LEXUS DEALER AGREEMENT
STANDARD PROVISIONS
The following Standard Provisions are expressly incorporated in and made a part
of the LEXUS Dealer Agreement.
VI. ACQUISITION, DELIVERY AND INVENTORY OF LEXUS PRODUCTS
A. APPOINTMENT OF DEALER
DISTRIBUTOR hereby appoints DEALER and grants unto it the non-
exclusive right to buy and resell the LEXUS Products identified
in the LEXUS Product Addendum. DEALER accepts such appointment
and understands that its appointment as a DEALER does not grant
it an exclusive right to sell LEXUS Products in any specified
geographical area.
DEALER shall have the right to purchase LEXUS Products from
DISTRIBUTOR in accordance with the provisions set forth herein
and such other requirements as may be established from time to
time by LEXUS.
B. AVAILABILITY AND ALLOCATION OF PRODUCT
DISTRIBUTOR will allocate LEXUS Products among its dealers in a
fair and equitable manner. DEALER acknowledges and agrees that
DISTRIBUTOR may consider, among other things, DEALER'S service
capacity, customer satisfaction performance, sales performance,
sales potential and facilities in determining the quantity of
Product to offer to DEALER. DISTRIBUTOR will, upon DEALER'S
request, explain the considerations and method used to distribute
LEXUS Products to DEALER.
C. PRICES AND TERMS OF SALE
DISTRIBUTOR, from time to time, shall establish and revise prices
and other terms for the sale of LEXUS Products to DEALER.
Revised prices, terms, or provisions shall apply to any LEXUS
Product not invoiced to DEALER by DISTRIBUTOR at the time the
notice of such change is given to DEALER (in the case of LEXUS
Motor Vehicles), or upon issuance of a new or modified Parts
Price List or through change notices, letters, bulletins, or
revision sheets (in the case of parts, options and accessories),
or at such other times as may be designated in writing by
DISTRIBUTOR.
5
D. MODE, PLACE AND CHARGES FOR DELIVERY OF PRODUCTS
DISTRIBUTOR shall designate the distribution points and the mode
of transportation and shall select carrier(s) for the delivery of
LEXUS Products to DEALER. DEALER shall pay DISTRIBUTOR such
charges as DISTRIBUTOR in its sole discretion establishes for
such transportation services.
E. DAMAGE CLAIMS AGAINST TRANSPORTATION CARRIERS
DEALER shall promptly notify DISTRIBUTOR of any damage occurring
during transit and shall, if so directed by DISTRIBUTOR, file
claims against transportation carrier for damage. DEALER agrees
to assist DISTRIBUTOR in obtaining recovery against any
transportation carrier or insuree for loss or damage to LEXUS
Products shipped hereunder. DISTRIBUTOR shall not be liable for
loss or damage to LEXUS Products sold hereunder occurring after
delivery thereof to premises of DEALER.
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 DISTRIBUTOR harmless from
any liability resulting from DEALER'S failure to so notify such
purchasers.
F. DELAY OR FAILURE OF DELIVERY
DISTRIBUTOR shall not be liable for delay or failure to deliver
LEXUS Products which it has previously agreed to deliver, where
such delay or failure to deliver is the result of any event
beyond the control of DISTRIBUTOR, including but not limited to
any law or regulation of any governmental entity, acts of God,
foreign or civil wars, riots, interruptions of navigation,
shipwrecks, fires, floods, storms, strikes, lockouts or other
labor troubles, embargoes, blockades, or delay or failure of
FACTORY to deliver LEXUS Products.
G. DIVERSION CHARGES
If after shipment DEALER fails or refuses to accept LEXUS
Products that it had agreed to purchase, DEALER shall pay all
charges incurred by DISTRIBUTOR as a result of such diversion.
Such charges shall not exceed the charge of returning any such
product to the point of original shipment by DISTRIBUTOR plus all
charges for demurrage, storage or other charges related to such
diversion.
6
DEALER also agrees to assume responsibility for, and shall pay
any and all reasonable charges for, demurrage, storage or other
charges accruing after arrival of shipment at the diversion point
established by DISTRIBUTOR.
H. CHANGES OF DESIGN, OPTIONS OR SPECIFICATIONS
DISTRIBUTOR may change the design or specifications of any LEXUS
Product or the options in any LEXUS Product and shall be under no
obligation to provide notice of same or to make any similar
change upon any product previously purchased by or shipped to
DEALER. No change shall be considered a model year change unless
so specified by DISTRIBUTOR.
I. DISCONTINUANCE OF MANUFACTURE OR IMPORTATION
FACTORY and/or DISTRIBUTOR may discontinue the manufacture,
importation or distribution of all or part of any LEXUS Product,
whether motor vehicle, parts, options, or accessories, including
any model, series, or body style of any LEXUS Motor Vehicle at
any time without any obligation or liability to DEALER by reason
thereof.
J. MINIMUM VEHICLE INVENTORIES
DEALER agrees that it shall, at all times, maintain in showroom
ready condition at least the minimum inventory of LEXUS Motor
Vehicles as may be established by DISTRIBUTOR from time to time.
K. PRODUCT MODIFICATIONS
DEALER agrees that it will not install aftermarket accessories or
make any modifications to LEXUS vehicles that may impair or
adversely affect a vehicle's safety, emissions, structural
integrity or performance.
VII. DEALER MARKETING OF LEXUS PRODUCTS
A. DEALER'S SALES RESPONSIBILITIES
DEALER recognizes that customer satisfaction and the successful
promotion and sale of LEXUS Products are significantly dependent
on DEALER'S advertising and sales promotion activities.
Therefore, DEALER at all times shall:
1. Use its best efforts to promote, sell and service new and
used LEXUS Products;
7
Advertise and merchandise LEXUS Products and use current LEXUS
showroom displays;
3. Ensure that its sales personnel meet the educational and
management standards established by DISTRIBUTOR and have
such personnel, as are appropriate, attend all sales
training courses prescribed by DISTRIBUTOR at DEALER'S
expense;
4. Maintain a high standard of ethics in advertising, promoting
and selling LEXUS Products and avoid engaging in any
misrepresentation or unfair or deceptive practices. DEALER
shall discontinue any advertising that DISTRIBUTOR may find
to be injurious to DISTRIBUTOR'S business or reputation or
to the LEXUS Marks, or that are likely to be violative of
applicable laws or regulations;
5. Advertise in the local classified telephone directories
identifying itself as an authorized LEXUS DEALER. Such
ad(s) shall properly display the LEXUS Marks; and
6. Accurately represent to customers the total selling price of
LEXUS Products. DEALER agrees to explain to customers of
LEXUS Products the items that make up the total selling
price and to give the customers itemized invoices and all
other information required by law. DEALER understands and
hereby acknowledges that it may sell LEXUS Products at
whatever price DEALER desires.
B. EXPORT POLICY
DEALER is authorized to sell LEXUS Motor Vehicles only to
customers located in the United States. DEALER agrees that it
will not sell LEXUS Motor Vehicles for resale or use outside the
United States. DEALER agrees to abide by any export policy
established by DISTRIBUTOR.
C. LEXUS DEALER ASSOCIATION
Except where prohibited by law, DEALER will participate in a
LEXUS Dealer Advertising Association. DEALER agrees to cooperate
in the establishment of such an association and to fund its fair
share of advertising and merchandising programs undertaken by the
association.
8
D. USED VEHICLES
DEALER agrees to display and sell used vehicles at the Approved
Location(s). DEALER shall maintain for resale an adequate
inventory of used vehicles.
E. PRIMARY AREA OF RESPONSIBILITY
DISTRIBUTOR will assign DEALER a geographic area called a Primary
Market Area ("PMA"), DEALER'S PMA may be altered or adjusted by
DISTRIBUTOR at any time. The PMA is a tool used by DISTRIBUTOR
to evaluate DEALER'S performance of its obligations. DEALER
agrees that it has no right or interest in any PMA that
DISTRIBUTOR, in its sole discretion, may designate. As permitted
by local law, DISTRIBUTOR may add new dealers to, or relocate
dealers in or into the PMA assigned to DEALER.
