AGREEMENT BETWEEN
AMERICAN HONDA MOTOR COMPANY, INC.
AND
UNITED AUTO GROUP, INC.
This Agreement, dated October 4, 1996, entered between United Auto Group,
Inc., a Delaware corporation with its principal place of business at 375 Park
Avenue, 22nd Floor, New York, New York 10152, UAG West, Inc., a Delaware
corporation with its principal place of business at 375 Park Avenue, 22nd
Floor, New York, New York 10152, UAG Northeast, Inc., a Delaware corporation
with its principal place of business at 375 Park Avenue, 22nd Floor, New
York, New York 10152, DiFeo Partnership, Inc., a Delaware corporation with
its principal place of business at 375 Park Avenue, 22nd Floor, New York, New
York 10152, Danbury Auto Partnership, Inc., a New Jersey partnership
corporation with its principal place of business at 102D Federal Road,
Danbury, Connecticut 06810, certain stockholders of UAG that have executed
the signatory page hereto (all of the above are collectively referred to
herein as "UAG") and American Honda Motor Co., Inc. ("AHM"), a California
corporation with its principal place of business at 1919 Torrance Boulevard,
Torrance, California 90501.
WHEREAS, UAG is currently the owner, directly or through its Affiliates (as
defined in Paragraph 1 below), in whole or in part, of a Honda automobile
dealership; and
WHEREAS, UAG wants to issue stock in a public offering of securities anticipated
to be traded on the New York Stock Exchange; and
WHEREAS, AHM has formulated the American Honda Motor Co., Inc. Policy on the
Public Ownership of Honda and Acura Dealerships (the "Policy"); and
WHEREAS, AHM is willing to permit UAG (as an entity of which a minority portion
is publicly owned) to own Honda and Acura dealerships, provided that UAG adheres
to the Policy and the terms and conditions set forth in this Agreement; and
WHEREAS, UAG is willing to adhere to the Policy and the terms set forth herein;
NOW THEREFORE, in consideration of the mutual covenants set forth herein and
other good and valuable consideration the sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. STRUCTURE OF RELATIONSHIP
1.1 DEALERSHIPS ARE SEPARATE LEGAL ENTITIES. UAG shall create and/or
maintain separate legal entities for each Honda and Acura dealership which it
owns, directly or through an Affiliate, shall obtain a separate motor vehicle
license for each dealership, and shall maintain separate financial statements
for
each such dealership. Consistent with AHM policy, the name "Honda" or "Acura,"
as applicable, shall appear in the d/b/a of each dealership. The Honda and/or
Acura dealerships currently owned by UAG and/or approved by AHM for acquisition
by UAG are listed in Schedule A, appended hereto. As used herein, "Affiliate"
of, or a person or entity "affiliated" with, a specified person or entity, means
a person or entity that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
person or entity specified. For the purpose of this definition, the term
"control" (including the terms "controlling," "controlled by" and "under common
control with") means the possession, directly or indirectly, or the power to
direct or cause the direction of the management and policies of a person or
entity, whether through the ownership of securities, by contract or otherwise.
1.2 AGREEMENT TO AUTOMOBILE DEALER SALES AND SERVICE AGREEMENT. UAG
hereby agrees to be bound by the terms of Honda and Acura Automobile Dealer
Sales and Service Agreements (the "Dealer Agreements"), copies of which are
appended hereto as Schedule B. UAG further agrees that each individual Honda
and Acura dealership that it owns, in whole or in part, shall execute and be
bound by the applicable Dealer Agreement.
1.3 ADHERENCE TO THE POLICY. UAG and its Honda and Acura dealerships
hereby agree to be bound by the terms of the Policy, a copy of which is appended
hereto as Schedule C.
1.4 TRANSFER OF OWNERSHIP OF HONDA AND ACURA DEALERSHIPS UPON
OCCURRENCE OF THE INITIAL PUBLIC OFFERING. UAG understands and agrees that the
public offering (the "Offering") of certain shares of the capital stock of UAG
(the entire capital stock of UAG being referred to herein as the "UAG Stock")
will constitute a change of ownership of the Honda and Acura dealerships that,
pursuant to the Dealer Agreement, requires AHM's prior written approval.
Provided that the representations and warranties in this Section are accurate
and that UAG, its Honda and Acura dealerships, and UAG's shareholders adhere to
the terms and conditions of this Agreement, the Policy, and the applicable
Dealer Agreements, AHM hereby agrees to the transfer of certain shares of UAG
Stock pursuant to the Offering as described herein. UAG hereby represents and
warrants that it has provided all documentation and information to AHM
pertaining to the public offering of UAG Stock, including but not limited to all
filings with the SEC and other federal and state regulatory agencies (including,
but not limited to, quarterly and annual financial statement filings,
prospectuses and other materials related to UAG), all agreements between or
among UAG and financial institutions and/or underwriters, and all agreements
between or among UAG and its shareholders. One copy of this documentation and
information has been filed with AHM and labeled Schedule X. UAG hereby further
represents, warrants and covenants as follows:
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1.4.1 No more than 40% of the UAG Stock, including warrants,
stock options and minority roll-up interests, will be offered in the Offering or
otherwise become freely tradable or unrestricted at any time.
Within three (3)business days, UAG shall notify AHM, in writing (the
"Report"), of the sale, or offer to sell, to the public of any UAG Stock owned
by any person or entity listed on Schedule D appended hereto (or as the same may
be modified from time to time), which is an accurate list of all individuals and
entities that own or who have options, warrants or minority roll-up interests to
acquire UAG Stock ("Stockholders") and the number of shares of UAG Stock held by
each and the percentage ownership of UAG Stock owned or controlled by each
Stockholder. The Report shall include (A) the name of the person or entity that
has made the sale or offer; (B) the date of the sale or offer; (C) the number of
shares of UAG Stock that have been sold or offered; (D) the total number of
shares of UAG Stock outstanding (including, but not limited to, restricted
shares of UAG Stock, freely traded shares of UAG, warrants, stock options, and
minority roll-up interests); and (E) the number of shares of UAG Stock that are
registered and freely tradable (not including the shares of UAG Stock enumerated
in (C) immediately above). "Public Stock" shall mean the sum of the shares of
UAG Stock enumerated in (C) and (E) hereof. "Public Stock Percentage" shall
mean the number of Public Stock (C+E) as a percentage of total UAG Stock (D).
(Public Stock Percentage = [C+E]/D expressed as a percentage.)
In the event that the Public Stock Percentage exceeds 40% (that is,
[C+E]/D>.4), then UAG shall: (1) within thirty(30) days, take such steps or
measures as may be required to prevent the proposed transfer, reacquire stock on
the public market or take such other steps so that the Public Stock Percentage
shall not exceed 40%; or (2) shall enter into an agreement to sell all of its
Honda and/or Acura dealerships to one or more third parties which shall be
acceptable to AHM (which agreement shall be subject to AHM's rights herein
including, without limitation, Section 8.2 hereof); or (3) shall voluntarily
relinquish its rights (including, without limitation, its ownership interests)
to any and all Honda and Acura dealerships then owned, in whole or in part, by
UAG or its Affiliates, and such rights shall revert to AHM.
