<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 13, 1996
REGISTRATION NO. 333-09429
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UNITED AUTO GROUP, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 5511 22-3086739
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) No.)
</TABLE>
------------------------
375 PARK AVENUE
NEW YORK, NEW YORK 10152
(212) 223-3300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------
CARL SPIELVOGEL
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
UNITED AUTO GROUP, INC.
375 PARK AVENUE
NEW YORK, NEW YORK 10152
(212) 223-3300
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
Laurence D. Weltman, Esq. Gerald S. Tanenbaum, Esq.
Willkie Farr & Gallagher Cahill Gordon & Reindel
One Citicorp Center 80 Pine Street
153 East 53rd Street New York, New York 10005
New York, New York 10022 (212) 701-3000
(212) 821-8000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any State.
<PAGE>
Prospectus Subject to Completion
Dated September 13, 1996
SHARES
[UNITED AUTO GROUP LOGO]
COMMON STOCK
(PAR VALUE $0.0001 PER SHARE)
All of the shares of Voting Common Stock, par value $0.0001 per share (the
"Common Stock"), offered hereby is being offered by United Auto Group, Inc., a
Delaware corporation (the "Company").
Prior to this offering (the "Offering"), there has been no public market for the
Common Stock. It is currently anticipated that the initial public offering price
will be between $ and $ per share. See "Underwriting" for information
relating to the factors to be considered in determining the initial public
offering price of the Common Stock.
The Company has applied for listing of the Common Stock on the New York Stock
Exchange ("NYSE") under the symbol "UAG."
SEE "RISK FACTORS" COMMENCING ON PAGE 8 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<CAPTION>
Price to Underwriting Proceeds to
Public Discount (1) Company (2)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Per Share $ $ $
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Total(3) $ $ $
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</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"). See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $ .
(3) The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional shares
of Common Stock on the same terms as set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
The shares of Common Stock being offered by this Prospectus are offered by the
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by the Underwriters, and subject to approval of certain legal matters by Cahill
Gordon & Reindel, counsel for the Underwriters. It is expected that delivery of
the shares of Common Stock offered hereby will be made against payment therefor
on or about , 1996 at the offices of J.P. Morgan Securities Inc., 60
Wall Street, New York, New York.
J.P. Morgan & Co.
Montgomery Securities
Smith Barney Inc.
, 1996
<PAGE>
[Artwork]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-
COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
2
<PAGE>
No person has been authorized to give any information or to make any
representations not contained in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or any Underwriter. This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy, the Common Stock in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company subsequent to the date hereof.
Table of Contents
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Page
<S> <C>
Prospectus Summary.............................. 4
Risk Factors.................................... 8
The Company..................................... 14
Use of Proceeds................................. 16
Dividend Policy................................. 16
Capitalization.................................. 17
Dilution........................................ 18
Pro Forma Condensed Consolidated Financial
Data........................................ 19
Selected Consolidated Financial Data............ 26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 27
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Page
<S> <C>
Business........................................ 35
Management...................................... 49
Certain Relationships and Related Transactions.. 56
Principal Stockholders.......................... 57
Description of Capital Stock.................... 58
Shares Eligible for Future Sale................. 61
Underwriting.................................... 63
Legal Matters................................... 64
Experts......................................... 64
Additional Information.......................... 65
Index to Financial Statements................... F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The Company intends to furnish stockholders with annual reports containing
financial statements audited by its certified public accountants and with
quarterly reports containing unaudited financial statements for each of the
first three quarters of each fiscal year.
This Prospectus includes statistical data regarding the automotive retailing
industry. Unless otherwise indicated, such data is taken or derived from
information published by the Industry Analysis Division of the National
Automobile Dealers Association ("NADA") in its NADA DATA 1995, Crain
Communications Inc. in its AUTOMOTIVE NEWS 100-YEAR ALMANAC AND 1996 MARKET DATA
BOOK and ADT Automotive, Inc. in its 1996 USED CAR MARKET REPORT or provided to
the Company by CNW Marketing Research.
No Manufacturer (as defined in this Prospectus) has been involved, directly or
indirectly, in the preparation of this Prospectus or in the Offering being made
hereby. No Manufacturer has made any statements or representations in connection
with the Offering or has provided any information or materials that were used in
connection with the Offering, and no Manufacturer has any responsibility for the
accuracy or completeness of this Prospectus.
3
<PAGE>
Prospectus Summary
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND HISTORICAL AND PRO FORMA
FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT
OTHERWISE REQUIRES, REFERENCES HEREIN TO THE "COMPANY" OR "UAG" INCLUDE UNITED
AUTO GROUP, INC. AND ITS SUBSIDIARIES, AND REFERENCES HEREIN TO "COMMON STOCK"
REFERS TO THE COMPANY'S VOTING COMMON STOCK, PAR VALUE $0.0001 PER SHARE. UNLESS
OTHERWISE INDICATED, ALL INFORMATION PRESENTED IN THIS PROSPECTUS ASSUMES THAT
(I) THE CONTEMPORANEOUS ACQUISITIONS (AS DEFINED HEREIN) HAVE BEEN CONSUMMATED,
(II) THE EXCHANGE OF THE MINORITY INTERESTS IN CERTAIN OF THE COMPANY'S
SUBSIDIARIES FOR AN AGGREGATE OF SHARES OF COMMON STOCK PLUS CERTAIN OTHER
CONSIDERATION (THE "MINORITY EXCHANGE"), ASSUMING AN INITIAL PUBLIC OFFERING
PRICE OF $ PER SHARE, HAS BEEN EFFECTED, (III) THE CONVERSION OF THE
COMPANY'S CLASS A PREFERRED STOCK INTO COMMON STOCK AT THE RATE OF ONE SHARE OF
COMMON STOCK FOR EACH SHARE OF CLASS A PREFERRED STOCK (THE "PREFERRED STOCK
CONVERSION") HAS BEEN EFFECTED, (IV) AN AMENDMENT OF THE COMPANY'S CERTIFICATE
OF INCORPORATION RELATING TO THE COMPANY'S CAPITALIZATION HAS BEEN EFFECTED AND
(V) THE UNDERWRITERS' OVER-ALLOTMENT OPTION HAS NOT BEEN EXERCISED. THE CLOSINGS
OF THE CONTEMPORANEOUS ACQUISITIONS WILL OCCUR CONTEMPORANEOUSLY WITH THE
CLOSING OF THE OFFERING AND ARE A CONDITION TO THE CLOSING OF THE OFFERING. IN
ADDITION, UNLESS OTHERWISE INDICATED, ALL PRO FORMA FINANCIAL INFORMATION
ASSUMES THAT ALL ACQUISITIONS CONSUMMATED SUBSEQUENT TO JANUARY 1, 1995,
INCLUDING THE CONTEMPORANEOUS ACQUISITIONS, WERE CONSUMMATED ON JANUARY 1, 1995.
The Company
UAG is a leading acquirer, consolidator and operator of franchised automobile
and light truck dealerships and related businesses. The Company believes that,
after giving effect to the Contemporaneous Acquisitions, it will be the fourth
largest retailer of new motor vehicles in the United States, operating 37
franchises located in Arizona, Arkansas, Connecticut, Georgia, New Jersey, New
York and Tennessee and representing 22 American, Asian and European brands. As
an integral part of its dealership operations, UAG sells used vehicles. In
addition, the Company has recently established four stand-alone used car retail
centers. All of UAG's dealerships include integrated service and parts
operations, which are an important source of recurring revenues. The Company
also owns Atlantic Auto Finance Corporation ("Atlantic Finance"), an automobile
finance company engaged in the purchase, sale and servicing of prime credit
quality automobile loans originated by both UAG and third-party dealerships. For
1995, on a pro forma basis, UAG had revenues of approximately $1.35 billion and
sold 37,358 new and 22,060 used vehicles.
The Company was formed to capitalize on consolidation opportunities within the
highly fragmented $660 billion automotive retailing industry. In 1995,
approximately 22,000 dealerships representing more than 48,000 franchises sold
14.8 million new vehicles and 15.7 million used vehicles for sales of $290
billion and $180 billion, respectively. Yet, the Company estimates that the
largest 100 dealership groups generated less than 10% of these total revenues
and control less than 5% of all franchised dealerships. As capital requirements
to operate dealerships continue to increase and many owners who were granted
franchises in the 1950s and 1960s approach retirement age, many individual
dealers are seeking exit opportunities. These conditions present attractive
consolidation opportunities for larger automobile retailers such as UAG. Since
its initial acquisition in 1992, the Company has completed 13 additional
acquisitions, including the Contemporaneous Acquisitions. Management believes
that UAG is well-positioned to continue capitalizing on the consolidation trend
in the automotive retailing industry due to its proven acquisition history,
diverse geographic presence, substantial size and financial resources.
The Company believes that it enjoys significant competitive advantages. The
Company's diverse product portfolio reduces the risks associated with changes in
consumer preferences and dependence on any single brand or market segment.
Geographic diversity mitigates the Company's exposure to regional economic and
weather conditions. In addition, the Company's large size allows it to
centralize certain administrative functions and negotiate favorable pricing on
certain automotive parts, aftermarket products, supplies and advertising.
Furthermore, the Company benefits from superior access to capital as compared to
smaller dealerships.
4
<PAGE>
Growth Strategy
UAG seeks to lead the consolidation of the automotive retailing industry and
increase stockholder value through a growth strategy focused on (i) acquiring
profitable dealership operations, (ii) leveraging its new car franchises to grow
higher-margin businesses and (iii) generating incremental revenue from its
automobile finance business.
ACQUIRE PROFITABLE DEALERSHIP OPERATIONS. UAG seeks to capitalize on continuing
consolidation in the U.S. automotive retailing industry by selectively acquiring
profitable dealerships. The Company targets dealerships or dealership groups
with established records of profitability and customer satisfaction as well as
experienced management willing to remain in place. The Company focuses on
opportunities in geographic markets with above-average projected population and
job growth. Of the approximately 22,000 dealerships in the United States, the
Company believes that at least 2,000 dealerships, some of which are members of
dealership groups, meet its acquisition criteria.
GROW HIGHER-MARGIN BUSINESSES. UAG is leveraging its new car franchises and
applying its financial resources to grow higher-margin businesses such as the
retail sale of used vehicles, aftermarket products and service and parts. UAG
receives a steady supply of used cars through trade-ins, vehicles coming off
lease ("off-lease vehicles") and used car auctions open only to new car dealers.
In addition, only new car dealers are able to sell used cars certified by
Manufacturers. Through these programs, UAG is able to provide customers
Manufacturer-backed extended warranties and attractive lease financing on their
used car purchases. UAG also has the opportunity on each new or used vehicle
sold to generate incremental revenue from the sale of aftermarket products,
including accessories such as radios, cellular phones and alarms as well as
agency services such as extended service contracts, credit insurance policies
and financing and lease contracts. Finally, each UAG new car dealership offers
an integrated service and parts department, which provides an important
recurring revenue stream to the Company's dealerships. The Company has
initiatives in place designed to grow each of these higher-margin businesses.
GENERATE INCREMENTAL REVENUE FROM AUTOMOBILE FINANCE BUSINESS. To further
increase the incremental profit achievable through its auto sales, the Company
established Atlantic Finance, an automobile finance company engaged in the
purchase, sale and servicing of prime credit quality automobile loans originated
by both UAG and third-party dealerships. Atlantic Finance's strategy is to grow
by (i) increasing its business with existing UAG dealerships, including those
with which it has yet to commence financing activities, (ii) commencing
financing activities with dealerships acquired by UAG in the future and (iii)
using its presence in its local operating markets to cultivate relationships
with additional unaffiliated dealerships.
Operating Strategy
The Company's operating strategy is designed to provide a high level of customer
service and professional management. Central to UAG's overall philosophy is
customer-oriented service designed to meet the needs of an increasingly
sophisticated and demanding automotive consumer. The Company strives to
cultivate lasting relationships with its customers, which it believes enhance
its reputation in the community and create the opportunity for significant
repeat and referral business. In addition, the Company employs professional
management practices throughout its business organization primarily through
implementing "best practices" as well as investing in sophisticated operational
controls.
Recent Acquisitions
UAG has completed the following dealership acquisitions in 1996 to date (the
"Recent Acquisitions"). See "The Company -- Acquisition History."
Effective January 1, 1996, the Company acquired Atlanta Toyota, Inc. ("Atlanta
Toyota"), located in Duluth, Georgia, for a purchase price consisting of $9.1
million in cash and $2.4 million in notes. In 1995, Atlanta Toyota had $112.2
million in sales.
On May 1, 1996, the Company acquired United Nissan, Inc. ("United Nissan")
(formerly Steve Rayman Nissan, Inc.), located in Morrow, Georgia, for a purchase
price of $11.5 million in cash. In 1995, United Nissan had $60.3 million in
sales.
Effective July 1, 1996, the Company acquired Peachtree Nissan, Inc. ("Peachtree
Nissan") (formerly Hickman Nissan, Inc.), located in Chamblee, Georgia, for a
purchase price consisting of $11.0 million in cash and a $2.0 million note. In
1995, Peachtree Nissan had $85.3 million in sales.
5
<PAGE>
Contemporaneous Acquisitions
The following dealerships will be acquired contemporaneously with the
consummation of the Offering with a portion of the proceeds of the Offering (the
"Contemporaneous Acquisitions"). The Contemporaneous Acquisitions are a
condition to the consummation of the Offering.
Pursuant to a stock purchase agreement dated as of June 6, 1996, the Company
will acquire substantially all of the Sun Automotive Group (the "Sun Group"),
located in Phoenix and Scottsdale, Arizona, for a purchase price of $30.9
million in cash. The Sun Group holds franchises for Acura, Audi, BMW, Land
Rover, Lexus and Porsche and, in 1995, had $154.5 million in sales (including
$17.0 million in sales from one Jaguar franchise, which the Company will not
acquire contemporaneously with the Offering).
Pursuant to two stock purchase agreements dated August 5, 1996, the Company will
acquire the Evans Automotive Group (the "Evans Group"), located in Duluth and
Conyers, Georgia, for an aggregate purchase price of $12.0 million in cash. The
Evans Group holds franchises for BMW and Nissan and, in 1995, had $81.7 million
in sales.
Pursuant to a stock purchase agreement dated September 5, 1996, the Company will
acquire Standefer Motor Sales, Inc. ("Standefer Motor"), located in Chattanooga,
Tennessee, for a purchase price of $18.2 million in cash. Standefer Motor holds
one Nissan franchise and, in 1995, had $65.8 million in sales.
Risk Factors
An investment in the Common Stock also involves certain risks associated with
the Company's business and the automotive retailing industry, including the
following: (i) the Company is subject to the influence of the various
Manufacturers whose franchises it holds; (ii) many of the Company's franchise
agreements impose restrictions upon the transferability of the Common Stock;
(iii) the Company's growth depends in large part on its ability to manage
expansion, control costs in its operations and consolidate dealership
acquisitions; (iv) the Company will require substantial additional capital to
acquire automobile dealerships and purchase inventory; (v) unit sales of motor
vehicles historically have been cyclical; (vi) the automotive retailing industry
is a mature industry; (vii) the Company's success depends to a significant
extent on key members of its personnel; (viii) the Company's business is
seasonal; and (ix) the automotive retailing industry is highly competitive. For
a fuller discussion of these and other risk factors, see "Risk Factors."
The Offering
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<S> <C>
Common Stock Offered........................ shares
Common Stock Outstanding after the Offering shares
(1)........................................
Use of Proceeds............................. The net proceeds from the Offering are
estimated to be $ million, of which
approximately $62.5 million will be used to
pay the consideration and related transaction
costs for the Contemporaneous Acquisitions,
approximately $43.6 million to repay
outstanding indebtedness and approximately
$15.0 million to fund the expansion of its
automobile finance business. The balance will
be used for working capital and general
corporate purposes, including other potential
acquisitions. See "-- Contemporaneous
Acquisitions" and "Use of Proceeds."
Dividend Policy............................. The Company anticipates that it will not pay
dividends on the Common Stock for the
foreseeable future. See "Dividend Policy."
Proposed NYSE Symbol........................ "UAG"
</TABLE>
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(1) Does not include 873,000 and, assuming an initial public offering price of
$ per share, 260,000 shares of Common Stock issuable at an exercise price per
share of $10.00 and the public offering price set forth on the cover page of
this Prospectus, respectively, upon the exercise of outstanding stock options or
1,016,099 shares issuable at a nominal exercise price upon the exercise of
outstanding warrants. See "Management -- Spielvogel Employment Agreement,"
"Management -- Stock Option Plan," "Description of Capital Stock -- Warrants"
and "Shares Eligible for Future Sale."
6
<PAGE>
Summary Historical and Pro Forma Financial Data
The following table presents (i) summary historical consolidated financial and
other data of the Company as of the dates and for the periods indicated,
including the results of operations of Landers Auto (as defined herein), Atlanta
Toyota and Steve Rayman Nissan from August 1, 1995, January 1, 1996 and May 1,
1996, respectively, the dates of their acquisition, and (ii) summary pro forma
financial and other data of the Company as of the date and for the periods
indicated giving effect to the events described in the Pro Forma Condensed
Consolidated Financial Statements included elsewhere in this Prospectus as
though they had occurred on the dates indicated therein. The summary pro forma
data are not necessarily indicative of operating results or financial position
that would have been achieved had these events been consummated on the date
indicated and should not be construed as representative of future operating
results or financial position. The summary historical and pro forma financial
data should be read in conjunction with the financial statements and related
notes thereto of UAG, Landers Auto, Atlanta Toyota, Steve Rayman Nissan, Hickman
Nissan, Sun Automotive Group, Evans Automotive Group and Standefer Motor, with
the Pro Forma Condensed Consolidated Financial Statements and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
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Six Months Ended
Years Ended December 31, June 30,
-------------------------------------------- ---------------------------------
Pro Forma Pro Forma
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA 1993 1994 1995 1995 1995 1996 1996
---------- --------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Auto Dealerships
Total revenues $ 606,091 $ 731,629 $ 805,621 $1,350,366 $ 352,739 $$597,939 $ 800,630
Gross profit 68,403 83,986 85,277 155,570 36,214 66,379 92,350
Operating income (loss) 1,493 3,571 (5,309) 18,405 (5,727) 9,404 16,723
Auto Finance
Loss before income taxes (616) (1,382) (1,382) (701) (349) (349)
Total Company
Income (loss) before minority interests and
provision for income taxes 260 (804) (5,921) 16,282 (5,819) 8,629 16,130
Net income (loss) 96 (1,691) (3,466) 9,220 (4,902) 3,898 9,205
Net income (loss) per common share $ .07 $ (.51) $ (.70) $ $ (1.19) $ .49 $
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
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<CAPTION>
As of June 30,
As of December 31, ---------------------------------
-------------------------------- Pro Forma
DOLLARS IN THOUSANDS 1993 1994 1995 1995 1996 1996
---------- --------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Auto Dealerships
Current assets $ 120,061 $ 118,534 $ 141,649 $ 119,909 $ 186,980 $ 256,714
Current liabilities 117,494 125,825 139,447 128,027 181,317 215,711
Property and equipment, net 8,845 12,072 12,146 11,814 14,609 21,344
Intangible assets, net 22,832 23,018 48,774 22,700 66,131 150,244
Long-term debt 4,122 6,735 24,073 6,556 38,694 15,062
Auto Finance
Net assets 291 3,501 3,714 12,549 27,549
Total Company
Total assets 154,218 170,342 236,027 176,945 311,104 469,704
Minority interests subject to repurchase 7,338 7,962 13,608 6,555 15,299
Stock purchase warrants 1,020 1,597
Total stockholders' equity 25,264 28,785 49,240 33,599 66,709 230,229
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
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As of December 31, As of June 30,
-------------------------------------------- ---------------------------------
Pro Forma Pro Forma
1993 1994 1995 1995 1995 1996 1996
---------- --------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Other Auto Dealerships Data:
Gross profit margin 11.3% 11.5% 10.6% 11.5% 10.3% 11.1% 11.5%
Operating margin 0.2% 0.5% (0.7)% 1.4% (1.6)% 1.6% 2.1%
New cars sold at retail 18,608 22,464 25,138 37,358 11,088 17,509 21,180
Used cars sold at retail 7,891 8,340 8,953 22,060 3,674 8,542 11,192
</TABLE>
7
<PAGE>
Risk Factors
Prospective investors should consider carefully the principal risk factors set
forth below as well as the other information set forth in this Prospectus in
evaluating the Company and its business before purchasing the shares of Common
Stock offered hereby.
Influence of Automobile Manufacturers
Each of the Company's dealerships operates pursuant to a franchise agreement
between the applicable automobile manufacturer (or authorized distributor
thereof, referred to herein as the "Manufacturer") and the subsidiary of the
Company that operates such dealership, and the Company is dependent to a
significant extent on its relationship with such Manufacturers. Manufacturers
exercise a great degree of control over dealerships, and the franchise agreement
provides for termination or non-renewal for a variety of causes. The Company
from time to time has been in non-compliance with certain provisions of certain
of its franchise agreements, such as the obligation to obtain prior Manufacturer
approval of changes in dealership management. Actions taken by Manufacturers to
exploit their superior bargaining position could have a material adverse effect
on the Company. For example, Saturn Corporation's refusal to grant its approval
for the Offering and its assertion of an alleged right of first refusal with
respect to one franchise necessitated the Company's transfer of the two Saturn
franchises in its DiFeo Group to an affiliated holding company. See "-- Stock
Ownership/Issuance Limits" and "Business -- Franchise Agreements." Furthermore,
prior Manufacturer approval is required with respect to acquisitions of
automobile dealerships, and a Manufacturer may deny the Company's application to
make an acquisition or seek to impose further restrictions on the Company as a
condition to granting approval of an acquisition. See "-- Risks Associated with
Acquisitions."
Many Manufacturers attempt to measure customers' satisfaction with their sales
and warranty service experiences through systems, which vary from Manufacturer
to Manufacturer, generally known as the consumer satisfaction index ("CSI").
These Manufacturers may use a dealership's CSI scores as a factor in evaluating
applications for additional dealership acquisitions and other matters. Certain
dealerships of the Company have had difficulty from time to time meeting their
Manufacturers' CSI standards. The components of CSI have been modified from time
to time in the past, and there is no assurance that such components will not be
further modified or replaced by different systems in the future. Failure of the
Company's dealerships to comply with the standards imposed by Manufacturers at
any given time may have a material adverse effect on the Company.
The success of each of the Company's franchises is, in large part, dependent
upon the overall success of the applicable Manufacturer. Accordingly, the
success of the Company is linked to the financial condition, management,
marketing and production capabilities of the Manufacturers of which the Company
is a franchisee. Accordingly, events, such as labor strikes, that may adversely
affect a Manufacturer may also adversely affect the Company. For example, a
strike of the independent truckers who distribute Chrysler Corporation
("Chrysler") motor vehicles adversely affected the Company in the second half of
1995. Moreover, any event that causes adverse publicity involving such
Manufacturers may have an adverse effect on the Company regardless of whether
such event involves any of the Company's dealerships.
Stock Ownership/Issuance Limits
Standard automobile franchise agreements prohibit transfers of any ownership
interests of the dealership and its parent, such as UAG, and, therefore, often
do not by their terms accommodate public trading of the capital stock of the
dealership or its parent. While all of the relevant Manufacturers of which the
Company will be a franchisee at the time of consummation of the Offering have
agreed to permit the Offering and trading in the Common Stock, a number of
Manufacturers continue to impose restrictions upon the transferability of the
Common Stock. The most prohibitive restriction, which has been imposed by
various Manufacturers, provides that, under certain circumstances, the Company
may lose its franchise if a person or entity acquires a 20% ownership interest
in the Company and does not obtain the approval of the applicable Manufacturer.
Violations by stockholders or prospective stockholders of the Company of such
restrictions are generally outside the control of the Company and may result in
the termination or non-renewal of one or more franchises, which could have a
material adverse effect on the Company. Such restrictions also may prevent or
deter prospective acquirers from acquiring control of the Company and,
therefore, may adversely impact the value of the Common Stock.
8
<PAGE>
Similarly, a number of Manufacturers, including Chrysler, have consented to the
Offering but continue to prohibit transactions which may affect management
control of the Company. Chrysler has agreed that it will not consider the
issuance of up to 40% of the Common Stock in the Offering to be a change of
control. However, acquisitions or sales of substantial amounts of shares in the
market may, after the Offering, affect management control and thereby require
the Company to obtain Chrysler's consent. Upon consummation of the Offering, %
of the Common Stock will be publicly owned (assuming full exercise of the
Underwriters' over-allotment option). It may be necessary for the Company to
seek additional Manufacturer approvals before selling additional Common Stock.
This may impede the Company's ability to raise required capital. See "-- Capital
Requirements."
Risks Associated with Acquisitions
The Company's growth will depend in large part on its ability to manage
expansion, control costs in its operations and consolidate dealership
acquisitions, including the Recent Acquisitions and the Contemporaneous
Acquisitions, into existing operations. This strategy will entail reviewing and
potentially reorganizing acquired dealership operations, corporate
infrastructure and systems and financial controls. Unforeseen expenses,
difficulties, complications and delays frequently encountered in connection with
the rapid expansion of operations could inhibit the Company's growth.
There can be no assurance that the Company will identify acquisition candidates
that would result in the most successful combinations or that acquisitions will
be able to be consummated on acceptable terms. The magnitude, timing and nature
of future acquisitions will depend upon various factors, including the
availability of suitable acquisition candidates, the negotiation of acceptable
terms, the Company's financial capabilities, the availability of skilled
employees to manage the acquired companies and general economic and business
conditions.
In addition, the Company's future growth via acquisition of automobile
dealerships will depend on its ability to obtain the requisite Manufacturer
approvals. There can be no assurance that Manufacturers will grant such
approvals. Management believes that certain Manufacturers, such as Ford Motor
Company ("Ford"), which represents approximately 25% of the U.S. automotive
retailing industry, would not now approve acquisitions by the Company because
they have expressed opposition to diffuse corporate ownership of their
dealerships. For example, Ford's subsidiary Jaguar Cars Ltd. refused to grant
its approval for the Company's acquisition of the Jaguar franchise in the Sun
Group. It is also possible that one or more Manufacturers might object to
ownership by one company of many of its franchises. For example, it is currently
the policy of Toyota Motor Sales ("Toyota") to restrict any company from holding
more than seven Toyota or more than three Lexus franchises and to impose
restrictions based on the number of franchises held within certain geographic
areas. After giving effect to the Contemporaneous Acquisitions, the Company will
hold 37 franchises, including six Chrysler franchises, six Toyota franchises (of
which two are Lexus), five General Motors Corporation ("GM") franchises and five
Nissan franchises. The Company is among the largest Chrysler, Toyota and Nissan
dealers in the United States. See "-- Influence of Automobile Manufacturers."
Alternatively, in connection with acquisitions by the Company, one or more
Manufacturers may seek to impose further restrictions on the Company in
connection with their approval of an acquisition. For example, each of GM and
Chrysler conditioned its approval of the acquisition of Landers Auto upon the
Company's agreement to implement certain measures at its existing GM and
Chrysler dealerships, respectively, to provide certain additional training to
the employees at such dealerships and to achieve and maintain higher CSI scores.
If such goals are not attained, the Company may be precluded from acquiring,
whether directly from GM or Chrysler or through acquisitions, additional GM or
Chrysler franchises and it may lead GM or Chrysler to conclude that it has a
basis pursuant to which it may seek to terminate or refuse to renew the
Company's existing GM or Chrysler franchises. Moreover, factors outside the
Company's control may cause a Manufacturer to reject the Company's application
to make acquisitions. See "-- Influence of Automobile Manufacturers."
Capital Requirements
The Company will require substantial additional capital in order to continue to
acquire automobile dealerships. Such capital might be raised through additional
public or private financings, as well as borrowings and other sources. The
Company does not have any commitments with respect to any acquisition financing,
and there can be no assurance that additional or sufficient financing will be
available, or, if available, that it will be available on acceptable terms.
Moreover, the Company may be impeded by certain Manufacturers from accessing the
public equity markets. See
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<PAGE>
"-- Stock Ownership/Issuance Limits." If additional funds are raised by issuing
equity securities of the Company, dilution to then existing stockholders may
result. If adequate funds are not available, the Company may be required to
significantly curtail its acquisition program.
In addition, the Company is dependent to a significant extent on its ability to
finance the purchase of inventory, which in the automotive retail industry
involves significant sums of money in the form of floor plan financing. As of
June 30, 1996, the Company had approximately $129.0 million of floor plan
indebtedness. Substantially all the assets of the Company's dealerships are
pledged to secure such indebtedness, which may impede the Company's ability to
borrow from other sources. The Company currently has floor plan facilities with
General Motors Acceptance Corporation, Chrysler Credit Corporation, World Omni
Financial Corp. and Nissan Motor Acceptance Corporation. Each of these lenders
is associated with a Manufacturer with whom the Company has franchise
agreements. Consequently, deterioration of the Company's relationship with a
Manufacturer could adversely affect its relationship with the affiliated floor
plan lender and vice versa. See "-- Influence of Automobile Manufacturers."
The operations of Atlantic Finance also require substantial borrowings. See "--
Risks Associated with Auto Finance Subsidiary -- Capital Requirements; Interest
Rate Fluctuations."
During the first half of 1996, the Company sought and obtained waivers of
non-compliance with, and amendments to, certain covenants under its Securities
Purchase Agreements and Credit Agreement (as such terms are defined under "Use
of Proceeds"), including covenants regarding fixed charge coverage ratios and
delivery of certain collateral to secure the indebtedness thereunder.
Cyclicality
Unit sales of motor vehicles, particularly new vehicles, historically have been
cyclical, fluctuating with general economic cycles. During economic downturns,
the automotive retailing industry tends to experience similar periods of decline
and recession as the general economy. The Company believes that the industry is
influenced by general economic conditions and particularly by consumer
confidence, the level of personal discretionary spending, interest rates and
credit availability. There can be no assurance that the industry will not
experience sustained periods of decline in vehicle sales in the future, and that
such decline would not have a material adverse effect on the Company.
Mature Industry
The automotive retailing industry is a mature industry in which minimal growth
in unit sales of new vehicles is expected. Accordingly, growth in the Company's
revenues and earnings will depend significantly on the Company's ability to
acquire and consolidate profitable dealerships, to grow its higher-margin
businesses and to expand its automobile finance business. See "Business --
Growth Strategy."
Dependence on Key Personnel
The Company believes that its success will depend to a significant extent upon
the efforts and abilities of the executive management of the Company and its
subsidiaries. The loss of the services of one or more of these key employees
could have a material adverse effect on the Company. The Company's business will
also be dependent upon its ability to continue to attract and retain qualified
personnel, including key management in connection with future acquisitions.
Seasonality
The Company's business is seasonal, with a disproportionate amount of sales
occurring in the second or third fiscal quarters. The DiFeo Group (as defined
herein), which is located in the New York metropolitan area, is the division of
the Company most affected by seasonality.
Competition
The automotive retailing industry is highly competitive with respect to price,
service, location and selection. The Company competes with numerous automobile
dealerships in each of its market segments, many of which are large and have
significant financial and marketing resources. The Company also competes with
private market buyers and sellers of used cars, used car dealers, other
franchised dealers, service center chains and independent shops for service
10
<PAGE>
and repair business. In recent years, automobile dealers have also faced
increased competition in the sale of vehicles from automobile rental agencies,
independent leasing companies and used-car "superstores," some of which employ
sales techniques such as "haggle-free" pricing. Some of these recent market
entrants are capable of operating on smaller gross margins than those on which
the Company is capable of operating because they have lower overhead and sales
costs. See "Business -- Competition."
Imported Products
Certain motor vehicles retailed by the Company, as well as certain major
components of vehicles retailed by the Company, are of foreign origin.
Accordingly, the Company is subject to the import and export restrictions of
various jurisdictions and is dependent to some extent upon general economic
conditions in and political relations with a number of foreign countries,
including Japan, Germany, South Korea and the United Kingdom.
Risks Associated with Automobile Finance Subsidiary
CAPITAL REQUIREMENTS; INTEREST RATE FLUCTUATIONS
Atlantic Finance, a wholly owned subsidiary of the Company, requires substantial
borrowings to fund the purchase of retail installment contracts from automobile
dealerships. Consequently, Atlantic Finance's profitability is affected by the
difference, or "spread," between the rate of interest paid on the funds it
borrows and the rate of interest charged on the installment contracts it
purchases, which rate in most states is limited by law. In addition, since the
interest rate at which Atlantic Finance borrows is variable and the interest
rate at which Atlantic Finance purchases the retail installment contracts is
fixed, Atlantic Finance assumes the risk of interest rate increases prior to the
time contracts are sold. There can be no assurance that Atlantic Finance will be
able to extend its present revolving credit facility or enter into new warehouse
financing facilities on reasonable terms in the future or that interest rate
increases will not adversely affect its ability to maintain profitability with
respect to the retail installment contracts it holds.
DEPENDENCE ON SECURITIZATION TRANSACTIONS
Atlantic Finance relies on a strategy of periodically selling retail installment
receivables on a securitized basis. The securitization proceeds are utilized to
repay borrowings under its revolving credit facility, thereby making such
facility available to acquire additional retail installment contract
receivables. The terms of any securitization transaction are affected by a
number of factors, some of which are beyond Atlantic Finance's control and any
of which could cause substantial delays. These factors include, among other
things, conditions in the securities markets in general, conditions in the
asset-backed securitization market and approval by all parties to the terms of
the transaction. Gains from the sale of receivables in securitized transactions
generate a significant portion of Atlantic Finance's revenues. If Atlantic
Finance were unable to securitize loans in a given financial reporting period,
Atlantic Finance could incur a significant decline in total revenues and
profitability for such period.
CREDIT RISK
Payments by consumers on a number of the retail installment contracts purchased
by Atlantic Finance become delinquent from time to time and some end up in
default. See "Business -- Atlantic Finance" for detailed information on Atlantic
Finance's delinquency and default rates. There can be no assurance that the
credit performance of Atlantic Finance's customers will be maintained or that
general economic conditions will not worsen and lead to higher rates of
delinquency and default. In addition, Atlantic Finance commenced operations in
the first quarter of 1995, and there can be no assurance that the rates of
future delinquency and defaults will be consistent with prior experience or at
levels that will allow Atlantic Finance to maintain overall profitability.
REGULATION
Atlantic Finance is subject to regulation under various federal, state and local
laws and in some jurisdictions is required to be licensed by the state banking
authority. Most states in which Atlantic Finance operates limit the interest
rate, fees and other charges that may be imposed by, or prescribe certain other
terms of, the contracts that Atlantic Finance purchases and restrict its right
to repossess and sell collateral. An adverse change in those laws or regulations
could have a material adverse effect on Atlantic Finance's profitability by,
among other things, limiting the states in which Atlantic Finance may operate or
the interest rate that may be charged on retail installment contracts or
restricting Atlantic Finance's ability to realize the value of the collateral
securing the contracts.
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Reliance by Company on Dividends and Other Payments From Operating Subsidiaries
The Company is a holding company, the principal assets of which are the shares
of the capital stock of its subsidiaries. As a holding company without
independent means of generating operating revenues, the Company depends on
dividends and other payments, including payments of management fees and pursuant
to tax sharing arrangements, from its subsidiaries to fund its obligations and
meet its cash needs. Certain subsidiaries of the Company are subject to
restrictions on the payment of dividends, which are described in "Dividend
Policy." Such restrictions limit the Company's ability to apply profits
generated from one subsidiary for use in other subsidiaries. Expenses of the
Company include salaries of its executive officers, insurance, professional fees
and service of certain indebtedness that may be outstanding from time to time.
See "Management -- Summary Compensation Table."
Environmental Matters
The Company is subject to federal, state and local laws, ordinances and
regulations which establish various health and environmental quality standards,
and liability related thereto, and provide penalties for violations of those
standards. Under certain laws and regulations, a current or previous owner or
operator of real property may be liable for the costs of removal and remediation
of hazardous or toxic substances or wastes on, under, in or emanating from such
property. Such laws typically impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances or wastes. Certain laws, ordinances and regulations may impose
liability on an owner or operator of real property where onsite contamination
discharges into waters of the state, including groundwater. Under certain other
laws, generators of hazardous or toxic substances or wastes that send such
substances or wastes to disposal, recycling or treatment facilities may be
liable for remediation of contamination at such facilities. Other laws,
ordinances and regulations govern the generation, handling, storage,
transportation and disposal of hazardous and toxic substances or wastes, the
operation and removal of underground storage tanks, the discharge of pollutants
into surface waters and sewers, emissions of certain potentially harmful
substances into the air and employee health and safety.
Past and present business operations of the Company subject to such laws,
ordinances and regulations include the use, handling and contracting for
recycling or disposal of hazardous or toxic substances or wastes, including
environmentally sensitive materials such as motor oil, waste motor oil and
filters, transmission fluid, antifreeze, freon, waste paint and lacquer thinner,
batteries, solvents, lubricants, degreasing agents, gasoline and diesel fuels.
The Company is subject to other laws, ordinances and regulations as the result
of the past or present existence of underground storage tanks at many of the
Company's properties. In addition, soil and groundwater contamination has been
known to exist at certain properties leased by the Company and there can be no
assurance that other properties have not been contaminated by any leakage from
such tanks or any spillage of hazardous or toxic substances or wastes.
Certain laws and regulations, including those governing air emissions and
underground storage tanks, have been amended so as to require compliance with
new or more stringent standards as of future dates. The Company cannot predict
what other environmental legislation or regulations will be enacted in the
future, how existing or future laws or regulations will be administered or
interpreted or what environmental conditions may be found to exist in the
future. Compliance with new or more stringent laws or regulations, stricter
interpretation of existing laws or the future discovery of environmental
conditions may require additional expenditures by the Company, some of which may
be material. See "Business -- Environmental Matters."
Control by Principal Stockholders; Anti-takeover Provisions
Upon completion of the Offering, Trace International Holdings, Inc. ("Trace"),
Aeneas Venture Corporation ("Aeneas"), an affiliate of Harvard Private Capital
Group, Inc. ("Harvard Private Capital"), and AIF II, L.P. ("AIF," an affiliate
of Apollo Advisors, L.P. ("Apollo")), will own %, % and % of the outstanding
Common Stock, respectively. As a result, such persons will have the ability to
control the Company and direct its affairs and business. Such concentration of
ownership, as well as certain provisions of the Company's franchise agreements,
its Certificate of Incorporation and the Delaware General Corporation Law (the
"DGCL"), could have the effect of delaying or preventing a change in control of
the Company. These provisions include the stock ownership limits imposed by
various Manufacturers, the classified structure of the Company's Board of
Directors, the Company's ability to issue "blank check" preferred stock and the
"interested stockholder" provisions of Section 203 of the DGCL. In addition,
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<PAGE>
such concentration of ownership may adversely affect the ability of stockholders
to realize a premium on the sale of their shares of Common Stock in a takeover
of the Company. See "-- Stock Ownership/Issuance Limits" and "Description of
Capital Stock."
Shares Eligible for Future Sale
Upon consummation of the Offering, the Company will have outstanding
shares of Common Stock. All of the shares of Common Stock to be sold in
the Offering will be eligible for immediate sale in the public market without
restriction unless held by affiliates of the Company. Of the remaining
outstanding shares of Common Stock, including the shares to be issued in
the Minority Exchange (the "Restricted Shares"), 4,254,208 shares will be
available for resale beginning 180 days after the date of this Prospectus upon
expiration of the applicable lock-up agreements described below and subject to
compliance with Rule 144 under the Securities Act and shares, including
the shares to be issued in the Minority Exchange, will become eligible for
sale under Rule 144 at various dates thereafter as the holding provisions of
Rule 144 are satisfied; provided, however, that all of the Restricted Shares are
entitled to certain registration rights. Further, upon consummation of the
Offering, 873,000 and 260,000 shares of Common Stock will be issuable at a price
per share of $10.00 and the public offering price set forth on the cover page of
this Prospectus, respectively, upon the exercise of outstanding stock options,
278,900 of which are immediately exercisable, and 1,016,099 shares of Common
Stock will be issuable at a nominal exercise price upon the exercise of
outstanding warrants, all of which are immediately exercisable and entitled to
certain registration rights. The Company intends to file a registration
statement on Form S-8 as soon as practicable after the consummation of the
Offering with respect to the shares of Common Stock issuable upon exercise of
all such options. See "Management -- Spielvogel Employment Agreement,"
"Management -- Stock Option Plan," "Description of Capital Stock -- Warrants"
and "Shares Eligible for Future Sale."
Sales of substantial amounts of Common Stock, or the perception that such sales
could occur, could adversely affect prevailing market prices of the Common
Stock. The Company has agreed not to sell any shares of its capital stock (or
any rights, options or warrants to purchase, or any securities convertible or
exchangeable into or exercisable for, capital stock), with certain limited
exceptions, for a period of 180 days following the date of this Prospectus
without the prior written consent of J.P. Morgan Securities Inc. In addition,
the holders of all the Restricted Shares (representing approximately % of the
Common Stock outstanding after giving effect to the Offering) have agreed not to
sell, directly or indirectly, any of their shares, with certain limited
exceptions, for a period of 180 days following the date of this Prospectus.
Further, certain holders of options and the holders of the Warrants have agreed
to similar restrictions with respect to the shares of Common Stock issuable upon
exercise of such options and Warrants for a period of 180 days following the
date of this Prospectus. See "Underwriting."
No Prior Market for the Common Stock
There is presently no established public market for securities of companies that
own and operate automobile dealerships, and, prior to the Offering, there has
been no public market for the Company's Common Stock. There can be no assurance
that an active public market for the Common Stock will develop or be sustained
after the Offering. The initial public offering price of the Common Stock will
be determined by negotiation between the Company and the representatives of the
Underwriters based on the factors described under "Underwriting." The price at
which the Common Stock will trade in the public market after the Offering may be
less than the initial public offering price. See "Underwriting."
Dilution to New Investors
Purchasers of Common Stock in the Offering will experience immediate and
substantial dilution in the amount of $ per share in net tangible book value
per share. See "Dilution."
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The Company
General
UAG is a leading acquirer, consolidator and operator of franchised automobile
and light truck dealerships and related businesses. The Company believes that,
after giving effect to the Contemporaneous Acquisitions, it will be the fourth
largest retailer of new motor vehicles in the United States, operating 37
franchises located in Arizona, Arkansas, Connecticut, Georgia, New Jersey, New
York and Tennessee and representing 22 American, Asian and European brands. As
an integral part of its dealership operations, UAG sells used vehicles. In
addition, the Company has recently established four stand-alone used car retail
centers. All of UAG's dealerships include integrated service and parts
operations, which are an important source of recurring revenues. The Company
also owns Atlantic Finance, an automobile finance company engaged in the
purchase, sale and servicing of prime credit quality automobile loans originated
by both UAG and third-party dealerships. For 1995, on a pro forma basis, UAG had
revenues of approximately $1.35 billion and sold 37,358 new and 22,060 used
vehicles.
The Company was incorporated in the State of Delaware in December 1990 and
commenced dealership operations in October 1992. The Company's executive offices
are located at 375 Park Avenue, New York, New York 10152, and its telephone
number is (212) 223-3300.
Acquisition History
Trace established the Company to acquire, consolidate and operate large
automobile retailers and related businesses. A history of automotive experience
enabled Trace to be among the first to recognize and capitalize on the
opportunities created by the industry's rapid consolidation. This consolidation
offered UAG a means to quickly establish significant market presence and realize
economies of scale through professional operation of dealerships.
The following table sets forth information with respect to each dealership that
will be owned at the time of consummation of the Offering:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Date
Acquiree Acquired Locations Franchises Presently Held
- ---------------------- ----------- -------------- --------------------------------------------------
<S> <C> <C> <C>
DiFeo Group
DiFeo Automotive 10/92 Danbury, CT Chevrolet-Geo, Hyundai, Isuzu, Suzuki
Group
Bound Brook, Lexus
NJ
Jersey City, Hyundai, Jeep-Eagle, Oldsmobile, Toyota
NJ
Tenafly, NJ BMW
Nyack, NY Mitsubishi, Toyota
DiFeo Nissan 11/92 Jersey City, Nissan
NJ
DiFeo Chrysler- 12/92 Jersey City, Chrysler-Plymouth
Plymouth NJ
DiFeo Chevrolet-Geo 12/92 Jersey City, Chevrolet-Geo
NJ
Fair Honda 1/93 Danbury, CT Honda
Fair Dodge 2/93 Danbury, CT Dodge
Gateway 8/93 Toms River, NJ Mitsubishi, Toyota
Landers Auto 8/95 Benton, AK Chrysler-Plymouth, Dodge, GMC Truck, Jeep-Eagle,
Oldsmobile
Atlanta Toyota 1/96 Duluth, GA Toyota
United Nissan 5/96 Morrow, GA Nissan
Peachtree Nissan 7/96 Chamblee, GA Nissan
Sun Group (1) Phoenix, AZ BMW, Land Rover
Scottsdale, AZ Acura, Audi, Land Rover, Lexus, Porsche
Evans Group (1) Duluth, GA BMW
Conyers, GA Nissan
Standefer Motor (1) Chattanooga, Nissan
TN
</TABLE>
- ------------------------------
(1) To be acquired contemporaneously with the consummation of the Offering.
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On October 1, 1992, the Company acquired a 70% interest in the DiFeo Automotive
Group (the "DiFeo Group") for a purchase price of $16.0 million in cash. At the
time, the DiFeo Group was comprised of 29 franchises. Since then, the Company
has added nine franchises in the division's primary marketing area through
acquisition or expansion and has eliminated a total of 17 unprofitable
franchises by voluntarily terminating 12 franchises and effectively ceasing to
be the controlling or majority owner of five additional franchises. In 1995, the
DiFeo Group had sales of $689.2 million (including $52.3 million in sales from
two Saturn franchises, which the Company will transfer to an affiliated holding
company prior to the consummation of the Offering). Operating 19 franchises
(which excludes the two Saturn franchises) from six locations in the New York
metropolitan area, the DiFeo Group is one of the largest automobile dealership
groups in the Northeast in terms of sales and number of franchises. Among its
dealerships is the sixth largest Toyota franchise in the United States.
Immediately prior to the consummation of the Offering, the Company will acquire
the 30% minority interest in the DiFeo Group in the Minority Exchange. See
"Certain Relationships and Related Transactions."
Effective August 1, 1995, the Company acquired an 80% interest in Landers Auto
Sales, Inc. ("Landers Auto"), located in Benton, Arkansas, for a purchase price
consisting of $20.0 million in cash and $4.0 million in notes. The acquisition
agreement provides for additional contingent purchase price payments to the
sellers based on the future profitability of the acquired dealerships. In 1995,
Landers Auto, the largest full-line Chrysler dealer in the United States, had
$280.8 million in sales. Immediately prior to the consummation of the Offering,
the Company will acquire the 20% minority interest in Landers Auto in the
Minority Exchange. See "Certain Relationships and Related Transactions."
Effective January 1, 1996, the Company acquired a 100% interest in Atlanta
Toyota, located in Duluth, Georgia, for a purchase price consisting of $9.1
million in cash and $2.4 million in notes. In 1995, Atlanta Toyota had $112.2
million in sales, making it the largest Toyota dealer in the Atlanta
metropolitan area and the seventh largest in the United States. Pursuant to an
agreement, 5% of the capital stock of Atlanta Toyota was purchased by its
general manager for a $300,000 note. Immediately prior to the consummation of
the Offering, the Company will reacquire such capital stock in the Minority
Exchange. See "Certain Relationships and Related Transactions."
On May 1, 1996, the Company acquired a 100% interest in United Nissan, located
in Morrow, Georgia, for a purchase price of $11.5 million in cash. In 1995,
United Nissan had $60.3 million in sales.
Effective July 1, 1996, the Company acquired a 100% interest in Peachtree
Nissan, located in Chamblee, Georgia, for a purchase price consisting of $11.0
million in cash and a $2.0 million note. In 1995, Peachtree Nissan had $85.3
million in sales.
Contemporaneously with the consummation of the Offering, pursuant to a stock
purchase agreement dated as of June 6, 1996, the Company will acquire
substantially all of the Sun Group, located in Phoenix and Scottsdale, Arizona,
for $30.9 million in cash. The Sun Group holds franchises for Acura, Audi, BMW,
Land Rover, Lexus and Porsche and, in 1995, had $154.5 million in sales
(including $17.0 million in sales from one Jaguar franchise, which the Company
will not acquire contemporaneously with the Offering).
Contemporaneously with the Offering, pursuant to two stock purchase agreements
dated August 5, 1996, the Company will acquire a 100% interest in the Evans
Group, located in Duluth and Conyers, Georgia, for a purchase price of $12.0
million in cash. The Evans Group holds one BMW and one Nissan franchise and, in
1995, had $81.7 million in sales.
Contemporaneously with the Offering, pursuant to a stock purchase agreement
dated September 5, 1996, the Company will acquire a 100% interest in Standefer
Motor, located in Chattanooga, Tennessee, for a purchase price of $18.2 million
in cash. Standefer Motor holds one Nissan franchise and, in 1995, had $65.8
million in sales.
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Use of Proceeds
The net proceeds to the Company from the sale of the Common Stock offered hereby
are estimated to be approximately $ million ($ million if the
Underwriters' over-allotment option is exercised in full) after deducting
underwriting discounts and estimated offering expenses. Of such net proceeds,
(i) approximately $62.5 million will be used to pay the consideration for the
Contemporaneous Acquisitions and related transaction costs, (ii) approximately
$38.6 million will be used to repay all the Company's outstanding Senior Notes
($3.6 million of which represents a required prepayment premium, which will be
reflected in the Company's financial statements as a charge against earnings in
the quarter in which such prepayment occurs), (iii) approximately $5.0 million
will be used to repay all the loans under the Company's revolving credit
agreement, (iv) approximately $15.0 million will be used to fund the expansion
of the Company's automobile finance business and (v) the balance of
approximately $ million will be used for working capital and other general
corporate purposes, including other potential acquisitions. Pending such uses,
the net proceeds will be invested in short-term, investment grade securities or
used to temporarily reduce floor plan indebtedness.
The Senior Notes were issued in several series pursuant to Securities Purchase
Agreements, dated as of September 22, 1995, between the Company and the
investors named therein (the "Securities Purchase Agreements"). They bear
interest at a weighted average interest rate of 11.94% and mature on September
15, 2003. The proceeds of the Senior Notes were used primarily to finance
acquisitions and for investments in Atlantic Finance. The revolving loans were
made under the Credit Agreement, dated February 28, 1996, between the Company
and Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), as amended
(the "Credit Agreement"). They bear interest at the higher of the prime rate
plus 2.0% or the federal funds rate plus 2.5% (an effective rate of 10.25% at
July 15, 1996) and mature on September 30, 1996. The holder of a majority of the
Senior Notes and Morgan Guaranty are affiliates of J.P. Morgan Securities Inc.
Dividend Policy
The Company has never declared or paid dividends on its Common Stock. The
Company intends to retain future earnings, if any, to finance the development
and expansion of its business and, therefore, does not anticipate paying any
cash dividends on its Common Stock in the foreseeable future. The decision
whether to pay dividends will be made by the Board of Directors of the Company
in light of conditions then existing, including the Company's results of
operations, financial condition and requirements, business conditions and other
factors.
Pursuant to support agreements by the Company in favor of subsidiaries of
Atlantic Finance entered into in connection with securitization transactions or
sales of automobile loan receivables, the Company is prohibited from paying
dividends in excess of 50% of its cumulative net income measured over specified
periods.
Pursuant to financing agreements with floor plan lenders, many of the Company's
dealerships are required to maintain a certain minimum working capital and a
certain aggregate net worth and/or are prohibited from making substantial
disbursements outside the ordinary course of business. In addition, pursuant to
the automobile franchise agreements to which the Company's dealerships are
subject, all dealerships are required to maintain a certain minimum working
capital, and some dealerships are also required to maintain a certain minimum
net worth. These requirements may restrict the ability of the Company's
operating subsidiaries to make dividend payments, which in turn may restrict the
Company's ability to make dividend payments.
16
<PAGE>
Capitalization
The following table sets forth the short-term debt and consolidated
capitalization of the Company as of June 30, 1996, and pro forma to give effect
to the Preferred Stock Conversion, the Minority Exchange, the acquisition of
Peachtree Nissan, the private placement of additional equity and repayment of
$4.0 million of short-term debt on July 10, 1996, the Contemporaneous
Acquisitions and the Offering. This table should be read in conjunction with the
consolidated historical and pro forma financial statements of the Company and
the notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
----------------------
As of
June 30, 1996
IN THOUSANDS, EXCEPT PER SHARE DATA Actual Pro Forma
--------- -----------
<S> <C> <C>
Short-term debt, excluding floor plan (1) $ 17,585 $ 8,585
Current portion of long-term debt 2,463 2,825
--------- -----------
Total short-term debt $ 20,048 $ 11,410
--------- -----------
--------- -----------
Long-term debt (excluding current portion):
Senior Notes (2) $ 27,988 $
Other 10,706 15,062
--------- -----------
Total long-term debt 38,694 15,062
--------- -----------
Minority interests subject to repurchase 15,299
--------- -----------
Stock purchase warrants 1,597
--------- -----------
Stockholders' equity:
Class A convertible preferred stock, $0.0001 par value; 4,911 shares
authorized, 4,491 shares issued and outstanding, actual; no shares
authorized, issued or outstanding, as adjusted 1
Preferred stock, $0.0001 par value; no shares authorized, actual; 100
shares authorized, no shares issued and outstanding, as adjusted
Voting common stock, $0.0001 par value; 15,100 shares authorized,
3,300 shares issued and outstanding, actual; 40,000 shares
authorized, shares issued and outstanding, as adjusted (3) 1 1
Non-voting common stock, $0.0001 par value; 1,025 shares authorized,
no shares issued and outstanding, actual; 1,125 shares authorized, no
shares issued and outstanding, as adjusted
Additional paid-in capital 68,319 243,009
Accumulated deficit (1,612) (12,781)
--------- -----------
Total stockholders' equity 66,709 230,229
--------- -----------
Total capitalization $ 122,299 $ 245,291
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) As of June 30, 1996, an aggregate of $129.0 million was outstanding under
the Company's floor plan facilities.
(2) As of July 31, 1996, there were Senior Notes outstanding in the aggregate
principal amount of $33.2 million, net of unamortized discount of $1.8 million.
(3) Does not include 873,000 and 260,000 shares of Common Stock issuable at an
exercise price per share of $10.00 and the public offering price set forth on
the cover page of this Prospectus, respectively, upon the exercise of
outstanding stock options or 1,016,099 shares issuable at a nominal exercise
price upon the exercise of outstanding warrants. See "Management -- Spielvogel
Employment Agreement," "Management -- Stock Option Plan," "Description of
Capital Stock -- Warrants" and "Shares Eligible for Future Sale."
17
<PAGE>
Dilution
As of June 30, 1996, the pro forma net tangible book value of the Common Stock,
after giving effect to the Preferred Stock Conversion, the Minority Exchange,
the acquisition of Peachtree Nissan and the applicable anti-dilution adjustments
of all outstanding warrants and the assumed exercise thereof, was approximately
$ million, or approximately $ per share. Net tangible book value per share
represents the amount of total tangible assets less total liabilities, divided
by the number of shares of Common Stock outstanding. After giving effect to the
Offering (assuming an initial public offering price of $ per share and after
deducting estimated offering expenses) and the Contemporaneous Acquisitions, the
pro forma net tangible book value of the Company at June 30, 1996 would have
been approximately $ million, or approximately $ per share. This represents
an immediate dilution of approximately $ per share to stockholders purchasing
shares at the initial public offering price. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share $
---------
Pro forma net tangible book value per share at June 30, 1996 after
giving effect to the Preferred Stock Conversion, the Minority Exchange,
the acquisition of Peachtree Nissan and the applicable anti-dilution
adjustments of all outstanding warrants and the assumed exercise
thereof $
---------
Increase in pro forma net tangible book value per share attributable to
new investors in the Offering
---------
Pro forma net tangible book value per share as further adjusted for the
Offering and the Contemporaneous Acquisitions
---------
Dilution per share to new investors in the Offering $
---------
---------
</TABLE>
The following table sets forth on a pro forma basis at June 30, 1996 the
difference between the existing holders of Common Stock (including the shares of
Common Stock issued pursuant to the Minority Exchange and upon the assumed
exercise of all outstanding warrants after giving effect to the applicable
anti-dilution adjustments thereof) and the new investors in the Offering with
respect to the number of shares of Common Stock purchased (assuming an initial
public offering price of $ per share), the total consideration paid and the
average price per share paid:
<TABLE>
<CAPTION>
---------------------------------------------------------------
Shares Total
Purchased Consideration (1) Average
------------------------- ----------------------- Price
Number Percent Amount Percent Per Share
----------- ------------ --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders % $ % $
New investors in the Offering
-- --
----------- ---------
Total 100% $ 100%
-- --
-- --
----------- ---------
----------- ---------
</TABLE>
- ------------------------------
(1) The shares of Common Stock issuable upon the exercise of the Warrants to
purchase 1,016,099 shares and the Additional Warrants to purchase 93,747 shares
(as such terms are defined herein) are deemed to have a purchase price,
including a nominal exercise price, of $1.81 and $10.00 per share, respectively.
See "Description of Capital Stock -- Warrants."
18
<PAGE>
Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated financial statements
give effect to the following: (i) the acquisitions of 80% of Landers Auto
(August 1, 1995), 100% of each of Atlanta Toyota (January 1, 1996), Steve Rayman
Nissan (May 1, 1996), Hickman Nissan (July 1, 1996) and, in the Contemporaneous
Acquisitions, substantially all of Sun Automotive Group and 100% of each of
Evans Automotive Group and Standefer Motor; (ii) the DiFeo Restructuring (as
defined herein); (iii) the purchase of a 5% equity interest in Atlanta Toyota by
its current general manager in exchange for a note; (iv) the acquisition of the
minority interest in each of the DiFeo Group, Landers Auto and Atlanta Toyota in
exchange for Common Stock plus certain other consideration in the Minority
Exchange; (v) the Offering; (vi) the repayment of $35.0 million aggregate
principal amount of Senior Notes, plus a related $3.6 million prepayment
premium, and $5.0 million of loans outstanding under the Credit Agreement; (vii)
the Preferred Stock Conversion; (viii) the reclassification of the common stock
warrants to stockholders' equity; (ix) the private placement of additional
equity and repayment of $4.0 million of short-term debt on July 10, 1996; and
(x) the increase in rental expense under amended leases relating to facilities
in the DiFeo Group.
The pro forma condensed consolidated statements of operations assume these
events occurred on January 1, 1995, and the pro forma condensed consolidated
balance sheet assumes these events, except for the Landers Auto, Atlanta Toyota
and Steve Rayman Nissan acquisitions, which are included in the historical
balance sheet, occurred on June 30, 1996.
The pro forma condensed consolidated financial statements are not necessarily
indicative of operating results or financial position that would have been
achieved had these events been consummated on the dates indicated and should not
be construed as representative of future operating results or financial
position.
These pro forma condensed consolidated financial statements should be read in
conjunction with the historical financial statements and related notes thereto
included in this Prospectus.
19
<PAGE>
United Auto Group, Inc.
Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1995
(In thousands except per share data)
<TABLE>
<CAPTION>
Steve Sun Evans
Landers Atlanta Rayman Hickman Automotive Automotive Standefer
UAG Auto(1) Toyota(1) Nissan(1) Nissan(1) Group(1) Group(1) Motor(1)
--------- ---------- --------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Auto Dealerships
Total revenues $805,621 $164,368 $112,162 $60,268 $85,822 $154,502 $81,669 $65,793
Cost of sales 720,344 147,566 98,969 50,166 77,256 133,980 72,459 58,284
--------- ---------- --------- --------- --------- ---------- ---------- ---------
Gross profit 85,277 16,802 13,193 10,102 8,566 20,522 9,210 7,509
Selling, general and
administrative expenses 90,586 10,132 11,182 8,989 7,619 18,469 7,842 5,192
--------- ---------- --------- --------- --------- ---------- ---------- ---------
Operating income (loss) (5,309) 6,670 2,011 1,113 947 2,053 1,368 2,317
Related party interest
income 3,039
Other income (expense), net (1,438) 242 17 1 21 (31) (34) 183
Equity in loss of uncombined
investees (831)
--------- ---------- --------- --------- --------- ---------- ---------- ---------
Income (loss) before income
taxes -- Auto Dealerships (4,539) 6,912 2,028 1,114 968 2,022 1,334 2,500
Auto Finance
Loss before income taxes --
Auto Finance (1,382)
--------- ---------- --------- --------- --------- ---------- ---------- ---------
Total Company
Income (loss) before minority
interests and provision for
income taxes (5,921) 6,912 2,028 1,114 968 2,022 1,334 2,500
Minority interests 366
Benefit (provision) for income
taxes 2,089 (449) (457) (147)
--------- ---------- --------- --------- --------- ---------- ---------- ---------
Net income (loss) $(3,466) $6,463 $2,028 $1,114 $968 $2,022 $877 $2,353
--------- ---------- --------- --------- --------- ---------- ---------- ---------
--------- ---------- --------- --------- --------- ---------- ---------- ---------
Net income (loss) per common
share $(.70)
---------
---------
Weighted average number of
common shares outstanding 4,905
---------
---------
<CAPTION>
Pro Forma
Adjustments Pro Forma
-------------- ---------
<S> <C> <C>
Auto Dealerships
Total revenues $(100,086) (2) $1,350,366
(79,753) (3)
Cost of sales (95,893) (2) 1,194,796
---------
(68,335) (3)
Gross profit 155,570
Selling, general and
administrative expenses (11,286) (2) 137,165
---------
(9,877) (3)
785 (5)
(82) (6)
(1,863) (7)
2,023 (8)
(3,121) (9)
575 (11)
Operating income (loss) 18,405
Related party interest
income (3,039) (5)
Other income (expense), net (550)(4) (741)
848(10)
Equity in loss of uncombined
investees 831 (5)
---------
Income (loss) before income
taxes -- Auto Dealerships 17,664
Auto Finance
Loss before income taxes --
Auto Finance (1,382)
---------
Total Company
Income (loss) before minority
interests and provision for
income taxes 16,282
Minority interests (366) (5)
Benefit (provision) for income
taxes (8,098) (12) (7,062)
---------
Net income (loss) $ 9,220
---------
---------
Net income (loss) per common
share
---------
---------
Weighted average number of
common shares outstanding
</TABLE>
See footnotes on following pages
20
<PAGE>
United Auto Group, Inc.
Pro Forma Condensed Consolidated Statement of Operations
For the Six Months Ended June 30, 1996
(In thousands except per share data)
<TABLE>
<CAPTION>
Steve Hickman Sun Evans
Rayman Nissan Nissan Automotive Automotive Standefer
Auto Dealerships UAG (1) (1) Group (1) Group (1) Motor (1)
--------- ------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total revenues $597,939 $19,892 $41,320 $93,823 $46,369 $34,994
Cost of sales 531,560 16,503 36,581 80,389 40,497 31,018
--------- ------------- --------- ---------- ---------- ---------
Gross profit 66,379 3,389 4,739 13,434 5,872 3,976
Selling, general and administrative expenses 56,975 2,481 4,072 10,386 4,664 2,187
--------- ------------- --------- ---------- ---------- ---------
Operating income 9,404 908 667 3,048 1,208 1,789
Related party interest income 1,548
Other income (expense), net (2,049) 19 8 13 30
Equity in loss of uncombined investees 75
--------- ------------- --------- ---------- ---------- ---------
Income (loss) before income taxes -- Auto
Dealerships 8,978 908 686 3,056 1,221 1,819
Auto Finance
Loss before income taxes -- Auto Finance (349)
--------- ------------- --------- ---------- ---------- ---------
Total Company
Income (loss) before minority interests and
provision for income taxes 8,629 908 686 3,056 1,221 1,819
Minority interests (1,734)
Benefit (provision) for income taxes (2,997) (365) (133)
--------- ------------- --------- ---------- ---------- ---------
Net income $3,898 $908 $686 $3,056 $856 $1,686
--------- ------------- --------- ---------- ---------- ---------
--------- ------------- --------- ---------- ---------- ---------
Net income per common share $.49
---------
---------
Weighted average number of common shares
outstanding 7,923
---------
---------
<CAPTION>
Pro Forma
Auto Dealerships Adjustments Total
-------------- ---------
<S> <C> <C>
Total revenues $(33,707) (3) $ 800,630
Cost of sales (28,268) (3) 708,280
---------
Gross profit 92,350
Selling, general and administrative expenses (450) (2) 75,627
(4,837) (3)
393 (5)
(1,300) (7)
768 (8)
288 (11)
-------------- ---------
Operating income 16,723
Related party interest income (1,548) (5)
Other income (expense), net 1,825 (10) (244)
(90)(4)
Equity in loss of uncombined investees (75)(5)
-------------- ---------
Income (loss) before income taxes -- Auto
Dealerships 16,479
Auto Finance
Loss before income taxes -- Auto Finance (349)
-------------- ---------
Total Company
Income (loss) before minority interests and
provision for income taxes 16,130
Minority interests 1,734 (5)
Benefit (provision) for income taxes (3,430)(12) (6,925)
---------
Net income $ 9,205
---------
---------
Net income per common share $
---------
---------
Weighted average number of common shares
outstanding
---------
---------
</TABLE>
See footnotes on following pages
21
<PAGE>
Footnotes to Pro Forma Condensed Consolidated Statements of Operations
(1) Represents the results of operations of such entities prior to their
respective dates of acquisition by UAG.
(2) Represents adjustments related to the DiFeo Restructuring (as defined
herein). Of the $11,286 reduction in selling, general and administrative
expenses for the year ended December 31, 1995, $8,122 was directly related to 17
unprofitable franchises which were eliminated and $3,164 was related to the
elimination of a level of senior management and a reduction of personnel at the
continuing franchises of the DiFeo Group. The DiFeo Restructuring increased pro
forma net income by $4,256 for the year ended December 31, 1995 and $270 for the
six months ended June 30, 1996.
(3) Represents adjustments to eliminate the results of operations of dealerships
not acquired (Buick, Saab and Jaguar) or dealerships transferred due to failure
to obtain Manufacturer approval (Saturn). The adjustments are as follows:
<TABLE>
<CAPTION>
Selling, General
and
Year ended Cost of Administrative
December 31, 1995: Revenues Sales Expenses
- -------------------------------------------------------------------------------------- --------- --------- -----------------
<S> <C> <C> <C>
Atlanta Toyota -- Buick $ 8,211 $ 7,388 $ 580
Sun Group -- Saab, Jaguar 19,244 16,155 2,637
DiFeo Group -- Saturn 52,298 44,792 6,660
--------- --------- -------
Total $ 79,753 $ 68,335 $ 9,877
--------- --------- -------
--------- --------- -------
Six months ended
June 30, 1996:
- --------------------------------------------------------------------------------------
Sun Group -- Saab, Jaguar $ 9,911 $ 8,311 $ 1,600
DiFeo Group -- Saturn 23,796 19,957 3,237
--------- --------- -------
Total $ 33,707 $ 28,268 $ 4,837
--------- --------- -------
--------- --------- -------
</TABLE>
(4) Represents additional interest expense from the issuance of notes payable to
sellers as part of the acquisitions.