F. EVALUATION OF DEALER'S SALES AND MARKETING PERFORMANCE
DISTRIBUTOR periodically will evaluate DEALER'S sales and
marketing performance under this Agreement. DEALER'S evaluation
will be based on such reasonable criteria as DISTRIBUTOR may
establish including, without limitation, comparisons of DEALER'S
sales with those of other LEXUS dealers. DISTRIBUTOR will review
such evaluations with DEALER and DEALER shall take prompt
corrective action, if required, to improve its performance.
VIII. DEALER SERVICE OBLIGATIONS
A. CUSTOMER SERVICE STANDARDS
DEALER and DISTRIBUTOR agree that the success and future growth
of the LEXUS franchise is substantially dependent upon the
customers' ability to obtain responsive, high-quality vehicle
servicing. Therefore, DEALER agrees to:
1. Take all reasonable steps to provide service of the highest
quality for all LEXUS Motor Vehicles, regardless of where
purchased and whether or not under warranty;
2. Ensure that the customer is advised of the necessary repairs
and his or her consent is obtained prior to the initiation
of any repairs;
9
3. Ensure that necessary repairs on LEXUS Motor Vehicles are
accurately diagnosed and professionally performed; and
4. Assure that the customer is treated courteously and fairly
at all times.
B. NEW MOTOR VEHICLE PRE-DELIVERY SERVICE
DEALER agrees that, prior to delivery of a new LEXUS Motor
Vehicle to a customer, it shall perform, if directed by
DISTRIBUTOR, pre-delivery service on each LEXUS Motor Vehicle in
accordance with LEXUS standards. DISTRIBUTOR shall reimburse
DEALER for such pre-delivery service according to such directives
and the applicable provisions of the LEXUS Warranty Policies and
Procedures Manual.
C. WARRANTY AND POLICY SERVICE
DEALER acknowledges that the only warranties of DISTRIBUTOR or
FACTORY applicable to LEXUS Products shall be the New Vehicle
Limited Warranty or such other written warranties that may be
expressly furnished by DISTRIBUTOR or FACTORY. Except for its
limited liability under such written warranty or warranties,
DISTRIBUTOR and FACTORY do not assume any other warranty,
obligation or liability. DEALER is not authorized to assume any
additional warranty obligations or liabilities on behalf of
DISTRIBUTOR or FACTORY. Any such additional obligations assumed
by DEALER shall be the sole responsibility of DEALER.
DEALER shall perform warranty and policy service specified by
DISTRIBUTOR, in accordance with the LEXUS Warranty Policies and
Procedures Manual. DISTRIBUTOR agrees to compensate DEALER for
all warranty and policy work, including labor, diagnosis and
Genuine LEXUS Parts and Accessories in accordance with procedures
and at rates to be announced from time to time by DISTRIBUTOR and
in accordance with applicable law. Unless otherwise approved in
advance by DISTRIBUTOR, DEALER shall use only Genuine LEXUS Parts
and Accessories when performing LEXUS warranty repairs. Warranty
and policy service is provided for the benefit of customers and
DEALER agrees that the customer shall not be obligated to pay any
charges for warranty or policy work or any other services for
which DEALER is reimbursed by DISTRIBUTOR, except as required by
law.
10
IX. USE OF PARTS AND ACCESSORIES IN NON-WARRANTY SERVICE
Subject to the provisions of Sections VI(k) and VIII(c), DEALER has
the right to sell, install or use for making non-warranty repairs
products that are not Genuine LEXUS Parts or Accessories.
DEALER acknowledges, however, that its customers expect that any parts
or accessories that DEALER sells, installs or uses in the sale, repair
or servicing of LEXUS vehicles are, or meet the high quality standards
of, Genuine LEXUS Parts or Accessories. DEALER agrees that in sales,
repairs or servicing where DEALER does not use Genuine LEXUS Parts or
Accessories, DEALER only will utilize such other parts or accessories
as:
1. Will not adversely affect the mechanical operation of the LEXUS
vehicle being sold, repaired or serviced; and
2. Are equivalent in quality and design to Genuine LEXUS Parts or
Accessories.
DEALER further agrees that it will not offer to sell any parts or
accessories that for reasons of quality or image are reasonably
objected to by LEXUS.
A. WARRANTY DISCLOSURES AS TO NON-GENUINE PARTS AND ACCESSORIES
In order to avoid confusion and to minimize potential customer
dissatisfaction, in any non-warranty instance where DEALER sells,
installs or uses non-Genuine LEXUS Parts or Accessories, DEALER
shall disclose such fact to the customer and shall advise the
customer that the item is not included in warranties furnished by
DISTRIBUTOR or FACTORY. Such disclosure shall be written,
conspicuous and stated on the customer's copy of the service or
repair order or sale document. In addition, DEALER will clearly
explain to the customer the extent of any warranty covering the
parts or accessories involved and will deliver a copy of the
warranty to the customer.
B. ROADSIDE ASSISTANCE PROGRAM
Dealer agrees to participate in the LEXUS Roadside Assistance
Program as specified by DISTRIBUTOR.
C. SERVICE CAMPAIGN INSPECTIONS AND CORRECTIONS
DEALER agrees to perform service campaign inspections and/or
corrections for owners or users
11
of all LEXUS Products that qualify for such inspections and/or
corrections. DEALER further agrees to comply with all
DISTRIBUTOR'S directives and with the applicable procedures in
the LEXUS Warranty Policies and Procedures Manual relating to
those inspections and/or corrections. DISTRIBUTOR agrees to
reimburse DEALER for all replacement parts and/or other materials
required and used in connection with such work and for labor
according to such directives and the applicable provisions of the
LEXUS Warranty Policies and Procedures Manual.
D. COMPLIANCE WITH SAFETY AND EMISSION CONTROL REQUIREMENTS
DEALER agrees to comply and operate consistently with all
applicable provisions of the National Traffic and Motor Vehicle
Safety Act of 1966 and the Federal Clean Air Act, as amended,
including applicable rules and regulations issued from time to
time thereunder, and all other applicable federal, state and
local motor vehicle safety and emission control statutes, rules
and regulations.
In the event that the laws of the state in which DEALER is
located require motor vehicle dealers or distributors to install
in new or used motor vehicles, prior to their retail sale, any
safety devices or other equipment not installed or supplied as
standard equipment by FACTORY, then DEALER, prior to the sale of
any LEXUS Motor Vehicle on which such installations are required,
shall properly install such devices or equipment on such LEXUS
Motor Vehicles. DEALER shall comply with state and local laws
pertaining to the installation and reporting of such equipment.
In the interest of motor vehicle safety and emission control,
DISTRIBUTOR and DEALER agree to provide to each other such
information and assistance as may reasonably be requested by the
other in connection with the performance of obligations imposed
on either party by the National Traffic and Motor Vehicle Safety
Act of 1966 and the Federal Clean Air Act, as amended, and their
rules and regulations, and all other applicable federal, state
and local motor vehicle safety and emissions control statutes,
rules and regulations.
E. COMPLIANCE WITH CONSUMER PROTECTION STATUTES, RULES AND
REGULATIONS.
Because certain customer complaints may impose liability upon
DISTRIBUTOR under various repair or
12
replace laws or other consumer protection laws and regulations,
DEALER agrees to provide prompt notice to DISTRIBUTOR of such
complaints and take such other steps as DISTRIBUTOR may require.
DEALER will do nothing to affect adversely DISTRIBUTOR'S rights
under such laws and regulations. Subject to any law or any
regulation to the contrary, DEALER shall be liable to DISTRIBUTOR
for any refunds or vehicle replacements provided to customer
where DISTRIBUTOR reasonably establishes that DEALER failed to
carry out vehicle repairs in accordance with DISTRIBUTOR'S
written published policies and procedures or its express oral
instructions subsequently confirmed in writing. DEALER also
agrees to provide applicable required customer notifications and
disclosures as prescribed by repair or replacement laws or other
consumer laws or regulations.
