EXHIBIT 10.4.3
LEXUS DEALER AGREEMENT
This is an Agreement between LEXUS, A Division of TOYOTA MOTOR SALES, U.S.A.,
INC., ("LEXUS" or "DISTRIBUTOR") and FAA Serramonte L, Inc. ("DEALER"), a
closely held corporation, incorporated in the State of California and doing
business as Lexus of Serramonte
LEXUS GOALS AND COMMITMENTS
LEXUS is committed to creating luxury automobiles which are and will be among
the finest ever built anywhere in the world. LEXUS is equally committed to
setting a new standard for extraordinary customer satisfaction throughout the
ownership cycle. To achieve this goal, LEXUS intends to maintain the finest
dealer network in the industry.
This Agreement embodies the LEXUS commitment to promote fairness within a
harmonious and mutually profitable business relationship between LEXUS and
DEALER. The ultimate goal shared by all parties to this Agreement is the
satisfaction of the LEXUS customer.
PURPOSES OF AGREEMENT
LEXUS is the exclusive distributor in the continental United States of LEXUS
Products which are manufactured or approved by TOYOTA MOTOR CORPORATION
("FACTORY"). The principal purposes of this Agreement are to set forth and
affirm the commitment of LEXUS and DEALER to the goals of LEXUS; authorize
DEALER to sell and service LEXUS Products; and identify the rights and
responsibilities of LEXUS and DEALER.
I. TERM OF AGREEMENT
This Agreement is effective on the date signed by LEXUS and shall continue
for a period of 24 months unless ended earlier by mutual agreement or
terminated as provided herein. This Agreement may not be extended except by
written consent of LEXUS. Any continuation of business relations between
the parties following expiration of this Agreement shall be on a day-to-day
basis and subject to the provisions of this Agreement. Such a continuation
shall not be deemed a waiver of the right of termination nor shall it imply
that either party has committed to continue to do business with the other
at any time in the future.
Upon the expiration of this Agreement, DISTRIBUTOR shall have no obligation
to renew the Agreement or to extend DEALER a subsequent Agreement. However,
should this Agreement be renewed or any other form of agreement be offered
to DEALER, DISTRIBUTOR reserves the right to offer an agreement of a term
to be determined at DISTRIBUTOR'S sole discretion.
II. OWNERSHIP AND OFFICERS
This is a personal service Agreement and has been entered into by LEXUS
upon, and in consideration of, DEALER'S representation that only the
following named persons are the owners and officers of DEALER, and that
such persons are committed to achieving the purposes, goals and commitments
of this Agreement:
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PERCENT OF
OWNERS NAMES ADDRESS OWNERSHIP
100 The Embarcadero, Penthouse
FirstAmerica Automotive, Inc. San Francisco, CA 94105 100%
- ------------------------------- ------------------------------ ----------
_______________________________ ______________________________ __________
_______________________________ ______________________________ __________
_______________________________ ______________________________ __________
OFFICERS NAMES ADDRESS TITLE
100 The Embarcadero, Penthouse
Thomas A. Price San Francisco, CA 94105 President
- ------------------------------- ------------------------------ --------------
100 The Embarcadero, Penthouse
Steven S. Hallock San Francisco, CA 94105 Vice President
- ------------------------------- ------------------------------ --------------
700 Serramonte Blvd.
John M. Driebe Colma, CA 94014 Secretary/Treasurer
- ------------------------------- ------------------------------ --------------
_______________________________ ______________________________ ______________
III. MANAGEMENT
LEXUS and DEALER agree that qualified dealership management and active,
day-to-day owner involvement are critical to the successful operation of
DEALER. OWNERS agree, and LEXUS enters into this Agreement on the
condition that at least one OWNER will be involved on a full-time basis in
the day-to-day operations of the dealership. If no OWNER is involved on a
full-time basis in DEALER's day-to-day operations, the General Manager
named below shall devote his or her personal services on a full-time basis
to the general management of the dealership.
DEALER appoints John Driebe as General Manager. The General Manager has
full managerial authority to make all operating decisions on behalf of
DEALER. DEALER shall make no change in the dealership's ownership or
General Manager without the prior written approval of LEXUS.
IV. APPROVED DEALER LOCATIONS
In order that DISTRIBUTOR may establish and maintain an effective network
of authorized LEXUS dealers, DEALER agrees that it shall conduct its LEXUS
operations only in facilities and at locations herein designated and
approved by DISTRIBUTOR. DISTRIBUTOR hereby designates and approves the
following facilities as the exclusive location(s) for the sale and
servicing of LEXUS Products and the display of LEXUS Marks:
New Vehicle Sales and Showroom Used Vehicle Display and Sales
700 Serramonte Blvd. 700 Serramonte Blvd.
Colma, CA 94014 Colma, CA 94014
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Sales and General Office Body and Paint
700 Serramonte Blvd. N/A
Colma, CA 94014
Parts and Service Other Facilities
700 Serramonte Blvd. N/A
Colma, CA 94014
DEALER shall not modify or change the designated usage or function of any
facility without the prior written consent of LEXUS.
V. CERTIFICATION
By their signatures hereto, the parties certify that they have read and
understood this Agreement, including the Standard Provisions which are
incorporated herein, and agree to abide and be bound by all of its terms
and conditions.
Lexus Of Serramonte, DEALER
--------------------
DBA
DATE: 4/2/97 By: /s/ President
--------------------------- ----------
SIGNATURE TITLE
LEXUS, A Division of
TOYOTA MOTOR SALES, U.S.A., INC.
DATE: June 30, 1997 By: /s/ Yoshio Ishizaka President
------------------- -------------------
SIGNATURE TITLE
Yoshio Ishizaka
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AGREEMENT BETWEEN
TOYOTA MOTOR SALES, U.S.A., INC.
AND
FIRSTAMERICA AUTOMOTIVE, INC.
Agreement, dated May 2, 1997, entered between FirstAmerica Automotive, Inc., a
Nevada corporation, with its principal place of business at 100 The Embarcadero,
Penthouse, San Francisco, CA, 94105, ("FAA"), and Toyota Motor Sales, U.S.A.,
Inc. ("TMS"), a California corporation, with its principal place of business at
19001 South Western Avenue, Torrance, CA, 90509.
WHEREAS, FAA wishes to acquire, directly or through an Affiliate, certain Toyota
and Lexus dealerships; and
WHEREAS, FAA has issued securities traded on the NASDAQ Stock Exchange and
intends to issue additional securities to be traded on the NASDAQ Stock
Exchange; and
WHEREAS, FAA and TMS have agreed that FAA will not use a public ownership
structure for its Toyota and Lexus dealerships without TMS' prior consent, which
shall be given or withheld in TMS' sole discretion; and
WHEREAS, TMS has advised FAA of TMS' policy limiting the number of commonly
owned or controlled, directly or through an Affiliate (as defined below),
dealerships by a single entity, which is currently as follows:
A. TOYOTA
------
A single entity shall not hold an ownership interest, directly or
through an Affiliate, in more than: (a) the greater of one (1)
dealership or 20% of the Toyota dealer count in a "Metro" market
("Metro" markets are multiple Toyota dealership markets as defined by
TMS);(b) the lesser of five (5) dealerships or 5% of the Toyota
dealerships in any Toyota Region ("Toyota Region" currently includes
nine TMS Regions, Central Atlantic Toyota, Southeast Toyota, and Gulf
States Toyota); and c) seven (7) Toyota dealerships nationally.
LEXUS
-----
A single entity shall not hold an ownership interest, directly or
through an Affiliate, in more than: (a) two (2) Lexus dealerships in
any Area ("Area" currently includes Eastern, Southern, Central and
Western); and (b) three (3) Lexus dealerships nationally.
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"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.
B. In order for an entity to acquire additional Toyota or Lexus dealerships,
within the limits of this Agreement, each Toyota or Lexus dealership which
it owns, directly or through an Affiliate, must: a) be in full compliance
with all of the terms of its Dealer Agreement; b) meet all of the applicable
Toyota or Lexus Market Representation policies and standards; and c) meet
applicable performance criteria for the most recent twelve (12) month
period.
C. In order to allow TMS sufficient time to evaluate performance at its
existing dealerships, an entity may not acquire any additional Toyota or
Lexus dealership within nine (9) months of its prior acquisition of a
similar make dealership.
D. If the purchase of any Toyota or Lexus dealership would result in exceeding
the limits set forth in Paragraph 1 above, TMS will reject a dealer's
application for approval of the ownership transfer until such time as the
dealer shall divest itself of the appropriate number of dealerships to bring
it into compliance with the requirements of this Agreement.
WHEREAS, FAA and TMS are willing to resolve these issues in accordance with the
terms set forth herein,
NOW THEREFORE, FAA and TMS agree as follows:
1. CHANGE IN OWNERSHIP OF FAA
--------------------------
TMS shall have the right to approve any ownership or voting rights of FAA of
twenty percent (20%) or greater by any individual or entity; PROVIDED
HOWEVER, that if TMS reasonably determines that such individual or entity is
unqualified to own a Toyota or Lexus dealership, or has interests
incompatible with TMS, and such transfer is effected, FAA must, within
ninety (90) days from the date of notification by TMS of its determination,
either: a) transfer the assets of its Toyota and Lexus dealerships to a
third party acceptable to TMS; b) voluntarily terminate its Toyota and Lexus
Dealership Agreements; or c) demonstrate that such individual or entity in
fact owns less that 20% of the outstanding shares of FAA, or does not have
20% of the voting rights in FAA.
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2. OWNERSHIP OF CONTIGUOUS DEALERSHIPS
-----------------------------------
FAA shall not own contiguous dealerships (as that term is defined in the
applicable Toyota or Lexus Dealer Agreement or policy) with common
boundaries.
3. SEPARATE LEGAL ENTITIES FOR EACH TOYOTA AND LEXUS DEALERSHIP
------------------------------------------------------------
FAA shall create separate legal entities for each Toyota and Lexus
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 TMS
policy, the name "Toyota" or "Lexus," as applicable shall appear in the
d/b/a of each dealership.
4. FACILITY STANDARDS
------------------
In no instance shall a Toyota or Lexus dealership or any department(s)
thereof be dualled with any other brand without TMS' prior written
approval.
5. GENERAL MANAGERS
----------------
Each Toyota and Lexus dealership owned or controlled by FAA shall have a
qualified, approved (subject to the exception noted in Paragraph 6 below)
General Manager. Each General Manager shall work at the Toyota or Lexus
dealership premises, shall devote all of his/her efforts to the management
of the dealership and shall have no other business interests or management
responsibilities.
6. APPROVAL OF THE GENERAL MANAGER
-------------------------------
Whenever FAA nominates a new General Manager candidate for a Toyota or
Lexus dealership, TMS shall have the right to withhold a decision
concerning approval or rejection of the candidate for a period of up to one
year, at its sole discretion; PROVIDED, HOWEVER, that the candidate may
operate in the capacity of General Manager until TMS has approved or
rejected him/her.
7. LIMITATIONS ON THE AUTHORITY OF THE GENERAL MANAGER
---------------------------------------------------
FAA shall advise TMS of the limitations, by category and, where applicable,
by specific action, on the authority of the General Manager regarding the
operation of the dealership, and shall provide the name of the individual
at FAA who has such authority with respect to each listed category or
specific action, in accordance with Paragraph 8 below.
