AUDI DEALER AGREEMENT
STANDARD PROVISIONS
STANDARD PROVISIONS
Article 1 . . . . . . . . . . . . . . . . . . . . . . . . 1
Basic Obligations of Distributor . . . . . . . . . . . . 1
Supply of Authorized Products . . . . . . . . . . . . 1
Assistance . . . . . . . . . . . . . . . . . . . . . 1
Compliance with Ethical Standards . . . . . . . . . . 1
Article 2 . . . . . . . . . . . . . . . . . . . . . . . . 1
Basic Obligations of Dealer . . . . . . . . . . . . . . 1
Sales, Service and Parts Supply . . . . . . . . . . . 1
Compliance with Ethical Standards . . . . . . . . . . 2
Operating Standards . . . . . . . . . . . . . . . . . 2
Disclaimer of Further Liability by Distributor . . . 2
Article 3 . . . . . . . . . . . . . . . . . . . . . . . . 2
General Requirements for Dealer's Facilities . . . . . . 2
Dealer's Premises . . . . . . . . . . . . . . . . . . 2
Business Hours . . . . . . . . . . . . . . . . . . . 2
Article 4 . . . . . . . . . . . . . . . . . . . . . . . . 2
Identification; Advertising . . . . . . . . . . . . . . 2
Use of Authorized Trademarks . . . . . . . . . . . . 2
Signs . . . . . . . . . . . . . . . . . . . . . . . . 3
Stationery . . . . . . . . . . . . . . . . . . . . . 3
Advertising . . . . . . . . . . . . . . . . . . . . . 3
Article 5 . . . . . . . . . . . . . . . . . . . . . . . . 3
Sales . . . . . . . . . . . . . . . . . . . . . . . . . 3
Sales Promotion . . . . . . . . . . . . . . . . . . 3
Sales Performance . . . . . . . . . . . . . . . . . . 4
Sales Outside Area . . . . . . . . . . . . . . . . . 4
Sales Facilities . . . . . . . . . . . . . . . . . . 4
Defective or Damaged Authorized Products . . . . . . 4
Changes by Dealer to Authorized Products . . . . . . 5
Product Changes by Dealer Neither Requested by
Distributor nor Required by Law . . . . . . . . . . 5
Used Car Operations . . . . . . . . . . . . . . . . . 5
Article 6 . . . . . . . . . . . . . . . . . . . . . . . . 6
Parts . . . . . . . . . . . . . . . . . . . . . . . . . 6
Parts Promotion . . . . . . . . . . . . . . . . . . . 6
Parts Department . . . . . . . . . . . . . . . . . . 6
Sale of Non-genuine Parts . . . . . . . . . . . . . . . . . 6
Parts Inventory . . . . . . . . . . . . . . . . . . . . . . 6
Article 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Quality and Promotion of Service . . . . . . . . . . . . . 6
Use of Non-genuine Parts . . . . . . . . . . . . . . . . . 7
Owner's Documents . . . . . . . . . . . . . . . . . . . . 7
Maintenance and Other Services Without Customer Charge . . 7
Repeated Repairs . . . . . . . . . . . . . . . . . . . . . 7
Article 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Dealer's Purchases and Inventories . . . . . . . . . . . . . 8
Purchase Prices . . . . . . . . . . . . . . . . . . . . . 8
Orders and Acceptance . . . . . . . . . . . . . . . . . . 8
Inventories . . . . . . . . . . . . . . . . . . . . . . . 8
Product Allocation . . . . . . . . . . . . . . . . . . . . 8
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Payment by Dealer . . . . . . . . . . . . . . . . . . . . 9
Passing of Title; Security Interest . . . . . . . . . . . 9
Passing of Risks . . . . . . . . . . . . . . . . . . . . . 9
Responsibility for Defects and Damage . . . . . . . . . . 10
Claims for Incomplete Delivery . . . . . . . . . . . . . . 10
Changes of Specifications . . . . . . . . . . . . . . . . 10
Failure of or Delay in Delivery by Distributor . . . . . . 11
Return or Diversion on Dealer's Failure to Accept . . . . 11
Article 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Warranty to Customers . . . . . . . . . . . . . . . . . . . . 11
Distributor's Warranties . . . . . . . . . . . . . . . . . 11
Incorporation of Distributor's Warranties in Dealer's
Sales . . . . . . . . . . . . . . . . . . . . . . . . . 12
Warranty Procedures . . . . . . . . . . . . . . . . . . . 12
Article 10 . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dealer's Record Keeping and Reports; Inspection of
Dealer's Operations . . . . . . . . . . . . . . . . . . . . 12
Dealer's Forms, Business Machines, Office Equipment
and Bookkeeping . . . . . . . . . . . . . . . . . . . 12
Financial Statements to be Supplied by Dealer . . . . . 13
Reports to be Supplied by Dealer . . . . . . . . . . . . 13
Inspection of Dealer's Operations and Records . . . . . 13
Article 11 . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dealer Performance Review . . . . . . . . . . . . . . . . . . 13
Evaluation and Assistance . . . . . . . . . . . . . . . . 13
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Evaluation of Dealer's Vehicle Sales Performance . . . . 13
Evaluation of Dealer's New Authorized Automobile
Sales Performance . . . . . . . . . . . . . . . . 13
Other Dealers in Dealer's Area . . . . . . . . . . . 14
Market Analysis Data . . . . . . . . . . . . . . . . 14
Evaluation of Dealer's Used Car Sales Performance . . . 14
Evaluation of Dealer's Service Performance . . . . . . . 14
Evaluation of Dealer's Parts Performance . . . . . . . . 15
Evaluation of Dealer's Premises . . . . . . . . . . . . 15
Article 12 . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Succeeding Dealers . . . . . . . . . . . . . . . . . . . . . 15
Procedure . . . . . . . . . . . . . . . . . . . . . . . . 15
Approvals . . . . . . . . . . . . . . . . . . . . . . . . 15
Right of First Refusal . . . . . . . . . . . . . . . . . . 16
Successorship . . . . . . . . . . . . . . . . . . . . . . 17
Modification of Terms of Payment . . . . . . . . . . . . . 17
Article 13 . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Termination . . . . . . . . . . . . . . . . . . . . . . . . . 18
Immediate Termination by Distributor . . . . . . . . . . . 18
Termination by Distributor on 90 Days' Notice . . . . . . 19
Discussions with Dealer. . . . . . . . . . . . . . . . . . 19
Modification of Terms of Payment . . . . . . . . . . . . . 20
No Waiver by Failure to Terminate . . . . . . . . . . . . 20
Termination by Dealer . . . . . . . . . . . . . . . . . . 20
Continuation of Business Relations after Termination . . . 20
Superseding Agreements . . . . . . . . . . . . . . . . . . 20
Agreements with Affiliates of Distributor . . . . . . . . 21
Article 14 . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Rights and Liabilities upon Termination . . . . . . . . . . . 21
Distributor's Obligations . . . . . . . . . . . . . . . . 21
New Authorized Automobile Inventory . . . . . . . . . . 21
New Genuine Parts Inventory . . . . . . . . . . . . . . 21
Tools and Equipment . . . . . . . . . . . . . . . . . . 22
Authorized Signs . . . . . . . . . . . . . . . . . . . 22
Terms of Sale . . . . . . . . . . . . . . . . . . . . . . 22
Pending Orders and Dealer's Obligations . . . . . . . . . 23
Removal of Authorized Signs . . . . . . . . . . . . . . . 23
Authorized Trademarks . . . . . . . . . . . . . . . . . . 23
Orders and Files . . . . . . . . . . . . . . . . . . . . . 23
Customer Lists . . . . . . . . . . . . . . . . . . . . . . 23
Literature . . . . . . . . . . . . . . . . . . . . . . . . 23
Specific Performance . . . . . . . . . . . . . . . . . . . 24
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Article 15 . . . . . . . . . . . . . . . . . . . . . . . . . 24
Definitions . . . . . . . . . . . . . . . . . . . . . . . . 24
Authorized Automobiles . . . . . . . . . . . . . . . . . 24
Authorized Products . . . . . . . . . . . . . . . . . . 24
Authorized Signs . . . . . . . . . . . . . . . . . . . . 24
Authorized Trademarks . . . . . . . . . . . . . . . . . 25
Dealer's Area . . . . . . . . . . . . . . . . . . . . . 25
Dealer's Executives . . . . . . . . . . . . . . . . . . 25
Dealer's Nominee . . . . . . . . . . . . . . . . . . . . 25
Dealer's Operations . . . . . . . . . . . . . . . . . . 26
Dealer's Owners . . . . . . . . . . . . . . . . . . . . 26
Dealer's Premises . . . . . . . . . . . . . . . . . . . 26
Distributor . . . . . . . . . . . . . . . . . . . . . . 26
Distributor's Warranties . . . . . . . . . . . . . . . . 26
Genuine Parts . . . . . . . . . . . . . . . . . . . . . 26
Manufacturer . . . . . . . . . . . . . . . . . . . . . . 26
Net Working Capital, Owner's Equity and Wholesale
Credit . . . . . . . . . . . . . . . . . . . . . . . . 26
Operating Standards . . . . . . . . . . . . . . . . . . 26
Owner's Documents . . . . . . . . . . . . . . . . . . . 26
Recommendations . . . . . . . . . . . . . . . . . . . . 26
Article 16 . . . . . . . . . . . . . . . . . . . . . . . . . 27
General Provisions. . . . . . . . . . . . . . . . . . . . . 27
Dealer Not an Agent . . . . . . . . . . . . . . . . . . 27
Authority to Sign . . . . . . . . . . . . . . . . . . . 27
Variations; Modifications; Amendments . . . . . . . . . 27
Entire Agreement . . . . . . . . . . . . . . . . . . . . 27
Release of Claims under Prior Agreements . . . . . . . . 27
Agreement Non-transferable . . . . . . . . . . . . . . . 27
Defense and Indemnification . . . . . . . . . . . . . . 28
Notices . . . . . . . . . . . . . . . . . . . . . . . . 28
Waivers . . . . . . . . . . . . . . . . . . . . . . . . 28
Titles . . . . . . . . . . . . . . . . . . . . . . . . . 28
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STANDARD PROVISIONS
ARTICLE 1
BASIC OBLIGATIONS OF DISTRIBUTOR
SUPPLY OF AUTHORIZED PRODUCTS
(1) Distributor will sell and deliver Authorized Products to Dealer in
accordance with this Agreement.
ASSISTANCE
(2) Distributor will actively assist Dealer in all aspects of Dealer's
Operations through such means as Distributor considers appropriate, including:
(a) Periodic reviews of Dealer's compliance with this Agreement
and the Operating Standards;
(b) Recommendations; and
(c) Schools, special training and meetings for Dealer's personnel.
COMPLIANCE WITH ETHICAL STANDARDS
(3) In the conduct of its business, Distributor will:
(a) Safeguard and promote the reputation of Authorized Products and
the Manufacturer;
(b) Refrain from all conduct which might be harmful to the
reputation or marketing of Authorized Products or inconsistent with the
public interest; and
(c) Avoid all discourteous, deceptive, misleading or unethical
practices.
ARTICLE 2
BASIC OBLIGATIONS OF DEALER
SALES, SERVICE AND PARTS SUPPLY
(1) Dealer assumes the responsibility in Dealer's Area for the promotion
and sale of Authorized Products and for the supply of Genuine Parts and
customer service for Authorized Products. This Agreement does not give Dealer
any exclusive right to sell or service Authorized Products in any area or
territory.
COMPLIANCE WITH ETHICAL STANDARDS
(2) In the conduct of its business, Dealer will:
(a) Safeguard and promote the reputation of Authorized Products, the
Manufacturer and Distributor;
(b) Refrain from all conduct which might be harmful to the reputation
or marketing of Authorized Products or inconsistent with the public
interest; and
(c) Avoid all discourteous, deceptive, misleading or unethical
practices.
OPERATING STANDARDS
(3) The Operating Standards are part of this Agreement and are
incorporated herein by this reference.
DISCLAIMER OF FURTHER LIABILITY BY DISTRIBUTOR
(4) Except as expressly provided in this Agreement, Distributor is not
liable for any expenditure made or liability incurred by Dealer in connection
with Dealer's performance of its obligations under this Agreement.
ARTICLE 3
GENERAL REQUIREMENTS FOR DEALER'S FACILITIES
DEALER'S PREMISES
(1) Dealer's Premises will conform to the requirements of this
Agreement, the Operating Standards and such other standards as Distributor
may prescribe from time to time.
