes to
Isuzu Products previously purchased by Dealer.

G. PRICING AND OTHER TERMS OF SALE

All sales of Isuzu Products shall be in accordance with the prices and other
applicable terms of sale in effect on the date said products are shipped by
Distributor to Dealer. Distributor may, without incurring any liability to
Dealer or to anyone else, at any time and from time to time change the
prices, charges, discounts, allowances and other terms of sale applicable to
any Isuzu Product. Except as otherwise provided in notices thereof sent to
Dealer by Distributor, any such change shall apply to all orders accepted but
not shipped by Distributor on the effective date of such change.

Except with respect to the pricing of any new model or body type of Isuzu
Vehicle at the introduction thereof, Distributor shall give written notice to
Dealer of any change increasing the price of any Isuzu Product to which such
change is applicable before shipping the same. Dealer may cancel or modify
orders for any such Isuzu Product by giving notice thereof to Distributor
within ten (10) days after receipt by Dealer of Distributor's notice of such
change. All unshipped orders for Isuzu Products not so cancelled or modified
shall remain in effect for shipment in accordance with said change.

H. PAYMENT

1. PAYMENT FOR VEHICLES

Dealer shall at all times during the term of this Agreement have flooring
arrangements (wholesale financing) satisfactory to Distributor with financial
institutions acceptable to Distributor. Payment by Dealer for Isuzu Vehicles
must be made in accordance with the applicable prices, charges, discounts,
allowances and other terms of sale established by Distributor either (i)
pursuant to wholesale financing arrangements in effect between

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Distributor, Dealer and a financial institution at the time of delivery of
said vehicles to Dealer or to a carrier for transportation to Dealer,
whichever shall first occur, or (ii) by cash or such other medium of payment
as Distributor may agree to accept paid by Dealer to Distributor prior to
delivery of said vehicles to Dealer or to a carrier for transportation to
Dealer, whichever shall first occur.

2. PAYMENT FOR PARTS, ACCESSORIES AND OTHER PRODUCTS

Parts, equipment, accessories and other products and services sold by
Distributor to Dealer will normally be billed by Distributor to Dealer on
Distributor's invoices, which shall be due the tenth (10th) day of the month
following the month of delivery of such products and services; provided,
however, Distributor reserves the right to place any and all sales of such
items on a C.O.D. or cash in advance basis, without notice. A late payment
charge will be assessed on any obligation not paid when due at a rate equal
to 1 1/2% per month; provided, however, that such late payment charge shall
not be assessed at a rate which exceeds the maximum permitted by applicable
law. Dealer shall, promptly upon Distributor's demand, execute such security
agreements, chattel mortgages, commercial code financing statements and other
instruments acknowledging and giving notice of Distributor's security
interest in Isuzu Products purchased by Dealer from Distributor for which
Dealer is indebted to Distributor.

3. TAXES

Dealer hereby represents and warrants that all Isuzu Products purchased from
Distributor are purchased for resale in the ordinary course of Dealer's
business. Dealer further represents and warrants that Dealer has obtained
all licenses and complied with all other requirements to collect sales, use
or other taxes incurred in any such resale transaction, and that Dealer will
furnish evidence thereof to Distributor, at Distributor's request. Dealer
agrees, as to any Isuzu Products put to a taxable use by Dealer or in fact
purchased by Dealer other than for resale, to pay directly to the appropriate
taxing authority any sales, use or similar taxes incurred as a result of such
use or purchase, to file any tax returns required in connection therewith,
and to hold Distributor harmless from any claims or demands with respect
thereto.

I. WARRANTIES

The only warranties of Manufacturer or Distributor that shall be applicable
to Isuzu Products (or any component thereof) shall be such written warranties
as may be made and furnished by Distributor. Except for the express
liability under such written warranties, neither Manufacturer nor Distributor
assumes or authorizes any other person to assume for it any obligations or
liabilities in connection with any Isuzu Product.

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Dealer shall comply with Distributor's instructions with all applicable laws
with respect to pre-sale availability and delivery of statements of
warranties to its customers and prospective customers.

J. FAILURE OR DELAY IN FILLING ORDERS

Distributor shall not be liable for any failure or delay in delivery or
shipment of orders for any Isuzu Products where such failure or delay is due,
in whole or in part, to non-receipt of said products from the Manufacturer or
other supplier thereof or to shortage or curtailment of labor, material,
transportation, or utility services, strikes, labor disputes or other labor
difficulties in connection with the operations of Distributor, Manufacturer
or any other person, acts or regulations of any government or to any cause or
causes beyond the control of Distributor.

K. ALTERATION OF ISUZU PRODUCTS

Unless directed in writing by Distributor or required to do so to comply with
an applicable law or rule, regulation or order of a governmental body, Dealer
shall not alter any Isuzu Product or change or substitute any of its
components. Dealer shall promptly notify Distributor in writing of any such
alterations made by Dealer.

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ARTICLE III. DEALERSHIP OPERATIONS

A. DEALERSHIP LOCATION AND FACILITIES

1. DEALERSHIP FACILITIES

Dealer shall Provide, at the Dealership Location, Dealership Facilities that
will enable Dealer to effectively perform its responsibilities under this
Agreement. The Dealership Facilities shall be satisfactory as to appearance
and layout, properly equipped and substantially in accordance with the
applicable Dealership Standards.

2. CHANGE IN DEALERSHIP LOCATION OR FACILITIES

Dealer shall not move, relocate, modify or change the Dealership Location or
any of the Dealership Facilities, nor shall Dealer or any Owner or Manager
directly or indirectly establish or operate any other locations or facilities
for the sale or servicing of Isuzu Products or for the conduct of any other
of the dealership operations contemplated by this Agreement without the prior
written consent of Distributor.

3. HOURS OF BUSINESS

In order to serve the needs of potential purchasers and the service
requirements of owners and users of Isuzu Products, Dealer shall keep its
Dealership Facilities open and operating for business during such days and
hours as automobile dealers' sales, parts and service facilities are
customarily open in the community wherein the Dealership Location is situated.

4. IDENTIFICATION OF DEALERSHIP FACILITIES

Insofar as permitted by local laws and regulations, Dealer shall display at
its Dealership Location, in such number and at such locations as Distributor
may reasonably require, signs which are compatible with the design standards
established by Distributor from time to time. Dealer shall maintain all such
signs in good condition at all times.

5. EVALUATION OF DEALER'S PERFORMANCE WITH RESPECT TO DEALERSHIP
FACILITIES

Distributor shall periodically evaluate Dealer's performance of its
responsibilities with respect to Dealership Facilities and shall discuss its
evaluation with Dealer. Dealer shall promptly take such action as may be
required to correct any deficiencies in its performance of these
responsibilities.

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<PAGE>

B. VEHICLE SALES OPERATIONS

1. RESPONSIBILITY OF DEALER

Dealer shall actively and effectively promote the sale at retail (and, if
Dealer elects, the leasing and rental) of Isuzu Vehicles to potential
customers located in Dealer's Market.

However, nothing contained in this Agreement shall limit or be construed to
limit the geographical area within which or the persons to whom Dealer may
sell or promote the sale of Isuzu Vehicles.

2. SALES PERSONNEL

Dealer shall at all times employ the number of trained and competent new
vehicle managerial and sales personnel reasonably required to fulfill its
responsibilities with respect to the sales of Isuzu Vehicles.

Dealer shall, without expense to Distributor, have its said employees attend
such vehicle sales training sessions as Distributor may from time to time
conduct.

3. INVENTORY

Subject to the ability of the Distributor to supply the same, Dealer shall
maintain at all times stocks of Isuzu Vehicles of an assortment and in
quantities adequate to meet its responsibilities with respect to sales of
Isuzu Vehicles. Dealer shall also have available at all times an adequate
number and variety of Isuzu Vehicles for purposes of display and
demonstration and shall, at all times, maintain the same in first class
condition.

4. MODIFICATION OF ISUZU VEHICLES

If the laws of the state in which the Dealership Location is situated or of
the states in which customers of Dealer are located require the installation
on vehicles of equipment not installed or supplied as standard equipment by
Distributor, Dealer shall, prior to its sale of the Isuzu Vehicles on which
such installation is required, install at its own expense such additional
equipment. Dealer shall indemnify and hold Distributor harmless from and
against any and all liabilities arising from Dealer's failure to install such
additional equipment on said vehicles.

5. EVALUATION OF DEALER'S SALES PERFORMANCE

Distributor shall periodically evaluate Dealer's performance of its
responsibilities with respect to sales of Isuzu Cars and shall discuss its
evaluation with Dealer. Dealer shall

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<PAGE>

promptly take such action as may be required to correct any deficiencies in
its performance of these responsibilities. Dealer's performance of these
responsibilities shall be evaluated by Distributor on the basis of such
reasonable factors as Distributor shall establish and furnish Dealer from
time to time. Such factors shall include:

(a) Reasonable sales objectives for Isuzu Cars which may be established from
time to time by Distributor for Dealer;

(b) Dealer's sales of Isuzu Cars as compared to:

(i) registrations of Isuzu Cars in Dealer's Market;

(ii) registrations of Competitive Cars in Dealer's Market;

(iii) registrations of Import Industry Cars in Dealer's Market;

(iv) registrations of Industry Cars in Dealer's Market; and

(v) the average sale of Isuzu Cars by comparable groupings of
Authorized Isuzu Dealers.

6. EVALUATION OF SALES OF ISUZU TRUCKS

Distributor shall periodically evaluate Dealer's performance of its
responsibilities with respect to sales of Isuzu Trucks and shall discuss its
evaluation with Dealer. Dealer shall promptly take such action as may be
required to correct any deficiencies in its performance of these
responsibilities. Dealer's performance of these responsibilities shall be
evaluated by Distributor on the basis of such reasonable factors as
Distributor shall establish and furnish Dealer from time to time. Such
factors shall include:

(a) Reasonable sales objectives for Isuzu Trucks which may be established
from time to time by Distributor for Dealer;

(b) Dealer's sales of Isuzu Trucks as compared to:

(i) registrations of Isuzu Trucks in Dealer's Market;

(ii) registrations of Competitive Trucks in Dealer's Market;

(iii) registrations of Import Industry Trucks in Dealer's
Market;

(iv) registrations of Industry Trucks in Dealer's Market; and

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<PAGE>

(v) the average sales of Isuzu Trucks by comparable groupings
of Authorized Isuzu Dealers.

C. USED VEHICLE SALES OPERATIONS

To enhance Dealer's opportunities to operate successfully, Dealer will engage
in such used vehicle operations as Dealer may deem appropriate. Dealer shall
be entitled to identify such used vehicle operations as a part of its
dealership operations and to apply the trademarks, tradenames and service
marks of Distributor relating to used vehicle operations, but only as and to
the extent Dealer subscribes to and fulfills all requirements of programs
relating thereto offered Dealer by Distributor.

D. RENTAL AND LEASING OPERATIONS

Since the rental and leasing of Isuzu Vehicles will offer Dealer additional
opportunities to improve its effectiveness in fulfilling its responsibilities
with respect to sales of Isuzu Vehicles, Dealer will explore such
opportunities and will establish rental and leasing operations if such
additional opportunities are apparent. Dealer shall be entitled to identify
such rental and leasing operations as a part of its dealership operations and
to apply the trademarks, tradenames and service marks of Distributor relating
to rental and leasing operations, but only as and to the extent Dealer
subscribes to and fulfills all requirements of programs relating thereto
offered Dealer by Distributor.

E. PARTS AND ACCESSORIES SALES OPERATIONS

1. RESPONSIBILITY OF DEALER

Dealer shall actively and effectively promote the sale of Isuzu Parts and
Accessories to service, wholesale and other customers located in Dealer's
Market. However, nothing contained in this Agreement shall limit or be
construed to limit the geographical area within which or the persons to whom
Dealer may sell Isuzu Parts and Accessories.

2. SALES PERSONNEL

Dealer shall at all times employ the number of trained and competent parts
and accessories managerial and sales personnel reasonably required to fulfill
its responsibilities with respect to the sales of Isuzu Parts and
Accessories. Dealer shall, without expense to Distributor, have its said
employees attend such parts and accessories sales training sessions as
Distributor may from time to time conduct.

3. INVENTORY

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<PAGE>

Dealer shall maintain at all times stocks of parts and accessories adequate
to meet its responsibilities with respect to service of Isuzu Products.
Dealer shall also maintain, subject to the ability of Distributor to supply
the same, stocks of Isuzu Parts and Accessories of an assortment and in
quantities adequate to meet customer demands and for warranty repairs,
special policy service and campaign corrections. Dealer shall maintain a
proper and adequate system of parts and accessories inventory control.

4. REPRESENTATIONS CONCERNING PARTS AND ACCESSORIES

In connection with its sale or offering for sale or use in the repair or
service of Isuzu Products, Dealer shall not represent as an Isuzu Part or
Accessory any part or accessory that in fact is not an Isuzu Part or
Accessory.

5. EVALUATION OF DEALER'S PARTS AND ACCESSORIES SALES PERFORMANCE

Distributor shall periodically evaluate Dealer's performance of its
responsibilities with respect to the sale of Isuzu Parts and Accessories and
shall discuss its evaluation with Dealer. Dealer shall promptly take such
action as may be required to correct any deficiencies in its performance of
these responsibilities.

F. SERVICE OPERATIONS

1. GENERAL SERVICE RESPONSIBILITIES OF DEALER

Dealer shall provide prompt, efficient and courteous service to owners and
users of Isuzu Products regardless of the origin of purchase thereof,
including, without limitation, the specific obligations described below. All
service performed by Dealer pursuant to this Agreement shall be performed in
a good and workmanlike manner and in accordance with the requirements,
specifications and instructions relating thereto set forth in the Service
Policies and Procedures Manual and bulletins and instructions furnished
Dealer by Distributor from time to time.

2. SPECIFIC SERVICE OBLIGATIONS OF DEALER

(a) NEW VEHICLE PRE-DELIVERY INSPECTIONS AND ADJUSTMENTS

Dealer shall perform pre-delivery inspections and adjustments on each Isuzu
Vehicle prior to sale and delivery thereof by Dealer. Such inspections and
adjustments shall be performed by Dealer without charge to the purchaser and
in accordance with the provisions relating thereto set forth in the Service
Policies and Procedures Manual and bulletins and instructions furnished
Dealer by Distributor from time to time.

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<PAGE>

The completion of such inspections and adjustments on each such Vehicle shall
be verified by Dealer on forms supplied or approved by Distributor for this
purpose, a copy of which shall be retained in Dealer's files and a copy of
which shall be furnished to the purchaser.

(b) COMPLIMENTARY MAINTENANCE SERVICE

Dealer shall perform or be responsible for the performance of such
complimentary maintenance or other services following delivery of Isuzu
Vehicles (including labor for lubrication) as may be prescribed for such
vehicle in Distributor's applicable service bulletins, in accordance with the
provisions relating thereto set forth in the Service Policies and Procedures
Manual or in bulletins or instructions issued by Distributor to Dealer from
time to time. Dealer will perform such services as and when required and
requested by the owner or user of the vehicle, without regard to its origin
of purchase.

Dealer shall perform (i) warranty repairs on each Isuzu Product which
qualifies for such repairs under the provisions of any warranty furnished
therewith by Distributor or by the manufacturer thereof and (ii) such other
inspections, repairs or adjustments as may be approved or authorized by
Distributor.

Dealer shall perform such repairs and adjustments on each such Isuzu Product
as and when required thereon and requested by the owner, without regard to
its origin of purchase, and in accordance with the provisions relating
thereto set forth in the Service Policies and Procedures Manual and in
bulletins and instructions furnished by Distributor to Dealer from time to
time.

Dealer shall provide each owner or user for whom Dealer performs such repairs
or adjustments with a copy of the repair order covering the same.

(d) CAMPAIGN INSPECTIONS AND CORRECTIONS

Dealer shall perform campaign inspections and/or corrections, including those
described in owner notifications and recall campaigns conducted by
Distributor in furtherance of Federal or state laws or regulations, on Isuzu
Products that qualify for such inspections and/or corrections and those on
which such campaign inspections and corrections are requested by Distributor,
regardless of their origin of purchase.

Dealer shall perform such campaign inspections and/or corrections and shall
advise Distributor as and when the same are performed, all in accordance with
the bulletins and instructions relating thereto furnished Dealer by
Distributor and as set forth in the Service Policies and Procedures Manual.

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<PAGE>

To enable Dealer to perform required corrections as promptly as practical,
and for the convenience of Dealer, parts and/or other materials required for
each such campaign may be pre-shipped to Dealer. Dealer will accept and
retain such parts and/or materials for use in such campaign. Upon completion
of the campaign, Dealer may return or dispose of any such parts and/or
materials that are in excess of Dealer's requirements for the campaign in
accordance with disposition instructions relating thereto furnished by
Distributor and Dealer shall receive credit therefor.

(e) DISPOSITION OF REPLACED PARTS

Dealer shall comply with the instructions set forth in the Service Policies
and Procedures Manual with respect to retention and disposition of parts
replaced by Dealer in the performance of repairs, adjustments and services
pursuant to Article III F2(a), (b), (c) and (d) of this Agreement.

(f) MAINTENANCE AND REPAIR SERVICE

Dealer shall provide, at its Dealership Facilities, prompt maintenance and
repair service to owners and users of Isuzu Products. Such service shall
include only those services specifically requested by the owner or user that
are discussed in advance by the Dealer with the owner or user as being
required.

Dealer shall provide all owners and users for whom Dealer provides
maintenance and repair service itemized invoices covering the details thereof.

(g) PAYMENTS BY DISTRIBUTOR TO DEALER

For Dealer's performance of pre-delivery inspections and adjustments,
complimentary maintenance service, warranty repairs, special policy
adjustments, and campaign inspections and corrections under and pursuant to
the above provisions, Distributor shall pay Dealer for the Parts and
Accessories and/or other materials or shall provide Dealer with the Parts and
Accessories and/or other materials required in connection therewith and shall
pay for labor in accordance with the provisions relating thereto set forth in
the Service Policies and Procedures Manual.

3. OTHER SERVICE RESPONSIBILITIES OF DEALER

(a) COMPLIANCE WITH LAWS REGULATING VEHICLES AND OTHER PRODUCTS

Dealer will comply with all applicable provisions of Federal, state and local
laws and governmental orders, rules

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<PAGE>

and regulations, including but not limited to laws, orders, rules and
regulations relating to safety, emission, noise control, damageability and
customer service.

In furtherance of facilitating compliance with such laws, orders, rules and
regulations by Distributor and Dealer, Distributor will provide to Dealer,
and Dealer will provide to Distributor, as the case may be, such information
and assistance as may reasonably be requested by the other in connection with
the performance of their respective obligations under such laws, orders,
rules and regulations.

(b) SERVICE PERSONNEL

Dealer shall at all times employ the number of trained and competent service
managerial and technical personnel reasonably required to fulfill its
responsibilities with respect to the service of Isuzu Products. Dealer
shall, without expense to Distributor, have its said employees attend such
service training sessions as Distributor may from time to time conduct.

Dealer shall provide adequate service equipment and such special and
essential tools as are required to fulfill its responsibilities for service
of Isuzu Products.

4. EVALUATIONS OF DEALER'S SERVICE PERFORMANCE

Distributor shall periodically evaluate Dealer's performance of its
responsibilities with respect to the servicing of Isuzu Products and shall
discuss its evaluation with Dealer. Dealer shall promptly take such action
as may be required to correct any deficiencies in its performance of these
responsibilities.

G. ADVERTISING, PROMOTIONAL AND PUBLIC RELATIONS OPERATIONS

1. ADVERTISING STANDARDS

In order to secure and maintain the confidence and respect of the public in
Dealer, Distributor, Manufacturer and Isuzu Products, Dealer will at all
times maintain the highest standards of ethical advertising and will not
publish or cause or permit to be published any advertising relating to any of
its dealership operations or to any Isuzu Product which is not in compliance
with all applicable federal, state and local laws, rules, regulations and
orders or that is likely to mislead or deceive the public or impair the
goodwill of Dealer, Distributor or Manufacturer or the good reputation of
Isuzu Products.

2. DEALER'S ADVERTISING PROGRAMS

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<PAGE>

Dealer shall develop and utilize advertising and promotion programs,
including, but not limited to, effective displays of Isuzu Products and use
of demonstration Isuzu Vehicles.

3. PARTICIPATION IN DISTRIBUTOR'S ADVERTISING PROGRAMS

Dealer shall participate in advertising and promotion programs developed from
time to time by Distributor, as and when requested by Distributor.

4. CUSTOMER RELATIONS

(a) INFORMING CUSTOMERS AS TO DETAILS OF CHARGES

In effecting sales or service of Isuzu Products, Dealer will inform the
customers of details covering the items which make up the purchase price or
charges, will give them itemized invoices covering the details thereof and
will provide them with such other information and documents relating thereto
as may be required under any applicable laws, rules, regulations or orders.

Dealer will not make any false, misleading or deceptive representations as to
the items making up the purchase price or charges, nor will Dealer make any
statements intended to lead any purchaser to believe that a greater portion
of the selling price of a Vehicle represents destination, factory delivery
and handling, or other charges than the amounts thereof actually charged to
and paid for by Dealer.

(b) RIGHT OF RETAIL PURCHASER TO BUY VEHICLE WITHOUT PURCHASING
OPTIONAL EQUIPMENT OR ACCESSORIES

Dealer shall not include, in any retail order for an Isuzu Vehicle taken by
Dealer nor in any order covering an Isuzu Vehicle submitted by Dealer to
Distributor, any item of optional equipment or accessories, unless the retail
purchaser thereof has requested such item and has knowledge that such item
will be included in such order or unless such item is required on such
vehicle under applicable laws, rules, regulations or orders.

In order to avoid disparagement of any trademark that is applied by
Distributor to items of optional equipment and accessories manufactured by or
for Distributor and in order to avoid misleading any retail purchasers who
may assume that all items of optional equipment and accessories included in
Isuzu Vehicles have been manufactured by or for Distributor, Dealer shall, if
it installs on any Isuzu Vehicle any item of optional equipment or accessory
that has not been manufactured by or for Distributor, disclose to the retail
purchaser thereof that such

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item of optional equipment or accessory has not been manufactured by or for
Distributor and that it is not included in any warranty furnished by
Distributor. Such disclosure by Dealer shall be included in writing by
Dealer on the retail purchaser's order for any such Isuzu Vehicle, if one is
signed by the retail purchaser thereof, but in any event in the itemized
invoice covering the details of such purchase furnished the retail purchaser
by Dealer.

H. CAPITAL

Dealer shall at all times maintain and employ in the operations of its
dealership at least that amount and allocation of net working capital needed
for Dealer to effectively fulfill its responsibilities under this Agreement,
as agreed upon in writing by Distributor and Dealer from time to time.

I. ACCOUNTING SYSTEM

Dealer will install and maintain an accounting system of a type designated by
Distributor. Dealer will maintain said system in accordance with
instructions to be issued by Distributor from time to time.

J. RECORDS AND REPORTS

1. FINANCIAL STATEMENTS

Dealer shall furnish to Distributor, on or before the tenth day of each
month, on such forms as Distributor may designate, complete and accurate
financial and operating statements reflecting Dealer's true financial
condition as of the end of the preceding month and the results of Dealer's
operations during the preceding month and for that portion of Dealer's fiscal
year then ended, with supporting data, and shall, within two (2) months after
the closing date of Dealer's fiscal year, furnish to Distributor complete and
accurate financial and operating statements for said fiscal year. Distributor
shall not furnish to any third party any financial statements or data
submitted to it hereunder, except as an unidentified part of a composite or
coded report, unless authorized by Dealer or required to do so by law or
unless they are pertinent to judicial or governmental administrative
proceedings.

2. OWNERSHIP AND MANAGEMENT RECORDS

Dealer shall keep and maintain complete and up-to-date records covering (a)
the names of all persons who are Owner(s) of Dealer and the dates and manner
in which any such ownership interests of such persons are transferred or
changed in any manner whatsoever; (b) the election, appointment or selection
of each person having a management position with Dealer, including the duly
elected officers and directors of Dealer if Dealer is a corporation; and (c)
the persons or parties who have either directly or indirectly supplied funds,
on either a

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secured or unsecured basis, to those having any ownership interests in Dealer
in connection with their acquisition of such ownership interests.

3. SALES AND SERVICE RECORDS AND REPORTS

Dealer shall prepare and maintain complete and up-to-date records covering
its sales of and service performed by it on Isuzu Products. Promptly upon
the sale of each Isuzu Vehicle, Dealer shall accurately and fully complete
and send to Distributor the vehicle retail delivery report supplied by
Distributor with respect to said vehicle. Dealer will furnish Distributor
with such other and further reports covering sales and service of Isuzu
Products by Dealer in such form or forms and within such times as is
specified in notices or bulletins relating thereto furnished Dealer by
Distributor.

4. RECORDS CONCERNING APPLICATIONS AND CLAIMS FOR PAYMENTS

Dealer shall prepare and retain, for a minimum period of two (2) years, in
accordance with the procedures set forth in the Service Policies and
Procedures Manual, records in support of applications for payment for
pre-delivery inspections and adjustment, warranty repairs and policy
adjustments and campaign inspections and corrections performed by Dealer,
claims for parts compensation and applications for discounts, allowances,
refunds or credits.

K. INSPECTION OF ACCOUNTS AND RECORDS

Distributor shall have the right at any reasonable time during Dealer's
regular business hours to inspect the Dealership Facilities and to examine,
audit and make copies of all accounts and records relating to the sale and
service of Isuzu Products.

L. TRADEMARKS AND SERVICE MARKS

Distributor grants Dealer the non-exclusive privilege to identify itself as
an Authorized Isuzu Dealer and to display and otherwise use in connection
with the sale and service of Isuzu Products, the various trademarks,
tradenames, service marks and other word and design marks which Manufacturer
or Distributor may use in connection with or apply to Isuzu Products during
the term of this Agreement. Except as provided herein, Dealer shall make no
use of any such trademark, tradename, service mark, or other word and design
mark. Dealer shall not use any mark, word or name which is similar to any of
the various trademarks, tradenames, service marks and other word and design
marks which Manufacturer or Distributor may use in connection with or apply
to Isuzu Products. Dealer shall neither have nor claim to have any rights in
or to any such trademark, tradename, service mark or other word and design
mark. Upon Distributor's request and, in any case, upon termination of this
Agreement, Dealer shall promptly discontinue, or cause to be discontinued,
the display and use of all such trademarks, tradenames, service marks and
other word and design

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marks. Dealer shall promptly change the manner in which such trademarks,
tradenames, service marks and other word and design marks are displayed and
used when requested to do so by Distributor. No such trademark, tradename,
service mark or other word and design mark may be used as part of the name
under which Dealer's business is conducted, except with Distributor's prior
written consent.

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ARTICLE IV. INDEMNIFICATION

A. INDEMNIFICATION OF DISTRIBUTOR

Dealer shall:

1. Upon Distributor's written request defend Distributor against claims
that during the term of this Agreement may arise, commence or be asserted
against Distributor in an action concerning:

(a) Dealer's failure or alleged failure to comply, in whole or in part with
any obligation of Dealer under this Agreement;

(b) Any actual or alleged negligence, error, omission or act of Dealer in
connection with the preparation, repair or service (including warranty
service) by Dealer of Isuzu Products;

(c) Any modification made by or on behalf of Dealer to Isuzu Products,
except those made pursuant to the express instruction or with the express
approval of Distributor;

(d) Dealer's breach or alleged breach of any agreement between Dealer and
Dealer's customer or other third party; or

(e) Misleading statements, misrepresentations or deceptive or unfair
practices or allegations of misleading statements, misrepresentations or
deceptive or unfair practices by Dealer, directly or indirectly, to
Distributor, a customer or other third party.

2. Indemnify and hold Distributor harmless from any and all settlements
made and final judgments rendered with respect to any of the claims described
in Section A.1. of this Article IV.

B. INDEMNIFICATION OF DEALER

Distributor shall, upon Dealer's written request:

1. Defend Dealer against claims that during the term of this Agreement may
arise, commence or be asserted against Dealer in an action concerning bodily
injury or property damage arising out of an occurrence caused solely by a
defect or alleged defect existing or claimed to have existed in an Isuzu
Product at the time title to said product passed to Dealer, provided:

(i) that the defect could not have reasonably been discovered by Dealer
during the pre-delivery inspection of the product required by this Agreement;
and

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<PAGE>

(ii) Distributor did not notify Dealer in writing of such defect prior to
delivery of the product to the first retail customer.

2. Indemnify and hold Dealer harmless from any and all settlements made
which are approved by Distributor and final judgments rendered with respect
to any of the claims described in Section B.1. of this Article IV; provided,
however, Dealer promptly notifies Distributor in writing of the assertion of
such claim and the commencement of such action against Dealer and cooperates
fully in the defense of such action in such manner and to such extent as
Distributor may require.

C. EXCEPTION TO INDEMNIFICATION

If the allegations asserted in any action or if any facts established during
or with respect to any action would require Dealer to defend and indemnify
Distributor under Section A, above, and Distributor to defend and indemnify
Dealer under Section B, above, Distributor and Dealer shall each be
responsible for its own defense in such an action and there shall be no
obligation or responsibility in connection with any defense, judgment,
settlement or expenses of such action as between Distributor and Dealer,
except to the extent that such an obligation or responsibility may be imposed
by applicable law.

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ARTICLE V. TERMINATION

A. TERMINATION OF AGREEMENT

1. VOLUNTARY TERMINATION BY DEALER

Dealer may terminate this Agreement at any time upon 30 days' written notice
to Distributor.

2. TERMINATION DUE TO ACTS OR EVENTS CONTROLLED BY DEALER, ITS OWNER(S)
OR MANAGER(S)

Each of the following represents an act or event that is within the control
of or originates from action taken by Dealer or its Owner(s) or Manager(s)
and over which Distributor has no control, but which, when contrary to the
spirit, nature, purpose or objectives of this Agreement, warrant its
termination:

(a) Any misrepresentation to Distributor by Dealer or by its Owner(s) or
Executive Manager in applying for this Agreement or any misrepresentation to
Distributor by Dealer or any such person as to the persons who are or will be
Owner(s) or Manager(s) of Dealer.

(b) Any attempted sale, transfer or assignment by Dealer of this Agreement
or any of the rights or privileges granted Dealer by this Agreement; or any
attempted transfer, assignment or delegation by Dealer of any of the
responsibilities assumed by Dealer under this Agreement, without in either
case the prior written consent of Distributor, which consent shall not be
unreasonably withheld.

(c) Any sale, transfer, relinquishment, voluntary or involuntary, by
operation of law or otherwise, of any ownership interest in Dealer without
the prior written consent of Distributor, which consent shall not be
unreasonably withheld.

(d) Any change of the Dealer's Executive Manager without the prior written
consent of Distributor, which consent shall not be unreasonably withheld.

(e) Any attempt by Dealer to conduct, either directly or indirectly, any of
the dealership operations contemplated by this Agreement at any facilities
other than the Dealership Facilities.

(f) Any sale or other transfer, by operation of law or otherwise, to any
third party or parties, or any relinquishment or discontinuance of use by
Dealer, of any of the Dealership Facilities or other principal assets that
are employed and required by Dealer in the conduct of the dealership
operations without the prior written consent of Distributor, which consent
shall not be unreasonably withheld.

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(g) Any dispute, disagreement, or controversy between or among the Owner(s)
or Executive Manager (or, if Dealer is a corporation, its directors or
officers) of Dealer relating to the ownership or management of Dealer or to
its dealership operations which, in the opinion of Distributor, may adversely
affect the dealership operations or the interest of Dealer or Distributor.

(h) Insolvency of Dealer; filing of a voluntary petition in bankruptcy by
Dealer; filing of a petition to have Dealer declared bankrupt, provided that
it is not vacated within one (1) month after filing; appointment of a
receiver or trustee for Dealer, provided such appointment is not vacated
within one (1) month after such appointment; or execution by Dealer of an
assignment for the benefit of creditors.

(i) Failure of Dealer to maintain the Dealership Facilities open for
business as required under the provisions of this Agreement, for seven (7)
consecutive business days.

(j) Conviction of Dealer or any Owner(s), Executive Manager or, if Dealer is
a corporation, any of its directors or officers, of any crime which, in the
opinion of Distributor, may adversely affect the reputation or interests of
Dealer or Distributor.

(k) Any submission by Dealer to Distributor of a false or fraudulent
application, or any claim or statement in support thereof, for payment
related to pre-delivery inspection or adjustment, or warranty repairs,
special policy or campaign adjustments performed by Dealer, or for parts
compensation or for any other discount, allowance, refund or credit whether
or not Dealer offers or makes to Distributor or Distributor seeks or obtains
from Dealer restitution of any payments made to Dealer on the basis of any
such false or fraudulent applications, claims or statements.

(l) Failure of Dealer to furnish Distributor with the financial and
operating statements or reports required to be furnished under this Agreement
or refusal by Dealer to permit Distributor to make any inspection or audit of
Dealer's facilities, accounts and records as provided in this Agreement, if
such failure or refusal shall continue for a period of one (1) month after
receipt by Dealer from Distributor of a written request for such statements
or reports or permission to make any such inspection or audit.

(m) Willful failure of Dealer to comply with the provisions of any laws,
rules, regulations or orders of a government body relating to Isuzu Products
or the advertising, promotion, sale or service thereof.

When Distributor has established to its satisfaction that any such act or
event has occurred, Distributor may terminate this Agreement by giving Dealer
written notice of termination, such termination to be effective upon receipt
by Dealer of such notice.

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3. TERMINATION BY DISTRIBUTOR FOR FAILURE OF PERFORMANCE BY DEALER

If, based on the evaluations thereof made by Distributor, Distributor
determines that Dealer has failed to fulfill any one or more of the
responsibilities assumed by Dealer under Article III of this Agreement by
failing to fulfill the responsibilities and obligations of Dealer relating
thereto set forth in said Article, Distributor will endeavor to review with
Dealer the nature and extent of such failure(s) and the reasons which, in
Distributor's opinion, account for such failure(s). Thereafter, based upon
such plan or plans of action as may be proposed by Dealer to remedy such
failure or failures and upon such other factors as Distributor deems relevant
in the circumstances, Distributor will determine whether it can be reasonably
expected that Dealer can and will remedy such failure or failures and the
period of time that Dealer may reasonably require to effect such remedy or
remedies.

As soon as practicable thereafter, Distributor will notify Dealer in writing
of the nature and extent of Dealer's failure or failures of performance and
of the period of time, if any, during which Dealer will be expected to remedy
such failure or failures of performance.

If, at the expiration of the period, if any, specified in such notice, such
failure or failures of performance have not been substantially remedied by
Dealer, Distributor may terminate this Agreement by giving Dealer written
notice of termination, with such termination to be effective three (3) months
after receipt by Dealer of such notice.

In the interest of providing continuing service to owners of Vehicles,
Distributor may, if it elects, process during such three (3) month period
applications for an Isuzu Dealer Sales and Service Agreement to replace
Dealer; provided, however, that such Isuzu Dealer Sales and Service Agreement
shall not become effective until after the effective date of termination of
this Agreement.

During such three (3) month period, Distributor and Dealer will commence such
actions as may be necessary or desirable so that the termination obligations
of Distributor and Dealer set forth in this Agreement may be fulfilled as
promptly as practicable.

4. TERMINATION BECAUSE OF DEATH OR INCAPACITY OF OWNER AND/OR EXECUTIVE
MANAGER

Since this Agreement is in the nature of a personal service agreement and its
continuation is conditioned upon Dealer being owned and managed as provided
in Section 4 hereof, Distributor (subject to the provisions of Article VII of
this Agreement) may terminate this Agreement by written notice to Dealer in
the event of the death of an Owner or the Executive Manager or in the event
Distributor determines that the Executive Manager is physically or mentally
incapacitated so as to be unable to actively exercise full managerial
authority for the operating management of Dealer. The effective date of any
such

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termination shall be the date set forth in such written notice, which shall
be not less than three (3) months after receipt by Dealer of such notice.

In the interest of providing continuing service to owners of Vehicles,
Distributor may, if it elects, process, during the period from the receipt by
Dealer of such notice to the effective date of such termination applications
for an Isuzu Dealer Sales and Service Agreement to replace Dealer; provided,
however, that such Isuzu Dealer Sales and Service Agreement shall not become
effective until after the effective date of termination of this Agreement.

During the period from Dealer's receipt of such notice to the effective date
of such termination, Distributor and Dealer will commence such actions as may
be necessary or desirable so that the termination obligations of Distributor
and Dealer set forth in this Agreement may be fulfilled as promptly as
practicable.

5. TERMINATION FOR FAILURE OF DEALER OR DISTRIBUTOR TO BE LICENSED

If Distributor or Dealer requires a license for the performance of any
obligation under or in connection with this Agreement in any state or
jurisdiction where this Agreement is to be performed and if either of the
parties shall fail to secure or maintain such license or a renewal thereof or
if such license shall be suspended or revoked, irrespective of the cause or
reason therefor, either party may immediately terminate this Agreement by
giving to the other party written notice of such termination.

6. TERMINATION BY MUTUAL AGREEMENT

This Agreement may be terminated at any time by written mutual agreement
between Distributor and Dealer in the event (1) any person named as an Owner
or Executive Manager wishes to retire, (2) Distributor and Dealer desire to
effect either a discontinuance or a relocation of Dealer's Dealership
facilities or (3) Distributor and Dealer deem it desirable for any other
cause or reason.

The Provisions of Section B of this Article V shall be deemed applicable to a
termination under this Section A.6. only to the extent and in the manner set
forth in such written mutual agreement of termination.

7. RIGHT TO RELY ON ANY APPLICABLE TERMINATION PROVISION

Because the notice periods may be different with respect to, and the rights
and obligations of the parties may vary depending upon, the particular
provisions under which this Agreement is terminated, the terminating party
shall have the right to select the provision of this Section A under which it
elects to terminate this Agreement without reference in its notice of
termination to any other provision of this Section A that may also be
applicable in the

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circumstances. The exercise of such right shall not preclude the terminating
party from at any time asserting or establishing that the termination of this
Agreement is also supportable under another provision of this Section A.

B. TRANSACTIONS AFTER TERMINATION

1. EFFECT OF TERMINATION ON ORDERS

In the event that this Agreement is terminated in accordance with any
provision of Section A of this Article V (other than Section A.6.),
Distributor may cancel all unshipped orders received from Dealer for Isuzu
Products.

Termination of this Agreement shall not release Dealer, however, from the
obligation to pay any sum which may then be owing Distributor.

2. EFFECT OF TRANSACTIONS AFTER TERMINATION

Neither the processing by Distributor of orders from Dealer nor the
continuation of sales of Isuzu Products or any other products to Dealer nor
any other act of Distributor after termination of this Agreement shall be
construed as a waiver of the termination, or as a renewal, extension or
continuation of this Agreement.

3. PURCHASES OF ELIGIBLE ITEMS

Distributor shall purchase, subject to and upon compliance with the
provisions hereinafter set forth in subsections 4 and 5 of this Section B,
all or any of the following Eligible Items from Dealer:

(i) Vehicles

All new, unused, unlicensed, undamaged Isuzu Vehicles of the then current
model year purchased by Dealer from Distributor then unsold which are the
unencumbered property and in the possession of Dealer or of Dealer's
financing institution at Dealer's net cost or the price last established by
Distributor for the sale of identical vehicles by Distributor to Authorized
Isuzu Dealers, whichever is lower, plus destination charges paid by Dealer
thereon, less all refunds or allowances paid thereon by Distributor, any
amount paid by Distributor for pre-delivery inspection and service thereon
and any costs required to place said vehicles in new condition.

(ii) Parts

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All new, unused, undamaged, resalable Isuzu Parts (except Publications and
parts listed in Distributor's Parts List as "non-returnable"), which are
still in the original and undamaged package, are for the then current and
three (3) immediately preceding vehicle model years and are the unencumbered
property of and in the possession of Dealer at the dealer prices set forth in
Distributor's then-current price list.

(iii) Accessories

All new, unused, undamaged, resalable Isuzu Accessories which are still in
the original and undamaged package, are for the then current vehicle model
year and are the unencumbered property of and in the possession of Dealer at
the dealer prices set forth in Distributor's then current price list.

(iv) Signs

Any signs owned by Dealer of a type recommended in writing by Distributor at
a price established in accordance with Distributor's pricing formula then in
effect.

(v) Special Tools

Any special tools of a type recommended by Distributor and designed
specifically for service of any Isuzu Vehicles that were offered for sale by
Distributor to Isuzu Dealers during the three (3) year period immediately
preceding termination and were purchased by Dealer from Distributor, at
prices therefor established in accordance with the pricing formula set forth
in the then current Service Policies and Procedures Manual.

4. RESPONSIBILITIES OF DEALER

Immediately following the effective date of a termination of this Agreement,
Dealer shall furnish Distributor with a list of the identification numbers of
and such other information as Distributor may require concerning eligible
vehicles to be purchased by Distributor in accordance with subsection 3 of
this Section B. Dealer will deliver all such vehicles in accordance with
Distributor's instructions. Within one (1) month following the effective
date of a termination of this Agreement, Dealer shall mail or deliver to
Distributor a list of eligible special tools and eligible signs. Within two
(2) months following effective date of a termination of this Agreement,
Dealer shall mail or deliver to Distributor a complete list of eligible parts
and accessories. Dealer shall retain possession of all such eligible items
until receipt of written shipping instructions from Distributor. Within one
(1) month after receipt of such instructions, Dealer shall tag, pack and ship
such eligible items, transportation charges prepaid, to the destination(s)
specified in such instructions. Dealer shall take such action and shall
execute and deliver such instruments as may be necessary (a) to convey to

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Distributor good marketable title to all eligible items to be purchased
hereunder, (b) to comply with the requirements of any applicable state law
relating to bulk sales or transfers and (c) to satisfy and discharge any
liens or encumbrances on such eligible items prior to delivery thereof to
Distributor.

5. PAYMENT BY DISTRIBUTOR

Subject to its right to offset any amounts owing Distributor from Dealer,
Distributor shall pay Dealer for the eligible items purchased by it under the
provisions of this Section B as soon as practicable following delivery
thereof to Distributor; provided, however, that any payment for such eligible
items may be made by Distributor, at its option, directly to any financing
institution or other person or concern which shall have a security or
ownership interest therein.

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ARTICLE VI. SUCCEEDING AND NEW AND SUPERSEDING
SALES AND SERVICE AGREEMENTS

A. SUCCEEDING AGREEMENTS

So that the dealer sales and service agreements offered to Authorized Isuzu
Dealers will reflect changes in conditions applicable to the sales and
service of Isuzu Products as well as changes in applicable laws or
regulations, or in the interpretations thereof, Distributor will review the
provisions of its current forms of Isuzu Dealer Sales and Service Agreement
on a periodic basis and will prepare new forms of Isuzu Dealer Sales and
Service Agreements that will be offered to those Authorized Isuzu Dealers who
receive an offer from Distributor of a succeeding Isuzu Dealer Sales and
Service Agreement. Dealer acknowledges, therefore, that any new form of
Isuzu Dealer Sales and Service Agreement that may be offered Dealer may
reflect therein any changes and modifications that are deemed necessary or
desirable by Distributor.

B. NEW AND SUPERSEDING DEALER AGREEMENTS

In the event a new and superseding form of Isuzu Dealer Sales and Service
Agreement is offered by Distributor to Authorized Isuzu Dealers generally at
any time, Distributor may terminate this Agreement upon prior written notice
to Dealer, provided that, at the same time, Distributor offers Dealer such
new and superseding form of Isuzu Dealer Sales and Service Agreement.

