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EXHIBIT 10.24
AGREEMENT BETWEEN
AMERICAN HONDA MOTOR CO., INC.
AND
THE DEALERSHIP PARTIES
This Agreement, effective as of October 21, 1997, is entered into
between Group 1 Automotive, Inc., a Delaware corporation, with its principal
place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the
"Ownership Entity") and the stockholders of the Ownership Entity set forth in
Schedule F attached hereto (the Dealership Principals") (the Ownership Entity
and the Dealership Principals are collectively referred to herein as the
"Dealership Parties") and American Honda Motor Co., Inc. ("AHM"), a California
corporation, with its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
WHEREAS, the Honda and Acura dealerships listed in Schedule A are parties to
agreements that provide for the acquisition of such Honda and Acura dealerships
by the Ownership Entity immediately prior to the completion of the initial
public offering of common stock of the Ownership Entity, and upon completion of
such initial public offering, the Ownership Entity will own and operate the
Authorized Honda and/or Acura automobile dealerships listed in Schedule B (the
"Listed Dealerships"); and
WHEREAS, the Ownership Entity proposes to issue common stock in a public
offering of the securities of the Ownership Entity anticipated to be traded on
the New York Stock Exchange; and
WHEREAS, AHM has formulated the American Honda Motor Co., Inc. Policy on the
Public Ownership of Honda and Acura Dealerships (the "Policy"), a copy of which
was forwarded to and subsequently reviewed by the Ownership Entity and the
Dealership Parties; and
WHEREAS, in order for the Ownership Entity to make the aforementioned public
offering and, at the same time, adhere to the Policy, the Ownership Entity and
the Dealership Parties desire to create a corporate structure, described herein
and in Schedule C hereto, in which one or more of the individuals or entities
listed in Schedule F (the "Dealership Principals") will retain majority
ownership and control of the Ownership entity and a public offering of shares
in a minority interest of the Ownership Entity will be issued, as more fully
specified herein; and
WHEREAS, AHM is willing to permit the Ownership Entity (as an entity of which a
minority portion is publicly owned and of which the majority portion is owned
by the Dealership Principals) to own the Listed Dealerships, provided that the
Dealership Parties adhere to the Policy and the terms and conditions set forth
in this Agreement;
WHEREAS, the Dealership Parties are willing to adhere to the Policy and the
terms and conditions set forth herein;
WHEREAS, AHM has filed a Protest, Complaint, Petition For Relief, And
Application For Statutory Stay Under The Texas Motor Vehicle Commission Code
(the "Protest"), before the Texas Motor Vehicle Board (the "Board"), to protest
and complain of the proposed transfer of Foyt Motors Inc.
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d/b/a ▇.▇. ▇▇▇▇ Honda, ▇▇▇▇ ▇▇▇▇▇ Autoplaza, Inc., d/b/a ▇▇▇▇ ▇▇▇▇▇ Honda and
▇▇▇▇▇, Liu & ▇▇▇▇▇▇, Inc., d/b/a Acura Southwest to Group 1 Automotive, Inc.,
all as more fully described in the Protest;
WHEREAS, the pending proceeding before the Board is styled American Honda Motor
Co., Inc., Petitioner, ▇. ▇▇▇▇ Motors Inc., d/b/a/ ▇.▇. ▇▇▇▇ Honda, ▇▇▇▇ ▇▇▇▇▇
Autoplaza, Inc. d/b/a ▇▇▇▇ ▇▇▇▇▇ Honda, and ▇▇▇▇▇, Liu & ▇▇▇▇▇▇, Inc. d/b/a
Acura Southwest, Respondents, and bears docket number 98-0005LIC (the
"Proceeding");
WHEREAS, the Board has set a hearing on the Protest on Tuesday, December 9,
1997 at 9:00 a.m. in the Board's offices in Austin, Texas, and imposed a
statutory stay pursuant to the provisions of Section 3.08A of the Texas Motor
Vehicle Commission Code;
WHEREAS, the parties to the Proceeding have entered into binding and
enforceable agreements to compromise and settle the matters in controversy
between them, all as more fully described in the Protest; and
WHEREAS, pursuant to that settlement, AHM, Group 1 Automotive, Inc., Foyt
Motors Inc., d/b/a ▇.▇. ▇▇▇▇ Honda, ▇▇▇▇ ▇▇▇▇▇ Autoplaza, Inc. d/b/a ▇▇▇▇ ▇▇▇▇▇
Honda, ▇▇▇▇▇, Liu & ▇▇▇▇▇▇, Inc. d/b/a Acura Southwest, and ▇▇▇ ▇▇▇▇▇▇
Automotive-H, Inc., d/b/a ▇▇▇ ▇▇▇▇▇▇ Honda and d/b/a ▇▇▇ ▇▇▇▇▇▇ Acura, among
other parties, have agreed to execute that certain Release of Claims,
Compromise and Settlement Agreement dated the date hereof, and AHM, Foyt Motors
Inc., d/b/a ▇.▇. ▇▇▇▇ Honda, ▇▇▇▇ ▇▇▇▇▇ Autoplaza, Inc. d/b/a ▇▇▇▇ ▇▇▇▇▇ Honda,
and ▇▇▇▇▇, Liu & ▇▇▇▇▇▇, Inc. d/b/a Acura Southwest have agreed to move for
entry of an agreed order of dismissal with prejudice of the Proceeeding;
NOW THEREFORE, in consideration of the mutual covenants set forth herein and
other good and valuable consideration the sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. STRUCTURE OF RELATIONSHIP
1.1 Dealerships Are Separate Legal Entities: The
Ownership Entity shall establish and maintain a separate legal entity to own
each Honda and Acura dealership which it owns or controls, directly or through
an Affiliate on or before 90 days after the date of this Agreement, shall
obtain a separate motor vehicle license for each dealership, and shall maintain
separate financial statements for each such dealership. Consistent with AHM
policy, the name "Honda" or "Acura," as applicable, shall appear in the d/b/a/
of each dealership and shall not appear in the corporate name of the dealership
or the Ownership Entity. The Honda and/or Acura dealership(s) to be owned by
the Ownership Entity (the "Listed Dealerships") are listed in Schedule B,
appended hereto. As used herein, "Affiliate" of, or a person or entity
"affiliated" with, a specified person or entity, means a person or entity that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, or shares substantial common
ownership with, the person or
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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, of the power to direct or
cause the direction of or influence the management and policies of a person or
entity, whether through the ownership of securities, by contract or otherwise.
1.2 Agreement to Automobile Dealer Sales and Service
Agreement. The Ownership Entity and, to the extent applicable, the other
Dealership Parties hereby agree to be bound by the terms of Honda Automobile
Dealer Sales and Service Agreements and Acura Automobile Dealer Sales and
Service Agreements including any addenda thereto (the "Dealer Agreements"),
copies of which are appended hereto as Schedule D. The Dealership Parties
further agree that each individual Honda and Acura dealership that the
Ownership Entity owns, in whole or in part, shall execute and be bound by the
applicable Dealer Agreement.
1.3 Adherence to the Policy. Each of the Dealership
Parties hereby agree to be bound by the terms of the Policy, a copy of which is
appended hereto as Schedule E.
1.4 Transfer of Ownership of Listed Dealerships Upon
Occurrence of the Initial Public Offering. Each of the Dealership Parties
understands and agrees that the public offering (the "Offering") of certain
shares of the capital stock of the Ownership Entity (all such stock being
referred to herein as the "Stock") will constitute a change of ownership of the
Listed Dealerships that, pursuant to the Dealer Agreement, requires AHM's prior
written approval. Provided that the representations and warranties in this
Section are accurate and that each of the Dealership Parties adhere to the
terms and conditions of this Agreement, the Policy, and the applicable Dealer
Agreements, AHM hereby agrees to the transfer of the Stock pursuant to the
Offering as described herein and in Schedule C and the transfer of ownership of
the Listed Dealership to the Ownership Entity. Each of the Dealership Parties
hereby represents and warrants that AHM has been provided with all
documentation pertaining to the public offering of the Stock, including but not
limited to all filings with the SEC and other federal and state regulatory
agencies (including, but not limited to, quarterly and annual financial
statement filings, prospectuses and other materials related to the Ownership
Entity), all agreements between or among any of the Dealership Parties and
financial institutions and underwriters, all agreements between or among any of
the Dealership Parties, and all agreements between or among any of the
Dealership Parties, on the one hand, and other shareholders of the Ownership
Entity, on the other hand. One copy of this documentation has been filed with
AHM and labeled Schedule X. Notwithstanding any statements in any of the
documentation provided by the Dealership parties to AHM to the contrary
(including but not limited to any statements in prospectuses), the Dealership
Parties hereby further represent, warrant and covenant as follows:
1.4.1 Schedule A, appended hereto, is an accurate
list of the individuals and entities that own the Listed Dealerships
immediately prior to the public offering.
1.4.2 Schedule C accurately depicts the corporate
structure of the Ownership Entity after the public offering.
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1.4.3 Schedule F, appended hereto, is an accurate
list of all individuals and entities that will own Stock as of the date of the
public offering, which Stock is subject to the restrictions set forth in
Section 1.5 hereof (such individuals and entities to be referred to as the
"Dealership Principals", such Stock to be referred to as "Restricted Stock"),
the number of shares held by each, and the percentage ownership of the
Ownership Entity held by each.
1.4.4 The corporate structure depicted in Schedule
C assures that at all times a majority of the Stock of the Ownership Entity
will be owned by the Dealership Principals in the form of Restricted Stock.
1.4.5 The corporate structure depicted in Schedule
C assures that at all times the Dealership Principals through ownership of the
Restricted Stock will have more than fifty percent (50%) of the total aggregate
voting power of the Ownership Entity.
1.5 Restrictions on Transfer of Stock by Dealership
Principals. Each of the Dealership Parties hereby agrees that the Dealership
Principals shall not, at any time, without the prior written approval of AHM
sell, transfer or in any manner encumber any of the Restricted Stock or enter
into any agreement providing for the voting of any of the Restricted Stock as
directed by any person or entity, or in a specified manner or pursuant to a
specified procedure or grant any voting proxy or otherwise enter into any
arrangement the purpose or effect of which is to vest in any other person or
entity the voting rights of any of the Restricted Stock. AHM will not approve
any transfers of Restricted Stock that it reasonably deems detrimental to AHM's
interests as provided in Section 1.8 below, and any approved transfer may only
be made on the condition that the transferee agrees in writing to be bound by
the terms of this Agreement to the same extent as if it had executed this
Agreement as one of the Dealership Parties. Each certificate representing
Restricted Stock or any securities issued in respect of such Restricted Stock
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
The shares represented by this certificate are subject to
restrictions on transfer set forth in an Agreement between
American Honda Motor Co., Inc. and the Corporation effective
as of October 21, 1997, as amended, a copy of which will be
furnished by the Corporation without charge upon written
request.
Without limiting the generality of the foregoing restrictions, the
Dealership Parties specifically agree that transfers of shares of Restricted
Stock are subject to AHM's prior written approval even if transfer is permitted
pursuant to the Ownership Entity's Articles of Incorporation, Bylaws, or by an
act of the board of directors or the shareholders or by any other means. In the
event that any Restricted Stock is transferred without the prior written
approval of AHM, including but not limited to transfer by operation of law
(e.g., upon the death of a Dealership Principal to an heir), the Ownership
Entity shall inform AHM of such transfer and either (a) request approval of
such transfer, (b) reacquire the shares or (c) arrange for the retransfer of
the shares to a previously approved Dealership Principal or to an individual or
entity that is approved in writing by AHM. In the event
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that the Ownership Entity selects (a) above and AHM refuses to approve the
transfer, then the Ownership Entity must make its best efforts effectuate (b)
or (c). If AHM refuses to approve the transfer and the Ownership Entity cannot
effectuate (b) or (c), then AHM may invoke the purchase procedures set forth in
Section 9.3, as though the Ownership Entity had breached this Agreement.
1.6 Restrictions on Transfer of the Ownership Interests
in Dealership Principals. To the extent that the Dealership Principals are
entities rather than individuals, the parties hereto acknowledge and agree that
changes in the ownership of such Dealership Principals could have the effect of
transferring actual control of the Ownership Entity without the prior approval
of AHM. To prevent such transfer, the parties have agreed to the restrictions
on the transfer of ownership of such Dealership Principals set forth in
Schedule G hereto.
1.7 Identification of Owners of the Ownership Entity.
Schedule H, appended hereto, includes accurate documentation and information
pertaining to each individual or entity that owns or controls 5% or more of the
Stock, whether such Stock is Restricted Stock or otherwise. In the event of any
change of ownership that results in an individual or entity not listed on
Schedule H obtaining ownership or control of 5% or more of the Stock, the
Ownership Entity shall provide AHM with the documentation and information
required by Schedule H with respect to such person or entity to the extent it
is publicly available. The Ownership Entity will provide AHM with copies of all
filings made with the SEC and comparable filings made with state agencies by
persons or entities that own more than 5% of the Ownership Entity and/or any of
its Affiliates. Without limiting the foregoing, the Ownership Entity will use
its best efforts to provide such information regarding such stockholders as AHM
may from time to time request.
1.8 Right of AHM to Disapprove Acquisitions of Stock.
Without limiting the restrictions set forth in Sections 1.5 and 1.6 above, AHM
shall have the irrevocable right to disapprove of the acquisition of more than
5% of Stock by any individual or entity if such acquisition is reasonably
deemed detrimental to AHM's interests. Without limiting the foregoing, the
parties agree that such acquisition or attempted acquisition may reasonably be
deemed to be detrimental to AHM's interests if the acquiring individual or
entity (a) competes with American Honda or its parent, subsidiaries or
Affiliates in manufacturing, marketing, or selling automotive products or
services or is owned or controlled by or has a substantial economic interest in
an entity that competes with AHM or its parent, subsidiaries or Affiliates in
manufacturing, marketing, or selling automotive products or services (not
including an interest in a dealership selling products manufactured by a
competing automobile manufacturer); (b) has criminal affiliations or a criminal
record; (c) has inadequate experience in the automotive sales and service
business; (d) has less than an excellent credit rating or credit history; (e)
has demonstrated unacceptable customer satisfaction index performance; or (f)
has had a prior relationship with AHM which AHM deems to have been
unsatisfactory. Notwithstanding the immediately preceding sentence, as long as
control of the Ownership Entity remains in the hands of persons or entities
approved by AHM, it is not AHM's intention to restrict reputable banks, mutual
funds, insurance companies, and/or pension funds (collectively referred to
herein as "Institutional Investors") from acquiring up to 10% of the Stock.
Therefore, the parties further agree that, unless such Institutional Investor
(i) is owned or controlled by or has a substantial
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economic interest in an entity that competes with AHM or its parent,
subsidiaries or Affiliates in manufacturing, marketing, or selling automotive
products or services (not including an interest in a dealership selling
products manufactured by a competing automobile manufacturer); or (ii) has
criminal affiliations or a criminal record; or (iii) has acquired, or has a
reasonable likelihood of acquiring, a controlling interest in the Ownership
Entity, acquisition of up to 10% of the Stock by such Institutional Investor
shall be presumed not to be detrimental to AHM's interests. The parties further
agree that acquisition or control of more than 10% of the Stock by any party
shall be subject to AHM's right of disapproval pursuant to the standards set
forth above with respect to parties that acquire 5% or more of the Stock.
Unless AHM objects in writing to such acquisition within 180 days of receiving
completed documentation and information from the Ownership Entity pertaining
thereto, AHM shall be deemed to have approved such acquisition. In the event
AHM disapproves of such acquisition, the Ownership Entity and its then current
shareholders shall make their best efforts to prevent such acquisition or, if
it has already taken place, to reacquire the shares so transferred. In the
event that the Ownership Entity is unable to prevent such acquisition or to
reacquire the shares, AHM may invoke the purchase provisions of Section 9.3
hereof.
1.9 Designation of the Ownership Entity's Executive
Manager. The Ownership Entity shall designate as its Executive Manager the
individual listed in Schedule I hereto. The Executive Manager shall have
operational control of the Honda and Acura dealerships and shall have final
authority to decide any dealership matters not within the authority of the
Dealer Manager. The Ownership Entity agrees not to change the Executive Manager
without the prior written approval of AHM, which approval shall not be
unreasonably withheld.
1.10 No Further Public Offerings of Stock Without AHM's
Prior Written Approval. The Ownership Entity shall not make any further public
offerings of Stock without AHM's prior written approval. The Ownership Entity
shall submit any proposals to make other public offerings of Stock to AHM in
the manner set forth in the Policy and AHM shall evaluate such proposal in
accordance therewith. The Dealership Parties understand and agree that AHM will
not approve of any public offering of Stock that will increase at any time the
number of shares of freely tradeable, unrestricted shares to fifty percent or
more of the total shares of Stock then outstanding.
1.11 No Public Ownership of Individual Dealerships. No
Honda and/or Acura dealership(s) that the Ownership Entity owns or acquires
shall be held or owned by an entity required to file reports under Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934.
1.12 Change of Control of the Ownership Entity. The
Dealership Parties acknowledge and agree that AHM has the right to ensure that
its dealerships remain under the control of persons and/or entities with a
full-time commitment to the sale and service of Honda Products or Acura
Products (as the case may be). The Dealership Parties recognize the legitimacy
of AHM's concern (as more fully set forth in the Policy) that public ownership
of dealerships, if unrestricted, could lead to the loss of AHM's control over
the selection of the individuals who sell and service AHM's products.
Therefore, in the event that a controlling interest in the Ownership Entity
(or, as set forth in Schedule G, in a Dealership Principal) or any of their
Affiliates that own Honda or Acura
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dealerships is acquired or threatened to be acquired by an individual or entity
not specifically approved by AHM, the Dealership Parties agree that AHM may
exercise the right to purchase set forth in Section 9.3. As used herein,
"controlling interest" means (a) ownership or practical control of shares of
the Ownership Entity or its Affiliates sufficient to appoint or control either
the management or the board of directors thereof or (b) the practical ability
to make the day-to-day and/or policy decisions of a Honda or Acura dealership.
2. FUTURE ACQUISITIONS BY THE DEALERSHIP PARTIES OF HONDA AND
ACURA DEALERSHIPS
2.1 Right of Approval by AHM. The Dealership Parties
agree that neither any of them nor any of their Affiliates (as defined above)
shall acquire any interest in any Honda or Acura dealership not listed on
Schedule B without AHM's prior written approval. Approval shall be at AHM's
sole discretion and will be evaluated in light of the then current Policy and
AHM's then current business interests. Without limiting the foregoing, in no
event will AHM approve any such acquisition unless all Honda and Acura
dealerships owned or controlled by any of the Dealership Parties and/or their
Affiliates are (a) in full compliance with all of the terms of the respective
Dealer Agreement(s) and this Agreement; and (b) meet all of the applicable
Honda and/or Acura policies and performance expectations.
