Document:

Exhibit 10.12

EXHIBIT 10.12

DEALER AGREEMENT

 

					
	 	 	 	 	 
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smart USA Distributor LLC

Passenger Car Dealer Agreement

Table of Contents

	 	 	 	 	 
	DEALER AGREEMENT	 	PAGE	 
	smart USA STATEMENT OF COMMITTMENT
	 	 	7	 
	A. Appointment of Dealer
	 	 	7	 
	B. Term
	 	 	8	 
	C. Additional Provisions
	 	 	8	 
	D. Dealership Ownership
	 	 	8	 
	E. Dealership Facilities
	 	 	8	 
	F. Modification of Agreement
	 	 	9	 
	G. Execution of Agreement
	 	 	9	 
	H. Mutual Release
	 	 	9	 
	I. Certification
	 	 	9	 
	J. Final Paragraph
	 	 	10	 
	STANDARD PROVISIONS
	 	 	 	 
	I. Acquisition, Delivery and Inventory of smart USA Passenger car products
	 	 	11	 
	A. Prices and Terms of Sale
	 	 	11	 
	B. Availability and Allocation of Products
	 	 	11	 
	C. Delivery of Products
	 	 	11	 
	D. Passage of Title
	 	 	11	 
	E. Risk of Damage or Loss
	 	 	11	 
	F. Delay or Failure of Delivery
	 	 	11	 
	G. Diversion and Storage Charges
	 	 	12	 
	H. Security Interest
	 	 	12	 
	1 Grant of Security Interest
	 	 	12	 
	2 Default in Payment
	 	 	12	 
	3 Assembly of Collateral, Payment of Costs and Notices
	 	 	12	 
	4 Recording and Further Assurances
	 	 	13	 
	5 Records and Schedules of Inventory
	 	 	13	 
	I. Changes of Design, Specifications or Options
	 	 	13	 
	J. Discontinuance of Manufacture or Importation
	 	 	13	 
	K. Minimum Vehicle Inventories
	 	 	13	 
	L. Product Modifications
	 	 	13	 

					
	 	 	 	 	 
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smart USA Distributor LLC

Passenger Car Dealer Agreement

Table of Contents

	 	 	 	 	 
	DEALER AGREEMENT (CONTINUED)	 	PAGE	 
	II. Dealer’s Marketing and Sales of smart USA Passenger Car Products
	 	 	14	 
	A. Dealer’s General Responsibilities
	 	 	14	 
	B. Export Policy
	 	 	14	 
	C. smart USA Dealer Association
	 	 	14	 
	D. Pre-Owned Vehicles
	 	 	15	 
	E. Dealer Market Area
	 	 	15	 
	F. Evaluation of Dealer’s Marketing and Sales Performance
	 	 	15	 
	III. Dealer’s Service Obligations
	 	 	16	 
	A. Customer Service Standards
	 	 	16	 
	B. Dealer’s Specific Service Obligations
	 	 	16	 
	1 Pre-Delivery Inspections and Service
	 	 	16	 
	2 Warranty Repairs and Policy Service
	 	 	16	 
	3 Service/Retail Campaign Inspections and Corrections
	 	 	17	 
	4 Roadside Assistance Program
	 	 	17	 
	C. Use of Parts and Accessories in Non-Warranty Service
	 	 	17	 
	1 Quality Standards
	 	 	17	 
	2 Dealer’s Disclosures as to Use of and Warranties for Non-Genuine Parts and Accessories
	 	 	17	 
	D. Compliance with Safety and Emission Control Requirements
	 	 	18	 
	E. Compliance with Consumer Protection Statutes, Rules and Regulations
	 	 	19	 
	F. Insurance Requirements
	 	 	19	 
	IV. Dealer’s Service and Parts Organization
	 	 	19	 
	A. Organization and Standards
	 	 	19	 
	B. Service Equipment and Special Tools
	 	 	20	 
	1 smart USA Special Tools
	 	 	20	 
	2 smart USA Service Equipment
	 	 	20	 
	C. Parts Stocking and Service Levels
	 	 	20	 
	D. After Hours Delivery
	 	 	20	 
	E. Assistance Provided by smart USA Distributor
	 	 	21	 
	1 Service Manuals and Materials
	 	 	21	 
	2 Field Personnel Assistance
	 	 	21	 
	F. Evaluation of Dealer’s Service and Parts Performance
	 	 	21	 
	G. Additional Facilities or Locations
	 	 	21	 

					
	 	 	 	 	 
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smart USA Distributor LLC

Passenger Car Dealer Agreement

Table of Contents

	 	 	 	 	 
	DEALER AGREEMENT (CONTINUED)	 	PAGE	 
	V. Customer Satisfaction Responsibilities
	 	 	22	 
	A. Dealer’s Customer Satisfaction Obligations
	 	 	22	 
	1 Dealer’s Customer Satisfaction Plan
	 	 	22	 
	2 Employee Training
	 	 	22	 
	3 Customer Assistance Response System
	 	 	22	 
	B. Evaluation of Dealer’s Customer Satisfaction Performance
	 	 	22	 
	VI. Dealership Facilities and Identification
	 	 	22	 
	A. Location and Facilities
	 	 	22	 
	B. Changes and Additions
	 	 	23	 
	C. Dealer’s Operating Hours
	 	 	23	 
	D. Corporate Identity
	 	 	23	 
	E. Evaluation and Dealership Facilities
	 	 	23	 
	F. Ownership and Use of smart Marks and smart USA Marks
	 	 	24	 
	1 Validity and Exclusive Ownership of smart Marks
	 	 	24	 
	2 Use by Dealer
	 	 	24	 
	3 Discontinuance of Use
	 	 	24	 
	4 Enforcement
	 	 	25	 
	VII. Warranties
	 	 	25	 
	VIII. Capital, Credit, Records and Uniform Systems
	 	 	25	 
	A. Net Working Capital
	 	 	25	 
	B. Flooring and Lines of Credit
	 	 	25	 
	C. Payment Terms
	 	 	26	 
	D. Uniform Accounting System
	 	 	26	 
	E. Records Maintenance
	 	 	26	 
	F. Examination of Dealership Accounts and Records
	 	 	26	 
	G. Taxes
	 	 	27	 
	H. Confidentiality
	 	 	27	 
	I. smart USA Dealer Communications System and Proprietary Manufacturer Systems
	 	 	27	 
	J. Sales Reporting
	 	 	27	 

					
	 	 	 	 	 
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smart USA Distributor LLC

Passenger Car Dealer Agreement

Table of Contents

	 	 	 	 	 
	DEALER AGREEMENT (CONTINUED)	 	PAGE	 
	IX. Transfers
	 	 	27	 
	A. Sale of Assets or Ownership Interest
	 	 	27	 
	B. Right of First Refusal or Option To Purchase
	 	 	28	 
	1 Rights Granted
	 	 	28	 
	2 Exercise of smart USA Distributor’s Rights
	 	 	29	 
	3 Right of First Refusal
	 	 	29	 
	4 Option to Purchase
	 	 	29	 
	5 Dealer’s Obligations
	 	 	30	 
	X. Succession Rights Upon Death or Incapacity
	 	 	30	 
	A. Succession to Ownership After Death of Owner
	 	 	30	 
	B. Incapacity of Owner
	 	 	31	 
	C. Nomination of Successor Prior to Death or Incapacity of Owner
	 	 	31	 
	XI. Termination
	 	 	32	 
	A. Voluntary Termination by Dealer
	 	 	32	 
	B. Termination For Cause
	 	 	32	 
	1 Immediate Termination
	 	 	32	 
	2 Termination Upon Sixty Days Notice
	 	 	34	 
	3 Termination for Failure of Performance
	 	 	34	 
	4 Termination Upon Death or Incapacity
	 	 	35	 
	C. Termination Upon Termination of Distributorship
	 	 	35	 
	D. Termination for Failure of smart USA Distributor to be Licensed
	 	 	35	 
	E. Termination Upon offering to Enter into a New or Amended Passenger Car Dealer Agreement
	 	 	35	 
	F. Notice of Termination
	 	 	35	 
	G. Continuance of Business Relations
	 	 	36	 
	H. Repurchase Provisions
	 	 	36	 
	1 Distributor’s Obligations
	 	 	36	 
	2 Dealer’s Responsibilities
	 	 	36	 
	3 Payment by Distributor
	 	 	37	 
	XII. Defense and Indemnification
	 	 	38	 
	A. Defense and Indemnification By Distributor
	 	 	38	 
	B. Defense and Indemnification By Dealer
	 	 	39	 
	C. Conditional Defense and/or Indemnification
	 	 	39	 
	D. The Effect of Subsequent Developments
	 	 	40	 
	E. Time to Respond and Responsibilities of the Parties
	 	 	40	 

					
	 	 	 	 	 
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smart USA Distributor LLC

Passenger Car Dealer Agreement

Table of Contents

	 	 	 	 	 
	DEALER AGREEMENT (CONTINUED)	 	PAGE	 
	XIII. Notice of Breach or Failure to Act in Good Faith
	 	 	40	 
	XIV. General Provisions
	 	 	41	 
	A. Notices
	 	 	41	 
	B. No Implied Waivers
	 	 	41	 
	C. Sole Agreement of the Parties
	 	 	41	 
	D. Dealer Not an Agent or Representative
	 	 	41	 
	E. Assignment of Rights or Delegations of Duties
	 	 	41	 
	F. No Franchise Fee
	 	 	41	 
	G. Benefit
	 	 	42	 
	H. Michigan Law
	 	 	42	 
	XV. Definitions
	 	 	42	 
	XVI. Additional Provisions
	 	 	43	 

					
	 	 	 	 	 
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smart USA DISTRIBUTOR LLC

smart USA Passenger Car Dealer Agreement

This PASSENGER CAR DEALER AGREEMENT is effective as of the day last set forth below by and between
smart USA DISTRIBUTOR LLC (“Distributor”) and the natural person or entity identified as “Dealer”
in the Final Paragraph of this Agreement.

smart USA STATEMENT OF COMMITMENT

This smart USA Passenger Car Dealer Agreement and all addendums hereto (collectively, the
“Agreement”) state the commitment of Distributor and Dealer to each other as well as their
relationship to the owners of smart USA Passenger Car Products.

Distributor, the exclusive distributor of smart USA Passenger Car Products in the United States of
America and Puerto Rico, brings to this relationship the peerless reputation and image of Daimler
AG (“DAG”). DAG has produced automobiles longer than any other manufacturer in the world. It has
never let sheer numbers of products, or the requirement of transportation alone, become the
yardstick for the design of its products. Its devoted craftsmen have built, and continue to build,
the finest automobiles in the world.

smart USA Passenger Car dealers are community leaders whose reputations, integrity and expertise
are essential to the sales and servicing of smart USA Passenger Cars. They must have well located
places of business with outstanding sales, service and parts facilities; they must be staffed by
courteous and well trained personnel who are dedicated to serving smart USA customers during the
acquisition and ownership experience; and they must be focused on attaining the collective long
term goals reflected herein as well as their own individual goals.

smart USA owners are loyal, devoted and proud; their minds are open to new ideas; they are
environmentally concerned and forward-looking; but they are also demanding towards the factory as
far as the product is concerned and towards the dealer as to how it is sold and serviced. DAG,
Distributor, and Dealer are committed to meeting and, where possible, exceeding those high
expectations.

By executing this Agreement, and pursuant to its terms, Distributor and its smart USA passenger car
dealers dedicate themselves jointly to serving and satisfying the past, present and future owners
of smart USA Passenger Car Products.

A. APPOINTMENT OF DEALER

Distributor hereby appoints Dealer and grants it the non-exclusive right to buy and resell
smart USA Passenger Car Products. Dealer accepts such appointment and understands that its
appointment as a Dealer (i) does not grant it an exclusive right to sell smart USA Passenger Car
Products in its Area of Responsibility (AOR) or in any other geographic area, and (ii) does not
grant it any right to buy or resell vehicles or other products that are not smart USA Passenger Car
Products.

					
	 	 	 	 	 
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B. TERM

This Agreement shall have a term commencing on its effective date continuing until the date
set forth in the Final Paragraph.

C. ADDITIONAL PROVISIONS

The accompanying smart USA Passenger Car Dealer Agreement Standard Provisions, Retail Capacity
Addendum, Dealer Operating Covenant and Standards Addendum, Dealer Area of Responsibility Addendum,
Dealer Improvement Addendum (if applicable), other facility addenda (if applicable) as identified
in Paragraph E, and Communications Guidelines and Graphic Standards (if applicable) are hereby
incorporated into and made a part of this Agreement. The data requirements reflected in the Retail
Capacity Addendum, Dealer Operating Covenant and Standards Requirements Addendum, and Dealer Area
of Responsibility Addendum are periodically updated with the current related addendum displayed
electronically on a website accessible via Distributor’s satellite communication system. Dealer
further agrees to be bound by and comply with the Warranty Manual, Dealership Facility Planning &
Corporate Identification Manual and all other manuals, bulletins, instructions and directives
issued to or which may issued to Dealer by Distributor during the term of this agreement.

D. DEALER OWNERSHIP

This is a personal service agreement. Distributor is entering into the Agreement in reliance
upon the personal qualifications, reputation, integrity and expertise of Owners and upon their
representation that they are committed to achieving the purposes and goals of this Agreement.
Dealer agrees that there will be no change in the identity of Owner or in Dealer’s ownership, name,
identity, business organization or structure without the prior written consent of Distributor,
which consent shall not be unreasonably withheld. If Dealer is a corporation, limited liability
company or any other entity, Dealer agrees to notify Distributor in writing of any change in the
identity of its officers, directors, managing member, general partner or managing partner, as the
case may be.

