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                                 Exhibit 10.18.1

                            SUPPLEMENTAL AGREEMENT TO
                           GENERAL MOTORS CORPORATION
                       DEALER SALES AND SERVICE AGREEMENT

This Supplemental Agreement to General Motors Corporation Dealer Sales and
Service Agreement is entered into between Lithia Motors, Inc. and General Motors
Corporation.

WHEREAS, Lithia Motors, Inc. is interested in acquiring ownership of one or more
GM Dealerships in selected areas of the United States;

WHEREAS, the parties desire to enter into a positive and productive business
relationship which will accomplish our mutual goals and promote sales of GM
products consistent with GM's brand strategy for its products and focus on total
customer enthusiasm;

\VHEREAS, the organization and ownership structure of Lithia Motors, Inc. and
its retail operating systems are such that the terms of the Dealer Agreement are
not wholly adequate to address the legitimate business needs and concerns of
Lithia Motors, Inc. and GM;

NOW, THEREFORE. the parties agree as follows:

1. Purpose of Agreement

      1.1   Purpose of Agreement

            The parties acknowledge that Lithia Motors, Inc. desires to purchase
            the stock or assets of one or more current GM Dealerships and to be
            appointed as the replacement Dealer by the appropriate Divisions.
            The parties further acknowledge that the ownership arrangements of
            Lithia Motors, Inc. and the operating processes arid procedures of
            Lithia Motors, Inc. require that the parties supplement the standard
            terms and provisions of the Dealer .Agreement to assure that the
            legitimate business needs of GM in regard to the representation of
            its products are satisfied The parties have agreed to enter into
            this Agreement for that purpose. This agreement shall not apply in
            any respect to Saturn Dealers or dealerships.

      1.2   Definitions

            For purposes of this Agreement, the following terms shall have the
            meaning indicated:

            1.2.1 "Agreement" means this Supplemental Agreement to General
                  Motors Corporation Dealer Sales and Service Agreement.

            1.2.2 "Lithia Motors, Inc." or "Lithia" means Lithia Motors, Inc.
                  and its subsidiary Dealer Companies.

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            1.2.3 "Dealer Agreement" means a General Motors Corporation Dealer
                  Sales and Service Agreement, a copy of which is attached
                  hereto as Exhibit A and is incorporated herein by reference.
                  It also includes any superseding Dealer Agreements.

            1.2.4 "Dealer Company" or "Dealer" means the business entity owned
                  or controlled by Lithia Motors, Inc. that is a parry to a
                  Dealer Agreement and is defined as the "Dealer" for purposes
                  of the Dealer Agreement.

            1.2.5 "Division" or "Divisions" means one or more of the marketing
                  divisions of GM; Chevrolet, Pontiac-GMC, Oldsmobile, Buick,
                  Cadillac.

            1.2.6 "GM" means General Motors Corporation.

            1.2.7 "GM Dealerships" means a specific, physical location from
                  which Dealership Operations are conducted by a Dealer pursuant
                  to the terms of one or more Dealer Agreements. It does not
                  include Saturn Dealerships.

            1.2.8 "Voting stock" means any stock of Lithia Motors, Inc. that has
                  voting rights as well as any debt or equity security of Lithia
                  Motors, Inc. that is convertible into stock of Lithia Motors,
                  Inc. that has voting rights.

2. Lithia Motors, Inc. Ownership

      2.1   Ownership Structure

            Each Dealer will be a separate company, distinct from Lithia Motors,
            Inc. in the form of either a corporation. partnership or other
            business enterprise form acceptable to GM, which is capitalized in
            accordance with the "GM Owned Working Capital Agreement". Each of
            the Dealer Companies will be owned by Lithia Motors, Inc. or may
            have minority interests held by employees of that Dealer Company
            subject to GM approval.

      2.2   Lithia Motors, Inc. hereby warrants that the representations and
            assurances contained in this Agreement are within its authority to
            make and do not contravene any directive, policy or procedure of
            Lithia Motors. Inc.

      2.3   Change in Ownership. Any material change in ownership of any Dealer
            company and any material change in Lithia Motors, Inc. or any event
            described in section 2.4 2(b) shall be considered a change in
            ownership of the Dealer Company under the terms of the dealer
            agreements and all applicable terms of the Dealer Agreement as
            supplemented by this Agreement will apply to any such change.