X. SERVICE AND PARTS ORGANIZATION
A. ORGANIZATION AND STANDARDS
DEALER agrees to organize and maintain a complete service and
parts organization of the highest quality, including a qualified
Service Manager, Parts Manager, Diagnostic Specialists,
Technicians and a sufficient complement of qualified customer
relations, service and parts personnel as recommended in the
LEXUS Dealer Facility Planner. DEALER'S personnel will meet the
educational, management and technical training standards
established by DISTRIBUTOR, and will attend all service, parts
and customer satisfaction training courses prescribed by
DISTRIBUTOR at DEALER'S expense.
B. SERVICE EQUIPMENT AND SPECIAL TOOLS
DEALER agrees to acquire and properly maintain adequate service
equipment and such special service tools and instruments as are
specified by DISTRIBUTOR.
C. PARTS STOCKING LEVEL
DEALER agrees to maintain its parts stock at minimum stocking
levels established by DISTRIBUTOR. In consideration for DEALER'S
maintenance of the Dealer Stocking Guide, DISTRIBUTOR grants
DEALER a one hundred percent (100%) obsolescence parts return
policy. For non-stocking guide parts, parts orders will accrue a
five percent (5%) obsolescence eligibility.
13
D. AFTER-HOURS DELIVERY
Dealer agrees to provide DISTRIBUTOR, upon request, access to a
secure area for after-hours parts or vehicle delivery.
E. ASSISTANCE PROVIDED BY DISTRIBUTOR
1. SERVICE MANUALS AND MATERIALS
DISTRIBUTOR agrees to make available to DEALER copies of such
service manuals and bulletins, publications and technical data as
DISTRIBUTOR shall deem to be necessary for the needs of DEALER'S
service and parts organization. DEALER shall be responsible for
keeping such manuals, publications and data current and available
for consultation by its employees.
2. FIELD SERVICE PERSONNEL ASSISTANCE
To assist DEALER in handling service responsibilities under this
Agreement, DISTRIBUTOR agrees to make available qualified field
service personnel who will, from time to time, advise and counsel
DEALER on service-related subjects, including service policies,
product and technical adjustments, repair and replacement of
product components, customer relations, warranty administration,
service and parts merchandising, and personnel/management
training.
F. EVALUATION OF DEALER'S SERVICE AND PARTS PERFORMANCE
DISTRIBUTOR will evaluate periodically DEALER'S: (i) service
performance in areas such as customer satisfaction, warranty
administration, service repairs, service management, facilities,
operating procedures, new vehicle pre-delivery service; and (ii)
parts operations, facilities, tools and equipment. DISTRIBUTOR
agrees to review such evaluations with DEALER and DEALER agrees
to take prompt action to improve the service and parts
performance to satisfactory levels as DISTRIBUTOR may require.
Such action shall, if requested by DISTRIBUTOR, include an action
plan by DEALER for improvement of service and parts performance
within a specific time period approved by DISTRIBUTOR.
XI. CUSTOMER SATISFACTION RESPONSIBILITIES
A goal of DISTRIBUTOR and DEALER is to be recognized as marketing the
finest products and providing the best
14
service in the automobile industry. The LEXUS name should be
synonymous with the highest level of customer satisfaction.
A. DEALER'S CUSTOMER SATISFACTION OBLIGATIONS
DEALER will be responsible for satisfying LEXUS customers in all
matters except those that are directly related to product design
and manufacturing or are otherwise out of DEALER'S control.
DEALER will take all reasonable steps to ensure that each
customer is completely satisfied with his or her LEXUS Products
and the services and practices of DEALER. DEALER will not engage
in any practice or method of operation if its nature or quality
may impair the reputation of LEXUS or LEXUS Products and it has
been reasonably objected to by DISTRIBUTOR.
1. DEALER'S CUSTOMER SATISFACTION PLAN
DEALER shall provide a detailed plan of DEALER'S customer
satisfaction program to DISTRIBUTOR and shall implement such
program on a continuous basis. This plan shall include an
ongoing system for emphasizing customer satisfaction to all
DEALER'S employees, for training DEALER employees and for
conveying to customers that DEALER is committed to the
highest possible level of customer satisfaction.
2. EMPLOYEE TRAINING
DEALER agrees to participate and to have its employees
participate in LEXUS customer satisfaction training as
required by DISTRIBUTOR, at DEALER'S expense.
3. CUSTOMER SATISFACTION MANAGER
If requested by DISTRIBUTOR, DEALER agrees to employ a full-
time Customer Satisfaction Manager with the necessary
authority to make all decisions regarding customer
satisfaction and to resolve all customer problems.
4. CUSTOMER ASSISTANCE RESPONSE SYSTEM
DEALER agrees to implement a system, approved by
DISTRIBUTOR, that will respond immediately to requests for
customer assistance from DISTRIBUTOR.
15
B. EVALUATION OF DEALER'S CUSTOMER SATISFACTION PERFORMANCE
DISTRIBUTOR periodically will evaluate DEALER'S customer
satisfaction performance based on the following considerations an
efforts by DEALER.
1. DISTRIBUTOR will provide DEALER with Owner Satisfaction
Index ("OSI") reports or such other equivalent data as will
permit DEALER to assess its performance and maintain the
highest level of customer satisfaction. DEALER agrees to
review with its employees on a regular basis the results of
the customer satisfaction reports or other data it receives.
2. DEALER agrees to develop and implement specific action plans
to improve results in the event that DEALER is below the
average for other LEXUS dealers. The plans are to be
reviewed with DISTRIBUTOR on a basis that DISTRIBUTOR deems
appropriate. DEALER will use its best efforts to respond on
a timely basis to requests from DISTRIBUTOR to take action
on unsatisfactory customer satisfaction matters and to
commit necessary resources to remedy deficiencies reasonably
specified by DISTRIBUTOR.
XII. DEALERSHIP FACILITIES AND IDENTIFICATION
A. FACILITIES
1. In order for DISTRIBUTOR to establish an effective network
of authorized LEXUS dealers, DEALER shall provide, and at
all times maintain, attractive dealership facilities at the
Approved Location(s) that satisfy the image, size, layout,
interior design, color, equipment and identification
required by DISTRIBUTOR. DEALER'S facility shall meet the
minimum facility standards established by LEXUS.
2. To assist DEALER in planning, building, remodeling, or
maintaining dealership facilities, DISTRIBUTOR will provide
DEALER a LEXUS Dealer Facility Planner and will identify
sources from which DEALER may purchase facility consultation
and planning services, and architectural materials and
furnishings that meet LEXUS standards and guidelines.
DISTRIBUTOR will also make available to DEALER, upon
request, sample copies of building layout
16
plans, facility planning recommendations, and an applicable
identification program covering the placement, installation
and maintenance of required signs. In addition,
representatives of DISTRIBUTOR will be available to DEALER
from time to time to counsel and advise DEALER and
dealership personnel in connection with DEALER'S planning
and equipping the dealership premises.
B. SERVICE RECEPTION AREA
DEALER agrees to maintain a service reception area that meets all
requirements set forth in the LEXUS Dealer Facility Planner, that
is consistent with the LEXUS image and that will promote a high
level of customer satisfaction.
C. DEALER'S OPERATING HOURS
DEALER agrees to keep its dealership operations open for business
during all days and hours that are customary and lawful for such
operations in the community or locality in which DEALER is
located and in accordance with industry standards.
D. SIGNS
Subject to applicable governmental statutes, ordinances and
regulations, DEALER agrees to erect, display and maintain, at
Approved Location(s) only and at DEALER'S sole expense, such
standard authorized product and service signs as specified by
DISTRIBUTOR.