E. DEALER FACILITIES

Dealer agrees that the Dealership Facilities shall satisfy all applicable provisions of this
Agreement, including the facility, space, appearance, layout, equipment and corporate
identification requirements in the Retail Capacity Addendum, and Dealership Facility Planning &
Corporate Identification Manual. Unless otherwise provided in the Retail Capacity Addendum,
Distributor hereby approves the location (s) of the Dealership Facilities identified in the Final
Paragraph for the exclusive purpose of: (i) a showroom and sales facility for smart USA Passenger
Cars; (ii) a service, and parts facility for smart USA Passenger Cars; (iii) facilities for display
and sale of pre-owned smart USA vehicles; and (iv) if applicable, other facilities for such other
purposes(s) as may be identified in the Final Paragraph. Additional facilities will operate
pursuant to the terms of the smart USA Passenger Car Dealer Agreement herein and the following
Dealer Agreement Addenda if applicable: Service Center Addendum, Pre-Owned & Service Center
Addendum, and Service Annex Addendum. Dealer shall not move, relocate or change the designated
usage or function of the Approved Locations(s) or any of the Dealership Facilities without the
prior written consent of Distributor. In particular, Dealer shall not add
sales, service or parts operations for any other line of vehicles to the Dealership Facilities or
at the Approved Location(s) without the prior written consent of the Distributor.

					
	 	 	 	 	 
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F. MODIFICATION OF AGREEMENT

No waiver, modification or change of any of the terms of this Agreement or change or erasure
of any printed part of this Agreement or addition to it (except filling of blank spaces and lines)
will be valid or binding on Distributor unless approved in writing by the President of Distributor.

G. EXECUTION OF AGREEMENT

This Agreement shall not become effective until signed by a duly authorized officer of Dealer,
if a corporation or limited liability Company, or by one of the general partners of Dealer, if a
partnership, or by the named individual if a sole proprietorship, and countersigned by the
President of Distributor.

H. MUTUAL RELEASE

Each party hereby releases the other from any and all claims and causes of action that it may
have against the other for money damages arising from any event occurring up to and including the
effective date of this Agreement, except for any accounts payable by one party to the other
reflected on the smart USA Consolidated Statement or adjustments to any prior payment, credit or
other benefit arising from any audit or other examination conducted by Distributor with respect
thereto. This mutual release does not extend to claims that either party does not know or
reasonably suspect to exist in its favor as of the effective date of this Agreement or that arise
under Section XII of the Standard Provisions to this Agreement.

I. CERTIFICATION

By their signatures on the following page, the parties certify that they have read and
understand the Agreement, including all of the additional provisions incorporated herein, and agree
to be bound by and comply with all of its terms and conditions.

					
	 	 	 	 	 
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J. FINAL PARAGRAPH

Dealer is EXAMPLE COPY, incorporated or formed under the laws of the State of EXAMPLE
STATE doing business as (‘EXAMPLE COPY). Dealer is located in the City of EXAMPLE
CITY which is in the State of EXAMPLE.

The Owners of Dealership (including all shareholders, general and limited partners, members and
other owners) are as follows:

			
	 	 	 
	Name: EXAMPLE
	 	60%
	 
	 	% interest

The Dealer Operator of Dealer is as follows:

Name: EXAMPLE

Showroom and Sales Facility for smart USA Passenger Cars located at:

	 	 	 	 	 
	Address: EXAMPLE
	 	 	 	 
	City:        EXAMPLE

	 	State: EXAMPLE
	 	Zip: EXAMPLE

Service and Parts Facility for smart USA Passenger Cars located at:

	 	 	 	 	 
	Address: EXAMPLE
	 	 	 	 
	City:        EXAMPLE

	 	State: EXAMPLE
	 	Zip: EXAMPLE

Facilities for the display and sale of pre-owned smart USA Vehicles located at:

	 	 	 	 	 
	Address: EXAMPLE
	 	 	 	 
	City:        EXAMPLE

	 	State: EXAMPLE
	 	Zip: EXAMPLE

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the
XXh day of XXXXXXXX, 20XX at smart center EXAMPLE — EXAMPLE CITY, EXAMPLE
STATE XXXXX. This Agreement shall have a term commencing on its effective date and continuing
until XXXXXXXX XX, 20XX.

	 	 	 	 	 	 	 	 	 	 	 
	Dealer:	 	 	 	smart USA Distributor LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 

Dealer Signature
	 	 
	 	 	 	 

XXXXX XXXXXXX, President
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 

Print Name
	 	 
	 	 	 	 

XXXXX XXXXXXX, Vice President
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Attested by:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	 	 	 	 	 

					
	 	 	 	 	 
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smart USA DISTRIBUTOR LLC

smart USA PASSENGER CAR DEALER AGREEMENT

STANDARD PROVISIONS

	I.	 	ACQUISITION, DELIVERY AND INVENTORY OF smart USA PASSENGER CAR PRODUCTS

	 	A.	 	PRICES AND TERMS OF SALE

Distributor shall offer to sell to Dealer and Dealer shall have the right to
purchase from Distributor smart USA Passenger Car Products in accordance with the
provisions of this Agreement and the prices and other terms of sale that Distributor
shall establish and revise from time to time. Such revised prices or terms shall
apply to any smart USA Passenger Car Product not invoiced to Dealer by Distributor
at the time the notice of such changes is given to Dealer (in the case of smart USA
Passenger Cars), or upon issuance of a new or modified parts prices list or through
change notices, letters, bulletins or revision sheets (in the case of Genuine smart
USA Passenger Car Parts and Accessories), or at such other times as may be
designated electronically or in writing by Distributor.

	 	B.	 	AVAILABILITY AND ALLOCATION OF PRODUCTS

Distributor will allocate smart USA Passenger Car Products among its passenger car
dealers in a fair and equitable manner. Distributor will, upon Dealer’s request,
explain the considerations and method used to allocate smart USA Passenger Car
Products to Dealer.

	 	C.	 	DELIVERY OF PRODUCTS

Distributor will ship smart USA Passenger Car Products to Dealer by whatever mode of
transportation, by whatever route, and from whatever point Distributor may select.
Dealer shall pay Distributor such charges as Distributor in its sole discretion
establishes for such transportation services.

	 	D.	 	PASSAGE OF TITLE

Title to each smart USA Passenger Car Product shall pass from Distributor to Dealer,
or to the financial institution designated by Dealer, upon Distributor’s receipt of
payment for said Product and upon the earlier of delivery of said Product to Dealer
or to a carrier for transportation to Dealer.

	 	E.	 	RISK OF DAMAGE OR LOSS

Dealer shall bear the risk of damage to or loss of smart USA Passenger Car Products
during transportation from the point of shipment; however, Distributor will, if
requested by Dealer assign any claims and rights to Dealer that Distributor may have
against the responsible carrier for damage to or loss of smart USA Passenger Car
during said transportation for and on behalf of Dealer. To the extent required by
law, Dealer shall notify the purchaser of a vehicle of any damage sustained by such
vehicle prior to sale.

	 	F.	 	DELAY OR FAILURE OF DELIVERY

Distributor shall not be liable for delay or failure to deliver smart USA Passenger
Car Products that it has previously agreed to deliver, where such delay or failure
to deliver is the result of any event beyond the control of Distributor, including
but not limited to
any law or regulation of any governmental entity, acts of God, foreign or civil
wars, riots, interruptions of navigation, shipwrecks, fires, floods, storms,
strikes, lockouts, or other labor troubles, acts of terrorism, embargoes, blockades,
or delay or failure of DAG or its affiliates to deliver smart USA Passenger Car
Products.

					
	 	 	 	 	 
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	 	G.	 	DIVERSION AND STORAGE CHARGES

Dealer shall be responsible for and shall pay all charges for demurrage, storage and
other expense accruing after shipment to Dealer or to a carrier for transportation
to Dealer. If diversions of shipments are made upon Dealer’s request or are made by
Distributor as a result of Dealer’s failure or refusal to accept shipments made
pursuant to Dealer’s orders, Dealer shall pay all additional charges and expenses
incident to such diversions.

	 	H.	 	SECURITY INTEREST

	 	1.	 	Grant of Security Interest

As a security for the full payment of all sums from time to time owed by
Dealer to Distributor under this Agreement, whether such sums are now or
hereafter become due and owing, Dealer hereby grants to Distributor a
security interest in the following items for which Distributor has not
received payment (collectively referred to as “Collateral”):

	 	(i)	 	All Genuine smart USA Passenger Car
Products, and other related items delivered by Distributor to Dealer
hereunder on account (all such inventory hereinafter referred to
collectively as “Inventory” and individually as “Item of Inventory”);
and

	 	(ii)	 	All proceeds from any of the foregoing,
including without limitation, insurance payable by reason of the
loss, damage or destruction of any Item of Inventory; and all
accounts and chattel paper of Dealer arising from its sale, lease or
other disposition of Inventory now existing or hereafter arising, and
all liens, securities, guarantees, remedies and privileges pertaining
thereto, together with all rights and liens of Dealer relating
thereto.

	 	2.	 	Default in Payment

Dealer shall be in default of this Agreement if: (i) Dealer shall fail to
pay any amounts secured hereby when due or fail to perform any obligations
under this Section I in a timely manner; (ii) there shall occur any material
adverse change in the financial condition of Dealer; or (iii) a proceeding
is commenced by or against Dealer under any bankruptcy or insolvency or
similar statute or regulation or Dealer makes an assignment for the benefit
of creditors or becomes insolvent; and, in any such case, Distributor may
declare all sums secured by this Section I.H immediately due and payable and
Distributor shall have all the rights and remedies afforded to a secured
party after default under the Uniform Commercial Code or other applicable
law in effect on the date of this Agreement.

	 	3.	 	Assembly of Collateral, Payment of Costs and Notices

Dealer shall, if requested by Distributor upon the occurrence of any default
under Section I.H.2, assemble the Collateral and make it available to
Distributor at a place or places designated by Distributor. Dealer also
shall pay all costs of
Distributor, including without limitation, attorneys fees incurred with
respect to the enforcement of any of Distributor rights under this Section
I.H.

					
	 	 	 	 	 
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	 	4.	 	Recording and Further Assurances

Dealer shall provide any assistance necessary in the preparation of
financing statements and such other instruments or documents and take any
other action as Distributor may request in order to create or maintain the
security interest intended to be created by this Section I.H., or to enable
Distributor to exercise and enforce its rights hereunder. A carbon,
photographic or other reproduction of this Agreement shall be sufficient as
a financing statement and may be filed in lieu of a financing statement in
any and all jurisdictions which accept such reproductions.

	 	5.	 	Records and Schedules of Inventory

Dealer shall keep accurate records itemizing and describing the kind, type
and quantity of Inventory and shall furnish to Distributor within five (5)
days of receipt of Distributor’s request therefore, a current schedule of
inventory in form and substance satisfactory to Distributor (“Schedule of
Inventory”), which shall be true and accurate in all respects. A physical
inventory shall be conducted by Dealer no less than annually in connection
with preparation of year-end financial statements of Dealer and, at
Distributor’s request, a report of such inventory shall be promptly provided
to Distributor.

	 	I.	 	CHANGES OF DESIGN, SPECIFICATIONS OR OPTIONS

Distributor may change the design or specifications of any smart USA Passenger Car
Product or the options in any smart USA Passenger Car Product and shall be under no
obligation to provide notice of same or to make any similar change to smart USA
Passenger Car Products previously purchased by or shipped to Dealer. No change
shall be considered a model year change unless so specified by Distributor.

	 	J.	 	DISCONTINUANCE OF MANUFACTURE OR IMPORTATION

DAG and/or Distributor may discontinue the manufacture, importation or distribution
of all or part of any smart USA Passenger Car Product, whether passenger car parts,
options or accessories, including any model, series or body style of any smart USA
Passenger Car at any time without any obligation or liability.

	 	K.	 	MINIMUM VEHICLE INVENTORIES

Dealer agrees that it shall, at all times, maintain in showroom ready condition at
least the minimum inventory of smart USA Passenger Cars that may be established by
Distributor from time to time.

	 	L.	 	PRODUCT MODIFICATIONS

Dealer agrees that it will not install aftermarket accessories, equipment, or make
any modifications to smart USA Passenger Cars that may impair or adversely affect
their safety, emissions, structural integrity, performance or original vehicle
warranty applicability.

					
	 	 	 	 	 
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	II.	 	DEALER’S MARKETING AND SALES OF smart USA PASSENGER CAR
PRODUCTS

	 	A.	 	DEALER’S GENERAL RESPONSIBILITIES

Dealer recognizes that customer satisfaction and the successful promotion and sale
of smart USA Passenger Car Products are significantly dependent on Dealer’s
advertising and sales promotion activities. Therefore, Dealer at all times shall:

	 	1.	 	Actively and effectively promote and sell new and used smart
USA Passenger Car Products to customers located within its Area of
Responsibility:

	 
	 	2.	 	Advertise and merchandise smart USA Passenger Car Products, and
use current smart USA showroom displays, sales materials and other promotional
media;

	 
	 	3.	 	Organize a complete sales organization of the highest quality,
ensure that its sale personnel meet the educational and management standards
established by Distributor, and, at Dealer’s expense, have such personnel as
are appropriate attend all training courses prescribed by Distributor;

	 
	 	4.	 	Comply with the Communications Guidelines and Graphic
Standards, maintain a high standard of ethics in advertising, promoting and
selling smart USA Passenger Car Products, and avoid engaging in any
misrepresentation or unfair or deceptive practices. Dealer shall discontinue
any advertising the Distributor considers injurious to Distributor’s or DAG’s
business or reputation or to the smart Marks or smart USA Marks, or that are
likely to be violative of applicable laws or regulations; and

	 
	 	5.	 	Accurately represent to customers the total selling price of
smart USA Passenger Car Products. Dealer agrees to explain to customers of
smart USA Passenger Car Products the items that make up the total selling price
and to give the customers itemized invoices and all other information required
by law. Dealer understands and hereby acknowledges that it may sell smart USA
Passenger Car Products at whatever price Dealer desires, but not in excess of
its MSRP established by Distributor and communicated to Dealer by Distributor
in writing and/or electronically.