2.2. Ownership of Contiguous Dealerships. The Ownership
entity and/or its Affiliates shall not own contiguous Honda dealerships or
contiguous Acura dealerships. Notwithstanding anything in the preceding
sentence to the contrary, despite the fact that the Honda dealerships currently
doing business as ▇▇▇▇ ▇▇▇▇▇ Autoplaza in Beaumont, Texas and ▇. ▇. ▇▇▇▇ Honda
in Kingwood, Texas are geographically contiguous, in light of the distance
between them and the markets they serve, in AHM's judgment these two
dealerships should not be treated as contiguous dealerships for purposes of the
Policy and this Agreement, and therefore AHM has no objection to the Ownership
Entity owning and operating both of these dealerships.
2.3 Ownership of Multiple Dealerships. The Dealership
Parties cumulatively or individually shall not own or control, directly or
through an Affiliate, Honda or Acura dealerships in excess of the numbers set
forth below.
2.3.1 Honda. The Dealership Parties shall not hold
an ownership interest, directly or through an Affiliate, in a multiple number
of Honda dealerships as provided below: (a) in a "Metro" market (a "Metro"
market is a metropolitan market area represented by two or more Honda dealer
points) with two (2) to ten (10) Honda dealership points (inclusive), no
Dealership Party or combination of Dealership Parties may own, operate or have
an interest in more than one (1) Honda dealership; (b) in a Metro market with
eleven (11) to twenty (20) Honda dealership points (inclusive), no Dealership
Party or combination of Dealership Parties may own, operate or have an interest
in more than two (2) Honda dealerships; (c) in a Metro market with twenty-one
(21) or more Honda dealership points (inclusive), no Dealership Party or
combination of Dealership Parties may own, operate or have an interest in more
than three (3) Honda dealerships; (d) in more than 4% of the Honda dealerships
in any one of the ten Honda Zones; and (e) in more than seven (7) Honda
dealerships nationally.
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2.3.2 Acura. The Dealership Parties shall not hold
an ownership interest, directly or through an Affiliate, in more than: (a) one
(1) Acura dealership in a Metro market (as used herein, "Metro market" is a
Metropolitan market area represented by two or more Acura dealer points); (b)
two (2) Acura dealerships in any one of the six Acura Zones; and (c) three (3)
Acura dealerships nationally.
2.4 Proposed Acquisition in Excess of Limits. If the
purchase of any Honda or Acura dealership would result in exceeding the limits
set forth in this Section 2, AHM will reject the application for approval of
the ownership transfer until such time as the applicable Dealership Party shall
divest itself of the appropriate number of dealerships to bring it into
compliance with the requirements of this Agreement at which time AHM will
reconsider the proposal in light of the Policy. In case of such divestiture,
AHM may invoke the right of first refusal/option to purchase provisions of
Section 8.2 hereof.
2.5 Agreements and Proposals Pertaining to Non-Listed
Dealerships. Agreements, if any, between AHM and any of the Dealership Parties
pertaining to Honda and/or Acura dealerships other than the Listed Dealerships
(for example, dealerships which AHM has agreed to permit the Ownership Entity
to acquire upon fulfillment of certain conditions) and proposals pending on the
Effective Date of the Agreement to acquire non-Listed Dealerships are set forth
in Schedule J hereto ("Pending Dealership Transactions").
3. SEPARATE, FREESTANDING, EXCLUSIVE DEALERSHIPS
3.1 Maintenance of Exclusive Dealership Premises. Each
Honda or Acura dealership owned by the Ownership Entity or its Affiliates shall
be maintained as separate, freestanding, exclusive Dealership Operations that
completely and timely comply with facility design and image enhancements to
AHM's brand image, functionality and capacity standards and guidelines, which
standards and guidelines AHM may reasonably modify from time to time, and shall
exclusively offer a full range of Honda Products and services or Acura Products
and services and shall not offer competing products or services from its
Dealership Premises. The current non-exclusive Acura and Honda Dealership
Operations in Edmond, Oklahoma that are being used by the Ownership Entity will
by no later than 12 months from the date of this Agreement, be conducting all
business in two separate, freestanding exclusive facilities built and
maintained in compliance and conformity with Acura's and Honda's designs and
specifications (as the case may be), including Acura's and Honda's minimum land
and building requirements, as detailed within the Acura Facility Upgrade
Program and Honda Image Program or such other standards and guidelines
published by AHM.
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3.2 Full Line of Products and Services. The Ownership
Entity shall make available to the customers at each of its Honda dealerships
all Honda Products and services, including, but not limited to, vehicles,
Genuine Parts and Accessories, American Honda finance Corporation retail
financing services (whether for purchases or leases), Honda Vehicle Service
Contracts, and Honda Certified Used Car Program. The Ownership Entity shall
make available to the customers at each of its Acura dealerships all Acura
Products and services, including, but not limited to, vehicles, Genuine Parts
and Accessories, American Honda Finance Corporation retail financing services
(whether for purposes or leases), Acura Vehicle Service Contracts, and Acura
Preferred Pre-Owned Program.
3.3 Treatment as Independent Dealerships. For allocation
and other purposes, transfer of Honda or Acura Automobiles from one dealership
to another dealership owned by the same entity will be treated the same as a
transfer between separately-owned dealers. In no event may Acura Automobiles be
transferred to any non-Acura dealership. In no event may Honda Automobiles be
transferred to any non-Honda dealership.
3.4 Independent Reporting Requirements. Each Honda and
Acura dealership that the Ownership Entity owns or acquires shall have the same
reporting requirements as all other Honda and Acura dealerships and fully
audited dealership-specific financial information. Each individual dealership
must at all times meet the capitalization requirements and other requirements
set forth in its individual Dealer Agreement including any addenda thereto. The
corporate bylaws of the individual corporation that actually owns the Honda or
Acura dealership must restrict it from engaging in any activity other than the
ownership and maintenance of a Honda or Acura dealership, as the case may be.
4. DEALER MANAGERS
4.1 Approval by AHM. Each Honda and Acura dealership
owned or controlled by the Ownership Entity shall have a qualified Dealer
Manager, approved by AHM (subject to the exception noted in Section 4.2 below).
Each Dealer Manager shall work at the Honda or Acura Dealership Premises, shall
devote all efforts to the management of the dealership and shall have no other
significant business interests or management responsibilities.
4.2 Trial Period. Whenever the Ownership Entity nominates
a new Dealer Manager candidate for a Honda or Acura dealership, AHM shall have
the right to withhold a decision concerning approval or rejection of the
candidate for a trial period of up to one year, at its sole discretion
provided, however, that the candidate may operate in the capacity of Dealer
Manager until AHM has approved or rejected the candidate.
4.3 Authority of Dealer Manager. The Ownership Entity
shall advise AHM in writing of the limitations, by category and, where
applicable, by specific action, on the authority of the Dealer Manager
regarding the operation of the dealership. Without limiting the foregoing, the
Dealer Manager must have the authority to run the day-to-day operations of the
dealership and the capacity to enter into substantial transactions (e.g., the
placement of orders for Honda or Acura Automobiles and Genuine Parts and
Accessories) on behalf of the dealership.
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5. REPRESENTATION ON HONDA AND ACURA DEALER ORGANIZATIONS
No more than one representative each from the Honda, and
separately, Acura dealerships owned, directly or through an Affiliate, by any
of the Dealership Parties, may serve on the Honda National Dealer Advisory
Board, the Acura National Dealer Council or any future Honda or Acura national
board(s) which may be established, and no more than one representative each may
serve on either a Honda or Acura Zone Advisory Board/Council, or Honda
Advertising Triad or Acura advertising council (should one be established in
the future). Such representative must be involved on a full-time basis in the
day-to-day operation of the dealership which it is appointed to represent and
must otherwise comply with the bylaws of the applicable organization.
6. DEALERSHIP PERSONNEL TRAINING
No Dealership Party shall substitute training courses of its
own for those provided or sponsored by AHM without the prior written approval
of AHM, which approval shall be at AHM's sole discretion. In no event will AHM
approve training courses unless the trainers are certified pursuant to Honda's
or Acura's certification programs, as applicable.
7. PROSPECTUS DISCLAIMER AND INDEMNIFICATION AGREEMENT.
The Ownership Entity shall place in its registration statement
and its prospectus, as well as in any other document offering Stock 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.
The Ownership Entity shall indemnify, defend and hold harmless AHM pursuant to
the terms of the Indemnification Agreement set forth in Schedule K to this
Agreement.
8. TRANSFER OF DEALERSHIPS BY THE OWNERSHIP ENTITY.
8.1 Sale of Ownership Interest in Dealership. This is a
personal services Agreement based upon personal skills, service, qualifications
and commitment of the Ownership Entity, its Executive Manager, and its Dealer
Managers. For this reason, and because AHM has entered into this Agreement in
reliance upon the Ownership Entity's, its Executive Manager's, and its Dealer
Managers' qualifications, without limiting any of the other restrictions on
transfer of ownership set forth in this Agreement, the Ownership Entity agrees
to obtain AHM's prior written
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approval of any proposed transfer of control or of any ownership interest in a
Honda or Acura dealership owned by the Ownership Entity.
Without limiting the foregoing, in the event of such proposed
transfer, AHM shall not be obligated to renew the Dealer Agreement or to
execute a new Dealer Agreement with the Ownership Entity or the proposed
transferee unless (a) the Ownership Entity first makes arrangements acceptable
to AHM to satisfy any outstanding indebtedness to AHM; (b) the proposed
transfer conforms to this Agreement and the Policy; and (c) the transferee
agrees to the terms and conditions of this Agreement and the Policy.
8.2 Right of First Refusal or Option to Purchase.
8.2.1 Rights Granted. If a proposal to sell a Honda
or Acura dealership's assets or transfer its ownership is submitted by the
Ownership Entity to AHM, AHM has a right of first refusal or option to purchase
the dealership assets or stock, including any leasehold interest or realty.
AHM's exercise of its right or option under this Section supersedes the
Ownership Entity's right to transfer its interest in, or ownership of, the
dealership. AHM's right or option may be assigned by it to any third party and
AHM hereby guarantees the full payment to the Ownership Entity of the purchase
price by such assignee. AHM may disclose the terms of any pending ownership
transfer agreement and any other relevant dealership performance information to
any potential assignee. AHM's rights under this Section will be binding on and
enforceable against any assignee or successor in interest of the Ownership
Entity or purchaser of the Ownership Entity's assets.
8.2.2 Exercise of AHM's Rights. AHM shall have 180
days from AHM's receipt of all completed documentation and information
customarily required by it to evaluate a proposed transfer of ownership in
which to exercise its right of first refusal or option to purchase. AHM's
exercise of its right of first refusal under this Section shall neither be
dependent upon nor require AHM's prior disapproval of the proposed transfer.
8.2.3 Right of First Refusal. If the Ownership
Entity has entered into a bona fide written ownership transfer agreement for
its dealership business or assets, AHM's right under this Section is a right of
first refusal, enabling AHM to assume the buyer's rights and obligations under
such ownership transfer agreement, and to cancel this Agreement and all rights
granted the Ownership Entity. Upon AHM's request, the Ownership Entity agrees
to provide other documents relating to the proposed transfer and any other
information which AHM deems appropriate, including, but not limited to, those
reflecting other agreements or understandings between the parties to the
ownership transfer agreement. Refusal to provide such documentation or to state
that no such documents exist shall create the presumption that the ownership
transfer agreement is not a bona fide agreement.
8.2.4 Option to Purchase. If the Ownership Entity
submits a proposal which AHM determines is not bona fide or in good faith, AHM
has the option to purchase the principal
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assets of the Ownership Entity utilizing the dealership business, including
real estate and leasehold interest, and to cancel this Agreement and the rights
granted the Ownership Entity. The purchase price of the dealership assets will
be determined by good faith negotiations between the parties. If an agreement
cannot be reached, the purchase price will be exclusively determined as set
forth in Section 9.3 of this Agreement.
8.2.5 The Ownership Entity's Obligations. Upon
AHM's exercise of its right or option and tender of performance under the
ownership transfer agreement or upon whatever terms may be expressed in the
ownership transfer agreement, the Ownership Entity 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 the Ownership
Entity shall deliver complete possession of the property and deed at the time
of closing. The Ownership Entity shall also furnish to AHM all copies of any
easements, licenses or other documents affecting the property or Dealership
Operations and shall assign any permits or licenses that are necessary or
desirable for the use of or appurtenant to the property or the conduct of such
Dealership Operations. The Ownership Entity also agrees to execute and deliver
to AHM instruments satisfactory to AHM conveying title to all personal
property, including leasehold interests, involved in the transfer or sale to
AHM. If any personal or real property is subject to any lien or charge of any
kind (including, without limitation, liabilities pursuant to any environmental
law or regulation), the Ownership Entity agrees to procure the discharge and
satisfaction thereof prior to the closing of sale of such property to AHM or,
if that is not possible, indemnify AHM for any liabilities incurred as a result
thereof.
8.3 Transfer Provisions Fair and Reasonable. In entering
into this Agreement, each of the Dealership Parties understands that AHM would
not consent to the transfer of Honda or Acura dealerships to an entity that is
owned in party by a publicly-held entity without the restrictions on subsequent
transfer set forth in this Agreement. The Dealership Parties have entered into
this Agreement to induce AHM to consent to such transfer to an entity that is
owned in part by a publicly-held entity and hereby acknowledge and agree that
the restrictions on subsequent transfer set forth herein are"fair" and
"reasonable" as those terms are used under state and federal laws governing the
relationship between automobile manufacturers and automobile dealers.
9. REMEDIES OF AHM.
9.1 Cumulative Remedies. All of AHM's remedies set forth
herein are cumulative. No explicit listing of any remedy shall foreclose AHM
from seeking any remedy at law or in equity, including injunctive relief, that
would otherwise be available to it.
9.2 Injunctive Relief. The Ownership Entity agrees that
any breach by any of the Dealership Parties or their Affiliates of the
covenants set forth in this Agreement that pertain to the ownership, control,
transfer, and/or operation of Honda or Acura dealerships would result in
irreparable harm to AHM and therefore agrees that AHM shall be entitled to
emergency, preliminary and permanent injunctive relief to prevent such
breaches.
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9.3 Right to Purchase. The Dealership Parties understand
and acknowledge that AHM has the right to maintain a personal relationship with
its dealers and a healthy and competitive dealer network and that the Policy
and this Agreement are designed to ensure the protection of that right and the
integrity of the dealer network while at the same time enabling the Ownership
Entity to raise capital through the public offering of stock. Therefore, in the
event that any of the Dealership parties materially breach the Policy or this
Agreement or any Dealer Agreement in addition to any other remedies that AHM
might have, upon notice from AHM, the Dealership Parties agree that they will
sell to AHM all assets of the Honda and Acura dealerships that they own or
control at their then current fair market value and on the terms set forth in
Section 8.2.5 and that the applicable Dealer Agreements will terminate upon
such sale. Any dispute as to the fair market value of such dealerships will be
resolved by arbitration as described in Section 10 hereof. In such arbitration,
the Arbitrator shall be empowered only to determine (1) whether a material
breach took place; and, (2) if so, the fair market value of the dealerships at
issue. The arbitrator in such proceeding shall not have the power to award any
other damages or other relief. If the arbitrator finds a material breach, the
Ownership Entity shall transfer the dealerships to AHM or AHM's designee at the
fair market value determined by the arbitrator without the necessity of further
legal action by AHM. The arbitrator's decision shall be unappealable and
unreviewable. If, in violation of the terms hereof, any of the Dealership
Parties require AHM to obtain a court judgment to enforce the arbitrator's
decision, the arbitrator's decision shall be enforceable in any court of
competent jurisdiction and the Ownership Entity agrees to pay the costs and
attorneys' fees expended in connection therewith. The foregoing arbitration
shall not, without the consent of both parties, be consolidated with any other
arbitration initiated by a party pursuant to Section 10 hereof.
9.4 Indemnification for Claims by Disappointed Buyer. The
Ownership Entity hereby agrees to indemnify and hold harmless AHM and its
affiliates from and against any and all losses, liabilities, judgments, amounts
paid in settlement, claims, damages and expenses whatsoever (collectively a
"Claim"), including, but not limited to, any and all expenses whatsoever
(including reasonable attorneys' fees) incurred in investigating, preparing or
defending against any litigation, commenced or threatened, to which AHM may
become subject as a result of AHM's exercise of the rights set forth in
Sections 8.2 and 9.3 of this Agreement. Without limiting the generality of the
immediately preceding sentence, this indemnification covers any Claim brought
against AHM by an individual or entity that alleges that the individual or
entity would have purchased an interest in a Honda or Acura dealership but for
AHM's interference with such proposed purchase.
10. DISPUTE RESOLUTION
Except as modified in Section 9.3 above, any controversy or claim
arising out of or relating to the Agreement, or the breach hereof, or any
failure to agree where agreement of the parties is necessary pursuant hereto,
including the determination of the scope of this agreement to arbitrate, shall
be resolved by the following procedures:
10.1 Attempt to Resolve Dispute. The parties shall use all
reasonable efforts to amicably resolve the dispute through direct discussions.
The senior management of each party
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commits itself to respond promptly to any such dispute. Any party may send
written notice to the other parties identifying the matter in dispute and
invoking the procedures of this article. Within ten (10) days after such
written notice is received, unless a delay is agreed to by both parties to the
dispute or the parties agree to confer by telephone, one or more senior
management of each party shall meet in Los Angeles, California to attempt to
amicably resolve the dispute by written agreement. If said dispute cannot be
settled through direct discussions, the parties agree to first endeavor to
settle the dispute in an amicable manner by mediation in Los Angeles and
administered by the American Arbitration Association ("AAA"), pursuant to the
Commercial Mediation Rules of the AAA at the time of submission prior to
resorting to binding arbitration.
10.2 Application to Binding Arbitration. If after
forty-five (45) days from the first written notice of dispute, the parties fail
to resolve the dispute by written agreement or mediation, either party may
submit the dispute to final and binding arbitration administered by the AAA,
pursuant to the Commercial Arbitration Rules of the AAA at the time of
submission. The arbitration shall be held in Los Angeles before a single
neutral, independent, and impartial arbitrator (the "Arbitrator").
10.3 Binding Arbitration Procedure. Unless the parties
have agreed upon the selection of the Arbitrator before then, the AAA shall
appoint the Arbitrator as soon as practicable, but in any event with thirty
(30) days after the submission to AAA for binding arbitration. The arbitration
hearings shall commence within forty-five (45) days after the selection of the
Arbitrator. Unless the Arbitrator otherwise directs, each party shall be
limited to three (3) prehearing depositions lasting no longer than six (6)
hours each. The parties shall exchange documents to be used at the hearing no
later than ten (10) days prior to the hearing date. Unless the Arbitrator
otherwise directs, each party shall have no longer than three (3) days to
present its position, the entire proceedings before the Arbitrator shall be on
no more than eight (8) hearing days within a three (3) week period. The
Arbitrator's award shall be made no more than thirty (30) days following the
close of the proceeding. The Arbitrator's award may not include consequential,
exemplary, or punitive damages. The Arbitrator's award shall be a final and
binding determination of the dispute and shall be fully enforceable in any
court of competent jurisdiction. The prevailing party shall be entitled to
recover its reasonable attorneys' fees and expenses, including arbitration
administration fees, incurred in connection with such proceeding. Except in a
proceeding to enforce the results of the arbitration, neither party nor the
Arbitrator may disclose the existence, content, or results of any arbitration
hereunder without the prior written consent of both parties.