C. EFFECT OF NEW OR SUPERSEDING AGREEMENT ON RESPONSIBILITIES AND OBLIGATIONS
UNDER THIS AGREEMENT

Although the execution by Distributor and Dealer of any new or superseding
Dealer Sales and Service Agreement, whether it is executed in accordance with
the provisions of Section A and B of this Article VI or for any other reason,
will, by the terms thereof, cancel and supersede this Agreement, such
succeeding or new and superseding Isuzu Dealer Sales and Service Agreement
generally contemplates continuation of the business relations contemplated by
this Agreement. Accordingly, unless otherwise expressly agreed in writing by
Distributor and Dealer, the rights and obligations of Dealer that may
otherwise become applicable upon any termination of this Agreement shall not
be applicable in the event of the execution by Distributor and Dealer of any
such new or superseding Isuzu Dealer Sales and Service Agreement. Any
evaluation (of the effectiveness of Dealer's performance of any of its
responsibilities under this Agreement may be reflected and considered
together with any evaluation made of the effectiveness of Dealer's
performance of similar responsibilities under any such succeeding or new and
superseding form of Isuzu Dealer Sales and Service Agreement. Except insofar
as they may be inconsistent with the provisions of such succeeding or new and
superseding form of Isuzu Dealer Sales and Service Agreement, any

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<PAGE>

outstanding rights and obligations of Distributor and Dealer that arose under
this Agreement, or under any separate agreements executed by Distributor and
Dealer under this Agreement, shall be deemed continued under such succeeding
or new and superseding form of Isuzu Dealer Sales and Service Agreement.

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ARTICLE VII. ESTABLISHMENT OF SUCCESSOR DEALER

A. BECAUSE OF DEATH OF OWNER

In the event of termination of this Agreement by Distributor pursuant to
Section A.4 of Article V because of the death of an Owner, the following
provisions shall apply:

1. Subject to the other provisions of this Article, Distributor shall offer
a provisional Sales and Service Agreement the term of which shall not exceed
two (2) years to a successor dealer ("Successor Dealer") comprised of the
person nominated by such deceased Owner as his or her successor, together
with the surviving Owner(s), provided that:

(a) the nomination was submitted to Distributor on a Successor Addendum, was
consented to by the remaining Owner(s) and was approved by Distributor prior
to the death of the deceased Owner;

(b) Either (i) there has been no change in the Executive Manager of Dealer
or (ii) the provisions of Section B, below, have been complied with; and

(c) The Successor Dealer has capital and facilities substantially in
accordance with Distributor's Standards therefor at the time the provisional
Sales and Service Agreement is offered.

2. If the deceased Owner has not nominated a successor in accordance with
the provisions of Section A.1.(a), above, but all of the beneficial interest
of the deceased Owner has passed by will or the laws of intestate succession
directly to the deceased Owner's spouse and/or children or to one or more
surviving Owners who each held not less than a twenty-five percent (25%)
beneficial ownership interest in the dealership prior to the death of the
deceased Owner (collectively "Proposed New Owners"), subject to the other
provisions of this Article, Distributor shall offer a provisional Sales and
Service Agreement the term of which shall not exceed two (2) years to
Successor Dealer ("Successor Dealer") composed of the Proposed New Owners,
together with the surviving Owners provided that:

(a) Either (i) there has been no change in the Executive Manager of Dealer
or (ii) the provisions of Section B, below, have been complied with; and

(b) The Successor Dealer has capital and facilities substantially in
accordance with Distributor's Standards therefor at the time the provisional
Sales and Service Agreement is offered.

B. BECAUSE OF DEATH OR INCAPACITY OF EXECUTIVE MANAGER

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In the event of the termination of this Agreement by Distributor pursuant to
Section A.4. of Article V because of the death, physical or mental incapacity
("Disability Event") of the Executive Manager ("Disabled Executive Manager"),
subject to the other provisions of this Article, Distributor shall offer a
provisional Sales and Service Agreement the term of which shall not exceed
two (2) years to a Successor Dealer composed of the Owner(s), provided that:

1. Either (i) the Owner(s) had nominated, in a Successor Addendum, which
was approved by Distributor prior to such Disability Event, a person to
succeed the Disabled Executive Manager or (ii) not later than two (2) months
after the occurrence of such Disability Event a new Executive Manager is
proposed to Distributor by all of the Owner(s) and such a person is approved
by Distributor;

2. The new Executive Manager owns in the aggregate beneficial interests in
the Successor Dealer of not less than twenty-five percent (25%) or is given
the right to acquire and does acquire within twelve (12) months beneficial
interests in the Successor Dealer of not less than twenty-five percent (25%);
and

3. The Successor Dealer has capital and facilities substantially in
accordance with Distributor's Standards therefor at the time the provisional
Sales and Service Agreement is offered.

C. EVALUATION OF SUCCESSOR DEALER

During the term of the provisional Sales and Service Agreement, Distributor
will evaluate the performance of the Successor Dealer and periodically review
with the Successor Dealer this evaluation. If the Successor Dealer's
performance is deemed to be satisfactory to Distributor continuously during
the last three (3) months of the provisional Sales and Service Agreement,
Distributor will give first consideration to such Successor Dealer with
respect to a new Sales and Service Agreement.

D. TERMINATION OF MARKET REPRESENTATION

Notwithstanding anything stated or implied to the contrary in this Article,
Distributor shall not be obligated to offer a provisional or new Sales and
Service Agreement to any Successor Dealer if Distributor notified Dealer in
writing prior to the event causing the termination of this Agreement that
Distributor's market representation plans do not provide for continuation of
representation in Dealer's Market.

E. TERMINATION OF OFFER

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If the person or persons comprising a proposed Successor Dealer to which any
offer of a provisional or new Sales and Service Agreement shall have been
made pursuant to this Article shall not accept same within thirty (30) days
after notification to them of such offer, such offer shall automatically
expire.

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ARTICLE VIII. GENERAL PROVISIONS

A. DEALER NOT MADE AGENT OR LEGAL REPRESENTATIVE

This Agreement does not constitute Dealer the agent or legal representative
of Distributor or Manufacturer for any purpose whatsoever. Dealer is not
granted any express or implied right or authority to assume or to create any
obligation in behalf of or in the name of Distributor or Manufacturer or to
bind Distributor or Manufacturer in any manner or thing whatsoever.

B. DEALER'S RESPONSIBILITY FOR ITS OPERATIONS, EXPENDITURES, LIABILITIES AND
OBLIGATIONS

Dealer acknowledges that, as an independently owned and operated enterprise,
its success will be determined substantially by how effectively its
management manages and conducts its operations and affairs. This Agreement,
therefore, contemplates that all investments made by or in Dealer shall be
made, and Dealer shall fulfill its responsibilities and obligations under
this Agreement, in conformity with the provisions hereof, but otherwise at
the discretion of Dealer, its management and Owner(s). Nothing herein
contained shall impose any liability on Distributor or Manufacturer in
connection with the establishment or conduct of Dealer's facilities or
operations, and Dealer shall be solely responsible for any and all
expenditures, liabilities and obligations made, incurred or assumed by Dealer
in preparation for performance or in the performance of Dealer's
responsibilities and obligations under this Agreement.

C. NOTICES

All notices required or permitted to be given by either party to the other
under or in connection with this Agreement shall be in writing and delivered
personally or by mail to Dealer at its Dealership Location and to Distributor
at its national headquarters, or to such other address as the party to
receive the notice may have previously designated by written notice to the
other party. Notices shall be effective upon receipt. If mailed, such
notices shall be postage prepaid and sent by registered or certified mail,
return receipt requested.

D. OFFSETS AND SET OFFS

In addition to any other specific rights of offset or set off provided for
otherwise in any documents affecting Dealer and Distributor, Distributor
shall have the right to offset or set off any sums or accounts due or to
become due from Dealer to Distributor against any sums or accounts due or to
become due from Distributor to Dealer.

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E. CHANGES REQUIRED BY LAW

Should Distributor at any time determine that Federal or state laws, or
regulations adopted thereunder, or any new interpretation thereof, as any
thereof may be validly applied, require changes in any of the provisions of
this Agreement, Distributor may offer Dealer a new and superseding Isuzu
Dealer Sales and Service Agreement that has been appropriately modified to
reflect changes that are required by such new laws, regulations or
interpretations, or, in lieu thereof, Distributor may offer Dealer an
amendatory agreement to this Agreement reflecting such changes.

If Dealer shall fail to execute such new and superseding Isuzu Dealer Sales
and Service Agreement or such amendatory agreement and return it to
Distributor within thirty (30) days after it is offered Dealer, this
Agreement may be terminated by Distributor upon written notice thereof to
Dealer, with such termination to be effective upon receipt by Dealer of such
notice.

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EXHIBIT 10.6.3

FORD MOTOR COMPANY

IMPORTED VEHICLE SALES AND SERVICE AGREEMENT

STANDARD PROVISIONS

1. NOTICES

Any notice or designation required or permitted by this agreement shall be
in writing and shall be given by personal delivery or by first-class mail,
postage prepaid. Notices to the Company shall be delivered to or addressed
to the District Sales Manager of the area in which the Dealer is located;
notices to the Dealer shall be delivered to any person designated in
paragraph F(ii) of this agreement or directed to the Dealer at the Dealer's
principal place of business as described herein.

2. OPERATION OF BUSINESS

(a) SALES AND SERVICE RESPONSIBILITY. The Dealer shall vigorously and
aggressively promote, solicit and make sales of IMPORTED VEHICLES at
retail, and of other IMPORTED PRODUCTS at retail and wholesale, in the
DEALER'S LOCALITY in volumes that are satisfactory in the considered
business judgment of the Company in the light of, among other things, the
total sales and registrations of IMPORTED VEHICLES and other foreign and
domestic vehicles of similar price and function in such locality, the
retail sales objectives for IMPORTED PRODUCTS established for the Dealer by
the Company from time to time, the number and location of other IMPORTED
PRODUCT dealers in such locality and the sales and registrations of
IMPORTED VEHICLES, other IMPORTED PRODUCTS and other imported and domestic
vehicles of similar price and function in any of the Company's sales zone,
district or region in which the Dealer is located. The Dealer shall also
render prompt, workmanlike, courteous and willing service on all IMPORTED
PRODUCTS presented to his place of business for such purpose, including
without limitation all service to which a purchaser of an IMPORTED PRODUCT
from any authorized dealer may be entitled, pursuant to the Company's then
current Warranty and Policy Manual; however, the Dealer shall render
warranty and policy service on eligible IMPORTED PRODUCTS to all purchasers
of any such products from any authorized dealer. The Dealer shall not be
limited to residents of the DEALER'S LOCALITY in making sales or rendering
service.

(b) PLACE OF BUSINESS, FACILITIES AND EQUIPMENT. The Dealer shall
establish and maintain a place of business at a location mutually
satisfactory to the Dealer and the Company, which shall (i) contain such
space for the storage, display, sale and service of IMPORTED VEHICLES at
retail and GENUINE NEW PARTS at retail and wholesale, the retail sale of
used vehicles, customer parking and waiting, and office functions, and (ii)
be equipped with such tools and diagnostic and other equipment, as will
meet facility, tool and equipment standards established by the Company from
time to time, in the exercise of its considered business judgment, for all
IMPORTED PRODUCTS dealers of comparable market area and

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sales potential and as will enable the Dealer to fulfill his sales and
service responsibilities hereunder. The Dealer shall maintain the
operation of such place of business during and for not less than the
business hours customary in the trade in the area, and shall not move or
alter the same or establish any other place of business for the sale or
service of IMPORTED PRODUCTS or the retail sale of used vehicles at any
other location, without the prior written consent of the Company.

(c) CAPITAL. The Dealer at all times shall maintain and employ in
connection with the Dealer's business and operations under this agreement
such investment, net working capital, net worth, lines of credit and retail
finance plans as may be required to enable the Dealer to fulfill all of the
Dealer's responsibilities under this agreement.

(d) SIGNS. The Dealer shall identify the Dealer's place of business as an
authorized sales and service establishment for IMPORTED PRODUCTS with such
signs as are consistent with standards established by the Company from time
to time and approved by the Company with respect to any display therein of
any trademark or trade name used or claimed by the Company.

(e) PERSONNEL. The Dealer shall employ and train a sufficient number of
competent personnel of good character, including, without limitation,
managers, salesmen and service technicians, to fulfill all of the Dealer's
responsibilities under this agreement, and shall cause such personnel to
attend such training schools as the Company may establish for them from
time to time.

(f) ACCOUNTING SYSTEM. The Dealer shall install and use in his business in
IMPORTED PRODUCTS and trade-ins thereon an accounting system in accordance
with the Company's manuals of accounting procedures for its authorized
dealers. Such system shall be given priority in use by the Dealer but
shall not be exclusive of any other system the Dealer may desire to use.

(g) REPORTS. The Dealer shall furnish to the Company, at the times and on
the forms prescribed by the Company, complete, accurate and true statements
of the financial condition and operating results of the Dealer's business
in IMPORTED PRODUCTS and trade-ins thereon, and such sales and other
reports as the Company from time to time may require. All such statements
and reports shall be based whenever applicable upon the accounting system
referred to in subparagraph 2(f) hereof. Financial information furnished
by the Dealer shall be handled on a confidential basis by the Company and,
unless authorized by the Dealer or required by law, or offered in evidence
in judicial or arbitration proceedings, shall not be furnished, except as
an unidentified part of a composite or coded report, to any party outside
of the Company.

(h) THE DEALER'S STOCKS. The Dealer, subject to the Company's filling his
orders, shall maintain stocks of IMPORTED VEHICLES and GENUINE NEW PARTS of
an assortment and quantity adequate to meet the Dealer's share of current
demand therefor in the DEALER'S LOCALITY and enable the Dealer to meet his
sales and service responsibilities hereunder.

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(i) THE DEALER'S ORDERS. The Dealer shall furnish the Company each month
on the dates and forms designated by the Company, (i) orders for the
numbers and models of IMPORTED VEHICLES the Dealer will purchase during
such further succeeding months as the Company may designate from time to
time, (ii) estimates of the Dealer's requirements of IMPORTED VEHICLES for
such succeeding months as the Company from time to time may request, and
orders for the Dealer's requirements of GENUINE NEW PARTS.

(j) DEMONSTRATORS. The Dealer shall keep available at all times in good
appearance and running order for demonstration purposes an adequate number
of new IMPORTED VEHICLES of the latest year model.

(k) CUSTOMER HANDLING. The Dealer shall cooperate with Company programs,
and develop and maintain his own programs, designed to develop good
relationships between the Dealer and the public. The Dealer shall make
reasonable efforts to handle satisfactorily all matters brought to his
attention relating to the sale and servicing of IMPORTED PRODUCTS, shall
make regular contact with owners and users of IMPORTED PRODUCTS in the
DEALER'S LOCALITY, and shall report promptly to the Company the details of
each inquiry or complaint received by the Dealer relating to any IMPORTED
PRODUCT which the Dealer cannot handle satisfactorily. The Dealer shall
not display, offer for sale, or promote as a GENUINE NEW PART, any part or
accessory which is not in fact a GENUINE NEW PART. The Dealer shall not
make directly or indirectly any false or misleading statement or
representation to a customer as to any IMPORTED VEHICLE, GENUINE NEW PART
or other item of purchase, or the source, condition or capabilities
thereof, or the prices or charges therefor, or the charges made by the
Company for distribution, delivery, taxes or other items.

(l) CUSTOMER DEPOSITS. The Dealer shall use all reasonable efforts to
safeguard each deposit of cash or property (and proceeds therefrom)
received from a customer in anticipation of a future delivery of an
IMPORTED VEHICLE until such delivery is consummated.

(m) TRADE PRACTICES AND ADVERTISING. The Dealer shall conduct business in
a manner that will reflect favorably at all times on the good name and
reputation of the Company and IMPORTED PRODUCTS; and avoid in every way any
"BAIT," deceptive, misleading, confusing or illegal advertising or business
practice. The Company shall not employ or encourage any dealer to employ
any such practice.

(n) INSPECTIONS AND TESTS. The Dealer shall allow persons designated by
the Company, at reasonable times and intervals, to examine the Dealer's
facilities, stocks of IMPORTED PRODUCTS and used vehicles and vehicles in
for service, to test the Dealer's equipment and to examine, copy and audit
any or all of the Dealer's records and documents relating in any way to the
Dealer's business hereunder. The Dealer shall maintain all records and
documents relating to claims made upon or paid by the Company for one (1)
year from the date of payment in the case of warranty and policy claims and
for two (2) years from the date of payment in the case of any other claims.

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(o) SUGGESTED PRICE LABELS. If any passenger car IMPORTED VEHICLE is
delivered by the Company to the Dealer with an incorrect label, or without
a completed label, affixed thereto pursuant to the Federal Automobile
Information Disclosure Act, the Dealer shall promptly complete and affix to
such vehicle a label on the form and in accordance with the directions
furnished by the Company.

(p) INDEMNIFICATION BY THE COMPANY. The Company shall defend, indemnify,
hold harmless and protect the Dealer from any losses, damages or expense,
including costs and attorney's fees, resulting from or related to lawsuits,
complaints or claims commenced against the Dealer by third parties
concerning:

(1) Property damage to an IMPORTED PRODUCT or bodily injury or
property damage arising out of an occurrence caused solely by a
"production defect" in that product (i.e., due to defective materials
or workmanship utilized or performed at the factory), except for any
"production defect" in tires and diesel engines made by others,
provided, however, that the "production defect" could not have been
discovered by the Dealer in the reasonable predelivery inspection of
the IMPORTED VEHICLE as recommended by the Company.

(2) Property damage to an IMPORTED PRODUCT or bodily injury or
property damage arising out of an occurrence caused solely by a defect
in the design of that product, except for a defect in the design of
tires or diesel engines made by others.

(3) Any damage occurring to a new IMPORTED VEHICLE and repaired by
the Company (excluding removal and replacement of an entire component
with a like component where no welding, riveting or painting is
involved), from the time the IMPORTED VEHICLE leaves the Company's
assembly plant or warehouse to the time it is delivered to the
Dealer's designated location, provided the Company failed to notify
the Dealer in writing of such damage and repair in transit prior to
delivery of the IMPORTED VEHICLE to the first retail customer.

In the event that any legal action arising out of any of these causes is
brought against the Dealer, the Company shall undertake, at its sole
expense, to defend said action on behalf of the Dealer when requested to do
so by the Dealer, provided that the Dealer promptly notifies the Company in
writing of the commencement of the action against the Dealer and cooperates
fully in the defense of the action in such manner and to such extent as the
Company may reasonably require (provided, however, that the Company shall
have the right to continue the suit in the name of the Dealer, if the
Company deems such action to be necessary). Should the Company refuse to
undertake the defense on behalf of the Dealer, or fail to undertake an
adequate defense, the Dealer may conduct its own defense and the Company
shall be liable for the cost of such defense, including reasonable
attorney's fees, together with any verdict, judgment or settlement paid by
the Dealer (provided, however, that the Dealer shall notify the Company
within a reasonable period of any such settlement).

(4) Personal injury or property damage arising solely out of a
negligent or improper act of any employee of the Company.

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3. SALES TO OTHERS AND PURCHASES FROM OTHERS

The Dealer reserves the right to make purchases from others without
liability of any kind to the Company, provided that the Dealer shall not be
relieved of any responsibility under this agreement. The Company reserves
the right to make sales to others (including without limitation to other
dealers) and to appoint other or additional dealers in IMPORTED PRODUCTS
without liability of any kind to the Dealer. The Dealer shall be given an
opportunity to discuss with Company representatives the appointment of any
additional dealer in IMPORTED VEHICLES in the DEALER'S LOCALITY prior to
the Company's appointing the same.

4. CONSIDERATION OF ORDERS

The Company shall make reasonable efforts to fill each order of the Dealer
that is accepted by the Company, but shall not be liable in any respect for
failure or delay in shipping any accepted order that is due wholly or in
part to any shortage of material, labor, transportation, or utility
service, or to any labor or production difficulty of the Company, any
source supplying IMPORTED PRODUCTS to the Company, or their suppliers, or
to any cause beyond the Company's control or without the Company's fault or
negligence. The Company shall not be liable for shipping IMPORTED PRODUCTS
over routes or by means of transportation not specified by the Dealer.

5. PRICES AND CHARGES

The Dealer shall pay the Company the DEALER PRICE for each IMPORTED PRODUCT
purchased from the Company by the Dealer, plus the Company's charges for
reimbursement for all applicable taxes and duties, plus any applicable
holdback deposit, plus any charge for import handling or advertising and
reimbursement of taxes not included in the DEALER PRICE. The Company may
change such DEALER PRICE, charges or deposit at any time without notice.
Such price, charges and deposit shall be those in effect, and delivery to
the Dealer shall be deemed made and the order filled, on the date of
delivery to the carrier or to the Dealer, whichever occurs first. If the
Company increases the DEALER PRICE for any IMPORTED PRODUCT, the Dealer may
cancel, by notice to the Company within ten (10) days after his receipt of
notice of the increase, any orders for such product placed by him prior to
receiving notice of the increase and unfilled at the time the Company
receives his notice of cancellation.

6. TERMS AND TITLE

(a) PAYMENT. Payment for each IMPORTED PRODUCT purchased by the Dealer
shall be made in cash in advance unless the invoice or the Company's then
current and applicable wholesale payment plan provides otherwise, in which
event the terms of the invoice or such plan shall govern. Receipt of any
commercial paper shall not constitute payment until collected in full. The
Dealer shall pay all collection charges.

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(b) TITLE. Title to each IMPORTED PRODUCT purchased by the Dealer shall
pass to the Dealer, or to the finance institution designated by him, upon
delivery by the Company to the carrier or the Dealer, whichever occurs
first, but the Company shall retain a security interest in and right to
repossess any product until paid therefor.

(c) LOSSES, SHIPPING AND STORAGE CHARGES. The Dealer shall bear all risk
of loss or damage to, and all shipping charges applicable to any IMPORTED
VEHICLE purchased by him occurring or accruing after delivery of the
vehicle to him or the carrier f.o.b. at a Company designated location. The
Dealer shall be responsible for and pay any and all demurrage, storage and
other charges accruing after arrival of any shipment at its destination.

(d) STATE AND LOCAL TAXES. As a part of each order, the Dealer represents
and warrants that all IMPORTED PRODUCTS are purchased for resale in the
ordinary course of business and that he has complied with all requirements
for his collection and/or payment of applicable sales, use and like taxes.
The Dealer agrees to make timely and proper return and payment of all
applicable sales, use and like taxes, and to hold the Company harmless from
all claims and demands therefor.

7. REFUNDS ON DEALER PRICE REDUCTIONS

If the Company changes the DEALER PRICE for any then current year model of
IMPORTED VEHICLE (or for any new year model which replaces an equivalent
next prior year model) or any factory-installed options therefor, the
Company shall pay or credit to the Dealer, for each unused, undamaged and
unsold IMPORTED VEHICLE and each Dealer-owned demonstrator of record, of
such current (or next prior) year model in the Dealer's stock or service on
the effective date of such change, the difference between the total DEALER
PRICES for such stock or demonstrator vehicle and factory-installed options
thereon before and after such changes, provided (i) such changes result,
after allowing for all other sums paid or offered by the Company on the
vehicle or its options, in a net price reduction for the vehicle as so
equipped in excess of Five Dollars ($5.00), (ii) the vehicle was purchased
from the Company or another authorized dealer within the next preceding
twelve (12) months, (iii) no substantial change has been made in the
opinion of the Company in the capacity, performance, size, weight, design,
and/or specifications of the vehicle or its factory-installed options, and
(iv) the Dealer applies for such payment or credit on the form, in the time
and with the supporting evidence specified by the Company.

Notwithstanding anything to the contrary in this paragraph 7, the Company
shall have no obligation to make any refund or credit hereunder with
respect to: (i) any reduction in the amount of the Company's charges for
reimbursement of taxes; (ii) any reduction in any contribution for
advertising or sales promotion; (iii) any reduction in or lower DEALER
PRICE for any option not factory-installed; (iv) any reduction in or lower
DEALER PRICE made by the Company in response to any law, order, regulation
or request of any government or governmental agency; or (v) any price
change or sum paid or offered by the Company with respect to any IMPORTED
PRODUCT unless it is announced by the Company as a reduction in the DEALER
PRICE, and is reflected in the Company's Suggested List Price, for such
product.

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8. CHANGES WITH RESPECT TO IMPORTED PRODUCTS

The Dealer acknowledges that the Company's plans for continued importation
and sale of IMPORTED PRODUCTS and its domestic marketing strategy therefor
depend upon satisfactory prices from the supplier(s) thereof, and will be
affected, among other things, by changes in international relationships,
world market conditions, foreign exchange rates and U.S. customs duties and
surcharges, the development of competitive products domestically produced
by the Company or other manufacturers, as well as satisfactory shipments,
sales and profits. Accordingly, the Dealer recognizes that at any time and
from time to time:

(a) The design of any IMPORTED PRODUCT may be changed without notice, or

(b) Upon notice to the Dealer, the Company may:

(i) reduce or discontinue the importation of any IMPORTED
PRODUCT, or
(ii) provide the Dealer a new product in place of any IMPORTED
PRODUCT, or
(iii) market a competitive product through other dealers,

all without any liability or obligation to the Dealer, including without
limitation, any obligation with respect to any IMPORTED PRODUCT theretofore
ordered or purchased by, or delivered to the Dealer.

9. WARRANTY

(a) IMPORTED VEHICLE WARRANTY. The Company shall from time to time
establish, by notice to the Dealer, the warranty to the owner
applicable to each IMPORTED VEHICLE. There shall be NO OTHER
WARRANTY, express or implied, including any warranty of
MERCHANTABILITY OR FITNESS, or any other obligation of the Company to
the Dealer or the owner with respect to the IMPORTED VEHICLE or any
part thereof except the warranty established pursuant to this
subparagraph. The Dealer shall expressly incorporate such warranty as
a part of each buyer's order form or other contract for the sale of an
IMPORTED VEHICLE and shall deliver a copy of the warranty, in the form
furnished by the Company, to the owner at the time the IMPORTED
VEHICLE is delivered to the owner, all in accordance with instructions
set forth in the Company's then current Warranty and Policy Manual and
supplements thereto (hereinafter called "Warranty Manual").

(b) GENUINE NEW PART WARRANTY. The Company shall from time to time
establish, by notice to the Dealer, the warranty applicable to each
GENUINE NEW PART. There shall be NO OTHER WARRANTY, express or
implied, including any warranty of MERCHANTABILITY OR FITNESS, or any
other obligation of the Company to the Dealer or the customer with
respect to any GENUINE NEW PART or any part thereof except the
warranty established pursuant to this subparagraph.

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10. OWNER LITERATURE

The Dealer shall deliver to each retail purchaser of an IMPORTED VEHICLE
from him, information concerning the warranty, product service and dealer
service policies in such form as may then be in effect.

11. PREDELIVERY INSPECTION

The Dealer shall, at his own expense, unless the Company shall establish a
reimbursement procedure therefor, inspect and condition each IMPORTED
VEHICLE before delivery to a retail customer in accordance with schedules
and instructions furnished by the Company from time to time.

12. DEALER NOT AGENT OF THE COMPANY

This agreement does not in any way create the relationship of principal and
agent between the Company and the Dealer; and under no circumstances shall
the Dealer be considered to be the agent of the Company. The Dealer shall
not act or attempt to act, or represent himself, directly or by
implication, as agent of the Company or in any manner create or attempt to
create any obligation on behalf or in the name of the Company.

13. TRADEMARKS AND TRADE NAMES

(a) LIMITATIONS ON USE. The Dealer shall not use, or permit the use of,
the word "Ford" or any other trademark or trade name used or claimed by the
Company or any source supplying IMPORTED PRODUCTS to the Company, or coined
words or combinations containing the same or parts thereof, either as a
part of any firm name or trade name unless the Company shall consent
thereto in writing, or in connection with any business conducted by the
Dealer other than dealing, under this agreement, in IMPORTED PRODUCTS to
which such mark or name refers, and in trade-ins thereon, and then only in
the manner, form and extent approved by the Company. The Dealer shall
accomplish discontinuance of such use on request of the Company at any
time.

(b) PROTECTION AND NON-CONTEST. The Dealer shall promptly carry out all
instructions issued by the Company from time to time to protect and promote
any trademark or trade name used or claimed by the Company or any source
supplying IMPORTED PRODUCTS to the Company, and shall not contest the
validity of, or the right of the Company or any such source to exclusive
use of, any such trademark or trade name.

14. TERMINATION

(a) BY THE COMPANY. The Company may terminate this agreement:

(1) By notice given to the Dealer not less than ninety (90) days
prior to the effective date of such notice in the event the
Dealer shall have failed to fulfill any one or more of the
Dealer's responsibilities set forth in this agreement.

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(2) By notice given to the Dealer, effective immediately, in any of
the following events: (i) failure of the Dealer to fulfill any
one or more of the Dealer's responsibilities set forth in
paragraphs 5 as to prices or charges, 6 as to terms or title, and
13 as to trademarks and trade names; (ii) any assignment or
attempted assignment by the Dealer of any interest in this
agreement or any change, however accomplished, in the direct or
indirect ownership or management of the Dealer from that set
forth in paragraph F, without the Company's prior written assent;
(iii) failure of the Dealer for any reason to function in the
ordinary course of business or to keep his place of business open
during and for not less than the hours customary in the trade in
his area; (iv) any conviction in a court of competent
jurisdiction of the Dealer or any person named in paragraph F, or
any disagreement between or among such persons, which in the
opinion of the Company may affect adversely the ownership,
operation, management, business, reputation or interest of the
Dealer or the Company; (v) submission by the Dealer to the
Company of any false or fraudulent report or statement, including
without limitation claims for labor or parts under paragraph 9 as
to warranties, and claims for any other sum from the Company;
(vi) the Dealer shall have continued or repeated any advertising
or practice contrary to subparagraph 2(m) or shall have engaged
in similar advertising or practices after notice from the Company
that the same may be regarded by the Company as a basis for
termination of this agreement; (vii) the Dealer shall have
continued or repeated any customer handling practice contrary to
subparagraph 2(k) or shall have engaged in similar customer
handling or practices after notice from the Company that the same
may be regarded by the Company as a basis for termination of this
agreement; (viii) misrepresentation by the Dealer to the Company
as to the ownership or management of the Dealer either in
connection with the application for this agreement or thereafter;
(ix) if the Dealer has been holding one or more other sales and
service agreements from the Company covering other vehicles made
or sold by the Company, the termination for any reason of any
such other agreement by either the Company or the Dealer; (x) any
of the reasons set forth in subparagraph 8(b) hereof (except
clause (iii) thereof) with respect to IMPORTED VEHICLES.

(3) By notice given to the Dealer not less than thirty (30) days
prior to the effective date of such notice in the event the
Company decides to terminate all outstanding sales agreements
with Dealers for IMPORTED PRODUCTS and to offer to them a new or
amended form or forms of sales and service agreement.

(b) BY EITHER PARTY. Either party may terminate this agreement by notice
given to the other, effective immediately, in any of the following
events: (i) dissolution of the Dealer if the Dealer is a corporation
or partnership; (ii) insolvency of the Dealer, inability of the Dealer
to meet debts as they mature, filing by or against the Dealer of any
petition under any bankruptcy or reorganization or receivership law,
appointment by a court of a temporary or permanent receiver or trustee
or custodian for the Dealer

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or all or any part of the Dealer's business, or an assignment by the
Dealer for benefit of creditors; (iii) failure of either party to
obtain or maintain any required license; or (iv) death or physical or
mental incapacity of any owner of the Dealer named in paragraph F,
provided, however, that in order to facilitate orderly liquidation of
the dealership, the Company shall defer the effective date of
termination for a period of from three months to one year, as the
Company may determine, if the representative of such deceased or
incapacitated owner shall so request.

(c) BY THE DEALER. The Dealer may terminate this agreement at any time at
will by notice given to the Company at least thirty (30) days prior to the
effective date of such notice.

15. ACTS IN GOOD FAITH

The Dealer acknowledges that each of the Dealer's responsibilities under
this agreement is reasonable, proper and fundamental to the purposes of
this agreement and failure by the Dealer to fulfill any of the same would
constitute a material breach of this agreement. The Dealer further
acknowledges that the occurrence of any of the events of immediate
termination described in subparagraphs 14(a)(2) or 14(b) would seriously
impair fundamental considerations upon which this agreement is based, and
that the right of termination reserved in subparagraph 14(a)(3) for the
offer of new sales and service agreements is necessary to permit the
Company to remain competitive at all times with other manufacturers and
sellers of vehicles. The Dealer agrees that if the Company or any of its
representatives (i) requests the Dealer to fulfill any of such
responsibilities, or (ii) believes that any such failure, occurrence or
event is occurring or has occurred and advises the Dealer that, unless
remedied, such failure, occurrence or event may result in termination or
nonrenewal of this agreement by the Company, or (iii) recommends or gives
notice of termination or nonrenewal of, or terminates, or does not renew,
this agreement because of any such failure, occurrence or event, then such
request, advice, recommendation, notice, termination or nonrenewal shall
not be considered to constitute or be evidence of coercion or intimidation,
or threat thereof, or action not in good faith.

16. OPPORTUNITY TO CURE

Notwithstanding anything herein to the contrary, the Company shall give the
Dealer a reasonable opportunity to cure any failure by the Dealer to
fulfill any of the Dealer's responsibilities set forth in paragraphs 2 as
to operation of his business, 5 as to prices and charges, 6 as to terms and
title, 9 as to warranties, 10 as to owner literature, 11 as to predelivery
inspection, 12 as to no agency and 13 as to trademarks and trade names
prior to giving the Dealer notice of termination or nonrenewal based upon
such failure.

17. DISPOSITION OF THE DEALER'S ASSETS

The Dealer agrees that the Company has the right to select the dealers it
shall appoint to distribute products made or sold by it and may decline to
appoint, as an authorized dealer of the Company, any purchaser or
prospective purchaser of any of the assets or capital stock of the Dealer
upon the termination of this agreement or otherwise.

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18. OBLIGATIONS UPON TERMINATION

Upon termination or nonrenewal of this agreement the Dealer shall cease to
be an authorized dealer in IMPORTED PRODUCTS and shall:

(a) SUMS OWING THE COMPANY. Pay to the Company all sums owing from the
Dealer to the Company.

(b) DISCONTINUANCE OF USE OF TRADEMARKS AND TRADE NAMES. At the Dealer's
expense (i) remove all signs erected or used by the Dealer, or by any
business affiliated with the Dealer and bearing any trademark or trade name
used or claimed by the Company or any source supplying IMPORTED PRODUCTS to
the Company (except as such use may be permitted under other sales and
service agreements with the Company), or any word indicating that the
Dealer is an authorized dealer in any IMPORTED PRODUCT; (ii) erase or
obliterate all such trademarks, trade names and words from stationery,
forms and other papers used by the Dealer or any business affiliated with
the Dealer; (iii) permanently discontinue all advertising of the Dealer as
an authorized dealer in any IMPORTED PRODUCT; and (iv) refrain from doing
anything that would indicate that the Dealer is or was an authorized dealer
in any IMPORTED PRODUCT. If the Dealer does not comply with any of the
requirements of this paragraph 18(b), the Dealer shall reimburse the
Company for all costs and expenses, including attorneys' fees, incurred by
the Company in effecting or enforcing compliance.

(c) ASSIGNMENT OF ORDERS AND CUSTOMER DEPOSITS. Assign to the Company, or
its nominee, all customer orders for IMPORTED PRODUCTS which the Dealer has
not filled, and all customer deposits made thereon; and deliver to the
Company the names and addresses of the Dealer's existing and prospective
customers of IMPORTED PRODUCTS.

(d) CANCELLATION OF ORDERS. Termination or nonrenewal of this agreement
shall operate to cancel each order for an IMPORTED PRODUCT theretofore
received by the Company from the Dealer and unfilled (as defined in
paragraph 5) on the effective date of termination or nonrenewal.

(e) WARRANTY WORK. The Dealer shall cease to be eligible to receive
reimbursement from the Company with respect to any work thereafter
performed or part thereafter supplied under any warranty or policy
applicable to any IMPORTED PRODUCT, unless specifically authorized by the
Company in writing to perform such work and then only in the manner and for
the period of time set forth in such authorization.

(f) SERVICE RECORDS. The Dealer shall deliver to the Company or its
nominee all of the Dealer's records with respect to predelivery, warranty,
policy, campaign and other service work of the Dealer.

19. REACQUISITION OF IMPORTED PRODUCTS AND ACQUISITION OF THE DEALER'S
SIGNS, TOOLS AND EQUIPMENT

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Upon termination or nonrenewal of this agreement by the Company
(except pursuant to subparagraph 14(a)(3) unless the Dealer shall fail
to accept a new agreement) or by the Dealer, the Dealer may elect, as
provided in paragraph 20, to have the Company purchase or accept upon
return from the Dealer, in return for his general release specified in
paragraph 20:

(a) IMPORTED VEHICLES. Each unused, undamaged and unsold IMPORTED
VEHICLE (including all factory-installed options thereon) in the
Dealer's stock on the effective date of such termination or
nonrenewal, provided such vehicle is in first-class saleable
condition, is of a then current year model, has not been altered since
purchase from the Company, and was purchased by the Dealer from the
Company or another authorized dealer in IMPORTED VEHICLES prior to the
time the Dealer first learned of the prospective termination or
nonrenewal of this agreement. The price for such IMPORTED VEHICLE
shall be its DEALER PRICE, plus the Company's charges for holdback
deposits, import handling, advertising and reimbursement of taxes if
the same are not included in the DEALER PRICE at the time it was
purchased from the Company, less all allowances previously paid or
offered thereon by the Company.

(b) GENUINE NEW PARTS.

(i) Each unused, undamaged and unsold GENUINE NEW PART
(including unopened appearance and maintenance materials and
paint) in the Dealer's stock on the effective date of
termination or nonrenewal, provided such part is offered for
sale by the Company to authorized IMPORTED VEHICLE dealers
in the Company's then current price list of pass and
accessories, is in first-class saleable condition and was
purchased by the Dealer either from the Company or in
reasonable volume from another authorized dealer in IMPORTED
VEHICLES prior to the time the Dealer first learned of the
prospective termination or nonrenewal of this agreement.

(ii) Each unused, undamaged and unsold accessory for IMPORTED
VEHICLES in the Dealer's stock on the effective date of
termination or nonrenewal, provided such accessory is in
first-class saleable condition, was purchased by the Dealer
either from the Company or another authorized dealer in
IMPORTED VEHICLES prior to the time the Dealer first learned
of the prospective termination or nonrenewal of this
agreement, and was sold by the Company either for use in an
IMPORTED VEHICLE that is a current year model on such
effective date or within the twelve months next preceding
such effective date.

(iii) The price for each such part or accessory shall be its
DEALER PRICE in effect on the effective date of termination
or nonrenewal, less all allowances and discounts paid or
offered thereon by the Company.

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(iv) The Dealer at his own expense shall carefully pack and box
such of the eligible parts and accessories as the Company
may direct and the Company shall pay the Dealer an
additional 5% of the DEALER PRICE of the eligible parts and
accessories so packed and boxed.

(c) THE DEALER'S SIGNS. Each sign or portion thereof bearing the word
"Merkur" or any trademark or trade name used or claimed by the Company
pertaining to IMPORTED PRODUCTS which is located at a place of
business of and is owned by the Dealer on the effective date of
termination or nonrenewal, and was approved by the Company pursuant to
subparagraph 2(d) hereof. The price for each such sign or part
thereof shall be its fair market value on such effective date as
agreed by the Company and the Dealer, or, if they cannot agree, as
determined by a qualified independent appraiser selected by the
Company and the Dealer.

(d) TOOLS AND MECHANICAL EQUIPMENT. All tools and automotive service
equipment owned by the Dealer on the effective date of termination or
nonrenewal which were designed especially for servicing IMPORTED
PRODUCTS, which are of a type and number recommended in writing by the
Company, which are in usable and good condition except for reasonable
wear and tear, and which were purchased by the Dealer within the three
(3) year period preceding the effective date of termination or
nonrenewal. The price for each such tool and item of automotive
service equipment shall be its fair market value on such effective
date as agreed by the Company and the Dealer, or, if they cannot
agree, as determined by a qualified independent appraiser selected by
the Company and the Dealer.

(e) PROCEDURES, DELIVERY AND TITLE. The Dealer shall return all property
to be purchased or reacquired by the Company pursuant to this
paragraph 19 in accordance with the procedures and timetables then
established by the Company, shall deliver such property at the
Dealer's place of business unless the Company directs otherwise (in
which event the Company shall pay transportation costs to the place of
delivery) and shall furnish a general warranty bill of sale thereof
satisfactory to the Company, together with evidence satisfactory to
the Company that the Dealer has complied with all applicable bulk
sales laws and that such property is free and clear of all claims,
liens and encumbrances.

(f) PAYMENT. The Company shall pay the Dealer for the property purchased
or reacquired by it pursuant to this paragraph 19 within a reasonable
time following the Dealer's fulfillment of all of the Dealer's
obligations under paragraph 18 and this paragraph 19, subject to the
Dealer's tender of a general release as specified in paragraph 20 and
subject to offset of any obligations then owing by the Dealer to the
Company.

(g) ASSIGNMENT OF BENEFITS. As an assist to the Dealer in effecting an
orderly transfer of his assets to a replacement dealer and to minimize
possible interruptions in customer convenience and service, in the
event of termination or nonrenewal by either party, any rights or
benefits with respect to subparagraphs 19(a), 19(b), 19(c) and 19(d),

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herein may be assigned by the Dealer to anyone to whom the Dealer has
agreed to sell the respective property and whom the Company has
approved as a replacement for the Dealer. Such assignments will be
subject to Dealer's fulfillment of his obligations under paragraph 18
and this paragraph 19 and subject to the Dealer's tender of a general
release as specified in paragraph 20.

20. TERMINATION BENEFITS FULL COMPENSATION; GENERAL RELEASE

If the Company or the Dealer terminates or does not renew this agreement,
the Company shall, within a reasonable time after the effective date of
such termination or nonrenewal, submit to the Dealer a written tender of
the benefits set forth in paragraph 19, including an estimate of the amount
to be paid thereunder, and a form for the Dealer to use if he desires to
reject and release the Company from providing such benefits. The Dealer
shall have thirty (30) days after his receipt of such tender and release
form to elect either (i) to reject all of such benefits by executing and
returning the release form to the Company within such thirty (30) days, or
(ii) to accept any or all such benefits as full and complete compensation
to the Dealer for such termination or nonrenewal by failing to execute and
return the release form within such thirty (30) days. Upon the Dealer's
election to accept any of such benefits, the Company shall be released from
any and all other liability to the Dealer, however claimed to arise, except
for such amounts as the Company may have agreed in writing to pay to the
Dealer. The Dealer, simultaneously with his receipt of the benefits
provided for in paragraph 19, shall execute and deliver to the Company a
satisfactory general release which shall exempt any remaining liability
under paragraph 19 or other written agreements.

21. DISPOSITION OF THE DEALERS ASSETS

In view of the nature, purposes and objectives of the Company's Dealer
Sales and Service Agreements, and the differences in operating requirements
among dealerships of differing sizes and types of markets, the Company
expressly reserves the right to select the dealers with whom it will enter
into such agreements so as to maintain as high quality a dealer
organization as possible.