BUSINESS HOURS
(2) Unless otherwise agreed by Distributor in writing, Dealer will operate
Dealer's Premises during the customary business hours of the trade in Dealer's
Area.
ARTICLE 4
IDENTIFICATION; ADVERTISING
USE OF AUTHORIZED TRADEMARKS
(1) Distributor will supply Dealer, from time to time, with trademark
standards to assist Dealer in the proper usage of Authorized Trademarks.
Dealer will use Authorized Trademarks only in connection with the promotion
and sale of new Authorized
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Products and customer service for Authorized Products pursuant to this
Agreement, and only in the manner and for the purposes Distributor specifies.
Dealer will not use any Authorized Trademark as part of its corporate or
business name without the prior written consent of Distributor. Dealer also
may use Authorized Trademarks in connection with the sale of used automobiles
if Dealer complies fully with Distributor's requirements relating to used car
sales under the Authorized Trademarks. If Dealer does not comply fully with
these requirements, Dealer may not use any Authorized Trademarks in
connection with its used car sales, except that Dealer may use the words
"Audi" or "Volkswagen" to describe used Authorized Automobiles, if this word
appears in characters and colors different from those usually employed by the
Manufacturer, Distributor and authorized dealers of Distributor.
SIGNS
(2) Dealer will display conspicuously at Dealer's Premises such
Authorized Signs at such locations as Distributor reasonably may require.
Dealer will use its best efforts to obtain all governmental approvals
necessary for such display. If Dealer transfers any of Dealer's Premises to
another location, Dealer immediately will remove all Authorized Signs and
other references to Authorized Products displayed at or around the prior
location.
STATIONERY
(3) All stationery and business forms used in Dealer's Operations will
be prepared in accordance with Recommendations. Dealer's use of Authorized
Trademarks on stationery and business forms will be in accordance with
trademark standards supplied by Distributor.
ADVERTISING
(4) Dealer will advertise Authorized Products and
customer service for Authorized Products only in accordance with reasonable
guidelines and policies established by Distributor. Dealer will refrain from
all false, deceptive, misleading or unlawful advertising. Dealer's
advertising will include, among other things, a listing in a principal local
classified telephone directory in Dealer's Area.
ARTICLE 5
SALES
SALES PROMOTION
(1) Dealer will use its best efforts to promote the sale of Authorized
Automobiles in Dealer's Area, in reasonable proportion to the intensity of
consumer demand, through regular contacts
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with owners, users, and prospective owners and users of Authorized Products;
through promotion, prospecting and follow-up programs; and through such means
as may be indicated from time to time by Recommendations.
SALES PERFORMANCE
(2) Dealer will achieve the best sales performance possible in Dealer's
Area for each model and type of Authorized Automobile.
SALES OUTSIDE AREA
(3) Subject to Dealer's performance of its obligations under Article
5(2), Distributor does not restrict Dealer's sale of Authorized Automobiles
within the 50 United States. Distributor hereby informs Dealer, however, that
Distributor has no authority to sell any products for distribution outside
the United States, and it is Distributor's policy not to do so. Dealer
acknowledges its understanding that this is intended to preserve the
integrity of the orderly worldwide distribution network for the products
supplied to Distributor, and to maximize customer satisfaction by ensuring
that Authorized Products meet the certification and operational standards to
which they were designed. Dealer therefore is authorized to sell new
Authorized Products only in the 50 United States, and is not authorized to,
and agrees it will not, sell any new Authorized Product for sale or use
elsewhere.
SALES FACILITIES
(4) Dealer's sales facilities will conform to the requirements of the
Operating Standards and such other reasonable standards as Distributor may
prescribe, after review with Dealer.
DEFECTIVE OR DAMAGED AUTHORIZED PRODUCTS
(5) If any Authorized Product sold by Distributor to Dealer should become
defective or damaged prior to its delivery by Dealer to a customer, Dealer
agrees to repair such defect or damage so that such Authorized Product is
placed in first-class salable condition prior to such delivery. Dealer
immediately will notify Distributor of any substantial defects or damage and
will follow such procedures for making damage claims as Distributor may
establish from time to time. Distributor shall have the option to repurchase
any Authorized Products with substantial defects or damage at the price at
which they were originally sold by Distributor, less any prior refunds or
allowances made by Distributor and less any insurance proceeds received by
Dealer in respect of such defect or damage. Distributor will make an
equitable adjustment with respect to damage which Dealer can demonstrate
occurred prior to the time of delivery to Dealer.
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CHANGES BY DEALER TO AUTHORIZED PRODUCTS
(6) Distributor may request Dealer to make changes, or not to make
changes, to Authorized Products, and Dealer agrees to comply promptly with
such requests. Dealer also agrees to take such steps as Distributor may
direct it to take to comply with any law or regulation pertaining to safety,
emissions, noise, fuel economy or vehicle labeling. Distributor will
reimburse Dealer at the then-current rate of reimbursement specified by
Distributor for Dealer for Genuine Parts and for labor which may be used by
Dealer in making such required changes on Authorized Products. Parts and
other materials necessary to make such changes may be shipped to Dealer
without Dealer's authorization and Dealer will accept them. Dealer will
receive credit for parts so shipped which prove unnecessary, provided they
are returned or disposed of in accordance with Distributor's instructions.
If the laws of the state in which Dealer is located or a vehicle is to be
registered require motor vehicles to carry equipment not installed or
supplied as standard equipment by the Manufacturer or Distributor, upon
Distributor's request Dealer will, prior to selling any Authorized
Automobiles on which such installation is required, properly install at its
own or its customers' expense equipment conforming to such laws and to
Distributor's standards. Dealer agrees to indemnify the Manufacturer and
Distributor and hold them harmless from any and all liabilities that may
arise out of Dealer's failure or alleged failure to comply with any
obligation assumed by Dealer in this paragraph.
PRODUCT CHANGES BY DEALER NEITHER REQUESTED BY DISTRIBUTOR NOR
REQUIRED BY LAW
(7) If Dealer installs on a new Authorized Automobile any equipment,
accessory or part other than a Genuine Part; sells any new Authorized
Automobile which has been modified; or sells in conjunction with a new
Authorized Automobile a service contract not offered or specifically endorsed
in writing by Distributor, then Dealer will advise the customer of the
identity of the warrantor of such modification, equipment, accessory or part,
or, in the case of a service contract, of the identity of the provider of its
coverage. Dealer will indemnify Distributor against claims that may be
asserted against Distributor in any action by reason of such modification,
equipment, accessory, part or service contract.
USED CAR OPERATIONS
(8) Dealer will use its best efforts to acquire, promote and sell at
retail used Authorized Automobiles and other used automobiles. Dealer's used
car operations will conform to the requirements of the Operating Standards
and such other reasonable standards as Distributor may prescribe, after
review with Dealer.
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ARTICLE 6
PARTS
PARTS PROMOTION
(1) Dealer will use its best efforts to promote the sale of Genuine Parts
in Dealer's Area, in reasonable proportion to the intensity of consumer
demand, through regular contacts with owners, users, and prospective owners
and users of Authorized Products; through promotion, prospecting and
follow-up programs; and through such means as may be indicated from time to
time by Recommendations.
PARTS DEPARTMENT
(2) Dealer's parts department will conform to the requirements of the
Operating Standards and such other reasonable standards as Distributor may
prescribe, after review with Dealer.
SALE OF NON-GENUINE PARTS
(3) Dealer will not sell any parts which are not equivalent in quality
and design to Genuine Parts, if such parts are necessary to the mechanical
operation of Authorized Automobiles. Dealer will not represent as new Genuine
Parts any parts which are not new Genuine Parts. If Dealer sells a part or
accessory which is not a Genuine Part, Dealer will advise the customer of the
identify of the warrantor of such part or accessory.
PARTS INVENTORY
(4) Dealer will maintain an inventory of Genuine Parts which is
sufficient to perform reasonably anticipated warranty service and which is in
proportion to the intensity of consumer demand and wholesale trade
requirements in Dealer's Area for Genuine Parts. Distributor will make
Recommendations for Dealer's inventory of Genuine Parts based on particular
conditions in Dealer's Area, and Dealer will give due consideration to such
Recommendations.
ARTICLE 7
SERVICE
QUALITY AND PROMOTION OF SERVICE
(1) Dealer will provide the best possible customer service for all
owners of Authorized Automobiles and automobiles of the same make formerly
sold by Distributor, and will use its best efforts to promote its customer
service. Dealer's service facilities, equipment and personnel will conform
to the
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requirements of the Operating Standards and other such reasonable
standards as Distributor may prescribe, after review with Dealer.
USE OF NON-GENUINE PARTS
(2) Dealer will not use in the repair or servicing of Authorized
Automobiles any parts which are not equivalent in quality and design to
Genuine Parts, if such parts are necessary to the mechanical operation of
such Authorized Automobiles. Dealer will use only Genuine Parts in performing
warranty service on Authorized Automobiles. Dealer will not represent as new
Genuine Parts any parts used by it in the repair or servicing of Authorized
Automobiles which are not new Genuine Parts.
OWNER'S DOCUMENTS
(3) Upon delivering a new Authorized Automobile to a customer, Dealer
will provide the Owner's Documents supplied by Distributor for such
Authorized Automobile, properly completed by Dealer. Dealer will take all
steps required prior to delivery of the Authorized Automobile and, in
particular, will perform properly the pre-delivery services specified by
Distributor.
MAINTENANCE AND OTHER SERVICES WITHOUT CUSTOMER CHARGE
(4) In accordance with bulletins issued form time to time by Distributor
and Distributor's Warranties, certain maintenance services and other repairs
following delivery of a new Authorized Automobile may be free of charge to
the customer. Upon presentation of an appropriate Owner's Document, Dealer
will perform properly the services required, whether or not the Authorized
Automobile to be serviced was sold by Dealer. Upon submission of appropriate
claims, Distributor will reimburse Dealer for performing such services at the
then-current rate of reimbursement specified by Distributor for Dealer.
Distributor will establish procedures for submitting and processing such
claims and transmitting reimbursements to Dealer. Dealer agrees to comply
with these procedures.
REPEATED REPAIRS
(5) Dealer will notify Distributor of repairs to Authorized Automobiles
pursuant to Distributor's Warranties under each of the following
circumstances:
(a) The Authorized Automobile has been brought to Dealer a specified
number of times for the same complaint; or
(b) The Authorized Automobile has been in Dealer's custody for all
repairs pursuant to Distributor's Warranties a specified number of days.
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Such notification shall be made at the times and by the means
Distributor may have instructed in any then-current dealer warranty manual
issued by Distributor.
ARTICLE 8
DEALER'S PURCHASES AND INVENTORIES
PURCHASE PRICES
(1) Distributor will sell Authorized Products to Dealer at prices and
upon terms established by Distributor from time to time. If Distributor
increases its established prices, Dealer may cancel all orders for Authorized
Products affected by the increase which are unfilled at the time Dealer
receives notice of the increase, by giving Distributor written notice of
cancellation within ten days from the time Dealer receives notice of the
price increase.
ORDERS AND ACCEPTANCE
(2) Dealer will transmit orders for Authorized Products to Distributor
electronically, at the times and for the periods, that Distributor reasonably
requires. With each order, Dealer represents that it is solvent.
Distributor may accept orders in whole or in part. Except as otherwise
expressly provided in Article 8(1), all orders of Dealer will be binding upon
it until they are rejected in writing by Distributor; however, in the event
of a partial acceptance by Distributor, Dealer will not be bound by the
portion of the order not accepted.
INVENTORIES
(3) Dealer will maintain in inventory at all times the inventories of
Authorized Products required by the Operating Standards.
PRODUCT ALLOCATION
(4) Dealer recognizes that certain Authorized Products may not be
available in sufficient supply from time to time because of factors such as
product importation, consumer demand, component shortages, manufacturing
constraints, governmental regulations or other causes. Distributor will
endeavor to make a fair and equitable allocation and distribution of the
Authorized Products available to it.