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      2.4   Acquisition of Ownership Interest by Third Party. Given the ultimate
            control Lithia Motors, Inc. will have over the Dealer Companies, and
            the Divisions' strong interest in assuring that those who own and
            control their Dealers have interests consistent with those of the
            Divisions, Lithia Motors, Inc. agrees to the following:

            2.4.1 Lithia Motors, Inc. will deliver to GM copies of all Schedules
                  13D and 13G, and all amendments thereto and termination's
                  thereof, received by Lithia Motors, Inc. within five (5) days
                  of receipt of such Schedules. If Lithia Motors, Inc. is aware
                  of any ownership of its stock that should have been reported
                  to it on Schedule 13D but that is not reported in a timely
                  manner, it will promptly give GM written notice of such
                  ownership, with any relevant information about the owner that
                  Lithia Motors, Inc. possesses.

            2.4.2 If Lithia Motors, Inc. through its Board of Directors or
                  through shareholder action proposes or if any person. entity
                  or group sends Lithia Motors, Inc. a schedule 13D, or any
                  amendment thereto, disclosing (a) a binding agreement to
                  acquire or the acquisition of aggregate ownership of more than
                  twenty percent (20%) of the voting stock of Lithia Motors,
                  Inc. and (b) Lithia Motors, Inc. through its Board of
                  Directors or through shareholder action proposes or if any
                  plans or proposals which relate to or would result in the
                  following: (i) the acquisition by any person of more than 20%
                  of the voting stock of Lithia Motors, Inc. other than for the
                  purposes of ordinary passive investment; (ii) an extraordinary
                  corporate transaction, such as a material merger,
                  reorganization or liquidation, involving Lithia Motors, Inc.
                  or a sale or transfer of a material amount of assets of Lithia
                  Motors, Inc. and its subsidiaries; or (iii) any change which
                  together with any changes made to the Board of Directors
                  within the preceding year, would result in a change in control
                  of the then current board of directors of Lithia Motors, Inc.;
                  or (iv) in the case of an entity that produces or controls or
                  is controlled by or is under common control with an entity
                  that either produces motor vehicles or is a motor vehicle
                  franchisor, the acquisition by any person entity or group of
                  more than 20% of the voting stock of Lithia Motors, Inc. and
                  any proposal by any such person, entity or group through the
                  Lithia Motors, Inc. Board of Directors or shareholders action
                  to change the board of directors of Lithia Motors, Inc., then
                  if such actions in GM's business judgment could have a
                  material or adverse effect on its image or reputation in the
                  GM dealerships or be materially incompatible with GM's
                  interests (and upon notice of GM's reasons for such judgment),
                  Lithia Motors, Inc. agree that it will take one of the
                  remedial actions set forth in Section 2.4.3 below within
                  ninety (90) days of receiving such Schedule 13D or such

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                  amendment.

            2.4.3 If Lithia Motors, Inc. is obligated under Section 2.4.2 above
                  to take remedial action, it will (a) transfer to GM or its
                  designee, and GM or its designee will acquire the assets,
                  properties or business associated with any Dealer Company at
                  fair market value as determined in accordance with Section 8
                  below, or (b) provide evidence to the Divisions (reasonably
                  acceptable to GM) that such person entity or group no longer
                  has such threshold level of ownership interest in Lithia
                  Motors, Inc. or that the actions described in Section 2.4.2(b)
                  will not occur.

            2.4.4 Should Lithia Motors, Inc. or Dealer Company enter into an
                  agreement to transfer the assets of a Dealer Company to a
                  third party, the right of first refusal described in Article
                  12.3 of the Dealer Agreement shall apply to any such transfer.

            2.4.5 Lithia Motors, Inc. will describe such provisions of this
                  Section in any prospectus it delivers in connection with the
                  offer or sale of its stock or any other securities filing as
                  may be required by any applicable laws or regulations.

      2.5   Officers and Key Management. Lithia Motors, Inc. agrees to provide
            to GM a list of the key management of Lithia Motors, Inc.
            responsibilities in regard to the control and management of Lithia
            Motors, Inc. and each Dealer Company. Each Dealer Company shall
            agree to propose to GM any material changes in the key management of
            the Dealer Company or their responsibilities. Such proposal should
            be provided to GM in writing prior to such change to the extent
            practicable and shall include sufficient information to permit GM to
            evaluate the proposed change consistent with normal policies and
            procedures Lithia Motors, Inc. will notify GM in writing of any
            material change in the key management of Lithia Motors, Inc. or
            their responsibilities. For purposes of this Agreement, the term
            "key management" shall mean CEO, President and Vice Presidents with
            respect to each dealer company and executive officers with respect
            to Lithia Motors, Inc.