	 	B.	 	EXPORT POLICY

Dealer is authorized to sell smart USA Passenger Cars only to customers residing in
the United States of America and Puerto Rico. Dealer agrees that it will not sell
smart USA Passenger Cars for resale or use outside the United States of America and
Puerto Rico. Dealer agrees to be bound by and comply with any export policy
established by Distributor.

	 	C.	 	smart USA DEALER ASSOCIATION

Distributor considers participation by smart USA Passenger Car dealers in smart USA
Passenger Car Dealer Advertising Associations to be a fundamental part of an overall
marketing strategy for their businesses and smart USA Passenger Car Products.
Distributor urges Dealer to cooperate in the establishment of such an association
and to fund its fair share of advertising and merchandising programs undertaken by
the association.

					
	 	 	 	 	 
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	 	D.	 	PRE-OWNED VEHICLES

Dealer agrees to display and sell pre-owned smart USA vehicles distributed only by
Distributor at the Approved Location(s). Dealer shall participate in programs as
specified by Distributor for the sale of such vehicles, and shall maintain the
minimum reasonable inventory established by Distributor from time to time for such
operations. Dealer shall conduct its pre-owned smart USA vehicle operations in
conformance with all standards set forth in this Agreement.

	 	E.	 	DEALER MARKET AREA

Distributor will assign to Dealer a geographic area consisting of a collection of
zip codes or census tracts that is called an Area of Responsibilities (“AOR”). The
AOR is a tool used by Distributor to evaluate Dealer’s performance of its primary
obligations hereunder. Dealer agrees that it has no right or interest in any AOR,
including rights of exclusivity, and Dealer acknowledges that the Distributor
reserves the right to appoint additional smart USA Dealers, whether located near
Dealer’s location or elsewhere, as the Distributor in its sole discretion deems
necessary or appropriate and that Distributor may change or alter Dealer’s AOR at
any time. If a decision is made by Distributor to change or alter Dealer’s AOR,
Distributor will provide Dealer no less than thirty (30) days written notice of such
decision. Distributor may, directly or indirectly, offer and sell smart USA
Passenger Car Products in Dealer’s AOR to the following:

	 	1.	 	Governmental or Municipal Authorities

	 
	 	2.	 	Certain Multi-national Fleet customers of DAG or a DAG group
company

	 
	 	3.	 	Customers who refuse to purchase from Dealer

	 	F.	 	EVALUATION OF DEALER’S MARKETING AND SALES PERFORMANCE

Distributor will periodically evaluate Dealer’s sales and marketing performance
under this Agreement. Dealer’s evaluation will be based on such reasonable criteria
as Distributor may establish, including without limitation: (i) Dealer’s reasonable
sales objectives that may be established by Distributor; (ii) Dealer’s sales of
smart USA Passenger Cars as a percentage of registrations of smart USA Passenger
Cars or Competitive Vehicles in Dealer’s AOR; (iii) the registrations of smart USA
Passenger Cars as a percentage of registrations of Competitive Vehicles in Dealer’s
AOR; (iv) Dealer’s sales or registrations of smart USA Passenger Cars as compared to
sales or registrations of smart USA Passenger Cards by authorized smart USA
passenger car dealers in other areas, including but not limited to the metropolitan
area, market and/or region in which Dealer is located; and (v) Dealer’s performance
in building and maintaining consumer satisfaction with Dealer and smart USA
Passenger Car Products. Distributor will review such evaluations with Dealer, and
Dealer shall take prompt corrective action if required to improve its performance.

					
	 	 	 	 	 
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	III.	 	DEALER’S SERVICE OBLIGATIONS

	 	A.	 	CUSTOMER SERVICE STANDARDS

Dealer and Distributor agree that customer satisfaction and the future growth of
their respective businesses is substantially dependent upon the ability of owners of
smart
USA Passenger Cars to obtain high-quality servicing from Dealer. Therefore, Dealer
agrees to:

	 	1.	 	Provide prompt, efficient and courteous service of the highest
quality for all smart USA Passenger Cars, regardless of where purchased and
whether or not under warranty.

	 
	 	2.	 	Provide prompt, efficient and courteous service of the highest
quality for all versions of smart passenger cars equal to smart USA Passenger
Cars not intended for sale in the United States of America and Puerto Rico
(“Equal smart Passenger Cars”), which are then under DAG warranty;

	 
	 	3.	 	Accurately diagnose and advise customers of the necessary
repairs, and obtain their consent prior to the initiation of such repairs;

	 
	 	4.	 	Professionally perform the necessary repairs; and

	 
	 	5.	 	Treat customers fairly at all times.

	 	B.	 	DEALER’S SPECIFIC SERVICE OBLIGATIONS

	 	1.	 	Pre-Delivery Inspections and Service

Dealer shall perform pre-delivery inspections and service on each smart USA
Passenger Car prior to sale and delivery thereof by Dealer in accordance
with the Warranty Manual.

	 	2.	 	Warranty Repairs and Policy Service

Dealer shall promptly, courteously and efficiently perform (i) warranty
repairs on each smart USA Passenger Car Product and Equal smart Passenger
Car that qualifies for such repairs under the provisions of any warranty
furnished therewith by Distributor or DAG, and (ii) such other inspections,
repairs or corrections on smart USA Passenger Car Products as may be
approved or authorized by Distributor to be made at Distributor’s expense
(hereinafter “policy service”). Dealer shall perform such repairs and
service on each such smart USA Passenger Car Product and Equal smart
Passenger Car as and when requested by owner or user (or in the case of
policy service when requested by Distributor), without regard to where such
smart USA Passenger Car was purchased and in accordance with the Warranty
Manual. Distributor agrees to compensate Dealer for all warranty repairs
and policy service, including labor, diagnosis and Genuine smart USA
Passenger Car Parts and Accessories, in accordance with procedures and at
rates to be established from time to time by Distributor. Unless otherwise
approved in advance by Distributor, Dealer shall use only genuine smart USA
Passenger Car Parts and Accessories when performing smart USA warranty
repairs and policy service. Warranty repairs and policy service are
provided for the benefit of customers, and Dealer agrees that the customer
shall not be obligated to pay any charges for such work or any other
services for which Dealer is reimbursed by Distributor, except as required
by law.

					
	 	 	 	 	 
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	 	3.	 	Service / Recall Campaign Inspections and Corrections

Dealer agrees to perform service/retail campaign inspections and/or
corrections for owners or users of all smart USA Passenger Car Products and
Equal smart
Passenger Cars that qualify for such inspections and/or corrections in
accordance with Distributor’s directives and the applicable procedures in
the Warranty Manual. Distributor agrees to reimburse Dealer for all
replacement parts and/or other materials required and used in connections
with such work and for labor according to such directives and the applicable
provisions of the Warranty Manual.

	 	4.	 	Roadside Assistance Program

Dealer agrees to participate in the smart USA Roadside Assistance Program as
specified by Distributor.

	 	C.	 	USE OF PARTS AND ACCESSORIES IN NON-WARRANTY SERVICE

Subject to the provisions of Sections I.L and III.B.2, Dealer has the right to sell,
install or use for making non-warranty repair products that are not Genuine smart
USA Passenger Car Parts and Accessories.

	 	1.	 	Quality Standards

Dealer Acknowledges, however, that its customers expect that any parts or
accessories that Dealer sells, installs or uses in the sale, repair or
servicing of smart USA Passenger Cars are, or meet the high quality
standards of, Genuine smart USA Passenger Cars Parts and Accessories.
Dealer agrees that in sales, repairs or servicing where Dealer does not use
genuine smart USA Passenger Car Parts and Accessories, Dealer will utilize
only such other parts or accessories as:

	 	(i)	 	Will not adversely affect the safety,
structural integrity, performance, mechanical operation or emissions
of the smart USA Passenger Car being sold, repaired or serviced; and

	 
	 	(ii)	 	Are equivalent in quality and design to
Genuine smart USA Passenger Car Parts and Accessories.

Dealer further agrees that it will not offer to sell any parts or
accessories that for reasons of quality or image are reasonably
objected to by Distributor

	 	2.	 	Dealer’s Disclosures as to Use of and Warranties for
Non-Genuine Parts and Accessories

In order to avoid confusion and to minimize potential customer
dissatisfaction, in any non-warranty instance where Dealer sells, installs
or uses non-Genuine smart USA Passenger Car Parts or Accessories, Dealer
shall disclose such fact to the customer and shall advise the customer that
the item is not included in warranties furnished by Distributor or DAG.
Such disclosure shall be written, conspicuous and stated on the customer’s
copy of the service or repair order or sale document. In addition, Dealer
will clearly explain to the customer the extent of any warranty covering the
parts or accessories involved and will deliver a copy of the warranty to the
customer.

					
	 	 	 	 	 
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	 	D.	 	COMPLIANCE WITH SAFETY AND EMISSION CONTROL REQUIREMENTS

Dealer agrees to comply and operate consistently with all applicable provisions of
National Traffic and Motor Vehicle Safety Act of 1966, and the Federal Clean Air
Act, as amended, including applicable rules and regulations issued from time to time
there under, and all other applicable federal, state, and local motor vehicle safety
and emission control statutes, rules, and regulations.

In event that the laws of the state in which Dealer is located require motor vehicle
dealers or distributors to install in new or used motor vehicles, prior to their
sale, any safety devices or other equipment not installed or supplied as standard
equipment by DAG, then Dealer, prior to the sale of any smart USA passenger car on
which such installations are required, shall properly install such devices or
equipment on such smart USA Passenger Cars. Dealer shall comply at its expense with
state and local laws pertaining to the installation and reporting of such equipment.

In the interest of motor vehicle safety and emission control, Distributor and Dealer
agree to provide to each other such information and assistance as may reasonably be
requested by the other in connection with the performance of obligations imposed on
either party by the National Traffic and Motor Vehicle Safety Act of 1966, and the
Federal Clean Air Act, as amended, and their rules and regulations, and all other
applicable federal, state and local motor vehicle safety and emission control
statutes, rules and regulations.

Dealer further agrees that should Distributor place any new smart USA Passenger Cars
in Dealer’s stock on retail hold pending the resolution of any federal or state
regulatory compliance issue, Distributor may, but shall not be required to, elect to
repurchase said retail held smart USA Passenger Cars. Should Distributor so elect,
Dealer agrees that it shall immediately sell the smart USA Passenger Cars back to
Distributor and withhold from retail sale all such smart USA Passenger Cars still in
its inventory at the time of said election as Distributor may reasonably determine.
In the event of such a repurchase, the price to be paid by Distributor to Dealer
shall be only the price paid by the Dealer to Distributor for said smart USA
Passenger Car. Distributor shall not be obligated to reimburse any other costs to
Dealer with respect to Dealer’s purchase or Distributor’s repurchase of the smart
USA Passenger Cars. Distributor shall make payment to the Dealer immediately upon
transfer of title to the smart USA Passenger Car to Distributor. During the period
from Distributor’s repurchase of smart USA Passenger Cars until the smart USA
Passenger Cars resale to Dealer, the subject smart USA Passenger Cars shall remain
in the possession, custody and control of Dealer as bailee of Distributor. Upon the
occurrence of the resolution of the event requiring the issuance of the retail hold
and smart USA Passenger Car repurchase via the issuance of appropriate repair
instructions to the Dealer, Distributor shall resell those smart USA Passenger Cars
to Dealer and Dealer hereby agrees to accept those smart USA Passenger Cars and
further agrees that it will only retail sell the smart USA Passenger Cars upon
completion of the work by dealer required to bring the smart USA Passenger Car into
regulatory compliance.

					
	 	 	 	 	 
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	 	E.	 	COMPLIANCE WITH CONSUMER PROTECTION STATUTES, RULES AND REGULATIONS

Dealer agrees to comply and operate consistently with all applicable provisions of
consumer protection statutes, rules and regulation (hereinafter “consumer protection
laws”). Because certain customer complaints may impose liability upon distributor
under consumer protection laws, Dealer agrees to provide prompt notice to
Distributor to such complaints and take such other steps as Distributor may require.
Dealer also agrees to provide applicable required customer notifications and
disclosures as prescribed by consumer protection laws. Dealer will do nothing to
affect adversely Distributor’s rights under consumer protection laws.