1.4.2 In addition to those persons or entities referred to in
Section 1.4.1 of this Agreement, Schedule D also lists those individuals or
entities with ownership interests in the following Stockholder: Trace
International Holdings, Inc. ("Trace"). On a continuing basis, UAG agrees to
provide pertinent financial and business data on Trace as well as Aeneas Venture
Corporation ("Aeneas") and AIF II, L.P. ("Apollo"), to the extent such
documentation and information is reasonably available.
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1.5 RESTRICTIONS ON TRANSFER OF UAG STOCK BY RESTRICTED STOCKHOLDERS.
Without AHM's prior written approval, Trace, Aeneas and Apollo (collectively,
"Restricted Stockholders") shall not sell, transfer or in any manner encumber
any UAG Stock nor enter into any agreement providing for the voting of UAG Stock
as directed by any person or entity or in a specified manner or pursuant to a
specified procedure, or grant any voting proxy or otherwise enter into any
arrangement the purpose or effect of which is to vest in any other person or
entity the voting rights of any UAG Stock held by the Restricted Stockholders.
AHM will not approve any transfers of UAG Stock that it reasonably deems
detrimental to AHM's interests as provided in Section 1.7 below, and any
approved transfer may only be made on the condition that the transferee(s) and
subsequent transferee(s) agree in writing to be bound by the terms of the
Agreement to the same extent as if it had executed this Agreement as a
Restricted Stockholder. Each certificate representing UAG Stock held by a
Restricted Stockholder or any securities issued in respect of such UAG Stock
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
The shares represented by this certificate are subject to restrictions on
transfer set forth in an Agreement between American Honda Motor Company,
Inc. and the Corporation dated October 4, 1996, as amended, a copy of
which will be furnished by the Corporation without charge upon written
request.
1.6 IDENTIFICATION OF OWNERS OF UAG. Schedule E, appended hereto,
includes accurate documentation and information pertaining to each individual or
entity that owns or controls 5% or more of the UAG Stock, whether such stock is
freely tradable and/or restricted. In the event of any change of ownership that
results in an individual or entity not listed on Schedule E obtaining ownership
or control of 5% or more of UAG Stock, UAG shall provide AHM with the
documentation and information required by Schedule E with respect to such person
or entity to the extent the documentation and information is reasonably
available. UAG will provide AHM with copies of all filings made with the SEC
and comparable filings made with state agencies by persons or entities that own
more than 5% of UAG and or any of its Affiliates. Without limiting the
foregoing, UAG will use its best efforts to provide such information regarding
such shareholders as AHM may from time to time request.
1.7 RIGHT OF AHM TO DISAPPROVE ACQUISITIONS OF UAG STOCK. Without
limiting the restrictions set forth in Section 1.5, AHM shall have the
irrevocable right to disapprove of the acquisition of more than 5% of the shares
of UAG Stock by any individual or entity if such acquisition is reasonably
deemed detrimental to AHM's interests. Without limiting the foregoing, the
parties agree that such acquisition or attempted acquisition may reasonably be
deemed to be detrimental to AHM's interests if the acquiring individual or
entity (a) competes with AHM or its
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parent, subsidiaries or Affiliates in manufacturing, marketing, or selling
automotive products or services or is owned or controlled by or has a
substantial economic interest in an entity that competes with American Honda or
its parent, subsidiaries or Affiliates in manufacturing, marketing, or selling
automotive products or services (not including an interest in a dealership
selling products manufactured by a competing automobile manufacturer); (b) has
criminal affiliations or a criminal record; (c) has less than an excellent
credit rating or credit history; (d) has demonstrated unacceptable customer
satisfaction index performance in any industry in which it has participated; or
(e) has had a prior relationship with AHM which AHM deems to have been
unsatisfactory. Notwithstanding the immediately preceding sentence, as long as
control of UAG remains in the hands of persons or entities approved by AHM, it
is not AHM's intention to restrict reputable banks, mutual funds, insurance
companies, and/or pension funds (collectively referred to herein as
"Institutional Investors") from acquiring up to 15% of UAG Stock. Therefore,
the parties further agree that, unless such Institutional Investor (i) is owned
or controlled by or owns 10% or more [15% or more if such ownership is in the
capacity as an investment advisor, trustee or custodian for the benefit of third
parties] of, or controls, any person or entity that competes with AHM or its
parent, subsidiaries or Affiliates in manufacturing, marketing, or selling
automotive products or services (not including an interest in a dealership
selling products manufactured by a competing automobile manufacturer); (ii) has
criminal affiliations or a criminal record; or (iii) has acquired, or has
reasonable likelihood of acquiring, a controlling interest in UAG, acquisition
of up to 15% of UAG Stock by such Institutional Investor shall be presumed not
to be detrimental to AHM's interests. The parties further agree that
acquisition or control of more than 15% of UAG Stock by any party shall be
subject to AHM's approval pursuant to the standards set forth above with respect
to parties that acquire 5% or more of UAG Stock.
UAG agrees that it will provide AHM with notice of any acquisition or
proposed acquisition of UAG Stock of which UAG becomes aware with respect to
which AHM has a right of disapproval pursuant to this Section 1.7. UAG shall
make its best efforts to obtain and provide to AHM such documentation and
information pertaining to the party or parties that have acquired or are
proposing to acquire the UAG Stock that AHM would need to exercise its right of
disapproval. Unless AHM objects in writing to such acquisition within 180 days
of receiving completed documentation and information from UAG pertaining
thereto, AHM shall be deemed to have approved such acquisition. In the event
AHM disapproves of such acquisition, UAG and its then current shareholders shall
make their best efforts to prevent such acquisition or, if it has already taken
place, to reacquire the shares of UAG Stock so transferred. In the event that
UAG is unable to prevent such acquisition or reacquire the shares of UAG
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Stock, AHM may invoke the purchase provisions of Section 9.3 hereof.
1.8 DESIGNATION OF UAG'S EXECUTIVE MANGER. UAG shall designate Carl
Spielvogel as its Executive Manager. The Executive Manager shall have
operational control of UAG and shall have final authority to decide any
dealership matters not within the authority of the Dealer Manager. UAG may not
change its Executive Manager without the prior written approval of AHM, which
approval shall not be unreasonably withheld.
1.9 NO FURTHER PUBLIC OFFERINGS OF STOCK WITHOUT AHM'S PRIOR WRITTEN
APPROVAL. UAG shall not make any further public offerings of UAG Stock without
AHM's prior written approval. UAG shall submit any proposals to make other
public offerings of UAG Stock to AHM in the manner set forth in the Policy and
AHM shall evaluate such proposal in accordance therewith. The restriction in
this Section 1.9 on making further public offerings of UAG Stock shall not be
construed to prevent any registration of shares of UAG Stock issuable to
employees pursuant to employee stock options; however, shares of UAG Stock so
registered shall be considered to be Public Stock as defined in Section 1.4.1 of
this Agreement which total Public Stock shall not be in excess of 40% of total
UAG Stock.