3. Lithia Motors, Inc. Operating Policies and Procedures

      3.1   GM Brand Strategy. Lithia Motors, Inc. acknowledges that GM has a
            Brand Strategy and has invested significant capital in the
            development of corporate, divisional and brand image. Relevant
            information regarding this strategy has been shared with Lithia
            Motors, Inc. . Lithia Motors, Inc. agrees to accommodate GM's Brand
            Strategy in its Lithia Motors, Inc. GM dealership Operations. Lithia
            Motors, Inc. will incorporate in each of its GM Dealerships the
            following as a minimum in support of the GM Brand Strategy:

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            3.1.1 GM has developed retail and service operating standards for
                  each of its Divisions. At each of its GM Dealerships. Lithia
                  Motors, Inc. will implement and use those divisional
                  standards, or higher standards which it may develop, subject
                  to GM's approval.

            3.1.2 Dealer marketing associations for each of the Divisions are an
                  integral part of GM's Brand Strategy. Lithia Motors, Inc.
                  agrees that its advertising and marketing practices will
                  support and enhance GM and Divisional brand and marketing
                  practices and goals. Lithia Motors, Inc. agrees and each
                  Dealer Company shall agree that the Dealer Company will
                  participate in the appropriate dealer marketing association or
                  group as provided in Section 11.

            3.1.3 Lithia Motors, Inc. will not, and will not permit any Dealer
                  Company to jointly advertise or market any of their non-GM
                  automotive operations in conjunction with its approved GM
                  Dealership Operations (it being understood that the
                  advertising example attached hereto as Exhibit C will be
                  permissible).

4. Acquisition of GM Dealerships

      4.1   In consideration for the representations, covenants and commitments
            contained herein, and assuming compliance with the normal
            requirements of General Motors regarding transfer of assets and
            appointment as a dealer. General Motors will permit the acquisition
            of up to five (5) General Motors Dealerships during the period
            commencing from the date of this Agreement and ending 24 months
            thereafter. Currently Lithia Motors is not in compliance with
            General Motors standards for the Pontiac dealership in Medford,
            Oregon for Customer Satisfaction and Sales performance. Lithia
            represents intent to bring the performance into compliance, but
            believes it will be able to do so if the location is in compliance
            with GM's channel plan. Accordingly, General Motors will approve.
            upon receipt of an acceptable proposal Lithia's acquisition of the
            Buick/Cadillac dealership or the Oldsmobile/GMC dealership or the
            sale of Pontiac assets to either of those dealers in Medford in
            order that the plan of a Pontiac-Buick-GMC dealership and a
            Chevrolet Oldsmobile/Cadillac dealership may be accomplished. If
            Lithia does not accomplish this purchase or sale within 12 months of
            the date of this agreement and the Pontiac Customer Satisfaction and
            Sales performance does not meet the performance standards identified
            in sections 4.2 and 4.3 of this agreement, Lithia will voluntarily
            terminate its Pontiac dealer agreement in exchange for payment
            provided in section 5.2 of this agreement. In the first 12 months
            following the date of this agreement, GM will allow Lithia to
            acquire two additional GM dealers, subject to receipt of acceptable
            proposals. while working on the purchase/sale/correction of the
            Medford Pontiac

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            dealership deficiencies. In the second 12 months, GM will allow,
            subject to receipt of acceptable proposals the acquisition of two
            additional GM dealerships if Lithia is meeting the performance
            standards for its then owned GM dealerships. Total Lithia owned GM
            dealerships will not exceed 5 at the conclusion of the 24 months
            following the date of this agreement.

      4.2   Following the 24 month period, each Dealer company in which Lithia
            Motors, Inc. has an investment must be in compliance with the terms
            of the General Motors Policies for Changes in GM Dealership
            Ownership Management bulletin of September 19, 1994 (a copy of which
            has already been provided) including any revisions or replacements
            of that bulletin, in order to be approved for additional
            acquisitions of General Motors Dealerships.