E. EVALUATION OF DEALERSHIP FACILITIES
DISTRIBUTOR periodically will evaluate DEALER'S facilities. In
making such evaluations, DISTRIBUTOR may consider, among other
things: the actual building and land provided by DEALER for the
performance of its responsibilities under this Agreement;
compliance with DISTRIBUTOR'S current requirements for dealership
operations; the appearance, condition, layout and signage of the
dealership facilities; and such other factors as in DISTRIBUTOR'S
opinion may relate to DEALER'S performance of its
responsibilities under this Agreement. DISTRIBUTOR will discuss
such evaluations with DEALER and DEALER shall take prompt action
to comply with DISTRIBUTOR'S recommendations and minimum facility
standards.
17
F. USE OF LEXUS MARKS
1. USE BY DEALER
DISTRIBUTOR grants to DEALER the non-exclusive privilege of
displaying or otherwise using authorized LEXUS Marks as
specified in the LEXUS Graphic Standards Manual at the
Approved Location(s) in connection with the selling or
servicing of LEXUS Products.
DEALER further agrees that it promptly shall discontinue the
display and use of any such LEXUS Marks, and shall change
the manner in which any LEXUS Marks are displayed and used,
when for any reason it is requested to do so by DISTRIBUTOR.
DEALER may use the LEXUS Marks only at Approved Location(s)
and for such purposes as are specified in this Agreement.
DEALER agrees that such LEXUS Marks may be used as part of
the name under which DEALER'S business is conducted only
with the prior written approval of DISTRIBUTOR.
2. DISCONTINUANCE OF USE
Upon termination, non-renewal, or expiration of this
Agreement, DEALER agrees that it shall immediately:
a. Discontinue the use of the word LEXUS and the LEXUS
Marks, or any semblance of same, including without
limitation, the use of all stationery, telephone
directory listing, and other printed material referring
in any way to LEXUS or bearing any LEXUS Mark;
b. Discontinue the use of the word LEXUS or the LEXUS
Marks, or any semblance of same, as part of its
business or corporate name, and file a change or
discontinuance of such name with appropriate
authorities;
c. Remove all product signs bearing said word(s) or LEXUS
Marks at DEALER'S sole cost and expense;
d. Cease representing itself as an authorized LEXUS
Dealer; and
e. Refrain from any action, including without limitation,
any advertising, stating or
18
implying that is authorized to sell or distribute LEXUS
Products.
In the event DEALER fails to comply with the terms and conditions of
this Section, DISTRIBUTOR shall have the right to enter upon DEALER'S
premises and remove, without liability, all such product signs and
identification bearing the word LEXUS or any LEXUS Marks. DEALER
agrees that it shall reimburse DISTRIBUTOR for any costs and expenses
incurred in such removal, including reasonable attorney fees.
XIII. CAPITAL, CREDIT, RECORDS AND UNIFORM SYSTEMS
A. NET WORKING CAPITAL
DEALER agrees to establish and maintain actual net working
capital in an amount not less than the minimum net working
capital specified by DISTRIBUTOR. DISTRIBUTOR will have the
right to increase the minimum net working capital required, and
DEALER agrees promptly to establish and maintain the increased
amount.
B. FLOORING AND LINES OF CREDIT
DEALER agrees to obtain and maintain at all times a confirmed and
adequate flooring line with a bank or financial institution or
other method of financing acceptable to DISTRIBUTOR to enable
DEALER to perform its obligations pursuant to this Agreement.
DISTRIBUTOR may increase the required amounts of flooring or
lines of credit, and DEALER agrees promptly to establish and
maintain the increased amount.
Subject to the foregoing obligations, DEALER is free to do its
financing business, wholesale, retail or both, with whomever it
chooses and to the extent it desires.
C. PAYMENT TERMS
All monies or accounts due DEALER from DISTRIBUTOR will be
considered net of DEALER'S indebtedness to DISTRIBUTOR.
DISTRIBUTOR may deduct or offset any amounts due or to become due
from DEALER to DISTRIBUTOR, or any amounts held by DISTRIBUTOR,
from or against any sums or accounts due or to become due from
DISTRIBUTOR to DEALER. Any amounts owed by DEALER to DISTRIBUTOR
that are not paid when due shall bear interest as established by
DISTRIBUTOR and permitted by law. Payments by
19
DEALER to DISTRIBUTOR shall be made in such a manner as
prescribed by DISTRIBUTOR and shall be applied against DEALER'S
indebtedness in accordance with DISTRIBUTOR'S policies and
practices.
D. UNIFORM ACCOUNTING SYSTEM
DEALER agrees to maintain its financial books and records in
accordance with the LEXUS Accounting Manual, as amended from time
to time by DISTRIBUTOR. In addition, DEALER shall furnish to
DISTRIBUTOR complete and accurate financial or operating
information, including without limitation, a financial and/or
operating statement covering the current month and calendar year-
to-date operations and showing the true and accurate condition of
DEALER'S business. DEALER shall promptly furnish to DISTRIBUTOR
copies of any adjusted financial and/or operating statements,
including any and all adjusted, year-end statements prepared for
tax or any other purposes. All such information shall be
furnished by DEALER to DISTRIBUTOR via DISTRIBUTOR'S electronic
communications network and in such a format and at such times as
prescribed by DISTRIBUTOR.
E. RECORDS MAINTENANCE
DEALER agrees to keep complete, accurate and current records
regarding its sale, leasing and servicing of LEXUS Products for a
minimum of five (5) years, exclusive of any retention period
required by any governmental entity. DEALER shall prepare, keep
current and retain records in support of requests for
reimbursement for warrant and policy work performed by DEALER in
accordance with the LEXUS Warranty Policies and Procedures
Manual.
F. EXAMINATION OF DEALERSHIP ACCOUNTS AND RECORDS
DISTRIBUTOR shall have the right at all reasonable times and
during regular business hours to inspect DEALER'S facilities and
to examine, audit and to reproduce all records, accounts and
supporting data relating to the operations of DEALER, including
without limitation, sales reporting, service and repair of LEXUS
Products by DEALER.
G. TAXES
DEALER shall be responsible for and duly pay all sales taxes, use
taxes, excise taxes and other governmental or municipal charges
imposed, levied or based upon the purchase or sale of LEXUS
Products by
20
DEALER, and shall maintain accurate records of the same.
H. CONFIDENTIALITY
DISTRIBUTOR agrees that it shall not provide any financial data
or documents submitted to it by DEALER to any third party unless
authorized by DEALER, required by law, or required to generate
composite or comparative data for analytical purposes.
DEALER agrees to keep confidential and not to disclose, directly
or indirectly, any information that DISTRIBUTOR designates as
confidential.
I. DATA TRANSMISSION SYSTEMS
DISTRIBUTOR has established a national, private, centralized
database of information about all LEXUS vehicles and customers.
In order to provide the highest level of service and support and
to facilitate accurate and timely reporting of relevant DEALER
operational and financial data, DEALER shall provide information
to DISTRIBUTOR as specified by DISTRIBUTOR from time to time,
including, but not limited to, customer service, sales, parts
inventory and accounting information. All information shall be
submitted by DEALER via the LEXUS electronic communications
network. DEALER will acquire, install and maintain at its
expense the necessary equipment and systems compatible with the
LEXUS electronic communications network. DISTRIBUTOR will
recommend to DEALER an independent source for purchasing the
required equipment and systems. DEALER, however, may purchase
equipment from any source, provided the equipment meets the LEXUS
electronic communications network specifications.
J. SALES REPORTING
DEALER agrees to accurately report to DISTRIBUTOR, with such
relevant information as DISTRIBUTOR may reasonably require, the
delivery of each new motor vehicle to a purchaser by the end of
the day in which the vehicle is delivered to the purchaser
thereof, and to furnish DISTRIBUTOR with such other reports as
DISTRIBUTOR may reasonably require from time to time.
21
XIV. TRANSFERS
A. SALE OF OWNERSHIP INTEREST IN DEALERSHIP
This is a personal services Agreement based upon the personal
skills, service, qualifications and commitment of DEALER'S OWNERS
and General Manager. For this reason, and because DISTRIBUTOR
has entered into this Agreement in reliance upon DEALER'S,
OWNERS' and General Manager's qualifications, DEALER agrees to
obtain DISTRIBUTOR'S prior written approval of any proposed
change in its ownership, General Manager or any proposed
disposition of DEALER'S principal assets.