1.10 NO PUBLIC OWNERSHIP OF INDIVIDUAL DEALERSHIPS. UAG will not use
a public ownership structure for any of its Honda and/or Acura dealerships.
1.11 CHANGE OF CONTROL OF UAG. UAG acknowledges and agrees that AHM
has the right to ensure that its dealerships remain under the control of persons
and/or entities with a full-time commitment to the sales and service of Honda
Products or Acura Products (as the case may be). UAG recognizes the legitimacy
of AHM's concern (as more fully set forth in the Policy) that public ownership
of dealerships, if unrestricted, could lead to the loss of AHM's control over
the selection of the individuals who sell and service Honda Products or Acura
Products. Therefore, in the event that a controlling interest in UAG or any of
its Affiliates that own Honda or Acura dealers is acquired or threatened to be
acquired by an individual or entity not specifically approved by AHM, UAG agrees
that AHM may terminate its Dealer Agreement(s) with the Honda and/or Acura
dealership(s) then owned by UAG and/or exercise the right to purchase set forth
in Section 9.3. As used herein, "controlling interest" means (a) ownership or
practical control of shares of UAG or its Affiliates sufficient to appoint or
control either the management or the board of directors thereof or (b) the
practical ability to make the day-to-day and/or policy decisions of a Honda or
Acura dealership.
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2. FUTURE ACQUISITIONS BY UAG OF HONDA AND ACURA DEALERSHIPS
2.1 RIGHT OF APPROVAL BY AHM. Neither UAG nor any UAG Affiliate (as
defined above) shall acquire any interest in any Honda or Acura dealership not
listed on Schedule A without AHM's prior written approval. Approval shall be at
AHM's sole discretion and will be evaluated in light of the then current Policy
and AHM's then current business interests. Without limiting the foregoing, in
no event will AHM approve any such acquisition unless all Honda and Acura
dealerships owned or controlled by UAG and/or its Affiliates are (a) in full
compliance with all of the terms of its Dealer Agreement and this Agreement; and
(b) meet all of the applicable Honda or Acura policies and performance
expectations.
2.2 OWNERSHIP OF CONTIGUOUS DEALERSHIPS. UAG and/or its Affiliates
shall not own contiguous Honda and/or Acura dealerships.
2.3 OWNERSHIP OF MULTIPLE DEALERSHIPS. UAG shall not own or control,
directly or through an Affiliate, Honda or Acura dealerships in excess of the
numbers set forth below:
2.3.1 HONDA. UAG shall not hold an ownership interest, directly
or through an Affiliate, in a multiple number of Honda dealerships as provided
below: (a) in a "Metro" market (a "Metro" market is a metropolitan market area
represented by two or more Honda Dealer points) with two (2) to ten (10) Honda
dealership points (inclusive), no Dealer Owner may own, operate or have an
interest in more than one (1) Honda dealership; (b) in a Metro market with
eleven (11) to twenty (20) Honda dealership points (inclusive), no Dealer Owner
may own, operate or have an interest in more than two (2) Honda dealerships; (c)
in a Metro market with twenty-one (21) or more Honda dealership points
(inclusive), no Dealer Owner may own, operate or have an interest in more than
three (3) Honda dealerships; (d) 4% of the Honda dealerships in any one of the
ten Honda Zones; and (e) seven (7) Honda dealerships nationally.
2.3.2 ACURA. UAG shall not hold an ownership interest, directly
or through an Affiliate, in more than: (a) one (1) Acura dealership in a Metro
market (as used herein, "Metro" market is a Metropolitan market area represented
by two or more Acura dealer points); (b) two (2) Acura dealerships in any one of
the six Acura Zones; and (c) three (3) Acura dealerships nationally.
2.4 PROPOSED ACQUISITION IN EXCESS OF LIMITS. If the purchase of any
Honda or Acura dealership would result in exceeding the limits set forth in this
Section 2, AHM will reject UAG's application for approval of the ownership
transfer until such time as UAG shall divest itself of the appropriate number of
dealerships to bring it into compliance with the requirements of this Agreement
at which time AHM will reconsider the proposal in
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light of the Policy. In case of such divestiture, AHM may invoke the purchase
option/right of first refusal provisions of Section 8.2 hereof.
3. SEPARATE, FREESTANDING, EXCLUSIVE DEALERSHIPS
3.1 MAINTENANCE OF EXCLUSIVE DEALERSHIP PREMISES. Each Honda or
Acura dealership owned by UAG or its Affiliates shall be maintained as separate,
freestanding Dealership Operations that meet complete and timely compliance with
facility design and image enhancements to AHM's brand image, functionality and
capacity standards and guidelines, which standards and guidelines AHM may
reasonably modify from time to time, and shall exclusively offer a full range of
Honda Products and services or Acura Products and services and do not offer
competing products or services from its Dealership Premises.
3.2 FULL LINE OF PRODUCTS AND SERVICES. UAG shall make available to
the customers at each of its Honda dealerships all Honda Products and services,
including, but not limited to, vehicles, Genuine Parts and Accessories, American
Honda Finance Corporation retail financing services (whether for purchases or
leases), Honda Vehicle Service Contracts, and Honda Certified Used Car Program.
UAG shall make available to the customers at each of its Acura dealerships all
Acura Products and services, including vehicles, Genuine Parts and Accessories,
American Honda Finance Corporation retail financing services (whether for
purchases or leases), Acura Vehicle Service Contracts, and Acura Preferred Pre-
Owned Program.
3.3 TREATMENT AS INDEPENDENT DEALERSHIPS. For allocation and other
purposes, transfer of Honda or Acura Automobiles from one dealership to another
dealership owned by the same entity will be treated the same as a transfer
between separately-owned dealers.
3.4 INDEPENDENT REPORTING REQUIREMENTS. Each Honda and Acura
dealership shall have the same reporting requirements as all other Honda and
Acura dealerships, including fully audited dealership-specific financial
information. Each individual dealership must meet the capitalization
requirements and other requirements set forth in its individual Dealer
Agreement. The corporate by-laws of the individual corporation that actually
owns the Honda or Acura dealership must restrict it from engaging in any
activity other than the ownership and maintenance of a Honda or Acura
dealership, as the case may be.
4. DEALER MANAGERS
4.1 APPROVAL BY AHM. Each Honda and Acura dealership owned or
controlled by UAG shall have a qualified Dealer Manager, approved by AHM
(subject to the exception noted in Section 4.2 below). Each Dealer Manager
shall work at the Honda or Acura Dealership Premises, shall devote all efforts
to
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the management of the dealership and shall have no other significant business
interests or management responsibilities.
4.2 TRIAL PERIOD. Whenever UAG nominates a new Dealer Manager
candidate for a Honda or Acura dealership, AHM shall have the right to withhold
a decision concerning approval or rejection of the candidate for a trial period
of up to one year, at its sole discretion; provided, however, that the candidate
may operate in the capacity of Dealer Manager until AHM has approved or rejected
the candidate.
4.3 AUTHORITY OF DEALER MANAGER. UAG shall advise AHM in writing of
the limitations, by category and, where applicable, by specific action, on the
authority of the Dealer Manager regarding the operation of the dealership.