(5) Represents adjustments that give effect to the proposed acquisition of the
minority interest in each of the DiFeo Group, Landers Auto and Atlanta Toyota in
exchange for Common Stock plus certain other consideration in the Minority
Exchange. These adjustments include amortization expense for the excess of cost
over net assets acquired, the elimination of related party interest income on
assets to be exchanged, the elimination of equity in operations of assets to be
exchanged and the elimination of minority interest in results of operations
acquired. The proposed acquisition of the minority interests decreased pro forma
net income by $1,530 for the year ended December 31, 1995 and $96 for the six
months ended June 30, 1996.
(6) Represents reduction in facility expenses at acquired dealerships due to
revised lease agreements upon acquisition.
(7) Represents reduction in compensation expense at acquired dealerships related
to former owners and employees to contractual amounts.
(8) Represents amortization of excess of cost over net assets acquired for the
acquired dealerships.
(9) Represents reduction for management fees paid to owners of acquired
dealerships.
(10)Represents reduction in historical interest expense due to the repayment of
the Senior Notes and loans under the Credit Agreement with a portion of the net
proceeds from the Offering.
(11)Represents adjustment for increase in rental expense under amended leases
relating to facilities in the DiFeo Group.
(12)Represents tax impact of pro forma adjustments at the statutory rate
adjusted for non-deductible items of $6,479 for the year ended December 31, 1995
and $3,340 for the six months ended June 30, 1996, the impact of the conversion
of certain acquired entities from an S corporation to a C corporation for tax
purposes of $2,364 for the year ended December 31, 1995 and $90 for the six
months ended June 30, 1996 and the elimination of the decrease in the valuation
allowance of $745 for the year ended December 31, 1995 since a deferred tax
asset valuation allowance would not have existed at January 1, 1995 if the pro
forma transactions detailed above occurred at that date.
22
<PAGE>
United Auto Group, Inc.
Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Sun Evans
Hickman Automotive Automotive Standefer Pro Forma
UAG Nissan Group Group Motor Adjustments
--------- --------- ---------- ---------- --------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Auto Dealerships
Cash and cash equivalents $9,301 $211 $121 $701 $232 $11,531 (1)
(11,350) (1)
135,000 (2)
(31,550) (3)
(13,350) (4)
(18,550) (5)
(38,600) (6)
(5,000) (7)
(15,000) (8)
4,000 (13)
(4,000) (13)
(1,312) (14)
(908) (15)
Accounts receivable 48,209 4,442 6,907 5,812 1,431 (5,608) (15)
Inventories 121,289 6,272 15,968 8,927 8,430 2,351 (1)
948 (3)
1,926 (4)
3,322 (5)
(7,292) (15)
Deferred income taxes 5,333 3,216 (6)
110 (9)
125 (14)
Other current assets 2,848 264 53 81 100 (9)
(227) (15)
--------- --------- ---------- ---------- ---------
Total current assets 186,980 11,189 23,049 15,521 10,093
Property and equipment, net 14,609 543 11,128 335 226 (4,845) (3)
(652) (15)
Intangible assets, net 66,131 1,137 9,832 (1)
19,070 (3)
7,482 (4)
14,625 (5)
31,434 (10)
600 (14)
(67) (15)
Due from related parties 15,727 699 (15,727) (10)
Other assets 11,090 64 843 32 150 200 (9)
(2,608) (6)
3,017 (3)
(3,317) (10)
(137) (15)
(198) (13)
--------- --------- ---------- ---------- ---------
Total Auto Dealership assets 294,537 11,796 36,157 16,587 10,469
--------- --------- ---------- ---------- ---------
Auto Finance
Cash and cash equivalents 1,530 15,000 (8)
Finance assets, net 775
Other assets 14,262
--------- --------- ---------- ---------- ---------
Total Auto Finance assets 16,567
--------- --------- ---------- ---------- ---------
Total assets $ 311,104 $11,796 $36,157 $16,587 $10,469
--------- --------- ---------- ---------- ---------
--------- --------- ---------- ---------- ---------
<CAPTION>
Pro Forma
----------
<S> <C>
ASSETS
Auto Dealerships
Cash and cash equivalents $21,477
Accounts receivable 61,193
Inventories 162,141
Deferred income taxes 8,784
Other current assets 3,119
----------
Total current assets 256,714
Property and equipment, net 21,344
Intangible assets, net 150,244
Due from related parties 699
Other assets 9,136
----------
Total Auto Dealership assets 438,137
----------
Auto Finance
Cash and cash equivalents 16,530
Finance assets, net 775
Other assets 14,262
----------
Total Auto Finance assets 31,567
----------
Total assets $469,704
----------
----------
</TABLE>
23
<PAGE>
United Auto Group, Inc.
Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 1996 (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Sun Evans
Hickman Automotive Automotive Standefer Pro Forma
UAG Nissan Group Group Motor Adjustments
--------- --------- ---------- ---------- --------- ----------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
Auto Dealerships
Floor plan notes payable $ 129,009 $8,978 $14,263 $9,808 $2,326 $(6,421) (15)
6,001 (5)
Short-term debt 15,069 (5,000) (7)
(4,000) (13)
Accounts payable 20,626 916 1,357 1,977 741 (1,094) (15)
Accrued expenses 14,150 646 2,946 766 798 (576) (15)
(400) (14)
Current portion of long-term debt 2,463 33 1,329 (1,000) (3)
--------- --------- ---------- ---------- ---------
Total current liabilities 181,317 10,573 19,895 12,551 3,865
Long-term debt 38,694 56 12,960 89 2,000 (1)
5,480 (1)
(10,265) (3)
(33,167) (6)
(785) (15)
Due to related party 1,191
Deferred income taxes 2,279 6 1,208 (3)
--------- --------- ---------- ---------- ---------
Total Auto Dealership liabilities 223,481 10,629 32,855 12,646 3,865
--------- --------- ---------- ---------- ---------
Auto Finance
Short-term debt 2,516
Accounts payable and other liabilities 1,502
---------
Total Auto Finance liabilities 4,018
---------
Minority interests subject to repurchase 15,299 15,299 (10)
---------
Stock purchase warrants 1,597 (1,597) (11)
---------
Commitments and contingent liabilities
Stockholders' equity
Convertible Preferred Stock 1 (1) (12)
Common Stock 1 50 7,228 2 1 (50) (1)
(7,228) (3)
(1) (5)
(2) (4)
Non-voting Common Stock 9 (9) (5)
Additional paid-in capital 68,319 1 897 (1) (1)
6,051 (1)
135,000 (2)
(922) (4)
575 (9)
27,689 (10)
1,597 (11)
1 (12)
3,802 (13)
Retained earnings (accumulated (1,116) (1)
deficit) (1,612) 1,116 (3,926) 3,042 6,594
3,926 (3)
(3,018) (4)
(6,594) (5)
(4,825) (6)
(165) (9)
(187) (14)
(6,016) (15)
--------- --------- ---------- ---------- --------- ----------------------
Total stockholders' equity 66,709 1,167 3,302 3,941 6,604
--------- --------- ---------- ---------- ---------
Total liabilities, minority interests
subject to repurchase, stock
purchase warrants and stockholders'
equity $ 311,104 $11,796 $36,157 $16,587 $10,469
--------- --------- ---------- ---------- ---------
--------- --------- ---------- ---------- ---------
<CAPTION>
Pro Forma
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Auto Dealerships
Floor plan notes payable $163,964
Short-term debt 6,069
Accounts payable 24,523
Accrued expenses 18,330
Current portion of long-term debt 2,825
----------
Total current liabilities 215,711
Long-term debt 15,062
Due to related party 1,191
Deferred income taxes 3,493
----------
Total Auto Dealership liabilities 235,457
----------
Auto Finance
Short-term debt 2,516
Accounts payable and other liabilities 1,502
----------
Total Auto Finance liabilities 4,018
----------
Minority interests subject to repurchase
Stock purchase warrants
Commitments and contingent liabilities
Stockholders' equity
Convertible Preferred Stock
Common Stock 1
Non-voting Common Stock
Additional paid-in capital 243,009
Retained earnings (accumulated (12,781)
deficit)
----------
Total stockholders' equity 230,229
----------
Total liabilities, minority interests
subject to repurchase, stock
purchase warrants and stockholders'
equity $469,704
----------
----------
</TABLE>
24
<PAGE>
United Auto Group, Inc.
Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 1996 (continued)
(Dollars in thousands)
- ---------------
(1) Represents the acquisition of Hickman Nissan for cash and debt, including
expenses of $350, the related preliminary purchase price allocations to
inventories and excess of cost over net assets acquired and the elimination of
historical equity accounts. Also reflects the issuance of debt and equity to
finance the acquisition and working capital.
(2) Represents the net proceeds from the Offering.
(3) Represents the acquisition of Sun Automotive Group for cash, including
estimated expenses of $650, and the related preliminary purchase price
allocations to inventories, property and equipment, other assets and excess of
cost over net assets acquired, payments of long-term debt and the elimination of
historical equity accounts.
(4) Represents the acquisition of Evans Group for cash, including estimated
expenses of $350, and the related preliminary purchase price allocations to
inventories, property and equipment and excess of cost over net assets acquired,
payments of long-term debt and the elimination of historical equity accounts.
(5) Represents the acquisition of Standefer Motor for cash, including estimated
expenses of $350, and the related preliminary price allocation to
inventories, property and equipment and excess of costs over net assets
acquired, payments of long-term debt and the elimination of historical equity
accounts.
(6) Represents the repayment for Senior Notes, the related prepayment penalty
and writeoff of deferred costs charged to retained earnings and related
deferred tax effect.
(7) Represents the repayment of loans under the Credit Agreement.
(8) Represents contribution of a portion of the net proceeds from the Offering
to Atlantic Finance to finance expansion.
(9) Represents the purchase of a 5% equity interest in Atlanta Toyota by its
current general manager in exchange for a note.
(10) Represents adjustments to give effect to the proposed acquisition of the
minority interest in each of the DiFeo Group, Landers Auto and Atlanta
Toyota in exchange for Common Stock plus certain other consideration in the
Minority Exchange.
(11) Represents a reclassification of the stock purchase warrants to
stockholders' equity since, following the Offering, the stock purchase
warrants will no longer be convertible into contingent value obligations.
(12) Represents the Preferred Stock Conversion.
(13) Represents the issuance of additional equity, the reclassification of
deferred issuance costs and the repayment of short-term debt in July 1996.
(14) Represents adjustment for retroactive increase in rental expense under
amended leases relating to facilities in the DiFeo Group.
(15) Represents adjustment to eliminate the impact of dealerships transferred or
not acquired because Manufacturer approval was not received.
25
<PAGE>
Selected Consolidated Financial Data
The following table sets forth selected consolidated financial and other data of
the Company for the three months ended December 31, 1992, each of the three
years in the period ended December 31, 1995 and the six months ended June 30,
1995 and June 30, 1996 and the Predecessor Company financial data as of December
31, 1991 and for the year ended December 31, 1991 and the nine months ended
September 30, 1992. The balance sheet data as of December 31, 1993, 1994 and
1995 and the statements of operations data for the years ended December 31,
1993, 1994 and 1995 have been derived from the financial statements of the
Company which have been audited by Coopers & Lybrand L.L.P., the Company's
independent accountants. The selected consolidated financial data set forth
below for the Predecessor Company and the Company for the three months ended
December 31, 1992, June 30, 1995 and June 30, 1996 are unaudited but have been
prepared on the same basis as the audited consolidated financial statements and
contain all adjustments, consisting of only normal recurring accruals, that the
Company considers necessary for a fair presentation of the financial position
and results of operations for the periods presented. Operating results for the
six months ended June 30, 1996 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. The selected
financial data should be read in conjunction with the consolidated financial
statements and related notes and Pro Forma Condensed Consolidated Financial
Statements of the Company.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Predecessor Company(1) The Company
--------------------------- -------------------------------------------------------------------
Year Nine Months Three Months
Ended Ended Ended Six Months Ended
DOLLARS IN THOUSANDS, December 31, September 30, December 31, Years Ended December 31, June 30,
EXCEPT PER SHARE DATA 1991 1992 1992 1993 1994 1995(2) 1995 1996(3)
------------ ------------- ------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Auto Dealerships
Total revenues $404,319 $297,010 $98,040 $ 606,091 $ 731,629 $ 805,621 $ 352,739 $ 597,939
Cost of sales, including
floor plan interest 361,961 257,845 85,712 537,688 647,643 720,344 316,525 531,560
Gross profit 42,358 39,165 12,328 68,403 83,986 85,277 36,214 66,379
Selling, general and
administrative expenses 45,120 40,873 12,929 66,910 80,415 90,586 41,941 56,795
Operating income (loss) (2,762) (1,708) (601) 1,493 3,571 (5,309) (5,727) 9,404
Other interest expense 1,233 860 1,438 402 2,049
Auto Finance
Loss before income taxes (616) (1,382) (701) (349)
Total Company
Minority interests 152 (117) (887) 366 917 (1,734)
Benefit (provision) for
income taxes (337) (197) (47) 2,089 (2,997)
Net income (loss) (3,099) (1,905) (449) 96 (1,691) (3,466) (4,902) 3,898
Net income (loss) per
common share $ .07 $ (.51) $ (.70) $ (1.19) $ .49
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
The Company
Predecessor Company ----------------------------------------------------------------
-------------------
As of As of December 31, As of June 30,
DOLLARS IN THOUSANDS December 31, 1991 1992 1993 1994 1995 1995 1996
------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Auto Dealerships
Current assets $53,579 $ 72,045 $ 120,061 $ 118,534 $ 141,649 $ 119,909 $ 186,980
Current liabilities 60,568 75,127 117,494 125,825 139,447 128,027 181,317
Property and equipment, net 4,121 5,598 8,845 12,072 12,146 11,814 14,609
Intangible assets, net 667 20,665 22,832 23,018 48,774 22,700 66,131
Long-term debt 3,801 3,092 4,122 6,735 24,073 6,556 38,694
Auto Finance
Net assets 291 3,501 3,714 12,549
Total Company
Total assets 58,487 100,794 154,218 170,342 236,027 176,945 311,104
Minority interests subject to
repurchase 7,024 7,338 7,962 13,608 6,555 15,299
Stock purchase warrants 1,020 1,597
Total stockholders' equity (6,316) 15,551 25,264 28,785 49,240 33,599 66,709
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Predecessor Company The Company
--------------------------- -----------------------------------------------------------------------
Year Nine Months Three Months
Ended Ended Ended Six Months Ended
December 31, September 30, December 31, Years Ended December 31, June 30,
1991 1992 1992 1993 1994 1995(2) 1995 1996(3)
------------ ------------- ------------ --------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other Auto Dealerships
Data:
Gross profit margin 10.5% 13.2% 12.6% 11.3% 11.5% 10.6% 10.3% 11.1%
Operating margin (0.7)% (0.6)% (0.6)% 0.2% 0.5% (0.7 )% (1.6)% 1.6%
New cars sold at retail 14,597 11,677 4,150 18,608 22,464 25,138 11,088 17,509
Used cars sold at
retail 5,195 3,335 1,535 7,891 8,340 8,953 3,674 8,542
</TABLE>
- ------------------------------
(1) Predecessor Company represents the combined historical results of the
DiFeo Group acquired by the Company on October 1, 1992.
(2) Includes the results of Landers Auto from August 1, 1995.
(3) Includes results of Atlanta Toyota from January 1, 1996 and of Steve
Rayman Nissan from May 1, 1996.
26
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
UAG is a leading acquirer, consolidator and operator of franchised automobile
and light truck dealerships and related businesses. The Company believes that,
after giving effect to the Contemporaneous Acquisitions, it will be the fourth
largest retailer of new motor vehicles in the United States, operating 37
franchises located in Arizona, Arkansas, Connecticut, Georgia, New Jersey, New
York and Tennessee and representing 22 American, Asian and European brands. As
an integral part of its dealership operations, UAG sells used vehicles. In
addition, the Company has recently established four stand-alone used car retail
centers. All of UAG's dealerships include integrated service and parts
operations, which are an important source of recurring revenues. The Company
also owns Atlantic Finance, an automobile finance company that purchases prime
credit quality automotive loans originated by both UAG and third-party
dealerships.
The Company's principal source of growth has come, and is expected to continue
to come, from acquisitions of automobile dealerships. Therefore, the Company's
period to period results of operations vary depending on the dates of such
acquisitions. In addition, results of operations fluctuate due the cyclicality
of unit sales of motor vehicles, particularly new vehicles. Such fluctuation is
generally influenced by general economic conditions. See "-- Cyclicality."
New vehicle revenues include sales to retail customers and to leasing companies
providing consumer leasing. Used vehicle revenues include amounts received for
used vehicles sold to retail customers, leasing companies providing consumer
leasing, other dealers and wholesalers. Finance and insurance revenues come from
sales of accessories such as radios, cellular phones, alarms, custom wheels,
paint sealants and fabric protectors, as well as amounts received as fees for
placing extended service contracts, credit insurance policies, financing and
lease contracts. In the case of arranging financing, the Company receives a fee
from the lender for originating the loan but is assessed a chargeback by the
lender if the contract terminates, in certain cases before its scheduled
maturity, and in other cases within 90 days of the making of the loan, which in
either case can result from early repayment because of refinancing the loan,
selling or trading in the vehicle or default on the loan. The Company
establishes a reserve based on historical chargeback experience to anticipate
future chargebacks. Revenues from finance and insurance products contribute a
disproportionate share of operating profits. Service and parts revenues include
fees paid by consumers for repair and maintenance service and the sale of
replacement parts. In addition, through its automobile finance subsidiary,
Atlantic Finance, the Company derives revenues from the purchase, sale and
servicing of motor vehicle installment contracts originated by both UAG and
third-party dealerships. Generally, finance receivables are accumulated by the
Company until they attain a value in excess of $5.0 million, at which time they
are sold into a commercial paper conduit (loan warehouse facility). An allowance
for financing losses on receivables is provided for the period from the date of
purchase to the date of sale. This allowance is shown as a reduction in
receivables held for sale. Revenue is recognized upon sale to the conduit.
Interest is received and credited to interest income based on the daily
principal balance of the receivables outstanding. Loan servicing fees on
receivables sold to the conduit are recognized as collected.
The Company's selling expenses consist of compensation for sales department
personnel, including commissions and related bonuses. General and administrative
expenses include compensation for administration, finance and general management
personnel, rent, insurance and utilities. Interest expense consists of interest
charges on all of the Company's interest-bearing debt other than floor plan
inventory financing. Interest expense on floor plan debt is included in cost of
sales.
The Company has accounted for each of its acquisitions by the purchase method of
accounting and, as a result, the Company's financial statements include only the
results of operations of the acquired dealerships from the effective date of
acquisition. The financial information included in this Prospectus may not
necessarily reflect the results of operations, financial position and cash flows
of the Company in the future or what the results of operations, financial
position and cash flows would have been had the acquisitions and Offering
occurred during the period presented in the financial statements.
27
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, the percentage of
applicable revenues represented by certain items contained in the Company's
consolidated historical statements of operations:
<TABLE>
<CAPTION>
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Six Months Ended
Year Ended December 31, June 30,
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
Auto Dealerships:
Vehicle sales 87.2% 88.1% 88.9% 88.0% 89.5%
Finance and insurance 4.1 3.8 3.7 4.1 3.7
Service and parts 8.7 8.1 7.4 7.9 6.8
--------- --------- --------- --------- ---------
Total revenues 100.0 100.0 100.0 100.0 100.0
Cost of sales, including floor plan
interest 88.7 88.5 89.4 89.7 88.9
--------- --------- --------- --------- ---------
Gross profit 11.3 11.5 10.6 10.3 11.1
Selling, general and administrative
expenses 11.0 11.0 11.2 11.9 9.5
--------- --------- --------- --------- ---------
Operating income (loss) 0.2 0.5 (0.7) (1.6) 1.6
Related party interest income 0.0 0.0 0.4 0.4 0.3
Other interest expense (0.2) (0.1) (0.2) (0.1) (0.4)
Equity in income (loss) of uncombined
investees 0.0 (0.4) (0.1) (0.1) 0.0
--------- --------- --------- --------- ---------
Income (loss) before income taxes 0.0 0.0 (0.6) (1.4) 1.5
Auto Finance:
Revenues 100.0 100.0 100.0 100.0
Interest expense (32.8) * (17.1)
Operating and other expenses * (327.9) * (116.8)
--------- --------- --------- --------- ---------
Loss before income taxes * (260.8) * (33.9)
Total Company:
Income (loss) before minority interests and
provision for income taxes 0.0 (0.1) (0.7) (1.6) 1.4
Minority interests 0.0 (0.1) 0.0 0.3 (0.3)
Benefit (provision) for income taxes 0.0 0.0 0.3 0.0 (0.5)
--------- --------- --------- --------- ---------
Net income (loss) 0.0% (0.2)% (0.4)% (1.3)% 0.6%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------
* Not meaningful due to early stage of operations.
The following discussion and analysis includes the Company's consolidated
historical results of operations for 1993, 1994 and 1995 and for the six months
ended June 30, 1995 and 1996.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
AUTO DEALERSHIPS
DIFEO RESTRUCTURING. In an effort to increase profitability of the DiFeo Group,
the Company commenced a broad restructuring program in the first quarter of 1995
( the "DiFeo Restructuring"), which was substantially completed by the fourth
quarter of 1995. First, the Company eliminated a total of 17 unprofitable
franchises, or 45% of the DiFeo Group's total number of franchises, by
voluntarily terminating 12 franchises and effectively ceasing to be the
controlling or majority owner of five additional franchises. Second, the Company
eliminated a level of senior management and shifted greater authority and
responsibility to the general manager of each dealership. Third, the Company
reduced personnel by approximately 250 employees (including senior management
who were eliminated) and implemented pay plans linked to net profits and
customer satisfaction. Fourth, the Company liquidated outdated inventory in
order to lower inventory carrying costs and improve the utilization of space.
Costs associated with the DiFeo Restructuring were approximately $0.7 million
and $0.5 million for the year ended December 31, 1995 and the six months ended
June 30, 1996, respectively, primarily related to severance.
28
<PAGE>
REVENUES. Revenues increased by $245.2 million, or 69.5%, from $352.7 million
to $597.9 million due primarily to the acquisitions of Landers Auto in August
1995, which contributed $160.4 million, Atlanta Toyota in January 1996, which
contributed $85.7 million, and United Nissan in May 1996, which contributed $9.8
million. While revenues at the continuing franchises of the DiFeo Group
increased by $47.9 million, or 16.3%, from $294.1 million to $342.0 million,
such increase was more than offset by a decrease of $58.6 million in revenues
due to the elimination of unprofitable franchises as part of the DiFeo
Restructuring.
Sales of new and used vehicles increased by $225.0 million, or 72.5%, from
$310.2 million to $535.2 million. The acquisition of Landers Auto contributed
$149.7 million, the acquisition of Atlanta Toyota contributed $79.0 million and
the acquisition of United Nissan contributed $8.6 million. While sales at the
continuing franchises of the DiFeo Group increased by $38.5 million, or 14.8%,
from $259.4 million to $297.9 million, such increase was more than offset by a
decrease of $50.8 million due to the elimination of unprofitable franchises as
part of the DiFeo Restructuring. Unit sales of new and used vehicles increased
by 57.9% and 132.5%, respectively, due to the acquisitions of Landers Auto,
Atlanta Toyota and United Nissan and increased sales volume at the continuing
franchises of the DiFeo Group, which increased by 8.3% and 24.6%, respectively.
New vehicle selling prices increased approximately 3.3% due primarily to changes
in Manufacturer pricing and the mix of new vehicles sold. Used vehicle selling
prices increased approximately 23.8% due to changes in market demand which
resulted in a change in the mix of used vehicles sold.
Sales of finance and insurance products increased by $7.8 million, or 53.8%,
from $14.5 million to $22.3 million, principally as a result of the acquisitions
of Landers Auto, Atlanta Toyota and United Nissan. Sales of such products at the
continuing franchises of the DiFeo Group increased by $4.0 million, or 31.0%,
from $12.9 million to $16.9 million.
Service and parts revenues increased by $12.4 million, or 44.3%, from $28.0
million to $40.4 million due principally to the acquisitions of Landers Auto,
Atlanta Toyota and United Nissan. While revenues at the continuing franchises of
the DiFeo Group increased by $5.5 million, or 25.3%, from $21.7 million to $27.2
million, such increase was more than offset by the elimination of unprofitable
franchises as part of the DiFeo Restructuring.
GROSS PROFIT. Gross profit increased by $30.2 million, or 83.4%, from $36.2
million to $66.4 million due principally to the acquisitions of Landers Auto,
Atlanta Toyota and United Nissan. Gross profit at the continuing franchises of
the DiFeo Group increased by $9.1 million, or 28.4%, from $32.0 million to $41.1
million. Gross profit as a percentage of revenues increased from 10.3% to 11.1%
reflecting higher margins resulting from improved inventory controls, enhanced
training of sales personnel and a change in marketing philosophy from a price
strategy to a customer service strategy.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $15.1 million, or 36.0%, from $41.9 million
to $57.0 million due principally to the acquisitions of Landers Auto, Atlanta
Toyota and United Nissan. Such expenses at the continuing franchises of the
DiFeo Group increased by $3.9 million, or 11.2%, from $34.7 million to $38.6
million, and such expenses as a percentage of revenues decreased overall by
20.2% from 11.9% to 9.5% due principally to the DiFeo Restructuring.
RELATED PARTY INTEREST INCOME. Related party interest income remained unchanged
at $1.5 million. Such income is related to certain amounts owed the Company from
minority partners and certain of their related entities on which the Company is
contractually permitted to charge interest. The amounts owed arose from advances
for certain business acquisitions and working capital advances for dealerships
in which the Company has no interest.
OTHER INTEREST EXPENSE. Interest expense other than floor plan increased by
$1.6 million from $0.4 million to $2.0 million as a result of increased
borrowings to finance the acquisitions of Landers Auto, Atlanta Toyota and
United Nissan as well as the issuance of certain promissory notes as part of the
consideration paid for Landers Auto and Atlanta Toyota.
EQUITY IN INCOME (LOSS) OF UNCOMBINED INVESTEE. During the six months ended
June 30, 1995, equity in loss of uncombined investee was $0.5 million, as
compared to income of $0.1 million during the six months ended June 30, 1996.
This item represents a minority interest in a group of dealerships located in
Jersey City, New Jersey.
29
<PAGE>
INCOME (LOSS) BEFORE INCOME TAXES. Pretax income from dealership operations
increased by $14.1 million from a loss of $5.1 million to a profit of $9.0
million as a result of the factors described above, including the DiFeo
Restructuring.
AUTO FINANCE
LOSS BEFORE INCOME TAXES. The pretax loss from operations at Atlantic Finance
decreased by $0.4 million from $0.7 million to $0.3 million. Atlantic Finance
was formed in the first quarter of 1994 and commenced loan operations in January
1995.
TOTAL COMPANY
MINORITY INTERESTS. Minority interests changed by $2.6 million from a charge of
$0.9 million to a credit of $1.7 million as a result of the factors described
above.
INCOME TAXES. The Company has provided for federal and state income taxes on
its period earnings at appropriate rates. The 1996 effective tax rate exceeds
the statutory rate due to the non-deductibility of the amortization of the
excess of cost over net assets acquired. No benefit was recorded for losses in
1995 since realization was deemed less likely than not at that time.
NET INCOME (LOSS). Net income increased by $8.8 million from a loss of $4.9
million to a profit of $3.9 million due to the factors described above.
1995 COMPARED TO 1994
AUTO DEALERSHIPS
REVENUES. Revenues increased by $74.0 million, or 10.1%, from $731.6 million to
$805.6 million due to the acquisition of Landers Auto in August 1995. Revenues
at Landers Auto contributed $116.3 million. Revenues at the continuing
franchises of the DiFeo Group increased by $6.2 million, or 1.0%, from $592.5
million to $598.7 million. Such increase was more than offset by a decrease of
$48.5 million in revenues due to the elimination of unprofitable franchises as
part of the DiFeo Restructuring.
Sales of new and used vehicles increased by $72.0 million, or 11.2%, from $644.4
million to $716.4 million. The acquisition of Landers Auto contributed $109.2
million of such increase. While revenues at the continuing franchises of the
DiFeo Group increased by $5.0 million, or 0.9%, from $524.0 million to $529.0
million, such increase was more than offset by a decrease of $42.3 million in
sales due to the elimination of unprofitable franchises as part of the DiFeo
Restructuring. Unit sales of new and used vehicles increased by 11.9% and 7.4%,
respectively, due principally to the acquisition of Landers Auto. Sales of new
vehicles increased by 5.6% and sales of used vehicles decreased by 10.3% at the
continuing franchises of the DiFeo Group, offset by the elimination of
unprofitable franchises as part of the DiFeo Restructuring. New vehicle selling
prices increased by 4.4% due primarily to changes in Manufacturer pricing. Used
vehicle selling prices increased by 17.2% due to changes in market conditions
which resulted in a change in the mix of used vehicles sold.
Sales of finance and insurance products increased by $2.3 million, or 8.3%, from
$27.5 million to $29.8 million due to the acquisition of Landers Auto. Sales of
such products increased by $2.5 million, or 10.8%, from $23.2 million to $25.7
million at the continuing franchises of the DiFeo Group, offsetting in part the
$2.3 million decrease in sales due to the elimination of unprofitable franchises
as part of the DiFeo Restructuring.
Service and parts revenues decreased by $0.3 million, or 0.5%, from $59.7
million to $59.4 million due to the DiFeo Restructuring, offset by increased
service and parts revenues attributable to Landers Auto.
GROSS PROFIT. Gross profit increased by $1.3 million, or 1.5%, from $84.0
million to $85.3 million. The acquisition of Landers Auto added $10.6 million
during the five months the Company owned it. Gross profit at the continuing
franchises of the DiFeo Group decreased by $3.3 million, or 4.7%, from $70.2
million to $66.9 million. Gross profit as a percentage of revenues decreased
7.8% from 11.5% to 10.6% as the Company implemented the DiFeo Restructuring.
30
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $10.2 million, or 12.7%, from $80.4 million
to $90.6 million due principally to the acquisition of Landers Auto. Such
expenses as a percentage of revenues increased from 11.0% to 11.2% of revenues.
Selling, general and administrative expenses at the continuing franchises of the
DiFeo Group increased by $3.9 million from $66.1 million to $70.0 million.
RELATED PARTY INTEREST INCOME. Related party interest income was $3.0 million
in 1995. There was no such income in 1994.
OTHER INTEREST EXPENSE. Interest expense other than floor plan increased by
$0.5 million, or 55.6%, from $0.9 million to $1.4 million as a result of
increased borrowings to finance the acquisitions of Landers Auto and Atlanta
Toyota and the issuance of certain promissory notes as part of the consideration
paid for Landers Auto, offset in part by a reduction in other interest-bearing
debt.
EQUITY IN LOSS OF UNCOMBINED INVESTEES. Equity in loss of uncombined investees
decreased by $2.1 million, or 72.4%, from $2.9 million to $0.8 million due to
improved performance of certain dealerships in which the Company retains a
minority interest.
LOSS BEFORE INCOME TAXES. The pretax loss from dealership operations increased
from $0.2 million to $4.5 million, including the costs incurred in connection
with the DiFeo Restructuring. The deterioration in the performance of the DiFeo
Group during the first quarter of 1995 led management to undertake the DiFeo
Restructuring.
AUTO FINANCE
LOSS BEFORE INCOME TAXES. The pretax loss from operations at Atlantic Finance
increased by $0.8 million from $0.6 million to $1.4 million, reflecting the
early stage of its operations. Atlantic Finance was formed in the first quarter
of 1994.
TOTAL COMPANY
MINORITY INTERESTS. Minority interests changed by $1.3 million from a charge of
$0.9 million to a credit of $0.4 million as a result of the factors described
above.
PROVISION FOR INCOME TAXES. An income tax credit of $2.1 million was recorded
in 1995. The credit was taken as the Company determined in the fourth quarter
that it was more likely than not that, due to the DiFeo Restructuring, future
taxable income from operations would be sufficient to fully recognize a net
deferred tax asset at December 31, 1995. Such net deferred tax asset was
provided as a result of tax basis operating losses sustained in 1994 and 1995.
NET INCOME (LOSS). Net income decreased by $1.8 million from a loss of $1.7
million to a loss of $3.5 million due to the factors described above.
1994 COMPARED TO 1993
AUTO DEALERSHIPS
REVENUES. Revenues increased by $125.5 million, or 20.7%, from $606.1 million
to $731.6 million. This increase was due to the full-year contributions of
dealerships acquired during 1993 by the DiFeo Group that were located within its
trading area and volume increases at the existing locations.
Sales of new and used vehicles increased by $115.9 million, or 21.9%, from
$528.5 million to $644.4 million. Unit sales of new and used vehicles increased
by 20.7% and 5.7%, respectively, due to the factors listed above. New vehicle
prices increased by 4.0% due primarily to changes in Manufacturer pricing. Used
vehicle prices increased by 17.1% due to changes in market conditions which
resulted in a change in the mix of used vehicles sold.
Sales of finance and insurance products increased by $2.8 million, or 11.3%,
from $24.7 million to $27.5 million due principally to the Company's successful
effort to increase the sale of such products.
Service and parts revenues increased by $6.8 million, or 12.8%, from $52.9
million to $59.7 million reflecting both the additional dealerships acquired by
the DiFeo Group and an increase in service and parts activity at its existing
franchises.
31
<PAGE>
GROSS PROFIT. Gross profit increased by $15.6 million, or 22.8%, from $68.4
million to $84.0 million due to the full-year contributions of dealerships
acquired during 1993 and a significant increase in gross profit from finance and
insurance products and, to a lesser extent, service and parts operations. Gross
profit as a percentage of revenues increased from 11.3% to 11.5% due to an
increase in the sale of finance and insurance products offset by a decline in
vehicle profitability.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $13.5 million, or 20.2%, from $66.9 million
to $80.4 million due to the full-year contributions of dealerships acquired
during 1993 and additions to overhead, principally personnel. Such expenses as a
percentage of revenues remained constant at 11.0%.
OTHER INTEREST EXPENSE. Interest expense other than floor plan declined by $0.3
million, or 25.0%, from $1.2 million to $0.9 million due to a decrease in
outstanding indebtedness resulting from the placement of shares of Class A
Preferred Stock for an aggregate price of $15.7 million and of shares of Common
Stock for an aggregate price of $0.5 million at the end of December 1993.
EQUITY IN LOSS OF UNCOMBINED INVESTEES. Equity in loss of uncombined investees
was $2.9 million in 1994.
INCOME (LOSS) BEFORE INCOME TAXES. Pretax income from dealership operations
declined from a profit of $0.3 million to a loss of $0.2 million due the factors
described above.
AUTO FINANCE
LOSS BEFORE INCOME TAXES. During the first quarter of 1994, the Company formed
a wholly owned automobile finance subsidiary, Atlantic Finance, located in
Rochester, New York. Losses from its early stage operations totaled $0.6 million
in 1994.
TOTAL COMPANY
MINORITY INTERESTS. Minority interests charge changed by $0.8 million from $0.1
million to $0.9 million due to the factors described above.
INCOME TAXES. The provision for income taxes was reduced from $0.1 million to
$0.0 in 1994.
NET INCOME (LOSS). Net income decreased by $1.8 million from $0.1 million to a
loss of $1.7 million due to the factors described above.
Liquidity and Capital Resources
The cash requirements of the Company are primarily for acquisition of new
dealerships, working capital, including inventory, and expansion of existing
facilities. Historically, these cash requirements have been met through
issuances of equity under the Equity Facility (as defined herein) and issuances
of Senior Notes (with Warrants) under the Securities Purchase Agreements,
neither of which currently has any availability, borrowings under the Credit
Agreement, which will have terminated prior to or upon consummation of the
Offering, floor plan facilities and warehouse facilities at Atlantic Finance.
At June 30, 1996, the Company had working capital of $5.7 million, including
accounts receivable of $48.2 million and inventory of $121.3 million, offset by
$34.8 million in accounts payable and accrued expenses and $129.0 million in
revolving floor plan financing arrangements. The Company's floor plan lenders
limit the aggregate amount of such borrowings by formulas based on the cost of
vehicles in inventory.
During the first half of 1996, operating activities resulted in net cash
provided by operations of $8.1 million, principally from income generated by
operations and an increase in trade credit.
For the first half of 1996, the Company used $23.9 million in investing
activities, principally for the acquisitions of Atlanta Toyota and United Nissan
and capital expenditures.
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Net cash provided by financing activities during the first half of 1996 totaled
$21.5 million, principally from the issuance of capital stock under the Equity
Facility for an aggregate price of $16.0 million and the issuance of additional
Senior Notes (with Warrants) in the aggregate principal amount of $13.2 million,
net of the repayment of certain short-term debt, principally floor plan.
For 1995, operating activities for the automobile dealerships provided cash of
$0.7 million. This was due principally to significantly lower inventories due to
the implementation of certain controls and procedures designed to maximize
inventory turnover, offset by a reduction in floor plan lending available for
used car financing. Net cash used by Atlantic Finance operating activities was
$8.0 million during 1995 due principally to the origination and warehousing of
automobile loans.
During 1995, the Company used $25.8 million in investing activities, principally
in the acquisition of Landers Auto, the cash cost of which was $20.0 million,
and capital expenditures of $1.7 million.
Net cash provided by financing activities in 1995 totaled $37.6 million
resulting principally from the issuance of capital stock under the Equity
Facility for an aggregate price of $25.2 million, the issuance of Senior Notes
(with Warrants) in the aggregate principal amount of $16.3 million and a
borrowing in the amount of $8.0 million under a short-term credit facility with
Morgan Guaranty, net of a reduction in floor plan borrowings of $11.9 million,
net borrowings of $4.2 million on the warehouse credit line at Atlantic Finance
and certain other costs associated with the issuance of debt and equity
securities.
In September 1995, the Company entered into the Securities Purchase Agreements
providing for the issuance and sale of up to $35 million aggregate principal
amount of Senior Notes due 2003 and Warrants to purchase Common Stock. See "Use
of Proceeds" and "Description of Capital Stock -- Warrants." The permitted uses
of proceeds from the sale of the Senior Notes are to finance acquisitions, to
make capital contributions to Atlantic Finance, to make capital expenditures and
to provide working capital. As of December 31, 1995 and March 31, 1996, $16.3
million and $23.4 million aggregate principal amount of Senior Notes,
respectively, were outstanding.
In December 1993, the Company entered into the Equity Facility providing for the
issuance and sale of Class A Preferred Stock and Common Stock for an aggregate
price of $77.8 million. The initial closing under the Equity Facility occurred
in December 1993 and provided aggregate net proceeds of $15.2 million. In
addition, in connection with the initial closing under the Equity Facility,
shares of then outstanding common stock were converted into shares of Common
Stock valued at $10.3 million. Proceeds from subsequent closings under the
Equity Facility during 1994, 1995 and 1996 equaled $5.5 million, $25.2 million
and $22.5 million, respectively. In addition, proceeds from additional offerings
of equity and the Additional Warrants (as defined herein) during July 1996
equaled $4.1 million.
The Company finances substantially all of its new and used vehicle inventory
under revolving floor plan financing arrangements with General Motors Acceptance
Corporation, Chrysler Credit Corporation, World Omni Financial Corp. and Nissan
Motor Acceptance Corporation. The floor plan lenders pay the Manufacturer
directly with respect to new vehicles. The Company makes monthly interest
payments on the amount financed but is not required to make loan principal
repayments prior to the sale of new and used vehicles. Substantially all of the
assets of the Company's dealerships are subject to security interests granted to
their floor plan lending sources.
The Company believes that its existing capital resources, including the net
proceeds of the Offering, will be sufficient to meet anticipated cash
requirements, including those relating to the Contemporaneous Acquisitions,
through at least the end of 1997. To the extent the Company pursues other
significant acquisitions, it will need to raise additional capital either
through the issuance of equity or debt securities or through borrowings. There
can be no assurance that such required additional capital will be available on
reasonable terms, if at all, at such times as required by the Company.
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Cyclicality
The Company's business, as well as the entire automotive retailing industry, is
dependent on a number of factors relating to general economic conditions,
including the price and availability of fuel, interest rate fluctuations,
economic recessions and consumer business cycles. The Company believes its
geographic diversity, expansion into automobile financial services and emphasis
on service and repair operations help to reduce the overall impact of these
general economic factors on the Company. The Company's business, however, may be
materially adversely affected by severe adverse economic conditions.
Seasonality
The Company's combined business is modestly seasonal overall. The greatest
seasonalities exist in the DiFeo Group, which operates in the New York
metropolitan area. At the DiFeo Group, the second and third quarters are the
strongest with the fourth and first quarters the weakest with respect to sales
and profits relating to vehicle sales. The service and parts business at all
dealerships experiences relatively modest seasonal fluctuations. At the
Company's other dealerships, seasonality in all business sectors is modest.
Effects of Inflation
The Company believes that the relatively moderate rates of inflation over the
last few years have not had a significant impact on revenue or profitability.
The Company does not expect inflation to have any near-term material effects on
the sale of its products and services. However, there can be no assurance that
there will be no such effect in the future.
The Company finances substantially all of its inventory through various
revolving floor plan arrangements with interest rates which vary based on the
prime rate or LIBOR. Such rates have historically increased during periods of
increasing inflation. The Company does not believe that it would be at a
competitive disadvantage should interest rates increase due to increased
inflation since most other automobile dealers have similar floating rate
borrowing arrangements.
Recent Accounting Pronouncements
In October 1995, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation
("SFAS 123"). SFAS 123 establishes financial and reporting standards for stock
based compensation plans. The Company anticipates adopting the disclosure only
provisions of this standard during 1996.
In June 1996, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities" ("SFAS 125"). SFAS 125
establishes financial and reporting standards for derecognition of certain
liabilities. The Company is currently assessing the impact that this standard
may have on its financial position and results of operations.
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Business
Overview
UAG is a leading acquirer, consolidator and operator of franchised automobile
and light truck dealerships and related businesses. The Company believes that,
after giving effect to the Contemporaneous Acquisitions, it will be the fourth
largest retailer of new motor vehicles in the United States, operating 37
franchises located in Arizona, Arkansas, Connecticut, Georgia, New Jersey, New
York and Tennessee and representing 22 American, Asian and European brands. As
an integral part of its dealership operations, UAG sells used vehicles. In
addition, the Company has recently established four stand-alone used car retail
centers. All of UAG's dealerships include integrated service and parts
operations, which are an important source of recurring revenues. The Company
also owns Atlantic Finance, an automobile finance company engaged in the
purchase, sale and servicing of prime credit quality automobile loans originated
by both UAG and third-party dealerships. For 1995, on a pro forma basis, UAG had
revenues of approximately $1.35 billion and sold 37,358 new and 22,060 used
vehicles.
The Company was formed to capitalize on consolidation opportunities within the
highly fragmented $660 billion automotive retailing industry. In 1995,
approximately 22,000 dealerships representing more than 48,000 franchises sold
14.8 million new vehicles and 15.7 million used vehicles for sales of $290
billion and $180 billion, respectively. Yet, the Company estimates that the
largest 100 dealership groups generated less than 10% of these total revenues
and control less than 5% of all franchised dealerships. As capital requirements
to operate dealerships continue to increase and many owners who were granted
franchises in the 1950s and 1960s approach retirement age, many individual
dealers are seeking exit opportunities. These conditions present attractive
consolidation opportunities for larger automobile retailers such as UAG. Since
its initial acquisition in 1992, the Company has completed 13 additional
acquisitions, including the Contemporaneous Acquisitions. Management believes
that UAG is well-positioned to continue capitalizing on the consolidation trend
in the automotive retailing industry due to its proven acquisition history,
diverse geographic presence, substantial size and financial resources.
The Company believes that it enjoys significant competitive advantages. The
Company's diverse product portfolio reduces the risks associated with changes in
consumer preferences and dependence on any single brand or market segment.
Geographic diversity mitigates the Company's exposure to regional economic and
weather conditions. In addition, the Company's large size allows it to
centralize certain administrative functions and negotiate favorable pricing on
certain automotive parts, aftermarket products, supplies and advertising.
Furthermore, the Company benefits from superior access to capital as compared to
smaller dealerships.
Growth Strategy
UAG seeks to lead the consolidation of the automotive retailing industry and
increase stockholder value through a growth strategy focused on (i) acquiring
profitable dealership operations, (ii) leveraging its new car franchises to grow
higher-margin businesses and (iii) generating incremental revenue from its
automobile finance business.
ACQUIRE PROFITABLE DEALERSHIP OPERATIONS
UAG seeks to capitalize on continuing consolidation in the U.S. automotive
retailing industry by selectively acquiring profitable dealerships. The Company
targets dealerships or dealership groups with established records of
profitability and customer satisfaction as well as experienced management
willing to remain in place. The Company focuses on opportunities in geographic
markets with above-average projected population and job growth. Of the
approximately 22,000 dealerships in the United States, the Company believes that
at least 2,000 dealerships, some of which are members of dealership groups, meet
its acquisition criteria.
The Company's acquisition program has been specifically tailored to address
dealers' desire to retain a management role in their businesses while achieving
personal liquidity. Owners of acquired dealerships typically continue in their
role as dealership manager and some also participate in overall Company
operations through their roles on UAG's Operating Committee. The Company
believes it provides dealership managers additional management tools as its
economies of scale, marketing expertise and corporate resources act as a
catalyst for continual dealership growth. In addition, the owner may retain an
equity interest in the business through the ownership of capital stock and/or
stock options of UAG.
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GROW HIGHER-MARGIN BUSINESSES
UAG is leveraging its new car franchises and applying its financial resources to
grow higher-margin businesses such as the retail sale of used vehicles,
aftermarket products and service and parts.
USED VEHICLES. Used vehicle sales by franchised dealers, with average prices
approximately 58% of new vehicle prices, typically generate higher gross margins
than new cars because of limited comparability among them and the somewhat
subjective nature of their valuation. Consumer acceptance of used vehicle
purchasing has grown due principally to the following factors: (i) the
availability of late-model, low-mileage used automobiles has increased due to
the large supply of cars coming off short-term leases and from rental company
fleets; (ii) the quality of motor vehicles has generally improved; and (iii) the
prices of new cars have risen. The Company has taken advantage of this trend by
recently opening four stand-alone used vehicle operations.
UAG believes that by virtue of its new vehicle franchises it enjoys significant
advantages over both independent and chain used-car companies in sourcing used
vehicles. Specifically, the Company has access to (i) a steady supply of used
cars accepted as trade-ins for new vehicle purchases, (ii) off-lease vehicles
that were originally leased through the new vehicle franchise and (iii) used car
auctions open only to new car dealers. In addition, only new car franchises are
able to sell used cars certified by the Manufacturer under newly introduced
programs in which the Manufacturer supports specific high-quality used cars with
extended warranties and attractive financing options.
AFTERMARKET PRODUCTS. Each sale of a new or used vehicle provides the
opportunity for the Company to sell aftermarket products. A substantial portion
of the gross profit on the sale of a vehicle generally is earned from the sale
of aftermarket products. Aftermarket products include accessories such as
radios, cellular phones, alarms, custom wheels, paint sealants and fabric
protectors, as well as agency services such as extended service contracts and
credit insurance policies. In addition, the Company receives fees for placing
financing and lease contracts. In order to meet customers' needs and help create
a "one-stop" shopping experience, management continues to expand aftermarket
product offerings.
SERVICE AND PARTS. Each of UAG's dealerships offers a fully integrated service
and parts department. The service and parts business provides an important
recurring revenue stream to the Company's dealerships, which may help to
mitigate the effects of downturns in the automobile sales cycle. Unlike
independent service shops or used car dealerships with service operations, UAG
is qualified to perform work covered by Manufacturer warranty. Since warranty
service work is paid for by the Manufacturer, consumers are motivated to service
their vehicles at a dealership for the warranty period. In recent years,
Manufacturers have generally lengthened standard warranty coverage on new cars
to three years/36,000 miles and introduced warranty coverage on used cars,
further enhancing customer retention opportunities in the service area. To grow
their service and parts businesses, UAG dealerships have implemented programs to
track maintenance records of customers and contact them regarding dealer
promotions and maintenance schedules. In addition, the Company is actively
marketing warranty-covered services to potential customers such as
municipalities and corporations with large fleets of automobiles located near
certain of its dealerships. The Company is able to offer repair services to such
customers on a more efficient and less costly basis than such customers
generally can perform themselves. The Company believes that its market share
will grow at the expense of independent mechanics' shops, which may be unable to
address the increased mechanical and electronic sophistication of today's motor
vehicles and the increased expenses of compliance with more stringent
environmental regulations.
GENERATE INCREMENTAL REVENUE FROM AUTOMOBILE FINANCE BUSINESS
In 1995, industry wide, approximately 72% of new and 73% of used automobile
purchases from franchised dealerships were financed. To capitalize on this
market, the Company established Atlantic Finance, its own automobile finance
subsidiary. Atlantic Finance purchases, sells and services prime credit quality
automobile loans originated by both UAG and third-party dealerships. Based in
Rochester, New York, Atlantic Finance commenced loan operations in January 1995
and currently serves approximately 127 dealerships in Connecticut, New Jersey
and New York. Atlantic Finance provides the Company with another opportunity to
earn incremental revenue on its vehicle sales.
Atlantic Finance's strategy is to grow by (i) increasing its business with
existing UAG dealerships, including those with which it has yet to commence
financing activities, (ii) commencing financing activities with dealerships
acquired by
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<PAGE>
UAG in the future and (iii) using its presence in its local operating markets to
cultivate relationships with additional unaffiliated dealerships. Atlantic
Finance's goal is to ultimately purchase up to 50% of its finance contracts from
non-UAG dealers.
Operating Strategy
EMPHASIZE CUSTOMER SERVICE
Central to UAG's overall philosophy is customer-oriented service designed to
meet the needs of an increasingly sophisticated and demanding automotive
consumer. The Company seeks to provide its customers with a satisfying, pleasant
and informative retailing experience, which entails "one-stop" shopping
convenience, competitive pricing and a sales staff that is knowledgeable about
product offerings and responsive to a customer's particular needs. The Company's
goal is to establish lasting relationships with its customers, which it believes
enhance its reputation in the community and create the opportunity for
significant repeat and referral business.
The quality of customer service provided by dealerships' sales and service
departments are measured by CSI scores, which are derived from data accumulated
by Manufacturers through individual customer surveys. UAG relies on this data to
improve dealership operations and uses it as a factor in determining the
compensation of general managers and sales and service personnel in all its
dealerships. CSI coordinators are responsible for ensuring top quality customer
service at the Company's dealerships. Training of the sales force focuses on
providing skills that improve its interaction with the customer. Additional
training is provided by organizations with superior reputations for customer
service, which the Company has engaged in its ongoing effort to refine the
automobile purchasing experience. The Company's most recent CSI scores indicate
that most of its dealerships ranked at or above the average CSI scores for their
regions.
EMPLOY PROFESSIONAL MANAGEMENT TO IMPROVE OPERATIONS
The Company implements professional management practices throughout its business
operations. To ensure "best practices" are promoted throughout the organization,
the Company has established an Operating Committee comprised of the Company's
Chairman and Chief Executive Officer and select dealership managers, which meets
monthly to share business experiences and ideas. See "Management -- Operating
Committee."
The Company believes it applies financial controls which exceed those required
by Manufacturers and those customarily found at the typical dealership.
Currently, the Company's dealerships' management information systems collect
operational data such as customer records, invoicing, payroll and inventory, as
well as routine accounting information. The dealerships also maintain customer
data bases that track information such as showroom traffic, aftermarket product
purchases and service and parts usage, which are utilized in pursuing follow-on
sales opportunities.
Industry Overview
With more than $660 billion in 1995 sales, automotive retailing is the third
largest domestic industry group in the United States, representing nearly 5% of
U.S. gross domestic product. The industry is highly fragmented and largely
privately held with approximately 22,000 automobile dealerships representing
more than 48,000 franchises. In 1995, U.S. franchised automobile dealers sold
14.8 million new vehicles and 15.7 million used vehicles for sales of
approximately $290 billion and $180 billion, respectively.
Manufacturers originally established franchised dealer networks for the
distribution of their vehicles as single-dealership, single-owner operations. In
return for exclusive distribution rights within specified territories,
Manufacturers exerted significant influence over such matters as a dealer's
location, inventory size and composition and merchandising programs, as well as
the identity of owners and managers. This strict control contributed to the
proliferation of small dealerships, which at their peak in the late 1940s
numbered in excess of 49,000. Several Manufacturers went out of business in the
1950s, and the number of dealerships decreased to 36,000 by 1960.
Significant industry changes took place in the 1970s when the oil embargo forced
dramatic increases in gasoline prices and foreign Manufacturers increased their
penetration of the U.S. market with fuel-efficient, low-cost vehicles. These
competitive pressures offered dealers a platform for stronger negotiating
positions with Manufacturers thereby fostering a change in the traditional
distribution system. Dealers began to add foreign franchises and the phenomenon
of the multi-franchise automobile dealer, or "megadealer," emerged, prompting
both significant acquisition activity
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and the consolidation activities of the 1980s. The easing of restrictions
against megadealers combined with continual competitive pressures upon
undercapitalized dealerships has led to further consolidation of the industry.
Since 1960, the number of dealerships has declined 39% to the current 22,000
level.
As the industry has evolved, so has the dealership profile. Over the past three
decades, there has been a trend toward fewer, but larger, dealerships. In 1995,
each of the largest 100 dealer groups had more than $140 million in revenues.
Although significant consolidation has taken place since its inception, the
industry today remains highly fragmented, with the largest 100 dealer groups
generating less than 10% of total revenues and controlling less than 5% of all
franchised dealerships.
Dealership Operations
The Company's management structure is designed to support and encourage
entrepreneurial drive and individual responsibility. Each dealership is operated
as a distinct profit center, where dealership managers are given a high degree
of autonomy. The Company believes that its dealership managers, as long-time
members of the local community, are best able to judge how to conduct day-to-day
operations in a manner consistent with the established character and needs of
the local community. A general manager oversees the operations, personnel and
financial performance of the dealership, which is typically staffed by a sales
manager, a parts manager, a service manager, sales representatives, technicians
and parts employees. The sales staff of each UAG dealership is compensated
primarily on a commission basis, while the general manager, service manager and
parts manager receive a combination of salary and performance bonus.
General managers prepare monthly forecasts based on historical information and
projected trends, and a component of each general manager's compensation is
determined by meeting or exceeding these operating plans. During the year,
general managers regularly review their dealerships' progress with senior
management and make appropriate adjustments as needed. To promote communication
and efficiency in operating standards, general managers and members of senior
management attend several Company-wide strategy sessions each year. In addition,
management attends various industry-sponsored leadership and management seminars
and receive continuing education in product, marketing strategies and management
information systems.
The Company's dealerships engage in a number of interrelated businesses: new
vehicle sales; used vehicle sales; sales of aftermarket products; and service
and parts operations.
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NEW VEHICLES
On a pro forma basis, in 1995, UAG sold at retail 37,358 new vehicles,
generating $846.6 million in revenues, or 62.7% of total auto dealership
revenues.
The Company sells 22 American, Asian and European brands ranging from economy
cars to luxury cars and sport utility vehicles. The following table sets forth,
on a pro forma basis for 1995, certain information relating to new vehicles sold
at retail by the Company:
<TABLE>
<CAPTION>
------------------------------------
<S> <C> <C>
Number of New % of New
Vehicles Sold at Vehicles Sold at
Manufacturer Retail Retail (1)
- ---------------------------------- ---------------- ------------------
Toyota 11,456 30.7%
Nissan 7,777 20.8
Chrysler 7,661 20.5
General Motors 4,204 11.3
BMW 1,900 5.1
Honda 1,661 4.4
Mitsubishi 1,087 2.9
Hyundai 862 2.3
Land Rover 378 1.0
Isuzu 159 0.4
Audi 81 0.2
Porsche 75 0.2
Suzuki 57 0.2
---------------- ------------------
Total 37,358 100.0%
---------------- ------------------
---------------- ------------------
</TABLE>
- ------------------------
(1) Amounts may not add due to rounding.
UAG purchases substantially all of its new car inventory directly from
Manufacturers. Manufacturers allocate inventory based on the size and location
of dealerships, but actual shipments result from negotiations with individual
dealers. From time to time, UAG will exchange new vehicles with other
dealerships to accommodate customer demand and balance inventory. The Company
believes that larger dealers such as UAG are better positioned to secure
favorable inventory shipments and optimize Manufacturers' allocations through
its retail network. UAG finances its inventory purchases through revolving
credit arrangements known in the industry as floor plan facilities. As a result
of its size, UAG is able to secure floor plan financing on terms more favorable
than those generally available to smaller dealers.
As required by law, UAG posts the Manufacturer's suggested retail price, or
"MSRP," on every new vehicle. However, as is customary in the industry, the
final sales price is generally a negotiated price. The Company continues to
evaluate changing consumer preferences for vehicle purchasing. For example,
certain dealerships have implemented "value pricing," where the dealer is given
less flexibility to negotiate between the MSRP and wholesale price.
New vehicle retail sales are made to individual customers and to leasing
companies providing consumer leasing. Industry wide, the percentage of new
vehicle retail sales that are leasing transactions has increased from 13.5% in
1990 to 31.5% in 1995. Manufacturers have encouraged this trend through their
captive finance companies by supporting residual values in such a way so as to
reduce consumers' monthly lease payments, particularly for shorter-term leases.
This method has attracted consumers to shorter-term leases, which has the effect
of bringing the consumer back to the market sooner than if the purchase were
debt financed and providing new car dealerships with a steady source of
late-model, off-lease vehicles for their used car inventory. In addition,
because the vehicle usually remains under factory warranty for the term of the
lease, the dealership has the opportunity to provide repair service to the
lessee.
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<PAGE>
USED VEHICLES
On a pro forma basis, in 1995, UAG sold at retail approximately 22,060 used
vehicles, generating $281.2 million in revenues, or 20.8% of total auto
dealership revenues.
The used car department is becoming an increasingly significant profit center of
a franchised dealership. Used vehicles typically generate higher gross margins
than new vehicles because of their limited comparability and the somewhat
subjective nature of their valuation. Profits from used cars sales are dependent
primarily on the ability to source a low-cost, high-quality supply and
effectively manage inventory. UAG's dealerships acquire their used cars through
trade-ins, lease expirations and auctions. Off-lease vehicles are regarded as
the highest quality in their age class due to their low mileage and good
condition relative to fleet and rental vehicles. When a leasing customer
declines to purchase the vehicle upon expiration of the lease, industry practice
is to offer it to the dealer that originated the transaction before it is
offered to other dealers or sold at auction. In addition, UAG purchases a
significant portion of its used car inventory at "closed" auctions, which offer
off-lease, rental and fleet vehicles. Such auctions can be attended only by new
car dealers. The balance of its used car inventory is purchased at "open"
auctions, which offer repossessed cars and cars sold by other dealers. The
Company has specialized used car managers who attend auctions several times a
week and can buy for an entire division.
The Company sells used vehicles at its franchised dealerships as well as at four
stand-alone used vehicle operations. At its multi-brand dealerships, trade-ins
obtained at one location are generally transferred to the location that sells
that particular brand of new vehicles, where customer interest for that brand is
likely to be stronger and the salespersons' knowledge of that brand is typically
greater. A well-stocked used vehicle inventory allows the Company's salespersons
to offer high-quality used vehicles not only to customers shopping for a used
vehicle, but also to customers who come to the dealership to buy a new vehicle
and then realize that they cannot afford one. In order to capitalize further on
the increased popularity of used cars, the Company has opened four "stand-alone"
used car centers. Two operate in the DiFeo Group under the name "UAG AutoMart"
and two operate as part of the Landers Auto division under the "Landers" name.
As a result of these and other initiatives, the Company expects its used car
sales to increase as a percentage of total vehicle sales in the future.
The Company has developed a systematic approach to managing its used car
inventory. Poor-quality trade-ins and used cars that have remained unsold for a
specific period of time varying generally from 60 to 75 days are sold at
auction. In the past, the volume of used cars that UAG has sold to certain
auctions has afforded it seller's fee discounts and favorable display locations
and times, which tend to maximize the vehicle's sale price.
The Company has taken several initiatives to enhance customer confidence in used
cars, including offering extended warranties, stocking higher-quality,
late-model used cars and participating in Manufacturer certification programs.
Under such certification programs, which are available exclusively to new car
dealers, Manufacturers support used vehicles with extended factory warranties
and attractive financing options. The Company performs the rigorous inspections
and reconditioning required for certification. Management believes that its size
is an advantage over smaller new car dealers, who may not receive a sufficient
supply to justify dedicating resources to the certification process.
The Company believes that its status as a franchised new car dealer provides it
a distinct competitive advantage over independent used car sellers and
superstores in terms of access to the highest-quality and lowest-cost supply of
used vehicles. Vehicles traded in for used cars are generally older, of poorer
quality and out-of-warranty compared to trade-ins received at a new car
franchise. New car dealers generally have the first opportunity to purchase the
desirable off-lease vehicles, while independents must bid for the remaining
vehicles and subsequently may incur brokerage fees and costs of transporting
them to their stores. Auctions of off-lease and fleet vehicles and rental cars
with guaranteed Manufacturer buyback are open only to franchised new car
dealers. In addition to advantages in sourcing used cars, management believes
that its affiliation with Manufacturers and ability to offer certified used cars
with factory warranties raises the consumer's level of trust and ultimately
their inclination to buy used cars from franchised rather than independent
sellers.
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AFTERMARKET PRODUCTS
On a pro forma basis, in 1995, UAG's sales of aftermarket products generated
$114.4 million in revenues, or 8.5% of total auto dealership revenues. The
reporting of sales of certain products in this category varies among UAG's
dealerships with certain dealerships treating the sale of products such as
radios and alarms as part of the sale of the vehicle itself.
UAG earns a significant portion of the gross profit on the sale of new and used
vehicles on the sale of aftermarket products. Aftermarket products include
accessories such as radios, cellular phones, alarms, custom wheels, paint
sealants and fabric protectors, as well as agency services such as extended
service contracts and credit insurance policies. In addition, the Company
receives fees for placing financing and lease contracts. The Company believes
that working closely with its customers to identify suitable financing products
enhances the Company's overall profitability by increasing the percentage of
vehicle purchases financed through its dealerships and by reducing the
subsequent default rate on such financing contracts.
Approximately 80% of customers who purchase or lease new and used vehicles from
or through the Company originate financing or lease contracts through the
dealership. UAG earns a fee from the finance provider in its diverse network of
finance companies and leasing companies that accepts and funds the transaction
without recourse to the dealership on the contract principal amount. The Company
is, however, typically assessed a chargeback against a portion of the finance
fee if the contract is terminated prior to its scheduled maturity for any
reason, such as early repayment or default. UAG has relationships with financing
sources across the credit quality spectrum. As a result, the Company is able to
service practically any customer who requires financing.
At the time of a new vehicle sale, the Company offers extended service contracts
to supplement warranties offered by Manufacturers. UAG also sells extended
service contracts with respect to used vehicles. Currently, the Company sells
third-party extended service contracts and recognizes the associated revenue at
the time of the vehicle sale. On a pro forma basis, in 1995, the Company sold
extended service contracts on 25% and 40% of its new and used vehicle sales,
respectively. The Company also offers certain types of credit insurance to
customers who finance their vehicle purchases through the Company. Such policies
generally provide for repayment of the vehicle loan if the obligor dies before
the loan is fully repaid. The Company also sells accident and health insurance
policies which provide payment of the monthly loan obligations during any period
in which the obligor is disabled. The Company receives a commission upon the
sale of a policy and a bonus based on whether payments are made under the
policy.
SERVICE AND PARTS
On a pro forma basis, in 1995, UAG's service and parts operations generated
$108.2 million in revenues, or 8.0% of total auto dealership revenues. The
Company considers its service and parts business integral to its objective of
providing customers with a satisfying and informative dealership experience,
thereby creating an opportunity to strengthen customer loyalty.
The service and parts business is relatively stable and provides an important
recurring revenue stream to the Company's dealerships, which may help to
mitigate the effects of downturns in the automobile sales cycle. UAG measures
the performance of each dealership's service and parts operations in terms of
"absorption rate," which measures the percentage of the dealership's overall
fixed costs covered by service and parts gross profit. For the six months ended
June 30, 1996, the average absorption rate at the Company's dealerships (not on
a pro forma basis) was approximately 49.0%. The Company currently targets an
absorption rate of between 60% and 70%.
The Company has a total of 552 service bays and 70 paint bays throughout its
network. The Company's service and body shop facilities are equipped with
technologically advanced tools and diagnostic equipment and staffed by
Manufacturer-trained and certified service technicians. The Company's service
technicians perform full-service repairs on all brands of vehicles UAG sells.
UAG dealerships feature various combinations of fully equipped service and body
shop facilities capable of handling almost any type of vehicle repair on
virtually any type of vehicle, from rebuilding entire engines to routine
maintenance functions, including tune-ups, oil changes, tire balancing,
front-end alignments and inspections. UAG dealerships offer such services in a
relaxed and accommodating atmosphere. Most UAG dealerships have lounges equipped
with televisions, recliners, sofas, phones and food and beverage machines to
allow customers to relax or conduct business while waiting for service to be
performed.
41
<PAGE>
The Company performs both warranty and non-warranty service work, with the cost
of the warranty work being paid by the Manufacturer at retail consumer rates.
Manufacturers permit warranty work to be performed only at franchised
dealerships. Hence, unlike independent service shops or used car dealerships
with service operations, UAG is qualified to perform work covered by
Manufacturer warranties.
UAG's factory-certified service employees regularly attend
Manufacturer-sponsored training programs to remain abreast of current diagnostic
and repair and maintenance techniques. The Company employs a compensation
program for its service technicians designed to encourage the performance of
expedited and high-quality repair and maintenance services and ensure a high
degree of customer satisfaction. Rather than paying service technicians on an
hourly basis, each technician receives a flat rate for each service or repair
performed. If a service or repair is performed incorrectly, the technician
making the initial repair or service must correct the situation without
additional compensation. This compensation arrangement facilitates the retention
of efficient service technicians who can increase their compensation by
expeditiously and accurately completing service and repairs and also enhances
customer satisfaction for repair jobs that are completed correctly the first
time.
The Company's body shops, which include multiple paint bays, are fully equipped
to make virtually any type of body repair, from complete reconstruction of
vehicle frames damaged in accidents to repairs and replacements of hoods, body
panels and fenders. UAG dealerships' body shops are also used to refurbish
vehicles in need of updating due to changes in industry standards or to satisfy
regulatory guidelines.
The parts departments support the Company's sales and service functions. The
Company utilizes its parts department when performing its repair, maintenance
and body shop services, including all parts required to recondition used
vehicles for resale. In addition to supporting the Company's service and body
shop functions, the Company markets its parts and accessories at its dealerships
to those customers who prefer to perform maintenance and repair of vehicles on
their own.
An important goal of the Company is to retain or convert each purchaser of a
vehicle into a customer of the service department. To that end, UAG has
implemented a program which tracks maintenance records of customers and contacts
them regarding dealer promotions and maintenance schedules. After a repair or
service has been completed, the customer is called to determine whether he or
she is completely satisfied. In addition, the Company is actively marketing its
warranty-covered services business to potential higher-volume service customers
such as municipalities and corporations with large motor vehicle fleets located
near certain of its dealerships. The Company is able to offer repair services to
such customers on a more efficient and less costly basis than such customers
generally can perform themselves.