	 	F.	 	INSURANCE REQUIREMENTS

Dealer shall maintain, at Dealer’s expense, adequate fire, general liability, garage
keepers liability, product liability, completed operations liability, automobile
liability, workers compensation and casualty insurance issued by an insurer of
recognized responsibility satisfactory to Distributor with coverage for each
occurrence and in an aggregate amount acceptable to Distributor, and providing
coverage for, among other things, death, bodily injury, property damage and loss of
income claims that might arise under the doctrine of products liability and any
other claims that might arise in connection with the dealership operations. All
insurance shall be placed with a reputable insurance company having a Financial Size
Category equal to or greater than 1x and Policyholders Rating of ‘A+’ or ‘A-’
(Excellent) as assigned by Alfred M. Best and Company, Inc., or any other insurance
company approved by Distributor. Each insurance policy shall list Distributor as an
additional insured, shall provide for thirty (30) day’s notice to Distributor prior
to cancellation of such insurance, and shall give Distributor the right to pay any
premium due to avoid cancellation of such insurance. The Dealer shall reimburse
Distributor immediately upon demand for any amount paid by Distributor on behalf of
the Dealer to maintain an insurance policy. Upon request, Dealer shall furnish
Distributor with certificates of insurance, proof of payment of premiums and copies
of insurance policies which evidence the Dealer’s compliance with the requirements
of this paragraph. Prior to the expiration of any existing policy, the Dealer
shall provide proof of the renewal of such policy or the acquisition of a
replacement or substitute policy. In addition, the Dealer shall provide proof of
insurance within five (5) days of any request by Distributor. Such insurance shall
be maintained in full force and effect at Dealer’s sole cost throughout the term of
this Agreement (and throughout any period during which Distributor has permitted
Dealer to continue any of the dealership operations despite the expiration or
termination of this Agreement).

	IV.	 	DEALER’S SERVICE AND PARTS ORGANIZATION

	 	A.	 	ORGANIZATION AND STANDARDS

Dealer agrees to organize and maintain a complete service and parts organization of
the highest quality, including a qualified service manager, parts manager,
diagnostic specialists, technicians and a sufficient complement of qualified service
and parts personnel as recommended by Distributor. Dealer’s personnel will meet the
educational, management and technical training standards reasonably established by
Distributor and, at Dealer’s expense, will complete all service, parts and customer
satisfaction training courses prescribed by Distributor.

					
	 	 	 	 	 
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	 	B.	 	SERVICE EQUIPMENT AND SPECIAL TOOLS

Anything herein to the contrary notwithstanding, if Distributor determines that
Dealer requires smart USA Special Tools and Service Equipment to service a model of
smart USA Passenger Cars, Dealer acknowledges that it has no right to purchase such
model from Distributor unless and until it has acquired all such smart USA Special
Tools and Service Equipment and completed all related training courses prescribed by
Distributor.

	 	1.	 	smart USA Special Tools

Dealer agrees to purchase from Distributor all smart USA Special Tools as
may be reasonably required by Distributor and which are the minimum required
for the service, maintenance, and repair of smart USA Passenger Cars
regardless of size. Delivery of smart USA Special Tools by Distributor to
Dealer will be automatic and via a timetable determined appropriate by
Distributor in its reasonable discretion. Dealer may also acquire, at its
own discretion, smart USA Special Tools for larger scale repairs.

Dealer agrees to maintain all smart USA Special Tools in operational
condition and in calibration as designated by Distributor. Dealer will
manage the inventory of smart USA Special Tools using a storage and
inventory management system specified by Distributor. Dealer agrees that
such inventory and/or physical inventory documentation will be subject to
periodic inspection by Distributor.

In the event a dealer utilizes its own body shop, dealer agrees to acquire
smart USA Special Tools for use in the repair of smart USA Passenger Cars as
specified by the smart USA repair procedure. A Dealer that sublets body
shop repairs shall use its best efforts to monitor, advise, and ensure that
these locations are equipped with the necessary smart USA tools, repair
instructions, and training support to perform the repairs.

	 	2.	 	smart USA Service Equipment

Dealer agrees to acquire approved Service Equipment designated as Basic
Equipment (“BE”) pursuant to the Distributor Standard Service Equipment
Program. Dealer agrees to maintain this equipment in operational condition
and in calibration as designated by Distributor. Dealer agrees that such
equipment and physical inventory documentation will be subject to periodic
inspection by Distributor.

	 	C.	 	PARTS STOCKING AND SERVICE LEVELS

Dealer agrees to maintain its parts stock at minimum stocking and service levels
reasonably established by Distributor.

	 	D.	 	AFTER-HOURS DELIVERY

Dealer agrees to provide Distributor, upon request, access to a secure area for
after-hours parts or passenger car delivery.

					
	 	 	 	 	 
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	 	E.	 	ASSISTANCE PROVIDED BY DISTRIBUTOR

	 	1.	 	Service Manuals and Materials

Distributor agrees to make available to Dealer copies of such service
manuals and bulletins, publications, computer software and technical data as
Distributor shall deem to be necessary for the needs of Dealer’s service and
parts organization. Dealer shall be responsible for keeping such manuals
and materials current and available for consultation by its employees.

	 	2.	 	Field Personnel Assistance

To assist Dealer in handling its responsibilities under this Agreement,
Distributor agrees to make available, as determined by Distributor in its
reasonable discretion, qualified field personnel who will, from time to
time, advise and counsel Dealer on service-related subjects determined by
Distributor in its reasonable discretion, including service policies,
product and technical adjustments, repair and replacement of product
components, customer relations, warranty administration, service and parts
merchandising, and personnel/management training.

	 	F.	 	EVALUATION OF DEALER’S SERVICE AND PARTS PERFORMANCE

Distributor will periodically evaluate Dealer’s: (i) service performance in areas
such as dealer’s service of smart USA Passenger Cars as a percentage of
registrations of smart USA Passenger Cars in Dealer’s AOR, customer satisfaction,
warranty administration, service repairs, service management, facilities, operating
procedures and new vehicle pre-delivery service; and (ii) parts purchases, sales,
operations, facilities, tools and equipment. Distributor will review such
evaluations with Dealer, and Dealer shall take prompt action to improve the service
and parts performance to satisfactory levels as Distributor may require. Such
action shall, if requested by Distributor, include an action plan by Dealer for
improvement of service and parts performance within a specific time period approved
by Distributor, including but not limited to the establishment of additional space,
facilities or locations for such operations.

	 	G.	 	ADDITIONAL FACILITIES OR LOCATIONS

If, with Distributor’s prior written consent, Dealer establishes additional
facilities or locations for its service and parts operations, Dealer shall meet the
facilities, identification, organizational, equipment, parts stocking and other
standards reasonably established by Distributor from time to time for such
facilities or locations.

					
	 	 	 	 	 
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	V.	 	CUSTOMER SATISFACTION RESPONSIBILITIES

Distributor and Dealer intend to conduct their respective businesses in a manner with a goal of
achieving the highest levels of customer satisfaction by marketing the finest products and
providing the best service in the automotive industry.

	 	A.	 	DEALER’S CUSTOMER SATISFACTION OBLIGATIONS

Dealer will be responsible for satisfying smart USA customers in all matters except
those that are directly related to product design and manufacturing. Dealer will
take all
reasonable steps to ensure that each customer is completely satisfied with smart USA
Passenger Car Products and the services and practices of Dealer. Dealer will not
engage in any practice or method of operation if its nature or quality may impair
the reputation of Distributor or smart USA Passenger Car Products or DAG.

	 	1.	 	Dealer’s Customer Satisfaction Plan

Upon Distributor’s request. Dealer shall provide a detailed plan of
Dealer’s customer satisfaction program to Distributor and shall implement
such program on a continuous basis. This plan shall include an ongoing
system for emphasizing customer satisfaction to all Dealers’ employees, for
training Dealer employees and for conveying to customers that Dealer is
committed to the highest possible level of customer satisfaction.

	 	2.	 	Employee Training

Dealer agrees to participate and to have its employees participate, at
Dealer’s expense, in smart USA customer satisfaction training as required by
Distributor.

	 	3.	 	Customer Assistance Response System

Dealer agrees to implement a system approved by Distributor that will
respond immediately to requests for customer assistance from Distributor.

	 	B.	 	 EVALUATION OF DEALER’S CUSTOMER SATISFACTION PERFORMANCE

Distributor periodically will evaluate Dealer’s customer satisfaction performance
based on the following considerations and efforts by Dealer.

	 	1.	 	Distributor will provide Dealer with Customer Relationship
Index reports or such other equivalent data as will permit Dealer to access its
performance and maintain the highest level of customer satisfaction. Dealer
agrees to review with its employees on a regular basis the results of the
customer satisfaction reports or other data it receives.

	 	2.	 	Dealer shall continuously develop and implement specific action
plans to improve its customer satisfaction performance and results. The plans
are to be reviewed with Distributor on a basis that Distributor deems
appropriate. Dealer will respond on a timely basis to requests from
Distributor to take action on unsatisfactory customer satisfaction matters and
to commit necessary resources to remedy deficiencies reasonably specified by
Distributor.

	VI.	 	DEALERSHIP FACILITIES AND IDENTIFICATION

	 	A.	 	LOCATION AND FACILITIES

Dealer shall provide Dealership Facilities at the Approved Location(s) that (i) will
enable Dealer to effectively perform its responsibilities under this Agreement, (ii)
are satisfactory in space, appearance, layout, equipment, and corporate
identification, and (iii) are otherwise substantially in accordance with the Retail
Capacity Addendum, Dealership Facility Planning & Corporate Identification Manual,
and such other standards as Distributor may establish from time to time. Dealer
shall conduct its Dealership Operations only from the Approved Location(s). If the
Approved Location(s) is of more than one place of business, Dealer shall use each
such place of business only for the purposes specified therefore in Paragraph E and
the Final Paragraph of this Agreement and, if applicable, in the Retail Capacity
Addendum.

					
	 	 	 	 	 
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	 	B.	 	CHANGES AND ADDITIONS

Dealer shall not move, relocate or change the designated usage or function of the
Approved Location(s) or any of the Dealership Facilities, or substantially modify
any of the Dealership Facilities, nor shall Dealer or any person named in the Final
Paragraph of this Agreement directly or indirectly establish or operate any other
locations or facilities for the sale or servicing of smart USA Passenger Car
Products or for the conduct of any other of the Dealership Operations contemplated
by this Agreement, without the prior written consent of Distributor. Any changes in
the Approved Location(s) or the Dealership Facilities that may be agreed to by
Distributor and Dealer may be reflected in a new Agreement or in a new Retail
Capacity Addendum.

In particular, Dealer acknowledges that the addition of sales, service or parts
operations for another line of vehicles to the Dealership Facilities or at the
Approved Location(s) could adversely affect Dealer’s sales, service and parts
performance with respect to smart USA Passenger Car Products. Accordingly, to give
Distributor an adequate opportunity to evaluate the effect of such a proposed
addition and to determine whether or not to consent thereto, Dealer agrees to notify
Distributor in writing at least sixty (60) days before Dealer enters into any
agreement or letter of intent with respect to the addition of such sales, service or
parts operations to the Dealership Facilities or at the Approved Location(s).

	 	C.	 	DEALER’S OPERATING HOURS

Dealer agrees to conduct Dealership Operations during all days and hours that are
customary and lawful for such operations in the community or locality in which
Dealer is located and in accordance with industry standards. In addition, when
necessary to accommodate customer needs, Dealer shall extend its operating hours.

	 	D.	 	CORPORATE IDENTITY

Subject to applicable governmental statutes, ordinances and regulations, Dealer
agrees to erect, display and maintain, at Approved Location(s) only and at Dealer’s
sole expense, such standard authorized product and service signs and other corporate
identity elements as specified in the Dealership Facility Planning & Corporate
Identification Manual or otherwise required by Distributor from time to time.

	 	E.	 	EVALUATION OF DEALERSHIP FACILITIES

Distributor will periodically evaluate the Dealership Facilities. In making such
evaluations, Distributor may consider, among other things: the actual building and
land provided by Dealer for the performance of its responsibilities under this
Agreement; compliance with Distributor’s current requirements for Dealership
Operations; the appearance, condition, layout and signage of the Dealership
Facilities; and such other factors as in Distributor’s opinion may relate to
Dealer’s performance of its responsibilities under this Agreement. Distributor will
discuss such evaluations with Dealer, and Dealer shall take prompt action to comply
with Distributor’s recommendations and minimum facility standards.

					
	 	 	 	 	 
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	 	F.	 	OWNERSHIP AND USE OF smart MARKS AND smart USA MARKS

	 	1.	 	Validity and Exclusive Ownership of smart Marks and smart USA
Marks

Dealer acknowledges the validity and DAG’s exclusive ownership of the smart
Marks and smart USA Marks, and agrees not to contest the same during the
term of the Agreement or at any time thereafter. Dealer and Distributor
agree to cooperate with each other in preventing any acts of trademark
infringement or unfair competition with respect to any smart Mark or smart
USA Mark, but DAG or Distributor shall have sole control over all actions
and legal proceedings to redress infringement of or any unfair competition
with respect to any smart Mark or smart USA Mark.

	 	2.	 	Use by Dealer

Distributor grants Dealer a non-exclusive license to use the smart Marks and
smart USA Marks subject to the terms and conditions of the Agreement and the
Dealership Facility Planning & Corporate Identification Manual. Dealer
agrees that it will use the smart Marks and smart USA Marks only in
connection with the sale and servicing of smart USA Passenger Car Products
and only in such manner, at such location, to such extent, and for such
purposes as Distributor may specify from time to time. Dealer shall
promptly change or discontinue its use of any smart Marks or smart USA Marks
upon Distributor’s request. Dealer shall not use the smart Marks or smart
USA Marks as part of its corporate or business name without Distributor’s
prior written consent.

	 	3.	 	Discontinuance of Use

Upon termination of this Agreement, Dealer agrees that it shall immediately:

	 	(i)	 	Discontinue the use of the words smart or smart
USA and the smart Marks and smart USA Marks, or any semblance of same,
including without limitation, the use of all stationery, telephone
directory listing and other printed material referring in any way to
smart or smart USA or bearing any smart Mark or smart USA Marks;

	 	(ii)	 	Discontinue the use of the word smart, smart
USA and “smart Center” or the smart Marks or smart USA Marks, or any
semblance of same, as part of its business or corporate name, and file
a change or discontinuance of such name with appropriate authorities;

	 	(iii)	 	Remove all product signs bearing said word(s)
or smart Marks or smart USA Marks at Dealer’s sole cost and expense;

	 	(iv)	 	Cease representing itself as an authorized
smart USA Passenger Car Dealer; and

	 	(v)	 	Refrain from any action, including without
limitation, any advertising, stating or implying that it is authorized
to sell or distribute smart USA Passenger Car Products.