Without limiting the foregoing, the Dealer Manager must have the authority to
run the day-to-day operations of the dealership and the capacity to enter into
substantial transactions (e.g., the placement of orders for Honda or Acura
Automobiles and Genuine Parts and Accessories) on behalf of the dealership.
5. REPRESENTATION ON HONDA AND ACURA DEALER ORGANIZATIONS
No more than one representative each from the Honda, and separately,
Acura dealerships owned, directly or through an Affiliate, by UAG, may serve on
the Honda National Dealer Advisory Board, the Acura National Dealer Council or
any future Honda or Acura national board(s) which may be established, and no
more than one representative each may serve on either a Honda or Acura Zone
Advisory Board/Council, or Honda Advertising Triad or Acura advertising counsel
(should one be established in the future). Such representative must be involved
on a full-time basis in the day-to-day operation of the dealership which it is
appointed to represent and must otherwise comply with the bylaws of the
applicable organization.
6. DEALERSHIP PERSONNEL TRAINING
UAG shall not substitute training courses of its own for those
provided or sponsored by AHM without the prior written approval of AHM, which
approval shall be in AHM's sole discretion. In no event will AHM approve UAG
training courses unless the trainers are certified pursuant to Honda's or
Acura's certification programs, as applicable.
7. PROSPECTUS DISCLAIMER AND INDEMNIFICATION AND HOLD HARMLESS AGREEMENT
UAG shall place in its registration statement and its prospectus, as
well as in any other document offering shares in UAG Stock to public or private
investors, the following disclaimer:
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No Manufacturer (as defined in this Prospectus) has been involved, directly
or indirectly, in the preparation of this Prospectus or in the offering
being made hereby. No Manufacturer has made any statements or
representations in connection with the offering or has provided any
information or materials that were used in connection with the Offering,
and no Manufacturer has any responsibility for the accuracy or completeness
of this Prospectus.
UAG shall indemnify and hold harmless AHM pursuant to the terms of the
Indemnification Agreement set forth in Schedule F to this Agreement.
8. TRANSFER OF DEALERSHIPS BY UAG.
8.1 SALE OF OWNERSHIP INTEREST IN DEALERSHIP. This is a personal
services Agreement based upon personal skills, service, qualifications and
commitment of UAG, its Executive Manager, and its Dealer Managers. For this
reason, and because AHM has entered into this Agreement in reliance upon UAG's,
its Executive Manager's, and its Dealer Managers' qualifications, without
limiting any of the other restrictions on transfer of ownership set forth in
this Agreement, UAG agrees to obtain AHM's prior written approval of any
proposed transfer of any ownership interest in a Honda or Acura dealership owned
by UAG.
Without limiting the foregoing, in the event of such proposed
transfer, AHM shall not be obligated to renew the applicable Dealer Agreement or
to execute a new Dealer Agreement with UAG or the proposed transferee unless (a)
UAG first makes arrangements acceptable to AHM to satisfy any outstanding
indebtedness to AHM; (b) the proposed transfer conforms to this Agreement and
the Policy; and (c) the transferee agrees to the terms and conditions of this
Agreement and the Policy.
8.2 RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE
8.2.1 RIGHTS GRANTED. If a proposal to sell a dealership's
assets or transfer its ownership is submitted by UAG to AHM, AHM has a right of
first refusal or option to purchase the dealership assets or stock, including
any leasehold interest or realty. AHM's exercise of its right or option under
this Section supersedes UAG's right to transfer its interest in, or ownership
of, the dealership. AHM's right or option may be assigned by it to any third
party and AHM hereby guarantees the full payment to UAG of the purchase price by
such assignee. AHM may disclose the terms of any pending ownership transfer
agreement and any other relevant dealership performance information to any
potential assignee. AHM's rights under this Section will be binding on and
enforceable against any assignee or successor in interest of UAG or purchaser of
UAG's assets.
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8.2.2 EXERCISE OF AHM'S RIGHTS. AHM shall have 180 days from
AHM's receipt of all completed documentation and information customarily
required by it to evaluate a proposed transfer of ownership in which to exercise
its option to purchase or right of first refusal. AHM's exercise of its right
of first refusal under this Section neither shall be dependent upon nor require
its prior refusal to approve the proposed transfer.
8.2.3 RIGHT TO FIRST REFUSAL. If UAG has entered into a bona
fide written ownership transfer agreement for its dealership business or assets,
AHM's right under this Section is a right of first refusal, enabling AHM to
assume the buyer's rights and obligations under such ownership transfer
agreement, and to cancel this Agreement and all rights granted UAG. Upon AHM's
request, UAG agrees to provide other documents relating to the proposed transfer
and any other information which AHM deems appropriate, including, but not
limited to, those reflecting other agreements or understandings between the
parties to the ownership transfer agreement. Refusal to provide such
documentation or to state that no such documents exist shall create the
presumption that the ownership transfer agreement is not a bona fide agreement.
8.2.4 OPTION TO PURCHASE. If UAG submits a proposal which AHM
determines is not bona fide or in good faith, AHM has the option to purchase the
principal assets of UAG utilizing the dealership business, including real estate
and leasehold interest, and to cancel this Agreement and the rights granted UAG.
The purchase price of the dealership assets will be determined by good faith
negotiations between the parties. If an agreement cannot be reached, the
purchase price will be exclusively determined as set forth in Section 9.3 of
this Agreement.
8.2.5 UAG'S OBLIGATIONS. Upon AHM's exercise of its right or
option and tender of performance under the ownership transfer agreement or upon
whatever terms may be expressed in the ownership transfer agreement, UAG shall
forthwith transfer the affected real property by warranty deed conveying
marketable title free and clear of all liens, claims, mortgages, encumbrances,
tenancies and occupancies. The warranty deed shall be in proper form for
recording, and UAG shall deliver complete possession of the property and deed at
the time of closing. UAG shall also furnish to AHM all copies of any easements,
licenses or other documents affecting the property or dealership operations and
shall assign any permits or licenses that are necessary or desirable for the use
of or appurtenant to the property or the conduct of such Dealer Operations. UAG
also agrees to execute and deliver to AHM instruments satisfactory to AHM
conveying title to all personal property, including leasehold interests,
involved in the transfer or sale to AHM. If any personal property is subject to
any lien or charge of any kind, UAG agrees to procure the discharge and
satisfaction thereof prior to the closing of sale of such property to AHM.
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9. REMEDIES OF AHM.
9.1 CUMULATIVE REMEDIES. All of AHM's remedies set forth herein are
cumulative. No explicit listing of any remedy shall foreclose AHM from seeking
any remedy at laws or in equity, including injunctive relief, that would
otherwise be available to it.
9.2 INJUNCTIVE RELIEF. UAG agrees that any breach by UAG or its
Affiliates of the covenants set forth in this Agreement that pertain to the
ownership, control, transfer, and/or operation of Honda or Acura dealerships
would result in irreparable harm to AHM and therefore agrees that AHM shall be
entitled to emergency, preliminary and permanent injunctive relief to prevent
such breaches.