Atlantic Finance
Atlantic Finance is the Company's automotive finance subsidiary engaged in the
purchase, sale and servicing of motor vehicle installment contracts originated
by both UAG and third-party dealerships. Based in Rochester, New York, Atlantic
Finance commenced loan operations in January 1995 and currently serves
approximately 127 dealers in Connecticut, New Jersey and New York. Atlantic
Finance derives its revenues from three primary areas: finance charges on its
automobile contracts; gains in connection with the sale or securitization of
pools of automobile contract receivables; and service fees, late charges and
other related income.
Atlantic Finance's strategy is to grow by (i) increasing its business with
existing UAG dealerships, including those with which it has yet to commence
financing activities, (ii) commencing financing activities with dealerships
acquired by UAG in the future and (iii) using its presence in its local
operating markets to cultivate relationships with additional unaffiliated
dealerships. While as of June 30, 1996, 77% of its $50.5 million in finance
contracts were originated by UAG dealers, Atlantic Finance is not intended to be
a captive finance company. Rather, Atlantic Finance's goal is to ultimately
purchase up to 50% of its finance contracts from non-UAG dealers.
With over 70 years of collective experience in the consumer finance industry,
the three members of Atlantic Finance's senior management expect to expand
Atlantic Finance's business by demonstrating commitment to dealer service,
achieving cost efficiencies through a centralized operations structure, pursuing
cost-effective sources of capital for business growth and focusing on
high-quality credit, as described below.
DEALER SERVICE. Atlantic Finance's goal is to be a service-oriented and
reliable source for financing. Atlantic Finance sales representatives solicit
dealers who meet Atlantic Finance's standards and enter into a dealer agreement
that
42
<PAGE>
outlines contract purchase terms. After a loan application is delivered, usually
by fax from the dealer, Atlantic Finance generally responds within two hours. If
an application is not initially acceptable, Atlantic Finance's loan officers
often suggest modifications to meet Atlantic Finance's standards, such as
increasing the down payment or reducing the term of the loan.
CENTRALIZED OPERATIONS. Atlantic Finance believes that it can effectively
service its dealers from a central site without the cost of duplicating
administrative and order processing functions in multiple locations. Atlantic
Finance employs local sales representatives who are responsible for different
geographic territories and constitute a flexible, cost efficient means for rapid
growth.
SOURCES OF CAPITAL. Atlantic Finance currently has available an aggregate of
$85.0 million under its revolving credit facilities, known in the industry as
warehousing programs, with Citibank, N.A. (and an affiliate thereof) and Morgan
Guaranty. Atlantic Finance uses automobile loans as collateral to borrow from
such banks. Once the warehoused amount reaches a specified level, Atlantic
Finance issues securities to investors at a fixed rate, collateralized by the
bundled loans, and continues to service the receivables for a fee. The net
proceeds of these securitizations are used by Atlantic Finance to repay
outstanding loans under its credit facilities, which enables Atlantic Finance to
redeploy its capital for further loans. Atlantic Finance benefits from its
affiliation with UAG by receiving favorable lending terms and access to capital
markets as a source of financing.
On July 19, 1996, Atlantic Finance, through a wholly owned, special-purpose
subsidiary, completed a private placement of $45.8 million aggregate principal
amount of 6.7% Asset Backed Certificates. Such certificates represent fractional
undivided interests in a trust consisting primarily of a pool of automobile loan
receivables. Atlantic Finance will service the receivables for an annual fee
equal to 1.0% of the principal amount of receivables plus certain supplemental
fees. Under certain conditions, Atlantic Finance is obligated to repurchase
receivables in the event of breach of certain representations and warranties
with respect to the receivables and in the event of breach of certain servicing
obligations and covenants of Atlantic Finance. On the basis of a credit
enhancement insurance policy issued by Financial Security Assurance Inc. for the
benefit of the holders of certificates, the certificates were rated "AAA" by
Standard & Poor's Rating Services and "Aaa" by Moody's Investors Service, Inc.
HIGH-QUALITY CREDIT. Atlantic Finance finances only prime credit quality loans
and believes its ability to effectively evaluate and monitor the
creditworthiness of the dealers' customers is a critical component to this
focus. To support its evaluation process, Atlantic Finance uses sophisticated
processing systems and controls that include an evaluation of multiple credit
bureau reports and a computerized scoring system. Every loan is ultimately
reviewed by an experienced loan officer for final approval. In addition to the
creditworthiness of the customer, pricing of a finance contract is based on
several criteria such as the age of the vehicle, the term of the loan,
prevailing interest rates and Atlantic Finance's cost of capital. Most states
have maximum chargeable interest rates that vary greatly from state to state.
Once the loan is approved, Atlantic Finance monitors customer accounts on a
regular basis. If an account is delinquent, Atlantic Finance works with
customers to resolve payment problems and bring accounts current at the earliest
possible stage of delinquency. In the event of an unremedied default, the
finance company will repossess the vehicle and sell it to a dealer, sometimes
UAG, or at public auction.
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<PAGE>
Set forth below are tables indicating delinquency experience of Atlantic Finance
(which commenced loan operations in January 1995) as of the end of each of the
past four fiscal quarters and its loss experience for such periods:
Historical Delinquency Experience (1)(2)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
September 30, 1995 December 31, 1995 March 31, 1996 June 30, 1996
-------------------- -------------------- -------------------- --------------------
# of # of # of # of
DOLLARS IN THOUSANDS Loans Amount Loans Amount Loans Amount Loans Amount
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio outstanding at
period end 553 $ 6,623 1,240 $15,799 2,419 $32,079 3,820 $50,472
Percent delinquent
31-60 days(3) 0.36% 0.78% 1.13% 1.26% 1.08% 1.23% 1.81% 1.96%
61-90 days(3) 0.04% 0.07% 0.18% 0.26%
over 90 days(3) 0.11% 0.22%
Repossessions on hand(4) 0.24% 0.33% 0.50% 0.47% 0.39% 0.35%
--------- --------- --------- --------- --------- --------- --------- ---------
Total 0.36% 0.78% 1.37% 1.58% 1.61% 1.78% 2.49% 2.79%
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(1) The information in this table includes all loans outstanding and serviced
by Atlantic Finance.
(2) As all of the Atlantic Finance's loans are simple interest, the dollar
amount includes only the principal balance.
(3) The period of delinquency is based on the number of days payments are
contractually past due.
(4) Amounts represent the remaining balance of installment loans relating to
reposessed vehicles as a percentage of the total principal amount all loans
outstanding and serviced by Atlantic Finance.
Historical Loan Loss Experience
<TABLE>
<CAPTION>
--------------------------------------------------------
September 30, December 31, March 31, June 30,
DOLLARS IN THOUSANDS 1995 1995 1996 1996
-------------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
Average portfolio(1) $4,725 $11,211 $23,939 $41,276
Losses(2) 28.6 70.5
Recoveries(3) 0.5 2.3
Net losses 28.1 68.2
Net losses as a percentage of
average portfolio (annualized) 0.47% 0.66%
</TABLE>
- ------------------------
(1) Represents the average of the beginning and ending balance for the period.
(2) Represents principal amounts charged off as uncollectible.
(3) Represents principal amounts recovered on accounts previously charged off.
Competition
AUTOMOBILE DEALERSHIPS
The automotive retailing industry is extremely competitive. In large
metropolitan areas, consumers have a number of choices in deciding where to
purchase a new or used vehicle and where to have such a vehicle serviced.
In the new vehicle area, the Company competes with other franchised dealers in
each of its marketing areas. The Company does not have any cost advantage in
purchasing new vehicles from the Manufacturer, and typically relies on
advertising and merchandising, sales expertise, service reputation and location
of its dealerships to sell new vehicles. In recent years, automobile dealers
have also faced increased competition in the sale of new vehicles from
independent leasing companies, on-line purchasing services and warehouse clubs.
Due to lower overhead and sales costs, these companies may be capable of
operating on smaller gross margins and offering lower sales prices than can
franchised dealers.
In used cars, the Company competes with other franchised dealers, independent
used car dealers, automobile rental agencies, private parties and used car
"superstores" for supply and resale of used vehicles. The Company believes that
it enjoys certain advantages over its competitors that sell only used cars. See
"-- Growth Strategy -- Grow Higher-Margin Businesses -- Used Vehicles."
The Company believes that the principal competitive factors in vehicle sales are
the marketing campaigns conducted by Manufacturers, the ability of dealerships
to offer a wide selection of the most popular vehicles, the location of
44
<PAGE>
dealerships and the quality of customer service. Other competitive factors
include customer preference for particular brands of automobiles, pricing
(including Manufacturer rebates and other special offers) and warranties. The
Company believes that its dealerships are competitive in all of these areas.
The Company competes against franchised dealers to perform warranty repairs and
against other automobile dealers, franchised and unfranchised service center
chains and independent garages for non-warranty repair and routine maintenance
business. The Company competes with other automobile dealers, service stores and
auto parts retailers in its parts operations. The Company believes that the
principal competitive factors in parts and service sales are price, the use of
factory-approved replacement parts, the familiarity with a Manufacturer's brands
and models and the quality of customer service. A number of regional or national
chains offer selected parts and services at prices that may be lower than the
Company's prices.
ATLANTIC FINANCE
Atlantic Finance faces competition from a variety of lenders in the fragmented
auto finance market: captive finance companies, banking institutions and
independent finance companies. Captive finance companies such as General Motors
Acceptance Corporation, Ford Motor Credit Company and Chrysler Credit
Corporation primarily focus on increasing dealer sales volume by offering
low-yield rates when promoting certain products. In general, captive finance
companies provide standardized products and fixed market rates and are not as
flexible in the marketplace. Captive finance companies also provide automobile
dealers with floor plan financing. Independent auto finance companies focus on
unconventional segments of the market with some lending to lower credit
borrowers in exchange for higher yields. The market shares of these companies
are as follows: approximately 36% of the total auto loans outstanding are held
by captive and independent finance companies, another 46% are controlled by
commercial banks and the remaining 18% are held by savings and loan
institutions, savings banks, credit unions and specialty finance companies. The
Company believes that the principal competitive factors in offering financing
are convenience, interest rates and contract terms. While market shares shift
over time, the trend in the banking market share is toward fewer and larger
super-regional competitors, reflecting the ongoing consolidations in that
industry. As in the case of Atlantic Finance, some finance companies are
organized by large dealership groups as part of a vertical integration strategy.
Franchise Agreements
Each of the Company's dealerships operates pursuant to a franchise agreement
between the applicable Manufacturer and the subsidiary of the Company that
operates such dealership. The typical automotive franchise agreement specifies
the locations at which the dealer has the right and the obligation to sell motor
vehicles and related parts and products and to perform certain approved services
in order to serve a specified market area. The designation of such areas and the
allocation of new vehicles among dealerships are subject to the discretion of
the Manufacturer, which generally does not guarantee exclusivity within a
specified territory. A franchise agreement may impose requirements on the dealer
concerning such matters as the showrooms, the facilities and equipment for
servicing vehicles, the maintenance of inventories of vehicles and parts, the
maintenance of minimum net working capital and the training of personnel.
Compliance with these requirements is closely monitored by the Manufacturer. In
addition, Manufacturers require each dealership to submit a financial statement
of operations on a monthly and annual basis. The franchise agreement also grants
the dealer the non-exclusive right to use and display Manufacturer's trademarks,
service marks and designs in the form and manner approved by the Manufacturer.
Each franchise agreement sets forth the name of the person approved by the
Manufacturer to exercise full managerial authority over the dealership's
operations and the names and ownership percentages of the approved owners of the
dealership and contains provisions requiring the Manufacturer's prior approval
of changes in management or transfers of ownership of the dealership. Each of
UAG's dealerships is owned, directly or indirectly, by the Company at the
subsidiary level, and the Company has obtained the approval of each relevant
Manufacturer to conduct the Offering and for the Common Stock to be publicly
traded. A number of Manufacturers, however, continue to prohibit the acquisition
of a substantial ownership interest in the Company or transactions that may
affect management control of the Company, in each case without the approval of
the Manufacturer. See "Risk Factors -- Stock Ownership/Issuance Limits."
Most franchise agreements expire after a specified period of time, ranging from
one to five years. The typical franchise agreement provides for early
termination or non-renewal by the Manufacturer under certain circumstances
45
<PAGE>
such as change of management or ownership without Manufacturer approval,
insolvency or bankruptcy of the dealership, death or incapacity of the dealer
manager, conviction of a dealer manager or owner of certain crimes,
misrepresentation of certain information by the dealership or dealer manager or
owner to the Manufacturer, failure to adequately operate the dealership, failure
to maintain any license, permit or authorization required for the conduct of
business, or material breach of other provisions of the franchise agreement. The
dealership is typically entitled to terminate the franchise agreement at any
time without cause.
The automobile franchise relationship is also governed by various federal and
state laws established to protect dealerships from the general unequal
bargaining power between the parties. The state statutes generally provide that
it is a violation for a Manufacturer to terminate or fail to renew a franchise
without good cause. These statutes also provide that the Manufacturer is
prohibited from unreasonably withholding approval for a proposed change in
ownership of the dealership. Acceptable grounds for disapproval include material
reasons relating to the character, financial ability or business experience of
the proposed transferee. Accordingly, certain provisions of the franchise
agreements, particularly as they relate to a Manufacturer's rights to terminate
or fail to renew the franchise, have repeatedly been held invalid by state
courts and administrative agencies.
Facilities
The Company presently leases or subleases all its facilities and seeks to
structure its acquisitions in a way to avoid the ownership of real property. Set
forth in the table below is certain information relating to the Company's leases
and subleases.
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Occupant Location Use Expiration
- --------------------- --------------------- ---------------------- ----------------------
<S> <C> <C> <C>
DiFeo Group
Fair Chevrolet-Geo 102 Federal Road New and used car October 1, 2010
Danbury, CT sales; general
office; service
Fair 100C Federal Road New and used car October 1, 2010
Hyundai/Isuzu/Suzuki Danbury, CT sales; service
Fair Used Car 102A and 104 Federal Used car sales October 1, 2010
Corner Road
Danbury, CT
DiFeo Lexus 1550 Route 22 East New and used car October 1, 2010
Bound Brook, NJ sales; service
DiFeo Chevrolet-Geo 599 Route 440W New and used car October 1, 2010
& J&F Oldsmobile Jersey City, NJ sales; service
DiFeo Hudson Mall on Route New and used car October 1, 2010
Chrysler-Plymouth/ 440 sales; service
Jeep-Eagle/Hyundai Jersey City, NJ
Hudson Toyota 585 Route 440W New and used car October 1, 2010
Jersey City, NJ sales; service;
general office
DiFeo BMW (a) 301 County Road New and used car sales January 5, 2002,
Tenafly, NJ renewable to 2012
(b) 64 North Summit Service July 1, 2016,
Street renewable to 2036
Tenafly, NJ
Rockland Mitsubishi 75 N. Highland Avenue New and used car October 1, 2010
Nyack, NY sales; service
Rockland Toyota 115 Route 59 New and used car October 1, 2002,
Nyack, NY sales; service renewable to 2012
DiFeo Nissan (a) 977 Communipaw New and used car sales October 1, 2010
Avenue
Jersey City, NJ
(b) 909-921 Service October 1, 2010
Communipaw Ave.
Jersey City, NJ
Fair Honda 102D Federal Road New and used car October 1, 2010
Danbury, CT sales; service
Fair Dodge 100B Federal Road New and used car March 27, 2000,
Danbury, CT sales; service renewable to 2008
Gateway Mitsubishi Route 37 & Batchelor New car sales; service October 1, 2010
St.
Toms River, NJ
Gateway Toyota Route 37 & Batchelor New and used car October 1, 2010
St. sales; service
Toms River, NJ
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Occupant Location Use Expiration
- --------------------- --------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Landers Auto
Landers (a) 7800 Alcoa Road New car sales; service August 31, 2016,
Jeep-Eagle/Chrysler- Benton, AR renewable to 2026
Plymouth/Dodge
(b) 7800 Alcoa Road Used car sales
Benton, AR
Landers 17821 I-30 New and used car August 31, 2016,
Oldsmobile-GMC Benton, AR sales; service renewable to 2026
Truck
Landers West 1719 Merrell Drive Used car sales December 31, 1998,
Little Rock, AR renewable to 2001
Landers North 6055 Landers Road Used car sales May 31, 1999
North Little Rock, AR
Atlanta Toyota 2345 Pleasant Hill New and used car January 31, 2016
Road sales; service
Duluth, GA
United Nissan 6889 Jonesboro Road New and used car April 30, 2016,
Morrow, GA sales; service renewable to 2026
Peachtree Nissan (a) 5211 and 5214 New and used car June 30, 2016,
Peachtree sales; service renewable to 2026
Industrial Boulevard
Chamblee, GA
(b) 3393 Malone Drive Storage facility June 30, 2016,
Chamblee, GA renewable to 2026
Sun Group
Scottsdale 6725 E. McDowell New and used car October 31, 2016
Porsche/Scottsdale Scottsdale, AZ sales; service
Audi
Scottsdale Acura 6825 E. McDowell New and used car October 31, 2016
Scottdsale, AZ sales; service
Scottsdale Lexus 6905 E. McDowell New and used car October 31, 2016
Scottsdale, AZ sales; service
Land Rover 6925 E. McDowell New and used car August 10, 2000,
Scottsdale Scottsdale, AZ sales; service renewable to 2020
Scottsdale Paint & 1111 N. Miller Auto painting; auto December 15, 1998,
Body Shop Scottsdale, AZ repairs renewable to 2013
Camelback BMW 1144 E. Camelback New and used car February 27, 2005
Scottsdale, AZ sales; service
Land Rover Phoenix 1127 E. Camelback New and used car August 31, 2005,
Phoenix, AZ sales; service renewable to 2010
Evans Group
Evans BMW 3624 Commerce Ave. New and used car March 31, 1998(1)
Duluth, GA sales; service
Evans Nissan 1420 Iris Drive New and used car March 31, 1998(2)
Conyers, GA sales; service
Standefer Motor 2121 Chapman Road New and used car October 31, 2016,
Chattanooga, TN sales; service renewable to 2026
UAG 375 Park Avenue Headquarters June 29, 2000
New York, NY
Atlantic Finance 800 Perinton Hills Offices August 31, 1999
Office Park
Fairport, NY
</TABLE>
- ------------------------------
(1) This lease requires the Company to purchase the property at any time prior
to the expiration date for $2.9 million. The Company expects to designate an
unaffiliated third party to purchase the property prior to such date and
simultaneously enter into a 20-year lease with the Company.
(2) This lease requires the Company to purchase the property prior to the
expiration date for $7.5 million (with a discount if purchased earlier). The
Company expects to designate an unaffiliated third party to purchase the
property prior to such date and simultaneously enter into a 20-year lease with
the Company.
Employees and Labor Relations
As of June 30, 1996, on a pro forma basis, UAG employed approximately 2,100
people, approximately 100 of whom are covered by collective bargaining
agreements with labor unions. Relations with employees are considered by the
Company to be satisfactory. The Company's policy is to motivate its key managers
through, among other things, grants of stock options. See "Management -- Stock
Option Plan."
47
<PAGE>
Litigation
The Company and its subsidiaries are involved in litigation that has arisen in
the ordinary course of business. None of these matters, either individually or
in the aggregate, are expected to have a material adverse effect on the
Company's results of operations or financial condition.
Environmental Matters
As with automobile dealerships generally, and service parts and body shop
operations in particular, the Company's business involves the use, handling and
contracting for recycling or disposal of hazardous or toxic substances or
wastes, including environmentally sensitive materials such as motor oil, waste
motor oil and filters, transmission fluid, antifreeze, freon, waste paint and
lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline
and diesel fuels. The Company's business also involves the past and current
operation and/or removal of aboveground and underground storage tanks containing
such substances or wastes. Accordingly, the Company is subject to regulation by
federal, state and local authorities establishing health and environmental
quality standards, and liability related thereto, and providing penalties for
violations of those standards. The Company is also subject to laws, ordinances
and regulations governing remediation of contamination at facilities it operates
or to which it sends hazardous or toxic substances or wastes for treatment,
recycling or disposal.
The Company believes that it does not have any material environmental
liabilities and that compliance with environmental laws, ordinances and
regulations will not, individually or in the aggregate, have a material adverse
effect on the Company's results of operations or financial condition. However,
soil and groundwater contamination has been known to exist at certain properties
leased by the Company. Furthermore, environmental laws and regulations are
complex and subject to frequent change. There can be no assurance that
compliance with amended, new or more stringent laws or regulations, stricter
interpretations of existing laws or the future discovery of environmental
conditions will not require additional expenditures by the Company, or that such
expenditures would not be material. See "Risk Factors -- Environmental Matters."
Insurance
The Company maintains general liability and property insurance and an umbrella
and excess liability policy in amounts it considers adequate and customary for
businesses of its kind. However, there can be no assurance that future claims
will not exceed insurance coverage.
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<PAGE>
Management
Executive Officers and Directors
The following information relates to the executive officers and directors of the
Company as of August 31, 1996.
<TABLE>
<CAPTION>
Name Age Position
- ----------------------------------- ----- -----------------------------------
<S> <C> <C>
Carl Spielvogel 67 Chairman of the Board and Chief
Executive Officer
Marshall S. Cogan 59 Vice Chairman of the Board and
Chairman of the Executive and
Compensation Committees
Arthur J. Rawl 54 Executive Vice President and Chief
Financial Officer
George G. Lowrance 52 Executive Vice President --
Development and Industry Relations
Philip N. Smith, Jr. 53 Vice President, Secretary and
General Counsel
Robert W. Thompson 45 Vice President -- Finance
Robert H. Nelson 51 Director; Vice Chairman of Atlantic
Finance
Michael R. Eisenson 40 Director
John J. Hannan 43 Director
Jules B. Kroll 55 Director
John M. Sallay 40 Director
Richard Sinkfield 54 Director
</TABLE>
The present principal occupation and employment background of each of the
executive officers and directors of the Company are set forth below.
Carl Spielvogel has served as Chairman and Chief Executive Officer of the
Company since October 1994. Mr. Spielvogel has had a 35-year career in
management and marketing. Prior to joining the Company, Mr. Spielvogel was
Chairman and Chief Executive Officer of Backer Spielvogel Bates Worldwide, Inc.,
one of the world's largest marketing, advertising and communications companies,
with 178 offices in 55 countries, where he worked from 1979 to 1994. During his
marketing career, he had extensive experience working with automobile
manufacturers and oversaw the introduction of the Hyundai line of motor vehicles
into the U.S. market. As part of this program, he worked with 450 automobile
dealers. Earlier, Mr. Spielvogel was Vice Chairman of the Interpublic Group of
Companies, which serves GM as one of its largest global clients; Interpublic was
among the first global marketing communications companies to become publicly
owned. He is also a director of Hasbro, Incorporated, Foamex International Inc.
and Data Broadcasting Corporation as well a former director of the International
Media Fund. Additionally, Mr. Spielvogel serves on the Board of Trustees of The
Metropolitan Museum of Art, The Mount Sinai Hospital and Medical Center, Lincoln
Center for the Performing Arts, Inc. and The Philharmonic-Symphony Society of
New York, Inc. He was appointed in 1996 by President Clinton to serve as a
member of the U.S. Broadcasting Board of Governors.
Marshall S. Cogan has served as a director of the Company since December 1990.
Since 1974, Mr. Cogan has been the principal stockholder, Chairman or
Co-Chairman of the Board of Directors and Chief Executive Officer or Co-Chief
Executive Officer of Trace. Trace has acquired many companies in various
consolidating industries and conceived the concept for UAG, which it founded in
December 1990. He has been the Chairman of the Board of Directors and Chairman
of the Executive Committee of Foamex International Inc. and its predecessor
company since September 1993 and Chief Executive Officer since January 1994. He
has also been a director of Recticel s.a. since February 1993. Mr. Cogan served
as Chairman and a director of other companies formerly owned by Trace, including
General Felt Industries, Inc., Knoll International, Inc. and Sheller-Globe
Corporation. Prior to forming Trace Holdings, he was a senior partner at Cogan,
Berlind, Weill & Levitt and subsequently CBWL-Hayden Stone, Inc., both
predecessor companies to Lehman Brothers Inc. Additionally, Mr. Cogan serves on
the Board of Trustees of The Museum of Modern Art, the Boston Latin School and
New York University Medical Center and the Board of Directors of the American
Friends of the Israel Museum. He also serves on several committees of Harvard
University.
Arthur J. Rawl has served as Executive Vice President and Chief Financial
Officer of the Company since 1994. Prior to joining the Company, Mr. Rawl was
Executive Vice President and Chief Financial Officer of Hanlin Group, Inc., a
chemical and PVC pipe products manufacturer. Mr. Rawl is a Certified Public
Accountant and a retired partner in the firm of Deloitte & Touche, where, in his
23-year tenure with the firm, his practice concentrated on the retail and
distribution industries.
49
<PAGE>
George G. Lowrance served as Executive Vice President, Secretary and General
Counsel of the Company from January 1993 to June 1996 and has served as
Executive Vice President -- Development and Industry Relations since June 1996.
Prior to joining the Company, Mr. Lowrance was the general manager of Ed Hicks
Company, an automobile dealership group, which he joined in January 1991. Prior
thereto, he was a dealer principal for 13 years, representing Pontiac,
Chevrolet, Volvo, Nissan, Saab, Range Rover, Porsche, Audi, Volkswagen, Peugeot,
Rolls Royce and Maserati. He also co-authored the current dealer agreements for
Volkswagen and Porsche. Mr. Lowrance served as Chairman of the National Dealer
Council for Audi from 1984 to 1987 and served in the same role for Porsche from
1987 to 1990.
Philip N. Smith, Jr. has served as Vice President, Secretary and General Counsel
of the Company since June 1996. Mr. Smith has also served as Vice President or
Senior Vice President and as Secretary and General Counsel of Trace since
January 1988 and as Vice President, Secretary and General Counsel of Foamex
International Inc. since October 1993. Prior to joining such companies, he was
the sole stockholder of a professional corporation that was a partner of the law
firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Robert W. Thompson has served as Vice President -- Finance of the Company since
August 1994. Prior to joining the Company, Mr. Thompson was Vice President and
Controller of Hanlin Group, Inc., where he worked for 11 years.
Robert H. Nelson has served as a director of the Company since January 1996. He
has served as Vice Chairman of Atlantic Finance since March 1996, Chief
Financial Officer and Treasurer of Trace since 1987 and Senior Vice President,
Chief Operating Officer and a director of Trace since 1994.
Michael R. Eisenson has served as a director of the Company since December 1993.
He is the President and Chief Executive Officer of Harvard Private Capital,
which he joined in 1986. Harvard Private Capital manages the private equity and
real estate portfolios of the Harvard University endowment fund. Mr. Eisenson is
also a director of Harken Energy Corporation, ImmunoGen, Inc., NHP Incorporated
and Somatix Therapy Corporation.
John J. Hannan has served as a director of the Company since December 1993. Mr.
Hannan is one of the founding principals of Apollo, which together with an
affiliate has acted since 1991 as managing general partner of Apollo Investment
Fund, L.P., AIF and Apollo Investment Fund III, L.P., private securities
investment funds, and of Apollo Real Estate Advisors, L.P., which since 1993 has
acted as managing general partner of the Apollo real estate investment funds,
and of Lion Advisors, L.P., which since 1991 has acted as financial advisor to
and representative for certain institutional investors with respect to
securities investments. Mr. Hannan is also a director of Aris Industries, Inc.,
Converse, Inc., The Florsheim Shoe Company, Inc. and Furniture Brands
International, Inc.
Jules B. Kroll has served as a director of the Company since December 1993. He
founded Kroll Associates, an international corporate investigation and
consulting firm, in 1972 and is presently its Chairman. Mr. Kroll is also a
director of Presidential Life Corporation.
John M. Sallay has served as a director of the Company since December 1993. He
is a Managing Director of Harvard Private Capital, which he joined in 1990. Mr.
Sallay is also a director of E-Z Serve Corporation.
Richard Sinkfield has served as a director of the Company since December 1993.
He is a Senior Partner with the law firm of Rogers & Hardin in Atlanta, Georgia,
which he joined in 1976. Mr. Sinkfield is also a director of Weyerhaeuser
Company.
Except for Mr. Spielvogel, who was elected pursuant to his employment agreement,
the directors were elected pursuant to the provisions of the Stockholders
Agreement, dated as of October 15, 1993 (the "Stockholders Agreement"), among
the Company and the Initial Stockholders (as defined herein). Pursuant to such
Stockholders Agreement, such provisions terminate upon consummation of the
Offering.
The Board of Directors is divided into three classes. The current terms of the
Class I directors, Class II directors and Class III directors expire at the
annual meetings of stockholders to be held in 1997, 1998 and 1999, respectively.
Messrs. and are members of Class I, Messrs. , and are
members of Class II and Messrs. , and are members of Class III.
At each annual meeting of the stockholders, directors will be elected for a
three-year term to succeed the directors whose terms then expire.
50
<PAGE>
Committees of the Board of Directors
The Board of Directors of the Company has established Executive, Compensation,
Audit and Stock Option Committees, each of which reports to the Board. The
Executive Committee consists of Messrs. Cogan, Spielvogel, Eisenson and Hannan
and has the authority to oversee the general business and affairs of the
Company. The Compensation Committee consists of Messrs. Cogan, Eisenson, Hannan
and Nelson and has the authority to determine all matters relating to
compensation of the Company's executive officers and management employees. The
Audit Committee consists of Messrs. Hannan, Kroll and Sinkfield and is
responsible for meeting with the Company's independent accountants regarding,
among other issues, audits and adequacy of the Company's accounting and control
systems. The Stock Option Committee consists of Messrs. Eisenson, Hannan and
Sallay and is responsible for administering the Company's Stock Option Plan and
granting options thereunder.
Director Compensation
The Company has adopted a compensation plan (the "Non-employee Director
Compensation Plan") for directors of the Company who are not paid employees of
the Company. Pursuant to the Non-employee Director Compensation Plan, each such
director will receive an annual retainer of $15,000, payable at the option of
the director in cash or in Common Stock at the current market price, $1,000 for
each Board of Directors meeting attended, $500 for each telephonic Board of
Directors meeting attended and $750 for each Board of Directors committee
meeting attended. In addition, directors are reimbursed for their reasonable
out-of-pocket expenses incurred in attending meetings of the Board of Directors
and committees thereof. In accordance with the internal policies of their
employers, certain directors will assign their director compensation to the
organizations that employ them. Directors who are paid employees of the Company
will not receive any fees for serving on the Company's Board of Directors or for
committee service.
Operating Committee
The Chairman and Chief Executive Officer has established an Operating Committee
made up of key managers of the Company's dealerships. The Operating Committee,
which is chaired by Mr. Spielvogel, meets monthly to review and discuss the
prior month's operating performance. It also examines important trends in the
business and, where appropriate, recommends specific operating improvements.
Certain ex officio and rotating members will attend certain meetings depending
on the matters under discussion. It is anticipated that the Operating
Committee's membership will expand in line with the Company's acquisition
program.
In addition to Mr. Spielvogel, the members of the Operating Committee are:
<TABLE>
<S> <C>
SAMUEL X. DIFEO Mr. DiFeo serves as Executive Vice President of the operating
partnerships of the DiFeo Group. Between 1970 and 1992, he
co-managed the operations of the DiFeo Group with his father,
Sam C. DiFeo, and his brother, Joseph C. DiFeo.
BRUCE DUNKER Mr. Dunker serves as President of United Nissan, which he joined
in 1992. He began his career in the automotive retailing
industry in 1968.
JAMES EVANS Mr. Evans serves as chief financial officer and co-managing
director of the Danbury Autopark division of the DiFeo Group,
which he joined in 1994. He began his career in the automotive
retailing industry in 1985.
HARRY GLANTZ Mr. Glantz serves as director of finance and insurance of the
DiFeo Group and co-managing director of the Danbury Autopark
division of the DiFeo Group, which he joined in 1992. He began
his career in the automotive retailing industry in 1968.
RICHARD J. HARRISON Mr. Harrison serves as the President of Atlantic Finance. He
began his career as a credit analyst in 1969. In 1984, he joined
the Rochester Community Savings Bank for the purpose of forming
American Credit Services, Inc., a consumer finance company which
grew into a business of over $325 million in annual loan
purchases.
STEVEN KNAPPENBERGER Mr. Knappenberger serves as President and Chief Operating
Officer of the Sun Group, which he joined in 1980. He will
become a member of the Operating Committee upon consummation of
the Contemporaneous Acquisitions.
</TABLE>
51
<PAGE>
<TABLE>
<S> <C>
STEVE LANDERS Steve Landers serves as Chief Executive Officer and President of
Landers Auto. He began his career in the automotive retailing
industry in 1969. In 1972, Mr. Landers, with his father, Bob
Landers, opened a used car operation, which was the predecessor
to Landers Auto.
JOHN SMITH Mr. Smith serves as President of Atlanta Toyota, which he joined
in 1988. He began his career in the automotive retailing
industry in 1983.
</TABLE>
Summary Compensation Table
The following Summary Compensation Table sets forth information concerning the
compensation for services paid to the officers named below (the "Named Executive
Officers") during fiscal years 1995, 1994 and 1993.
<TABLE>
<CAPTION>
-----------------------------------------------
Long Term
Compensation
-------------
Annual Compensation Securities
Name and --------------------- Underlying
Principal Position Year Salary($) Bonus($) Options(#)
- ---------------------------------------- ------- --------- --------- -------------
<S> <C> <C> <C> <C>
Carl Spielvogel (1) 1995 750,000 250,000
Chairman of the Board 1994 155,946 70,017(2)
and Chief Executive Officer
Ezra P. Mager (3) 1995 600,000
Executive Vice Chairman 1994 601,969
1993 703,952
Arthur J. Rawl (4) 1995 255,300 70,000
Executive Vice President 1994 160,000 60,000
and Chief Financial Officer
George G. Lowrance 1995 207,677 20,000
Executive Vice President -- 1994 172,244 5,000
Development and Industry Relations 1993 138,254 25,000
Robert W. Thompson (5) 1995 107,600 10,000
Vice President -- Finance 1994 42,619
</TABLE>
- ------------------------------
(1) Mr. Spielvogel's employment commenced on October 18, 1994.
(2) Represents the number of shares of Common Stock subject to options on
October 18, 1994, the date of grant, which number was subject to increase from
time to time to a total of 170,095 shares upon the issuance of shares under the
Equity Facility. These options were canceled and replaced with new options on
April 3, 1996. See "--Stock Option Grants."
(3) Mr. Mager resigned from all his positions with the Company on January 18,
1996. In connection with such resignation, the Company agreed to make severance
payments to Mr. Mager in the aggregate amount of $500,000 in installments
through the end of 1997. In consideration therefor, Mr. Mager agreed to refrain
from (i) discussing acquisition transactions with certain specified dealerships
until March 1, 1998, (ii) soliciting the employment of UAG employees until March
1, 1998 and (iii) disclosing confidential information relating to the Company.
(4) Mr. Rawl's employment commenced on May 1, 1994.
(5) Mr. Thompson's employment commenced on August 1, 1994.
Spielvogel Employment Agreement
The Company has an Employment Agreement with Carl Spielvogel dated as of June
21, 1996 (the "Spielvogel Employment Agreement") which provides that Mr.
Spielvogel will serve as Chief Executive Officer and Chariman of the Board of
Directors of the Company until December 31, 2000, subject to automatic one-year
renewals unless either party delivers notice not to renew.
The Spielvogel Employment Agreement provides for a base salary of $750,000 for
1996 and, beginning January 1, 1997, of $1,000,000 per year. In addition, Mr.
Spielvogel is entitled to receive an annual bonus in an amount determined by the
Company's Compensation Committee. If the Company's established performance
targets are met, such bonus must equal at least 50% of Mr. Spielvogel's base
salary, but in no event may such bonus exceed his base salary.
52
<PAGE>
Pursuant to an amendment to his initial employment agreement, Mr. Spielvogel
received options to purchase up to 400,000 shares of Common Stock at an exercise
price of $10.00 per share. Such options became exercisable with respect to
one-fourth of the option shares on October 18, 1995. The remainder will vest and
become exercisable in three equal installments on October 18th in each of 1996,
1997 and 1998.
Pursuant to the Spielvogel Employment Agreement, effective upon the effective
date of the Offering, Mr. Spielvogel will receive options under the Stock Option
Plan to purchase up to an additional 100,000 shares of Common Stock at an
exercise price equal to the public offering price set forth on the cover page of
this Prospectus, and effective on the first anniversary thereof, Mr. Spielvogel
will receive options under the Stock Option Plan to purchase up to 100,000
shares of Common Stock at an exercise price per share equal to the market price
per share of Common Stock on the date preceding the date of grant. Such options
will vest and become exercisable in four equal annual installments beginning on
the first anniversary of the date of grant. All such options are collectively
referred to herein as the "Spielvogel Options."
The Spielvogel Employment Agreement provides that Mr. Spielvogel's employment
may be terminated at any time by the Company or by Mr. Spielvogel. In the event
of termination of Mr. Spielvogel's employment by reason of death, by the Company
for "Cause" or by Mr. Spielvogel other than for "Good Reason," including a
"Change in Control" of the Company (as such terms are defined in the Spielvogel
Employment Agreement), or disability, the Spielvogel Options will be forfeited
to the extent not yet vested and exercisable. That portion already vested and
exercisable on the date of termination may be exercised as follows: (i) in the
event of termination by the Company for Cause, for a period of 90 days from the
date of termination and (ii) in the event of termination by reason of death, or
by Mr. Spielvogel other than for Good Reason or disability, for a period of one
year from the date of termination.
In the event of termination of Mr. Spielvogel's employment by the Company other
than for Cause or by Mr. Spielvogel for Good Reason, in addition to any base
salary and bonus earned but not yet received, Mr. Spielvogel is entitled to be
paid $83,333 per month for the remainder of the contract term. In the event of
termination of Mr. Spielvogel's employment by the Company other than for Cause,
by Mr. Spielvogel for Good Reason or by reason of disability, the Spielvogel
Options, to the extent not granted or not vested and exercisable on the date of
termination, will become immediately granted and vested and exercisable in full
for a period equal to the shorter of four years after the date of termination
and the remainder of the original term of the respective Spielvogel Options.
The Spielvogel Employment Agreement contains customary provisions relating to
exclusivity of services, non-competition and confidentiality. It also contains
general provisions relating to indemnification of Mr. Spielvogel in accordance
with the DGCL.
Stock Option Plan
The Company's Stock Option Plan (the "Stock Option Plan") has been adopted by
the Board of Directors and the stockholders of the Company. The Stock Option
Plan provides for the grant of non-qualified options ("NQOs") and incentive
stock options ("ISOs") as defined in Section 422 of the Internal Revenue Code of
1986 (the "Code"). The Stock Option Plan is administered by the Stock Option
Committee of the Board of Directors (the "Committee"). The Board believes that
the Stock Option Plan is important to provide an inducement to obtain and retain
the services of employees of the Company, its subsidiaries and affiliates, and
to increase their proprietary interest in the Company's success.
At present, all full-time employees of the Company and its subsidiaries, as well
as employees of its affiliates who perform services for the Company and its
subsidiaries, are eligible to participate in the Stock Option Plan. The
aggregate number of shares of Common Stock as to which stock options ("Options")
may be granted under the Stock Option Plan may not exceed 1,500,838, subject to
adjustment as provided in the Stock Option Plan. The number of shares of Common
Stock available for grant of Options at any time under the Stock Option Plan
shall be decreased by the sum of the number of shares for which Options have
been issued and have not yet lapsed or canceled and the number of shares already
issued upon exercise of Options.
Recipients of Options under the Stock Option Plan ("Optionees") are selected by
the Committee, which has sole authority (1) to determine the number of Options
to be granted to such recipient, (2) to prescribe the form or forms of the
Option agreements, (3) to adopt, amend or rescind rules and regulations for the
administration of the Stock Option Plan, (4) to construe and interpret the Stock
Option Plan, rules and regulations, (5) to determine the exercise
53
<PAGE>
price of shares subject to Options, (6) to determine the dates on which Options
become exercisable, (7) to determine the expiration date of each Option (which
shall be a ten-year term from the date of grant) and (8) to cancel any Option
held with the express written consent of the Optionee to be affected. Options
granted under the Stock Option Plan will be evidenced by a written Option
agreement between each Optionee and the Company.
The exercise price of the shares of Common Stock subject to Options will be
fixed by the Committee, in its discretion, at the time Options are granted,
provided that the per share exercise price of an ISO may not be less than the
fair market value of a share of Common Stock on the date of grant. There are
presently NQOs outstanding under the Stock Option Plan to purchase an aggregate
of 473,000 shares, each of which is exercisable at a price of $10.00 per share
and vests in five equal annual installments beginning on the first anniversary
of the later of December 29, 1993 and the date of the Optionee's employment. In
addition, as of the effectiveness of the Offering, NQOs to purchase an
additional 100,000 shares of Common Stock will be granted to each of Mr.
Spielvogel and Mr. Cogan. Such Options will be exercisable at the public
offering price set forth on the cover page of this Prospectus and will vest in
four equal annual installments beginning on the first anniversary of the date of
grant.
Optionees will have no voting, dividend or other rights as shareholders with
respect to shares of Common Stock covered by Options prior to becoming the
holders of record of such shares. All Option grants will permit the exercise
price to be paid in cash or by certified check, bank draft or money order or by
"cashless" exercise. The number of shares covered by Options will be
appropriately adjusted in the event of any merger, recapitalization or similar
corporate event (a "Merger Event"). If the Company is the surviving corporation
of any Merger Event, the Optionee shall receive substitute Options to purchase
shares of the surviving corporation so as to preserve the value, rights and
benefits of any Option granted hereunder. If the Company is not the surviving or
resulting corporation of any Merger Event, the Committee may elect to pay in
cash the difference between the fair market value of the Common Stock on the
date of the Merger Event and the exercise price of such Options. If the
Committee does not elect to make a cash payment, the surviving corporation will
be required, as a condition to the Merger Event, to grant substitute Options to
purchase shares of the surviving or resulting corporation so as to preserve the
value, rights and benefits of any Option granted hereunder.
The Board of Directors may at any time terminate the Stock Option Plan or from
time to time make such modifications or amendments to the Stock Option Plan as
it may deem advisable, provided that the Board may not, without the consent of
the Optionee, take action which would have a material adverse effect on
outstanding Options or any unexercised rights under outstanding Options.
The following is a brief discussion of the federal income tax consequences of
transactions under the Stock Option Plan based on the Code. The Stock Option
Plan is not qualified under Section 401(a) of the Code.
No taxable income is realized by an Optionee upon the grant or exercise of an
ISO. If Common Stock is issued to an Optionee pursuant to the exercise of an
ISO, and if no disqualifying disposition of such shares is made by such Optionee
within two years after the date of grant or within one year after the transfer
of such shares to such Optionee, then (i) upon sale of such shares, any amount
realized in excess of the Option price will be taxed to such Optionee as a
long-term capital gain and any loss sustained will be a long-term capital loss
and (ii) no deduction will be allowed to the Optionee's employer for federal
income tax purposes.
If the Common Stock acquired upon the exercise of an ISO is disposed of prior to
the expiration of either holding period described above, generally (i) the
Optionee will realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of such shares at exercise
(or, if less, the amount realized on the disposition of such shares) over the
Option price paid for such shares and (ii) the Company will be entitled to
deduct such amount for federal income tax purposes if the amount represents an
ordinary and necessary business expense. Any further gain (or loss) realized by
the Optionee will be taxed as short-term or long-term capital gain (or loss), as
the case may be, and will not result in any deduction by the Company.
With respect to NQOs, (i) no income is realized by an Optionee at the time the
Option is granted, (ii) generally, at exercise, ordinary income is realized by
the Optionee in an amount equal to the difference between the Option price paid
for the shares and the fair market value of the shares, if unrestricted, on the
date of exercise, and the Company is generally entitled to a tax deduction in
the same amount subject to applicable tax withholding requirements and (iii) at
sale, appreciation (or depreciation) after the date of exercise is treated as
either short-term or long-term
54
<PAGE>
capital gain (or loss) depending on how long the shares have been held.
Deductions for compensation attributable to NQOs (or disqualified ISOs) granted
to the Company's named executive officers may be subject to the deduction limits
of Section 162(m) of the Code, unless such compensation qualifies as
"performance-based" (as defined therein).
Stock Option Grants
The following table sets forth information concerning individual grants of
options to purchase Common Stock made to the Named Executive Officers during
1996.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Potential Realizable
Value at
Assumed Annual Rates
of
Number of Percent of Stock Price
Securities Total Exercise Appreciation for
Underlying Options or Option Term(1)
Options Granted to Base Price Expiration ----------------------
Name Granted Employees ($/Share) Date 5%($) 10%($)
- --------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Carl Spielvogel 400,000(2) 35.3% 10.00 10/18/04
100,000(3) 8.8 (3) (3)
Ezra P. Mager
Arthur J. Rawl 34,000(4) 3.0 10.00 4/23/06
George G. Lowrance 34,000(5) 3.0 10.00 4/23/06
Robert W. Thompson 3,500(5) 0.3 10.00 4/23/06
</TABLE>
- ------------------------------
(1) Amounts reflect certain assumed rates of appreciation set forth in the
Commission's executive compensation disclosure rules. Actual gains, if any, on
stock option exercises will depend on future performance of the Common Stock. No
assurance can be made that the amounts reflected in these columns will be
achieved.
(2) Options were granted on April 3, 1996 in replacement of options granted on
October 18, 1994 and vest and become exercisable in four equal annual
installments beginning on October 18, 1995.
(3) Options were granted as of the date of this Prospectus at an exercise price
per share equal to the public offering price set forth on the cover page of this
Prospectus and vest and become exercisable in four equal annual installments
beginning on the first anniversary of the date of this Prospectus. Such options
terminate on the tenth anniversary of the date of grant.
(4) Options were granted on April 23, 1996 and vest and become exercisable in
five equal annual installments beginning on May 1, 1995.
(5) Options were granted on April 23, 1996 and vest and become exercisable in
five equal annual installments beginning on December 29, 1993.
55
<PAGE>
Certain Relationships and Related Transactions
Jules B. Kroll, a director of the Company, is Chairman of Kroll Associates, a
corporate investigation and consulting firm which performs services for the
Company from time to time.
Richard Sinkfield, a director of the Company, is a member of the law firm of
Rogers & Hardin, which represents the Company in connection with various
business transactions.
Pursuant to Stock Purchase Agreements, dated October 15, 1993 (as amended, the
"Equity Facility"), among the Company and the investors named therein (the
"Initial Stockholders"), the Initial Stockholders purchased an aggregate of
8,504,750 shares of Common Stock in multiple closings and were granted
registration rights in respect of such shares. Such registration rights also
apply to an additional 306,346 shares of Common Stock subsequently purchased by
the Initial Stockholders and to 10,000 shares of Common Stock held by Richard
Sinkfield, a director of the Company. See "Shares Eligible for Future Sale."
Among the Initial Stockholders are Trace, Aeneas and AIF, each of which is a
significant stockholder of the Company, Carl Spielvogel, Chairman of the Board
and Chief Executive Officer of the Company, Ezra P. Mager, a former executive
officer of the Company, and Jules Kroll, a director of the Company. See
"Principal Stockholders." In addition, as of June 30, 1996, the Company owes
Trace approximately $1.2 million, which was incurred for working capital
purposes. Such indebtedness is subject to offset against a $2 million guaranty
by Trace of a third party's indebtedness to the Company.
The Company is the tenant under a number of lease agreements with employees of
the Company. All such leases are on terms no less favorable to the Company than
would be obtained in arm's-length negotiations with unaffiliated third parties.
For information regarding the Company's lease agreements, see "Business --
Facilities." In addition, the Company intends to enter into a Broker's Agreement
with an entity controlled by Steven Knappenberger, which provides for payment by
the Company of brokerage fees for assistance in acquiring or opening automobile
dealerships in Arizona, Colorado, New Mexico, Utah and certain counties in
California.
Pursuant to agreements with the holders of minority interests (the "Minority
Interests") in certain of the Company's subsidiaries, immediately prior to the
consummation of the Offering, such holders will exchange (the "Minority
Exchange") their Minority Interests for shares of Common Stock. The
consideration to be paid by the Company for the Minority Interest in the DiFeo
Group will also include (i) an option to purchase up to 60,000 shares of Common
Stock at the public offering price set forth on the cover page of this
Prospectus, (ii) the settlement of certain advances made by the Company for the
benefit of the holders of such Minority Interest for certain business
acquisitions and for working capital for dealerships owned solely by such
holders and (iii) the minority interests owned by the Company in a group of
dealerships in Jersey City, New Jersey. Upon consummation of the Minority
Exchange, all of the Company's dealerships will be wholly owned, directly or
indirectly, by the Company. The following table sets forth certain information
with respect to each division of the Company whose Minority Interest will be
exchanged in the Minority Exchange:
<TABLE>
<CAPTION>
--------------------------------
Shares of
Common Stock
Minority to be Issued in
Division Interest Minority Exchange
- --------------------------- ----------- -------------------
<S> <C> <C>
DiFeo Group 30%
Landers Auto 20%
Atlanta Toyota 5%
</TABLE>
The Company has agreed in principle to grant to the three senior officers of
Atlantic Finance options to purchase an aggregate of 5% of the outstanding
common stock of Atlantic Finance (as constituted immediately prior to the
Offering) at an aggregate exercise price of $400,000. Such options will be
immediately exercisable in full and will terminate on the seventh anniversary of
the date of grant. Upon the termination date (or upon the termination of an
option holder's employment, with respect to such holder's options), the option
holders will have the right to sell to the Company, and the Company will have
the right to purchase from the option holders, the options (or any shares of
common stock issued upon exercise thereof) at the then fair market value
thereof, payable in cash or Common Stock of the Company at the option of the
Company. The Company has also agreed that up to an additional 5% of the common
stock of Atlantic Finance will be issuable to employees of Atlantic Finance
under a stock option plan, subject to the discretion of the Board of Directors
of Atlantic Finance.
56
<PAGE>
Principal Stockholders
The table below sets forth the beneficial ownership of Common Stock as of August
31, 1996 after giving effect to the Preferred Stock Conversion, the Minority
Exchange and the Offering by (i) all persons who beneficially own 5% or more of
the Common Stock, (ii) each of the Named Executive Officers, (iii) each director
of the Company and (iv) all directors and Named Executive Officers as a group.
<TABLE>
<CAPTION>
Shares
Beneficially
Owned
----------------
Beneficial Owner Number(1) Percent
- -------------------------------------------------- ------- -------
<S> <C> <C>
Trace International Holdings, Inc. ............... 3,531,156
375 Park Avenue
New York, New York 10152
Aeneas Venture Corporation........................ 2,843,656
(an affiliate of Harvard Private Capital)
600 Atlantic Avenue
Boston, Massachusetts 02210
AIF II, L.P....................................... 1,843,656
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
Carl Spielvogel (2)............................... 226,118
Ezra P. Mager..................................... 163,240
Arthur J. Rawl (3)................................ 13,600 *
George G. Lowrance (3)............................ 13,600 *
Robert W. Thompson (3)............................ 1,400 *
Marshall S. Cogan (4)............................. 3,531,156
Michael R. Eisenson (5)........................... 2,843,656
John J. Hannan (6)................................ 1,843,656
Jules Kroll....................................... 104,474 *
Robert H. Nelson (7).............................. 3,544,756
John M. Sallay (8)................................ 2,843,656
Richard Sinkfield................................. 10,000 *
All directors and Named Executive Officers, 8,764,500
without duplication (12 persons).................
</TABLE>
- ------------------------
* Less than 1%.
(1) Pursuant to the regulations of the Commission, shares are deemed to be
"beneficially owned" by a person if such person directly or indirectly has or
shares the power to vote or dispose of such shares, whether or not such person
has any pecuniary interest in such shares, or the right to acquire the power to
vote or dispose of such shares within 60 days, including any right to acquire
through the exercise of any option, warrant or right.
(2) Includes 200,000 shares issuable upon exercise of options granted under the
Spielvogel Employment Agreement that are vested and exercisable within 60 days.
(3) Represents the shares issuable upon exercise of options granted under the
Stock Option Plan that are vested and exercisable within 60 days.
(4) Represents the shares held by Trace, of which Mr. Cogan is the principal
stockholder, Chairman of the Board and Chief Executive Officer. Mr. Cogan
disclaims beneficial ownership of all shares held by Trace.
(5) Represents the shares held by Aeneas. Mr. Eisenson is the Managing
Director, President and Chief Executive Officer of Harvard Private Capital, the
investment advisor of Aeneas. Mr. Eisenson disclaims beneficial ownership of all
shares held by Aeneas.
(6) Represents the shares held by AIF. Mr. Hannan is a director of Apollo
Capital Management, Inc., which is the general partner of Apollo, which is the
managing general partner of AIF. Mr. Hannan disclaims beneficial ownership of
all shares held by AIF.
(7) Includes 3,531,156 shares held by Trace, of which Mr. Nelson is Senior Vice
President, Chief Operating Officer, Chief Financial Officer, Treasurer and a
director. Mr. Nelson disclaims beneficial ownership of all shares held by Trace.
Also includes 13,600 shares issuable upon exercise of options granted under the
Stock Option Plan that are vested and exercisable within 60 days.
(8) Represents the shares held by Aeneas. Mr. Sallay is a Managing Director of
Harvard Private Capital, the investment advisor of Aeneas. Mr. Sallay disclaims
beneficial ownership of all shares held by Aeneas.
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<PAGE>
Description of Capital Stock
General
Upon the consummation of the Offering, the authorized capital stock of the
Company will consist of 40,000,000 shares of Voting Common Stock, par value
$0.0001 per share, 1,125,000 shares of Non-voting Common Stock, par value
$0.0001 per share, and 100,000 shares of Preferred Stock, par value $0.0001 per
share. References herein to "Common Stock" refers to the Company's Voting Common
Stock.
Common Stock
As of July 31, 1996, as adjusted to reflect the Preferred Stock Conversion,
there were 8,821,096 shares of Common Stock outstanding, owned of record by 16
stockholders. Holders of Common Stock have no pre-emptive, redemption,
conversion or sinking fund rights. Holders of Common Stock are entitled to one
vote per share on all matters submitted to a vote of stockholders and do not
have any cumulative voting rights. In the event of a liquidation, dissolution,
or winding-up of the Company, the holders of Common Stock are entitled to share
equally and ratably in the assets of the Company, if any, remaining after
provision for the payment of creditors and after payment of any liquidation
preference to holders of Preferred Stock. Upon completion of the Offering, all
outstanding shares of Common Stock will be validly issued, fully paid and
nonassessable. Holders of Common Stock will receive such dividends, if any, as
may be declared by the Board out of funds legally available for such purposes.
See "Dividend Policy."
Non-voting Common Stock
No shares of Non-voting Common Stock have been issued. The Company created the
class of Non-voting Common Stock in connection with the Securities Purchase
Agreements. The investors party to the Securities Purchase Agreements are
subject to various regulations that restrict their ability to own in excess of a
given percentage of the voting power of any company or that impose burdensome
requirements in respect of investments above a given threshold. Accordingly, the
Company granted such investors the right to convert, at any time and from time
to time, any number of shares of Voting Common Stock into an equal number of
shares of Non-voting Common Stock. Each holder of shares of Non-voting Common
Stock is entitled to convert, at any time and from time to time, any number of
such shares into an equal number of shares of Voting Common Stock, provided that
such holder, as a result of such conversion, would not own shares of the
Company's voting securities in excess of the applicable threshold. Holders of
Non-voting Common Stock are not entitled to vote on matters submitted to a vote
of stockholders, except that they are entitled to vote as a separate class on
any modification of the Certificate of Incorporation that adversely affects
their rights. Except with respect to such voting rights, the Voting Common Stock
and the Non-voting Common Stock are equivalent in every respect.
Preferred Stock
Pursuant to the Preferred Stock Conversion, upon the date of this Prospectus,
all 5,227,346 shares of the Company's Class A Preferred Stock, par value $0.0001
per share, outstanding prior to the Offering will convert into an equal number
of shares of Common Stock, and such class of Preferred Stock will be retired.
Upon consummation of the Offering, the Company will be authorized to issue up to
100,000 shares of Preferred Stock. The Board of Directors will have the
authority to issue this Preferred Stock in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of such series, without further vote or action by
the stockholders. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the voting and other
rights of the holders of Common Stock, including the loss of voting control to
others.
Warrants
In connection with the issuance and sale of Senior Notes from time to time
pursuant to the Securities Purchase Agreements, the Company issued warrants (the
"Warrants") to purchase up to 1,016,099 shares of Common Stock, as adjusted
through the date of this Prospectus and subject to further adjustment upon
certain events. The Warrants will become exercisable on the date of this
Prospectus at a nominal exercise price and expire on September 22, 2003.
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<PAGE>
In addition, the Company issued to the holders of the Warrants additional
warrants (the "Additional Warrants") to purchase up to 93,747 shares of Common
Stock, subject to adjustment upon certain events. Pursuant to their terms, the
Additional Warrants will be exercised on the date of this Prospectus at an
exercise price of $0.01 per share. The initial holders of the Warrants and
Additional Warrants, under certain conditions, are entitled to participate on
the same terms in the sale of Common Stock by the Initial Stockholders if such
sale would result in a Change in Control (as defined in the Securities Purchase
Agreements) of the Company. The Warrants and Additional Warrants contain
registration rights in respect of the shares of Common Stock issuable upon
exercise thereof. See "Shares Eligible for Future Sale."
Restrictions under Franchise Agreements
A number of franchise agreements to which the Company is party impose
restrictions on the transfer of the Common Stock. The most prohibitive
restriction, which has been imposed by various Manufacturers, provides that,
under certain circumstances, the Company may lose its franchise if a person or
entity acquires a 20% ownership interest in the Company and does not obtain the
approval of the applicable Manufacturer. Similarly, a number of Manufacturers,
including Chrysler, prohibit transactions which may affect management control of
the Company. Such restrictions may prevent or deter prospective acquirers from
obtaining control of the Company. See "Risk Factors -- Stock Ownership/Issuance
Limits."
Certain Provisions of Certificate of Incorporation and Bylaws
The Certificate of Incorporation and Bylaws of the Company provide that the
Board of Directors will be divided into three classes of directors, each class
to be as nearly equal in number as possible. The term of office of one class of
directors expires each year in rotation so that one class is elected at each
annual meeting of stockholders for a three-year term. The Certificate of
Incorporation provides that the size of the Board of Directors shall be
determined as set forth in the Bylaws, which provide for between five and eleven
directors, with the precise number to be fixed from time to time by resolution
of the Board of Directors. The Board of Directors is currently comprised of
eight members. The affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock entitled to vote thereon is required to
amend or repeal these provisions of the Certificate of Incorporation and Bylaws.
Accordingly, it would take at least two elections of directors for any outside
individual or group to gain control of the Board of Directors. In addition,
stockholder action must be taken at duly convened meetings, not by written
consent. These provisions could render more difficult or discourage an attempt
to obtain control of the Company.
Certain Effects of Authorized but Unissued Stock
After the completion of the Offering, there will be shares of Common Stock
and 100,000 shares of Preferred Stock available for future issuance without
stockholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital or to facilitate corporate acquisitions. The Company currently does not
have any plans to issue additional shares of Common Stock or Preferred Stock.
One of the effects of the existence of unissued and unreserved Common Stock and
Preferred Stock of the Company may be to enable the Board of Directors to issue
shares to persons supportive of current management, which could render more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of the Company's management and possibly deprive the stockholders of
opportunities to sell their shares of Common Stock at prices higher than
prevailing market prices. Such additional shares also could be used to dilute
the stock ownership of persons seeking to obtain control of the Company pursuant
to the operation of a shareholders' rights plan or otherwise.
Delaware General Corporation Law
Pursuant to Section 203 of the DGCL, with certain exceptions, a Delaware
corporation may not engage in any of a broad range of business combinations,
such as mergers, consolidations and sales of assets, with an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless (i) the transaction that results in the
person's becoming an interested stockholder, or the business combination, is
approved by the board of directors of the corporation before the person becomes
an interested stockholder, (ii) the interested stockholder acquires 85% or more
of the outstanding voting stock of the corporation in the same transaction that
makes it an interested stockholder or (iii) on or after the date the person
becomes an interested
59
<PAGE>
stockholder, the business combination is approved by the corporation's board of
directors and by holders of at least two-thirds of the corporation's outstanding
voting stock, excluding shares owned by the interested stockholder, at a meeting
of the stockholders. Under Section 203, an "interested stockholder" is defined
as any person that is (i) the owner of 15% or more of the outstanding voting
stock of the corporation or (ii) an affiliate or associate of the corporation
and the owner of 15% or more of the outstanding voting stock of the corporation
at any time within the three-year period immediately prior to the date on which
it is sought to be determined whether such person is an interested stockholder
or (iii) an affiliate or associate of such person. Pursuant to an exception
within Section 203, no stockholders of the Company existing prior to the
Offering are subject to the restrictions of Section 203.
Under certain circumstances, Section 203 makes it more difficult for a person
who would be an "interested stockholder" to effect various business combinations
with a corporation for a three-year period, although the stockholders may elect
to exclude a corporation from the restrictions imposed thereunder. The Company's
Certificate of Incorporation does not exclude the Company from the restrictions
imposed under Section 203. The provisions of Section 203 may encourage companies
interested in acquiring the Company to negotiate in advance with the Company's
Board, since the stockholder approval requirement would be avoided if a majority
of the directors then in office approve either the business combination or the
transaction which results in the shareholder becoming an interested shareholder.
Such provisions also may have the effect of preventing changes in the management
of the Company. It is possible that such provisions could make it more difficult
to accomplish transactions which stockholders may otherwise deem to be in their
best interests.
Limitation of Liability of Directors
The Certificate of Incorporation provides that a director of the Company will
not be personally liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
which concerns unlawful payments of dividends, stock purchases or redemption, or
(iv) for any transaction from which the director derived an improper personal
benefit.
While the Certificate of Incorporation provides directors with protection from
awards for monetary damages for breaches of their duty of care, it does not
eliminate such duty. Accordingly, the Certificate of Incorporation will have no
effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of his duty of care. The provisions of
the Certificate of Incorporation described above apply to an officer of the
Company only if he is a director of the Company and is acting in his capacity as
director, and do not apply to officers of the Company who are not directors.
Registration Rights
Certain holders of shares of Common Stock are entitled to certain registration
rights. See "Shares Eligible for Future Sale."
Transfer Agent
The transfer agent and registrar of the Common Stock is The Bank of Nova Scotia
Trust Company of New York.
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<PAGE>
Shares Eligible for Future Sale
Of the shares of Common Stock outstanding immediately after the
consummation of the Offering, the shares of Common Stock sold in the
Offering will be freely transferable without restriction under the Securities
Act unless held by "affiliates" of the Company as that term is used under the
Securities Act and the regulations promulgated thereunder. The remaining
shares of Common Stock outstanding, including the shares to be issued in
the Minority Exchange, were sold by the Company in reliance on exemptions from
the registration requirements of the Securities Act and are deemed "restricted"
securities within the meaning of Rule 144 under the Securities Act and may not
be resold without registration under the Securities Act or pursuant to an
exemption from registration, including exemptions provided by Rule 144 under the
Securities Act. All of the Restricted Shares are subject to lock-up agreements
(as described under "Underwriting"). Of the Restricted Shares, 4,254,208 will
become eligible for sale beginning 180 days after the date of this Prospectus
upon expiration of such lock-up agreements and subject to compliance with Rule
144. The remaining Restricted Shares, including the shares to be
issued in the Minority Exchange, will have been held for less than two years
upon the expiration of such lock-up agreements and will become eligible for sale
under Rule 144 at various dates thereafter as the holding period provisions of
Rule 144 are satisfied.
In general, under Rule 144 as currently in effect, any person (or persons whose
shares are aggregated), including an affiliate of the Company, who has
beneficially owned shares for at least a two-year period (as computed under Rule
144) is entitled to sell within any three-month period commencing 90 days after
the Offering such number of shares that does not exceed the greater of (i) 1% of
the then outstanding shares of Common Stock (approximately shares upon
completion the Offering) and (ii) the average weekly trading volume in the
Common Stock during the four calendar weeks immediately preceding such sale.
Sales under Rule 144 are also subject to certain manner-of-sale provisions,
notice requirements and the availability of current public information about the
Company. A person who is not deemed to have been an affiliate of the Company at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least three years, is entitled to
sell such shares under Rule 144(k) without regard to the volume limitations or
other requirements described above. The foregoing summary of Rule 144 is not
intended to be a complete description of that rule.
The Company has authorized 1,500,838 shares of Common Stock for issuance under
the Stock Option Plan. As of the date of this Prospectus, options to purchase up
to 673,000 shares of Common Stock have been granted under the Stock Option Plan.
In addition, options to purchase up to 400,000 shares of Common Stock have been
granted under the Spielvogel Employment Agreement and options to purchase up to
60,000 shares of Common Stock have been granted as part of the consideration for
the DiFeo Group Minority Interest. The Company intends to file a registration
statement on Form S-8 as soon as practicable after the consummation of the
Offering with respect to the shares of Common Stock issuable upon exercise of
all such options.
Prior to the Offering, there has been no public market for securities of the
Company. No predictions can be made of the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of a substantial number of
such shares by existing stockholders or by stockholders purchasing in the
Offering could have a negative effect on the market price of the Common Stock.
The Company, its directors, executive officers, stockholders and certain other
persons have agreed not to offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock or any securities convertible into or exchangable for
shares of Common Stock, for a period of 180 days after the date of this
Prospectus, without the prior written consent of J.P. Morgan Securities Inc.,
with certain limited exceptions.
In connection with the Equity Facility, pursuant to a registration rights
agreement dated October 15, 1993, the Company granted the Initial Stockholders
registration rights in respect of up to 8,504,750 shares of Common Stock to be
issued pursuant to the Equity Facility. Each of three specified classes of
Initial Stockholders has the right to request one registration, provided that
such registration relates to a least 20% of the registrable securities held by
the person requesting registration or is expected to have an offering price of
$10 million or more. The Initial Stockholders also have the right to request
unlimited registrations on Form S-3, provided that the anticipated net aggregate
offering price exceeds $500,000. In addition, the Initial Stockholders are
entitled to have their registrable securities included in an unlimited number of
registrations initiated by the Company, subject to certain customary conditions.
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<PAGE>
The registration rights are presently exercisable, although the Company would
not be required to file a registration statement prior to 180 days after the
date of this Prospectus, and are subject to customary conditions. In addition to
the 8,504,750 shares of Common Stock that have been issued pursuant to the
Equity Facility, such registration rights also apply to an additional 316,346
shares of Common Stock issued by the Company.
In connection with the acquisition of certain automobile dealerships and the
related agreements to exchange shares of Common Stock for the remaining minority
interests in such dealerships in the Minority Exchange, the Company granted
registration rights in respect of shares of Common Stock pursuant to a
registration rights agreement dated as of August 1, 1995. Effective one year
after the completion of the Offering, subject to customary conditions, the
holders of such shares will be entitled to request one registration and to have
their shares included in an unlimited number of Company registrations.