In the event this agreement is terminated or not renewed by either party or
if the Dealer plans to terminate or not renew this agreement, the Company
acknowledges that the Dealer has the right to negotiate for the sale of the
assets of the Dealer at such price as may be agreed upon by the Dealer and
the prospective purchaser. In turn, the Dealer acknowledges that the
Company has the right to approve or decline to approve any prospective
purchaser as to his character, automotive experience, management, capital
and other qualifications for appointment as an authorized dealer in
IMPORTED PRODUCTS for the dealership operations involved. Approval by the
Company of the prospective purchaser shall not, however, be unreasonably
withheld. If, in the opinion of the Company, the price to be paid for such
assets appears, on the basis of the average operating results of other
dealers, to result in an unsatisfactory return on investment so that such
prospective purchaser (i) may not remain as a dealer, or (ii) may be
impelled to sell IMPORTED PRODUCTS at high noncompetitive prices with a
probable reduction in sales volume, the Company may without liability to
the Dealer, counsel with such prospective purchaser regarding such
opinions.

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22. DEALER'S SUCCESSOR ON DEATH OR INCAPACITY

Upon any termination or nonrenewal of this agreement because of the death
or incapacity of any owner named in paragraph F(i), the Company shall offer
a two-year interim sales agreement for IMPORTED PRODUCTS:

(a) To any person previously nominated, in an amendment to paragraph
F(ii), by such owner as his successor, together with any remaining
persons named in paragraph F(i), provided that:

(i) The nominee has been participating in the management of the
dealership for a reasonable period of time and is named in
paragraph F(ii) when notice of such termination or
nonrenewal is given; and

(ii) The facilities and capital of the dealership are then
satisfactory in the opinion of the Company; and

(iii) If more than one person has been nominated, the Company in
its discretion shall determine to which nominee or nominees
the interim agreement shall be offered.

(b) If there is no valid nominee, then to the spouse of such owner,
together with any remaining persons named in paragraph F(i), provided
that:

(i) Managerial authority for the operation of the dealership
will be vested in persons named in paragraph F(ii), or in
other persons determined by the Company to be qualified; and

(ii) The facilities and capital of the dealership are then
satisfactory in the opinion of the Company.

(c) Such two-year interim sales and service agreement shall be the same as
the Company's then standard sales and service agreement for IMPORTED
PRODUCTS, except that it shall be designated as an interim agreement.
The Company may, in its discretion, extend the term of any interim
sales and service agreement to facilitate the purchase by others of
the former owner's interest in the dealership. Before the end of any
interim sales and service agreement, the Company shall determine, in
its discretion, whether or not the persons named in paragraphs F(i)
and F(ii) of such agreement then possess the necessary qualifications,
capital and facilities of an authorized dealer. If the Company
determines that they do possess the same, the Company shall offer them
its then standard form of IMPORTED PRODUCTS sales and service
agreement.

(d) In the event that the persons to whom an interim or standard sales and
service agreement is offered do not accept the same within thirty (30)
days, the offer shall automatically expire.

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(e) Notwithstanding anything to the contrary in this paragraph 22, the
Company shall not be obligated to offer an Interim Agreement to any
person if the Company notifies the Dealer in writing prior to
termination or nonrenewal of this agreement because of the death or
incapacity of an owner named in paragraph F(i) that the Company's
plans do not provide for continuation of representation of IMPORTED
PRODUCTS at the Dealer's location.

23. ACKNOWLEDGMENTS

This agreement terminates and supersedes all other agreements, and
constitutes the entire agreement, between the parties with respect to
IMPORTED PRODUCTS. Each party acknowledges that, except as expressly set
forth herein or elsewhere in writing, no representation, understanding or
presumption of law or fact has been made or relied upon (i) which has
induced the execution of this agreement or would in any way modify any of
its provisions, or (ii) with respect to the effectiveness or duration of
this agreement or the sales or profit expectancy of the Dealer. The Dealer
also acknowledges that he has voluntarily entered into this agreement
without coercion or intimidation or threats thereof from the Company, and
that each of its terms and conditions are reasonable, fair and equitable.

24. ASSIGNMENT

Neither this agreement nor any right or interest hereunder may be assigned
by the Dealer without the prior written assent of the Company.

25. NO IMPLIED WAIVERS

Except as expressly provided in this agreement, the waiver by either party,
or the failure by either party to claim a breach, of any provision of this
agreement shall not constitute a waiver of any subsequent breach, or affect
in any way the effectiveness of such provision.

26. TRANSACTIONS AFTER TERMINATION NOT A RENEWAL

In the event either party has any business relations with the other party
after termination or nonrenewal of this agreement, such relations shall not
constitute a renewal of this agreement or a waiver of such termination, but
all such transactions shall be governed by terms identical with the
provisions of this agreement unless the parties execute a new and different
agreement.

27. LIMITATION OF THE COMPANY'S LIABILITY

This agreement contemplates that all investments by or in the Dealer shall
be made, and the Dealer shall purchase and resell IMPORTED PRODUCTS, in
conformity with the provisions hereof, but otherwise in the discretion of
the Dealer and the Dealer's owners. Except as herein specified, nothing
herein contained shall impose any liability on the Company in connection
with the Dealer's operations under this agreement or otherwise or for

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any expenditure made or incurred by the Dealer in preparation for
performance or in performance of the Dealer's responsibilities under this
agreement.

28. EFFECT OF DETERMINATIONS BY THE COMPANY

Any determination, opinion or exercise of discretion to be made by the
Company in connection with any provision of this agreement shall be made by
the Company alone and shall be final, conclusive, and binding upon the
parties hereto.

29. AMENDMENT

Notwithstanding anything in this agreement to the contrary, the Company
shall have the right to amend, modify or change this agreement in case of
legislation, government regulation or changes in circumstances beyond the
control of the Company that might affect materially the relationship
between the Company and the Dealer.

30. MICHIGAN AGREEMENT

This agreement has been signed by the Dealer and sent to the Company in
Michigan for final approval and execution, and has been signed and
delivered on behalf of the Company. The parties intend this agreement to
be executed as a Michigan agreement and to be construed in accordance with
the laws of the State of Michigan.

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EXHIBIT 10.6.4

FORD MOTOR COMPANY

IMPORTED VEHICLE SALES AND SERVICE AGREEMENT

Oakland DISTRICT AGREEMENT made as of the 2nd day of July, 1984, by and
between Lithia Motors, Inc. Corporation, Oregon, doing business as Lithia
Toyota, Lincoln-Mercury and with a principal place of business at 360 E.
Jackson, Medford, Jackson, Oregon 97501 (hereinafter called "Dealer"), and Ford
Motor Company, a Delaware corporation with its principal place of business at
Dearborn, Michigan (hereinafter called "Company")

PREAMBLE

The purpose of this agreement is to establish the Dealer as an authorized
dealer for the sale and service of the new IMPORTED VEHICLES (as herein defined
and designated to the Dealer), and parts and accessories therefor, offered to
the Dealer by the Company, and to set forth the responsibilities of the Company
in selling those products to the Dealer and of the Dealer in reselling and
providing service for them within the framework of a franchised dealer system.

The purpose of this preamble is to assist in understanding those
responsibilities in the light of the nature of the Company's business in
imported products, the franchised dealer system, and the interdependence among
the Company, the dealer and the public.

The Company and its dealers in imported products can succeed only if an
adequate supply of their products is made available to consumers at prices they
are willing and able to pay and prompt, reliable and efficient sources for
service and replacement parts are provided. To achieve these results, the
Company and its suppliers must schedule production and importation and build up
warehouse stocks of vehicles and parts and accessories therefor in substantial
quantities far in advance of receipt of actual orders. These production and
importation schedules are generally set at least six months in advance based
upon its and the best estimates available of the current and future market for
each product. If the estimated sales volume for any product is not realized,
the Company suffers because of commitments already made, and the costs of
distributing that product are increased. If the dealers' actual orders for any
product are different or higher than estimated, the Company and the dealers both
suffer loss of profits because of insufficient supply.

In the opinion of the Company, franchised dealers, each responsible for
representation of designated imported products in a market area, are usually
best able to sell such products in the necessary volumes and provide

[TEXT MISSING]

IN CONSIDERATION of the mutual agreements and acknowledgements herein made,
the parties agree as follows:

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A. DEFINITIONS. As used herein:

1. "IMPORTED VEHICLES" shall mean the makes, lines and models of automotive
vehicles designated in paragraph I hereof, and such other or additional makes,
lines or models as the Company may designate in writing to the Dealer from time
to time, made by one or more foreign sources and from time to time imported into
the United States from countries other than Canada, and offered for sale by the
Company to the Dealer for resale.

2. "GENUINE NEW PARTS" shall mean parts, equipment and accessories distributed
by the Company for IMPORTED VEHICLES and "IMPORTED PRODUCTS" shall mean IMPORTED
VEHICLES and GENUINE NEW PARTS.

3. "DEALER PRICE" shall mean the price to the Dealer established by the
Company from time to time for each IMPORTED PRODUCT f.o.b. Company warehouse
before deduction of any cash or other discount and as the Company may establish
from time to time, either inclusive or exclusive of any dealer holdback deposit
or any charge for taxes, import handling or advertising.

4. "DEALER'S LOCALITY" shall mean such locality as may be designated by the
Company from time to time as the area of the Dealer sales and service
responsibility for IMPORTED VEHICLES.

B. APPOINTMENT. Subject to the provisions of this agreement, the Company
appoints the Dealer as an authorized dealer at retail in IMPORTED VEHICLES and
at retail and wholesale in other IMPORTED PRODUCTS. The Dealer accepts such
appointment and agrees to fulfill the responsibilities of such a dealer as
herein provided.

C. AGREEMENT TO PURCHASE AND SELL. Subject to the provisions of this
agreement, the Dealer shall purchase IMPORTED PRODUCTS from the Company, and the
Company shall make reasonable efforts to supply and sell the same to the Dealer,
in sufficient quantities to enable him to fulfill his responsibilities
hereunder.

D. STANDARD PROVISIONS PART OF AGREEMENT. Ford Motor Company's Imported
Vehicle Sales and Service Agreement Standard Provisions (Form LM-8137a), a
duplicate original of which is attached to the Dealer's copy hereof, have been
read and agreed to by each party, and such Standard Provisions and any duly
executed and delivered supplement or amendment thereto, are hereby made a part
of this agreement as if here set forth in full.

E. AUTHORIZED COMPANY PERSONNEL The Dealer acknowledges notice that (i)
this agreement shall bind the Company when it bears the facsimile signature of
the Vice President and General Manager or the General Manager of the Lincoln-
Mercury Division of the Company, and the manual countersignature of the General
Sales Manager, Market Representation Manager, or a Regional or District Sales
Manager, of the Lincoln-Mercury Division of the Company, and a copy thereof is
delivered personally or by mail to the Dealer or the Dealer's principal place of
business, (ii) no one except the Vice President and General Manager, or the
General Manager, General Sales Manager, or Market Representation Manager of the
Lincoln-Mercury Division of the Company, or the Secretary or an Assistant
Secretary of the Company, is authorized on behalf of the Company to

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make or execute any other agreement relating to the subject matter hereof, or in
any manner to modify the terms of this agreement, and they only by an instrument
in writing, and (iii) no one except such Vice President and General Manager, or
the General Manager, Secretary or Assistant Secretary is authorized to terminate
this agreement on behalf of the Company, and they only by an instrument in
writing.

F. DEALER PERSONNEL. This agreement has been entered into by the Company
in reliance (i) upon the representation and agreement that the following
person(s), and only the following person(s), shall be the principal owners of
the Dealer:

PERCENTAGE
NAME HOME ADDRESS OF INTEREST
- ---- ------------ -----------
Sidney B. DeBoer 401 E. Modec, Medford, Or. 62.5%
Manfred L. Heimann 426 Roundelay Circle, Medford, Or. 37.5%

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EXHIBIT 10.7.1

PONTIAC DIVISION
DEALER SALES AND SERVICE AGREEMENT

In reliance upon the agreement by the parties to fulfill their respective
commitments, this Agreement, effective March 10, 1993, is entered into by
GENERAL MOTORS CORPORATION, PONTIAC DIVISION ("PONTIAC"), a Delaware
corporation, and LITHIA MOTORS, INC., dba LITHIA PONTIAC, an OREGON corporation,
incorporated on October 1, 1977; doing business at 700 North Central Avenue,
Medford, Oregon 97501 ("Dealer").

PREAMBLE

The future of PONTIAC and PONTIAC dealers depends on setting and meeting high
standards of excellence. We will succeed by achieving superior customer
satisfaction through selling and servicing vehicles with innovative styling and
engineering as well as outstanding performance and roadability.

PONTIAC'S Dealer Sales and Service Agreement is intended to clarify and
strengthen the business relationship between PONTIAC and PONTIAC dealers.
PONTIAC recognizes the need for open and candid communication with dealers so
that mutual goals are achieved. Sharing responsibility and accountability will
improve cooperation.

PONTIAC will offer and promote innovative and exciting Products and provide
competitive programs and services that assist dealers. Dealers will ethically
promote and advertise PONTIAC vehicles and related products and provide quality
sales and service through a professional staff that includes knowledgeable and
well-trained service technicians and sales personnel.

FIRST
TERM OF AGREEMENT

This Agreement shall expire on January 28, 1997, or ninety days after the death
or incapacity of a Dealer Operator or Dealer Owner, whichever occurs first,
unless earlier terminated. Dealer is assured the opportunity to enter into a
new Dealer Agreement with PONTIAC at the expiration date if PONTIAC determines
Dealer has fulfilled its obligations under this Agreement.

SECOND
INCORPORATION OF STANDARD PROVISIONS

The "Standard Provisions" (Form GMMS 1013) are incorporated as a part of this
Agreement.

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EIGHTH
TRAINING

PONTIAC and Dealer agree that professional and knowledgeable sales and service
personnel are essential to a satisfactory customer sales and service experience.
PONTIAC commits to provide training to its personnel. PONTIAC also agrees to
make available new Product and service training to all dealers. Dealer agrees
that it will require its personnel to attend training identified by PONTIAC as
necessary. If PONTIAC identifies Dealer deficiencies, Dealer agrees that its
sales and service personnel will complete courses specified by PONTIAC to
address those deficiencies. PONTIAC agrees to consult with the established
dealer advisory committee before adopting additional required training. PONTIAC
will consider the committee's recommendations as to content, cost and frequency
of additional required training.

NINTH
DEALER FACILITY APPEARANCE

Customers have high expectations for PONTIAC, its Products and dealers. As the
point of customer contact with PONTIAC Products, dealership Premises play a
significant role in determining whether a customer's sales and service
experience is consistent with these expectations. PONTIAC and Dealer recognize
it is essential that PONTIAC'S image and identity be reinforced at the
dealership level. Dealer therefore agrees to provide facilities that meet, in
appearance and quality, PONTIAC'S reasonable requirements. To assist Dealer,
PONTIAC will counsel and advise Dealer concerning facility appearance and
design. PONTIAC agrees to consult with the established dealer advisory
committee when developing appearance guidelines.

TENTH
TOOLS AND EQUIPMENT

PONTIAC and Dealer acknowledge that a properly equipped dealership promotes
customer satisfaction and sale of PONTIAC Products. PONTIAC agrees to provide
Dealer with lists of essential tools and necessary equipment. PONTIAC will
endeavor to select tools and equipment whose acquisition cost is reasonable.
Dealer agrees that it will acquire and use essential tools and necessary
equipment identified by PONTIAC. PONTIAC agrees to consult with the established
dealer advisory committee prior to recommending or requiring tools or equipment
other than those determined by PONTIAC to be essential or necessary.

ELEVENTH
BUSINESS PLANNING

PONTIAC has established a business planning process to assist dealers. Dealer
agrees to prepare and submit any reasonable business plan required by PONTIAC.
PONTIAC agrees to provide Dealer with information specific to its dealership and
to assist Dealer in its business planning. PONTIAC agrees to improve the
business planning process based on experience with it and to consult with the
established dealer advisory committee before making substantive changes to the
process.

TWELFTH

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DEALER SALES AND SERVICE REVIEW

PONTIAC'S willingness to enter into this Agreement with Dealer is based in part
on Dealer's commitment to effectively sell and promote the purchase, lease and
use of PONTIAC Products in Dealer's Area of Primary Responsibility ("APR"). The
success of PONTIAC and Dealer depends to a substantial degree on Dealer's taking
advantage of available sales opportunities.

EXECUTION OF AGREEMENT

This Agreement and related agreements are valid only if signed:

(a) on behalf of Dealer by its duly authorized representative and, in the
case of this Agreement, by its Dealer Operator; and

(b) on behalf of PONTIAC by its General Sales and Service Manager and his
authorized representative.

LITHIA MOTORS, INC. PONTIAC DIVISION
DBA LITHIA PONTIAC General Motors Corporation

By By
-------------------------------- ------------------------------------
Dealer Operator General Sales & Service Manager
March 10, 1993 March 10, 1993

By
------------------------------------
Authorized Representative
March 10, 1993

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EXHIBIT 10.7.2

STANDARD PROVISIONS

DEALER
SALES AND SERVICE
AGREEMENT

GENERAL MOTORS CORPORATION

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TABLE OF CONTENTS FOR STANDARD PROVISIONS
Page

PURPOSE OF AGREEMENT......................................................... 1

ARTICLE 1. APPOINTMENT AS AUTHORIZED DEALER................................. 1

ARTICLE 2. DEALER OPERATOR.................................................. 1

ARTICLE 3. DEALER OWNER..................................................... 2

ARTICLE 4. AUTHORIZED LOCATIONS............................................. 2

4.1 Dealer Network Planning.................................................. 2

4.2 Area of Primary Responsibility........................................... 2

4.3 Establishment of Additional Dealers...................................... 3

4.4 Facilities............................................................... 3
4.4.1 Location....................................................... 3
4.4.2 Change in Location or Use of Premises.......................... 3
4.4.3 Size........................................................... 4
4.4.4 Dealership Image and Design.................................... 4
4.4.5 Dealership Equipment........................................... 4

ARTICLE 5. DEALER'S RESPONSIBILITY TO PROMOTE, SELL,
AND SERVICE PRODUCTS.......................................... 5

5.1 Responsibility to Promote and Sell....................................... 5

5.2 Responsibility to Service................................................ 6

5.3 Customer Satisfaction.................................................... 6

5.4 Business Planning........................................................ 6

ARTICLE 6. SALE OF PRODUCTS TO DEALERS...................................... 7

6.1 Sale of Motor Vehicles to Dealer......................................... 7

6.2 Sale of Parts and Accessories to Dealer.................................. 7

6.3 Prices and Other Terms of Sale........................................... 7

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6.3.1 Motor Vehicles................................................. 7
6.3.2 Parts and Accessories.......................................... 8

6.4 Inventory................................................................ 8
6.4.1 Motor Vehicle Inventory........................................ 8
6.4.2 Parts and Accessories.......................................... 8

6.5 Warranties on Products................................................... 8

ARTICLE 7. SERVICE OF PRODUCTS.............................................. 9

7.1 Service for Which Division Pays.......................................... 9
7.1.1 New Motor Vehicle Pre-Delivery Inspections and Adjustments..... 9
7.1.2 Warranty and Special Policy Repairs............................ 9
7.1.3 Campaign Inspections and Corrections........................... 9
7.1.4 Payment for Pre-Delivery Adjustments, Warranty, Campaign and
Transportation Damage Work..................................... 9

7.2 Parts, Accessories, and Body Repairs.....................................10
7.2.1 Warranty and Policy Repairs....................................10
7.2.2 Representations and Disclosures as to Parts and Accessories....10
7.2.3 Body Repairs...................................................10
7.2.4 Tools and Equipment............................................10

ARTICLE 8. TRAINING.........................................................10

ARTICLE 9. REVIEW OF DEALER'S SALES AND SERVICE
PERFORMANCE...................................................11

ARTICLE 10. CAPITALIZATION...................................................11

ARTICLE 11. ACCOUNTS AND RECORDS.............................................11

11.1 Uniform Accounting System...............................................11

11.2 Examination of Accounts and Records.....................................11

11.3 Confidentiality of Dealer Data..........................................12

ARTICLE 12. CHANGES IN MANAGEMENT AND OWNERSHIP.............................12

12.1 Succession Rights Upon Death or Incapacity..............................12
12.1.1 Successor Addendum.............................................12
12.1.2 Absence of Successor Addendum..................................13
12.1.3 Successor Dealer Requirements..................................13
12.1.4 Term of New Dealer Agreement...................................13

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12.1.5 Limitation on Offers...........................................13
12.1.6 Cancellation of Addendum.......................................14

12.2 Other Changes in Ownership or Management................................14

12.3 Right of First Refusal to Purchase......................................15
12.3.1 Creation and Coverage..........................................15
12.3.2 Purchase Price and Other Terms of Sale.........................15
(a) Bona Fide Agreement..................................15
(b) Absence of Bona Fide Agreement.......................15
12.3.3 Consummation...................................................15
12.3.4 Assignment.....................................................15
12.3.5 Transfer Involving Family Members and Dealer Management........16

ARTICLE 13. BREACHES AND OPPORTUNITY TO REMEDY..............................16

13.1 Certain Acts or Events..................................................16

13.2 Failure of Performance by Dealer........................................17

ARTICLE 14. TERMINATION OF AGREEMENT........................................18

14.1 By Dealer...............................................................18

14.2 By Agreement............................................................18

14.3 Failure to be Licensed..................................................18

14.4 Incapacity of Dealer Operator...........................................18

14.5 Acts or Events..........................................................19

14.6 Reliance on Any Applicable Termination Provision........................19

14.7 Transactions After Termination..........................................19
14.7.1 Effect on Orders...............................................19
14.7.2 Termination Deliveries.........................................20
14.7.3 Effect of Transactions After Termination.......................20

ARTICLE 15. TERMINATION ASSISTANCE..........................................20

15.1 Deferral of Effective Date..............................................20

15.2 Purchase of Personal Property...........................................20
15.2.1 Division's Obligations.........................................20
15.2.2 Dealer's Responsibilities......................................21

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15.2.3 Payment........................................................22
15.2.4 Assignment of Rights...........................................22

15.3 Assistance on Premises..................................................22
15.3.1 Division's Obligation..........................................22
15.3.2 Owned Premises.................................................23
15.3.3 Leased Premises................................................23
15.3.4 Rent and Price.................................................23
15.3.5 Limitations on Obligation to Provide Assistance................24

ARTICLE 16. DISPUTE RESOLUTION PROCESS......................................24

ARTICLE 17. GENERAL PROVISIONS..............................................25

17.1 No Agent or Legal Representative Status.................................25

17.2 Responsibility for Operations...........................................25

17.3 Taxes...................................................................25

17.4 Indemnification by General Motors.......................................25

17.5 Trademarks and Service Marks............................................26

17.6 Notices.................................................................27

17.7 No Implied Waivers......................................................27

17.8 Assignment of Rights or Delegation of Duties............................27

17.9 No Third Party Benefit Intended.........................................27

17.10 Accounts Payable.......................................................27

17.11 Sole Agreement of Parties..............................................28

17.12 Applicable Law.........................................................28

17.13 Superseding Dealer Agreements .........................................28

GLOSSARY.....................................................................29

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STANDARD PROVISIONS

The following Standard Provisions are part of Division's Dealer Sales and
Service Agreement (Form GMMS 1012).

PURPOSE OF AGREEMENT

The purpose of this Agreement is to promote a relationship between Division
and its Dealers which encourages and facilitates cooperation and mutual effort
to satisfy customers, and permits Division and its dealers to fully realize
their opportunities for business success. Division has established a network of
authorized dealers operating at approved locations to effectively sell and
service its Products and to build and maintain consumer confidence and
satisfaction in Dealer and Division. Consequently, Division relies upon each
Dealer to provide appropriate skill, capital, equipment, staff and facilities to
properly sell, service, protect the reputation, and satisfy the customers of
Division's Products in a manner that demonstrates a caring attitude toward those
customers. At the same time, Dealer relies upon Division to provide sales and
service support and to continually strive to enhance the quality and
competitiveness of its Products.

This mutual dependence requires a spirit of cooperation, trust and
confidence between Division and its dealers. To facilitate attainment of
cooperation, trust and confidence, and to provide Division with the benefit of
dealer advice regarding many decisions which affect dealer business operations,
Division has established mechanisms to obtain dealer input in the decision-
making process. These mechanisms are described in Division's Dealer Sales and
Service Agreement.

This Agreement (i) authorizes Dealer to sell and service Division's
Products and represent itself as a Division Dealer; (ii) states the terms under
which Dealer and Division agree to do business together; (iii) states the
responsibilities of Dealer and Division to each other and to customers; and (iv)
reflects the mutual dependence of the parties in achieving their business
objectives.

ARTICLE 1. APPOINTMENT AS AUTHORIZED DEALER

Division appoints Dealer as a non-exclusive dealer of Division Products.
Dealer has the right to buy Products and the obligation to market and service
those Products in accordance with this Agreement and related documents.

ARTICLE 2. DEALER OPERATOR

This is a Personal Services Agreement, entered into in reliance on the
qualifications of Dealer Operator identified in Paragraph Third, and on Dealer's
assurance that Dealer Operator will provide personal services by exercising full
managerial authority over Dealership Operations. Dealer Operator will have an
unencumbered ownership interest in Dealer of at least 15 percent at all times.
A Dealer Operator must be a competent business person, an effective manager,
must have demonstrated a caring attitude toward customers, and should have a
successful record as a merchandiser of automotive products

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and services or otherwise have demonstrated the ability to manage a dealership.
The experience necessary may vary with the potential represented by each dealer
location.

ARTICLE 3. DEALER OWNER

Division enters into this Agreement in reliance on the qualifications of
dealer owner(s) identified in the Dealer Statement of Ownership. Division and
Dealer agree each dealer owner will continue to own, both of record and
beneficially, the percentage stated in the Dealer Statement of Ownership, unless
a change is made in accordance with Article 12.

ARTICLE 4. AUTHORIZED LOCATIONS

4.1 DEALER NETWORK PLANNING

Because Division distributes its Products through a network of authorized
dealers operating from approved locations, those dealers must be appropriate in
number, located properly, and have proper facilities to represent and service
Division's Products competitively and to permit each dealer the opportunity to
achieve a reasonable return on investment if it fulfills its obligations under
its Dealer Agreement. Through such a dealer network, the Division can maximize
the convenience of customers in purchasing Products and having them serviced.
As a result, customers, dealers, and the Division all benefit.

To maximize the effectiveness of its dealer network, Division agrees to
monitor marketing conditions and strive, to the extent practicable, to have
dealers appropriate in number, size and location to achieve the objectives
stated above. Such marketing conditions include Division's sales and
registration performance, present and future demographic and economic
considerations, competitive dealer networks, the ability of Division's existing
dealers to achieve the objectives stated above, the opportunities available to
existing dealers, and other appropriate circumstances.

4.2 AREA OF PRIMARY RESPONSIBILITY

Dealer is responsible for effectively selling, servicing and otherwise
representing Division's Products in the Area designated in a Notice of Area of
Primary Responsibility. Division retains the right to revise Dealer's Area of
Primary Responsibility at Division's sole discretion consistent with dealer
network planning objectives. If Division determines that marketing conditions
warrant a change in Dealer's Area of Primary Responsibility, it will advise
Dealer in writing of the proposed change, the reasons for it, and will consider
any information the Dealer submits. Dealer must submit such information in
writing within 30 days of receipt of notice of the proposed change. If Division
thereafter decides the change is warranted, it will issue a revised Notice of
Area of Primary Responsibility.

4.3 ESTABLISHMENT OF ADDITIONAL DEALERS

Division reserves the right to appoint additional dealers but Division will
not exercise this right without first analyzing dealer network planning
considerations.

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Prior to establishing an additional dealer within Dealer's Area of Primary
Responsibility, Division will advise Dealer in writing and give Dealer thirty
days to present relevant information before Division makes a final decision.
Division will advise Dealer of the final decision, which will be made solely by
Division pursuant to its business judgment. Nothing in this Agreement is
intended to require Dealer's consent to the establishment of an additional
dealer.

Neither the appointment of a dealer at or within three miles of a former
dealership location as a replacement for the former dealer nor the relocation of
an existing dealer will be considered the establishment of an additional Dealer
for purposes of this Article 4.3. Such events are within the sole discretion of
Division, pursuant to its business judgment.

4.4 FACILITIES

4.4.1 LOCATION

Dealer agrees to conduct Dealership Operations only from the approved
location(s) within its Area of Primary Responsibility. The Location and
Premises Addendum identifies Dealer's approved location(s) and facilities
("Premises"). If more than one location is approved, Dealer agrees to conduct
from each location only those Dealership Operations authorized in the Addendum
for such location.

4.4.2 CHANGE IN LOCATION OR USE OF PREMISES

If Dealer wants to make any change in location(s) or Premises, or in the
uses previously approved for those Premises, Dealer will give Division written
notice of the proposed change, together with the reasons for the proposal, for
Division's evaluation and final decision in light of dealer network planning
considerations. No change in location or in the use of Premises, including
addition of any other vehicle lines, will be made without Division's prior
written authorization.

Before Division requires any changes in Premises, it will consult with
Dealer, indicate the rationale for the change, and solicit Dealer's views on the
proposal. If, after such review with Dealer, Division determines a change in
Premises or location is appropriate, the Dealer will be allowed a reasonable
time to implement the change. Any such changes will be reflected in a new
Location and Premises Addendum or other written agreement executed by Dealer and
Division.

Nothing herein is intended to require the consent or approval of any dealer
to a proposed relocation of any other dealer.

4.4.3 SIZE

Dealer agrees to provide Premises at its approved location(s) that will
promote the effective performance and conduct of Dealership Operations, and the
Division's image and goodwill. Consistent with Division's dealer network
planning objectives and Division's interest in maintaining the stability and
viability of its dealers, Dealer agrees that its facilities will be sized in
accordance with Division's requirements for that location.

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Division agrees to establish and maintain a clearly stated policy for
determining reasonable dealer facility space requirements and to periodically
re-evaluate those requirements to ensure that they continue to be reasonable.

4.4.4 DEALERSHIP IMAGE AND DESIGN

The appearance of Dealer's Premises is important to the image of Dealer and
Division, and can affect the way customers perceive Division's Products and its
dealers generally. Dealer therefore agrees that its Premises will be properly
equipped and maintained, and that the interior and exterior retail environment
and signs will comply with any reasonable requirements Division may establish to
promote and preserve the image of Division and its dealers.

Division will monitor developments in automotive and other retailing to
ensure that Division's image and facility requirements are responsive to changes
in the marketing environment.

Division will take into account existing economic and marketing conditions,
and consult with dealers as described in Division's Dealer Sales and Service
Agreement, in establishing such requirements.

4.4.5 DEALERSHIP EQUIPMENT

Effective performance of Dealer's responsibilities under this Agreement
requires that the dealership be reasonably equipped to communicate with
customers and the Division and to properly diagnose and service Products.
Accordingly, Dealer agrees to provide for use in the Dealership Operations any
equipment reasonably designated by Division as necessary to Dealer's effective
performance under this Agreement. Division will make such designations only
after having consulted with dealers as described in Division's Dealer Sales and
Service Agreement.

ARTICLE 5. DEALER'S RESPONSIBILITY TO PROMOTE, SELL,
AND SERVICE PRODUCTS

5.1 RESPONSIBILITY TO PROMOTE AND SELL

5.1.1 Dealer agrees to effectively, ethically and lawfully sell and
promote the purchase, lease and use of Products by consumers located in its Area
of Primary Responsibility. To achieve this objective, Dealer agrees to:

(a) maintain an adequate force of trained sales personnel;

(b) explain to Product purchasers the items which make up the
purchase price and provide purchasers with itemized invoices;

(d) include in customer orders only equipment or accessories
requested by customer or required by law; and

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(e) ensure that the customer's purchase and delivery experience are
satisfactory.

If Dealer modifies or sells a modified new Motor Vehicle, or installs any
equipment, accessory or part not supplied by General Motors, or sells any non-
General Motors service contract for a Motor Vehicle, Dealer will disclose this
fact on the purchase order and bill of sale, indicating that the modification,
equipment, accessory or part is not warranted by General Motors or, in the case
of a service contract, the coverage is not provided by General Motors or an
affiliate.

5.1.2 Dealer is authorized to sell new Motor Vehicles only to customers
located in the United States. Dealer agrees that it will not sell new Motor
Vehicles for resale or principal use outside the United States. Dealer also
agrees not to sell any new Motor Vehicles which were not originally manufactured
for sale and distribution in the United States.

5.1.3 Division will conduct general advertising programs to promote the
sale of Products for the mutual benefit of Division and Dealers. Division will
make available to Dealer advertising and sales promotion materials from time to
time and advise Dealer of any applicable charges.

5.2 RESPONSIBILITY TO SERVICE

5.2.1 Dealer agrees to maximize customer satisfaction by providing
courteous, convenient, prompt, efficient and quality service to owners of Motor
Vehicles, regardless of from whom the Vehicles were purchased. All service will
be performed and administered in a professional manner and in accordance with
all applicable laws and regulations, and this Agreement, including the Service
Policies and Procedures Manual, as amended from time to time.

5.2.2 Dealer agrees to maintain an adequate service and parts
organization as recommended by Division, including a competent, trained service
and parts manager(s), trained service and parts personnel and, where service
volume or other conditions make it advisable, a consumer relations manager.

5.2.3 Dealer and Division will each provide the other with such
information and assistance as may reasonably be requested by the other to
facilitate compliance with applicable laws, regulations, investigations and
orders relating to Products.

5.2.4 To build and maintain consumer confidence in, and satisfaction
with, Dealer and Division, Dealer will comply with Divisional procedures for the
investigation and resolution of Product-related complaints.

5.2.5 Division will make available to Dealer current service and parts
manuals, bulletins, and technical data publications relating to Motor Vehicles.

5.3 CUSTOMER SATISFACTION

Dealer and Division recognize that appropriate care for the customer will
promote customer satisfaction with Division's Products and its dealers, which is
critically important to our current and future business success. Dealer
therefore agrees to conduct its operations in a manner which will promote

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customer satisfaction with the purchase and ownership experience. Division
agrees to provide Dealer with reasonable support to assist Dealer's attainment
of customer satisfaction. At its discretion, Division will monitor the
satisfaction of Dealer's customers, and report the results to Dealer. Any
written response from Dealer concerning a customer satisfaction report issued to
Dealer will become a part of the report.

5.4 BUSINESS PLANNING

To enable Dealer to most effectively meet its obligations under this
Agreement, and to enable Division to effectively support Dealer's efforts,
Dealer agrees to develop and implement a Business Plan if such is required by
Division.

ARTICLE 6. SALE OF PRODUCTS TO DEALERS

6.1 SALE OF MOTOR VEHICLES TO DEALER

Division will periodically furnish Dealer one or more Motor Vehicle Addenda
specifying the current model types or series of new Motor Vehicles which Dealer
may order under this Agreement. Division may change a Motor Vehicle Addendum by
furnishing a superseding one, or may cancel an Addendum at any time.

Division will endeavor to distribute new Motor Vehicles among its dealers
in a fair and equitable manner. Many factors affect the availability and
distribution of Motor Vehicles to dealers, including component availability and
production capacity, sales potential in Dealer's Area of Primary Responsibility,
varying consumer demand, weather and transportation conditions, governmental
regulations, and other conditions beyond the control of General Motors.
Division reserves to itself discretion in accepting orders and distributing
Motor Vehicles, and its judgments and decisions are final. Upon written
request, Division will advise Dealer of the total number of new Motor Vehicles,
by series, sold to Dealers in Dealer's Zone or Branch during the preceding
month.

6.2 SALE OF PARTS AND ACCESSORIES TO DEALER

New, reconditioned or remanufactured automotive parts and accessories
marketed by General Motors and listed in current Dealer Parts and Accessories
Price Schedules or supplements furnished to Dealer are called Parts and
Accessories.

Orders for Parts and Accessories will be submitted and processed according
to written procedures established by General Motors or other designated
suppliers.

6.3 PRICES AND OTHER TERMS OF SALE

6.3.1 MOTOR VEHICLES

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Prices, destination charges, and other terms of sale applicable to
purchases of new Motor Vehicles will be those established according to Vehicle
Terms of Sale Bulletins furnished periodically to Dealer.

Prices, destination charges, and other terms of sale applicable to any
Motor Vehicle may be changed at any time. Except as otherwise provided in
writing, changes apply to Motor Vehicles not shipped to Dealer at the time the
changes are made effective.

Dealer will receive written notice of any price increase before any Motor
Vehicle to which such increase applies is shipped, except for initial prices for
a new model year or for any new model or body type. Dealer has the right to
cancel or modify the affected orders by delivering written notice to Division
within 10 days after its receipt of the price increase notice.

6.3.2 PARTS AND ACCESSORIES

Prices and other terms of sale applicable to Parts and Accessories are
established by General Motors according to the Parts and Accessories Terms of
Sale Bulletin furnished to Dealer.

Prices and other terms of sale applicable to Parts and Accessories may be
changed by General Motors at any time. Such changes apply to Parts and
Accessories not shipped to Dealer at the time changes become effective.

6.4 INVENTORY

6.4.1 MOTOR VEHICLE INVENTORY

Dealer recognizes that customers expect Dealer to have a reasonable
quantity and variety of current model Motor Vehicles in inventory. Accordingly,
Dealer agrees to order and stock and Division agrees to make available, subject
to Article 6.1, a mix of models and series of Motor Vehicles identified in the
Motor Vehicle Addendum in quantities adequate to enable Dealer to fulfill its
obligations in its Area of Primary Responsibility.

6.4.2 PARTS AND ACCESSORIES

Dealer agrees to stock sufficient Parts and Accessories made available by
General Motors to perform warranty repairs and policy adjustments and meet
customer demand.

6.5 WARRANTIES ON PRODUCTS

General Motors warrants new Motor Vehicles and Parts and Accessories
(Products) as explained in documents provided with the Products or in the
Service Policies and Procedures Manual.

EXCEPT AS OTHERWISE PROVIDED BY LAW, THE WRITTEN GENERAL MOTORS WARRANTIES
ARE THE ONLY WARRANTIES APPLICABLE TO PRODUCTS. WITH RESPECT TO DEALERS, SUCH
WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES OR LIABILITIES, EXPRESS OR
IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF

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MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY LIABILITY FOR
COMMERCIAL LOSSES BASED UPON NEGLIGENCE OR MANUFACTURER'S STRICT LIABILITY.
EXCEPT AS MAY BE PROVIDED UNDER AN ESTABLISHED GENERAL MOTORS PROGRAM OR
PROCEDURE, GENERAL MOTORS NEITHER ASSUMES NOR AUTHORIZES ANYONE TO ASSUME FOR IT
ANY OTHER OBLIGATION OR LIABILITY IN CONNECTION WITH PRODUCTS, AND GENERAL
MOTORS MAXIMUM LIABILITY IS TO REPAIR OR REPLACE THE PRODUCT.

ARTICLE 7. SERVICE OF PRODUCTS

7.1 SERVICE FOR WHICH DIVISION PAYS

7.1.1 NEW MOTOR VEHICLE PRE-DELIVERY INSPECTIONS AND ADJUSTMENTS

Because new vehicle delivery condition is critical to customer
satisfaction, Dealer agrees to perform specified pre-delivery inspections and
adjustments on each new Motor Vehicle and verify completion according to
procedures identified in the Service Policies and Procedures Manual.

7.1.2 WARRANTY AND SPECIAL POLICY REPAIRS

Dealer agrees to perform (i) required warranty repairs on each qualified
Motor Vehicle at the time of pre-delivery service and when requested by owner,
and (ii) special policy repairs approved by Division. When the vehicle is
returned to the owner, Dealer will provide owner a copy and explanation of the
repair document reflecting all services performed.

7.1.3 CAMPAIGN INSPECTIONS AND CORRECTIONS

Division will notify Dealer of suspected unsatisfactory conditions on
Products and issue campaign instructions. Dealer agrees to inspect and correct
suspected unsatisfactory conditions on Products in accordance with the
instructions. Dealer will also determine that campaign inspections and
corrections have been made on new and used Motor Vehicles in its inventory prior
to sale, and follow-up on Products on which campaigns are outstanding.

Division may ship, and Dealer agrees to accept, unordered parts and
materials required for campaigns. Upon campaign completion, Dealer will receive
credit for excess parts and materials so shipped if they are returned or
disposed of according to Division's instructions.

7.1.4 PAYMENT FOR PRE-DELIVERY ADJUSTMENTS, WARRANTY, CAMPAIGN AND
TRANSPORTATION DAMAGE WORK

For Dealer's performance of services, pre-delivery inspections and
adjustments, warranty repairs, special policy repairs, campaign inspections and
corrections, and transportation damage repairs, Division will provide or pay
Dealer for the Parts and other materials required and will pay Dealer a
reasonable amount for labor. Payment will be made according to policies in the
Service Policies and

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Procedures Manual. Deter will not impose any charge for such service on owners
or users except where a deductible or pro-rata charge applies.

7.2 PARTS, ACCESSORIES, AND BODY REPAIRS

7.2.1 WARRANTY AND POLICY REPAIRS

Dealer agrees to use only genuine GM or General Motors approved Parts and
Accessories in performing warranty repairs, special policy repairs, and any
other repairs paid for by Division, in accordance with the applicable provisions
of the Service Policies and Procedures Manual.

7.2.2 REPRESENTATIONS AND DISCLOSURES AS TO PARTS AND ACCESSORIES

In servicing vehicles marketed by General Motors, Dealer agrees to disclose
the use of non-General Motors parts and accessories as set forth in Article
5.1.1.

7.2.3 BODY REPAIRS

Dealer agrees to provide quality body repair service for Motor Vehicles.
Dealer can provide this service through its own body shop, or by arrangement
with an alternate repair establishment.

7.2.4 TOOLS AND EQUIPMENT

Dealer agrees to provide essential service tools as required by Division
and other tools and equipment as necessary to fulfill its responsibilities to
properly diagnose and service Products.

ARTICLE 8. TRAINING

Properly trained personnel are essential to the success of Dealer and
Division, and to providing customers with a satisfactory sales and service
experience. Division agrees to make available or recommend to Dealer product,
sales, service and parts, accounting and business management training courses
for Dealer personnel. Division will make such training available as
conveniently in time and location as practical circumstances permit. Division
will assist Dealer in determining training requirements and periodically will
require that Dealer have personnel attend specific courses. Dealer agrees to
comply with any such reasonable training requirements and pay any specified
training charges. Division will consult with dealers as described in Division's
Dealer Sales and Service Agreement prior to determining the training courses or
programs from which an individual Dealer's requirements under this Article may
be established. Specific minimum service training requirements will be
described in Division's Service Policies and Procedures Manual.

Division will make available personnel to advise and counsel Dealer
personnel on sales, service, parts and accessories, and related subjects.

ARTICLE 9. REVIEW OF DEALER'S SALES AND SERVICE PERFORMANCE

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Dealer's performance of its obligations is essential to the effective
representation of Division's Products, and to the reputation and goodwill of
Dealer, Division, and other Division dealers. Periodically, Division will
review various aspects of Dealer's sales and service performance. Division and
Dealer will use the review process to identify areas in which improvements or
changes are necessary so that Dealer can take prompt action to achieve
acceptable performance.

ARTICLE 10. CAPITALIZATION

The Capital Standard Addendum reflects the minimum net working capital
necessary for Dealer to conduct Dealership Operations. Dealer agrees to
maintain at least this level of net working capital. Division will issue a new
Addendum if changes in operating conditions or Divisional guidelines indicate
capital needs have changed materially.

To avoid damage to goodwill which could result if Dealer is financially
unable to fulfill its commitments, Dealer agrees to have and maintain a separate
line of credit from a financial institution available to finance its purchase of
new vehicles. The amount of the line of credit will be sufficient for Dealer to
meet its obligations under Article 6.4.