10.4 Exceptions. Notwithstanding the foregoing, either
party may, without recourse to arbitration, assert against the other party a
third-party claim, cross-claim or like claim in any action brought by a third
party to which this Agreement or the obligations of the parties hereunder may
pertain. Nothing herein shall prevent a party from seeking injunctive relief,
where appropriate, from a court of competent jurisdiction pending the outcome
of any arbitration concerning the subject of such arbitration or when
authorized by an arbitrator's award or when emergency relief is required.
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11. ENTIRE AGREEMENT OF THE PARTIES
There are no prior agreements or understandings, either oral
or written, between the parties affecting this Agreement, except as otherwise
specified or referred to in this Agreement (including the Schedules hereto). No
change or addition to, or deletion of any portion of this Agreement shall be
valid or binding upon the parties hereto unless approved in writing signed by
an officer of each of the parties hereto. The parties acknowledge that each of
them have been represented by counsel and are substantial entities with
considerable resources. This Agreement has been fully negotiated. No provision
of this Agreement shall be construed against a party on the ground that the
party or its attorneys drafted it.
12. SEVERABILITY
If any provision of this Agreement should be held invalid or
unenforceable for any reason whatsoever, or conflicts with any applicable law,
this Agreement will be considered divisible as to such provision(s), and such
provision(s) will be deemed amended to comply with such law, or if it (they)
cannot be so amended without materially affecting the tenor of the Agreement,
then it (they) will be deemed deleted from this Agreement in such jurisdiction,
and in either case, the remainder of the Agreement will be valid and binding.
Notwithstanding the foregoing, if, as a result of any provision of this
Agreement being held invalid or unenforceable, AHM's ability to control the
selection of the Dealership Principals, Executive Manager, or Dealer Managers
or to otherwise maintain its ability to exercise reasonable discretion over the
selection of the actual individual who is managing a Honda or Acura dealership
is materially restricted beyond the terms of this Agreement or the Dealer
Agreement, AHM shall be permitted to invoke the purchase provisions of Section
9.3 hereof.
13. NO IMPLIED WAIVERS
The failure of either party at any time to require performance
by the other party of any provision herein shall in no way affect the right of
such party to require such performance at any time thereafter, nor shall any
waiver by any party of a breach of any provision herein constitute a waiver of
any succeeding breach of the same or any other provision, nor constitute a
waiver of the provision itself.
14. AHM POLICIES
AHM has adopted certain policies which are attached hereto as
Schedule L. The Ownership Entity hereby agrees to abide by these policies as
attached hereto and as reasonable amended by AHM from time to time, and other
policies promulgated in the future by AHM. In addition, AHM has expressed a
commitment to diversity in management and among employees. The Ownership Entity
hereby agrees to adhere to that commitment by seeking to achieve diversity
among the management personnel and employees it hires and/or appoints in
connection with the Honda and
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Acura dealerships it owns or controls. Without limiting the generality of the
foregoing, the Ownership Entity hereby agrees that its dealerships will meet or
exceed (with respect to both the applicable zone and the United States as a
whole) average Honda and/or Acura dealership performance (as such performance
is measured by AHM, now or in the future) with respect to customer
satisfaction, sales, and market share.
15. APPLICABLE LAW
This Agreement shall be governed by and construed according to
the laws of the State of California without applying its conflicts of law
principles.
16. BENEFIT
This Agreement is entered into by and between AHM and the
Dealership Parties for their sole and mutual benefit. Neither this Agreement
nor any specific provision contained in it is intended or shall be construed to
be for the benefit of any third party.
17. NOTICE TO THE PARTIES
Any notices permitted or required under the terms of this
Agreement shall be directed to the following respective addresses of the
parties, or if either of the parties shall have specified another address by
notice in writing to the other party, then to the address last specified:
If to AHM:
AMERICAN HONDA MOTOR CO., INC.
Honda Division
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Dealer Placement Department
AMERICAN HONDA MOTOR CO., INC.
Acura Division
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Dealer Development Department
with a copy to:
Associate General Counsel
HONDA NORTH AMERICA, INC.
Law Department
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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If to any of the Dealership Parties:
c/o GROUP 1 AUTOMOTIVE, INC.
▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
with a copy to :
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
18. TERM
This Agreement shall remain in effect so long as the Ownership
Entity owns any Honda or Acura dealership. Sections 9.4, 10, 11, 12, 13, 15, 16
and Schedule K shall survive any termination or expiration of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
DEALERSHIP PARTIES: GROUP 1 AUTOMOTIVE, INC.
By:
-------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
President
----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
----------------------------------------------
▇. ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇ ▇. ▇. ▇▇▇
----------------------------------------------
▇▇▇ ▇▇▇▇ Liu
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▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇
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----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
SMC INVESTMENT, INC.
By:
---------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
President
SBM-T FAMILY LIMITED PARTNERSHIP
By: SBM-T LIMITED-LIABILITY
COMPANY, General Partner
By:
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Operating Manager
-----------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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GULF COAST FAMILY LIMITED PARTNERSHIP
By: GULF COAST FINANCIAL LIMITED-
LIABILITY COMPANY, General Partner
By:
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Operating Manager
----------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇
----------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇
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----------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ TRUST
By:
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Trustee
LEIGH ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ TRUST
By:
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Trustee
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AHM: AMERICAN HONDA MOTOR CO., INC.
Acura Division
By:
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
Acura Division
AMERICAN HONDA MOTOR CO., INC.
Honda Division
By:
-------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Executive Vice President
Automobile Sales Division
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SCHEDULE LIST
A. List of Current Owners and Ownership Information
B. Listed Dealerships
C. Description of Corporate Structure
D. AHM Automobile Dealer Sales and Service Agreements
E. AHM Policy on the Public Ownership of Honda and Acura Dealerships
F. Dealership Principal Information
G. Additional Restrictions on Transfer of Interests in Dealership Principals
H. List of 5% Owners
I. Executive Manager Information
J. Pending Dealership Transactions
K. Indemnification Agreement
L. AHM Policies
X. Transactional Documentation
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SCHEDULE A
▇▇▇ ▇▇▇▇▇▇ Automotive-H, Inc. (d/b/a ▇▇▇ ▇▇▇▇▇▇ Honda and ▇▇▇ ▇▇▇▇▇▇ Acura)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
Foyt Motors, Inc. (d/b/a ▇. ▇. ▇▇▇▇ Honda)
▇. ▇. ▇▇▇▇, Jr.
▇. ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ Autoplaza, Inc. (d/b/a ▇▇▇▇ ▇▇▇▇▇ Honda)
▇. ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ & ▇▇▇▇▇▇, Inc. (d/b/a Acura Southwest)
▇. ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. O'▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇. ▇▇▇
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SCHEDULE B
▇▇▇ ▇▇▇▇▇▇ Automotive-H, Inc. (d/b/a ▇▇▇ ▇▇▇▇▇▇ Honda and ▇▇▇ ▇▇▇▇▇▇ Acura)
Foyt Motors, Inc. (d/b/a ▇. ▇. ▇▇▇▇ Honda)
▇▇▇▇ ▇▇▇▇▇ Autoplaza, Inc. (d/b/a ▇▇▇▇ ▇▇▇▇▇ Honda)
▇▇▇▇▇, Liu & ▇▇▇▇▇▇, Inc. (d/b/a Acura Southwest)
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SCHEDULE C
DESCRIPTION OF CORPORATE STRUCTURE
The Ownership Entity shall be Group 1 Automotive, Inc. ("Group 1").
Group 1 is currently and shall be at all times constituted as a Delaware
corporation. Its principal place of business is ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
The corporate structure as it relates to the Honda and Acura
dealerships that it will acquire will be as follows: Group 1 will at all times
own 100% of each of the Listed Dealerships.
After the initial public offering Group 1 will have 13,957,220 shares
of Stock outstanding (14,677,220 shares of stock outstanding if the
Underwriters' overallotment option is exercised in full) including 34.4% (37.6%
if the Underwriters' overallotment option is exercised in full) that will be
sold during the initial public offering.
In order to insure that the majority of the Stock -- that is, equity
interest -- of Group 1 is maintained by persons approved by AHM, the Dealership
Principals listed on Schedule F agree that, notwithstanding any statements in
Group 1's Form S-1 or the provisions of Rule 144 or any other rule or statute
to the contrary, they will not transfer, individually or jointly, any
Restricted Stock in Group 1 without complying with the terms and conditions of
this Agreement, including but not limited to the requirement that they obtain
AHM's written approval prior to such transfer and that they have their
Restricted Stock marked with a legend set forth in Section 1.5 of the
Agreement.
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SCHEDULE D
HONDA
AUTOMOBILE DEALER
SALES AND SERVICE
AGREEMENT
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A
This is an agreement between the Honda Automobile Division, American
Honda Motor Co., Inc. (American Honda) and ______________________________
(Dealer), a(n) ____________________ doing business as
______________________________. By this agreement, which is made and entered
into at __________, California, effective the _____ day of __________, 19___,
American Honda gives to Dealer the nonexclusive right to sell and service Honda
Products at the Dealership Location. It is the purpose of this Agreement,
including the Honda Automobile Dealer Sales and Service Agreement Standard
Provisions (Standard Provisions), which are incorporated herein by reference,
to set forth the rights and obligations which Dealer will have as a retail
seller of Honda Products. Achievement of the purposes of this Agreement is
premised upon the mutual understanding and cooperation between American Honda
and Dealer. American Honda and Dealer have each entered into this Agreement in
reliance on the integrity and ability and expressed intention of each to deal
fairly with the consuming public and with each other.
For consistency and clarity, terms which are used frequently in this
Agreement have been defined in Article 12 of the Standard Provisions.
B
American Honda grants to Dealer the nonexclusive right to buy Honda
Products and to identify itself as a Honda dealer at the Dealership Location.
Dealer assumes the obligations specified in this Agreement and agrees to sell
and service effectively Honda Products within Dealer's Primary Market Area and
to maintain premises satisfactory to American Honda.
C
Dealer covenants and agrees that this Agreement is personal to Dealer,
to the Dealer Owner, and to the Dealer Manager, and American Honda has entered
into this Agreement based upon their particular qualifications and attributes
and their continued ownership or participation in Dealership Operations. The
parties therefore recognize that the ability of Dealer to perform this
Agreement satisfactorily and the Agreement itself are both conditioned upon the
continued active involvement in or ownership of Dealer by either:
(1.) the following person(s) in the percentage(s) shown:
PERCENT OF
NAME: ADDRESS TITLE OWNERSHIP
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(2.) ______________________________, an individual personally
owning an interest in Dealer of at least 25% and who has
presented to American Honda a firm and binding contract giving
to him the right and obligation of acquiring an ownership
interest in Dealer in excess of 50% within five years of the
commencement of Dealership Operations and being designated in
that contract as Dealer operator.
D
Dealer represents, and American Honda enters into this Agreement in
reliance upon the representation, that ____________________ exercises the
functions of Dealer Manager and is in complete charge of Dealership Operations
with authority to make all decisions on behalf of Dealer with respect to
Dealership Operations. Dealer agrees that there will be no change in Dealer
Manager without the prior written approval of American Honda.
E
American Honda has approved the following premise as the location(s)
for the display of Honda Trademarks and for Dealership Operations.
HONDA NEW VEHICLE PARTS AND SERVICE FACILITY
SALES SHOWROOM
SALES AND GENERAL OFFICES USED VEHICLE DISPLAY
AND SALES FACILITIES
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F
There shall be no voluntary or involuntary change, direct or indirect,
in the legal or beneficial ownership or executive power or responsibility of
Dealer for the Dealership Operations, specified in Paragraphs C and D hereof,
without the prior written approval of American Honda.
G
Dealer agrees to maintain, solely with respect to the Dealership
Operations, minimum net working capital of $__________, minimum owner's equity
of $_______________*, and flooring and a line or lines of credit in the
aggregate amount of $__________ with banks or financial institutions approved
by American Honda for use in connection with Dealer's purchases of and carrying
of inventory of Honda Products, all of which American Honda and Dealer agree
are required to enable Dealer to perform its obligations pursuant to this
Agreement. If Dealer also carries on another business or sells other products,
Dealer's total net working capital, owner's equity and lines of credit shall be
increased by an appropriate amount.
* Long Term Debt, less Real Estate Mortgages, shall not exceed a ratio
of 1:1 when compared to Effective Net Worth which is defined as Total Net Worth
less Total Other Assets.
H
This Agreement is made for the period beginning ___________ and ending
__________, unless sooner terminated. Continued dealings between American
Honda and Dealer after the expiration of this Agreement shall not constitute a
renewal of this Agreement for a term, but rather shall be on a day-to-day
basis, unless a new agreement or a renewal of this Agreement is fully executed
by both parties.
I
This Agreement may not be varied, modified or amended except by an
instrument in writing, signed by duly authorized officers of the parties,
referring specifically to this Agreement and the provision being modified,
varied or amended.
J
Neither this Agreement, nor any part thereof or interest therein, may
be transferred or assigned by Dealer, directly or indirectly, voluntarily or by
operation of law, without the prior written consent of American Honda.
By
--------------------------------------- -----------------------------------
(Corporate or Firm Name) (Dealer)
AMERICAN HONDA MOTOR CO., INC. (Corporate Seal)
HONDA AUTOMOBILE DIVISION
-----------------------------------
By
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HONDA
AUTOMOBILE DEALER
SALES AND SERVICE
AGREEMENT
STANDARD PROVISIONS
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HONDA AUTOMOBILE DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
TABLE OF CONTENTS
PAGE
1. THE OBLIGATIONS OF AMERICAN HONDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. SALE OF HONDA PRODUCTS TO DEALER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. THE OBLIGATION OF DEALER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. WARRANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. ADVERTISING AND PROMOTIONAL PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. TRADEMARKS AND SERVICE MARKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. GENERAL BUSINESS REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. APPOINTMENT OF SUCCESSOR AND REPLACEMENT DEALERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. RIGHTS, OBLIGATIONS AND DEALINGS UPON TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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HONDA AUTOMOBILE DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
The following Standard Provisions are, by reference, incorporated in and made a
part of the Honda Automobile Dealer's Sales and Service Agreement. These
Standard Provisions accompany the Honda Dealer's Sales and Service Agreement
which has been executed on behalf of both American Honda and Dealer.
1. THE OBLIGATIONS OF AMERICAN HONDA
1.1. It is the obligation of American Honda to supply to Dealer,
and to all authorized dealers, Honda Products in a fair and
reasonable manner in order that Dealer may conduct Dealership
Operations in a businesslike manner. In fulfilling this
obligation, Honda Products may be supplied either on the basis
of dealer order or on the basis of allocation, depending on
market conditions and availability. There are numerous factors
which affect the availability of Honda Products. Among those
factors are component availability and production capacity,
consumer demand, strikes and other labor troubles, weather and
transportation conditions, and government regulations. Because
such factors affect individual dealer supply, American Honda
necessarily reserves discretion in accepting orders and
allocating and distributing Honda Products, and its judgment
and decision in such matters will be final.
1.2. To assist Dealer in the fulfillment of its obligations under
this Agreement, which it has as a retail seller of Honda
Products, American Honda agrees to provide Dealer sales,
service and parts support.
1.2.A. To assist Dealer in fulfilling its sales
responsibility, American Honda agrees to offer
general and specialized product information and to
provide field sales personnel to advise and counsel
Dealer's sales organization on sales-related subjects
such as merchandising, training and sales management.
1.2.B. To assist Dealer in fulfilling its service and parts
responsibilities, American Honda agrees to offer, or
cause to be offered, general and specialized service
and parts training courses. Based on the service
training needs of Dealer's service personnel, to be
determined by American Honda with the assistance of
Dealer, Dealer agrees to have members of Dealer's
service organization attend such courses. Further,
American Honda agrees to make available to Dealer
field service personnel capable of advising and
counseling Dealer's service personnel on
service-related subjects, including product quality,
technical adjustments, repairs and replacement of
product components, recall, product improvement or
product update campaigns which American Honda may
conduct, owner complaints, warranty administration,
service and parts merchandising, and training and
service management.
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1.3. To assist Dealer in planning, establishing and maintaining the
Dealership Premises, American Honda will, at its sole option,
make available to Dealer, upon request, sample copies of
building layout plans or facility planning recommendations,
including sales, service and parts space and the placement,
installation and maintenance of recommended signs. In
addition, representatives of American Honda will be available
to Dealer from time to time to counsel and advise Dealer and
its personnel in connection with Dealer's planning and
equipping the Dealership Premises.
1.4. American Honda agrees to make available to Dealer, at
reasonable cost, such sales, service and parts manuals,
brochures, special service tools and equipment and other data
for Honda Products as American Honda deems necessary for
Dealership Operations.
1.5. American Honda agrees to maintain a nationwide system of
authorized dealers of Honda Products. In order that those
authorized dealers may be assured of the benefits of
comprehensive advertising of Honda Products, American Honda
agrees to establish and maintain general advertising programs
in such manner and amount as it may deem appropriate and will
make sales promotion and campaign materials available to
Dealer.
1.6. American Honda agrees to compensate Dealer for the labor and
parts used by Dealer in performing its obligations under any
American Honda warranty and in connection with any recall,
product improvement or product update campaign which American
Honda may undertake and require Dealer to perform. Such
compensation will be in such reasonable amounts, and pursuant
to such requirements and instructions, as American Honda shall
establish from time to time, and such compensation shall
constitute full and complete payment by American Honda to
Dealer for such work.