TAXES
(5) Dealer is responsible for any and all
sales taxes, use taxes, excise taxes (including luxury taxes) and other
governmental charges imposed, levied or based upon the sale of Authorized
Products by Distributor to Dealer. Dealer represents
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and warrants, as of the date of the purchase of each Authorized Product, that
all Authorized Products purchased from Distributor are purchased by Dealer
for resale in the ordinary course of Dealer's business and that Dealer has
complied with all laws relating to the collection and payment of all sales
taxes, use taxes, excise taxes (including luxury taxes) and other
governmental charges applicable to the purchase of such products and will
furnish evidence thereof upon request. If any Authorized Products are put to
taxable use by Dealer, or are purchased by Dealer for purposes other than
resale in the ordinary course of Dealer's business, Dealer will make timely
return and payment to the appropriate taxing authorities of all applicable
taxes and other governmental charges imposed, levied or based upon the sale
of such Authorized Products by Distributor to Dealer and will hold
Distributor harmless with respect thereto.
PAYMENT BY DEALER
(6) Dealer will pay for Authorized Products in the manner, at the time
and upon the conditions specified in the terms of payment established from
time to time by Distributor. Delivery of instruments of payment other than
cash will not constitute payment until Distributor has collected the full
amount in cash. Dealer will pay all collection charges, including reasonable
attorney's fees, and costs of exchange, if any, incurred in connection with
its payments.
PASSING OF TITLE; SECURITY INTEREST
(7) Title to Authorized Products will remain with Distributor until
Distributor has collected their full purchase price in cash. Dealer will
execute and deliver, and Distributor is authorized to execute and deliver on
behalf of Dealer or, to the extent permitted by law, to file without the
signature of Dealer, all financing statements and other instruments which
Distributor may deem necessary to evidence its ownership of such Authorized
Products. Dealer hereby grants Distributor a purchase money security
interest in all Authorized Products for which Distributor has not collected
in full, authorizes Distributor to take such steps as Distributor deems
necessary to perfect such security interests, and agrees to cooperate fully
with Distributor in connection therewith. Distributor may take possession at
any time of Authorized Products to which it has title.
PASSING OF RISKS
(8) Authorized Products will be at Dealer's risk and peril from the
time of their delivery to Dealer or Dealer's agent. It will be up to Dealer
to insure such risks for its benefit and at its expense.
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RESPONSIBILITY FOR DEFECTS AND DAMAGE
(9) Distributor assumes responsibility for the quality and condition of
Authorized Products, to the extent of (a) defects caused by its own
negligence and (b) damage caused during storage by Distributor or occurring
prior to delivery of the Authorized Products to Dealer or Dealer's agent.
Distributor will make any required disclosure thereof to Dealer. If
Distributor has insured against such defects in or damage to Authorized
Products, Distributor's liability to Dealer for such damage will be limited
to the amount actually paid by the insurance carrier to Distributor by reason
of such defect or damage, together with any deductible amount applicable to
such claim. Dealer may decline to accept any Authorized Products delivered
to Dealer in damaged condition; however, should Dealer accept such Authorized
Product Dealer will, subject to the provisions of Article 5(5), repair all
such defects and damage fully as required by Distributor before any defective
or damaged Authorized Product is delivered to a customer. Dealer will make
any required disclosure to Dealer's customers of damage or repairs, and will
hold Distributor harmless with respect thereto. Distributor will notify
Dealer promptly of the amount paid by the insurance carrier with respect to
any such defect or damage and will pay Dealer the full amount thereof, or any
other amount due from Distributor pursuant to this paragraph, following
Dealer's submission of such proof of repair as Distributor may require.
CLAIMS FOR INCOMPLETE DELIVERY
(10) Dealer will make all claims for incomplete delivery of Authorized
Products (including the delivery of Authorized Products with damage) in
writing not later than three business days after Dealer's receipt of
shipment; PROVIDED, HOWEVER, that Dealer will make claims as to Genuine Parts
within the period specified in policies established by Distributor from time
to time; and PROVIDED, FURTHER, that Dealer will note claims for visible
damage to Authorized Automobiles on the delivery receipt.
CHANGES OF SPECIFICATIONS
(11) Distributor will deliver Authorized Products to Dealer in
accordance with specifications applicable at the time of their manufacture.
In the event of any change or modification with respect to any Authorized
Products, Dealer will not be entitled to have such change or modification
made to any Authorized Products manufactured prior to the introduction of
such change or modification. Distributor expressly reserves, and Dealer
acknowledges, the right to make such changes and modifications, and Dealer's
only right in such event shall be the cancellation of any orders for
Authorized Products affected by the change or modification not yet accepted
by Distributor.
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FAILURE OF OR DELAY IN DELIVERY BY DISTRIBUTOR
(12) Distributor will not be liable to Dealer for failure of or delay in
delivery under orders of Dealer accepted by Distributor, other than failure
or delay resulting from willful misconduct or gross negligence of Distributor.
RETURN OR DIVERSION ON DEALER'S FAILURE TO ACCEPT
(13) If Dealer fails or refuses for any reason to accept delivery of any
Authorized Products ordered by Dealer (except as permitted under Article
8(9)), Dealer will be liable to Distributor for all expenses incurred as a
result of such failure or refusal, and will store such Authorized Products at
no charge to Distributor until Distributor can arrange for their removal.
Dealer's liability pursuant to this paragraph will be in addition to, and not
in lieu of, any other liabilities which may arise from Dealer's failure or
refusal to accept delivery.
ARTICLE 9
WARRANTY TO CUSTOMERS
DISTRIBUTOR'S WARRANTIES
(1) Distributor warrants each new Authorized Product as set forth in
Distributor's Warranties.
INCORPORATION OF DISTRIBUTOR'S WARRANTIES IN DEALER'S SALES
(2) Dealer will make all sales of Authorized Automobiles and Genuine
Parts in such a way that its customers acquire all rights in accordance with
Distributor's Warranties and, to the extent permitted by law, no other
express or implied warranties. Dealer will make the text of Distributor's
Warranties part of its contracts for the sale of Authorized Products and will
display the text of the warranties of all products it sells in customer
contact areas where Authorized Products are offered.
WARRANTY PROCEDURES
(3) Dealer agrees to comply with the provisions of the various dealer
warranty manuals which Distributor may issue from time to time, and will
follow the procedures established by Distributor for processing warranty
claims and returning and disposing of defective Genuine Parts. Dealer also
will comply with all requests of Distributor for the performance of services
pursuant to warranty claims and will maintain detailed records of time and
parts consumption and any other records used as the basis for submitting
warranty claims. Dealer will submit warranty claims to Distributor
electronically. Upon Dealer's compliance with such requests and maintenance
of such records, Distributor will reimburse Dealer within a reasonable time
for
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warranty claims at the then-current rate of reimbursement specified by
Distributor for Dealer. Strict adherence to the procedures established for
processing warranty claims is necessary for Distributor to process such
claims fairly and expeditiously. Distributor will be under no obligation
with respect to warranty claims not made strictly in accordance with such
procedures.
ARTICLE 10
DEALER'S RECORD KEEPING AND REPORTS;
INSPECTION OF DEALER'S OPERATIONS
DEALER'S FORMS, BUSINESS MACHINES, OFFICE EQUIPMENT AND
BOOKKEEPING
(1) Dealer's will use accounting, sales, bookkeeping and service
workshop forms; business machines; data processing and transmission
equipment; and other office equipment which meet specifications, and which
provide information and function in the manner, prescribed by Distributor and
its affiliates in the Operating Standards and by other means. Dealer will
keep accurate and current records in accordance with Distributor's uniform
accounting system and with accounting practices and procedures reasonably
satisfactory to Distributor, in order to enable Distributor to develop
comparative data and to furnish Dealer business management assistance.
FINANCIAL STATEMENTS TO BE SUPPLIED BY DEALER
(2) Dealer will transmit to Distributor (a) on or
before the tenth day of each calendar month, in such form and by such methods
as Distributor reasonably may require, a financial and operating statement
reflecting the consolidated operations of Dealer for the preceding month and
from the beginning of the calendar year to the end of the preceding month and
(b) within three and one-half months after the close of Dealer's fiscal or
calendar year, a consolidated balance sheet and profit and loss statement of
Dealer, which documents shall be certified by a certified public accountant
if so requested by Distributor at least 30 days prior to the close of
Dealer's fiscal or calendar year.
REPORTS TO BE SUPPLIED BY DEALER
(3) Dealer will furnish to Distributor, on such forms as Distributor
reasonably may require, accurate daily reports of Dealer's sales and
transfers of new Authorized Automobiles for that day. Dealer also will
furnish to Distributor, on a timely and accurate basis, such other reports
and financial statements as Distributor reasonably may require.
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INSPECTION OF DEALER'S OPERATIONS AND RECORDS
(4) Until the expiration or termination of this Agreement, and thereafter
until consummation of all transactions referred to in Article 14, Distributor,
through its employees and other designees, at all reasonable times during
regular business hours, may inspect Dealer's Operations, Dealer's Premises and
the methods, records and accounts of Dealer relating to Dealer's Operations.
ARTICLE 11
DEALER PERFORMANCE REVIEW
EVALUATION AND ASSISTANCE
(1) Each year, Distributor will prepare objectives for Dealer and will
use them as a basis for evaluating Dealer's performance of its obligations in
each of the areas described in this Article 11. Distributor may evaluate
Dealer's performance during the year through periodic reviews. Distributor will
review its evaluations with Dealer, so that Dealer may take prompt action, if
necessary, to improve its performance to such levels as Distributor reasonably
may require. Any written comments received from Dealer on Distributor's
evaluation of Dealer will become a part of such evaluation.
EVALUATION OF DEALER'S VEHICLE SALES PERFORMANCE
(2) Distributor will evaluate the effectiveness of Dealer's vehicle sales
performance. In evaluating such performance, the following factors will be
considered:
EVALUATION OF DEALER'S NEW AUTHORIZED AUTOMOBILE SALES PERFORMANCE
(a) Distributor will evaluate Dealer's sales performance as a
whole, and separately for each model and type of new Authorized Automobile,
taking into account:
(i) Fair and reasonable sales objectives which may be
established from time to time by Distributor for Dealer, after review
with Dealer;
(ii) The ratio in Dealer's Area of sales of Authorized
Automobiles to sales of other makes of automobiles, as compared to:
(A) such ratio on a nationwide basis;
(B) the average ratio for all dealers of the same
line-make in Distributor's sales zone and district in which
Dealer is located; and
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(C) such ratios for other comparable dealers of the
same line-make in Distributor's sales zone in which Dealer is located;
(iii) The development of Dealer's sales performance over a
reasonable period of time;
(iv) Particular conditions in Dealer's Area, if any, directly
affecting actual and potential sales performance; and
(v) Measures of customer satisfaction.
OTHER DEALERS IN DEALER'S AREA
(b) If one or more other dealers of the same line-make operate
within Dealer's Area, as in a metropolitan area, the combined sales
performance of all such dealers in Dealer's Area will be evaluated in the
manner described in Article 11(2)(a) above. Dealer's individual sales
performance then will be evaluated on the basis of that proportion of the
sales and potential sales of Authorized Automobiles in Dealer's Area for
which Dealer fairly may be held responsible, according to such reasonable
criteria as Distributor may determine, including standards for Dealer's
sales participation in Dealer's Area previously determined by Distributor
and reviewed with Dealer.
MARKET ANALYSIS DATA
(c) Distributor also may measure and evaluate Dealer's sales
performance by reference to appropriate market penetration and sales
statistics and forecasts published by, or developed with the usage of data
from, organizations generally recognized by the automobile industry.
EVALUATION OF DEALER'S USED CAR SALES PERFORMANCE
(d) Distributor will evaluate Dealer's used automobile sales
performance, including the extent of Dealer's overall compliance with the
Operating Standards.
EVALUATION OF DEALER'S SERVICE PERFORMANCE
(3) Because of the importance of Dealer's service performance to the
purposes and objectives of this Agreement, Distributor will evaluate Dealer's
performance of its responsibilities for service, including the extent of
Dealer's overall compliance with the Operating Standards. Distributor also will
consider measures of customer satisfaction with the service and repair work
performed by Dealer.
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EVALUATION OF DEALER'S PARTS PERFORMANCE
(4) Distributor will evaluate Dealer's performance of Dealer's
responsibilities pertaining to Dealer's parts department, including Dealer's
actual parts sales compared to market potential and the extent of Dealer's
overall compliance with the Operating Standards.
EVALUATION OF DEALER'S PREMISES
(5) Distributor will evaluate Dealer's performance of its
responsibilities pertaining to Dealer's Premises, analyzing both separately and
collectively Dealer's sales facilities, service facilities, parts facilities,
administrative offices, storage, parking and signage. In making such
evaluation, Distributor will consider the factors set forth in the Operating
Standards.