The Warrants and Additional Warrants contain registration rights in respect of
the shares of Common Stock issuable upon exercise thereof. Such rights entitle
the holders thereof to request one registration, plus two registrations on Form
S-3, and have their shares included in an unlimited number of Company
registrations, subject to customary conditions. Upon the date of this
Prospectus, the Warrants will become immediately exercisable for an aggregate of
1,016,099 shares of Common Stock at a nominal exercise price and the Additional
Warrants will be exercised for an aggregate of 93,747 shares of Common Stock at
an exercise price of $0.01 per share.
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Underwriting
Under the terms and subject to the conditions set forth in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters
named below, for whom J.P. Morgan Securities Inc., Montgomery Securities and
Smith Barney Inc. are acting as representatives (the "Representatives"), have
severally agreed to purchase, and the Company has agreed to sell to them, the
respective number of shares of Common Stock set forth opposite their names
below:
<TABLE>
<CAPTION>
---------------
Number of
Underwriters Shares
---------------
<S> <C>
J.P. Morgan Securities Inc.
Montgomery Securities
Smith Barney Inc.
---------------
Total...............................................
---------------
---------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and certain other conditions. The Underwriters
are obligated to take and pay for all such shares of Common Stock, if any are
taken.
The Underwriters propose initially to offer such shares of Common Stock directly
to the public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $
per share to certain other dealers. After the shares of Common Stock are
released for sale to the public, the offering price and such concessions may be
changed.
The Company has granted to the Underwriters an option, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
additional shares of Common Stock at the public offering price, less the
underwriting discount. The Underwriters may exercise such option solely for the
purpose of covering over-allotments, if any. To the extent that the Underwriters
exercise such option, each Underwriter will have a firm commitment, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as the number set forth next to such Underwriter's name in the
preceding table bears to the total number of shares of Common Stock offered
hereby.
The Company has applied for listing of the Common Stock on the NYSE under the
symbol "UAG." The Underwriters have undertaken to comply with the NYSE
distribution standards.
The Company, its directors, executive officers, stockholders and certain other
persons have agreed not to offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for shares of Common Stock, for a period of 180 days after the date
of this Prospectus, without the prior written consent of J.P. Morgan Securities
Inc., with certain limited exceptions.
At the request of the Company, the Underwriters have reserved up to of the
shares of Common Stock offered hereby for sale at the public offering price set
forth on the cover page of this Prospectus to employees, officers and directors
of the Company.
Prior to the Offering, there has been no public market for the Common Stock. The
initial public offering price for the Common Stock offered hereby has been
determined by agreement between the Company and the Representatives.
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Among the factors considered in making such determination were the history of
and the prospects of the industry in which the Company competes, an assessment
of the Company's management, the past and present operations of the Company, the
historical results of operations of the Company and the trend of its revenues
and earnings, the prospects for future earnings of the Company and the general
condition of the securities markets at the time of the Offering. There can be no
assurance that an active trading market will develop for the Common Stock or
that the Common Stock will trade in the public market subsequent to the offering
at or above the initial public offering price.
The Representatives have informed the Company that the Underwriters do not
intend to sell shares of Common Stock offered hereby to any accounts over which
the Underwriters exercise discretionary authority.
J.P. Morgan Capital Corporation (or an affiliate thereof), an affiliate of J.P.
Morgan Securities Inc., holds $20,000,000 aggregate principal amount of the
Senior Notes, Warrants to purchase 580,628 shares of Common Stock at a nominal
exercise price and Additional Warrants that will be exercised on the date of
this Prospectus for 53,570 shares of Common Stock at an exercise price of $0.01
per share. Morgan Guaranty, an affiliate of J.P. Morgan Securities Inc.,
provides loans to the Company under the Credit Agreement. J.P. Morgan Securities
Inc. has provided financial advisory services to the Company in the past, for
which it has received customary fees.
Under Rule 2710(c)(8) of the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), when more than 10% of the net proceeds of
a public offering of equity securities is to be paid to members of the NASD or
affiliates thereof, the price at which the equity securities are distributed to
the public must be no higher than that recommended by a "qualified independent
underwriter" meeting certain standards. J.P. Morgan Securities Inc. is an NASD
member and its affiliate, J.P. Morgan Capital Corporation, will receive more
than 10% of the net proceeds from the Offering as a result of the use of such
proceeds to repay the Senior Notes. Therefore, in compliance with such rule,
Smith Barney Inc. is assuming the responsibilities of acting as a qualified
independent underwriter in pricing the Offering and conducting due diligence.
Derek Lemke-von Ammon, Frank Dunlevy and Jerome Markowitz are affiliated with
Montgomery Securities and own 2,786, 2,786 and 5,572 shares of Common Stock,
respectively, which shares are entitled to registration rights granted to the
Initial Stockholders in connection with the Equity Facility. See "Shares
Eligible for Future Sale." The aggregate ownership interest in the Company
represented by such shares is less than 1%.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments which the Underwriters may be required to make in respect thereof.
Legal Matters
The validity of the Common Stock offered hereby will be passed upon for the
Company by Willkie Farr & Gallagher, New York, New York. Certain legal matters
in connection with the Offering will be passed upon for the Underwriters by
Cahill Gordon & Reindel (a partnership including a professional corporation),
New York, New York.
Experts
The (i) consolidated financial statements of UAG and its subsidiaries as of
December 31, 1994 and 1995 and for each of the three years in the period ended
December 31, 1995, (ii) financial statements of Landers Auto as of December 31,
1994 and July 31, 1995 and for each of the two years in the period ended
December 31, 1994 and the seven-month period ended July 31, 1995, (iii)
financial statements of Atlanta Toyota as of December 31, 1994 and 1995 and for
each of the three years in the period ended December 31, 1995, (iv) financial
statements of United Nissan as of December 31, 1994 and 1995 and for the period
from inception (April 5, 1993) to December 31, 1993 and each of the two years in
the period ended December 31, 1995, (v) financial statements of Hickman Nissan
as of December 31, 1995 and for the year ended December 31, 1995, (vi) combined
financial statements of the Sun Group as of December 31, 1994 and 1995 and for
each of the three years in the period ended December 31, 1995, (vii) financial
statements of Standefer Motor as of December 31, 1994 and 1995 and for each of
the three years in the period ended December 31, 1995 and (viii) combined
financial statements of the Evans Group as of December 31, 1995 and for the year
ended December 31, 1995 included in this Registration Statement have been
included in reliance upon the reports of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that Firm as experts in accounting and
auditing.
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Additional Information
The Company has filed with the Commission a Registration Statement on Form S-1
(herein, together with all
amendments thereto, called the "Registration Statement") under the Securities
Act with respect to the Common Stock offered by the Company hereby. This
Prospectus, which is part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement and the exhibits and
financial schedules thereto, to which reference is hereby made. Statements
contained in this Prospectus as to the contents of any contract or other
document are summaries which are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement herein being
qualified in all respects by such reference. The Registration Statement,
including the exhibits thereto, may be inspected without charge at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Avenue, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of
such materials can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a Website (http://www.sec.gov.) that contains reports,
proxy and information statements and other information that is filed
electronically with the Commission.
65
<PAGE>
Index to Financial Statements
<TABLE>
<S> <C>
United Auto Group, Inc.
Report of Independent Accountants................................................... F-3
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996...... F-4
Consolidated Statements of Operations for the years ended December 31, 1993, 1994
and 1995 and the six months ended June 30, 1995 and 1996........................... F-5
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1993, 1994 and 1995 and the six months ended June 30, 1996......................... F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994
and 1995 and the six months ended June 30, 1995 and 1996........................... F-7
Notes to Consolidated Financial Statements.......................................... F-9
Landers Auto Sales, Inc.
Report of Independent Accountants................................................... F-22
Balance Sheets as of December 31, 1994 and July 31, 1995............................ F-23
Statements of Operations for the years ended December 31, 1993 and 1994 and the
seven months ended July 31, 1995................................................... F-24
Statements of Retained Earnings for the years ended December 31, 1993 and 1994 and
the seven months ended July 31, 1995............................................... F-25
Statements of Cash Flows for the years ended December 31, 1993 and 1994 and the
seven months ended July 31, 1995................................................... F-26
Notes to Financial Statements....................................................... F-28
Atlanta Toyota, Inc.
Report of Independent Accountants................................................... F-33
Balance Sheets as of December 31, 1994 and 1995..................................... F-34
Statements of Operations for the years ended December 31, 1993, 1994 and 1995....... F-35
Statements of Retained Earnings for the years ended December 31, 1993, 1994 and
1995............................................................................... F-36
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995....... F-37
Notes to Financial Statements....................................................... F-38
Steve Rayman Nissan, Inc. (presently United Nissan, Inc.)
Report of Independent Accountants................................................... F-41
Balance Sheets as of December 31, 1994 and 1995..................................... F-42
Statements of Operations for the period from inception (April 5, 1993) to December
31, 1993 and the years ended December 31, 1994 and 1995 and the three months ended
March 31, 1995 and the four months ended April 30, 1996............................ F-43
Statements of Retained Earnings for the period from inception (April 5, 1993) to
December 31, 1993 and the years ended December 31, 1994 and 1995................... F-44
Statements of Cash Flows for the period from inception (April 5, 1993) to December
31, 1993 and the years ended December 31, 1994 and 1995 and the three months ended
March 31, 1995 and the four months ended April 30, 1996............................ F-45
Notes to Financial Statements....................................................... F-46
Hickman Nissan, Inc. (presently Peachtree Nissan, Inc.)
Report of Independent Accountants................................................... F-51
Balance Sheets as of December 31, 1995, and June 30, 1996........................... F-52
Statements of Income and Retained Earnings for the year ended December 31, 1995 and
the six months ended June 30, 1995 and 1996........................................ F-53
Statements of Cash Flows for the year ended December 31, 1995 and the six months
ended June 30, 1995 and 1996....................................................... F-54
Notes to Financial Statements....................................................... F-55
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
Sun Automotive Group
Report of Independent Accountants................................................... F-58
Combined Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996.......... F-59
Combined Statements of Operations for the years ended December 31, 1993, 1994 and
1995 and the six months ended June 30, 1995 and 1996............................... F-60
Combined Statements of Stockholders' Equity for the years ended December 31, 1993,
1994 and 1995 and the six months ended June 30, 1996............................... F-61
Combined Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and the six months ended June 30, 1995 and 1996............................... F-62
Notes to Combined Financial Statements.............................................. F-64
Evans Automotive Group
Report of Independent Accountants................................................... F-71
Combined Balance Sheets as of December 31, 1995 and June 30, 1996................... F-72
Combined Statements of Operations and retained earnings for the year ended December
31, 1995 and the six months ended June 30, 1995 and 1996........................... F-73
Combined Statements of Cash Flows for the year ended December 31, 1995 and the six
months ended June 30, 1995 and 1996................................................ F-74
Notes to Combined Financial Statements.............................................. F-75
Standefer Motor Sales, Inc.
Report of Independent Accountants................................................... F-80
Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996................... F-81
Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and
the six months ended June 30, 1995 and 1996........................................ F-82
Statements of Retained Earnings for the years ended December 31, 1993, 1994 and 1995
and the six months ended June 30, 1996............................................. F-83
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and
the six months ended June 30, 1995 and 1996........................................ F-84
Notes to Financial Statements....................................................... F-85
</TABLE>
F-2
<PAGE>
Report of Independent Accountants
To the Stockholders of
United Auto Group, Inc.:
We have audited the accompanying consolidated balance sheets of United Auto
Group, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of United
Auto Group, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Princeton, New Jersey
June 17, 1996
F-3
<PAGE>
UNITED AUTO GROUP, INC.
Consolidated Balance Sheets
(In thousands except per share data)
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
(Unaudited)
December 31, June 30,
-------------------- ---------
1994 1995 1996
--------- --------- ---------
ASSETS
Auto Dealerships
Cash and cash equivalents $ 751 $ 4,697 $ 9,301
Accounts receivable 19,588 27,349 48,209
Inventories 96,065 101,556 121,289
Deferred income taxes 5,153 5,333
Other current assets 2,130 2,894 2,848
--------- --------- ---------
Total current assets 118,534 141,649 186,980
Property and equipment, net 12,072 12,146 14,609
Intangible assets, net 23,018 48,774 66,131
Due from related parties 10,388 14,578 15,727
Other assets 5,754 10,128 11,090
--------- --------- ---------
Total Auto Dealership assets 169,766 227,275 294,537
--------- --------- ---------
Auto Finance
Cash and cash equivalents 32 531 1,530
Finance assets, net 7,555 775
Other assets 544 666 14,262
--------- --------- ---------
Total Auto Finance assets 576 8,752 16,567
--------- --------- ---------
Total assets $ 170,342 $ 236,027 $ 311,104
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Auto Dealerships
Floor plan notes payable $ 92,310 $ 97,823 $ 129,009
Short-term debt 20,050 16,187 15,069
Accounts payable 7,638 12,393 20,626
Accrued expenses 3,922 9,875 14,150
Current portion of long-term debt 1,905 3,169 2,463
--------- --------- ---------
Total current liabilities 125,825 139,447 181,317
Long-term debt 6,735 24,073 38,694
Due to related party 750 1,109 1,191
Deferred income taxes 2,279 2,279
--------- --------- ---------
Total Auto Dealership liabilities 133,310 166,908 223,481
--------- --------- ---------
Auto Finance
Short-term debt 4,661 2,516
Accounts payable and other liabilities 285 590 1,502
--------- --------- ---------
Total Auto Finance liabilities 285 5,251 4,018
--------- --------- ---------
Minority interests subject to repurchase 7,962 13,608 15,299
--------- --------- ---------
Stock purchase warrants 1,020 1,597
--------- --------- ---------
Commitments and contingent liabilities
Stockholders' Equity
Class A Convertible Preferred Stock, $0.0001 par value, shares authorized 4,911; shares
issued and outstanding 1,972 and 3,651 at December 31, 1994 and 1995, respectively 1 1 1
Voting Common Stock, $0.0001 par value, shares authorized 15,100; shares issued and
outstanding 1,529 and 2,583 at December 31, 1994 and 1995, respectively 1 1 1
Non-voting Common Stock, $0.0001 par value, authorized 1,025; none issued and
outstanding
Additional paid-in-capital 30,827 54,748 68,319
Accumulated deficit (2,044) (5,510) (1,612)
--------- --------- ---------
Total stockholders' equity 28,785 49,240 66,709
--------- --------- ---------
Total liabilities, minority interests subject to repurchase, stock purchase warrants
and stockholders' equity $ 170,342 $ 236,027 $ 311,104
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
UNITED AUTO GROUP, INC.
Consolidated Statements of Operations
(In thousands except per share data)
<TABLE>
<CAPTION>
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Unaudited)
Years ended Six months ended
December 31, June 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
Auto Dealerships
Vehicle sales $ 528,484 $ 644,380 $ 716,394 $ 310,217 $ 535,173
Finance and insurance 24,666 27,518 29,806 14,499 22,339
Service and parts 52,941 59,731 59,421 28,023 40,427
--------- --------- --------- --------- ---------
Total revenues 606,091 731,629 805,621 352,739 597,939
Cost of sales, including floor plan
interest for the years ended December 31,
1993, 1994 and 1995 of $3,754, $4,557 and
$5,784, respectively 537,688 647,643 720,344 316,525 531,560
--------- --------- --------- --------- ---------
Gross profit 68,403 83,986 85,277 36,214 66,379
Selling, general and administrative
expenses 66,910 80,415 90,586 41,941 56,975
--------- --------- --------- --------- ---------
Operating income (loss) 1,493 3,571 (5,309) (5,727) 9,404
Related party interest income 3,039 1,519 1,548
Other interest expense (1,233) (860) (1,438) (402) (2,049)
Equity in income (loss) of uncombined
investees (2,899) (831) (508) 75
--------- --------- --------- --------- ---------
Income (loss) before income taxes -- Auto
Dealerships 260 (188) (4,539) (5,118) 8,978
--------- --------- --------- --------- ---------
Auto Finance
Revenues 2 530 101 1,029
Interest expense (174) (13) (176)
Operating and other expenses (618) (1,738) (789) (1,202)
--------- --------- --------- --------- ---------
Loss before income taxes -- Auto Finance (616) (1,382) (701) (349)
--------- --------- --------- --------- ---------
Total Company
Income (loss) before minority interests
and provision for income taxes 260 (804) (5,921) (5,819) 8,629
Minority interests (117) (887) 366 917 (1,734)
Benefit (provision) for income taxes (47) 2,089 (2,997)
--------- --------- --------- --------- ---------
Net income (loss) $ 96 $ (1,691) $ (3,466) $ (4,902) $ 3,898
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income (loss) per common share $ .07 $ (.51) $ (.70) $ (1.19) $ .49
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average number of common shares
outstanding 1,317 3,296 4,905 4,105 7,923
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
UNITED AUTO GROUP, INC.
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
Convertible Preferred
Stock Common Stock
---------------------- ---------------------- Additional Total
Issued Issued Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
--------- ----------- --------- ----------- ----------- ----------- ----------
Balances, December 31, 1992 0 1,281,250 $ 1 $ 15,999 $ (449) $ 15,551
Issuance of stock for cash 1,570,000 $ 1 62,500 14,616 14,617
Distribution to stockholder (5,000) (5,000)
Net income for 1993 96 96
--------- --- --------- --- ----------- ----------- ----------
Balances, December 31, 1993 1,570,000 1 1,343,750 1 25,615 (353) 25,264
Issuance of stock for cash 401,611 185,486 5,212 5,212
Net loss for 1994 (1,691) (1,691)
--------- --- --------- --- ----------- ----------- ----------
Balances, December 31, 1994 1,971,611 1 1,529,236 1 30,827 (2,044) 28,785
Issuance of stock for cash 1,679,118 1,053,549 23,921 23,921
Net loss for 1995 (3,466) (3,466)
--------- --- --------- --- ----------- ----------- ----------
Balances, December 31, 1995 3,650,729 1 2,582,785 1 $ 54,748 (5,510) 49,240
Issuance of stock for cash
(Unaudited) 840,325 717,017 13,571 13,571
Net income for the six months
ended June 30, 1996 (Unaudited) 3,898 3,898
--------- --- --------- --- ----------- ----------- ----------
Balances, June 30, 1996
(Unaudited) 4,491,054 $ 1 3,299,802 $ 1 $ 68,319 $ (1,612) $ 66,709
--------- --- --------- --- ----------- ----------- ----------
--------- --- --------- --- ----------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
UNITED AUTO GROUP, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
(Unaudited)
Years ended December 31, Six months ended June 30,
----------------------------------------------------- ------------------------------------------
1993 1994 1995 1995 1996
--------- -------------------- -------------------- -------------------- --------------------
Auto Auto Auto Auto Auto Auto Auto Auto Auto
Dealerships Dealerships Finance Dealerships Finance Dealerships Finance Dealerships Finance
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating
activities:
Net income
(loss) $ 96 $ (1,075) $ (616) $ (2,084) $ (1,382) $ (4,201) $ (701) $ 4,247 $ (349)
Adjustments to
reconcile net
income (loss)
to net cash
used in
operating
activities:
Depreciation
and
amortization 924 2,225 20 2,536 284 1,109 62 1,619 90
Deferred
income tax
benefit (2,374)
Related party
interest
income (3,039)
Accrued
interest
related
parties...... (1,519) (1,548)
Loss on sale
of interest
in uncombined
investee 117 348 253
Equity in
income (loss)
of uncombined
investee 2,782 483 255 (75)
Gain on sales
of loans (129) (510)
Loans
originated (18,769) (3,219) (44,075)
Loans repaid
or sold 11,236 339 37,456
Minority
interests 117 887 (366) (917) 1,734
Changes in
operating
assets and
liabilities:
Accounts
receivable (8,315) (7,042) (1,524) (2,343) (16,091)
Inventories (23,982) (12,417) 16,319 (2,054) (2,494)
Floor plan
notes payable 22,458 14,874 (14,753) 3,020 16,651
Accounts
payable and
accrued
expenses (4,431) (1,239) 288 5,240 302 4,223 (79) 8,430 910
Other 460 (879) (5) (90) 411 (499) 38 (598) 2,670
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net cash
provided by
(used in)
operating
activities (12,673) (1,767) (313) 696 (8,047) (2,673) (3,560) 11,875 (3,808)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Investing
activities:
Purchase of
equipment and
improvements (1,624) (4,675) (562) (1,496) (243) (1,158) (117) (1,916) (153)
Dealership
acquisitions (1,975) (755) (19,921) (92) (20,803)
Investment in
auto finance
subsidiary (907) 907 (4,592) 4,592 (4,125) 4,125 (9,400) 9,400
Funding for
subsequent
acquisition (1,840)
Advances to
related parties (1,775) (5,923) (1,496) (64) 400
Investment and
advances to
uncombined
investee (4,087) (799) 102 (1,438)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net cash
provided by
(used in)
investing
activities (5,374) (16,347) 345 (30,144) 4,349 (5,337) 4,008 (33,157) 9,247
--------- --------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
F-7
<PAGE>
UNITED AUTO GROUP, INC.
Consolidated Statements of Cash Flows (Continued)
(Dollars in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------
(Unaudited)
Six months
ended June
Years ended December 31, 30,
-------------------------------------------------------- ----------
1993 1994 1995 1995
---------- --------------------- --------------------- ----------
Auto Auto Auto Auto Auto Auto
Dealerships Dealerships Finance Dealerships Finance Dealerships
---------- ---------- --------- ---------- --------- ----------
Financing activities:
Proceeds from issuance of stock 15,209 5,450 25,220 10,079
Proceeds from borrowings of long-term debt 2,320 4,299 16,300 410
Deferred financing costs (2,549)
Net borrowings (repayments) of short-term debt 11,023 9,027 (3,863) (3,129)
Payments of long-term debt and capitalized lease
obligations (2,680) (1,139) (2,073) (1,063)
Distribution to stockholders and minority interest (5,328) (42)
Advances from affiliates 6,162 359 1,187
Advances to affiliates (7,389)
Borrowings of warehouse credit line 14,202
Payments of warehouse credit line (10,005)
---------- ---------- --------- ---------- --------- ----------
Net cash provided by financing activities 26,706 10,206 0 33,394 4,197 7,484
---------- ---------- --------- ---------- --------- ----------
Net increase (decrease) in cash and cash
equivalents 8,659 (7,908) 32 3,946 499 (526)
Cash and cash equivalents, beginning of year 0 8,659 0 751 32 751
---------- ---------- --------- ---------- --------- ----------
Cash and cash equivalents, end of year $ 8,659 $ 751 $ 32 $ 4,697 $ 531 $ 225
---------- ---------- --------- ---------- --------- ----------
---------- ---------- --------- ---------- --------- ----------
<CAPTION>
1996
---------------------
Auto Auto Auto
Finance Dealerships Finance
--------- ---------- ---------
Financing activities:
Proceeds from issuance of stock 15,986
Proceeds from borrowings of long-term debt 13,220
Deferred financing costs (908)
Net borrowings (repayments) of short-term debt (1,118)
Payments of long-term debt and capitalized lease
obligations (1,376)
Distribution to stockholders and minority interest
Advances from affiliates 82
Advances to affiliates
Borrowings of warehouse credit line 45 30,880
Payments of warehouse credit line (35,320)
--------- ---------- ---------
Net cash provided by financing activities 45 25,886 (4,440)
--------- ---------- ---------
Net increase (decrease) in cash and cash
equivalents 493 4,604 999
Cash and cash equivalents, beginning of year 32 4,697 531
--------- ---------- ---------
Cash and cash equivalents, end of year $ 525 $ 9,301 $ 1,530
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements
(Dollars in thousands)
1. Organization:
United Auto Group, Inc. ("UAG" or the "Company") is engaged in the sale of new
and used motor vehicles, finance and insurance products, vehicle service and
parts and aftermarket products. Through its wholly-owned consumer finance
subsidiary, Atlantic Auto Finance Corporation ("AAFC"), UAG also purchases,
sells and services financing contracts on new and used vehicles originated by
both UAG and third party dealerships.
The Company has through its wholly owned subsidiaries, DiFeo Partnership, Inc.
and United Landers, Inc., a 70% interest in the partnerships within the United
DiFeo Automotive Group (the "DiFeo Group") and an 80% interest in the
corporations of Landers Auto Sales, Inc. ("Landers"), respectively. The DiFeo
Group is comprised of twenty-seven automobile dealerships, organized as
partnerships, and a management partnership. These partnerships operate in
Connecticut, New Jersey and New York and are under common ownership, management
and control. Landers is comprised of two automobile dealerships organized as
corporations, operating in Arkansas.
The Company operates dealerships which hold franchise agreements with a number
of automotive manufacturers. In accordance with the individual franchise
agreement, each dealership is subject to certain rights and restrictions typical
of the industry. The ability of the manufacturers to influence the operations of
the dealerships or the loss of a franchise agreement could have a negative
impact on operating results of the Company.
2. Summary of Significant Accounting Policies:
ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The accounts which require the
use of significant estimates are receivables, inventory, taxes, intangibles and
accrued expenses.
INTERIM FINANCIAL STATEMENTS (UNAUDITED):
The interim unaudited financial statements reflect adjustments, consisting only
of normal recurring accruals, which are, in the opinion of the Company's
management, necessary for a fair presentation of the financial position and
results of operations for the periods presented. Operating results for any
interim period are not necessarily indicative of the results for a full year.
PRINCIPLES OF CONSOLIDATION:
These consolidated financial statements include all significant majority-owned
subsidiaries and reflect the operating results, assets, liabilities and cash
flows for two business segments: auto dealerships and financial services. The
assets and liabilities of the auto dealerships segment are classified as current
or noncurrent and those of the financial services segment are unclassified. All
material accounts and transactions among the consolidated affiliates have been
eliminated. Affiliated companies that are 20% to 50% owned are accounted for
under the equity method of accounting.
RECLASSIFICATIONS:
Certain reclassifications have been made to 1993 and 1994 amounts to conform
them to the 1995 presentation.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include all highly-liquid investments that have an
original maturity of three months or less at the date of purchase.
F-9
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
2. Summary of Significant Accounting Policies: (Continued)
REVENUE RECOGNITION -- AUTO DEALERSHIPS:
Revenue is recognized by the Company when vehicles are delivered to consumers or
motor vehicle service work is performed and parts are delivered. Finance and
insurance revenues are recognized upon the sale of the finance or insurance
contract. An allowance for chargebacks against revenue recognized from Company
originated and sold customer finance contracts is established during the period
in which the related revenue is recognized.
REVENUE RECOGNITION --AUTO FINANCE:
Revenue from finance receivables is recognized over the term of the receivable
using the interest method. Certain loan origination costs are deferred and
amortized over the term of the related receivable as a reduction in financing
revenue. Generally, finance receivables are accumulated by the Company until
they attain a value in excess of $5,000, at which time they are sold into a
commercial paper conduit (loan warehouse facility). An allowance for financing
losses on receivables is provided for the period from the date of purchase to
the date of sale. This allowance is shown as a reduction in receivables held for
sale. Revenue is recognized upon sale to the conduit. Interest is received and
credited to interest income based on the daily principal balance of the
receivables outstanding. Loan servicing fees on receivables sold to the conduit
are recognized as collected.
INVENTORY VALUATION:
Inventories are stated at the lower of cost or market with cost determined by
the following methods:
<TABLE>
<CAPTION>
------------------------
<S> <C>
Inventory Component Valuation Method
- --------------------------- ------------------------
New vehicles Last in, first out
(LIFO)
Used vehicles Specific identification
Parts, accessories and Factory list price
other
</TABLE>
New vehicle and parts inventories are purchased primarily from the related
vehicle manufacturer.
PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost and depreciated over their estimated
useful lives, primarily using the straight-line method. Useful lives for
purposes of computing depreciation are:
<TABLE>
<S> <C>
Leasehold improvements and -- Economic life or life of
equipment under capital the lease, whichever is
lease shorter.
Equipment, furniture and -- 5 to 7 years
fixtures
</TABLE>
Expenditures for repairs and maintenance which increase the useful life or
substantially increase serviceability of the asset are capitalized. When
equipment is sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from their respective accounts, and any resulting gain
or loss is included in the statement of operations.
INCOME TAXES:
The Company provides for income taxes in accordance with Statement of Financial
Accounting Standard No. 109 "Accounting for Income Taxes" ("SFAS 109") which
requires the asset and liability method of accounting for income taxes. Deferred
tax assets or liabilities are computed based upon the difference between the
financial statement and income tax basis of assets and liabilities using enacted
tax rates. The Company provides a valuation allowance for net deferred tax
assets when it will be more likely than not that taxable income will not be
sufficient to realize such assets.
F-10
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
2. Summary of Significant Accounting Policies: (Continued)
INTANGIBLE ASSETS:
Intangible assets consists of excess of cost over net assets acquired which is
being amortized on a straight-line basis over the estimated benefit period of 40
years. The Company periodically reviews these costs to assess recoverability.
Losses in value, if any, are charged to operations in the period such losses are
determined to be permanent. Amortization expense was $549, $570 and $904 for the
years ended December 31, 1993, 1994 and 1995.
The Company's policy with respect to assessing whether there has been a
permanent impairment in the value of excess cost over net assets acquired is to
compare the carrying value of a business' excess cost over net assets acquired
with the anticipated undiscounted future cash flows from operating activities of
the business. Factors considered by the Company in performing this assessment
include current operating income, trends and other economic factors.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company's financial instruments consist of cash and cash equivalents and
debt. The carrying amount of these financial instruments approximates fair value
due either to length of maturity or existence of variable interest rates that
approximates prevailing market rates.
LONG-LIVED ASSETS:
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of" ("SFAS
121") requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. SFAS 121 was adopted in 1996 and did not have a
material effect on the Company's results of operations, cash flows or financial
position.
AUTO FINANCE -- FINANCE ASSETS:
All finance receivables are sold principally into a commercial paper conduit
through the issuance of a certificate indicating ownership of the contracts by
CXC Incorporated ("CXC"), a Citibank, N. A. related entity. These contracts are
carried at the lower of their principal balance outstanding or market value.
Market value is estimated based on the characteristics of the finance
receivables held for sale and the terms of recent sales of similar finance
receivables computed by the Company. While finance receivables are being
accumulated for sale into the conduit, they are pledged against a liquidity
credit line with Citibank, N.A. As of December 31, 1995, none of the finance
receivables qualified as impaired, subject to the terms set forth in Statement
of Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan."
The Company is required to hedge each pool of finance receivables sold to CXC.
Swaps against the commercial paper rate have been used to provide protection for
the net yield in each pool as required by CXC. The differential to be paid or
received as interest rates change is included in the calculation of excess
servicing and amortized over the life of the pool. The notional amounts of
outstanding hedges were $0 and $10,987 at December 31, 1994 and 1995,
respectively. There were no swap agreements outstanding as of December 31, 1994.
The fair value of interest rate swap agreements represented an unrecorded
liability of $170 as of December 31, 1995.
The Company has credit and interest rate risk on finance receivables held for
sale. The Company has a program of credit review prior to final approval of
specific loans and maintains reserves as appropriate. Interest rate risk is
mitigated by the short period of time that receivables are held.
NET INCOME (LOSS) PER COMMON SHARE:
The computations of net income (loss) per share are based on the weighted
average number of common shares, the weighted average number of preferred shares
and warrants outstanding to the extent dilutive.
F-11
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
3. Acquisition of Landers Auto Sales, Inc.:
Effective August 1, 1995, the Company acquired an 80% interest in Landers for
$20,000 in cash and $4,014 in notes payable through August 2000. The acquisition
was accounted for under the purchase method and the accompanying financial
statements reflect the results of operations from the date of acquisition. The
excess of purchase price over the underlying estimated fair value of net assets
acquired was $25,777. In addition, if Landers achieves certain levels of annual
pre-tax earnings, the Company will be obligated to make additional payments
during each of the next three years. Any additional purchase price incurred
under the terms of this agreement will be recorded as additional cost in excess
of net assets acquired.
The following unaudited pro forma summary presents the consolidated results of
operations of the Company for 1994 and 1995 with pro forma adjustments as if the
acquisition had been consummated as of January 1, 1994.
<TABLE>
<CAPTION>
----------------------
<S> <C> <C>
December 31,
----------------------
1994 1995
---------- ----------
Revenues $ 960,541 $ 969,989
Income before minority interests and provision for income taxes 4,921 502
</TABLE>
The foregoing pro forma results are not necessarily indicative of results of
operations that would have been reported had the acquisition been completed at
January 1, 1994.
4. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
-----------------------------------
<S> <C> <C> <C>
June 30,
December 31, 1996
---------------------- -----------
1994 1995 (Unaudited)
---------- ---------- -----------
New vehicles $ 83,393 $ 74,789 $ 86,588
Used vehicles 12,098 24,917 33,332
Parts, accessories and other 5,154 6,220 6,492
---------- ---------- -----------
100,645 105,926 126,412
Cumulative LIFO reserve (4,580) (4,370) (5,123)
---------- ---------- -----------
$ 96,065 $ 101,556 $ 121,289
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
For the years ended December 31, 1993, 1994 and 1995 and for the six months
ended June 30, 1995 and 1996, the effect of using the LIFO method as compared to
the First In, First Out (FIFO) method was to decrease net income by $1,146 in
1993, increase net loss by $1,446 in 1994 and decrease net loss by $290 in 1995,
increase net loss by $350 in June 1995 and decrease net income by $753 in June
1996.
F-12
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
5. Property and Equipment:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
December 31,
--------------------
1994 1995
--------- ---------
Equipment $ 4,516 $ 4,602
Furniture and fixtures 957 1,237
Equipment under capital lease 2,380 2,380
Leasehold improvements 6,696 7,705
--------- ---------
Total 14,549 15,924
Less: Accumulated depreciation and amortization 2,477 3,778
--------- ---------
Total property and equipment, net $ 12,072 $ 12,146
--------- ---------
--------- ---------
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1993,
1994 and 1995 was $1,052, $1,497 and $1,632, respectively. Accumulated
amortization, included in accumulated depreciation and amortization above, on
equipment under capital lease was approximately $747 and $1,072 at December 31,
1994 and 1995, respectively.
6. Other Assets:
Auto dealerships other assets consist of the following:
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
December 31,
--------------------
1994 1995
--------- ---------
Restricted cash $ $ 1,840
Investment and advances in uncombined subsidiary 2,134 3,228
Security deposits 679 956
Deferred financing costs 1,685 2,934
Other 1,256 1,170
--------- ---------
$ 5,754 $ 10,128
--------- ---------
--------- ---------
</TABLE>
Restricted cash represents the proceeds from capital stock issued for the
purpose of financing an acquisition completed in January 1996.
Equity in uncombined subsidiary represents net investment, services provided,
cash advances and used vehicle transactions with dealerships where the Company
does not own a majority interest.
7. Floor Plan Notes Payable:
The DiFeo Group vehicle floor plan agreement is with General Motors Acceptance
Corporation ("GMAC"). The Landers new vehicle floor plan agreement is with
Chrysler Credit Corporation ("Chrysler"). The Landers used vehicle floor plan
agreements are with Chrysler and Benton State Bank.
F-13
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
7. Floor Plan Notes Payable: (Continued)
Floor plan notes payable reflects amounts for the purchase of specific vehicle
inventory and consists of the following:
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
December 31,
--------------------
1994 1995
--------- ---------
GMAC, bearing interest at prime commercial lending rate plus 1%. The borrowing rate was 9.75%
at December 31, 1995 $ 92,310 $ 63,728
Chrysler, bearing interest at LIBOR plus 2.75% or prime plus 0.5%, whichever is less. The
borrowing rate was 8.75% at December 31, 1995 31,354
Benton State Bank, bearing interest at the prime commercial lending rate. The borrowing rate
was 8.75% at December 31, 1995 2,741
--------- ---------
$ 92,310 $ 97,823
--------- ---------
--------- ---------
</TABLE>
The floor plan agreements grant a collateral interest in substantially all of
the Company's inventory and generally require the repayment of debt within two
weeks of inventory sales. In addition, the GMAC floorplan agreement provides the
DiFeo Group with additional borrowing facilities beyond the floor plan agreement
(see Notes 8 and 9).
Included in the Chrysler vehicle floor plan at December 31, 1995 is $6,928
payable to a related party participating in the floor plan agreements. This was
repaid in May 1996.
The weighted average interest rate on floor plan borrowings was 7.1% and 8.9%
for the years ended December 31, 1994 and 1995, respectively.
8. Short-Term Debt:
The DiFeo Group and GMAC have entered into additional short-term and long-term
debt agreements which share in the collateral interest granted under the floor
plan arrangement. One such agreement permitted maximum borrowings of $15,000 at
December 31, 1994 and $10,000 at December 31, 1995, subject to a formula based
on parts and used vehicle collateral limitations, and includes covenants that
require the maintenance of tangible net worth and other financial ratios. At
December 31, 1994 and 1995, $15,000 and $8,187, respectively, were outstanding
under this agreement. These borrowings are made at the prime rate plus 1.25%.
The borrowing rate at December 31, 1995 was 10.0%.
The Company has a $9,000 revolving line of credit with Morgan Guaranty Trust
Company of New York that expires on September 30, 1996. At December 31, 1995,
$8,000 was outstanding under this agreement. The line of credit bears interest
at a variable rate, the prime rate plus two or the Federal Funds rate plus two
and one half percent, whichever is greater. The borrowing rate at December 31,
1995 was 10.5%.
The weighted average interest rate on short term borrowings was 7.1% and 10.25%
for the years ended December 31, 1994 and 1995, respectively.
In addition, AAFC maintains a $5,000 loan arrangement with Citibank, N.A. for
the purpose of purchasing finance receivables. The amount borrowed by AAFC may
not exceed 93% of the outstanding principal balance of eligible receivables
pledged to secure the loan. The total amount outstanding under this arrangement
at December 31, 1994 and 1995 was $0 and $4,197, respectively.
F-14
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
9. Long-Term Debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
---------------------------------
<S> <C> <C> <C>
June 30,
December 31, 1996
-------------------- -----------
1994 1995 (Unaudited)
--------- --------- -----------
Series A and B Senior Notes due 2003, net of unamortized discount of $1,007 $ $ 15,293 $ 27,988
Landers term notes, payable in monthly installments through August 2000, bearing
interest at 8.0% 3,697 3,302
Term note, payable July 1998 bearing interest at 8 1/2% 2,100
GMAC term loan, payable in equal monthly installments of $17 through March 1998
with a final payment of $1,000 in April 1998; interest at the prime rate plus
1.0% 1,650 1,450 1,350
GMAC term loan, payable in equal monthly installments of $25 through June 1999
with a final payment of $1,500 in July 1999; interest at the prime rate plus
1.0% 2,850 2,550 2,400
Capitalized lease obligations 2,243 1,686 1,444
Other installment loans 1,897 2,566 2,573
--------- --------- -----------
8,640 27,242 41,157
Less: Current portion 1,905 3,169 2,463
--------- --------- -----------
$ 6,735 $ 24,073 $ 38,694
--------- --------- -----------
--------- --------- -----------
</TABLE>
The GMAC term loans share in the security interest granted to the lender under
the floor plan arrangement.
Maturities of long-term debt for the next five years and thereafter are as
follows:
<TABLE>
<CAPTION>
---------
<S> <C>
Amount
---------
1996 $ 3,169
1997 2,166
1998 2,009
1999 2,484
2000 2,121
2001 and thereafter 16,300
---------
$ 28,249
---------
---------
</TABLE>
On September 22, 1995, the Company finalized a placement on $35,000 of Series A
and B Senior Notes (collectively referred to as the "Notes") due in 2003 under
which Notes are available to be issued through March 1997. The Company initially
issued $16,300 of the Notes at 12.0% with an original issue discount of $1,020,
which is being amortized to interest expense over the term of the Notes,
increasing the effective interest rate on such Notes to 12.8%. Such interest
rate will increase by 2.0% if certain franchisor approvals are not obtained by
March 1997 and would be effective as of the date of original issuance of the
Notes. The Notes are callable by the Company at a premium as determined pursuant
to the placement agreement of up to 10% of the principal balance. The Notes also
contain covenants that require the maintenance of certain financial ratios and
restrict additional indebtedness.
The Notes contain detachable warrants, whereby each warrant grants the holder
the option to purchase UAG Common Stock at $.01 per share. The warrants become
exercisable after certain franchisor approvals are received and were recorded at
their fair value at the date of issuance. At December 31, 1995, there were
526,039 warrants outstanding. The warrants expire in 2003. If certain franchisor
approvals are not received by March 1997, the
F-15
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
9. Long-Term Debt: (Continued)
warrants will convert to contingent value obligations ("CVO's"). The CVO's are
intended to provide the holder with economic benefits substantially similar to
those that would have been realized upon exercise of the warrants and sale of
the underlying Common Stock. The warrants have been recorded as temporary equity
at their fair value at their dates of issuance due to the CVO feature. No
accretion to the carrying amount has been made as franchisors' approvals are
probable.
10. Operating Lease Obligations:
The Company leases its dealership facilities and corporate office under
operating lease agreements primarily with related parties. These leases are
noncancelable and expire on various dates through 2012. The lease agreements are
subject to renewal under essentially the same terms and conditions as the
original lease.
The following is a schedule by year of future minimum rental payments required
under the operating leases as of December 31, 1995.
<TABLE>
<CAPTION>
---------
<S> <C>
Amount
---------
1996 $ 5,859
1997 6,002
1998 6,391
1999 6,470
2000 5,286
2001 and thereafter 17,093
---------
$ 47,101
---------
---------
</TABLE>
Total rent expense for the years ended December 31, 1993, 1994 and 1995
approximated $6,367, $6,302 and $7,113, respectively.
Rental payments to related parties were $4,272 and $4,502 for the years ended
December 31, 1994 and 1995, respectively.
11. Minority Interests Subject to Repurchase:
As result of the minority ownership of the DiFeo Group and Landers, the Company
has recorded minority interests. The minority owners have the right to require
repurchase of their interest by UAG at fair value if they are not converted into
UAG common stock in connection with an initial public offering or equity
offering. The minority interests were recorded at fair value at the dates of
acquisition and such amounts are adjusted for their share of the applicable
earnings and losses. If repurchased, the difference between the recorded value
and the repurchase amount will adjust the recorded amount of assets and
liabilities including the cost in excess of net assets acquired in accordance
with purchase accounting.
12. Other Related Party Transactions:
The Company was owed $10,388, $14,578 and $15,727 from the minority shareholders
and certain of their related entities as of December 31, 1994 and 1995 and June
30, 1996, respectively, arising out of advances for certain business
acquisitions and working capital advances for dealerships in which the Company
has no ownership. Related party interest income represents interest on the above
mentioned advances and advances to the uncombined investee. The Company owes a
stockholder $750, $1,109 and $1,191 as of December 31, 1994 and 1995 and June
30, 1996, respectively, for working capital advances. Such indebtedness is
subject to offset against a guarantee of $2,000 third party indebtedness to the
Company.
F-16
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
13. Stock Options:
Options have been granted to purchase 127,200 shares of the Company's Common
Stock under an employment agreement at an exercise price of twelve dollars and
fifty cents per share. These options vest over four years. At December 31, 1995,
31,800 options were exercisable.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 "Accounting for Stock Based Compensation"
("SFAS 123"). SFAS 123 establishes financial and reporting standards for stock
based compensation plans. The Company anticipates adopting the disclosure only
provisions of this standards during 1996.
14. Stockholders' Equity:
On December 29, 1993, UAG and certain investors entered into a private placement
agreement (the "Agreement") whereby the investors committed to purchase over a
period of time an aggregate 4,911,000 shares of Class A Convertible Preferred
Stock (the "Preferred Stock") at ten dollars per share. The Preferred Stock can
be issued as UAG calls upon the funds committed by the investors pursuant to the
Agreement.
If by December 29, 1999 the Company has not (i) redeemed at least 50% of the
Preferred Stock, (ii) consummated a Qualified Public Offering (as defined in the
Company's Certificate of Incorporation) or (iii) sold all or substantially all
of the Company's assets or merged with or into another entity in a transaction
in which 50% or more of the voting control of the Company is transferred
(collectively a "Triggering Event"), certain rights of the holders of the
Company's Preferred Stock (the "Preferred Investors") under the Agreement will
be triggered. Specifically, the Preferred Investors will receive warrants to
purchase, at a nominal price, 50% of the fully diluted equity of the Company
(after exercise of such warrants) in the form of Common Stock. If a Triggering
Event does not occur by December 29, 2000, the Preferred Investors will receive
warrants to purchase, at a nominal price, an additional 25% of the fully diluted
equity of the Company (after exercise of such warrants) in the form of Common
Stock. In lieu of such warrants, after December 29, 1999, the Preferred
Investors may elect to receive promissory notes evidencing indebtedness of the
Company in an amount equal to 50% of the fair market value of the fully diluted
equity of the Company. If a Triggering Event does not occur by December 29,
2000, in lieu of warrants, the Preferred Investors may elect to receive
promissory notes in an amount equal to an additional 25% of the fair market
value of the fully diluted equity of the Company. Upon the occurrence of any of
these events, the holders of the warrants, the warrant shares or the CVOs could
experience significant diminution of value, although the warrants contain
certain anti-dilution protection in the event the above-described warrants are
issued. The Preferred Stock has been included as a component of equity as these
rights are incremental and the Preferred Shares will remain outstanding.
The Agreement also provides a commitment by existing common stockholders to
purchase an aggregate 2,250,000 shares of Common Stock at eight dollars per
share. Such shares must be purchased in proportion to Preferred Stock. Common
Stock dividends are payable only with the approval of the Preferred Investors.
F-17
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
15. Income Taxes:
The provision (benefit) for income taxes consists of the following components:
<TABLE>
<CAPTION>
-----------------------------------
<S> <C> <C> <C>
Years ended December 31,
-----------------------------------
1993 1994 1995
----- ----- ---------
Currently payable:
Federal
State and local $ 47 $ 285
-- -
---------
Total currently payable 0 0 285
-- -
---------
Deferred tax liability (asset):
Federal (2,374)
State and local 47
-- -
---------
Total deferred 47 0 (2,374)
-- -
---------
Total (benefit) provision $ 47 $ 0 $ (2,089)
-- -
-- -
---------
---------
</TABLE>
The reasons for the differences between the provision for income taxes using the
Federal statutory income tax rate and the tax provisions reported by the Company
are as follows:
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
Years ended December 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
Tax provisions computed at the Federal statutory income tax rate $ (33) $ 592 $ 1,944
State and local income taxes, net of Federal benefit (186)
Valuation allowance (745) 745
Other (14) 153 (414)
--- --------- ---------
Benefit (provision) for income taxes $ (47) $ 0 $ 2,089
--- --------- ---------
--- --------- ---------
</TABLE>
F-18
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
15. Income Taxes: (Continued)
The Company accounts for income taxes in accordance with SFAS 109. Under SFAS
109, deferred income taxes reflect the estimated tax effect of temporary
differences between assets and liabilities for financial accounting purposes and
those amounts as measured by tax laws and regulations. The components of
deferred income tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
Years ended December
31,
--------------------
1994 1995
--------- ---------
Deferred Tax Assets
Net operating loss carryforward $ 2,214 $ 4,467
Capital loss carryforwards 201
Organization costs 259 241
All other 244
--------- ---------
Total deferred tax assets 2,473 5,153
Valuation allowance (745)
--------- ---------
Net deferred tax assets 1,728 5,153
Deferred Tax Liabilities
Partnership investments (1,728) (2,179)
Sale of finance receivables (47)
All other (53)
--------- ---------
Total deferred tax liabilities (1,728) (2,279)
--------- ---------
Net deferred tax assets (liabilities) $ 0 $ 2,874
--------- ---------
--------- ---------
</TABLE>
The Company had determined, based upon prior taxable losses, that taxable income
would probably not be sufficient to recognize a net deferred tax asset at
December 31, 1993 and 1994. Accordingly, a valuation allowance was provided for
the net deferred tax assets.
Based upon the restructuring of dealerships and other operational measures
implemented in 1995 (see Note 16), the Company determined that it was more
likely than not that future taxable income would be sufficient to fully
recognize the net deferred tax asset at December 31, 1995.
At December 31, 1995, the Company has $10,600 of regular tax, net operating loss
carryforwards for Federal income tax purposes expiring from 2008 to 2010, of
which $3,300 is subject to an annual limitation of approximately $1,300 per year
as imposed by Section 382 of the Internal Revenue Code.
16. Terminated Franchises:
During the first quarter of 1995, the Company commenced a restructuring of its
then unprofitable DiFeo Group. Such restructuring included the termination of
certain unprofitable dealerships, a reduction in personnel of approximately 250
employees, the implementation of pay plans linked to net profit and the
liquidation of outdated inventory. Costs associated with this restructuring were
approximately $680 and $450 for the year ended December 31, 1995 and the six
months ended June 30, 1996, respectively, and were primarily related to
severance, and the program was substantially completed by the fourth quarter of
1995.
F-19
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
17. Supplemental Cash Flow Information:
The following table presents certain supplementary information to the
Consolidated Statements of Cash Flows:
<TABLE>
<CAPTION>
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995
--------- -------------------- --------------------
Auto Auto Auto Auto Auto
Dealerships Dealerships Finance Dealerships Finance
--------- --------- --------- --------- ---------
Supplemental information:
Cash paid for interest $4,901 $6,385 $8,437 $109
Cash paid for income taxes 3
Non-cash financing
activities:
Stock issuance costs
amortized against proceeds
from issuance of stock 883 543 910
Dealership acquisition cost
financed by long-term debt 4,014
Capitalized lease
obligations 1,777 433
Warrants issued 1,020
</TABLE>
18. Summary of Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------
<S> <C> <C> <C>
Three Months Ended
-------------------------------------------------
<CAPTION>
March 31, 1995 June 30, 1995 September 30, 1995
-------------- ------------- ------------------
<S> <C> <C> <C>
Statements of Operational Data:
Auto Dealerships
Total revenues $162,598 $190,142 $239,601
Gross profit 16,544 19,671 26,228
Operating income (loss) (4,285) (1,442) 2,271
Auto Finance
Loss before income taxes (354) (347) (356)
Total Company
Income (loss) before minority interests and provision for
income taxes (4,104) (1,715) 2,074
Net income (loss) (3,231) (1,671) 1,082
Net income (loss) per common share $(.82) $(.38) $.19
<CAPTION>
<S> <C>
December 31, 1995
-----------------
<S> <C>
Statements of Operational Data:
Auto Dealerships
Total revenues $213,280
Gross profit 22,834
Operating income (loss) (1,853)
Auto Finance
Loss before income taxes (325)
Total Company
Income (loss) before minority interests and provision for
income taxes (2,176)
Net income (loss) 354
Net income (loss) per common share $.05
</TABLE>
In the fourth quarter of 1995 the Company determined that it was more likely
than not that future taxable income would be sufficient to fully recognize a net
deferred tax asset of $2,874 (See Note 16).
The net income (loss) per common share amounts are calculated independently for
each of the quarters presented and are not presented in thousands. The sum of
the quarters may not equal the full year net income (loss) per common share
amount.
F-20
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
19. Subsequent Events:
Effective January 1, 1996, the Company acquired a 100% interest in Atlanta
Toyota, Inc. for a purchase price consisting of $9,100 in cash plus $2,400 in
notes. This acquisition was accounted for under the purchase method and the
accompanying financial statements reflect the results of operations from the
date of acquisition. In order to finance the acquisition, the Company issued
additional Preferred Stock and Common Stock in the amount of $6,100 and issued
Notes in the amount of $4,400 at an interest rate of 11.60%.
On May 1, 1996, the Company acquired a 100% interest in Steve Rayman Nissan,
Inc. for a purchase price of $11,500 in cash. This acquisition will be accounted
for under the purchase method and the financial statements will reflect the
results of operations from the date of acquisition. The dealership has been
renamed United Nissan. In order to finance the acquisition, the Company issued
additional Preferred Stock and Common Stock in the amount of $7,380 and issued
Notes in the amount of $4,620 at an interest rate of 11.95%.
The following unaudited pro forma summary presents the consolidated results of
operations of the Company, Landers and the aforementioned acquisitions for 1994
and 1995 with pro forma adjustments as if these transactions had been
consummated as of January 1, 1994.
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
December 31,
--------------------
1994 1995
--------- ---------
Revenues $1,122,463 $1,144,823
Income before minority interests and provision
for income taxes 6,678 4,187
</TABLE>
The foregoing pro forma results are not necessarily indicative of results of
operations that would have been reported had the acquisitions been completed at
January 1, 1994.
F-21
<PAGE>
Report of Independent Accountants
To the Stockholders of
Landers Auto Sales, Inc.
We have audited the accompanying balance sheets of Landers Auto Sales, Inc. as
of July 31, 1995 and December 31, 1994 and the related statements of operations,
retained earnings and cash flows for the period ended July 31, 1995 and the
years ended December 31, 1994 and 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Landers Auto Sales, Inc. as of
July 31, 1995 and December 31, 1994 and the results of its operations and its
cash flows for the period ended July 31, 1995 and the years ended December 31,
1994 and 1993 in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Memphis, Tennessee
May 31, 1996
F-22
<PAGE>
LANDERS AUTO SALES, INC.
Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
------------------------
<S> <C> <C>
December 31, July 31,
1994 1995
------------- ---------
Assets:
Current Assets
Cash $ 3,229 $ 2,278
Accounts receivable 6,948 6,593
Inventories 26,871 22,433
Other current assets 29
------------- ---------
Total current assets 37,048 31,333
------------- ---------
Property and equipment, net 871 927
Intangible assets 55 49
------------- ---------
Total assets $ 37,974 $ 32,309
------------- ---------
------------- ---------
Liabilities and stockholders' equity:
Current Liabilities
Floor plan notes payable $ 26,328 $ 21,384
Current portion of long-term debt 88 115
Due to stockholders 2,669 2,046
Accounts payable 1,374 1,337
Accrued expenses 959 1,313
Income taxes payable 1,623 336
Accrued dividends 1,545
------------- ---------
Total current liabilities 33,041 28,076
------------- ---------
Long-term debt -- net of current portion 187 239
------------- ---------
Total liabilities 33,228 28,315
------------- ---------
Commitments and contingent liabilities
Stockholders' equity:
Common stock, no par value; authorized 100 shares, issued and outstanding 10 shares 805 805
Retained earnings 3,941 3,189
------------- ---------
Total stockholders' equity 4,746 3,994
------------- ---------
Total liabilities and stockholders' equity $ 37,974 $ 32,309
------------- ---------
------------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE>
LANDERS AUTO SALES, INC.
Statements of Operations
(Dollars in thousands)
<TABLE>
<CAPTION>
----------------------------------
<S> <C> <C> <C>
Period
Years ended ended July
December 31, 31,
---------------------- ----------
1993 1994 1995
---------- ---------- ----------
Sales $ 163,343 $ 228,912 $ 164,368
Cost of sales, including floor plan interest for the years ended December 31,
1993 and 1994 and for the period ended July 31, 1995 of $274, $1,922 and
$1,503, respectively 153,631 208,932 147,566
---------- ---------- ----------
Gross profit 9,712 19,980 16,802
Selling, general and administrative expenses 9,530 15,445 10,132
---------- ---------- ----------
Income from operations 182 4,535 6,670
Other income (expense), net 214 209 242
---------- ---------- ----------
Income before income taxes 396 4,744 6,912
Provision for income taxes 181 1,810 449
---------- ---------- ----------
Net income $ 215 $ 2,934 $ 6,463
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE>
LANDERS AUTO SALES, INC.
Statements of Retained Earnings
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------
<S> <C>
Retained earnings, December 31, 1992 $ 850
Net income for the year 215
------
Retained earnings, December 31, 1993 1,065
Dividends (58)
Net income for the year 2,934
------
Retained earnings, December 31, 1994 3,941
Dividends (7,215)
Net income for the period 6,463
------
Retained earnings, July 31, 1995 $ 3,189
------
------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
LANDERS AUTO SALES, INC.
Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
Period
Years ended ended
December 31, July 31,
-------------------- ---------
1993 1994 1995
--------- --------- ---------
Operating activities:
Net income $ 215 $ 2,934 $ 6,463
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 177 290 159
Amortization 38 27 7
Net loss (gain) on sale of assets 19 (5)
Changes in operating assets and liabilities:
Accounts receivable (2,236) (2,390) 353
Inventories (858) (7,534) 4,439
Other current assets (534) 654 (29)
Floor plan notes payable 1,862 5,954 (4,944)
Accounts payable 523 89 (37)
Accrued expenses 583 292 354
Income taxes payable (319) 1,623 (1,287)
--------- --------- ---------
Net cash provided by (used in) operating activities (549) 1,958 5,473
Investing activities:
Acquisition of property and equipment (365) (414) (76)
Proceeds from sale of assets 13 21
--------- --------- ---------
Net cash used in investing activities (365) (401) (55)
Financing activities:
Payment on debt (30) (96) (76)
Net increase (decrease) in cash overdrafts 1,015 (1,015)
Net increase (decrease) in due to stockholders (67) 2,201 (623)
Dividends paid (5,670)
--------- --------- ---------
Net cash provided by (used in) financing activities 918 1,090 (6,369)
--------- --------- ---------
Net increase (decrease) in cash 4 2,647 (951)
Cash, beginning of period 578 582 3,229
--------- --------- ---------
Cash, end of period $ 582 $ 3,229 $ 2,278
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
LANDERS AUTO SALES, INC.
Statements of Cash Flows -- Supplemental Information
(Dollars in thousands)
<TABLE>
<CAPTION>
---------------------------------------
<S> <C> <C> <C>
Period
Years ended December 31, ended July
-------------------------- 31,
1993 1994 1995
------------ ------------ -----------
Supplemental cash flow information:
Cash paid during the period:
Interest $ 183 $ 1,966 $ 1,525
Income taxes 993 88 1,804
</TABLE>
Supplemental Disclosures of Non-Cash Activities:
During the years ended December 31, 1993 and 1994 and the period ended July 31,
1995, the Company purchased equipment and vehicles totaling $88, $70 and $125,
respectively, through direct financing. During the period ended July 31, 1995,
the Company acquired computer equipment totaling $31 through a capital lease.
During the year ended December 31, 1993, the Company entered into the capital
lease of a computer for $230.
During the year ended December 31, 1994, a Company vehicle was destroyed. The
note relating to the vehicle in the amount of $20 was subsequently paid off by
the insurance company in full.
During the year ended December 31, 1994, the Company paid dividends to
stockholders in the form of Company owned land with a cost and a fair value of
$58.
During the period ended July 31, 1995, the Company accrued dividends to
stockholders in the amount of $1,545.
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE>
LANDERS AUTO SALES, INC.
Notes to Financial Statements
(Dollars in thousands)
1. Organization:
The December 31, 1993 financial statements of Landers Auto Sales, Inc. (the
"Company") were prepared on a consolidated basis and included the accounts of
its wholly owned subsidiaries, Landers Oldsmobile-GMC, Inc. and Landers
Jeep-Eagle, Inc. As of December 22, 1994, Landers Oldsmobile-GMC, Inc. and
Landers Jeep-Eagle, Inc. were merged into Landers Auto Sales, Inc. and operate
as divisions of Landers Auto Sales, Inc. under the trade names of Landers
Oldsmobile-GMC Trust and Landers Jeep-Eagle/Chrysler-Plymouth-Dodge,
respectively. All material divisional accounts and transactions have been
eliminated.
The Company, operating in Benton, Arkansas, sells and services new Oldsmobile,
GMC Trucks, Jeep, Eagle, Chrysler, Plymouth, Dodge cars and trucks and used
automobiles, and finance insurance and service contracts thereon.
The Company operates dealerships which hold franchise agreements with a number
of automotive manufacturers. In accordance with the individual franchise
agreement, each dealership is subject to certain rights and restrictions typical
of the industry. The ability of the manufacturers to influence the operations of
the dealerships or the loss of a franchise agreement could have a negative
impact on operating results of the Company.
2. Summary of Significant Accounting Policies:
The following is a summary of significant accounting policies followed in the
preparation of the financial statements.
ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION:
Revenue is recognized by the Company when vehicles and parts are delivered to
consumers and when service work is performed.
INVENTORIES:
Inventories are stated at the lower of cost or market with cost determined by
the following methods: new vehicles are valued at the Last-in, first-out (LIFO)
method; used vehicles at the specific identification method; and parts,
accessories and other at factory list price.
PROPERTY AND EQUIPMENT:
Equipment and improvements are recorded at cost and depreciated over their
estimated useful lives, using the straight-line and accelerated methods. Useful
lives of equipment and improvements for purposes of computing depreciation are:
<TABLE>
<S> <C> <C>
Leasehold improvements -- Economic life or life of the lease,
whichever is shorter.
Equipment, furniture and -- 5 to 7 years
fixtures
</TABLE>
Expenditures for repairs and maintenance which increase the useful life or
substantially increase serviceability of the asset are capitalized. All others
are charged to expense as incurred. When equipment is sold or otherwise disposed
of, the cost and related accumulated depreciation are removed from their
respective accounts and any resulting gain or loss is included in the statement
of operations.
AMORTIZATION:
Amortization of intangibles is computed on the straight-line method. The period
of amortization is based upon the estimated time of benefit assigned to
intangible assets when acquired.
F-28
<PAGE>
LANDERS AUTO SALES, INC.
Notes to Financial Statements (Continued)
(Dollars in thousands)
3. Concentration of Credit Risk:
The Company's significant concentration of credit risk is with its cash. The
Company maintains cash balances at several financial institutions located in
Arkansas which are at times in excess of federally-insured amounts.
4. Inventories:
Inventories consist of the following items as of:
<TABLE>
<CAPTION>
-----------------------
December 31, July 31,
1994 1995
------------ ---------
<S> <C> <C>
New vehicles $ 18,945 $ 13,001
Used vehicles 7,903 9,517
Parts, accessories and other 1,503 1,435
------------ ---------
28,351 23,953
Cumulative LIFO reserve 1,480 1,520
------------ ---------
$ 26,871 $ 22,433
------------ ---------
------------ ---------
</TABLE>
If the FIFO method had been used instead of the LIFO method, inventories would
have been higher by $1,480 and $1,520 at December 31, 1994 and July 31, 1995,
respectively.
5. Property and Equipment:
Property and equipment consists of the following as of:
<TABLE>
<CAPTION>
-------------------------
December 31, July 31,
1994 1995
------------ -----------
<S> <C> <C>
Buildings and leasehold improvements $ 249 $ 289
Machinery and shop equipment 707 791
Furniture and fixtures 487 542
Company vehicles 147 148
------------ -----------
Total 1,590 1,770
Less: Accumulated depreciation and amortization 719 843
------------ -----------
Total property and equipment, net $ 871 $ 927
------------ -----------
------------ -----------
</TABLE>
The Company has entered into several leases of computer equipment. The leases
meet the criteria of a capital lease and, accordingly, have been recorded as
such. The leases are noncancelable and expire in September 1998. The following
is a schedule of the computer equipment under capital leases at December 31,
1994 and July 31, 1995:
<TABLE>
<CAPTION>
-------------------------
December 31, July 31,
1994 1995
------------ -----------
<S> <C> <C>
Computer equipment $ 230 $ 260
Accumulated depreciation (120) (147)
------------ -----
$ 110 $ 113
------------ -----
------------ -----
</TABLE>
F-29
<PAGE>
LANDERS AUTO SALES, INC.
Notes to Financial Statements (Continued)
(Dollars in thousands)
6. Floor Plan Notes Payable:
The amounts payable to financial institutions under trust receipt transactions
are collateralized by liens on inventories of specific new and used vehicles.
Floor plan notes payable for new and used vehicles are as follows as of:
<TABLE>
<CAPTION>
----------------------------
December 31, July 31,
1994 1995
------------- -------------
<S> <C> <C>
Chrysler Credit Corporation:
Interest rate on new and used vehicles is prime plus 1/2%;
collateralized by specific motor vehicles and the personal guarantees
of the stockholders $ 19,027 $ 15,091
Interest is at prime plus 1%; collateralized by specific motor vehicles
and the personal guarantees of the stockholders 5,416 3,762
Benton Savings Bank:
Interest is at prime; collateralized by specific motor vehicles and the
personal guarantees of the stockholders 1,885 2,531
------------- -------------
Total floor plan notes payable -- new and used vehicles $ 26,328 $ 21,384
------------- -------------
------------- -------------
</TABLE>
The prime rate at December 31, 1994 and July 31, 1995 was 8.5% and 8.75%,
respectively.
Included in the Chrysler vehicle floor plan at December 31, 1994 and July 31,
1995 is $126 and $0, respectively, payable to a related party participating in
the floor plan agreements.
7. Long-Term Debt:
Long-term debt consists of the following as of:
<TABLE>
<CAPTION>
-------------------------
December 31, July 31,
1994 1995
------------ -----------
<S> <C> <C>
Benton State Bank:
Various notes payable; interest is 7%. Monthly payment of $4 includes
principal and interest; collateralized by specific vehicles and various
Company assets expiring through June 1998 $ 102 $ 113
Chrysler Credit Corporation:
Interest is 7.5%. Monthly principal payment of $2, plus interest;
collateralized by specific equipment expiring June 2000 12 76
Capital lease obligations:
Interest is 8.4%. Monthly payments are $5. 161 166
------------ ---
Total 275 355
Less -- current portion 88 116
------------ ---
Long-term debt $ 187 $ 239
------------ ---
------------ ---
</TABLE>
F-30
<PAGE>
LANDERS AUTO SALES, INC.
Notes to Financial Statements (Continued)
(Dollars in thousands)
7. Long-Term Debt: (Continued)
Principal maturities of long-term debt in each of the next five years are as
follows:
<TABLE>
<CAPTION>
-----------
Twelve month period ending July 31, Amount
- ------------------------------------------------------------------------------------- -----------
<S> <C>
1996 $ 116
1997 115
1998 99
1999 15
2000 10
---
Total $ 355
---
---
</TABLE>
Interest expense on all indebtedness amounted to $279, $1,989 and $1,504 for the
years ended December 31, 1993 and 1994 and for the period ended July 31, 1995,
respectively.
8. Related Party Transactions:
The Company leases its buildings and lots from Steve Landers, John Landers and
Bob Landers, stockholders of the Company. Rent expense for the year ended
December 31, 1994 and the period ended July 31, 1995 amounted to $429 and $378,
respectively. Effective August 1, 1995, the Company entered into a new twenty
year lease agreement with such stockholders.
Future minimum lease payments are as follows:
<TABLE>
<CAPTION>
---------
Twelve month period ending July 31, Amount
- ------------------------------------------------------------------------------------ ---------
<S> <C>
1996 $ 540
1997 540
1998 540
1999 540
2000 540
Thereafter 8,100
---------
Total $ 10,800
---------
---------
</TABLE>
The balance due to stockholders at December 31, 1994 and July 31, 1995 totaled
$2,669 and $2,046, respectively. The stockholders are paid interest at a rate of
2% above the current certificate of deposit interest which are adjusted monthly
and payable on demand. The balance was repaid on August 15, 1995.
9. Provisions for Income Taxes:
Prior to January 1, 1995, the Company was treated as a C corporation for federal
income tax purposes. As of January 1, 1995, the Company elected to be treated as
an S corporation. Under this election, the Company's stockholders were
responsible for reporting the Company's federal taxable income on their personal
income tax returns.
F-31
<PAGE>
LANDERS AUTO SALES, INC.