DISTRIBUTOR shall not be obligated to renew this Agreement or to
execute a new Agreement to a proposed transferee unless DEALER
first makes arrangements acceptable to DISTRIBUTOR to satisfy any
outstanding indebtedness to DISTRIBUTOR.
B. RIGHTS OF FIRST REFUSAL OR OPTION TO PURCHASE
1. RIGHTS GRANTED
If a proposal to sell the dealership's assets or transfer
its ownership is submitted by DEALER to DISTRIBUTOR, or in
the event of the death of the majority owner of DEALER,
DISTRIBUTOR has a right of first refusal or option to
purchase the dealership assets or stock, including any
leasehold interest or realty. DISTRIBUTOR'S exercise of its
right or option under this Section supersedes DEALER'S right
to transfer its interest in, or ownership of, the
dealership. DISTRIBUTOR'S right or option may be assigned
by it to any third party and DISTRIBUTOR hereby guarantees
the full payment to DEALER of the purchase price by such
assignee. DISTRIBUTOR may disclose the terms of any pending
buy/sell agreement and any other relevant dealership
performance information to any potential assignee.
DISTRIBUTOR'S rights under this Section will be binding on
and enforceable against any assignee or successor in
interest of DEALER or purchaser of DEALER'S assets.
2. EXERCISE OF DISTRIBUTOR'S RIGHTS
DISTRIBUTOR shall have thirty (30) days from the following
events within which to exercise its option to purchase or
right of first refusal: (i) DISTRIBUTOR'S receipt of all
data
22
and documentation customarily required by it to evaluate a
proposed transfer of ownership; (ii) DISTRIBUTOR'S receipt
of notice from DEALER of the death of the majority owner of
DEALER; or (iii) DISTRIBUTOR'S disapproving of any
application submitted by an OWNER'S heirs pursuant to
Section XIV. DISTRIBUTOR'S exercise of its right of first
refusal under this Section neither shall be dependent upon
nor require its prior refusal to approve the proposed
transfer.
3. RIGHT OF FIRST REFUSAL
If DEALER has entered into a bona fide written buy/sell
agreement for its dealership business or assets,
DISTRIBUTOR'S right under this Section is a right of first
refusal, enabling DISTRIBUTOR to assume the buyer's rights
and obligations under such buy/sell agreement, and to cancel
this Agreement and all rights granted DEALER. Upon
DISTRIBUTOR'S request, DEALER agrees to provide other
documents relating to the proposed transfer and any other
information which DISTRIBUTOR deems appropriate, including,
but not limited to, those reflecting other agreements or
understandings between the parties to the buy/sell
agreement. Refusal to provide such documentation or to
state that no such documents exist shall create the
presumption that the buy/sell agreement is not a bona fide
agreement.
4. OPTION TO PURCHASE
In the event of the death of a majority OWNER or if DEALER
submits a proposal which DISTRIBUTOR determines is not bona
fide or in good faith, DISTRIBUTOR has the option to
purchase the principal assets of DEALER utilizing the
dealership business, including real estate and leasehold
interest, and to cancel this Agreement and the rights
granted DEALER. The purchase price of the dealership assets
will be determined by good faith negotiations between the
parties. If an agreement cannot be reached, the purchase
price will be exclusively determined by binding arbitration
in accordance with the commercial arbitration rules of the
American Arbitration Association. The site of the
arbitration shall be the office of the American Arbitration
Association in the locality of DISTRIBUTOR'S principal place
of business.
23
5. DEALER'S OBLIGATIONS
Upon DISTRIBUTOR'S exercise of its rights or option and
tender of performance under the buy/sell agreement or upon
whatever terms may be expressed in the buy/sell agreement,
DEALER shall forthwith transfer the affected real property
by warranty deed conveying marketable title free and clear
of all liens, claims, mortgages, encumbrances, tenancies and
occupancies. The warranty deed shall be in proper form for
recording, and DEALER shall deliver complete possession of
the property and deed at the time of closing. DEALER shall
also furnish to DISTRIBUTOR all copies of any easements,
licenses or other documents affecting the property or
dealership operations and shall assign any permits or
licenses that are necessary or desirable for the use of or
appurtenant to the property or the conduct of such dealer
operations. DEALER also agrees to execute and deliver to
DISTRIBUTOR instruments satisfactory to DISTRIBUTOR
conveying title to all personal property, including
leasehold interests, involved in the transfer or sale to
DISTRIBUTOR. If any personal property is subject to any
lien or charge of any kind, DEALER agrees to procure the
discharge and satisfaction thereof prior to the closing of
sale of such property to DISTRIBUTOR.
XV. SUCCESSION RIGHTS UPON DEATH OR INCAPACITY
A. SUCCESSION TO OWNERSHIP AFTER DEATH OF OWNER
In the event that OWNER dies and his or her interest in
dealership passes directly to any person or persons ("Heirs") who
wish to succeed to OWNER'S interest, then OWNER'S legal
representative must notify DISTRIBUTOR within sixty (60) days of
the death of the OWNER of such Heir's or Heirs' intent to succeed
OWNER. The legal representative also must then designate a
proposed General Manager for DISTRIBUTOR approval. The effect of
such notice from OWNER'S legal representative will be to suspend
any notice of termination provided for in Section XVI(B)(4)
issued hereunder.
Upon delivery of such notice, OWNER'S legal representative shall
immediately request any person(s) identified by it as intending
to succeed OWNER and the designated candidate for General Manager
to submit an application and to provide all personal and
financial information that DISTRIBUTOR
24
may reasonably and customarily require in connection with its
review of such applications. All requested information must be
provided promptly to DISTRIBUTOR and in no case later than thirty
(30) days after receipt of such request from OWNER'S legal
representative. Upon the submission of all requested
information, DISTRIBUTOR agrees to review such application(s)
pursuant to the then current criteria generally applied by
DISTRIBUTOR in qualifying dealer OWNERS and/or General Managers.
DISTRIBUTOR shall either approve or disapprove the application(s)
within ninety (90) days of full compliance with all DISTRIBUTOR'S
requests for information. If DISTRIBUTOR approves the
application(s), it shall offer to enter into a new LEXUS Dealer
Agreement with OWNER'S Heir(s) in the form then currently in use,
subject to such additional conditions and for such term as
DISTRIBUTOR deems appropriate.
In the event that DISTRIBUTOR does not approve the designated
Heir(s) or designated candidate for Manager, or if the OWNER'S
legal representative withdraws his or her notice of the Heir(s)
intent to succeed as OWNER(S) or if the legal representative or
any proposed OWNERS or General Manager fails to timely provide
the required information, DISTRIBUTOR may reinstate or issue a
notice of termination. Nothing in this Section shall waive
DISTRIBUTOR'S right to exercise its Option to Purchase set forth
in Section XIV herein.
B. INCAPACITY OF OWNER
The parties agree that, as used herein, incapacity shall refer to
any physical or mental ailment that, in DISTRIBUTOR'S opinion,
adversely affects OWNER'S ability to meet his or her obligations
under this Agreement. DISTRIBUTOR may terminate this Agreement
when an incapacitated OWNER also is the General Manager
identified herein.
Prior to the effective date of any notice of termination, an
incapacitated OWNER who is also the General Manager, or his or
her legal representative, may propose a new candidate for the
position of General Manager. Such proposal shall be in writing
and shall suspend any pending notice of termination until
DISTRIBUTOR advises DEALER of its approval or disapproval of the
new candidate. Upon receipt of such notice, DISTRIBUTOR and
DEALER shall follow the qualification procedures set forth in
subsection A above.
25
C. NOMINATION OF SUCCESSOR PRIOR TO DEATH OR INCAPACITY OF OWNER
An OWNER owning a majority of DEALER'S stock may nominate a
candidate to assume ownership and/or the position of General
Manager of the dealership upon his or her death or incapacity.