ARTICLE 12
SUCCEEDING DEALERS
PROCEDURE
(1) If Dealer chooses to transfer its principal assets or change owners,
Distributor has the right to approve the proposed transferees, the new owners
and executives and, if different from Dealer's, their premises. Distributor
will consider in good faith any such proposal Dealer may submit to it during the
term of this Agreement. In determining whether the proposal is acceptable to
it, Distributor will take into account factors such as the personal, business
and financial qualifications of the proposed new owners and executives as well
as the proposal's effect on competition. In such evaluation, Distributor may
consult with the proposed new owners and executives on any aspect of the
transaction or their proposed dealership operations. Notwithstanding anything
set forth in this paragraph to the contrary, Distributor shall not be obligated
to consider such proposal if it previously had notified Dealer in writing that
it would not appoint a succeeding dealer in Dealer's Area; provided, however,
that such notice shall be given only if there is good cause for discontinuing
representation of Authorized Automobiles in Dealer's Area.
APPROVALS
(2) Distributor will notify Dealer in writing of the approval or
disapproval of a proposal by Dealer for transfer of principal assets or change
of owners within 45 business days, or the exercise by Distributor of its right
of first refusal under Article 12(3) within 30 calendar days, after Dealer has
furnished to Distributor all applications and information reasonably requested
by Distributor to evaluate such proposal. If Distributor approves Dealer's
proposal, Distributor shall be
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obligated to grant the proposed transferees only a Dealer Agreement in
substantially the same form as this Agreement. If Distributor had previously
notified Dealer in writing that Distributor would not appoint a succeeding
dealer in Dealer's Premises, then Distributor's approval of Dealer's proposal
may be conditioned on the proposed transferees agreeing to provide different
facilities for their dealership operations. Upon the consummation of Dealer's
approved proposal, Dealer will deliver to Distributor a voluntary termination of
this Agreement and a general release in favor of Distributor.
RIGHT OF FIRST REFUSAL
(3) Whenever Dealer proposes to transfer its principal assets or change
owners of a majority interest, Distributor shall have the right to purchase such
assets or ownership interest, as follows:
(a) Distributor may elect to exercise its purchase right by written
notice to Dealer within 30 calendar days after Dealer has furnished to
Distributor all applications and information reasonably requested by
Distributor to evaluate Dealer's proposal.
(b) If Dealer's proposed sale or transfer was to Dealer's Nominee,
to another successor approved in advance by Distributor, to any of Dealer's
Owners, to Dealer's employees as a group or to Dealer's spouse, children or
heirs, then Dealer may withdraw its proposal within 30 calendar days
following receipt of Distributor's notice of election of its purchase
right.
(c) Distributor's right under this Article 12(3) shall be a right
of first refusal, permitting Distributor to (i) assume the proposed
transferee's rights and obligations under its agreement with Dealer and
(ii) cancel this Agreement and all rights granted Dealer hereunder. Except
to the extent specifically inconsistent with the terms of this Agreement,
the price and all other terms of Distributor's purchase shall be as set
forth in any bona fide written purchase and sale agreement between Dealer
and its proposed transferee and in any related documents.
(d) Dealer shall furnish to Distributor copies of all applicable
liens, mortgages, encumbrances, leases, easements, licenses or other
documents affecting any of the property to be transferred, and shall assign
to Distributor any permits or licenses necessary for the continued conduct
of Dealer's Operations.
(e) Distributor may assign its right of first refusal to any party
it chooses, but in that event Distributor will remain primarily liable for
payment of the purchase price to Dealer.
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(f) If Distributor exercises its purchase right, Distributor will
reimburse Dealer's proposed transferee for reasonable documented actual
expenses which such proposed transferee incurred through the date of such
exercise which are directly and solely attributable to the transaction
Dealer proposed.
(g) Nothing contained in this Article 12(3) shall require
Distributor to exercise its right of first refusal in any case, nor
restrict any right Distributor may have to refuse to approve Dealer's
proposed transfer.
SUCCESSORSHIP
(4) Article 13(1)(a) notwithstanding, in the event of the death of any
of Dealer's Owners, Distributor will not terminate this Agreement by reason of
such death before the end of 12 months after the death of such owner if:
(a) His interest in Dealer passes directly to his surviving spouse
and his children, or any of them, or as specified in any Successor
Addendum to this Agreement; and
(b) Dealer's general manager remains as stated in the Statement of
Ownership and Management, or within 90 days after the death of such
owner, Dealer's Nominee becomes the general manager of the Dealer or
Dealer appoints another qualified individual as general manager. After
the expiration of this 12-month period and Distributor's evaluation of
the performance of Dealer's management during such period, Distributor
will review with Dealer the changes, if any, in the management or equity
interests of Dealer required by Distributor as a condition of extending
this Dealer Agreement with Dealer. Any new Dealer Agreement entered
into pursuant to this paragraph will be in substantially the same form
as the Dealer Agreements then currently offered by Distributor to its
dealers in Authorized Automobiles generally.
MODIFICATION OF TERMS OF PAYMENT
(5) Upon receipt of an application for a replacement dealer agreement,
Distributor may modify its terms of payment with respect to Dealer to the extent
Distributor deems appropriate, irrespective of Dealer's credit standing or
payment history.
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ARTICLE 13
TERMINATION
IMMEDIATE TERMINATION BY DISTRIBUTOR
(1) Except to the extent a greater notice period is required by
anyapplicable statute, Distributor has the right to terminate this Agreement for
cause, with immediate effect, by sending notice of termination to Dealer by
certified mail, or by personal delivery to any of Dealer's Owners or Executives,
if any of the following should occur:
(a) Death of any of Dealer's Owners or any change, whether
voluntary or by operation of law, in the record or beneficial ownership
of Dealer without Distributor's prior written consent; any change in
Dealer's Executives without prior notice to Distributor; or the failure
of Dealer's Executives to continue to manage Dealer's Operations;
(b) Dissolution or liquidation of Dealer, if a partnership or
corporation;
(c) Insolvency of Dealer or voluntary institution by Dealer of any
proceeding under the Bankruptcy Act or state insolvency law; or the
involuntary institution against Dealer of any proceeding under the
Bankruptcy Act or state insolvency law which is not vacated within ten
days from the institution thereof; or the appointment of a receiver or
other officer having similar powers for Dealer or Dealer's business who
is not removed within ten days of his appointment; or any levy under
attachment, execution or similar process which is not within ten days
vacated or removed by payment or bonding;
(d) Any attempted transfer of this Agreement by Dealer, in whole
or in part, without Distributor's prior written consent;
(e) Any change in the location of any of Dealer's Premises or the
establishment of any additional premises for Dealer's Operations without
Distributor's prior written consent;
(f) Failure of Dealer to continue to operate any of Dealer's
Premises in the usual manner for a period of five consecutive business
days, unless caused by an Act of God, war, riot, strike, lockout, fire,
explosion or similar event;
(g) Dealer's failure, for a period of ten consecutive business
days, to have any license necessary for the conduct of Dealer's
Operations;
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(h) Conviction of Dealer or any of Dealer's Owners or Executives
of a felony or any misdemeanor involving fraud, deceit or an unfair
business practice, if in Distributor's opinion such conviction may
adversely affect the conduct of Dealer's business, or be harmful to the
good will of the Manufacturer or Distributor or to the reputation and
marketing of Authorized Products;
(i) Any material misrepresentation by any of Dealer's Owners or
Executives as to any fact relied upon by Distributor in entering into
this Agreement;
(j) Submission by Dealer of a fraudulent or knowingly false report
or statement or claim for reimbursement, refund or credit; or
(k) Failure or refusal of Dealer or Dealer's owners, executives,
agents or employees to provide Distributor, upon request, with access to
and the opportunity to inspect and copy all books, papers, instruments,
certificates or other documents evidencing the record or beneficial
ownership of Dealer.
TERMINATION BY DISTRIBUTOR ON 90 DAYS' NOTICE
(2) Except to the extent a greater notice period is required by any
applicable statute, Distributor has the right to terminate this Agreement upon
90 days' notice if any of the following shall occur:
(a) Any disagreement or personal difficulties of Dealer's Owners
or Executives which in Distributor's opinion may adversely affect the
conduct of Dealer's business, or the presence in the management of
Dealer of any person who in Distributor's opinion does not have
appropriate qualifications for his position;
(b) Impairment of the reputation or financial standing of Dealer
or any of Dealer's Owners or Executives or ascertainment by Distributor
of any fact existing at or prior to the time of execution of this
Agreement which tends to impair such reputation or financial standing;
or
(c) Any breach of any obligation of Dealer pursuant to this
Agreement or any other agreement between Distributor or any of its
subsidiaries or affiliates and Dealer.
DISCUSSIONS WITH DEALER
(3) Upon learning that any event or situation which would give
Distributor grounds to terminate this Agreement has occurred, Distributor will
endeavor to discuss such event or situation with Dealer. Thereafter,
Distributor may give Dealer written notice of termination.
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MODIFICATION OF TERMS OF PAYMENT
(4) During the period a situation specified in Article 13(1) or 13(2)
continues to exist, Distributor may modify its terms of payment with respect to
Dealer to such extent as Distributor may consider appropriate, irrespective of
Dealer's credit standing or payment record.
NO WAIVER BY FAILURE TO TERMINATE
(5) Should Distributor be entitled to terminate this Agreement but fail
to do so, such failure shall not be considered a waiver of Distributor's right
to terminate this Agreement unless the situation entitling Distributor to
terminate this Agreement has ceased to exist and (a) six months have elapsed
from the time Distributor obtained knowledge of such situation or (b)
Distributor has entered into a subsequent written agreement with Dealer
superseding this Agreement. Nevertheless, any situation entitling Distributor
to terminate this Agreement may be considered at any subsequent time together
with any subsequent events in determining Distributor's right to terminate this
Agreement.
TERMINATION BY DEALER
(6) Dealer has the right to terminate this Agreement without cause by
giving 60 days' notice of such termination to Distributor by certified mail. In
the event Dealer, in connection with its termination of this Agreement, also
wishes to terminate any other agreement between Dealer and Distributor or any of
Distributor's subsidiaries or affiliates, Dealer must do so separately and
subject to the provisions of Article 13(9) below.
CONTINUATION OF BUSINESS RELATIONS AFTER TERMINATION
(7) Any business relations between Distributor and Dealer after the
termination of this Agreement without a written extension or renewal or a new
written dealer agreement will not operate as an extension or renewal of this
Agreement or as a new dealer agreement. Nevertheless, all such business
relations, so long as they are continued, will be governed by terms identical
with the provisions of this Agreement.
SUPERSEDING AGREEMENTS
(8) If any superseding form of Dealer Agreement is offered by
Distributor to its authorized dealers generally at any time, Distributor may, by
written notice to Dealer, terminate this Agreement and replace it with a Dealer
Agreement in the superseding form.
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AGREEMENTS WITH AFFILIATES OF DISTRIBUTOR
(9) The termination of this Agreement by either party does not
necessarily waive or terminate any other agreement between Dealer and
distributor or any of its subsidiaries or affiliates. Such other agreements may
be terminated only in accordance with their terms, and the parties' respective
obligations under any such other agreements will continue in accordance with
their terms until terminated.
ARTICLE 14
RIGHTS AND LIABILITIES UPON TERMINATION
DISTRIBUTOR'S OBLIGATIONS
(1) Within 90 days after the termination of this Agreement pursuant to
Article 13, Distributor will purchase from Dealer and Dealer will sell to
Distributor all the following:
NEW AUTHORIZED AUTOMOBILE INVENTORY
(a) All new, unused and undamaged current model year Authorized
Automobiles (introduced in the United States no earlier than 12 months
prior to the date of such expiration or termination and not superseded
by a later model year) in Dealer's inventory on the date of such
expiration or termination which are in first-class salable condition,
provided they were sold by Distributor and purchased by Dealer from
Distributor (or in the ordinary course of business from other dealers of
Authorized Automobiles appointed by Distributor) and have never been
sold by Dealer. The price for such Authorized Automobiles will be the
price at which they were originally sold by Distributor, less all prior
funds or allowances made by Distributor, if any.