Notes to Financial Statements (Continued)
(Dollars in thousands)
9. Provisions for Income Taxes: (Continued)
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
----------------------------------
Years Ended December Period Ended
31, July 31,
1993 1994 1995
--------- --------- ------------
<S> <C> <C> <C>
Federal $ 166 $ 1,506 $ 449
State 15 304 0
--------- --------- ------------
$ 181 $ 1,810 $ 449
--------- --------- ------------
--------- --------- ------------
</TABLE>
Prior to January 1, 1995, deferred income taxes were recognized for tax
consequences of temporary difference by applying enacted statutory tax rates,
applicable to future years, to differences between the financial reporting and
the tax basis of existing assets and liabilities. These differences relate
primarily to depreciation and amortization of intangibles which were minimal in
1994 and 1993.
Prior to January 1, 1995, the Company's effective income tax rate differed from
the Federal statutory tax rate principally due to state income taxes and certain
expenses which are not deductible for tax purposes. Such non-deductible expenses
were minimal during 1994 and 1993. The provision for income tax in 1995 relates
to the recapture of the LIFO reserve upon the Company's S Corporation election.
10. Profit Sharing Plan:
The Company maintains a profit sharing plan for all employees over the age of 21
who have completed one year of service. Contributions to the plan are at
management's discretion. Contributions for the year ended December 31, 1993 and
1994 and the period ended July 31, 1995 amounted to $190, $300 and $117,
respectively.
11. Reclassifications:
Certain amounts in the 1994 and 1993 financial statements have been reclassified
to conform to the presentation adopted in 1995.
12. Subsequent Event:
On August 15, 1995, the stockholders of the Company sold 80% of the stock to
United Auto Group, Inc. Upon completion of the sale, two of the original
stockholders each had a 10% interest in the Company. The remaining original
stockholder held no interest in the Company.
F-32
<PAGE>
Report of Independent Accountants
To the Stockholder
Atlanta Toyota, Inc.
We have audited the accompanying balance sheets of Atlanta Toyota, Inc. as of
December 31, 1995 and 1994 and the related statements of operations, retained
earnings, and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Atlanta Toyota, Inc. as of
December 31, 1995 and 1994 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
June 30, 1996
F-33
<PAGE>
ATLANTA TOYOTA, INC.
Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
December 31,
--------------------
1994 1995
--------- ---------
Assets
Current Assets:
Cash $ 1,677 $ 555
Accounts receivable, net of allowance for doubtful accounts ($4 and $7 for 1994 and
1995, respectively) 1,069 1,714
Current portion of notes receivable from related parties, net of allowance for
doubtful accounts of $219 and $378 in 1994 and 1995, respectively) 622 842
Inventories 8,282 8,123
Other current assets 11 1
--------- ---------
Total current assets 11,661 11,235
Property and equipment, net 336 1,150
Notes receivable from related parties, net of allowance for doubtful accounts ($128
and $379 in 1994 and 1995, respectively), non-current portion 357 857
Intangible assets 32 30
Other assets 2 1
--------- ---------
Total assets $ 12,388 $ 13,273
--------- ---------
Liabilities and Stockholders' Equity
Current Liabilities:
Floor plan notes payable $ 8,627 $ 8,847
Accounts payable 1,277 1,639
Accrued expenses 510 720
Deferred revenue 2,701 2,762
Reserve for chargebacks of finance and insurance income 243 471
--------- ---------
Total Current Liabilities 13,358 14,439
--------- ---------
Commitments and contingent liabilities
Stockholder's equity:
Common stock -- authorized, 10,000 shares of $.10 par value; issued and outstanding
1,000 shares 0 0
Distributions in excess of earnings (970) (1,166)
--------- ---------
Total stockholder's equity (970) (1,166)
--------- ---------
Total liabilities and stockholder's equity $ 12,388 $ 13,273
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-34
<PAGE>
ATLANTA TOYOTA, INC.
Statements of Operations
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
Years ended December 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
Sales $ 104,080 $ 114,394 $ 112,162
Cost of sales, including floor plan interest for the years
ended December 31, 1993, 1994 and 1995 of $440, $540 and $752,
respectively 90,556 100,350 98,969
--------- --------- ---------
Gross profit 13,524 14,044 13,193
Selling, general and administrative 11,067 11,938 11,182
--------- --------- ---------
Income from operations 2,457 2,106 2,011
Other income (expense), net (148) (105) 17
--------- --------- ---------
Net income $ 2,309 $ 2,001 $ 2,028
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-35
<PAGE>
ATLANTA TOYOTA, INC.
Statements of Retained Earnings
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------
<S> <C>
Distribution in excess of earnings at December 31, 1992 $ (552)
Net income for the year 2,309
Distributions to stockholder (2,114)
------
Distribution in excess of earnings at December 31, 1993 (357)
Net income for the year 2,001
Distributions to stockholder (2,614)
------
Distribution in excess of earnings at December 31, 1994 (970)
Net income for the year 2,028
Distributions to stockholder (2,224)
------
Distribution in excess of earnings at December 31, 1995 $ (1,166)
------
------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-36
<PAGE>
ATLANTA TOYOTA, INC.
Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
Years ended December 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
Operating activities:
Net income $ 2,309 $ 2,001 $ 2,028
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 287 240 215
Net loss (gain) on sales of assets (15) 4
Provision for losses on accounts and notes receivable 323 143 413
Provision for chargebacks on finance and insurance income and
warranty claims 393 311 228
Changes in operating assets and liabilities:
Accounts and notes receivable (619) (482) (1,776)
Inventories (922) 1,043 243
Prepaid expenses (20) 55 10
Other assets (3) 1 1
Floorplan notes payable 2,514 (790) 223
Accounts payable and accrued liabilities (888) 751 635
--------- --------- ---------
Net cash provided by operating activities 3,359 3,277 2,220
--------- --------- ---------
Investing activities:
Refund of deposit 110
Purchases of equipment and leasehold improvements (351) (107) (1,115)
Proceeds from sale of assets 53 12
--------- --------- ---------
Net cash provided by (used for) investing activities (298) 15 (1,115)
--------- --------- ---------
Financing activities:
Payments on long-term debt (250)
Net payments on notes payable on rental vehicles (65) (88) (3)
Principal payments on capital lease obligations (121)
Distributions to stockholders (2,114) (2,614) (2,224)
--------- --------- ---------
Net cash used in financing activities (2,550) (2,702) (2,227)
--------- --------- ---------
Net increase (decrease) in cash 511 590 (1,122)
Cash, beginning of year 576 1,087 1,677
--------- --------- ---------
Cash, end of year $ 1,087 $ 1,677 $ 555
--------- --------- ---------
--------- --------- ---------
Supplemental cash flow information:
Cash paid during the period for interest $ 432 $ 540 $ 753
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-37
<PAGE>
ATLANTA TOYOTA, INC.
Notes to Financial Statements
(Dollars in thousands)
1. Organization:
Atlanta Toyota, Inc. (the "Company"), a Texas Corporation, operating in Duluth,
Georgia, sells and services new Toyota and Buick vehicles and used automobiles,
as well as finance, insurance and service contracts thereon.
The Company operates two franchise agreements with automotive manufacturers. In
accordance with the individual franchise agreement, each dealership is subject
to certain rights and restrictions typical of the industry. The ability of the
manufacturers to influence the operations of the dealerships or the loss of a
franchise agreement could have a negative impact on the operating results of the
Company.
2. Summary of Accounting Policies:
The following is a summary of significant accounting policies followed in the
preparation of the financial statements.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue is recognized by the Company when vehicles and parts are delivered to
consumers and when service work is performed.
NOTES RECEIVABLE
In the ordinary course of business, the Company sells used vehicles on an
installment payment basis through a related acceptance corporation installment
receivables that generally range from twelve to fifteen months. The related
acceptance corporation collects the installment payments and transmits to the
Company its portion periodically. The installment receivables are collateralized
by the related vehicle sold.
Management provides an allowance for estimated uncollectible amounts based on
historical experience and an evaluation of specific past-due notes.
INVENTORIES
Inventories are stated at the lower of cost or market with cost determined by
the following methods: new vehicles are valued at the last-in, first-out (LIFO)
method; used vehicles at the specific identification method; and parts,
accessories and other at factory list price.
PROPERTY AND EQUIPMENT
Equipment and improvements are recorded at cost and depreciated over their
estimated useful lives, principally on a straight-line basis. Leasehold
improvements are amortized over the lives of the respective leases or the
service lives of the improvements, whichever is shorter.
Expenditures for repairs and maintenance which increase the useful life or
substantially increase serviceability of the asset are capitalized. All others
are charged to expense as incurred. When equipment is sold or otherwise disposed
of, the cost and related accumulated depreciation are removed from their
respective accounts and any resulting gain or loss is included in the statement
of operations.
AMORTIZATION
Amortization of intangibles is computed on the straight-line method. The period
of amortization is based upon the estimated time of benefit assigned to
intangible assets when acquired.
F-38
<PAGE>
ATLANTA TOYOTA, INC.
Notes to Financial Statements (Continued)
(Dollars in thousands)
2. Summary of Accounting Policies: (Continued)
RESERVE FOR CHARGEBACKS OF FINANCE AND INSURANCE INCOME
Provisions for chargebacks of finance and insurance income resulting from
customer prepayments and repossessions are recorded based on management's
estimates and historical experience.
LIABILITY FOR SERVICE CONTRACT WARRANTY CLAIMS
The Company sells extended service contracts on vehicles. A liability for future
repair costs covered by these service contracts and amounts for future contract
cancellations is established based on management's estimates and historical
experience.
INCOME TAXES
The income taxes on the net earnings of the Company are payable personally by
the stockholder pursuant to an S corporation election under the Internal Revenue
Code. Accordingly, no provision for income taxes has been made in these
financial statements.
3. Concentration of Credit Risk:
The Company's significant concentration of credit risk is with its cash and
notes receivable from a related party. The Company maintains cash balances at
several financial institutions located in Georgia which are at times in excess
of federally insured amounts. The notes receivable are from a related acceptance
corporation and are supported by installment receivables that generally range
from twelve to fifteen months.
4. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
--------------------
December 31,
1994 1995
--------- ---------
<S> <C> <C>
New vehicles $ 8,867 $ 7,517
Used vehicles 872 2,283
Parts, accessories and other 645 625
--------- ---------
10,384 10,425
Cumulative LIFO reserve (2,102) (2,302)
--------- ---------
$ 8,282 $ 8,123
--------- ---------
--------- ---------
</TABLE>
If the FIFO method had been used instead of the LIFO method, inventories would
have been higher by $2,102 and $2,302 at December 31, 1994 and 1995,
respectively.
5. Property and Equipment:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
December 31,
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Furniture, fixtures and equipment $ 995 $ 944
Service vehicles 309 332
Leasehold improvements 29 241
Construction in progress 786
--------- ---------
Total 1,333 2,303
Less: Accumulated depreciation and amortization 997 1,153
--------- ---------
Total property and equipment, net $ 336 $1,150
--------- ---------
--------- ---------
</TABLE>
F-39
<PAGE>
ATLANTA TOYOTA, INC.
Notes to Financial Statements (Continued)
(Dollars in thousands)
6. Floor Plan Notes Payable:
The amounts payable to financial institutions under trust receipt transactions
are collateralized by liens on inventories of specific new and used vehicles.
Notes payable for new and used vehicles at December 31 are as follows:
<TABLE>
<CAPTION>
--------------------------
December 31,
1994 1995
------------ ------------
<S> <C> <C>
General Electric Capital Corporation:
Interest rate on new and used vehicles is 8.5% and 8.75%, respectively;
collateralized by specific motor vehicles $8,547 $8,770
South East Toyota Distributors:
Interest is at prime; collateralized by specific motor vehicles and the
personal guarantee of the stockholder 80 77
------------ ------------
Total notes payable -- new and used vehicles $8,627 $8,847
------------ ------------
------------ ------------
</TABLE>
The prime rate at December 31, 1994 and 1995 was 8.5%.
7. Operating Lease Commitments:
The Company conducts its operations in leased facilities under a long-term
operating lease agreement with a related party requiring monthly payments of
approximately $90 through March 1997. Total rent expense paid was $1,072, $1,089
and $1,085 for 1993, 1994 and 1995, respectively.
8. Related Party Transactions:
The Company utilizes an advertising agency which is owned by the Company's
stockholder. The agency charges the Company an agency fee of fifteen percent of
total advertising costs plus a monthly consulting fee. Such advertising costs
were $1,638, $1,673 and $1,624 and total agency and consulting fees were $271,
$281 and $274 in 1993, 1994 and 1995, respectively.
The Company contracts with a related party which is majority owned by the
Company's stockholder to administer extended service contracts sold to
customers. A fee of forty-two dollars per contract is charged for
administration. Total administration fees were approximately $81, $70 and $62 in
1993, 1994 and 1995, respectively.
The Company sells used car notes receivable to an acceptance corporation which
is majority owned by the Company's stockholder. The related notes receivable
totaled $1,200 and $2,585 at December 31, 1994 and 1995, respectively.
9. Reclassifications:
Certain amounts in the 1993 and 1994 financial statements have been reclassified
to conform to the presentation adopted in 1995.
10. Subsequent Event:
On January 16, 1996, the stockholder of Atlanta Toyota, Inc. sold 100% of the
stock to United Auto Group, Inc.
F-40
<PAGE>
Report of Independent Accountants
To the Stockholders
of Steve Rayman Nissan, Inc.:
We have audited the accompanying balance sheets of Steve Rayman Nissan, Inc. as
of December 31, 1995 and 1994, and the related statements of operations,
retained earnings and cash flows for each of the two years in the period ended
December 31, 1995 and from the date of inception (April 5, 1993) to December 31,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Steve Rayman Nissan, Inc. as of
December 31, 1995 and 1994 and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1995 and from the
date of inception (April 5, 1993) to December 31, 1993, in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
June 14, 1996
F-41
<PAGE>
STEVE RAYMAN NISSAN, INC.
Balance Sheets
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
December 31,
--------------------
1994 1995
--------- ---------
ASSETS
Current assets:
Cash $ 187 $ 6
Accounts receivable 942 2,522
Inventories 4,172 4,514
Prepaid expenses and other assets 12 33
--------- ---------
Total current assets 5,313 7,075
Leasehold improvements, furniture and equipment, net 281 205
Intangibles, net 619 543
--------- ---------
Total assets $ 6,213 $ 7,823
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Floor plan notes payable $ 2,954 $ 4,100
Current portion of long-term debt 100 100
Current portion of payable for noncompete agreements 75 75
Current portion of obligation under capital lease 71 70
Accounts payable 392 734
Accrued expenses 352 471
--------- ---------
Total current liabilities 3,944 5,550
Long-term debt, net of current portion 225 125
Payable for noncompete agreements, non-current 550 475
Obligation under capital lease, non-current 133 63
--------- ---------
Total liabilities 4,852 6,213
Commitments and contingent liabilities
Stockholders' equity:
Common stock, par value $100 per share, authorized issued and outstanding 5,000 shares 500 500
Additional paid-in capital 100 100
Retained earnings 761 1,010
--------- ---------
Total stockholders' equity 1,361 1,610
--------- ---------
Total liabilities and stockholders' equity $ 6,213 $ 7,823
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-42
<PAGE>
STEVE RAYMAN NISSAN, INC.
Statements of Operations
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Unaudited Unaudited
Nine months Three months Four months
ended Years ended ended ended
December 31, December 31, March 31, April 30,
------------ -------------------- ------------ -----------
1993 1994 1995 1995 1996
------------ --------- --------- ------------ -----------
Sales $ 27,225 $ 46,036 $ 60,268 $ 13,072 $ 19,892
Cost of sales, including floor plan interest of
$164, $262 and $434 for 1993, 1994 and 1995,
respectively 22,890 39,435 50,166 11,150 16,503
------------ --------- --------- ------------ -----------
Gross profit 4,335 6,601 10,102 1,922 3,389
Selling, general and administrative expenses 3,981 6,045 8,989 1,889 2,481
------------ --------- --------- ------------ -----------
Operating income 354 556 1,113 33 908
Other income (expense), net (22) (27) 1
------------ --------- --------- ------------ -----------
Net income $ 332 $ 529 $ 1,114 $ 33 $ 908
------------ --------- --------- ------------ -----------
------------ --------- --------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-43
<PAGE>
STEVE RAYMAN NISSAN, INC.
Statements of Retained Earnings
(Dollars in thousands)
<TABLE>
<CAPTION>
---------
<S> <C>
Retained earnings, April 5, 1993 $ 0
Net income for the year 332
Dividends (100)
---------
Retained earnings, December 31, 1993 232
Net income for the year 529
---------
Retained earnings, December 31, 1994 761
Net income for the year 1,114
Dividends (865)
---------
Retained earnings, December 31, 1995 1,010
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-44
<PAGE>
STEVE RAYMAN NISSAN, INC.
Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Unaudited
Unaudited Four
Nine months Three Months months
ended Years ended ended ended
December 31, December 31, March 31, April 30,
<CAPTION>
------------ -------------------- ------------ ---------
1993 1994 1995 1995 1996
------------ --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income $ 332 $ 529 $ 1,114 $ 33 $ 908
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 28 37 38 14 8
Amortization 126 145 145 19
Changes in operating assets and liabilities:
Accounts receivables (702) (241) (1,580) (666) 452
Inventories (696) (234) (343) (1,226) (2,120)
Prepaid expenses and other assets (3) 7 (21) (54) (254)
Floor plan notes payable 500 (287) 1,146 934 1,570
Accounts payable and accrued expenses 543 204 461 1,026 211
------------ --------- --------- ------------ ---------
Net cash provided by operating activities 128 160 960 80 775
------------ --------- --------- ------------ ---------
Investing activities:
Purchase of property and equipment (146) (16) (32) (9) (6)
Other (16) 0 2
------------ --------- --------- ------------ ---------
Net cash used in investing activities (162) (16) (30) (9) (6)
------------ --------- --------- ------------ ---------
Financing activities:
Cash overdraft 398
Cash paid for noncompete agreement (50) (75) (75) (19)
Proceeds from the sale of common stock 600 0 0
Principal payments under capital lease (59) (64) (71) (70)
Principal payments on long-term borrowings (75) (100) (100) (25) (775)
Cash dividends paid (100) 0 (865) (398)
------------ --------- --------- ------------ ---------
Net cash provided by (used in) financing
activities 316 (239) (1,111) (114) (775)
------------ --------- --------- ------------ ---------
Net increase (decrease) in cash 282 (95) (181) (43) (6)
Cash at beginning of the period 0 282 187 187 6
------------ --------- --------- ------------ ---------
Cash at end of period $ 282 $ 187 $ 6 $ 144 $ 0
------------ --------- --------- ------------ ---------
------------ --------- --------- ------------ ---------
Supplemental schedule of non-cash investing and
financing activities:
Capitalization of noncompete agreement and
related debt $ 750
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-45
<PAGE>
STEVE RAYMAN NISSAN, INC.
(Information related to the three months ended March 31, 1995
and four months ended 1996 is unaudited)
Notes to Financial Statements
(Dollars in thousands)
1. Organization:
Steve Rayman Nissan, Inc. (the "Company"), operating in Morrow, Georgia, sells
and services new Nissan cars and trucks and used vehicles, as well as finance,
insurance and service contracts thereon.
The Company operates a dealership which holds a franchise agreement with an
automotive manufacturer. In accordance with the franchise agreement, the
dealership is subject to certain rights and restrictions typical of the
industry. The ability of the manufacturer to influence the operations of the
dealership or the loss of the franchise agreement would have a negative impact
on operating results of the Company.
2. Summary of Significant Accounting Policies:
The following is a summary of significant accounting policies followed in the
preparation of the financial statements.
ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION:
Revenue is recognized by the Company when vehicles or parts are delivered to
consumers and when service work is performed.
INVENTORIES:
New and used vehicles and parts and accessories inventories are valued at the
lower of cost or market. Cost is determined on the Last-in, first-out (LIFO)
method.
LEASEHOLD IMPROVEMENTS, FURNITURE AND EQUIPMENT:
Leasehold improvements, furniture and equipment are stated at cost and
depreciated over their estimated useful lives, principally by the straight-line
method. Computer equipment under a capital lease used in operating the
dealership is amortized over the life of the lease (five years).
Expenditures for repairs and maintenance which increase the useful life or
substantially increase serviceability of the asset are capitalized. All others
are charged to expense as incurred. When equipment is sold or otherwise disposed
of, the cost and related accumulated depreciation are removed from their
respective accounts and any resulting gain or loss included in the statement of
operations.
INTANGIBLES:
Intangibles are being amortized using the straight-line method over ten years.
Accumulated amortization of intangibles as of December 31, 1994 and 1995 was
$131 and $205, respectively.
INCOME TAXES:
The income taxes on the net earnings of the Company are payable personally by
the stockholder pursuant to an S corporation election under the Internal Revenue
Code. Accordingly, no provision for income taxes has been made in these
financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying values of cash, contracts in transit, accounts receivable, factory
receivables, warranty receivables, notes payable, long-term debt and accounts
payable approximate their fair values due to the short-term maturities of those
instruments.
F-46
<PAGE>
STEVE RAYMAN NISSAN, INC.
(Information related to the three months ended March 31, 1995
and four months ended 1996 is unaudited)
Notes to Financial Statements (Continued)
(Dollars in thousands)
3. Concentration of Credit Risk:
The Company's significant concentration of credit risk is with its cash. The
Company maintains cash balances at several financial institutions located in
Georgia which are at times in excess of federally-insured amounts.
4. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
--------------------
December 31,
--------------------
1994 1995
--------- ---------
New vehicles and demonstrators $ 3,063 $ 3,737
<S> <C> <C>
Used vehicles 686 391
Parts and accessories 423 386
--------- ---------
$ 4,172 $ 4,514
--------- ---------
--------- ---------
</TABLE>
The use of the LIFO method of determining the cost of new and used vehicle
inventories and parts had the effect of decreasing inventories at December 31,
1994 and 1995 by $273 and $446, respectively, and decreasing net income for the
periods ended December 31, 1993, 1994 and 1995 by $121, $152 and $173,
respectively, as compared to what they would have been under the
specific-identification cost method.
5. Leasehold Improvements, Furniture and Equipment:
Leasehold improvements, furniture and equipment consists of:
<TABLE>
<CAPTION>
--------------------
1994 1995
--------- ---------
Computer equipment under capital lease $ 347 $ 347
<S> <C> <C>
Machinery and shop equipment 33 44
Furniture and fixtures 73 79
Leasehold improvements 44 53
Service vehicles 10 12
--- ---
507 535
Less: accumulated depreciation and amortization 226 330
--- ---
$ 281 $ 205
--- ---
--- ---
</TABLE>
6. Floor Plan Payable:
Floor plan notes payable are collateralized by chattel mortgages on new and used
vehicles. Amounts are payable when the collateral is sold. The obligation is
guaranteed by the stockholders. Interest was payable at the LIBOR rate on the
first day of the month plus 2.5%, and at the prime commercial rate at prime plus
1/2% for the years ended December 31, 1994 and 1995, respectively. The effective
rate at December 31, 1995 was 8.4%, and the prime rate was 8.5% for the year
ended December 31, 1994.
F-47
<PAGE>
STEVE RAYMAN NISSAN, INC.
(Information related to the three months ended March 31, 1995
and four months ended 1996 is unaudited)
Notes to Financial Statements (Continued)
(Dollars in thousands)
7. Long-Term Debt:
Long-term debt consists of a note payable to a bank, due in monthly installments
of $8 plus interest to April 1998. Interest is payable at the bank's prime
commercial rate. The bank's prime rate at December 31, 1994 and 1995 was 8.5%.
The note is collateralized by all inventories, not otherwise provided as
collateral, tools, equipment and receivables and is guaranteed by the
stockholders.
<TABLE>
<CAPTION>
--------------------
December 31,
--------------------
1994 1995
--------- ---------
Total debt $ 325 $ 225
<S> <C> <C>
Less: current maturity of long-term debt 100 100
--- ---
Long-term debt $ 225 $ 125
--- ---
--- ---
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
-----------
<S> <C>
Year Ending December 31, Amount
- ----------------------------------- -----------
1996 $ 100
1997 100
1998 25
---
$ 225
---
---
</TABLE>
Interest expense on all long-term debt amounted to $23, $27 and $25, for the
years ended December 31, 1993, 1994 and 1995.
8. Acquisition of Nissan Dealership and Noncompete Agreements:
On April 5, 1993, the Company acquired the inventory and equipment of Stovall
Nissan, Inc. for approximately $2,284. The debt for new vehicles acquired was
assumed by the Company as an addition to the floor plan note payable.
On April 5, 1993, in connection with the acquisition, the Company entered into
noncompete agreements with the former owners of the Company in which the former
owners are precluded from participating in direct or indirect competition
related to the sale of new Nissan vehicles for a period of ten years in exchange
for $750. During the periods ended December 31, 1993, 1994 and 1995, the Company
paid $50, $75 and $75, respectively, in accordance with the noncompete
agreements. The maturity of the remaining obligations is as follows:
<TABLE>
<CAPTION>
----------
<S> <C>
December
31,
1995
----------
Total amount due $ 550
Less: current portion of amount due 75
----------
Long-term payable for noncompete agreements $ 475
----------
----------
</TABLE>
F-48
<PAGE>
STEVE RAYMAN NISSAN, INC.
(Information related to the three months ended March 31, 1995
and four months ended 1996 is unaudited)
Notes to Financial Statements (Continued)
(Dollars in thousands)
9. Lease Transactions:
The Company leases its building and land under an operating lease from a
stockholder. The lease expires in May 2004 and requires annual rentals plus the
payment of property taxes and insurance on the property. The rent expense was
$162 for the period ended December 31, 1993 and $226 for each of the years ended
December 31, 1994 and 1995.
The following is a schedule by year of future minimum rental payments required
unde the operating leases as of December 31, 1995.
<TABLE>
<CAPTION>
---------
<S> <C>
Year Ending December 31, Amount
- -------------------------------------------------------------------- ---------
1996 $ 228
1997 228
1998 236
1999 248
2000 260
Thereafter 1,132
---------
$ 2,332
---------
---------
</TABLE>
The Company leases certain computer equipment and software used in the operation
of the dealership. The leases have been accounted for as capital leases. The
assets under capital leases of $347 are being amortized over the lives of the
leases on a straight-line basis. Accumulated amortization amounted to $162 and
$231 as of December 31, 1994 and 1995 respectively.
As of December 31, 1995, minimum future lease payments due under the capital
leases are as follows:
<TABLE>
<CAPTION>
---------
<S> <C>
Year Ending December 31, Amount
- -------------------------------------------------------------------- ---------
1996 $ 80
1997 66
---------
Total minimum lease payments 146
Less amount representing interest 13
---------
Present value of net minimum lease payments 133
Less current principal maturities of obligations under capital lease 70
---------
Long-term obligation under capital lease $ 63
---------
---------
</TABLE>
F-49
<PAGE>
STEVE RAYMAN NISSAN, INC.
(Information related to the three months ended March 31, 1995
and four months ended 1996 is unaudited)
Notes to Financial Statements (Continued)
(Dollars in thousands)
10. Transactions With Affiliates:
Transactions with related parties are as follows:
<TABLE>
<CAPTION>
-------------------------------
Period Ended
December 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
Management fees (paid to company under common control) $ 452 $ 683 $ 1,230
<S> <C> <C> <C>
Rent (paid to majority stockholder) 162 226 226
Receivables (from companies under common control) 49 113
Payables (to companies under common control) 3
Sales (to companies under common control, primarily body shops and other
auto dealerships) 165 363 474
Purchases (from companies under common control, primarily body shops and
other auto dealerships) 315 318
</TABLE>
11. President-Stockholder Bonus Arrangement:
The Company has agreed to pay a year-end bonus equal to 25% of its net income
before the bonus and the LIFO effect on income to its president, who is also a
49% stockholder. The bonus was $609, $913 and $1,650 for the years ended
December 31, 1993, 1994 and 1995, respectively.
12. Employee Benefit Plan:
The Company provides a savings plan under Section 401(k) of the Internal Revenue
Code. The savings plan covers all employees who elect to be participants and who
have been credited with 1,000 hours of service in the preceding twelve months of
the plan year. Employees may contribute to the savings plan up to 20% of their
salary. The amount the Company contributes is discretionary. Company
contributions vest in varying percentages over six years and Company
contributions to those employees with over six years of service vest
immediately. Company contributions are charged to expense. Amounts recorded for
Company contributions were $0, $10 and $11 for the periods ended December 31,
1993, 1994 and 1995, respectively.
13. Reclassifications:
Certain amounts in the 1993 and 1994 financial statements have been reclassified
to conform to the presentation adopted in 1995.
14. Subsequent Event:
On May 1, 1996, the stockholders of the Company consummated a transaction to
sell the outstanding stock of the Company to a third party. The acquisition
agreement provides for the Company to lease the land and building on which the
dealership is located for a period of 20 years, with an option to extend up to
30 years.
F-50
<PAGE>
Report of Independent Accountants
To the Stockholder of
Hickman Nissan, Inc.:
We have audited the accompanying balance sheet of Hickman Nissan, Inc. as of
December 31, 1995 and the related statements of income and retained earnings and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hickman Nissan, Inc. as of
December 31, 1995 and the results of its operations and cash flows for the year
then ended in conformity with generally accepting accounting principles.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Atlanta, Georgia
August 16, 1996
F-51
<PAGE>
HICKMAN NISSAN, INC.
Balance Sheets
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
(Unaudited)
December June 30,
31, 1995 1996
--------- ---------
ASSETS
Current
Cash and cash equivalents $ $ 211
Accounts receivable 5,789 4,442
Inventories (note 3) 4,766 6,272
Prepaid expenses 49 264
--------- ---------
Total current assets 10,604 11,189
Property and equipment, at cost
Furniture and Office equipment 1,077 1,134
Leasehold improvements 746 746
Parts and service equipment 338 352
Company vehicles 150 138
Signs 39 43
--------- ---------
Total property and equipment 2,350 2,413
Less: accumulated depreciation 1,869 1,870
--------- ---------
Property and equity, net 481 543
Other assets
Deposits 61 64
--------- ---------
Total assets $ 11,146 $ 11,796
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current
Notes payable (note 4)
Bank South floor plan 6,975 8,978
Reyna Financial, current portion 31 33
--------- ---------
Total notes payable 7,006 9,011
Accounts payable 1,574 916
Accrued liabilities 910 646
--------- ---------
Total current liabilities 9,490 10,573
Long-term portion of notes payable (note 4) 75 56
--------- ---------
Total liabilities 9,565 10,629
Stockholder's Equity
Common stock, $100 par value, 10,000 shares
authorized,
500 shares issued and outstanding 50 50
Paid-in capital 1 1
Retained earnings 1,530 1,116
--------- ---------
1,581 1,167
--------- ---------
Total liabilities and stockholder's equity $ 11,146 $ 11,796
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-52
<PAGE>
HICKMAN NISSAN, INC.
Statements of Income and Retained Earnings
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------
<S> <C> <C> <C>
Year Ended (Unaudited)
December Six Months Ended
31, June 30,
1995 1995 1996
---------- ---------- -----------
Net sales
New vehicles $ 59,966 $ 27,028 $ 28,556
Used vehicles 15,568 7,368 7,564
Finance, insurance and other revenue 2,668 3,795 4,198
Parts and service 7,620 794 1,002
---------- ---------- -----------
Total net sales 85,822 38,985 41,320
Cost of sales, including floor plan interest of $668
at December 31, 1995 77,256 35,005 36,581
---------- ---------- -----------
Gross profit 8,566 3,980 4,739
Operating expenses 7,619 3,597 4,072
---------- ---------- -----------
Operating income 947 383 667
Other income net of other (expense) 21 (7) 19
---------- ---------- -----------
Net income 968 376 686
Retained earnings, beginning of period 562 562 1,530
Distributions (1,100)
---------- ---------- -----------
Retained earnings, end of period $ 1,530 $ 938 $ 1,116
---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-53
<PAGE>
HICKMAN NISSAN, INC.
Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
---------------------------------------
<S> <C> <C> <C>
Year Ended (Unaudited)
December Six Months Ended
31, June 30,
----------- --------------------------
1995 1995 1996
----------- ------------ ------------
Cash flows from operating activities:
Net income $ 968 $ 376 $ 686
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 212 106 51
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (3,153) (859) 1,347
(Increase) in inventory (418) (3,286) (1,506)
(Increase) in prepaid (11) (6) (215)
(Increase) decrease in other assets (267) 18 (3)
Proceeds of notes payable -- floor plan 1,600 3,540 2,003
Increase (decrease) in accounts payable 142 72 (110)
Increase (decrease) in accrued liabilities 444 127 (264)
----------- ------------ ------------
Net cash provided by (used in) operating
activities (483) 88 1,989
----------- ------------ ------------
Cash flows from investing activities:
Purchase of fixed assets (280) (248) (113)
----------- ------------ ------------
Net cash used in investing activities (280) (248) (113)
----------- ------------ ------------
Cash flows from financing activities:
Cash overdraft 548 (548)
Distributions to Owner (1,100)
Repayment of note payable (37) (19) (17)
----------- ------------ ------------
Net cash provided by financing activities 511 (19) (1,665)
----------- ------------ ------------
Net increase (decrease) in cash and cash equivalents (252) (179) 211
Cash and cash equivalents, beginning of period 252 252 0
----------- ------------ ------------
Cash and cash equivalents, end of period $ 0 $ 73 $ 211
----------- ------------ ------------
----------- ------------ ------------
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 668
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-54
<PAGE>
HICKMAN NISSAN, INC.
Notes to Financial Statements
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
(Dollars in thousands)
1. Organization:
The Company was organized in the State of Georgia on October 14, 1976 to operate
a Nissan automobile dealership in DeKalb County, Georgia. The Company is engaged
in the sale of new and used motor vehicles, finance and insurance products, and
vehicle service and parts.
2. Accounting Principles Followed:
The following summarizes the accounting principles applied to designated items:
REVENUE RECOGNITION
Revenue is recognized by the Company when vehicles are delivered to consumers,
when finance and insurance income is earned, and when motor vehicles service
work is performed and parts are delivered.
INVENTORY VALUATION
All inventories are stated at the lower of cost or market, with cost determined
by the Last-in, first-out (LIFO) method. See note 3 for inventories summary.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. The Company depreciates its assets
using the straight-line method and predominately accelerated methods over lives
ranging from three to fifteen years. Depreciation expense for the year ended
December 31, 1995 is $212.
INCOME TAXES
Due to the Company's status as an S corporation, net income and investment tax
credits flow through to the stockholder and are reported by the stockholder in
such stockholder's return.
CASH & CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
CREDIT RISK
There are funds in excess of federally insured amounts for the Company of
approximately $150. However, due
to the rating and stability of the financial institution at which these funds
are held, the Company considers that credit risk to be minimal.
ESTIMATES
The preparation of these financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported. Actual results are not expected
to, but could, differ from those estimates. The accounts which require the use
of estimates are receivables, inventory, and accrued expenses.
UNAUDITED FINANCIAL STATEMENTS
The financial statements as of June 30, 1995 and 1996 and for the six month
periods then ended are unaudited; however, in the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the financial statements for the interim periods have been
included.
F-55
<PAGE>
HICKMAN NISSAN, INC.
Notes to Financial Statements
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
(Dollars in thousands) (Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents, trade
accounts receivable and payable, and debt. The carrying amount of these
financial instruments approximates fair value due either to length of maturity
or existence of variable interest rates that approximate prevailing market
rates.
3. Inventories Summary:
<TABLE>
<CAPTION>
--------------------------
<S> <C> <C>
(unaudited)
December 31, June 30,
1995 1996
------------- -----------
New Kia cars and trucks $ 1,278
New Nissan cars and trucks 3,857 $ 6,907
Used cars and trucks 1,010 739
Parts, accessories and other 961 977
Cumulative LIFO reserve (2,340) (2,351)
------ -----------
$ 4,766 $ 6,272
------ -----------
------ -----------
</TABLE>
4. Notes Payable:
The Company is obligated on notes payable as follows:
<TABLE>
<CAPTION>
-----------
<S> <C>
December
31,
1995
-----------
Floor plan notes payable to Bank South, due upon demand, secured by inventory
and personal guarantee of Lynda Hickman, interest is LIBOR plus 225 basis
points and is adjusted monthly. Interest at December 31 was 8.12% $ 6,975
-----------
-----------
Note payable, $3 monthly including interest at approximately 9%, through March
1999 secured by computer equipment. 103
Note payable $1 monthly including interest at approximately 11%, through March
1996 secured by computer system. 3
-----------
106
Less current maturities 31
-----------
Long term $ 75
-----------
-----------
Maturities of long-term debt for the year ending December 31,
<CAPTION>
-----------
Amount
-----------
<S> <C>
1996 $ 31
1997 31
1998 34
1999 10
2000 --
-----------
$ 106
-----------
-----------
</TABLE>
F-56
<PAGE>
HICKMAN NISSAN, INC.
Notes to Financial Statements
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
(Dollars in thousands) (Continued)
5. Related Party Transactions:
The Company leases the dealership lot and buildings from a stockholder. Rent is
$34 per month.
Subsequent to December 31, 1995, these related party leases were terminated upon
sale of the Company (note 7) and new leases were executed with payments of $35
due monthly, with CPI adjustments beginning January 1, 1998 through June 30,
2016.
The Company sells finance contracts which it originates on used automobiles to
an entity owned by Lynda Hickman. These finance contracts are sold on an
approximate 35% discount to face amount basis. Sales proceeds and the face
amount of finance contracts sold during 1995 were $707 and $1,087, respectively.
At December 31, 1995, the Company had contract receivables from Peachtree
Acceptance Corporation of $95.
6. Operating Leases:
The Company leases property and equipment under operating leases expiring in
various years through 2016.
Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of December 31, 1995 for each of the
next 5 years and in the aggregate are:
<TABLE>
<CAPTION>
-----------
<S> <C>
Year Ending Amount
- ----------------------------------------------------------- -----------
1996 $ 459
1997 458
1998 458
1999 458
2000 447
Thereafter 6,433
-----------
$ 8,713
-----------
-----------
</TABLE>
The above table includes the related party leases as described in note 5.
7. Subsequent Events:
In 1996, the Company terminated its Kia automobile dealership agreement. The
Company did not incur any losses as a result of terminating this dealership
agreement.
On July 12, 1996 and effective June 30, 1996, the sole stockholder of the
Company sold 100% of the common stock of the Company to an affiliate of United
Auto Group, Inc.
8. Restatement:
Subsequent to the issuance of the Company's financial statements, management
determined that estimated liabilities for finance chargebacks had not been
included in those financial statements. The effect of including these estimated
liabilities in the Company's financial statements is to reduce retained earnings
at January 1, 1995 and December 31, 1995 and reduce net income for the year
ended December 31, 1995 as disclosed in the following table.
<TABLE>
<CAPTION>
As
Previously As
Reported Restated
------------ ----------
<S> <C> <C>
Retained Earnings, January 1, 1995 $ 705 $ 562
Net Income for the year 1995 1,019 968
Retained Earnings, December 31, 1995 1,724 1,530
</TABLE>
In addition, certain amounts have been reclassified to conform to current
presentation.
F-57
<PAGE>
Report of Independent Accountants
To Stockholders of
Sun Automotive Group:
We have audited the accompanying combined balance sheets of Sun Automotive Group
as of December 31, 1995 and 1994, and the related combined statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Sun Automotive Group
as of December 31, 1994 and 1995, and the results of its combined operations and
its combined cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Phoenix, Arizona
June 12, 1996
F-58
<PAGE>
SUN AUTOMOTIVE GROUP
Combined Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
(Unaudited)
December 31, June 30,
1994 1995 1996
--------- --------- ---------
ASSETS:
Current assets:
Cash $ 121
Accounts receivable $ 5,160 $ 6,562 6,907
Current portion of notes receivable 475
Inventories 11,747 20,366 15,968
Other current assets 35 30 53
--------- --------- ---------
Total current assets 17,417 26,958 23,049
--------- --------- ---------
Notes receivable, net of current portion 380
Property and equipment, net 10,329 11,358 11,128
Intangible assets 1,157 1,137
Other assets 206 690 843
--------- --------- ---------
Total assets $ 28,332 $ 40,163 $ 36,157
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable $ 1,624 $ 2,015 $ 1,357
Accrued liabilities 2,636 3,497 2,946
Floor plan note payable 9,732 17,104 14,263
Current portion of long-term debt 647 1,260 1,329
--------- --------- ---------
Total current liabilities 14,639 23,876 19,895
--------- --------- ---------
Long-Term Liabilities:
Long-term debt, net of current portion 11,994 13,708 12,960
--------- --------- ---------
Total liabilities 26,633 37,584 32,855
--------- --------- ---------
Commitments and contingent liabilities
Stockholders' Equity:
Common stock, no par value, authorized
50,000 and 70,000 shares, issued and
outstanding 3,595 and 5,229 shares, as
of December 31, 1994 and 1995,
respectively 4,935 6,978 7,228
Retained earnings (deficit) (3,236) (4,399) (3,926)
--------- --------- ---------
Total stockholders' equity 1,699 2,579 3,302
--------- --------- ---------
Total liabilities and stockholders'
equity $ 28,332 $ 40,163 $ 36,157
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-59
<PAGE>
SUN AUTOMOTIVE GROUP
Combined Statements of Operations
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Unaudited) For the
For the Years Ended December Six Months Ended
31, June 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
Sales $ 98,130 $ 116,252 $ 154,502 $ 74,822 $ 93,823
Cost of sales, including floor plan interest
for the years ended December 31, 1993, 1994
and 1995 of $499, $670 and $1,237,
respectively. 83,758 100,125 133,980 64,728 80,389
--------- --------- --------- --------- ---------
Gross profit 14,372 16,127 20,522 10,094 13,434
Selling, general and administrative expenses 13,956 14,965 18,469 8,530 10,386
--------- --------- --------- --------- ---------
Income from operations 416 1,162 2,053 1,564 3,048
Other income (expense), net 14 128 (31) 8
--------- --------- --------- --------- ---------
Net income $ 430 $ 1,290 $ 2,022 $ 1,564 $ 3,056
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-60
<PAGE>
SUN AUTOMOTIVE GROUP
Combined Statements of Stockholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
--------------------------------------------
<S> <C> <C> <C> <C>
Common Stock Retained
-------------------- Earnings
Shares Amount (Deficit) Total
--------- --------- ----------- ---------
Balance, December 31, 1992 2,526 $ 3,148 $ (1,426) $ 1,722
Issuance of common stock 670 1,342 1,342
Dividends (2,010) (2,010)
Net income 430 430
--------- --------- ----------- ---------
Balance, December 31, 1993 3,196 4,490 (3,006) 1,484
Issuance of common stock 399 445 445
Dividends (1,520) (1,520)
Net income 1,290 1,290
--------- --------- ----------- ---------
Balance, December 31, 1994 3,595 4,935 (3,236) 1,699
Issuance of common stock 1,634 2,043 2,043
Dividends (3,185) (3,185)
Net income 2,022 2,022
--------- --------- ----------- ---------
Balance, December 31, 1995 5,229 6,978 (4,399) 2,579
Issuance of common stock (Unaudited) 250 250
Dividends (Unaudited) (2,583) (2,583)
Net income (Unaudited) 3,056 3,056
--------- --------- ----------- ---------
Balance, June 30, 1996 (Unaudited) 5,229 $ 7,228 $ (3,926) $ 3,302
--------- --------- ----------- ---------
--------- --------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-61
<PAGE>
SUN AUTOMOTIVE GROUP
Combined Statements of Cash Flows
for the years ended December 31, 1993, 1994 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Unaudited)
Six Months
Years Ended Ended
December 31, June 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
Operating activities:
Net income $ 430 $ 1,290 $ 2,022 $ 1,564 $ 3,056
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 462 545 726 296 364
Net gain on sale of assets (244) (287)
Changes in operating assets and liabilities:
Accounts receivable 156 (712) (1,402) (3,909) (345)
Inventories 279 (250) (7,220) (4,294) 4,398
Notes receivable (855) 127
Prepaid and other assets 414 502 (479) (573) (176)
Floor plan notes payable (789) 741 7,372 7,222 (2,841)
Accounts payable and accrued liabilities 1,040 (176) 1,383 55 (837)
--------- --------- --------- --------- ---------
Net cash provided by operating activities 1,992 1,085 2,285 361 3,332
--------- --------- --------- --------- ---------
Investing activities:
Purchases of property and equipment (390) (846) (1,308) (669) (115)
Proceeds from sale of assets 971 287
Acquisition of dealership (1,936) (1,936)
--------- --------- --------- --------- ---------
Net cash used in investing activities (390) (846) (2,273) (2,605) 172
--------- --------- --------- --------- ---------
Financing activities:
Cash overdraft, net (408) 374 (131) 923 (371)
Payment on debt (816) (553) (2,070) (478) (679)
Proceeds from issuance of long-term debt 290 1,015 3,293 2,100
Dividends paid to shareholders (2,010) (1,520) (3,147) (1,537) (2,583)
Proceeds from issuance of common stock 1,342 445 2,043 1,236 250
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing
activities (1,602) (239) (12) 2,244 (3,383)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash 0 0 0 0 121
Cash, beginning of year 0 0 0 0 0
--------- --------- --------- --------- ---------
Cash, end of year $ 0 $ 0 $ 0 $ 0 $ 121
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-62
<PAGE>
SUN AUTOMOTIVE GROUP
Statements of Cash Flows -- Supplemental Information
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
Years Ended December 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 2,503 $ 2,042 $ 1,805
Property acquired under capital leases:
Assets 87
Liabilities 87
Property acquired with debt:
Assets 191
Liabilities 191
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-63
<PAGE>
SUN AUTOMOTIVE GROUP
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes To Combined Financial Statements
(Dollars in thousands)
1. Organization:
The Sun Automotive Group (the "Combined Group" or the "Company"), operating in
the State of Arizona, is engaged in the sale of new and used vehicles, as well
as finance, insurance and service contracts thereon.
The Company operates dealerships which hold franchise agreements with a number
of automotive manufacturers. In accordance with the individual franchise
agreement, each dealership is subject to certain rights and restrictions typical
of the industry. The ability of the manufacturers to influence the operations of
the dealerships or the loss of a franchise agreement could have a negative
impact on the operating results of the Company.
2. Summary of Significant Accounting Policies:
The following is a summary of significant accounting policies followed in the
preparation of the financial statements.
COMBINATION POLICY - COMMON CONTROL
The accompanying combined financial statements include the following automotive
affiliated companies that are all under common control:
Scottsdale Management Group, Ltd.
SA Automotive, Ltd. (Scottsdale Acura)
Scottsdale Jaguar, Ltd. (Scottsdale Jaguar)
SL Automotive, Ltd. (Scottsdale Lexus)
SPA Automotive, Ltd. (Land Rover Scottsdale)
Sun BMW, Ltd. (Camelback BMW)
LRP, Ltd. (Land Rover Phoenix)
6725 Dealership, Ltd.
6725 Agent
Arizona Cars & Credit
Arizona Cars & Credit provided used vehicles and financing in Scottsdale,
Arizona. This affiliate was sold in July 1995, resulting in a $244 gain on the
sale.
All significant intercompany transactions and balances have been eliminated in
the combination.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INTERIM FINANCIAL STATEMENTS (UNAUDITED):
The interim unaudited financial statements reflect adjustments, consisting only
of normal recurring accruals, which are, in the opinion of the Company's
management, necessary for a fair presentation of the financial position and
results of operations for the periods presented. Operating results for any
interim period are not necessarily indicative of the results for a full year.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments that have an
original maturity of three months or less at the date of purchase. The Company
also reflects outstanding checks in excess of the ledger cash balance as a
component of accounts payable. Such amounts as of December 31, 1994 and 1995
were $502 and $371, respectively.
REVENUE RECOGNITION
Revenue is recognized by the Company when vehicles and parts are delivered to
consumers, or when service is performed.
INVENTORIES
Inventories are stated at the lower of cost or market. In 1993, cost was
determined by using the specific identification method for vehicles and the
First-in, first-out (FIFO) method for parts. The Company changed its method of
F-64
<PAGE>
SUN AUTOMOTIVE GROUP
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes To Combined Financial Statements (Continued)
(Dollars in thousands)
2. Summary of Significant Accounting Policies: (Continued)
inventory valuation to the Last-in, first-out (LIFO) method for both vehicles
and parts in 1994. Under the current economic environment of rising vehicle
prices, the Company believes that the LIFO method will result in a better
measurement of operating results. The effect of the change in 1994 was to
decrease net income by approximately $489. The cumulative effect of the change
has not been calculated nor have proforma results of prior periods been prepared
as it would require assumptions that may furnish results different from what
they would have been had the LIFO method actually been used in prior periods.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated over their estimated
useful lives, using the straight-line and accelerated methods. Useful lives for
purposes of computing depreciation and amortization are:
<TABLE>
<S> <C>
Buildings -- 31.5 years
Leasehold improvements -- Economic life or life of
the lease, whichever is
shorter.
Equipment, furniture and -- 5 to 7 years
fixtures, and company
vehicles
</TABLE>
Expenditures for repairs and maintenance which increase the useful life or
substantially increase serviceability of the asset are capitalized. All others
are charged to expense as incurred. When equipment is sold or otherwise
disposed, the cost and related accumulated depreciation are removed from their
respective accounts and any resulting gain or loss is included in the statement
of operations.
INTANGIBLE ASSETS
Intangible assets consist of excess of cost over net assets acquired which is
being amortized on a straight-line basis over the estimated benefit period of 40
years. The Company periodically reviews these costs to assess recoverability.
Losses in value, if any, are charged to operations in the period such losses are
determined to be permanent.
The Company's policy with respect to assessing whether there has been a
permanent impairment in the value of excess of cost over net assets is to
compare the carrying value of a business' excess of cost over net assets with
the anticipated undiscounted future cash flows from operating activities of the
business. Factors considered by the Company in performing this assessment
include current operating income, trends and other economic factors. Accumulated
amortization at December 31, 1994 and 1995 was $0 and $43, respectively.
RESERVE FOR CHARGEBACK OF FINANCE AND INSURANCE INCOME
Provisions for chargebacks of finance and insurance income resulting from
customer prepayments and repossessions are recorded based on management's
estimates and historical experience.
LONG-LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of" ("SFAS
121") requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. SFAS 121 was adopted 1996, and did not have an
effect on the Group's results of operations, cash flows or financial position.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable,
accounts payable, debt, and an interest rate swap agreement. The carrying amount
of these financial instruments approximates fair value due either to length of
maturity or existence of variable interest rates that approximate prevailing
market rates. The fair value of the interest rate swap is the amount the Company
would receive or pay to terminate the swap agreement. At
F-65
<PAGE>
SUN AUTOMOTIVE GROUP
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes To Combined Financial Statements (Continued)
(Dollars in thousands)
2. Summary of Significant Accounting Policies: (Continued)
December 31, 1994 and 1995, the Company would have been required to pay $39 and
$149, respectively, to settle this agreement, representing an excess of carrying
value over fair value, based on estimates received from financial institutions.
INTEREST RATE SWAP AGREEMENT
The Company entered into an interest rate swap agreement to exchange fixed and
variable rate interest payment obligations without the exchange of the
underlying principal amounts in order to manage interest rate exposures on its
variable rate long-term mortgage obligations. The differential to be paid or
received is accrued as interest rates change and is recognized as an adjustment
to interest expense over the life of the agreement. The Company does not hold or
issue interest rate swap agreements for trading purposes.
CAPITAL STOCK
Each affiliate of the Company is an individual entity that issues stock for that
entity only and at different and unrelated prices. The Company as a single
entity does not issue stock. For purposes of these financial statements, the
capital stock activity of the individual affiliates have been summed to present
combined totals.
INCOME TAXES
Scottsdale Management Group, Ltd. is a C corporation under the provisions of the
Internal Revenue Code and, accordingly, is subject to federal and state income
taxes. The other affiliates of Sun Automotive Group have elected S corporation
status under the provisions of the Internal Revenue Code, except for 6725 Agent
which is a general partnership. Accordingly, they are generally not subject to
federal and state income taxes. For income tax reporting purposes, all profits
and losses, and certain other items, pass through to the stockholders/partners
of the other affiliates of Sun Automotive Group, who report these items on their
individual income tax returns. Scottsdale Management Group Ltd. recognizes no
profit or loss and as such a tax provision has not been made.
3. Concentration of Credit Risk:
The Company's significant concentration of credit risk is with its cash. The
Company maintains cash balances at a financial institution located in Arizona
which are at times in excess of federally-insured levels.
4. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
---------------------------------
<S> <C> <C> <C>
June 30,
December 31, 1996
1994 1995 (Unaudited)
--------- --------- -----------
New vehicles $ 8,314 $ 15,790 $ 11,583
Used vehicles 2,565 3,682 3,687
Parts, accessories and other 1,357 1,768 1,646
--------- --------- -----------
12,236 21,240 16,916
Cumulative LIFO reserve 489 874 948
--------- --------- -----------
$ 11,747 $ 20,366 $ 15,968
--------- --------- -----------
--------- --------- -----------
</TABLE>
If the FIFO method had been used instead of the LIFO methods, inventories would
have been higher by $489 and $874 at December 31, 1994 and December 31, 1995,
respectively.
F-66
<PAGE>
SUN AUTOMOTIVE GROUP
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes To Combined Financial Statements (Continued)
(Dollars in thousands)
5. Property and Equipment:
Property and equipment consists of the following as of:
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
December 31,
--------------------
1994 1995
--------- ---------
Land $ 3,473 $ 3,473
Buildings and leasehold improvements 6,528 6,556
Machinery and shop equipment 1,159 1,412
Furniture, fixtures, vehicles and other 2,694 3,912
--------- ---------
Total 13,854 15,353
Less: Accumulated depreciation and amortization 3,525 3,995
--------- ---------
Total property and equipment, net $ 10,329 $ 11,358
--------- ---------
--------- ---------
</TABLE>
The Company has entered into a lease of computer equipment. The lease meets the
criteria of a capital lease and, accordingly, has been recorded as such. The
lease is noncancelable and expires November 1997. As of December 31, 1994 and
1995, there are approximately $87 of assets under capital leases.
6. Acquisitions:
On February 27, 1995, the Company acquired substantially all the assets of two
dealer franchises for $1,936 in cash and $1,231 of notes payable. The
acquisition was accounted for under the purchase method and the accompanying
financial statements reflect the results of operations from the date of
acquisition. The excess of purchase price over the underlying estimate fair
value of assets acquired was $1,200.
Included in other assets long-term and as part of the purchase, the Company
entered into certain lease arrangements with the seller to lease certain land
and buildings. As part of this lease, the Company made a $500 payment to the
seller as an advance on rent; the balance of which is being amortized over the
life of the lease.
7. Floor Plan Notes Payable:
The amounts payable to financial institutions under trust receipt transactions
are collateralized by liens on inventories of specific new and used vehicles.
Floor plan notes payable are as follows:
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
December 31,
--------------------
1994 1995
--------- ---------
Bank of America, interest at variable reference rate as determined by
Bank of America National Trust and Savings Association $ 7,852 $ 13,558
Jaguar Cars, Inc. and other, interest at prime minus 2%, increasing
to prime plus 1% after 180 days 1,880 3,546
--------- ---------
Total $ 9,732 $ 17,104
--------- ---------
--------- ---------
</TABLE>
The Bank of America note contains, among other provisions, requirements for
maintaining certain working capital and other financial ratios and restrictions
on incurring additional indebtedness.
The prime rate at December 31, 1994 and 1995 was 8.5%.
F-67
<PAGE>
SUN AUTOMOTIVE GROUP
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes To Combined Financial Statements (Continued)
(Dollars in thousands)
8. Long-Term Debt:
Long-term debt consists of the following as of:
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
December 31,
--------------------
1994 1995
--------- ---------
Bank of America:
Mortgage note payable, interest negotiated periodically based on the
bank's First Rate, interest was 7.75% at December 31, 1994 and 1995,
due in 2004, collateralized by land and buildings $ 8,783 $ 8,618
Bank of America:
Notes payable, interest negotiated periodically based on the bank's
First Rate, interest ranged from 7.75% to 8.5% at December 31, 1994
and 1995, maturing between March 1997 and December 2004,
collateralized by all the Company's personal property including
inventories, receivables, and furniture and fixtures 1,484 5,609
Camelback Automotive:
Note payable, interest at 6%, due in three annual installments of $150,
$150, and $200 plus interest in February 1996, 1997, and 1998,
respectively, collateralized by all BMW personal property and
inventory 500
H.M. Knappenberger Revocable Trusts:
Notes payable, interest at prime, due 367 days from demand 2,028
ADP Credit Corporation:
Capital lease obligation, terminated in September 1995 244
ADP Credit Corporation:
Note payable, interest at 9.4%, due September 2000, collateralized by
certain computer equipment 186
Toyota Motor Distributors:
Capital lease obligation, monthly payments of $2 including interest at
7.5% through December 1997, collateralized by computer equipment 66 45
Various notes payable 36 10
--------- ---------
12,641 14,968
Less - current portion 647 1,260
--------- ---------
$ 11,994 $ 13,708
--------- ---------
--------- ---------
</TABLE>
F-68
<PAGE>
SUN AUTOMOTIVE GROUP
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes To Combined Financial Statements (Continued)
(Dollars in thousands)
8. Long-Term Debt: (Continued)
Principal maturities of long-term debt in each of the next five years are as
follows:
<TABLE>
<CAPTION>
---------
<S> <C>
Period Ending
December 31, Amount
- -------------- ---------
1996 $ 1,260
1997 1,328
1998 1,308
1999 1,133
2000 6,584
Thereafter 3,355
---------
Total $ 14,968
---------
---------
</TABLE>
The terms of certain financing agreements contain, among other provisions,
requirements for maintaining certain cash flows, current ratios and tangible net
worth ratios and restrictions on incurring additional indebtedness.
Interest expense for the years ending December 31, 1993, 1994 and 1995 was $762,
$664, and $819, respectively.
9. Commitments:
The Company is leasing land and buildings in Arizona under several noncancelable
operating leases with terms expiring at various dates from December 15, 1998
through December 31, 2005. Annual payments range from $89 to $324. Certain
leases provide for periodic increases in payments throughout the lease term in
proportion to increases in the consumer price index and other factors. Certain
leases also contain options to purchase the related property.
Rental expense for the years ended December 31, 1993, 1994 and 1995 was $508,
$668 and $1,183, respectively.
Future minimum lease commitments are summarized as follows:
<TABLE>
<CAPTION>
---------
<S> <C>
Amount
---------
1996 $ 1,253
1997 1,248
1998 1,231
1999 1,127
2000 1,054
Thereafter 4,245
---------
Total $ 10,158
---------
---------
</TABLE>
10. Interest Rate Swap Agreement:
At December 31, 1995, the Company had one outstanding interest rate swap
agreement with Bank of America, under which the Company receives a variable rate
based on three month LIBOR rates on a notional amount of $5,750 and pays a fixed
rate of 7.45% as determined in three month intervals. The transaction
effectively changes a portion of the Company's interest rate exposure from a
variable rate to a fixed rate. The interest rate swap agreement expires at
January 31, 1997. The Company is exposed to credit loss in the event of
nonperformance by the other party to the interest rate swap agreements. However,
the Company does not anticipate nonperformance by the counterparties.
F-69
<PAGE>
SUN AUTOMOTIVE GROUP
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes To Combined Financial Statements (Continued)
(Dollars in thousands)
11. Terminated Franchises:
In the first quarter of 1993, the Company terminated two franchises. As a result
of the termination, the Company recognized a charge to earnings from operations
of $1,161 which represented the remainder of rental payments for which the
Company was obligated under a non-cancelable lease obligation net of future
sublet rental income.
12. Defined Contribution Plan:
The Company has a 401(k) and profit sharing plan (the "Plan") for all employees
meeting certain service requirements. This Plan qualifies under Section 401(k)
of the Internal Revenue Code. The Plan allows employees to contribute up to 20%
of their annual compensation subject to Internal Revenue Code limitations. The
Company may make matching contributions at its discretion. During the years
ended December 31, 1993, 1994, and 1995, the Company contributed $30, $50 and
$75 to the Plan, respectively.
13. Reclassification:
Certain amounts in the 1993 and 1994 financial statements have been reclassified
to conform with the presentation adopted in 1995.
14. Subsequent Event:
In January 1996, the Company sold its Saab franchise and realized net profit of
$287 as a result of the sale of the franchise.
On June 6, 1996, the Company entered into an acquisition agreement and plan of
merger with United Auto Group, Inc.
F-70
<PAGE>
Report of Independent Accountants
To Stockholders of
Evans Automotive Group:
We have audited the accompanying combined balance sheet of Evans Automotive
Group as of December 31, 1995, and the related combined statements of
operations, stockholders' equity and cash flows for the year ended December 31,
1995. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Evans Automotive
Group as of December 31, 1995, and the results of its combined operations and
its combined cash flows for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
September 1, 1996
F-71
<PAGE>
EVANS AUTOMOTIVE GROUP
Combined Balance Sheets
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
December (Unaudited)
31, June 30,
1995 1996
--------- ---------
ASSETS:
Current assets:
Cash $ 667 $ 701
Accounts receivable 4,491 5,812
Inventories 9,024 8,927
Prepaid expenses and other assets 84 81
--------- ---------
Total current assets 14,266 15,521
--------- ---------
Property and equipment, net 365 335
Due from stockholder 550 699
Other assets 29 32
--------- ---------
Total assets $ 15,210 $ 16,587
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 757 $ 1,977
Accrued liabilities 682 729
Floor plan note payable 9,502 9,286
Due to stockholder 1,040 522
Other current liabilities 34 37
--------- ---------
Total current liabilities 12,015 12,551
--------- ---------
Deferred tax liability 6 6
Long-term lease obligations 104 89
--------- ---------
Total liabilities 12,125 12,646
--------- ---------
Commitments and contingent liabilities
Stockholders' equity:
Common stock, par value $1 per share, shares
authorized 1,500,000, shares issued and outstanding
1,501 2 2
Additional paid-in capital 922 922
Retained earnings 2,186 3,042
Less: Treasury stock, 500 shares at cost (25) (25)
--------- ---------
Total stockholders' equity 3,085 3,941
--------- ---------
Total liabilities and stockholders' equity $ 15,210 $ 16,587
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-72
<PAGE>
EVANS AUTOMOTIVE GROUP
Combined Statements of Operations and Retained Earnings
(Dollars in thousands)
<TABLE>
<CAPTION>
--------------------------------
<S> <C> <C> <C>
For the
Year Ended (Unaudited) For the
December Six Months Ended
31, June 30,
---------- --------------------
1995 1995 1996
---------- --------- ---------
Sales $ 81,669 $ 38,593 $ 46,369
Cost of sales, including floor plan interest for the year
ended December 31, 1995 of $709 72,459 34,264 40,497
---------- --------- ---------
Gross profit 9,210 4,329 5,872
Selling, general and administrative expenses 7,842 3,666 4,664
---------- --------- ---------
Income from operations 1,368 663 1,208
Other income (expense), net (34) (11) 13
---------- --------- ---------
Income before provision for income taxes 1,334 652 1,221
Provision for income taxes 457 161 365
---------- --------- ---------
Net income 877 491 856
Retained earnings, beginning of period 1,309 1,308 2,186
---------- --------- ---------
Retained earnings, end of period $ 2,186 $ 1,779 $ 3,042
---------- --------- ---------
---------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-73
<PAGE>
EVANS AUTOMOTIVE GROUP
Combined Statements of Cash Flows
for the year ended December 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
----------------------------------
<S> <C> <C> <C>
(Unaudited)
Six Months
Year Ended Ended
December 31, June 30,
------------ --------------------
1995 1995 1996
------------ --------- ---------
Operating activities:
Net income $ 877 $ 491 $ 856
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 90 45 48
Changes in operating assets and liabilities:
Accounts receivable 377 1,601 (1,321)
Inventories (1,522) (1,993) 97
Prepaid expenses and other current assets 1 (20) 3
Other assets 5 (3)
Floor plan notes payable 864 484 (216)
Floor plan notes payable--stockholder 143 116 (518)
Accounts payable and accrued liabilities (82) (110) 1,267
Deferred tax liability 6
------------ --------- ---------
Net cash provided by operating activities 759 614 213
------------ --------- ---------
Investing activities:
Purchases of property and equipment (91) (146) (30)
------------ --------- ---------
Net cash used in investing activities (91) (146) (30)
------------ --------- ---------
Financing activities:
Repayment of note payable to stockholder (67)
Due from stockholder (184) 19 (149)
Increase in note payable to stockholder 44
------------ --------- ---------
Net cash provided by (used in) financing activities (251) 63 (149)
------------ --------- ---------
Net increase (decrease) in cash 417 531 34
Cash, beginning of year 250 250 667
------------ --------- ---------
Cash, end of year $ 667 $ 781 $ 701
------------ --------- ---------
------------ --------- ---------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 746
Property acquired under capital leases:
Assets $ 130
Liabilities $ (130)
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-74
<PAGE>
EVANS AUTOMOTIVE GROUP
Notes To Combined Financial Statements
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
(Dollars in thousands)
1. Organization:
The Evans Automotive Group (the "Group" or the "Company"), operating in the
State of Georgia, is engaged in the sale of new and used vehicles, as well as
finance, insurance and service contracts thereon.
The Company operates dealerships which hold franchise agreements with two
automotive manufacturers. In accordance with the individual franchise agreement,
each dealership is subject to certain rights and restrictions typical of the
industry. The ability of the manufacturers to influence the operations of the
dealerships or the loss of a franchise agreement could have a negative impact on
the operating results of the Company.
2. Summary of Significant Accounting Policies:
The following is a summary of significant accounting policies followed in the
preparation of the financial statements.
COMBINATION POLICY - COMMON CONTROL
The accompanying combined financial statements include Charles Evans BMW, Inc.,
and Charles Evans Nissan, Inc.. All significant intercompany transactions and
balances have been eliminated in the combination.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INTERIM FINANCIAL STATEMENTS (UNAUDITED):
The interim unaudited financial statements reflect adjustments, consisting only
of normal recurring accruals, which are, in the opinion of the Company's
management, necessary for a fair presentation of the financial position and
results of operations for the periods presented. Operating results for any
interim period are not necessarily indicative of the results for a full year.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments that have an
original maturity of three months or less at the date of purchase.
REVENUE RECOGNITION
Revenue is recognized by the Company when vehicles and parts are delivered to
consumers, and when services are performed. Finance and insurance revenues are
recognized upon the sale of the finance or insurance contract.
INVENTORIES
Inventories are stated at cost. The cost of new vehicles and parts is determined
using the Last-in, first-out (LIFO) method, and the cost of used vehicles is
determined on a specific identification basis.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated over their estimated
useful lives, using the straight-line and accelerated methods.
Expenditures for repairs and maintenance which increase the useful life or
substantially increase serviceability of the asset are capitalized. All others
are charged to expense as incurred. When equipment is sold or otherwise
disposed, the cost and related accumulated depreciation are removed from their
respective accounts and any resulting gain or loss is included in the statement
of operations.