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8. IDENTIFICATION OF FAA CONTACT OFFICIAL
--------------------------------------
FAA shall identify, in each Toyota and Lexus Dealer Agreement, the FAA
executive (other than the General Manager of the dealership) who will
respond directly to any Toyota or Lexus concerns regarding the operation or
performance of the dealership, which executive will have full authority, in
accordance with FAA management policies, to resolve issues raised by TMS in
connection with the operation of the dealership.
9. SELLING TOYOTA AND LEXUS PRODUCTS
---------------------------------
FAA shall make available to the customers at its Toyota and Lexus
dealerships, all Toyota and/or Lexus products, including vehicles, Genuine
Parts and Accessories, retail financing (whether for purchases or leases)
and extended service contracts.
10. REPRESENTATION ON TOYOTA AND LEXUS DEALER ORGANIZATIONS
-------------------------------------------------------
No more than one representative each from the Toyota, and, separately,
Lexus, dealerships owned, directly or through an Affiliate, by FAA, may
serve on the National Dealer Council or any future Toyota or Lexus national
board(s) which may be established, and no more than one representative each
may serve on either a Regional or Area Dealer Council, or Toyota or Lexus
Dealer Association Board of Directors.
11. DEALERSHIP PERSONNEL TRAINING
-----------------------------
FAA shall not substitute training courses or certification programs of its
own for those provided or sponsored by TMS without the prior approval of
TMS.
12. PUBLIC OFFERING OF SECURITIES BY FAA
------------------------------------
TMS shall not object to the transfer of Toyota and Lexus dealerships to
FAA, a public company, so long as the limitations on ownership of voting
control of FAA contained in this Agreement are not exceeded or breached in
any way.
13. FINANCIAL DISCLOSURES
---------------------
FAA shall provide TMS with copies of all information and materials filed
with the Securities Exchange Commission, including, but not limited to,
quarterly and annual financial statement filings, prospectuses and other
materials related to FAA.
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14. PROSPECTUS DISCLAIMER AND INDEMNIFICATION AND HOLD HARMLESS AGREEMENT
---------------------------------------------------------------------
FAA shall place in its registration statement and its prospectus, as well
as in any other document offering shares in FAA to public or private
investors, the following disclaimer:
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.
FAA shall indemnify and hold harmless TMS pursuant to the terms of the
Indemnification and Hold Harmless Agreement set forth in Attachment 1 to
this Agreement.
15. SOLE 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.
16. SEVERABLLITY
------------
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.
17. 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.
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18. TMS POLICIES
------------
This Agreement refers to certain policies and standards. FAA acknowledges
that these policies and standards are prepared by TMS in its sole
discretion based upon TMS' evaluation of the marketplace. TMS may
reasonably amend its policies and standards from time to time.
19. APPLICABLE LAW
--------------
This Agreement shall be governed by and construed according to the laws of
California.
20. BENEFIT
-------
This Agreement is entered into by and between TMS and FAA 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.
21. 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 specified another address by notice in
writing to the other party, then to the address last specified:
TOYOTA MOTOR SALES, U.S.A., INC.
19001 South Western Avenue
Torrance, CA 90509
FIRSTAMERICA AUTOMOTIVE, INC.
100 The Embarcadero, Penthouse
San Francisco, CA 94105
6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
FIRSTAMERICA AUTOMOTIVE, INC.
BY:/s/
------------------------------
ITS: President
----------------------------
TOYOTA MOTOR SALES, U.S.A., INC.
BY:/s/
-----------------------------
ITS:____________________________
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[LOGO OF LEXUS APPEARS HERE]
LEXUS
DEALER AGREEMENT
LEXUS DEALER AGREEMENT
AND
STANDARD PROVISIONS
TABLE OF CONTENTS
I. TERM OF AGREEMENT................................................... 1
II. OWNERSHIP AND OFFICERS.............................................. 1
III. MANAGEMENT.......................................................... 2
IV. APPROVED DEALER LOCATIONS........................................... 2
V. CERTIFICATION....................................................... 3
VI. ACQUISITION, DELIVERY AND INVENTORY OF LEXUS PRODUCTS............... 4
A. APPOINTMENT OF DEALER.......................................... 4
B. AVAILABILITY AND ALLOCATION OF PRODUCT......................... 4
C. PRICES AND TERMS OF SALE....................................... 4
D. MODE, PLACE AND CHARGES FOR DELIVERY OF PRODUCTS............... 4
E. DAMAGE CLAIMS AGAINST TRANSPORTATION CARRIERS.................. 5
F. DELAY OR FAILURE OF DELIVERY................................... 5
G. DIVERSION CHARGES.............................................. 5
H. CHANGES OF DESIGN, OPTIONS OR SPECIFICATIONS................... 5
I. DISCONTINUANCE OF MANUFACTURE OR IMPORTATION................... 5
J. MINIMUM VEHICLE INVENTORIES.................................... 6
K PRODUCT MODIFICATIONS.......................................... 6
VII. DEALER MARKETING OF LEXUS PRODUCTS.................................. 6
A. DEALER'S SALES RESPONSIBILITIES................................ 6
B. EXPORT POLICY.................................................. 7
C. LEXUS DEALER ASSOCIATION....................................... 7
D. USED VEHICLES.................................................. 7
E. PRIMARY AREA OF RESPONSIBILITY................................. 7
F. EVALUATION OF DEALER'S SALES AND MARKETING PERFORMANCE...... .. 7
VIII. DEALER SERVICE OBLIGATIONS.......................................... 7
A. CUSTOMER SERVICE STANDARDS..................................... 7
B. NEW MOTOR VEHICLE PRE-DELIVERY SERVICE......................... 8
C. WARRANTY AND POLICY SERVICE.................................... 8
IX. USE OF PARTS AND ACCESSORIES IN NON-WARRANTY SERVICE................ 8
A. WARRANTY DISCLOSURES AS TO NON-GENUINE PARTS AND
ACCESSORIES.................................................... 9
B. ROADSIDE ASSISTANCE PROGRAM.................................... 9
C. SERVICE CAMPAIGN INSPECTIONS AND CORRECTIONS................... 9
D. COMPLIANCE WITH SAFETY AND EMISSION CONTROL
REQUIREMENTS................................................... 9
E. COMPLIANCE WITH CONSUMER PROTECTION STATUTES, RULES
AND REGULATIONS................................................10
X. SERVICE AND PARTS ORGANIZATION......................................10
A. ORGANIZATION AND STANDARDS.....................................10
B. SERVICE EQUIPMENT AND SPECIAL TOOLS............................10
C. PARTS STOCKING LEVEL...........................................11
D. AFTER-HOURS DELIVERY...........................................11
E. ASSISTANCE PROVIDED BY DISTRIBUTOR.............................11
1. Service Manuals And Materials...............................11
2. Field Service Personnel Assistance..........................11
F. EVALUATION OF DEALER'S SERVICE AND PARTS PERFORMANCE...........11
XI. CUSTOMER SATISFACTION RESPONSIBILITIES..............................12
A. DEALER'S CUSTOMER SATISFACTION OBLIGATIONS.....................12
1. DEALER'S Customer Satisfaction Plan.........................12
2. Employee Training...........................................12
3. Customer Satisfaction Manager...............................12
4. Customer Assistance Response System.........................12
B. EVALUATION OF DEALER'S CUSTOMER SATISFACTION PERFORMANCE.......12
XII. DEALERSHIP FACILITIES AND IDENTIFICATION............................13
A. FACILITIES.....................................................13
B. SERVICE RECEPTION AREA.........................................13
C. DEALER'S OPERATING HOURS.......................................13
D. SIGNS..........................................................14
E. EVALUATION OF DEALERSHIP FACILITIES............................14
F. USE OF LEXUS MARKS.............................................14
1. Use By DEALER...............................................14
2. Discontinuance of Use.......................................14
XIII. CAPITAL, CREDIT, RECORDS AND UNIFORM SYSTEMS........................15
A NET WORKING CAPITAL............................................15
B FLOORING AND LINES OF CREDIT...................................15
C. PAYMENT TERMS..................................................15
D UNIFORM ACCOUNTING SYSTEM......................................16
E RECORDS MAINTENANCE............................................16
F EXAMINATION OF DEALERSHIP ACCOUNTS AND RECORDS.................16
G TAXES..........................................................16
H CONFIDENTIALITY................................................16
I DATA TRANSMISSION SYSTEMS......................................17
J SALES REPORTING................................................17
XIV. TRANSFERS...........................................................17
A. SALE OF OWNERSHIP INTEREST IN DEALERSHIP.......................17
B. RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE...................17
1. Rights Granted..............................................17
2. Exercise of Distributor's Rights............................18
3. Right of First Refusal......................................18
4. Option to Purchase..........................................18
5. Dealer's Obligations........................................19
XV. SUCCESSION RIGHTS UPON DEATH OR INCAPACITY..........................19
A. SUCCESSION TO OWNERSHIP AFTER DEATH OF OWNER...................19
B. INCAPACITY OF OWNER............................................20
C. NOMINATION OF SUCCESSOR PRIOR TO DEATH OR INCAPACITY OF
OWNER..........................................................20
XVI. TERMINATION........................................................21
A. VOLUNTARY TERMINATION BY DEALER................................21
B. TERMINATION FOR CAUSE..........................................21
1. Immediate Termination.......................................21
2. Termination Upon Sixty Days Notice..........................22
3. Termination for Failure of Performance......................23
4. Termination Upon Death or Incapacity........................23
C. NOTICE OF TERMINATION..........................................23
D. CONTINUANCE OF BUSINESS RELATIONS..............................23
E. REPURCHASE PROVISIONS..........................................23
1. DISTRIBUTOR'S Obligations...................................23
2. Responsibilities of DEALER..................................24
3. Payment by DISTRIBUTOR......................................25
XVII. MANAGEMENT OF DISPUTES.............................................25
A. ALTERNATIVE DISPUTE RESOLUTION PROGRAMS........................25
B. APPLICABLE LAW.................................................26
C. MUTUAL RELEASE.................................................26
XVIII. DEFENSE AND INDEMNIFICATION........................................26
A. DEFENSE AND INDEMNIFICATION BY DISTRIBUTOR.....................26
B. DEFENSE AND INDEMNIFICATION BY DEALER..........................27
C. CONDITIONAL DEFENSE AND/OR INDEMNIFICATION.....................28
D. THE EFFECT OF SUBSEQUENT DEVELOPMENTS..........................28
E. TIME TO RESPOND AND RESPONSIBILITIES OF THE PARTIES............28
XIX. GENERAL PROVISIONS.................................................29
A. NOTICES........................................................29
B. NO IMPLIED WAIVERS.............................................29
C. SOLE AGREEMENT OF THE PARTIES..................................29
D. DEALER NOT AN AGENT OR REPRESENTATIVE..........................29
E. ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES...................29
F. NO FRANCHISE FEE...............................................30
G. SEVERABILITY...................................................30
H. NEW AND SUPERSEDING DEALER AGREEMENTS..........................30
I. BENEFIT........................................................30
XX. DEFINITIONS........................................................31
A. DEALER.........................................................31
B. OWNER..........................................................31
C. GENERAL MANAGER................................................31
D. DEALER FACILITIES..............................................31
E. APPROVED LOCATION(S)...........................................31
F. LEXUS MARKS....................................................31
G. LEXUS MOTOR VEHICLES...........................................31
H. GENUINE LEXUS PARTS AND ACCESSORIES............................31
I. LEXUS PRODUCTS.................................................31
XXI. ADDITIONAL PROVISIONS..............................................32
LEXUS
PRODUCT ADDENDUM
LEXUS hereby grants DEALER the non-exclusive right to buy and resell the LEXUS
Motor Vehicles as defined in the LEXUS Dealer Agreement and identified below:
GS 300
ES 300
LS 400
SC 300
SC 400
LX 450
and all Genuine Lexus Parts and Accessories for such vehicles.