NEW GENUINE PARTS INVENTORY
(b) All the following new, unused and undamaged articles listed in
Distributor's current Genuine Parts Price List (other than articles
listed as obsolete) in Dealer's inventory on the date of such expiration
or termination which are in first-class salable condition and complete,
provided they were purchased by Dealer from Distributor and never sold
by Dealer:
(i) new and factory remanufactured replacement parts
supplied by Distributor for Authorized Automobiles;
(ii) accessories considered by Distributor to be suitable
for installation in the current model year
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Authorized Automobiles specified in Article 14(1)(a); and
(iii) other accessories, provided that Distributor has made
sales of identical articles during six of the last twelve full
calendar months immediately preceding such expiration or
termination. The price for such articles will be the price then
last established by Distributor for the sale of identical articles,
less a handling charge equal to ten percent of such amount and less
all prior refunds or allowances made by Distributor;
TOOLS AND EQUIPMENT
(c) All special tools and equipment for servicing Authorized
Automobiles owned by Dealer on the date of expiration or termination
which are in operating condition and complete, provided they were
purchased by Dealer from Distributor or pursuant to written requests of
Distributor. The price for such tools and equipment will be the fair
market value thereof; and
AUTHORIZED SIGNS
(d) All Authorized Signs which Dealer displayed publicly or at
Dealer's Premises. The price for such Authorized Signs will be the fair
market value thereof.
TERMS OF SALE
(2) Any and all items to be sold by Dealer to Distributor pursuant to
this paragraph will be delivered by Dealer to Distributor at Dealer's place of
business suitably packed for transportation. For such periods of time as
Distributor reasonably may determine, Distributor may enter Dealer's Premises
for the purpose of taking an inventory of all or any part of Dealer's stock of
Authorized Products and special tools and equipment. At the request of
Distributor, Dealer will comply in all respects with the provisions of all
applicable bulk sales acts or similar statutes protecting a transferee of
personal property with respect to liabilities of the transferor. Promptly
following performance by Dealer of all its obligations pursuant to this Article
14, the completion by Distributor of all steps required to obtain possession of
such items and the delivery to Distributor of a bill of sale, documents of title
and a general release of Distributor and the Manufacturer from Dealer and
Dealer's Owners, all in form satisfactory to Distributor, Distributor will pay
Dealer the specified prices for the said items, less all amounts owed by Dealer
to Distributor, its subsidiaries or affiliates. Distributor will not be
required to purchase any item from Dealer pursuant to this paragraph unless
Dealer is able to convey to Distributor, within such 90-day
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period, title to such item free and clear of all liens, claims, encumbrances and
security interests.
PENDING ORDERS AND DEALER'S OBLIGATIONS
(3) Upon the expiration or termination of this Agreement, all pending
orders of Dealer for Authorized Products previously accepted by Distributor will
be canceled and Dealer immediately will:
REMOVAL OF AUTHORIZED SIGNS
(a) Remove at its own expense all Authorized Signs which it
displayed publicly or at its premises;
AUTHORIZED TRADEMARKS
(b) Cease all usage of the Authorized Trademarks, cease to hold
itself out as an authorized dealer in Authorized Automobiles, destroy
all stationery and other printed material bearing any Authorized
Trademark, and, if its corporate or business name contains any
Authorized Trademark, take all steps to remove the same therefrom;
ORDERS AND FILES
(c) Transfer to Distributor
(i) all orders for sale by Dealer of Authorized Products
then pending with Dealer;
(ii) all deposits made thereon, whether in cash or
property;
(iii) all Dealer's warranty records for Authorized Products
or complete copies of all such records and files; and
(iv) all Dealer's customer service files. Upon the written
request of Dealer, Distributor will return such customer service
files to Dealer after Distributor has made copies of such files at
Distributor's expense;
CUSTOMER LISTS
(d) Make available to Distributor in writing the names and
addresses of all its service customers and prospective customers for
Authorized Products; and
LITERATURE
(e) Deliver to Distributor at Dealer's place of business, free of
charge, all technical or service literature, advertising and other
printed material relating
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to Authorized Products, including sales instruction manuals or
promotional material, then in Dealer's possession and which were
acquired by Dealer from Distributor. None of the foregoing will result
in any liability of Distributor to Dealer for damages, commissions, loss
of profits or compensation for services, or in any other liability of
Distributor to Dealer of any kind or nature whatsoever.
SPECIFIC PERFORMANCE
(4) Since Dealer's obligations under this Article 14 are of such a
nature that it is impossible to measure in money the damages which will be
suffered by Distributor if Dealer should fail to perform any of them, Dealer
agrees that, in the event of any such failure of performance on its part,
Distributor will be entitled to maintain an action to compel the specific
performance by Dealer of these obligations and Dealer agrees not to urge in any
such action the defense that Distributor has an adequate remedy at law.
ARTICLE 15
DEFINITIONS
Throughout this Agreement various abbreviations and abbreviated phrases
have been used. Their meanings are:
AUTHORIZED AUTOMOBILES
(1) "Authorized Automobiles" means motor vehicles of such models and
types as may be supplied by Distributor during the term of this Agreement and of
the line-make designated in Paragraph 1 of the Agreement of which these Standard
Provisions are a part.
AUTHORIZED PRODUCTS
(2) "Authorized Products" means Authorized Automobiles and Genuine
Parts.
AUTHORIZED SIGNS
(3) "Authorized Signs" means displays of any Authorized Trademark, in
such material, type, presentation and colors as Distributor may prescribe from
time to time.
AUTHORIZED TRADEMARKS
(4) "Authorized Trademarks" means any trademark, service mark or trade
name now or any other time hereafter used or claimed by the Manufacturer or
Distributor.
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DEALER'S AREA
(5) "Dealer's Area" means the normal area for Dealer's Operations
corresponding to the location of Dealer's Premises.
DEALER'S EXECUTIVES
(6) "Dealer's Executives" means all the persons named in Paragraph 5
and 6 of the Statement of Ownership and Management as officers or other
executives of Dealer, as well as any other person who succeeds to any position
in Dealer referred to in such paragraphs in accordance with the provisions of
this Agreement.
DEALER'S NOMINEE
(7) "Dealer's Nominee" means an individual approved by Distributor to
become the general manager of Dealer, in the event of the death or incapacity of
a general manager who also is one of Dealer's Owners.
DEALER'S OPERATIONS
(8) "Dealers Operations" means all activities of Dealer relating to the
promotion and sale of Authorized Products, the supply of Genuine Parts, customer
service for Authorized Products and all other activities of Dealer pursuant to
this Agreement.
DEALER'S OWNERS
(9) "Dealer's Owners" means all the persons named in Paragraph 4 of the
Statement of Ownership and Management as beneficial or record owners of Dealer,
as well as any other person who acquires or succeeds to any beneficial interest
or record ownership in Dealer in accordance with the provisions of this
Agreement.
DEALER'S PREMISES
(10) "Dealer's Premises" means all premises to in the Dealer Premises
Addendum and used by Dealer for or in connection with Dealer's Operations,
including sales facilities, service workshops, offices, facilities for storage
of Authorized Automobiles and Genuine Parts, used car sales facilities and,
parking facilities.
DISTRIBUTOR
(11) "Distributor" means Volkswagen of America, Inc., a New Jersey
corporation, and includes, as appropriate, all divisions of that corporation.
-25-
DISTRIBUTOR'S WARRANTIES
(12) "Distributor's Warranties" means with respect to each Authorized
Product, those express written warranties provided with such product or as set
forth in the Dealer Warranty Manual for Authorized Products in effect at the
time such product is first sold at retail.
GENUINE PARTS
(13) "Genuine Parts" means new and factory rebuilt replacement parts,
accessories and optional equipment for Authorized Automobiles if such parts,
accessories and optional equipment are supplied by Distributor.
MANUFACTURER
(14) "Manufacturer" means any supplier of Authorized Products to
Distributor, including as appropriate, but not limited to, Audi AG, a German
corporation, and Volkswagen AG, a German corporation.
NET WORKING CAPITAL, OWNER'S EQUITY AND WHOLESALE CREDIT
(15) "Networking Capital," "Owner's Equity" and "Wholesale Credit" shall
have the meanings set forth in the Operating Standards and in accordance with
generally accepted accounting principles.
OPERATING STANDARDS
(16) "Operating Standards" means the Dealer Operating Standards
currently issued by Distributor to its dealers of Authorized Products, as well
as any amendments thereof or additions thereto by Distributor during the term of
this Agreement.
OWNER'S DOCUMENTS
(17) "Owner's Documents" means all the documents which are supplied by
Distributor in respect of each Authorized Automobile and which are intended for
the customer, including, but not limited to, the Owner's Manual, Warranty
Booklet and Maintenance Booklet.
RECOMMENDATIONS
(18) "Recommendations" means written suggestions provided by
Distributor, as well as all currently applicable written suggestions previously
provided by Distributor.
-26-
ARTICLE 16
GENERAL PROVISIONS
DEALER NOT AN AGENT
(1) Dealer will conduct all Dealer's Operations on its own behalf and
for its own account. Dealer has no power or authority to act for the
Manufacturer or Distributor.
AUTHORITY TO SIGN
(2) Dealer acknowledges that only the President, a Vice President or a
Zone Manager of Distributor is authorized on behalf of Distributor to execute
this Agreement or to agree to any variation, modification or amendment of any of
its provisions or to sign any notice of termination.
VARIATIONS; MODIFICATIONS; AMENDMENTS
(3) This Agreement may not be varied, modified or amended except by an
express instrument in writing to that effect signed on behalf of both
Distributor and Dealer.
ENTIRE AGREEMENT
(4) This instrument contains the entire agreement between the parties.
No representations or statements other than those expressly set forth or
referred to herein were made or relied upon in entering into this Agreement.
RELEASE OF CLAIMS UNDER PRIOR AGREEMENTS
(5) This Agreement terminates and supersedes all prior agreements with
respect to Authorized Products between the parties, if any. The parties hereby
waive, abandon and relinquish any and all claims of any kind and nature arising
out of or in connection with any such prior agreement, except for any accounts
payable by one party to the other as a result of the purchase of any Authorized
Products, audit adjustments or reimbursement for any services.
AGREEMENT NON-TRANSFERABLE
(6) No part of this Agreement nor any interest in this Agreement may be
transferred by Dealer without the prior written consent of Distributor.
DEFENSE AND INDEMNIFICATION
(7) Distributor will, upon Dealer's written request:
(a) Defend Dealer against any and all claims for breach of
Distributor's Warranties, bodily injury or death,
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or for physical damage to or destruction of property, that, during the
term of this Agreement, may be asserted against Dealer in any action
solely by reason of a manufacturing defect or design deficiency in
(i) an Authorized Product or
(ii) a product of the same line-make formerly supplied by
Distributor pursuant to a former dealer agreement; and
(b) Hold Dealer harmless from any and all settlements made and
final judgments rendered with respect to such claims,
PROVIDED Dealer promptly notifies Distributor in writing of the
commencement of such action against Dealer and cooperates fully in the defense
of such action in such manner and to such extent as Distributor may require.
However, such defense and indemnification by Distributor will not be required if
any fact indicates that any negligence, error, omission, act, failure, breach,
statement or representation of Dealer may have caused or contributed to the
claim asserted against Dealer or if Distributor determines that such action
seeks recovery for allegations other than those described in Article 16(7)(a).
NOTICES
(8) Any notices under or pursuant to the provisions of this Agreement
will be directed to the respective addresses of the parties stated herein, or,
if either party shall have specified another address by notice in writing to the
other party, to the address thus last specified. Any notice delivered
personally to any of Dealer's Owners or Executives shall have the same effect as
a notice to Dealer sent by certified mail.
WAIVERS
(9) The waiver by either party of any breach or violation of or
default under any provision of this Agreement will not operate as a waiver of
such provision or of any subsequent breach or violation thereof or default
thereunder. The failure or refusal of Distributor to exercise any right or
remedy shall not be deemed to be a waiver or abandonment of any such right or
remedy.
TITLES
(10) The titles appearing in this Agreement have been inserted for
convenient reference only and do not in any way affect the construction,
interpretation or meaning of the text.
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AUDI DEALER
OPERATING STANDARDS
FOREWORD
- ------------------------------------------------------------------------
The Audi Dealer Agreement incorporates by reference the Dealer Operating
Standards. These standards are based on sound business principles, and
reflect the high standards of professionalism that the public has come to
expect from Audi and its authorized dealers. As such, the Dealer Operating
Standards are an integral part of the Audi Dealer Agreement. Adherence to
these standards by every Audi dealer is required by the Audi Dealer Agreement
and will substantially enhance Audi's public image and its dealers' customer
satisfaction, and have a positive effect on Audi dealer operating results.