					
	 	 	 	 	 
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	 	4.	 	Enforcement

In the event Dealer fails to comply with the terms and conditions of this
Section VI.F, Distributor shall have the right, in its sole discretion, to
effect compliance through litigation and/or to enter upon Dealer’s premises
and remove, without liability, all such product signs and identification
bearing the word smart or smart USA or any smart Mark or smart USA Mark.
Dealer agrees that it shall reimburse Distributor for any costs and expenses
incurred in such litigation and/or removal, including reasonable attorney
fees and expenses.

	VII.	 	WARRANTIES

The only warranties of Distributor or DAG applicable to smart USA Passenger Car Products shall be
the New Vehicle Limited Warranty or such other written warranties that may be expressly furnished
by Distributor or DAG. Except for its express limited liability under such written warranties,
Distributor and DAG do not assume any additional warranty obligations or liabilities in connection
with any smart USA Passenger Car Products. Dealer is not authorized to assume any additional
obligations or liabilities on behalf of Distributor or DAG. Any such additional obligations assumed
by Dealer shall be the sole responsibility of Dealer.

Dealer shall expressly incorporate in full and without modification any warranty furnished by
Distributor or DAG with a smart USA Passenger Car as a conspicuous part of each order form or other
contact for the sale of such a smart USA Passenger Car by Dealer to any buyer. Dealer shall make
available to the buyer of each smart USA Passenger Car Product prior to purchase of such smart USA
Passenger Car Product, copies of such applicable warranties as maybe furnished by Distributor or
DAG. Dealer shall also provide to the buyer of each smart USA Passenger Car Product, in full and
without modification, any owner’s manual, warranty booklet or other owner information which
Distributor or DAG may provide to Dealer for delivery with such smart USA Product. Dealer agrees to
abide by and implement in all other respects Distributor’s warranty procedures then in effect.

	VII.	 	CAPITAL, CREDIT, RECORDS AND UNIFORM SYSTEMS

	 	A.	 	NET WORKING CAPITAL

Dealer agrees to establish and maintain actual net working capital in an amount not
less than the minimum net working capital specified by Distributor. Distributor
will have the right to modify the amount of net working capital required, and Dealer
agrees promptly to establish and maintain the required amount.

	 	B.	 	FLOORING AND LINES OF CREDIT

Dealer agrees to obtain and maintain at all times a confirmed and adequate flooring
line with a bank or financial institution or other method of financing acceptable to
Distributor to enable Dealer to perform its obligations pursuant to this Agreement.

Distributor may increase the required amounts of flooring or lines of credit, and
Dealer agrees promptly to establish and maintain the increased amount.

Subject to the foregoing obligations, Dealer is free to do its financing business,
wholesale, retail or both, with whomever it chooses and to engage in retail
financing activity to the extent it desires.

					
	 	 	 	 	 
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	 	C.	 	PAYMENT TERMS

All monies or accounts due Dealer from Distributor will be considered net of
Dealer’s indebtedness to Distributor. Distributor may deduct or offset any amounts
due or to become due from Dealer to Distributor, or any amounts held by Distributor,
from or against any sums or accounts due or to become due from Dealer to
Distributor. Payments by Dealer to Distributor shall be made in such a manner as
prescribed by Distributor and shall be applied against Dealer’s indebtedness in
accordance with Distributor’s policies and practices. If Dealer disputes any
deduction or offset imposed by Distributor pursuant to this Section VII.C, it shall
provide written notice of such dispute to Distributor within ninety (90) days of the
date on which Distributor imposed such deduction or offset. If Dealer fails to
provide such written notice to Distributor within that 90-day period, it shall be
deemed to have waived any right that it may have to challenge such deduction or
offset before any court, administrative agency or governmental body.

	 	D.	 	UNIFORM ACCOUNTING SYSTEM

Dealer agrees to maintain its financial books and record in accordance with the
smart USA Accounting Requirements, as amended from time to time by Distributor. In
addition, Dealer shall furnish to Distributor complete and accurate financial or
operating information, including without limitation, a financial and/or operating
statement covering the current month and calendar year-to-date operations and
showing the true and accurate condition of Dealer’s business. Dealer shall promptly
furnish to Distributor copies of any adjusted annual statements, including any and
all adjusted year-end statements prepared for tax or any other purposes. All such
information shall be furnished by Dealer to Distributor via Distributor’s electronic
communications network and in such format and at such times as prescribed by
Distributor. If requested by Distributor, Dealer shall furnish to Distributor an
audited annual financial statement.

	 	E.	 	RECORDS MAINTENANCE

Dealer agrees to keep complete, accurate and current records regarding its sale,
leasing and servicing of smart USA Car Products for a minimum of seven (7) years,
exclusive of any retention period required by any government entity. Dealer shall
prepare, keep current and retain records in support of requests for reimbursement
for warranty and policy work performed by Dealer in accordance with the Warranty
Manual.

	 	F.	 	EXAMINATION OF DEALERSHIP ACCOUNTS AND RECORDS

Distributor shall have the right at all reasonable times and during regular business
hours to inspect the Dealership Facilities and to examine, audit and reproduce all
records, accounts and supporting data relating to all dealership operations for any
line of vehicles conducted in the Dealership Facilities or at the Approved
Location(s), including without limitation, sales reporting, service and repair of
smart USA Passenger Car Products by Dealer.

					
	 	 	 	 	 
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	 	G.	 	TAXES

Dealer shall be responsible for and duly pay all sales taxes, use taxes, excise
taxes and other governmental or municipal charges imposed, levied or based upon the
purchases or sale of smart USA Passenger Car Products by Dealer, and shall maintain
accurate records of the same.

	 	H.	 	CONFIDENTIALITY

Distributor agrees that it shall not provide any data or documents submitted to it
by Dealer to any third party, other than DAG, unless authorized by Dealer, required
by law, or required to generate composite or comparative data for analytic purposes.
Dealer agrees to keep confidential and not to disclose, directly or indirectly, any
information that Distributor designates as confidential. In addition, Dealer agrees
to comply with all applicable laws relating to the handling, security, and sharing
of lead and customer data provided by Distributor or DAG.

	 	I.	 	smart USA COMMUNICATIONS SYSTEM AND PROPRIETARY MANUFACTURER SYSTEMS

Distributor has established the smart USA Dealer Communications System (“DCS”) to
retrieve information from and disseminate information to Dealer. The DCS collects
parts, warranty and financial data from Dealer, and provides access to various
reports, data bases and administrative messages to Dealer. Dealer shall utilize the
DCS to provide such information to Distributor as Distributor shall specify from
time to time. Dealer shall acquire, install and maintain at its expense the
necessary equipment and systems compatible with the DCS, as well as other
proprietary manufacturer systems, which are deemed necessary by Distributor and DAG
to transact business and serve customers in the most efficient manner.

	 	J.	 	SALES REPORTING

Dealer agrees to accurately report to Distributor, with such relevant information as
Distributor may reasonably require, the delivery of each smart USA Passenger Car and
pre-owned smart USA vehicle to an ultimate consumer, and to furnish Distributor with
such other reports as Distributor may reasonable require in accordance with
Distributor’s Ultimate Consumer RDR Provision or such other sales reporting
requirements (i.e. reporting of sales, customer traffic, and customer order banks)
as Distributor may establish from time to time. All new car vehicles must be
reported no later than 48 hours after delivery.

	IX.	 	TRANSFERS

	 	A.	 	SALE OF ASSETS OR OWNERSHIP INTEREST

This is a personal service agreement that Distributor has entered into in
reliance upon personal qualifications, reputation, integrity, expertise and
commitment of Owners and Dealer Operator. For this reason, Dealer agrees to
obtain Distributor’s prior written consent to any proposed sale or transfer
of Dealer’s principal assets or any ownership interest of Owner, which
consent shall not be unreasonably withheld.

Distributor shall not be obligated to execute a new Agreement with a
proposed transferee of such assets or ownership interest unless Dealer first
makes arrangements acceptable to Distributor to satisfy any outstanding
indebtedness to Distributor.

					
	 	 	 	 	 
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	 	B.	 	RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE

	 	1.	 	Rights Granted

If a proposal to sell Dealer’s principle assets to transfer the
majority ownership interest in Dealer is submitted by Dealer to
Distributor, or in the event of the death of the majority Owner of
Dealer, Distributor has the right of first refusal or option to
purchase such assets or ownership interest, including any leasehold
interest or reality. Distributor’s exercise of its right or option
under this Section IX.B supersedes Dealer’s right to transfer its
interest in, or ownership of, the dealership. Distributor’s right or
option may be assigned by it to any third party and Distributor
hereby guarantees the full payment to Dealer of the purchase price
assigned to such assignee. Distributor may disclose the terms of any
pending buy/sell agreement and any other relevant dealership
performance information to any potential assignee. Distributor’s
rights under this section IX.B will be binding on and enforceable
against any assignee or successor in interest of Dealer or purchaser
of Dealer’s assets. In the event the proposed sale of assets or
transfer in majority interest (“Proposed Sale”) includes assets or
interests that are not related to Dealer’s smart franchise, the right
of first refusal shall apply only to portions of the Proposed Sale
that relates to the smart franchise. If the buy/sell agreement does
not specifically reference the portion of the purchase price of the
Proposed Sale that relates to the smart franchise then Distributor
shall reasonably determine the purchase price of the smart related
portion of the Proposed Sale. In the event of a transfer of majority
ownership interest in a dealership entity which holds both smart and
non-smart related assets and liabilities, Dealer shall transfer all
non-smart related assets and liabilities from the dealership entity
prior to the closing of the transaction so that at the closing
Distributor or its assignee is acquiring the ownership interest of an
entity that holds only smart related assets and liabilities.

Anything herein to the contrary notwithstanding, Distributor shall
not have a right of first refusal or option to purchase Dealer’s
principle assets or the majority interest in Dealer if the proposed
transferee is the spouse or a child of an Owner and such spouse or
child meets the criteria then currently used by Distributor in
qualifying owners of smart USA Passenger Car dealers. If the
proposed transferee fails to meet such criteria due to insufficient
personal qualifications or expertise, Distributor may, in its sole
discretion, approve the transfer subject to the proposed transferee’s
successful completion of such training as Distributor may require.
If the proposed transferee fails to complete such training
successfully or otherwise fails to meet the criteria then
currently used by Distributor in qualifying such owners within the
time period prescribed by Distributor, Distributor may thereafter
exercise its right of first refusal or option to purchase under this
section IX.B.

					
	 	 	 	 	 
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	 	2.	 	Exercise of Distributor’s Rights

Distributor shall have sixty (60) days from the following events
within which to exercise its option to purchase or right of first
refusal: (i) Distributor’s receipt of all data and documentation
customarily required by it to evaluate a proposed transfer of
ownership; (ii) Distributor’s receipt of notice from Dealer of the
death of the majority Owner of Dealer, or (iii) Distributor’s
disapproval of any application submitted by Owner’s heirs pursuant to
Section X. Distributor’s exercise of its right of first refusal
under this Section IX.B neither shall be dependent upon nor require
its prior refusal to approve the proposed transfer.

	 	3.	 	Right of First Refusal

If Dealer has entered into a bona fide written buy/sell agreement for
its dealership business or assets, Distributor’s right under this
Section IX.B is a right of first refusal, enabling Distributor to
assume the buyer’s rights and obligations under such buy/sell
agreement, and to cancel this Agreement and all rights granted
Dealer. Upon Distributor’s request, Dealer agrees to provide other
documents relating to the proposed transfer and any other information
which Distributor deems appropriate, including, but not limited to,
those reflecting other agreements or understandings between the
parties to the buy/sell agreement. If Dealer refuses to provide such
documentation or to state in writing that no such documents exist, it
shall be conclusively presumed that the buy/sell agreement is not a
bona fide agreement. If Dealer withdraws its proposal in writing
within ten (10) days following Dealer’s receipt of Distributor’s
notice exercising its right of first refusal, such right shall be
null and void.

	 	4.	 	Option to Purchase

In the event of the death of the majority Owner of if Dealer submits
a proposal which Distributor determines is not bona fide or in good
faith, Distributor has the option to purchase the principal assets of
Dealer utilized in Dealership Operations, including real estate and
leasehold interest, and to cancel this Agreement and the rights
granted Dealer hereunder. The purchase price of the dealership
assets will be determined by good faith negotiations between the
parties.

					
	 	 	 	 	 
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	 	5.	 	Dealer’s Obligations

Upon Distributor’s exercise of its right or option and tender of
performance under the buy/sell agreement or upon whatever terms may
be expressed in the buy/sell agreement, Dealer shall forthwith
transfer the affected real property by warranty deed conveying
marketable title free and clear of all liens, claims, mortgages,
encumbrances, tenancies and occupancies. The warranty deed shall be
in proper form of recording, and Dealer shall deliver complete
possession of the property and deed at the time of closing. Dealer
shall also furnish to Distributor all copies of any easements,
licenses, or other documents affecting the property or Dealership
Operations and shall assign any permits or license that are necessary
or desirable for the use of or appurtenant to the property of the
conduct of such operations. Dealer also agrees to execute and
deliver to Distributor instruments satisfactory to Distributor
conveying title to all personal property, including leasehold
interests, involved in the transfer or sale to Distributor. If any
personal property is subject to any lien or charge of any kind,
Dealer agrees to procure the discharge and satisfaction thereof prior
to the closing of the sale of such property to the Distributor.