F-75
<PAGE>
EVANS AUTOMOTIVE GROUP
Notes To Combined Financial Statements (Continued)
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
(Dollars in thousands)
2. Summary of Significant Accounting Policies: (Continued)
RESERVE FOR CHARGEBACK OF FINANCE AND INSURANCE INCOME
Provisions for chargebacks of finance and insurance income resulting from
customer prepayments and repossessions are recorded based on management's
estimates and historical experience.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable,
accounts payable and debt. The carrying amount of these financial instruments
approximates fair value due either to length of maturity or existence of
variable interest rates that approximate prevailing market rates.
CAPITAL STOCK
Each affiliate of the Company is an individual entity that issues stock for that
entity only and at different and unrelated prices. The Company as a single
entity does not issue stock. For purposes of these financial statements, the
capital stock activity of the individual affiliates have been summed to present
combined totals.
INCOME TAXES
Charles Evans BMW, Inc. is a C corporation under the provisions of the Internal
Revenue Code and, accordingly, is subject to federal and state income taxes for
which a provision has been made. The other affiliate of Evans Automotive Group
has elected S corporation status under the provisions of the Internal Revenue
Code. Accordingly, Charles Evans Nissan, Inc. is generally not subject to
federal and state income taxes. For income tax reporting purposes, all profits
and losses, and certain other items, pass through to the stockholder of Charles
Evans Nissan, Inc., who reports those items on the stockholder's individual
income tax return.
3. Concentration of Credit Risk:
The Company's significant concentration of credit risk is with its cash. The
Company maintains cash balances at a financial institution located in Georgia
which are at times in excess of federally-insured levels.
F-76
<PAGE>
EVANS AUTOMOTIVE GROUP
Notes To Combined Financial Statements (Continued)
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
(Dollars in thousands)
4. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
-------------------------
<S> <C> <C>
June 30,
December 31, 1996
1995 (Unaudited)
------------ -----------
New vehicles $ 7,778 $ 8,107
Used vehicles 2,403 2,047
Parts, accessories and other 769 755
------------ -----------
10,950 10,909
Cumulative LIFO reserve 1,926 1,982
------------ -----------
$ 9,024 $ 8,927
------------ -----------
------------ -----------
</TABLE>
5. Property and Equipment:
Property and equipment consists of the following as of:
<TABLE>
<CAPTION>
-----------------
<S> <C>
December 31, 1995
-----------------
Leasehold improvements $ 335
Machinery and shop equipment 640
Furniture, fixtures, vehicles and other 633
-----------------
Total 1,608
Less: Accumulated depreciation and amortization 1,243
-----------------
Total property and equipment, net $ 365
-----------------
-----------------
</TABLE>
6. Floor Plan Notes Payable:
The amounts payable to financial institutions under trust receipt transactions
are collateralized by the inventories and fixed assets. Floor plan notes payable
are to NationsBank and bear interest at 8.5% at December 31, 1995. Related
parties also provide floor plan financing (see Note 9).
F-77
<PAGE>
EVANS AUTOMOTIVE GROUP
Notes To Combined Financial Statements (Continued)
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
(Dollars in thousands)
7. Income Taxes:
The provision (benefit) for income taxes consists of the following components:
<TABLE>
<CAPTION>
------------
<S> <C>
Year ended
December 31,
------------
1995
------------
Currently payable:
Federal $ 406
State and local 45
------------
Total currently payable 451
------------
Deferred tax liability:
Federal 5
State and local 1
------------
Total deferred 6
------------
Total provision $ 457
------------
------------
</TABLE>
The reasons for the differences between the provision for income taxes using the
Federal statutory income tax rate and the tax provisions reported by the Group
are as follows:
<TABLE>
<CAPTION>
------------
<S> <C>
Year ended
December 31,
------------
1995
------------
Tax provision computed at the Federal statutory income tax rate $ 454
State and local income taxes, net of Federal benefit 48
Entity not subject to tax (49)
Other 4
------------
Provision for income taxes $ 457
------------
------------
</TABLE>
The Group is comprised of two dealerships, one of which is structured as an S
corporation under the Internal Revenue Code. No tax provisions have been made
for the S corporation as amounts pass through to shareholder.
F-78
<PAGE>
EVANS AUTOMOTIVE GROUP
Notes To Combined Financial Statements (Continued)
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
(Dollars in thousands)
7. Income Taxes: (Continued)
The Group accounts for income taxes in accordance with SFAS 109. Under SFAS 109,
deferred income taxes reflect the estimated tax effect of temporary differences
between assets and liabilities for financial accounting purposes and those
amounts as measured by tax laws and regulations. The components of deferred
income tax liabilities of $11 at December 31, 1995 were the result of
depreciation and inventory accounting differences. The components of deferred
income tax assets of $60 at December 31, 1995 is the result of reserves and
accruals for inventory and chargebacks.
8. Commitments:
The Company leases certain computer and telephone equipment used in the
operation of the dealerships. The leases have been accounted for as capital
leases. The assets under capital leases of $163 are being amortized over the
lives of the leases on a straight-line basis. Accumulated amortization amounted
to $28 as of December 31, 1995.
Future minimum lease commitments are summarized as follows:
<TABLE>
<CAPTION>
-----------
<S> <C>
Amount
-----------
1996 $ 42
1997 41
1998 40
1999 40
2000 2
-----
Total minimum lease payments $ 165
Less amount representing interest (31)
-----
Present value of net minimum lease payments 134
Less current principal maturities of obligations
under capital leases 30
-----
Long-term obligation under capital lease $104
-----
-----
</TABLE>
9. Related Party Transactions:
During 1994, the sole stockholder and other family members began floor planning
cars for the dealership. Interest is paid to the stockholder and family members
at prime. Total interest paid to the sole stockholder and family was $89 in
1995.
The Company rents both dealership facilities from the sole stockholder under a
month-to-month agreement currently requiring monthly payments of $42. Total rent
expense for 1995 was $504.
10. Defined Contribution Plan:
The Company has a 401(k) plan (the "Plan") for all employees meeting certain
service requirements. This Plan qualifies under Section 401(k) of the Internal
Revenue Code. The Company may make matching contributions at its discretion.
During the year ended December 31, 1995, the Company contributed $26 to the
Plan.
11. Subsequent Event:
In August 1996 the Company entered into an acquisition agreement and plan of
merger with United Auto Group, Inc.
F-79
<PAGE>
Report of Independent Accountants
To the Stockholders
of Standefer Motor Sales, Inc.:
We have audited the accompanying balance sheets of Standefer Motor Sales, Inc.
as of December 31, 1995 and 1994, and the related statements of operations,
retained earnings and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Standefer Motor Sales, Inc. as
of December 31, 1995 and 1994 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Memphis, Tennessee
August 29, 1996
F-80
<PAGE>
STANDEFER MOTOR SALES, INC.
Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
---------------------------------
December 31, (Unaudited)
-------------------- June 30,
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 742 $ 1,043 $ 232
Accounts receivable 1,240 1,682 1,431
Inventories 5,792 6,980 8,430
--------- --------- -----------
Total current assets 7,774 9,705 10,093
Plant and equipment, net 42 178 226
Other assets 150 150 150
--------- --------- -----------
Total assets $ 7,966 $ 10,033 $ 10,469
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable-line of credit $ 466 $ 553 480
Accounts payable 724 1,090 741
Accrued expenses 264 384 678
Notes payable-related parties 1,472 1,879 1,846
State income taxes payable 69 96 120
--------- --------- -----------
Total current liabilities 2,995 4,002 3,865
Commitments and contingent liabilities
Stockholders' equity:
Common stock, Class A, no par value 10,000 shares authorized, 1,000 shares issued
and outstanding 1 1 1
Common stock Class B, no par value, non-voting shares, 90,000 shares authorized,
9,000 shares issued and outstanding 9 9 9
Retained earnings 4,961 6,021 6,594
--------- --------- -----------
Total stockholders' equity 4,971 6,031 6,604
--------- --------- -----------
Total liabilities and stockholders' equity $ 7,966 $ 10,033 $ 10,469
--------- --------- -----------
--------- --------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-81
<PAGE>
STANDEFER MOTOR SALES, INC.
Statements of Operations
(Dollars in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Unaudited)
Years ended Six months ended
December 31, June 30,
------------------------------- --------------------
<CAPTION>
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
Sales $ 41,546 $ 50,203 $ 65,793 $ 29,897 $ 34,994
<S> <C> <C> <C> <C> <C>
Cost of sales 37,055 44,874 58,284 26,703 31,018
--------- --------- --------- --------- ---------
Gross profit 4,491 5,329 7,509 3,194 3,976
Selling, general and administrative expenses 3,489 3,835 5,192 1,982 2,187
--------- --------- --------- --------- ---------
Operating income 1,002 1,494 2,317 1,212 1,789
Other income, net 217 166 183 21 30
--------- --------- --------- --------- ---------
Income before income taxes 1,219 1,660 2,500 1,233 1,819
Provision for income taxes 64 98 147 107 133
--------- --------- --------- --------- ---------
Net income $ 1,155 $ 1,562 $ 2,353 $ 1,126 $ 1,686
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-82
<PAGE>
STANDEFER MOTOR SALES, INC.
Statements of Retained Earnings
(Dollars in thousands)
<TABLE>
<CAPTION>
---------
<S> <C>
Retained earnings, January 1, 1993 $ 3,878
Net income for the year 1,155
Dividends (771)
---------
Retained earnings, December 31, 1993 4,262
Net income for the year 1,562
Dividends (863)
---------
Retained earnings, December 31, 1994 4,961
Net income for the year 2,353
Dividends (1,293)
---------
Retained earnings, December 31, 1995 6,021
Net income for the period (unaudited) 1,686
Dividends (1,113)
---------
Retained earnings, June 30, 1996 (unaudited) $ 6,594
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-83
<PAGE>
STANDEFER MOTOR SALES, INC.
Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Unaudited)
Six months ended
Years ended December 31, June 30,
---------------------------------- --------------------
<CAPTION>
------------ -------------------- --------------------
1993 1994 1995 1995 1996
------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income $ 1,155 $ 1,562 $ 2,353 $ 1,126 $ 1,686
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on disposition of assets (108)
Depreciation 36 18 43 18 21
Changes in operating assets and liabilities:
Accounts receivables (377) (128) (442) 270 251
Inventories (341) (984) (1,188) (1,954) (1,450)
Note payable -- line of credit 119 466 87 993 (73)
Accounts payable and accrued expenses (595) 195 513 119 (31)
Notes payable -- related parties (79) (2) 407 235 (33)
------------ --------- --------- --------- ---------
Net cash provided by (used in) operating
activities (190) 1,127 1,773 807 371
------------ --------- --------- --------- ---------
Investing activities:
Purchase of plant and equipment (23) (6) (179) (96) (69)
Proceeds from sale of assets 164
------------ --------- --------- --------- ---------
Net cash provided by (used in) investing
activities 141 (6) (179) (96) (69)
------------ --------- --------- --------- ---------
Financing activities:
Cash dividends paid (771) (863) (1,293) (1,058) (1,113)
------------ --------- --------- --------- ---------
Net cash used in financing activities (771) (863) (1,293) (1,058) (1,113)
------------ --------- --------- --------- ---------
Net increase (decrease) in cash (820) 258 301 (347) (811)
Cash at beginning of the period 1,304 484 742 742 1,043
------------ --------- --------- --------- ---------
Cash at end of period $ 484 $ 742 $ 1,043 $ 395 $ 232
------------ --------- --------- --------- ---------
------------ --------- --------- --------- ---------
Supplemental schedule of cash flows
Cash paid during the year for:
Interest $ 178 $ 156 $ 259
------------ --------- ---------
------------ --------- ---------
Income taxes $ 25 $ 92 $ 123
------------ --------- ---------
------------ --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-84
<PAGE>
STANDEFER MOTOR SALES, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Financial Statements
(Dollars in thousands)
1. Organization:
Standefer Motor Sales, Inc. (the "Company"), operating in Chattanooga,
Tennessee, sells and services new Nissan cars and trucks and used vehicles, as
well as finance, insurance and service contracts thereon.
The Company operates a dealership which holds a franchise agreement with an
automotive manufacturer. In accordance with the franchise agreement, the
dealership is subject to certain rights and restrictions typical of the
industry. The ability of the manufacturer to influence the operations of the
dealership or the loss of the franchise agreement would have a negative impact
on operating results of the Company.
2. Summary of Significant Accounting Policies:
The following is a summary of significant accounting policies followed in the
preparation of the financial statements.
ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INTERIM FINANCIAL STATEMENTS (UNAUDITED):
The interim unaudited financial statements reflect adjustments, consisting only
of normal recurring accruals, which are, in the opinion of the Company's
management, necessary for a fair presentation of the financial position and
results of operations for the periods presented. Operating results for any
interim period are not necessarily indicative of the results for a full year.
REVENUE RECOGNITION:
Revenue is recognized by the Company when vehicles or parts are delivered to
consumers and when service work is performed. Finance and insurance revenues are
recognized upon the sale of the finance or insurance product to a third party.
INVENTORIES:
New and used vehicles and parts and accessories inventories are valued at the
lower of cost or market. Cost is determined on the Last-in, first-out (LIFO)
method.
PLANT AND EQUIPMENT:
Plant and equipment are stated at cost and depreciated over their estimated
useful lives, principally by the straight-line method.
Expenditures for repairs and maintenance which increase the useful life or
substantially increase serviceability of the asset are capitalized. All others
are charged to expense as incurred. When equipment is sold or otherwise disposed
of, the cost and related accumulated depreciation are removed from their
respective accounts and any resulting gain or loss included in the statement of
operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying values of cash, accounts receivable, notes payable, and accounts
payable approximate their fair values due to the short-term maturities of those
instruments. The carrying value of long-term debt approximates fair value due to
the market rate of interest charged.
3. Concentrations of Credit Risk:
The Company's significant concentration of credit risk is with its cash. The
Company maintains cash balances at several financial institutions located in
Tennessee which are at times in excess of federally-insured amounts.
F-85
<PAGE>
STANDEFER MOTOR SALES, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Financial Statements (Continued)
(Dollars in thousands)
4. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
-------------------------------
June 30,
December 31, ---------
-------------------- 1996
1994 1995 (Unaudited)
--------- --------- ---------
New vehicles and demonstrators $ 4,546 $ 4,017 $ 4,742
<S> <C> <C> <C>
Used vehicles 3,809 5,870 6,516
Parts and accessories 413 414 494
--------- --------- ---------
8,768 10,301 11,752
Cumulative LIFO Reserve (2,976) (3,321) (3,322)
--------- --------- ---------
$ 5,792 $ 6,980 $ 8,430
--------- --------- ---------
--------- --------- ---------
</TABLE>
The use of the LIFO method of determining the cost of new and used vehicle
inventories and parts had the effect of decreasing inventories at December 31,
1994 and 1995 by $2,976 and $3,321, respectively, and decreasing net income for
the periods ended December 31, 1993, 1994 and 1995 by approximately $433, $563
and $345, respectively, as compared to what they would have been under the FIFO
cost method.
5. Plant and Equipment:
Property, plant and equipment consists of:
<TABLE>
<CAPTION>
--------------------
1994 1995
--------- ---------
Building $ 35 $ 131
<S> <C> <C>
Machinery and equipment 69 93
Furniture and fixtures 54 113
Leasehold improvements 9 9
Service vehicles 22 22
--- ---
189 368
Less: accumulated depreciation and amortization 147 190
--- ---
$ 42 $ 178
--- ---
--- ---
</TABLE>
At June 30, 1996, the Company had purchase commitments of approximately $120 for
computer equipment.
6. Line of Credit
The Company has a $2,000 line of credit with Suntrust Bank. Outstanding amounts
are due on demand. Interest is payable at the bank's prime rate (8.5% at
December 31, 1995). This line of credit is collateralized by substantially all
of the Company's assets.
7. Notes Payable-Related Parties:
Notes payable-related parties consists of various notes payable to the
stockholders and related parties at an interest rates of 10%. These amounts are
payable on demand.
8. Taxes on Income:
The Company has elected to be treated as an S corporation for Federal income tax
reporting purposes. Under this election, the Company's Stockholders are
responsible for reporting the Company's Federal taxable income on their personal
tax returns.
F-86
<PAGE>
STANDEFER MOTOR SALES, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Financial Statements (Continued)
(Dollars in thousands)
8. Taxes on Income: (Continued)
For state tax purposes, the Company accounts for its taxes under the provisions
of Financial Accounting Standard 109, "Accounting for Income Taxes."
9. Other Related Party Transactions:
The Company rents its operating facilities and certain equipment from Standefer
Investment Co., a related partnership. A shareholder of the Company is also a
partner in the related partnership. Total rents paid to the partnership were
$282 for each of the years ended December 31, 1995, 1994 and 1993.
The stockholders of the Company are also stockholders in a related company
engaged in the sale of insurance contracts. Standefer Motor Sales received
commissions from this entity of $101, $82 and $47 for the years ended December
31, 1995, 1994 and 1993, respectively.
The Company has an investment in an insurance company which is engaged in the
sale of insurance contracts. Dividends received from such entity amounted to
$121, $98, and $41 for the years ended December 31, 1995, 1994, and 1993. Such
dividends are recorded as other income.
10. Reclassifications:
Certain amounts in the 1993 and 1994 financial statements have been reclassified
to conform to the presentation adopted in 1995.
11. Subsequent Event (Unaudited):
In September, 1996 the stockholders of the Company entered into an agreement to
sell the outstanding stock of the Company to United Auto Group, Inc.
F-87
<PAGE>
[Artwork]
<PAGE>
[UAG LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the sale
and distribution of the securities being registered which will be paid solely by
the Company. All the amounts shown are estimates, except the Commission
registration fee and the NASD filing fee:
<TABLE>
<S> <C>
SEC Registration Fee.................................................... $ 59,483
NASD Fees............................................................... 17,750
NYSE Listing Fee........................................................ *
Transfer Agent and Registrar Fees and Expenses.......................... *
Printing and Engraving Expenses......................................... *
Legal Fees and Expenses................................................. *
Accounting Fees and Expenses............................................ *
Blue Sky Fees and Expenses.............................................. *
Miscellaneous Expenses.................................................. *
---------
Total........................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL empowers a Delaware corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation or enterprise. A corporation may indemnify such person against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful. A corporation may, in
advance of the final disposition of any civil, criminal, administrative or
investigative action, suit or proceeding, pay the expenses (including attorneys'
fees) incurred by any officer or director in defending such action, provided
that the director or officer undertake to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation.
A Delaware corporation may indemnify officers and directors in an action by or
in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses (including attorneys' fees) which he actually or reasonably
incurred in connection therewith. The indemnification provided is not deemed to
be exclusive of any other rights to which an officer or director may be entitled
under any corporation's bylaw, agreement, vote or otherwise.
The Company has adopted provisions in its Certificate of Incorporation and
Bylaws that provide that the Company shall indemnify its officers and directors
to the maximum extent permitted under the DGCL. The Spielvogel Employment
Agreement provides for indemnification of Mr. Spielvogel to the maximum extent
legally permitted or authorized by the Company's Certificate of Incorporation or
Bylaws or resolutions of the Board of Directors. The Stockholders Agreement
provides that in the
II-1
<PAGE>
event that a director elected pursuant thereto is made or threatened to be made
a party to any action, suit or proceeding with respect to which such director
may be entitled to indemnification by the Company, such director will be
entitled to be represented by counsel of his choice and the reasonable expenses
of such representation will be reimbursed by the Company to the extent provided
in or authorized by its Certificate of Incorporation or Bylaws. Certain
directors are also entitled to indemnification from the organizations that
employ them.
In addition, the Underwriting Agreement filed as Exhibit 1.1 to the Registration
Statement provides for indemnification of the Company, its officers and its
directors by the Underwriters under certain circumstances.
The Company has purchased insurance on behalf of its officers and directors for
liabilities arising out of their capacities as such.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this Registration Statement, the
Company has issued the following securities that were not registered under the
Securities Act.
In connection with the Equity Facility, the Company issued shares of its capital
stock in multiple transactions between December 28, 1993 and July 10, 1996.
Montgomery Securities acted as the placement agent for the Equity Facility and
received fees in the amount of $1.4 million in connection therewith. In
addition, on July 10, 1996, the Company issued additional shares of its capital
stock to its existing stockholders on terms substantially similar to those of
the Equity Facility. After giving effect to the Preferred Stock Conversion, the
number of shares of Common Stock purchased and the aggregate offering price paid
by each investor are set forth in the following table:
<TABLE>
<CAPTION>
AGGREGATE
SHARES OF OFFERING
INVESTOR COMMON STOCK PRICE
- ------------------------------------------------------------------------- -------------- -------------
<S> <C> <C>
Trace International Holdings, Inc........................................ 3,531,156 $ 28,436,560
Aeneas Venture Corporation............................................... 2,843,656 28,436,560
AIF II, L.P.............................................................. 1,843,656 18,436,560
Ezra P. Mager............................................................ 163,240 1,319,900
Jeremy Grantham.......................................................... 104,474 1,044,740
Jules Kroll.............................................................. 104,474 1,044,740
Andrea Farace............................................................ 52,237 522,370
Natio Vie Developpment................................................... 52,237 522,370
Assu Venture............................................................. 36,566 365,660
Natio Fonds Venture 2.................................................... 36,566 365,660
Carl Spielvogel.......................................................... 26,118 261,180
Jerome Markowitz......................................................... 5,572 55,720
Philip Halperin.......................................................... 5,572 55,720
Derek Lemke-von Ammon.................................................... 2,786 27,860
Frank Dunlevy............................................................ 2,786 27,860
</TABLE>
Pursuant to the Securities Purchase Agreements, the Company issued its Senior
Notes and Warrants in multiple transactions between September 22, 1995 and July
11, 1996. J.P. Morgan Securities Inc. acted as the placement agent for sales to
non-affiliated investors and received fees in the amount of $0.9 million in
connection therewith. In addition, on July 10, 1996, the Company issued
Additional Warrants to such investors. The amount of securities purchased and
the aggregate offering price paid by each investor are set forth in the
following table:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK AGGREGATE
PRINCIPAL AMOUNT SUBJECT TO OFFERING
INVESTOR OF SENIOR NOTES WARRANTS PRICE
- -------------------------------------------------- ---------------- ------------------ -------------
<S> <C> <C> <C>
J.P. Morgan Capital Corporation (and its
affiliates)...................................... $ 20,000,000 634,198 $ 20,535,164
The Equitable Life Assurance Society
of the United States............................. 15,000,000 475,648 15,401,368
</TABLE>
II-2
<PAGE>
On April 3, 1996, the Company granted Carl Spielvogel an option to purchase up
to 400,000 shares of Common Stock at an exercise price of $10.00 per share. The
stock option vests in four equal installments beginning on the first anniversary
of October 18, 1994, the date of Mr. Spielvogel's employment with the Company.
Under the Stock Option Plan, adopted April 23, 1996, the Company granted options
to purchase 473,000 shares of Common Stock at an exercise price of $10.00 per
share to employees of the Company and its affiliates. Such options vest in five
equal installments on each of the first five anniversaries of the later of
December 29, 1993 and the optionee's date of employment. See "Management --
Stock Option Plan." The grants of options under the Stock Option Plan were
effected in reliance on Rule 701 promulgated under the Securities Act for offers
and sales pursuant to certain compensatory benefit plans.
On July 31, 1996, the Company issued 10,000 shares of Class A Preferred Stock to
Richard Sinkfield for an aggregate offering price of $100,000.
In addition to any exemptions specified above, each of the foregoing offerings
was effected in reliance on Section 4(2) of the Securities Act as a transaction
not involving any public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NO. DESCRIPTION
- ------------ ------------------------------------------------------------------------------------------
<C> <S> <C>
**1.1 Form of Underwriting Agreement.
**3.1 Form of Restated Certificate of Incorporation.
**3.2 Form of Restated Bylaws.
**4.1 Specimen Common Stock certificate.
**5.1 Opinion of Willkie Farr & Gallagher.
10.1.1.1 Registration Rights Agreement, dated as of October 15, 1993, among the Company and the
investors listed therein.
10.1.1.2 Amendment to Registration Rights Agreement, dated as of July 31, 1996, among the Company
and the investors listed therein.
10.1.2 Waiver, Consent and Modification Agreement, dated as of September 22, 1995, among the
Company and its stockholders.
10.1.3 Letter Agreement, dated September 22, 1996, between the Company and J.P. Morgan Capital
Corporation.
10.1.4 Form of Warrant.
10.1.5 Form of Additional Warrant.
10.1.6 Employment Agreement, dated as of June 21, 1996, between the Company and Carl Spielvogel.
10.1.7 Severance Agreement, dated April 5, 1996, among the Company, Trace and Ezra P. Mager.
**10.1.8 Stock Option Plan of the Company.
**10.1.9 Registration Rights Agreement, dated as of August 1, 1995, among the Company and the
parties listed on Schedule I thereto.
10.1.10 Sublease, dated August 1994, between Overseas Partners, Inc. and the Company.
10.1.11 Letter, dated July 24, 1996, from Chrysler Corporation to the Company.
10.1.12 Agreement, dated July 24, 1996, between the Company and Toyota Motor Sales U.S.A., Inc.
**10.1.13 Non-employee Director Compensation Plan of the Company.
**10.2.1.1 Honda Automobile Dealer Sales and Service Agreement, dated October 5, 1995, between
American Honda Motor Co. Inc. and Danbury Auto Partnership (standard provisions are in
Exhibit 10.2.1.2 hereto).
**10.2.1.2 American Honda Motor Co. Standard Provisions.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- ------------ ------------------------------------------------------------------------------------------
10.2.2.1 Lexus Dealer Agreement, dated October 5, 1992, between Lexus, a division of Toyota Motor
Sales, U.S.A., Inc. and Somerset Motors Partnership (standard provisions are in Exhibit
10.2.2.2 hereto).
<C> <S> <C>
10.2.2.2 Lexus Dealer Agreement Standard Provisions.
10.2.3.1 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service Agreement, dated August
29, 1994, between Mitsubishi Motor Sales of America, Inc. and Rockland Motors Partnership,
as amended August 20, 1996 (standard provisions are in Exhibit 10.2.3.2 hereto).
10.2.3.2 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service Agreement Standard
Provisions.
**10.2.4.1 BMW of North America, Inc. Dealer Agreement, dated January 1, 1994, between BMW of North
America, Inc. and DiFeo BMW Partnership, as amended July 25, 1996 (standard provisions are
in Exhibit 10.2.4.2 hereto).
**10.2.4.2 BMW of North America, Inc. Dealer Standard Provisions Applicable to Dealer Agreement.
**10.2.5.1 Term Dealer Sales and Service Agreement, dated July 3, 1996, between American Suzuki Motor
Corporation and Fair Hyundai Partnership (standard provisions are in Exhibit 10.2.5.2)
**10.2.5.2 Suzuki Dealer Sales and Service Agreement Standard Provisions.
**10.2.6.1 Toyota Dealer Agreement, dated May 5, 1995, between Toyota Motor Distributors, Inc. and
Hudson Motors Partnership (standard provisions are in Exhibit 10.2.6.2 hereto).
**10.2.6.2 Toyota Dealer Agreement Standard Provisions.
10.2.7.1 Oldsmobile Division Dealer Sales and Service Agreement, dated October 2, 1992, between
General Motors Corporation, Oldsmobile Division and J & F Oldsmobile-Isuzu Partnership, as
amended December 20, 1993 and July 23, 1996 (standard provision are in Exhibit 10.2.7.2
hereto).
10.2.7.2 General Motors Dealer Sales and Service Agreement Standard Provisions.
10.2.8.1 Chevrolet-Geo Dealer Sales and Service Agreement, dated November 1, 1995, between General
Motors Corporation, Chevrolet Motor Division and Fair Chevrolet-Geo Partnership
(substantially similar to Exhibit 10.2.7.1).
**10.2.9.1 Nissan Dealer Term Sales and Service Agreement, between the Nissan Division of Nissan
Motor Corporation in U.S.A. and DiFeo Nissan Partnership (standard provisions are in
Exhibit 10.2.9.2 hereto).
**10.2.9.2 Nissan Dealer Sales and Service Agreement Standard Provisions.
**10.2.10.1 Chrysler Corporation Term Sales and Service Agreement, between Fair Chrysler Plymouth
Partnership and Chrysler Corporation, as amended December 15, 1993 (standard provisions
are in Exhibit 10.2.10.2).
10.2.10.2 Chrysler Corporation Sales and Service Agreement Additional Terms and Provisions.
**10.2.11 Chrysler Corporation Eagle Sales and Service Agreement, dated October 8, 1992, between
DiFeo Jeep-Eagle Partnership and Chrysler Corporation (substantially similar to Exhibit
10.2.10.1).
**10.2.12 Chrysler Corporation Chrysler Sales and Service Agreement, dated August 16, 1995, between
DiFeo Chrysler Plymouth Jeep Eagle Partnership and Chrysler Corporation (substantially
similar to Exhibit 10.2.10.1).
**10.2.13 Chrysler Corporation Plymouth Sales and Service Agreement, dated November 13, 1992,
between DiFeo Chrysler Plymouth Jeep Eagle Partnership and Chrysler Corporation
(substantially similar to Exhibit 10.2.10.1).
**10.2.14 Toyota Dealer Agreement, dated May 5, 1995, between Toyota Motor Distributors, Inc. and
County Auto Group Partnership (substantially similar to Exhibit 10.2.6.1).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- ------------ ------------------------------------------------------------------------------------------
**10.2.15.1 Hyundai Motor America Dealer Sales and Service Agreement, dated October 12, 1992, between
Hyundai Motor America and Fair Hyundai Partnership as amended November 22, 1993, October
12, 1995, March 14, 1996, and , 1996 (standard provisions are in Exhibit
10.2.15.2 hereto).
<C> <S> <C>
**10.2.15.2 Hyundai Motor America Dealer Sales and Service Agreement Standard Provisions.
**10.2.16 Hyundai Motor America Dealer Sales and Service Agreement, dated November 22, 1993, as
amended April 1, 1994, and November 3, 1995, between Hyundai Motor America and DiFeo
Hyundai Partnership (substantially similar to Exhibit 10.2.15.1).
**10.2.17 Toyota Dealer Agreement, dated August 23, 1995, between Toyota Motor Distributors, Inc.
and OCT Partnership (substantially similar to Exhibit 10.2.6.1).
10.2.18 Mitsubishi Motor Sales of America, Inc. Sales and Service Agreement, dated June 30, 1994,
between Mitsubishi Motor Sales of America, Inc. and OCM Partnership (substantially similar
to Exhibit 10.2.3.1).
**10.2.19 Chrysler Corporation Jeep Sales and Service Agreement, dated October 8, 1992, between
DiFeo Jeep-Eagle Partnership and Chrysler Corporation (substantially similar to Exhibit
10.2.10.1).
10.2.20 Chevrolet-Geo Dealer Sales and Service Agreement, dated November 1, 1995 between General
Motors Corporation, Chevrolet Motor Division and DiFeo Chevrolet-Geo Partnership
(substantially similar to Exhibit 10.2.7.1).
**10.2.21 Employment Agreement, dated July 1, 1996, between James D. Evans and Danbury-Mt. Kisco
Saturn Partnership.
10.3.1 Receivables Purchase Agreement, dated as of June 28, 1995, between Atlantic Auto Funding
Corporation and Atlantic Auto Finance Corporation.
10.3.2 Loan and Security Agreement, dated as of June 28, 1995, among Atlantic Auto Funding
Corporation, Atlantic Auto Finance Corporation and Citibank, N.A.
10.3.3 Support Agreement of the Company, dated as of June 28, 1995, in favor of Atlantic Auto
Funding Corporation.
10.3.4 Purchase Agreement, dated as of June 14, 1996, between Atlantic Auto Finance Corporation
and Atlantic Auto Second Funding Corporation.
10.3.5 Transfer and Administration Agreement, dated as of June 14, 1996, among Atlantic Auto
Second Funding Corporation, Atlantic Auto Finance Corporation and Morgan Guaranty Trust
Company of New York.
**10.3.6 Support Agreement of the Company, dated as of June 14, 1996, in favor of Atlantic Auto
Second Funding Corporation.
10.3.7 Pooling and Servicing Agreement relating to Atlantic Auto Grantor Trust 1996-A, dated as
of June 20, 1996, among Atlantic Auto Third Funding Corporation, Atlantic Auto Finance
Corporation and The Chase Manhattan Bank.
10.3.8 Insurance and Indemnity Agreement, dated as of June 20, 1996, among Financial Security
Assurance Inc., Atlantic Auto Third Funding Corporation and Atlantic Auto Finance
Corporation.
10.3.9 Master Spread Account Agreement, dated as of June 20, 1996, among Atlantic Auto Third
Funding Corporation, Financial Security Assurance Inc. and The Chase Manhattan Bank.
10.3.10 Lease Agreement, dated as of March 18, 1994, between Perinton Hills and the Company,
including guaranty of lease of Atlantic Auto Finance Corporation.
10.4.1 Amended and Restated Stock Purchase Agreement, dated as of July 1, 1995, among the
Company, Landers Auto Sales, Inc., Steve Landers, John Landers and Bob Landers.
10.4.2 Promissory Note of the Company, dated August 1, 1995, in favor of Steve Landers and John
Landers.
10.4.3 Promissory Note of the Company, dated August 1, 1995, in favor of Steve Landers and John
Landers.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- ------------ ------------------------------------------------------------------------------------------
10.4.4 Guarantee of the Company, dated as of August 1, 1995, in favor of Steve Landers and John
Landers.
<C> <S> <C>
10.4.5 Employment Agreement, dated as of August 1, 1995, between Landers Auto Sales, Inc. and
Steve Landers.
10.4.6 Lease, dated as of August 1, 1995, among Steve Landers, John Landers, Bob Landers and
Landers Auto Sales, Inc., regarding Jeep-Eagle premises.
10.4.7 Lease, dated as of August 1, 1995, among Steve Landers, John Landers, Bob Landers and
Landers Auto Sales, Inc., regarding Oldsmobile-GMC premises.
10.4.8 Shareholders' Agreement, dated as of August 1, 1995, among the Company, United Landers,
Inc., Landers Auto Sales, Inc., Steve Landers and John Landers.
10.4.9 Chrysler Corporation Eagle Sales and Service Agreement, dated August 16, 1995, between
United Landers Auto Sales, Inc. and Chrysler Corporation (standard provisions are in
Exhibit 10.2.10.2).
10.4.10 Chrysler Corporation Jeep Sales and Service Agreement, dated August 16, 1995, between
United Landers Auto Sales, Inc. and Chrysler Corporation (substantially similar to Exhibit
10.4.9).
10.4.11 Chrysler Corporation Dodge Sales and Service Agreement, dated August 16, 1995, between
United Landers Auto Sales, Inc. and Chrysler Corporation (substantially similar to Exhibit
10.4.9).
10.4.12 Chrysler Corporation Plymouth Sales and Service Agreement, dated August 16, 1995, between
United Landers Auto Sales, Inc. and Chrysler Corporation (substantially similar to Exhibit
10.4.9).
10.4.13 Chrysler Corporation Chrysler Sales and Service Agreement, dated August 16, 1995, between
United Landers Auto Sales, Inc. and Chrysler Corporation (substantially similar to Exhibit
10.4.9).
10.4.14 Oldsmobile Division Dealer Sales and Service Agreement, dated November 1, 1995, between
General Motors Corporation, Oldsmobile Division and United Landers Auto Sales, Inc.
(substantially similar to Exhibit 10.2.7.1).
10.4.15 GMC Truck Division Dealer Sales and Service Agreement, dated November 1, 1995, between
General Motors Corporation, GMC Truck Division and United Landers Auto Sales, Inc.
(substantially similar to Exhibit 10.2.7.1).
10.4.16 Security Agreement and Master Credit Agreement, dated October 25, 1993, between Landers
Oldsmobile-GMC Inc. and Chrysler Credit Corporation.
10.4.17 Security Agreement and Master Credit Agreement, dated May 17, 1989, between Landers
Jeep-Eagle, Inc. and Chrysler Credit Corporation.
10.4.18 Continuing Guaranty of United Landers, Inc., dated August 15, 1994, in favor of Chrysler
Credit Corporation.
**10.4.19 Commercial Loan Agreement, dated December 5, 1994, between Landers Oldsmobile-GMC, Inc.
and The Benton State Bank.
**10.4.20 Commercial Security Agreement, dated December 5, 1994, between Landers Oldsmobile-GMC,
Inc. and The Benton State Bank.
10.5.1 Stock Purchase Agreement, dated as of November 17, 1995, among the Company, UAG Atlanta,
Inc., Atlanta Toyota, Inc. and Carl H. Westcott.
10.5.2 Promissory Note of UAG Atlanta, Inc., dated January 16, 1996, in favor of Carl H.
Westcott.
10.5.3 Guaranty of the Company, dated as of January 16, 1996, in favor of Carl Westcott.
**10.5.4 Promissory Note of Atlanta Toyota, Inc., dated January 16, 1996, in favor of First
Extended Service Corporation.
**10.5.5 Guaranty of the Company, dated as of January 16, 1996, in favor of Carl Westcott.
10.5.6 Lease Agreement, dated as of January 3, 1996, between Carl Westcott and Atlanta Toyota,
Inc.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- ------------ ------------------------------------------------------------------------------------------
10.5.7 Lease Guaranty of the Company, dated as of January 16, 1996, in favor of Carl Westcott.
<C> <S> <C>
**10.5.8 Toyota Dealer Agreement, dated January 16, 1996, between Southeast Toyota Motor
Distributors, Inc. and Atlanta Toyota, Inc. (substantially similar to Exhibit 10.2.6.1).
10.5.9 Wholesale Floor Plan Security Agreement, dated May 24, 1996, between World Omni Financial
Corp. and Atlanta Toyota, Inc.
**10.5.10 Continuing Guaranty of the Company in favor of World Omni Financial Corp. and certain
affiliates.
10.5.11 Inventory Financing Payment Agreement, dated May 24, 1996, among Atlanta Toyota, Inc.,
Fidelity Warranty Services, Inc. and World Omni Financial Corp.
**10.5.12 Shareholders' Agreement, dated as of July 31, 1996, among the Company, UAG Atlanta, Inc.,
Atlanta Toyota and John Smith.
10.5.13 Employment Agreement, dated as of January 16, 1996, among the Company, UAG Atlanta, Inc.
and John Smith.
10.6.1 Stock Purchase Agreement, dated as of March 1, 1996, among the Company, UAG Atlanta II,
Inc., Steve Rayman Nissan, Inc., Steven L. Rayman and Richard W. Keffer, Jr.
10.6.2 Employment Agreement, dated as of May 1, 1996, among the Company, UAG Atlanta II, Inc.,
Steve Rayman Nissan, Inc. and Bruce G. Dunker.
10.6.3 Lease Agreement, dated as of May 1, 1996, among Steven L. Rayman, Richard W. Keffer, Jr.
and Steve Rayman Nissan, Inc.
**10.6.4 Nissan Dealer Term Sales and Service Agreement, between the Nissan Division of Nissan
Motor Corporation in U.S.A. and United Nissan, Inc. (substantially similar to Exhibit
10.2.9.1).
10.6.5 Wholesale Floor Plan Security Agreement, dated April 29, 1996, between World Omni
Financial Corp. and United Nissan, Inc. (substantially similar to Exhibit 10.5.9).
**10.6.6 Continuing Guaranty of the Company, dated April 29, 1996, in favor of World Omni Financial
Corp. and certain affiliates (substantially similar to Exhibit 10.5.10).
10.7.1 Stock Purchase Agreement, dated as of June 7, 1996, among the Company, UAG Atlanta III,
Inc., Hickman Nissan, Inc., Lynda Jane Hickman and Lynda Jane Hickman as Executrix under
the will of James Franklin Hickman, Jr., deceased.
**10.7.2 Nissan Dealer Term Sales and Service Agreement, between the Nissan Division of Nissan
Motor Corporation in U.S.A. and Peachtree Nissan, Inc. (substantially similar to Exhibit
10.6.4).
10.7.3 Automotive Wholesale Financing and Security Agreement, dated July 12, 1996, between Nissan
Motor Acceptance Corporation and Peachtree Nissan, Inc.
10.7.4 Guaranty of the Company and UAG Atlanta III, Inc., dated July 12, 1996, in favor of Nissan
Motor Acceptance Corporation.
10.7.5 Promissory Note of UAG Atlanta III, Inc., dated July 12, 1996, in favor of Lynda Jane
Hickman, as Executrix under the will of James Franklin Hickman, Jr.
10.7.6 Guaranty of Note of Hickman Nissan, Inc., dated July 12, 1996, in favor of Lynda Jane
Hickman, as Executrix under the will of James Franklin Hickman, Jr.
10.7.7 Guaranty of Note of the Company, dated July 12, 1996, in favor of Lynda Jane Hickman, as
Executrix under the will of James Franklin Hickman, Jr.
10.7.8 Lease Agreement, dated July 12, 1996, between Lynda Jane Hickman, as Executrix under the
will of James Franklin Hickman, Jr., and Hickman Nissan, Inc.
10.7.9 Lease Agreement, dated July 12, 1996, between Argonne Enterprises, Inc. and Hickman
Nissan, Inc.
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- ------------ ------------------------------------------------------------------------------------------
**10.7.10 Guaranty of Lease of the Company, dated July 12, 1996, in favor of Lynda Jane Hickman, as
Executrix under the will of James Franklin Hickman, Jr.
<C> <S> <C>
10.7.11 Guaranty of Lease of the Company, dated July 12, 1996, in favor of Argonne Enterprises,
Inc.
**10.8.1 Stock Purchase Agreement, dated as of June 6, 1996, among the Company, UAG West, Inc.,
Scottsdale Jaguar, LTD., SA Automotive, LTD., SL Automotive, LTD., SPA Automotive, LTD.,
LRP, LTD., Sun BMW, LTD., Scottsdale Management Group, LTD., 6725 Dealership, LTD., Steven
Knappenberger Revocable Trust Dated April 15, 1983, as amended, Brochick 6725 Trust dated
December 29, 1992, Beskind 6725 Trust dated December 29, 1992, Steven Knappenberger, Jay
P. Beskind December 29, 1992, Knappenberger 6725 Trust dated and George W. Brochick.
**10.8.2 Purchase and Sale Agreement, 6950 E. McDowell Road, dated June 6, 1996, among Steven
Knappenberger, as Trustee of the Steven Knappenberger Revocable Trust II, Bruce
Knappenberger, as Trustee of the Bruce Knappenberger Trust and UAG West, Inc.
**10.8.3 Form of Employment Agreement between the Company, UAG West, Inc. and Steven Knappenberger.
**10.8.4 Form of Broker's Agreement between UAG West, Inc. and KBB, Inc.
**10.8.5.2 Land Rover North America, Inc. Dealer Agreement Standard Terms and Conditions.
**10.9.1 Stock Purchase Agreement, dated August 5, 1996, among the Company, UAG Atlanta IV, Inc.,
Charles Evans BMW, Inc. and Charles F. Evans.
**10.9.2 Stock Purchase Agreement, dated August 5, 1996, among the Company, UAG Atlanta IV, Inc.,
Charles Evans Nissan, Inc. and Charles F. Evans.
**10.10.1 Stock Purchase Agreement, dated September 5, 1996, among the Company, UAG Tennessee, Inc.,
Standefer Motor Sales, Inc., Charles A. Standefer and Charles A. Standefer and Karen S.
Nicely, trustees under the Irrevocable Trust Agreement of Charles B. Stendefer for the
primary benefit of children, dated December 31, 1992.
**21.1 List of subsidiaries of the Company.
23.1.1 Consent of Coopers & Lybrand L.L.P.
23.1.2 Consent of Coopers & Lybrand L.L.P.
23.1.3 Consent of Coopers & Lybrand L.L.P.
23.1.4 Consent of Coopers & Lybrand L.L.P.
23.1.5 Consent of Coopers & Lybrand L.L.P.
23.1.6 Consent of Coopers & Lybrand L.L.P.
23.1.7 Consent of Coopers & Lybrand L.L.P.
23.1.8 Consent of Coopers & Lybrand L.L.P.
**23.2 Consent of Willkie Farr & Gallagher (included in Exhibit 5.1).
*24.1 Powers of Attorney.
27.1 Financial Data Schedules.
</TABLE>
- ------------------------
*Previously filed.
**To be filed by amendment.
(b) Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts
II-8
<PAGE>
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreements certificates for the
Common Stock in such denominations and registered in such names as required
by the Underwriters to permit prompt delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to its Bylaws, the Underwriting Agreements or otherwise,
the Registrant has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(3) The Registrant hereby undertakes that:
(a)For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(b)For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in New York, New York on September 13, 1996.
UNITED AUTO GROUP, INC.
By: /s/ CARL SPIELVOGEL
-----------------------------------
Carl Spielvogel
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------------------- ----------------------
<C> <S> <C>
/s/ CARL SPIELVOGEL
--------------------------------- Chairman of the Board and Chief Executive September 13, 1996
Carl Spielvogel Officer (Principal Executive Officer)
/s/ ARTHUR J. RAWL
--------------------------------- Executive Vice President and Chief Financial September 13, 1996
Arthur J. Rawl Officer (Principal Financial Officer)
/s/ ROBERT W. THOMPSON
--------------------------------- Vice President-Finance (Chief Accounting September 13, 1996
Robert W. Thompson Officer)
/s/ MARSHALL S. COGAN
--------------------------------- Director September 13, 1996
Marshall S. Cogan
*
--------------------------------- Director September 13, 1996
Michael R. Eisenson
*
--------------------------------- Director September 13, 1996
John J. Hannan
*
--------------------------------- Director September 13, 1996
Jules B. Kroll
/s/ ROBERT H. NELSON
--------------------------------- Director September 13, 1996
Robert H. Nelson
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ --------------------------------------------- ----------------------
<C> <S> <C>
*
--------------------------------- Director September 13, 1996
John M. Sallay
*
--------------------------------- Director September 13, 1996
Richard Sinkfield
*By: /s/ CARL SPIELVOGEL
----------------------------
Attorney-in-fact
</TABLE>
<PAGE>
Report of Independent Accountants on Financial Statement Schedule
In connection with our audits of the consolidated financial statements of United
Auto Group, Inc. and Subsidiaries as of December 31, 1995 and 1994, and for each
of the three years in the period ended December 31, 1995, which financial
statements are included in this Registration Statement, we have also audited the
financial statement schedule listed in Item 16 herein.
In our opinion, the financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Princeton, New Jersey
June 17, 1996
S-1
<PAGE>
SCHEDULE II
UNITED AUTO GROUP, INC.
Valuation and Qualifying Accounts
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions
----------------------------------
Balance Charged to Balance
beginning costs and Charged to end of
of period expenses other accounts Deductions period
----------- ----------------- --------------- ----------- -----------
1995
- --------------------------------------------
Allowance for uncollectibles................ $ 678 $ 500 $ (678) $ 500
Allowance for finance income chargebacks.... 2,123 3,634 (3,451) 2,306
1994
- --------------------------------------------
Allowance for uncollectibles................ 393 285 678
Allowance for finance income chargebacks.... 2,564 1,176 (1,617) 2,123
1993
- --------------------------------------------
Allowance for uncollectibles................ 0 393 393
Allowance for finance income chargebacks.... 0 3,136 (572) 2,564
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
<C> <S> <C>
**1.1 Form of Underwriting Agreement.
**3.1 Form of Restated Certificate of Incorporation.
**3.2 Form of Restated Bylaws.
**4.1 Specimen Common Stock certificate.
**5.1 Opinion of Willkie Farr & Gallagher.
10.1.1.1 Registration Rights Agreement, dated as of October 15, 1993, among the Company and the
investors listed therein.
10.1.1.2 Amendment to Registration Rights Agreement, dated as of July 31, 1996, among the Company
and the investors listed therein.
10.1.2 Waiver, Consent and Modification Agreement, dated as of September 22, 1995, among the
Company and its stockholders.
10.1.3 Letter Agreement, dated September 22, 1996, between the Company and J.P. Morgan Capital
Corporation.
10.1.4 Form of Warrant.
10.1.5 Form of Additional Warrant.
10.1.6 Employment Agreement, dated as of June 21, 1996, between the Company and Carl Spielvogel.
10.1.7 Severance Agreement, dated April 5, 1996, among the Company, Trace and Ezra P. Mager.
**10.1.8 Stock Option Plan of the Company.
**10.1.9 Registration Rights Agreement, dated as of August 1, 1995, among the Company and the
parties listed on Schedule I thereto.
10.1.10 Sublease, dated August 1994, between Overseas Partners, Inc. and the Company.
10.1.11 Letter, dated July 24, 1996, from Chrysler Corporation to the Company.
10.1.12 Agreement, dated July 24, 1996, between the Company and Toyota Motor Sales U.S.A., Inc.
**10.1.13 Non-employee Director Compensation Plan of the Company.
**10.2.1.1 Honda Automobile Dealer Sales and Service Agreement, dated October 5, 1995, between
American Honda Motor Co. Inc. and Danbury Auto Partnership (standard provisions are in
Exhibit 10.2.1.2 hereto).
**10.2.1.2 American Honda Motor Co. Standard Provisions.
10.2.2.1 Lexus Dealer Agreement, dated October 5, 1992, between Lexus, a division of Toyota Motor
Sales, U.S.A., Inc. and Somerset Motors Partnership (standard provisions are in Exhibit
10.2.2.2 hereto).
10.2.2.2 Lexus Dealer Agreement Standard Provisions.
10.2.3.1 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service Agreement, dated August
29, 1994, between Mitsubishi Motor Sales of America, Inc. and Rockland Motors Partnership,
as amended August 20, 1996 (standard provisions are in Exhibit 10.2.3.2 hereto).
10.2.3.2 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service Agreement Standard
Provisions.
**10.2.4.1 BMW of North America, Inc. Dealer Agreement, dated January 1, 1994, between BMW of North
America, Inc. and DiFeo BMW Partnership, as amended July 25, 1996 (standard provisions are
in Exhibit 10.2.4.2 hereto).
**10.2.4.2 BMW of North America, Inc. Dealer Standard Provisions Applicable to Dealer Agreement.
**10.2.5.1 Term Dealer Sales and Service Agreement, dated July 3, 1996, between American Suzuki Motor
Corporation and Fair Hyundai Partnership (standard provisions are in Exhibit 10.2.5.2)
**10.2.5.2 Suzuki Dealer Sales and Service Agreement Standard Provisions.
**10.2.6.1 Toyota Dealer Agreement, dated May 5, 1995, between Toyota Motor Distributors, Inc. and
Hudson Motors Partnership (standard provisions are in Exhibit 10.2.6.2 hereto).
**10.2.6.2 Toyota Dealer Agreement Standard Provisions.
10.2.7.1 Oldsmobile Division Dealer Sales and Service Agreement, dated October 2, 1992, between
General Motors Corporation, Oldsmobile Division and J & F Oldsmobile-Isuzu Partnership, as
amended December 20, 1993 and July 23, 1996 (standard provision are in Exhibit 10.2.7.2
hereto).
10.2.7.2 General Motors Dealer Sales and Service Agreement Standard Provisions.
10.2.8.1 Chevrolet-Geo Dealer Sales and Service Agreement, dated November 1, 1995, between General
Motors Corporation, Chevrolet Motor Division and Fair Chevrolet-Geo Partnership
(substantially similar to Exhibit 10.2.7.1).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
**10.2.9.1 Nissan Dealer Term Sales and Service Agreement, between the Nissan Division of Nissan
Motor Corporation in U.S.A. and DiFeo Nissan Partnership (standard provisions are in
Exhibit 10.2.9.2 hereto).
<C> <S> <C>
**10.2.9.2 Nissan Dealer Sales and Service Agreement Standard Provisions.
**10.2.10.1 Chrysler Corporation Term Sales and Service Agreement, between Fair Chrysler Plymouth
Partnership and Chrysler Corporation, as amended December 15, 1993 (standard provisions
are in Exhibit 10.2.10.2).
10.2.10.2 Chrysler Corporation Sales and Service Agreement Additional Terms and Provisions.
**10.2.11 Chrysler Corporation Eagle Sales and Service Agreement, dated October 8, 1992, between
DiFeo Jeep-Eagle Partnership and Chrysler Corporation (substantially similar to Exhibit
10.2.10.1).
**10.2.12 Chrysler Corporation Chrysler Sales and Service Agreement, dated August 16, 1995, between
DiFeo Chrysler Plymouth Jeep Eagle Partnership and Chrysler Corporation (substantially
similar to Exhibit 10.2.10.1).
**10.2.13 Chrysler Corporation Plymouth Sales and Service Agreement, dated November 13, 1992,
between DiFeo Chrysler Plymouth Jeep Eagle Partnership and Chrysler Corporation
(substantially similar to Exhibit 10.2.10.1).
**10.2.14 Toyota Dealer Agreement, dated May 5, 1995, between Toyota Motor Distributors, Inc. and
County Auto Group Partnership (substantially similar to Exhibit 10.2.6.1).
**10.2.15.1 Hyundai Motor America Dealer Sales and Service Agreement, dated October 12, 1992, between
Hyundai Motor America and Fair Hyundai Partnership as amended November 22, 1993, October
12, 1995, March 14, 1996, and , 1996 (standard provisions are in Exhibit
10.2.15.2 hereto).
**10.2.15.2 Hyundai Motor America Dealer Sales and Service Agreement Standard Provisions.
**10.2.16 Hyundai Motor America Dealer Sales and Service Agreement, dated November 22, 1993, as
amended April 1, 1994, and November 3, 1995, between Hyundai Motor America and DiFeo
Hyundai Partnership (substantially similar to Exhibit 10.2.15.1).
**10.2.17 Toyota Dealer Agreement, dated August 23, 1995, between Toyota Motor Distributors, Inc.
and OCT Partnership (substantially similar to Exhibit 10.2.6.1).
10.2.18 Mitsubishi Motor Sales of America, Inc. Sales and Service Agreement, dated June 30, 1994,
between Mitsubishi Motor Sales of America, Inc. and OCM Partnership (substantially similar
to Exhibit 10.2.3.1).
**10.2.19 Chrysler Corporation Jeep Sales and Service Agreement, dated October 8, 1992, between
DiFeo Jeep-Eagle Partnership and Chrysler Corporation (substantially similar to Exhibit
10.2.10.1).
10.2.20 Chevrolet-Geo Dealer Sales and Service Agreement, dated November 1, 1995 between General
Motors Corporation, Chevrolet Motor Division and DiFeo Chevrolet-Geo Partnership
(substantially similar to Exhibit 10.2.7.1).
**10.2.21 Employment Agreement, dated July 1, 1996, between James D. Evans and Danbury-Mt. Kisco
Saturn Partnership.
10.3.1 Receivables Purchase Agreement, dated as of June 28, 1995, between Atlantic Auto Funding
Corporation and Atlantic Auto Finance Corporation.
10.3.2 Loan and Security Agreement, dated as of June 28, 1995, among Atlantic Auto Funding
Corporation, Atlantic Auto Finance Corporation and Citibank, N.A.
10.3.3 Support Agreement of the Company, dated as of June 28, 1995, in favor of Atlantic Auto
Funding Corporation.
10.3.4 Purchase Agreement, dated as of June 14, 1996, between Atlantic Auto Finance Corporation
and Atlantic Auto Second Funding Corporation.
10.3.5 Transfer and Administration Agreement, dated as of June 14, 1996, among Atlantic Auto
Second Funding Corporation, Atlantic Auto Finance Corporation and Morgan Guaranty Trust
Company of New York.
**10.3.6 Support Agreement of the Company, dated as of June 14, 1996, in favor of Atlantic Auto
Second Funding Corporation.
10.3.7 Pooling and Servicing Agreement relating to Atlantic Auto Grantor Trust 1996-A, dated as
of June 20, 1996, among Atlantic Auto Third Funding Corporation, Atlantic Auto Finance
Corporation and The Chase Manhattan Bank.
10.3.8 Insurance and Indemnity Agreement, dated as of June 20, 1996, among Financial Security
Assurance Inc., Atlantic Auto Third Funding Corporation and Atlantic Auto Finance
Corporation.
10.3.9 Master Spread Account Agreement, dated as of June 20, 1996, among Atlantic Auto Third
Funding Corporation, Financial Security Assurance Inc. and The Chase Manhattan Bank.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
10.3.10 Lease Agreement, dated as of March 18, 1994, between Perinton Hills and the Company,
including guaranty of lease of Atlantic Auto Finance Corporation.
<C> <S> <C>
10.4.1 Amended and Restated Stock Purchase Agreement, dated as of July 1, 1995, among the
Company, Landers Auto Sales, Inc., Steve Landers, John Landers and Bob Landers.
10.4.2 Promissory Note of the Company, dated August 1, 1995, in favor of Steve Landers and John
Landers.
10.4.3 Promissory Note of the Company, dated August 1, 1995, in favor of Steve Landers and John
Landers.
10.4.4 Guarantee of the Company, dated as of August 1, 1995, in favor of Steve Landers and John
Landers.
10.4.5 Employment Agreement, dated as of August 1, 1995, between Landers Auto Sales, Inc. and
Steve Landers.
10.4.6 Lease, dated as of August 1, 1995, among Steve Landers, John Landers, Bob Landers and
Landers Auto Sales, Inc., regarding Jeep-Eagle premises.
10.4.7 Lease, dated as of August 1, 1995, among Steve Landers, John Landers, Bob Landers and
Landers Auto Sales, Inc., regarding Oldsmobile-GMC premises.
10.4.8 Shareholders' Agreement, dated as of August 1, 1995, among the Company, United Landers,
Inc., Landers Auto Sales, Inc., Steve Landers and John Landers.
10.4.9 Chrysler Corporation Eagle Sales and Service Agreement, dated August 16, 1995, between
United Landers Auto Sales, Inc. and Chrysler Corporation (standard provisions are in
Exhibit 10.2.10.2).
10.4.10 Chrysler Corporation Jeep Sales and Service Agreement, dated August 16, 1995, between
United Landers Auto Sales, Inc. and Chrysler Corporation (substantially similar to Exhibit
10.4.9).
10.4.11 Chrysler Corporation Dodge Sales and Service Agreement, dated August 16, 1995, between
United Landers Auto Sales, Inc. and Chrysler Corporation (substantially similar to Exhibit
10.4.9).
10.4.12 Chrysler Corporation Plymouth Sales and Service Agreement, dated August 16, 1995, between
United Landers Auto Sales, Inc. and Chrysler Corporation (substantially similar to Exhibit
10.4.9).
10.4.13 Chrysler Corporation Chrysler Sales and Service Agreement, dated August 16, 1995, between
United Landers Auto Sales, Inc. and Chrysler Corporation (substantially similar to Exhibit
10.4.9).
10.4.14 Oldsmobile Division Dealer Sales and Service Agreement, dated November 1, 1995, between
General Motors Corporation, Oldsmobile Division and United Landers Auto Sales, Inc.
(substantially similar to Exhibit 10.2.7.1).
10.4.15 GMC Truck Division Dealer Sales and Service Agreement, dated November 1, 1995, between
General Motors Corporation, GMC Truck Division and United Landers Auto Sales, Inc.
(substantially similar to Exhibit 10.2.7.1).
10.4.16 Security Agreement and Master Credit Agreement, dated October 25, 1993, between Landers
Oldsmobile-GMC Inc. and Chrysler Credit Corporation.
10.4.17 Security Agreement and Master Credit Agreement, dated May 17, 1989, between Landers Jeep-
Eagle, Inc. and Chrysler Credit Corporation.
10.4.18 Continuing Guaranty of United Landers, Inc., dated August 15, 1994, in favor of Chrysler
Credit Corporation.
**10.4.19 Commercial Loan Agreement, dated December 5, 1994, between Landers Oldsmobile-GMC, Inc.
and The Benton State Bank.
**10.4.20 Commercial Security Agreement, dated December 5, 1994, between Landers Oldsmobile-GMC,
Inc. and The Benton State Bank.
10.5.1 Stock Purchase Agreement, dated as of November 17, 1995, among the Company, UAG Atlanta,
Inc., Atlanta Toyota, Inc. and Carl H. Westcott.
10.5.2 Promissory Note of UAG Atlanta, Inc., dated January 16, 1996, in favor of Carl H.
Westcott.
10.5.3 Guaranty of the Company, dated as of January 16, 1996, in favor of Carl Westcott.
**10.5.4 Promissory Note of Atlanta Toyota, Inc., dated January 16, 1996, in favor of First
Extended Service Corporation.
**10.5.5 Guaranty of the Company, dated as of January 16, 1996, in favor of Carl Westcott.
10.5.6 Lease Agreement, dated as of January 3, 1996, between Carl Westcott and Atlanta Toyota,
Inc.
10.5.7 Lease Guaranty of the Company, dated as of January 16, 1996, in favor of Carl Westcott.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
**10.5.8 Toyota Dealer Agreement, dated January 16, 1996, between Southeast Toyota Motor
Distributors, Inc. and Atlanta Toyota, Inc. (substantially similar to Exhibit 10.2.6.1).
<C> <S> <C>
10.5.9 Wholesale Floor Plan Security Agreement, dated May 24, 1996, between World Omni Financial
Corp. and Atlanta Toyota, Inc.
**10.5.10 Continuing Guaranty of the Company in favor of World Omni Financial Corp. and certain
affiliates.
10.5.11 Inventory Financing Payment Agreement, dated May 24, 1996, among Atlanta Toyota, Inc.,
Fidelity Warranty Services, Inc. and World Omni Financial Corp.
**10.5.12 Shareholders' Agreement, dated as of July 31, 1996, among the Company, UAG Atlanta, Inc.,
Atlanta Toyota and John Smith.
10.5.13 Employment Agreement, dated as of January 16, 1996, among the Company, UAG Atlanta, Inc.
and John Smith.
10.6.1 Stock Purchase Agreement, dated as of March 1, 1996, among the Company, UAG Atlanta II,
Inc., Steve Rayman Nissan, Inc., Steven L. Rayman and Richard W. Keffer, Jr.
10.6.2 Employment Agreement, dated as of May 1, 1996, among the Company, UAG Atlanta II, Inc.,
Steve Rayman Nissan, Inc. and Bruce G. Dunker.
10.6.3 Lease Agreement, dated as of May 1, 1996, among Steven L. Rayman, Richard W. Keffer, Jr.
and Steve Rayman Nissan, Inc.
**10.6.4 Nissan Dealer Term Sales and Service Agreement, between the Nissan Division of Nissan
Motor Corporation in U.S.A. and United Nissan, Inc. (substantially similar to Exhibit
10.2.9.1).
10.6.5 Wholesale Floor Plan Security Agreement, dated April 29, 1996, between World Omni
Financial Corp. and United Nissan, Inc. (substantially similar to Exhibit 10.5.9).
**10.6.6 Continuing Guaranty of the Company, dated April 29, 1996, in favor of World Omni Financial
Corp. and certain affiliates (substantially similar to Exhibit 10.5.10).
10.7.1 Stock Purchase Agreement, dated as of June 7, 1996, among the Company, UAG Atlanta III,
Inc., Hickman Nissan, Inc., Lynda Jane Hickman and Lynda Jane Hickman as Executrix under
the will of James Franklin Hickman, Jr., deceased.
**10.7.2 Nissan Dealer Term Sales and Service Agreement, between the Nissan Division of Nissan
Motor Corporation in U.S.A. and Peachtree Nissan, Inc. (substantially similar to Exhibit
10.6.4).
10.7.3 Automotive Wholesale Financing and Security Agreement, dated July 12, 1996, between Nissan
Motor Acceptance Corporation and Peachtree Nissan, Inc.
10.7.4 Guaranty of the Company and UAG Atlanta III, Inc., dated July 12, 1996, in favor of Nissan
Motor Acceptance Corporation.
10.7.5 Promissory Note of UAG Atlanta III, Inc., dated July 12, 1996, in favor of Lynda Jane
Hickman, as Executrix under the will of James Franklin Hickman, Jr.
10.7.6 Guaranty of Note of Hickman Nissan, Inc., dated July 12, 1996, in favor of Lynda Jane
Hickman, as Executrix under the will of James Franklin Hickman, Jr.
10.7.7 Guaranty of Note of the Company, dated July 12, 1996, in favor of Lynda Jane Hickman, as
Executrix under the will of James Franklin Hickman, Jr.
10.7.8 Lease Agreement, dated July 12, 1996, between Lynda Jane Hickman, as Executrix under the
will of James Franklin Hickman, Jr., and Hickman Nissan, Inc.
10.7.9 Lease Agreement, dated July 12, 1996, between Argonne Enterprises, Inc. and Hickman
Nissan, Inc.
**10.7.10 Guaranty of Lease of the Company, dated July 12, 1996, in favor of Lynda Jane Hickman, as
Executrix under the will of James Franklin Hickman, Jr.
10.7.11 Guaranty of Lease of the Company, dated July 12, 1996, in favor of Argonne Enterprises,
Inc.
**10.8.1 Stock Purchase Agreement, dated as of June 6, 1996, among the Company, UAG West, Inc.,
Scottsdale Jaguar, LTD., SA Automotive, LTD., SL Automotive, LTD., SPA Automotive, LTD.,
LRP, LTD., Sun BMW, LTD., Scottsdale Management Group, LTD., 6725 Dealership, LTD., Steven
Knappenberger Revocable Trust Dated April 15, 1983, as amended, Brochick 6725 Trust dated
December 29, 1992, Beskind 6725 Trust dated December 29, 1992, Steven Knappenberger, Jay
P. Beskind December 29, 1992, Knappenberger 6725 Trust dated and George W. Brochick.
**10.8.2 Purchase and Sale Agreement, 6950 E. McDowell Road, dated June 6, 1996, among Steven
Knappenberger, as Trustee of the Steven Knappenberger Revocable Trust II, Bruce
Knappenberger, as Trustee of the Bruce Knappenberger Trust and UAG West, Inc.
**10.8.3 Form of Employment Agreement between the Company, UAG West, Inc. and Steven Knappenberger.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
**10.8.4 Form of Broker's Agreement between UAG West, Inc. and KBB, Inc.
<C> <S> <C>
**10.8.5.2 Land Rover North America, Inc. Dealer Agreement Standard Terms and Conditions.
**10.9.1 Stock Purchase Agreement, dated August 5, 1996, among the Company, UAG Atlanta IV, Inc.,
Charles Evans BMW, Inc. and Charles F. Evans.
**10.9.2 Stock Purchase Agreement, dated August 5, 1996, among the Company, UAG Atlanta IV, Inc.,
Charles Evans Nissan, Inc. and Charles F. Evans.
**10.10.1 Stock Purchase Agreement, dated September 5, 1996, among the Company, UAG Tennessee, Inc.,
Standefer Motor Sales, Inc., Charles A. Standefer and Charles A. Standefer and Karen S.
Nicely, trustees under the Irrevocable Trust Agreement of Charles B. Stendefer for the
primary benefit of children, dated December 31, 1992.
**21.1 List of subsidiaries of the Company.
23.1.1 Consent of Coopers & Lybrand L.L.P.
23.1.2 Consent of Coopers & Lybrand L.L.P.
23.1.3 Consent of Coopers & Lybrand L.L.P.
23.1.4 Consent of Coopers & Lybrand L.L.P.
23.1.5 Consent of Coopers & Lybrand L.L.P.
23.1.6 Consent of Coopers & Lybrand L.L.P.
23.1.7 Consent of Coopers & Lybrand L.L.P.
23.1.8 Consent of Coopers & Lybrand L.L.P.
**23.2 Consent of Willkie Farr & Gallagher (included in Exhibit 5.1).
*24.1 Powers of Attorney.