This LEXUS Product Addendum shall remain in effect unless and until superseded
by a new LEXUS Product Addendum furnished DEALER by DISTRIBUTOR.
33
LEXUS DEALER AGREEMENT
STANDARD PROVISIONS
The following Standard Provisions are expressly incorporated in and made a part
of the LEXUS Dealer Agreement.
VI. ACQUISITION, DELIVERY AND INVENTORY OF LEXUS PRODUCTS
A. APPOINTMENT OF DEALER
DISTRIBUTOR hereby appoints DEALER and grants unto it the non-exclusive
right to buy and resell the LEXUS Products identified in the LEXUS
Product Addendum. DEALER accepts such appointment and understands that
its appointment as a DEALER does not grant it an exclusive right to sell
LEXUS Products in any specified geographical area.
DEALER shall have the right to purchase LEXUS Products from DISTRIBUTOR
in accordance with the provisions set forth herein and such other
requirements as may be established from time to time by LEXUS.
B. AVAILABILITY AND ALLOCATION OF PRODUCT
DISTRIBUTOR will allocate LEXUS Products among its dealers in a fair and
equitable manner. DEALER acknowledges and agrees that DISTRIBUTOR may
consider, among other things, DEALER'S service capacity, customer
satisfaction performance, sales performance, sales potential and
facilities in determining the quantity of Product to offer to DEALER.
DISTRIBUTOR will, upon DEALER'S request, explain the considerations and
method used to distribute LEXUS Products to DEALER.
C. PRICES AND TERMS OF SALE
DISTRIBUTOR, from time to time, shall establish and revise prices and
other terms for the sale of LEXUS Products to DEALER. Revised prices,
terms, or provisions shall apply to any LEXUS Product not invoiced to
DEALER by DISTRIBUTOR at the time the notice of such change is given to
DEALER (in the case of LEXUS Motor Vehicles), or upon issuance of a new
or modified Parts Price List or through change notices, letters,
bulletins, or revision sheets (in the case of parts, options and
accessories), or at such other times as may be designated in writing by
DISTRIBUTOR.
D. MODE, PLACE AND CHARGES FOR DELIVERY OF PRODUCTS
DISTRIBUTOR shall designate the distribution points and the mode of
transportation and shall select carrier(s) for the delivery of LEXUS
Products to DEALER. DEALER shall pay DISTRIBUTOR such charges as
DISTRIBUTOR in its sole discretion establishes for such transportation
services.
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E. DAMAGE CLAIMS AGAINST TRANSPORTATION CARRIERS
DEALER shall promptly notify DISTRIBUTOR of any damage occurring during
transit and shall, if so directed by DISTRIBUTOR, file claims against
transportation carrier for damage. DEALER agrees to assist DISTRIBUTOR
in obtaining recovery against any transportation carrier or insuree for
loss or damage to LEXUS Products shipped hereunder. DISTRIBUTOR shall
not be liable for loss or damage to LEXUS Products sold hereunder
occurring after delivery thereof to premises of DEALER.
To the extent required by law, DEALER shall notify the purchaser of a
vehicle of any damage sustained by such vehicle prior to sale. DEALER
shall indemnify and hold DISTRIBUTOR harmless from any liability
resulting from DEALER'S failure to so notify such purchasers.
F. DELAY OR FAILURE OF DELIVERY
DISTRIBUTOR shall not be liable for delay or failure to deliver LEXUS
Products which it has previously agreed to deliver, where such delay or
failure to deliver is the result of any event beyond the control of
DISTRIBUTOR, including but not limited to any law or regulation of any
governmental entity, acts of God, foreign or civil wars, riots,
interruptions of navigation, shipwrecks, fires, floods, storms, strikes,
lockouts or other labor troubles, embargoes, blockades, or delay or
failure of FACTORY to deliver LEXUS Products.
G. DIVERSION CHARGES
If after shipment DEALER fails or refuses to accept LEXUS Products that
it had agreed to purchase, DEALER shall pay all charges incurred by
DISTRIBUTOR as a result of such diversion. Such charges shall not exceed
the charge of returning any such product to the point of original
shipment by DISTRIBUTOR plus all charges for demurrage, storage or other
charges related to such diversion.
DEALER also agrees to assume responsibility for, and shall pay any and
all reasonable charges for, demurrage, storage or other charges accruing
after arrival of shipment at the diversion point established by
DISTRIBUTOR.
H. CHANGES OF DESIGN, OPTIONS OR SPECIFICATIONS
DISTRIBUTOR may change the design or specifications of any LEXUS Product
or the options in any LEXUS Product and shall be under no obligation to
provide notice of same or to make any similar change upon any product
previously purchased by or shipped to DEALER. No change shall be
considered a model year change unless so specified by DISTRIBUTOR.
I. DISCONTINUANCE OF MANUFACTURE OR IMPORTATION
FACTORY and/or DISTRIBUTOR may discontinue the manufacture, importation
or distribution of all or part of any LEXUS Product, whether motor
vehicle, parts, options, or accessories, including any model, series, or
body style of any
5
LEXUS Motor Vehicle at any time without any obligation or liability to
DEALER by reason thereof.
J. MINIMUM VEHICLE INVENTORIES
DEALER agrees that it shall, at all times, maintain in showroom ready
condition at least the minimum inventory of LEXUS Motor Vehicles as may
be established by DISTRIBUTOR from time to time.
K. PRODUCT MODIFICATIONS
DEALER agrees that it will not install aftermarket accessories or make
any modifications to LEXUS vehicles that may impair or adversely affect
a vehicle's safety, emissions, structural integrity or performance.
VII. DEALER MARKETING OF LEXUS PRODUCTS
A. DEALER'S SALES RESPONSIBILITIES
DEALER recognizes that customer satisfaction and the successful
promotion and sale of LEXUS Products are significantly dependent on
DEALER'S advertising and sales promotion activities. Therefore, DEALER
at all times shall:
1. Use its best efforts to promote, sell and service new and used LEXUS
Products;
2. Advertise and merchandise LEXUS Products and use current LEXUS
showroom displays;
3. Ensure that its sales personnel meet the educational and management
standards established by DISTRIBUTOR and have such personnel, as are
appropriate, attend all sales training courses prescribed by
DISTRIBUTOR at DEALER'S expense;
4. Maintain a high standard of ethics in advertising, promoting and
selling LEXUS Products and avoid engaging in any misrepresentation or
unfair or deceptive practices. DEALER shall discontinue any
advertising that DISTRIBUTOR may find to be injurious to
DISTRIBUTOR'S business or reputation or to the LEXUS Marks, or that
are likely to be violative of applicable laws or regulations;
5. Advertise in the local classified telephone directories identifying
itself as an authorized LEXUS DEALER. Such ad(s) shall properly
display the LEXUS Marks; and
6. Accurately represent to customers the total selling price of LEXUS
Products. DEALER agrees to explain to customers of LEXUS Products the
items that make up the total selling price and to give the customers
itemized invoices and all other information required by law. DEALER
understands and hereby acknowledges that it may sell LEXUS Products
at whatever price DEALER desires.
6
B. EXPORT POLICY
DEALER is authorized to sell LEXUS Motor Vehicles only to customers
located in the United States. DEALER agrees that it will not sell LEXUS
Motor Vehicles for resale or use outside the United States. DEALER
agrees to abide by any export policy established by DISTRIBUTOR.
C. LEXUS DEALER ASSOCIATION
Except where prohibited by law, DEALER will participate in a LEXUS
Dealer Advertising Association. DEALER agrees to cooperate in the
establishment of such an association and to fund its fair share of
advertising and merchandising programs undertaken by the association.
D. USED VEHICLES
DEALER agrees to display and sell used vehicles at the Approved
Location(s). DEALER shall maintain for resale an adequate inventory of
used vehicles.
E. PRIMARY AREA OF RESPONSIBILITY
DISTRIBUTOR will assign DEALER a geographic area called a Primary Market
Area ("PMA"). DEALER'S PMA may be altered or adjusted by DISTRIBUTOR at
any time. The PMA is a tool used by DISTRIBUTOR to evaluate DEALER'S
performance of its obligations. DEALER agrees that it has no right or
interest in any PMA that DISTRIBUTOR, in its sole discretion, may
designate. As permitted by local law, DISTRIBUTOR may add new dealers
to, or relocate dealers in or into the PMA assigned to DEALER.
F. EVALUATION OF DEALER'S SALES AND MARKETING PERFORMANCE
DISTRIBUTOR periodically will evaluate DEALER'S sales and marketing
performance under this Agreement. DEALER'S evaluation will be based on
such reasonable criteria as DISTRIBUTOR may establish including, without
limitation, comparisons of DEALER'S sales with those of other LEXUS
dealers. DISTRIBUTOR will review such evaluations with DEALER and DEALER
shall take prompt corrective action, if required, to improve its
performance.
VIII. DEALER SERVICE OBLIGATIONS
A. CUSTOMER SERVICE STANDARDS
DEALER and DISTRIBUTOR agree that the success and future growth of the
LEXUS franchise is substantially dependent upon the customers' ability
to obtain responsive, high-quality vehicle servicing. Therefore, DEALER
agrees to:
1. Take all reasonable steps to provide service of the highest quality
for all LEXUS Motor Vehicles, regardless of where purchased and
whether or not under warranty;
7
2. Ensure that the customer is advised of the necessary repairs and
his or her consent is obtained prior to the initiation of any
repairs;
3. Ensure that necessary repairs on LEXUS Motor Vehicles are
accurately diagnosed and professionally performed; and
4. Assure that the customer is treated courteously and fairly at all
times.
B. NEW MOTOR VEHICLE PRE-DELIVERY SERVICE
DEALER agrees that, prior to delivery of a new LEXUS Motor Vehicle to
a customer, it shall perform, if directed by DISTRIBUTOR, pre-delivery
service on each LEXUS Motor Vehicle in accordance with LEXUS
standards. DISTRIBUTOR shall reimburse DEALER for such pre-delivery
service according to such directives and the applicable provisions of
the LEXUS Warranty Policies and Procedures Manual.
C. WARRANTY AND POLICY SERVICE
DEALER acknowledges that the only warranties of DISTRIBUTOR or FACTORY
applicable to LEXUS Products shall be the New Vehicle Limited Warranty
or such other written warranties that may be expressly furnished by
DISTRIBUTOR or FACTORY. Except for its limited liability under such
written warranty or warranties, DISTRIBUTOR and FACTORY do not assume
any other warranty, obligation or liability. DEALER is not authorized
to assume any additional warranty obligations or liabilities on behalf
of DISTRIBUTOR or FACTORY. Any such additional obligations assumed by
DEALER shall be the sole responsibility of DEALER.