1.7. American Honda agrees to assume the defense of Dealer and to
indemnify Dealer against any money judgment, less any offset
recovered by Dealer, in any lawsuit naming Dealer as a
defendant, where such lawsuit relates to: (a) an alleged
breach of any Honda warranty relating to Honda Products; (b)
bodily injury or property damage claimed to have been caused
by a defect in the design, manufacture or assembly of a Honda
Product prior to delivery thereof to Dealer (other than a
defect which could have been detected by Dealer in a
reasonable inspection); or (c) a misrepresentation or
misleading statement of American Honda; provided, however,
that if any information discloses the possibility of Dealer
error or omission in servicing or otherwise (including but not
limited to Dealer not having performed all recalls of which
Dealer has notice on the Honda Product involved in the lawsuit
if the defect subject to the recall is alleged or contended to
be a contributing cause of the breach of warranty, injury or
damage which is the subject matter of the lawsuit), or should
it appear that the Honda Product involved in such lawsuit had
been altered by or for Dealer, or if Dealer has violated any
of the provisions of this Paragraph 1.7, then Dealer will
immediately obtain its own counsel and defend itself, and
American Honda will not be obligated to defend or indemnify
Dealer further. Dealer will
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promptly notify American Honda of any claim which Dealer will
assert American Honda might be obligated to defend under this
Paragraph 1.7. American Honda will have not less than thirty
(30) days to conduct a reasonable investigation to initially
determine whether or not American Honda is obligated to defend
under this Paragraph 1.7. Dealer will take the steps necessary
to protect its own interests involved in the lawsuit until
American Honda assumes the active defense of Dealer. American
Honda will, upon assuming the defense of Dealer, reimburse
Dealer for all attorneys' fees or court costs incurred by
Dealer from the date of the tender. American Honda, upon
assuming Dealer's defense, will have the right to retain and
direct counsel of its own choosing, and Dealer will cooperate
in all matters during the course of defending the lawsuit. If,
upon final judgment in a lawsuit, it is determined that
American Honda wrongfully failed or refused to defend Dealer,
American Honda will reimburse Dealer for all costs and
attorneys' fees incurred by Dealer from the date of the tender
of defense.
2. SALE OF HONDA PRODUCTS TO DEALER.
2.1. To the extent that Honda Products are the subject of dealer
order, such orders will be submitted and processed in
accordance with procedures established by American Honda. No
order will be binding on American Honda, as evidenced by
either the issuance of an invoice or shipment of the ordered
Honda Products, and any such order may be accepted in whole or
in part. All orders by Dealer will be deemed firm orders and
binding upon the Dealer, except that at any time prior to
acceptance, an order may be canceled by Dealer by giving
actual notice to American Honda in writing of the desire by
Dealer to cancel such order.
2.2. While it is the intent of American Honda to provide Honda
Automobiles to Dealer in such quantities and types as are
ordered by Dealer, American Honda and Dealer recognize that
Honda Automobiles may not always be available in desired
quantities. It is therefore understood and agreed that
American Honda, at its sole election, will have the right to
allocate Honda Automobiles among authorized dealers of Honda
Products in a fair and reasonable manner. American Honda will
provide to Dealer an explanation, in writing, of any
allocation system it may adopt.
2.3. American Honda will have the right at any time and from time
to time to establish and revise prices and other terms,
including payment by Dealer, for its sales of Honda Products
to Dealer. Revised prices, terms or provisions will apply to
the sale of any Honda Products as of the effective date of the
revised prices, terms or provisions, even though a difference
price or different terms may have been in effect at the time
such Honda Products were allocated to or ordered by Dealer.
2.4. American Honda will have the right to select the distribution
points and the mode of transportation and may pay carriers for
all charges in effecting delivery of Honda Products to Dealer.
Dealer agrees to pay to American Honda such charges for
delivery as American Honda may assess. Subject to the terms of
sale which may be established from time to time by American
Honda, risk of loss to Honda Products
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will pass to Dealer upon tender of the Honda Products to
Dealer or its authorized agent, and title will pass to Dealer
upon receipt by American Honda of payment.
2.5. If Dealer should fail or refuse or for any reason be unable to
accept delivery of any Honda Products ordered by Dealer, or if
Dealer should request diversion of a shipment from American
Honda, Dealer will be responsible for and pay to American
Honda, promptly on demand, all costs and expenses incurred by
American Honda in filling and shipping Dealer's order and by
reason of such diversion, including costs of demurrage and
storage, plus restocking charges as determined by American
Honda, American Honda may direct that such returned Honda
Products be delivered to another destination, but the amount
charged Dealer for return to such other destination will not
be greater than the costs and expenses of returning such Honda
Products to their original place of shipment plus any
demurrage, storage and restocking charges.
2.6. As between American Honda and Dealer, American Honda assumes
responsibility for damage to Honda Products caused prior to
delivery to Dealer or its authorized agent.
2.7. American Honda will not be liable in any manner for delay or
failure in supplying any Honda Products where such delay or
failure is the result of any event beyond the control of
American Honda. Such event may include, but is not limited to,
any law or regulation or any acts of God, foreign or civil
wars, riots, interruptions of navigation, shipwrecks, fires,
strikes, lockouts, or other labor troubles, embargoes,
blockades, demand for, or delay or failure of any supplier to
deliver or in making delivery, of Honda Products.
2.8. American Honda reserves the right at any time to change or
modify, without notice, any specification, design or model of
Honda Products. In the event of any change or modification
with respect to any Honda Products, Dealer will not be
entitled to have such or similar change or modification made
with respect to any other Honda Products, except as may be
required by applicable law. American Honda may, however, in
its sole discretion, make such changes or modifications to all
Honda Products in its inventory or control, whether or not
invoiced to Dealer. No such change will be considered a model
year change unless specified by American Honda.
2.9. American Honda may at any time discontinue, without obligation
to Dealer or Dealer's customers, the sale of any Honda
Products, or models or lines thereof or any other items, goods
or services. Further, American Honda will have no obligation,
under any circumstances, to accept orders for any Honda
Products which are not in current inventory.
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3. THE OBLIGATION OF DEALER.
3.1. It is the obligation of Dealer to promote and sell, at retail,
Honda Products, and to promote and render service, whether or
not under warranty, for those products within the Dealer's
Primary Market Area.
3.2. Dealer's performance of its sales obligations for Honda
Products will be evaluated by American Honda on the basis of
such reasonable criteria as American Honda may develop from
time to time, including, but not limited to, such reasonable
sales objectives as American Honda may establish and a
comparison of Dealer's sales performance with other authorized
dealers of Honda Products.
3.3. To enable Dealer to fulfill its obligations satisfactorily,
Dealer agrees to establish and maintain an adequate and
trained sales and customer relations organization. Dealer
further agrees to establish and maintain a complete service
and parts organization, including a qualified service manager
and a qualified parts manager and a number of competent
service and parts personnel adequate to care for the service
obligations to be performed by Dealer under the Agreement.
3.4. Dealer agrees to acknowledge, investigate and resolve
satisfactorily all complaints received from owners of Honda
Products in a businesslike manner in order to secure and
maintain the goodwill of the public. Any complaint received by
Dealer which, in the opinion of Dealer, cannot be readily
remedied, shall be promptly reported to American Honda by
Dealer.
3.5. Dealer agrees that it will not make any misrepresentations or
misleading statements regarding the items making up the total
selling price of Honda Products or as to the prices or charges
relating to such items. With the understanding that Dealer is
the sole judge of the price at which it sells Honda Products,
dealer recognizes that a retail customer has the right to
purchase Honda Automobiles without being required to purchase
any optional equipment or accessories which the purchaser does
not want or order unless such equipment or accessories are
required under applicable laws or regulations.
3.6. Dealer agrees to make certain that all Honda Products sold by
it have received predelivery services and inspection in
accordance with applicable procedures and directives issued by
American Honda. Dealer further agrees that all Honda Products
sold by it will be in proper operating condition prior to
delivery to any customer. To enable Dealer to fulfill its
obligations in this regard, Dealer agrees that an appropriate
number of its service personnel will be fully qualified to
perform all necessary predelivery service and inspection.
3.7. Dealer agrees to comply with, and operate consistent with, all
applicable provisions of the National Traffic and Motor
Vehicle Safety Act of 1966 and the Federal Clean Air Act, as
amended, including such applicable rules and regulations as
may be issued thereunder, and all other applicable federal,
state and local motor vehicle
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safety and emission control requirements. In the interests of
motor vehicle safety and emission control, American Honda
agrees to provide to Dealer, and Dealer to American Honda,
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 the rules and regulations issued thereunder, and
all other applicable federal, state and local motor vehicle
safety and emission control requirements.
3.8. Dealer agrees to conduct a used vehicle operation at or in
connection with the Dealership Premises, to the extent
reasonably required to enhance the opportunity for sales of
Honda Automobiles.
3.9. American Honda and Dealer recognize that it may be necessary
for American Honda to formulate new or different policies or
directives to meet new or changing technology, laws or
circumstances. In the operation of Dealer's business and in
the sale and promotion of Honda Products, in rendering service
and in all other activities of the Dealership Operations,
Dealer will follow all reasonable directives, suggestions and
policies of American Honda. All written directives,
suggestions and policies of American Honda contained in any of
its bulletins or manuals, which are in effect as of the date
of the Agreement or are issued thereafter, will be deemed a
part of the Agreement.
3.10. Dealer agrees that it will, at all times, maintain in effect
all licenses required for Dealership Operations and for the
Dealership Premises.
3.11. Dealer agrees that it will comply with all laws, rules,
regulations and guides relating to the conduct of its
business.
3.12. Dealer agrees that it will perform any and all warranty,
recall, product improvement or product update service in
compliance with instructions and directives issued by American
Honda, regardless of where the Honda Product involved was
purchased. To protect and maintain the goodwill and reputation
of Honda Products and the Honda Trademarks, Dealer agrees that
it will not charge any customer for warranty service or any
work done in connection with such warranty, recall, product
improvement or update or any other service as to which Dealer
is reimbursed by American Honda.
3.13. Dealer fully understands that the success of its Dealership
Operations depends to a great extend upon the amount of net
working capital, owner's equity, flooring and liens of credit
which Dealer maintains. Accordingly, for the benefit of both
American Honda and Dealer, Dealer agrees that it will, at all
times, pay for Honda Products promptly and, to do so, maintain
its minimum net working capital, owner's equity, flooring and
lines of credit in the amounts specified in Paragraph G of the
Agreement. American Honda will have the right, reasonably, to
specify an increased amount of minimum net working capital,
owner's equity, flooring, or lines of credit
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to be used in Dealership Operations and Dealer agrees promptly
to establish and maintain the increased amount. Dealer and
American Honda agree to execute such new documents as American
Honda may reasonably require to evidence revised capital
requirements.
3.14. Dealer agrees to assume the defense of American Honda and to
indemnify American Honda against any money judgment, less any
offset recovered by American Honda, in any lawsuit naming
American Honda as a defendant where such lawsuit relates to:
(a) an alleged failure by Dealer to comply, in whole or in
part, with any obligation assumed by Dealer pursuant to the
Agreement, (b) Dealer's alleged negligent or improper
repairing or servicing of Honda Products, or such other motor
vehicles or equipment as may be sold or serviced by Dealer,
(c) Dealer's alleged breach of any contract between Dealer and
Dealer's customer, or (d) Dealer's alleged misrepresentation
or misleading statement, either direct or indirect, to any
customer of Dealer. American Honda may, at its sole option and
at its expense, participate in defending any such lawsuit.
4. WARRANTY.
4.1. Dealer understands and agrees that the only warranties that
will be applicable to Honda Products will be such written
warranty or warranties as may be furnished by American Honda.
Except for its express liability under such written
warranties, American Honda neither assumes nor authorizes any
other person or party to assume for it any other obligation or
liability in connection with any Honda Product or component
thereof.
4.2. Dealer agrees that it will expressly incorporate any warranty
furnished by American Honda with a Honda Automobile as a part
of each order form or other contract for the sale of such
Honda Automobile by Dealer to any buyer. Dealer further agrees
that it will deliver to the buyer of all Honda Products, at
the time of delivery of such Honda Products, copies of such
applicable warranties as may be furnished by American Honda.
Dealer agrees to abide by and implement in all other respects
American Honda's warranty procedures in effect at the time of
Dealer's sale.
5. ADVERTISING AND PROMOTIONAL PROGRAMS.
5.1. Dealer agrees to develop and actively utilize programs for the
advertisement and promotion of Honda Products and its
servicing of such products. Such programs will include the
prominent display and use or demonstration of Honda
Automobiles. Dealer further agrees to cooperate with all
reasonable promotional programs developed by American Honda.
5.2. Dealer agrees that it will not advertise, promote or trade in
Honda Products or the servicing thereof in such a manner as to
injure or be detrimental to the goodwill and reputation of
American Honda and the Honda Trademarks. Dealer further agrees
that it will not publish or otherwise disseminate any
advertisement or announcement or
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use any form or media of advertising which is objectionable to
American Honda. Dealer agrees to discontinue immediately any
advertisement or form of advertising deemed objectionable upon
request of American Honda.
5.3. Subject to applicable federal, state or local ordinances,
regulations and statutes, Dealer agrees to erect and maintain,
at the Dealership Location, at Dealer's expense, authorized
product and service signs of types required by American Honda,
as well as such other authorized signs as are necessary to
advertise the Dealership Operations effectively and as are
required by American Honda.
6. TRADEMARKS AND SERVICE MARKS.
6.1. Dealer agrees that American Honda has the exclusive right to
use and to control the use of the Honda Trademarks and but for
the right and license granted by Paragraph 6.2 hereof to use
and display the Honda Trademarks, Dealer would have no right
to use the same.
6.2. Dealer is hereby granted the nonexclusive right and license to
use and display the Honda Trademarks at the Dealership
Premises. Such use or display is limited to that which is
necessary in connection with the sale, offering for sale and
servicing of Honda Products at retail at the Dealership
Location. Dealer agrees that it will promptly discontinue the
use of any of the Honda Trademarks or change the manner in
which any of the Honda Trademarks is used when requested to do
so by American Honda.
6.3. American Honda and Dealer recognize that Dealer is free to
sell Honda Products to customers wherever they may be located.
However, in order that American Honda may establish and
maintain an effective network of authorized dealers for the
sale and service of Honda Products, Dealer specifically agrees
that it will not display Honda Trademarks, or, either directly
or indirectly, establish any place or places of business for
the conduct of any of its Dealership Operations except at the
locations and for the purpose described in Paragraph E of the
Agreement without the prior written approval of American
Honda. Dealer further agrees that the rights and license
granted by Paragraph 6.2 hereof will be automatically canceled
upon a change in the location of the Dealership Location
unless such change in location was previously approved in
writing by American Honda. Dealer further agrees that such
right and license terminates with the termination of the
Agreement.
6.4. If Dealer refuses or neglects to keep and perform its
obligations assumed under this Article 6 or under paragraph
10.3 hereof, Dealer will reimburse American Honda for all
costs, attorneys' fees and other expenses incurred by American
Honda in connection with any action to require Dealer to
comply therewith.
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7. GENERAL BUSINESS REQUIREMENTS.
7.1. It is to the mutual benefit of Dealer and American Honda that
uniform accounting systems and practices be maintained by
authorized dealers. Accordingly, Dealer agrees to maintain
such systems and practices as are required by American Honda.
In the event Dealer engages in the sale of any other product,
Dealer agrees to maintain and keep separate records and books
relating to the sale and servicing of Honda Products.
7.2. Dealer agrees to furnish monthly to American Honda, on or
before the times designated by American Honda, on forms
prescribed by American Honda, a complete and accurate
financial and operating statement covering the preceding month
and calendar-year-to-date operations and showing the true and
accurate condition of Dealership Operations. Financial
statements and other business information furnished to
American Honda will not be submitted to any third party unless
authorized by Dealer or required by law, or the information is
pertinent to a proceeding in which American Honda and Dealer
are parties.
7.3. Dealer agrees to keep complete and current records regarding
the sale and servicing of Honda Products and to prepare for
American Honda such reports, based on those records, as
American Honda may reasonably request. In order that policies
and procedures relating to the applications for reimbursement
for warranty and other applicable work and for other credits
or reimbursements may be applied uniformly to all authorized
dealers, Dealer agrees to prepare, keep current and retain
records in support of requests for reimbursement or credit in
accordance with policies and procedures designated by American
Honda.
7.4. Dealer agrees to permit, during reasonable business hours,
American Honda, or its designee, to examine, audit, reproduce
and take copies of all reports, accounts and records
pertaining to the sale, servicing and inventorying of Honda
Products, including, but not limited to, records in support of
claims for reimbursement or credit from American Honda, and
with the prior approval of Dealer, which approval will not be
unreasonably withheld, to interview Dealer employees with
respect thereto.
7.5. Dealer agrees that Dealership Operations will be conducted in
the normal course of business during and for not less than the
days of the week and hours of the day customary for automobile
dealerships in the Primary Market Area.
7.6. Dealer agrees and understands that any retail price which may
be suggested by American Honda is merely a suggested price,
and Dealer has no obligation to sell any Honda Products at
such price. Dealer further understands and agrees that it is
the sole judge of the price at which it sells Honda Products
and the price it charges others for service, subject only to
applicable local, state and federal laws, rules and
regulations.
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7.7. Dealer understands and agrees that it will be responsible for
and will pay any and all taxes, whether sales, use or excise,
and all other governmental or municipal charges imposed upon
the sale of Honda Products by American Honda to Dealer and
will maintain accurate records of the same, which records will
be available to American Honda, or its designee, during
regular business hours for inspection.
7.8. Dealer understands and agrees that, while it has
responsibility for the promotion and retail sale and servicing
of Honda Products within the Primary Market Area, it has no
territorial exclusivity. Further, American Honda reserves the
right, based upon reasonable criteria, to appoint other
authorized dealers of Honda Products in the Primary Market
Area.
8. APPOINTMENT OF SUCCESSOR AND REPLACEMENT DEALERS.
8.1. The parties recognize that Honda Products are marketed through
a system of authorized dealers developed by American Honda and
that customers and American Honda have a vital interest in the
preservation and efficient operation of the system. American
Honda has the responsibility of continuing to administer the
system and of selecting the most suitable dealer candidate in
each circumstance. Accordingly, Dealer agrees that American
Honda has the right to select each successor and replacement
dealer and to approve its owners and principal management and
the location of dealership facilities. Further, Dealer agrees
to provide written notice to American Honda of any potential
change in the involvement, ownership or management specified
in Paragraphs C and D of the Agreement. No change affecting
such involvement, ownership or management will be made without
the prior written approval of American Honda, which approval
will not be unreasonably withheld.
8.2. Upon Dealer's request, American Honda will execute with Dealer
a Successor Addendum designating proposed Dealer operators or
owners of a successor dealer to be established if the
Agreement expires or is terminated because of death or
incapacity. The request must be executed by all persons
identified in Paragraph C of the Agreement and all proposed
dealer operators or owners and be submitted to American Honda
prior to such death or incapacity; provided that such proposed
dealer operators or owners must be acceptable to American
Honda.
8.3. Dealer, but not American Honda, may cancel any executed
Successor Addendum. If American Honda notifies Dealer that it
does not plan to permit Dealership Operations to continue at
the Dealership Location, American Honda shall have no
obligation to execute a new Successor Addendum.
8.4. If the Agreement expires or is terminated because of death or
incapacity and Dealer and American Honda have not executed a
Successor Addendum, the remaining owners, successors or heirs
may propose a successor dealer entity to continue Dealership
Operations at the Dealership Location. Such proposal must be
made within thirty days of the event causing expiration or
termination by submitting a written proposal to American
Honda. Such proposal will be accepted by American Honda if it
does not introduce new owners or if the proposed new owners
are acceptable to American Honda.