	X.	 	SUCCESSION RIGHTS UPON DEATH OR INCAPACITY

	 	A.	 	SUCCESSION TO OWNERSHIP AFTER DEATH OF OWNER

In the event that an Owner dies and his or her interest in Dealer passes
directly to any person or persons (“Heirs”) who wish to succeed to Owner’s
interest, then Owner’s legal representative must notify Distributor within
sixty (60) days of the death of Owner of such Heir’s or Heirs’ intent to
succeed Owner. The legal representative also must then designate a proposed
Dealer Operator for Distributor’s approval. The effect of such notice from
Owner’s legal representative will be to suspend any notice of termination
provided for in Section X.B.4 issued hereunder.

Upon delivery of such notice, Owner’s legal representative shall immediately
request any person(s) identified by it as intending to succeed Owner and the
designated candidate for Dealer Operator to submit an application and to
provide all personal and financial information that Distributor may
reasonably and customarily require in connection with its review of such
applications. All requested information must be provided promptly to
Distributor and in no case later than thirty (30) days after receipt of such
request from Owner’s legal representative. Distributor shall have sixty
(60) days after its receipt of all requested information in which to: (i)
review such application(s) pursuant to the then current criteria generally
applied by Distributor in qualifying owners and/or dealer operators of smart
USA passenger car dealers, and (ii) either approve or disapprove the
application(s). If all requested information is not received by Distributor
within thirty (30) days of Owner’s legal representative’s request,
Distributor shall have no obligation to review and approve or disapprove
such application(s). If Distributor approves the application(s), it shall
offer to enter into a new smart USA Passenger Car Dealer Agreement with
Owner’s Heir(s) in the form then currently in use, subject to such
additional conditions and for such term as Distributor deems appropriate.

					
	 	 	 	 	 
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In the event that Distributor does not approve the designated Heir(s) or
designated candidate for Dealer Operator, or if Owner’s legal representative
withdraws his or her notice of the intent of Heir(s) to succeed as Owner(s),
or if the legal representative or any proposed Owner or Dealer Operator
fails to timely provide the required information, Distributor may reinstate
or issue a notice of termination. This Section X.A. is subject to, and
shall not be deemed to waive, Distributor’s right to exercise its option to
purchase as set forth in Section IX.

If Distributor has notified Dealer that it does not plan to continue to have
a smart USA passenger car dealer in Dealer’s AOR, Distributor shall have no
obligation to execute a new smart USA Passenger Car Dealer Agreement with
Owner’s Heir(s) pursuant to this Section X.

	 	B.	 	INCAPACITY OF OWNER

The parties agree that, as used herein, incapacity shall refer to any
physical or mental ailment that, in Distributor’s opinion, adversely affects
an Owner’s ability to meet his or her obligations under this Agreement.
Distributor may terminate this Agreement when an incapacitated Owner also is
the Dealer Operator identified herein.

Prior to the effective date of any notice of termination, an incapacitated
Owner who is also the Dealer Operator, or his or her legal representative,
may propose a new candidate for the position of Dealer Operator. Such
proposal shall be in writing and shall suspend any pending notice of
termination until Distributor advises Dealer of its approval or disapproval
of the new candidate. Upon receipt of such notice, Distributor and Dealer
shall follow the qualification procedures set forth in Section X.A.

	 	C.	 	NOMINATION OF SUCCESSOR PRIOR TO DEATH OR INCAPACITY OF
OWNER

An Owner owning a majority of Dealer’s stock may nominate a candidate to
assume ownership and/or position of Dealer Operator of the dealership upon
his or her death or incapacity.

As soon as practicable after such nomination, Distributor will request such
personal financial information from the nominated Owner and/or Dealer
Operator candidate as it reasonably and customarily may require in
evaluating such candidates. Distributor shall apply criteria then currently
used by Distributor in qualifying owners and/or dealer operators of smart
USA passenger car dealers. Upon receipt of all requested information,
Distributor shall either approve or disapprove such candidate. If Successor
Addendum and shall remain in effect for five (5) years if the proposed
candidate continues to comply with the then current criteria used by
Distributor in qualifying such candidates. If Distributor does not
initially qualify the candidate, Distributor agrees to review the reason(s)
for its decision with Owner. Owner is free at any time to renew its
nomination. However, in such instances, the candidate must again qualify
pursuant to the then current criteria. Owner may, by written notice,
withdraw a nomination at any time, even if Distributor has previously
qualified said candidate.

					
	 	 	 	 	 
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	XI.	 	TERMINATION

	 	A.	 	VOLUNTARY TERMINATION BY DEALER

Dealer shall have the right to terminate this Agreement at any time by
sending notice of such termination to smart USA, by certified mail, return
receipt requested, telegram, or overnight mail service at least sixty (60)
days in advance of the effective date thereof.

	 	B.	 	TERMINATION FOR CAUSE

	 	1.	 	Immediate Termination

Dealer and Distributor agree that the following conduct is within
Dealer’s control and is so contrary to the goals, purposes and
objectives of this Agreement as to warrant its immediate termination.
Accordingly, Dealer agrees that if it engages in any of the
following types of conduct, Distributor shall have the right to
terminate this Agreement immediately:

	 	(i)	 	Any attempted or actual sale,
transfer or assignment by Dealer of this Agreement or any of
the rights granted Dealer hereunder, or any attempted or
actual transfer, assignment or delegation by Dealer of any of
the responsibilities assumed by it under this Agreement,
without prior written consent of Distributor;

	 	(ii)	 	Subject to the provisions of
Section IX, a change by operation of law or otherwise in the
direct or indirect ownership of Dealer, whether voluntary of
involuntary, from that set forth in the Final Paragraph of
this Agreement, except as expressly permitted herein, without
the prior written consent of Distributor;

	 	(iii)	 	Removal, resignation,
withdrawal or elimination from Dealer for any reason of the
Dealer Operator; provided, however, Distributor shall give
Dealer a reasonable period of time within which to replace
such person with a Dealer Operator satisfactory to
Distributor;

	 	(iv)	 	The failure of Dealer to
conduct all Dealership Operations required by this Agreement
during and for not less than the customary and lawful hours of
five (5) consecutive business days, except in the event such
closure or cessation of operation is caused by some physical
event beyond the control of the Dealer, such as strikes, civil
war, riots, fires, floods, earthquakes, or other acts of God;

	 	(v)	 	Any undertaking by Dealer to
conduct, directly or indirectly, any of the Dealership
Operations at a location or facility other than those
specified in Paragraph E and the Final Paragraph of this
Agreement for that Dealership Operation;

					
	 	 	 	 	 
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	 	(vi)	 	Insolvency of Dealer;
voluntary institution by Dealer of any proceeding under the
federal bankruptcy laws or under any state insolvency law;
institution against dealer of any proceeding under the federal
bankruptcy laws or under any state insolvency law which is not
vacated within thirty (30) days from the institution thereof;
appointment of a receiver, trustee or other office having
similar powers for Dealer or Dealer’s business, provided such
appointment is not vacated within thirty (30) days of the date
of such appointment; execution by Dealer of an assignment for
the benefit of creditors; or any levy under attachment,
foreclosure, execution or similar process whereby a third
party acquires rights to a significant portion of the assets
of Dealer necessary for the performance of Dealer’s
responsibilities under this Agreement or to the operation or
ownership of Dealer, which is not within thirty (30) days from
the date of such levy vacated or removed by payment or
bonding;

	 	(vii)	 	Any material
misrepresentation by Dealer or any person named in the Final
Paragraph of this Agreement as to any fact relied on by
Distributor in entering into, amending or continuing with this
Agreement, including without limitation any representation
concerning the ownership, management, or capitalization of
Dealer;

	 	(viii)	 	The conviction in a court of original jurisdiction of Dealer
or Owner of a crime affecting the Dealership Operations or of
any felony, or any willful failure to Dealer to comply with
the provisions of any laws, ordinances, rules, regulations, or
orders relating to the conduct of Dealership Operations;

	 	(ix)	 	The failure of Dealer to
obtain or maintain any license, permit or authorization
necessary for the conduct by Dealer of Dealership Operations
pursuant to this Agreement, or the suspension or revocation of
such license, permit or authorization.

	 	1A.	 	 Submission by Dealer to Distributor of:

	 	(i)	 	A knowingly false or fraudulent report or statement;

	 	(ii)	 	a knowingly false or
fraudulent claim (or statement in support
thereof) for
payment, reimbursement or for any discount, allowance,
refund, rebate, credit or other incentive under any plan that
may be offered by Distributor, whether or not Dealer offers or
makes restitution;

	 	(iii)	 	False financial information;

					
	 	 	 	 	 
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	 	(iv)	 	False sales reporting data; or

	 	(v)	 	Any false report of
statement relating to pre-delivery inspection, testing,
warranties, service, repair or maintenance required to the
performed by Dealer; or

	 	2.	 	Termination Upon Sixty Days of Notice

The following conduct violates the terms and conditions of this
Agreement and, if Dealer engages in such conduct,
Distributor shall have the right to terminate this Agreement upon
sixty (60) days notice if Dealer fails to cure such conduct within
the sixty-day period provided in such notice:

	 	(i)	 	Failure of Dealer to pay
Distributor for any smart USA Passenger Car Products;

	 	(ii)	 	Failure of Dealer to
establish or maintain the required net working capital or
adequate flooring and lines of credit;

	 	(iii)	 	Any dispute, disagreement or
controversy among managers, officers or Owners of Dealer that,
in the reasonable opinion of Distributor, adversely affects
the ownership, operation, management, business, reputation or
interests of Dealer or Distributor;

	 	(iv)	 	Impairment of the reputation
or financial standing of Dealer subsequent to the execution of
this Agreement;

	 	(v)	 	Refusal to permit Distributor
to examine or audit Dealer’s accounting records as provided
herein upon receipt by Dealer from Distributor of written
notice requesting such permission or information;

	 	(vi)	 	Failure by Dealer to timely
furnish accurate sales or financial information and related
supporting data; or

	 	(vii)	 	Breach or violation by
Dealer of any other term or provision of this Agreement.

	 	3.	 	Termination for Failure of Performance

If, upon evaluation of Dealer’s performance pursuant to Sections
II.F, IV.F, V.B or VI.E herein, Distributor concludes that Dealer has
failed to perform adequately its marketing and sales, service or
customer satisfaction responsibilities or to provide adequate
dealership facilities, Distributor shall issue to Dealer a Dealer
Improvement Addendum notifying it of such failure(s). Distributor
will endeavor to review promptly with Dealer the nature and extent of
such failure(s) and will grant Dealer one hundred eighty (180) days
or such other period as may be required by law to correct such
failure(s). If Dealer fails or refuses to correct such failure(s) or
has not made substantial progress towards
remedying such failure(s) at the expiration of such period,
Distributor may terminate this Agreement upon sixty (60) days notice
or such other notice as may be required by law.

					
	 	 	 	 	 
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	 	4.	 	Termination Upon Death or Incapacity

Subject to certain exceptions identified in Section X, Distributor
may terminate this Agreement in the event of the death or an Owner or
upon in the incapacity of any Owner’s legal representative.
Termination upon either of these events shall be effective ninety
(90) days from the date of such notice.

	 	C.	 	TERMINATION UPON TERMINATION OF DISTRIBUTORSHIP

Distributor may terminate this Agreement at any time by written notice to
Dealer, such termination to be effective thirty (30) days after receipt of
notice by Dealer unless otherwise mutually agreed in writing, if any
licensing or distribution agreement pursuant to which Distributor is
distributor for smart USA Passenger Car Products in the United States of
America and Puerto Rico shall terminate or be terminated.

	 	D.	 	TERMINATION FOR FAILURE OF DISTRIBUTOR TO BE LICENSED

If Distributor fails to obtain or maintain any license, permit, or
authorization necessary for Distributor’s performance of its obligations
under this Agreement or if such license, permit or authorization is
suspended or revoked, and such suspension or revocation continues for a
period of five (5) days, either party may immediately terminate this
Agreement by giving notice to the other party.

	 	E.	 	TERMINATION UPON OFFERING TO ENTER INTO A NEW OR AMENDED
PASSENGER CAR DEALER AGREEMENT

Distributor may terminate this Agreement at any time on or after the
expiration of the period commencing on the effective date of this Agreement
and ending three (3) years thereafter by giving Dealer ninety (90) days
prior notice thereof and offering to enter into a new or amended form of
Passenger Car Dealer Agreement with Dealer in a form being offered generally
to smart USA passenger car dealers.

	 	F.	 	NOTICE OF TERMINATION

Any notice of termination under this Agreement shall be in writing and shall
be mailed to the person(s) designated to receive such notice, via overnight
mail, or shall be delivered in person. Such notice shall be effective upon
the date of receipt. Distributor shall state the grounds on which it relies
in its termination of Dealer, and shall have the right to amend such notice
as appropriate. Distributor’s failure to refer to additional grounds for
termination shall not constitute a waver of its right later to rely upon
such grounds.

					
	 	 	 	 	 
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	 	G.	 	CONTINUANCE OF BUSINESS RELATIONS

Upon receipt of any notice of termination, Dealer agrees to conduct itself
and its operation until the effective date of termination in a manner that
will not injure the reputation or goodwill of the smart Marks or smart USA
Marks or Distributor or DAG.