27.1 Financial Data Schedules.
</TABLE>
- ------------------------
*Previously filed.
**To be filed by amendment.
<PAGE>
EXECUTED ORIGINAL
EMCO MOTOR HOLDINGS, INC.
REGISTRATION RIGHTS AGREEMENT
This AGREEMENT (the "Agreement") is made as of October 15, 1993 by and
among EMCO MOTOR HOLDINGS, INC., a Delaware corporation (the "Company"), and the
investors listed on Exhibit A hereto (the "Investors").
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company, the Investors and Ezra P. Mager have entered into a
Class A Preferred Stock Purchase Agreement dated as of October 15, 1993 (as in
effect from time to time, the "Purchase Agreement"), in connection with the
issuance and sale of certain shares of the Company's Class A Preferred Stock, no
par value (the "Shares");
WHEREAS, each Share issued in accordance with the Purchase Agreement is
convertible into the number of shares of the Company's Common Stock, no par
value (the "Common Stock"), as set forth in the Restated Certificate of
Incorporation of the Company (the "Conversion Shares"); and
WHEREAS, it is a condition to the purchase of the Shares pursuant to the
Purchase Agreement that the Company and the Investors enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. REGISTRATION RIGHTS.
1.1. DEFINITIONS.
(a) The terms "Form S-1", "Form S-3", "Form S-4" and "Form S-8" mean
such respective forms under the 1933 Act as in effect on the date hereof or
any successor registration forms to Form S-1, Form S-3, Form S-4 and Form
S-8, respectively, under the 1933 Act subsequently adopted by the
Securities and Exchange Commission (the "SEC").
(b) the term "Aeneas Registrable Securities" means all Registrable
Securities now held or hereafter acquired by Aeneas Venture Corporation or
any of its affiliates.
<PAGE>
(c) the term "Apollo Registrable Securities" means all Registrable
Securities now held or hereafter acquired by AIF II, L.P. or any of its
affiliates.
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
(e) The term "Investment Agreements" means each of (i) the Purchase
Agreement, (ii) the Stockholders Agreement dated as of October 15, 1993
among the Company, the Investors and Ezra P. Mager, (iii) the letter
agreement dated as of October 15, 1993 among the Company, certain of its
subsidiaries, the Investors, Ezra P. Mager and Joseph C. Herman, (iv) the
letter agreement dated as of October 15, 1993 among the Company, certain of
its subsidiaries, the Investors (other than TIHI), Samuel X. DiFeo, Joseph
DiFeo and certain other corporations party thereto and (v) the letter
agreement dated as of October 15, 1993 among the Company, the Investors and
Ezra P. Mager, in each case as from time to time in effect.
(f) The terms "register", "registered", and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended
(the "1933 Act"), and the automatic effectiveness or the declaration or
ordering of effectiveness of such registration statement or document.
(g) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Shares, (ii) the Common Stock
purchased by each of TIHI and Ezra P. Mager (1) prior to the date hereof or
(2) pursuant to the Common Stock Purchase Agreement dated as of October 15,
1993 and (iii) any Common Stock issued as (or issuable upon the conversion
or exercise of any warrant, right, or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares described in the foregoing clauses (i) and (ii);
PROVIDED, HOWEVER, that any shares previously sold to the public pursuant
to a registered public offering or pursuant to an exemption from the
registration requirements of the 1933 Act shall cease to be Registrable
Securities. For purposes of this Agreement, the number of shares of
Registrable Securities outstanding at any time shall be determined by
adding the number of shares of Common Stock outstanding which are, and the
number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities which upon issuance would be, Registrable
Securities.
(h) The term "TIHI" means '21' International Holdings, Inc., a
Delaware corporation.
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1.2. REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the earlier of (i)
June 30, 1995 or (ii) the date six months after the effective date of the
first registration statement for a public offering of securities of the
Company, a written request from the Holders of at least 50% of the
Registrable Securities then outstanding and entitled to registration rights
under this Section 1 (the "Initiating Holders") that the Company effect the
registration under the 1933 Act of the lesser of (1) 20% of the Registrable
Securities then outstanding or (2) the number of Registrable Securities
whose aggregate offering price is expected to be at least $10,000,000, then
the Company shall, within five days of the receipt thereof, give written
notice of such request to all Holders and shall, subject to the limitations
of this Section 1.2, use its best efforts to effect such a registration as
soon as practicable and in any event to file within 75 days of the receipt
of such request a registration statement under the 1933 Act covering all
the Registrable Securities which the Holders shall in writing request
(within 20 days of receipt of the notice given by the Company pursuant to
this Section 1.2(a)) to be included in such registration and to use its
best efforts to have such registration statement become effective.
(b) If the Company shall receive at any time after the earlier of (i)
June 30, 1995 or (ii) the date six months after the effective date of the
first registration statement for a public offering of securities of the
Company, a written request from the Holders of at least 50% of the Aeneas
Registrable Securities then outstanding and entitled to registration rights
under this Section 1 (the "Aeneas Initiating Holders") that the Company
effect the registration under the 1933 Act of the lesser of (1) 20% of the
Aeneas Registrable Securities then outstanding or (2) the number of
Registrable Securities whose aggregate offering price is expected to be at
least $10,000,000, then the Company shall, within five days of the receipt
thereof, give written notice of such request to all Holders and shall,
subject to the limitations of this Section 1.2, use its best efforts to
effect such a registration as soon as practicable and in any event to file
within 75 days of the receipt of such request a registration statement
under the 1933 Act covering all the Registrable Securities which the
Holders shall in writing request (within 20 days of receipt of the notice
given by the Company pursuant to this Section 1.2(b)) to be included in
such registration and to use its best efforts to have such registration
statement become effective.
(c) If the Company shall receive at any time after the earlier of (i)
June 30, 1995 or (ii) the date six months after the effective date of the
first registration statement
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for a public offering of securities of the Company, a written request from
the Holders of at least 50% of the Apollo Registrable Securities then
outstanding and entitled to registration rights under this Section 1 (the
"Apollo Initiating Holders") that the Company effect the registration under
the 1933 Act of the lesser of (1) 20% of the Apollo Registrable Securities
then outstanding or (2) the number of Registrable Securities whose
aggregate offering price is expected to be at least $10,000,000, then the
Company shall, within five days of the receipt thereof, give written notice
of such request to all Holders and shall, subject to the limitations of
this Section 1.2, use its best efforts to effect such a registration as
soon as practicable and in any event to file within 75 days of the receipt
of such request a registration statement under the 1933 Act covering all
the Registrable Securities which the Holders shall in writing request
(within 20 days of receipt of the notice given by the Company pursuant to
this Section 1.2(c)) to be included in such registration and to use its
best efforts to have such registration statement become effective.
(d) If the Initiating Holders, the Aeneas Initiating Holders or the
Apollo Initiating Holders, as the case may be, intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as part of their request
made pursuant to this Section 1.2 and the Company shall include such
information in the written notice referred to in Sections 1.2(a), (b) and
(c). In such event, the right of any Holder to include its Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders, the Aeneas
Initiating Holders or the Apollo Initiating Holders, as the case may be,
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with
the Company as provided in Section 1.4(d)) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected
for such underwriting by a majority in interest of the Initiating Holders,
the Aeneas Initiating Holders or the Apollo Initiating Holders, as the case
may be. The Initiating Holders, the Aeneas Initiating Holders or the
Apollo Initiating Holders, as the case may be, must obtain the approval of
the Company's Board of Directors regarding the selection of an underwriter
or underwriters, which approval shall not be unreasonably withheld;
PROVIDED, HOWEVER, that the Board of Directors shall be deemed to approve
any under-writer selected by the Initiating Holders, the Aeneas Initiating
Holders or the Apollo Initiating Holders, as the case may be, unless such
approval is denied within 15 days
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of such selection. Notwithstanding any other provision of this Section
1.2, if, in the case of a registration requested pursuant to Section
1.2(a), 1.2(b) or 1.2(c), the underwriter advises the Initiating Holders,
the Aeneas Initiating Holders or the Apollo Initiating Holders, as the case
may be, in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Initiating Holders, the
Aeneas Initiating Holders or the Apollo Initiating Holders, as the case may
be, shall so advise the Company and all Holders of Registrable Securities
which would otherwise be underwritten pursuant hereto, and all the
securities other than Registrable Securities sought to be included in the
underwriting shall first be excluded. To the extent that further
limitation is required, the number of Registrable Securities that may be
included in the underwriting shall be allocated pro rata among all Holders
thereof desiring to participate in such underwriting (according to the
number of Registrable Securities then held by each such Holder). No
Registrable Securities requested by any Holder to be included in a
registration pursuant to Section 1.2(a), 1.2(b) or 1.2(c) shall be excluded
from the underwriting unless all securities other than Registrable
Securities are first excluded.
(e) The Company is obligated to effect only one registration pursuant
to Section 1.2(a), one registration pursuant to Section 1.2(b), and one
registration pursuant to Section 1.2(c); PROVIDED, HOWEVER that no
registration pursuant to Section 1.2(a), (b) or (c) shall be deemed to be a
registration for any purpose of this sentence unless the number of
Registrable Securities included in the underwriting equals or exceeds 35%
of the number of Registrable Securities proposed by the Holders to be
distributed through such underwriting; and PROVIDED, FURTHER, that no
registration of Registrable Securities which shall not have become and
remained effective in accordance with Section 1.4 shall be deemed to be a
registration for any purpose of this sentence.
(f) Notwithstanding the foregoing provisions of this Section 1.2, in
the event that the Company is requested to file any registration statement
pursuant to this Section 1.2, (i) the Company shall not be obligated to
effect the filing of such registration statement during the 180 days
following the effective date of any other registration statement pertaining
to an underwritten public offering of securities for the account of the
Company, or (ii) if the Company shall furnish to Holders requesting such
registration statement a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would not be in the best interests of the Company and its
stockholders generally for such registration statement to be filed, the
Company shall have the right to defer such filing for a
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period of not more than 90 days after receipt of the request of the
relevant Initiating Holders; PROVIDED, HOWEVER, that the Company may not
utilize the right set forth in this Section 1.2(f)(ii) more than once in
any twelve-month period.
(g) Each registration requested pursuant to Section 1.2(a), (b) or
(c) shall be effected by the filing of a registration statement on Form S-1
(or if such form is not available, any other form which includes
substantially the same information (other than information which is
incorporated by reference) as would be required to be included in a
registration statement on such form as currently constituted), unless the
use of a different form is consented to by Initiating Holders, Aeneas
Initiating Holders or Apollo Initiating Holders, as the case may be,
holding a majority of the Registrable Securities, Aeneas Registrable
Securities or Apollo Registrable Securities, as the case may be, held by
all Initiating Holders, Aeneas Initiating Holders as Apollo Initiating
Holders, as the case may be, or unless another form would be equally
effective, as determined by the Initiating Holders, the Aeneas Initiating
Holders or the Apollo Initiating Holders, as the case may be, at their sole
discretion.
1.3. COMPANY REGISTRATION. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its capital stock
or other securities under the 1933 Act in connection with the public offering of
such securities solely for cash (other than a registration on Form S-8 relating
solely to the sale of securities to participants in a Company stock plan or a
registration on Form S-4 or any successor form), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of any Holder given within 20 days after mailing of such notice
by the Company, the Company shall, subject to the provisions of Section 1.8, use
its best efforts to cause a registration statement covering all of the
Registrable Securities that each such Holder has requested to be registered to
become effective under the 1933 Act. The Company shall be under no obligation
to complete any offering of its securities it proposes to make and shall incur
no liability to any Holder for its failure to do so.
1.4. OBLIGATIONS OF THE COMPANY. Whenever required under this Section 1
to use its best efforts to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible, prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration statement
effective for up to
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180 days or until such Holders have informed the Company in writing that the
distribution of their securities has been completed. In addition, the Company
shall:
(a) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement, and use its best efforts to cause each such
amendment and supplement to become effective, as may be necessary to comply
with the provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement.
(b) Furnish to the Holders such reasonable number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(c) Use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such states and jurisdictions as shall be reasonably requested
by the Holders, except that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(d) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an underwriting agreement, including furnishing
any opinion of counsel or entering into a lock-up agreement reasonably
requested by the managing underwriter.
(e) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered under
the 1933 Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing and promptly file such amendments and supplements which may be
required pursuant to Section 1.4(b) on account of such event and use its
best efforts to cause each such amendment and supplement to become
effective.
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<PAGE>
(f) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or, if such securities are
not being sold through underwriters, on the date that the registration
statement with respect to such securities becomes effective, (i) an opinion
or opinions, dated such date, of the counsel representing the Company for
the purposes of such registration, in form and substance as is customarily
given by company counsel to the underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a letter dated
such date, from the independent certified public accountant of the Company,
in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
(g) Apply for listing and use its best efforts to list the
Registrable Securities being registered on any national securities exchange
on which a class of the Company's equity securities is listed or, if the
Company does not have a class of equity securities listed on a national
securities exchange, apply for qualification and use its best efforts to
qualify the Registrable Securities being registered for inclusion on the
automated quotation system of the National Association of Securities
Dealers, Inc.
(h) Without in any way limiting the types of registrations to which
this Section 1 shall apply, in the event that the Company shall effect a
"shelf registration" under Rule 415 promulgated under the 1933 Act, the
Company shall take all necessary action, including, without limitation, the
filing of post-effective amendments, to permit the Investors to include
their Registrable Securities in such registration in accordance with the
terms of this Section 1.
1.5. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 in
respect of the Registrable Securities of any selling Holder that such selling
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of its
Registrable Securities.
1.6. EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions relating to Registrable Securities
incurred in connection with each
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registration, filing or qualification pursuant to Section 1.2 and each
registration, filing or qualification pursuant to Section 1.11, including
(without limitation) all registration, filing and qualification fees, printing
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders, shall
be borne by the Company; PROVIDED, HOWEVER, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2(a) if the registration request is subsequently withdrawn at any
time at the request of the Holders of a majority of the Registrable Securities
to be registered (in which case all participating Holders shall bear such
expenses), unless the Holders of a majority of the Registrable Securities agree
to forfeit their right to one demand registration pursuant to Section 1.2(a);
and PROVIDED, FURTHER, that if at the time of such withdrawal the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders of a majority of the Registrable
Securities, then outstanding at the time of their request that makes the
proposed offering unreasonable in the good faith judgment of a majority in
interest of the Holders of the Registrable Securities then the Holders shall not
be required to pay any of such expenses and the right to one demand registration
pursuant to Section 1.2(a) shall not be forfeited. The Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2(b) if the registration request is subsequently withdrawn at any
time at the request of the Holders of a majority of the Aeneas Registrable
Securities to be registered (in which case all participating Holders of Aeneas
Registrable Securities shall bear such expenses), unless the Holders of a
majority of the Aeneas Registrable Securities agree to forfeit their right to
one demand registration pursuant to Section 1.2(b); PROVIDED FURTHER, HOWEVER,
that if at the time of such withdrawal, such Holders have learned of a material
adverse change in the condition, business, or prospects of the Company from that
known to the Holders of a majority of the Aeneas Registrable Securities then
outstanding at the time of their request that makes the proposed offering
unreasonable in the good faith judgment of a majority in interest of the Holders
of the Aeneas Registrable Securities then the Holders shall not be required to
pay any of such expenses and the right to one demand registration pursuant to
Section 1.2(b) shall not be forfeited. The Company shall not be required to pay
for any expenses of any registration proceeding begun pursuant to Section 1.2(c)
if the registration request is subsequently withdrawn at any time at the request
of the Holders of a majority of the Apollo Registrable Securities to be
registered (in which case all participating Holders of Apollo Registrable
Securities shall bear such expenses), unless the Holders of a majority of the
Apollo Registrable Securities agree to forfeit their right to one demand
registration pursuant to Section 1.2(c); PROVIDED FURTHER, HOWEVER, that if at
the time of such withdrawal, such Holders have learned of a material adverse
change in the condition, business, or prospects of the Company from that known
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to the Holders of a majority of the Apollo Registrable Securities then
outstanding at the time of their request that makes the proposed offering
unreasonable in the good faith judgment of a majority in interest of the Holders
of the Apollo Registrable Securities then the Holders shall not be required to
pay any of such expenses and the right to one demand registration pursuant to
Section 1.2(c), shall not be forfeited. Underwriting discounts and commissions
relating to Registrable Securities included in any registration effected
pursuant to Section 1.6 will be borne and paid ratably by the Holders of such
Registrable Securities, and, if it participates, the Company.
1.7. EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to any registration pursuant to Section
1.3 for each Holder, including, without limitation, all registration, filing and
qualification fees, printing and accounting fees, fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one counsel
for the selling Holders. Underwriting discounts and commissions relating to
Registrable Securities will be borne and paid ratably by the Holders of such
Registrable Securities and the Company.
1.8. UNDERWRITING REQUIREMENTS. In connection with any offering involving
an underwriting of securities being issued by the Company, the Company shall not
be required under Section 1.3 to include any of the Holders' securities in such
underwriting unless such Holders accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it, and then only in
such quantity, if any, as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If the managing
underwriter for the offering shall advise the Company in writing that the total
amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities to
be sold other than by the Company that can be successfully offered, then the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the managing underwriter
believes will not jeopardize the success of the offering (the securities so
included to be reduced as follows: all securities which stockholders other than
the Company and the Holders seek to include in the offering shall be excluded
from the offering to the extent limitation on the number of shares included in
the underwriting is required (unless such securities are being registered
pursuant to Section 7.03 of the Master Agreement (as defined in Section 14.1) in
which case such securities shall be pari passu with the Registrable Securities),
and, if further limitation on the number of shares to be included in the
underwriting is required, then the number of shares held by Holders that may be
included in the underwriting shall be reduced pro rata among the selling Holders
in accordance with the number of shares of Registrable Securities held by such
Holder) but in
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no event shall the amount of securities of the selling Holders included in the
offering be reduced below 35% of the total amount of securities included in such
offering, unless such offering is the initial public offering of the Company's
securities in which case the selling Holders may be excluded if the managing
underwriter makes the determination described above and no securities other than
those of the Company are included. For purposes of the preceding parenthetical
concerning apportionment, for any selling shareholder which is a Holder of
Registrable Securities and which is a partnership or a corporation, the
partners, retired partners and shareholders of such Holder, or the estates and
family members of such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall collectively be deemed to be a
"selling Holder", and any pro rata reduction with respect to such "selling
Holder" shall be based upon the aggregate amount of shares carrying registration
rights owned by all entities and individuals included in such "selling Holder",
as defined in this sentence.
1.9. INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) The Company will indemnify and hold harmless each Holder, the
officers, directors, partners, agents and employees of each Holder, any
underwriter (as defined in the 1933 Act) for such Holder and each person,
if any, who controls such Holder or underwriter within the meaning of the
1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the 1933 Act, the 1934 Act
or any other federal or state law, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (each a
"Violation"): (i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they
were made, not misleading, or (iii) any violation or alleged violation by
the Company of the 1933 Act, the 1934 Act, any state securities law or any
rule or regulation promulgated under the 1933 Act, the 1934 Act or any
state securities law in connection with any matter relating to such
registration statement. The Company will reimburse each such Holder,
officer, director, partner, agent, employee, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; PROVIDED, HOWEVER, that
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the Company will pay for only one firm of counsel for all such Holders.
The indemnity agreement contained in this Section 1.9(a) shall not apply to
amounts paid in settlement of any loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be
liable to a Holder in any such case for any such loss, claim, damage,
liability, or action (1) to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by or on behalf of such Holder, underwriter or controlling
person or (2) in the case of a sale directly by a Holder of Registrable
Securities (including a sale of such Registrable Securities through any
underwriter retained by such Holder engaging in a distribution solely on
behalf of such Holder), such untrue statement or alleged untrue statement
or omission or alleged omission was contained in a preliminary prospectus
and corrected in a final or amended prospectus, and such Holder failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the Registrable Securities to the person
asserting any such loss, claim, damage or liability in any case where such
delivery is required by the Securities Act.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement, that the Company
shall have received an undertaking from any prospective selling Holder that
such selling Holder will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the registration
statement, each person, if any, who controls the Company within the meaning
of the 1933 Act, each agent and any underwriter for the Company, and any
other Holder selling securities in such registration statement or any of
its directors, officers, partners, agents or employees or any person who
controls such Holder or underwriter, against any losses, claims, damages,
or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, agent, or underwriter or controlling
person, or other such Holder or director, officer or controlling person may
become subject, under the 1933 Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by or on
behalf of such Holder expressly for use in connection with such
registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, agent or underwriter or controlling person, other
Holder, officer,
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director, partner, agent, employee, or controlling person in connection
with investigating or defending any such loss, claim, damage, liability, or
action; PROVIDED, HOWEVER, that the liability of any Holder hereunder shall
be limited to the amount of net proceeds (after deduction of all
underwriters' discounts and commissions paid by such Holder in connection
with the registration in question) received by such Holder, in the offering
giving rise to the Violation; and PROVIDED, FURTHER, that the indemnity
agreement contained in this Section 1.9(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld nor, in the case of a sale directly by
the Company of its securities (including a sale of such securities through
any underwriter retained by the Company to engage in a distribution solely
on behalf of the Company), shall the Holder be liable to the Company in any
case in which such untrue statement or alleged untrue statement or omission
or alleged omission was contained in a preliminary prospectus and corrected
in a final or amended prospectus, and the Company failed to deliver a copy
of the final or amended prospectus at or prior to the confirmation of the
sale of the securities to the person asserting any such loss, claim, damage
or liability in any case where such delivery is required by the 1933 Act.
(c) Promptly after receipt by an indemnified party under this Section
1.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to
be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume and control the defense
thereof with counsel mutually satisfactory to the parties; PROVIDED,
HOWEVER, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party,
if representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential
differing interests, as reasonably determined by either party, between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 1.9 to the extent of such prejudice, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any
liability that
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it may have to any indemnified party otherwise than under this Section 1.9.
(d) The obligations of the Company and the Holders under this Section
1.9 shall survive the conversion, if any, of the Shares and the completion
of any offering of Registrable Securities in a registration statement
whether under this Section 1 or otherwise.
(e) If the indemnification provided for in this section 1.9 is
unavailable to a party that would have been an indemnified party under this
Section 1.9 in respect of any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to therein, then each
party that would have been an indemnifying party thereunder shall, in lieu
of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in
such proportion as is appropriate to reflect the relative fault of such
indemnifying party on the one hand and such indemnified party on the other
in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions or proceedings in
reference to, among other things, whether the Violation relates to
information supplied by such indemnifying party or such indemnified party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such Violation. The parties agree that
it would not be just and equitable if contribution pursuant to this Section
1.9(e) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations
referred to in the preceding sentence. The amount paid or payable by a
contributing party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
above in this Section 1.9(e) shall include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The liability of any
Holder of Registrable Securities in respect of any contribution obligation
of such Holder (after deduction of all underwriters' discounts and
commissions paid by such Holder in connection with the registration in
question) arising under this Section 1.9(e) shall not in any event exceed
an amount equal to the net proceeds to such Holder from the disposition of
the Registrable Securities disposed of by such Holder pursuant to such
registration.
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<PAGE>
1.10. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934.
(a) RESALES UNDER RULE 144; FORM S-3 REGISTRATION. With a view to
making available to the Holders the benefits of Rule 144 promulgated under
the 1933 Act and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public
without registration, and with a view to making it possible for Holders to
register the Registrable Securities pursuant to a registration on Form S-3,
the Company agrees to:
(i) use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144, at
all times after 90 days after the effective date of the first
registration statement filed by the Company for the offering of its
securities to the general public;
(ii) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to
enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable
(but not later than 90 days) after the end of the fiscal year in which
the first registration statement filed by the Company for the offering
of its securities to the general public is declared effective;
(iii) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under
the 1933 Act and the 1934 Act; and
(iv) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (1) a written statement
by the Company as to its compliance with the reporting requirements of
Rule 144 (at any time after 90 days after the effective date of the
first registration statement filed by the Company for the offering of
the securities to the general public), the 1933 Act and the 1934 Act
(at any time after it has become subject to such reporting
requirements), or as to its qualification as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (2) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the
Company, and (3) such other information as may be reasonably requested
in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or
pursuant to such form.
-15-
<PAGE>
(b) RESALE UNDER RULE 144A. The Company agrees that, at all times
during which the Company is neither subject to the reporting requirement of
Sections 13 or 15(d) of the 1934 Act, nor exempt from reporting pursuant to
Rule 12g32(b) under the 1934 Act, it will provide in written form, upon the
written request of a Holder, or a prospective purchaser of securities of
the Company from such Holder all information required by Rule 144A(d)(4)(i)
of the General Regulations promulgated by the SEC under the 1933 Act ("Rule
144A Information"). The Company further agrees, upon written request, to
cooperate with and assist any Holder or any member of the National
Association of Securities Dealers, Inc. system for Private Offerings
Resales and Trading through Automated Linkages ("PORTAL") in applying to
designate and thereafter maintaining the eligibility of the Company's
securities for trading through PORTAL. With respect to each Holder, the
Company's obligations under this Section 1.10(b) shall at all times be
contingent upon such Holder's obtaining from a prospective purchaser an
agreement to take all reasonable precautions to safeguard the Rule 144A
Information from disclosure to anyone other than employees of the
prospective purchaser who require access to the Rule 144A Information for
the sole purpose of evaluating its purchase of the Company's securities.
1.11. FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 (or on any successor form to Form S-3 regardless of its
designation) and any related qualification or compliance with respect to all or
a part of the Registrable Securities owned by such Holder or Holders, the
Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) use its best efforts to effect, as soon as practicable, such
registration, qualification or compliance as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion
of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such request as are
specified in a written request given within 20 days after receipt of such
written notice from the Company; PROVIDED, HOWEVER, that the Company shall
not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 1.11 if: (i) Form S-3 (or any
successor form to Form S-3 regardless of its designation) is not available
for such offering by the Holders; (ii) the aggregate net offering price
(after deduction of underwriting discounts and commissions) of the
Registrable Securities specified in such
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<PAGE>
request is not at least $500,000; (iii) the Company has already effected
one registration on Form S-3 or pursuant to Section 1.2 hereof within the
previous six-month period; or (iv) the Company shall furnish to the Holders
a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would not
be in the best interests of the Company and its stockholders for such Form
S-3 registration to be effected at such time, in which event the Company
shall have the right to defer the filing of the Form S-3 registration for a
period of not more than 90 days after receipt of the request of the Holder
or Holders under this Section 1.11; PROVIDED, HOWEVER, that the Company
shall not utilize this right more than once in any twelve-month period.
1.12. LOCK-UP AGREEMENTS. If reasonably requested by the Company and the
managing underwriter, the Holders agree to enter into lock-up agreements
pursuant to which they will not, for a period of 120 days following the
effective date of a registration statement for any public offering of the
Company's securities, offer, sell or otherwise dispose of the Registrable
Securities, except the Registrable Securities sold pursuant to such registration
statement, without the prior consent of the Company and the underwriter,
provided that the officers, directors and all holders of more than 1% of the
shares of Common Stock (calculated for the purpose as if all securities
convertible into or exercisable for Common Stock, directly or indirectly, are so
converted or exercised) of the Company enter such lock-up agreements for the
same period and on the same terms.
1.13. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 1 may be assigned by
any Holder to a permitted transferee, and by such transferee to a subsequent
permitted transferee, but only if such rights are transferred (a) to an
affiliate, partner or stockholder of such Holder or transferee or an account
managed or advised by the manager or adviser of such Holder or transferee or (b)
in connection with the sale or other transfer of not less than an aggregate of
50,000 Registrable Securities or some lesser number, if such lesser number
represents all the Registrable Securities then held by such Holder. Any
transferee to whom rights under this Agreement are transferred shall (i) as a
condition to such transfer, deliver to the Company a written instrument by which
such transferee agrees to be bound by the obligations imposed upon Holders under
this Agreement to the same extent as if she, he or it were a Holder under this
Agreement and (ii) be deemed to be a Holder hereunder.
1.14. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. Except as
contemplated by Section 7.03 of the Master Agreement dated as of March 11, 1993,
as amended and in effect on the date hereof (the "Master Agreement"), among the
Company and certain other persons party thereto, from and after the date of this
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<PAGE>
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities then outstanding, enter into
any agreement with any holder or prospective holder of any securities of the
Company relating to registration rights unless such agreement includes (a) to
the extent such agreement would allow such holder or prospective holder to
include such securities in any registration filed under Section 1.2, 1.3 or 1.11
hereof, a provision that such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of its
securities will not reduce the amount of the Registrable Securities of the
Holders which would otherwise be included and (b) no provision which would allow
such holder or prospective holder to make a demand registration which could
result in such registration statement being declared effective prior to the
earlier of the dates set forth in Section 1.2(a).
2. MISCELLANEOUS.
2.1. LEGEND. Each certificate representing Registrable Securities shall
state therein:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF
A REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 15, 1993 BY AND AMONG
THE CORPORATION AND THE INVESTORS NAMED THEREIN, A COPY OF WHICH IS ON FILE
AT THE OFFICES OF THE CORPORATION.
2.2. NOTICES. All notices, requests, consents and demands shall be in
writing and shall be personally delivered, mailed, postage prepaid, telecopied
or telegraphed or delivered by any nationally recognized overnight delivery
service to the Company at:
EMCO DiFeo Automotive Group
585 Route 440
Jersey City, New Jersey 07304
Attn: Ezra P. Mager
Fax number: (201) 433-9743
with a copy to:
George G. Lowrance
EMCO DiFeo Automotive Group
585 Route 440
Jersey City, New Jersey 07304
to each Investor at its address set out on Exhibit A hereto with a copy to:
Larry Jordan Rowe, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Fax number: (617) 951-7050
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<PAGE>
or such other address as may be furnished in writing to the other parties
hereto. All such notices, requests, demands and other communication shall, when
mailed (registered or certified mail, return receipt requested, postage
prepaid), personally delivered, or telegraphed, be effective four days after
deposit in the mails, when personally delivered, or when delivered to the
telegraph company, respectively, addressed as aforesaid, unless otherwise
provided herein and, when telecopied or delivered by any nationally recognized
overnight delivery service, shall be effective upon actual receipt.
2.3. ENTIRE AGREEMENT. This Agreement and the Investment Agreements
constitute the entire understanding of the parties with respect to the subject
matter hereof and thereof and supersede any and all prior understandings and
agreements, whether written or oral, with respect to such subject matter.
2.4. AMENDMENTS, WAIVERS AND CONSENTS. Any provision in this Agreement to
the contrary notwithstanding, modifications or amendments to this Agreement may
be made, and compliance with any covenant or provision herein set forth may be
omitted or waived, if the Company (a) shall obtain consent thereto in writing
from persons holding or having the right to acquire in the aggregate a majority
of the aggregate of the Registrable Securities then outstanding and (b) shall,
in each such case, deliver copies of such consent in writing to any Holders who
did not execute the same; PROVIDED, HOWEVER, that no Holder shall, without its
consent, be adversely affected by any such modification, amendment or waiver in
any manner in which the other Holders are not likewise adversely affected.
2.5. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the personal representatives, successors and permitted
assigns of the respective parties hereto. The Company shall not have the right
to assign its obligations hereunder or any interest herein without obtaining the
prior written consent of the Holders holding a majority of the Registrable
Securities then outstanding, provided in accordance with Section 2.4.
2.6. GENERAL. The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement. In this Agreement the singular includes the plural, the plural
includes the singular, and the masculine gender includes the neuter, masculine
and feminine genders. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
2.7. SEVERABILITY. If any provision of this Agreement shall be found by
any court of competent jurisdiction to be invalid or unenforceable, the parties
hereby waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision shall, to the maximum extent allowable by law, be
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<PAGE>
modified by such court so that it becomes enforceable, and, as modified, shall
be enforced as any other provision hereof, all the other provisions hereof
continuing in full force and effect.
2.8. COUNTERPARTS. This Agreement may be executed in counterparts, all of
which together shall constitute one and the same instrument.
2.9. SPECIFIC PERFORMANCE. The Company recognizes that the rights of the
Holders under this Agreement are unique, and, accordingly, the Holders shall, in
addition to such other remedies as may be available to them at law or in equity,
have the right to enforce their rights hereunder by actions for injunctive
relief and specific performance to the extent permitted by law. This Agreement
is not intended to limit or abridge any rights of the Holders which may exist
apart from this Agreement.
[The rest of this page has been intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first above written.
EMCO MOTOR HOLDINGS, INC.
By /s/ Ezra P. Mager
--------------------------------------
Title:
INVESTORS
AENEAS VENTURE CORPORATION
By /s/Illegible
--------------------------------------
By /s/ John M. Sallay
--------------------------------------
AIF II, L.P.
By Apollo Advisors, L.P.,
Managing General Partner
By Apollo Capital Management, Inc.,
General Partner
By /s/ Michael D. Weiner
----------------------------
Title: Vice President
NATIO VIE DEVELOPPMENT
By /s/Illegible
--------------------------------------
Title: Portfolio Manager
ASSU VENTURE
By /s/Illegible
--------------------------------------
Title: Portfolio Manager
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<PAGE>
NATIO FONDS VENTURE 2
By /s/Illegible
--------------------------------------
Title: Portfolio Manager
/s/Jeremy Grantham
--------------------------------------
Jeremy Grantham
/s/Jules Kroll
--------------------------------------
Jules Kroll
/s/Adreal Farace
--------------------------------------
Andrea Farace
/s/Carl Spielvogel
--------------------------------------
Carl Spielvogel
/s/Jerome Markowitz
--------------------------------------
Jerome Markowitz
/s/Philip Halperin
--------------------------------------
Philip Halperin
/s/Derek Lemke-von Ammon
--------------------------------------
Derek Lemke-von Ammon
/s/Frank Dunlevy
--------------------------------------
Frank Dunlevy
/s/Thomas Sullivan
--------------------------------------
Thomas Sullivan
'21' INTERNATIONAL HOLDINGS, INC.
By /s/Philip Smith Jr.
--------------------------------------
Title: Vice President
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<PAGE>
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
AMENDMENT, dated as of July 31, 1996 (this "Amendment"), to the
Registration Rights Agreement, dated as of October 15, 1993 (as amended or
modified from time to time, the "Agreement"), by and among United Auto Group,
Inc. (formerly EMCO Motor Holdings, Inc.), a Delaware corporation (the
"Company"), the investors listed on Exhibit A thereto and Ezra P. Mager (the
"Investors"). Capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to such terms in the Agreement.
WHEREAS, on July 10, 1996, the Company issued and sold to the Investors an
aggregate of 306,346 shares of Class A Preferred Stock, par value $0.0001 per
share ("Preferred Stock");
WHEREAS, as a condition to the purchase of their portion of such shares of
Preferred Stock by the Investors party hereto, the Company and such Investors
agreed that such shares will be entitled to the benefits of the Agreement;
WHEREAS, on July 10, 1996, the Company issued and sold warrants (the
"Additional Warrants") to purchase up to an aggregate of 93,747 shares of
Preferred Stock to the initial holders of the warrants (the "Mezzanine
Warrants") issued pursuant to the Securities Purchase Agreements dated as of
September 22, 1995;
WHEREAS, as a condition to the purchase of the Additional Warrants, the
Company and the purchasers thereof agreed that the Additional Warrants will
contain substantially the same registration rights as the Mezzanine Warrants;
WHEREAS, on July 31, 1996, the Company issued and sold 10,000 shares of
Preferred Stock to Richard Sinkfield;
WHEREAS, as a condition to the purchase of such shares of Preferred Stock
by Mr. Sinkfield, the Company agreed that such shares will be entitled to the
benefits of the Agreement; and
WHEREAS, the parties hereto collectively hold or have the right to acquire
a majority of the outstanding Registrable Securities;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
Section 1. The Agreement is hereby amended by adding the following to the
end of clause (i) of Section 1.1(g) thereof: "and upon conversion of the shares
of Class A Preferred Stock, par value $0.0001 per share, issued and sold to the
Investors on July 10, 1996 and to Richard Sinkfield on July 31, 1996."
<PAGE>
Section 2. For purposes of Section 1.8 of the Agreement, any reference to
"Warrants" shall be deemed to refer to both the Mezzanine Warrants and the
Additional Warrants.
Section 3. Richard Sinkfield shall be a party to the Agreement for all
purposes thereunder.
Section 4. Except for the amendments expressly provided herein, the
Agreement shall continue to be, and shall remain, in full force and effect in
accordance with its terms. The amendments provided herein shall be limited
precisely as drafted and shall not be construed to an amendment, modification or
waiver of any other provision of the Agreement other than as specifically
provided herein.
Section 5. This Amendment may be executed in any number of counterparts by
the parties hereto, and all of said counterparts when taken together shall be
deemed to constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed as of the date first above written.
UNITED AUTO GROUP, INC.
By: /s/ Philip N. Smith, Jr.
------------------------------
Philip N. Smith, Jr.
Vice President
TRACE INTERNATIONAL HOLDINGS, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Philip N. Smith, Jr.
Senior Vice President
TRACE AUTO HOLDINGS, INC.
By: /s/ Philip N. Smith, Jr.
--------------------------------
Philip N. Smith, Jr.
Vice President
AENEAS VENTURE CORPORATION
By: /s/ John M. Sallay
--------------------------------
John M. Sallay
Authorized Signatory
By: /s/ Michael R. Eisenson
--------------------------------
Michael R. Eisenson
Authorized Signatory
AIF II, L.P.
By Apollo Advisors, L.P.
Managing General Partner
By Apollo Capital Management, Inc.
General Partner
By: /s/ Michael D. Weiner
--------------------------------
Michael D. Weiner
Accepted and agreed to as of
the date first above written:
/s/ Richard Sinkfield
- ------------------------------
Richard Sinkfield
-3-
<PAGE>
WAIVER, CONSENT AND MODIFICATION AGREEMENT
This WAIVER, CONSENT AND MODIFICATION AGREEMENT (this "Agreement"),
dated as of September 22, 1995, among United Auto Group, Inc. (formerly EMCO
Motor Holdings, Inc.), a Delaware corporation (the "Company"), the Common
Holders (as defined below) and the Preferred Holders (as defined below).
W I T N E S S E T H:
WHEREAS, the Company has entered into (i) the Class A Preferred Stock
Purchase Agreement (the "Preferred Purchase Agreement"), dated October 15, 1993,
with the investors listed on Exhibit A thereto (collectively, the "Preferred
Holders"), and '21' International Holdings, Inc., a Delaware corporation
("TIHI"), and Ezra P. Mager ("Mager" and, together with TIHI, the "Common
Holders"), and (ii) the Common Stock Purchase Agreement, dated October 15, 1993,
with the Common Holders (the "Common Purchase Agreement" and, collectively with
the Preferred Purchase Agreement, the "Stock Purchase Agreements");
WHEREAS, the Restated Certificate of Incorporation of the Company (the
"Certificate of Incorporation") provides the Common Holders and the Preferred
Holders with certain rights with respect to the Company's common stock, par
value $0.0001 (the "Common Stock") and the Company's Class A Preferred Stock,
par value $0.0001 (the "Preferred Stock");
WHEREAS, the Company has entered into the Registration Rights
Agreement (the "Registration Rights Agreement"), dated as of October 15, 1993,
with the Preferred Holders and TIHI;
WHEREAS, on August 15, 1995, TIHI contributed all of its shares of
Common Stock to '21' Auto Holdings, Inc., a Delaware corporation and wholly
owned subsidiary of TIHI ("'21' Auto"), and '21' Auto agreed to be bound by the
Common Stock Purchase Agreement and Registration Rights Agreement and, as such,
is deemed a "Common Holder" hereunder;
WHEREAS, immediately upon entering into this Agreement, the Company
will enter into several Securities Purchase Agreements (as in effect on the date
hereof, the "Securities Purchase Agreements") with the institutional investors
listed in Schedule A thereto (the "Investors") pursuant to which the Company
will issue and sell to the Investors up to $35,000,000 in aggregate principal
amount of its senior notes in several tranches (the "Senior Notes") and, in
connection therewith, warrants to purchase shares of Common Stock (as in effect
on the date hereof, the "Senior
<PAGE>
Warrants") which, in the event that certain approvals relating to the exercise
of the Warrants are not obtained, will convert into contingent value obligations
(the "CVOs");
WHEREAS, pursuant to the Certificate of Incorporation and except as
otherwise set forth therein, the Company is prohibited from authorizing or
issuing, or obligating itself to authorize or issue, any additional shares of
securities without the consent of the holders of a majority of the Preferred
Stock then outstanding;
WHEREAS, pursuant to the Certificate of Incorporation, the issuance
and sale of the Warrants may result in an adjustment in the Applicable
Conversion Value (as defined in the Certificate of Incorporation) relating to
the Preferred Stock and in the right of each holder of Preferred Stock or Common
Stock to purchase its PRO RATA portion of any securities newly issued by the
Company, unless otherwise waived by the holders of the majority of the shares of
Preferred Stock then outstanding;
WHEREAS, the Company desires to amend the Certificate of Incorporation
to provide for, among other things, a class of non-voting common stock to be
issued upon exercise of certain of the Warrants;
WHEREAS, pursuant to the Senior Warrants, the holders of Senior
Warrants or shares of Common Stock (or shares of non-voting common stock of the
Company, as the case may be) issued upon exercise of the Senior Warrants (the
"Warrant Shares") will be entitled to certain registration rights relating to
the Warrant Shares;
WHEREAS, pursuant to each Stock Purchase Agreement and except as
otherwise set forth therein, the Company is prohibited from issuing additional
shares of capital stock or warrants to purchase such shares without the prior
written consent of the holders of at least a majority of the outstanding shares
of Preferred Stock or Common Stock, as the case may be;
WHEREAS, pursuant to Section 8 of the Preferred Purchase Agreement,
after December 29, 1999, the Company will be required under certain
circumstances to issue to the Preferred Holders, at their option, either
warrants (the "Preferred Warrants") to purchase Common Stock or promissory notes
(the "Preferred Notes") secured by the assets of the Company to the extent such
assets are not otherwise encumbered; and
WHEREAS, it is a condition precedent to the Securities Purchase
Agreements that certain rights of the Common Holders and Preferred Holders with
respect to the Company be waived and that certain existing agreements be
amended, all as set forth herein;
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the terms and
provisions set forth herein, the parties hereby agree as follows:
SECTION 1. WAIVERS AND CONSENTS RELATING TO THE CERTIFICATE OF
INCORPORATION.
(a) CONSENT TO SENIOR WARRANTS AND WARRANT SHARES. Pursuant to
Section 8(b) of Article IV of the Certificate of Incorporation, the
authorization and issuance of the Senior Warrants, the Warrant Shares and, if
applicable, the CVOs in accordance with the Securities Purchase Agreements and
the Senior Warrants are hereby approved.
(b) ANTI-DILUTION. Pursuant to Section 5.4(a)(iv)(G) of Article IV of
the Certificate of Incorporation, application of Section 5.4(a) of Article IV of
the Certificate of Incorporation is hereby waived with respect to the issuance
or sale of, or any obligation, agreement or undertaking to issue or sell, the
Senior Warrants, the Warrant Shares or the CVOs in accordance with the
Securities Purchase Agreements and the Senior Warrants.
(c) PRE-EMPTIVE RIGHTS. Pursuant to Article VI of the Certificate of
Incorporation, neither the Senior Warrants nor the Warrant Shares nor, if
applicable, the CVOs shall constitute "New Securities" for purposes of Article
VI of the Certificate of Incorporation.
(d) AMENDMENT TO CERTIFICATE OF INCORPORATION. Pursuant to Sections
228 and 242 of the Delaware General Corporation Law and Section 8(b)(vii) of
Article IV of the Certificate of Incorporation, the amendment to the Certificate
of Incorporation, in the form set forth in EXHIBIT 1(D) hereto, is hereby
approved.
SECTION 2. AMENDMENTS TO THE REGISTRATION RIGHTS AGREEMENT. Pursuant
to Section 2.4 of the Registration Rights Agreement, the Registration Rights
Agreement is hereby amended as follows:
(a) UNDERWRITING REQUIREMENTS. The second sentence of Section 1.8
shall be amended in its entirety to read:
"If the managing underwriter for the offering shall advise the Company
in writing that the total amount of securities, including Registrable
Securities, requested by shareholders to be included in such offering
exceeds the amount of securities to be sold other than by the Company
that can be successfully offered, then the Company shall be required
to include in the offering
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<PAGE>
only that number of such securities, including Registrable Securities,
which the managing underwriter believes will not jeopardize the
success of the offering (the securities so included to be reduced as
follows: all securities which stockholders other than the Company and
the Holders seek to include in the offering shall be excluded from the
offering to the extent limitation on the number of shares included in
the underwriting is required (unless (i) such securities are being
registered pursuant to Section 11.2 of the Warrants (the "Warrants")
issued pursuant to the several Securities Purchase Agreements, dated
as of September 22, 1995, among the Company and the institutional
investors listed in Schedule A thereto, or Section 1.2 of the
Registration Rights Agreement (the "Venture Registration Rights
Agreement"), dated as of August 1, 1995, among the Company, Steve
Landers, John Landers and certain other persons party thereto from
time to time, in which case such securities shall be included in the
offering prior to including any Registrable Securities or (ii) such
securities are being registered pursuant to Section 11.3 of the
Warrants or Section 1.3 of the Venture Registration Rights Agreement,
in which case such securities shall be included in the offering on a
PRO RATA basis with the Registrable Securities), and, if further
limitation on the number of shares to be included in the underwriting
is required, then the number of shares held by Holders that may be
included in the underwriting shall be reduced PRO RATA among the
selling Holders in accordance with the number of shares of Registrable
Securities held by such Holders but in no event shall the amount of
securities of the selling Holders included in the offering be reduced
below 35% of the total amount of securities such selling Holders have
requested to be included in such offering, unless such offering is the
initial public offering of the Company's securities in which case the
selling Holders may be excluded if the managing underwriter makes the
determination described above and no securities other than those of
the Company are included.)"
(b) LOCK-UP. Section 1.12 shall be amended in its entirety to read:
"1.12 LOCK-UP AGREEMENTS. If reasonably requested by the Company
and any managing underwriter, the Holders agree to enter into lock-up
agreements pursuant to which they will not, for a period of 120 days
following the effective date of a registration statement for any
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<PAGE>
primary or secondary public offering of the Company's securities (or a
period of 180 days following the initial public offering of the
Company's securities) and for such reasonable period of time prior to
the effective date of such registration statement as the Company and
such underwriter may specify, offer, sell or otherwise dispose of any
Registrable Securities, except any Registrable Securities sold
pursuant to such registration statement, without the prior consent of
the Company and such underwriter."
(c) INCLUSION OF MAGER. The parties hereto acknowledge that Mager was
inadvertently not made a party to the Registration Rights Agreement and,
accordingly, shall be deemed a party thereto for all purposes thereunder.
SECTION 3. AMENDMENTS TO AND WAIVERS, CONSENTS AND AGREEMENTS
RELATING TO THE STOCK PURCHASE AGREEMENTS.
(a) CONSENT TO SENIOR WARRANTS AND WARRANT SHARES. Pursuant to
Section 7.11 of the Preferred Purchase Agreement and Section 7.9 of the Common
Purchase Agreement, the issuance and sale of the Senior Warrants, the Warrant
Shares and, if applicable, the CVOs in accordance with the Securities Purchase
Agreements and the Senior Warrants are hereby approved.
(b) MODIFICATIONS RELATING TO PREFERRED NOTES. (i) Notwithstanding
anything in the Preferred Purchase Agreement to the contrary, pursuant to
Section 9.5 of the Preferred Purchase Agreement, in the event that the Preferred
Holders shall be entitled to receive the Preferred Notes pursuant to Section 8.2
of the Preferred Purchase Agreement and have notified the Company in writing of
their election to so receive the Preferred Notes, a copy of which notice shall
be promptly sent to each holder of the Senior Notes, as soon as practicable but
in no event later than 20 days following such notice and as a condition
precedent to the issuance of the Preferred Notes:
(A) the Company at its sole expense shall duly organize a wholly
owned subsidiary incorporated in the State of Delaware (such corporation to
be referred to herein as "Newco") and transfer to Newco (1) all of the
assets of the Company, including, without limitation, all of the capital
stock or other ownership interests in all of the subsidiaries of the
Company other than, at the option of the Company, the capital stock of
Atlantic Auto Finance Corporation ("Atlantic Auto"), such that the sole
remaining assets of the Company shall be all of the issued and outstanding
capital stock of Newco and, if the Company so elects, Atlantic Auto and (2)
-5-
<PAGE>
the liabilities evidenced by the Senior Notes, after which all references
in the Securities Purchase Agreements to "the Company" shall also be deemed
to refer to Newco;
(B) upon the formation of Newco and the transfers contemplated in
clause (A) above, the Company shall execute and deliver (1) to the holders
of the Senior Notes a guaranty (the "Senior Note Guaranty") of payment of
the Senior Notes, substantially in the form of Exhibit 9.6-2 to the
Securities Purchase Agreements, and (2) to the collateral agent for the
holders of the Senior Notes a pledge agreement (the "Senior Note Pledge
Agreement"), substantially in the form of Exhibit 9.6-1 to the Securities
Purchase Agreements, securing the Senior Note Guaranty by a first priority
lien on all of the issued and outstanding capital stock of Newco and
Atlantic Auto (if such capital stock of Atlantic Auto is directly held by
the Company);
(C) upon the formation of Newco and the transfers contemplated in
clause (A) above, the date of maturity of the Preferred Notes shall be
modified to coincide with the date of maturity of the Senior Notes by
amending the form of promissory note in Exhibit J to the Preferred Purchase
Agreement as follows: (1) the first sentence of the first paragraph
following the legend shall be amended to read:
"FOR VALUE RECEIVED, the undersigned, United Auto Group, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to
_____________ (the "Payee") or order, on [the date of maturity of the
Company's Senior Notes due 2003], the principal sum of __________
DOLLARS ($__________), which amount equals the Payee's pro rata
portion of 50% of the Fair Market Value of the Company determined in
accordance with Section 8.3 of the Stock Purchase Agreement (as
defined below).";
and (2) Section 1 shall be amended to read in its entirety:
"1. NOTES. This Note is one of the Notes issued by the Company
pursuant to Section 8.2 of the Stock Purchase Agreement with a
maturity date of [the date of maturity of the Company's Senior Notes
due 2003] and evidences a return of the Payee's investment in the
Company's Class A Preferred Stock.";
(D) the holders of the Preferred Notes shall enter into a
subordination agreement (the "Subordination Agreement"), substantially in
the form set forth in EXHIBIT 3(B)(I)(D) hereto (together with an
intercreditor agreement
-6-
<PAGE>
substantially in the form of Exhibit A to the Subordination Agreement),
with the holders of the Senior Notes providing for, among other things, the
subordination of the Preferred Notes to the Senior Notes and the waiver of
certain rights of the holders of the Preferred Notes;
(E) the Company shall either (1) deliver to the holders of the
Senior Notes a certificate executed by the chief financial officer of the
Company stating that, after giving effect to the transactions contemplated
by clause (A) of this Section 3(b), the fair value of the assets of the
Company will exceed the total amount of its liabilities and the Company
will be able to pay its debts as they mature, or (2) simultaneously with
the transfer of assets contemplated by clause (A) of this Section 3(b),
transfer all of the liabilities of the Company (other than the Preferred
Notes) to Newco to the extent permitted, such that the sole remaining
liabilities of the Company shall be the Preferred Notes and those
liabilities, if any, relating to the Company's ownership of the capital
stock of Atlantic Auto; and
(F) the holders of the Senior Notes shall have received an
opinion of the Company's outside legal counsel (who shall be reasonably
satisfactory to the holders of a majority of the outstanding principal
amount of Senior Notes), substantially in the form set forth in EXHIBIT
3(b)(i)(F) hereto, which opinion shall contain such assumptions,
qualifications and exceptions as are customary and as such counsel deems
appropriate; and
(ii) Notwithstanding that pursuant to Section 2.1.15 of the Security
Agreement (the "Preferred Security Agreement") to be entered into between the
Company and the collateral agent for the Preferred Holders substantially in the
form of Exhibit K to the Preferred Purchase Agreement, the capital stock of
Newco and, if applicable, Atlantic Auto, as the sole assets of the Company, will
be excluded from the Collateral (as defined in the Preferred Security Agreement)
securing the Credit Obligations (as defined in the Preferred Security
Agreement), for purposes of the Preferred Security Agreement, the Collateral
shall be deemed to consist of, and only of, the capital stock of Newco, and, if
applicable, Atlantic Auto, thereby creating a subordinated pledge in such
capital stock, which subordinated pledge will be subject to the terms of the
Subordination Agreement and the Senior Note Pledge Agreement; and
-7-
<PAGE>
(c) FURTHER AGREEMENTS RELATING TO PREFERRED NOTES. In the event
that the Preferred Notes are issued as contemplated in Section 3(b) hereof:
(i) '21' Auto hereby agrees to vote, and TIHI hereby agrees to cause
'21' Auto to vote, all shares of Common Stock held by '21' Auto in accordance
with the written instructions of the holders of a majority of the Preferred
Stock then outstanding in connection with any required shareholder approval of
any proposed merger, consolidation, sale of all of the capital stock or sale of
all or substantially all of the assets of the Company ; and
(ii) the holders of a majority of the shares of Preferred Stock then
outstanding shall have the right to purchase all, but not less than all, of the
Senior Notes from the holders thereof by paying to each holder of Senior Notes
in immediately available funds the principal amount thereof and the accrued
interest and applicable premium thereon pursuant to the terms and conditions
contained in Sections 8.1 through 8.3 of the Securities Purchase Agreements;
PROVIDED, HOWEVER, that notwithstanding the last sentence of Section 8.3 of the
Securities Purchase Agreements, any Senior Notes so purchased shall not be
surrendered to the Company or cancelled solely on account of such purchase but
shall be transferred to and held by such holders of Preferred Stock on a PRO
RATA basis based upon the amount of Senior Notes purchased by each holder until
such Senior Notes are repaid upon maturity or otherwise cancelled pursuant to
their terms. Any Senior Notes so transferred to the Preferred Holders shall
remain subject to the rights of the Company pursuant to Sections 8.1 through 8.3
of the Securities Purchase Agreements.
(d) FURTHER ASSURANCES. The Company hereby agrees that, without the
prior written consent of (A) the holders of a majority of the shares of
Preferred Stock then outstanding and (B) the holders of a majority of the
aggregate principal amount of Senior Notes then outstanding, it will not enter
into any agreements that would restrict its ability to implement the matters set
forth in clauses (A) through (D) of Section 3(b)(i) hereof.
(e) ADJUSTMENT TO PREFERRED WARRANTS. In the event that the Preferred
Warrants are issued pursuant to Section 8.1 of the Preferred Purchase Agreement,
the determination of the number of shares of Voting Common Stock purchasable
upon exercise of such Preferred Warrants shall take into account the adjustment
of the number of Warrant Shares purchasable upon exercise of the Senior Warrants
pursuant to Section 8.1(e) of the Senior Warrants such that '21' Auto and its
transferees will bear the dilution caused by the issuance of all of the
Preferred Warrants and by the related adjustments to the Senior Warrants.
-8-
<PAGE>
SECTION 4. TAG-ALONG RIGHT. Pursuant to Section 20 of the Senior
Warrants, each Common Holder and each Preferred Holder hereby agrees to comply
with the terms and provisions of Section 12.1 of the Senior Warrants relating to
the right of the holders of the Senior Warrants, under certain conditions, to
participate in a sale by such Common Holder or Preferred Holder, as applicable,
of capital stock of the Company to a third party, as more fully described in
such Section 12.1.
SECTION 5. MISCELLANEOUS.
(a) AUTHORITY TO AMEND AND WAIVE. (i) The Preferred Holders party
hereto hold in the aggregate a sufficient number of shares of Preferred Stock to
amend or waive as contemplated in this Agreement the provisions of the
Certificate of Incorporation, the Registration Rights Agreement, the Preferred
Purchase Agreement, the form of Preferred Note and the form of Preferred
Security Agreement pursuant to their respective terms. (ii) The Common Holders
party hereto hold in the aggregate a sufficient number of shares of Common Stock
to waive as contemplated in this Agreement the provisions of the Common Purchase
Agreement pursuant to its terms.
(b) NO IMPLIED MODIFICATIONS. Except for the modifications and
agreements set forth herein, (i) the Certificate of Incorporation, the
Registration Rights Agreement, the Preferred Purchase Agreement and the Common
Purchase Agreement shall remain in full force and effect in accordance with
their respective terms and (ii) the forms of Preferred Security Agreement and
promissory note set forth in the various exhibits referenced herein shall
continue to read as set forth therein.
(c) EFFECT OF HEADINGS. The section and paragraph headings herein are
for convenience only and shall not affect the construction hereof.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts by the parties hereto, and all of said counterparts taken together
shall be deemed to constitute one and the same document.
(e) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
UNITED AUTO GROUP, INC.
By: /s/ Carl Spielvogel
----------------------------
Name: Carl Spielvogel
Title: Chairman of the Board and
Chief Financial Officer
COMMON HOLDERS
'21' INTERNATIONAL HOLDINGS, INC.
By: /s/ Robert H. Nelson
----------------------------
Name: Robert H. Nelson
Title: Senior V.P.
'21' AUTO HOLDINGS, INC.
By: /s/ Robert H. Nelson
----------------------------
Name: Robert H. Nelson
Title: Vice President
/s/ Ezra P. Mager
---------------------------------
Ezra P. Mager
PREFERRED HOLDERS
AENEAS VENTURE CORPORATION
By: /s/ Mark A. Rosen
----------------------------
Name: Mark A. Rosen
Authorized Signatory
By: /s/ Michael R. Eisenson
----------------------------
Name: Michael R. Eisenson
Authorized Signatory
-10-
<PAGE>
AIF II, L.P.
By: Apollo Advisors, L.P.
Managing General Partner
By: Apollo Capital Management, Inc.
General Partner
By: /s/ Michael D. Weiner
----------------------------
Name: Michael D. Weiner
Title: Vice President
NATIO VIE DEVELOPPMENT
By: /s/ D. Bellanger
----------------------------
Name: D. Bellanger
Title: Portfolio Manager
ASSUE VENTURE
By: /s/ D. Bellanger
----------------------------
Name: D. Bellanger
Title: Portfolio Manager
NATIO FONDS VENTURE 2
By: /s/ D. Bellanger
----------------------------
Name: D. Bellanger
Title: Portfolio Manager
/s/ Jeremy Grantham
------------------------------------
Jeremy Grantham
/s/ Jules Kroll
------------------------------------
Jules Kroll
-11-
<PAGE>
/s/ Andrea Farare
------------------------------------
Andrea Farace
/s/ Carl Spielvogel
------------------------------------
Carl Spielvogel
/s/ Jerome Markowitz
------------------------------------
Jerome Markowitz
/s/ Philip Halperin
------------------------------------
Philip Halperin
/s/ Derek Lemke-von Ammon
------------------------------------
Derek Lemke-von Ammon
/s/ Frank Dunlevy
------------------------------------
Frank Dunlevy
-12-
<PAGE>
The foregoing Agreement is hereby acknowledged, accepted
and agreed to as of the date first above written:
SENIOR NOTE HOLDERS
J.P. MORGAN CAPITAL CORPORATION
By: /s/ Charles Ewald
--------------------------------
Name: Charles Ewald
Title:
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By: /s/ U. Peter C. Gummeson
--------------------------------
Name: U. Peter C. Gummeson
Title: Investment Officer
-13-
<PAGE>
EXHIBIT 10.1.3
-2-
<PAGE>
September 22, 1995
United Auto Group, Inc.
375 Park Avenue, Suite 2201
New York, New York 10152
Re: PROPOSED SALE AND PURCHASE OF SECURITIES OF UNITED AUTO GROUP,
INC.
Gentlemen:
Reference is made to the Securities Purchase Agreement dated September
22, 1995 (together with all exhibits and schedules thereto, the "Securities
Purchase Agreement"), entered into by United Auto Group, Inc. (the "Company")
and J.P. Morgan Capital Corporation ("Morgan Capital"). This letter will
confirm our agreement to supplement the Securities Purchase Agreement as set
forth herein. Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Securities Purchase Agreement.
1. MANUFACTURER APPROVALS
(a) For purposes of Section 1.1 of the Warrants issued to Morgan
Capital, the term "Manufacturer Approvals" shall not include any manufacturer's
approval that contains any condition that could limit or adversely affect (i)
the ability of Morgan Capital (or its Affiliated transferees) to exercise the
Warrants or (ii) the ability of Morgan Capital to transfer Warrants and Warrant
Shares to its Affiliates as contemplated by Section 2.3 hereof (a "Limited
Approval"), PROVIDED that, notwithstanding any such adverse condition contained
in a manufacturer's approval, Morgan Capital, in its sole discretion, may, by
written notice to the Company, elect to treat any Limited Approval as a
Manufacturer Approval.
(b) The Company will use its reasonable best efforts to obtain all
applicable manufacturers' approvals relating to all the transactions
contemplated by the Securities Purchase Agreement.
2. TRANSFERABILITY.
2.1 RESTRICTIONS ON TRANSFER.
Notwithstanding the termination of any provision of this Agreement or
the Securities Purchase Agreements or anything to the contrary in this Agreement
or the Securities Purchase
<PAGE>
United Auto Group, Inc.
September 22, 1995
Page 2
Agreements, no Regulation Y Stockholder (as defined below) may transfer Warrants
or Warrant Shares may sell, assign, pledge, encumber or transfer any shares of
Non-voting Common Stock or Warrants to purchase Non-voting Common Stock, except:
(a) to the Company or any member or members of the Initial
Shareholder Group who own or control a majority of the voting shares of the
Company;
(b) to the ultimate parent (a "Parent") of such Regulation Y
Stockholder or any wholly-owned direct or indirect subsidiary of such Parent or
any partnership of which any such subsidiary is the general partner (a
"Controlled Subsidiary");
(c) pursuant to Section 12 of the Warrants;
(d) to any member of the Initial Shareholder Group pursuant to
Section 13.1 of the Warrants;
(e) in connection with any merger, consolidation or reorganization of
the Company (a "reorganization");
(f) in a registered public offering or an open market sale pursuant
to Rule 144 under the Securities Act (or any successor rule or regulation);
(g) in a private sale (otherwise than to the Company, any member
referred to above of Initial Shareholder Group, a Parent, a Controlled
Subsidiary, in a reorganization or pursuant to Section 12 of the Warrants),
provided that the Regulation Y Stockholder (i) shall have first offered to the
Company the right to purchase all of such shares of Non-voting Common Stock
being sold pursuant to a written offer which shall have been open to acceptance
for a period of at least ten days, for cash at a price which did not exceed the
price obtained in the private sale, and (ii) shall not knowingly sell or
otherwise transfer to any single person or group of persons acting in concert a
number of shares of Non-voting Common Stock which, if converted into shares of
Voting Common Stock would represent more than two percent of the shares of
Voting Common Stock then outstanding; or
(h) upon the advice of counsel to such Regulation Y Stockholder that
such sale or other transfer is permitted under the laws and regulations
applicable to such Regulation Y Stockholder;
<PAGE>
United Auto Group, Inc.
September 22, 1995
Page 3
PROVIDED, HOWEVER, that nothing in this Section 2.1 shall be deemed to modify
the terms and provisions contained in the Warrants regarding the sale,
assignment, pledge, encumbrance or transfer of Warrants or Warrant Shares.
"Regulation Y Stockholder" means (i) any stockholder that is subject
to the provisions of Regulation Y of the Board of Governors of the Federal
Reserve System (12 C.F.R. Part 225) or any successor to such regulation
("Regulation Y") so long as such stockholder shall hold, and only with respect
to, the Warrants, the Warrant Shares or shares issued upon conversion(s) of the
Warrant Shares, (ii) any Affiliate of a Regulation Y Stockholder that is a
transferees of Warrants, Warrant Shares or shares issued upon conversion(s) of
the Warrant Shares, so long as such Affiliate shall hold, and only with respect
to such Warrants, Warrant Shares or shares issued upon conversion(s) of the
Warrant Shares and (iii) any Person to which such Regulation Y Stockholder or
any of its Affiliates has transferred such Warrants, Warrant Shares or shares
issued upon conversion(s) of the Warrant Shares, so long as such transferee
shall hold and only with respect to, any Warrants, Warrant Shares or shares
issued upon conversion(s) of the Warrant Shares transferred by such stockholder
or Affiliates but only if such Person is (or an Affiliate of such person is)
subject to the Provisions of Regulation Y.
2.2 ASSISTANCE IN SALES.
Anything in this Agreement or in the Securities Purchase Agreements to
the contrary notwithstanding, in the event that it becomes unlawful for any
Regulated Stockholder to continue to hold some or all of the Warrants or shares
of Common Stock held by it, or restrictions are imposed on any such stockholder
by any statute, regulation or governmental authority which, in the reasonable
judgment of such stockholder, make it unduly burdensome to continue to hold such
Warrants or shares of Common Stock, such stockholder, subject to the provisions
of the Warrants, may sell or otherwise dispose of its Warrants and shares in the
Company, and the Company shall (i) provide (and authorize such stockholder to
provide) to any prospective purchaser of the Warrants and shares of Common Stock
owned by such stockholder financial and other information concerning the Company
reasonably requested by such stockholder or prospective purchaser and (ii)
endeavor to obtain such automobile manufacturers' approvals as are necessary to
effect such disposition.
<PAGE>
United Auto Group, Inc.
September 22, 1995
Page 4
2.3 PERMITTED TRANSFERS.
Notwithstanding anything to the contrary contained in the Securities
Purchase Agreement, the Warrants or herein, Morgan Capital shall be permitted to
transfer to Sixty Wall Street Fund 1995, L.P. ("Sixty Wall"), or any similar
partnership in which a Controlled Subsidiary is the sole General Partner, any
Notes, Warrants or Value Notes held by it or any of its rights under the
Securities Purchase Agreement, under any Transaction Document or the Agreement
for Purchase of Notes dated September ___, 1995 between Morgan Capital and The
Equitable Life Assurance Society of the United States. Notwithstanding anything
to the contrary contained in the Securities Purchase Agreement, Morgan Capital
shall be permitted to transfer Notes in denominations of less than $100,000 to
Sixty Wall Street 1995 Fund, L.P. or any similar partnership in which a
Controlled Subsidiary is the sole General Partner. As used in the Transaction
Documents, "JPMCC" shall mean Morgan Capital together with Sixty Wall Street
Fund 1995, L.P.
3. CONTINGENT VALUE OBLIGATIONS.
For purposes of Section 1.2 of the Warrants, Sixty Wall shall be
deemed an initial holder of Warrants distributed to Morgan Capital pursuant to
the Warrant Escrow Agreement.
4. COVENANTS.
With respect to Sections 4.1 and 4.2 below, until the first date on
which Morgan Capital (and its Affiliated transferees) has transferred in the
aggregate more than 50 percent of the Warrant Shares that Morgan Capital would
be entitled to purchase upon exercise of four-sevenths (4/7ths) of all the
Warrants issued by the Company (after taking into account all adjustments to the
number of Warrant Shares underlying the Warrants):
4.1 OBSERVER RIGHTS.
The Company shall allow a representative designated by Morgan Capital
to attend as an observer any meeting of the Company's board of directors (the
"Board"), including telephonic meetings (except such meetings, or portions
thereof, in which Morgan Capital (or any of its Affiliates) is discussed and in
relation to which the Board makes a good faith determination that the presence
of a representative of Morgan Capital would be inappropriate), in a non-voting
capacity. The Company shall give
<PAGE>
United Auto Group, Inc.