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8.5. Any successor dealer entity approved by American Honda
pursuant to this Article 8 must establish that it can conduct
Dealership Operations in an efficient and businesslike manner.
Such successor dealer entity will have one year to meet
reasonable performance criteria established from time to time
by American Honda. In the event such successor dealer entity
fails to meet those criteria, such failure will be separate
grounds for termination of the Agreement.
9. TERMINATION OF AGREEMENT.
9.1. The Agreement may be terminated, at any time, by mutual
agreement of American Honda and Dealer.
9.2. Dealer may terminate the Agreement, at any time, by giving
American Honda notice of such termination. Such termination
shall be effective upon the date specified by Dealer, or if no
date is specified, than upon receipt by American Honda of such
notice.
9.3. American Honda may terminate the Agreement, at any time, by
serving on Dealer a written notice of such termination by
certified or registered mail to Dealer at the Dealership
Premises. Subject to other provisions of the Agreement,
termination will be effective ninety (90) days after mailing
of such notice to dealer or such longer period as American
Honda may specify; provided, however, that termination will be
effective ten (10) days after mailing if for an occurrence of
any circumstance referred to in Paragraphs 9.4.A, 9.4.B, 9.4.J
or 9.4.M hereof.
9.4. It is recognized that each of the following grounds is within
control of Dealer or originates from action taken by Dealer or
its employee(s) and is contrary to the spirit and objectives
of the Agreement. Therefore, American Honda may terminate the
Agreement upon the occurrence of any of the following:
9.4.A. Failure by Dealer to secure and continuously maintain
any license necessary for the conduct by Dealer of
its business pursuant to the Agreement or the
termination or expiration without renewal, or
suspension or revocation of any such license for any
reason whatsoever, whether or not license is
reinstated.
9.4.B. Any change, transfer or attempted transfer by Dealer
or any Dealer Owner, voluntarily or by operation of
law, of the whole or any part of the Agreement or any
interest or legal or beneficial ownership therein or
any right or obligation thereunder, directly or
indirectly, such as, for example only, by way of a
sale of an underlying ownership interest in Dealer or
the Dealership Premises or a change in the persons
having control or managerial authority, without prior
written consent of American Honda. Any purported
change, transfer or assignment shall be null and void
and not binding on American Honda.
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9.4.C. Any dispute, disagreement, controversy or personal
difficulty between or among Dealer Owner or in the
management of Dealer which, in American Honda's
opinion, may adversely affect the conduct of Dealer's
business, or the presence in the management of Dealer
of any person who, in American Honda's opinion, does
not have or no longer has requisite qualifications
for his position.
9.4.D. Impairment of the reputation or the financial
standing of Dealer or of any Dealer Owner subsequent
to the execution of the Agreement; or the
ascertainment by American Honda of any facts existing
at or prior to execution of the Agreement which tend
to impair such reputation or financial standings; or
the failure of Dealer continuously to meet American
Honda's minimum requirements of net working capital,
owner's equity or line(s) of credit.
9.4.E. Failure by Dealer to pay, within ten (10) days after
written demand from American Honda, any delinquent
accounts or other monies due to American Honda from
Dealer.
9.4.F. Submission or participation in the submission to
American Honda of any false or fraudulent statement,
application, report, request for issuance of
reimbursement, compensation, refund or credit,
including but not limited to any false or fraudulent
claim for warranty work, labor rate, set-up
reimbursement or warranty coverage.
9.4.G. Use by Dealer of any deceptive or fraudulent
practice, whether willful, negligent or otherwise, in
the sale of any Honda Product.
9.4.H. Any conviction in any court of original jurisdiction
of Dealer or any Dealer Owner or any employee of the
Dealership Operations for any crime or violation of
any law if, in the opinion of American Honda, such
conviction or violation may adversely affect the
conduct of the Dealership Operations or tend to be
harmful to the goodwill of American Honda or to the
reputation of Honda Products or the Honda Trademarks,
or the violation or refusal or neglect of Dealer to
comply with the provisions of the National Traffic
and Motor Vehicle Safety Act of 1966, as amended, or
the Clean Air Act, or any rules, regulations or
standards under either of said Acts, including but
not limited to performance of any product update or
recall operation as directed by American Honda.
9.4.I. Dealer's entering into any agreement, combination,
understanding or contract, oral or written, with any
other corporation, person, firm or other legal entity
for the purpose of fixing prices of Honda Products or
otherwise violating any law.
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9.4.J. Dealer's abandonment of Dealership Premises or
failure to maintain Dealership Operations as a going
business, open during customary business hours for
the day and hours as are customary for automobile
dealerships in the Primary Market Area, provided such
failure is not due to causes beyond Dealer's control.
Failure of the Dealership Premises to remain open for
seven (7) consecutive days will constitute, without
more, such abandonment.
9.4.K. Death or incapacity of any Dealer Owner or Dealer
Manager, subject to the provisions of Article 8.
9.4.L. Failure of Dealer to make improvements, alterations
or modifications of its Dealership Premises which are
required to meet reasonable facility requirements of
American Honda or which Dealer has agreed or
represented to American Honda that Dealer will make
or do.
9.4.M. The movement of Dealership Premises to a new location
or the establishment of an additional location for
the sale or service of any Honda Products without the
prior written approval of American Honda.
9.4.N. The failure of Dealer to provide adequate
representation, promotion, sales or service,
including warranty work, of any Honda Products.
9.4.O. Dealer's breach of any provision of the Agreement or
Dealer's failure to comply with any contained in the
Agreement.
9.5. The Agreement will also be terminated upon written notice by
American Honda in the event:
9.5.A. Of termination of American Honda's distribution
agreement as Honda Automobile distributor.
9.5.B. Of withdrawal by American Honda from the market in
which Dealer is located.
9.5.C. American Honda will, for any reason, discontinue the
distribution of Honda Automobiles.
9.6. Upon the occurrence of any of the following facts or
circumstances, the Agreement will terminate automatically,
without notice or other action by American Honda or Dealer;
and upon such termination, any dealings between American Honda
and dealer will be on a day-to-day basis at the sole option of
American Honda and may be discontinued at any time by American
Honda:
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9.6.A. Insolvency by any definition of Dealer; or
9.6.B. The existence of facts or circumstances which would
allow the voluntary commencement by Dealer, or the
involuntary commencement against Dealer, of any
proceedings under any bankruptcy act or law or under
any state insolvency law; or
9.6.C. The appointment of a receiver or other officer having
similar powers for Dealer or the Dealership Premises;
or
9.6.D. Any levy against Dealer under attachment, garnishment
or execution or similar process which is not within
ten (10) days vacated or removed by payment or
bonding.
9.7. American Honda may select any applicable provision under which
it elects to terminate the Agreement and give notice
thereunder, notwithstanding the existence of any other grounds
for termination or the failure to refer to such other grounds
in the notice of termination. The failure by American Honda to
specify additional ground(s) for cancellation in its notice
will not preclude American Honda from later establishing that
termination is also supported by such additional ground(s).
9.8. The acceptance by American Honda of orders from Dealer or the
continued sale of Honda Products to Dealer or any other act or
course of dealing of American Honda after termination of the
Agreement will not be construed as or deemed to be a renewal
of the Agreement for any further term or a waiver of such
termination. Any dealings after termination will be on a
day-to-day basis.
9.9. In all cases, Dealer agrees to conduct itself and Dealership
Operations until the effective date of termination and after
termination or expiration of the Agreement, so as not to
injure the reputation or goodwill of the Honda Trademarks or
American Honda.
10. RIGHTS, OBLIGATIONS AND DEALINGS UPON TERMINATION.
10.1. Upon the mailing of a written notice of termination or after
date of the expiration of the Agreement without renewal,
American Honda will have the right to cancel all pending
orders of Dealer for Honda Products, special tools and
equipment, whether previously accepted by American Honda or
not, except as specifically otherwise provided in this Section
10. Notwithstanding the foregoing, if American Honda chooses
to fill any orders, it will not be obligated to fill any other
orders and will not be precluded from changing the terms of
any sale.
10.2. Not later than the effective date of the termination or
expiration of the Agreement, Dealer will cease to hold itself
out as being authorized to sell Honda Products and will
discontinue selling Honda Products or performing service as an
authorized dealer.
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10.3. In addition to the requirements of Section 10.2, not later
than the effective date of the termination or expiration of
the Agreement, Dealer will, at its sole expense, discontinue
any and all uses of any Honda Trademarks and any words,
symbols and marks which are confusingly similar thereto; will
remove all signs bearing any Honda Trademark and will destroy
all stationery, repair orders, advertising and solicitation
materials, and all other printed matter bearing any Honda
Trademark or referring directly or indirectly to American
Honda or Honda Products in any way which might make it appear
to members of the public that Dealer is still an authorized
dealer. The foregoing will include, but not be limited to,
discontinuing the use of a Honda Trademark as part of Dealer's
business and corporate name. Dealer will also deliver to
American Honda, at American Honda's place of business, or to a
person designated by American Honda, or will destroy the same
upon request by American Honda, any and all technical or
service literature, advertising and other printed material
then in Dealer's possession which relates to Honda Products
and which was acquired or obtained by Dealer from American
Honda. Dealer will destroy any sign bearing a Honda Trademark
which has not been repurchased by American Honda.
10.4. In the event the Agreement is terminated pursuant to the
provisions of paragraph 9.3 hereof, upon request of American
Honda for copying Dealer's records of predelivery service,
warranty service, recall or update service or other service of
Honda Products. In the event the Agreement is terminated
pursuant to the provisions of paragraphs 9.1 or 9.2 hereof,
upon the request of American Honda, Dealer will deliver to
American Honda copies of such Dealer records.
10.5. Dealer may, at any time within five (5) days after the
effective date of termination or expiration of the Agreement,
notify American Honda in writing of Dealer's desire to have
American Honda repurchase from Dealer Honda Products in
Dealer's inventory which were purchased from American Honda
and which, when American Honda accepts sole possession:
10.5.A. In the case of Honda Automobiles, are new and of
the then current model year, as designated by
American Honda, unused, undamaged and in
first-class resalable condition, regardless of
whether or not American Honda has exercised its
right of inspection; and
10.5.B. In the case of Honda Parts are new, listed as
current in the Parts Price Book unused,
undamaged, in their original package and in
first-class resalable condition.
10.6. Upon termination or expiration without renewal, upon request
of Dealer given no later than five (5) days after the
effective date of termination or expiration, American Honda
will repurchase all signs which use a Honda Trademark as were
authorized in advance by American Honda and all service
information and materials, special tools and equipment
designed specifically for service of Honda Automobiles and
which were purchased from American Honda and are usable on
current Honda
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Products, provided that such signs, information, materials,
tools and equipment are less than five (5) years old and are
in good working order.
10.7. American Honda will repurchase from Dealer Honda Products and
signs, information, materials, tools and equipment as
aforesaid on the condition that Dealer furnishes an inventory
to American Honda within thirty (30) day after the termination
or expiration without renewal of the Agreement and complies
strictly with all procedures and conditions of repurchase
issued by American Honda at the time of repurchase. American
Honda will have the right and option to assign to another
person or entity the right to purchase such Honda Products.
10.7.A. The price for Honda Products, other than tools,
equipment, information, materials and signs, will
be the price at which they were originally
purchased by Dealer from American Honda or the
price last established by American Honda for the
sale of identical Honda Products, whichever may
be lower, and in either case will be less all
prior refunds and allowances made by American
Honda with respect thereto, if any. The price for
tools, equipment, information, materials and
signs will be the price paid by Dealer reduced by
straight-line depreciation on the basis of a
useful life of five (5) years. In all cases, the
price will be reduced by any applicable
restocking charge which may be in effect at the
time American Honda's receipt of goods to be
repurchased.
10.7.B. Dealer agrees to store Honda Products and other
items which American Honda desires or is
obligated to repurchase until receipt from
American Honda of rejection of repurchase or
instructions for shipping and return to American
Honda. Dealer agrees to strictly follow and abide
by all instructions for return as may be issued
from time to time by American Honda. All Honda
Products will be properly and suitably packaged
and containered for safe transportation to
American Honda. All damage, regardless of nature
or cause, will be the responsibility of Dealer
until the Honda Products are inspected and
accepted by American Honda for repurchase.
Storage of such Honda Products and other items
will be at Dealer's expense for a period of
ninety (90) days after Dealer requests repurchase
and provides an inventory as provided by
paragraphs 10.6 and 10.7 hereof. Thereafter,
Dealer will be entitled to charge American Honda
a reasonable storage charge.
10.7.C. American Honda, or its designee, at such
reasonable time and for such a reasonable period
of time as American Honda may determine, will
have the right to enter the premises where items
for repurchase are being held for the purpose of
checking the inventory submitted by Dealer or
examining, inspecting and inventorying any and
all Honda Products. If American Honda agrees to
repurchase and Dealer fails to furnish an
inventory, Dealer will reimburse American Honda
for all costs of American Honda taking an
inventory.
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10.7.D. Only those Honda Products meeting the
requirements of Paragraphs 10.5 and 10.6 hereof
are or will be eligible for return to American
Honda. American Honda will not be obligated to
give Dealer credit for any Honda Products which
do not meet those requirements.
10.7.E. Dealer warrants and represents that all Honda
Products tendered to American Honda for
repurchase will be free of all liens,
encumbrances, security interests or attachments
at the time repurchase is requested by Dealer.
Clear title will be vested in American Honda upon
receipt of goods. Dealer will execute and deliver
any documents necessary to vest clear title in
American Honda, and Dealer will be responsible
for complying with all applicable procedures,
including but not limited to those relating to
bulk transfers.
10.7.F. Dealer will pay all freight and insurance charges
from Dealer to the place of delivery designated
by American Honda, provided that Dealer will not
be liable for any amount greater than the freight
and insurance charges from Dealer to American
Honda's closest automobile warehouse or parts
center as American Honda may designate. Claims
for damage or allegedly caused by any carrier
will be the sole responsibility of Dealer, and in
no event will American Honda be obligated to make
a claim against a carrier or be liable to Dealer
for damage.
10.7.G. As a condition of repurchase and notwithstanding
any other agreement or offer to repurchase,
payment for repurchase will first be applied
against any obligations or money owed by Dealer
to American Honda. All payment due from American
Honda to Dealer pursuant to any provisions of the
Agreement or in connection with the termination
of the Agreement or in connection with the
termination of the Agreement will be made by
American Honda after receipt of the goods to be
repurchased and after all debits and credits have
been ascertained and applied to Dealer's
accounts, and Dealer has delivered to American
Honda the manufacturer's certificate of origin or
other document of title for Honda Automobiles
tendered to American Honda for repurchase. In the
event it be found that a balance is due from
Dealer to American Honda, Dealer will pay such
sum to American Honda within ten (10) days of
written notice of such balance.
11. GENERAL PROVISIONS.
11.1. Dealer acknowledges that only the President or a designated
Vice President, Secretary or Assistant Secretary of American
Honda is authorized to execute the Agreement, agree to any
variation, modification or amendment of any of the provisions
thereof, including authorized location, or to make commitments
for or on behalf of American Honda. No other employee of
American Honda may make any promise or commitment on behalf of
American Honda or in any way bind American
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Honda. Dealer agrees that it will not rely on any statements
or purported statements except from personnel as authorized
hereinabove.
11.2. The Agreement contains the entire agreement between Dealer and
American Honda. Dealer acknowledges that no representations or
statements other than those expressly set forth therein were
made by American Honda or any officer, employee, agent or
representative thereof, or were relief upon by Dealer in
entering into the Agreement. The Agreement terminates and
supersedes, as of the execution thereof, all prior agreements
relating to Honda Products, if any.
11.3. Dealer hereby waives, abandons and relinquishes any and all
claims of any kind and nature whatsoever arising from or out
of or in connection with any prior agreement entered into
between Dealer and American Honda; provided, however, that
nothing herein contained shall be deemed a release or waiver
of any claim arising out of prior sales of Honda Products by
American Honda to Dealer.
11.4. The Agreement is personal to the individuals identified as
principals, owner(s), partners or shareholder(s) in Paragraph
C. Neither the Agreement, nor any part hereof or any interest
therein, may be transferred or assigned by Dealer, in whole or
in part, directly or indirectly, voluntarily or by operation
of law, without the prior written approval of American Honda.
Any attempted transfer or assignment will be void and not
binding upon American Honda.
11.5. All notices, notifications or requests under or pursuant to
the provisions of the Agreement will be directed to the
address of the principal places of business of the respective
parties to the Agreement. If either party cannot effect
notice at the place of business of the other because a party
has abandoned its place of business or refuses to accept
notice, then, and only in such case, notice may be served on
American Honda through its designated agent for service of
process and upon Dealer through the Department of Motor
Vehicles (or its equivalent) in the state where the Dealership
Location is authorized by American Honda.
11.6. The waiver by either party of any breach or violation of or
default under any provision of the Agreement will not be a
waiver by such party of any other provision or of any
subsequent breach or violation thereof or default thereunder.
The failure or delay of either party to take prompt action
upon any breach or violation of the Agreement will not be
deemed a waiver of the right to take action for such breach,
default or violation at any time in the future.
11.7. Dealer agrees to keep confidential and not disclose, directly
or indirectly, any information which American Honda designates
as confidential.
11.8. The Agreement is and shall be deemed to have been entered into
in California and shall be governed by and construed in
accordance with the laws of the State of California.
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11.9. If any provision of this Agreement should be held invalid or
unenforceable for any reason whatsoever or to conflict with
any applicable law, the Agreement will be considered divisible
as to such provisions, and such provisions will be deemed
amended to comply with such law, or if it cannot be so amended
without materially altering the tenor of the Agreement, then
it will be deemed deleted from the Agreement in such
jurisdiction, and in either case, the remainder of the
Agreement will be valid and binding.
11.10. The terms of the Agreement may not be modified except in
writing signed by an authorized officer of the parties.
Without limiting the generality of the foregoing, no course of
dealing will serve to modify or later the terms of the
Agreement.
11.11. Dealer is an independent business. The Agreement does not
constitute Dealer the agent or legal representative of
American Honda for any purpose whatsoever. Dealer is not
granted any expressed or implied right or authority to assume
or create any obligation on behalf of or in the name of
American Honda or to bind American Honda in any manner or
thing whatsoever. Dealer has paid no consideration for the
Agreement. Neither the Agreement nor any right granted under
it is a property right.
11.12. The expiration or termination of the Agreement will not
extinguish any claims American Honda may have for the
collection of money or the enforcement of any obligations
which may be in the nature of continuing obligations.
12. DEFINITIONS.
12.1. American Honda means American Honda Motor Co., Inc. a
California corporation, and the Honda Automobile Division that
markets Honda Automobiles.
12.2. Dealer means the person, firm, corporation, partnership or
other legal entity that signs the Agreement and each of the
persons identified in Paragraph C.
12.3. Dealer Manager means the principal manager of Dealer
identified in Paragraph D upon which personal service American
Honda relies in entering into the Agreement.