GENERAL MANAGEMENT
- ------------------------------------------------------------------------
I. PERSONNEL
A. REQUIREMENTS
1. General Manager
A General Manager is required whenever the owner of an Audi
dealership is inactive, lacks automotive experience, or is
absent from the dealership frequently or for extended periods
of time. The General Manger must be authorized to make all
operational decisions on behalf of the dealer principal.
2. Office Manager
An Office Manager is required at all Audi dealerships. This
individual is responsible for the efficient management and
control of the dealership's financial resources as well as
compliance with the financial reporting requirements of Audi
of America, Inc. ("AoA"). In addition to the Office Manager,
at least one clerical employee is required. Additional
Bookkeepers, Title Clerks and other clerical employees are
required as experience indicates.
B. TRAINING
All dealership personnel shall attend seminars and training sessions
as required or recommended from time to time by AoA. Specific
training requirements are outlined in periodically issued minimum
training requirement directives. In-dealership training shall be
scheduled and conducted as required utilizing materials recommended
by AoA. Participation is a prerequisite to all AoA certification
programs.
II. FACILITIES
A. GENERAL
All dealership facilities must meet AoA's minimum space requirements
as detailed in Appendix A. Facilities erected and approved before the
initial application of such standards may continue to be operated, but
new dealership facilities shall conform in all respects to the
standards set forth herein.
-2-
Dealership facilities must be of a free standing nature and provide a
paved vehicle access on all sides adjacent to the facility. Approved
facilities may modify this requirement.
All vehicle parking and storage areas must be part of the dealership
property and dedicated to the exclusive use of vehicle sales, service
and parts customers. Property considered to be "Commons Areas" will
not be considered as part of the dealership property.
Employee parking space shall be provided equal to the number of
employees.
B. APPEARANCE
A regular cleaning and maintenance schedule shall be followed to
assure overall cleanliness and appearance of the property and all
facilities. Audi approved building colors shall be used.
On-site parking, display and access areas must be properly graded,
hard-surfaced, lined and identified.
C. IDENTIFICATION/TRADEMARKS
Identification signs shall be displayed as approved and required
by AoA.
Minimum sign requirements for Audi dealerships are as follows:
- One illuminated Audi brand sign.
Audi trademarks shall only be used in connection with the promotion
of Audi products and shall be displayed and utilized in strict
accordance with any then-current Audi Trademark Standards Guide.
D. NEW VEHICLE AREA
An enclosed showroom of sufficient size to display properly at least
one of each Audi model line shall be provided. In addition, adequate
space for Sales Representatives is required.
Sufficient space shall be provided for the parking and safe unloading
of automobile carriers.
A storage area sufficient to inventory a 60-day supply of new Audi
vehicles based on new vehicle sales objective, will be provided.
-3-
An office shall be provided for the New Vehicle Sales Manager.
E. USED VEHICLE AREA
Used vehicle display space adjacent to the dealership shall be
sufficient to display a 45-day supply of used vehicles based on the
dealer's used vehicle sales objective.
Outside used vehicle sales areas shall be hard-surfaced and properly
graded.
Layout, lighting, signs and offices shall be in accordance with Audi
recommendations.
An office shall be provided for the Used Vehicle Sales Manager.
F. SERVICE
The number of workstalls shall be as required by AoA. A minimum of
80% of the workstalls shall be equipped with hoists meeting Audi
standards for the proper servicing of Audi vehicles.
The number of service customer parking spaces shall equal four times
the number of available workstalls.
The number of service reception parking spaces shall at least equal
the number of workstalls and shall be convenient to the reception
area.
Customer Waiting Area - is to be clearly identified, clean and well
kept.
The Service Advisor/Customer Service Professional - Write-up area is
to be clean, organized, free of clutter, and in good repair.
An office shall be provided for the Service Manager.
G. PARTS
Parts Storage Area - The space provided for the storage of parts and
accessories inventories shall be a minimum of 200 sq. ft. of storage
area per workstall.
Separate counters for technicians and retail/wholesale customers shall
be provided.
-4-
A separate parts and accessories display area is required for
customers.
An office shall be provided for the Parts Manager.
III. CAPITALIZATION
Dealer Minimum Financial Requirements shall be determined by AoA on an
annual basis with consideration given to operating conditions and business
potential. These requirements, as enumerated in the Audi Dealer
Objectives, must be met or exceeded.
A. NET WORKING CAPITAL
Adequate net working capital (total current assets minus total current
liabilities) shall be maintained. Minimum net working capital
requirements will be established annually and will be calculated as
follows:
1. Current Assets shall comprise the total of:
Cash and Equivalent Equal to two month's Total
Operating Expenses. After
one year's operating
experience, one month's
Total Operating Expense
plus Trade Accounts
Payable (Account #2201) is
acceptable.
Cash and Equivalent shall be calculated as follows:
Cash on hand and in the bank
Finance Contracts in Transit (Account #1202)
Marketable Securities (Actually owned by the
dealership corporation)
Accounts Receivable Vehicles (Account #1302)
Accounts Receivable from Dealerships (Account #1362)
New Vehicle Equity - New Vehicle (including New
Vehicle LIFO Reserve), Demonstrator and Rental
Vehicle Inventory, less New Vehicle Notes
Payable (Account #2101)
Less Customer Deposits in Trust (Account #2401)
-5-
Accounts Receivable Established dealer
requirements shall be
based on current dealer
experience. New dealer
requirements shall be
based on 75% of an average
month's forecasted
service, parts and
accessories sales.
Used Vehicle
Inventory Existing Dealer - 45-days'
supply based on dealer's
annual used vehicle sales
objective x dealer average
unit retail cost of sale.
New Dealer - 45-days'
supply based on .5 to 1
retail used-to-new ratio x
average composite retail
cost of sale.
Parts and
Accessories Inventory 2.5 months' supply based
on the dealer's average
monthly cost of sales.
NOTE: Existing dealer capital requirements for
used vehicles, parts and accessories should be
based on dealer's actual inventory or the guide
requirements provided, WHICHEVER IS HIGHER. New
dealer capital requirements for used vehicles,
parts and accessories should be based on dealer's
acquisition costs or the guide requirements
provided, WHICHEVER IS HIGHER.
----------------------
Other Parts &
Accessories
Work in Process
- actual or forecast
Sublet average inventory value.
Miscellaneous
Inventory
----------------------
-6-
Prepaid Expenses Existing Dealer - average
balance of Total Prepaid
Expenses.
New Dealer - 20% of an
average month forecasted
Total Operating Expense.
2. Current Liabilities:
----------------------
the sum of Accounts
Accounts Payable Payable and Accrued
- Liabilities shall be
Accrued Liabilities calculated at one
month's average Total
---------------------- Operating Expense
B. OWNERS' EQUITY
Owner's Equity shall be maintained at a minimum of 50% of Total
Operating Investment plus 100% of Land, Construction-in-Progress,
Buildings and Improvements - Net (less Mortgage Payable) and
Investments and Advances.
Operating Investment shall comprise the Net total of:
Net Working Capital
Leasehold Improvements
Machinery and Equipment
Furniture and Fixtures
Company Vehicles
Other Depreciable Assets
Total Other Assets (less Investments and Advances and
Lease Vehicle Liability)
C. WHOLESALE LINE OF CREDIT
A separate wholesale line of credit for the sale of new Audi vehicles
shall be maintained with the dealer's financial institution and in an
amount determined annually by AoA. A current written letter of
commitment, in a form satisfactory to AoA, will be provided to AoA by
dealer's financial institution. The dealer's financial institution
will accommodate the vehicle drafting procedure employed by AoA.
-7-
D. ACCOUNTING AND REPORTING
Accounting controls and procedures shall be established and maintained
in accordance with the current edition of the Audi Dealer Accounting
and Management Procedures Manual. This includes the development and
use of dealership objectives, a Daily Operating Control System and the
timely submission of complete and accurate dealer financial and
operating statements, retail delivery information, warranty claims and
other reports required by AoA from time to time. THE DEALER MUST
PROVIDE TO ITS AoA ZONE OFFICE, BY THE 10TH OF EACH MONTH, THE DEALER
FINANCIAL STATEMENT ON THE FORM AND BY THE METHOD REQUIRED BY AoA.
DEALER'S FAILURE TO PROVIDE A FINANCIAL STATEMENT TO THE AUDI ZONE
OFFICE WITHIN THE TIME PERIOD SET FORTH ABOVE, MAY RESULT IN THE
REVOCATION OF THE DEALER'S OPEN PARTS AND ACCESSORIES ACCOUNT.
A certified financial statement may be required in certain situations.
IV. ORGANIZATION AND STRUCTURE
To establish and maintain an effective customer responsive dealership and
to maximize its profits, the dealership organization shall be structured
according to the departmental profit center and management by objective
concepts. Annual objectives and a Daily Operating Control shall be
established for each operating department according to AoA procedures.
Regular meeting shall be held with Department Managers to review
performance against these objectives.
An organization chart and an Employee Policies and Procedures Manual should
be developed and made available to all dealership personnel.
Position descriptions should be developed and issued to all dealership
personnel, to include definitions of individual functions,
responsibilities, authority and reporting relationships.
A. CUSTOMER RELATIONS
The dealer is responsible for developing and maintaining good customer
relations by offering quality repair and maintenance services and
through regular contacts with all customers in his trading area.
Customer satisfaction is the most important measure of a dealer's
performance and is critical to the long-term success of both the
dealership and AoA. The Audi Customer Satisfaction Index (C.S.I.) is
assessed by the Audi Customer Satisfaction Telephone Follow-Up System
which provides a measurement of each dealership's new
-8-
vehicle delivery and service customer satisfaction and will be
used as a basis for performance evaluation. This system requires:
1. Telephone Follow-Up (warranty repairs, new vehicle in warranty) -
The dealer will use its best efforts to provide valid customer
telephone numbers during new car sales reporting and warranty
claim submission for Customer Satisfaction Telephone follow-up.
2. Daily Customer Alerts generated from the Telephone Follow-Up
System are to be followed up within 24 hours of receipt by Dealer
Management.
3. Customer Complaint List/Call Report - The CSI Customer Complaint
List/Call Report is to be reviewed by Dealer Management or other
appointed personnel monthly to ensure that all Customer Alerts
have been or are being resolved properly and expeditiously.
B. ADVERTISING
The Audi trademark, including the distinctive Audi logo, shall be used
for identification, advertising and/or promotion of Audi products and
service exclusively.
This will include all:
- Product Advertising (New - Used - Service - Parts)
- Dealership Stationery and Forms
- Billboards
The use of Audi trademarks must be in accordance with the Trademark
Standards Guide. They will only be used by the dealer for the purpose
of dealership identification and the advertising/promotion of Audi
products and services.
It is the dealer's responsibility to place one Yellow Pages trademark
heading and bold type lettering advertisement in his primary local
telephone directory under the heading "Automobile Dealers - New Cars."
Multiple-make dealers should insure that this ad is placed under
"A" for Audi.
Sufficient quantities of all legally required brochures, as well as
all current Sales, Service and
-9-
Parts literature and promotional materials shall be prominently
displayed and readily available.
-10-
SALES
- -------------------------------------------------------------------------------
I. PERSONNEL
A. REQUIREMENTS
1. New Vehicle Sales Manager
Required.
2. Used Vehicle Sales Manager
A separate Used Vehicle Sales Manager is required when the used
vehicle retail sales objective is 20 or more per month, or when
the new vehicle sales objective is 40 or more per month, or when
Used Vehicle Operation is physically separate from the main
dealership facility.
A combination Sales Manager is acceptable in dealerships with
sales volume lower than those outlined above.
3. Salespersons
One Audi Certified Salesperson for each 100 units of new and used
vehicle sales as measured by dealer's annual objective.
In dealerships selling other makes, where a separate Audi sales
facility is required, AoA reserves the option of requiring an
exclusive Audi sales force.
B. TRAINING
Annual Training objectives shall be established for each Dealer, New
Vehicle Sales Manager, Used Vehicle Sales Manager, and New and Used
Vehicle Salespersons, and they shall participate in all sales and
management training programs outlined in periodically issued minimum
training requirement directives.
The dealer will maintain the minimum number of Audi Certified
salespersons as established by AoA, in no case less than one Audi
Certified salesperson.
In-dealership training shall be scheduled and conducted utilizing
materials recommended by AoA.
-11-
II. INVENTORY
A. NEW VEHICLES
Subject to AoA production and distribution capabilities, the dealer's
new vehicle inventory must be equal to a minimum of two months' retail
sales at the established annual retail objective level. Dealer's new
vehicle inventory will be representative of the full line of Audi
products.