DEALER shall perform warranty and policy service specified by
DISTRIBUTOR, in accordance with the LEXUS Warranty Policies and
Procedures Manual. DISTRIBUTOR agrees to compensate DEALER for all
warranty and policy work, including labor, diagnosis and Genuine LEXUS
Parts and Accessories, in accordance with procedures and at rates to
be announced from time to time by DISTRIBUTOR and in accordance with
applicable law. Unless otherwise approved in advance by DISTRIBUTOR,
DEALER shall use only Genuine LEXUS Parts and Accessories when
performing LEXUS warranty repairs. Warranty and policy service is
provided for the benefit of customers and DEALER agrees that the
customer shall not be obligated to pay any charges for warranty or
policy work or any other services for which DEALER is reimbursed by
DISTRIBUTOR, except as required by law.
IX. USE OF PARTS AND ACCESSORIES IN NON-WARRANTY SERVICE
Subject to the provisions of Sections VI(k) and VIII(c), DEALER has the
right to sell, install or use for making non-warranty repairs products that
are not Genuine LEXUS Parts or Accessories.
DEALER acknowledges, however, that its customers expect that any parts or
accessories that DEALER sells, installs or uses in the sale, repair or
servicing of LEXUS vehicles are, or meet the high quality standards of,
Genuine LEXUS Parts or Acces-
8
sories. DEALER agrees that in sales, repairs or servicing where DEALER does
not use Genuine LEXUS Parts or Accessories, DEALER only will utilize such
other parts or accessories as:
1. Will not adversely affect the mechanical operation of the LEXUS
vehicle being sold, repaired or serviced; and
2. Are equivalent in quality and design to Genuine LEXUS Parts or
Accessories.
DEALER further agrees that it will not offer to sell any parts or
accessories that for reasons of quality or image are reasonably objected to
by LEXUS.
A. WARRANTY DISCLOSURES AS TO NON-GENUINE PARTS AND ACCESSORIES
In order to avoid confusion and to minimize potential customer
dissatisfaction, in any non-warranty instance where DEALER sells,
installs or uses non-Genuine LEXUS Parts or Accessories, DEALER shall
disclose such fact to the customer and shall advise the customer that
the item is not included in warranties furnished by DISTRIBUTOR or
FACTORY. Such disclosure shall be written, conspicuous and stated on
the customer's copy of the service or repair order or sale document.
In addition, DEALER will clearly explain to the customer the extent of
any warranty covering the parts or accessories involved and will
deliver a copy of the warranty to the customer.
B. ROADSIDE ASSISTANCE PROGRAM
Dealer agrees to participate in the LEXUS Roadside Assistance Program
as specified by DISTRIBUTOR.
C. SERVICE CAMPAIGN INSPECTIONS AND CORRECTIONS
DEALER agrees to perform service campaign inspections and/or
corrections for owners or users of all LEXUS Products that qualify for
such inspections and/or corrections. DEALER further agrees to comply
with all DISTRIBUTOR'S directives and with the applicable procedures
in the LEXUS Warranty Policies and Procedures Manual relating to those
inspections and/or corrections. DISTRIBUTOR agrees to reimburse DEALER
for all replacement parts and/or other materials required and used in
connection with such work and for labor according to such directives
and the applicable provisions of the LEXUS Warranty Policies and
Procedures Manual.
D. COMPLIANCE WITH SAFETY AND EMISSION CONTROL REQUIREMENTS
DEALER agrees to comply and operate consistently with all applicable
provisions of the National Traffic and Motor Vehicle Safety Act of
1966 and the Federal Clean Air Act, as amended, including applicable
rules and regulations issued from time to time thereunder, and all
other applicable federal, state and local motor vehicle safety and
emission control statutes, rules and regulations.
In the event that the laws of the state in which DEALER is located
require motor vehicle dealers or distributors to install in new or
used motor vehicles,
9
prior to their retail sale, any safety devices or other equipment not
installed or supplied as standard equipment by FACTORY, then DEALER,
prior to the sale of any LEXUS Motor Vehicle on which such
installations are required, shall properly install such devices or
equipment on such LEXUS Motor Vehicles. DEALER shall comply with state
and local laws pertaining to the installation and reporting of such
equipment.
In the interest of motor vehicle safety and emission control,
DISTRIBUTOR and DEALER agree to provide to each other such information
and assistance as may reasonably be requested by the other in
connection with the performance of obligations imposed on either party
by the National Traffic and Motor Vehicle Safety Act of 1966 and the
Federal Clean Air Act, as amended, and their rules and regulations,
and all other applicable federal, state and local motor vehicle safety
and emissions control statutes, rules and regulations.
E. COMPLIANCE WITH CONSUMER PROTECTION STATUTES, RULES AND REGULATIONS
Because certain customer complaints may impose liability upon
DISTRIBUTOR under various repair or replace laws or other consumer
protection laws and regulations, DEALER agrees to provide prompt
notice to DISTRIBUTOR of such complaints and take such other steps as
DISTRIBUTOR may require. DEALER will do nothing to affect adversely
DISTRIBUTOR'S rights under such laws and regulations. Subject to any
law or any regulation to the contrary, DEALER shall be liable to
DISTRIBUTOR for any refunds or vehicle replacements provided to
customer where DISTRIBUTOR reasonably establishes that DEALER failed
to carry out vehicle repairs in accordance with DISTRIBUTOR'S written
published policies and procedures or its express oral instructions
subsequently confirmed in writing. DEALER also agrees to provide
applicable required customer notifications and disclosures as
prescribed by repair or replacement laws or other consumer laws or
regulations.
X. SERVICE AND PARTS ORGANIZATION
A. ORGANIZATION AND STANDARDS
DEALER agrees to organize and maintain a complete service and parts
organization of the highest quality, including a qualified Service
Manager, Parts Manager, Diagnostic Specialists, Technicians and a
sufficient complement of qualified customer relations, service and
parts personnel as recommended in the LEXUS Dealer Facility Planner.
DEALER'S personnel will meet the educational, management and technical
training standards established by DISTRIBUTOR, and will attend all
service, parts and customer satisfaction training courses prescribed
by DISTRIBUTOR at DEALER'S expense.
B. SERVICE EQUIPMENT AND SPECIAL TOOLS
DEALER agrees to acquire and properly maintain adequate service
equipment and such special service tools and instruments as are
specified by DISTRIBUTOR.
10
C. PARTS STOCKING LEVEL
DEALER agrees to maintain its parts stock at minimum stocking levels
established by DISTRIBUTOR. In consideration for DEALER'S maintenance
of the Dealer Stocking Guide, DISTRIBUTOR grants DEALER a one hundred
percent (100%) obsolescence parts return policy. For non-stocking
guide parts, parts orders will accrue a five percent (5%) obsolescence
eligibility.
D. AFTER-HOURS DELIVERY
Dealer agrees to provide DISTRIBUTOR, upon request, access to a secure
area for after-hours parts or vehicle delivery.
E. ASSISTANCE PROVIDED BY DISTRIBUTOR
1. SERVICE MANUALS AND MATERIALS
DISTRIBUTOR agrees to make available to DEALER copies of such
service manuals and bulletins, publications and technical data as
DISTRIBUTOR shall deem to be necessary for the needs of DEALER'S
service and parts organization. DEALER shall be responsible for
keeping such manuals, publications and data current and available
for consultation by its employees.
2. FIELD SERVICE PERSONNEL ASSISTANCE
To assist DEALER in handling service responsibilities under this
Agreement, DISTRIBUTOR agrees to make available qualified field
service personnel who will, from time to time, advise and counsel
DEALER on service-related subjects, including service policies,
product and technical adjustments, repair and replacement of
product components, customer relations, warranty administration,
service and parts merchandising, and personnel/management
training.
F. EVALUATION OF DEALER'S SERVICE AND PARTS PERFORMANCE
DISTRIBUTOR will evaluate periodically DEALER'S: (i) service
performance in areas such as customer satisfaction, warranty
administration, service repairs, service management, facilities,
operating procedures, new vehicle pre-delivery service; and (ii) parts
operations, facilities, tools and equipment. DISTRIBUTOR agrees to
review such evaluations with DEALER and DEALER agrees to take prompt
action to improve the service and parts performance to satisfactory
levels as DISTRIBUTOR may require. Such action shall, if requested by
DISTRIBUTOR, include an action plan by DEALER for improvement of
service and parts performance within a specific time period approved
by DISTRIBUTOR.
11
XI. CUSTOMER SATISFACTION RESPONSIBILITIES
A goal of DISTRIBUTOR and DEALER is to be recognized as marketing the
finest products and providing the best service in the automobile industry.
The LEXUS name should be synonymous with the highest level of customer
satisfaction.
A. DEALER'S CUSTOMER SATISFACTION OBLIGATIONS
DEALER will be responsible for satisfying LEXUS customers in all
matters except those that are directly related to product design and
manufacturing or are otherwise out of DEALER'S control. DEALER will
take all reasonable steps to ensure that each customer is completely
satisfied with his or her LEXUS Products and the services and
practices of DEALER. DEALER will not engage in any practice or method
of operation if its nature or quality may impair the reputation of
LEXUS or LEXUS Products and it has been reasonably objected to by
DISTRIBUTOR.
1. DEALER'S CUSTOMER SATISFACTION PLAN
DEALER shall provide a detailed plan of DEALER'S customer
satisfaction program to DISTRIBUTOR and shall implement such
program on a continuous basis. This plan shall include an ongoing
system for emphasizing customer satisfaction to all DEALER'S
employees, for training DEALER employees and for conveying to
customers that DEALER is committed to the highest possible level
of customer satisfaction.
2. EMPLOYEE TRAINING
DEALER agrees to participate and to have its employees
participate in LEXUS customer satisfaction training as required
by DISTRIBUTOR, at DEALER'S expense.
3. CUSTOMER SATISFACTION MANAGER
If requested by DISTRIBUTOR, DEALER agrees to employ a full-time
Customer Satisfaction Manager with the necessary authority to
make all decisions regarding customer satisfaction and to resolve
all customer problems.
4. CUSTOMER ASSISTANCE RESPONSE SYSTEM
DEALER agrees to implement a system, approved by DISTRIBUTOR,
that will respond immediately to requests for customer assistance
from DISTRIBUTOR.
B. EVALUATION OF DEALER'S CUSTOMER SATISFACTION PERFORMANCE
DISTRIBUTOR periodically will evaluate DEALER'S customer satisfaction
performance based on the following considerations and efforts by
DEALER.
1. DISTRIBUTOR will provide DEALER with Owner Satisfaction Index
("OSI") reports or such other equivalent data as will permit
DEALER to assess its performance and maintain the highest level
of customer satisfaction.
12
DEALER agrees to review with its employees on a regular basis the
results of the customer satisfaction reports or other data it
receives.
2. DEALER agrees to develop and implement specific action plans to
improve results in the event that DEALER is below the average for
other LEXUS dealers. The plans are to be reviewed with
DISTRIBUTOR on a basis that DISTRIBUTOR deems appropriate. DEALER
will use its best efforts to respond on a timely basis to
requests from DISTRIBUTOR to take action on unsatisfactory
customer satisfaction matters and to commit necessary resources
to remedy deficiencies reasonably specified by DISTRIBUTOR.