      4.3   Multiple Dealer Policy. Lithia Motors, Inc. recognizes that
            customers benefit from competition in the marketplace and agree that
            any proposal to acquire additional GM dealerships shall be subject
            to the terms of General Motors Multiple Dealer Investor/Multiple
            Dealer Operator policies as set forth in NAO Bulletin 94-1l,
            including any revisions of replacements to the bulletin.

      4.4   GM and Lithia Motors, Inc. agree that Lithia Motors, Inc. will not
            attempt to acquire more than 50% of the GM dealerships by franchise
            line in a GM defined Multiple Dealer Area. GM will provide upon
            Lithia Motors, Inc. request the number of GM dealerships, by line,
            in the Multiple Dealer Area and the maximum number of dealerships
            Lithia Motors, Inc. may acquire in that Multiple Dealer Area.

      4.5   Evaluation of Operations. GM will conduct semi annual evaluation
            meetings with the management of Lithia Motors, Inc. and the Dealer
            Operators of each GM Dealer Company to review the performance of
            each GM Dealer Company. In the event GM advises Lithia Motors, Inc.
            for any two consecutive evaluation periods that the performance of a
            GM dealership is not meeting the sales volume. Customer Satisfaction
            and Branding requirements of GM, in addition to other available
            remedies. GM will have the right to demand a change in the
            management of the dealer company not meeting those requirements.
            Lithia Motors, Inc. will make the management changes at any
            deficient dealership within not more than six (6) months after
            notice of the deficiencies.

5. Dealership Operations

      5.1   Dealership Operations. Each Dealer Company shall be a distinct and
            complete business entity which shall include complete Dealership
            Operations as that term is defined in the Dealer Agreement
            including, but -not limited to sales, service, parts and used car
            operations. This requirement will not preclude certain centralized
            functions provided that they are consistent with GM's Channel

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            Strategy, and that such centralized functions are reviewed with and
            approved by GM, which approval shall not be unreasonably withheld.
            However, no sales, service or parts operations may be combined with
            any non-GM representation and all GM Dealerships will have
            reasonable used car operations.

      5.2   GM Channel Strategy. Lithia Motors, Inc. further stipulates and
            agrees that if Lithia Motors, Inc., . GM, and the public are to
            realize the potential benefits that Lithia Motors, Inc. represents
            to be the result of the acquisitions proposed by Lithia Motors,
            Inc., then an integral component of the participation by Lithia
            Motors, Inc. and Dealer Company is their agreement that all GM
            Dealerships shall fully comply with General Motors Channel Strategy
            including proper divisional representation alignment and facilities
            that are properly located and that are in compliance with
            appropriate divisional image programs. The Channel Strategy is set
            forth in a memorandum dated October 5, 1995, from Ronald L Zarrella
            to all GM dealers, and in the written statement of the strategy as
            it relates to each Dealer Company, copies of which will be provided
            to Lithia Motors, Inc. and each Dealer Company. Lithia Motors, Inc.
            agrees and each Dealer Company shall agree that within 12 months of
            the acquisition of any GM Dealership that is not consistent with the
            Channel Strategy, Lithia Motors, Inc. and Dealer Company will have
            complied with the Channel Strategy for that location.
            Notwithstanding the above, GM will consider reasonable requests from
            Lithia Motors, Inc. for an extension if Lithia Motors, Inc. is
            making reasonable progress and is unable to comply with the Channel
            Strategy for reasons beyond Lithia Motors, Inc. control. If Lithia
            Motors, Inc. and Dealer Company fail to do so within the time
            provided, then Lithia Motors, Inc. will cause Dealer Company and
            Dealer Company will agree to terminate the representation of such
            products as reasonably required by GM to comply with the Channel
            Strategy If such termination is required. GM will compensate Lithia
            Motors, Inc. the of sum $1,000 for each unit of GM retail planning
            guide for each Dealer Agreement so terminated.