ARTICLE 11. ACCOUNTS AND RECORDS

11.1 UNIFORM ACCOUNTING SYSTEM

A uniform accounting system facilitates an evaluation of Dealer business
management practices and the impact of Division's policies and practices.
Division therefore agrees to maintain, and Dealer agrees to use and maintain
records in accordance with, a uniform accounting system set forth in an
accounting manual furnished to Dealer.

Dealer also agrees to timely submit true and accurate applications or
claims for payments, discounts or allowances; true and correct orders for
Products and reports of sale and delivery; and any other reports or statements
required by Division, in the manner specified by Division, and to retain such
records for at least two years.

11.2 EXAMINATION OF ACCOUNTS AND RECORDS

Dealer agrees to permit any designated representative of Division to
examine, audit, and take copies of any of the accounts and records Dealer is to
maintain under the accounting manual and this Agreement. Dealer agrees to make
such accounts and records readily available at its facilities during regular
business hours. Division agrees to furnish Dealer with a list of any reproduced
records.

11.3 CONFIDENTIALITY OF DEALER DATA

Division agrees not to furnish any personal or financial data submitted to
it by Dealer to any non-affiliated entity unless authorized by Dealer, required
by law, or pertinent to judicial or administrative proceedings, or to
proceedings under the Dispute Resolution Process.

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ARTICLE 12. CHANGES IN MANAGEMENT AND OWNERSHIP

The parties recognize that customers and authorized dealers, as well as
shareholders and employees of General Motors, have a vital interest in the
continued success and efficient operation of Division's dealer network.
Accordingly, Division has the responsibility of continuing to administer the
network to ensure that dealers are owned and operated by qualified persons able
to meet the requirements of this Agreement.

12.1 SUCCESSION RIGHTS UPON DEATH OR INCAPACITY

12.1.1 SUCCESSOR ADDENDUM

Dealer can apply for a Successor Addendum designating a proposed dealer
operator and/or owners of a successor dealer to be established if this Agreement
expires or is terminated because of death or incapacity. Division will execute
the Addendum provided Dealer is meeting its obligations under this Agreement and
under any Dealer Agreement which Dealer may have with other Divisions of General
Motors for the conduct of Dealership Operations at the approved location; and
the proposed dealer operator is, and will continue to be, employed full-time by
Dealer or a comparable automotive dealership, and is already qualified or is
being trained to qualify as a dealer operator; and provided all other proposed
owners are acceptable.

Division may refuse to enter into a Successor Addendum with Dealer if
Division has previously notified Dealer it does not plan to continue Dealership
Operations at the approved location, except for renewal of an existing Successor
Addendum where the same proposed dealer operator continues to be qualified.

Upon expiration of this Agreement, Division will, upon Dealer's request,
execute a new successor addendum provided a new and superseding dealer agreement
is executed with Dealer, and Dealer, the proposed dealer operator and dealer
owners are then qualified as described above.

12.1.2 ABSENCE OF SUCCESSOR ADDENDUM

If this Agreement expires or is terminated because of death or incapacity
and Dealer and Division have not executed a Successor Addendum, the Dealer
Operator or, if there is not a remaining Dealer Operator, the remaining dealer
owners may propose a successor dealer [to] continue the operations identified in
this Agreement. The proposal must be made to Division in writing at least 30
days prior to the expiration or termination of this Agreement, including any
deferrals.

12.1.3 SUCCESSOR DEALER REQUIREMENTS

Division will accept a proposal to establish a successor dealer submitted
by a proposed dealer operator under this Article 12.1 provided:

(a) the proposed successor dealer and the proposed dealer operator
are ready, willing and able to meet the requirements of a new dealer
agreement at the approved location(s);

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(b) Division approves the proposed dealer operator and all proposed
owners not previously approved for the existing Dealership Operations;

(d) Dealer has not been previously notified that Division may
discontinue Dealership Operations at that location.

12.1.4 TERM OF NEW DEALER AGREEMENT

The dealer agreement offered a successor dealer will be for a three-year
term. Division will notify the successor dealer in writing at least 90 days
prior to the expiration date whether the successor dealer has performed
satisfactorily and, if so, that Division will offer a new dealer agreement.

12.1.5 LIMITATION ON OFFERS

Dealer will be notified in writing of the decision on a proposal to
establish a successor dealer submitted under Article 12.1 within 60 days after
Division has received from Dealer all applications and information reasonably
requested by Division. Division may condition its offer of a dealer agreement
on the relocation of dealership operations to an approved location by successor
dealer within a reasonable time. Division's offer of a new dealer agreement
under this Article 12.1 will automatically expire if not accepted in writing by
the proposed successor dealer within 60 days after it receives the offer.

12.1.6 CANCELLATION OF ADDENDUM

Dealer may cancel an executed Successor Addendum at any time prior to the
death of a Dealer Operator or Dealer Owner, or the incapacity of Dealer
Operator. Division may cancel an executed Successor Addendum only if the
proposed dealer operator is no longer qualified under Article 12.1.1.

12.2 OTHER CHANGES IN OWNERSHIP OR MANAGEMENT

If Dealer proposes a change in Dealer Operator, a change in ownership, or a
transfer of the dealership business or its principal assets to any person
conditioned upon Division's entering into a dealer agreement with that person,
Division will consider Dealer's proposal and not arbitrarily refuse to approve
it, subject to the following:

12.2.1 Dealer agrees to give Division prior written notice of any
proposed change or transfer described above. Dealer understands that if any
such change is made prior to Division's approval of the proposal, termination of
this Agreement will be warranted and Division will have no further obligation to
consider Dealer's proposal.

12.2.2 Division agrees to consider Dealer's proposal, taking into
account factors such as (a) the personal, business, and financial qualifications
of the proposed dealer operator and owners, and (b) whether the proposed change
is likely to result in a successful dealership operation with acceptable

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management, capitalization, and ownership which will provide satisfactory sales,
service, and facilities at an approved location, while promoting and preserving
competition and customer satisfaction.

12.2.3 Division will notify Dealer in writing of Division's decision on
Dealer's proposal within 60 days after Division has received from Dealer all
applications and information reasonably requested by Division. If Division
disagrees with the proposal, it will specify its reasons.

12.2.4 Any material change in Dealer's proposal, including change in
price, facilities, capitalization, proposed owners, or dealer operator, will be
considered a new proposal, and the time period for Division to respond shall
recommence.

12.2.5 Division's prior written approval is not required where the
transfer of equity ownership or beneficial interest to an individual is (a) less
than ten percent in a calendar year; and (b) between existing dealer owners
previously approved by Division where there is no change in majority ownership
or voting control. Dealer agrees to notify Division within 30 days of the date
of the change and to execute a new Dealer Statement of Ownership.

12.2.6 Division is not obligated to approve any proposed changes in
management or ownership under this Article unless Dealer makes arrangements
acceptable to Division to satisfy any indebtedness of Dealer to General Motors.

12.3 RIGHT OF FIRST REFUSAL TO PURCHASE

12.3.1 CREATION AND COVERAGE

If Dealer submits a proposal for a change of ownership under Article 12.2,
Division will have a right of first refusal to purchase the dealership assets
regardless of whether the proposed buyer is qualified to be a dealer. If
Division chooses to exercise this right, it will do so in its written response
to Dealer's proposal. Division will have a reasonable opportunity to inspect
the assets, including real estate, before making its decision.

12.3.2 PURCHASE PRICE AND OTHER TERMS OF SALE

(a) BONA FIDE AGREEMENT

If Dealer has entered into a bona fide written buy/sell agreement, the
purchase price and other terms of sale will be those set forth in such agreement
and any related documents, unless Dealer and Division agree to other terms.

Upon Division's request, Dealer agrees to provide all documents relating to
the proposed transfer. If Dealer refuses to provide such documentation or state
in writing that such documents do not exist, it will be presumed that the
agreement is not bona fide.

(b) ABSENCE OF BONA FIDE AGREEMENT

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In the absence of a bona fide written buy/sell agreement, the purchase
price of the dealership assets will be determined by good faith negotiations by
Dealer and Division. If agreement cannot be reached within a reasonable time,
the price and other terms of sale will be established by arbitration according
to the rules of the American Arbitration Association.

12.3.3 CONSUMMATION

Dealer agrees to transfer the property by Warranty Deed, where possible,
conveying marketable title free and clear of liens and encumbrances. The
Warranty Deed will be in proper form for recording and Dealer will deliver
complete possession of the property when the Deed is delivered. Dealer will
also furnish copies of any easements, licenses or other documents affecting the
property and assign any permits or licenses necessary for the conduct of
Dealership Operations.

12.3.4 ASSIGNMENT

Division's rights under this section may be assigned to any third party
("Assignee"). If there is an assignment, Division will guarantee full payment
of the purchase price by the Assignee. Division shall have the opportunity to
discuss the terms of the buy/sell agreement with a potential Assignee.

Division's rights under this Article are binding on and enforceable against
any Assignee or successor in interest of Dealer or purchaser of Dealer's assets.

12.3.5 TRANSFER INVOLVING FAMILY MEMBERS AND DEALER MANAGEMENT

When the proposed change of ownership involves a transfer by a dealer owner
solely to a member or members of his or her immediate family, or to a qualifying
member of Dealer's Management, the Division's right of first refusal will not
apply. An "immediate family member" shall be the spouse, child, grandchild,
spouse of a child or grandchild, brother, sister or parent of the dealer owner.
A "qualifying member of Dealer's Management" shall be an individual who has been
employed by Dealer for at least two years and otherwise qualifies as a dealer
operator.

ARTICLE 13. BREACHES AND OPPORTUNITY TO REMEDY

13.1 CERTAIN ACTS OR EVENTS

The following acts or events, which are within the control of Dealer or
originate from action taken by Dealer or its management or owners, are material
breaches of this Agreement. If Division learns that any of the acts or events
has occurred, it may notify the Dealer in writing. If notified, Dealer will be
given the opportunity to respond in writing within 30 days of receipt of the
notice, explaining or correcting the situation to Division's satisfaction.

13.1.1 The removal, resignation, withdrawal, or elimination from Dealer
for any reason of any Dealer Operator or dealer owner without Division's prior
written approval.

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13.1.2 Any attempted or actual sale, transfer, or assignment by Dealer
of this Agreement or any of the rights granted Dealer hereunder, or any
attempted or actual transfer, assignment or delegation by Dealer of any of the
responsibilities assumed by it under this Agreement contrary to the terms of
this Agreement.

13.1.3 Any change, whether voluntary or involuntary, in the record or
beneficial ownership of Dealer as set forth in the Dealer Statement of Ownership
furnished by Dealer, unless permitted by Article 12.2.5 or pursuant to
Division's written approval.

13.1.4 Any undertaking by Dealer or any of its owners to conduct, either
directly or indirectly, any of the Dealership Operations at any unapproved
location.

13.1.5 Any sale, transfer, relinquishment, or discontinuance of use by
Dealer of any of the Dealership Premises or other principal assets required in
the conduct of the Dealership Operations, without Division's prior written
approval.

13.1.6 Any dispute among the owners or management personnel of Dealer
which, in Division's opinion, may adversely affect the Dealership Operations or
the interests of Dealer or Division.

13.1.7 Refusal by Dealer to timely furnish sales, service or financial
information and related supporting data, or to permit Division's examination or
audit of Dealer's accounts and records.

13.1.8 A finding by a government agency or court of original
jurisdiction or a settlement arising from charges that Dealer, or it predecessor
of Dealer owned or controlled by the same person, had committed a misdemeanor or
unfair or deceptive business practice which, in Division's opinion, may
adversely affect the reputation or interests of Dealer or Division.

13.1.9 Willful failure of Dealer to comply with the provisions of any
laws or regulations relating to the sale or service of Products.

13.1.10 Submission by Dealer of false applications or reports, including
false orders for Products or reports of delivery or transfer of Products.

13.1.11 Failure of Dealer to maintain the line of credit required by
Article 10.

13.1.12 Failure of Dealer to timely pay its obligations to General
Motors.

13.1.13 Any other material breach of Dealer's obligations under this
Agreement not otherwise identified in this Article 13 or in Article 14.

If Dealer's response demonstrates that the breach has been corrected, or
otherwise explains the circumstances to Division's satisfaction, then Division
shall confirm this fact in writing to Dealer.

If, however, Dealer's response does not demonstrate that the breach has
been corrected, or explain the circumstances to Division's satisfaction,
termination is warranted and Division may terminate

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<PAGE>

this Agreement upon written notice to Dealer. Termination will be effective 60
days following Dealer's receipt of the notice.

13.2 FAILURE OF PERFORMANCE BY DEALER

If Division determines that Dealer's Premises are not acceptable, or that
Dealer has failed to adequately perform its sales or service responsibilities,
including those responsibilities relating to customer satisfaction and training,
Division will review such failure with Dealer.

As soon as practicable thereafter, Division will notify Dealer in writing
of the nature of Dealer's failure and of the period of time (which shall not be
less than six months) during which Dealer will have the opportunity to correct
the failure.

If Dealer does correct the failure by the expiration of the period,
Division will so advise the Dealer in writing.

If, however, Dealer does not correct the failure by the expiration of the
period, Division may terminate this Agreement by giving Dealer 90 days advance
written notice.

ARTICLE 14. TERMINATION OF AGREEMENT

14.1 BY DEALER

Dealer has the right to terminate this Agreement without cause at any time
upon written notice to Division. Termination will be effective 30 days after
Division's receipt of the notice, unless otherwise mutually agreed in writing.

14.2 BY AGREEMENT

This Agreement may be terminated at any time by written agreement between
Division and Dealer.

Termination assistance will apply only as specified in the written
termination agreement.

14.3 FAILURE TO BE LICENSED

If Division or Dealer fails to secure or maintain any license required for
the performance of obligations under this Agreement or such license is suspended
or revoked, either party may immediately terminate this Agreement by giving the
other party written notice.

14.4 INCAPACITY OF DEALER OPERATOR

Because this is a Personal Services Agreement, Division may terminate this
Agreement by written notice to Dealer if Dealer Operator is so physically or
mentally incapacitated that the Dealer

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Operator is unable to actively exercise full managerial authority. The
effective date of termination will be stated in such written notice and will be
not less than three months after receipt of such notice.

14.5 ACTS OR EVENTS

If Division learns that any of the following has occurred, it may terminate
this Agreement by giving Dealer written notice of termination. Termination will
be effective on the date specified in the notice.

14.5.1 Conviction in a court of original jurisdiction of Dealer, or a
predecessor of Dealer owned or controlled by the same person, or any Dealer
Operator or dealer owner of any felony.

14.5.2 Insolvency of Dealer; or filing by or against Dealer of a
petition in bankruptcy; or filing of a proceeding for the appointment of a
receiver or trustee for Dealer, provided such filing or appointment is not
dismissed or vacated within thirty days; or execution by Dealer of an assignment
for the benefit of creditors or any foreclosure or other due process of law
whereby a third party acquires rights to the operation, ownership or assets of
Dealer.

14.5.3 Failure of Dealer to conduct customary sales and service
operations during customary business hours for seven consecutive business days.

14.5.4 Any misrepresentation to General Motors by Dealer or by any
Dealer Operator or owner in applying for this Agreement, or in identifying the
Dealer Operator, or record or beneficial ownership of Dealer.

14.5.5 Submission by Dealer of false applications or claims for any
payment, credit, discount, or allowance, including false applications in
connection with incentive activities, where the false information was submitted
to generate a payment to Dealer for a claim which would not otherwise have
qualified for payment.

Termination for failure to correct other breaches will be according to the
procedures outlined in Article 13.

14.6 RELIANCE ON ANY APPLICABLE TERMINATION PROVISION

The terminating party may select the provision under which it elects to
terminate without reference in its notice to any other provision that may also
be applicable. The terminating party subsequently also may assert other grounds
for termination.

14.7 TRANSACTIONS AFTER TERMINATION

14.7.1 EFFECT ON ORDERS

If Dealer and Division do not enter into a new Dealer Agreement when this
Agreement expires or is terminated, all of Dealer's outstanding orders for
Products will be automatically cancelled except as provided in this Article
14.7.

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Termination of this Agreement will not release Dealer or Division from the
obligation to pay any amounts owing the other, nor release Dealer from the
obligation to pay for Special Vehicles if Division has begun processing such
orders prior to the effective date of termination.

14.7.2 TERMINATION DELIVERIES

If this Agreement is voluntarily terminated by Dealer or expires or is
terminated because of the death or incapacity of a Dealer Operator or death of a
Dealer Owner, without a termination or expiration deferral, Division will use
its best efforts consistent with its distribution procedures to furnish Dealer
with Motor Vehicles to fill Dealer's bona fide retail orders on hand on the
effective date of termination or expiration, not to exceed, however, the total
number of Motor Vehicles invoiced to Dealer for retail sale during the three
months immediately preceding the effective date of termination.

14.7.3 EFFECT OF TRANSACTIONS AFTER TERMINATION

Neither the sale of Products to Dealer nor any other act by Division or
Dealer after termination of this Agreement will be construed as a waiver of the
termination.

ARTICLE 15. TERMINATION ASSISTANCE

15.1 DEFERRAL OF EFFECTIVE DATE

If this Agreement is scheduled to expire or terminate because of the death
or incapacity of a Dealer Operator or the death of a Dealer Owner and Dealer
requests an extension of the effective date of expiration or termination thirty
days prior to such date, Division will defer the effective date for up to a
total of eighteen months after such death or incapacity occurs to assist Dealer
in winding up its Dealership Operations.

15.2 PURCHASE OF PERSONAL PROPERTY

15.2.1 DIVISION'S OBLIGATIONS

If this Agreement expires or is terminated and Division does not offer
Dealer or a replacement dealer that has substantially the same ownership (more
than 50 percent including total family ownership) a new Dealer Agreement,
Division will offer to purchase the following items of personal property (herein
called Eligible Items) from Dealer at the prices indicated:

(a) New and unused Motor Vehicles of the current model year purchased
by Dealer from Division at a price equal to the net prices and charges that
were paid to General Motors;

(b) Any signs owned by Dealer of a type recommended in writing by
Division and bearing any Marks at a price agreed upon by Division and
Dealer. If Division and Dealer cannot agree on a price, they will select a
third party who will set the price;

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(c) Any essential tools recommended by Division and designed
specifically for service of Motor Vehicles that Division offered for sale
during the three years preceding termination at prices established in
accordance with the applicable pricing formula in the Service Policies and
Procedures Manual; and

(d) Unused and undamaged Parts and Accessories that (i) are still in
the original, resalable merchandising packages and in unbroken lots (in the
case of sheet metal, a comparable substitute for the original package may
be used); (ii) are listed for sale in the then current Dealer Parts and
Accessories Price Schedules (except "discontinued" or "replaced" Parts and
Accessories); and (iii) were purchased by Dealer either directly from
General Motors or from an outgoing dealer as a part of Dealer's initial
Parts and Accessories inventory. Prices will be those dealer prices in
effect at the time General Motors receives the Parts and Accessories, less
any applicable allowances whether or not any such allowances were made to
Dealer when Dealer purchased the Parts and Accessories. In addition, an
allowance of five percent of dealer price for packing costs and
reimbursement for transportation charges to the destination specified by
General Motors will be credited to Dealer's account.

15.2.2 DEALER'S RESPONSIBILITIES

Division's obligation to purchase Eligible Items is subject to Dealer
fulfilling its responsibility under this subsection.

Within fifteen days following the effective date of termination or
expiration of this Agreement, Dealer will furnish Division with a list of
vehicle identification numbers and such other information as Division may
request pertaining to eligible Motor Vehicles. Dealer will deliver the eligible
Motor Vehicles to a destination determined by Division that will be in a
reasonable proximity to Dealer's Premises.

Within two months following the effective date of termination or expiration
of this Agreement, Dealer will mail or deliver to General Motors a complete and
separate list of each of the Eligible Items other than Motor Vehicles. Dealer
will retain the Eligible Items until receipt of written shipping instructions
from General Motors. Within thirty days after receipt of instructions, Dealer
will ship the Eligible Items, transportation charges prepaid, to the
destinations specified in the instructions.

Dealer will take action and execute and deliver such instruments as
necessary to (a) convey to Division and General Motors good and marketable title
to all Eligible Items to be purchased, (b) comply with the requirements of any
applicable state law relating to bulk sales or transfer, and (c) satisfy and
discharge any liens or encumbrances on Eligible Items prior to their delivery to
Division and General Motors.

15.2.3 PAYMENT

Subject to Article 17.10, Division will pay for the Eligible Items as soon
as practicable following their delivery to the specified destinations. Payment
may be made directly to anyone having a security or ownership interest in the
Eligible Items.

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If Division has not paid Dealer for the Eligible Items within two months
after delivery, and if Dealer has fulfilled its termination obligations under
this Agreement, Division will, at Dealer's written request, estimate the
purchase price of the unpaid Eligible Items and all other amounts owed Dealer by
General Motors. After deducting the amounts estimated to be owing General
Motors and its subsidiaries by Dealer, Division will advance Dealer 75 percent
of the net amount owed Dealer and will pay the balance, if any, as soon as
practicable thereafter.

15.2.4 ASSIGNMENT OF RIGHTS

If Division has decided to appoint a replacement dealer at Dealer's
location, Dealer may sell its Eligible Items and, if approved in writing by
Division, assign its rights under this Article 15.2 to a designated replacement
dealer provided the replacement dealer assumes Dealer's obligations under this
Article.

15.3 ASSISTANCE ON PREMISES

15.3.1 DIVISION'S OBLIGATION

Subject to Article 17.10, Division agrees to give Dealer assistance in
disposing of the Premises if (i) this Agreement expires for any reason or is
terminated by Division under Articles 13.2 or 14.4 and (ii) Dealer is not
offered a new Dealer Agreement. Such assistance shall be given only on Premises
that are described in the Location and Premises Addendum and only if:

(a) they are used solely for Dealership Operations (or similar
dealership operations under agreements with other Divisions of General
Motors which will be terminated simultaneously with this Agreement); and

(b) they are not substantially in excess of space requirements at the
time of termination or, if they are substantially in excess, they became
excessive because of a reduction in the requirements applicable to Dealer's
facilities.

Any Dealer request for such assistance must be in writing and received by
Division within thirty days of the expiration or termination of this Agreement.

Premises that consist of more than one parcel of property or more than one
building, each of which is separately usable, distinct and apart from the whole
or any other part with appropriate ingress or egress, shall be considered
separately under this Article 15.3.

15.3.2 OWNED PREMISES

Division will provide assistance on owned Premises by either (a) locating a
purchaser who will offer to purchase the Premises at a reasonable price, or
(b) locating a lessee who will offer to lease the Premises. If Division does
not locate a purchaser or lessee within a reasonable time, Division will itself
either purchase or, at its option, lease the Premises for a reasonable term at a
reasonable rent. If the cause of termination or expiration is a death or the
incapacity of the Dealer Operator, Division may

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instead pay Dealer a sum equal to a reasonable rent for a period of twelve
months immediately following the effective date of termination or expiration of
this Agreement.

15.3.3 LEASED PREMISES

Division will provide assistance on leased Premises by either:

(a) locating a tenant(s), satisfactory to lessor, who will sublet for the
balance of the lease or assume it; or

(b) arranging with the lessor for the cancellation of the lease without
penalty to Dealer; or

(c) reimbursing Dealer for the lesser of the rent specified in the lease
or settlement agreement or a reasonable rent for a period equal to the
lesser of twelve months from the effective date or termination or
expiration of the balance of the lease term.

Upon request, Dealer will use its best efforts to effect a settlement of
the lease with the lessor subject to Division's prior approval of the terms.
Division is not obligated to reimburse Dealer for rent for any month during
which the Premises are occupied by Dealer or anyone else after the first month
following the effective date of termination or expiration.

15.3.4 RENT AND PRICE

Division and Dealer will fix the amount of a reasonable rent and a
reasonable price for the Premises by agreement at the time Dealer requests
assistance. The factors to be considered in fixing those amounts are:

(a) the adequacy and desirability of the Premises for a dealership
operation; and

(b) the fair market value of the Premises. If Division and Dealer cannot
agree, the fair market value will be determined by the median appraisal of
three qualified real estate appraisers, of whom Dealer and Division will
each select one and the two selected will select the third. The cost of
appraisals will be shared equally by Dealer and Division.

15.3.5 LIMITATIONS ON OBLIGATION TO PROVIDE ASSISTANCE

Division will not be obligated to provide assistance on Premises if Dealer:

(a) fails to accept a bona fide offer from a prospective purchaser,
sublessee or assignee;

(b) refuses to execute a settlement agreement with the lessor if the
agreement would be without cost to Dealer;

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(d) refuses to permit Division to examine Dealer's books and records if
necessary to verify claims of Dealer under this Article.

Any amount payable by Division as rental reimbursement or reasonable rent
shall be proportionately reduced if the Premises are leased or sold to another
party during the period for which such amount is payable. Payment of rental
reimbursement or reasonable rent is waived by Dealer if it does not file its
claim therefor within two months after the expiration of the period covered by
the payment. Upon request, Dealer will support its claim with satisfactory
evidence of its accuracy and reasonableness.

ARTICLE 16. DISPUTE RESOLUTION PROCESS

Division and Dealer agree that mutual respect, trust and confidence are
vital to the relationship between Division and Dealer. So that such respect,
trust and confidence can be maintained, and differences that may develop between
Dealer and Division may be resolved amicably, Division and Dealer agree to
resolve disputes in accordance with the Dispute Resolution Process, a copy of
which has been provided to Dealer.

ARTICLE 17. GENERAL PROVISIONS

17.1 NO AGENT OR LEGAL REPRESENTATIVE STATUS

This Agreement does not make either party the agent or legal representative
of the other for any purpose, nor does it grant either party authority to assume
or create any obligation on behalf of or in the name of the others. No
fiduciary obligations are created by this Agreement.

17.2 RESPONSIBILITY FOR OPERATIONS

Except as provided in this Agreement, Dealer is solely responsible for all
expenditures, liabilities and obligations incurred or assumed by Dealer for the
establishment and conduct of its operations.

17.3 TAXES

Dealer is responsible for all local, state, federal, or other applicable
taxes and tax returns related to its dealership business and will hold General
Motors harmless from any related claims or demands made by any taxing authority.

17.4 INDEMNIFICATION BY GENERAL MOTORS

General Motors will assume the defense of Dealer and indemnify Dealer
against any judgment for monetary damages or rescission of contract, less any
offset recovered by Dealer, in any lawsuit naming Dealer as a defendant relating
to any Product that has not been altered when the lawsuit concerns:

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17.4.1 Breach of the General Motors warranty related to the Product,
bodily injury or property damage claimed to have been caused solely by a defect
in the design, manufacture, or assembly of a Product by General Motors (other
than a defect which should have been detected by Dealer in a reasonable
inspection of the Product);

17.4.2 Failure of the Product to conform to the description set forth in
advertisements or product brochures distributed by General Motors because of
changes in standard equipment or material component parts unless Dealer received
notice of the changes prior to retail delivery of the affected Product by
Dealer; or

17.4.3 Any substantial damage to a Product purchased by Dealer from
General Motors which has been repaired by General Motors unless Dealer has been
notified of the repair prior to retail delivery of the affected Product.

If General Motors reasonably concludes that allegations other than those
set forth in 17.4.1, 17.4.2, or 17.4.3 above are being pursued in the lawsuit,
General Motors shall have the right to decline to accept the defense or
indemnify dealer or, after accepting the defense, to transfer the defense back
to Dealer and withdraw its agreement to indemnify Dealer.

Procedures for requesting indemnification, administrative details, and
limitations are contained in the Service Policies and Procedures Manual under
"Indemnification." The obligations assumed by General Motors are limited to
those specifically described in this Article and in the Service Policies and
Procedures Manual and are conditioned upon compliance by Dealer with the
procedures described in the Manual. This Article shall not affect any right
either party may have to seek indemnification or contribution under any other
contract or by law and such rights are hereby expressly preserved.

17.5 TRADEMARKS AND SERVICE MARKS

General Motors or affiliated companies are the exclusive owners or
licensees of the various trademarks, service marks, names and designs (Marks)
used in connection with Products and services.

Dealer is granted the non-exclusive right to display Marks in the form and
manner approved by Division in the conduct of its dealership business. Dealer
agrees to permit any designated representative of Division upon the Premises
during regular business hours to inspect Products or services in connection with
Marks.

Dealer will not apply to register any Marks either alone or as part of
another mark, and will not take any action which may adversely affect the
validity of the Marks or the goodwill associated with them.

Dealer agrees to purchase and sell goods bearing Marks only from parties
authorized or licensed by Division or General Motors.

Marks may be used as part of the Dealer's name with Division's written
approval.

Dealer agrees to change or discontinue the use of any Marks upon Division's
request.

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Dealer agrees that no company owned by or affiliated with Dealer or any of
its owners may use any Mark to identify a business without Division's written
permission.

Upon termination of this Agreement, Dealer agrees to immediately
discontinue, at its expense, all use of Marks. Thereafter, Dealer will not use,
either directly or indirectly, any Marks or any other confusingly similar marks
in a manner that Division determines is likely to cause confusion or mistake or
deceive the public.

Dealer will reimburse Division for all legal fees and other expenses
incurred in connection with action to require Dealer to comply with this Article
17.5.

17.6 NOTICES

Any notice required to be given by either party to the other in connection
with this Agreement will be in writing and delivered personally or by first
class or express mail or by facsimile. Notices to Dealer will be directed to
Dealer or its representatives at Dealer's principal place of business and,
except for indemnification requests made pursuant to Article 17.4, notices by
Dealer will be directed to the appropriate Zone or Branch Manager of the
Division(s) of General Motors.

17.7 NO IMPLIED WAIVERS

The delay or failure of either party to require performance by the other
party or the waiver by either party of a breach of any provision of this
Agreement will not affect the right to subsequently require such performance.

17.8 ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES

Dealer has not paid any fee for this Agreement. Neither this Agreement nor
any right granted by this Agreement is a property right.

Except as provided in Article 12, neither this Agreement nor the rights or
obligations of Dealer may be sold, assigned, delegated or otherwise transferred.

Division may assign this Agreement and any rights, or delegate any
obligations, under this Agreement to any affiliated or successor company, and
will provide Dealer written notice of such assignment or delegation. Such
assignment or delegation shall not relieve Division of liability for the
performance of its obligations under this Agreement.

17.9 NO THIRD PARTY BENEFIT INTENDED

This Agreement is not enforceable by any third parties and is not intended
to convey any rights or benefits to anyone who is not a party to this Agreement.

17.10 ACCOUNTS PAYABLE

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All monies or accounts due Dealer are net of Dealer's indebtedness to
Division, General Motors and its subsidiaries. In addition, Division may deduct
any amounts due or to become due from Dealer to Division or General Motors, or
any amounts held by Division, from any sums or accounts due or to become due
from Division, General Motors or its subsidiaries.

17.11 SOLE AGREEMENT OF PARTIES

Except as provided in this Agreement, Division has made no promises to
Dealer, Dealer Operator, or dealer owner and there are no other agreements or
understandings, either oral or written, between the parties affecting this
Agreement or relating to any of the subject matters covered by this Agreement.

Except as otherwise provided herein, this Agreement cancels and supersedes
all previous agreements between the parties that relate to any matters covered
herein, except as to any monies which may be owing between the parties.

No agreement between Division and Dealer which relates to matters covered
herein, and no change in, addition to (except the filling in of blank lines) or
erasure of any printed portion of this Agreement, will be binding unless
permitted under the terms of this Agreement or related documents, or approved in
a written agreement executed as set forth in Division's Dealer Sales and Service
Agreement.

17.12 APPLICABLE LAW

This agreement is governed by the laws of the State of Michigan. However,
if performance under this Agreement is illegal under a valid law of any
jurisdiction where such performance is to take place, performance will be
modified to the minimum extent necessary to comply with such law if it was
effective as of the effective date of this Agreement.

17.13 SUPERSEDING DEALER AGREEMENTS

If Division offers a superseding form of dealer agreement to Division's
dealers generally at any time prior to expiration of this Agreement, Division
may terminate this Agreement by prior written notice to Dealer, provided
Division offers Dealer a dealer agreement in the superseding form for a term of
not less than the unexpired term of this Agreement.

Unless otherwise agreed in writing, the rights and obligations of Dealer
that may otherwise become applicable upon termination or expiration of the term
of this Agreement shall not be applicable if Division and Dealer execute a
superseding dealer agreement, and the matured rights and obligations of the
parties hereunder shall continue under the new agreement.

Dealer's performance under any prior agreement may be considered in an
evaluation of Dealer's performance under this or any succeeding agreement.

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GLOSSARY

1. AREA OF PRIMARY RESPONSIBILITY - The geographic area designated by Division
from time to time in a Notice of Area of Primary Responsibility.

2. DEALER - The corporation, partnership or proprietorship that signs the
Dealer Agreement with Division.

3. DEALER AGREEMENT - The Dealer Sales and Service Agreement, including the
Agreement proper that is executed, the Standard Provisions, all of the
related Addenda, the Accounting and Service Policies and Procedures
Manuals, and the Terms of Sale Bulletins.

4. DEALERSHIP OPERATIONS - All operations contemplated by the Dealer
Agreement. These operations include the sale and service of Products and
any other activities undertaken by Dealer related to Products, including
rental and leasing operations, used vehicle sales and body shop operations
and finance and insurance operations whether conducted directly or
indirectly by Dealer.

5. DIVISION - The unit of General Motors Corporation that has entered into a
Dealer Agreement with Dealer authorizing it to market and service
Division's Motor Vehicles.

6. GENERAL MOTORS - General Motors Corporation.

7. MOTOR VEHICLES - All current model types or series of new motor vehicles
specified in any Motor Vehicle Addendum and all past General Motors motor
vehicles marketed through Motor Vehicle Dealers.

8. PRODUCTS - Motor Vehicles, Parts and Accessories.

9. SERVICE POLICIES AND PROCEDURES MANUAL - The Manual issued periodically
which details certain administrative and performance requirements for
Dealer service under the Dealer Agreement.

10. SPECIAL VEHICLES - Motor Vehicles that have limited marketability because
they differ from standard specifications or incorporate special equipment.

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EXHIBIT 10.8.1

MAZDA DEALER AGREEMENT
- --------------------------------------------------------------------------------
SIGNATURE PAGE

TERM APRIL 11, 1994 THROUGH DECEMBER 31, 1994
---------------- --------------------------------

DEALER DEALER'S LEGAL NAME LITHIA DODGE
----------------------------------------------------

d/b/a LITHIA MAZDA
----------------------------------------------------

DEALER'S APPROVED LOCATION 333 NORTH RIVERSIDE AVE. - SALES
----------------------------------------
325 EAST 5TH STREET - SERVICE & PARTS
----------------------------------------

MEDFORD, OREGON 97501
-----------------------------------

BY /s/ SIDNEY B. DEBOER TITLE PRESIDENT
---------------------- ------------------------------------

MAZDA MOTOR OF AMERICA, INC. 7755 IRVINE CENTER DRIVE
IRVINE, CALIFORNIA 92718

BY /s/ W.D. GOETZE TITLE SENIOR VICE PRESIDENT, GENERAL MANAGER
---------------------- --------------------------------------

THE MAZDA DEALER AGREEMENT SHALL BE EFFECTIVE ONLY UPON THE WRITTEN
APPROVAL OF THE PRESIDENT OR ANY OF THE VICE PRESIDENTS OF MAZDA.

<PAGE>

SCHEDULE OF DOCUMENTS

I. BASIC AGREEMENT Basic Agreement
Sales and Service Obligations of MAZDA and
DEALER
MAZDA Image
Customer Satisfaction
Essential MAZDA Programs
MAZDA Information Systems
Reasonable Expectations of DEALER and MAZDA
Communications and Review Procedures
Additional Provisions
Term
DEALER Acknowledgment

- --------------------------------------------------------------------------------

II. ADDITIONAL AGREEMENTS General Terms and Conditions
Definitions
General Provisions

Purchase Terms and Conditions
Dealership Location
DEALER Review and Action Plan
MAZDA Image
Renewal and Termination
Renewal
Termination
Effect of Expiration or Termination
Mutual Releases
Other Actions

Ownership and Transfer
General
Rights of Spouses and Children
Transfer to Other Nominees

Dispute Resolution
Non-Judicial Resolution
Third Party Non-Judicial Resolution
Judicial Resolution

(d) advertise MAZDA Products and services in the local area where DEALER
is located, using media selected by DEALER,

(e) participate in local auto shows and product exhibitions,

(f) use retail sales promotion materials prepared by MAZDA for use by
MAZDA Dealers, such as catalogs, banners, product information centers and other
point-of-sale materials,

(g) use sales aids prepared by MAZDA for use by sales, service and parts
personnel of MAZDA Dealers,

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(h) encourage DEALER's sales, service, parts and administrative personnel
to participate in incentive programs offered by MAZDA,

(i) cause DEALER's eligible employees to fully participate in training
programs conducted by MAZDA for sales, service, parts, administrative and
management personnel of MAZDA Dealers, and

(j) acquire, maintain and use special tools, manuals and equipment offered
by MAZDA for use by DEALER's personnel.

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II. MAZDA IMAGE

MAZDA and DEALER acknowledge that the following are essential purposes of the
MAZDA Dealer Agreement:

(a) to safeguard and promote the image, goodwill and reputation of the
MAZDA Trademarks, MAZDA Products, MAZDA, DEALER and MAZDA Dealers generally, and

(b) to avoid any and all deceptive, misleading, illegal, unethical and
discourteous practices by the parties and their personnel.

Accordingly, MAZDA and DEALER agree to conduct all activities between them and
others in such manner as is consistent with and in furtherance of these
essential purposes, and to take any action reasonably required to correct a
situation having an adverse effect on the MAZDA image.

- --------------------------------------------------------------------------------

III. CUSTOMER SATISFACTION

1. Acknowledgment

MAZDA and DEALER acknowledge that, in maintaining and preserving the image,
reputation and goodwill of the MAZDA Trademarks, MAZDA Products, DEALER, MAZDA
and MAZDA Dealers generally, the highest priority shall be given to ensuring
that customers are continually informed about and satisfied with MAZDA Products
and services provided by MAZDA and DEALER. MAZDA and DEALER further acknowledge
that the principal contact with customers will be DEALER, that DEALER shall have
the primary responsibility for handling customer satisfaction matters, and that
MAZDA shall support DEALER's efforts by providing technical information and
assistance regarding MAZDA Products. Accordingly, in addition to their other
obligations under the MAZDA Dealer Agreement, MAZDA and DEALER agree to the
following provisions.

2. MAZDA's Obligations.

MAZDA shall:

(a) cause qualified personnel to visit DEALER's facilities on a periodic
basis to discuss customer satisfaction matters,

(b) designate a person having the principal responsibility and authority
on behalf of MAZDA to handle and resolve customer satisfaction matters with
customers and DEALER,

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(d) establish consumer communications programs,

(e) keep DEALER promptly and fully advised with respect to customer
matters involving DEALER, and timely respond to notices from DEALER. In
situations involving claims of defects in MAZDA Products, and

(f) provide suitable information to permit DEALER to respond to customers,
consumer organizations and government agencies in a timely and courteous fashion
in customer satisfaction matters involving DEALER.

3. DEALER'S OBLIGATIONS

Dealer shall:

(a) ensure proper training in customer satisfaction matters for sales,
service, parts and administrative personnel, and cause DEALER's personnel at all
times to treat customers in a prompt, courteous and professional manner,

(b) designate a person having the principal responsibility and authority
on behalf of DEALER to handle and resolve customer satisfaction matters with
customers and MAZDA,

(d) participate in consumer communications programs established by MAZDA,

(e) keep MAZDA promptly and fully advised with respect to claims of
defects in MAZDA Products and other customer matters in which MAZDA has
expressed an interest, and

(f) cooperate with consumer organizations and government agencies in
customer satisfaction matters involving DEALER, and use its best efforts to
resolve customer satisfaction matters in a fair and honest manner which will
maintain the goodwill of customers and the image and reputation of MAZDA
Products.

IV. ESSENTIAL MAZDA PROGRAMS

MAZDA shall develop and offer programs for the benefit of (i) customers, (ii)
MAZDA Dealers or (iii) MAZDA concerning, without limitation, advertising, sales,
data processing, consumer information and service and training. MAZDA's general
manager may reasonably deem participation by MAZDA Dealers generally in certain
programs to be essential for maintaining an effective and efficient distribution
system for MAZDA Products.

Accordingly, DEALER shall participate in these essential programs pursuant to
their terms and conditions as part of the performance by DEALER of its
obligations under the MAZDA Dealer Agreement. MAZDA reserves the right to limit
DEALER's participation in other programs of MAZDA if DEALER fails or refuses to
participate in an essential program.

V. MAZDA INFORMATION SYSTEMS

1. Establishment and Purpose.

MAZDA shall establish, from time to time, information systems for use by MAZDA
Dealers generally and MAZDA to maintain an effective and efficient distribution
system for MAZDA Products, to facilitate the efficient and timely performance of

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their obligations to one another, and to enhance the competitive position of
MAZDA Products in the marketplace. These systems shall, without limitation,
relate to:

(a) distribution, sales and inventories of MAZDA Products,
(b) warranty claims,
(c) consumer communications,
(d) product quality assurance,
(e) DEALER financial information, and
(f) transportation claims.

2. DEALER Utilization.

DEALER shall utilize these information systems, in accordance with policies and
procedures applicable to MAZDA Dealers generally and established by MAZDA from
time to time. As part of such utilization, DEALER shall report, update and
verify information as may be required by MAZDA for processing and maintaining
information under such systems.

3. Electronic Systems.

MAZDA and DEALER acknowledge that effective and efficient communication of
information between them is increasingly likely to require DEALER to utilize
electronic communication and data processing hardware and software which can
communicate with and is otherwise compatible with MAZDA hardware and software.
Accordingly, DEALER shall acquire and maintain hardware and software deemed by
MAZDA to be necessary for this purpose. DEALER shall implement necessary
changes and modifications in its hardware and software as may be required by
MAZDA for this purpose upon MAZDA's giving at least three months' advance
written notice to DEALER of such changes.

4. Accurate Information.

DEALER acknowledges that maintaining accurate information regarding DEALER's
Business on a current basis is important for the management and evaluation of
DEALER's Business and also to permit MAZDA to identify and develop programs and
services for the benefit of MAZDA Dealers and customers generally. Accordingly,
DEALER agrees that all information submitted to MAZDA shall be complete and
accurate and submitted in the form and at the times requested by MAZDA. DEALER
will verify the accuracy of all information prior to its being submitted to
MAZDA so that no information will be false or misleading. In addition to any
other remedies available to MAZDA under the MAZDA Dealer Agreement, DEALER
agrees to fully compensate MAZDA for all costs incurred by MAZDA in identifying
and correcting false or misleading information problems.

VI. REASONABLE EXPECTATIONS
OF DEALER AND MAZDA

1. Business Expectations.

The reasonable expectations of DEALER and MAZDA are to deal in good faith with
each other in pursuit of their respective interests and the intents and purposes
of the MAZDA Dealer Agreement. Each party acknowledges that meeting its goals
and objectives for the business relationship contemplated hereby is and will
continue to be dependent upon its own conduct, business judgment and performance
hereunder. DEALER and MAZDA further acknowledge: (i) that by entering into the
MAZDA Dealer Agreement, each party is and will continue to be involved in an
inherently speculative business venture that requires each party to assume
significant business risks; (ii) that the success or failure of the business

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contemplated hereby is uncertain; and (iii) that no profit or specific level of
profitability is represented or can be assured to either party. The MAZDA
Dealer Agreement is not intended to eliminate the business risks, but is
intended to fairly and reasonably allocate the business risks between DEALER and
MAZDA. Accordingly, except as expressly set forth in the MAZDA Dealer
Agreement, DEALER makes no representations or warranties to MAZDA, including
without limitation any representation or warranty that DEALER will sell a
particular number of MAZDA Vehicles, meet any specific sales objective for MAZDA
Products, or otherwise achieve any particular level of market penetration in any
area served from DEALER's Approved Location. Similarly, except as expressly set
forth in the MAZDA Dealer Agreement, MAZDA makes no representations or
warranties to DEALER, including without limitation any representation or
warranty with respect to the future success or profitability of the business
contemplated hereby, or that MAZDA will be able to satisfy DEALER's requirements
for MAZDA Products when and as they arise from time to time.