9.3 RIGHT TO PURCHASE. UAG understands and acknowledges that AHM has
the right to maintain a personal relationship with its dealers and a healthy and
competitive dealer network and that the Policy and this Agreement are designed
to ensure the protection of that right and the integrity of the dealer network
while at the same time enabling UAG to raise capital through the public offering
of stock. Therefore, in the event that UAG materially breaches the Policy or
this Agreement, in addition to any other remedies that AHM might have, upon
notice from AHM, AHM may exercise its right to purchase, and UAG agrees that it
will sell, all assets of its Honda and Acura dealerships at their then current
fair market value and on the terms set forth in Section 8.2.5 and that the
applicable Dealer Agreements will terminate upon such sale. In the event that
UAG or any of its Honda or Acura dealerships materially breaches any applicable
Honda or Acura Dealer Agreement(s), in addition to any other remedies that AHM
might have, upon notice from AHM, AHM may exercise its right to purchase, and
UAG agrees that it will sell, the assets of the affected Honda and/or Acura
dealerships or all Honda and Acura dealerships, at their then current fair
market value and on the terms set forth in Section 8.2.5 and that the applicable
Dealer Agreements will terminate upon such sale. Any dispute as the fair market
value of such dealerships will be resolved by arbitration as described in
Section 10 hereof. In such arbitration, the Arbitrator shall be empowered only
to determine (1) whether a material breach took place; and, (2) if so, the fair
market value of the dealerships at issue. The arbitrator in such proceeding
shall not have the power to award any other damages or other relief. If the
arbitrator finds a material breach, UAG shall transfer the dealerships to AHM or
its designee at the fair market value determined by the arbitrator without the
necessity of further legal action by AHM. The arbitrator's decision shall be
unappealable and unreviewable. If, in violation of the terms hereof, UAG
requires AHM to obtain a court judgment to enforce the arbitrator's decision,
that decision shall be enforceable in any court of competent jurisdiction and
UAG agrees to pay the costs and attorneys' fees expended in connection
therewith. The foregoing arbitration
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shall not, without the consent of both parties, be consolidated with any other
arbitration initiated by a party pursuant to Section 10 hereof.
10. DISPUTE RESOLUTION
Except as modified in Section 9.3 immediately above, any controversy
or claim arising out of or relating to the Agreement, or the breach thereof, or
any failure to agree where agreement of the parties is necessary pursuant
hereto, including the determination of the scope of this agreement to arbitrate,
shall be resolved by the following procedures:
10.1 ATTEMPT TO RESOLVE DISPUTE. The parties shall use all
reasonable efforts to amicably resolve the dispute through direct discussions.
The senior management of each party commits itself to respond promptly to any
such dispute. Any party may send written notice to the other parties
identifying the matter in dispute and invoking the procedures of this article.
Within ten (10) days after such written notice is received, unless a delay is
agreed to by both parties to the dispute or the parties agree to confer by
telephone, one or more senior management of each party shall meet in Los
Angeles, California to attempt to amicably resolve the dispute by written
agreement. If said dispute cannot be settled through direct discussions, the
parties agree to first endeavor to settle the dispute in an amicable manner by
mediation in Los Angeles and administered by the American Arbitration
Association ("AAA"), pursuant to the Commercial Mediation Rules of the AAA at
the time of submission prior to resorting to binding arbitration.
10.2 APPLICATION TO BINDING ARBITRATION. If after forty-five (45)
days from the first written notice of dispute, the parties fail to resolve the
dispute by written agreement or mediation, either party may submit the dispute
to final and binding arbitration administered by the AAA, pursuant to the
Commercial Arbitration Rules of the AAA at the time of submission. The
arbitration shall be held in Los Angeles before a single neutral, independent,
and impartial arbitrator (the "Arbitrator").
10.3 BINDING ARBITRATION PROCEDURE. Unless the parties have agreed
upon the selection of the Arbitrator before then, the AAA shall appoint the
Arbitrator as soon as practicable, but in any event within thirty (30) days
after the submission to AAA for binding arbitration. The arbitration hearings
shall commence within forty-five (45) days after the selection of the
Arbitrator. Unless the Arbitrator otherwise directs, each party shall be
limited to three pre-hearing depositions lasting no longer than 6 hours each.
The parties shall exchange documents to be used at the hearing no later than ten
(10) days prior to the hearing date. Unless the Arbitrator otherwise directs,
each party shall have no longer than three days to present its position, the
entire proceedings before the
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Arbitrator shall be on no more than eight hearing days within a three week
period. The Arbitrator's award shall be made no more than thirty (30) days
following the close of the proceeding. The Arbitrator's award may not include
consequential, exemplary, or punitive damages. The Arbitrator's award shall be
a final and binding determination of the dispute and shall be fully enforceable
in any court of competent jurisdiction. the prevailing party shall be entitled
to recover its reasonable attorneys' fees and expenses, including arbitration
administration fees, incurred in connection with such proceeding. Except in a
proceeding to enforce the results of the arbitration, neither party nor the
Arbitrator may disclose the existence, content, or results of any arbitration
hereunder without the prior written consent of both parties.
10.4 EXCEPTIONS. Notwithstanding the foregoing, either party may,
without recourse to arbitration, assert against the other party a third-party
claim, cross-claim or like claim in any action brought by a Third Party to which
this Agreement or the obligations of the parties hereunder may pertain. Nothing
herein shall prevent a party from seeking injunctive relief, where appropriate,
from a court of competent jurisdiction pending the outcome of any arbitration
concerning the subject of such arbitration or when authorized by an arbitrator's
award or when emergency relief is required.
11. ENTIRE AGREEMENT OF THE PARTIES
There are no prior agreements or understandings, either oral or
written, between the parties affecting this Agreement, except as otherwise
specified or referred to in this Agreement. No change or addition to, or
deletion of any portion of this Agreement shall be valid or binding upon the
parties hereto unless approved in writing signed by an officer of each of the
parties hereto. The parties acknowledge that each of them have been represented
by counsel and are substantial entities with considerable resources. This
Agreement has been fully negotiated. No provision of this Agreement shall be
construed against a party on the ground that the party or its attorneys drafted
it.
12. SEVERABILITY
If any provision of this Agreement should be held invalid or
unenforceable for any reason whatsoever, or conflicts with any applicable law,
this Agreement will be considered divisible as to such provision(s), and such
provision(s) will be deemed amended to comply with such law, or if it (they)
cannot be so amended without materially affecting the tenor of the Agreement,
then it (they) will be deemed deleted from this Agreement in such jurisdiction,
and in either case, the remainder of the Agreement will be valid and binding.
Notwithstanding the foregoing, if, as a result of any provision of this
Agreement being held invalid or unenforceable, AHM's ability to control the
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selection of the Dealer Owner, Executive Manager, or the Dealer Manager or to
otherwise maintain its ability to exercise reasonable discretion over the
selection of the actual individual who is managing a Honda or Acura dealership
is materially restricted beyond the terms of this Agreement or the Dealer
Agreement, AHM shall be permitted to invoke the purchase provisions of Section
9.3 hereof.
13. NO IMPLIED WAIVERS
The failure of either party at any time to require performance by the
other party of any provision herein shall in no way affect the right of such
party to require such performance at any time thereafter, nor shall any waiver
by any party of a breach of any provision herein constitute a waiver of any
succeeding breach of the same or any other provision, nor constitute a waiver of
the provision itself.