      5.3   Exclusive Representation. Lithia Motors, Inc. agrees and each Dealer
            Company shall agree that all GM Dealerships shall be used solely for
            the exclusive representation of GM products and related services and
            in no event shall be used for the display, sale or promotion or
            warranty service of any new vehicle other than those of General
            Motors Corporation (provided that if Lithia Motors, Inc. acquires a
            GM Dealership having a sales and service agreement with a
            competitive automobile manufacturer or importer and related sales
            and service operations at the same facility, at GM's request Lithia
            Motors, Inc. shall cause the competitive sales and service
            operations to be relocated within one year of acquisition). Lithia
            Motors, Inc. agrees and each Dealer Company shall agree that should
            a Dealer Company cease to provide exclusive representation of GM
            products, based on the proper franchise alignment as determined by
            the Channel Strategy, then that shall constitute good cause in and
            of itself for the termination

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            of the Dealer Agreement then in effect with such Dealer Company and
            Lithia Motors, Inc. shall cause Dealer Company to and Dealer Company
            shall voluntarily terminate the Dealer Agreements then in effect.

      5.4   Image Compliance. Any Dealer Company acquired by Lithia Motors, Inc.
            shall be brought into compliance with applicable Divisional facility
            image requirements. Any new construction or significant interior or
            exterior remodeling of any GM Dealerships shall incorporate the
            appropriate divisional image program and shall be subject to
            approval by the appropriate Division before such construction is
            undertaken.

      5.5   Corporate Name and Tradenames. Both the corporate name and any
            tradename or d/b/a of each Dealer Company must include the names of
            those GM Divisions represented by such Dealer Company.

      5.6   Dealer Company Advertising. Lithia Motors, Inc. agrees that the
            advertising of each of the Dealer companies will maintain and
            support the GM brand strategy Newspaper, radio, television and any
            other form of advertising will not combine GM brands or non GM
            brands, unless GM has approved combined operations and will clearly
            identify each GM dealership as a separate entity at its approved
            location (it being understood that the advertising example attached
            hereto as Exhibit C will be permissible).

6. Dealer Operator

      6.1   Appointment of Dealer Operator. For purposes of the Dealer
            Agreement, including Paragraph Third and Article 2 and for each GM
            Dealership, Lithia Motors, Inc. shall appoint an individual who
            shall act as Executive Manager of that GM Dealership only and who
            shall be considered as Dealer Operator for purposes of the Dealer
            Agreement. The Divisions will rely upon the personal qualifications
            and management skills of Dealer Operator. Lithia Motors, Inc. hereby
            represents that Dealer Operator will have complete managerial
            authority to make all decisions, and enter into any and all
            necessary business commitments required in the normal course of
            conducting Dealership Operations on behalf of Dealer Company and may
            take all actions normally required of a Dealer Operator pursuant to
            Paragraph Third and Article 2 of the Dealer Agreement. Lithia
            Motors, Inc. will not revoke, modify or amend such authority without
            the prior written approval of the applicable Division (except as
            provided in Section 6.3 below). Because of the unique structure of
            Lithia Motors, Inc., the 15% ownership requirement contained in
            Article 2 shall not apply to Dealer Operator.

      6.2   Removal of Dealer Operator. Except as provided in Section 6.3 below,
            the removal or withdrawal of Dealer Operator without Divisions'
            prior written consent shall constitute grounds for termination of
            the Dealer Agreements

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            However, the Divisions recognize that employment responsibilities of
            the Dealer Operator with Dealer Company may change, making it
            impractical for the Dealer Operator to continue to fulfill his/her
            responsibilities as Dealer Operator. In that case, or in the event
            Dealer Operator leaves the employ of the Dealer Company, Dealer
            Company shall have the opportunity to propose a replacement Dealer
            Operator. The Divisions will not unreasonably withhold approval of
            any such proposal, provided the proposed replacement has the skills
            and qualifications to act as Dealer Operator pursuant to the
            standard policies and procedures of GM.

      6.3   Replacement Dealer Operator Dealer Company shall make every effort
            to obtain the consent of the Divisions to a proposed replacement
            Dealer Operator prior to the removal or withdrawal of the approved
            Dealer Operator. If that is not practical, Dealer Company shall
            notify Division in writing within 10 days following the removal or
            withdrawal of the approved Dealer Operator. Within 30 days of that
            removal or withdrawal, Dealer Company will submit to Division a plan
            and appropriate applications to replace Dealer Operator with a
            qualified replacement acceptable to Division. The replacement Dealer
            Operator must assume his/her responsibilities no later than 90 days
            following the withdrawal of the approved Dealer Operator. Lithia
            Motors, Inc. shall be permitted to appoint a temporary general
            manager to manage the GM Dealership during the interim period while
            the Dealer Operator is being replaced.