2. Acknowledgments.

DEALER and MAZDA acknowledge that they may not fulfill their respective
expectations for the business contemplated by the MAZDA Dealer Agreement and
agree that in such event the parties may take any one or more of the following
actions, consistent with applicable law: (i) DEALER or MAZDA may elect to
terminate or not renew the MAZDA Dealer Agreement as provided herein; (ii)
DEALER may elect to utilize some of its resources to engage in businesses
involving the promotion, sale and service of products other than MAZDA Products,
including those which may be competitive with MAZDA Products; or (iii) if MAZDA
determines it would be in the best interests of customers or MAZDA to do so,
MAZDA may elect to appoint another dealer to promote, sell and service MAZDA
Products near DEALER's Approved Location. DEALER and MAZDA shall give each
other at least sixty days' written notice prior to taking any of the foregoing
actions, for the purpose of enabling the parties to discuss whether there exist
any mutually agreeable alternatives to the proposed action. To the extent any
consent is required from a party, such party will not unreasonably withhold its
consent to any of the foregoing actions by the other.

3. DEALER's Representations.

DEALER represents and warrants and MAZDA enters into the MAZDA Dealer Agreement
in reliance upon DEALER's representation that the information contained in the
MAZDA Dealer Representations made to MAZDA by DEALER are true, complete and not
misleading.

VII. COMMUNICATIONS AND
REVIEW PROCEDURES

1. Periodic Review.

From time to time one or more designated representatives from MAZDA and DEALER
shall meet to review the past performance under the MAZDA Dealer Agreement,
anticipated sales, service, parts and other matters affecting the past, present
and future conduct of DEALER's Business and DEALER's relationship with MAZDA.
Both parties shall make every effort towards continuing frank, open and
constructive discussions to best promote the continuing and successful
performance of MAZDA and DEALER under the MAZDA Dealer Agreement and to enhance
the relationship between the parties.

2. Responsibility of MAZDA Representatives.

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DEALER acknowledges that designated field representatives of MAZDA having
responsibility for communications with DEALER on behalf of MAZDA with respect to
day-to-day operational matters do not have authority to represent MAZDA or make
commitments on behalf of MAZDA concerning matters of interpretation of the MAZDA
Dealer Agreement or matters of policy affecting the relationship of DEALER and
MAZDA, including without limitation matters involving: (i) methods of allocation
for MAZDA Products; (ii) the determination by MAZDA of essential MAZDA programs
necessary for DEALER to perform its obligations under the MAZDA Dealer
Agreement; (iii) whether MAZDA has fulfilled its reasonable expectations for the
business contemplated by the MAZDA Dealer Agreement; (iv) the appointment of
another Dealer near DEALER's Approved Location; or (v) the termination or
renewal of the MAZDA Dealer Agreement. Accordingly, DEALER may not rely on any
such field representative of MAZDA with respect to such matters. If DEALER has
any questions concerning matters of interpretation of the MAZDA Dealer Agreement
or other policy matters, DEALER shall consult with an appropriate officer of
MAZDA having executive responsibility for the matter in question, including
MAZDA's general manager.

3. DEALER's General Manager.

DEALER agrees to employ at all times qualified and competent personnel to manage
DEALER's business, including one individual who shall act as DEALER's General
Manager. Such General Manager shall have principal responsibility for the
overall management of DEALER's Business, shall have full authority to make
decisions and act on DEALER's behalf, and shall devote his or her full time and
attention to serving in that capacity. If DEALER is an individual, DEALER shall
act as such General Manager. If DEALER is not an individual, DEALER shall
inform MAZDA in writing in advance and on a continuing basis of the name and
qualifications of each individual employee who is designated by DEALER from time
to time to act as such General Manager. DEALER acknowledges that any such
designation shall not relieve DEALER of its responsibilities under the MAZDA
Dealer Agreement even though MAZDA may rely upon such individual to act on
DEALER's behalf.

VIII. ADDITIONAL PROVISIONS

1. Components of MAZDA Dealer Agreement.

DEALER and MAZDA acknowledge that the business relationship between them
involves many matters requiring detailed terms and conditions governing their
respective contractual rights and obligations, and that the terms and conditions
of their relationship may be changed or supplemented because of changes in
market conditions and other relevant factors. Accordingly, MAZDA and DEALER
agree to the following provisions, which are incorporated by this reference into
and made a part of the MAZDA Dealer Agreement:

(a) those provisions which are set forth in the additional agreements
attached hereto,

(b) those provisions which currently are set forth in written instructions
issued by MAZDA to MAZDA Dealers generally, as amended from time to time,
including but not limited to MAZDA warranty policies and procedures, MAZDA
transportation claims policies and procedures, MAZDA parts bulletins, MAZDA
parts policies and procedures, the MAZDA service organization and facilities
guide and the MAZDA Dealer identification policies,

(c) those provisions which are set forth in other additional agreements or
written instructions which are issued by MAZDA in the future to be generally
applicable to all MAZDA Dealers, it being understood and agreed by DEALER that

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the conduct of DEALER's business is to be governed by requirements established
by MAZDA as applicable to all MAZDA Dealers generally.

2. Definition of Terms.

All terms which are defined in the additional provisions, when so used in the
MAZDA Dealer Agreement, shall have the same meaning as set forth therein.

3. Amendments.

MAZDA may amend the MAZDA Dealer Agreement (including any of the above
referenced additional provisions) or issue a new Dealer Agreement, without
further consideration, provided that MAZDA takes any such action with respect to
all MAZDA Dealers generally.

IX. TERM

The MAZDA Dealer Agreement and all additional provisions incorporated by
reference under Section VIII shall be in effect with respect to DEALER for the
term stated on the signature page of the MAZDA Dealer Agreement unless
terminated sooner pursuant to the additional agreement entitled "Renewal and
Termination."

X. DEALER ACKNOWLEDGMENT

DEALER has read and understands the terms and conditions of the MAZDA Dealer
Agreement, including the Basic Agreement and all additional provisions
incorporated by reference under Section VIII of the Basic Agreement and is fully
aware of the obligations of DEALER and MAZDA. DEALER and MAZDA each acknowledge
that they are entering into the MAZDA Dealer Agreement as their free and
voluntary act in order to pursue their independent business interests and in the
expectation that their business relationship will be to their mutual economic
benefit. In so doing DEALER and MAZDA are relying upon their own judgment and
the counsel of their advisors.

DEALER Initials:

This General Terms and Conditions document is an additional agreement under
the MAZDA Dealer Agreement between MAZDA and DEALER, and as such is incorporated
by reference into the MAZDA Dealer Agreement and is binding upon MAZDA and
DEALER as if executed by each of them.

1. DEFINITIONS

As used in the MAZDA Dealer Agreement the following terms shall have the
following meanings:

1. "DEALER" means the business entity identified as dealer on the signature
page of the MAZDA Dealer Agreement.

2. "DEALER's Approved Location" means the address of DEALER set forth on the
signature page of the MAZDA Dealer Agreement.

3. "DEALER's Business" means all activities of DEALER relating to the
promotion, sale and service of MAZDA Products and all other activities of
DEALER under the MAZDA Dealer Agreement.

4. "Manufacturer" means MAZDA Motor Corporation, a corporation, or any other
corporation which manufactures MAZDA Vehicles.

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5. "MAZDA" means the business entity identified as Mazda on the signature page
of the MAZDA Dealer Agreement.

6. "MAZDA Dealers" means others who promote, sell and service MAZDA Products
pursuant to an agreement with MAZDA authorizing them to engage in business
under the MAZDA Trademarks and to participate in the distribution system
established by MAZDA for MAZDA Products.

7. "MAZDA Dealer Representations" means the application, related documents and
information, and representations previously submitted or made by DEALER to
MAZDA for the purpose of enabling MAZDA to evaluate DEALER and to determine
whether to enter into or renew the MAZDA Dealer Agreement with DEALER
including but not limited to the information set forth on any attachment
hereto entitled MAZDA Dealer Representations, which is incorporated herein
by reference.

8. "MAZDA Parts and Accessories" means new parts and accessories designed for
use on MAZDA Vehicles and marketed by MAZDA, or other parts and accessories
specifically designated by MAZDA in writing as MAZDA Parts and Accessories.

9. "MAZDA Products" means MAZDA Vehicles and MAZDA Parts and Accessories.

10. "MAZDA Vehicles" means new cars and trucks which bear the trademark MAZDA
and are sold by MAZDA to MAZDA Dealers.

11. "MAZDA Trademarks" means the various trademarks, service marks, names,
logos and designs (including the name "MAZDA"), and all registrations
thereof, now or hereafter owned, claimed, adopted, acquired or used by
Manufacturer, MAZDA or any other company involved in the chain of
distribution for MAZDA Products.

II. GENERAL PROVISIONS

1. Relationship Between DEALER and MAZDA.

DEALER and MAZDA acknowledge that the MAZDA Dealer Agreement does not make
either party the agent, partner, or legal representative of the other for any
purpose, and that neither party has any power or authority to act as agent for
the other or assume or create any obligation on behalf of or in the name of the
other, or bind such party in any manner. DEALER and MAZDA further acknowledge
_________ length, and that the business relationship between them does not
create any franchise, special trust, confidential or other fiduciary
relationship, or any duties arising from such relationship. Each party shall be
solely responsible for any and all expenditures and liabilities incurred by it
in connection with the MAZDA Dealer Agreement or the performance of obligations
hereunder. DEALER has not paid to MAZDA and MAZDA has not _____________________

This Purchase Terms and Conditions document is an additional agreement under the
MAZDA Dealer Agreement between MAZDA and DEALER, and as such is incorporated by
reference into the MAZDA Dealer Agreement and is binding upon MAZDA and DEALER
as if executed by each of them.

PURCHASE TERMS AND CONDITIONS

1. Orders.

DEALER agrees to submit orders for MAZDA Products to MAZDA in such form and
under such terms and conditions as may be required by MAZDA from time to time.
Any

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such orders are subject to acceptance by MAZDA, and may be accepted in whole or
in part. Orders may be accepted by notice to DEALER or by shipment of the MAZDA
Products ordered. Orders shall be irrevocable for 120 days after submission to
MAZDA, and shall be irrevocable after shipment to DEALER of the MAZDA Products
ordered.

2. Changes in MAZDA Products.

MAZDA may fill DEALER orders with MAZDA Products incorporating the most recent
improvements or changes, including those made after an order is placed, without
any obligation to make the same or similar changes on MAZDA Products previously
purchased by or shipped to DEALER. MAZDA may install any equipment required by
applicable law to be installed on any MAZDA Products ordered by DEALER, whether
or not such item of equipment is included in DEALER's order for the MAZDA
Products. MAZDA may at any time, without incurring liability to DEALER,
discontinue sales or shipments of any model or type of MAZDA Products. MAZDA
may act under the provisions of this paragraph without notice and without any
obligation to DEALER by reason of DEALER's previous purchases.

3. Delivery

MAZDA shall endeavor to deliver MAZDA Products to DEALER as soon as practicable
after acceptance of DEALER's order. MAZDA shall not be liable for delay or
nondelivery of MAZDA Products, nor shall MAZDA be obligated to deliver to DEALER
any particular quantity or mix of MAZDA Products. MAZDA may deliver MAZDA
Products by any means or carrier. MAZDA Products may be shipped to DEALER at
DEALER's Approved Location ______ or DEALER's Approved Location. Upon delivery
of the MAZDA Products to the first carrier or to DEALER, whichever occurs first,
risk of loss of the MAZDA Products shall pass to DEALER or to the financing
institution previously designated by DEALER in writing to MAZDA. Title to the
MAZDA Vehicles shall pass to DEALER upon payment in full therefor, while title
to MAZDA Parts and Accessories shall pass upon delivery as set forth in the
previous sentence. MAZDA shall retain a lien on the MAZDA Products securing
payment for the MAZDA Products until paid for in full. DEALER shall make
written claim for any shortage or damage in any shipment of MAZDA Products
within the time and in the manner as may be required by MAZDA.

4. MAZDA Product Supply.

DEALER and MAZDA acknowledge that the supply of MAZDA Products to MAZDA can vary
from time to time for many reasons beyond the control of MAZDA. Accordingly,
MAZDA may not at all times have an available supply of all makes, models and
colors of MAZDA Vehicles or of MAZDA Parts and Accessories sufficient to meet
the demands of all MAZDA Dealers generally or the specific demands of DEALER or
its customers; or at other times MAZDA may have a greater supply of MAZDA
Vehicles or of MAZDA Parts and Accessories than is required by all MAZDA Dealers
generally or specifically by DEALER or its customers. In order to maintain an
effective distribution system for MAZDA Products, it may be necessary for MAZDA
to allocate its supply of MAZDA Products among all MAZDA Dealers, utilizing
uniform methods of allocation from time to time which take into consideration
such factors as MAZDA deems relevant, including without limitation the size,
sales performance, inventories and sales potential of MAZDA Dealers.
Accordingly, MAZDA has not made, and cannot make any representation or warranty
to Dealer that Dealer can expect to ____________ including particular makes,
models or colors of MAZDA Vehicles. DEALER acknowledges that it is not entering
into the MAZDA Dealer Agreement on the basis of any such representation or
warranty, and that it may not at all times have such quantities of MAZDA
Products available or in its inventories as it desires or deems necessary to
meet the demands therefor from prospective customers of MAZDA Products, or to
satisfy DEALER's objectives for

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sales of MAZDA Products. DEALER agrees to conduct DEALER's Business in
accordance with the terms and conditions of allocation systems established by
MAZDA from time to time for all MAZDA Dealers generally. MAZDA acknowledges
that DEALER is not required to purchase any specific quantity of MAZDA Products,
and that DEALER may from time to time decline to purchase from MAZDA any or all
MAZDA Products allocated to DEALER under MAZDA's allocation system; provided
DEALER acknowledges that any refusal to purchase MAZDA Products allocated to it
may adversely affect its ability relative to other MAZDA Dealers to receive
MAZDA Products thereafter or to participate in other programs of MAZDA available
to other MAZDA Dealers. DEALER acknowledges that the allocation system
presently utilized by MAZDA for MAZDA Vehicles has been explained to and
understood by DEALER and that it is a fair and reasonable system for allocating
MAZDA Vehicles among all MAZDA Dealers generally.

5. Prices.

DEALER agrees to purchase MAZDA Products according to the prices, charges and
terms established by MAZDA from time to time and in effect on the date of
shipment, including destination charges. MAZDA reserves the right, without
prior notice, to change prices, charges and terms for any MAZDA Products.

6. Taxes.

DEALER agrees to pay all excise or other taxes levied on MAZDA Products
purchased by DEALER or on the sale, shipment, ownership or use of the MAZDA
Products to or by DEALER.

7. Reshipment and Diversion.

MAZDA agrees to pay all expenses incurred by DEALER in reshipping to MAZDA any
MAZDA Products not ordered by DEALER, provided that DEALER reships the MAZDA
Products promptly as directed by MAZDA. DEALER agrees to pay any expenses
incurred by MAZDA for any diversion of MAZDA Products resulting from DEALER's
failure or refusal to accept any MAZDA Products ordered by and shipped to DEALER
or to make timely payment for any MAZDA Products.

8. Payment.

DEALER agrees to pay MAZDA for MAZDA Products sold to DEALER on terms
established by MAZDA from time to time. DEALER agrees to pay MAZDA's cost of
collection (including attorneys' fees) of any amount owed by DEALER to MAZDA.
MAZDA may offset any amount owed by MAZDA to DEALER. All MAZDA Products
purchased by DEALER from MAZDA (other than MAZDA Vehicles) shall be charged to
DEALER's parts account, unless otherwise specified by MAZDA prior to the date of
purchase. If any payment of DEALER's parts account is delinquent, MAZDA may
ship MAZDA Products purchased by DEALER on a C.O.D. or prepaid basis.

9. Financial Resources.

DEALER agrees to maintain and employ in DEALER's Business at all times financial
resources sufficient to enable DEALER to satisfy DEALER's obligations under the
MAZDA Dealer Agreement. These resources shall include the amounts of working
capital, new vehicle flooring, and other financial resources which MAZDA may
reasonably require; provided that no such requirement shall be deemed to be a
warranty by MAZDA of the adequacy of such financial resources for the successful
conduct of DEALER's Business.

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DEALERSHIP LOCATION

DEALER's Approved Location.

DEALER agrees to conduct DEALER's Business at DEALER's Approved Location and at
no other location. DEALER acknowledges that DEALER's Approved Location is an
integral part of MAZDA's network of MAZDA Dealers which promote, sell and
service MAZDA products, and the continued conduct of DEALER's Business at
DEALER's Approved Location is essential to maintain an effective and efficient
distribution system for MAZDA Products. Accordingly, MAZDA will not require
DEALER to relocate its facilities to another location unless such relocation is
deemed reasonably necessary to meet changes in sales and service requirements of
customers of MAZDA Products. In addition, DEALER shall not sell or transfer any
interest of DEALER in DEALER's facilities or the underlying property of DEALER's
Approved Location without the prior written consent of MAZDA.

This DEALER Review and Action Plan document is an additional agreement under the
MAZDA Dealer Agreement between MAZDA and DEALER, and as such is incorporated by
reference into the MAZDA Dealer Agreement and is binding upon MAZDA and DEALER
as if executed by each of them.

DEALER REVIEW AND ACTION PLAN

This DEALER Review and Action Plan document is an additional agreement under the
MAZDA Dealer Agreement between Mazda and Dealer, and as such is incorporated by
reference into the MAZDA Dealer Agreement and is binding upon MAZDA and Dealer
as if executed by each of them.

DEALER REVIEW AND ACTION PLAN

1. Purpose.

MAZDA and DEALER acknowledge that it is desirable for MAZDA to review, evaluate
and suggest to DEALER goals related to the sales, service, parts and other
operations of DEALER which DEALER should reasonably expect to accomplish so as
to : (i) provide for high levels of satisfied customers of MAZDA products; (ii)
promote the image, reputation and goodwill of DEALER, MAZDA, MAZDA Products, and
MAZDA Dealers generally; and (iii) permit DEALER to operate as an effective
member of the nationwide distribution system for MAZDA Products.

2. Information From DEALER.

DEALER acknowledges that MAZDA will require information on a continuing basis
from DEALER regarding DEALER's facilities, operations and personnel in order for
MAZDA to review and evaluate DEALER's operations. DEALER agrees to provide such
information in a prompt and helpful manner as requested from time to time by
MAZDA. MAZDA intends to utilize such information to compile data regarding
MAZDA Dealers and the local areas where they do business as part of MAZDA's
review program.

3. Individualized Annual Action Plan.

Based on the information from DEALER and other information developed by MAZDA,
MAZDA will evaluate DEALER's representation of MAZDA in the local area where
DEALER does business. MAZDA will prepare and present to DEALER at least
annually an individualized action plan for DEALER with respect to DEALER's
operations, facilities, personnel, tools, equipment and support services which
MAZDA reasonably determines need to be improved to provide effective
representation of

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MAZDA under the MAZDA Dealer Agreement. MAZDA agrees to discuss with DEALER the
analysis and the goals for improvement presented in the action plan.

4. Voluntary Nature of Compliance.

DEALER acknowledges that the individual action plan for DEALER will be prepared
by MAZDA to benefit DEALER and MAZDA Dealers generally, and to enhance the
effectiveness and efficiency of the nationwide distribution system for MAZDA
Products. DEALER agrees to consider seriously and to use its best efforts to
accomplish within a reasonable period of time, on a cost effective basis for
DEALER, those goals for improvement which MAZDA presents to DEALER in an action
plan. MAZDA agrees to cooperate with DEALER and help DEALER accomplish those
goals. DEALER acknowledges that its failure to make adequate progress toward
accomplishing the goals suggested by MAZDA in an action plan may mean that
DEALER will not be able to provide effective representation of MAZDA in the
local area in which DEALER does business, and that MAZDA will not be able to
fulfill its reasonable expectations for the business relationship with DEALER
contemplated by the MAZDA Dealer Agreement.

This MAZDA image document is an additional agreement under the MAZDA Dealer
Agreement between MAZDA and DEALER, and as such is incorporated by reference
into the MAZDA Dealer Agreement and is binding upon MAZDA and DEALER as if
executed by each of them.

MAZDA IMAGE

1. Use of MAZDA Trademarks.

In connection with DEALER's performance of its obligations under the MAZDA
Dealer Agreement, DEALER may use the MAZDA Trademarks as authorized by MAZDA.
DEALER shall not use any MAZDA Trademarks, or any mark, word, symbol, trade
dress or logo similar to any MAZDA Trademark, in connection with the sale of any
property other than MAZDA Products. DEALER shall use the MAZDA Trademarks only
in the color, size, form and style required or approved by MAZDA from time to
time. No MAZDA Trademark or mark, name or word similar thereto may be used in
any trademark registration by DEALER. Except as provided below, DEALER shall
use the word "MAZDA" in its assumed business name, and shall not use the word in
DEALER's legal name. The word "MAZDA" may be used in DEALER's legal name only
when required by law or when DEALER may not legally utilize an assumed business
name containing the word "MAZDA." DEALER's use of the word "MAZDA" in its
assumed business name or in its legal name shall be made only with the prior
written approval of MAZDA and upon such terms and conditions as MAZDA may
specify from time to time. No company owned by or affiliated with DEALER or any
person who is an owner of DEALER may use the MAZDA Trademarks or other marks,
names or words similar thereto without the prior written permission of MAZDA.
At MAZDA's request, DEALER agrees to discontinue or change the manner in which
DEALER uses any MAZDA trademarks.

2. Ownership and Protection of MAZDA Trademarks.

DEALER shall not impair the value or contest the right of Manufacturer or MAZDA
to the exclusive ownership and use of any MAZDA Trademark. DEALER's use of any
MAZDA Trademark shall not create, or be deemed to create, any right, title or
interest in the MAZDA Trademarks in DEALER or any other party, and any such use
shall inure to the _________________ benefit of the owner of the MAZDA
Trademarks. To help protect the MAZDA Trademarks, DEALER agrees to notify MAZDA
promptly whenever DEALER learns of an infringement or misuse of MAZDA Trademarks
by any person. DEALER shall not represent as MAZDA Products any products which
are not MAZDA Products.

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3. DEALER Facilities.

DEALER's place of business shall be satisfactory to MAZDA in appearance and
condition.

4. Signs.

DEALER agrees to provide identification and departmental signs required by
MAZDA. DEALER agrees to prominently display, illuminate, maintain and repair
the signs at DEALER's Approved Location, at DEALER's expense and in a manner
approved by MAZDA.

5. Advertising.

DEALER agrees to actively and adequately advertise MAZDA Products in a manner
that will develop interest and confidence in MAZDA Products in the local area
where DEALER does business. DEALER shall not use any advertising which in
MAZDA's opinion tends to mislead or deceive the public. DEALER's advertising
will conform to MAZDA's advertising standards, will adequately maintain the
image, reputation and goodwill of the MAZDA Trademarks, MAZDA Products, MAZDA
and other MAZDA Dealers, and will not conflict with other national and regional
advertising for MAZDA Products. DEALER agrees to discontinue immediately any
advertising that MAZDA determines: (i) may be injurious to the image, goodwill
or reputation of the MAZDA Trademarks, MAZDA, MAZDA Products, and other MAZDA
Dealers; or (ii) may be likely to mislead or deceive the public; or (iii) which
is inconsistent with MAZDA's advertising or the requirements of this paragraph.

This Renewal and Termination document is an additional agreement under the MAZDA
Dealer Agreement between MAZDA and DEALER, and as such is incorporated by
reference into the MAZDA Dealer Agreement and is binding upon MAZDA and DEALER
as if executed by each of them.

I. RENEWAL

MAZDA and DEALER agree to renew the MAZDA Dealer Agreement upon the expiration
of its stated period for such renewal period as MAZDA may reasonably offer to
DEALER at least ninety days prior to expiration, unless:

(a) DEALER refuses to agree to special conditions for the conduct of
DEALER's Business proposed in good faith by MAZDA, which refusal shall give
MAZDA good cause for non-renewal, or (b) Any event or series of events has
occurred during the period of the MAZDA Dealer Agreement which gives DEALER or
MAZDA the right to terminate.

II. TERMINATION

1. Termination by Mutual Consent.

The MAZDA Dealer Agreement may be terminated at any time by the written consent
of DEALER and MAZDA. The termination shall be effective on the date specified
in the written consent. If MAZDA and DEALER fail to renew the MAZDA Dealer
Agreement pursuant to Section I, the MAZDA Dealer Agreement shall be deemed to
be terminated by mutual consent of DEALER and MAZDA.

2. New Form of Dealer Agreement.

If MAZDA at any time offers a new form of MAZDA dealer agreement to MAZDA
Dealers generally, MAZDA may terminate the MAZDA Dealer Agreement by a written
notice to DEALER which offers the new form of dealer agreement to DEALER. The
termination

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shall be effective ninety days after DEALER receives the notice or, if it occurs
earlier, on the date upon which the new MAZDA Dealer Agreement between MAZDA and
DEALER becomes effective.

3. Termination by DEALER.

DEALER may terminate the MAZDA Dealer Agreement at any time by written notice to
MAZDA. DEALER acknowledges that MAZDA has made a significant investment in
servicing DEALER and in performing its obligations under the MAZDA Dealer
Agreement in order to maintain customer satisfaction and supply of MAZDA
Products in the local area where DEALER does business. DEALER acknowledges
further that in order to preserve and protect that investment, MAZDA requires
adequate notice in order to engage a substitute dealer in the event DEALER
wishes to terminate the relationship with MAZDA under the MAZDA Dealer
Agreement. Accordingly, the termination shall be effective sixty days after
receipt by MAZDA of the notice.

4. Termination for Cause by MAZDA.

(a) IMMEDIATE. The following events are so contrary to the spirit, nature
and purposes of the MAZDA Dealer Agreement that MAZDA shall have the right upon
the occurrence of any of them to terminate the MAZDA Dealer Agreement, effective
as of the date of the event, by sending notice of termination to DEALER by
registered or certified mail or telegram:

(i) The insolvency of DEALER; the filing by DEALER of a voluntary petition
in bankruptcy; the filing of an involuntary petition to have DEALER declared
bankrupt, if the petition is not vacated within thirty days from the date of
filing; the appointment of a receiver or trustee for DEALER, if the appointment
is not vacated within thirty days from the date of appointment; the execution by
DEALER of an assignment for the benefit of creditors; any other act of
bankruptcy by DEALER; or any of the foregoing with respect to any partner in
DEALER.

(ii) Except as provided for elsewhere in the MAZDA Dealer Agreement the
death or incapacity of DEALER to perform the obligations of DEALER hereunder, if
an individual, or of any partner of DEALER, if a partnership, or the dissolution
or liquidation of DEALER (or the taking of any action to dissolve or liquidate
DEALER), if a partnership or corporation.

(iii) The conduct of DEALER's Business at other than DEALER's Approved
Location without the prior written approval of MAZDA.

(iv) DEALER's entering into any contract for the sale, transfer or
assignment by DEALER of any rights or privileges of DEALER under the MAZDA
Dealer Agreement, or for the transfer or delegation by DEALER of any material
obligations of DEALER under the MAZDA Dealer Agreement, unless such contract
contains a provision requiring MAZDA's written approval of the purchaser,
transferee or assignee before the closing of the transaction, and DEALER
delivers to MAZDA a copy of such contract within seven days following DEALER's
execution thereof.

(v) DEALER's entering into any contract for the sale, transfer, or
assignment of the principal assets of DEALER required for the conduct of
DEALER's Business, unless such contract contains a provision requiring MAZDA's
written determination before the closing of the transaction that the transaction
will not impair DEALER's ability to conduct DEALER's Business at DEALER's
Approved Location, and DEALER delivers to MAZDA a copy of such contract within
seven days following DEALER's execution thereof.

(vi) The conviction of DEALER or of any owner or manager of DEALER referred
to in the MAZDA Dealer Agreement of any crime which may have a material adverse
effect on DEALER's Business or the image, goodwill or reputation of MAZDA, MAZDA
Products or other MAZDA Dealers.

(vii) The failure of DEALER to be open for business at DEALER's Approved
Location for seven or more consecutive days (excluding Sundays).

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(viii) The termination of MAZDA's rights to distribute MAZDA Products to
DEALER.

(b) WITHIN SIXTY DAYS. The following events are so contrary to the
spirit, nature and purposes of the MAZDA Dealer Agreement that it any of them
continue to exist sixty days after MAZDA has sent to DEALER a written notice of
the existence of any such event listed below and MAZDA's intention to terminate
if such event is not remedied, MAZDA may terminate the MAZDA Dealer Agreement,
effective immediately, by sending final notice of termination to DEALER by
registered or certified mail or telegram:

(i) A voluntary or involuntary change in the ownership of DEALER without
the prior written approval of MAZDA.

(ii) The failure of DEALER to have any license or permit required by law
for the conduct of DEALER's Business under the MAZDA Dealer Agreement.

(iii) Any conduct of DEALER detrimental to the image, goodwill or
reputation of MAZDA, MAZDA Products or MAZDA Dealers generally.

(iv) The failure to pay any amount due MAZDA within 7 days following
receipt of notice that an amount due has not been paid.

(v) Any chronic or repeated default in reporting, record keeping, or other
business requirement of DEALER arising out of the MAZDA Dealer Agreement, and
the business contemplated hereby.

(vi) Any other material breach by DEALER of DEALER's warranties,
obligations or performance under the MAZDA Dealer Agreement.

5. Notices.

(a) DEALER agrees to immediately give MAZDA written notice upon the
occurrence of any of the events specified in Section 11.4. If DEALER fails to
give MAZDA written notice within seven days after the occurrence of any event
set forth in Section 11.4(b), the notice of intention to terminate the MAZDA
Dealer Agreement from MAZDA under Section 11.4(b) shall be deemed to have been
sent to DEALER on the date of the event.

(b) If DEALER is deemed to be a debtor under the Bankruptcy Code and a
Debtor-in-Possession or Trustee of DEALER has a right to accept or reject the
MAZDA Dealer Agreement, the MAZDA Dealer Agreement shall be deemed to be
rejected if it is not accepted by the Debtor-in-Possession or Trustee within
sixty days following the filing of the petition in bankruptcy.

RENEWAL AND TERMINATION

III. EFFECT OF EXPIRATION OR TERMINATION

1. General.

The provisions of this Section shall govern the rights and obligations of the
parties upon expiration or termination of the MAZDA Dealer Agreement. Except as
provided in this Section, DEALER shall immediately upon expiration or
termination of the MAZDA Dealer Agreement cease to be, or act as, or represent
itself to be an authorized dealer of MAZDA Products.

2. Further Transactions.

If, after the expiration or termination of the MAZDA Dealer Agreement, MAZDA
accepts any orders from DEALER or otherwise transacts business with DEALER, all
such transactions shall be governed by terms identical to those in the MAZDA
Dealer Agreement. Nevertheless, the acceptance of orders or transaction of
other business shall not waive the expiration or termination, or constitute an
extension or renewal of the MAZDA Dealer Agreement.

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3. Signs, Trademarks and Names.

DEALER agrees to immediately discontinue and abandon the direct or indirect use
of all MAZDA Trademarks with the word "MAZDA," or any other words, symbols or
expressions including or resembling MAZDA Trademarks, whether appearing on
signs, posters, advertising matter or stationery, in any legal name or assumed
business name, or in any other form. If DEALER falls to comply with the
requirements of this paragraph following expiration or termination of the MAZDA
Dealer Agreement, MAZDA or Manufacturer may bring a legal action against DEALER
seeking any remedy available to MAZDA or Manufacturer, including without
limitation the issuance of an injunction against any unauthorized use of a MAZDA
Trademark, and in such case all costs, attorneys' fees and expenses incurred in
the action by MAZDA or Manufacturer shall be paid by DEALER.

4. Repurchase by MAZDA.

MAZDA agrees to repurchase from DEALER, and DEALER agrees to sell to MAZDA, all
of the following property owned by DEALER:

(a) All saleable, unused and undamaged current model MAZDA Vehicles, at a
price equal to DEALER's net cost (excluding the cost of inland freight and all
parts and accessories other than MAZDA Parts and Accessories) or the price last
established by MAZDA for the sale by MAZDA to MAZDA Dealers of identical MAZDA
Vehicles, whichever is lower, less prior refunds or allowances thereon, and less
any costs required to place the MAZDA Vehicles in new-car condition.

(b) All new, unused and undamaged MAZDA Parts and Accessories which appear
on MAZDA's then current price list and are in good and saleable condition, at a
price equal to the price established by MAZDA for the sale to MAZDA Dealers of
identical MAZDA Parts and Accessories, less MAZDA's then current charge for the
cost of handling and restocking.

(c) All tools, manuals, equipment specially designed for servicing MAZDA
Vehicles, and any other materials bearing any MAZDA Trademark which are in good
and useable condition and were purchased by DEALER from MAZDA, as well as all
authorized MAZDA signs at DEALER's Approved Location. Tools, equipment and
signs shall be sold at prices to be agreed upon by MAZDA and DEALER or
determined by a third party selected by MAZDA and DEALER.

5. Inventory and Inspection.

Within thirty days after expiration or termination of the MAZDA Dealer
Agreement, DEALER shall deliver to MAZDA an accurate inventory in the form
required by MAZDA of all property to be repurchased by MAZDA. If DEALER fails
to timely deliver the inventory, MAZDA may enter DEALER's place of business to
prepare the inventory and DEALER shall reimburse MAZDA for the cost to MAZDA of
preparation. MAZDA may inspect the property at any time.

6. Delivery.

As soon as possible after MAZDA receives and reviews the inventory of property
to be repurchased, MAZDA shall furnish DEALER with shipping instructions and
DEALER agrees to make delivery of the property to be repurchased, transportation
charges prepaid, to destinations within the United States designated by MAZDA.
DEALER agrees to take action and execute and deliver instruments as may be
required by MAZDA to convey to MAZDA or its nominee good and marketable title to
the property upon delivery to MAZDA or the shipper, comply with any applicable
state law relating to bulk sales or transfers, and satisfy and discharge any
liens or encumbrances on the property prior to delivery.

7. Payment.

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MAZDA agrees to pay DEALER for the property repurchased under this Section
within sixty days after delivery of the property. All or part of the payment
may be made by MAZDA, at its option, to any financing institution or other
person to discharge any lien or encumbrance on the property. The expiration or
termination of the MAZDA Dealer Agreement shall not release DEALER from any
obligation to pay any amounts which DEALER may then owe MAZDA. MAZDA may deduct
from the purchase price of any property repurchased by MAZDA under this Section
any amounts owned by DEALER to MAZDA.

8. Customer Records.

Immediately upon expiration or termination of the MAZDA Dealer Agreement, DEALER
shall inform MAZDA of all unfilled orders for sale of MAZDA Products by DEALER.
Within thirty days after expiration or termination, DEALER agrees to deliver to
MAZDA copies of all DEALER's customer, service and warranty files and records
which are requested by MAZDA during the thirty-day period, provided MAZDA agrees
to pay the reasonable costs of the copies.

IV. MUTUAL RELEASES

Effective upon (i) the renewal of the MAZDA Dealer Agreement pursuant to Section
I, (ii) ninety days after the termination of the MAZDA Dealer Agreement pursuant
to Section II, or (iii) DEALER's transfer of the principal assets of DEALER used
in DEALER's Business or the cumulative transfer of a controlling interest in
DEALER, it is the express intention of each party to release the other party and
each party shall be deemed to have released the other party from all claims,
causes of action, costs or expenses, including attorneys' fees, whether known or
unknown, as of such effective date, arising from or related to the MAZDA Dealer
Agreement, except that DEALER shall not be deemed to have released any claims
related to defects in the design or manufacture of MAZDA Products, MAZDA and
DEALER shall not be deemed to have released any claims for amounts which the
other then owes it under the MAZDA Dealer Agreement, and neither party shall be
deemed to have released any claim arising from the termination or refusal to
renew the MAZDA Dealer Agreement or any claim to enforce the provisions of this
Section IV. Upon the request of any party deemed to have been released
hereunder, the other party shall execute and deliver a written release in form
satisfactory to the releasing party.

V. OTHER ACTIONS

DEALER acknowledges that if good cause for non-renewal or termination by MAZDA
arises under Section I or II, MAZDA will be unable to fulfill its reasonable
expectations of economic benefits from DEALER's performance under the MAZDA
Dealer Agreement. Accordingly, if MAZDA is prevented for any reason from
refusing not to renew or from terminating the MAZDA Dealer Agreement, where the
terms of the MAZDA Dealer Agreement would otherwise permit such action, MAZDA
shall be entitled to limit its obligations under the MAZDA Dealer Agreement to
those which are reasonably related to the economic benefits which MAZDA expects
to derive from DEALER's actual performance hereunder.

This Ownership and Transfer document is an additional agreement under the MAZDA
Dealer Agreement between MAZDA and DEALER, and as such is incorporated by
reference into the MAZDA Dealer Agreement and is binding upon MAZDA and DEALER
as if executed by each of them.

I. GENERAL

As part of its MAZDA Dealer Representations, DEALER has stated the name, address
and percentage of ownership of each person who is an owner of DEALER. MAZDA has

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entered into the MAZDA Dealer Agreement in reliance upon this statement. DEALER
agrees to give MAZDA prior written notice of any proposed change in the persons
or percentages set forth in this statement. If such change would cause a change
in the control of DEALER or would be equivalent to a sale, transfer or
assignment of substantially all of the DEALER's Business or of any right under
the MAZDA Dealer Agreement ("Ownership Change"), no such change shall be
effective without the prior written consent of MAZDA, which consent shall not be
unreasonably withheld. MAZDA will give its consent as provided in Sections II
and III below.

II. RIGHTS OF SPOUSES AND CHILDREN

Upon the death or incapacity of DEALER to perform the obligations of DEALER
hereunder (of an individual) or of any person owning an interest in DEALER (if a
partnership or corporation), MAZDA agrees to consent to the transfer of the
MAZDA Dealer Agreement or the ownership interest to the spouse or children of
the deceased or incapacitated person, if all of the following conditions are
met:

(a) Prior to his death or incapacity, the deceased or incapacitated person
shall have delivered to MAZDA a written notice nominating as his successor his
spouse or children and specifying the proportions in which ownership is to be
transferred to each of them;

(b) Within ninety days after the death or incapacity, all of the persons
nominated shall have submitted to MAZDA a written application for the transfer
to them of the MAZDA Dealer Agreement or the ownership interest;

(c) MAZDA shall have determined that after the transfer to them of the
MAZDA Dealer Agreement or the ownership interest, DEALER will satisfy all of
DEALER's obligations under the MAZDA Dealer Agreement, including but not limited
to the requirements set forth in the MAZDA Dealer Representations; and

(d) DEALER and all of the persons nominated shall have provided MAZDA with
all information requested by MAZDA and shall have executed all documents needed
by MAZDA to effect the transfer.

III. TRANSFER TO OTHER NOMINEES

The MAZDA Dealer Agreement, any ownership interest in DEALER, and the principal
assets of DEALER required for conduct of DEALER's Business may be transferred
only with the prior written consent of MAZDA. MAZDA will give its consent as
set forth below. In the event of the death or incapacity of DEALER to perform
the obligations of DEALER hereunder (if an individual) or of any person owning
an interest in DEALER (if a partnership or corporation), MAZDA shall consent to
__________ the ownership interest to any persons referred to in the MAZDA Dealer
Representations and with respect to whom MAZDA has received prior written notice
as provided in the MAZDA Dealer Representations, if all of the following
conditions are met:

(a) Prior to his death or incapacity, the deceased or incapacitated person
shall have delivered to MAZDA a written notice nominating as his successor one
or more of the persons referred to in the MAZDA Dealer Representations
______________ and specifying the proportions in which ownership is to be
transferred to each of them;

(c) MAZDA shall have determined that after the transfer of the MAZDA
Dealer Agreement or the ownership interest, DEALER will satisfy all of DEALER's
obligations under the MAZDA Dealer Agreement, including but not limited to the
requirements set forth in the MAZDA Dealer Representations; and

(d) DEALER and all of the persons nominated shall have provided MAZDA with
all information requested by MAZDA and shall have executed all documents needed
by MAZDA to effect the transfer.

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DISPUTE RESOLUTION

This Dispute Resolution document is an additional agreement under the MAZDA
Dealer Agreement between MAZDA and DEALER, and as such is incorporated by
reference into the MAZDA Dealer Agreement and is binding upon MAZDA and DEALER
as if executed by each of them.

I. NON-JUDICIAL RESOLUTION

1. Acknowledgment.

DEALER and MAZDA recognize that from time to time disputes may arise between
them involving matters affecting their business relationship and performance
under the MAZDA Dealer Agreement. DEALER and MAZDA further recognize that
frequent disputes or the continuation of unresolved disputes between them is not
consistent with the spirit of dealing in good faith between them, and may
interfere with fulfilling the various purposes of the MAZDA Dealer Agreement,
including without limitation those of maintaining high levels of customer
satisfaction, the image, reputation and goodwill of the MAZDA Trademarks, MAZDA
Products, DEALER, MAZDA and MAZDA Dealers generally, and an effective and
efficient distribution system for MAZDA Products. Accordingly, DEALER and MAZDA
agree in all circumstances to seek prompt and expeditious non-judicial
resolution of disputes between them through good faith negotiations, involving
open, frank and constructive discussions having reference to the spirit, intents
and purposes of the MAZDA Dealer Agreement.

2. Management Review.

If requested in writing by DEALER's General Manager, MAZDA agrees to cause any
matter in dispute, including without limitation matters involving participation
in MAZDA programs, supply of MAZDA Products, interpretation of the MAZDA Dealer
Agreement and policies affecting the relationship between DEALER and MAZDA, to
be reviewed by the appropriate officer of MAZDA having management responsibility
for the matter, including MAZDA's general manager. Neither party shall be
required to be represented by legal counsel in the course of the foregoing
review process.

II. THIRD PARTY NON-JUDICIAL RESOLUTION

1. Stipulations as to Facts and Issues in Dispute.

If MAZDA and DEALER have any dispute between them that has not been resolved
pursuant to Section I, and if either party wishes to pursue the matter further,
the initiating party shall first give written notice to the other, which notice
shall set forth in detail every basis claimed for liability and each issue of
fact which the initiating party reasonably believes supports its claims. Within
thirty days thereafter the responding party shall inform the initiating party in
writing of (i) all factual issues as to which the responding party agrees; (ii)
all factual issues to which it does not agree and the reasons therefor; (iii)
its statement of additional issues of fact not identified by the initiating
party but which the responding party believes are relevant to the claims and
(iv) any additional claims and supporting facts the responding party wishes to
assert against the initiating party. Within thirty days following receipt of
such response, the initiating party shall state in writing to the responding
party: (i) all facts that it agrees to; and (ii) all facts to which it does not
agree and the reasons therefor. Within thirty days thereafter, both parties
shall stipulate in a single writing: (i) all facts as to which they agree; and
(ii) all of the remaining contested issues of fact. Upon the execution of the

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stipulation, either party may pursue the dispute based on those facts agreed to
or alleged in such stipulation and no others.