14. AHM POLICIES
AHM has adopted certain policies which are attached hereto as Schedule
G. UAG hereby agrees to abide by these policies as attached hereto and as
reasonably amended by AHM from time to time, and other policies promulgated in
the future by AHM. In addition, AHM has expressed a commitment to diversity in
management and among employees. UAG hereby agrees to adhere to that commitment
by seeking to achieve diversity among the management personnel and employees it
appoints in connection with the Honda and Acura dealerships it owns or controls.
Without limiting the foregoing, UAG hereby agrees that its dealerships will meet
or exceed (with respect to both the applicable zone and the United States as a
whole) average Honda and/or Acura dealership performance (as such performance is
measured by AHM, now or in the future) with respect to customer satisfaction,
sales, and market share.
15. APPLICABLE LAW
This Agreement shall be governed by and construed according to the
laws of the State of California.
16. BENEFIT
This Agreement is entered into by and between AHM and UAG for their
sole and mutual benefit. Neither this Agreement nor any specific provision
contained in it is intended or shall be construed to be for the benefit of any
third party.
17. NOTICE TO THE PARTIES
Any notices permitted or required under the terms of this Agreement
shall be directed to the following respective addresses of the parties, or if
either of the parties shall have
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specified another address by notice in writing to the other party, then to the
address last specified:
AMERICAN HONDA MOTOR CO., INC.
Acura Division
1919 Torrance Boulevard
Torrance, California 90501
Attention: Acura Dealer Development Department
AMERICAN HONDA MOTOR CO., INC.
Honda Division
1919 Torrance Boulevard
Torrance, California 90501
Attention: Dealer Placement Department
with a copy to:
Associate General Counsel
HONDA NORTH AMERICA, INC.
Law Department
700 Van Ness Avenue
Torrance, California 90509-2206
UNITED AUTO GROUP
375 Park Avenue
22nd Floor
New York, New York 10152
Attention: Carl Spielvogel, Chairman and C.E.O.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
UNITED AUTO GROUP, INC.
By:________________________________
Carl Spielvogel, Chairman and
Chief Executive Officer
UAG NORTHEAST, INC.
By:________________________________
Title:_____________________________
UAG WEST, INC.
By:________________________________
Title:_____________________________
DIFEO PARTNERSHIP, INC.
By:________________________________
Title:_____________________________
DANBURY PARTNERSHIP, INC.
By:________________________________
Title:_____________________________
RESTRICTED STOCKHOLDERS
TRACE INTERNATIONAL HOLDINGS, INC.
By:________________________________
Title:_____________________________
AENEAS VENTURE CORPORATION
By:_______________________________
Title:____________________________
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AIF II, L.P.
By:_______________________________
Title:____________________________
AMERICAN HONDA MOTOR CO., INC.
Acura Division
By:_______________________________
Richard B. Thomas
Executive Vice President
Acura Division
AMERICAN HONDA MOTOR CO., INC.
Honda Division
By:_______________________________
Richard Colliver
Senior Vice President
Automobile Sales Division
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AMERICAN HONDA MOTOR CO., INC.
POLICY ON THE PUBLIC OWNERSHIP
OF HONDA AND ACURA DEALERSHIPS
I. OBJECTIVES
In this policy on the Public Ownership of Honda and Acura Dealerships (the
"Policy"), American Honda Motor Co., Inc. ("American Honda") addresses several
issues raised by the recent announcement by certain entities which own
automobile dealerships that they intend to offer stock for sale to the public.
Proposals for the public ownership of automobile dealerships have been widely
publicized in the press. American Honda has been asked by several dealers and
the National Automobile Dealers Association to state its position on the public
ownership of Honda and Acura dealerships. This Policy is an effort to address
these inquiries by providing guidelines for the ownership of Honda and Acura
dealerships that assist Dealer Owners and potential Dealer Owners in assessing
whether a particular form of ownership is consistent with American Honda's
standards for its dealerships.
II. BACKGROUND
A. THE PERSONAL NATURE OF THE DEALER OWNER RELATIONSHIP
There is no simple "yes" or "no" answer to the question, "Will
American Honda permit transfer of a dealership to a publicly-owned corporation?"
The answer depends on whether the proposed form of ownership preserves the
individualized relationship between the Dealer Owner and the local community, on
the one hand, and American Honda and the Dealer Owner, on the other hand.
Despite the recent increase of mass marketing (including the advent
over the last twenty years of so-called "category killers" such as the toy store
giants that have replaced neighborhood toy stores and the hardware giants that
have replaced local hardware stores), American Honda continues to believe that
automobile sales and service are most effectively done through dedicated, local
dealerships with strong ties to the community. For most automobile purchasers,
the decision to buy a new car is a major financial commitment and is only made
after extensive deliberation. Although competitive price is undoubtedly a major
factor in the buying decision, American Honda believes strongly that the
building of a relationship between the dealer and the buyer, particularly the
development of trust in the quality of the product and the service provided by
Honda dealers has, over the years, been a major selling point that has
distinguished Honda and Acura vehicles from the competition. When a first-time
new car buyer purchases a Honda vehicle,
American Honda believes that we have a great opportunity to make that customer a
life-time Honda and Acura buyer -- because we provide the best products and the
best service through the most dedicated and committed dealers.
In order to ensure that Honda and Acura dealers provide the advice and
service required by new car buyers, American Honda attempts to select the best
people to be its dealers and requires that these people maintain personal
control over dealership operations. Because individual Dealer Owners have
considerable autonomy as to how they run their dealerships, American Honda's
influence over the quality of its dealerships depends in large part on how
wisely it selects its dealers. Although no process is perfect, American Honda
believes that over the years it has done an excellent job of selecting Dealer
Owners and is extremely proud of the quality of its dealerships.
B. THE DEALER AGREEMENT
The Honda or Acura Automobile Dealer Sales and Service Agreement (the
"Dealer Agreement") between American Honda and its dealers includes a number of
provisions that ensure that the relationship between American Honda and its
dealers will remain personal. Section C of the Dealer Agreement states:
"Dealer covenants and agrees that this Agreement is personal to Dealer, to the
Dealer Owner, and to the Dealer Manager, and American Honda has entered into
this Agreement based upon their particular qualifications and attributes and
their continued ownership or participation in Dealership Operations." Sections
C and D of the Dealer Agreement name the specific individuals who own the
dealership, their percentage of ownership, the individual who will function as
the Dealer operator and the individual who will function as the Dealer Manager.
Section J states: "Neither this Agreement, nor any part thereof or interest
therein, may be transferred or assigned by Dealer, directly or indirectly,
voluntarily or by operation of law, without the prior written consent of
American Honda." In Section 8.1 of the Dealer Agreement, "Dealer agrees that
American Honda has the right to select each successor and replacement dealer and
to approve its owners and principal management." Dealers must inform American
Honda in writing of any potential change in the ownership or management listed
in Sections C and D. Prior to taking effect, such changes must be approved in
writing by American Honda. American Honda's approval will not be unreasonably
withheld.