As soon as practicable after such nomination, DISTRIBUTOR will
request such personal financial information from the nominated
OWNER and/or General Manager candidate as it reasonably and
customarily may require in evaluating such candidates.
DISTRIBUTOR shall apply criteria then currently used by
DISTRIBUTOR in qualifying OWNERS and/or General Managers of
authorized dealers. Upon receipt of all requested information,
DISTRIBUTOR shall either approve or disapprove such candidate.
If DISTRIBUTOR initially approves the candidate, said approval
shall remain in effect for the duration of the current Agreement.
DISTRIBUTOR agrees that DEALER may renominate the candidate after
the expiration of this Agreement, and DISTRIBUTOR will approve
such nomination provided: (i) DISTRIBUTOR and DEALER have
entered into a new LEXUS Dealer Agreement; and (ii) the proposed
candidate continues to comply with the then current criteria used
by DISTRIBUTOR in qualifying such candidates. If DISTRIBUTOR
does not initially qualify the candidate, DISTRIBUTOR agrees to
review the reason(s) for its decision with OWNER. OWNER is free
at any time to renew its nomination. However, in such instances,
the candidate must again qualify pursuant to the then current
criteria. OWNER may, by written notice, withdraw a nomination at
any time, even if DISTRIBUTOR has previously qualified said
candidate.
XVI. TERMINATION
A. VOLUNTARY TERMINATION BY DEALER
DEALER may voluntarily terminate this Agreement at any time by
written notice to DISTRIBUTOR. Termination shall be effective
thirty (30) days after receipt of the notice by DISTRIBUTOR,
unless otherwise mutually agreed in writing.
B. TERMINATION FOR CAUSE
1. IMMEDIATE TERMINATION
DEALER and DISTRIBUTOR agree that the following conduct is
within DEALER'S control and is so
26
contrary to the goals, purposes and objectives of this
Agreement as to warrant its immediate termination.
Accordingly, DEALER agrees that if it engages in any of the
following types of conduct, DISTRIBUTOR shall have the right
to terminate this Agreement immediately:
a. If DEALER fails to conduct any customary dealership
operations for seven consecutive business days, except
in the event such closure or cessation of operation is
caused by some physical event beyond the control of the
DEALER, such as strikes, civil war, riots, fires,
floods, earthquakes, or other acts of God;
b. If DEALER becomes insolvent, or files any petition
under bankruptcy law, or executes an assignment for the
benefit of creditors, or appoints a receiver or trustee
or another officer having similar powers is appointed
for DEALER and is not removed within thirty (30) days
from his appointment thereto or there is any levy under
attachment or execution or similar process which is not
vacated or removed by payment or bonding within ten
(10) days;
c. If DEALER, or any OWNER or Officer of DEALER is
convicted of any felony;
d. If DEALER or any OWNER, Officer or General Manager of
Dealer makes any material misrepresentation to
DISTRIBUTOR; or
e. If DEALER fails to obtain or maintain any license,
permit or authorization necessary for the conduct by
DEALER of his or her business pursuant to this
Agreement, or such license, permit or authorization is
suspended or revoked.
2. TERMINATION UPON SIXTY DAYS NOTICE
The following conduct violates the terms and conditions of this
Agreement and, if DEALER engages in such conduct, DISTRIBUTOR
shall have the right to terminate this Agreement upon sixty (60)
days notice:
a. 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
27
transfer, assignment or delegation by DEALER of any of the
responsibilities assumed by it under this Agreement without
the prior written approval of DISTRIBUTOR;
b. Any unreasonable removal of the General Manager;
c. Appointment of a new General Manager without the prior
written approval of DISTRIBUTOR;
d. The conducting, directly or indirectly, of any LEXUS dealer
operation other than at the Approved Location(s);
e. Failure of DEALER to pay DISTRIBUTOR for any LEXUS Products;
f. Failure of DEALER to establish or maintain during the
existence of this Agreement the required net working capital
or adequate flooring and lines of credit;
g. Any dispute, disagreement or controversy among managers,
officers or stockholders of DEALER that, in the reasonable
opinion of DISTRIBUTOR, adversely affects the ownership,
operation, management, business, reputation or interests of
DEALER or DISTRIBUTOR;
h. Retention by DEALER of any General Manager, who, in
DISTRIBUTOR'S reasonable opinion, is not competent or, if
previously approved by DISTRIBUTOR, no longer possesses the
requisite qualifications for the position, or who has acted
in a manner contrary to the continued best interest of both
DEALER and DISTRIBUTOR;
i. Impairment of the reputation of financial standing of DEALER
subsequent to the execution of this Agreement;
j. Refusal to permit DISTRIBUTOR to examine or audit DEALER'S
accounting records as provided herein upon receipt by DEALER
from DISTRIBUTOR of written notice requesting such
permission or information;
28
k. Failure of DEALER to timely furnish accurate sales or
financial information and related supporting data;
l. Breach or violation by DEALER of any other term or provision
of this Agreement; or
m. Any civil or administrative liability found against DEALER
or any OWNER or Officer of DEALER for any automotive-related
matter which in DISTRIBUTOR'S opinion tends to seriously and
adversely affect the ownership, operation, management,
reputation, business or interests of DEALER, or to impair
the goodwill associated with the LEXUS Marks.
3. TERMINATION FOR FAILURE OF PERFORMANCE
If, upon evaluation of DEALER's performance pursuant to
paragraphs VII(F), X(F), X(B) or XII(E) herein, DISTRIBUTOR
concludes that DEALER has failed to perform adequately its sales,
service or customer satisfaction responsibilities or to provide
adequate dealership facilities, DISTRIBUTOR shall notify DEALER
in writing of such failure(s) and will endeavor to review
promptly with DEALER the nature and extent of such failure(s),
and will grant DEALER 180 days or such other period as may be
required by law to correct such failure(s). If DEALER fails or
refuses to correct such failure(s) or has not made substantial
progress towards remedying such failure(s) at the expiration of
such period, DISTRIBUTOR may terminate this Agreement upon sixty
(60) days notice or such other notice as may be required by law.
4. TERMINATION UPON DEATH OR INCAPACITY
Subject to certain exceptions identified in Section XV,
DISTRIBUTOR may terminate this Agreement in the event of the
death of an OWNER or upon the incapacity of any OWNER who is also
the General Manager identified herein, upon written notice to
DEALER and such OWNER'S legal representative. Termination, upon
either of these events shall be effective ninety (90) days from
the date of such notice.
29
C. NOTICE OF TERMINATION
Any notice of termination under this Agreement shall be in
writing and shall be mailed to person(s) designated to receive
such notice, via certified mail, or shall be delivered in person.
Such notice shall be effective upon the date of receipt.
DISTRIBUTOR shall state the grounds on which it relies in its
termination of DEALER, and shall have the right to amend such
notice as appropriate. DISTRIBUTOR'S failure to refer to
additional grounds for termination shall not constitute a waiver
of its right later to rely upon such grounds.
D. CONTINUANCE OF BUSINESS RELATIONS
Upon receipt of any notice of termination or non-renewal, DEALER
agrees to conduct itself and its operation until the effective
date of termination or non-renewal in a manner that will not
injure the reputation or goodwill of the LEXUS Marks or
DISTRIBUTOR.