2. Third Party Resolution.

DEALER and MAZDA agree to submit promptly the unresolved dispute to a non-
judicial third party review process where required by law, or where the parties
mutually agree such review is likely to result in a prompt resolution of the
dispute. Neither party shall be required to be represented by legal counsel in
the course of the foregoing review process.

3. Binding Arbitration.

If a controversy or claim arising out of or relating to the MAZDA Dealer
Agreement, the breach thereof or the business relationship between DEALER and
MAZDA under the MAZDA Dealer Agreement, cannot be resolved by a legally required
third party non-judicial review process, or where the parties cannot mutually
agree on some other third party non-judicial review process, either party may
submit the matter to binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon the
award rendered by the Arbitrator may be entered in any court having jurisdiction
thereof. Any demand for arbitration under this paragraph must be flied in
writing with the American Arbitration Association within thirty days following a
written notice by DEALER or MAZDA to the other that, in the notifying party's
opinion, the controversy or claim cannot be resolved by the means specified in
the second paragraph of this Section II. The demand for arbitration shall be
filed in the city in which MAZDA's principal place of business is located.
Either party shall be entitled to appear at the arbitration proceedings and take
or give testimony by telephone.

4. Confidentiality of Proceedings.

DEALER and MAZDA acknowledge that the foregoing non-judicial procedures are
intended to provide a private resolution of disputes between them. Accordingly,
all documents, records, and other information relating to the dispute shall at
all times be maintained in the strictest confidence and not disclosed to any
third party except when necessary for the specific purpose of resolving the
pending dispute.

5. Costs and Expenses.

Each party shall bear its own expenses, including without limitation
professional fees and costs, incurred in connection with the non-judicial
resolution of any dispute between them. The parties shall share equally the
costs and expenses of any third party participating in a non-judicial review
process or in an arbitration proceeding.

III. JUDICIAL RESOLUTION

1. Acknowledgement.

The parties acknowledge and agree that their business relationship and
performance under the MAZDA Dealer Agreement involves transactions in or
affecting interstate commerce, and that they intend and agree that all disputes
between them shall be resolved by the non-judicial procedures set forth in this
additional agreement. The foregoing obligation shall not be enforceable by
either party as to any issue in dispute when expressly prohibited by law, in
which event DEALER and MAZDA agree to seek judicial resolution of such
unresolved issue in dispute only after all reasonably available non-judicial
means have been

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fully explored and exhausted in accordance with Section I above, and the
procedures have been followed for the execution of the written stipulation of
facts and issues in dispute as set forth in Section II above.

2. Court Litigation.

Any party who brings a judicial proceeding shall file the same in the
jurisdiction in which the principal office of the other party is located. The
complaint in such action shall include and incorporate by reference the
stipulation of facts and issues in dispute referred to in Section II above. For
the purposes of expediting the resolution of their dispute, the parties agree to
limit the litigation and discovery to the contested issues of fact contained in
the stipulation, and not litigate or take discovery with respect to any other
factual matters.

3. Costs and Expenses.

All costs, attorneys' fees and expenses incurred in a judicial proceeding by the
prevailing party shall be paid by the other.

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EXHIBIT 10.8.2

Mazda Motor of America, Inc. William D Goetze
Senior Vice President
General Manager

CERTIFIED MAIL
RETURN RECEIPT REQUESTED

September 29, 1995

Sidney Deboer
LITHIA MAZDA
333 North Riverside Ave
Medford, OR 97501

Dear Dealer Principal:

Mazda Motor of America, Inc. (Mazda) hereby extends the duration of hte Mazda
Dealer Agreement currently existing between you and Mazda to and including
December 31, 1996.

This extension is automatic and does not require any action by you to take
effect, but you should keep this letter with your executed Mazda Dealer
Agreement.

Sincerely,

/s/ W.D.Goetze

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EXHIBIT 10.9.1

SATURN
DEALER
AGREEMENT

SATURN DISTRIBUTION CORPORATION

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SATURN DISTRIBUTION CORPORATION
DEALER AGREEMENT

TABLE OF CONTENTS

ARTICLE PAGE

PART ONE:

MISSION, PHILOSOPHY AND FRAMEWORK
OF FRANCHISOR-DEALER RELATIONSHIP

1. SATURN MISSION............................................................1

2. SATURN PHILOSOPHY.........................................................2

3. DEALER COMMITMENT TO MISSION AND PHILOSOPHY...............................2

4. SHARED RESPONSIBILITY.....................................................2

A. Customer Action Council..............................................2
B. Franchise Development Team...........................................3
C. Franchise Task Forces................................................3

5. DISPUTE RESOLUTION PROCESS................................................3

A. Exclusive Remedy.....................................................3
B. Mediation............................................................4
C. Binding Arbitration..................................................4

PART TWO:

RIGHTS GRANTED

6. AUTHORIZED DEALER.........................................................5

7. DEALER OPERATOR...........................................................5

A. Personal Qualifications..............................................5
B. Management Responsibility............................................5

8. TERM......................................................................6

9. AUTHORIZED LOCATIONS AND TERRITORIAL RIGHTS...............................6

A. Dealer's Marketing Area..............................................6
(1) Facility Design and Appearance..................................6
(2) Exclusive Use...................................................7
B. Territorial Rights...................................................7

PART THREE:

PRODUCT RESPONSIBILITIES

10. DEALER'S RESPONSIBILITY TO PROMOTE, SELL AND SERVICE
SATURN PRODUCTS...........................................................8

A. Responsibility to Promote and Sell...................................8
B. Responsibility to Service............................................8

<PAGE>

11. SALE OF PRODUCTS TO DEALERS...............................................8

A. Sale of Motor Vehicles to Dealer.....................................8
B. Sale of Parts and Accessories to Dealer..............................9
C. Prices and Other Terms of Sale.......................................9
(1) Motor Vehicles..................................................9
(2) Parts and Accessories...........................................9
D. Inventory...........................................................10
(1) Motor Vehicle Inventory........................................10
(2) Parts and Accessories..........................................10
E. Warranties on Products..............................................10

12. SERVICE OF PRODUCTS......................................................11

A. Service for Which Franchisor Pays...................................11
(1) New Motor Vehicle Pre-Delivery Inspections
and Adjustments................................................11
(2) Warranty Repairs and Special Policy
Adjustments....................................................11
(3) Campaign Inspections and Corrections...........................11
(4) Payment for Pre-Delivery Adjustments,
Warranty and Campaign Work.....................................11
B. Parts, Accessories, Service Contracts and Body
Repairs.............................................................12
(1) Warranty Repairs and Policy Adjustments........................12
(2) Representations and Disclosures as to Modifications, Parts,
Accessories and
Service Contracts..............................................12
(3) Body Repair....................................................12

PART FOUR:

THE BUSINESS PLANNING PROCESS

13. BUSINESS PLANNING........................................................12

A. Marketing Area Plan.................................................12
(1) Marketing Area Development.....................................13
(2) Operations.....................................................13
B. Annual Plan Review..................................................13
(1) Performance Evaluation.........................................14
(2) Plan Modifications.............................................14

PART FIVE:

OTHER OPERATING RESPONSIBILITIES

14. SATURN SYSTEMS...........................................................15

A. Systems for Which Dealer Pays.......................................15
(1) Sales and Service Systems......................................15
(2) Computer System................................................15
(3) Signs..........................................................16
(4) Tools and Equipment............................................16
B. Other Systems.......................................................16
(1) Convenience Systems............................................16
(2) Accounts and Records...........................................16
a. Uniform Accounting System.................................16
b. Examination of Accounts and Records.......................17

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c. Confidentiality of Dealer Data............................17
(3) Additional Systems.............................................17

15. MARKETING ASSOCIATIONS...................................................17

16. TRAINING.................................................................17

17. CAPITALIZATION...........................................................18

PART SIX:

REPLACEMENT DEALERS

18. CHANGES IN OWNERSHIP.....................................................18

A. Succession Rights upon Death or Incapacity..........................18
(1) Successor Addendum.............................................18
(2) Rights of Remaining Owners.....................................19
(3) Successor Dealer Requirements..................................19
(4) Limitation on Offers...........................................19
(5) New Successor Addendum.........................................20
B. Changes of Ownership or Dealer Operator.............................20
C. Right of First Refusal or Option to Purchase........................21
(1) Creation and Coverage..........................................21
(2) Purchase Price and Other Terms of Sale.........................22
(a) Bona Fide Agreement.......................................22
(b) Absence of Bona Fide Agreement............................22

PART SEVEN:

TERMINATION AND TERMINATION ASSISTANCE

19. TERMINATION..............................................................23

A. Termination of Agreement............................................23
(1) By Dealer......................................................23
(2) By Agreement...................................................23
(3) Failure to be Licensed.........................................23
(4) Misrepresentation, Failure to Conduct
Operations, or Disqualification or Change
of Dealer Operator or Owner....................................24
(5) Failure of Performance.........................................24
(6) Reliance on Any Applicable Termination
Provision......................................................24
(7) Option to Purchase.............................................25
B. Transactions after Termination......................................25
(1) Orders.........................................................25
(2) Deliveries.....................................................25
(3) Effect of Transactions after Termination.......................26

20. TERMINATION ASSISTANCE...................................................26

PART EIGHT:

GENERAL PROVISIONS

21. ACKNOWLEDGEMENT OF FRANCHISE LAW COMPLIANCE..............................26

A. Dealer's Investigation..............................................26

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B. Disclosure..........................................................26
C. Review..............................................................27

22. GENERAL PROVISIONS.......................................................27

A. No Agent or Legal Representative Status.............................27
B. Dealer's Responsibility for its Operations..........................27
C. Taxes...............................................................27
D. Indemnification by Saturn...........................................27
E. Trademarks and Service Marks........................................28
F. Notices.............................................................29
G. No Implied Waivers..................................................29
H. Assignment of Rights or Delegation of Duties........................29
I. Accounts Payable....................................................29
J. Sole Agreement of Parties...........................................29
K. Review and Modifications of Agreement Terms.........................30

23. EXECUTION ON BEHALF OF DEALER AND FRANCHISOR.............................30

GLOSSARY.................................................................32

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SATURN DISTRIBUTION CORPORATION
DEALER AGREEMENT

This Agreement, effective the [25th] day of [October], 19[91], is entered into
by Saturn Distribution Corporation (Franchisor), a wholly-owned subsidiary of
Saturn Corporation (Saturn), and [MEDFORD DODGE D/B/A SATURN OF MEDFORD].

( ) a proprietorship;
( ) a partnership;
( ) a corporation, [formed] in the State of [OREGON] on
[12/31/88], located in [MEDFORD], [OREGON] (Dealer).

PURPOSE OF THE AGREEMENT

The principal purposes of this Agreement are to:

A. affirm the commitment of Franchisor and Dealer to adhere to the Saturn
Philosophy and achieve the Saturn Mission;

B. identify the framework within which Franchisor and Dealer will jointly act
to fulfill their commitments to each other;

C. authorize Dealer to sell and service Saturn Products and to represent
itself as a Saturn Dealer; and

D. identify other commitments, rights and responsibilities of Franchisor and
Dealer.

PART ONE:

MISSION, PHILOSOPHY AND FRAMEWORK
OF FRANCHISOR-DEALER RELATIONSHIP

1. SATURN MISSION

The Mission of Saturn is to market vehicles developed and manufactured in
the United States that are world leaders in quality, cost and customer
satisfaction through the integration of people, technology and business
systems.

Achieving this Mission is dependent in part upon the development and
maintenance of a network of authorized Dealers working together with
Franchisor to build and maintain customer confidence in Dealer and Saturn.

2. SATURN PHILOSOPHY

Meeting the needs of customers, Dealers, Saturn, Franchisor, suppliers and
the community is fundamental to the Saturn Mission. To meet the needs of
customers, Saturn Products and services must be world leaders in
satisfaction and value. To meet the needs of Dealers, Franchisor will
conduct business in an open and fair manner, and will share responsibility
and decision-making with Dealers in the manner specified in this Agreement
to further the spirit of trust and respect which is critical to the
relationship.

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3. DEALER COMMITMENT TO MISSION AND PHILOSOPHY

Because Dealers represent Saturn's products to the public, it is essential
to the success of Saturn, Franchisor and Dealers that each Dealer embrace
Saturn's Mission and Philosophy as its own. Dealer understands that its
relationship with Franchisor can be conducted in a spirit of trust and
respect only if both Dealer and Franchisor act in an open, fair and
cooperative manner. Dealer therefore commits to adhere to the Saturn
Philosophy in the conduct of its business and to work jointly with
Franchisor and Saturn, in the framework identified in this Agreement, to
accomplish the Saturn Mission. Dealer acknowledges that the success of
Saturn, Franchisor, other Dealers and suppliers is dependent upon Dealer
fulfilling this commitment.

Consistent with the Saturn Philosophy, Dealer pledges to maintain the
highest ethical standard in all activities.

4. SHARED RESPONSIBILITY

In consideration for Dealers' commitments and to ensure that the
relationship between Franchisor and its Dealers remains mutually
satisfactory, Franchisor has established mechanisms for collective Dealer
input to the decision-making process on all matters significantly affecting
Dealers' business. Dealer involvement is provided through three principal
mechanisms: the Customer Action Council, the Franchise Development Team,
and the Franchise Task Forces.

A. CUSTOMER ACTION COUNCIL

The Customer Action Council (CAC) is a Saturn policy team whose
primary focus is customer satisfaction. Its scope includes market
research, product planning, promotional planning, customer
satisfaction systems, and other strategies affecting Saturn customers
and Dealers.

Three Dealer Operators participate along with Franchisor and Saturn
representatives from various disciplines including sales, service,
marketing, engineering, manufacturing and finance. The Dealer
Operators must be members of the Franchise Development Team, are
selected by that Team, and serve on the CAC for staggered two-year
terms.

B. FRANCHISE DEVELOPMENT TEAM

The Franchise Development Team (FDT) is comprised of an equal number
of Saturn Dealer Operators and Franchisor representatives. The FDT
has authority to make decisions on proposed modifications to specific
areas of the business covered in Parts Four and Five of this
Agreement. These areas are key to the successful operation of the
Saturn dealer network, and proposed changes can only be made through
the FDT.

The FDT uses a consensus decision-making process, described in the
Franchise System Manuals. Dealer Operator will be trained in the
process following the execution of this Agreement.

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The FDT is self-governing according to its by-laws. Franchisor
representatives are chosen by Franchisor. Dealer Operators are chosen
according to the by-laws.

C. FRANCHISE TASK FORCES

As necessary, the FDT may establish Franchise Task Forces and delegate
certain of its functions if it concludes the input of additional
Dealer Operators and Franchisor representatives is required. However,
the FDT cannot delegate its decision-making responsibilities. The FDT
will determine the membership of each Task Force and the scope of its
assignment. A representative from the FDT will serve as coordinator
of each Task Force.

5. DISPUTE RESOLUTION PROCESS

A. EXCLUSIVE REMEDY

Franchisor and Dealer believe that their mutual commitment to the
Mission and Philosophy, together with the mechanisms for sharing
responsibility described in Article 4, should minimize the potential
for disputes between them. Nevertheless, disputes may occur which
cannot be resolved in the normal course of business.

Franchisor and Dealer acknowledge that, at the state and federal
levels, various courts and agencies would, in the absence of this
Article 5, be available to them to resolve claims or controversies
which might arise between them. Franchisor and Dealer agree that it
is inconsistent with the Mission and Philosophy 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. Section 1 et seq.), DEALER AND FRANCHISOR
AGREE THAT THE DISPUTE RESOLUTION PROCESS OUTLINED IN THIS ARTICLE,
WHICH INCLUDES BINDING ARBITRATION, SHALL BE THE EXCLUSIVE MECHANISM
FOR RESOLVING ANY CONTROVERSY OR CLAIM BETWEEN THEM ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ITS CREATION, OR TERMINATION.

There are two steps in the Dispute Resolution Process: Mediation and
Binding Arbitration. All controversies or claims must first be
submitted to Mediation, unless that step is waived by written
agreement of the parties. If Mediation does not resolve the dispute
to their mutual satisfaction, then Dealer or Franchisor can submit the
dispute to Binding Arbitration.

B. MEDIATION

Dealer or Franchisor can submit to Mediation a claim or controversy
between them which arises out of or relates to the Dealer Agreement.
Mediation is conducted by a panel consisting of an equal number of
Franchisor representatives and Dealer Operators selected by the
Franchise Development Team. The Mediation Panel will evaluate each
position and recommend a solution. This recommended solution is not
binding.

Franchisor and Dealer agree that the procedures contained in the
Dealer Dispute Resolution Guide govern Mediation under this Article.

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C. BINDING ARBITRATION

If a claim or controversy arising out of or relating to this Agreement
has not been resolved after Mediation, or if Dealer and Franchisor
have agreed in writing to waive Mediation, the claim or controversy
will be settled by Binding Arbitration in accordance with the
procedures in the Dealer Dispute Resolution Guide. All awards of the
arbitration are binding and non-appealable except as otherwise
provided in the United States Arbitration Act. Judgment upon any
award rendered by the arbitrator(s) may be entered and enforced in any
court having jurisdiction.

PART TWO:

RIGHTS GRANTED

6. AUTHORIZED DEALER

Dealer has presented to Franchisor information regarding its qualifications
to be appointed a Saturn Dealer, and its Dealer Operator and Owners have
been evaluated and found to satisfy Franchisor's standards. Dealer has
also presented to Franchisor a Marketing Area Plan, stating Dealer's
proposal to develop and operate facilities in its Marketing Area to
promote, sell and service Saturn Products and Franchisor has accepted the
Plan.

In reliance upon these representations made by Dealer and Dealer's
commitment to the Mission and Philosophy, Franchisor grants Dealer a non-
exclusive right to:

A. buy new Saturn motor vehicles identified in any Motor Vehicle Addendum
and related Parts and Accessories; and

B. identify itself as an authorized Saturn Dealer at the locations
approved by the Franchisor.

Dealer accepts the rights granted and agrees to fulfill its obligations
under this Agreement.

7. DEALER OPERATOR

A. PERSONAL QUALIFICATIONS

Franchisor is entering into this Agreement in reliance on the
qualifications and capabilities of the person identified in Article 23
as Dealer Operator, on that person's commitment to the Mission and
Philosophy, and on Dealer's assurance that the personal services of
the Dealer Operator will be provided in the overall management of the
dealership business.

B. MANAGEMENT RESPONSIBILITY

Franchisor and Dealer agree that the Dealer Operator must have the
authority to exercise management control of the Dealer.

Dealer's Marketing Area Plan describes the ownership of Dealer and any
arrangements necessary to comply with this Article.

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8. TERM

If Dealer continues to meet all conditions and fulfill its obligations and
responsibilities under this Agreement, the Agreement will not expire until
90 days following the death or incapacity of Dealer Operator. If this
Agreement is to expire because of the death or incapacity of Dealer
Operator, Dealer may request a deferral of the effective date of expiration
to assist Dealer in winding up its dealership business or to provide for a
transfer of assets or ownership previously approved under Article 18. The
request must be made at least 30 days prior to the effective date of
expiration, and Franchisor will not unreasonably refuse to grant any
necessary extension.

9. AUTHORIZED LOCATIONS AND TERRITORIAL RIGHTS

A. DEALER'S MARKETING AREA

Dealer has been furnished a Notice of Dealer's Marketing Area. Dealer
is responsible for effectively selling, servicing, and otherwise
representing Saturn Products in the territory designated. Dealer
agrees to conduct dealership operations only from approved locations
within its Marketing Area. The locations are specified in Dealers
Marketing Area Plan as described in Article 13. Where applicable,
Dealer will establish additional facilities in the time and manner
agreed to by Dealer and Franchisor in that Plan.

(1) Facility Design and Appearance

Saturn's Mission to be the industry leader in customer
satisfaction can be furthered if Dealers' facilities share a
consistent architectural design and retail environment and are
readily identifiable as Saturn dealership locations.
Accordingly, Dealer agrees to purchase Franchisor's Retail
Environmental Design Package and to provide dealership facilities
consistent with that Package. Dealer agrees to review all
proposed facility plans with Franchisor and obtain Franchisors
approval before committing to construction.

Dealer pledges that its facilities will be properly maintained
and satisfactory in appearance to promote and preserve the image
of Saturn and Dealers. Dealer further agrees to make any future
modifications to facilities which may be approved by the
Franchise Development Team. Dealer agrees that it will not make
modifications to its facilities without Franchisor's prior
written authorization.

(2) Exclusive Use

To ensure that Saturn, Franchisor and Dealer benefit from the
common dealership facility design and retail environment and to
ensure that Dealer can effect properly any required future
modifications, Dealer agrees that its facilities will be used
exclusively for the conduct of Saturn dealership operations.

B. TERRITORIAL RIGHTS

It is the intention of Franchisor and Dealer that Dealer devote its
full efforts to developing its Marketing Area. Consequently, Dealer

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agrees that it will not engage, either directly or indirectly, in any
of the activities contemplated by this Agreement from locations
outside of its Marketing Area.

Franchisor will not authorize any other dealer to establish a Saturn
dealer facility in Dealer's Marketing Area if Dealer meets its
obligations under the Marketing Area Plan and this Agreement. If
Dealer fails to develop its territory according to its Marketing Area
Plan, then Franchisor may terminate this Agreement for failure of
performance under Article 19 or restructure Dealer's Marketing Area
and reassign any areas necessary to achieve the maximum potential
development of the territory.

PART THREE:

PRODUCT RESPONSIBILITIES

10. DEALER'S RESPONSIBILITY TO PROMOTE, SELL AND SERVICE SATURN PRODUCTS

A. RESPONSIBILITY TO PROMOTE AND SELL

(1) Dealer agrees to effectively sell and promote the purchase and
use (including rental and leasing) of Saturn Products to customers
located in its Marketing Area. Dealers performance of this obligation
will be reviewed annually in conjunction with the Marketing Area Plan,
as described in Article 13.

(2) Dealer is authorized to sell new and unused Motor Vehicles only
(a) to customers who purchase for personal use or for a primary
business use other than resale and (b) to other Saturn Dealers.

(3) Dealer is authorized to sell Motor Vehicles only to customers
located in the United States. Dealer agrees that it will not sell
Motor Vehicles for resale or use outside the continental United
States, Alaska and Hawaii.

B. RESPONSIBILITY TO SERVICE

Dealer agrees to provide courteous, convenient, prompt, efficient and
quality service to owners of Motor Vehicles, regardless of where the
vehicles were purchased. All service will be performed in a
professional manner and in accordance with the systems in the
Franchise System Manuals.

11. SALE OF PRODUCTS TO DEALERS

A. SALE OF MOTOR VEHICLES TO DEALER

Dealer has a Motor Vehicle Addendum specifying the current model types
or series of new motor vehicles which Dealer may purchase. Franchisor
may change the Motor Vehicle Addendum by furnishing Dealer a
superseding Motor Vehicle Addendum.

Franchisor will endeavor to allocate new Motor Vehicles among its
dealers in a fair and equitable manner. The method used to allocate

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Motor Vehicles will give Franchisor discretion in exercising business
judgment to achieve fairness and equity.

B. SALE OF PARTS AND ACCESSORIES TO DEALER

New or remanufactured automotive parts and accessories marketed by
Saturn and listed in current Dealer Parts and Accessories Price
Schedules or supplements furnished to Dealer are called Parts and
Accessories. Sales of Parts and Accessories to Dealer will be made by
Franchisor, Saturn or other suppliers designated by Franchisor.

Orders for Parts and Accessories will be submitted and processed
according to written procedures established by Franchisor, Saturn or
other designated suppliers.

C. PRICES AND OTHER TERMS OF SALE

(1) Motor Vehicles

Prices, destination charges and other terms of sale applicable to
purchases of new Motor Vehicles will be those established
according to the Vehicle Terms of Sale Bulletin furnished to
Dealer.

Prices, destination charges and other terms of sale applicable to
any Motor Vehicle may be changed at any time. Changes apply to
Motor Vehicles not shipped at the time the changes are made
effective.

If there is an increase in the price charged to Dealer for a
Motor Vehicle or any optional equipment during a model year, such
increase does not apply to bona fide sold orders submitted prior
to the effective date of the price increase.

Dealer will receive written notice of any price increase before
any Motor Vehicle to which such increase applies is shipped
except for initial prices for a new model year or for any new
model or body type.

(2) Parts and Accessories

Prices and other terms of sale applicable to Parts and
Accessories are established according to the Parts and
Accessories Terms of Sale Bulletin furnished to Dealer.

Prices and other terms of sale applicable to Parts and
Accessories may be changed at any time. Such changes apply to
Parts and Accessories not shipped at the time changes become
effective.

D. INVENTORY

(1) Motor Vehicle Inventory

Dealer recognizes that customers expect Dealer to have a
reasonable quantity and variety of current model Motor Vehicles
in inventory. Accordingly, Dealer agrees to stock and sell,
subject to any supply restrictions, all models and

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series of Motor Vehicles identified in the Motor Vehicle
Addendum.

(2) Parts and Accessories

Dealer agrees to stock sufficient Parts and Accessories to
perform warranty repairs and policy adjustments and meet the
demands of its customers. Dealer will use the Saturn Parts
Inventory Control System to provide on-line computer access to
Dealers parts inventory and parts sales.

E. WARRANTIES ON PRODUCTS

Saturn warrants the new Motor Vehicles and Parts Accessories
(Products) it produces. The warranties are explained in documents
provided with the Products or explained in the Franchise System
Manuals. Franchisor does not warrant Products.

EXCEPT AS OTHERWISE PROVIDED BY LAW, THE WRITTEN SATURN WARRANTIES ARE
THE ONLY WARRANTIES APPLICABLE TO NEW PRODUCTS. WITH RESPECT TO
DEALERS, SUCH WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES OR
LIABILITIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY LIABILITY
FOR COMMERCIAL LOSSES BASED UPON NEGLIGENCE OR MANUFACTURER'S STRICT
LIABILITY. EXCEPT AS MAY BE PROVIDED UNDER AN ESTABLISHED SATURN
PROGRAM OR PROCEDURE, SATURN NEITHER ASSUMES NOR AUTHORIZES ANYONE TO
ASSUME FOR IT ANY OTHER OBLIGATION OR LIABILITY IN CONNECTION WITH
PRODUCTS, AND SATURN'S MAXIMUM LIABILITY IS TO REPAIR OR REPLACE THE
PRODUCT.

Any Parts and Accessories sold to Dealer by a designated supplier are
not warranted by Saturn or Franchisor and are warranted only as
specified by the supplier.

12. SERVICE OF PRODUCTS

A. SERVICE FOR WHICH FRANCHISOR PAYS

(1) New Motor Vehicle Pre-Delivery Inspections and Adjustments

Because new vehicle delivery condition is critical to customer
satisfaction, Dealer agrees to perform pre-delivery inspections
and adjustments on each new Motor Vehicle and verify completion
according to procedures.

(2) Warranty Repairs and Special Policy Adjustments

Dealer agrees to perform (i) required warranty repairs on each
qualified Motor Vehicle at the time of pre-delivery service and
when requested by owner, and (ii) special policy adjustments
approved by Franchisor. When the vehicle is returned to the
owner, Dealer will provide owner a copy and explanation of the
repair document reflecting all services performed.

(3) Campaign Inspections and Corrections

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Dealer agrees to find and correct suspected unsatisfactory
conditions on Products identified by Franchisor. Dealer will
also determine that campaign inspections and corrections have
been made on new and used Saturn motor vehicles in its inventory
prior to sale and follow-up on Products on which campaigns are
outstanding.

(4) Payment for Pre-Delivery Adjustments, Warranty and Campaign Work

For Dealer's performance of services, pre-delivery adjustments,
warranty repairs, special policy adjustments, and campaign
inspections and corrections, Franchisor will provide or pay
Dealer for the Parts and other materials required and will pay
Dealer a fair amount for labor. Payment will be made according
to policies in the Franchise System Manuals. Dealer will not
impose any charge for such service on owners or users except
where a deductible or pro-rata charge applies.

B. PARTS, ACCESSORIES, SERVICE CONTRACTS AND BODY REPAIRS

(1) Warranty Repairs and Policy Adjustments

Dealer agrees to use only genuine Saturn or Franchisor approved
parts in performing warranty repairs and special policy
adjustments.

(2) Representations and Disclosures as to Modifications, Parts,
Accessories and Service Contracts

Dealer and Franchisor recognize that owners and users of Motor
Vehicles reasonably expect that the vehicles sold by Dealer and
the parts, accessories and service contracts sold or used by
Dealer in servicing vehicles are marketed by Saturn or
Franchisor. If Dealer sells or uses parts, accessories or
service contracts not marketed by Saturn or Franchisor, it will
give customers written notice, prior to the sale or service, that
such parts, accessories or service contracts are not marketed or
warranted by Saturn or Franchisor. Dealer also agrees not to
represent that vehicle modifications not specifically authorized
by Saturn are warranted or approved by Saturn or Franchisor.

(3) Body Repairs

Dealer must provide body repair service for Saturn Motor
Vehicles. Dealer can provide this service through its own body
shop, or in cases where Franchisor agrees that unusual
circumstances make it impractical for Dealer to own and operate
its own body shop, by arrangement with an independent repair
establishment acceptable to Franchisor.

PART FOUR:

THE BUSINESS PLANNING PROCESS

13. BUSINESS PLANNING

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A. MARKETING AREA PLAN

Dealer and Franchisor have executed a Marketing Area Plan (Plan) which
describes how Dealer will develop its Marketing Area and fulfill its
sales and service commitments. The Plan is an essential part of the
Agreement.

(1) Marketing Area Development

Dealer agrees to develop its assigned Marketing Area according to
the Marketing Area Plan. Its commitments for development
include:

(a) detailed description of the number, location, type, size and
opening date of facilities to be provided;

(b) detailed implementation schedules for each facility; and

(2) Operations

Dealer agrees to fulfill the sales and service commitments
described in the Marketing Area Plan. Its commitments for
operations include:

(a) performance standards;

(b) detailed organizational structure and staffing plans;

(d) specific plans for maximizing customer satisfaction,
including hours of operation and customer convenience systems;

(e) advertising, merchandising, and community relations plans;
and

(f) other items as agreed by Franchisor and Dealer or as
required by the Franchise Development Team.

B. ANNUAL PLAN REVIEW

Dealer agrees to update its Plan annually, or more often if needed,
and submit it to Franchisor for joint review. Updated Plans will
include a performance evaluation and any proposed modifications to the
prior year's Plan. If Franchisor and Dealer agree that changes to the
proposed Plan are necessary, Dealer will make such changes and
resubmit its Plan.

(1) Performance Evaluation

Dealer's performance of its obligations is essential to the
effective representation of Saturn Products, and to the
reputation and goodwill of Franchisor, Saturn, and other Saturn
Dealers. Therefore, Dealer agrees to review its performance
against the prior year's Plan in its updated Plan.

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Franchisor and Dealer will use this analysis as the basis for
jointly evaluating Dealers performance so that any necessary
improvements can be made.

Factors considered in evaluating Dealer's performance will
include its attainment of the prior year's objectives, Dealer's
performance trends, Dealer's financial performance and the manner
in which Dealer has conducted its operations. Periodic facility
evaluations will be conducted, including an evaluation of
Dealer's compliance with then-current requirements and standards
for dealership under the Marketing Area Plan. Other factors
considered in the evaluation will include product availability
and an assessment of whether actual market conditions adversely
affected Dealer's ability to attain the prior year's objectives.

(2) Plan Modifications

While Dealer's plan for Marketing Area development is subject to
update, modifications to facility plans will occur only if
Franchisor believes that a material change in marketing
conditions warrants a proposed modification.

Plans for operations are subject to update, but modifications can
be implemented only if Franchisor and Dealer reach consensus that
the proposed modifications are consistent with the Saturn
Mission, Philosophy, and systems.

PART FIVE:

OTHER OPERATING RESPONSIBILITIES

14. SATURN SYSTEMS

Dealer recognizes that achieving industry-leading customer satisfaction is
a major objective of the Saturn Mission. This level of satisfaction cannot
be attained without consistent application by all Dealers of designated
sales, service, marketing, facilities and other systems. Dealer agrees to
purchase, implement and maintain required systems identified in this
Agreement set forth in the Franchise System Manuals, or approved by the
Franchise Development Team.

A. SYSTEMS FOR WHICH DEALER PAYS

(1) Sales and Service Systems

Dealer agrees to pay Saturn, Franchisor, or approved sources for
initial systems necessary to develop and implement Saturn sales
and service in Dealer's Marketing Area. These systems include
materials and programs which will promote proper, consistent and
competitive display, sales and service of Saturn Products.
Periodically, the Franchise Development Team will determine that
new updated materials, information or programs are necessary.
Dealer agrees to accept and utilize such designated new or
updated materials, information or programs and pay any applicable
charges. Any such charges

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will be established by the Franchise Development Team and will be
based upon anticipated costs.

(2) Computer System

Saturn's Mission involves the integration of people, technology
and business systems. This integration is possible only if all
Dealers have computer systems which meet the dealership's
internal business needs, permit direct communication between
Dealers, Franchisor and Saturn, and give Franchisor and Saturn
ready access to Dealer's accounts and records. Accordingly,
Dealer agrees to purchase and use the approved computer system
packages.

To maintain this integration, Dealer agrees to update its
computer system packages when changes are approved by the
Franchise Development Team.

(3) Signs

To promote consistency of image, Dealer agrees to purchase and
use only signs approved by Franchisor. Dealer agrees to make and
pay for any changes in signage approved by the Franchise
Development Team.

(4) Tools and Equipment

Dealer agrees to provide adequate service tools and equipment as
required to fulfill its responsibilities for service. Dealer
also agrees to purchase and maintain specified special tools and
equipment to service Saturn Products.

B. OTHER SYSTEMS

(1) Convenience Systems

An integral part of Franchisor's plan to develop industry-leading
customer satisfaction is to promote Saturn Dealers as the
unsurpassed source of convenient automobile sales and service.
Dealer agrees it will conduct dealership operations to support
this concept.

Dealers proposed operating hours and customer convenience systems
will be elements of its Marketing Area Plan.

(2) Accounts and Records

a. Uniform Accounting System

Both Franchisor and Dealers can benefit by using Dealer
operating information to develop composite operating
statistics, analyze Dealers' business management practices,
and assess the impact of Franchisor's policies and
practices. To assure maximum benefit, Dealer agrees to
maintain a uniform accounting system and furnish reports and
records as provided in the Franchise System Manuals.

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b. Examination of Accounts and Records

In addition to the access which Franchisor and Saturn have
to Dealers accounts and records through computer systems,
any designated representative of Franchisor is authorized to
examine, audit, reproduce and take copies of any of the
accounts and records Dealer maintains under this Agreement.
Dealer agrees to make such accounts and records readily
available at its facilities during business hours.
Franchisor agrees to furnish Dealer with a copy of any
reproduced records.

c. Confidentiality of Dealer Data

Franchisor will not furnish any personal or financial data
submitted to it by Dealer to any non-affiliated entity
unless authorized by Dealer, required by law, pertinent to
proceedings under the Dispute Resolution Process, or to
court or administrative proceedings.

(3) Additional Systems

Dealer can use additional systems that are compatible with
Saturn's Mission, Philosophy, and systems. Dealer agrees to
discontinue use of systems deemed incompatible by Franchisor.

15. MARKETING ASSOCIATIONS

Franchisor and Dealer acknowledge the mutual benefits of comprehensive
joint advertising and merchandising by Dealers to promote the sale and
service of Saturn Products, including Parts and Accessories. Accordingly,
Franchisor will assist Dealers in establishing marketing associations and
in developing their by-laws. Dealer agrees to cooperate in forming the
associations and to participate actively in them.

The marketing associations will assess a fixed amount for each new Saturn
Motor Vehicle purchased by Dealers to fund advertising and merchandising
programs. As a service to the associations, Franchisor will collect the
assessed amount.

16. TRAINING

Training of all Dealer employees is critical to the success of Dealer and
Franchisor in conducting business based on the Mission, Philosophy and
designated systems. Therefore, Dealer agrees that all its employees will
participate in initial and ongoing training programs identified in the
Franchise System Manuals, and any others approved by the Franchise
Development Team, within the time frames specified. Dealer agrees to pay
any specified training charges.

17. CAPITALIZATION

Dealer will maintain the levels of capitalization mutually agreed upon with
Franchisor in the Marketing Area Plan to ensure Dealer's financial
capability to fulfill its commitments. To avoid erosion of Saturn's
goodwill which could result if Dealer is financially unable to fulfill its
commitments, Dealer agrees to have and maintain a separate line of credit
from a financial institution available for Dealer to draw upon to finance

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new vehicles. The amount of the line of credit and the identity of the
financial institution shall be included in Dealer's Marketing Area Plan.

PART SIX:

REPLACEMENT DEALERS

18. CHANGES IN OWNERSHIP

Dealer and Franchisor recognize that it is essential to the success of all
associated with Saturn that each Dealer be owned and operated by parties
committed to the Mission and Philosophy. It is equally important that
Dealer Operators remain highly qualified and continue to meet the same high
personal standards of the initial Saturn Dealer Operators. Because
Franchisor has entered into this Agreement based on the personal
qualifications of Dealer Operator and the qualifications of any Owner(s),
Dealer agrees that it cannot assign its rights under this Agreement.

A. SUCCESSION RIGHTS UPON DEATH OR INCAPACITY

(1) Successor Addendum

Dealer can apply for a Successor Addendum designating a proposed
dealer operator and/or owners of a successor dealer to be
established if this Agreement expires because of death or
incapacity. Franchisor will execute the Successor Addendum if
the proposed dealer operator successfully completes the Dealer
Selection Process then used by Franchisor to evaluate proposed
new dealers, and any proposed owners satisfy applicable Dealer
Selection Criteria. However, the proposed dealer operator and
owners will not be required to meet the usual capital
requirements nor demonstrate an ability to implement Dealer's
Marketing Area Plan until the Successor Addendum is implemented.
At the time of application, Dealer will pay Franchisor a non-
refundable fee to defray costs associated with review of the
proposal.

(2) Rights of Remaining Owners

If this Agreement expires because of the death or incapacity of
the Dealer Operator, and Dealer and Franchisor have not executed
a Successor Addendum, the remaining owners may propose a
successor dealer to continue the operations identified in this
Agreement. The proposal must be made in writing to Franchisor at
least 30 days prior to the expiration of this Agreement,
including any deferrals granted under Article 8. At the time of
application, Dealer will pay Franchisor a non-refundable fee to
defray costs associated with review of the proposal.

The proposal will be accepted if it meets the requirements of
Article 18A(3), if the proposed dealer operator successfully
completes the Dealer Selection Process, and any proposed owners
satisfy applicable Dealer Selection Criteria.

(3) Successor Dealer Requirements

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Franchisor will accept a proposal to establish a successor dealer
submitted by a proposed dealer operator under Article 18A
provided:

(a) the proposed successor dealer and the proposed dealer
operator are ready, willing and able to comply with the
requirements of a new dealer agreement and agree to adhere to and
implement the Marketing Area Plan agreed to by Dealer;

(b) all outstanding monetary obligations of Dealer to Saturn and
Franchisor have been paid.

(4) Limitation on Offers

Dealer will be notified in writing of the decision on a proposal
under Article 18A(3) within 60 days after Dealer has submitted
all applications and information reasonably requested by
Franchisor and the proposed dealer operator has successfully
completed the Dealer Selection Process. Franchisors offer of a
new dealer agreement under this Article 18A will automatically
expire if not accepted by the proposed successor dealer within
60 days after it receives the offer.

(5) New Successor Addendum

Dealer may cancel an executed Successor Addendum at any time
prior to the death or incapacity of the Dealer Operator.
Franchisor may cancel an executed Successor Addendum only if the
proposed dealer operator or proposed owner(s) no longer meet the
Dealer Selection Criteria applicable to each. The parties may
execute a superseding Successor Addendum by agreement.

B. CHANGES OF OWNERSHIP OR DEALER OPERATOR

If Dealer proposes a change in Dealer Operator or a transfer of its
Saturn dealership business to any person conditioned upon Franchisors
entering into a Dealer Agreement with that person, Franchisor will
consider Dealer's proposal subject to the following:

(1) To maintain the high standard and quality of the Dealer network,
Dealer agrees to give Franchisor prior written notice of any proposed
disposition of its principal assets or of any proposed change of
ownership in which a party (i) first acquires a five percent equity
ownership or beneficial interest in the franchised business, (ii)
acquires an additional five percent equity ownership or beneficial
interest in the franchised business in a calendar year, or (iii)
acquires majority ownership or voting control in the franchised
business. Dealer understands if any such change is made prior to
Franchisor's approval of the proposal, termination of this Agreement
will be warranted and Franchisor will have no further obligation to
consider Dealer's proposal.

(2) If the proposal involves a change of Dealer Operator, Dealer will
pay Franchisor a fee to defray the costs of review of the proposal and
completion of the Dealer Selection Process. Franchisor has no
obligation to consider the proposal until it has received this non-
refundable payment.

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(3) Dealer will be notified in writing of the decision on its
proposal within 60 days after Dealer has furnished all applications
and information reasonably requested by Franchisor and the proposed
dealer operator has successfully completed the Dealer Selection
Process. If Franchisor disagrees with the proposal, it will specify
its reasons.

(4) Any material change in Dealers proposal, including change in
price, proposed owners, or Dealer Operator, will be considered a new
proposal, and the time period for Franchisor to respond shall
recommence.

(5) Prior written approval is not required where the transfer of
equity ownership or beneficial interest to an individual is (a) less
than five percent in a calendar year; or (b) between existing owners
of Dealer previously approved by Franchisor where there is no change
in majority ownership or voting control. Dealer agrees to notify
Franchisor within 30 days of the date of the change and to execute a
new Dealer statement of ownership.

(6) Franchisor is not obligated to execute a new Dealer Agreement
under this Article unless Dealer makes arrangements acceptable to
Franchisor to satisfy any indebtedness to Saturn or Franchisor.

C. RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE

(1) Creation and Coverage

If a proposal is submitted by Dealer under Article 18B,
Franchisor has a right of first refusal or option to purchase the
dealership assets under this Article 18C. If Franchisor
exercises its right or option, it will do so in the written
decision on Dealer's proposal. Franchisor's right or option may
be assigned to any party and Franchisor will guarantee the full
payment of the purchase price by the assignee. Franchisor has
the right to disclose the terms of the buy/sell agreement to any
potential assignee.

If Dealer has entered into a bona fide written buy/sell agreement
for its dealership business or assets, Franchisor's right under
this Section is a right of first refusal, enabling Franchisor to
assume the buyer's rights and obligations under such buy/sell
agreement and cancel this Agreement and all rights granted
Dealer. In the absence of a bona fide written buy/sell
agreement, Franchisor has the option to purchase the principal
assets of Dealer utilized in the dealership business, other than
real property, and cancel this agreement and all rights granted
Dealer. Real property will be included only if the Franchisor
and Dealer agree.

If Franchisor exercises its right or option, the fee described in
Article 18B(2) will be refunded if the person proposed by Dealer
as replacement dealer operator or owner satisfies the Dealer
Selection Criteria.

Franchisor's rights under this Article 18C will be binding on and
enforceable against any assignee or successor in interest of
Dealer or purchaser of Dealer's assets.

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(2) Purchase Price and Other Terms of Sale

(a) Bona Fide Agreement

If Dealer has entered into a bona fide written buy/sell
agreement, the purchase price and other terms of sale will be
those set forth in such agreement and any related documents,
unless Dealer and Franchisor agree to other terms.

Upon Franchisor's request, Dealer agrees to provide all other
documents relating to 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 does not provide such documentation or state in writing
that such documents do not exist, it will be presumed that the
agreement is not bona fide.