12.4. Dealer Owner means the owner(s) of Dealer identified in
Paragraph C upon whose personal service American Honda relies
in entering into the Agreement.
12.5. Dealership Location means the location approved by American
Honda for the purpose of conducting Dealership Operations.
12.6. Dealership Operations means all operations contemplated by the
Agreement. These operations include the sale and service of
Honda Products, and any other activities undertaken by Dealer
related to Honda Products, including rental and leasing
operations, used car sales and body shop operations, and
finance and insurance operations, whether conducted directly
or indirectly by Dealer.
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12.7. Dealership Premises means the facilities provided by Dealer at
its Dealership Location for the conduct of Dealership
Operations as approved by American Honda.
12.8. Honda Automobiles means such new passenger cars as are from
time to time offered for sale by American Honda to Dealer for
resale as part of the Honda automobile line as defined by
American Honda.
12.9. Honda Parts means parts, accessories and optional equipment
marketed by American Honda for use with Honda Automobiles.
12.10. Honda Products means Honda Automobiles and Honda Parts.
12.11. Honda Trademarks means the various trademarks, service marks,
names and designs which American Honda uses or is authorized
to use in connection with Honda Products or services relating
thereto.
12.12. Primary Market Area means the geographical area designated for
Dealer by American Honda from time to time.
12.13. The Agreement means the Honda Automobile Dealer's Sales and
Service Agreement and these Standard Provisions which are
incorporated therein by reference.
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SCHEDULE E
AMERICAN HONDA MOTOR CO., INC.
POLICY ON THE PUBLIC OWNERSHIP
OF HONDA AND ACURA DEALERSHIPS
I. OBJECTIVES
In this Policy on the Public Ownership of Honda and Acura Dealerships
(the "Policy"), American Honda Motor Co., Inc. ("American Honda") addresses
several issues raised by the recent announcement by certain entities which own
automobile dealerships that they intend to offer stock for sale to the public.
Proposals for the public ownership of automobile dealerships have been widely
publicized in the press. American Honda has been asked by several dealers and
the National Automobile Dealers Association to state its position on the public
ownership of Honda and Acura dealerships. This Policy is an effort to address
inquiries by providing guidelines for the ownership of Honda and Acura
dealerships that assist Dealer Owners and potential Dealer Owners in assessing
whether a particular form of ownership is consistent with American Honda's
standards for its dealerships.
II. BACKGROUND
A. THE PERSONAL NATURE OF THE DEALER OWNER RELATIONSHIP
There is no simple "yes" or "no" answer to the question, "Will
American Honda permit transfer of a dealership to a publicly-owned
corporation?" The answer depends on whether the proposed form of ownership
preserves the individualized relationship between the Dealer Owner and the
local community, on the one hand, and American Honda and the Dealer Owner, on
the other hand.
Despite the recent increase of mass marketing (including the advent
over the last twenty years of so-called "category killers" such as the toy
store giants that have replaced neighborhood toy stores and the hardware giants
that have replaced local hardware stores), American Honda continues to believe
that automobile sales and service are most effectively done through dedicated,
local dealerships with strong ties to the community. For most automobile
purchasers, the decision to buy a new car is a major financial commitment and
is only made after extensive deliberation. Although competitive price is
undoubtedly a major factor in the buying decision, American Honda believes
strongly that the building of a relationship between the dealer and the buyer,
particularly the development of trust in the quality of the product and the
service provided by Honda dealers has, over the years, been a major selling
point that has distinguished Honda and Acura vehicles from the competition.
When a first-time new car buyer purchases a Honda vehicle, American Honda
believes that we have a great opportunity to make that customer a life-time
Honda and Acura buyer -- because we provide the best products and the best
service through the most dedicated and committed dealers.
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
In order to ensure that Honda and Acura dealers provide the advice and
service required by new car buyers, American Honda attempts to select the best
people to be its dealers and requires that these people maintain personal
control over Dealership Operations. Because individual Dealer Owners have
considerable autonomy as to how they run their dealerships, American Honda's
influence over the quality of its dealerships depends in large part on how
wisely it selects its dealers. Although no process is perfect, American Honda
believes that over the years it has done an excellent job of selecting Dealer
Owners and is extremely proud of the quality of its dealerships.
B. THE DEALER AGREEMENT
The Honda or Acura Automobile Dealer Sales and Service Agreement (the
"Dealer Agreement") between American Honda and its dealers includes a number of
provisions that ensure that the relationship between American Honda and its
dealers will remain person. Section C of the Dealer Agreement states: "Dealers
covenants and agrees that this Agreement is personal to Dealer, to the Dealer
Owner, and to the Dealer Manager, and American Honda has entered into this
Agreement based upon their particular qualifications and attributes and their
continued ownership or participation in Dealership Operations." Sections C and
D of the Dealer Agreement name the specific individuals who own the dealership,
their percentage of ownership, the individual who will function as the Dealer
operator and the individual who will function as the Dealer Manager. Section J
states: "Neither this Agreement, nor any part thereof or interest therein, may
be transferred or assigned by Dealer, directly or indirectly, voluntarily or by
operation of law, without the prior written consent of American Honda." In
Section 8.1 of the Dealer Agreement, "Dealer agrees that American Honda has the
right to select each successor and replacement dealer and to approve its owners
and principal management." Dealers must inform American Honda in writing of any
potential change in the ownership or management listed in Sections C and D.
Prior to taking effect, such changes must be approved in writing by American
Honda. American Honda's approval will not be unreasonably withheld.
C. THE POTENTIAL BENEFITS OF PUBLIC INVESTMENT IN DEALERSHIPS
Public investment in dealerships offers potential benefits to
both American Honda and its dealers. American Honda needs exclusive Honda or
Acura dealerships with separate, freestanding, state-of-the-art facilities at
prime locations to meet its long term business objectives. American Honda
dealers need to compete vigorously and such competition may include expanded
and improved showrooms, upgraded computerization, the introduction of various
customer amenities, etc. The ability to raise capital through public offerings
of stock provides an additional means of financing improvement in dealership
facilities and operations.
D. THE TENSION BETWEEN PERSONAL RELATIONSHIP AND PUBLIC OWNERSHIP
American Honda believes that the quality of the individuals who serve
as Honda or Acura dealers and Dealer Managers is essential to the success of
American Honda and the dealerships. Therefore, American Honda is determined to
maintain its personal relationship with its Dealer
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
Owners and Dealer Managers and to continue to exercise the right of approval of
changes in dealer ownership and management as set forth in the Dealer
Agreement. To the extent that public ownership of a Honda or Acura dealership
means that the Dealer Manager will be appointed by a board of directors
selected by owners of publicly-traded stock, such an arrangement is
inconsistent with American Honda's needs and the Dealer Agreement. On the other
hand, public ownership of a portion of the shares of a dealership may be
consistent with American Honda's objectives in cases in which a controlling
interest in the dealership is maintained by a specified Dealer Owner and the
dealership is managed by a specified Dealer Manager. The following guidelines
are an attempt to reconcile the tension between American Honda's need for a
personal relationship with each dealer and dealer proposals for public
ownership of an interest in dealerships.
III. PUBLIC OWNERSHIP GUIDELINES
A. CASE-BY-CASE DETERMINATION.
As in the past, American Honda will evaluate requests to transfer
ownership of Honda and Acura dealerships on a case-by-case basis. Proposals to
transfer ownership to entities with publicly-traded shares will be reviewed
based on the standards set forth in this Policy. AMERICAN HONDA RESERVES THE
RIGHT, IN ITS SOLE BUSINESS JUDGMENT, TO APPROVE OR REJECT SUCH TRANSFERS.
B. PROPOSALS TO BE SUBMITTED IN WRITING.
All proposals to transfer ownership of Honda and Acura dealerships
must be submitted in writing to American Honda and must include:
1. A list of the individuals and entities that will
own PRIVATELY-HELD SHARES of the dealership, including the amount of
shares owned by such individual or entity and information and
documentation about each such individual or entity; in the case of
entities owning or controlling such privately-held shares, a list of
the individuals owning such entities and information and documentation
about such individuals;
2. With respect to ownership interests not listed in
accordance with subsection 1, immediately above, a list of the
individuals and entities that will own or control 5% or more of the
dealership (either through ownership of publicly-held stock or any
combination of privately-held stock and publicly-held stock or any
other arrangement), including information and documentation about each
such individual or entity;
3. The number and percentage (if any) of the shares
of the entity that owns the dealership that will be publicly traded;
4. A detailed description, including flow charts, of
the proposed structure of the entity that will own and/or control the
dealership and the relationship of the Dealer
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
Owner to these entities, including, with respect to entities with a
significant interest in the Dealer Owner, a description of the
individuals holding such interest;
5. The name and a brief biography of the individual
who will function as Dealer Manager and a detailed description of the
functions and responsibilities of the Dealer Manager;
6. Complete financial documents (including but not
limited to the most recent and the prior year end audited financial
statements of any entity proposing to obtain any interest equal to or
greater than 5% of a dealership or 5% of any entity that owns a
dealership), indicating, among other things, the amount of
capitalization of the dealership and the verifiable sources of such
capitalization;
7. A detailed description of the proposed use of the
funds to be raised from the public investment;
8. The articles and bylaws of the entity or entities
that will own and/or control the dealership;
9. Copies of the proposed transactional documents
that will be used to effectuate the transaction, including, without
limitation, copies of any government filings and contracts pertaining
thereto; and
10. Copies of any additional documents that the
transferees, transferors and other parties having a substantial
interest in the transaction have that American Honda would reasonably
need to evaluate the proposal.
After receipt of complete documentation for the proposal, as outlined
above, and due consideration thereof, American Honda will provide the party
submitting the proposal with a preliminary assessment of the proposed
transaction. NO FINAL DECISION ON THE PROPOSAL WILL BE MADE UNTIL SUBMISSION
OF FINAL VERSIONS OF ITEMS 1 THROUGH 10 WITH ANY OTHER DOCUMENTATION REQUESTED
BY AMERICAN HONDA AND AMERICAN HONDA AND THE NEW OWNERSHIP ENTITY AGREE ON AND
ENTER INTO A DEALER AGREEMENT.
It is not advisable to make any expenditures or commitments, or to
enter into any contracts or incur any obligations on the assumption that
authorization of a proposal will be granted. Any such expenditures, commitments
or obligations, financial or otherwise, made or entered into by a dealer in
anticipation of authorization of a proposal, and prior to: (1) receipt of final
written approval by American Honda and (2) execution of the necessary documents
as described above (including a new Dealer Agreement) are made entirely at the
dealer's own risk and without any liability on the part of American Honda.
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
C. GUIDES TO PREPARATION OF AN ACCEPTABLE PROPOSAL
In preparing the documents listed immediately above, the dealer should
keep in mind the following list of standards (which is intended to provide
guidance, not to be a complete list) to which American Honda will require
adherence:
1. All dealerships must have a qualified Dealer
Manager acceptable to American Honda. American Honda's right of prior
written approval of any change of Dealer Manager must be incorporated
into the transactional documents. The Dealer Manager should be
well-respected, civically-active member of the community. As
discussed above, personal involvement by Dealer Managers in Dealership
Operations is an important means of ensuring that Honda and Acura
dealerships are run with a high level of attention, care and
commitment. The Dealer Manager must maintain control over the
day-to-day operations of the dealership and the transactional
documents should set forth in detail the level of autonomy that the
Dealer Manager will exercise, including, for example, the amount of
money that the Dealer Manager will be empowered to transfer.
Dealerships must abide by American Honda's commitment to encourage
diversity of persons in dealer management positions.
2. The Dealer Owner's Executive Manager (that is,
the person who has operational control of the entity that owns and/or
controls the dealership) should be an experienced, well-respected
executive with final authority to decide any dealership matters not
within the authority of the Dealer Manager.
3. Dealerships are non-transferable without the
prior written consent of American Honda. Because the shares of
publicly-owned corporations are freely transferable, the percentage of
public ownership must be restricted so that a controlling interest of
the dealership remains in the hands of approved individuals. It
follows that the controlling interest in the entity that controls the
dealership cannot be transferred without the prior written consent of
American Honda. In on event may the percentage of public ownership of
a dealership be greater than or equal to the percentage of private
ownership by American Honda-approved individuals and privately-held
entities. To the extent that an entity not approved by American Honda
attempts to acquire control and/or ownership of a dealership, the
Dealer Agreement with American Honda must provide for termination of
the Dealer Agreement and/or American Honda's right to acquire the
dealership at its fair market value.
4. The controlling interest in Honda or Acura
dealerships must remain in the hands of a person or entity engaged
predominantly in the sale and service of new automobiles. For example,
American Honda will not approve transfer of dealerships or entities
that control dealerships to general retailers or retailers that deal
primarily in non-automotive products.
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
5. American Honda will not approve the transfer of
Honda or Acura dealerships to entities that are known to have
significant investments in companies that compete with American Honda
or its parent, subsidiaries or Affiliates in manufacturing, marketing
or selling automotive products or services.
6. Public corporations having an ownership interest
in the dealership and the individuals and entities that control such
public corporations (but not persons whose ownership interest is
limited to passive ownership of 5% or less of the shares of public
corporations) must agree to obtain American Honda's approval before
acquiring an interest in any other Honda or Acura dealership. American
Honda reserves the right to limit the number and/or location of Honda
and Acura dealerships that can be owned or controlled by any one
individual or corporation. In the future, except where a specific
finding is made by American Honda that such acquisition would further
a business interest of American Honda, individuals and/or entities
will be limited to acquiring interests in dealerships as follows:
a. HONDA
No one shall be allowed to acquire an ownership
interest, directly or through an Affiliate, in a
multiple number of Honda dealerships as provided
below:
(a) in a "Metro" market (a "Metro" market is a
metropolitan market area represented by two or
more Honda dealer points) with two (2) to ten
(10) Honda dealership points (inclusive), no
Dealer Owner may own, operate or have an interest
in more than one (1) Honda dealership;
(b) in a Metro market with eleven (11) to twenty
(20) Honda dealership points (inclusive), no
Dealer Owner may own, operate or have an interest
in more than two (2) Honda dealerships;
(c) in a Metro market with twenty-one (21) or
more Honda dealership points, no Dealer Owner may
own, operate or have an interest in more than
three (3) Honda dealerships;
(d) in more than 4% of the Honda dealerships in
any one of the ten Honda Zones; and
(e) in more than seven (7) Honda dealerships
nationally.
No one shall acquire contiguous Honda
dealerships.
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
b. ACURA
No one shall be allowed to acquire an ownership
interest, directly or through an Affiliate, in a
multiple number of Acura dealerships as provided
below:
(a) in a "Metro" market (a "Metro" market is a
metropolitan market area represented by two or
more Acura dealer points), no Dealer Owner may
own, operate or have an interest in more than one
(1) Acura dealership;
(b) in more than two (2) Acura dealerships in any
one of the six Acura Zones; and
(c) in more than three (3) Acura dealerships
nationally.
No one shall acquire contiguous Acura
dealerships.
"Affiliate" of, a or person or entity
"affiliated" with, a specified person or entity,
means a person or entity that directly or
indirectly, through one or more intermediaries,
controls, is controlled by, or is under common
control with, the person or entity specified. For
the purpose of this definition, the term
"control" (including the terms "controlling,"
"controlled by" and "under common control with")
means the possession, directly or indirectly, or
the power to direct or cause the direction of the
management and policies of a person or entity,
whether through the ownership of securities by
contract or otherwise.
7. The dealership would continue to have the same
reporting requirements as all other Honda and Acura dealerships,
including dealership-specific financial information on the same basis
that the dealership has provided such information in the past. In the
case of corporations that, with American Honda's approval, own
multiple Honda and Acura dealerships, each such dealership must be
separately incorporated and financial information must be broken down
by individual dealership and must meet capitalization requirements,
etc., by individual dealership. The corporate bylaws of the individual
corporation that actually owns a Honda or Acura dealership must
restrict it from engaging in any activity other than the ownership and
maintenance of a Honda or Acura dealership.
8. The dealership must agree to provide American
Honda with all information and documents, including but not limited to
SEC filings, that evidence a substantial change of ownership or
control of such dealership or any entity with a controlling interest
in such dealership. Individuals or entities that acquire, own or
control more than 5% of any entity that owns or controls a Honda or
Acura dealership must provide American
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
Honda with copies of all filings made to the SEC, all comparable
filings made to state agencies, and, at least once annually, the most
recent calendar year's fully audited financial statements. Nothing in
this subsection 8 should be construed to limit the requirement that
any proposed change in the ownership or control of privately-held
shares of a dealership or an entity that owns a dealership must be
reported to American Honda and is subject to American Honda's prior
written approval.
9. For allocation and other purposes, transfer of
Honda or Acura Automobiles from one dealership to another dealership
owned and/or controlled by the same entity will be treated the same as
a transfer between separately-owned dealerships.
10. The dealership should be committed to providing
separate, freestanding Dealership Operations that exclusively offer a
full range of Honda Products and services or Acura Products and
services and do not offer competing products or services from its
Dealership Premises.
11. The controlling individual or entity must be
liable for the operation of the dealership, and must agree to
indemnify American Honda for any claims made by shareholders of
publicly-held shares against American Honda to the full extent
permitted by law. American Honda must have the right (but not the
obligation) to review all documentation and other representations to
the public about any offering of stock in the dealership or the entity
owning the dealership. Whether or not American Honda reviews them,
such documentation and representations must include an affirmative
statement that American Honda is completely independent of the entity
offering the stock and that, although American Honda's acts or
omissions may have an impact on the value of the stock, American Honda
bears no responsibility for such impact and has no liability to any
investor under any legal or equitable theory.
12. The entity that owns or controls the dealership
may not commingle its trademarks with dealer trademarks other than
those used exclusively in connection with the dealership. For example,
a dealer could use its own "dealership" trademark in conjunction with
the Honda or Acura Trademarks as in "▇▇▇▇ ▇▇▇▇▇ HONDA" but it could
not use a trademark in conjunction with the Honda or Acura Trademarks
that it also uses in conjunction with non-Honda or non-Acura goods or
services. The entity must agree to maintain the Honda or Acura brand
image, as that image is developed by American Honda.
13. The entity that owns the dealership must agree to
have all dealership sales and service personnel certified by American
Honda pursuant to its usual certification programs; to use and sell
genuine Honda and Acura parts and accessories; and to participate in
good faith in applicable Honda or Acura sales, marketing, service,
parts, facility image and upgrade, training, customer satisfaction,
and diversity programs.
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AMERICAN HONDA "PUBLIC OWNERSHIP POLICY"
14. The Dealer Agreement will also provide that
breaches of the Dealer Agreement or failure to adhere to American
Honda requirements by any individual dealership owned by an entity
shall be treated as breaches of the Dealer Agreement between American
Honda and such entity and shall constitute reasonable grounds for
rejection by American Honda of acquisition by the entity of additional
Honda or Acura dealerships.