XII. DEALERSHIP FACILITIES AND IDENTIFICATION
A. FACILITIES
1. In order for DISTRIBUTOR to establish an effective network of
authorized LEXUS dealers, DEALER shall provide, and at all times
maintain, attractive dealership facilities at the Approved
Location(s) that satisfy the image, size, layout, interior
design, color; equipment and identification required by
DISTRIBUTOR. DEALER'S facility shall meet the minimum facility
standards established by LEXUS.
2. To assist DEALER in planning, building, remodeling, or
maintaining dealership facilities, DISTRIBUTOR will provide
DEALER a LEXUS Dealer Facility Planner and will identify sources
from which DEALER may purchase facility consultation and planning
services, and architectural materials and furnishings that meet
LEXUS standards and guidelines. DISTRIBUTOR will also make
available to DEALER, upon request, sample copies of building
layout plans, facility planning recommendations, and an
applicable identification program covering the placement,
installation and maintenance of required signs. In addition,
representatives of DISTRIBUTOR will be available to DEALER from
time to time to counsel and advise DEALER and dealership
personnel in connection with DEALER'S planning and equipping the
dealership premises.
B. SERVICE RECEPTION AREA
DEALER agrees to maintain a service reception area that meets all
requirements set forth in the LEXUS Dealer Facility Planner, that is
consistent with the LEXUS image and that will promote a high level of
customer satisfaction.
C. DEALER'S OPERATING HOURS
DEALER agrees to keep its dealership operations open for business
during all days and hours that are customary and lawful for such
operations in the community or locality in which DEALER is located and
in accordance with industry standards.
13
D. SIGNS
Subject to applicable governmental statutes, ordinances and
regulations, DEALER agrees to erect, display and maintain, at Approved
Location(s) only and at DEALER'S sole expense, such standard
authorized product and service signs as specified by DISTRIBUTOR.
E. EVALUATION OF DEALERSHIP FACILITIES
DISTRIBUTOR periodically will evaluate DEALER'S facilities. In making
such evaluations, DISTRIBUTOR may consider, among other things: the
actual building and land provided by DEALER for the performance of its
responsibilities under this Agreement; compliance with DISTRIBUTOR'S
current requirements for dealership operations; the appearance,
condition, layout and signage of the dealership facilities; and such
other factors as in DISTRIBUTOR'S opinion may relate to DEALER'S
performance of its responsibilities under this Agreement. DISTRIBUTOR
will discuss such evaluations with DEALER and DEALER shall take prompt
action to comply with DISTRIBUTOR'S recommendations and minimum
facility standards.
F. USE OF LEXUS MARKS
1. USE BY DEALER
DISTRIBUTOR grants to DEALER the nonexclusive privilege of
displaying or otherwise using authorized LEXUS Marks as specified
in the LEXUS Graphic Standards Manual at the Approved Location(s)
in connection with the selling or servicing of LEXUS Products.
DEALER further agrees that it promptly shall discontinue the
display and use of any such LEXUS Marks, and shall change the
manner in which any LEXUS Marks are displayed and used, when for
any reason it is requested to do so by DISTRIBUTOR. DEALER may
use the LEXUS Marks only at Approved Location(s) and for such
purposes as are specified in this Agreement. DEALER agrees that
such LEXUS Marks may be used as part of the name under which
DEALER'S business is conducted only with the prior written
approval of DISTRIBUTOR.
2. DISCONTINUANCE OF USE
Upon termination, non-renewal, or expiration of this Agreement,
DEALER agrees that it shall immediately:
a. Discontinue the use of the word LEXUS and the LEXUS Marks, or
any semblance of same, including without limitation, the use
of all stationery, telephone directory listing, and other
printed material referring in any way to LEXUS or bearing any
LEXUS Mark;
b. Discontinue the use of the word LEXUS or the LEXUS Marks, or
any semblance of same, as part of its business or corporate
name, and file a change or discontinuance of such name with
appropriate authorities;
14
c. Remove all product signs bearing said word(s) or LEXUS Marks
at DEALER'S sole cost and expense;
d. Cease representing itself as an authorized LEXUS Dealer; and
e. Refrain from any action, including without limitation, any
advertising, stating or implying that it is authorized to
sell or distribute LEXUS Products.
In the event DEALER fails to comply with the terms and conditions
of this Section, DISTRIBUTOR shall have the right to enter upon
DEALER'S premises and remove, without liability, all such product
signs and identification bearing the word LEXUS or any LEXUS
Marks. DEALER agrees that it shall reimburse DISTRIBUTOR for any
costs and expenses incurred in such removal, including reasonable
attorney fees.
XIII. CAPITAL, CREDIT, RECORDS AND UNIFORM SYSTEMS
A. NETWORKING CAPITAL
DEALER agrees to establish and maintain actual net working capital in
an amount not less than the minimum net working capital specified by
DISTRIBUTOR. DISTRIBUTOR will have the right to increase the minimum
net working capital required, and DEALER agrees promptly to establish
and maintain the increased amount.
B. FLOORING AND LINES OF CREDIT
DEALER agrees to obtain and maintain at all times a confirmed and
adequate flooring line with a bank or financial institution or other
method of financing acceptable to DISTRIBUTOR to enable DEALER to
perform its obligations pursuant to this Agreement.
DISTRIBUTOR may increase the required amounts of flooring or lines of
credit, and DEALER agrees promptly to establish and maintain the
increased amount.
Subject to the foregoing obligations, DEALER is free to do its
financing business, wholesale, retail or both, with whomever it
chooses and to the extent it desires.
C. PAYMENT TERMS
All monies or accounts due DEALER from DISTRIBUTOR will be considered
net of DEALER'S indebtedness to DISTRIBUTOR. DISTRIBUTOR may deduct or
offset any amounts due or to become due from DEALER to DISTRIBUTOR, or
any amounts held by DISTRIBUTOR, from or against any sums or accounts
due or to become due from DISTRIBUTOR to DEALER. Any amounts owed by
DEALER to DISTRIBUTOR that are not paid when due shall bear interest
as established by DISTRIBUTOR and permitted by law. Payments by DEALER
to DISTRIBUTOR shall be made in such a manner as prescribed by
DISTRIBUTOR and shall be applied against DEALER'S indebtedness in
accordance with DISTRIBUTOR'S policies and practices.
15
D. UNIFORM ACCOUNTING SYSTEM
DEALER agrees to maintain its financial books and records in
accordance with the LEXUS Accounting Manual, as amended from time to
time by DISTRIBUTOR. In addition, DEALER shall furnish to DISTRIBUTOR
complete and accurate financial or operating information, including
without limitation, a financial and/or operating statement covering
the current month and calendar year-to-date operations and showing the
true and accurate condition of DEALER'S business. DEALER shall
promptly furnish to DISTRIBUTOR copies of any adjusted financial
and/or operating statements, including any and all adjusted, year-end
statements prepared for tax or any other purposes. All such
information shall be furnished by DEALER to DISTRIBUTOR via
DISTRIBUTOR'S electronic communications network and in such a format
and at such times as prescribed by DISTRIBUTOR.
E. RECORDS MAINTENANCE
DEALER agrees to keep complete, accurate and current records regarding
its sale, leasing and servicing of LEXUS Products for a minimum of
five (5) years, exclusive of any retention period required by any
governmental entity. DEALER shall prepare, keep current and retain
records in support of requests for reimbursement for warranty and
policy work performed by DEALER in accordance with the LEXUS Warranty
Policies and Procedures Manual.
F. EXAMINATION OF DEALERSHIP ACCOUNTS AND RECORDS
DISTRIBUTOR shall have the right at all reasonable times and during
regular business hours to inspect DEALER'S facilities and to examine,
audit and to reproduce all records, accounts and supporting data
relating to the operations of DEALER, including without limitation,
sales reporting, service and repair of LEXUS Products by DEALER.
G. TAXES
DEALER shall be responsible for and duly pay all sales taxes, use
taxes, excise taxes and other governmental or municipal charges
imposed, levied or based upon the purchase or sale of LEXUS Products
by DEALER, and shall maintain accurate records of the same.
H. CONFIDENTIALITY
DISTRIBUTOR agrees that it shall not provide any financial data or
documents submitted to it by DEALER to any third party unless
authorized by DEALER, required by law, or required to generate
composite or comparative data for analytical purposes.
DEALER agrees to keep confidential and not to disclose, directly or
indirectly, any information that DISTRIBUTOR designates as
confidential.
16
I. DATA TRANSMISSION SYSTEMS
DISTRIBUTOR has established a national, private, centralized database
of information about all LEXUS vehicles and customers. In order to
provide the highest level of service and support and to facilitate
accurate and timely reporting of relevant DEALER operational and
financial data, DEALER shall provide information to DISTRIBUTOR as
specified by DISTRIBUTOR from time to time, including, but not limited
to, customer service, sales, parts inventory and accounting
information. All information shall be submitted by DEALER via the
LEXUS electronic communications network. DEALER will acquire, install
and maintain at its expense the necessary equipment and systems
compatible with the LEXUS electronic communications network.
DISTRIBUTOR will recommend to DEALER an independent source for
purchasing the required equipment and systems. DEALER, however, may
purchase equipment from any source, provided the equipment meets the
LEXUS electronic communications network specifications.
J. SALES REPORTING
DEALER agrees to accurately report to DISTRIBUTOR, with such relevant
information as DISTRIBUTOR may reasonably require, the delivery of
each new motor vehicle to a purchaser by the end of the day in which
the vehicle is delivered to the purchaser thereof, and to furnish
DISTRIBUTOR with such other reports as DISTRIBUTOR may reasonably
require from time to time.
XIV. TRANSFERS
A. SALE OF OWNERSHIP INTEREST IN DEALERSHIP
This is a personal services Agreement based upon the personal skills,
service, qualifications and commitment of DEALER'S OWNERS and General
Manager. For this reason, and because DISTRIBUTOR has entered into
this Agreement in reliance upon DEALER'S, OWNERS' and General
Manager's qualifications, DEALER agrees to obtain DISTRIBUTOR'S prior
written approval of any proposed change in its ownership, General
Manager or any proposed disposition of DEALER'S principal assets.
DISTRIBUTOR shall not be obligated to renew this Agreement or to
execute a new Agreement to a proposed transferee unless DEALER first
makes arrangements acceptable to DISTRIBUTOR to satisfy any
outstanding indebtedness to DISTRIBUTOR.
B. RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE
1. RIGHTS GRANTED
If a proposal to sell the dealership's assets or transfer its
ownership is submitted by DEALER to DISTRIBUTOR, or in the event
of the death of the majority owner of DEALER, DISTRIBUTOR has a
right of first refusal or option to purchase the dealership
assets or stock, including any leasehold
17
interest or realty. DISTRIBUTOR'S exercise of its right or option
under this Section supercedes DEALER'S right to transfer its
interest in, or ownership of, the dealership. DISTRIBUTOR'S right
or option may be assigned by it to any third party and
DISTRIBUTOR hereby guarantees the full payment to DEALER of the
purchase price by such assignee. DISTRIBUTOR may disclose the
terms of any pending buy/sell agreement and any other relevant
dealership performance information to any potential assignee.