B. DEMONSTRATORS
A clean and properly conditioned inventory of current model year
dealer demonstrators shall be maintained sufficient to represent the
full Audi model line. All prospects will be offered the opportunity
to test drive an Audi product.
All dealers are required to maintain a minimum inventory of one of
each Audi model, either in new vehicle inventory or demonstrator
service, regardless of sales objective.
C. FLEET AND LEASE
The dealer shall be responsible for developing and maintaining
adequate Audi representation in his local fleet and lease market by
insuring that regular sales and service contracts are made on these
accounts.
D. USED VEHICLES
A properly reconditioned inventory, equivalent to a forty-five days'
supply based on dealer's retail sales objective, shall be maintained
and displayed to meet the dealership's monthly used vehicle retail
sales objective. Audi products should be adequately represented in
the used vehicle inventory in order to enhance their value and promote
owner loyalty.
E. ADVERTISING AND MERCHANDISING
The dealer shall establish and maintain advertising and sales
promotion programs and should participate to the extent possible in
cooperative advertising and promotional programs developed by AoA.
F. SALES LITERATURE
Sufficient quantities of all legally required brochures, as well as
all current sales literature and promotional material shall be on
display at all times.
-12-
III. CUSTOMER RELATIONS
SALES SATISFACTION
All sales personnel shall always treat customers courteously and
efficiently with sound and ethical business practices to ensure customer
satisfaction.
All customer complaints shall be investigated promptly by Dealership
Management. Justified complaints shall be resolved to the satisfaction of
the customer.
The Audi Customer Satisfaction Telephone Follow-Up System provides an
assessment of each dealership's sales satisfaction and will be utilized as
a measure of performance (see page 8).
The new car delivery process is to be performed as outlined in written Audi
procedures provided to dealers from time to time. To promote customer
satisfaction, the dealer will operate a delivery system consisting of:
- Pre-delivery certification of all new Audi vehicles by, first, the
service department and, second, the delivering salesperson.
- Maintain vehicles in inventory in salable condition by following
established stock maintenance guidelines that are in writing and
updated from time to time.
- All customers, at the time they take delivery of their new cars, are to
be introduced to the Service Department, specifically the Customer
Service Advisor/Customer Service Professional for an introduction to the
Service Department's operation, policy and procedures.
-13-
SERVICE
- -------------------------------------------------------------------------------
I. PERSONNEL
A balance must be established between the number of service department
employees within your dealership and the number of customers who require
service. This balance is achieved when the number of employees is
sufficient to service your customers' needs. This means not having to wait
in excessive lines, or to have to wait for an appointment beyond what the
customer feels is reasonable.
A. REQUIREMENTS
1. Service Manager
Required.
2. Service Advisors/Customer Service Professionals
The first Service Advisor/Customer Service Professional shall be
employed when Average Daily Vehicle Attendance exceeds 10. A
second Service Advisor/Customer Service Professional shall be
employed when the average vehicle attendance exceeds 20. One
additional Service Advisor/Customer Service Professional is
required for every additional 15 daily vehicle attendance.
3. Shop Foreman
The first full-time Shop Foreman shall be employed when the
number of productive employees reaches 8. The second Shop
Foreman shall be employed when the number of productive
employees reaches 20.
4. Dispatcher
One full-time Dispatcher is required when the daily vehicle
attendance exceeds 60.
5. Productive Employees (Technicians, Trainees, Lubemen)
One productive employee is required for each monthly vehicle
attendance increment of 65 vehicles.
6. Car Washer, Porter, Etc.
Required.
-14-
7. Cashier/Service Clerk
Adequate personnel must be provided to perform these functions.
B. TRAINING
It is vital to the success of your service department's profit
potential and customer satisfaction activities that all service
training programs be utilized freely and frequently.
1. All service personnel shall attend Audi recommended training
programs.
2. The Service Department staff - is required to achieve and
maintain at the very least, minimum training levels as published
periodically by AoA.
3. Key Personnel product training - is to be attended by a minimum
of one Service Advisor/Customer Service Professional annually.
4. All customer contact personnel are to attend the Key Personnel
Training course, "Customer Service Professionals Seminar."
5. Dealer Service Training Specialist - is to be appointed to
conduct training sessions within the dealership utilizing the
Audi Interactive Tech Talk Program.
6. All video tapes, technical bulletins, service circulars,
microfiche and all other service related material, is to be
stored in an organized fashion, neatly arranged and easily
accessible by all service department employees.
C. PERSONNEL APPEARANCE
The appearance of Service Department employees conveys a message to
the service customer about the professionalism of the service
department and the dealership in general. Just as the Service Manager
is to dress as a professional, the Service Advisors/Customer Service
Professionals are to dress in a manner that reinforces the image of
Customer Service Professional.
1. Service Advisors/Customer Service Professionals - are to present
themselves as professionals, clean and neat in their appearance.
They should dress in a consistent manner that is conducive to
good
-15-
business practices and can be easily identified by the customer.
2. Service Advisors/Customer Service Professionals - are to be
easily identifiable as Dealership employees. Name tags and
uniforms are to be consistent in their appearance.
3. The Service Manager - is to dress as a professional, in a manner
that identifies him or her as a department manager, clean and
neat in appearance.
4. Service Technicians - are to dress in uniforms that are
consistent in appearance and that identify them as employees of
the dealership.
II. INVENTORY
Special tools and general workshop equipment meeting Audi standards shall
be available in working condition according to then-current minimum
requirements, which will be updated from time to time.
A secure tool and equipment storage area shall be provided with all tools
and equipment properly located and identified.
Complete and up-to-date Audi recommended service literature shall be
available including microfiche and reader for both the customer write-up
area and workshop.
All In-Dealership Service Training videos and materials are to be stored,
organized and available to all service department personnel.
The service department is to have access to a working video cassette
recorder and television within the service department at all times.
A computer terminal work station is to be located within the service
department for convenient access by both Service Advisors/Customer Service
Professionals and technicians in order to access AoA service systems and
information networks such as V.D.F., campaigns, service actions, vehicle
history and the Audi Online Technical Information Systems (OTIS).
III. ORGANIZATION
Audi dealership must follow current service procedures as outlined in the
"Service Management Guide," the "Warranty Policies and Procedures Manual"
and other publications and manuals, which may be issued and revised from
time to time by AoA.
-16-
Opening and closing - times are not to restrict the flow of business.
Customers are to be able to pick up their serviced vehicles anytime the
dealership is open. The service department must be accessible throughout
the lunch hour.
Early morning, late night and weekend vehicle drop-off arrangements are to
be available for all Audi service customers. These are commonly referred
to as "Early-Bird" or "Night-Owl" drop-off.
IV. CUSTOMER RELATIONS
NEW CAR QUALITY
The Pre-Delivery inspection process is to be performed as outlined in
written Audi procedures provided to Dealer from time to time.
Pre-Delivery Quality - The Service Department is responsible for the
check-in, inspection, storage quality and preparation for delivery of all
new Audi automobiles.
SERVICE SATISFACTION
All service personnel shall always treat customers courteously and
efficiently with sound and ethical business practices to ensure customer
satisfaction.
All customer complaints shall be investigated promptly by Dealership
Management. Justified complaints shall be resolved to the satisfaction of
the customer.
The Audi Customer Satisfaction Telephone Follow-Up System provides an
assessment of each dealership's service satisfaction and will be used as a
measure of performance (see page 8).
Telephone Follow-Up (Audi customer pay repairs, not associated with
warranty repairs) - All customers who have non-warranty repairs performed
are to be contacted within three days after the vehicle is picked up to
ensure the highest level of satisfaction with the service experience.
All vehicles are to be Quality Inspected to ensure that all repairs are
performed as requested and to the customer's satisfaction.
-17-
PARTS
- -------------------------------------------------------------------------------
I. PERSONNEL
A. REQUIREMENTS
1. Parts Manager
Required.
2. Parts Persons
One additional Parts Employee is required when the dealership's
monthly parts and accessories cost of sales reaches $22,000. An
additional employee is required at each $22,000 increment
thereafter. Once the dealership's monthly cost of sales reaches
$70,000, the Parts Manager will not be included in the
calculation and an additional employee is then required and
again, thereafter, at each increment of $22,000.
B. TRAINING
All parts personnel shall attend AoA recommended parts training
programs.
The Parts Department staff is required to achieve and maintain
minimum training levels as published periodically by the Parts
Division.
In-dealership training shall be scheduled and routinely conducted
utilizing materials recommended by AoA.
II. INVENTORY
A. The assortment and quantity of new parts, remanufactured parts and
accessories to be maintained will be determined in accordance with
the demand characteristics of the individual item.
B. The inventory mix of Assortment vs. Non-Assortment items should
reflect the optimum guidelines as established and published
periodically by AoA.
C. Inventory requirements are based on the dealer's average monthly cost
of sales as follows:
Combined New Parts, Small Remanufactured
Parts and Assemblies,
and Accessories . . . . . . 2.5 months' supply
-18-
D. Storage and Identification - The space provided for the storage of
parts and accessories shall be a minimum of 200 sq. ft. of storage
area per available workstall.
As the workshop expands or the market changes the relationship between
the various facets of the business, the storage area shall be modified
accordingly.
The parts and accessories inventory shall be stored in an orderly and
efficient manner. Bins shall be labeled showing the Audi part number.
The inventory in the parts storage area shall be kept neat and clean.
New parts and accessories, remanufactured items and used parts must
each be placed in separate storage areas.
E. Storage Area and Equipment - Shall be sufficient and suitable for
proper storage of parts and accessories.
III. ORGANIZATION
The inventory control system shall be maintained in a way which enables the
Parts Manager to effectively manage the flow and availability of parts and
accessories. Additionally, it must provide sufficient information on which
to base periodic reordering. It shall include proper use of AoA recommended
forms and procedures for the recording of transactions, the maintenance of
individual stock balances, as well as sales histories. A regular program
shall be followed in verifying the inventory records by comparison with
actual quantities on hand. As a minimum, a complete physical inventory
shall be taken annually and corresponding adjustment of records must be
made in accordance with the current edition of the Dealer Accounting and
Management Procedures Manual.
Ordering shall be scheduled to meet the stock order dates set by AoA.
Current parts reference material, microfiche, parts and accessory
literature shall be available to Parts Department employees and customers
as appropriate.
IV. SALES
The dealer will promote the sale of Genuine Audi parts and accessories in
volumes commensurate with market potential. The merchandising of genuine
Audi parts and accessories shall be governed by the Audi principle of
offering quality maintenance and parts service to the Audi owner. This
principle is to be applied in serving the dealer's New and Used Vehicle
Departments, own workshop and bodyshop, and the wholesale and retail
customer.
-19-
Programs for the merchandising of genuine Audi parts and accessories as
well as promotional material and literature supplied or offered by AoA
shall be used.
AoA approved parts and accessories displays shall be placed prominently.
V. CUSTOMER RELATIONS
All customers shall be attended to promptly and treated courteously. Unit
down and special parts orders will be placed in an expeditious manner to
facilitate prompt customer service and satisfaction.
-20-
APPENDIX A
- -------------------------------------------------------------------------------
Adherence to Audi facility standards will improve the image of each Audi
dealership and the Audi marque in an increasingly competitive retail
environment.
FACILITY EVALUATIONS
The evaluation of dealership facilities compares the actual amount of square
footage each dealership facility occupies against Audi building and land
requirements at specific sales objective levels.
FACILITY SPACE REQUIREMENTS
Minimum facility space requirements are quantified in the accompanying Audi
Facility Requirement Tables for Building and Land. The facility requirements
are based on dealership new vehicle sales objectives (Audi and all other make
new vehicle sales objectives, individually, then totaled). Table calculations
are determined as follows:
1. TOTAL LAND. Land area is the total usable acreage occupied by
the entire dealership facility including building, used car lot,
storage areas, parking areas, driveways and landscaping. Vacant,
undeveloped land is not included in the evaluation.
2. TOTAL BUILDING. Building area is calculated in square feet and
will include only structures under a roof that are pertinent to
the dealership operation.
3. SHOWROOM UNIT DISPLAY CAPACITY. A minimum of three Audi model
cars are required in an enclosed showroom, with each model
occupying at least 400 square feet. Outside display areas should
not be included. Sufficient space to meet all showroom
requirements, including other makes, is necessary.
4. SHOWROOM DISPLAY (SQUARE FEET). The square footage of the
showroom is evaluated on display area only and should not include
any offices - Dealer, General Manager, Sales Manager or sales
personnel. Similarly, if open-partitioned sales desks are present
on the showroom floor, the space occupied will be deducted from
the overall square footage of the showroom.