C. THE POTENTIAL BENEFITS OF PUBLIC INVESTMENT IN DEALERSHIPS
Public investment in dealerships offers potential benefits to both
American Honda and its dealers. American Honda needs exclusive Honda or Acura
dealerships with separate, free-standing state-of-the-art facilities at prime
locations to meet its long term business objectives. American Honda dealers
need to compete vigorously and such competition may include expanded
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and improved showrooms, upgraded computerization, the introduction of various
customer amenities, etc. The ability to raise capital through public offerings
of stock provides an additional means of financing improvement in dealership
facilities and operations.
D. THE TENSION BETWEEN PERSONAL RELATIONSHIP AND PUBLIC OWNERSHIP
American Honda believes that the quality of the individuals who serve
as Honda or Acura dealers and Dealer Managers is essential to the success of
American Honda and the dealerships. Therefore, American Honda is determined to
maintain its personal relationships with its Dealer Owners and Dealer Managers
and to continue to exercise the right of approval of changes in dealer ownership
and management as set forth in the Dealer Agreement. To the extent that public
ownership of a Honda or Acura dealership means that the Dealer Manager will be
appointed by a board of directors selected by owners of publicly-traded stock,
such an arrangement is inconsistent with American Honda's needs and the Dealer
Agreement. On the other hand, public ownership of a portion of the shares of a
dealership may be consistent with American Honda's objectives in cases in which
a controlling interest in the dealership is maintained by a specified Dealer
Owner and the dealership is managed by a specified Dealer Manager. The
following guidelines are an attempt to reconcile the tension between American
Honda's need for a personal relationship with each dealer and dealer proposals
for public ownership of an interest in dealerships.
III. PUBLIC OWNERSHIP GUIDELINES
A. CASE-BY-CASE DETERMINATION. As in the past, American Honda will
evaluate requests to transfer ownership of Honda and Acura dealerships on a
case-by-case basis. Proposals to transfer ownership to entities with publicly-
traded shares will be reviewed based on the standards set forth in this Policy.
AMERICAN HONDA RESERVES THE RIGHT, IN ITS SOLE BUSINESS JUDGMENT, TO APPROVE OR
REJECT SUCH TRANSFERS.
B. PROPOSALS TO BE SUBMITTED IN WRITING. All proposals to transfer
ownership of Honda and Acura dealerships must be submitted in writing to
American Honda and must include:
1. A list of the individuals and entities that will own
PRIVATELY-HELD SHARES of the dealership, including the amount of shares
owned by such individual or entity and information and documentation about
each such individual or entity; in the case of entities owning or
controlling such privately-held shares, a list of the individuals owning
such entities and information and documentation about such individuals;
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2. With respect to ownership interests not listed in accordance with
subsection 1, immediately above, a list of the individuals and entities
that will own or control 5% or more of the dealership (either through
ownership of publicly-held stock or any combination of privately-held stock
and publicly-held stock or any other arrangement), including information
and documentation about each such individual or entity;
3. The number and percentage (if any) of the shares of the entity
that owns the dealership that will be publicly traded;
4. A detailed description, including flow charts, of the proposed
structure of the entities that will own and/or control the dealership and
the relationship of the Dealer Owner to these entities, including, with
respect to entities with a significant interest in the Dealer Owner, a
description of the individuals holding such interest;
5. The name and a brief biography of the individual who will
function as Dealer Manager and a detailed description of the functions and
responsibilities of the Dealer Manager;
6. Complete financial documents (including but not limited to the
most recent and the prior year end audited financial statements of any
entity proposing to obtain any interest equal to or greater than 5% of a
dealership or 5% of an entity that owns a dealership), indicating, among
other things, the amount of capitalization of the dealership and the
verifiable sources of such capitalization;
7. A detailed description of the proposed use of the funds to be
raised from the public investment;
8. The articles and bylaws of the entity or entities that will own
and/or control the dealership;
9. Copies of the proposed transactional documents that will be used
to effectuate the transaction, including, without limitation, copies of any
government filings and contracts pertaining thereto; and
10. Copies of any additional documents that the transferees,
transferors and other parties having a substantial interest in the
transaction have that American Honda would reasonably need to evaluate the
proposal.
After receipt of complete documentation for the Proposal, as outlined
above, and due consideration thereof, American Honda will provide the party
submitting the proposal with a preliminary assessment of the proposed
transaction. NO FINAL DECISION ON THE PROPOSAL WILL BE MADE UNTIL SUBMISSION OF
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FINAL VERSIONS OF ITEMS 1 THROUGH 10 WITH ANY OTHER DOCUMENTATION REQUESTED BY
AMERICAN HONDA AND AMERICAN HONDA AND THE NEW OWNERSHIP ENTITY AGREE ON AND
ENTER INTO A DEALER AGREEMENT.
It is not advisable to make any expenditures or commitments, or to
enter into any contracts or incur any obligations on the assumption that
authorization of a proposal will be granted. Any such expenditures, commitments
or obligations, financial or otherwise, made or entered into by a dealer in
anticipation of authorization of a proposal, and prior to: (1) receipt of final
written approval by American Honda and (2) execution of the necessary documents
as described above (including a new Dealer Agreement) are made entirely at the
dealer's own risk and without any liability on the part of American Honda.
C. GUIDES TO PREPARATION OF AN ACCEPTABLE PROPOSAL
In preparing the documents listed immediately above, the dealer should
keep in mind the following list of standards (which is intended to provide
guidance, not to be a complete list) to which American Honda will require
adherence:
1. All dealerships must have a qualified Dealer Manager acceptable
to American Honda. American Honda's right of prior written approval of any
change of Dealer Manager must be incorporated into the transactional
documents. The Dealer Manager should be a well-respected, civicly-active
member of the community. As discussed above, personal involvement by
Dealer Managers in Dealership Operations is an important means of ensuring
that Honda and Acura dealerships are run with a high level of attention,
care and commitment. The Dealer Manager must maintain control over the
day-to-day operations of the dealership and the transactional documents
should set forth in detail the level of autonomy that the Dealer Manager
will exercise, including, for example, the amount of money that the Dealer
Manager will be empowered to transfer. Dealerships must abide by American
Honda's commitment to encourage diversity of persons in dealer management
positions.
2. The Dealer Owner's Executive Manager (that is, the person who has
operational control of the entity that owns and/or controls the dealership)
should be an experienced, well-respected executive with final authority to
decide any dealership matters not within the authority of the Dealer
Manager.
3. Dealerships are non-transferable without the prior written
consent of American Honda. Because the shares of publicly-owned
corporations are freely transferable, the percentage of public ownership
must be restricted so that a controlling interest of the dealership remains
in the hands of approved individuals. It follows that the controlling
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interest in the entity that controls the dealership cannot be transferred
without the prior written consent of American Honda. In no event may the
percentage of public ownership of a dealership exceed the percentage of
private ownership by American Honda-approved individuals and privately-held
entities. To the extent that an entity not approved by American Honda
attempts to acquire control and/or ownership of a dealership, the Dealer
Agreement with American Honda must provide for termination of the Dealer
Agreement and/or American Honda's right to acquire the dealership at its
fair market value.