DISTRIBUTOR'S rights under this Section will be binding on and
enforceable against any assignee or successor in interest of
DEALER or purchaser of DEALER'S assets.
2. EXERCISE OF DISTRIBUTOR'S RIGHTS
DISTRIBUTOR shall have thirty (30) days from the following events
within which to exercise its option to purchase or right of first
refusal: (i) DISTRIBUTOR'S receipt of all data and documentation
customarily required by it to evaluate a proposed transfer of
ownership; (ii) DISTRIBUTOR'S receipt of notice from DEALER of
the death of the majority owner of DEALER; or (iii) DISTRIBUTOR'S
disapproving of any application submitted by an OWNER'S heirs
pursuant to Section XIV. DISTRIBUTOR'S exercise of its right of
first refusal under this Section neither shall be dependent upon
nor require its prior refusal to approve the proposed transfer.
3. RIGHT OF FIRST REFUSAL
If DEALER has entered into a bona fide written buy/sell agreement
for its dealership business or assets, DISTRIBUTOR'S right under
this Section is a right of first refusal, enabling DISTRIBUTOR to
assume the buyer's rights and obligations under such buy/sell
agreement, and to cancel this Agreement and all rights granted
DEALER. Upon DISTRIBUTOR'S request, DEALER agrees to provide
other documents relating to the proposed transfer and any other
information which DISTRIBUTOR deems appropriate, including, but
not limited to, those reflecting other agreements or
understandings between the parties to the buy/sell agreement.
Refusal to provide such documentation or to state that no such
documents exist shall create the presumption that the buy/sell
agreement is not a bona fide agreement.
4. OPTION TO PURCHASE
In the event of the death of a majority OWNER or if DEALER
submits a proposal which DISTRIBUTOR determines is not bona fide
or in good faith, DISTRIBUTOR has the option to purchase the
principal assets of DEALER utilizing the dealership business,
including real estate and leasehold interest, and to cancel this
Agreement and the rights granted DEALER. The purchase price of
the dealership assets will be determined by good faith
negotiations between the parties. If an agreement cannot be
reached, the purchase price will be exclusively determined by
binding arbitration in accordance with the commercial arbitration
rules of the American Arbitration Association. The site of the
arbitration shall be the office of the American
18
Arbitration Association in the locality of DISTRIBUTOR'S
principal place of business.
5. DEALER'S OBLIGATIONS
Upon DISTRIBUTOR'S exercise of its right or option and tender of
performance under the buy/sell agreement or upon whatever terms
may be expressed in the buy/sell agreement, DEALER shall
forthwith transfer the affected real property by warranty deed
conveying marketable title free and clear of all liens, claims,
mortgages, encumbrances, tenancies and occupancies. The warranty
deed shall be in proper form for recording, and DEALER shall
deliver complete possession of the property and deed at the time
of closing. DEALER shall also furnish to DISTRIBUTOR all copies
of any easements, licenses or other documents affecting the
property or dealership operations and shall assign any permits or
licenses that are necessary or desirable for the use of or
appurtenant to the property or the conduct of such dealer
operations. DEALER also agrees to execute and deliver to
DISTRIBUTOR instruments satisfactory to DISTRIBUTOR conveying
title to all personal property, including leasehold interests,
involved in the transfer or sale to DISTRIBUTOR. If any personal
property is subject to any lien or charge of any kind, DEALER
agrees to procure the discharge and satisfaction thereof prior to
the closing of sale of such property to DISTRIBUTOR.
XV. SUCCESSION RIGHTS UPON DEATH OR INCAPACITY
A. SUCCESSION TO OWNERSHIP AFTER DEATH OF OWNER
In the event that OWNER dies and his or her interest in Dealership
passes directly to any person or persons ("Heirs") who wish to succeed
to OWNER'S interest, then OWNER'S legal representative must notify
DISTRIBUTOR within sixty (60) days of the death of the OWNER of such
Heir's or Heirs' intent to succeed OWNER. The legal representative
also must then designate a proposed General Manager for DISTRIBUTOR
approval. The effect of such notice from OWNER'S legal representative
will be to suspend any notice of termination provided for in Section
XVI (B)(4) issued hereunder.
Upon delivery of such notice, OWNER'S legal representative shall
immediately request any person(s) identified by it as intending to
succeed OWNER and the designated candidate for General Manager to
submit an application and to provide all personal and financial
information that DISTRIBUTOR may reasonably and customarily require in
connection with its review of such applications. All requested
information must be provided promptly to DISTRIBUTOR and in no case
later than thirty (30) days after receipt of such request from OWNER'S
legal representative. Upon the submission of all requested
information, DISTRIBUTOR agrees to review such application(s) pursuant
to the then current criteria generally applied by DISTRIBUTOR in
qualifying dealer OWNERS and/or General Managers. DISTRIBUTOR shall
either approve or disapprove the application(s) within ninety (90)
days of full compliance with all DISTRIBUTOR'S requests for
information. If DISTRIBUTOR approves the application(s), it shall
offer to enter into a new LEXUS Dealer
19
Agreement with OWNER'S Heir(s) in the form then currently in use,
subject to such additional conditions and for such term as DISTRIBUTOR
deems appropriate.
In the event that DISTRIBUTOR does not approve the designated Heir(s)
or designated candidate for Manager, or if the OWNER'S legal
representative withdraws his or her notice of the Heir(s) intent to
succeed as OWNER(S) or if the legal representative or any proposed
OWNERS or General Manager fails to timely provide the required
information, DISTRIBUTOR may reinstate or issue a notice of
termination. Nothing in this Section shall waive DISTRIBUTOR'S right
to exercise its Option to Purchase set forth in Section XIV herein.
B. INCAPACITY OF OWNER
The parties agree that, as used herein, incapacity shall refer to any
physical or mental ailment that, in DISTRIBUTOR'S opinion, adversely
affects OWNER'S ability to meet his or her obligations under this
Agreement. DISTRIBUTOR may terminate this Agreement when an
incapacitated OWNER also is the General Manager identified herein.
Prior to the effective date of any notice of termination, an
incapacitated OWNER who is also the General Manager, or his or her
legal representative, may propose a new candidate for the position of
General Manager. Such proposal shall be in writing and shall suspend
any pending notice of termination until DISTRIBUTOR advises DEALER of
its approval or disapproval of the new candidate. Upon receipt of such
notice, DISTRIBUTOR and DEALER shall follow the qualification
procedures set forth in subsection A above.
C. NOMINATION OF SUCCESSOR PRIOR TO DEATH OR INCAPACITY OF OWNER
An OWNER owning a majority of DEALER'S stock may nominate a candidate
to assume ownership and/or the position of General Manager of the
dealership upon his or her death or incapacity.
As soon as practicable after such nomination, DISTRIBUTOR will request
such personal financial information from the nominated OWNER and/or
General Manager candidate as it reasonably and customarily may require
in evaluating such candidates. DISTRIBUTOR shall apply criteria then
currently used by DISTRIBUTOR in qualifying OWNERS and/or General
Managers of authorized dealers. Upon receipt of all requested
information, DISTRIBUTOR shall either approve or disapprove such
candidate. If DISTRIBUTOR initially approves the candidate, said
approval shall remain in effect for the duration of the current
Agreement. DISTRIBUTOR agrees that DEALER may renominate the candidate
after the expiration of this Agreement, and DISTRIBUTOR will approve
such nomination provided: (i) DISTRIBUTOR and DEALER have entered into
a new LEXUS Dealer Agreement; and (ii) the proposed candidate
continues to comply with the then current criteria used by DISTRIBUTOR
in qualifying such candidates. If DISTRIBUTOR does not initially
qualify the candidate, DISTRIBUTOR agrees to review the reason(s) for
its decision with OWNER. OWNER is
20
is free at any time to renew its nomination. However, in such
instances, the candidate must again qualify pursuant to the then
current criteria. OWNER may, by written notice, withdraw a nomination
at any time, even if DISTRIBUTOR has previously qualified said
candidate.
XVI. TERMINATION
A. VOLUNTARY TERMINATION BY DEALER
DEALER may voluntarily terminate this Agreement at any time by written
notice to DISTRIBUTOR. Termination shall be effective thirty (30) days
after receipt of the notice by DISTRIBUTOR, unless otherwise mutually
agreed in writing.
B. TERMINATION FOR CAUSE
1. IMMEDIATE TERMINATION
DEALER and DISTRIBUTOR agree that the following conduct is within
DEALER'S control and is so contrary to the goals, purposes and
objectives of this Agreement as to warrant its immediate
termination. Accordingly, DEALER agrees that if it engages in any
of the following types of conduct, DISTRIBUTOR shall have the
right to terminate this Agreement immediately:
a. If DEALER fails to conduct any customary dealership
operations for seven consecutive business days, except in the
event such closure or cessation of operation is caused by
some physical event beyond the control of the DEALER, such as
strikes, civil war, riots, fires, floods, earthquakes, or
other acts of God;
b. If DEALER becomes insolvent, or files any petition under
bankruptcy law, or executes an assignment for the benefit of
creditors, or appoints a receiver or trustee or another
officer having similar powers is appointed for DEALER and is
not removed within thirty (30) days from his appointment
thereto or there is any levy under attachment or execution or
similar process which is not vacated or removed by payment or
bonding within ten (10) days;
c. If DEALER, or any OWNER or Officer of DEALER is convicted of
any felony;
d. If DEALER or any OWNER, Officer or General Manager of Dealer
makes any material misrepresentation to DISTRIBUTOR; or
e. If DEALER fails to obtain or maintain any license, permit or
authorization necessary for the conduct by DEALER of his or
her business pursuant to this Agreement, or such license,
permit or authorization is suspended or revoked.
21
2. TERMINATION UPON SIXTY DAYS NOTICE
The following conduct violates the terms and conditions of this
Agreement and, if DEALER engages in such conduct, DISTRIBUTOR shall
have the right to terminate this Agreement upon sixty (60) days
notice:
a. Any attempted or actual sale, transfer or assignment by DEALER of
this Agreement or any of the rights granted DEALER hereunder, or
any attempted or actual transfer, assignment or delegation by
DEALER of any of the responsibilities assumed by it under this
Agreement without the prior written approval of DISTRIBUTOR;
b. Any unreasonable removal of the General Manager;
c. Appointment of a new General Manager without the prior written
approval of DISTRIBUTOR;
d. The conducting, directly or indirectly, of any LEXUS dealer
operation other than at the Approved Location(s);
e. Failure of DEALER to pay DISTRIBUTOR for any LEXUS Products;
f. Failure of DEALER to establish or maintain during the existence
of this Agreement the required net working capital or adequate
flooring and lines of credit;
g. Any dispute, disagreement or controversy among managers, officers
or stockholders of DEALER that, in the reasonable opinion of
DISTRIBUTOR, adversely affects the ownership, operation,
management, business, reputation or interests of DEALER or
DISTRIBUTOR;
h. Retention by DEALER of any General Manager, who, in DISTRIBUTOR'S
reasonable opinion, is not competent or, if previously approved
by DISTRIBUTOR, no longer possesses the requisite qualifications
for the position, or who has acted in a manner contrary to the
continued best interest of both DEALER and DISTRIBUTOR;
i. Impairment of the reputation or financial standing of DEALER
subsequent to the execution of this Agreement;
j. Refusal to permit DISTRIBUTOR to examine or audit DEALER'S
accounting records as provided herein upon receipt by DEALER from
DISTRIBUTOR of written notice requesting such permission or
information;
k. Failure of DEALER to timely furnish accurate sales or financial
information and related supporting data;
l. Breach or violation by DEALER of any other term or provision of
this Agreement; or
m. Any civil or administrative liability found against DEALER or any
OWNER or Officer of DEALER for any automotive related matter
which in DISTRIBUTOR'S opinion tends to seriously and adversely
affect the
22
ownership, operation, management, reputation, business or
interests of DEALER, or to impair the goodwill associated with
the LEXUS Marks.