	 	H.	 	REPURCHASE PROVISIONS

	 	1.	 	Distributor’s Obligations

Upon the termination of this Agreement, Distributor shall have the
right to cancel any and all shipments of smart USA Passenger Car
Products scheduled for delivery to Dealer, and Distributor shall
repurchase from Dealer the following:

	 	(i)	 	New, unused, unmodified and
undamaged smart USA Passenger Cars then unsold in Dealer’s
inventory that are of the then current or prior model year. The
prices of such passenger cars shall be the same as those at
which they were originally purchased by Dealer, less all prior
refunds or other allowances made by Distributor to Dealer with
respect thereto.

	 	(ii)	 	New, unused and undamaged Genuine
smart USA Passenger Car Parts and Accessories then unsold in
Dealer’s inventory that are in good and saleable condition and
are listed in the current parts catalog. The prices for such
parts and accessories shall be the prices last established by
Distributor for the sale of the identical parts or accessories
to smart USA passenger car dealers in the area in which Dealer
is located less any discounts, allowances or prior refunds
provided by Distributor to Dealers.

	 	(iii)	 	Special service tools
recommended by Distributor for then owned smart USA Passenger
Cars. The prices for such special service tools will be the
price paid by Dealer less depreciation calculated on a
straight-line basis over a three-year period, or such other
price as the parties may negotiate.

	 	(iv)	 	Signs that Distributor has
recommended for identification of Dealer. The price of such
signs shall be the price paid by Dealer less appropriate
depreciation calculated on a straight-line basis over a
three-year period, or such other price as the parties may
negotiate.

	 	2.	 	Dealer’s Responsibilities

Distributor’s obligations to repurchase the items set forth in this
Section XI.H are contingent upon Dealer fulfilling all of the
following obligations:

	 	(i)	 	Within thirty (30) days after the
effective date of termination of this Agreement, Dealer shall
deliver or mail to Distributor a detailed inventory of all items
referred to in this Section XI.H
that it requests Distributor repurchase and shall certify
that such list is true and accurate.

					
	 	 	 	 	 
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	 	(ii)	 	Dealer shall be entitled to request
repurchase of only those items that it purchased from Distributor,
unless Distributor agrees otherwise.

	 	(iii)	 	Dealer will deliver to Distributor
at Distributor’s place of business and at Dealer’s expense all
smart USA Passenger Car Products and special service tools to be
repurchased by Distributor. If Dealer fails to do so, Distributor
may transfer such items and deduct the cost therefore from the
repurchase price.

	 	(iv)	 	Dealer will execute and deliver to
Distributor instruments satisfactory to Distributor conveying good
and marketable title to the aforesaid items to Distributor. If
such items are subject to any lien or charge of any kind, Dealer
will procure the discharge in satisfaction thereof prior to their
repurchase by Distributor. Dealer will comply with the
requirements of any state or federal laws that relate to the
repurchase, including bulk sales or transfer laws.

	 	(v)	 	Dealer will provide to
Distributor in writing the names and addresses of all of its
smart USA Passenger Car service customers.

	 	(vi)	 	Dealer will deliver to
Distributor at Distributor’s place of business or to a third
party designated by the Distributor and at the Dealer’s expense
any and all sales instruction manuals, promotional materials,
technical or service literature, advertising and other printed
materials, computer hardware and software or other media
relating to smart USA Passenger Car Products then in Dealer’s
possession and that were acquired or obtained by Dealer from
Distributor.

	 	(vii)	 	Dealer will remove, at its own
expense, all signage and corporate identification from Dealer’s
Approved Location(s), including all smart Marks and smart USA
Marks, before it is eligible for payment hereunder.

	 	3.	 	Payment by Distributor

Distributor will pay Dealer for such items as Dealer may request be
repurchased and that quantity hereunder as soon as practicable upon
Dealer’s compliance with all of the obligations set forth herein and
upon computation of any outstanding indebtedness of Dealer to
Distributor.

Distributor shall have the right to offset from any amounts to Dealer
hereunder the total sum of Dealer’s outstanding indebtedness to
Distributor.

If Dealer disagrees with Distributor’s valuation of any item herein,
and Dealer and Distributor have not resolved their disagreement
within ninety (90) days of the effective date of termination of this
Agreement, Distributor shall pay to Dealer the amount of which it
reasonably believes Dealer is entitled.

					
	 	 	 	 	 
	smart center EXAMPLE
	 	
	 	 

 

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	XII.	 	DEFENSE AND INDEMNIFICATION

	 	A.	 	DEFENSE AND INDEMNIFICATION BY DISTRIBUTOR

Distributor agrees to assume the defense of Dealer and to indemnify and hold
Dealer harmless in any lawsuit naming Dealer as a defendant and involving
any smart USA Passenger Car Product when the lawsuit also involves
allegations of:

	 	1.	 	Bodily injury or property damage arising out of
an occurrence allegedly caused solely by a defect or failure to warn of
a defect in design, manufacture or assembly of a smart USA Passenger
Car Product, provided that the defect could not reasonably have been
discovered by Dealer during the pre-delivery inspections and service of
the smart USA Passenger Car Product or otherwise;

	 	2.	 	Any misrepresentation or misleading statement
or unfair or deceptive trade practice of Distributor; or

	 	3.	 	Any substantial damage to a smart USA Passenger
Car Product purchased by Dealer from Distributor that was repaired by
Distributor and where Dealer had not been notified of such damage in
writing prior to the delivery of the subject passenger car, part or
accessory to a retail customer; and

Provided:

	 	4.	 	That Dealer delivers to Distributor, in a
manner to be designated by Distributor, within twenty (20) days of the
service of any summons or complaint, copies of such documents and
requests in writing a defense and/or indemnification therein (except as
provided in Section XII.D below);

	 	5.	 	That the complaint does not involve allegations
of dealer misconduct, including but not limited to, improper or
unsatisfactory service or repair, misrepresentation, or any claim of
Dealer’s unfair or deceptive trade practice;

	 	6.	 	That the smart USA Passenger Car Product which
is the subject of the lawsuit was not altered by or for Dealer;

	 	7.	 	That Dealer agrees to cooperate fully in the
defense of such action as Distributor may reasonably require; and

	 	8.	 	That Dealer agrees that Distributor may offset
any recovery on Dealer’s behalf against any indemnification that may be
required hereunder.

					
	 	 	 	 	 
	smart center EXAMPLE
	 	
	 	 

 

- 38 -

 

	 	B.	 	DEFENSE AND INDEMNIFICATION BY DEALER

Dealer agrees to assume the defense of Distributor or DAG and to indemnify
and hold them harmless in any lawsuit naming Distributor or DAG as a
defendant when the lawsuit involves allegations of

	 	1.	 	Dealer’s failure to comply, in whole or in
part, with any obligation assumed by Dealer under this Agreement;

	 	2.	 	Dealer’s negligent or improper inspection,
preparation, repair or servicing of a new or used smart USA Passenger
Car Product, or such other motor vehicles or equipment as may be sold
or serviced by Dealer;

	 	3.	 	Dealer’s alleged breach of any contract or
warranty other than that provided by Distributor or DAG;

	 	4.	 	Dealer’s alleged misleading statements,
misrepresentations, or deceptive or unfair trade practices;

	 	5.	 	Any modification or alteration made by or on
behalf of Dealer to a smart USA Passenger Car Product, except those
made pursuant to the express written instruction or with the express
written approval of Distributor;

	 	6.	 	Any change in the employment status or in the
terms or conditions of employment of any officer, employee, or agent of
Dealer or of any Owner or the Dealer Operator, including but not
limited to claims for breach of employment contact, wrongful
termination or discharge, tortuous interference with contract or
economic advantage, and similar claims; and

Provided:

	 	7.	 	That Distributor delivers to Dealer, within
twenty (20) days of the service of any summons or complaint, copies of
such documents, and requests in writing a defense and/or
indemnification therein (except as provided in Section XII.D below);

	 	8.	 	That Distributor agrees to cooperate fully in
the defense of such action such as Dealer may reasonably require; and

	 	9.	 	That the complaint does not involve allegations
of liability premised upon Distributor’s separate conduct or omissions.

	 	C.	 	CONDITIONAL DEFENSE AND/OR INDEMNIFICATION

In agreeing to defend and/or indemnify each other, Dealer and Distributor
may make their agreement conditional on the continued existence of that
state of facts as then known to such party and may provide for the
withdrawal of such defense and/or indemnification at such time as facts
arise which, if known at the time of the original request for a defense
and/or indemnification, would have caused either Dealer or Distributor to
refuse such request.

					
	 	 	 	 	 
	smart center EXAMPLE
	 	
	 	 

 

- 39 -

 

The party withdrawing from its agreement to defend and/or indemnify shall
give timely notice of its intent to withdraw. Such notice shall be in
writing and shall be effective upon receipt. The withdrawing party shall be
responsible for all costs and expenses of defense up to the date of receipt
of its notice to withdrawal.

	 	D.	 	THE EFFECT OF SUBSEQUENT DEVELOPMENTS

In the event that subsequent developments in a case make clear that the
allegations which initially precluded a request or an acceptance of a
request for a defense and/or indemnification are no longer at issue therein
or are without foundation, any party having a right to a defense and/or
indemnification hereunder may tender such request to the other party and the
non-tendering party shall be required to agree to such subsequent request
for a defense and/or indemnification where the non-tendering party would not
be unduly prejudiced by such delay.

	 	E.	 	TIME TO RESPOND AND RESPONSIBILITIES OF THE PARTIES

Dealer and Distributor shall have sixty (60) days from the receipt of a
request for a defense and/or indemnification to conduct an investigation to
determine whether or not, or under what conditions, it may agree to defend
and/or indemnify pursuant to this Section.

If local rules require a response to the complaint in the lawsuit prior to
the time provided hereunder for a response for such request, the requesting
party shall take all steps necessary, including obtaining counsel, to
protect its own interest in the lawsuit until Dealer or Distributor assumes
the requested defense and/or indemnification. In the event that Dealer and
Distributor agrees to assume the defense and/or indemnification of a
lawsuit, it shall have the right to engage and direct counsel of its own
choosing and, except in cases where the request is made pursuant to Section
XII.D above, shall have the obligations to reimburse the requesting party
for all reasonable costs and expenses including actual attorneys’ fees,
incurred prior to such assumption.

	XIII.	 	NOTICE OF BREACH OR FAILURE TO ACT IN GOOD FAITH

In the interest of maintaining a harmonious relationship between Distributor and Dealer, if the
Dealer believes that Distributor has breached this Agreement or has failed to act in good faith
toward Dealer, Dealer shall report its belief and the bases therefore promptly, in writing, to the
President of Distributor. For the purposes of this Section XII, the term “good faith” shall mean
Distributor and its representatives acting in a fair, honest, commercially reasonable, equitable,
and impartial manner toward Dealer. It is the intention of the parties that the purpose of the
requirement of such notification by Dealer is to afford Distributor sufficient opportunity to
consider the claim of Dealer and if, in the sole determination of Distributor, such claim is found
to be meritorious, to undertake such measures as may be necessary to correct the condition of which
Dealer complains.

					
	 	 	 	 	 
	smart center EXAMPLE
	 	
	 	 

 

- 40 -

 

	XIV.	 	GENERAL PROVISIONS

	 	A.	 	NOTICES

Except as otherwise specifically provided herein, any notice required to be
given by either party to the other shall be in writing, shall be delivered
personally or by mail to the party at its address as stated in this
Agreement, and shall be effective upon receipt by hand delivery or upon
mailing.

	 	B.	 	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. The waiver by any party
of a breach of any provision herein shall not constitute a waiver of any
succeeding breach of the same or any other provision or constitute a waiver
of the provision itself.

	 	C.	 	 SOLE AGREEMENT OF THE PARTIES

This Agreement terminates and supersedes all prior agreements between the
parties relating to the subject matters covered herein. There are no prior
agreements or understandings, either oral or written, between the parties
affecting this Agreement or relating to the sale or service of smart USA
Passenger Car Products, except as otherwise specifically provided for or
referred to in this Agreement. Dealer acknowledges that no representations
or statements other than those expressly set forth therein were made by
Distributor or any officer, employee, agent, or representative thereof, or
were relied upon by Dealer in entering into this Agreement.

	 	D.	 	DEALER NOT AN AGENT OR REPRESENTATIVE

Dealer is an independent business. This Agreement does not constitute
Dealer the agent or legal representative of Distributor or DAG for any
purposes whatsoever. Dealer is not granted any express or implied right or
authority to assume or create any obligation on behalf of or in the name of
Distributor or DAG or to bind Distributor or DAG in any manner whatsoever.
No fiduciary obligations are created by this Agreement.

	 	E.	 	ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES

This is a personal service agreement and may not be assigned or sold in
whole or in part, directly or indirectly, voluntarily or by operation of
law, by the Dealer without the prior written consent of Distributor. Any
attempted transfer, assignment or sale without Distributor’s prior written
consent will be void and not binding upon Distributor.

	 	F.	 	NO FRANCHISE FEE

Dealer warrants that it has paid no fee, nor has it provided any goods or
services in lieu of same, to Distributor in consideration of entering into
this Agreement. The sole consideration for Distributor’s entering into or
continuing this Agreement is Owner’s and Dealer Operator’s ability,
integrity, assurance of
personal services, and expressed intention of deal fairly and equitably with
Distributor and the public.

					
	 	 	 	 	 
	smart center EXAMPLE
	 	
	 	 

 

- 41 -

 

	 	G.	 	BENEFIT

This Agreement is entered into by and between Distributor and Dealer 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.

	 	H.	 	MICHIGAN LAW

This Agreement shall be deemed to have been entered into in the State of
Michigan, and all questions concerning the validity, interpretation, or
performance of any of its terms, or of any contractual rights or obligations
of the parties hereto, shall be governed by and resolved in accordance with
the internal laws of the State of Michigan, including, without limitation,
its statutes of limitations.