5. NEW VEHICLE STORAGE CAPACITY. Storage area must be sufficient
to hold the minimum inventory requirement of new Audi vehicles,
based on annual Audi sales objective, and satisfy dealership new
car sales objective requirements of reach franchise represented.
Page 1 of 5
6. NEW VEHICLE STORAGE (SQUARE FEET). A minimum of 220 square feet
per unit is required.
7. USED VEHICLE STORAGE CAPACITY. The used car sales lot must be
capable of storing and displaying a 45 days' supply of vehicles,
based on a ratio of 0.5 to 1.0 - used retail to new.
8. USED VEHICLE STORAGE (SQUARE FEET). Minimum of 220 square feet
per vehicle is required for the display of used vehicles.
9. NUMBER OF PRODUCTIVE WORK STALLS. Only productive stalls will be
considered - tool and equipment rooms or occasional work areas
such as aisles will not be included. Work stall requirements are
based on Audi vehicles in operation. A minimum of 80 percent of
the total service stalls should be equipped with AoA approved
hoists.
10. TOTAL WORK STALLS (SQUARE FEET). Minimum stall space is 330
square feet per stall, including the wash rack. Driveway lanes,
tool and equipment room and employee facilities are not included.
11. PARTS STORAGE CAPACITY (SQUARE FEET). Space for storage of parts
and accessories must be a minimum of 200 square feet for each
available work stall.
12. SERVICE PARKING AND STORAGE UNIT CAPACITY. The amount of parking
spaces required is equal to four (4) times the number of work
stalls, including wash stalls.
13. SERVICE PARKING AND STORAGE (SQUARE FEET). Space required is
equal to the number of parking spaces x 200 square feet.
14. CUSTOMER AND EMPLOYEE PARKING NUMBER OF UNITS. Based on the
total number of employees plus the number of work stalls.
15. CUSTOMER AND EMPLOYEE PARKING (SQUARE FEET). Based on 200 square
feet per vehicle.
16. TOOL AND EQUIPMENT STORAGE AREA. A secure tool and equipment
storage area shall be provided with all tools and equipment
properly located and identified.
17. ADDITIONAL SPACE REQUIREMENTS. Adequate space for a technicians'
locker room, service storage room, shop access and customer
lounge is required.
18. ADMINISTRATIVE OFFICES (SQUARE FEET). The business office,
Dealer's and General Manager's office and
Page 2 of 5
conference room constitutes this square footage requirement.
19. AUDI SIGNAGE. A minimum of one approved Audi brand sign (Logo)
is required. Additional AoA approved signage may be displayed.
Page 3 of 5
AUDI MINIMUM SPACE REQUIREMENTS Appendix A
BUILDING
SALES SERVICE AREA PARTS AREA OTHER
--------------------- ----------------------------------------------- ---------------- -------
TOTAL SHOW SHOW NO. OF TOOL & SERVICE PARTS PARTS ADMIN.
NEW VEH BUILDING ROOM ROOM SALES PRODUCTIVE WASH STALLS EQUIP. MGR'S STORAGE MGR'S OFFICES
SLS OBJ AREA UNIT SQ.FT OFFICES WORKSTALLS STALLS SQ.FT. ROOM OFFICE SQ.FT. OFFICE SQ.FT.
- ------- -------- ---- ----- ------- ---------- ------ ------ ------ ------- ------- ------ -------
50 4800 3 1200 2 4 1 1320 1 1 800 1 500
100 5200 3 1200 2 5 1 1584 1 1 1000 1 500
150 5500 4 1600 2 5 1 1584 1 1 1000 1 600
200 6000 4 1600 2 6 1 1848 1 1 1200 1 600
250 6700 4 1600 3 7 1 2112 1 1 1400 1 700
300 7200 5 2000 3 7 1 2112 1 1 1400 1 700
350 7800 5 2000 4 8 1 2376 1 1 1600 1 800
400 9200 6 2400 4 10 1 2904 1 1 2000 1 800
450 9500 6 2400 5 10 1 2904 1 1 2000 1 1000
500 10000 6 2400 5 11 1 3168 1 1 2200 1 1000
550 10500 6 2400 6 12 1 3432 1 1 2400 1 1200
600 11000 6 2400 6 12 1 3432 1 1 2400 1 1200
650 11500 6 2400 7 13 1 3696 1 1 2600 1 1400
700 12000 6 2400 7 14 1 3960 1 1 2800 1 1400
750 12500 6 2400 8 15 1 4224 1 1 3000 1 1600
800 13500 6 2400 8 16 1 4488 1 1 3200 1 1600
850 14000 6 2400 9 17 1 4752 1 1 3400 1 1800
900 14600 7 2800 9 18 1 5016 1 1 3600 1 1800
950 15400 7 2800 10 19 1 5280 1 1 3800 1 2000
1000 16000 7 2800 10 20 1 5544 1 1 4000 1 2000
1100 17500 7 2800 12 22 1 6072 1 1 4400 1 2200
1200 18500 7 2800 12 24 1 6600 1 1 4800 1 2200
1300 20000 7 2800 13 26 1 7128 1 1 5200 1 2400
1400 21000 7 2800 14 28 1 7656 1 1 5600 1 2400
1500 22000 8 3200 15 30 1 8184 1 1 6000 1 2500
Page 4 of 5
AUDI MINIMUM SPACE REQUIREMENTS Appendix A
BUILDING
- -----------------------------------------------------------------------------------------------------------
NEW VEHICLE USED VEHICLE SERVICE PARKING CUSTOMER &
STORAGE & DISPLAY STORAGE & DISPLAY & STORAGE EMPLOYEE PARKING
-----------------------------------------------------------------------------
TOTAL TOTAL
NEW VEH LAND LAND NO. SQ. FT. NO. SQ. FT. NO. SQ. FT. NO. SQ. FT.
SLS OBJ SQ. FT. ACRES
- -----------------------------------------------------------------------------------------------------------
50 43560 1.0 9 1980 5 1250 20 4000 12 2400
100 43560 1.0 17 3740 6 1500 24 4800 15 3000
150 43560 1.0 25 5500 9 2250 24 4800 19 3800
200 43560 1.0 33 7260 13 3250 28 5600 24 4800
250 43560 1.0 42 9240 16 4000 32 6400 28 5600
300 43560 1.0 50 11000 19 4750 32 6400 32 6400
350 47040 1.1 58 12760 22 5500 36 7200 36 7200
400 55510 1.3 65 14300 25 6250 44 8800 41 8200
450 59900 1.4 75 16500 28 7000 44 8800 44 8800
500 64820 1.5 83 18260 31 7750 48 9600 50 10000
550 70225 1.6 92 20240 34 8500 52 10400 53 10600
600 73610 1.7 100 22000 37 9250 52 10400 57 11400
650 78760 1.8 108 23760 41 10250 56 11200 60 12000
700 84210 1.9 117 25740 44 11000 60 12000 63 12600
750 87820 2.0 125 27500 47 11750 64 12800 66 13200
800 95270 2.2 133 29260 50 12500 68 13600 69 13800
850 100950 2.3 142 31240 53 13250 72 14400 72 14400
900 104570 2.4 150 33000 56 14000 76 15200 75 15000
950 110205 2.5 158 34760 59 14750 80 16000 78 15600
1000 115620 2.7 166 36520 62 15500 84 16800 80 16000
1100 125000 2.9 183 40260 69 17250 92 18400 87 17400
1200 135000 3.1 200 44000 75 18750 100 20000 94 18800
1300 145000 3.3 217 47740 81 20250 108 21600 99 19800
1400 155000 3.6 233 51260 87 21750 116 23200 103 20600
1500 165000 3.8 250 55000 94 23500 124 24800 105 21000
- ---------------------------------------------------------------------------------------------------------
[LOGO] Effective February 1992
Page 5 of 5
[Audi letterhead]
February 22, 1995
Scottsdale Jaguar, Ltd. d/b/a/ Scottsdale Audi
6725 E. McDowell Rd.
Scottsdale, AZ 85257
Attention of Mr. Steven Knappenberger, President
Gentlemen:
This letter will confirm the terms under which Volkswagen of America, Inc.
("VWoA") has agreed for a period of time to forbear from appointing an
additional Audi dealer in metropolitan Phoenix, Arizona.
This letter is written with reference to the following facts. Sun-West Audi,
Inc. ("Sun-West") has informed VWoA of Sun-West's desire to terminate
voluntarily its Audi Dealer Agreement, effective as soon as practicable.
Scottsdale Jaguar, Ltd. d/b/a Scottsdale Audi ("Scottsdale") has represented to
VWoA that Scottsdale is willing and able to serve as the only Audi dealer in
metropolitan Phoenix. Scottsdale has tentatively agreed with Sun-West that
Scottsdale will purchase from Sun-West certain assets which do not qualify for
repurchase by VWoA upon termination under the terms of Sun-West's Audi Dealer
Agreement.
VWoA agrees that, upon the occurrence of the contemplated transactions, your
agreement to all terms and conditions of this letter, and your continued
compliance with its terms and with the terms of your Audi Dealer Agreement, VWoA
will not appoint an additional dealer in the Phoenix, Arizona Standard
Metropolitan Statistical Area before January 1, 1997.
Throughout such period, Scottsdale will comply with all then-current
requirements of VWoA, as set forth in the Audi Dealer Agreement and in the
Operating Standards for Audi Dealers, for facilities, capitalization,
management, personnel, and all other matters addressed therein from time to
time. Scottsdale also will participate in and comply with all then-current
terms of the Audi brand specialist program and all other programs offered by
Audi.
Further, Scottsdale must perform at least at the then-current average for all
Audi dealers nationally in sales performance as a percentage of objective;
penetration of the market as measured as a percentage of the European high group
defined by VWoA and any other relevant competitive group defined by Audi; and
customer satisfaction ratings for sales, for service, and overall. Scottsdale's
sales performance and market penetration performance will be judged in view of
the availability of new Audi automobiles to Scottsdale. In the event VWoA finds
Scottsdale
out of compliance with this paragraph at any time, VWoA will give Scottsdale
written notice of the specific deficiency. Scottsdale will have one full
calendar quarter thereafter to improve its performance to a level satisfactory
to VWoA.
VWoA agrees that, also subject to availability, Scottsdale's planning volume
will be at least 150 new vehicles annually. This is subject to all terms and
conditions of Scottsdale's Audi Dealer Agreement respecting vehicle supply and
allocation.
After December 31, 1996, VWoA will have the rights in its sole discretion to
appoint an additional Audi dealer in metropolitan Phoenix, restricted only as
may be provided by any specific Arizona statute in force at such time; provided,
that in consideration of Audi's agreements memorialized in this letter and
Audi's performance of those agreements, Scottsdale agrees it will not protest
any such appointment.
In the event VWoA determines to make such an appointment and Scottsdale has
performed at a level satisfactory to VWoA, then VWoA will offer Scottsdale a
first right of refusal to open a satellite sales and service operation in the
geographic area identified by VWoA. In the event Scottsdale does not exercise
such right within 30 days after the offer by VWoA, or does not submit to VWoA
within 90 days after exercising such right detailed plans for establishing such
an operation, including the acquisition or construction of a suitable facility,
and does not in fact establish such an operation within a period of time
determined by VWoA after its approval of Scottsdale's plans, then VWoA will be
free to appoint any other dealer of its own choosing. Scottsdale's sales and
market penetration performance under the terms of this letter, for purposes of
determining whether Scottsdale will be offered the first right of refusal
contemplated in this paragraph, will be measured as though Scottsdale's primary
of area of influence were the area within a ten-mile radius of Scottsdale's
premises.
Except to the extent specifically in conflict with the terms of this letter, all
terms and conditions of the Audi Dealer
Agreement between VWoA and Scottsdale remain in full force and effect and
control their relationship.
To ensure there is no misunderstanding in this matter, please execute this
letter where indicated below and return the original to me.
Very truly yours,
VOLKSWAGEN OF AMERICA, INC.
d/b/a AUDI OF AMERICA, INC.
By: /s/James R. Barton
--------------------------
James R. Barton
Area Executive
Acknowledged, agreed and accepted:
SCOTTSDALE JAGUAR, LTD. d/b/a SCOTTSDALE AUDI
By: /s/Stephen Knappenberger
--------------------------
Steven Knappenberger
Chairman
Date: 2-24-95
--------------------