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EXHIBIT 10.16
Supplemental Terms and Conditions
This Agreement is made this 4th day of September, 1997 by and
between Ford Motor the Company, a Delaware corporation with its principal place
of business at The American Road, Dearborn, Michigan (hereinafter called
"Ford"), and Group 1 Automotive, Inc., a Delaware corporation with its
principal place of business at 000 Xxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000
(hereinafter called the "the Company").
AGREEMENT
1. Definitions. For purposes hereof, the following definitions
shall apply
a. "Agreement" shall mean the Ford, Lincoln or Mercury Sales and
Service Agreement.
b. "General Manager" shall mean the person designated by the
Company pursuant to paragraph F (ii) of the Agreement with full day to day
management authority and approved by Ford in writing.
c. "Securities Act" shall mean the Securities Act of 1933, as
amended.
d. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
e. "SEC" shall mean the Securities and Exchange Commission.
f. "Dealership" shall mean each Ford, Mercury or Lincoln
authorized dealership owned or controlled directly or indirectly by the
Company.
g. "Delegation Certificate" shall be the instrument executed by
an authorized officer of the Company granting full day to day operational and
management control of the Dealership to the General Manager.
h. "CSI" shall mean the Customer Satisfaction Index used by Ford
to measure customer satisfaction in terms of the selling process as well as
after sales service, as such may be modified from time to time by Ford.
i. "Supplemental Terms" shall mean these Supplemental Terms and
Conditions.
2. Scope. The Company has indicated that it will seek to acquire
or to apply for Ford, Mercury and Lincoln authorized dealerships. In order to
simplify future discussions and to avoid any misunderstanding, these
Supplemental Terms are intended to apply to those situations where Ford is
willing to approve the Company (or its designated wholly owned or controlled
direct or indirect subsidiary) as the purchaser of the capital stock or assets
of a Ford, Mercury or Lincoln authorized dealership or where it is willing to
enter into an Agreement with the Company with respect to a new dealership
location. In each situation where Ford is willing to enter into an Agreement,
the Company
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will cause the Dealership to execute an Agreement and will cause such
Dealership to be bound by these Supplemental Terms.
3. Sole Ownership. To maintain financial and operational autonomy
and accountability, each Dealership will be a separate corporation with the
Ford, Mercury and/or Lincoln dealership operation being its sole business
unless otherwise agreed in writing by Ford; provided, however, that if, at the
time of acquisition of any Dealership, such Dealership is not a separate
corporation, the Company will use reasonable efforts to cause the Dealership to
be held as a separate corporation as soon as practicable. The Company shall
furnish to Ford a copy of the certificate of incorporation and bylaws of each
Dealership. As is required of all Ford authorized dealerships, each Dealership
shall submit monthly financial and operating performance data to Ford.
4. Capitalization. Each Dealership will be separately and fully
capitalized to ensure the maintenance of net cash, working capital and
operating investment in accordance with Ford guidelines. Other than through
dividends permitted by the law of the state of incorporation of each
Dealership, the effect of which shall not impair the ability of the Dealership,
to meet the above mentioned Ford capitalization guidelines, or through
arms-length transactions, all cash and other assets generated by each
Dealership will remain within the Dealership and none of the assets of any
Dealership owned or controlled by the Company shall be used directly or
indirectly to secure the debt or liability of the Company or any other
Dealership or other business owned or controlled by the Company.
5. General Manager. The Company shall delegate in writing the
complete day to day management control of each Dealership to the General
Manager of such Dealership whose appointment shall be subject to Ford's prior
written approval which shall not be unreasonably withheld. The General Manager
shall be designated in paragraph F (ii) of the Agreement and shall have full
managerial authority and accountability for operating the Dealership in
accordance with the terms of the Agreement and the Supplemental Terms. Each
person nominated by the Company as a General Manager must have substantial,
successful retail automotive experience and must meet Ford's high standards for
moral and ethical behavior. Upon the appointment of a General Manager, a copy
of the Delegation Certificate shall be submitted to Ford. All proposed changes
to the Delegation Certificate shall be in writing, submitted to Ford and
subject to Ford's prior written approval. The Company will notify Ford and
obtain Ford's prior written approval of any proposed change to the General
Manager, such approval not to be unreasonably withheld. The Company shall have
the right to appoint an interim General Manager as a temporary replacement for
any General Manager who is terminated for cause or who voluntarily resigns, in
each case without the prior written approval of Ford. In the event that an
interim General Manager is appointed, the Company shall work with Ford to
appoint a permanent General Manager within 90 days after the appointment of the
interim General Manager. In addition to meeting the criteria Ford customarily
applies to new dealer candidates, the General Manager will be assigned to the
Dealership for a sufficient time (being a minimum of 3 years unless otherwise
agreed by Ford in writing) to allow the General Manager to develop and maintain
ties to the local community evidenced by involvement in community civic and
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charitable organizations. The General Manager must reside in the Dealer
Locality as required by the Agreement.