(b) Absence of Bona Fide Agreement

In the absence of a bona fide written buy/sell agreement, the
purchase price of the dealership assets, excluding new and
undamaged parts and accessories, will be determined by good faith
negotiations between the parties. If agreement cannot be
reached, the purchase price will be determined through the
Dispute Resolution Process. The repurchase prices for such new
and undamaged parts and accessories will be the prices last
indicated in the parts price listing established by the
Franchisor. Franchisor will not be responsible for repurchase of
non-Saturn parts or accessories in the Franchisee's inventory, or
of Saturn parts and accessories that are not resaleable as new,
as specified in the Franchise System Manual. Dealer agrees to
transfer the property by Warranty Deed conveying marketable title
free and clear. The Warranty Deed will be in proper form for
recording and Dealer will deliver complete of the Warranty Deed.
Dealer will also furnish Franchisor copies of any easements,
licenses or other documents affecting the property and assign any
permits or licenses necessary for the conduct of the dealership
business to Franchisor.

PART SEVEN:

TERMINATION AND TERMINATION ASSISTANCE

19. TERMINATION

A. TERMINATION OF AGREEMENT

(1) By Dealer

Dealer may terminate this Agreement by written notice to
Franchisor. Termination will be effective 30 days after
Franchisor's receipt of the notice, unless otherwise mutually
agreed in writing.

(2) By Agreement

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This Agreement may be terminated at any time by written agreement
between Franchisor and Dealer.

Termination assistance will be applicable only as specified in
the written termination agreement.

(3) Failure to be Licensed

If Franchisor or Dealer fails to secure or maintain any license
required for the performance of obligations under this Agreement
or such license is suspended or revoked, either party may
immediately terminate this Agreement by giving the other party
written notice.

(4) Misrepresentation, Failure to Conduct Operations, or
Disqualification or Change of Dealer Operator or Owner

If Dealer submits any false information to Saturn or Franchisor;
fails to conduct customary dealership operations for seven
consecutive business days; or Dealer Operator or Owner fails to
continue to meet the Dealer Selection Criteria applicable to
each; or Dealer Operator is changed or withdraws without prior
written approval of Franchisor; or a party i) first acquires a
five percent equity ownership or beneficial interest in dealer,
ii) acquires an additional five percent equity ownership or
beneficial interest in a calendar year, or iii) acquires majority
ownership or voting control, without the prior written approval
of Franchisor; Franchisor will notify Dealer and provide 30 days
for Dealer to respond. Thereafter, Franchisor may notify Dealer
that the Agreement will be terminated not less than 30 days after
receipt of notice. If Dealer chooses to use the Dispute
Resolution Process, the Agreement will continue pending a final
resolution of the dispute.

(5) Failure of Performance

If Dealer fails to perform any other obligations it has under
this Agreement, including those in the Marketing Area Plan,
Franchisor will review the failure with Dealer.

If Franchisor determines that corrective action by Dealer is not
forthcoming, it will notify Dealer of the failure in writing and
of the period of time during which Dealer is expected to remedy
the failure.

If the failure is not remedied within that period, Franchisor may
terminate this Agreement by giving Dealer three months advance
written notice.

(6) Reliance on Any Applicable Termination Provision

The terminating party may select the termination provision under
which it elects to terminate without reference in its notice of
termination to any other provision that may also be applicable.
The terminating party subsequently also may avert other grounds
for termination.

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<PAGE>

(7) Option to Purchase

If this Dealer Agreement is to expire or terminate for any
reason, Franchisor has the option to purchase the principal
assets of Dealer utilized in the dealership business, other than
real property, and cancel this Agreement and all rights granted
Dealer. Real property will be included only if the Franchisor
and Dealer agrees.

The purchase price of the dealership assets and other terms will
be determined under Article 18C(2)(b). Franchisor must advise
Dealer of its intent to exercise this option within 60 days after
it notifies Dealer that an event has occurred which would cause
expiration or warrant termination.

B. TRANSACTIONS AFTER TERMINATION

(1) Orders

If Dealer and Franchisor do not enter into a new Dealer Agreement
when this Agreement expires or is terminated, Dealers designated
supply of Products will be automatically cancelled except as
provided in this Article.

Termination or expiration of this Agreement will not release
Dealer or Franchisor from the obligation to pay any amounts owing
the other when due.

(2) Deliveries

If this Agreement is voluntarily terminated by Dealer or expires
because of the death or incapacity of a Dealer Operator,
Franchisor will use its best efforts consistent with distribution
procedures to furnish Dealer with Motor Vehicles to fill Dealer's
bona fide retail orders on hand on the effective date of
termination or expiration, not to exceed, however, the total
number of Motor Vehicles invoiced to Dealer for retail sale
during the average of any three month period from the year
preceding the effective date of termination.

(3) Effect of Transactions after Termination

Neither the sale of Products to Dealer nor any other act by
Saturn, Franchisor, or Dealer after termination or expiration of
this Agreement will be a waiver of the termination or expiration.

20. TERMINATION ASSISTANCE

If this Agreement expires or is terminated and Franchisor does not offer
Dealer or a replacement dealer that has substantially the same ownership
(more than 50 percent including total family ownership) a new Dealer
Agreement, Franchisor will offer to purchase certain items of personal
property from Dealer and will provide assistance on Dealership Premises, as
specified in the Franchise System Manuals. Franchisor's obligations under
this Article 20 are subject to Dealer fulfilling its responsibilities
relating to termination assistance, described in the Franchise System
Manuals.

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PART EIGHT:

GENERAL PROVISIONS

21. ACKNOWLEDGEMENT OF FRANCHISE LAW COMPLIANCE

A. DEALER'S INVESTIGATION

Dealer acknowledges that it has conducted an independent investigation
of the business venture contemplated by this Agreement, and recognizes
that it involves business risks and that its success will be largely
dependent upon the ability of Dealer. Franchisor expressly disclaims
the making of, and Dealer acknowledges that it has not received, and
warranty or guarantee, express or implied, as to the potential volume,
profits, or success of the business venture contemplated by this
Agreement.

B. DISCLOSURE

Dealer acknowledges having received a copy of this Agreement (together
with attachments and related documents) at least five business days
prior to the date on which this Agreement was executed. Dealer
further acknowledges having received the disclosure document which is
required by the Trade Regulation Rule of the Federal Trade Commission
entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures," and which contains a
copy of this Agreement, at least ten business days prior to the date
on which this Agreement was executed.

C. REVIEW

Dealer acknowledges that it has read and understood this Agreement
(and its attachments and related agreements) and that Franchisor has
afforded Dealer ample time and opportunity to consult with advisors of
Dealer's own choosing about the potential benefits and risks of its
entering into this Agreement.

22. GENERAL PROVISIONS

A. NO AGENT OR LEGAL REPRESENTATIVE STATUS

This Agreement does not make either party or Saturn the agent or legal
representative of the others for any purpose, nor does it grant either
party or Saturn authority to assume or create any obligation on behalf
of or in the name of the others. No fiduciary obligations are created
by this Agreement.

B. DEALER'S RESPONSIBILITY FOR ITS OPERATIONS

Except as provided in this Agreement, Dealer is solely responsible for
all expenditures, liabilities and obligations incurred or assumed by
Dealer for the establishment and conduct of its operations.

C. TAXES

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Dealer is responsible for all local, state, federal or other
applicable taxes and tax returns related to its dealership business
and will hold Franchisor and Saturn harmless from any related claims
or demands made by any taxing authority.

D. INDEMNIFICATION BY SATURN

Saturn has agreed with Franchisor that Saturn will assume the defense
of Dealer and indemnify Dealer against any judgment for monetary
damages or rescission of contract in any lawsuit naming Dealer as a
defendant when the lawsuit concerns:

(1) Breach of the Saturn warranty related to a Product or bodily
injury or property damage claimed to have been caused solely by a
defect in the design, manufacture or assembly of a Product by Saturn.
Saturn may withhold indemnification where a defect should have been
detected during the predelivery inspection of the Product;

(2) Failure of a Product to conform to the description set forth in
advertisements or product brochures distributed by Saturn because of
changes in standard equipment or material component parts unless
Dealer received notice of the changes prior to retail delivery of the
affected Product by Dealer; or

(3) Any substantial damage to a Product purchased by Dealer from
Saturn which has been repaired by Saturn unless Dealer has accepted
the Product with knowledge of the repair.

Saturn has no obligation under its agreement with Franchisor if the
Product involved has been altered. Any indemnification provided by
Saturn will be net of any offset recovered by Dealer.

Procedures for requesting indemnification, administrative details, and
limitations are contained in the Franchise System Manuals.

E. TRADEMARKS AND SERVICE MARKS

Saturn, Franchisor, or affiliated companies are the exclusive owners
of the various trademarks, service marks, names, and designs (Marks)
used in connection with Products.

Dealer is granted the non-exclusive right to display Marks in the form
and manner approved by Franchisor in the conduct of its dealership
business.

Marks may be used as part of the Dealer's name with the written
approval of Franchisor.

Dealer agrees to change or discontinue the use of any Marks upon
request by Franchisor.

Dealer agrees that no company owned by or affiliated with Dealer or
any of its owners may use any Mark to identify a business without
Franchisor's written permission.

Upon termination of this Agreement, Dealer agrees to immediately
discontinue, at its expense, all use of Marks. Thereafter, Dealer
will not use, either directly or indirectly, any Marks or any other

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<PAGE>

confusingly similar marks in a manner that Franchisor determines is
likely to cause confusion or mistake or deceive the public.

Dealer will reimburse Franchisor for all legal fees and other expenses
incurred in connection with action to require Dealer to comply with
this Article 22E.

F. NOTICES

Any notice required to be given by either party to the other in
connection with this Agreement will be in writing and delivered
personally or by mail. Notices to Dealer will be directed to Dealer
or its representatives at Dealer's principal place of business and
notices by Dealer will be directed to: Dealer Development, Saturn
Distribution Corporation, 1400 Stephenson Highway, Troy, Michigan
48007-7025. Mailed notices will be deemed received on the date
deposited in U.S. or express mail.

G. NO IMPLIED WAIVERS

The delay or failure of Franchisor or Dealer to require performance by
the other party or the waiver by Franchisor or Dealer of a breach of
any provision of this Agreement will not affect the right to
subsequently require such performance.

H. ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES

Franchisor may assign this Agreement and any rights or delegate any
obligations to any affiliated or successor company, and will provide
Dealer written notice of such assignment or delegation. Such
assignment or delegation by Franchisor will not relieve Franchisor of
liability for the performance of its obligations.

I. ACCOUNTS PAYABLE

All monies or accounts due Dealer will be considered net of Dealer's
indebtedness to Franchisor and Saturn. Franchisor and Saturn may
deduct any amounts due or to become due from Dealer to Franchisor or
Saturn, or any amounts held by Franchisor or Saturn, from any sums or
accounts due or to become due from Saturn or Franchisor to Dealer.

J. SOLE AGREEMENT OF PARTIES

Except as provided in this Agreement, Franchisor has made no promises
to Dealer, Dealer Operator, or Dealer Owner and there are no other
agreements or understandings, either oral or written, between the
parties affecting this Agreement or relating to any of the subject
matters covered by this Agreement.

Except as otherwise provided herein, this Agreement cancels and
supersedes all previous agreements between the parties that relate to
any matters covered herein.

No agreement between Franchisor and Dealer which relates to matters
covered herein, and no change in, addition to (except the filling in
of blank lines) or erasure of any printed portion of this Agreement,

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<PAGE>

will be binding unless it is approved in a written agreement executed
under Article 23.

K. REVIEW AND MODIFICATIONS OF AGREEMENT TERMS

To demonstrate its commitment to the Saturn Philosophy, Franchisor has
entered into this indefinite term Agreement. However, neither
Franchisor nor Dealer want to prevent the modification of their
contractual relationship as necessary to respond to changes in
marketing conditions. Therefore, the Franchise Development Team will
review the Agreement every five years, unless it determines an earlier
review is necessary.

In the event the FDT recommends a superseding form of Dealer
Agreement, Franchisor and Dealer agree to terminate this Agreement and
execute the new Agreement. Unless otherwise agreed in writing, the
rights and obligations of Dealer that may otherwise become applicable
upon termination or expiration of this Agreement will not be
applicable.

23. EXECUTION ON BEHALF OF DEALER AND FRANCHISOR

This Agreement and related agreements are valid only if signed:

(a) on behalf of Dealer by its duly authorized representative and, in
the case of this Agreement, by its chief executive officer,
Dealer Operator and Dealer Owner(s); and

(b) on behalf of Franchisor by either its President or the Vice-
President, Sales.

[MEDFORD DODGE D/B/A SATURN
OF MEDFORD] Saturn Distribution Corporation
- ------------------------------ -------------------------------
Dealer Name

By By
--------------------------- ----------------------------
Dealer Operator Date President Date

By By
--------------------------- ----------------------------
Dealer Owner Date Vice-President Date
Sales

By
---------------------------
Dealer Owner Date

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By
---------------------------
Dealer Owner Date

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GLOSSARY

As used in this Dealer Agreement, the following terms shall have the following
definitions:

1. Dealer - The corporation, partnership or proprietorship that signs the
Dealer Agreement.

2. Dealer Agreement - The Dealer Agreement that is executed including the
Marketing Area Plan and other related Addenda, the Franchise System
Manuals, and the Terms of Sale Bulletins.

3. Dealer Operator - Principal manager of Dealer upon whose personal service
Franchisor relies in entering into the Dealer Agreement.

4. Dealer Owner - Owner of five percent or more equity ownership or beneficial
interest of Dealer upon whom Franchisor relies in entering into the Dealer
Agreement.

5. Dealer Selection Criteria - The qualifications and standards which
prospective Dealer Operators and Dealer Owners must satisfy to be approved
by Franchisor.

6. Dealer Selection Process - The process which an applicant must successfully
complete prior to becoming a Saturn Dealer Operator. This process
includes: the application, questionnaires, assessment at the applicant's
place of business, an orientation and interview, and agreement upon a
Marketing Area Plan.

7. Dealership Premises - Approved facilities provided by Dealer for dealership
operations.

8. Franchise System Manuals - The Manual which contains the policies,
procedures, systems, and guidelines for the conduct of Saturn dealership
operations under the Dealer Agreement.

9. Marketing Area - The geographic area assigned to Dealer and identified in a
Notice of Dealer's Marketing Area.

10. Marks - The various trademarks, service marks, names and designs used by
Saturn, Franchisor, and its affiliated companies in connection with
Products.

11. Motor Vehicles - All current model types or series of new motor vehicles
specified in any Motor Vehicle Addendum and all past motor vehicles
marketed through Dealers.

12. Parts and Accessories - New or remanufactured automotive parts and
accessories marketed or approved by Saturn or Franchisor and listed in
current Dealer Parts and Accessories Price Schedules and supplements.

13. Products - Motor Vehicles, Parts and Accessories.

14. Retail Environmental Design Package - A comprehensive design package that
provides a design guide and access to a portfolio of Saturn dealership
facility design control drawings (interior and exterior).

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EXHIBIT 10.10.1

TOYOTA DEALER AGREEMENT

This is an Agreement between TOYOTA MOTOR DISTRIBUTORS, INC. (DISTRIBUTOR), and
LITHIA MOTORS, INC. (DEALER), a(n) individual, partnership, X
corporation, duly incorporated in the state of OREGON, and doing business as
Medford Toyota.

PURPOSES AND OBJECTIVES OF THIS AGREEMENT

DISTRIBUTOR sells Toyota Products which are manufactured or approved by TOYOTA
MOTOR CORPORATION (FACTORY) and imported and/or sold to DISTRIBUTOR by TOYOTA
MOTOR SALES, U.S.A., INC. (IMPORTER). It is of vital importance to DISTRIBUTOR
that Toyota Products are sold and serviced in a manner which promotes consumer
confidence and satisfaction and leads to increased product acceptance.
Accordingly, DISTRIBUTOR has established a network of authorized Toyota dealers,
operating at approved locations and pursuant to certain standards, to sell and
service Toyota Products. DEALER desires to become one of DISTRIBUTOR's
authorized dealers. Based upon the representations and promises of DEALER, set
forth herein, DISTRIBUTOR agrees to appoint DEALER as an authorized Toyota
dealer and welcomes DEALER to DISTRIBUTOR's network of authorized dealers of
Toyota Products.

This Agreement sets forth the rights and responsibilities of DISTRIBUTOR as
seller and DEALER as buyer of Toyota Products. DISTRIBUTOR enters into this
Agreement in reliance upon DEALER's integrity, ability, assurance of personal
services, expressed intention to deal fairly with the consuming public and with
DISTRIBUTOR, and promise to adhere to the terms and conditions herein.
Likewise, DEALER enters into this Agreement in reliance upon DISTRIBUTOR's
integrity, expressed intention to deal fairly with DEALER and the consuming
public, and promise to adhere to the terms and conditions herein. DISTRIBUTOR
and DEALER shall refrain from conduct which may be detrimental to or adversely
reflect upon the reputation of FACTORY, IMPORTER, DISTRIBUTOR, DEALER or Toyota
Products in general. The parties acknowledge that the success of the
relationship between DISTRIBUTOR and DEALER depends upon the mutual
understanding, cooperation, trust and confidence of both DISTRIBUTOR and DEALER.

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I. RIGHTS GRANTED TO THE DEALER

Subject to the terms of this Agreement, DISTRIBUTOR hereby grants DEALER
the non-exclusive right:

A. To buy and resell the Toyota Products identified in the Toyota Product
Addendum hereto which may be periodically revised by IMPORTER;

B. To identify itself as an authorized Toyota dealer utilizing approved
signage at the location(s) approved herein;

C. To use the name Toyota and the Toyota Marks in the advertising,
promotion, sale and servicing of Toyota Products in the manner herein
provided.

DISTRIBUTOR reserves the unrestricted right to sell Toyota Products and to
grant the privilege of using the name Toyota or the Toyota Marks to other
dealers or entities, wherever they may be located.

II. RESPONSIBILITIES ACCEPTED BY THE DEALER

DEALER accepts its appointment as an authorized Toyota dealer and agrees
to:

A. Sell and promote Toyota Products subject to the terms and conditions
of this Agreement;

B. Service Toyota Products subject to the terms and conditions of this
Agreement; and

C. Establish and maintain satisfactory dealership facilities at the
location(s) set forth herein.

III. TERM OF THIS AGREEMENT

This Agreement is effective this 30th day of JANUARY, 1990, and shall
continue for a period of Six (6) Years and shall expire on JANUARY 29,
1996, unless ended by mutual agreement or terminated as provided herein.
This Agreement may not be extended except in writing signed by DISTRIBUTOR
and IMPORTER.

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<PAGE>

IV. OWNERSHIP OF DEALER

DISTRIBUTOR enters into this Agreement in reliance upon DEALER's
representation that the following persons, and only the following persons,
will be the Owner(s) of DEALER and that, by their signatures hereto, such
persons are committed to the achievement of the purposes and objectives of
this Agreement and agree to abide by the terms and conditions herein:

OWNERSHIP
NAME ADDRESS INTEREST
---- ------- ---------

Sidney B. DeBoer 360 E. Jackson Street 62.5%
Medford, OR

Manfred L. Heiman Same 37.5%

V. MANAGEMENT OF THE DEALERSHIP

DISTRIBUTOR and DEALER agree that the retention of qualified management is
of critical importance to the successful operation of DEALER. DISTRIBUTOR,
therefore, enters into this Agreement upon DEALER's representation that
SIDNEY B. DEBOER, and no other person, exercises the function of General
Manager and is in complete charge of DEALER's Toyota operations with
authority to make all decisions on behalf of DEALER with respect to
DEALER's operations. DEALER further agrees that the General Manager shall
devote his or her full efforts to DEALER's operations.

VI. CHANGE IN MANAGEMENT OR OWNERSHIP

This is a personal services contract. DISTRIBUTOR has entered into this
Agreement because DEALER has represented to DISTRIBUTOR that the Owners and
General Manager of DEALER identified herein possess the personal
qualifications, skill and commitment necessary to ensure that DEALER will
promote, sell and service Toyota Products in the most effective manner,
enhance the Toyota image and increase market acceptance of Toyota Products.
Because DISTRIBUTOR has entered into this Agreement in reliance upon these
representations and DEALER's assurances of the active involvement of such
persons in DEALER operations, any change in Ownership, no matter what the
share or relationship between parties, or any changes in General Manager
from the person specified herein, requires the prior written consent of
DISTRIBUTOR, which DISTRIBUTOR shall not unreasonably withhold.

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<PAGE>

VII. APPROVED DEALER LOCATIONS

DISTRIBUTOR and DEALER recognize that DEALER is free to sell Toyota
Products to CUSTOMERS wherever they may be located. However, in order that
DISTRIBUTOR may establish and maintain an effective network of authorized
Toyota dealers, DISTRIBUTOR has approved the following facilities as the
exclusive location(s) for the sale and servicing of Toyota Products and for
the display of Toyota Marks:

TOYOTA NEW VEHICLE SALES
AND SHOWROOM PARTS AND SERVICE
------------------------ -----------------
360 E. JACKSON STREET
MEDFORD, OR SAME

SALES AND GENERAL OFFICE USED VEHICLE DISPLAY AND SALES
------------------------ ------------------------------
SAME SAME

BODY AND PAINT STORAGE
-------------- -------
NONE THIRD AND RIVERSIDE
MEDFORD, OR

Each of these facilities is approved only for the function indicated.

DEALER may not, either directly or indirectly, display Toyota Marks or
establish or conduct any dealership operations contemplated by this
Agreement, including the display, sale and servicing of Toyota Products, at
any location or facility other than those approved herein without the prior
written consent of DISTRIBUTOR. Neither may DEALER modify or change the
usage or function of any location or facility approved herein or otherwise
utilize such locations or facilities for any functions other than the
approved function(s) without the prior written consent of DISTRIBUTOR.

VIII. APPLICABLE LAW

The parties acknowledge and agree that this Agreement is or is deemed to
have been made in the County and State in which DEALER is located and shall
be governed by and construed according to the laws thereof.

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<PAGE>

IX. STANDARD PROVISIONS

The "Toyota Dealer Agreement Standard Provisions" are incorporated herein
and made part of this Agreement as if fully set forth herein.

X. ADDITIONAL PROVISIONS

In consideration of DISTRIBUTOR's agreement to appoint DEALER as an
authorized Toyota dealer, DEALER further agrees:

1. The Dealer agrees to achieve a sales level on Toyota cars which will
result in the Dealer achieving a penetration level at or above
Regional average for import nameplate car as measured by R.L. Polk
registration data by December 31, 1990.

2. The Dealer agrees to achieve an Owner Satisfaction Index score at or
above Regional average by December 31, 1990. The Dealer understanding
the importance of total customer satisfaction, further agrees to
maintain scores at or above Regional average for the remainder of this
Agreement.

XI. EXECUTION OF AGREEMENT

Notwithstanding any other provision herein, the parties to this Agreement,
DISTRIBUTOR and DEALER, agree that this Agreement only shall be valid and
binding if it is signed:

A. On behalf of DEALER by a duly authorized person;

B. On behalf of DISTRIBUTOR by the President and General and/or Regional
Manager, if any, of DISTRIBUTOR; and

C. On behalf of IMPORTER, solely in connection with its limited
undertaking herein, by President of IMPORTER.

XII. CERTIFICATION

By their signatures hereto, the parties agree that they have read and
understand this Agreement, including the Standard Provisions incorporated
herein, are committed to its purposes and objectives and agree to abide by
all of its terms and conditions, in good faith and for their mutual
benefit.

LITHIA MOTORS, INC. DBA MEDFORD TOYOTA DEALER
--------------------------------------

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<PAGE>

(Dealer Entity Name)

DATE: By: [PRESIDENT]
------------ -------------------------- ---------------
SIGNATURE TITLE

DATE: By:
------------ -------------------------- ---------------
SIGNATURE TITLE

TOYOTA MOTOR DISTRIBUTORS, INC. DISTRIBUTOR
-------------------------------
(Distributorship Name)

DATE: By: [GENERAL MANAGER]
------------ -------------------------- ------------------
SIGNATURE [DONALD R. MILLER] TITLE

DATE: [JAN 30 1990] By: [PRESIDENT]
------------- -------------------------- ---------------
SIGNATURE TITLE

Undertaking by IMPORTER: In the event of termination of this Agreement by
virtue of termination or expiration of DISTRIBUTOR's contract with
IMPORTER, IMPORTER, through its designee, will offer DEALER a new agreement
of no less than one year's duration and containing the terms of the Dealer
Agreement then prescribed by IMPORTER.

TOYOTA MOTOR SALES, U.S.A., INC.

DATE: [JAN 30 1990] By: [PRESIDENT]
------------- -------------------------- ---------------
SIGNATURE [Y. TOGO] TITLE

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TOYOTA
PRODUCT ADDENDUM
TO
TOYOTA DEALER AGREEMENT

Pursuant to Paragraph I(A) of the Toyota Dealer Agreement, DISTRIBUTOR hereby
grants DEALER the non-exclusive right to buy and resell the Toyota Products as
defined in the Toyota Dealer Agreement and identified below:

Tercel Cressida
Corolla Land Cruiser
MR 2 Van/Cargo Van
Camry Truck (GVW 1 & 2)
Celica Cab/Chassis (GVW 1 & 2)
Supra 4 Runner

and all parts, accessories and equipment for such vehicles.

This Toyota Product Addendum shall remain in effect unless and until superseded
by a new Toyota Product Addendum furnished DEALER by IMPORTER.

<PAGE>

EXHIBIT 10.13.1

ASSET PURCHASE AGREEMENT

THIS AGREEMENT is made and entered into this 2nd day of August, 1996, by
and between ROBERTS DODGE, INC., an Oregon corporation (hereinafter referred to
as "Seller" or the "Company"), and LITHIA MOTORS, INC. an Oregon corporation
(hereinafter referred to as "Purchaser").

WITNESSETH:

WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to buy
from Seller substantially all of the assets of the Company which Assets are used
in and related to the business of the Company of selling, leasing and repairing
used vehicles and new Dodge vehicles (the "Business").

NOW, THEREFORE, upon the terms and considerations herein set forth, it is
agreed as follows:

1. PURCHASE AND SALE. Purchaser agrees to buy and Seller agrees to sell
the following assets of Company (hereinafter referred to as the "Assets") on the
following terms and at the prices indicated with payment to be made at
Preliminary and Final Closing (as hereinafter defined):

a. FIXED ASSETS. Purchaser agrees to purchase all of Seller's fixed
assets, subject to Purchaser's review and approval of same, including, but not
limited to machinery and shop equipment, special tools, signs, office equipment,
furniture and fixtures presently located

<PAGE>

at Seller's place of business or in Seller's possession as of the date of this
offer. The purchase price for said assets is the sum of $450,000 and shall
include all of the fixed assets, as mentioned above, excluding the ADP computer
on lease and furniture in dealer's office, and also excluding any items,
mutually agreed to, and listed in Schedule "A" to become attached here. The
$450,000 shall be paid in full at the Final Closing.

b. GOODWILL, COVENANT NOT-TO-COMPETE AND OTHER ASSETS. Purchaser
shall purchase Seller's goodwill, name, service and sales customer lists,
vehicles sales and service records, telephone, fax number, and covenant not-to-
compete from BOB AND BUTCH ROBERTS. The covenant not-to-compete shall be for a
period of five (5) years and shall include Lane County, Oregon. The purchase
price for said assets, including the covenant not-to-compete, is the sum of
$1,800,000. The terms of payment is as follows: $1,300,00 to be paid at the
Final Closing and the remaining $500,000 shall be in the form of a promissory
note from Purchaser which shall be fully amortized, including all principal and
interest at a rate of 8.5% per annum over a five (5) year period. In the event
Purchaser elects to use a Corporate Nominee, Lithia Motors, Inc., shall be a co-
maker of said promissory note, at anytime, without penalty. Purchaser shall be
obligated to pay off the promissory note if Purchaser becomes a public company.
Seller shall not hire any existing personnel without the written permission from
purchaser. Permission is granted for list provided 8/13/96.

c. NEW VEHICLES. Purchaser shall purchase from Seller all of
Seller's new unregistered, and unused 1996 and 1997 model Dodge vehicles ("New
Vehicles") at a price equal to factory invoice, less any factory holdbacks,
rebates or incentives, carryover model

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allowances, floorplan allowances, finance cost allowances, advertising charges,
and any other similar items which should reasonably be deducted to establish
Seller's net cost for such vehicles, plus dealer installed parts and accessories
at dealer's actual cost, and less the Seller's actual cost of any missing
accessories, equipment or parts. If there is any damage to any new vehicles,
there shall be a deduction of such damages as agreed upon between a
representative of Purchaser and a representative of Seller. If Purchaser and
Seller cannot agree on this amount, they shall choose an independent third party
to determine the amount and such party's determination shall be binding. All
new vehicles shall be paid in full at the Final Closing.

d. USED VEHICLES, COMPANY VEHICLES, AND DEMONSTRATORS. Purchaser
shall purchase, on an all-or-nothing basis, Seller's used vehicles, company
vehicles and demonstrators in Seller's inventory, as of the closing date, at a
value mutually agreed to by both Purchaser and Seller. In the event Purchaser
and Seller cannot agree on a value, then Seller shall retain those vehicles, and
Purchaser shall not be obligated to purchase same. Any of the above vehicles
purchased shall be paid in full at the Final Closing. [SELLER MUST REMOVE
VEHICLES WITHIN 1 WEEK IF NOT PURCHASED.]

e. PARTS AND ACCESSORIES. Purchaser shall purchase from Seller all
of Seller's current returnable, unused, undamaged, non-obsolete, new factory
parts and accessories for Dodge vehicles on hand at Final Closing. Purchaser
shall also purchase all of Seller's non-obsolete parts and accessories on hand
at closing obtained from suppliers other than Seller's franchiser. All Dodge
pals shall be listed in the most recent factory price book, as inventoried and
valued by a mutually acceptable inventory service, at the net cost set forth in
the price

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<PAGE>

books, less any dealer discounts available. Non-factory parts and accessories
shall be valued in accordance with the current prices in the price lists of
suppliers of such parts and accessories. Purchaser shall not be obligated to
purchase any used, damaged or obsolete parts or accessories (obsolete shall mean
parts which have no sales for 270 days). Seller agrees to maintain the parts
and accessories inventory at normal operating levels through the Final Closing.
The cost of the inventory service shall be divided equally between Purchaser and
Seller. The value of the parts and accessory inventories shall be paid in full
at the Final Closing.

f. WORK-IN-PROCESS. Purchaser shall purchase from Seller all of
Seller's work-in-process and sublet repairs work at a price equal to Seller's
actual net cost. The value of the work-in-process inventory shall be paid in
full at the Final Closing.

g. MISCELLANEOUS INVENTORY AND SUPPLIES. Purchaser shall purchase
from Seller all of Seller's miscellaneous inventory such as gas, oil, nuts,
bolts, and the like, the price of which is to be determined by a representative
of Purchaser and Seller, at Seller's actual cost of such items. The value of
the miscellaneous inventory and supplies shall be paid in full at the Final
Closing.

h. ASSUMPTIONS OF LEASES AND CONTRACTS. In addition to the purchase
of the fixed assets, as outlined in paragraph 1(a) above, Purchaser shall assume
Seller's obligations under those leases and contracts set forth in Schedule "B"
attached hereto.

i. PURCHASE ORDERS. Seller shall transfer to Purchaser all of
Seller's purchase orders for new vehicles as of the closing date, together with
all deposits on such purchase orders.

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<PAGE>

j. REAL AND IMPROVED PROPERTY. Purchaser shall purchase from Seller
the real property and all improvements for the sum of $2,330,050, subject to a
loan approval satisfactory to Purchaser. The purchase price of the real
property and improvements shall be paid in full at the Final Closing. Unless
otherwise agreed to in writing, the Real Property and Dealership Asset Purchase
shall close simultaneously. Purchaser hereby acknowledges that it is the
intention of Seller to complete an IRC Section 1031 exchange which will not
delay the close of escrow or cause additional expense to Purchaser. Seller's
rights and obligations under this agreement may be assigned to REAL ESTATE
EXCHANGE, INC. for the purpose of completing such an exchange. Purchaser agrees
to cooperate with Seller and REAL ESTATE EXCHANGE, INC. in a manner necessary to
complete the exchange.

k. ASSETS NOT SOLD. Notwithstanding anything to the contrary
hereinabove, the following assets and properties shall be retained by Seller and
shall not be sold or transferred to Purchaser: Accounts and notes receivable,
prepaid insurance and other prepaid assets, antiques, personal effects, dealer
finance reserves, earned factory rebates, earned credits, manufacturer holdbacks
or other allowances or incentives relating to vehicles sold prior to Final
Closing, bank deposits and cash. Provided, however, Purchaser, with the
assistance of Seller, shall for a period of 180 days following Final Closing use
its best efforts to collect Seller's accounts receivable. Purchaser shall
collect such accounts receivable as are paid to Purchaser in the normal course
of business, without charge to Seller, [ON A MONTHLY BASIS] and shall promptly
pay the same over to Seller (whether the payments are received during or
subsequent to the 180 day period), but shall act solely as a conduit in doing so
and shall have no

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<PAGE>

responsibility to undertake any collection efforts with regard thereto. All
payments from the customer shall be applied first to such accounts receivable
accruing prior to Final Closing, unless customer expressly directs otherwise.

l. OTHER OBLIGATIONS ASSUMED. Except as specifically set forth
herein, Purchaser is assuming no liabilities of Seller in connection with the
transaction set forth in this Agreement. However, Purchaser will assume all of
Seller's customer complaints, contracts in transit, "make goods", "comebacks"
and the like arising out of service performed by Seller prior to the
commencement date of the Final Closing, and which would normally be covered
under Seller's applicable warranties, good customer relations and adjustments.
Seller agrees to reimburse Purchaser for the mutually agreeable dealer costs of
these items for a period of up to sixty days from the effective date of the
Final Closing; and for finance and insurance charge backs paid by Purchaser on
Seller's behalf as provided in paragraph 8(b) below.

2. PRELIMINARY CLOSING AND FINAL CLOSING.

a. PRELIMINARY CLOSING. The Preliminary Closing shall be the
execution and delivery of this Agreement and a Real Estate Purchase Agreement
for the sale to Purchaser, or its designated nominee or assignee, of the
Company's dealership property. The Final Closing shall occur on or before
October 1, 1996. Purchaser shall pay to Seller at the Preliminary Closing as
partial payment for the Dealerships assets the sum of One Hundred Thousand
Dollars ($100,000).

i. The Final Closing of the purchase and sale shall be
contingent upon the approval of this transaction and the issuance of sales and
service agreements by Chrysler

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<PAGE>

Corporation and Chrysler Financial Corporation or financial institution of
Purchaser's choice for credit line financing, and approval and license by the
Oregon Department of Motor Vehicles, if required, and shall occur at such place
and time as the parties mutually agree, within fourteen (14) days (or as
otherwise agreed in writing to coordinate Final Closing with the end of a
monthly accounting period) after the date upon which Purchaser, or its
designated nominee or assignee, shall have received written approval to become
an authorized dealer of Dodge vehicles at Seller's location in Eugene (the
"Approvals"). The parties agree to use best efforts to expedite the Approvals
of Purchaser or its nominee or assignee, as a new Dodge dealer and to meet the
minimum capital requirements imposed by Dodge.

ii. Purchaser shall notify Seller promptly of the receipt of the
Approvals.

b. FINAL CLOSING.

i. PAYMENTS.

1. At Final Closing, Purchaser shall either re-floor all
new vehicles or shall pay to Seller, in addition to the amounts set forth in
paragraph 2(b)(i)(2) an amount as calculated in paragraph 1(d) hereto as and for
the purchase price thereof.

2. At the Final Closing, Purchaser shall receive a credit
against the Purchase Price of the payment in paragraph 2(a) and shall pay the
following to Seller in cash: The balance of the Purchase Price, as calculated
pursuant to paragraph 1, cash, less any offsets under paragraph 2(b)(i)(3).

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<PAGE>

3. Seller shall pay to Purchaser, by offset from the
amount to be paid by Purchaser the full amount of all manufacturer hold backs,
rebates, incentives and the like that are due or have been taken by Seller on
the new vehicles purchased by Purchaser, and Purchaser shall promptly pay Seller
any such amounts received by Purchaser with respect to vehicles sold prior to
Final Closing.

ii. DOCUMENTS. At the Final Closing, the parties shall exchange
the following:

1. Seller shall deliver the Assets and a bill of sale for
the Assets, certain of which assets described in Schedule "B" hereto are subject
to the lease obligations identified therein; but all of the other Assets shall
be free and clear of all claims, liens or encumbrances.

2. Purchaser's Approvals to become an authorized dealer of
Dodge vehicles at Seller's present location under respective dealer sales and
service agreements.

3. Seller shall deliver all of the dealerships' service
records, customer records, customer lists, deal jackets and the like, which
shall remain the property of Seller, but shall be retained and stored by
Purchaser; provided, however, that Purchaser shall be entitled to destroy these
records after six (6) years.

4. Each party shall deliver to the other evidence to the
reasonable satisfaction of the other or its counsel of proper corporate and
stockholder action authorizing ratifying the execution of this Agreement and the
consummation of the transactions contemplated hereby.

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<PAGE>

5. The parties shall deliver such other documents as
Seller or Purchaser or their counsel shall reasonably request in order to carry
out the intent, purpose and terms of this Agreement.

3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller, with any exceptions
and subject to any disclosures which may be contained herein, in schedules
attached hereto or in other writings referred to herein, represents, warrants
and covenants to Purchaser that at the time of Preliminary Closing and Final
Closing:

a. Seller owns all the Assets to be sold hereunder and at the final
Closing they will be delivered free and clear of all restrictions and/or
conditions to transfer or assignment, claims or right of an other person or
entity, or defects in title, and free and clear of mortgages, liens, pledges,
encumbrances, equities, covenants, conditions or restrictions, except as
described herein and for possible minor matters that, in the aggregate, are not
substantial in amount, do not materially detract from or interfere with the
present or intended use of any of the assets, nor materially impair operations
of the Company as a Dodge dealership; and all new vehicles sold to Purchaser
shall be in the computer inventory of DODGE and not previously sold. Seller, to
the best of its knowledge, has full power to sell and transfer the Assets
without obtaining the consent or approval of any other person or entity, other
than factory approvals. The transfer of the Assets to Purchaser will not
violate, at Final Closing, any provision of the articles of incorporation or
bylaws of the Company, or the provisions of any material note, mortgage, lien,
lease, agreement, instrument of arbitration, award, judgment or

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<PAGE>

decree to which the Company, or its principal shareholders, is subject or a
party, to the best of Sellers knowledge.

b. Seller has made or will make available to Purchaser for
examination all of the Company's book and records concerning the dealership and
the Assets at reasonable times following execution hereof.

c. No representations or statements made by Seller or on its behalf
contain or will contain any untrue statement of a material fact or omit to state
any material fact regarding the Assets, which fact would be necessary to make
such representations, warranties or statements not materially misleading to
Purchaser.

d. Upon the receipt of factory and respective manufacturer
approvals, the consummation of the transactions contemplated by this Agreement
will not, to the best of Seller's knowledge, result in or constitute any of the
following that would materially, adversely affect the transactions contemplated
herein:

i. A default or event that, with notice or lapse of time or
both, would be a default, breach or violation of the articles of incorporation
or bylaws of the Company or any license, promissory note, conditional sale
contract, commitment, indenture, mortgage, deed of trust, dealer agreement or
other agreement instrument or arrangement to which the Company is a party or by
which the Assets are bound.

ii. An event that would permit any party to terminate any
agreement or to accelerate the maturity of any indebtedness or other obligation
of the Company; or

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<PAGE>

iii. The creation or imposition of a third party lien, charge or
encumbrance on any of the Assets.

e. Seller is validly existing, and in good standing under the laws
of Oregon, and has all regulatory authorizations and permits necessary to
operate its business, and is duly qualified to do business from and at the real
property described.

f. To the best of Seller's knowledge, Seller has good and marketable
title to the Assets and interests in the Assets purchased by Purchaser, whether
real, personal, mixed, tangible or intangible, which constitute all of the
Assets and interest in the Assets that are used in the Business.

g. The Company has no employment contracts or consulting agreements
with or for any officer or employee that cannot be terminated at will and does
not have, and is not bound by, any unfunded severance pay, and bonus which is
not accrued on the books of the Company to the best of Seller's knowledge.
[SELLER SHALL PAY PURCHASER FOR ALL ACCRUED LIABILITIES TO EMPLOYEES, ANY EXCESS
NOT PAID TO EMPLOYEES SHALL BE REFUNDED WITHIN 1 YEAR.]

h. Except as disclosed in writing and to the best of Seller's
knowledge, Seller is not a party to any written or oral (i) contract not made in
the ordinary course of business, (ii) contract with any labor union,
(iii) advertising contract or contract for public relations services,
(iv) continuing contract for the purchase of materials, supplies or equipment,
or (v) contract continuing for a period of more than thirty (30) days or which
is not terminable

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<PAGE>

without cost or other liability to Seller, or its successors, which relates to
the operation of the dealerships or the Assets.

i. To the best of the Company's knowledge, it has complied with, and
is not in violation of, applicable Federal, State or local statutes, laws and
regulations affecting the Assets, the real estate at which it conducts business
or the operation of its Business.

j. Except for minor collection matters under $1,000, there is not
any claim, suit, action, counterclaim, cross claim, arbitration or legal,
administrative or other proceeding or governmental investigation pending or
threatened against or affecting the Assets, Seller or its principal
shareholders. The Company is not in default or in violation with respect to any
order, writ, injunction or decree issued by any federal, state, local or foreign
court or regulatory authority affecting the dealership, Seller or the Assets
except as reflected in Schedule "C".

k. The Company does not, to the best of its knowledge, have any
debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, whether due or to become due that would have a
material, adverse effect on the transactions contemplated by this Agreement,
that is not reflected on Schedule "C", the Company's July 31, 1996 Financial
Statement. Seller represents Schedule "D" is the financial statement it
provides to Chrysler Financial and it has been prepared in accordance with
factory reporting requirements. [PURCHASER HAS RIGHT TO AUDIT BOOKS OF SELLER
FOR WHATEVER PERIODS REQUIRED BY SEC REQUIREMENTS FOR PUBLIC COMPANIES AT
PURCHASER'S EXPENSE. (SECURITY EXCHANGE COMMISSION)].