7.    Dispute Resolution. Lithia Motors, Inc. agrees not to join any legal or
      administrative action a seller of a General Motors dealership may take
      against General Motors in the event General Motors declines to approve a
      proposed transfer to Lithia Motors, Inc. . Lithia Motors, Inc. and GM
      stipulate and agree and each Dealer Company shall stipulate and agree that
      the dispute resolution process attached hereto as Exhibit D, or any
      replacement process offered to all GM Dealers, shall be the exclusive
      source of resolution of any dispute regarding the Dealer Agreements and
      this Agreement including, but not limited to, involuntary termination of
      the Dealer Agreements and/or approval of Lithia Motors, Inc. for
      additional investment in or ownership of GM Dealerships. The parties
      further agree that the Chevrolet dealer dispute resolution process will be
      used for the resolution of the matter. regardless of the GM Division
      involved.

8.    Right to Purchase or Lease. In the event of any termination of the Dealer
      Agreement or any transaction or event that would, in effect, discontinue
      Dealership Operations from that GM Dealership, or a transfer of assets,
      properties or business to GM or a GM designee pursuant to Section 2.4.3,
      Lithia Motors, Inc. agrees and each Dealer Company shall agree to provide
      GM with: (a) the right to purchase the dealership assets, properties or
      business for fair market value based on automotive use, and (b) an
      assignment of any existing lease or lease options that are available.
      subject in each case to any legal or contractual obligations existing at
      such time through the process attached hereto as Exhibit B, that Lithia
      Motors, Inc. shall assure GM or its delegate of quiet possession of the
      dealership facilities for a period of not less than five years if the
      right to have any existing lease or lease option assigned as set forth
      above is exercised with respect to such

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      facilities within ten years of the execution of this Agreement. If,
      however, Lithia Motors, Inc. enters into a financing arrangement with
      respect to GM's option as described in this Section 8 would be
      subordinated to the interests of any lender in connection with any default
      by Lithia Motors, Inc. under the terms of the financing arrangement other
      than a default due to the discontinuance of dealership operations from
      such facilities. The Parties agree that GM may exercise its rights under
      this Section 8 with respect to some or all of the dealership facilities to
      which it may apply at any given time, and that failure to exercise such
      rights as to one facility shall not affect GM's rights as to other
      facilities.

9.    Electronic Funds Transfer. Lithia Motors, Inc. agrees that each Dealer
      Company will use Electronic Funds Transfer (EFT) for settlement of the
      dealership obligations to GM and that GM will have a right of offset for
      any unpaid debit balances for any Dealer Company at the time the
      indebtedness is due and will have the right to collect those amounts from
      the account of the Dealer Company that owes the debt or the account of any
      other Dealer Company.

10.   Compliance with Policies and Procedures. Each Dealer Company must comply
      with all terms of the Dealer Agreement and all GM policies applicable to
      Dealer company's Dealership Operations. Those procedures include policies
      precluding joint advertising and prohibiting sales of GM auction vehicles
      from other than the purchasing GM Dealership. Except as specifically
      provided herein, all Dealership Operations shall be conducted consistent
      with requirements for other GM dealerships.

11.   Membership in Dealer Marketing Group. Each Dealer Company will join its
      respective dealer marketing group and area marketing group including
      membership financial support and will participate as a regular member in
      meetings and marketing activities.

12.   Capital Standards. Lithia Motors, Inc. agrees and Dealer Company shall
      agree that Dealer Company shall maintain, at all times. sufficient working
      capital to meet or exceed the minimum net working capital standards for
      the Dealer Company as determined from time to time by GM consistent with
      its normal practices and procedures Lithia Motors, Inc. and Dealer Company
      shall provide such documentation as reasonably requested by GM to assure
      compliance with that requirement. Lithia Motors, Inc. shall submit an
      annual consolidated balance sheet for the combined GM Dealership
      operations of Lithia Motors, Inc.

13.   Discontinuance of Representation. In the event that Lithia Motors, Inc.
      determines. voluntarily or otherwise to discontinue representation in any
      given Multiple Dealer Area, Lithia Motors, Inc. shall grant the right to
      GM to acquire at fair market value as determined in accordance with
      Exhibit B the right to representation of the Divisions previously
      represented by any Dealer Company in that Multiple Dealer Area. GM shall
      also have the option to acquire the fixed assets and/or the Dealership
      Facilities in that Multiple Dealer Area in accordance with section 8. The
      terms and conditions for the exercise of such rights shall be set forth in
      appropriate and customary documents. Lithia

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      Motors, Inc. has received GM's standard option agreements modified for
      this Agreement.