4. The controlling interest in Honda or Acura dealerships must
remain in the hands of a person or entity engaged predominantly in the sale
and service of new automobiles. For example, American Honda will not
approve transfer of dealerships or entities that control dealerships to
general retailers or retailers that deal primarily in non-automotive
products.
5. American Honda will not approve the transfer of Honda or Acura
dealerships to entities that are known to have significant investments in
companies that compete with American Honda or its parent, subsidiaries or
Affiliates in manufacturing, marketing, or selling automotive products or
services.
6. Public corporations having an ownership interest in the
dealership and the individuals and entities that control such public
corporations (but not persons whose ownership interest is limited to
passive ownership of 5% or less of the shares of public corporations) must
agree to obtain American Honda's approval before acquiring an interest in
any other Honda or Acura dealership. American Honda reserves the right to
limit the number and/or location of Honda and Acura dealerships that can be
owned or controlled by any one individual or corporation. In the future,
except where a specific finding is made by American Honda that such
acquisition would further a business interest of American Honda,
individuals and/or entities will be limited to acquiring interests in
dealerships as follows:
a. HONDA
No one shall be allowed to acquire an ownership interest, directly or
through an Affiliate, in a multiple number of Honda dealerships as
provided below:
a) in a "Metro" market (a "Metro" market is a metropolitan
market area represented by two or more Honda dealer points) with
two (2) to ten (10) Honda dealership points (inclusive), no
Dealer Owner may own, operate or have an interest in more than on
(1) Honda dealership;
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b) in a Metro market with eleven (11) to twenty (20) Honda
dealership points (inclusive), no Dealer Owner may own, operate
or have an interest in more than two (2) Honda dealerships;
c) in a Metro market with twenty-one (21) or more Honda
dealership points, no Dealer Owner may own, operate or have an
interest in more than three (3) Honda dealerships;
d) 4% of the Honda dealerships in any one of the ten Honda
Zones; and
e) seven (7) Honda dealerships nationally.
No one shall acquire contiguous Honda dealerships.
b. ACURA
No one shall be allowed to acquire an ownership interest,
directly or through an Affiliate, in a multiple number of Acura
dealerships as provided below:
(a) one (1) Acura dealer in a "Metro" market (a "Metro" market
is a Metropolitan market area represented by two or more Acura
dealer points)
(b) two (2) Acura dealerships in any one of the Six Acura Zones;
and
(c) three (3) Acura dealerships nationally.
No one shall acquire contiguous Acura dealerships.
"Affiliate" of, or a person or entity "affiliated" with, a
specified person or entity, means a person or entity that
directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the
person or entity specified. For the purpose of this definition,
the term "control" (including the terms "controlling,"
"controlled by" and "under common control with" means the
possession, directly or indirectly, or the power to direct or
cause the direction of the management and policies of a person or
entity, whether through the ownership of securities, by contract
or otherwise.
7. The dealership would continue to have the same reporting
requirements as all other Honda and Acura dealerships, including
dealership-specific financial information on the same basis that the
dealership has provided such information in the past. In the case of
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corporations that, with American Honda's approval, own multiple Honda and
Acura dealerships, each such dealership must be separately incorporated and
financial information must be broken down by individual dealership and must
meet capitalization requirements, etc., by individual dealership. The
corporate by-laws of the individual corporation that actually owns a Honda
or Acura dealership must restrict it from engaging in any activity other
than the ownership and maintenance of a Honda or Acura dealership.
8. The dealership must agree to provide American Honda with all
information and documents, including but not limited to SEC filings, that
evidence a substantial change of ownership or control of such dealership or
any entity with a controlling interest in such dealership. Individuals or
entities that acquire, own or control more than 5% of any entity that owns
or controls a Honda or Acura dealership must provide American Honda with
copies of all filings made to the SEC, all comparable filings made to state
agencies, and, at least once annually, the most recent calendar year's
fully audited financial statements. Nothing in this section 8 should be
construed to limit the requirement that any proposed change in the
ownership or control of privately-held shares of a dealership or an entity
that owns a dealership must be reported to American Honda and is subject to
American Honda's prior written approval.
9. For allocation and other purposes, transfer of Honda or Acura
Automobiles from one dealership to another dealership owned and/or
controlled by the same entity will be treated the same as a transfer
between separately-owned dealers.
10. The dealership should be committed to providing separate,
freestanding Dealership Operations that exclusively offer a full range of
Honda Products and services or Acura Products and services and do not offer
competing products or services from its Dealership Premises.
11. The controlling individual or entity must be liable for the
operation of the dealership and must agree to indemnify American Honda for
any claims made by shareholders of publicly-held shares against American
Honda to the full extent permitted by law. American Honda must have the
right (but not the obligation) to review all documentation and other
representations to the public about any offering of stock in the dealership
or the entity owning the dealership. Whether or not American Honda reviews
them, such documentation and representations must include an affirmative
statement that American Honda is completely independent of the entity
offering the stock and that, although American Honda's acts or omissions
may have an impact on the value of the stock, American Honda bears no
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responsibility for such impact and has no liability to any investor under
any legal or equitable theory.
12. The entity that owns or controls the dealership may not commingle
its trademarks with dealer trademarks other than those used exclusively in
connection with the dealership. For example, a dealer could use its own
"dealership" trademark in conjunction with the Honda or Acura trademarks as
in "John Smith HONDA" but it could not use a trademark in conjunction with
the Honda or Acura Trademarks that it also uses in conjunction with the
non-Honda or non-Acura goods or services. The entity must agree to
maintain the Honda or Acura brand image, as that image is developed by
American Honda.
13. The entity that owns the dealership must agree to have all
dealership sales and service personnel certified by American Honda pursuant
to its usual certification programs; to use and sell genuine Honda and
Acura parts and accessories; and to participate in good faith in applicable
Honda or Acura sales, marketing, service, parts, facility image and
upgrade, training, customer satisfaction, and diversity programs.
14. The Dealer Agreement will also provide that breaches of the
Dealer Agreement or failure to adhere to American Honda requirements by any
individual dealership owned by an entity shall be treated as breaches of
the Dealer Agreement between American Honda and such entity and shall
constitute reasonable grounds for rejection by American Honda of
acquisition by the entity of additional Honda or Acura dealerships.
15. American Honda will not approve any transfer of a dealership that
is not in full compliance with the Dealer Agreement between American Honda
and such dealership prior to such transfer.
16. The Dealer Agreement with the entity that owns the dealership
will include provisions that incorporates the provisions of this Policy
and, without limiting the foregoing, permit American Honda to terminate the
Dealer Agreement for breaches of the above-listed requirements and to
reacquire the dealership as set forth in subsection IIIC3 above.
INQUIRIES ABOUT THE POLICY SHOULD BE MADE TO HONDA DEALER PLACEMENT DEPARTMENT
AND/OR ACURA DEALER DEVELOPMENT, AS APPLICABLE.
INQUIRIES ABOUT THE TRANSFER OF A DEALERSHIP SHOULD BE MADE TO ZONE SALES
OFFICE.
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