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<PAGE>

l. The Company has filed or will file all Federal, State and local
Tax returns required by law and has paid all taxes, assessments and penalties
due and payable as of the date hereof and on the date of Final Closing, except
as the time for filing or payments has been properly extended and disclosed to
Purchaser, that would have a material, adverse effect on the transactions
contemplated in this Agreement. Except for federal and state income taxes, the
provision for taxes reflected in the financial statements (Schedule "D") is
adequate for any and all federal, state, and local taxes for the period ending
on the date of such financial statement and for all prior periods whether or not
disputed, and the amounts so provided on said financial statements have actually
been paid or will be paid when due (or as extended) to the appropriate federal,
state or local tax collecting agency as of the date hereof and as of the date of
Final Closing. There are no pending disputes as to taxes of any nature payable
by the Company.

m. From the date of this Agreement to the Final Closing, the Company
will not cause or make, except in the ordinary course of its business, or except
with Purchaser's written consent prior to the Final Closing, any:

i. change in the manner of conducting the business of the
Company;

ii. loan or commitments to make loans, or capital expenditures
by the Company;

iii. sale or transfer of the Assets of the Company;

iv. amendment, release or voluntary termination of any contract,
agreement, lease, insurance policy, bonding agreement, license or dealer
agreement to which the Company is a party;

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<PAGE>

v. mortgage, pledge or other encumbrance of any Assets of the
Company; or

vi. enter into any other contract, commitment or transaction
affecting the Assets or Seller's obligations hereunder, prior to the Final
closing.

n. Except for transactions in the normal course of its business,
Seller shall also, from the date of this Agreement until the Final Closing, not
cause or make without Purchaser's written consent (which consent shall not be
unreasonably withheld) any:

i. material adverse change in the financial condition,
liabilities, Assets, business or prospects of the Company, including the
telephone number of the Business, which Seller agrees to release to Purchaser
upon Final Closing, subject to Purchaser paying all future accruing telephone
charges with regard thereto, but with no liability on Purchaser's part for
accrued advertising charges through the date of Final Closing;

ii. increase in the salary or other compensation payable or to
become payable by the Company to any of its agents, officers, employees or
consultants, or the declaration, payment or commitment or obligation of any kind
for the payment by it of a substantial bonus or other additional salary or
compensation to any such person, or any deferred compensation agreement for any
such person;

iii. issue or create any offerings, warrants, obligations,
subscriptions, options, convertible securities or other commitments under which
any interests of the Company might be directly or indirectly authorized, sold,
issued or transferred;

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<PAGE>

iv. pay any obligation or liability of the Company, fixed or
contingent, other than current liabilities and monthly payments required on
installment liabilities and any payments on the obligations owed by the Company;

v. cause a material change in, perform any act or fail to
perform any act which would render any of the representations or warranties in
this paragraph untrue or inaccurate or incomplete as of the Final Closing Date
of the purchase contemplated by this Agreement.

o. From and after the date hereof and for a term of five (5) years,
Seller and Guarantors individually agree and covenant not to:

i. engage in any new car franchise ownership within Lane
County, Oregon;

ii. actively solicit by phone, mail or other direct
advertisement, customers of the Company; or

iii. use the name Roberts Dodge, Inc. for any purposes except to
finalize the termination of the dealership business, within the State of Oregon,
without using a DBA.

4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER. Purchaser,
with any exceptions and subject to any disclosures which may be contained
herein, in schedules hereto or in other writings referred to herein, represents,
warrants and covenants to Seller that at the time of Preliminary and Final
Closing:

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<PAGE>

a. Purchaser has the right, power, legal capacity and authority to
enter into and perform its obligations under this Agreement.

b. This Agreement and the documents to be delivered or executed at
the Preliminary and Final Closing have been or will be, duly executed and
delivered and are, or will be, the lawful, valid and legally binding obligation
of Purchaser, its designated nominee or assignee, enforceable against it in
accordance with their respective terms. The execution, delivery and
consummation of this Agreement are not prohibited by and do not violate or
conflict with any provision of and will not result in a default under, a
termination of, an acceleration of, or a breach of: (i) any material contract,
agreement or other instrument to which Purchaser is a party; (ii) to the best
knowledge of Purchaser, any regulation, order, decree or judgment of any
arbitration panel, court or governmental agency; and (iii) to the best knowledge
of Purchaser, any other restriction of any kind to which it is subject.

c. Purchaser, or its designated nominee or assignee, will diligently
and in good faith pursue an application to become an authorized Dodge dealer.

d. Purchaser will arrange in good faith adequate financing to
consummate this Agreement and the Real Estate Purchase Agreement.

e. Cause a material change in, perform any act or fail to perform
any act which would render any of the representations or warranties in this
paragraph untrue or inaccurate or incomplete as of the Final Closing Date of the
purchase contemplated by this Agreement.

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f. Purchaser agrees to store on the Real Property without cost to
Seller, but at Seller's risk, including all risk or loss, any item to which
Seller retains title hereunder and does not sell to Purchaser for a maximum
period of one hundred twenty (120) days following Final Closing, [EXCEPT FOR
NONPURCHASED VEHICLES WHICH MUST BE REMOVED IN 1 WEEK.] during which time Seller
may by any reasonable means, including mutually agreeable consignment
arrangements with Purchaser, hold the same out for sale for Seller's account;
provided such storage does not unreasonably hamper Purchaser's operation of the
dealership business or use of the Real Property.

g. Purchaser agrees that Seller shall have reasonable access to the
dealership and its records after Final Closing and Purchaser will assist Seller
as Seller may reasonably require to wind down Seller's business after Final
Closing, including without limitation, assisting Seller in the collection of
Seller's accounts receivable, including Seller's Dodge warranty claims. Seller
shall provide Purchaser with a list of those of Seller's accounts receivable as
to which Seller desires Purchaser's assistance, and all amounts received in
payment of such accounts receivable shall be recorded as such, immediately upon
receipt, and paid over to Seller in the form received on a [MONTHLY BASIS.] In
the case of Seller's Dodge warranty claims and incentive payments, to the extent
and if, as and when Dodge tenders any payment in respect of Seller's warranty
claims or incentive payments in the form of credit to Purchaser's Dodge parts
account or to Purchaser's incentive account, Purchaser shall refund to Seller on
or before the 10th day of each month the net amount of all such credits received
during the prior calendar month and there shall accompany each refund an
appropriate accounting of Seller's warranty

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<PAGE>

claim or incentive credits represented by such refund. If payments are received
by Purchaser from a customer having account balances outstanding to both Seller
and Purchaser, any such payment which is specifically identified by the payor as
being for Seller's account shall be paid over by Purchaser to Seller and any
such payment not so identified as belonging to Seller shall be applied first to
the accounts receivable of Seller and the remainder shall be credited as a
payment on the accounts receivable of Purchaser. Purchaser will assist Seller
in the collection of Seller's accounts receivable, without costs or expense to
Seller, for a period of six (6) months following the Final Closing.

5. PURCHASER'S CONDITIONS TO CLOSING. Purchaser's conditions to closing
shall be the following:

a. FACTORY APPROVALS. This offer is subject to approval of
Purchaser, or Purchaser's nominee and the issuance of a Dodge Dealership Sales
and Service Agreement with Chrysler Corporation and approval of Buyer's nominee
as the Dealer-Operator of the franchise. It is expressly understood and agreed
that any facility requirements shall be approved by Purchaser and this agreement
is subject to Purchaser's sole and complete approval of such requirements, if
any.

b. ENVIRONMENTAL, TOXIC WASTE AND PERMITS. This offer is subject to
the dealership meeting the requirements established by all regulatory agencies
governing the operation of the dealership, including but not limited to, the
Department of Motor Vehicles, city and/or county permits and license
departments. Environmental Protection Agency, and other agencies as shall be
included in the final purchase agreement to be approved by both Purchaser,

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<PAGE>

Seller and their respective attorneys. Purchaser represents that there are no
in-ground hoists, below-ground gas tanks, below-ground waste oil tanks, and the
real property is free and clear of any toxic waste or hazardous waste material.
Seller shall furnish Purchaser with a copy of all environmental reports and any
certificates of compliance regarding the above items and that the property is
environmentally free of any toxic or hazardous waste.

6. SELLER'S OBLIGATIONS BEFORE FINAL CLOSING. Seller agrees from the
date of this Agreement until Final Closing:

a. To perform, abide by and adhere to all representations and
warranties set forth in this Agreement.

b. To cause the Company to allow Purchaser, its counsel and
representatives, to have full access to all properties, books, accounts,
records, contracts and documents of, or relating to, its Dodge dealership and
the Assets. Seller shall furnish or cause to be furnished to Purchaser all data
and information concerning its dealership and the Assets that may reasonably be
requested. Purchaser agrees to treat this information as confidential, not to
deliver any of it to third parties, except as required by law, [AND SEC
REQUIREMENTS] or to carry the intent and purpose of this transaction, to use it
only for Purchaser's purposes, and, if the transactions contemplated herein are
not consummated, to return the information to Seller and Purchaser warrants to
Seller that Purchaser will not use any such information for any purpose.
[PURCHASER MAY DISCLOSE AUDIT RESULTS IN PROSPECTUS AS A PUBLIC COMPANY.]

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<PAGE>

c. To certify that all representations and warranties of Seller set
forth in this Agreement will also be true on and as of the Final Closing, as if
made on that date, except for changes in the ordinary course of business.

d. To diligently and in good faith assist and cooperate with
Purchaser in its application to become an authorized Dodge dealer. At or prior
to Final Closing, Seller shall terminate its working agreements with Dodge by
delivering to them letters of resignation in a form satisfactory to each such
manufacturer.

e. Seller shall use its best efforts not to damage any Asset of the
Company (whether or not covered by insurance) that materially and adversely
affects its financial condition, business or prospects.

f. Seller shall use its best efforts to prevent any other event or
condition of any character that has or might reasonably have a material and
adverse effect on the financial condition, business, Assets or prospects of the
Company and shall keep the dealerships in full operation between Preliminary and
Final Closing.

7. TERMINATION. If either party files for bankruptcy, voluntarily or
involuntarily, on or before the date of Final Closing, the other party shall
have the option to terminate this Agreement for 30 days following receipt of
written notice of such filing. In the event of termination of this Agreement,
neither party shall have any further liability hereunder, except said
termination shall not excuse or eliminate any breaches of this Agreement which
have occurred prior to such termination.

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<PAGE>

8. REMEDIES.

a. In the event the transactions contemplated by this Agreement
should not be completed for any reason other than Seller's unexcused failure to
tender the performance required pursuant to this Agreement, Purchaser, Seller
and Guarantors agree that Seller shall be entitled to retain, as its sole and
exclusive remedy, the payments made by Purchaser at Preliminary Closing, and
that such payments are not refundable to Purchaser under any circumstances
except as expressly provided in this Paragraph 7.

b. In the event of a failure to close resulting from Seller's
unexcused failure or refusal to tender the performance required by this
Agreement and the Land Sale Contract, Purchaser may either (i) obtain a refund
of any payments made by Purchaser under this Agreement or (ii) obtain specific
performance of this Agreement, which remedies shall be Purchaser's sole,
mutually exclusive remedies.

9. INDEMNIFICATION.

a. Seller shall indemnify and hold harmless Purchaser and its
agents, its designated nominee, transferee, successors and assigns from and
against all claims, damages, actions, losses and expenses, including reasonable
attorney's fees and expert witness fees, arising out of or that are caused in
whole or in part from any default or breach of any warranty, representation, or
covenant of Seller in this Agreement. In the event or a loss for which
Purchaser is entitled to indemnification under this Agreement that Seller does
not dispute, Purchaser may set off against Seller the amount of the loss
incurred by Purchaser.

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<PAGE>

b. Seller agrees to reimburse Purchaser for all amounts mutually
agreed to be paid by Purchaser for a period of up to [NINETY (90)] days from the
effective date of the Final Closing on charge backs or expenses related to
customer complaints, "make goods", "comebacks" and the like arising from
services performed prior to the date of commencement of the Final Closing and
which would normally be covered under Seller's applicable warranties, good
customer relations and adjustments; and for finance and insurance charge backs
paid by Purchaser on Seller's behalf. Purchaser shall invoice Seller or this
designee monthly for these charges.

c. Purchaser shall indemnify and hold harmless Seller and its
agents, its designated nominee, transferee, successors and assigns from and
against all claims, damages, action, losses and expenses, including reasonable
attorney fees and expert witness fees, arising out of or that are caused in
whole or in part from any default or breach of any warranty, representation, or
covenant of Purchaser in this Agreement.

d. Any party or parties seeking indemnification under this
paragraph 8 (i.e. collectively, the "Indemnitee") shall, on each occasion that
indemnification is sought, give prompt written notice for such indemnification,
of any claim, suit or demand which the Indemnitee believes give rise to
indemnification to it hereunder (the person to whom such notice of claim is
given being referred to herein as the "Indemnitor"). Except as hereinafter
provided, the Indemnitor shall be obligated to defend and to direct the defense
against any such claim, suit or demand, in its name or in the name of the
Indemnitee at the Indemnitor's expense and with counsel of the Indemnitor's own
choosing and shall have the sole right to settle or compromise

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<PAGE>

any such claim, suit or demand; provided, however, that the Indemnitor will not,
without the Indemnitee's written consent, settle or compromise any claim or
consent to any entry of judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnitee of a
release from all liability in respect of such claim, in form and substance
reasonably satisfactory to the Indemnitee. The Indemnitee shall at the
Indemnitor's expense, cooperate in the defense of any such claim, suit or
demand. If the Indemnitor, within a reasonable time after notice of a claim,
fails to defend the Indemnitee, the Indemnitee shall be entitled to undertake
the defense, compromise or settlement of such claim at the expense of and for
the account and risk of the Indemnitor, utilizing counsel of the Indemnitee's
own choosing.

e. If (i) losses are claimed by Seller Indemnitees and Purchaser
Indemnitees with respect to the same cause, condition, event, circumstance,
occurrence, happening or transaction; and (ii) such losses are caused by or
arise out of Seller's operation or ownership of the Assets prior to Final
Closing and Purchaser's conduct after Final Closing, or if Seller and Purchaser
are jointly and severally liable therefor, then Seller and Purchaser shall be
obligated INTER SE to each indemnify the other under this Paragraph only for
that portion of such losses as are legally caused by, or equitably attributable
to, Seller or Purchaser, respectively.

10. BROKERAGE FEES. Purchaser and Seller each agree to pay National
Business Brokers, Inc. a commission of [$100,000] (for a total of [$200,000)] on
the purchase price of the assets of the dealership and the price of the real
property. Said commissions shall be paid to Broker upon Final Closing.

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<PAGE>

11. COSTS. Each of the parties shall pay all costs and expenses
(including attorney fees and accounting fees) incurred or to be incurred by them
in negotiating, closing and carrying out the transactions contemplated by this
Agreement.

12. ENTIRE AGREEMENT. This Agreement and the schedules or exhibits
attached hereto or thereto, constitute the entire agreement between the parties
pertaining to the subject matter contained herein and supersede any prior
agreements. No supplement, modification or amendment of this agreement shall be
binding unless executed in writing by the parties. No waiver of the provisions
of this Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver. No waiver shall be binding unless executed in writing by the party
granting the waiver.

13. COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

14. ASSIGNMENT. This Agreement shall be binding on and shall inure to the
benefit of the parties to it and their respective heirs, legal representatives,
successors and assigns. Purchaser may assign this Agreement, provided
Purchaser guarantees the performance of all obligations under this Agreement of
any nominee or assignee.

15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except for the provisions
of paragraph 3(o), the several representations, warranties, indemnities,
covenants and agreements of the parties contained in or made pursuant to this
Agreement shall be deemed to

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survive the Final Closing for 24 months and shall be binding upon the parties
and their successors in interest.

16. COMMUNICATIONS. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall either be
delivered personally or sent by first-class mail, registered or certified,
postage prepaid and properly addressed as follows:

To Seller: Roberts Dodge, Inc.
c/o Milford G. Roberts, Sr.
10705 Island Avenue
Island City, OR 97850

To Purchaser: Lithia Motors, Inc.
c/o Sidney DeBoer
360 East Jackson
Medford, OR 97501

17. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the local laws of the State of Oregon.

18. ARBITRATION AND ATTORNEY FEES.

a. In the event of a dispute over the terms, conditions, performance
or interpretation of this Agreement, the parties agree to submit to mandatory
binding arbitration for resolution of their disputes in accordance with the
Oregon Revised Statutes Section 36.300 ET SEQ.

b. Notice of such dispute must be timely given by serving upon the
other party written notice of the complaint, a statement adequately describing
the complaint, the specific paragraphs or subparagraphs of this Agreement
allegedly violated and the remedies sought. The arbitration panel shall consist
of three arbitrators, one nominated by Purchaser, one

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nominated by Seller, with the third arbitrator to be selected by the other two.
The arbitrators shall adopt their own rules for the conduct of the arbitration
and shall be authorized to make an award of specific performance. The
arbitration shall take place in Eugene, Oregon.

c. If any claim, arbitration or legal action or other proceeding is
brought for the interpretation or enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover actual attorney fees, expert witness fees and other costs
and expenses incurred in the enforcement of this Agreement whether by filing
suit or not, but not the costs of their appointed arbitrator, in addition to any
other relief to which that party may be entitled.

d. Nothing herein set forth shall prevent the parties from settling
any dispute by mutual agreement at any time.

19. SEVERABILITY. Notwithstanding anything contained herein to the
contrary, if this Agreement is or may be deemed for any reason to violate
Seller's Dodge dealer sales and service agreement, in any manner whatsoever,
then and in that event this Agreement shall be deemed modified, by consent of
the parties, to the extent and in the manner necessary to reform this Agreement
to comply with and not violate all relevant provisions of the said Dodge dealer
sales and service agreements.

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IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on
the day and year first above written.

SELLER: PURCHASER:

ROBERTS DODGE, INC. LITHIA MOTORS, INC.

By By
------------------------- -------------------------
MILFORD G. ROBERTS, SR. SIDNEY B. DeBOER
President President & CEO

By
-------------------------
MILFORD G. ROBERTS, SR.

The undersigned, Milford G. Roberts, unconditionally guarantee the
foregoing performance of Roberts Dodge, Inc.

-------------------------
MILFORD G. ROBERTS, SR.

The undersigned, Sidney B. DeBoer unconditionally guarantees the foregoing
performance of Lithia Motors, Inc. [EXCEPT FOR NOTE]

-------------------------
SIDNEY B. DeBOER

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LIST OF ATTACHED SCHEDULES

Schedule A Excluded Personal Property

Schedule B Leased Personal Property

Schedule C Legal Matters, Debts or Obligations

Schedule D Financial Statement dated July 31, 1996

<PAGE>

EXHIBIT 10.13.2

LAND SALE CONTRACT

LITHIA PROPERTIES, L.L.C., (hereinafter referred to as "Buyer"), hereby
agrees to purchase from MILFORD G. ROBERTS, SR. and SANDRA L. ROBERTS, husband
and wife, (hereinafter referred to as "Seller"), and Seller hereby agrees to
sell to Buyer, that certain real property located in Eugene, Oregon, together
with all structures and improvements located thereof (the "Property"), more
particularly described in Exhibit "A" attached hereto and incorporated herein by
reference, on the following terms and conditions:

1. TITLE RESERVED. Title to the premises and improvements or fixtures
thereon is reserved in the Seller until Buyer fully performs the terms,
conditions and covenants of this Contract to be performed by Buyer.

2. PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Property shall be Two Million Three Hundred Thirty Thousand Fifty Dollars
($2,330,050), which shall be paid as follows:

(a) cash out upon Final Closing; [or cash to loan at Chrysler Credit
if buyer qualifies]

(b) Buyer hereby acknowledges that it is the intention of Seller to
complete an IRC Section 1031 exchange which will not delay the close of escrow
or cause additional expense to Purchaser. Seller's rights and obligations under
this agreement may be assigned to REAL ESTATE EXCHANGE, INC. for the purpose of
completing such an exchange. Buyer agrees

<PAGE>

to cooperate with Seller and REAL ESTATE EXCHANGE, INC. in a manner necessary to
complete the exchange.

3. THE CLOSING.

a. The closing (the "Initial Closing") of the transaction
contemplated by this Agreement shall take place contemporaneously with the Final
Closing of an Asset Purchase Agreement executed contemporaneously herewith.

b. The Final Closing (the "Final Closing") shall occur when buyer
has paid the entire Deferred Amount and performed all its other obligations
under this Contract.

4. PRORATIONS AND CLOSING COSTS. All real property taxes and assessments
and any other expenses with respect to the Property shall be prorated between
Seller and Buyer as of the Initial Closing to the extent of information then
available, and Seller and Buyer agree to cooperate and to use their best efforts
to complete any other such prorations no later than sixty (60) days after
Initial Closing Date. Such expenses for the period prior to the Initial Closing
will be for the account of Seller and such expenses for the period on and after
the Initial Closing Date will be for the account of Buyer. The parties shall
split equally all routine title company fees. Seller shall pay all title
insurance premiums for a Purchaser's ALTA title policy in favor of Buyer in the
amount of the Purchase Price. Buyer shall select the title company to handle
the closing.

5. TITLE. Within thirty (30) days after the execution of this Contract
by both parties, Seller shall furnish to Buyer a title insurance commitment (the
"Title Binder") showing marketable title to the Property in Seller and
committing to issue an ALTA Purchaser's Policy

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to Buyer, such Title Binder to specify all exceptions to title, including,
without limitation, easements, liens, encumbrances, restrictions, conditions or
covenants affecting the Property together with copies of all such exceptions.
In the event any exceptions appear on the Title Binder that are not acceptable
to Buyer (referred to as "Objections"), Buyer shall notify Seller in writing of
such Objections within ten (10) days of receipt of the Title Binder, copies of
exceptions and the survey required in Paragraph 9 hereof. In the event Seller
is unable or unwilling to cure such title Objections within ten (10) days after
receipt of Buyer's notification of such Objections, Buyer may either extend the
time during which Seller may cure such objections, terminate this contract by
written notice to Seller, or accept such title as Seller can deliver. In the
event of termination or Seller's unwillingness to cure any title Objections, the
parties shall have no further right or obligation hereunder. Buyer's obligation
to close shall be conditioned upon the issuance of the ALTA Form B Purchaser's
Title Policy in conformity with the Title Binder. Title exceptions to which the
Buyer does not object shall be referred to herein as Permitted Encumbrances.

6. TAXES. Buyer shall pay all further taxes and assessments against the
property and all public, municipal and statutory liens which may be lawfully
imposed upon the property. The taxes and assessments may be paid at the times
provided by the laws of the State of Oregon or pursuant to any available
installment method.

7. TAX STATEMENTS. Until a change is requested, all tax statements shall
be sent to the following address: Lithia Properties, L.L.C. 360 East Jackson,
Medford, OR 97501.

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8. INSURANCE. Buyer agrees to keep the buildings on the premises insured
against loss by fire or other casualty in an amount not less than the insurable
value thereof with loss payable to the parties hereto as their interests appear
at the time of loss with priority in payment to Seller. Buyer may apply the
proceeds of such insurance to repair or replacement in the event election to do
so is done within a period of three months after the loss; but otherwise any
amount received by Seller under such insurance in payment of a loss shall be
applied upon the unpaid balance owed by the Buyer to the Seller. The proceeds
of insurance applied to repair or replacement shall not reduce the amount owing
by Buyer under this Contract.

9. IMPROVEMENT, ALTERATIONS AND REPAIRS. Buyer agrees that all
improvements now located, or which shall hereafter be placed on the property,
shall remain a part of the real property and shall not be removed at any time
prior to the expiration of this Contract without the written consent of Seller.
Buyer shall not commit or suffer any waste of the property, or the improvements
thereon, or the alterations thereof; and shall maintain the property, and all
improvements thereon and all alterations thereof, in good condition and repair.
Buyer shall not otherwise make or cause to be made any substantial changes or
alterations to the property without first obtaining the written consent of
Seller.

10. UTILITIES. Buyer shall promptly pay all charges of public utilities
for the delivery of water, gas, electricity or other services to the premises.

11. DELIVERY OF POSSESSION. Buyer shall be entitled to possession of the
property as of the date of Final Closing under the Asset Purchase Agreement.

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12. COMPLIANCE WITH LAW. Buyer shall promptly comply with all laws,
ordinances, regulations, directions, rules and requirements of all governmental
authorities applicable to the use or occupancy of the property, and in this
connection shall promptly make all required repairs, alterations and additions.

13. DELIVERY OF DEED. Upon payment of the entire purchase price for the
property, as provided herein, and performance by Buyer of all other terms,
conditions and provisions hereof, Seller shall forthwith execute and deliver to
Buyer a general warranty deed conveying the property free and clear of all liens
and encumbrances, except as above provided and those placed upon the property or
suffered by Buyer subsequent to the date of this Contract.

14. DEFAULT. In the event that Buyer shall fail to perform any of the
terms of this Contract, time of payment and performance being of the essence,
Seller shall, subject to the requirements of notice as herein provided, have the
following rights:

a. To foreclose the Contract by strict foreclosure in equity.

b. To declare the full unpaid balance of the Contract immediately
due and payable.

c. To specifically enforce the terms of this Contract by suit in
equity.

15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER. Seller, with any
exceptions and subject to any disclosures which may be contained herein, in
exhibits hereto or in other writings referred to herein, represents, warrants
and covenants to Buyer that at the time of the Initial and Final Closings:

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a. Seller has the right, power, legal capacity and authority to
enter into and perform its obligations under this Contract;

b. This Contract and the documents to be delivered or executed at
the Initial and Final Closings have been, or will be, duly executed and
delivered and are, or will be, the lawful, valid and legally binding obligation
of Seller enforceable against Seller in accordance with their respective terms.
The execution, delivery and consummation of this Contract are not prohibited by
and do not violate or conflict with any provision of and will not result in a
default under, a termination of, an acceleration of, or breach of: (i) to the
best of Seller's knowledge any material contract, agreement or other instrument
to which Seller is a party; (ii) to the best of Seller's knowledge any
regulation, order, decree or judgment of any arbitration panel, court or
governmental agency, including any Environmental Protection Agency rules or
regulations pertaining to toxic waste or hazardous materials; and (iii) to the
best of Seller's knowledge any other restriction of any kind to which Seller is
subject.

c. Seller has, or will have at the Initial Closing, good and
marketable equitable title to the Property, free and clear of all deeds of trust
and mortgages; and free and clear of all liens, security agreements, financing
statements, conditional sale or title retention agreements, charges and
encumbrances of every kind, nature or description, except for those disclosed in
the Title Binder and Accepted by Buyer as Permitted Encumbrances.

d. At the Final Closing, Seller shall convey by general warranty
deed to Buyer good and marketable fee simple absolute title to the property
owned in fee, free of all liens and encumbrances except the Permitted
Encumbrances. Seller agrees that Seller will not

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suffer, permit or cause any additional debt or encumbrance to attach to the
property, and will not modify any provisions of any existing deed of trust or
mortgage without the prior consent of Buyer.

e. No material, adverse change shall have occurred in the condition
of the property, nor shall Buyer or Seller have made any material change in, or
performed or failed to perform any act which would render any of the
representations or warranties in this paragraph untrue or inaccurate or
incomplete between the execution hereof and the Final Closing.

f. Except as may be incidental to the operation of an automobile
dealership and associated vehicle repair and maintenance facilities:

i. Seller has not to the best of its knowledge, engaged in or
permitted any operations or activities upon, or any use or occupancy of the
property, or any portion thereof, for the purpose of or in any way involving the
handling, manufacture, treatment, storage, use, generation, release, discharge,
refining, dumping or disposal of any "Hazardous Materials" (whether legal or
illegal, accidental or intentional) on, under, in or about the property, or
transported any "Hazardous Materials" to, from or across the Property, nor, to
the best of Seller's knowledge, are any "Hazardous Materials" presently
constructed, deposited, stored, or otherwise located on, under, in or about the
Property, nor, to the best of Seller's knowledge, have any "Hazardous Materials"
migrated from the Property upon or beneath other properties, nor, to the best of
Seller's knowledge, have any "Hazardous Materials" migrated or threatened to
migrate from other properties upon, about or beneath the Property.

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For the purposes of the above paragraph "Hazardous Materials" is defined as
any chemical, element or molecule which can or will cause pollution or the
presence of which requires investigation or remediation under any federal, state
or local statute, regulation, ordinance, order, action, policy or common law or
can create a nuisance, hazard, toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or other dangerous condition on
the Property.

ii. There is not constructed, placed, deposited, stored,
disposed or located on the Property any asbestos in any form which has become or
threatens to become friable.

iii. To the extent there are underground improvements, including
but not limited to treatment, storage, gas, sump or water tanks, gas or oil
wells located on the Property, such underground improvements are and, at all
times while under Seller's control, to the best of Seller's knowledge, have been
in compliance with all federal, state or local laws or regulations applicable
thereto.

iv. To the best of Seller's knowledge, there is not constructed,
placed, deposited, stored, disposed of nor located on the Property any
polychlorinated biphenyls ("PCB's") nor transformers, capacitors, ballasts, or
other equipment which contains dielectric fluid containing PCB's.

v. There is not constructed, placed, deposited, stored,
disposed of nor located on the Property any insulating material containing urea
formaldehyde, to the best of Seller's knowledge.

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vi. The Property and its existing uses and activities thereon,
including but not limited to Seller's use, maintenance and operation of the
Property, and all of Seller's activities and conduct of business related
thereto, comply and have at all times complied in all material respects with all
environmental requirements ("Environmental Requirements") imposed by any
federal, state or local authority, to the best of Seller's knowledge.

vii. Seller has not received notice or other communication
concerning any alleged material violation of "environmental Requirements",
whether or not corrected to the satisfaction of the appropriate authority, nor
notice or other communication concerning alleged material liability for damages
or costs resulting from non-conformity with "Environmental Requirements" in
connection with the Property and there exists no writ, injunction, decree, order
or judgment outstanding, nor any lawsuit, claim, proceeding, citation,
directive, summons or investigation, pending or threatened, relating to the
ownership, use, maintenance or operation of the Property by any person, or from
alleged material violation of "Environmental Requirements", or from the
suspected presence of material quantities of "Hazardous Material" thereon, nor,
to the best of Seller's knowledge, does there exist any basis for such lawsuit,
claim, proceeding, citation, directive, summons or investigation being
instituted or filed.

viii. To the best of Seller's knowledge, Seller has all permits
and licenses required to be issued to it by any governmental authority on
account of any or all of its activities on the Property, and is in full
compliance with the terms and conditions of such permits and licenses. No
change in the facts or circumstances reported or assumed in the application for
or granting of such permits or licenses exists, and such permits and licenses
are

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in full force and effect. The Property is properly zoned for the business
activities presently conducted thereon.

16. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYER. Buyer, with
any exceptions and subject to any disclosures which may be contained herein, in
exhibits hereto or in other writings referred to herein, represents, warrants
and covenants to Seller that at the time of the Initial and Final Closings;

a. Buyer has the right, power, legal capacity and authority to enter
into and perform Buyer's obligations under this Contract.

b. This Contract and the documents to be delivered or executed at
the Initial Closing have been, or will be, duly executed and delivered and are,
or will be, the lawful, valid and legally binding obligation of Buyer,
enforceable against Buyer in accordance with their respective terms. The
execution, delivery and consummation of this Contract are not prohibited by and
do not violate or conflict with any provision of and will not result in a
default under, a termination of, an acceleration of or a breach of: (i) any
material contract, agreement or other instrument to which Buyer is a party; (ii)
to the best knowledge of Buyer, any regulation, order, decree or judgment of any
arbitration panel, court or governmental agency; and (iii) to the best knowledge
of Buyer, any other restriction of any kind to which Buyer is subject.

c. Buyer certifies that this Contract of purchase is accepted and
executed on the basis of Buyer's own examination and personal knowledge of the
premises and opinion of the value thereof; that no attempt has been made to
influence Buyer's judgment; that no representations as to the condition or
repair of said premises have been made by Seller or by any

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agent of Seller; that no agreement or promise to alter, repair or improve said
premises have been made by Seller or by any agent of Seller; and that Buyer
takes said property and the improvements thereon in the condition existing at
the time of this Contract.

17. SELLER'S DELIVERY AT INITIAL CLOSING. On or before the completion of
the Initial Closing, Seller shall deliver the following into escrow:

a. A duly executed and acknowledged General Warranty Deed and such
other documents as are necessary to grant and convey the Property, including all
water rights appurtenant thereto that are owned by Seller, to Buyer or Buyer's
designee, free and clear of all liens and encumbrances (except Permitted
Encumbrances) and those accepted by Buyer, and warranting the title to the
property against all persons whomsoever; and

b. Such other documents and funds as are required of Seller to close
the sale of the Property in accordance with this Contract; and

On the date Final Closing is completed, Buyer shall be issued, at Seller's
expense, an ALTA owner's policy of title insurance, with liability in the amount
of the Purchase Price, insuring that fee simple absolute title in the Property
is vested in Buyer, or its designee, subject only to the lien of real property
taxes not delinquent, and the Permitted Encumbrances, and those accepted by
Buyer; and

c. A written Phase 11 environmental audit performed by environmental
engineers has been furnished to Buyer and accepted by Buyer; and

d. Possession of all of the Property; and

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e. Confirmation that Lithia Motors, Inc., or its nominee or
assignee, has been approved by Chrysler Corporation to be a Dodge dealer at the
Property, and the parties have closed on the Asset Purchase Agreement.

18. BUYER'S DELIVERY AT INITIAL CLOSING. On or before the completion of
closing, Buyer shall deliver the following:

a. The Down Payment in cash or readily available funds.

b. Such other documents and funds as are required of Buyer to close
the purchase of the Property in accordance with this Contract.

19. SELLER'S DELIVERY AT FINAL CLOSING. From escrow Seller shall deliver
the deed described in paragraph 17.a. of this Contract.

20. RISK OF LOSS. Seller shall assume all risk of loss or damage to the
Property, including building and improvements located thereon, from the date
hereof until Final Closing. Seller agrees to maintain insurance for the
replacement value of the Property and improvements located thereon from the date
hereof until Final Closing. In the event there is loss or damage to the
Property between the date hereof and the date of Final Closing that is covered
by insurance, then Buyer shall proceed with this transaction upon the transfer
and assignment to Buyer of all Seller's right, title and interest in and to the
aforementioned insurance proceeds on the full value of the property and
improvements located thereon.

21. DEFAULT/FAILURE TO CLOSE. The following shall be the remedies of
Seller and Buyer if either party hereto defaults or fails to close the
transaction set forth herein:

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a. REMEDIES IN EVENT OF FAILURE TO CLOSE. In the event the Initial
Closing does not take place at the time and in the manner herein specified due
to a default of Seller hereunder, Buyer shall have the option in Buyer's
discretion to (i) elect to extend the time as may be necessary for Seller to
cure such default, or (ii) waive such default and proceed with closing, or (iii)
demand and receive specific performances by Seller of all of the obligations,
covenants and agreements by Seller to be performed hereunder. In the event the
Initial Closing does not take place at the time and in the manner specified
herein due to a default of Buyer hereunder, Seller shall have all remedies
against Buyer available to Seller at law, including the remedy of specific
performance.

b. BUYER'S REMEDIES IN EVENT SELLER FAILS TO REMOVE LIENS OR
ENCUMBRANCES AGAINST PROPERTY. In the event there are any liens, notices of
interest, options, judgments, or encumbrances against the Property at the time
of Final Closing which have not been accepted by Buyer, or in the event any
liens, notices of interest, options, judgments or encumbrances shall hereafter
accrue against the Property during the term of this Agreement by acts or neglect
of Seller, and without the prior written consent of Buyer, then Buyer may, at
Buyer's option, in addition to all other remedies Buyer may have by statute or
under the Agreement, demand and receive specific performance of Seller's
obligations to clear such liens, options, notices, judgments, or encumbrances
affecting the Property.

22. CURE OF ENCUMBRANCES AND LIENS. If Seller shall be unable to deliver
at the Final Closing a General Warranty Deed, and other documents necessary to
convey the Property to Buyer free and clear of all liens and encumbrances not
provided for herein or

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accepted by Buyer, and if Buyer shall not exercise the privilege (which Buyer
shall have) of waiving the liens and encumbrances which shall be the basis of
such inability, and accepting the title in its then condition without diminution
of the Purchase Price and without claim or demand against Seller, then each and
all of the obligations of the parties under this Contract shall thereunder
cease.

23. ASSIGNMENT. Neither Seller nor Buyer may assign this Contract without
the prior written consent of the other, except that Buyer shall have the right
to assign this Contract and all Buyer's rights hereunder to any person or entity
controlled by Buyer, subject to the terms and conditions of this Contract,
provided that the assignee assumes all obligations of Buyer and agrees to
execute all documents and perform all obligations imposed on Buyer as if the
assignee was the original buyer under this Contract. An assignment will not
relieve Buyer of Buyer's obligations hereunder. This Contract shall be binding
upon and inure to the benefit of the successors and assigns of Buyer and Seller.

24. ENTIRE AGREEMENT. This Contract and the exhibits attached hereto
constitute the entire agreement between the parties pertaining to the purchase
and sale of the subject property and supersedes any prior agreements. No
supplement, modification or amendment of this Contract shall be binding unless
executed in writing by the parties. No waiver of the provisions of this
Contract shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver. No
waiver shall be binding unless executed in writing by the party granting the
waiver.

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25. RECORDING. This Contract shall not be recorded or filed in any public
records without the mutual consent of all parties. Seller shall execute and
acknowledge a memorandum of this Contract in a form suitable for recording, and
Buyer may record the memorandum.

26. PARTIES IN INTEREST. Nothing in this Contract, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Contract on any persons other than the parties to it and their respective
successors and assigns, or is anything in this Contract intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Contract, nor shall any provision give any other person any right of subrogation
or action over against any party to this Contract.

27. NOTICES. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed given upon personal service or deposit
in the United States first class mail, postage prepaid, and addressed as
follows:

To Seller: Milford G. Roberts, Sr. and Sandra L. Roberts
10705 Island Avenue
Island City, OR 97850

To Buyer: Lithia Properties, L.L.C.
360 East Jackson
Medford, OR 97501

28. ARBITRATION AND ATTORNEY FEES.

a. In the event of a dispute over the terms, conditions, performance
or interpretation of this Contract, the parties agree to submit to mandatory
binding arbitration for resolution of their disputes.

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b. Notice of such dispute must be timely given by serving upon the
other party written notice of the complaint, a statement adequately describing
the complaint, and the specific paragraphs or subparagraphs of this Contract
allegedly violated and the remedies sought. The arbitration panel shall consist
of three arbitrators, one nominated by Buyer, one nominated by Seller, with the
third arbitrator to be selected by the other two. The arbitrators shall adopt
their own rules for the conduct of the arbitration and shall be authorized to
make an award of specific performance. The arbitration shall take place in
Eugene, Oregon in accordance with Oregon Revised Statutes Section 36.300 ET SEQ.

c. If any claim, arbitration or legal action or other proceeding is
brought for the interpretation or enforcement of this Contract, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Contract, the successful or prevailing party shall be
entitled to recover actual attorney fees, expert witness fees and other costs
and expenses incurred in the enforcement of this Contract whether by filing suit
or not, but not the costs of their appointed arbitrator, in addition to any
other relief to which that party may be entitled.

d. Nothing herein set forth shall prevent the parties from settling
any suit brought for the enforcement of this Contract, or because of an alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Contract. The successful or prevailing party shall be
entitled to recover actual attorney fees, expert witness fees and other costs
and expenses incurred in the enforcement of this Contract whether by filing
suit,

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<PAGE>

commencing an arbitration proceeding, or otherwise, in addition to any other
relief to which that party may be entitled.

29. TIME. Time, prompt and punctual payment of any and all sums payable
hereunder,and the exact performance and observation of each and all of the
agreements and provisions herein contained on the part of Buyer to be observed
and performed, are in each and every case of the essence of this Contract.
Failure of Seller at any time to require performance by Buyer of any of the
provisions hereof, or the acceptance of any payment after the same is due, or
the failure in any one instance to pursue any of the remedies of Seller upon the
default of Buyer in the performance of Buyer's obligations in this agreement
shall not constitute a waiver of this non-waiver clause or the other provisions
of this Contract and shall not prevent Seller from exercising any of the
remedies herein provided on account of any past or future breach, either in the
making of the payments herein provided or in the performance of the various
obligations hereof by Buyer.

30. FURTHER ASSURANCES. Seller and Buyer shall execute, acknowledge and
deliver such instruments, do such things and perform such acts as may be
reasonably necessary to complete the purchase and sale of the Property in
accordance with this Agreement.

31. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Oregon.

32. SEVERABILITY. If any section, sentence, clause or phrase of this
Agreement shall be held to be illegal or unenforceable, such determination shall
not affect the remaining portions hereof.

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33. COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

34. ZONING STATEMENT. THE PROPERTY DESCRIBED IN THIS INSTRUMENT MAY NOT
BE WITHIN A FIRE PROTECTION DISTRICT PROTECTING STRUCTURES. THE PROPERTY IS
SUBJECT TO LAND USE LAWS AND REGULATIONS, WHICH IN FARM OR FOREST ZONES, MAY NOT
AUTHORIZE CONSTRUCTION OR SITING OF A RESIDENCE. BEFORE SIGNING OR ACCEPTING
THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD CHECK
WITH THE APPROVED USES AND EXISTENCE OF FIRE PROTECTION FOR STRUCTURES.

35. CAVEAT. THIS INSTRUMENT WILL NOT ALLOW USE OF THE PROPERTY DESCRIBED
IN THIS INSTRUMENT IN VIOLATION OF APPLICABLE LAND USE LAWS AND REGULATIONS.
BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO
THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING
DEPARTMENT TO VERIFY USES AND TO DETERMINE ANY LIMITS ON LAWSUITS AGAINST
FARMING OR FOREST PRACTICES AS DEFINED IN ORS 30.930.

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<PAGE>

IN WITNESS WHEREOF, the foregoing Real Estate Purchase Agreement was
executed this [2nd] day of August, 1996.

SELLER: BUYER:

LITHIA PROPERTIES, L.L.C.

[s] [s]
By
- ------------------------------ -----------------------------------
MILFORD G. ROBERTS, SR. SIDNEY B. DeBOER

[s]
- ------------------------------
SANDRA L. ROBERTS

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<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
Lithia Motors, Inc. and Affiliated Companies

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" and "Selected Combined Financial Data" in the
prospectus.

/s/ KPMG Peat Marwick LLP

Portland, Oregon
October 11, 1996

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<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
Roberts Dodge, Inc. and Affiliated Company

We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.

/s/ KPMG Peat Marwick LLP

Portland, Oregon
October 11, 1996

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EXHIBIT 23.3

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated September 17, 1996 on our audits of the financial
statements of Sam Linder, Inc. in the Lithia Motors, Inc. Registration Statement
(Form S-1) dated October , 1996 for the registration of Common Stock.

Moss Adams LLP

Seattle, Washington
October , 1996

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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
FINANCIAL STATEMENTS OF LITHIA MOTORS, INC. AND AFFILIATED COMPANIES AT
DECEMBER 31, 1995, [AND FOR THE YEAR THEN ENDED] AND THE UNAUDITED COMBINED
FINANCIAL STATEMENTS OF LITHIA MOTORS, INC. AND AFFILIATED COMPANIES AT JUNE
30, 1996, AND FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 9,350 3,819
<SECURITIES> 0 0
<RECEIVABLES> 1,884 2,472
<ALLOWANCES> 0 0
<INVENTORY> 17,700 16,480
<CURRENT-ASSETS> 32,796 27,383
<PP&E> 5,074 3,170
<DEPRECIATION> 1,840 1,892
<TOTAL-ASSETS> 39,222 32,116
<CURRENT-LIABILITIES> 25,035 18,620
<BONDS> 10,743 8,262
0 0
0 0
<COMMON> 801 801
<OTHER-SE> 50 1,105
<TOTAL-LIABILITY-AND-EQUITY> 39,222 32,116
<SALES> 114,196 69,125
<TOTAL-REVENUES> 115,531 69,600
<CGS> 93,253 57,669
<TOTAL-COSTS> 109,988 67,048
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1,390) (649)
<INCOME-PRETAX> 4,153 1,903
<INCOME-TAX> 0<F1> 0
<INCOME-CONTINUING> 3,375 1,586
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,375 1,586
<EPS-PRIMARY> 0<F2> 0<F2>
<EPS-DILUTED> 0<F2> 0<F2>
<FN>
<F1>COMPANY IS A SUBCHAPTER S CORPORATION
<F2>NOT MEANINGFUL. COMPANY'S CAPITAL STRUCTURE PRECLUDES MEANINGFUL PER SHARE
CALCULATIONS
</FN>

</TABLE>