E. REPURCHASE PROVISIONS
1. DISTRIBUTOR'S Obligations
Upon the expiration or termination of this Agreement,
DISTRIBUTOR shall have the right to cancel any and all
shipments of LEXUS Products scheduled for delivery to DEALER
and DISTRIBUTOR shall repurchase from DEALER the following:
a. New, unused, unmodified and undamaged LEXUS Motor
Vehicles then unsold in DEALER'S inventory. The price
of such Motor Vehicles shall be the same as those at
which they were originally purchased by DEALER, less
all prior refunds or other allowances made by
DISTRIBUTOR to DEALER with respect thereto.
b. New, unused and undamaged LEXUS parts and accessories
then unsold in DEALER'S inventory that are in good and
saleable condition. The prices for such parts and
accessories shall be the prices last established by
DISTRIBUTOR for the sale of identical parts or
accessories to dealers in the area in which DEALER is
located.
c. Special service tools recommended by DISTRIBUTOR and
then owned by DEALER and
30
that are especially designed for servicing LEXUS Motor
Vehicles. The prices for such special service tools
will be the price paid by DEALER less appropriate
depreciation, or such other price as the parties may
negotiate.
d. Signs that DISTRIBUTOR has recommended for
identification of DEALER. The price of such signs
shall be the price paid by DEALER less appropriate
depreciation or such other price as the parties may
negotiate.
2. RESPONSIBILITIES OF DEALER
DISTRIBUTOR'S obligations to repurchase the items set forth
in this Section are contingent upon DEALER fulfilling the
following obligations:
a. Within thirty (30) days after the date of expiration or
the effective date of termination of this Agreement,
DEALER shall deliver or mail to DISTRIBUTOR a detailed
inventory of all items referred to in this Section
which it requests DISTRIBUTOR repurchase and shall
certify that such list is true and accurate.
b. DEALER shall be entitled to request repurchase of only
those items which it purchased from DISTRIBUTOR, unless
DISTRIBUTOR agrees otherwise.
c. Products and special service tools to be repurchased by
DISTRIBUTOR from DEALER shall be delivered by DEALER to
DISTRIBUTOR'S place of business at DEALER'S expense.
If DEALER fails to do so, DISTRIBUTOR may transfer such
items and deduct the cost therefor from the repurchase
price.
d. DEALER will execute and deliver to DISTRIBUTOR
instruments satisfactory to DISTRIBUTOR conveying good
and marketable title to the aforesaid items to
DISTRIBUTOR. If such items are subject to any lien or
charge of any kind, DEALER will procure the discharge
in satisfaction thereof prior to their repurchase by
DISTRIBUTOR. DEALER will comply with the requirements
of any state or federal laws
31
that relate to the repurchase including bulk sales or
transfer laws.
e. DEALER will remove, at its own expense, all signage
from DEALER'S approved locations including all LEXUS
Marks before it is eligible for payment hereunder.
3. PAYMENT BY DISTRIBUTOR
DISTRIBUTOR will pay DEALER for such items as DEALER may
request be repurchased and that qualify hereunder as soon as
practicable upon DEALER'S compliance with the obligations
set forth herein and upon computation of any outstanding
indebtedness of DEALER to DISTRIBUTOR.
DISTRIBUTOR shall have the right to offset from any amounts
due to DEALER hereunder the total sum of DEALER'S
outstanding indebtedness to DISTRIBUTOR.
If DEALER disagrees with DISTRIBUTOR'S valuation of any item
herein, and DEALER and DISTRIBUTOR have not resolved their
disagreement within sixty (60) days of the effective date of
termination or expiration of this Agreement, DISTRIBUTOR
shall pay to DEALER the amount to which it reasonably
believes DEALER is entitled. DEALER'S exclusive remedy to
recover any additional sums that it believes is due under
this Section shall be by resort to an Alternative Dispute
Resolution program, including arbitration, that is binding
on both parties.
XVII. MANAGEMENT OF DISPUTES
A. ALTERNATIVE DISPUTE RESOLUTION PROGRAMS
1. DISTRIBUTOR and DEALER acknowledge that disputes involving
the performance of this Agreement may from time to time
arise. In order to minimize the effects of such disputes on
their business relationship, the parties agree to
participate in such Alternative Dispute Resolution programs
as may be established by DISTRIBUTOR.
2. Such Alternative Dispute Resolution programs may be
established to resolve disputes in matters including, but
limited to, sales reporting and/or sales credit disputes,
product
32
allocation disputes, DEALER liability for repair/replace
claims, warranty and service campaign reimbursement, sales
contests and merchandising incentive programs, and accounts
of debt between the parties.
3. In all disputes between DEALER and DISTRIBUTOR, the parties
shall first resort to such Alternative Dispute Resolution
programs, including mediation, as may have been established
by DISTRIBUTOR.
4. It is expressly understood that, unless otherwise specified
in this Agreement, the results of any Alternative Dispute
Resolution program will not be binding upon DEALER or
DISTRIBUTOR.
5. The parties' commitment to support and participate in non-
binding Alternative Dispute Resolution programs specifically
is not a waiver of DEALER'S or DISTRIBUTOR'S right to later
resort to litigation before any judicial or administrative
forum.
B. APPLICABLE LAW
This Agreement shall be governed by and construed according to
the laws of the state in which DEALER is located.
C. MUTUAL RELEASE
Each party hereby releases the other from any and all claims and
causes of action that it may have against the other for money
damages arising from any event occurring prior to the date of
execution of this Agreement, except for any accounts payable by
one party to the other as a result of the purchase of any LEXUS
Products, audit adjustments or reimbursement for any services.
This release does not extend to claims which either party does
not know or reasonably suspect to exist in its favor at the time
of the execution of this Agreement.
XVIII. DEFENSE AND INDEMNIFICATION
A. DEFENSE AND INDEMNIFICATION BY DISTRIBUTOR
DISTRIBUTOR agrees to assume the defense of DEALER and to
indemnify and hold DEALER harmless in any lawsuit naming DEALER
as a defendant and involving any LEXUS Product when the lawsuit
also involves allegations of:
33
1. Breach of warranty provided by DISTRIBUTOR, bodily injury or
property damage arising out of an occurrence allegedly
caused solely by a defect or failure to warn of a defect in
design, manufacture or assembly of a LEXUS Product (except
for tires not manufactured by FACTORY), provided that the
defect could not reasonably have been discovered by DEALER
during the pre-delivery service of the LEXUS Product;
2. Any misrepresentation or misleading statement or unfair or
deceptive trade practice of DISTRIBUTOR; or
3. Any damage to a LEXUS Product purchased by DEALER from
DISTRIBUTOR that was repaired by DISTRIBUTOR and where
DEALER had not been notified of such damage in writing prior
to the delivery of the subject vehicle, part or accessory to
a retail Customer; and
Provided:
4. That DEALER delivers to DISTRIBUTOR, in a manner to be
designated by DISTRIBUTOR, within twenty (20) days of the
service of any summons or complaint, copies of such
documents and requests in writing a defense and/or
indemnification therein (except as provided in Paragraph (D)
below);
5. That the complaint does not involve allegations of DEALER
misconduct, including but not limited to, improper or
unsatisfactory service or repair, misrepresentation, or any
claim of DEALER'S unfair or deceptive trade practice;
6. That the LEXUS Product which is the subject of the lawsuit
was not altered by or for DEALER;
7. That DEALER agrees to cooperate fully in the defense of such
action as DISTRIBUTOR may reasonably require; and
8. That DEALER agrees that DISTRIBUTOR may offset any recovery
on DEALER'S behalf against any indemnification that may be
required hereunder.
B. DEFENSE AND INDEMNIFICATION BY DEALER
DEALER agrees to assume the defense of DISTRIBUTOR or FACTORY and
to indemnify and hold them harmless
34
in any lawsuit naming DISTRIBUTOR or FACTORY as a defendant when
the lawsuit involves allegations of:
1. DEALER'S alleged failure to comply, in whole or in part,
with any obligations assumed by DEALER pursuant to this
Agreement;
2. DEALER'S alleged negligent or improper repairing or
servicing of a new or used LEXUS Motor Vehicle or equipment,
or such other motor vehicles or equipment as may be sold or
serviced by DEALER;
3. DEALER'S alleged breach of any contract or warranty other
than that provided by DISTRIBUTOR or FACTORY;
4. DEALER'S alleged misleading statements, misrepresentations,
or deceptive or unfair trade practices;
5. Any modification or alteration made by or on behalf of
DEALER to a LEXUS Product, except those made pursuant to the
express instruction or with the express approval of
DISTRIBUTOR; and
Provided:
6. That DISTRIBUTOR delivers to DEALER, within twenty (20) days
of the service of any summons or complaint, copies of such
documents, and requests in writing a defense and/or
indemnification therein (except as provided in Paragraph (D)
below);
7. That DISTRIBUTOR agrees to cooperate fully in the defense of
such action as DEALER may reasonably require; and,
8. That the complaint does not involve allegations of liability
premised upon separate DISTRIBUTOR'S conduct or omissions.