6. Compensation Plans. The Company will cause each Dealership to
provide to its General Manager and other key employees of the Dealership, as
deemed appropriate, as part of their compensation, incentive programs that will
provide specific financial rewards to the General Manager and such other
employees that are payable to them at least annually and are based upon the
achievement and maintenance by the Dealership of the long term and short term
operating performance objectives described in paragraph 7 hereof.
7. Performance Criteria. Should any Dealership fail to meet
reasonable performance criteria established by Ford relating to such matters as
sales performance, CSI and such other performance criteria that Ford may
reasonably apply to all its authorized dealers, Ford will have the right to
implement the following procedure. Ford shall notify the Company and the
General Manager in writing of such failure and shall grant the Company and the
General Manager 90 days to either cure the failure in total or, with respect to
sales performance and CSI only, to present to Ford evidence of progress to cure
the failure indicating in Ford's reasonable judgment that the failure will be
cured within one year of Ford's notice. Should the failure not be cured within
the above period, persons delegated with authority from the Company immediately
shall meet with authorized personnel from Ford to arrange for the orderly and
expeditious replacement of the General Manager. Should agreement not be reached
upon the identity of an appropriate replacement General Manger within 90 days
of the end of the cure period, Ford may terminate the Agreement with immediate
effect. Requirements that each Dealership consistently meet or exceed Ford's
regional average retail car and truck market share and comparable dealer group
average customer satisfaction ratings, as measured by CSI or other criteria
established by Ford, shall be considered reasonable performance requirements.
Ford will not unreasonably withhold its consent to the appointment of an
appropriate replacement General Manger.
8. Additional Appointments. Should any Dealership fail to
maintain for any 12 month period the level of CSI at substantially the same
level that was reported for such Dealership as of the date of its acquisition
by the Company, the Company shall not seek or apply for another Ford authorized
dealership until such time as such level of CSI is restored to Ford's
reasonable satisfaction. Ford will provide each Dealership a report monthly,
summarizing its CSI performance for the preceding month and for the calendar
year to date. Unless otherwise agreed by Ford in writing, the Company shall not
seek or apply for a Ford authorized dealership if, once owning such dealership,
the Company would own or control, directly or indirectly, the greater of (a) 15
Ford and 15 Lincoln Mercury Dealerships or (b) that number of Ford authorized
dealerships with total retail sales of new vehicles in the immediately
preceding calendar year of more than 5% of the total Ford and Lincoln Mercury
branded vehicles sold at retail in the United States; provided, however, that
in no event shall the Company seek or apply for a Ford authorized dealership in
any market area, as defined from time to time by Ford for its dealership
network, that would result in the Company owning or
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controlling, directly or indirectly, more than one Ford authorized dealership
in those market areas having 2 or less Ford authorized dealerships in them, or
in the Company owning or controlling, directly or indirectly, more than 33% of
the Ford authorized dealerships in market areas, as defined from time to time
by Ford for its dealership network, having more than 3 authorized Ford
dealerships in them, it being understood that this proviso is intended to apply
separately to Ford and to Lincoln Mercury dealerships. Should the above
limitations be exceeded and, notwithstanding the above limitations, the Company
seek Ford's approval to acquire an additional authorized dealership, Ford's
refusal to approve such an acquisition shall be deemed to be a reasonable
action by Ford.