3. TERMINATION FOR FAILURE OF PERFORMANCE
If, upon evaluation of DEALER's performance pursuant to paragraphs
VII(F), X(F), XI(B) or XII(E) herein, DISTRIBUTOR concludes that
DEALER has failed to perform adequately its sales, service or customer
satisfaction responsibilities or to provide adequate dealership
facilities, DISTRIBUTOR shall notify DEALER in writing of such
failure(s) and will endeavor to review promptly with DEALER the nature
and extent of such failure(s), and will grant DEALER 180 days or such
other period as may be required by law to correct such failure(s). If
DEALER fails or refuses to correct such failure(s) or has not made
substantial progress towards remedying such failure(s) at the
expiration of such period, DISTRIBUTOR may terminate this Agreement
upon sixty (60) days notice or such other notice as may be required by
law.
4. TERMINATION UPON DEATH OR INCAPACITY
Subject to certain exceptions identified in Section XV, DISTRIBUTOR
may terminate this Agreement in the event of the death of an OWNER or
upon the incapacity of any OWNER who is also the General Manager
identified herein, upon written notice to DEALER and such OWNER'S
legal representative. Termination, upon either of these events shall
be effective ninety (90) days from the date of such notice.
C. NOTICE OF TERMINATION
Any notice of termination under this Agreement shall be in writing and
shall be mailed to the person(s) designated to receive such notice, via
certified mail, or shall be delivered in person. Such notice shall be
effective upon the date of receipt. DISTRIBUTOR shall state the grounds on
which it relies in its termination of DEALER, and shall have the right to
amend such notice as appropriate. DISTRIBUTOR'S failure to refer to
additional grounds for termination shall not constitute a waiver of its
right later to rely upon such grounds.
D. CONTINUANCE OF BUSINESS RELATIONS
Upon receipt of any notice of termination or non-renewal, DEALER agrees to
conduct itself and its operation until the effective date of termination or
non-renewal in a manner that will not injure the reputation or goodwill of
the LEXUS Marks or DISTRIBUTOR.
E. REPURCHASE PROVISIONS
1. DISTRIBUTOR'S OBLIGATIONS
Upon the expiration or termination of this Agreement, DISTRIBUTOR
shall have the right to cancel any and all shipments of LEXUS Products
scheduled for delivery to DEALER, and DISTRIBUTOR shall repurchase
from DEALER the following:
23
a. New, unused, unmodified and undamaged LEXUS Motor Vehicles then
unsold in DEALER'S inventory. The prices of such Motor Vehicles
shall be the same as those at which they were originally
purchased by DEALER, less all prior refunds or other allowances
made by DISTRIBUTOR to DEALER with respect thereto.
b. New, unused and undamaged LEXUS parts and accessories then unsold
in DEALER'S inventory that are in good and saleable condition.
The prices for such parts and accessories shall be the prices
last established by DISTRIBUTOR for the sale of identical parts
or accessories to dealers in the area in which DEALER is located.
c. Special service tools recommended by DISTRIBUTOR and then owned
by DEALER and that are especially designed for servicing LEXUS
Motor Vehicles. The prices for such special service tools will be
the price paid by DEALER less appropriate depreciation, or such
other price as the parties may negotiate.
d. Signs that DISTRIBUTOR has recommended for identification of
DEALER. The price of such signs shall be the price paid by DEALER
less appropriate depreciation or such other price as the parties
may negotiate.
2. RESPONSIBILITIES OF DEALER
DISTRIBUTOR'S obligations to repurchase the items set forth in this
Section are contingent upon DEALER fulfilling the following
obligations:
a. Within thirty (30) days after the date of expiration or the
effective date of termination of this Agreement, DEALER shall
deliver or mail to DISTRIBUTOR a detailed inventory of all items
referred to in this Section which it requests DISTRIBUTOR
repurchase and shall certify that such list is true and accurate.
b. DEALER shall be entitled to request repurchase of only those
items which it purchased from DISTRIBUTOR, unless DISTRIBUTOR
agrees otherwise.
c. Products and special service tools to be repurchased by
DISTRIBUTOR from DEALER shall be delivered by DEALER to
DISTRIBUTOR'S place of business at DEALER'S expense. If DEALER
fails to do so, DISTRIBUTOR may transfer such items and deduct
the cost therefor from the repurchase price.
d. DEALER will execute and deliver to DISTRIBUTOR instruments
satisfactory to DISTRIBUTOR conveying good and marketable title
to the aforesaid items to DISTRIBUTOR. If such items are subject
to any lien or charge of any kind, DEALER will procure the
discharge in satisfaction thereof prior to their repurchase by
DISTRIBUTOR. DEALER will comply with the requirements of any
state or federal laws that relate to the repurchase including
bulk sales or transfer laws.
24
e. DEALER will remove, at its own expense, all signage from
DEALER'S approved locations including all LEXUS Marks before
it is eligible for payment hereunder.
3. PAYMENT BY DISTRIBUTOR
DISTRIBUTOR will pay DEALER for such items as DEALER may request
be repurchased and that qualify hereunder as soon as practicable
upon DEALER'S compliance with the obligations set forth herein
and upon computation of any outstanding indebtedness of DEALER to
DISTRIBUTOR.
DISTRIBUTOR shall have the right to offset from any amounts due
to DEALER hereunder the total sum of DEALER'S outstanding
indebtedness to DISTRIBUTOR.
If DEALER disagrees with DISTRIBUTOR'S valuation of any item
herein, and DEALER and DISTRIBUTOR have not resolved their
disagreement within sixty (60) days of the effective date of
termination or expiration of this Agreement, DISTRIBUTOR shall
pay to DEALER the amount to which it reasonably believes DEALER
is entitled. DEALER'S exclusive remedy to recover any additional
sums that it believes is due under this Section shall be by
resort to an Alternative Dispute Resolution program, including
arbitration, that is binding on both parties.
XVII. MANAGEMENT OF DISPUTES
A. ALTERNATIVE DISPUTE RESOLUTION PROGRAMS
1. DISTRIBUTOR and DEALER acknowledge that disputes involving the
performance of this Agreement may from time to time arise. In
order to minimize the effects of such disputes on their business
relationship, the parties agree to participate in such
Alternative Dispute Resolution programs as may be established by
DISTRIBUTOR.
2. Such Alternative Dispute Resolution programs may be established
to resolve disputes in matters including, but not limited to,
sales reporting and/or sales credit disputes, product allocation
disputes, DEALER liability for repair/replace claims, warranty
and service campaign reimbursement, sales contests and
merchandising incentive programs, and accounts of debt between
the parties.
3. In all disputes between DEALER and DISTRIBUTOR, the parties shall
first resort to such Alternative Dispute Resolution programs,
including mediation, as may have been established by DISTRIBUTOR.
4. It is expressly understood that, unless otherwise specified in
this Agreement, the results of any Alternative Dispute Resolution
program will not be binding upon DEALER or DISTRIBUTOR.
25
5. The parties' commitment to support and participate in non-binding
Alternative Dispute Resolution programs specifically is not a
waiver of DEALER'S DISTRIBUTOR'S right to later resort to
litigation before any judicial or administrative forum.
B. APPLICABLE LAW
This Agreement shall be governed by and construed according to the
laws of the state in which DEALER is located.
C. MUTUAL RELEASE
Each party hereby releases the other from any and all claims and
causes of action that it may have against the other for money damages
arising from any event occurring prior to the date of execution of
this Agreement, except for any accounts payable by one party to the
other as a result of the purchase of any LEXUS Products, audit
adjustments or reimbursement for any services. This release does not
extend to claims which either party does not know or reasonably
suspect to exist in its favor at the time of the execution of this
Agreement.
XVIII. DEFENSE AND INDEMNIFICATION
A. DEFENSE AND INDEMNIFICATION BY DISTRIBUTOR
DISTRIBUTOR agrees to assume the defense of DEALER and to indemnify
and hold DEALER harmless in any lawsuit naming DEALER as a defendant
and involving any LEXUS Product when the lawsuit also involves
allegations of:
1. Breach of warranty provided by DISTRIBUTOR, bodily injury or
property damage arising out of an occurrence allegedly caused
solely by a defect or failure to warn of a defect in design,
manufacture or assembly of a LEXUS Product (except for tires not
manufactured by FACTORY), provided that the defect could not
reasonably have been discovered by DEALER during the pre-delivery
service of the LEXUS Product;
2. Any misrepresentation or misleading statement or unfair or
deceptive trade practice of DISTRIBUTOR; or
3. Any damage to a LEXUS Product purchased by DEALER from
DISTRIBUTOR that was repaired by DISTRIBUTOR and where DEALER had
not been notified of such damage in writing prior to the delivery
of the subject vehicle, part or accessory to a retail Customer;
and Provided:
4. That DEALER delivers to DISTRIBUTOR, in a manner to be designated
by DISTRIBUTOR, within twenty (20) days of the service of any
summons or complaint, copies of such documents and requests in
writing a defense and/or indemnification therein (except as
provided in Paragraph (D) below;
26
5. That the complaint does not involve allegations of DEALER misconduct,
including but not limited to, improper or unsatisfactory service or
repair, misrepresentation, or any claim of DEALER'S unfair or
deceptive trade practice;
6. That the LEXUS Product which is the subject of the lawsuit was not
altered by or for DEALER;
7. That DEALER agrees to cooperate fully in the defense of such action
as DISTRIBUTOR may reasonably require; and
8. That DEALER agrees that DISTRIBUTOR may offset any recovery on
DEALER'S behalf against any indemnification that may be required
hereunder.
B. DEFENSE AND INDEMNIFICATION BY DEALER
DEALER agrees to assume the defense of DISTRIBUTOR or FACTORY and to
indemnify and hold them harmless in any lawsuit naming DISTRIBUTOR or
FACTORY as a defendant when the lawsuit involves allegations of:
1. DEALER'S alleged failure to comply, in whole or in part, with any
obligations assumed by DEALER pursuant to this Agreement;
2. DEALER'S alleged negligent or improper repairing or servicing of a
new or used LEXUS Motor Vehicle or equipment, or such other motor
vehicles or equipment as may be sold or serviced by DEALER;
3. DEALER'S alleged breach of any contract or warranty other than that
provided by DISTRIBUTOR or FACTORY;
4. DEALER'S alleged misleading statements, misrepresentations, or
deceptive or unfair trade practices;
5. Any modification or alteration made by or on behalf of DEALER to a
LEXUS Product, except those made pursuant to the express instruction
or with the express approval of DISTRIBUTOR; and Provided:
6. That DISTRIBUTOR delivers to DEALER, within twenty (20) days of the
service of any summons or complaint, copies of such documents, and
requests in writing a defense and/or indemnification therein (except
as provided in Paragraph (D) below);
7. That DISTRIBUTOR agrees to cooperate fully in the defense of such
action as DEALER may reasonably require; and,
8. That the complaint does not involve allegations of liability premised
upon separate DISTRIBUTOR'S conduct or omissions.