15. American Honda will not approve any transfer of a
dealership that is not in full compliance with the Dealer Agreement
between American Honda and such dealership prior to such transfer.
16. The Dealer Agreement with the entity that owns
the dealership will include provisions that incorporate the provisions
of this Policy and, without limiting the foregoing, permit American
Honda to terminate the Dealer Agreement for breaches of the
above-listed requirement and to reacquire the dealership as set forth
in subsection III.C.3 above.
Inquiries about the Policy should be made to Honda Dealer Placement and/or
Acura Dealer Development, as applicable.
Inquiries about the transfer of a dealership should be made to Zone Sales
Office.
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SCHEDULE F
GROUP 1 RESTRICTED STOCKHOLDERS
Stockholder Stock Owned (Shares)(1)(2) Stock Owned (%)(1)
----------- -------------------- ---------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ 196,368 1.34
Gulf Coast Family Limited Partnership 250,248 1.71
▇. ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇. 546,368 3.72
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ 2,910,374 19.83
▇▇▇▇▇▇ ▇▇▇▇ 162,027 1.10
▇▇▇ ▇▇▇▇ Liu 305,790 2.08
▇▇▇▇▇▇ ▇. ▇. ▇▇▇ 278,955 1.90
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. 436,638 2.97
▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ 202,719 1.38
▇▇▇▇▇▇ ▇▇▇▇ 40,725 0.28
▇▇▇▇▇▇▇ ▇▇▇▇ 162,027 1.10
SBM-T Family Limited Partnership 106,041 0.72
SMC Investment, Inc. 637,475 4.34
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 679,181 4.63
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 232,021 1.58
▇. ▇. ▇▇▇▇▇ 247,909 1.69
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 774,040 5.27
The Ownership Entity agrees that, unless such documentation has been
provided to AHM previously, the following persons will provide to AHM within
thirty days of the date of this Agreement the same type of documentation
provided by the persons in the above list:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 45,455 0.33
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 15,727 0.11
Leigh ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ Trust 50,000 0.36
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ Trust 50,000 0.36
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 16,290 0.12
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 120,455 0.86
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 55,845 0.40
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 30,629 0.22
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 55,008 0.39
▇▇▇▇▇ ▇▇▇▇▇▇ 22,727 0.16
▇▇▇▇ ▇▇▇▇▇▇ 93,636 0.67
▇▇▇▇▇ ▇▇▇▇▇ 22,727 0.16
▇▇▇▇▇ ▇▇▇▇▇ 6,818 0.05
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 16,290 0.12
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 129,091 0.92
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 67,116 0.48
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 122,727 0.88
▇▇▇▇ ▇▇▇▇▇▇▇▇ 22,727 0.16
----------------------------
(1) Indicates Stock ownership following consummation of Group 1's
initial public offering (the "IPO"), and assumes (i) a per share
IPO price of $11.00; (ii) the sale of 371,864 shares of Stock by
▇. ▇. ▇▇▇▇▇ in the IPO; and (iii) the Underwriters' full exercise
of their overallotment option.
(2) These shares of Stock will be Restricted Stock subject to the
restrictions set forth in Section 1.5 of the Agreement.
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SCHEDULE G
ADDITIONAL RESTRICTIONS ON TRANSFER
OF INTERESTS IN DEALERSHIP PRINCIPALS
Gulf Coast Family Limited Partnership
SBM-T Family Limited Partnership
SMC Investment, Inc.
The Dealership Parties hereby represent that the only Dealership
Principals that are entities (i.e., not individual persons) are the entities
listed above (the "Entity Principals"). Each of the Dealership Parties hereby
agree that the holders of any ownership interest in any Entity Principal (an
"Entity Interest") shall not, at any time without the prior written approval of
AHM sell, transfer, or in any manner encumber any Entity Interest or enter into
any agreement providing for the voting or control of any Entity Interest as
directed by any person or entity, or in a specified manner or pursuant to a
specified procedure or grant any voting proxy or otherwise enter into any
arrangement the purpose or effect of which is to vest in any other person or
entity the voting rights of any Entity Interest. AHM will not approve any
transfers of any Entity Interest that it reasonably deems detrimental to AHM's
interests as provided in Section 1.8 of the Agreement, and any approved
transfer may only be made on the condition that the transferee agrees in
writing to be bound by the terms of this Agreement to the extent as if it had
executed this Agreement as an owner of the Entity Interest on the effective
date hereof. Each certificate representing any Entity Interest, if any, or any
securities issues in respect of such Entity Interest shall be stamped or
otherwise imprinted with a legend substantially in the following form:
The shares represented by this Certificate are subject to
restrictions on transfer set forth in an Agreement between
American Honda Motor Co., Inc. and the Corporation [or other
form of entity] effective as of October ____, 1997, as
amended, a copy of which will be furnished by the Corporation
without charge upon written request.
Without limiting the generality of the foregoing restrictions, the
Dealership Parties specifically agree that transfers of Entity Interests are
subject to AHM's prior written approval even if transfer is permitted pursuant
to the Entity Principal's Articles of Organization or by an act of owners of
the Entity Principal or by any other means. In the event that any Entity
Interest is transferred without the prior written approval of AHM including,
but not limited to, transfer by operation of law (e.g. upon the death of an
owner of an Entity Interest to an heir), such Entity Principal shall inform AHM
of such transfer and either (a) request approval of such transfer, (b)
reacquire the Entity Interest, or (c) arrange for the retransfer of the Entity
Interest to a previously approved owner of an Entity Interest. In the event
that the Entity Principal selects (a) above and AHM refuses to approve the
transfer, then the Entity Principal must make its best efforts to effectuate
(b) or (c). If AHM refuses to approve the transfer and the Entity Principal
cannot effectuate (b) or (c), then AHM may invoke the purchase procedures set
forth in Sectio 9.3, as though Group 1 had breached this Agreement.
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SCHEDULE H
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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SCHEDULE I
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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SCHEDULE J
None
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SCHEDULE K
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT, effective as of October 21, 1997, is
entered into between Group 1 Automotive, Inc., a Delaware corporation, with its
principal place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
on the one hand (the "Ownership Entity"), and American Honda Motor Co., Inc.
("AHM), a California corporation, with its principal place of business at ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, on the other hand.
WITNESSETH
WHEREAS, Ownership Entity has been formed to own subsidiary
corporations which will own and operate automobile dealerships, and
WHEREAS, Ownership Entity intends to publicly offer and sell a portion
of the shares of Stock (as defined in the Agreement between American Honda
Motor Co., Inc. and the Dealership Parties (the "Agreement") in a public
offering pursuant to the Securities Act of 1993 (the "Act"); and
WHEREAS, AHM has consented to the offer and sale of such Stock to the
public on the terms set forth in the Agreement between the parties on or bout
date herewith; and
WHEREAS, in recognition of AHM's demand for complete protection
against liability and threats of legal action and in order to obtain AHM's
consent to the offer and sale of such shares, the Ownership Entity wishes to
provide in this Indemnification Agreement for the indemnification of and the
advancing of expenses to AHM as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants made herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
18. INDEMNITY OF RELEASEES
The Ownership Entity hereby agrees to indemnify and hold harmless AHM
and its parent, subsidiaries and Affiliates (the "Releasees") from and against
any and all losses, liabilities, judgments, amounts paid in settlement, claims,
damages and expenses whatsoever (collectively a "Claim"), including, but not
limited to, any and all expenses whatsoever (including reasonable attorneys'
fees) incurred in investigating, preparing or defending against any litigation,
commenced or threatened, to which Releases may become subject under the
Securities Act of 1933 (the "Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the securities laws of any state (the "Blue Sky
Laws"), or any other federal, state, local or foreign law (including common
law) providing for liability in connection with or resulting from the offer for
sale, sale and/or issuance of securities or other equity interests, relating to
the offer for sale, sale and/or issuance of equity interests in the Ownership
Entity, its subsidiaries, or entities that directly or indirectly hold an
interest in the Ownership Entity, whether such interests are in the form of the
Stock or other
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68
membership interests, units, shares or any other form. In addition, the
Ownership Entity hereby agrees to indemnify and hold harmless Releasees from
any and all claims of the shareholders of the Ownership Entity with respect to
any matter. If it is ultimately determined, based upon a final decision of a
court, arbitrator or other authorized panel, that any Releasee participated in
such offer for sale, sale and/or issuance and in connection therewith acted
with willful misconduct, then the indemnification of such Releasee set forth
herein shall be reduced proportionately to reflect the extent of such
Releasee's willful misconduct, and such Releasee shall reimburse the Ownership
Entity for any expenses advanced by the Ownership Entity for the benefit of
such Releasee pursuant to Section 3 of this Indemnification Agreement to the
extent that such expenses were in excess of the Ownership Entity's
proportionate liability.
If the indemnification provided for in this Section 1 from the
Ownership Entity is unavailable to Releasees hereunder in respect of any
losses, claims, damages, liabilities or expenses referred to therein as a
result of a judicial determination that such indemnification may not be
enforced in such case notwithstanding this Indemnification Agreement, the
Ownership Entity, in lieu of indemnifying Releasees, shall contribute to the
amount paid or payable by Releasee as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the Ownership Entity and Releasees in connection with the
actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
fault of such Ownership Entity and Releasees shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such Ownership Entity or Releasees, and the Ownership Entity's relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
19. NOTIFICATION AND DEFENSE OF CLAIM
(a) If any litigation is commenced against Releasees in
respect of which indemnity may be sought pursuant to this Indemnification
Agreement, AHM shall promptly notify the Ownership Entity in writing of the
commencement of any such litigation, and the Ownership Entity shall then assume
the defense of any such litigation, including the employment and fees of counsel
(reasonably satisfactory to AHM) and the payment of all such expenses.
(b) Releasees shall have the right to employ their own
counsel in any such case to oversee the litigation on behalf of Releasees, to
consult with the attorneys engaged by the Ownership Entity as to the proper
handling of the litigation and to take such actions in connection with the
litigation as are reasonably necessary to protect Releasees' interests. The
Ownership Entity shall pay the reasonable fees and expenses of not more than one
additional firm of attorneys for Releasees. In the event of a conflict of
interest between AHM and the Ownership Entity such that it would be
inappropriate for Ownership Entity's counsel to represent Releasees in any
litigation, the limitation in the immediately preceding sentence shall not apply
and the Ownership Entity shall pay the reasonable fees and expenses of as many
firms of attorneys as Releasees reasonably require to defend their interests.
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(c) The Ownership Entity agrees to notify AHM promptly of
the commencement of any litigation against any of the parties to the Agreement
in connection with the issue and sale of the Stock. The Ownership Entity and
Releasees agree to cooperate with each other in the defense of any such
litigation in which any of the Releasees is named as a party.
(d) The Ownership Entity shall not be obligated to
indemnify or reimburse Releasees under this Indemnification Agreement for any
amounts paid in settlement of any litigation effected without the Ownership
Entity's prior written consent. The Ownership Entity shall not, in the defense
of any such litigation, except with AHM's prior written consent, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to
Releasees of a release from all liability in respect to such litigation. Neither
the Ownership Entity nor AHM shall unreasonably withhold its consent to any
proposed settlement.
20. PAYMENT OF EXPENSES
The Ownership Entity agree that they will pay any and all expenses
incurred by Releasees in defending any civil or criminal action, suit or
proceeding against Releasees covered by this Indemnification Agreement in
advance of the time such expenses are due. With respect to legal fees and
disbursements of attorneys retained to defend Releasees, the Ownership Entity
will pay such attorneys as advance retainer of up to $20,000 and will pay
additional fees and expenses of such attorneys in increments of not more than
$20,000 periodically in advance of the dates that such fees and expenses are
incurred.
21. ENFORCEMENT
(a) The Ownership Entity expressly confirms and agrees
that it has entered into this Indemnification Agreement and assume the
obligations imposed by it in order to induce AHM to consent to the offer and
sale of the Stock and acknowledge that AHM is relying upon this Indemnification
Agreement to grant such consent.
(b) In the event AHM is required to bring any action to
enforce rights or to collect monies due under this Indemnification Agreement and
is successful in such action, the Ownership Entity shall reimburse AHM for all
of AHM's reasonable fees and expenses in bringing and pursuing such action.
22. MISCELLANEOUS
(a) This Indemnification Agreement shall be interpreted
and construed in accordance with the laws of the State of California, without
giving effect to the conflict of law rules.
(b) This Indemnification Agreement shall be binding upon
and inure to the benefit of the Ownership Entity and Releasees and their
respective legal representatives, successors and assigns.
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(c) No amendment, modification or termination of this
Indemnification Agreement shall be effective unless in writing and signed by all
parties hereto.
(d) If any provision of this Indemnification Agreement
should be held invalid or unenforceable for any reason whatsoever, or conflicts
with any applicable law, this Indemnification 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 this Indemnification Agreement, then it (they) will be
deemed deleted from this Indemnification Agreement in such jurisdiction, and in
either case, the remainder of this Indemnification Agreement will be valid and
binding.
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement effective on the date first above written.
GROUP 1 AUTOMOTIVE, INC.
BY:
--------------------------------------
▇. ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇.
Chairman, President and
Chief Executive Officer
AMERICAN HONDA MOTOR CO., INC.
Acura Division
BY:
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
Acura Division
AMERICAN HONDA MOTOR CO., INC.
Honda Division
BY:
--------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Executive Vice President
Automobile Sales Division
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SCHEDULE L
VIA CERTIFIED MAIL -- RETURN RECEIPT REQUESTED
TO: ALL HONDA AUTOMOBILE DEALERS
DATE: July 24, 1995
SUBJECT: AHM's Wholesaling Policy
Enclosed is a copy of the Wholesaling Policy (the "Policy"). Beginning November
1, 1995, the Honda Division of American Honda Motor Co., Inc. ("AHM") will
enforce the Policy in order to ensure that each Honda dealer complies with
AHM's Honda Automobile Dealer Sales and Service Agreement (the "Dealer
Agreement"). Although advance notification is hereby provided, AHM's position
is that applicable law does not require any advance notice prior to the
adoption, implementation and enforcement of the Policy.
While AHM's position is that the Policy is not a modification of your Dealer
Agreement and that AHM is not required to file the Policy with State agencies,
we have, in an abundance of caution and to the extent such filing may be deemed
to be required, also filed a copy of the Policy with any appropriate State
agencies. If the Policy is deemed to be a modification to your Dealer
Agreement, you may believe you have certain rights, under applicable state law,
to contest the Policy. To the extent required, you are hereby notified of the
existence of such potential rights.
All questions pertaining to this letter and the Policy should be addressed to
AHM's Wholesale Policy Administrator, which position is currently held by
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Assistant Vice President, Market Operations, Honda
Division.
Please acknowledge receipt of this letter and the Policy by signing and dating
the attached Dealer Acknowledgment and returning the Dealer Acknowledgment to
your Zone Sales Office within ten days of the date of this letter.
Very truly yours,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Senior Vice President
Auto Sales
Attachments
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TO: All Honda Automobile Dealers in the United States
DATE: July 24, 1995
SUBJECT: AHM's Wholesaling Policy
__________________________________________________________
The Honda Division of American Honda Motor Co., Inc. ("AHM") has been
made aware that some Authorized Honda Dealers are transferring Honda vehicles
to intermediaries which resell or lease the vehicles. AHM believes that such
wholesaling is inconsistent with AHM's Automobile Dealer Sales and Service
Agreement (the "Dealer Agreement"), which limits Authorized Honda Dealers to
retail sales and retail leases from the Authorized Honda Dealers' premises and
prohibits the creation of additional dealership locations. AHM also believes
that transfers to intermediaries are detrimental to the best interests of AHM
since they undermine AHM's Authorized Honda Dealer network, which is a key
element of AHM's success in the market, impair the ability of AHM to provide
the highest level of customer satisfaction, create situations that tarnish the
reputation of Honda and Honda's Authorized Dealers for quality automobiles and
service, and lead to lost sales.
Accordingly, Honda adopts the following policy with respect to
transfers of Honda Automobiles by Authorized Honda Dealers to intermediaries.
1. Definitions.
1.1 As used herein, "Wholesaling" and "Wholesale Sales" shall mean
the sale or lease and delivery of new Honda Automobiles to persons other than
(1) the ultimate end user of such vehicles, or (2) leasing companies that do
not operate unauthorized dealerships (as described more fully below), or (3)
another Authorized Honda Dealer. (Transfers of Honda Automobiles between and
among Authorized Honda Dealers are permitted as long as AHM is timely notified
of each transfer and such transfer is consistent with both Authorized Honda
Dealers' obligations to provide appropriate market representation and accurate
reporting to AHM. For allocation purposes, any such transfer will be attributed
to the Authorized Honda Dealer who makes the sale or lease to the ultimate end
user.) By way of example, Wholesaling shall include:
(a) Transfers to third-party resellers who sell or lease
the new Honda Automobiles to end users as new vehicles.
(b) Transfers to third-party leasing companies that
operate (1) showrooms and/or (2) otherwise engage in sales, lease or service
activities typically done by Authorized Honda Dealers. Included in this
classification would be, any way of example, third party leasing companies that
display new Honda Automobiles on their premises or hold new Honda Automobiles
in stock, advertise for sale or lease new Honda Automobiles from their
premises, or accessorize new Honda Automobiles for sale or lease to end users.
(c) By way of example, Wholesaling does NOT include: (1)
Transfers to third parties who are end users and are NOT resellers or lessors
of new vehicles; (2) Transfers of used vehicles to any party for any purpose;
(3) Transfers to leasing companies that do NOT operate showrooms or otherwise
engage in sales, advertising and/or service activities typically done by
Authorized Honda Dealers. The sole function of such leasing companies is to
lease cars to end users
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All Honda Automobile Dealers in the United States
AHM's Wholesaling Policy
July 24, 1995
who do not wish to lease directly from an Authorized Honda Dealer. Such
companies do NOT display new Honda Automobiles on their premises, do NOT hold
new Honda Automobiles in stock, do NOT advertise for sale or lease new Honda
Automobiles from their premises, and do NOT accessorize new Honda Automobiles.
Instead, such leasing companies are approached by an end user seeking to lease
a specific, fully-equipped new Honda Automobile, acquire such a new Honda
Automobile from an Authorized Honda Dealer, and lease said new Honda Automobile
from an Authorized Honda Dealer, and lease said new Honda Automobile to such
end user; and/or (4) Transfers of title to financial institutions in cases in
which delivery of the Honda Automobile is made by the Authorized Honda Dealer
directly to the ultimate end user and the transfer of title to the financial
institution is solely for the purpose of financing the sale or lease of the
Honda Automobile.
1.2 As used Herein, "Honda Automobiles" is used as defined in
Section 12.8 of the Dealer Agreement.
1.3 As used herein, "Policy" refers to this Wholesaling Policy.
2. Restriction on Wholesaling.
Effective November 1, 1995, AHM will strictly enforce the Dealer
Agreement and require that Authorized Honda Dealers NOT engage in Wholesaling
of Honda Automobiles.