9. Major Changes. The Company shall submit to Ford copies of all
effective registration statements and final reports, proxies and information
statements it files with the SEC pursuant to the Securities Act or the Exchange
Act within five (5) business days of filing with the SEC. The Company, shall
submit to Ford all filings submitted to the SEC by third parties that are
required to disclose significant holdings or substantial acquisitions of, or
changes in, the ownership of the voting securities (or other securities
convertible into voting securities) of the Company including, without
limitation, Schedules 13D or 13G. Should any SEC filing disclose that (a) a
person, entity or group has a binding agreement to acquire, or has acquired,
voting securities (or other securities convertible into voting securities) of
the Company that would place 50% or more of the voting securities (or other
securities convertible into voting securities) of the Company into the hands of
such person, entity or group, or (b) a person or entity that owns or controls
fifty percent (50%) of the voting securities (or other securities convertible
into voting securities) of the Company intends or may intend to acquire
additional voting securities (or other securities convertible into voting
securities) of the Company, or (c) an extraordinary corporate transaction, such
as a merger, reorganization or liquidation, involving the Company or any of its
subsidiaries is planned or anticipated or (d) a sale or transfer of a material
amount of assets of the Company, or any of its subsidiaries, is planned or
anticipated, or (e) a change has been made or is planned to be made in the
Board of Directors or management of the Company or (f) any other material
change in the Company's business or corporate structure or (g) any action
similar to those noted above, the Company shall provide 30 days prior written
notice to Ford describing the matter disclosed in such filing in detail. If any
such action is believed by Ford in its reasonable judgment to have a material
and adverse effect on its reputation in the market place with respect to an
action described in (e), (f), or (g) or with respect to the other actions
should Ford reasonably conclude that such action will not be compatible with
the interests of Ford, the Company agrees that within 90 days of Ford's notice
thereof, the Company shall sell or cause to be sold one or more of the
Dealerships, as specified in the notice, to Ford or its designee at fair market
value, determined in accordance with Attachment A or resign the Agreements, or
provide evidence to Ford that the proposed action which gave rise to the
issuance of Ford's notice will not take place. Should the Company enter into an
agreement to transfer the assets or capital stock of any Dealership to a third
party, Ford's right of first refusal provided in paragraph 24(b) of the
Agreement shall apply.
10. Exclusive Dealership Facilities. Each Dealership shall operate
as an exclusive fully dedicated Ford, Mercury and/or Lincoln dealership, as the
case may be, and the Company will not accept a sales and service agreement with
any other automobile manufacturer or importer or allow the merchandising,
display, sale or service of new vehicles other than Ford, Mercury or Lincoln
vehicles at the facilities and locations approved by Ford and used by any
Dealership for the conduct
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of its business ("Ford Approved Facilities"). Unless otherwise agreed in
writing, should the Company acquire a Dealership having a sales and service
agreement with a competitive automobile manufacturer or importer and related
sales and service operations at the Ford Approved Facilities, it shall cause
the Dealership to relocate such competitive sales and service operations from
the Ford Approved Facilities within one year of acquisition; provided, however,
that Ford shall grant the Company additional time to effect such relocation if
Ford believes the Company is making reasonable progress in so doing. No
Dealership will merchandise, display or sell new Ford, Mercury or Lincoln
vehicles at any unauthorized location including those owned or controlled by
the Company. In conducting its advertising programs each Dealership shall
portray the products it is authorized to sell and service under the Agreement
in a distinctive manner taking care not to mingle such advertising with
advertising of competitive make new vehicles or used vehicles.
11. Advertising. The Company recognizes the benefit of local
cooperative advertising and has indicated that it will cause each Dealership to
become a fully participating member of the local Ford, Lincoln or Mercury
dealer advertising group (FDAF/LMDA).
12. Auctions. Used vehicle purchases from Ford sponsored auctions
will be governed by a separate "Sponsored Auction Agreement" which will be
executed by each Dealership.
13. Dealership Name. The trade name and corporate name of each
Dealership will be subject to Ford's approval and will not include any
reference to any non-Ford, Mercury or Lincoln make vehicle.
14. Site Control. Any existing agreement covering a Dealership or
its assets relating to site control will be assumed by the Company and shall
remain in full force and effect.
15. Dispute Settlement. Any dispute concerning the Agreement or
the Supplemental Terms shall be resolved Using the arbitration plan described
in paragraph 18 of the Agreement; provided, however, that notwithstanding
anything in the Agreement to the contrary, the use of such Plan shall be
mandatory and not optional and; provided, further, that no dispute need be
brought before the Ford Dealer Policy Board.
16. Agreement and Supplemental Terms. The Company confirms that
the provisions of these Supplemental Terms are material to its relationship
with Ford and that a failure by the Company to fully comply with any material
term hereof, after having been given a reasonable opportunity to cure such
failure, will constitute good and just cause for Ford, in its discretion, to
terminate the Agreement and these Supplemental Terms with immediate effect.
17. Binding Effect. These Supplemental Terms are intended to
modify certain provisions of the Agreement and to be incorporated as a part of
the Agreement. Should there be an inconsistency between the terms of these
Supplemental Terms and any provision of the Agreement, the terms of these
Supplemental Terms shall apply.
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18. Parent-Subsidiary. The Company shall cause each Dealership to
carry out the actions and to assume the responsibilities provided herein.
IN WITNESS WHEREOF, the Company and Ford, through their authorized
officers, have set there hands on the day and year above written.
Ford Motor Company Group 1 Automotive, Inc.
By: /s/ FORD MOTOR COMPANY By: /s/ X.X. XXXXXXXXXXXXX, XX.
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X.X. Xxxxxxxxxxxxx, Xx.
Its:
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