14.   Supplement to Dealer Agreement. The parties agree that each Dealer Company
      shall be required to execute an addendum to the Dealer Agreements binding
      the Dealer Company to the applicable portions of this Agreement. For each
      Dealer Company, this Agreement shall supplement the terms of the Dealer
      Agreements in accordance with Article 17.11 of the Dealer Agreements.

15.   Further Modifications. In the event that the policies of GM with regard to
      Dealerships owned or controlled in whole or in part by' public
      shareholders should be modified, the parties agree to review such
      modifications to determine whether modification to this Agreement is
      appropriate.

16.   No Third Party Rights. Nothing in this Agreement or the Dealer Agreement
      shall be construed to confer any rights upon any person not a party hereto
      or thereto, nor shall it create in any party an interest as a third party
      beneficiary of this Agreement or the Dealer Agreement. Lithia Motors, Inc.
      and Dealer Company hereby agree to indemnify and hold harmless GM, its
      directors, officers, employees, subsidiaries, agents and representatives
      from and against all claims, actions, damages, expenses, costs and
      liability, including attorneys fees, arising from or in connection with
      any action by a third-party in its capacity as a stockholder of Lithia
      Motors, Inc. relating to this Agreement other than through a derivative
      stockholder suit authorized by the Board of Lithia Motors, Inc., provided
      that Lithia Motors, Inc. shall have the right to assume the defense and
      control any such actions or suits and that GM shall not settle any such
      actions or suits without Lithia Motors, Inc. consent (such consent not to
      be unreasonably withheld). Notwithstanding the above, GM may choose, at
      its own expense, to manage and control its own defense in any such action.

17.   Modification of Dealer Agreement. This Agreement is intended to modify and
      adapt certain provisions of the Dealer Agreement and is intended to be
      incorporated as part of the Dealer Agreement for each Dealer Company. In
      the event that any provisions of this Agreement are in conflict with other
      provisions of the standard Dealer Agreement, the provisions contained in
      this Agreement shall govern. Except as expressly provided in this
      Agreement the terms of the Dealer Agreements remain unchanged and apply
      herein.

18.   Confidentiality. Each party agrees not to disclose the content of this
      Agreement to non-affiliated entities and to treat the Agreement with the
      same degree of confidentiality as it treats its own confidential documents
      of the same nature, except as expressly provided by Article 2.3.5 of this
      Agreement or unless authorized by the other party, required by law,
      pertinent to judicial or administrative proceedings or to proceedings
      under the Dispute Resolution Process.

19.   Duration of Agreement. This .Agreement remains in effect so long as Lithia
      Motors, Inc. or any successor thereto, directly or indirectly holds or has
      an agreement to hold an

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      ownership interest in any GM Dealer Company.

IN WITNESS WHEREOF, the parties have executed this Agreement this 16th day of
January, 1998.

LITHIA MOTORS, INC.                    GENERAL MOTORS CORPORATION

By: /s/                                By: /s/
Sidney B. DeBoer                       E.K. Roggenkamp, III
CEO                                    General Manager
                                       North American Operations
                                       Dealer Network Investment and Development

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                                 Exhibit 10.20.1

                             TOYOTA DEALER AGREEMENT

This is an Agreement between Toyota Motor Sales, USA, Inc. (DISTRIBUTOR) and
Lithia Motors, Inc., DBA Lithia Toyota, (DEALER) corporation. If a corporation,
DEALER is duly incorporated in the State of Oregon and doing business as Lithia
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 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 the 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 and cooperation of
both DISTRIBUTOR and DEALER.

I. RIGHTS GRANTED TO THE DEALER

      Subject to the terms of this Agreement, DISTRIBUTOR hereby grants DEALER
      the nonexclusive right:

      A.    To buy and resell the Toyota Products identified in the Toyota
            Product Addendum hereto which may be periodically revised by
            IMPORTER;

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      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;

      C.    Establish and maintain satisfactory dealership facilities at the
            locations set forth herein; and

      D.    Make all payments to DISTRIBUTOR when due.

III. TERM OF AGREEMENT

      This Agreement is effective this 15th day of February, 1996 and shall
      continue for a period of Six (6) Years and shall expire on February 14,
      2002, unless ended earlier by mutual agreement or terminated as provided
      herein. This Agreement may not be continued beyond its expiration date
      except by written consent of DISTRIBUTOR and IMPORTER.