27
C. CONDITIONAL DEFENSE AND/OR INDEMNIFICATION
In agreeing to defend and/or indemnify each other, DEALER and DISTRIBUTOR may
make their agreement conditional on the continued existence of the state of
facts as then known to such party and may provide for the withdrawal of such
defense and/or indemnification at such time as facts arise which, if known at
the time of the original request for a defense and/or indemnification, would
have caused either DEALER or DISTRIBUTOR to refuse such request.
The party withdrawing from its agreement to defend and/or indemnify shall
give timely notice of its intent to withdraw. Such notice shall be in writing
and shall be effective upon receipt. The withdrawing party shall be
responsible for all costs and expenses of defense up to the date of receipt
of its notice of withdrawal.
D. THE EFFECT OF SUBSEQUENT DEVELOPMENTS
In the event that subsequent developments in a case make clear that the
allegations which initially preclude a request or an acceptance of a request
for a defense and/or indemnification are no longer at issue therein or are
without foundation, any party having a right to a defense and/or
indemnification hereunder may tender such request for a defense and
indemnification to the other party. Neither DEALER nor DISTRIBUTOR shall be
required to agree to such subsequent request for a defense and/or
indemnification where that party would be unduly prejudiced by such delay.
E. TIME TO RESPOND AND RESPONSIBILITIES OF THE PARTIES
DEALER and DISTRIBUTOR shall have sixty (60) days from the receipt of a
request for a defense and/or indemnification to conduct an investigation to
determine whether or not, or under what conditions, it may agree to defend
and/or indemnify pursuant to this Section.
If local rules require a response to the complaint in the lawsuit prior to
the time provided hereunder for a response to such request, the requesting
party shall take all steps necessary, including obtaining counsel, to protect
its own interest in the lawsuit until DEALER or DISTRIBUTOR assumes the
requested defense and/or indemnification. In the event that DEALER or
DISTRIBUTOR agrees to assume the defense and/or indemnification of a lawsuit,
it shall have the right to engage and direct counsel of its own choosing and,
except in cases where the request is made pursuant to Paragraph (D) above,
shall have the obligation to reimburse the requesting party for all
reasonable costs and expense, including actual attorneys' fees, incurred
prior to such assumption.
28
ADDENDUM TO PARAGRAPH XXI
-------------------------
These Additional Provisions to Lexus Dealer Agreement ("Additional
Provisions") are entered into as of JUN 30 1997, among DISTRIBUTOR, DEALER, and
FIRSTAMERICA AUTOMOTIVE, INC., a Nevada corporation (hereinafter "FAA"), and
form a part of and are incorporated into the Dealer Agreement.
RECITALS
--------
1. DISTRIBUTOR and DEALER have entered into a Lexus Dealer Agreement
(the "Dealer Agreement") dated as of JUN 3 0 1997
2. FAA is the 100% shareholder of DEALER.
3. FAA and DEALER are hereinafter collectively referred to as the
"Dealer Parties". DISTRIBUTOR and the Dealer Parties are hereinafter
collectively referred to as the "Parties".
4. The Parties wish to enter into these Additional Provisions for the
purposes of agreeing to be bound by the terms of these Additional Provisions,
which are a part of and are incorporated into the Dealer Agreement.
5. The ownership of FAA shall be approximately as follows:
Thomas A. Price: 41%
- --------------------------------------------------------------------------------
Donald V. Strough: 11%
- --------------------------------------------------------------------------------
TCW/Crescent Mezzanine Partners L.P.19%
- --------------------------------------------------------------------------------
Others: 29%
- --------------------------------------------------------------------------------
NOW THEREFORE, in consideration for the mutual agreements contained
herein and in the Dealer Agreement, the Parties agree as follows:
1
A. General
-------
1. DISTRIBUTOR and FAA have entered into an Agreement dated
__________________________(the "Agreement") relating, among other matters, to
the number of Toyota and Lexus dealerships which may be acquired by FAA and its
affiliates and to certain aspects of the management of Toyota and Lexus
dealerships owned by FAA. The Dealer Parties agree that the Agreement is
incorporated into and forms a part of the Dealer Agreement and these Additional
Provisions. To the extent that any provision of the Agreement is inconsistent
with the Dealer Agreement or these Additional Provisions, the provisions of the
Agreement shall be controlling.
2. The Dealer Parties acknowledge and agree that if any provision of
these Additional Provisions is violated in any material respect by any of the
Dealer Parties, DISTRIBUTOR will have the right to terminate the Dealer
Agreement on sixty (60) days' written notice to Dealer if Dealer fails to cure
such violation prior to the expiration of such sixty (60) days.
B. Provisions Relating to the Structure of DEALER
----------------------------------------------
1. Single Purpose Entity. DEALER will be maintained as a separate
---------------------
legal entity, and will not engage in any business other than operation of a
Lexus dealership and activities related thereto.
2. No Merger, Consolidation, Etc. DEALER will not be merged with or
-----------------------------
into, or be consolidated with, or acquire substantially all of the assets of,
any other entity, without the prior written consent of DISTRIBUTOR, in its sole
discretion.
2
C. Provisions Relating to Management
---------------------------------
1. Role of the Responsible Executive. Pursuant to Section 8 of the
---------------------------------
Agreement, Thomas A. Price is hereby designated as the FAA executive who will
have responsibility and authority with respect to all matters concerning DEALER
and the relationship between DEALER and DISTRIBUTOR (the "FAA Executive"). The
FAA Executive will be actively involved in the management of all aspects of the
operations of DEALER.
(a) The FAA Executive will be an officer of DEALER. The FAA
Executive, in consultation with management of FAA, will have complete control
over all day-to-day management decisions of DEALER or relating to DEALER.
(b) The General Manager will report directly to and be
responsible to the FAA Executive.
(c) DISTRIBUTOR may rely on oral or written communications and
agreements from the FAA Executive as being the binding agreements of DEALER,
without any duty of DISTRIBUTOR to confirm that any such communication or
agreement has been duly authorized by the Board of Directors of DEALER, FAA, or
any other individual or entity.
2. Successors to the FAA Executive. In the event that the FAA
-------------------------------
Executive wishes to discontinue his role in the management of DEALER as set
forth in Section C.1., such action may be taken only with the prior written
consent of DISTRIBUTOR. Such consent of DISTRIBUTOR may be conditioned on
transfer of the FAA Executive's management responsibilities to an individual or
individuals approved by DISTRIBUTOR, taking into account such factors as
DISTRIBUTOR reasonably deems to be relevant and are consistent with applicable
laws.
3
3. Role of the General Manager.
---------------------------
(a) John M. Driebe or any subsequent General Manager of DEALER
approved by DISTRIBUTOR, will serve exclusively as General Manager of DEALER on
a full time basis and will not have any management responsibilities with respect
to any other dealership or other business or appear as the General Manager on
any automobile dealership franchise agreement other than that of DEALER.
(b) The General Manager will have responsibility for and
authority with respect to the day-to-day operations of DEALER in the ordinary
course of business, under the supervision of the FAA Executive, and the General
Manager will have the following authority, without the need for obtaining the
prior approval of any other individual or entity:
(i) the authority to hire or terminate any employee of DEALER;
(ii) the authority to order vehicles and other products;
(iii) the authority to place advertising;
(iv) the authority to communicate with DISTRIBUTOR with respect to
all aspects of the business of DEALER;
(v) the authority to approve expenditures by DEALER in the ordinary
course of business in amounts of less than $50,000 per item;
(vi) the authority to approve capital improvements or modifications
to the DEALER'S facilities in amounts not to exceed $100,000
with respect to any expenditure.
4. Membership of Executive Committee. There shall be no change in
---------------------------------
the membership of the Executive Committee, Board of Directors or other governing
body of DEALER without the prior written approval of DISTRIBUTOR.
4
5. FAA Directors. FAA shall provide a list of all current members
-------------
of its Board of Directors, and resumes for each member, to DISTRIBUTOR, and
provide such information for each new member of the Board of Directors of FAA.
D. Provisions Relating to Capitalization and Accounting
----------------------------------------------------
1. No distributions will be made by DEALER to FAA if such
distributions would cause DEALER to fail to meet any of DISTRIBUTOR'S
capitalization guidelines, including but not limited to net working capital
requirements.
2. The operations and financial results of DEALER will be reported
to DISTRIBUTOR separately from those of any other entity, business or activity,
including but not limited to any of the Dealer Parties and any other dealerships
directly or indirectly owned or controlled by any of the Dealer Parties.
3. DEALER will maintain complete and separate departments for new
and used vehicle sales, service, parts sales, leasing and finance and insurance,
and will provide separate identifiable areas for each department. DEALER will
maintain a separate and permanent personnel staff and separate retail operations
from other dealerships directly or indirectly owned by any of the Dealer
Parties. DEALER shall not combine its used car operation with that of any other
entity, including any other dealerships directly or indirectly owned by any of
the Dealer Parties.
E. Provisions Relating to Ownership
--------------------------------
1. Successors and Assigns. In the event that any interest in DEALER
----------------------
is transferred in accordance with the provisions of the Dealer Agreement, the
Agreement and these Additional Provisions, as a condition to such transfer the
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transferee must agree in writing to be bound by all of the terms and provisions
of the Dealer Agreement, the Agreement and these Additional Provisions, such
agreement to be in form and substance reasonably acceptable to DISTRIBUTOR.
2. Competitors. In no event may any interest in DEALER be
-----------
transferred to an entity which is directly or indirectly engaged in the business
of manufacturing and/or distributing automobiles, or an affiliate thereof, and
no such entity may acquire an ownership interest in FAA as described in Section
1 of the Agreement.
F. Provisions Relating to Performance
----------------------------------
1 Dealer will achieve and thereafter sustain, within six months of
the effective date of this Agreement, customer satisfaction performance levels,
as measured by the New Vehicle Sales and Delivery Survey (NVSDS), Lexus Service
Survey (LSS) and the Owner Satisfaction Index (OSI), such that each of the
indices equal or exceed the Western Area's averages or the Elite of Lexus
standards of excellence, whichever is lower.
2. Dealer will achieve and thereafter sustain, within twelve months
of the effective date of this Agreement, Lexus luxury-car market share within
its Primary Market Area equal to or higher than the Lexus Western Area average.
3. Dealer will achieve and thereafter sustain, within twelve
months of the effective date of this Agreement, retail sales efficiency of at
least 100%.
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IN WITNESS WHEREOF, the Parties have executed these Additional
Provisions as of the date first above written.
TOYOTA MOTOR SALES, USA, INC. LEXUS DIVISION OF
TOYOTA MOTOR SALES, U.S.A., INC.
LEXUS WESTERN AREA
By:____________________________ By: Y. Ishizaka
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Title:_________________________ Title: President
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FIRSTAMERICA AUTOMOTIVE, INC. FAA SERRAMONTE L, INC.
d.b.a. LEXUS OF SERRAMONTE
By:/s/ By:/s/
------------------- -------------------
Title: President Title:President
---------------- -----------------
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