	XV.	 	DEFINITIONS

As used in this Agreement, the parties agree that the following terms shall be defined exclusively
as set forth below.

	 	A.	 	DEALER: The natural person or entity that executes the Agreement and is
authorized by Distributor to sell and service smart USA Passenger Car Products as
defined herein.

	 
	 	B.	 	OWNER: The persons identified in Paragraph D and the Final Paragraph of this
Agreement.

	 
	 	C.	 	DEALER OPERATOR: The person identified in Paragraph D and the Final Paragraph
of this Agreement.

	 
	 	D.	 	DEALERSHIP FACILITIES: The buildings, improvements, fixtures and equipment
situated at the Approved Location(s) and identified in Paragraph E and the Final
Paragraph of this Agreement.

	 
	 	E.	 	APPROVED LOCATION(S): The location(s) and any facilities thereon designated in
Paragraph E and the Final Paragraph of this Agreement that Distributor has approved for
the Dealership Operation(s) specified therein.

	 
	 	F.	 	DEALERSHIP OPERATIONS: All dealer functions contemplated by this Agreement
including, without limitation, sale and servicing of smart USA Passenger Car Products,
use and display of smart Marks or smart USA Marks and smart USA Passenger Car Products,
rental and leasing of smart USA Passenger Car, sale of pre-owned smart USA Vehicles,
body shop work, financing or insurance services and any other activities undertaken by
Dealer in connection with smart USA Passenger Car Products whether conducted directly
or indirectly by Dealer.

	 
	 	G.	 	DAG: Daimler Aktiengesellschaft, a corporation of the Federal Republic of
Germany and the manufacturer of smart USA Passenger Cars, and any successor thereto.

					
	 	 	 	 	 
	smart center EXAMPLE
	 	
	 	 

 

- 42 -

 

	 	H.	 	smart or smart USA MARKS: The various smart and smart USA trademarks, service
marks, names, logos, and designs that Dealer is authorized to use in the sale and
servicing of smart USA Passenger Car Products.

	 
	 	I.	 	smart USA PASSENGER CARS: All new smart USA passenger cars that Distributor is
authorized to sell to smart USA passenger car dealers in the United States of America
and Puerto Rico pursuant to a written distributor agreement between DAG and
Distributor, and that Distributor, in its sole discretion, sells to Dealer for resale.

	 
	 	J.	 	GENUINE smart USA PASSENGER CAR PARTS AND ACCESSORIES: All smart USA passenger
car parts and accessories manufactured by or on behalf of Distributor or DAG and such
other parts and accessories specifically approve by DAG for use in servicing smart USA
Passenger Cars that Distributor sells to Dealer for resale.

	 
	 	K.	 	smart USA PASSENGER CAR PRODUCTS: All smart USA Passenger Cars and Genuine
smart USA Passenger Car Parts and Accessories that Distributor sells to Dealer for
resale.

	 
	 	L.	 	COMPETITIVE VEHICLES: Those new vehicles that are considered by Distributor to
be directly competitive with smart USA Passenger Cars.

	 
	 	M.	 	WARRANTY MANUAL: The smart USA Warranty Policies and Procedures Manual.

	XVI.	 	ADDITIONAL PROVISIONS

In consideration of Distributor’s agreement to appoint dealer as a smart USA Passenger Car
dealer, Dealer further agrees:

All terms and conditions in this Agreement inconsistent with the laws and rules of the State in
which Dealer’s smart USA dealership facilities specified in this Agreement are located are of no
force and effect.

If any provision herein contravenes the laws or regulations of any state or other jurisdiction
wherein this agreement is to be performed, or denies access to the procedures, forums, or
remedies provided for by such laws or regulations, such provision shall be deemed to be modified
to conform to such laws or regulations, and all other terms and provisions shall remain in full
force.

					
	 	 	 	 	 
	smart center EXAMPLE
	 	
	 	 

 

- 43 -exv10w12

Exhibit 10.12

OSI PHARMACEUTICALS, INC.

AMENDED AND RESTATED STOCK INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

     THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”), by and between OSI
PHARMACEUTICALS, INC., a Delaware corporation (the “Company”) and [EMPLOYEE NAME] (the “Optionee”),
an employee of the Company, is entered into as of the date set forth beneath the Optionee’s name
below.

     Pursuant to the OSI Pharmaceuticals, Inc. Amended and Restated Stock Incentive Plan, as
amended (the “Plan”), the Compensation Committee of the Board of Directors of the Company (the
“Committee”) approved on [GRANT DATE] (the “Grant Date”) the grant to the Optionee of a
non-qualified stock option to purchase shares of the Company’s common stock, par value $.01 per
share (the “Common Stock”), as hereinafter set forth. The option granted herein is not intended to
qualify as an “incentive stock option” as defined in Section 422 of the Internal Revenue Code of
1986, as amended.

W I T N E S S E T H:

     1. Grant. On the Grant Date, the Company granted to the Optionee an option (the
“Option”) to purchase on the terms and conditions set forth herein and in the Plan all or any part
of an aggregate of [NUMBER OF OPTIONS GRANTED] shares of Common Stock (the “Option Shares”), at the
purchase price of [OPTION PRICE] per share (the “Option Price”).

     2. Vesting. Subject to the terms and conditions of this Option and the Plan, the
Optionee shall have the cumulative right to exercise the Option over a period of four years, with
one quarter (25%) of the Option Shares becoming exercisable on each of the next four anniversaries
of the Grant Date, with any fractional number of Option Shares that would otherwise become
exercisable as of any such anniversary rounded to a whole integer as determined in the discretion
of the Committee.

     3. Term. The Option shall terminate in all events at 5:00 p.m. (local New York,
New York time) on [INSERT DATE ONE DAY IMMEDIATELY PRIOR TO TENTH ANNIVERSARY OF GRANT DATE] (the
“Termination Date”), unless sooner terminated as provided in Subparagraphs (a) or (b) below.

          (a) Termination of Employment or Service. The Option shall terminate and shall no
longer be exercisable ninety (90) days after the Optionee’s employment (or service as an officer or
consultant) with the Company and any parent or subsidiary of the Company terminates, unless such
termination of employment or service was caused by the Optionee’s death or Retirement (as defined
in the Plan). The death or Retirement of the Optionee shall not affect the remaining term of the
Option. Following a termination of employment or service

 

 

(including due
to death or Retirement), the Optionee (or the Optionee’s heirs or personal representatives if
Optionee is deceased) may, during the remaining term of the Option, purchase any remaining Option
Shares which could have been purchased on the date Optionee’s employment or service was terminated,
but may not purchase any Option Shares which would otherwise have first become purchasable
following such termination of employment or service.

          (b) Sale or Reorganization. As provided in Section 6(h) of the Plan, if the Company
is merged or consolidated with another corporation, or if the property or stock of the Company is
acquired by another corporation, or if there is a separation, reorganization or liquidation of the
Company, the Board of Directors of the Company may, in its discretion, give Optionee a written
notice that the Option will terminate thirty (30) days after the date of such written notice. In
any such case, the Option will become immediately exercisable in full, notwithstanding Paragraph 2
above.

     4. Method of Exercise and Payment.

          (a) Method of Exercise. The Option shall be exercised through the Company’s
broker-assisted stock option program (the “Broker Program”) in accordance with the terms and
conditions of the Broker Program as may be in effect from time to time.

          (b) Taxes. It shall be a condition to the performance of the Company’s obligation to
issue or transfer Option Shares upon the exercise of the Option that the Optionee remit an amount
sufficient to satisfy any federal, state and/or local tax withholding requirements arising in
connection with the exercise of the Option or the issuance of Option Shares, other than stock
transfer taxes, in each case in accordance with the terms and conditions of the Broker Program as
may be in effect from time to time. If the Company for any reason does not require the Optionee to
make a payment sufficient to satisfy such withholding requirements, any tax withholding payments
made by the Company to any federal, state or local tax authority with respect to the exercise of
the Option shall constitute a personal obligation of the Optionee to the Company, payable upon
demand or, at the option of the Company, by deduction from future compensation payable to the
Optionee.

          (c) Partial Exercise. To the extent otherwise exercisable, the Option may be
exercised in whole or in part, except that the Option may in no event be exercised with respect to
fractional shares.

     5. Transfers. The Option is not transferable by the Optionee otherwise than by will
or pursuant to the laws of descent and distribution in the event of the Optionee’s death, in which
event the Option may be exercised by the heirs or legal representatives of the Optionee. The
Option may be exercised during the lifetime of the Optionee only by the Optionee. Any attempt at
assignment, transfer, pledge or disposition of the Option contrary to the provisions hereof or the
levy of any execution, attachment or similar process upon the Option shall be null and void and
without effect. Any exercise of the Option by a person other than the Optionee shall be
accompanied by appropriate proofs of the right of such person to exercise the Option.

     6. Adjustments on Changes in Common Stock. In the event that dividends payable in
Common Stock during any fiscal year of the Company exceed in the aggregate five percent (5%)

2

 

of the
Common Stock issued and outstanding at the beginning of the year, or in the event there is during
any fiscal year of the Company one or more splits, subdivisions or combinations of shares of Common
Stock resulting in an increase or decrease by more than five percent (5%) of the shares of Common
Stock outstanding at the beginning of the year, the number of Option Shares deliverable upon the
exercise thereafter of the Option shall be increased or decreased proportionately, as the case may
be, without change in the aggregate purchase price payable upon exercise of the Option. Common
Stock dividends, splits, subdivisions or combinations during any fiscal year which do not exceed in
the aggregate five percent (5%) of the Common Stock issued and outstanding at the beginning of such
year shall not result in any adjustment under the Option. All adjustments shall be made as of the
day such action necessitating such adjustment becomes effective.

     7. Legal Requirements.

          (a) Listing Requirements. If at any time the Board of Directors shall determine, in
its discretion, that the listing, registration, or qualification of any of the Option Shares upon
any securities exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in connection with,
the granting of the Option or the issue, transfer or purchase of Option Shares hereunder, the
Option may not be exercised in whole or in part unless such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any conditions not acceptable to
the Board of Directors.

          (b) Securities Laws. The Company shall not be obligated to sell or issue any Option
Shares in any manner in contravention of the Securities Act of 1933, as amended, or any state
securities law. The Board of Directors or the Committee may, at any time, require, as a condition
to the exercise of the Option, the representation or agreement of the Optionee to the effect that
the Option Shares issuable upon exercise of the Option are acquired by the Optionee for investment
purposes and not with a view to the resale or distribution thereof, and may require such other
representations and documents as may be required to comply with applicable securities laws.

     8. Administration. The Option has been granted pursuant to, and is subject to the
terms and provisions of, the Plan. All terms used herein which are defined in the Plan and not
otherwise defined herein shall have the same meanings as in the Plan. To the extent that the
provisions hereof conflict with those of the Plan, the provisions of the Plan shall control. All
decisions or interpretations made by the Committee (as designated under the Plan) regarding any
issue or question arising under the Option or the Plan shall be final, binding and conclusive on
the Company and the Optionee.

     9. Rights as Stockholder. The Optionee shall have none of the rights of a stockholder
with respect to the Option Shares unless and until such Option Shares shall be issued to the
Optionee upon the exercise of the Option. Except as provided in Paragraph 6 above, no
adjustments shall be made for dividends or other rights for which the record date is prior to
the date the stock certificate is issued.

3

 

     10. Continued Employment or Service. Nothing contained herein or in the Plan shall
confer any right to continue in the employ or service of the Company or any parent or subsidiary of
the Company or interfere in any way with the right of the Company or any parent or subsidiary of
the Company to terminate the employment, services, responsibilities or duties of the Optionee at
any time for any reason whatsoever.

     11. Sale of Option Shares. Unless otherwise provided by the Committee, no Option
Shares acquired upon exercise of the Option may be sold or otherwise disposed of by the Optionee
within six months from the Grant Date.

     12. Notices. Any notice to be given to the Company hereunder shall be delivered
personally to the Secretary of the Company or mailed or delivered to the Company at its principal
executive office, addressed to the attention of the Secretary, and any notice to be given to the
Optionee hereunder shall be delivered personally or mailed or delivered to the Optionee at the
address then appearing on the records of the Company. Such addresses may be changed at any time by
notice from one party to the other. Notices given hereunder shall be in writing, and shall be
deemed to have been duly given upon delivery thereof, if personally delivered, or three days after
being deposited in the United States mail, registered or certified mail, properly addressed, with
proper postage and fees prepaid, or one day after being deposited with a delivery service
guaranteeing overnight delivery, properly addressed, with fees paid by the sender.

     13. Governing Law. This Agreement will be interpreted and enforced under the laws of
the State of New York, other than any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of this Agreement to the substantive law of another
jurisdiction. The parties will submit any dispute or claim arising under this Agreement to the
exclusive jurisdiction of the U.S. federal or New York state courts within the New York counties of
New York, Nassau, or Suffolk, and the parties hereby submit to, and waive any objection to,
personal jurisdiction and venue in such courts for such purpose.

     14. Binding Effect. This agreement shall be binding upon and inure to the benefit of
the parties hereto, including the successors and assigns of the Company and the heirs and personal
representatives of the Optionee.

     15. Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

4

 

IN WITNESS WHEREOF, the parties hereto have entered into this Non-Qualified Stock Option Agreement
as of the date set forth below.

	 	 	 	 	 
	 

	 	OSI PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	ACCEPTED BY (OPTIONEE):	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 

Name:
	 	 
	 
	 	 	 	 
	 

	 	 

Date
	 	 

5

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