IV. OWNERSHIP OF DEALERSHIP

      This Agreement is a personal service Agreement and has been entered into
      by DISTRIBUTOR in reliance upon and in consideration of DEALER's
      representation that only the following named persons are the Owners of
      DEALER, that such persons will serve in the capacities indicated, and that
      such persons are committed to achieving the purposes. goals and
      commitments of this Agreement:

            OWNERS'                                                PERCENT OF
            NAMES                        TITLE                      OWNERSHIP

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      Sidney B. DeBoer                 President                      62.5%
      Manfred Heiman                   Vice President                 37.5%

V. MANAGEMENT OF DEALERSHIP

      DISTRIBUTOR and DEALER agree that the retention of qualified management is
      of critical importance to satisfy the commitments made by DEALER in this
      Agreement. DISTRIBUTOR, therefore, enters into this Agreement in reliance
      upon DEALER's representation that Sidney B. DeBoer and no other person,
      will exercise the function of General Manager, be in complete charge of
      DEALER's operations, and will have 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 effort to DEALER's
      operations.

VI. CHANGE IN MANAGEMENT OR OWNERSHIP

      This is a personal service 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.

      DEALER agrees that factors which would make DISTRIBUTOR's withholding of
      consent reasonable would include, without limitation, the failure of a new
      Owner or General Manager to meet DISTRIBUTOR'S standards with regard to
      financial capability, experience and success in the automobile dealership
      business.

VII. APPROVED DEALER LOCATIONS

      In order that DISTRIBUTOR may establish and maintain an effective network
      of authorized Toyota dealers, DEALER agrees that it shall conduct its
      Toyota operation only and exclusively in facilities and at locations
      herein designated and approved by DISTRIBUTOR. DISTRIBUTOR hereby
      designates and approves the following facilities as the exclusive
      location(s) for the sale and servicing of Toyota Products and the display
      of Toyota Marks:

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      New Vehicle Sales and Showroom             Used Vehicle Display and Sales
      ------------------------------             ------------------------------
      360 E. Jackson Street                      400 North Central
      Medford, OR 97501                          Medford, OR 97501

      Sales and General Office                   Body and Paint
      ------------------------                   --------------
      360 E. Jackson Street                      None
      Medford, OR 97501

      Parts                                      Service
      -----                                      -------
      345 Apple Street                           345 Apple Street
      Medford, OR 97501                          Medford, OR 97501

      Other Facilities
      ----------------
      325 East Jackson
      Medford, OR 97501

      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. DEALER may not 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 functions without the prior written consent of DISTRIBUTOR.

VIII. PRIMARY MARKET AREA

      DISTRIBUTOR will assign DEALER a geographic area called a Primary Marker
      Area ("PMA"). The PMA is used by DISTRIBUTOR to evaluate DEALER's
      performance of its obligations, among other things. DEALER agrees that it
      has no exclusive right to any such PMA. DISTRIBUTOR may add new dealers,
      relocate dealers, or adjust DEALER's PMA as it reasonably determines is
      necessary. DEALER's PMA is set forth on the PMA Addendum hereto.

      Nothing contained in this Agreement, with the exception of Section XIV(B),
      shall limit or be construed to limit the geographical area in which, or
      the persons to whom, DEALER may sell or promote the sale of Toyota
      products.

IX. STANDARD PROVISIONS

      The "Toyota Dealer Agreement Standard Provisions" are incorporated herein
      and made

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      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.    Dealer agrees to achieve, within twelve months of the effective date of
      this Agreement and to thereafter maintain throughout the duration of this
      Agreement, a satisfactory customer satisfactory performance, as measured
      by all applicable standards established by Toyota Motor Sales USA Inc. and
      which are modified from time to time.

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 Toyota Dealer Agreement then
prescribed by IMPORTER.

TOYOTA MOTOR SALES, U.S.A., INC.

Date: February 15, 1996

By: /s/
  Shinji Sakai
  President

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