C. CONDITIONAL DEFENSE AND/OR INDEMNIFICATION
In agreeing to defend and/or indemnify each other, DEALER and
DISTRIBUTOR may make their agreement conditional on the continued
existence of the state of facts as then known to such party and
may provide for the withdrawal of such defense and/or
indemnification at such time as facts arise which, if known at
the time of the original request for a
35
defense and/or indemnification, would have caused either DEALER
or DISTRIBUTOR to refuse such request.
The party withdrawing from its agreement to defend and/or
indemnify shall give timely notice of its intent to withdraw.
Such notice shall be in writing and shall be effective upon
receipt. The withdrawing party shall be responsible for all
costs and expenses of defense up to the date of receipt of its
notice of withdrawal.
D. THE EFFECT OF SUBSEQUENT DEVELOPMENTS
In the event that subsequent developments in a case make clear
that the allegations which initially preclude a request or an
acceptance of a request for a defense and/or indemnification are
no longer at issue therein or are without foundation, any party
having a right to a defense and/or indemnification hereunder may
tender such request for a defense and indemnification to the
other party. Neither DEALER nor DISTRIBUTOR shall be required to
agree to such subsequent request for a defense and/or
indemnification where that party would be unduly prejudiced by
such delay.
E. TIME TO RESPOND AND RESPONSIBILITIES OF THE PARTIES
DEALER and DISTRIBUTOR shall have sixty (60) days from the
receipt of a request for a defense and/or indemnification to
conduct an investigation to determine whether or not, or under
what conditions, it may agree to defend and/or indemnify pursuant
to this Section.
If local rules require a response to the complaint in the lawsuit
prior to the time provided hereunder for a response to such
request, the requesting party shall take all steps necessary,
including obtaining counsel, to protect its own interest in the
lawsuit until DEALER or DISTRIBUTOR assumes the requested defense
and/or indemnification. In the event that DEALER or DISTRIBUTOR
agrees to assume the defense and/or indemnification of a lawsuit,
it shall have the right to engage and direct counsel of its own
choosing and, except in cases where the request is made pursuant
to Paragraph (D) above, shall have the obligation to reimburse
the requesting party for all reasonable costs and expense,
including actual attorneys' fees, incurred prior to such
assumption.
36
XIX. GENERAL PROVISIONS
A. NOTICES
Except as otherwise specifically provided herein, any notice
required to be given by either party to the other shall be in
writing and delivered personally or by certified mail, return
receipt requested, and shall be effective from the date of
mailing. Notices to DEALER shall be directed to DEALER or its
General Manager at DEALER'S Approved Location. Notices to
DISTRIBUTOR shall be directed to the General Manager of DEALER'S
LEXUS Area Office.
B. NO IMPLIED WAIVERS
The failure of either party at any time to require performance by
the other party of any provision herein shall in no way affect
the right of such party to require such performance at any time
thereafter, nor shall any waiver by any party of a breach of any
provision herein constitute a waiver of any succeeding breach of
the same or any other provision, nor constitute a waiver of the
provision itself.
C. SOLE AGREEMENT OF THE PARTIES
There are no prior agreements or understandings, either oral or
written, between the parties affecting this Agreement or relating
to the sale or service of LEXUS Products, except as otherwise
specifically provided for or referred to in this Agreement.
DEALER acknowledges that no representations or statements other
than those expressly set forth therein were made by DISTRIBUTOR
or any officer, employee, agent or representative thereof, or
were relied upon by DEALER in entering into this Agreement. This
Agreement cancels and supersedes all previous agreements between
the parties relating to the subject matters covered herein.
D. DEALER NOT AN AGENT OR REPRESENTATIVE
DEALER is an independent business. This Agreement is not a
property right and does not constitute DEALER the agent or legal
representative of DISTRIBUTOR or FACTORY for any purpose
whatsoever. DEALER is not granted any express or implied right
or authority to assume or create any obligation on behalf of or
in the name of DISTRIBUTOR or FACTORY
37
or to bind DISTRIBUTOR or FACTORY in any manner whatsoever.
E. ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES
This is a personal services agreement and may not be assigned or
sold in whole or in part, directly or indirectly, voluntarily or
by operation of law, without the prior written approval of
DISTRIBUTOR. Any attempted transfer, assignment or sale without
DISTRIBUTOR'S prior written approval will be void and not binding
upon DISTRIBUTOR.
F. NO FRANCHISE FEE
DEALER warrants that it has paid no fee, nor has it provided any
goods or services in lieu of same, to DISTRIBUTOR in
consideration of entering into this Agreement. The sole
consideration for DISTRIBUTOR'S entering into this Agreement is
DEALER'S ability, integrity, assurance of personal services and
expressed intention to deal fairly and equitably with DISTRIBUTOR
and the public.
G. SEVERABILITY
If any provision of this Agreement should be held invalid or
unenforceable for any reason whatsoever, or conflicts with any
applicable law, this Agreement will be considered divisible as to
such provisions, and such provisions will be deemed amended to
comply with such law, or if it cannot be so amended without
materially affecting the tenor of the Agreement, then it will be
deemed deleted from this Agreement in such jurisdiction, and in
either case, the remainder of the initial Agreement will be valid
and binding.
H. NEW AND SUPERSEDING DEALER AGREEMENTS
In the event any new and superseding form of dealer agreement is
offered by DISTRIBUTOR to authorized LEXUS dealers generally at
any time prior to the expiration of the term of this Agreement,
DISTRIBUTOR, may, by written notice to DEALER, replace this
Agreement with a new agreement in a new and superseding form for
a term not less than the then unexpired term of this Agreement.
I. BENEFIT
This Agreement is entered into by and between DISTRIBUTOR and
DEALER for their sole and mutual benefit. Neither this Agreement
nor any specified
38
provision contained in it is intended or shall be construed to be
for the benefit of any third party.
XX. DEFINITIONS
As used in this Agreement, the parties agree that the following terms
shall be defined exclusively as set forth below:
A. DEALER: The entity that executes the Dealer Agreement and is
authorized by DISTRIBUTOR to sell and service LEXUS Products.
B. OWNER: The persons identified in Section II hereof.
C. GENERAL MANAGER: The person identified in Section III hereof.
D. DEALER FACILITIES: The buildings, improvements, fixtures, and
equipment situated at the Approved Location(s).
E. APPROVED LOCATION(S): The location(s) and any facilities
thereon, designated in Section IV that DISTRIBUTOR has approved
for the dealership operation(s) specified therein.
F. LEXUS MARKS: The various LEXUS trademarks, service marks, names,
logos and designs that DEALER is authorized by DISTRIBUTOR to use
in the sale and servicing of LEXUS Products.
G. LEXUS MOTOR VEHICLES: All motor vehicles identified in the
current LEXUS Product Addendum that DISTRIBUTOR sells to DEALER
for resale.
H. GENUINE LEXUS PARTS AND ACCESSORIES: All LEXUS brand Parts and
Accessories manufactured by or on behalf of DISTRIBUTOR or
FACTORY, or other parts and accessories specifically approved by
FACTORY for use in servicing LEXUS Motor Vehicles and sold by
DISTRIBUTOR to DEALER for resale.
I. LEXUS PRODUCTS: All LEXUS Motor Vehicles, Parts and Accessories
that DISTRIBUTOR, in its sole discretion, sells to DEALER for
resale. The term "LEXUS PRODUCTS" specifically excludes any
motor vehicle, part or accessory imported into the United States
by any individual or company other than DISTRIBUTOR.
39