3. Enforcement of Wholesaling Policy.
3.1 Submission of Reports.
Pursuant to Section 7.3 of the Dealer Agreement, the Authorized Honda
Dealer shall submit to AHM reports on a daily basis, which include the
following information:
(a) The Vehicle Identification Number of each Honda
Automobile transferred, sold or leased by the Authorized Honda Dealer;
(b) The name and address of the person (whether an
individual or business) who has purchased or leased each such Honda Automobile
(by Vehicle Identification Number) in accordance with AHM's reporting
requirements in place at the time of the sale or lease;
(c) The calendar date of delivery to the transferee,
purchaser or lessee of each such Honda Automobile; and
(d) Upon reasonable notice to the Authorized Honda
Dealer, such additional information as may be required by AHM.
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AHM's Wholesaling Policy
July 24, 1995
Refusal by the Authorized Honda Dealer to submit such reports
constitutes a breach of the Dealer Agreement. In case of such refusal, in
addition to the remedies set forth herein, AHM reserves the right to exercise
all remedies permitted by the Dealer Agreement for a material breach thereof.
3.2 Audit of Authorized Honda Dealers.
Pursuant to Section 7.4 of the Dealer Agreement, AHM will conduct
periodic audits of its Authorized Honda Dealers to verify the accuracy of
reports submitted to AHM pursuant to Section 3.1 hereof. Audits will be
initiated on either of the following bases:
(a) AHM, in its sole discretion, may conduct random
audits of an Authorized Honda Dealer, no more frequently than once every month;
(b) If AHM receives information from which it reasonably
believes that an Authorized Honda Dealer is engaged in Wholesaling, AHM will
audit the Authorized Honda Dealer's records to determine whether such
information is correct.
Refusal by an authorized Honda Dealer to permit AHM to conduct the
audits described herein constitutes a breach of the Dealer Agreement. In case
of such refusal, in addition to the remedies set forth herein, AHM reserves the
right to exercise all remedies permitted by the Dealer Agreement for a material
breach thereof.
3.3 Preliminary Finding of a Wholesaling Violation.
AHM shall issue to the Authorized Honda Dealer a preliminary finding
of a violation of this Policy when one or more of the following events occurs:
(a) The Authorized Honda Dealer makes either an oral or
written refusal to submit the reports described in Section 3.1 hereof;
(b) After written request from AHM, the Authorized Honda
Dealer neglects to submit the reports described in Section 3.1 hereof;
(c) The Authorized Honda Dealer refuses to submit to the
audit described in Section 3.2 hereof;
(d) Upon audit by AHM pursuant to Section 3.2 hereof, it
is determined that reports submitted by the Authorized Honda Dealer to AHM are
substantially inaccurate in that the Authorized Honda Dealer has inaccurately
identified (by Vehicle Identification Number) the person (whether an individual
or business) who has purchased or leased one or more Honda Automobiles from
said Authorized Honda Dealer;
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AHM's Wholesaling Policy
July 24, 1995
(e) Upon audit by AHM pursuant to Section 3.2 hereof, AHM
has reason to believe that the Authorized Honda Dealer has engaged in
Wholesaling; or
(f) Upon other reliable evidence (which evidence will be
described to the Authorized Honda Dealer), AHM has reason to believe that the
Authorized Honda Dealer has engaged in Wholesaling.
AHM will notify the Authorized Honda Dealer in writing of any
preliminary finding of a Wholesaling violation. Such notice will include a
brief description of the basis for the preliminary finding.
3.4 The Authorized Honda Dealer Response to Preliminary Finding:
Final Finding.
The Authorized Honda Dealer will have fourteen (14) days from
notification of any such preliminary finding to contest AHM's finding in
writing by submission of sales data and/or other information that disproves
said finding. Should the Authorized Honda Dealer fail to contest such finding
within fourteen (14) days or should AHM find that the Authorized Honda Dealer's
submission does not disprove such finding, then AHM will issue a final finding
detailing the Authorized Honda Dealer's violation of this Policy.
4. AHM's Remedies in the Event of a Violation.
In the event of a final finding by AHM that the Authorized Honda
Dealer has violated the Policy;
4.1 For purposes of allocating vehicles, AHM will adjust the
Authorized Honda Dealer's sales history to exclude retail sales credit earned
on transfers found to violate the Policy;
4.2 AHM will charge-back all incentives paid by AHM related to
transfers of Honda Automobiles found to violate the Policy; and
4.3 AHM will reduce marketing allowances available to the
Authorized Honda Dealer pursuant to then-current AHM marketing programs and
proportionate to the number of Honda Automobiles which have been found to
violate the Policy and/or charge-back all Dealer Marketing Allowance amounts
(or similar payments) paid by AHM related to transfer of such Honda
Automobiles.
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All Honda Automobile Dealers in the United States
AHM's Wholesaling Policy
July 24, 1995
4.4 Should AHM issue a second final finding of a violation of the
Policy, then, in addition to the steps stated above, AHM will:
(a) Not consider that Authorized Honda Dealer eligible
for additional Honda Automobiles in excess of the standard allocation for one
(1) year thereafter; and
(b) Not consider that Authorized Honda Dealer for any
additional AHM dealership location(s) for five (5) years thereafter.
In the event that AHM issues more than two final findings of
violations of the Policy against an Authorized Honda Dealer, then the remedies
set forth in (a) and (b) of this subparagraph shall be made permanent.
4.5 Notwithstanding the above, AHM considers any Wholesaling to be
inconsistent with the Dealer Agreement and AHM reserves its rights to take
appropriate action to prevent such Wholesaling. Moreover, AHM will hold the
Authorized Honda Dealer liable for any expenses or losses that AHM may incur as
a result of any Wholesaling by that Authorized Honda Dealer, including, without
limitation, expenses or losses resulting from (a) AHM's inability to notify
customers of product recalls or other service information and product liability
claims resulting therefrom and (b) consumer claims including claims in
connection with intermediaries installing non-Honda equipment, providing
inadequate service, or making misrepresentations.
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DEALER ACKNOWLEDGMENT
I hereby acknowledge that I have received, read and understand both a copy of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇'▇ letter dated July 24, 1995 regarding AHM's Wholesaling
Policy and the enclosed copy of AHM's Wholesaling Policy also dated July 24,
1995.
Dealership Name:
------------------------------------------------------------
City and State:
------------------------------------------------------------
Dealer Code:
------------------------------------------------------------
Authorized
Dealer Signature:
------------------------------------------------------------
(Print Name):
------------------------------------------------------------
Title:
------------------------------------------------------------
Date:
------------------------------------------------------------
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TO: All Acura Automobile Dealers in the United States
DATE: August 2, 1995
SUBJECT: AHM's Wholesaling Policy
__________________________________________________________
The Acura Division of American Honda Motor Co., Inc. ("AHM") has been
made aware that some Authorized Acura Dealers are transferring Acura vehicles
to intermediaries which resell or lease the vehicles. AHM believes that such
wholesaling is inconsistent with AHM's Automobile Dealer Sales and Service
Agreement (the "Dealer Agreement"), which limits Authorized Acura Dealers to
retail sales and retail leases from the Authorized Acura Dealers' premises and
prohibits the creation of additional dealership locations. AHM also believes
that transfers to intermediaries are detrimental to the best interests of AHM
since they undermine AHM's Authorized Acura Dealer network, which is a key
element of AHM's success in the market, impair the ability of AHM to provide
the highest level of customer satisfaction, create situations that tarnish the
reputation of Acura and Acura's Authorized Dealers for quality automobiles and
service, and lead to lost sales.
Accordingly, AHM adopts the following policy with respect to transfers
of Acura Automobiles by Authorized Acura Dealers to intermediaries.
1. Definitions.
1.1 As used herein, "Wholesaling" and "Wholesale Sales" shall mean
the sale or lease and delivery of new Acura Automobiles to persons other than
(1) the ultimate end user of such vehicles, or (2) leasing companies that do
not engage in activities described more fully below in 1.1(b), or (3) another
Authorized Acura Dealer. (Transfers of Acura Automobiles between and among
Authorized Acura Dealers are permitted as long as AHM is timely notified of
each transfer and such transfer is consistent with both Authorized Acura
Dealers' obligations to provide appropriate market representation and accurate
reporting to AHM. For allocation purposes, any such transfer will be attributed
to the Authorized Acura Dealer who makes the sale or lease to the ultimate end
user.) By way of example, Wholesaling shall include:
(a) Transfers to third-party resellers who sell or lease
the new Acura Automobiles to end users as new vehicles.
(b) Transfers to third-party leasing companies that
operate (1) showrooms and/or (2) otherwise engage in sales, lease or service
activities typically done by Authorized Acura Dealers. Included in this
classification would be, by way of example, third party leasing companies that
display new Acura Automobiles on their premises or hold new Acura Automobiles
in stock, advertise for sale or lease new Acura Automobiles from their
premises, or accessorize new Acura Automobiles for sale or lease to end users.
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All Acura Automobile Dealers in the United States
AHM's Wholesaling Policy
August 2, 1995
(c) By way of example, Wholesaling does NOT include: (1)
Transfers to third parties who are end users and are NOT resellers or lessors
of new vehicles; (2) Transfers of used vehicles to any party for any purpose;
(3) Transfers to leasing companies that do NOT operate showrooms or otherwise
engage in sales, advertising and/or service activities typically done by
Authorized Acura Dealers. The sole function of such leasing companies is to
lease cars to end users who do not wish to lease directly from an Authorized
Acura Dealer. Such companies do NOT display new Acura Automobiles on their
premises, do NOT hold new Acura Automobiles in stock, do NOT advertise for sale
or lease new Acura Automobiles from their premises, and do NOT accessorize new
Acura Automobiles. Instead, such leasing companies are approached by an end
user seeking to lease a specific, fully-equipped new Acura Automobile, acquire
such a new Acura Automobile from an Authorized Acura Dealer, and lease said new
Acura Automobile to such end user; and/or (4) Transfers of title to financial
institutions in cases in which delivery of the Acura Automobile is made by the
Authorized Acura Dealer directly to the ultimate and end user and the transfer
of title to the financial institution is solely for the purpose of financing
the sale or lease of the Acura Automobile
1.2 As used herein, "Acura Automobiles" is used as defined in
Section 12.8 of the Dealer Agreement.
1.3 As used herein, "Policy" refers to this Wholesaling Policy.
2. Restriction on Wholesaling.
Effective November 1, 1995, AHM will strictly enforce the Dealer
Agreement and require that Authorized Acura Dealers not engage in Wholesaling
of Acura Automobiles.
3. Enforcement of Wholesaling Policy.
3.1 Submission of Reports.
Pursuant to Section 7.3 of the Dealer Agreement, the Authorized Acura
Dealer shall submit to AHM reports on a daily basis, which include the
following information:
(a) The Vehicle Identification Number of each Acura
Automobile transferred, sold or leased by the Authorized Acura Dealer;
(b) The name and address of the person (whether an
individual or business) who has purchased or leased each such Acura Automobile
(by Vehicle Identification Number) in accordance with AHM's reporting
requirements in place at the time of the sale or lease;
(c) The calendar date of delivery to the transferee,
purchaser or lessee of each such Acura Automobile; and
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All Acura Automobile Dealers in the United States
AHM's Wholesaling Policy
August 2, 1995
(d) Upon reasonable notice to the Authorized Acura
Dealer, such additional information as may be required by AHM.
Refusal by the Authorized Acura Dealer to submit such reports
constitutes a breach of the Dealer Agreement. In case of such refusal, in
addition to the remedies set forth herein, AHM reserves the right to exercise
all remedies permitted by the Dealer Agreement for a material breach thereof.
3.2 Audit of Authorized Acura Dealers.
Pursuant to Section 7.4 of the Dealer Agreement, AHM will conduct
periodic audits of its Authorized Acura Dealers to verify the accuracy of
reports submitted to AHM pursuant to Section 3.1 hereof. Audits will be
initiated on either of the following bases:
(a) AHM, in its sole discretion, may conduct random
audits of an Authorized Acura Dealer, no more frequently than once every month;
(b) If AHM receives information from which it reasonably
believes that an Authorized Acura Dealer is engaged in Wholesaling, AHM will
audit the Authorized Acura Dealer's records to determine whether such
information is correct.
Refusal by an Authorized Acura Dealer to permit AHM to conduct the
audits described herein constitutes a breach of the Dealer Agreement. In case
of such refusal, in addition to the remedies set forth herein, AHM reserves the
right to exercise all remedies permitted by the Dealer Agreement for a material
breach thereof.
3.3 Preliminary Finding of a Wholesaling Violation.
AHM shall issue to the Authorized Acura Dealer a preliminary finding
of a violation of this Policy when one or more of the following events occurs:
(a) The Authorized Acura Dealer makes either an oral or
written refusal to submit the reports described in Section 3.1 hereof;
(b) After written request from AHM, the Authorized Acura
Dealer neglects to submit the reports described in Section 3.1 hereof;
(c) The Authorized Acura Dealer refuses to submit to the
audit described n Section 3.2 hereof;
(d) Upon audit by AHM pursuant to Section 3.2 hereof, it
is determined that reports submitted by the Authorized Acura Dealer to AHM are
substantially inaccurate in that the Authorized Acura Dealer has inaccurately
identified (by Vehicle Identification Number) the person (whether an individual
or business) who has purchased or leased one or more Acura Automobiles from
said Authorized Acura Dealer;
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AHM's Wholesaling Policy
August 2, 1995
(e) Upon audit by AHM pursuant to Section 3.2 hereof, AHM
has reason to believe that the Authorized Acura Dealer has engaged in
Wholesaling; or
(f) Upon other reliable evidence (which evidence will be
described to the Authorized Acura Dealer), AHM has reason to believe that the
Authorized Acura Dealer has engaged in Wholesaling.
AHM will notify the Authorized Acura Dealer in writing of any
preliminary finding of a Wholesaling violation. Such notice will include a
brief description of the basis for the preliminary finding.
3.4 The Authorized Acura Dealer Response to Preliminary Finding;
Final Finding.
The Authorized Acura Dealer will have fourteen (14) days from
notification of any such preliminary finding to contest AHM's finding in
writing by submission of sales data and/or other information that disproves
said finding. Should the Authorized Acura Dealer fail to contest such finding
within fourteen (14) days or should AHM find that the Authorized Acura Dealer's
submission does not disprove such finding, then AHM will issue a final finding
detailing the Authorized Acura Dealer's violation of this Policy.
4. AHM's Remedies in the Event of a Violation.
In the event of a final finding by AHM that the Authorized Acura
Dealer has violated the Policy:
4.1 For purposes of allocating vehicles, AHM will adjust the
Authorized Acura Dealer's sales history to exclude retail sales credit earned
on transfers found to violate the Policy;
4.2 AHM will charge-back all incentives paid by AHM related to
transfers of Acura Automobiles found to violate the Policy; and
4.3 AHM will also reduce or charge-back any assistance for any AHM
marketing allowances that are made available or paid by AHM to Acura Division
Dealers proportionate to the number of Acura Automobiles which have been found
to violate the Policy and/or related to transfer of such Acura Automobiles.
4.4 Should AHM issue a second final finding of a violation of the
Policy, then, in addition to the steps stated above, AHM will:
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AHM's Wholesaling Policy
August 2, 1995
(a) Not consider the Authorized Acura Dealer eligible for
additional Acura Automobiles in excess of the standard allocation for one (1)
year thereafter; and
(b) Not consider that Authorized Acura Dealer for any
additional AHM dealership location(s) for five (5) years thereafter.
In the event that AHM issues more than two final findings of
violations of the Policy against an Authorized Acura Dealer, then the remedies
set forth in (a) and (b) of this subparagraph shall be made permanent.
4.5 Notwithstanding the above, AHM considers any Wholesaling to be
inconsistent with the Dealer Agreement and AHM reserves its rights to take
appropriate action to prevent such Wholesaling. Moreover, AHM will hold the
Authorized Acura Dealer liable for any expenses or losses that AHM may incur as
a result of any Wholesaling by that Authorized Acura Dealer, including, without
limitation, expenses or losses resulting from (a) AHM's inability to notify
customers of product recalls or to her service information and product
liability claims resulting therefrom and (b) consumer claims including claims
in connection with intermediaries installing non-Acura equipment, providing
inadequate service, or making misrepresentations.
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DEALER ACKNOWLEDGEMENT
I hereby acknowledge that I have received, read and understand both a copy of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇' letter dated August 2, 1995 regarding AHM's Wholesaling
Policy and the enclosed copy of AHM's Wholesaling Policy also dated August 2,
1995.
Dealership Name:
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City and State:
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Dealer Code:
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Authorized
Dealer Signature:
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(Print Name):
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Title:
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Date:
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SCHEDULE X
In addition to the documents referred to in Section 1.4, Dealership
Parties agree to provide to AHM for its files on or before October 24, 1997,
the following documentation: ▇▇▇ ▇▇▇▇▇▇ Acura - Dealer Proposal, Verification
Card, Dealership Data Report, Minimum Requirements Form, Proforma Balance
Sheet, Acknowledgment Letter from Flooring Institution, Open Parts Account
Assumption Letter, DCS Assumption Letter, New Vehicle Delivery Letter, Warranty
Labor Rate Request Form, Confidential Mailing List Form; Acura Southwest -
Dealer Proposal, Verification Card, Dealership Data Report, Minimum
Requirements Form, Proforma Balance Sheet, Acknowledgment Letter from Flooring
Institution, Open Parts Account Assumption Letter, DCS Assumption Letter, New
Vehicle Delivery Letter, Warranty Labor Rate Request Form, Confidential Mailing
List Form; ▇▇▇ ▇▇▇▇▇▇ Honda - Dealer Proposal, Verification Card, Dealership
Data Report, Minimum Requirements Form, Proforma Balance Sheet, Acknowledgment
Letter from Flooring Institution, Open Parts Account Assumption Letter, DCS
Assumption Letter, New Vehicle Delivery Letter, Warranty Labor Rate Request
Form, Confidential Mailing List Form; ▇▇▇▇ ▇▇▇▇▇ Honda - Dealer Proposal,
Verification Card, Dealership Data Report, Minimum Requirements Form, Proforma
Balance Sheet, Acknowledgment Letter from Flooring Institution, Open Parts
Account Assumption Letter, DCS Assumption Letter, New Vehicle Delivery Letter,
Warranty Labor Rate Request Form, Confidential Mailing List Form; ▇. ▇. ▇▇▇▇
Honda - Dealer Proposal, Verification Card, Dealership Data Report, Minimum
Requirements Form, Proforma Balance Sheet, Acknowledgment Letter from Flooring
Institution, Open Parts Account Assumption Letter, DCS Assumption Letter, New
Vehicle Delivery Letter, Warranty Labor Rate Request Form, Confidential Mailing
List Form; statement of ownership for SMC Investments, Inc., Gulf Coast FLP,
and SBM-TFLP, and additional information as reasonably requested by AHM.
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