September 22, 1995
Page 5
such representative notice of each such meeting in the form and manner such
notice is given to the Board. The Company will provide such representative with
copies of all written materials and other information given to the Board in
connection with such meetings (except such information relating to Morgan
Capital that the Company determines not to provide) at the same time such
materials and information are given to the Board. Morgan Capital and such
representative shall keep all such materials and information, as well as the
matters discussed at such Board meetings (whether written or oral),
confidential. If the Company proposes to take any action by written consent in
lieu of a meeting of the Board, the Company will give written notice thereof to
such representative simultaneously with and in the same manner as it sends such
consent documents to the Board. For purposes of this Section 4.1, the initial
designee of Morgan Capital shall be Charles Ewald. In the event that Morgan
Capital desires to change its designee, Morgan Capital shall select a new
designee subject to the Company's approval, which approval shall not be
unreasonably withheld.
It is agreed that breach of the Company's obligations under this
Section 4.1 (which, to the extent remediable, is not remedied within five (5)
days) shall constitute an additional Event of Default under the Securities
Purchase Agreement pursuant to which Morgan Capital (or any Affiliate transferee
of the Notes) can, upon 15 days' notice to the Company, declare the Notes to be
immediately due and payable, anything to the contrary herein or in the
Securities Purchase Agreement notwithstanding. This provision is not intended
to, and shall not, afford to noteholders other than Morgan Capital (or any
Affiliate transferee of the Notes) any independent basis for declaring a default
and exercising remedies.
4.2 FINANCIAL AND OTHER INFORMATION.
The Company will deliver to Morgan Capital:
(a) Monthly Statements -- within a reasonable time after the end of
each calendar month, a copy of the consolidated balance sheet and consolidated
statement of income of the Company and a copy of the balance sheet and statement
of income for each operating division of the Company, together with a brief
discussion by the Chairman of the Company, for such calendar month, PROVIDED,
HOWEVER, that such financials shall be subject to year-end adjustments and may
not contain all footnotes required under GAAP;
<PAGE>
United Auto Group, Inc.
September 22, 1995
Page 6
(c) Quarterly Statements -- within 45 days after the end of the first
three quarters of each fiscal year, a copy of the consolidated balance sheet of
the Company as of the end of such quarter and consolidated statements of income,
changes in shareholders' equity and cash flows and a management's discussion and
analysis of financial condition and results of operation of the Company for the
fiscal quarter and for the portion of the fiscal year ending on the last day of
such quarter, each of the foregoing balance sheets and statements to set forth
in comparative form the corresponding figures for the same period of the prior
fiscal year and actual versus budgeted amounts, to be in reasonable detail;
PROVIDED, HOWEVER, such financials are subject to year-end adjustments and may
not contain all footnotes required under GAAP and to be certified, subject to
normal year-end audit adjustments, by the principal financial officer of the
Company that they are true and accurate in all material respects as of their
dates and PROVIDED FURTHER, that statements of changes in shareholders' equity,
cash flows and actual versus budgeted amounts need not be provided with respect
to any fiscal quarter prior to the quarter ending June 30, 1996, and PROVIDED
FURTHER, that the financial statements delivered pursuant hereto need not cover
any newly acquired Subsidiary until the fiscal quarter ending one year after the
end of the fiscal quarter in which such Subsidiary was acquired;
(b) Annual Statements -- within 150 days after the end of the fiscal
year ending December 31, 1995 and within 120 days after the end of each
subsequent fiscal year, PROVIDED, HOWEVER, that for the fiscal year in which the
Company becomes subject to the reporting requirements of the Exchange Act and
for each subsequent fiscal year, within 90 days after the end of such fiscal
year a copy of the balance sheet of the Company as of the end of such year,
together with consolidated and consolidating statements of income and of cash
flows and a management's discussion and analysis of financial condition and
results of operation of the Company for such year, in all reasonable detail,
prepared in accordance with GAAP, consistently applied, and certified in an
audit report by independent public accountants of national standing selected by
the Board;
(d) SEC and Other Reports -- promptly upon their becoming available,
copies of all financial statements and reports that the Company shall send to
its stockholders or file with the Securities and Exchange Commission or any
stock exchange on which any securities of the Company may be listed; and
(e) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs, financial
condition, assets or properties of the Company or any of its Subsidiaries as
from time to time may be reasonably requested by Morgan Capital.
<PAGE>
United Auto Group, Inc.
September 22, 1995
Page 7
4.3 CERTAIN TRANSACTION EXPENSES.
Notwithstanding anything to the contrary contained in the Securities
Purchase Agreement, the Company hereby acknowledges its obligation to pay all
reasonable legal fees and disbursements of Proskauer Rose Goetz & Mendelsohn LLP
("Proskauer"), counsel for Morgan Capital, together with legal fees and
disbursements of Davis Polk & Wardwell, incurred in connection with the
transactions contemplated by the Securities Purchase Agreement. Payment by the
Company pursuant to this Section 4.3 of the fees and disbursements of Proskauer
shall satisfy the obligations of the Company to Morgan Capital under Section
14.2 of the Securities Purchase Agreements except insofar as Section 14.2
relates to the fees of Davis Polk and Wardwell, which fees have been paid.
If the foregoing accurately sets forth our agreement, please so
indicate by executing this letter in the space provided and delivering one
executed copy to us.
Sincerely yours,
J.P. MORGAN CAPITAL CORPORATION
By: /s/ Charles Ewald
----------------------------
Accepted and Agreed:
UNITED AUTO GROUP, INC.
By: /s/ Carl Spielvogel
-------------------
<PAGE>
[FORM OF WARRANT]
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE BLUE SKY LAWS OF ANY STATE AND MAY
NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN
COMPLIANCE WITH SAID ACT AND WITH SUCH BLUE SKY LAWS. IN ADDITION, THE
SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER
CONTAINED IN THIS WARRANT.
NUMBER OF SHARES: ___________ WARRANT No. ___
PPN: 90944# 12 2
WARRANT TO PURCHASE
CLASS A PREFERRED STOCK OF
UNITED AUTO GROUP, INC.
UNITED AUTO GROUP, INC., a Delaware corporation (the "COMPANY"), HEREBY
CERTIFIES THAT, for value received ______________________ _________________, or
registered assign, is entitled to purchase _________ shares (adjusted as below
provided) of Class A Preferred Stock at any time from the Manufacturer Approval
Date (as defined below) until 5:00 p.m., New York City time, on the Termination
Date (as defined below) or the next succeeding Business Day (as defined below)
if such Termination Date is not a Business Day. As used herein, the term "CLASS
A PREFERRED STOCK" means the Company's Class A Preferred Stock, par value
$0.0001 per share, as constituted on the date of original issue of this Warrant,
and (unless the context otherwise requires) irrespective of the classes into
which such shares of Class A Preferred Stock may be divided, and any shares of
capital stock into which such shares of Class A Preferred Stock may thereafter
be changed or that may be issued in respect of, or in exchange or in
substitution for, such shares of Class A Preferred Stock by reason of any
transaction described in Section 8; PROVIDED, HOWEVER, that in the event that
the Class A Preferred Stock is automatically converted into Voting Common Stock,
par value $0.0001 per share, (the "VOTING COMMON STOCK") of the Company pursuant
to the Company's Restated Certificate of Incorporation, as amended, then all
references in this Warrant to Class A Preferred Stock (other than in Section
11.7 and unless the context otherwise requires) shall be deemed to be a
reference to Voting Common Stock.
This Warrant is one of an issue of warrants (the "WARRANTS") to
purchase Class A Preferred Stock of the Company issued pursuant to the Warrant
Purchase Agreement dated as of July 10, 1996 (the "AGREEMENT"), entered into by
the Company with J.P. Morgan Capital Corporation ("JPMCC") and The Equitable
Life Assurance Society of the United States ("EQUITABLE" and, together
<PAGE>
with JPMCC, the "PURCHASERS"). The holder of this Warrant is entitled to
certain benefits of the Agreement.
SECTION 1. TERM AND EXERCISE; CONTINGENT VALUE OBLIGATIONS.
SECTION 1.1 TERM OF WARRANTS; EXERCISE OF WARRANTS. Subject to the
terms hereof, including, but not limited to, Section 1.2 hereof, the holder of
this Warrant shall have the right, at any time during the period commencing on
the Manufacturer Approval Date (as defined below) and ending at 5:00 p.m., New
York time, on the earlier of the date of effectiveness of the Company's initial
Public Offering (as defined below) and September 22, 2005 (the "TERMINATION
DATE"), to purchase from the Company up to the number of shares of Class A
Preferred Stock which such holder may at the time be entitled to purchase
pursuant to this Warrant, upon written notice to the Company of such holder's
election to exercise this Warrant and upon surrender of this Warrant to the
Company, at its office located at 375 Park Avenue, New York, New York, together
with the purchase form at the end hereof duly completed and signed, accompanied
by payment to the Company of the Warrant Price (as defined in and determined in
accordance with the provisions of Sections 7 and 8) for the number of shares
with respect to which this Warrant is then exercised, PROVIDED, HOWEVER, that
the holder of this Warrant shall be deemed to have given notice to exercise this
Warrant on the date of effectiveness of the Company's initial Public Offering
unless the Company receives from such holder written notice to the contrary
prior to such date. The term "MANUFACTURER APPROVAL DATE" means the date that
all applicable approvals that are required to, and in effect, permit the
exercise of this Warrant and the issuance of all shares of Class A Preferred
Stock that are issuable upon the exercise of this Warrant are received from all
automobile franchisors with whom the Company has entered into franchise or
similar agreements, which approvals shall not by their terms be revocable and
shall not limit or adversely affect the ability of a stockholder to convert
Class A Preferred Stock into Voting Common Stock or of a Regulated Stockholder
to convert Non-voting Common Stock into Voting Common Stock or to convert Voting
Common Stock into Non-voting Common Stock pursuant to the Company's Restated
Certificate of Incorporation, as amended (collectively, the "MANUFACTURER
APPROVALS"). The Company will use its reasonable best efforts to obtain the
Manufacturer Approvals, PROVIDED that approvals by the Company's franchisors
required to effect a Public Offering that are broad enough, in the legal opinion
of outside counsel (reasonably satisfactory to the holders of the Warrants) to
the Company addressed to the holders of the Warrants and in form and substance
reasonably satisfactory to them, to allow the exercise of the Warrants and
issuance of the Warrant Shares will be deemed to be Manufacturer Approvals. The
Company will use its reasonable best efforts to ensure that the provisions in
the Company's franchise agreements with automobile franchisors in respect of the
transfer of shares of
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the Company do not prevent the holders of the Warrants from exercising the
Warrants and selling in the open market, or through exercise of their
registration rights, shares acquired upon exercise of the Warrants. Payment of
the aggregate Warrant Price shall be made, at the election of the holder of this
Warrant, either (i) by certified or cashier's check or wire transfer or (ii) in
lieu of paying the Warrant Price in cash, by electing to receive such number of
shares of Class A Preferred Stock equal to (A) the excess of (x) the fair market
value per share of Voting Common Stock on the date of such exercise multiplied
by the number of shares being purchased pursuant to such exercise over (y) the
aggregate Warrant Price of the shares being purchased pursuant to such exercise,
divided by (B) the fair market value per share of Voting Common Stock on the
date of such exercise. For purposes hereof, "FAIR MARKET VALUE" shall mean (i)
at any time prior to the Company's initial Public Offering, the then current
fair market value per share of such class of capital stock immediately prior to
such sale or issuance, determined in good faith by the Board of Directors of the
Company, and (ii) on the effective date of the registration statement filed in
connection with the Company's initial Public Offering, the price per share to
the public set forth on the cover page of the prospectus included in such
registration statement. As used herein, the term "BUSINESS DAY" means any day
other than a Saturday or Sunday or a day on which commercial banks are required
or authorized by law to be closed in New York, New York. As used herein, the
term "PUBLIC OFFERING" means the sale or issuance of shares of Voting Common
Stock or Derivative Securities pursuant to a registration statement (other than
forms S-4, S-8 or similar forms) which has become effective under the Securities
Act. As used herein, the term "DERIVATIVE SECURITIES" means rights, options,
warrants, convertible securities or options or other rights to purchase
convertible securities or any similar instrument containing the right to
subscribe for, purchase or otherwise acquire shares of capital stock of the
Company.
Upon such surrender of this Warrant, together with any other Warrants
so surrendered, and payment of such Warrant Price as aforesaid, the Company
shall issue and cause to be delivered with all reasonable dispatch, and in any
event within five Business Days thereafter, to or upon the written order of the
holder of this Warrant and in such name or names as such holder may designate, a
certificate or certificates for the number of full shares and any fraction of a
share of Class A Preferred Stock (or, if the Class A Preferred Stock has been
converted into Voting Common Stock pursuant to the Company's Restated
Certificate of Incorporation, as amended, Voting Common Stock) so purchased, or,
at the Company's option, together with cash, as provided in Section 9, with
respect to any fraction of a share of capital stock, otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of such shares of capital stock, as of
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<PAGE>
the close of business on the date of the surrender of this Warrant and payment
of the Warrant Price as aforesaid, notwithstanding that the certificates
representing such shares shall not actually have been delivered or that the
stock transfer books of the Company shall then be closed.
This Warrant shall be exercisable, at the election of the holder of
this Warrant, either in full or from time to time in part. In the event that
this Warrant is exercised with respect to less than the aggregate number of
shares of Class A Preferred Stock this Warrant then entitles such holder to
purchase, the Company shall deliver to or upon the order of such holder hereof a
new Warrant evidencing the rights of such holder to purchase the unpurchased
shares of Class A Preferred Stock then called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant. In the
alternative, at the request of the holder upon any partial exercise of this
Warrant, appropriate notation may be made on this Warrant and the same shall be
returned to such holder.
The term "REGULATED STOCKHOLDER" means (i) any stockholder that is
subject to the provisions of Regulation Y of the Board of Governors of the
Federal Reserve System (12 C.F.R. Part 225) or any successor to such regulation
("REGULATION Y"), so long as such stockholder shall hold, and only with respect
to, the Warrants, Warrant Shares or shares issued upon conversion(s) of the
Warrant Shares, (ii) any stockholder that is subject to regulation under the New
York Insurance Law, so long as such stockholder shall hold, and only with
respect to, the Warrants, Warrant Shares or shares issued upon conversion(s) of
the Warrant Shares, (iii) any Affiliate of a Regulated Stockholder that is a
transferee of any Warrants, Warrant Shares or shares issued upon conversion(s)
of the Warrant Shares, so long as such Affiliate shall hold, and only with
respect to, such Warrants, Warrant Shares or shares issued upon conversion(s) of
the Warrant Shares and (iv) any Person to which such Regulated Stockholder or
any of its Affiliates has transferred such Warrants, Warrant Shares or shares
issued upon conversion(s) of the Warrant Shares, so long as such transferee
shall hold, and only with respect to, any Warrants, Warrant Shares or shares
issued upon conversion(s) of the Warrant Shares transferred by such stockholder
or Affiliates but only if such Person is (or any Affiliate of such Person is)
(A) subject to the provisions of Regulation Y or (B) subject to regulation under
the insurance laws of any jurisdiction.
SECTION 1.2 CONTINGENT VALUE OBLIGATIONS. In the event that the
Manufacturer Approvals are not received by March 22, 1997, then this Warrant
shall be converted into a number of Contingent Value Obligations ("CVOS")
determined pursuant to the Contingent Value Obligations Agreement substantially
in the form of EXHIBIT A hereto to be entered into at such time between the
holder of this Warrant and the Company. If the Manufacturer Approvals are
received with respect to the initial holder hereof, then this Section 1.2 shall
terminate and cease to be of any
<PAGE>
force or effect and this Warrant shall no longer be convertible into CVOs under
any circumstance.
SECTION 2. PAYMENT OF TAXES. The Company shall pay all documentary
stamp taxes, if any, attributable to the initial issuance of the shares of Class
A Preferred Stock upon exercise of this Warrant, PROVIDED that the Company shall
not be required to pay any tax or taxes which may be payable with respect to any
secondary transfer of a Warrant or the shares of Class A Preferred Stock issued
upon exercise of any Warrant, and in such case the Company shall not be required
to issue or deliver any certificates for shares of Class A Preferred Stock until
the person requesting the same has paid to the Company the amount of such tax or
has established to the Company's reasonable satisfaction that such tax has been
paid or that no such tax is due.
SECTION 3. TRANSFERABILITY.
SECTION 3.1 REGISTRATION. The Warrants shall be numbered and shall
be registered on the books of the Company maintained for such purpose (the
"SECURITY REGISTER").
SECTION 3.2 TRANSFER. Subject to compliance with Sections 3.3, 12
and 13, this Warrant, the Warrant Shares (as defined below) and all rights
hereunder are transferable upon delivery hereof together with the assignment
form at the end hereof duly completed and signed by the holder hereof or such
holder's duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment or authority to transfer, PROVIDED that any
transferee of this Warrant or such Warrant Shares shall expressly agree to be
bound by the terms and conditions hereof, and PROVIDED FURTHER that the rights
set forth in Sections 12.1 and 13.2 hereof shall not be transferable or
otherwise assigned by the holder of this Warrant to any person or entity other
than an Affiliate (as defined below) of such holder without the consent of the
Company. Upon any registration of transfer of this Warrant, or part thereof,
the Company shall execute and deliver a new Warrant or Warrants as may be
requested by such holder for the same aggregate number of shares of Class A
Preferred Stock as this Warrant. As used herein, the term "WARRANT SHARES"
shall mean, collectively, the shares of Class A Preferred Stock acquired
pursuant to the exercise of this Warrant, or upon conversion of the shares
acquired pursuant to the exercise of this Warrant, and any securities issued or
issuable with respect to such Class A Preferred Stock by way of stock dividend
or other distribution or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As used herein, the term "TRANSFER" shall mean and include (i) when
used as a verb, the act of selling, pledging, mortgaging, hypothecating, giving,
transferring, creating a security interest, lien or trust (voting or otherwise),
assigning or otherwise encumbering or disposing of, and (ii) when used as a
<PAGE>
noun, any sale, pledge, mortgage, hypothecation, gift, transfer, creation of
security interest, lien or trust, any assignment or other encumbrance or
disposition. As used herein, the term "AFFILIATE" of a specified person means a
person that directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person
specified, and in the case of a specified person who is a natural person, his
spouse, his issue, his parents, his estate and any trust entirely for the
benefit of his spouse and/or issue. The term "CONTROL" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person or entity, whether through the ownership of
voting securities, by contract or otherwise.
SECTION 3.3 LIMITATIONS ON TRANSFER OF THE WARRANTS AND THE WARRANT
SHARES. (a) If, at the time of any transfer of this Warrant or any Warrant
Shares, this Warrant or such Warrant Shares, as the case may be, are not
registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
the Company may require as a condition of allowing such transfer or exchange
that the holder or transferee of this Warrant or such Warrant Shares furnish to
the Company such information as, in the reasonable opinion of counsel to the
Company, is necessary in order to establish that such transfer or exchange may
be made without registration under the Securities Act, including a written
statement that such holder or transferee will not sell or otherwise dispose of
this Warrant or such Warrant Shares purchased or acquired by him in any
transaction which would violate the Securities Act or any other securities laws,
PROVIDED that the disposition thereof shall at all times be within the control
of such holder or transferee.
(b) Notwithstanding anything to the contrary contained herein,
without the prior written consent of the Company, neither this Warrant nor any
Warrant Shares may be transferred to a person or entity (or an Affiliate of such
person or entity (other than an entity engaged principally in the management of
investments for third parties exclusively in a fiduciary capacity)) who owns,
operates, controls, or participates or engages in the ownership, management,
operation or control of, or is connected with as an officer, employee, partner,
director, shareholder, representative, consultant, independent contractor,
guarantor, advisor or in any other manner or otherwise has a financial interest
in the equity of, a proprietorship, partnership, joint venture, association,
firm, corporation or other business organization or enterprise that competes
with the Company or any of its subsidiaries in the business of operating
dealerships for the retail sale of new and/or used automobiles and trucks or
businesses ancillary to the operation of such type of dealerships (including
service and parts operations, body shops, the sale of finance and insurance
products (including after-market items), and the purchase, sale and servicing of
finance contracts for new and/or used vehicles); provided, however, that for
purposes of this paragraph the ownership of
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<PAGE>
equity securities representing less than 5% of the outstanding shares of capital
stock (or equivalent ownership) of any business organization or entity shall not
be deemed to constitute the ownership or participation in the ownership of, or a
financial interest in the equity of, such business organization or entity.
SECTION 3.4 LEGEND ON WARRANT SHARES. Each certificate for shares of
Class A Preferred Stock initially issued upon exercise of this Warrant shall
bear the following legend, unless at the time of exercise such shares are
registered under the Securities Act, in which case, such certificate shall bear
only the second sentence of the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the Blue Sky
laws of any State and may not be sold, exchanged, hypothecated or
transferred in any manner except in compliance with said Act and with such
Blue Sky laws. In addition, the securities represented by this certificate
are subject to restrictions on transfer and certain other provisions of the
Warrant issued by United Auto Group, Inc. (the "Company"), dated as of
___________, as the same may be amended from time to time, a copy of which
may be obtained at the offices of the Company."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend shall also bear the above legend unless counsel
for the Company or such other counsel as may be reasonably satisfactory to the
Company renders a written legal opinion to the Company that the securities
represented thereby need no longer be subject to such restriction.
SECTION 4. EXCHANGE OF WARRANT CERTIFICATE. Any Warrant certificate
may be exchanged for another certificate or certificates entitling the holder
thereof to purchase the aggregate number of shares of Class A Preferred Stock
that this certificate then entitles such holder to purchase. Any holder of a
Warrant desiring to exchange such Warrant certificate shall make such request in
writing delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver one or more new Warrant certificates as so requested.
SECTION 5. MUTILATED OR MISSING WARRANT. In case any Warrant
certificate shall be mutilated, lost, stolen or destroyed, the Company shall, at
the request of the holder thereof, issue and deliver in exchange and
substitution for and upon cancellation of the mutilated certificate or
certificates, or in lieu of and substitution for the certificate or certificates
lost, stolen or destroyed, a new Warrant certificate or certificates of like
tenor and representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such
Warrant
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<PAGE>
and indemnity, if requested, satisfactory to the Company. In the case of any
Purchaser or any other institutional investor holder of a Warrant, such holder's
unsecured agreement of indemnity shall be deemed satisfactory to the Company.
SECTION 6. REQUIREMENT OF AVAILABILITY OF SHARES OF CLASS A PREFERRED
STOCK AND VOTING COMMON STOCK. There are authorized and available for issuance,
and so long as any Warrant remains outstanding the Company shall at all times
keep authorized and available for issuance, such number of shares of the
Company's authorized but unissued Class A Preferred Stock and Voting Common
Stock as will be sufficient to permit the exercise in full of all outstanding
Warrants (and the conversion of all shares of Class A Preferred Stock into
Voting Common Stock). Every transfer agent for the Class A Preferred Stock and
other securities of the Company issuable upon the exercise of the Warrants shall
be irrevocably authorized and directed at all times to keep available such
number of authorized shares and other securities as will be sufficient for such
purpose. The Company shall keep a copy of the Warrants on file with every such
transfer agent for the Class A Preferred Stock and other securities of the
Company issuable upon the exercise of the Warrants. The Company shall supply
any such transfer agent with duly executed stock and other certificates for such
purpose and shall provide or otherwise make available any cash which may be
payable as provided in Section 9.
SECTION 7. WARRANT PRICE. The price per share of Class A Preferred
Stock (the "WARRANT PRICE") at which shares of Class A Preferred Stock shall be
purchasable upon the exercise of the Warrants shall be $0.01, subject to
adjustment pursuant to Section 8.
SECTION 8.1 ADJUSTMENTS AND DISTRIBUTIONS WITH RESPECT TO CLASS A
PREFERRED STOCK. Subject to the terms hereof, the number of shares purchasable
upon the exercise of this Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) Except in respect of transactions described in subsection (b)
below, in case the Company shall (i) subdivide its outstanding Class A Preferred
Stock, (ii) combine its outstanding Class A Preferred Stock into a smaller
number of shares of Class A Preferred Stock, or (iii) issue by reclassification
of its Class A Preferred Stock, spin-off, split-up, recapitalization, merger,
consolidation or any similar corporate event or arrangement other securities of
the Company, the kind and number of shares of capital stock purchasable upon
exercise of this Warrant immediately prior thereto shall be adjusted so that the
holder of this Warrant shall be entitled to receive the kind and number of
shares or other securities of the Company which it would have owned or would
have been entitled to receive after the happening of any of the events described
above had this Warrant been exercised immediately prior to the happening of such
event or any record date with respect thereto. Any adjustment made
8
<PAGE>
pursuant to this subsection (a) shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(b) In case the Company shall distribute in any calendar year to all
or substantially all holders of its Class A Preferred Stock evidences of its
indebtedness (including Derivative Securities) or assets (including cash or
other dividends or distributions out of earnings), or securities or rights to
acquire securities of the Company, then, and in each case, the Company shall pay
or distribute to the holder of this Warrant an amount equal to such holder's PRO
RATA share (assuming for such purpose the exercise of this Warrant in full) of
such distributions; and for such purpose any assets (other than cash) or
evidences of indebtedness so distributed shall be valued at the fair market
value thereof determined in good faith by the Board of Directors of the Company.
(c) Whenever the number of shares of Class A Preferred Stock
purchasable upon the exercise of this Warrant is increased or decreased as
provided in this Section 8, the Warrant Price payable upon exercise of this
Warrant shall be adjusted by multiplying the Warrant Price in effect immediately
prior to such adjustment by a fraction, the numerator of which shall be the
number of shares of Class A Preferred Stock purchasable upon exercise of this
Warrant immediately prior to such adjustment, and the denominator of which shall
be the number of shares of Class A Preferred Stock so purchasable immediately
after such adjustment.
(d) Whenever the number of shares of Class A Preferred Stock
purchasable upon the exercise of this Warrant or the Warrant Price is adjusted
as herein provided and whenever any event or transaction shall result in an
adjustment to the Applicable Conversion Value (as defined in the Company's
Restated Certificate of Incorporation, as amended) relating to the Class A
Preferred Stock, the Company shall cause to be promptly mailed to the holder by
first-class mail, postage prepaid, notice of such adjustment or adjustments and,
if requested by such holder, a certificate, prepared by independent public
accountants of nationally recognized standing, showing such adjustment, and
stating in detail the facts upon which such adjustment is based.
(e) It is the intention of the Company that the holder of this
Warrant be protected against dilution to the same extent that holders of Class A
Preferred Stock outstanding on the date of original issuance of this Warrant are
so protected. In case the Company shall take any action affecting its capital
stock, other than an action (i) described in this Section 8 or (ii) which
results in an adjustment to the Applicable Conversion Value relating to the
Class A Preferred Stock, or would result in an adjustment to such Applicable
Conversion Value were any shares of Class A Preferred Stock then outstanding,
and the failure to make any adjustment would not fairly protect the purchase
rights
9
<PAGE>
represented by this Warrant in accordance with the essential intent and
principle of this Section 8 or the conversion rights of the Class A Preferred
Stock issuable upon exercise of this Warrant, then the number of shares of Class
A Preferred Stock or Voting Common Stock, as the case may be, issuable upon
exercise of this Warrant and the Warrant Price shall be adjusted in such manner
and at such time as the Board of Directors of the Company may in good faith
determine to be equitable in the circumstances.
SECTION 8.2 PRESERVATION OF PURCHASE RIGHTS UPON REORGANIZATION,
CONSOLIDATION, MERGER, ETC. In case of any reorganization, consolidation or
merger of the Company with or into another entity as a result of which the
holders of Class A Preferred Stock become holders of other shares or securities
of the Company or of another entity or person, or such holders receive cash or
other assets, or in case of any sale or conveyance to another person of the
property, assets or business of the Company as an entirety or substantially as
an entirety, the Company or such successor or purchasing entity or person, as
the case may be, shall execute, concurrently with the consummation of such
transaction, with the holder of this Warrant an agreement (in form and substance
reasonably satisfactory to such holder) that such holder shall have the right
thereafter upon payment of the aggregate Warrant Price in effect immediately
prior to such action to purchase upon exercise of this Warrant the kind and
amount of shares and other securities and property which such holder would have
owned or have been entitled to receive after the happening of such
reorganization, consolidation, merger, sale or conveyance had this Warrant been
exercised immediately prior to such action.
The agreements referred to in this Section 8.2 shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 8. The provisions of this Section 8.2
shall similarly apply to successive reorganizations, consolidations, mergers,
sales or conveyances.
SECTION 8.3 STATEMENT ON WARRANTS. This Warrant shall entitle the
holder hereof to purchase such number of shares of Class A Preferred Stock at
such Warrant Price as may be determined in accordance with the terms hereof
after giving effect to any adjustments in the number or kind of shares
purchasable upon the exercise hereof or the Warrant Price, as the case may be,
notwithstanding that this Warrant certificate may continue to express the same
price and number and kind of shares as are initially stated herein.
SECTION 9. FRACTIONAL INTERESTS. The Company shall not be required
to issue a fraction of a share of Class A Preferred Stock on the exercise of any
one or more Warrants. If any fraction of a share would, except for the
provisions of this Section 9, be issuable on the exercise of such Warrant or
Warrants (or specified portions thereof), the Company may, at its
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<PAGE>
option, pay an amount in cash equal to the then current market price of a share
of Class A Preferred Stock (as determined in good faith by the Board of
Directors of the Company) multiplied by such fraction.
SECTION 10. NO RIGHTS AS SHAREHOLDER; NOTICES. Except for a holder's
of this Warrant right to receive dividends and distributions as provided in
Section 8.1(b) hereof, nothing contained in this Warrant shall be construed as
conferring upon the holder or its transferees any rights as a shareholder of the
Company, including the right to vote, consent or receive notices as a
shareholder with respect to any meeting of shareholders for the election of
directors of the Company or any other matter. If, however, at any time prior to
the Termination Date and prior to the exercise of this Warrant, any of the
following events shall occur:
(a) any action which would require an adjustment pursuant to
Section 8.2; or
(b) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger or sale of its
property, assets and business as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to each holder of Warrants as provided in Section 14 at least 20
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the shareholders entitled to any rights
or for the determination of shareholders entitled to vote on such proposed
dissolution, liquidation or winding up. Such notice shall also set forth such
facts as shall indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the current Warrant Price and the kind
and amount of Warrant Shares and other securities and property deliverable upon
the exercise of the Warrant. Such notice shall also specify the date as of
which the holders of the Company's capital stock of record shall be entitled to
exchange their capital stock of the Company for securities or other property
deliverable upon such reorganization, consolidation, merger, dissolution,
liquidation or winding-up, as the case may be. Notwithstanding the foregoing,
failure to mail or receive such notice or any defect therein or in the mailing
thereof shall not affect the validity of any such action taken. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be.
SECTION 11. REGISTRATION RIGHTS.
SECTION 11.1 DEFINITIONS. As used in this Section 11:
(a) the terms "REGISTER," "REGISTERED" AND "REGISTRATION" refer to a
registration effected by preparing and
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<PAGE>
filing a registration statement in compliance with the Securities Act (and any
post-effective amendments filed or required to be filed) and the declaration or
ordering of effectiveness of such registration statement;
(b) the term "REGISTRABLE SECURITIES" means the Warrant Shares, the
Warrant Shares that are subject to issuance upon exercise of the other Warrants
and the Mezzanine Warrant Shares, subject to Section 11.7 hereof. As used
herein, the term "MEZZANINE WARRANTS" shall mean, collectively, the warrants
issued pursuant to the Securities Purchase Agreements, dated as of September 22,
1995 (the "SECURITIES PURCHASE AGREEMENTS"), entered into by the Company with
certain institutional investors named in Schedule A thereto, and the term
"MEZZANINE WARRANT SHARES" shall mean, collectively, the shares of capital stock
acquired pursuant to the exercise of the Mezzanine Warrants, or upon conversion
of the shares acquired pursuant to the exercise of the Mezzanine Warrants, and
any securities issued or issuable with respect to such shares by way of stock
dividend or other distribution or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. Registrable Securities will cease to be such when
(i) a registration statement covering such Registrable Securities has become or
been declared or ordered effective and they have been disposed of pursuant to
such effective registration statement, (ii) they are sold, transferred or
distributed pursuant to and in compliance with Rule 144 (or any similar
provision then in force, but not including Rule 144A) under the Securities Act,
or (iii) they have been otherwise transferred and the Company has delivered new
certificates or other evidences of ownership for them not subject to any stop
transfer order or other restriction on transfer (other than those set forth in
Sections 3.2, 12.2 and 13 hereof) and not bearing a legend restricting transfer
in the absence of an effective registration or an exemption from the
registration requirements of the Securities Act;
(c) the term "HOLDER" means any person owning or having the right to
acquire Registrable Securities;
(d) the term "PRIOR HOLDER" means any person or entity who has been
(or, in the case of clause (ii) below, will be) granted rights pursuant to (i)
the Registration Rights Agreement, dated as of October 15, 1993, as amended,
among the Company and certain parties named therein (the "PRIOR REGISTRATION
RIGHTS AGREEMENT"), or (ii) the Registration Rights Agreement, dated as of
August 1, 1995, among the Company and certain parties named therein (the
"VENTURER REGISTRATION RIGHTS AGREEMENT"), to have shares of Voting Common Stock
registered under the Securities Act, either in respect of issued shares of
Voting Common Stock or shares of Voting Common Stock to be issued upon
conversion of outstanding securities of the Company; and
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(e) the number of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" shall be determined by adding the number of shares of Voting Common
Stock outstanding which are, and the number of shares of Voting Common Stock
issuable pursuant to then exercisable or convertible securities (without regard
to any restrictions on the ability of the holders thereof to convert such
securities) which upon issuance would be, Registrable Securities.
SECTION 11.2 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. If, at any time after the earlier to
occur of September 22, 1998 and six (6) months after the Company's initial
Public Offering, the Company shall receive a written request from the Holder or
Holders of in excess of 50% of the Registrable Securities then outstanding and
entitled to registration rights under this Section 11.2 (the "INITIATING
HOLDERS") that the Company effect the registration under the Securities Act with
respect to all or a part of the Registrable Securities, the Company will, within
five days of the receipt thereof, give written notice of such request to all
Holders and shall within sixty (60) days of its receipt of such written request,
file a registration statement on a form deemed appropriate by the Company's
counsel with the Securities and Exchange Commission (the "SEC") covering all the
Registrable Securities which the Holders shall in writing request (given within
twenty (20) days of receipt of the notice given by the Company pursuant to this
Section 11.2(a)) to be included in such registration and the Company shall use
its reasonable best efforts to cause such registration statement to become
effective.
The Company shall not be obligated to effect such registration
pursuant to this Section 11.2(a) (A) after the Company already has effected one
(1) such registration pursuant to this Section 11.2(a), such registration has
been declared or ordered effective and no stop order suspending the
effectiveness of such registration statement has been issued within 60 days of
such effectiveness (PROVIDED that the Company shall be deemed to have effected
such registration if it files a registration statement pursuant to this Section
11.2(a) and such registration statement is subsequently withdrawn because the
Holders request that such registration statement be withdrawn, unless (i) such
request is as a result of the occurrence of an event (other than general
economic or market conditions) that has had a material adverse effect on the
Company's business or (ii) the Company is immediately reimbursed in full for all
costs and expenses incurred by it in connection with such registration), (B) if
a registration statement filed by the Company has been declared or ordered
effective within six (6) months prior to the receipt of a written request from a
Holder or Holders under this Section 11.2(a), (C) if in the good faith judgment
of the Board of Directors of the Company, it would not be in the best interests
of the Company and its stockholders generally for such registration statement to
be filed (in which case the Company
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shall have the right to defer such filing for a period of not more than ninety
(90) days after receipt of the request of the Initiating Holders), PROVIDED that
such deferral will not occur more than once in any 12-month period, or (D) if
the Company is negotiating the material acquisition of a business and the
Company's board of directors has determined in good faith that such negotiations
could reasonably be expected to result in an agreement in principle to acquire
such business (in which case the Company will have the right to defer such
filing until the Company determines that it is no longer necessary to maintain
the confidentiality of such negotiations, but in no event for longer than 90
days, provided that any such deferral will not occur more than once in any 12
month period).
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 11.2(b) below,
include other securities of the Company for its own account or which are held by
officers or directors of the Company or persons or entities who, by virtue of
agreements with the Company, are entitled to include their securities in any
such registration, including Prior Holders (the "OTHER SHAREHOLDERS", PROVIDED,
HOWEVER, that holders of Registrable Securities shall not be deemed Other
Shareholders with respect to such Registrable Securities).
(b) UNDERWRITING. If the Initiating Holders desire to distribute
the Registrable Securities covered by such request by means of an underwriting,
they shall so advise the Company as a part of such request made pursuant to
Section 11.2(a) and the Company shall include such information in the written
notice referred to Section 11.2(a). The underwriter or underwriters of such
registration shall be mutually selected by the Company and a majority in
interest of the Initiating Holders. If the Company and a majority in interest
of the Initiating Holders are in good faith unable to agree on the selection of
such underwriter or underwriters, then such underwriter or underwriters shall be
selected by a majority in interest of the Initiating Holders, subject to the
approval of the Company, which approval shall not be unreasonably withheld. The
right of any Holder to registration pursuant to this Section 11.2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein.
If officers or directors of the Company holding other securities of
the Company shall request inclusion in any registration pursuant to this
Section 11.2, or if Other Shareholders request such inclusion, the Holders shall
offer to include the securities of such officers, directors and Other
Shareholders in the underwriting and may condition such offer upon their
participation in the underwriting and on their acceptance of the further
applicable provisions of this Section 11.
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The Holders shall (together with the Company, officers, directors and
Other Shareholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such underwriting
as provided above, but the Company shall not be required to pay any commission
to the underwriter in respect of the sale of Registrable Securities.
Notwithstanding any other provision of this Section 11.2, if the representative
of the underwriters determines that marketing factors require a limitation on
the number of shares to be underwritten, the securities of the Company held by
officers or directors of the Company and the securities held by Other
Shareholders shall be excluded from the underwriting by reason of the
underwriters' marketing limitation to the extent so required by such limitation.
If a further limitation is required, the Company shall so advise all Holders
requesting inclusion in such offering, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders requesting inclusion in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held (or
entitled to be held upon conversion) by each such Holder at the time of filing
the registration statement. No Registrable Securities or any other securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. If any Holder, officer,
director or Other Shareholder who has requested inclusion in such registration
as provided above disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The securities so withdrawn shall also be withdrawn
from registration; PROVIDED, HOWEVER, that, if by the withdrawal of such
Registrable Securities a greater number of Registrable Securities held by other
Holders may be included in such registration (up to a maximum of any limitation
imposed by the underwriters), then the Company shall offer to all Holders who
have included Registrable Securities in the registration the right to include
additional Registrable Securities in the same proportion used in determining the
underwriter limitation in this Section 11.2(b). If the representative of the
underwriters has not limited the number of Registrable Securities, the Company
may include its securities for its own account in such registration if the
underwriter so agrees and if the number of Registrable Securities which would
otherwise have been included in such registration and underwriting will not
thereby be limited.
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SECTION 11.3 COMPANY REGISTRATION.
(a) INCLUSION IN REGISTRATION. If, at any time after the initial
Public Offering, the Company shall determine to register any of its shares of
Voting Common Stock on a form (other than for the registration of securities to
be offered and sold by the Company on any registration form which does not
permit secondary sales or pursuant to (i) an employee benefit plan, (ii) a
dividend or interest reinvestment plan, (iii) other similar plans or (iv)
reclassifications of securities, mergers, consolidations and acquisitions of
assets) which would permit the registration of any Registrable Securities, or
the Company shall be requested to register any of its shares of Voting Common
Stock by any holder of any securities entitled to registration upon such request
(other than the Holders or their nominees), the Company will:
(i) promptly give to the Holders written notice
thereof (which shall include a list of the jurisdictions, if any, in
which the Company intends to qualify such shares of Voting Common
Stock under the applicable blue sky or other state securities laws);
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests made by each of the
Holders, within fifteen (15) days after receipt of the written notice
from the Company described in clause (i) above; PROVIDED, HOWEVER,
that if the offering is underwritten and relates only to shares of
Voting Common Stock to be sold by the Company and the Holders are
advised in writing by the managing underwriter that the sale of
Registrable Securities by the Holders will, due to market conditions,
adversely affect such underwriting, the Holders shall not sell any of
their Registrable Securities included therein until such time as the
managing underwriter may permit, provided that such period of time
will not exceed 120 days from the effective date of such registration.
The Company shall be under no obligation to complete any offering of the shares
of Voting Common Stock it proposes to make and shall incur no liability to any
Holder for its failure to do so.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 11.3(a). In such event the right of the Holders to
registration pursuant to this Section 11.3 shall be conditioned upon the
Holders' participation in such underwriting and the inclusion of
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the Holders' Registrable Securities in the underwriting to the extent provided
herein. The Holders shall (together with the Company, officers, directors and
the Other Shareholders distributing their shares of Voting Common Stock through
such underwriting) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for underwriting by the Company and
shall deliver all documents and opinions required to be delivered thereunder in
respect of their participation as selling shareholders. Notwithstanding any
other provision of this Section 11.3, if the representative of the underwriters
determines that marketing factors require a limitation on the number of shares
of Voting Common Stock to be underwritten, then the Company shall include in the
underwriting only that number of shares, including Registrable Securities, which
the representative believes will not jeopardize the success of the offering (the
shares so included to be apportioned as follows: first, all shares which
stockholders other than the Holders and the Prior Holders seek to include in the
offering shall be excluded from the offering to the extent limitation on the
number of shares included in the underwriting is required, then the number of
shares held by Holders and the Prior Holders that may be included in the
underwriting shall be apportioned PRO RATA among the selling Holders and the
Prior Holders according to the total number of Registrable Securities and shares
entitled to be included therein owned by each selling Holder and Prior Holder,
respectively, or in such other proportions as shall be mutually agreed to by
such selling Holders and Prior Holders, PROVIDED that all of the securities to
be issued by the Company and sold by the Prior Holders who have requested the
registration to which such offering relates pursuant to Section 1.2 of the Prior
Registration Rights Agreement or Section 1.2 of the Venturer Registration Rights
Agreement, as applicable, are included in such offering). If any of the Holders
or any officer, director or Other Shareholder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the representative of the underwriters. Any Registrable Securities
or other securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
(c) NUMBER. The Holders shall be entitled to have their shares
included in an unlimited number of registrations pursuant to this Section 11.3.
SECTION 11.4 FORM S-3. After the Company has qualified for the use
of Form S-3 under the Securities Act for secondary sales, Holders of in excess
of 50% of Registrable Securities shall have the right to request that the
Company effect the registration on Form S-3 with respect to all or part of the
Registrable Securities (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
method of disposition of shares by such holders), subject to the limitations set
forth in the second paragraph of Section 11.2(a) hereof, as applicable,
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PROVIDED, HOWEVER, that the Company shall not be obligated to effect such
registration pursuant to this Section 11.4 after the Company already has
effected two (2) such registrations pursuant to this Section 11.4 (and PROVIDED
that the Company shall be deemed to have effected such a registration if it
files a registration statement pursuant to this Section 11.4 and such
registration statement is subsequently withdrawn because the Holders request
that such registration statement be withdrawn, unless (i) such request is as a
result of the occurrence of an event (other than general economic or market
conditions) that has had a material adverse effect on the Company's business or
(ii) the Company is immediately reimbursed in full for all costs and expenses
incurred by it in connection with such registration), and PROVIDED, FURTHER,
that the Company shall not be required to effect a registration pursuant to this
Section 11.4 unless the Holder or Holders requesting registration propose to
dispose of shares of Registrable Securities having an aggregate price to the
public (after deduction of underwriting discounts and expenses of sale) of more
than $1,000,000. The Company shall give written notice to all Holders of the
receipt of a request for registration pursuant to this Section 11.4 and shall
provide a reasonable opportunity for other Holders to participate in the
registration, PROVIDED that if the registration is for an underwritten offering,
the terms of Section 11.2(b) shall apply to all participants in such offering.
SECTION 11.5 EXPENSES OF REGISTRATION. Except as otherwise provided
herein, in connection with a registration pursuant to this Section 11, the
Company shall pay all registration, filing and qualification fees, accounting
fees and printing expenses of the Company, reasonable fees and disbursements of
counsel for the Company and the reasonable fees and expenses of one counsel for
the selling Holders. All (i) underwriting discounts and commissions, (ii) stock
transfer taxes incurred in respect of the Registrable Securities being sold, and
(iii) legal and accounting fees, expenses and disbursements of the Holders
(except as set forth above), shall be borne and paid ratably by the Holders of
the Registrable Securities included in any such registration based on the number
of Registrable Securities so registered.
SECTION 11.6 REGISTRATION PROCEDURES. In the case of each
registration effected by the Company pursuant to this Section 11, the Company
shall:
(i) furnish to each Holder, prior to the filing thereof with
the SEC, a copy of the registration statement;
(ii) keep such registration effective for a period of one
hundred twenty (120) days or until each Holder has completed the
distribution described in the registration statement relating thereto,
whichever first occurs;
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(iii) furnish each Holder copies of any registration statement
and each preliminary or final prospectus, or supplement or amendment
required to be prepared pursuant hereto, as any Holder may from time to
time reasonably request;
(iv) prepare and promptly file with the SEC and promptly notify
each Holder of the filing of any amendments or supplements to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities
Act, any event with respect to the Company shall have occurred as a result
of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made, in the light
of the circumstances under which they were made, not misleading; and use
its reasonable best efforts to cause each such amendment or supplement to
become effective, as may be necessary to comply with the provisions of the
Securities Act with respect to disposition of all securities covered by
such registration statement;
(v) use its best efforts to qualify as soon as reasonably
practicable the Registrable Securities included in the registration
statement for sale under the securities or blue-sky laws of such states and
jurisdictions within the United States as shall be reasonably requested by
any Holder, PROVIDED that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business, to become
subject to taxation or to file a consent to service of process generally in
any of the aforesaid states or jurisdictions;
(vi) furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 11 on the
date that the registration statement becomes effective, (i) an opinion or
opinions, dated such date, of counsel representing the Company for purposes
of such registration, in form and substance as is customarily given by
company counsel to the underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities, (ii) if the registration is
underwritten, a letter, dated such date, from the independent certified
public accountant of the Company, in form and substance as is customarily
given by independent certified public accountants to underwriters,
addressed to the underwriters and (iii) a letter, dated such date, from
such accountant in form and substance as is customarily given by
independent certified accountants to the selling stockholders in a
secondary public offering,
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addressed to the Holders registering Registrable Securities; and
(vii) apply for listing and use its reasonable best efforts to
list the Registrable Securities being registered on any national securities
exchange on which a class of the Company's equity securities is listed, or
if the Company does not have a class of equity securities listed on a
national exchange, apply for qualification and use its reasonable best
efforts to qualify the Registrable Securities being registered for
inclusion on the automated quotation system of the National Association of
Securities Dealers, Inc.
SECTION 11.7 LIMITATIONS ON REGISTRATION RIGHTS. Anything in this
Warrant or in the Agreement to the contrary notwithstanding, the Company shall
not be required to effect a registration under the Securities Act with respect
to any shares of Class A Preferred Stock or Non-voting Common Stock, but shall
be required, pursuant to Section 11 of this Warrant, to register shares of
Voting Common Stock issuable upon the conversion thereof, PROVIDED that any
Holder of Class A Preferred Stock or Non-voting Common Stock shall not be
required to convert any Class A Preferred Stock or Non-voting Common Stock into
Voting Common Stock until the closing of the sale of Voting Common Stock
pursuant to any requested registration. Except that the Warrant Shares are to
be deemed Registrable Securities, nothing in this Warrant shall be construed to
grant to the holder of this Warrant registration rights that are in addition to
the registration rights granted under the Mezzanine Warrants.
SECTION 11.8 INDEMNIFICATION. (a) The Company shall indemnify each
Holder offering Registrable Securities for sale pursuant to each registration
that has been effected pursuant to this Section 11, the officers, directors,
partners, agents, employees and shareholders of each such Holder, and any
underwriter (as defined in the Securities Act) for each such Holder and each
person, if any, who controls such person or underwriter within the meaning of
the Securities Act or Exchange Act, and, with respect to any indemnity for the
benefit of Equitable, Alliance Corporate Finance Group Incorporated, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement of a material fact contained in any
registration statement under which such Registrable Securities were registered
under the Securities Act, or based on any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse each such Holder, officer, director, partner,
agent, employee, underwriter and controlling person for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; PROVIDED, HOWEVER, that the
Company shall pay for only one firm of counsel for all such Holders and the
Company shall not be
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liable to a Holder in any such case (i) to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission made in reliance upon and in conformity with information furnished
to the Company by any Holder or the underwriter of any Holder and stated to be
specifically for use therein or (ii) in the case of a sale directly by a Holder
of Registrable Securities (including a sale of such Registrable Securities
through any underwriter retained by such Holder engaging in a distribution on
behalf of such Holder), such untrue statement or omission was contained in a
preliminary prospectus and corrected in a final or amended prospectus, and such
Holder failed to deliver a copy of the final or amended prospectus at or prior
to the confirmation of the sale of the Registrable Securities to the person or
entity asserting any such loss, claim, damage or liability.
(b) Each of the Holders shall, if Registrable Securities held by
them are included in the securities as to which such registration is being
effected, severally indemnify the Company, each of its directors and officers
who sign such registration statement, each Affiliate of the Company, each
underwriter, if any, of the Company's securities covered by such registration
statement, each other Holder and each other security holder whose securities are
included in such registration, and each Affiliate thereof against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement of a material fact contained in any such
registration statement under which such Registrable Securities were registered
under the Securities Act, or based on any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company, such directors, officers,
employees, Affiliates, other Holders or security holders or underwriters for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement or omission is
made in such registration statement in reliance upon and in conformity with
information furnished to the Company by such Holder and stated to be
specifically for use therein; PROVIDED, HOWEVER, that the liability of any
Holder hereunder shall be limited to the amount of net proceeds (after deduction
of all underwriters' discounts and commissions paid by such holder in connection
with the applicable registration) received by such Holder; and PROVIDED,
FURTHER, that the indemnity agreement contained in this Section 11.8(b) shall
not apply (i) to amounts paid in settlement of any such claim, loss, damage or
liability (or actions in respect thereof) if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld, or
(ii) in the case of a sale directly by the Company (including a sale of such
securities through any underwriter retained by the Company to engage in a
distribution on behalf of the Company) in which such untrue statement or
omission was contained in a preliminary prospectus
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and corrected in a final or amended prospectus, and the Company failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the securities to the Person asserting any such
loss, claim, damage or liability.
(c) Each party entitled to indemnification under this Section 11
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and any
claim or any litigation resulting therefrom. In case any action is brought
against an Indemnified Party, and it notifies the Indemnifying Parties of the
commencement thereof, the Indemnifying Party will be entitled to participate in
and, to the extent it so determines, assume the defense thereof; PROVIDED that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or any litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party's expense. After notice
from the Indemnifying Party of its election to so assume the defense thereof,
the Indemnifying Party will not be liable to such Indemnified Party for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof; PROVIDED, HOWEVER, that the Indemnified
Party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the Indemnifying Party, if representation of the Indemnified Party
by the counsel retained by the Indemnifying Party would be inappropriate due to
actual or potential differing interests, as reasonably determined by either
party, between the Indemnified Party and any other party represented by such
counsel in such proceeding. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request and as shall be reasonably required in connection with
the defense of such claim and litigation resulting therefrom.
SECTION 11.9 LOCKUP AGREEMENT. In consideration for the Company
agreeing to its obligations under this Section 11, each Holder agrees in
connection with any registration (other than for the registration of securities
pursuant to (i) an employee benefit plan, (ii) a dividend or interest
reinvestment plan, (iii) other similar plans or (iv) reclassifications of
securities, mergers, consolidations and acquisitions of assets) of the Company's
securities, upon the request of the Company and any underwriter managing any
underwritten primary or secondary offering of the Company's securities, not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Warrants or Registrable Securities without the prior
written consent of the Company and such underwriter, as the case may be, for
such reasonable period of time prior to and after the effective date of such
registration as the Company and such underwriter may specify, PROVIDED that such
period of time will not exceed 180 days, in the case of registration relating to
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the initial Public Offering, and 120 days, in the case of any registration
relating to a Public Offering after the initial Public Offering.
SECTION 11.10 INFORMATION ABOUT THE PURCHASERS. Each Holder shall
promptly furnish to the Company such information regarding itself, its
Affiliates or subsidiaries and the distribution proposed by it as the Company
may reasonably request in writing and as shall be reasonably required in
connection with any registration referred to in this Section 11.
SECTION 11.11 CONDITIONS TO REGISTRATION. As a condition to the
Company's obligation hereunder to cause a registration statement to be filed or
Registrable Securities to be included in a registration statement, each Holder
shall provide such information and execute such documents as may reasonably be
required in connection with such registration. In addition, the Company shall
not be obligated to file a registration statement or to include Registrable
Securities in a registration statement hereunder as to any Holder to the extent
such Registrable Securities can then be sold during a single three-month period
pursuant to Rule 144 (not including Rule 144(k)) under the Securities Act.
SECTION 11.12 RULE 144. With a view to making available the benefits
of certain rules and regulations of the SEC which may permit the sale of the
restricted securities to the public without registration, the Company agrees to
(i) make and keep public information available as those terms are understood and
defined in Rule 144 under the Securities Act at all times from and after ninety
(90) days following the closing date of the first registration under the
Securities Act filed by the Company for an offering of its securities to the
general public, and (ii) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Exchange Act of 1934, as amended, at any time after it has become
subject to such reporting requirements.
SECTION 11.13 TRANSFERABILITY. The registration rights granted in
this Section 11 shall not be assignable in any manner to any transferee of any
of the Warrants or Registrable Securities except in connection with the sale by
the holder of their Warrant or part thereof or the Registrable Securities issued
upon exercise of this Warrant or such securities, as the case may be, in a
transaction not involving a Public Offering.
SECTION 12. TAG-ALONG AND TAKE-ALONG RIGHTS.
SECTION 12.1 TAG-ALONG RIGHT.
(a) TAG-ALONG SALE NOTICE. Subject to Section 20, if the Initial
Shareholder Group (as defined below) at any time receives a bona fide offer (a
"TAG-ALONG OFFER") from a third party to purchase from the Initial Shareholder
Group shares of
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capital stock of the Company or the Initial Shareholder Group otherwise proposes
to sell shares of capital stock of the Company for value, in each case pursuant
to a sale that would constitute a Change in Control (as defined in the
Securities Purchase Agreements) (a "TAG-ALONG SALE"), but other than in
connection with a Public Offering, the Initial Shareholder Group shall be
required to notify (i) prior to the Qualified Public Offering, the original
holder of this Warrant or its Affiliated transferees (provided it or its
Affiliated transferees owns at such time all or a portion of this Warrant or
Warrant Shares), and (ii) after the Qualified Public Offering, the Qualified
Warrantholders (as defined below), not less than fifteen (15) days prior to such
proposed Tag-Along Sale, of such Tag-Along Offer or proposed Tag-Along Sale and
such holder or Qualified Warrantholders, as the case may be, shall have the
option to participate in such Tag-Along Sale as set forth in paragraph (b) of
this Section 12.1. The notice from the Initial Shareholder Group (the "TAG-
ALONG SALE NOTICE") shall include a copy of the Tag-Along Offer, if in writing,
and shall set forth: (A) the number of shares of each class proposed to be
transferred, (B) the name and address of the proposed purchaser, (C) the
proposed amount of consideration and terms and conditions of payment offered by
or to such proposed purchaser, and (D) that the proposed purchaser has been
informed of the "tag-along" rights provided for in this Section 12.1 and has
agreed to purchase shares in accordance with the terms hereof. For purposes
hereof, the term "INITIAL SHAREHOLDER GROUP" means all of the holders of shares
of Voting Common Stock and Class A Preferred Stock on September 22, 1995 who
purchased such shares pursuant to the Common Stock Purchase Agreement dated
October 15, 1993 and the Class A Preferred Stock Purchase Agreement dated
October 15, 1993, respectively, and the term "QUALIFIED WARRANTHOLDER" means any
original holder of a Warrant (or its Affiliated transferees) who has purchased
(and not otherwise transferred) Warrant Shares or has the right to purchase
Warrant Shares and Mezzanine Warrant Shares, which together constitute more than
50% of all of the Warrant Shares such holder was entitled to purchase upon
exercise of all of the Warrants issued to such holder pursuant to the Agreement
PLUS all of the Mezzanine Warrant Shares such holder was entitled to purchase
upon exercise of all of the Mezzanine Warrants issued to such holder pursuant to
the Securities Purchase Agreements (in each case, after taking into account all
adjustments to the number of shares underlying such warrants).
(b) TAG-ALONG RIGHT. Each initial holder of Warrants (or its
Affiliated Transferees) prior to the Qualified Public Offering who owns at such
time all or a portion of this Warrant or Warrant Shares and each Qualified
Warrantholder after the Qualified Public Offering shall have the right to
require the proposed purchaser to purchase from it a number of whole shares of
Warrant Shares up to the number of shares equal to the total number of shares to
be sold to the proposed purchaser (including the shares of Voting Common Stock
issuable upon conversion of the Class A Preferred Stock to be sold to the
proposed purchaser),
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multiplied by a fraction, the numerator of which is the number of Warrant Shares
held by it or purchasable upon exercise of Warrants held by it and the
denominator of which is the total number of shares of common stock held (or
entitled to be acquired upon conversion or exercise of convertible securities)
by all of the holders of the Warrants, Warrant Shares, Mezzanine Warrants and
Mezzanine Warrants and the Initial Shareholder Group. Any Warrant Shares
purchased from a Warrantholder pursuant to this Section 12.1 shall be paid for
upon the same terms and conditions (including as to price and type of
consideration) received by the Initial Shareholder Group.
(c) TAG-ALONG NOTICE. If an original Warrantholder (or its
Affiliated transferees) prior to the Qualified Public Offering and a Qualified
Warrantholder after a Qualified Public Offering elects to exercise the tag-along
right provided for in this Section 12.1, it must deliver written notice to the
Initial Shareholder Group (the "TAG-ALONG PARTICIPATION NOTICE") within ten (10)
days following receipt by it of the Tag-Along Sale Notice. If such holder does
not deliver a Tag-Along Participation Notice within such ten-day period it shall
be deemed to have waived its tag-along right with respect to the proposed Tag-
Along Sale. Each Tag-Along Participation Notice shall state the number of
Warrant Shares that such holder proposes to include in such transfer to the
proposed purchaser up to the number of shares determined in accordance with
Section 12.1(b) hereof.
SECTION 12.2 TAKE-ALONG RIGHT.
(a) TAKE-ALONG NOTICE. If the Initial Shareholder Group at any time
prior to a Qualified Public Offering receives a bona fide offer from a third
party (other than an affiliate of the Company, Harvard Private Capital, Inc.,
Apollo Advisors, Inc. or Trace International Holdings, Inc. (provided they are
stockholders of the Company at the time of such sale)) to purchase shares of
capital stock of the Company from the Initial Shareholder Group or the Initial
Shareholder Group otherwise proposes to sell shares of capital stock of the
Company for value (a "TAKE-ALONG SALE"), the Initial Shareholder Group, subject
to paragraph (c) of this Section 12.2, can require the holders of the Warrants
and Warrant Shares to participate in such Take-Along Sale as set forth in
paragraph (b) of this Section 12.2. If the Initial Shareholder Group elects to
exercise the take-along right provided for in this Section 12.2, it must
provide, at least twenty (20) days before the date of consummation of the
proposed Take-Along Sale, notice to the holders of the Warrants and Warrant
Shares setting forth: (i) the number of shares proposed to be transferred, (ii)
the number of Warrant Shares that such holder must include in such transfer to
the proposed purchaser as determined in accordance with paragraph (b) of this
Section 12.2, (iii) the name and address of the proposed purchaser, (iv) the
proposed amount of consideration and terms and conditions of payment offered by
or to such proposed purchaser, and (v) that
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the proposed purchaser has been informed of the "take-along" rights provided for
in this Section 12.2 and has agreed to purchase shares in accordance with the
terms hereof.
(b) TAKE-ALONG RIGHT. The Initial Shareholder Group shall at any
time have the right to require each holder of a Warrant and Warrant Shares to
sell to the proposed purchaser, as applicable, all or a portion of such Warrant
or Warrant Shares up to the sum of the number of shares issuable upon exercise
of such Warrant and such Warrant Shares equal to the total number of shares to
be sold to the proposed purchaser (including the shares of Voting Common Stock
issuable upon conversion of the Class A Preferred Stock to be sold to the
proposed purchaser) multiplied by a fraction, the numerator of which is the
number of Warrant Shares held by such holder after the full exercise of such
holder's Warrants and the denominator of which is the total number of shares of
common stock held (or entitled to be acquired upon conversion or exercise of
convertible securities) by all of the holders of the Warrants, Warrant Shares,
Mezzanine Warrants and Mezzanine Warrant Shares and the Initial Shareholder
Group. Any shares purchased from holders of Warrants and Warrant Shares
pursuant to this Section 12.2 shall be paid for (i) upon the same terms and
conditions (including as to price and type of consideration) received by the
Initial Shareholder Group and (ii) in either all cash or a combination of cash
and securities; PROVIDED, HOWEVER, that if such securities are not or, at the
option of such holders, will no longer be restricted securities (as such term is
defined in Rule 144 of the Securities Act) within 180 days of the date such sale
is consummated or if such securities are otherwise subject to restrictions
pursuant to any shareholders' agreement entered into in connection with such
Take-Along Sale that precludes the transfer of such securities within 180 days
of the date such sale is consummated, or if a reasonably liquid trading market
does not exist for such securities, then, unless the holders of at least 66 2/3%
of the sum of (A) the Warrant Shares outstanding or subject to issuance upon
exercise of the Warrants and (B) the Mezzanine Warrant Shares outstanding or
subject to issuance upon exercise of the Mezzanine Warrants elect to receive
such securities, the Initial Shareholder Group may require each holder of a
Warrant or Warrant Shares to sell Warrant Shares to the proposed purchaser
pursuant to this Section 12 only if the Company or the Initial Shareholder Group
pays such holder an amount in cash equal to the then current fair market value
of such securities as determined in good faith by the Company's Board of
Directors. In the event that such holders of 66 2/3% of such Warrant Shares and
Mezzanine Warrant Shares do not agree with such determination, then the then
current fair market value of such securities shall be determined as follows,
which determination shall be final and binding:
(i) The Company shall select a qualified investment banking
firm or appraisal firm (the "INVESTMENT BANKER") and any such holders may select
their own qualified
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investment banking firm or appraisal firm (the "ADDITIONAL APPRAISER"), each to
appraise the then current fair market value of such securities.
(ii) If the difference between the appraisals of the Investment
Banker and the Additional Appraiser is not greater than 10% of the higher
appraisal, then the average of the two appraisals shall be deemed to be the then
current fair market value of such securities.
(iii) If the difference between the appraisals of the
Investment Banker and the Additional Appraiser is greater than 10% of the higher
appraisal, then the Investment Banker and the Additional Appraiser shall select
a third appraiser (the "THIRD APPRAISER"), and the then current fair market
value shall be determined by (1) averaging the appraisal of each of the
Investment Banker, the Additional Appraiser and the Third Appraiser, (2)
disregarding the appraisal which deviates most from such average and (3)
averaging the remaining two appraisals. The fees and expenses of the Investment
Banker, the Additional Appraiser and the Third Appraiser shall be borne equally
by the Company and such holders, PROVIDED that such holders may pay their share
of such fees and expenses from the proceeds they receive in connection with the
Take-Along Sale.
(c) FAIRNESS OPINION. As a condition precedent to the consummation
of the Take-Along Sale, the Initial Shareholder Group shall furnish to the
holders of the Warrants and Warrant Shares an opinion (in form and substance
reasonably satisfactory to such holders) of an unaffiliated, nationally
recognized investment banking firm as to the fairness of the Take-Along Sale to
such holders from a financial point of view.
SECTION 12.3. IMPROPER TRANSFER. Any attempt to transfer any shares
not in compliance with this Section 12 shall be null and void and neither the
Company nor any transfer agent shall give any effect in the Company's stock
records to such attempted transfer.
SECTION 13. RIGHT OF FIRST REFUSAL AND PRE-EMPTIVE RIGHTS.
SECTION 13.1 RIGHT OF FIRST REFUSAL.
(a) FIRST OFFER NOTICE. Prior to the Qualified Public Offering, no
holder of a Warrant or Warrant Shares shall transfer all or any portion of a
Warrant or any Warrant Shares (collectively, the "OFFERED SHARES") to any person
or entity (other than an Affiliate) unless (x) such holder (the "SELLING
WARRANTHOLDER") has received a bona fide written offer (the "PURCHASE OFFER")
from the proposed transferee of the Offered Shares (the "PURCHASER") to purchase
the Offered Shares, which offer shall be in writing signed by the Purchaser, and
(y) the Selling Warrantholder first offers to sell to the Company and
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each member of the Initial Shareholder Group such number of Offered Shares as is
determined in accordance with paragraph (c) of this Section 13.1. Prior to
making any transfer that is subject to this Section 13.1, the Selling
Warrantholder shall give the Company and each member of the Initial Shareholder
Group written notice (the "OFFER NOTICE") which shall include (x) the identity
of the Purchaser, (y) a copy of the Purchase Offer, and (z) an offer (the "FIRST
OFFER") to sell to the Company and each such member of the Initial Shareholder
Group its Pro Rata Amount (as defined in paragraph (c) below) of the Offered
Shares upon the same terms and conditions as those provided for in the Purchase
Offer. The First Offer shall be irrevocable with respect to the Initial
Shareholder Group for a period of fifteen (15) days following receipt by each
member of the Initial Shareholder Group of the Offer Notice (the "FIRST OFFER
PERIOD") and, with respect to the Company, for a period of twenty (20) days
following receipt by the Company of the Offer Notice.
(b) ACCEPTANCE OF FIRST OFFER. At any time during the First Offer
Period, each member of the Initial Shareholder Group may accept the First Offer
as to its respective Pro Rata Amount of the Offered Shares by giving written
notice to the Selling Warrantholder of such acceptance (each such member of the
Initial Shareholder Group who accepts the First Offer in the manner provided
herein is referred to herein as a "PURCHASING STOCKHOLDER"). In the event that
the Purchasing Stockholders, individually or collectively, do not accept the
First Offer as to all of the Offered Shares, then within five days of the end of
the First Offer Period, the Company may, by giving written notice to the Selling
Warrantholder, accept the First Offer as to all, but not less than all, of the
Offered Shares as to which the Purchasing Stockholders have not accepted the
First Offer. In the event that the Initial Shareholder Group and the Company
accept the First Offer as to all of the Offered Shares, the closing of the sale
of the Offered Shares shall take place within thirty-five (35) days after the
First Offer is accepted by all Purchasing Stockholders, or the Company, as the
case may be, or, if later, the date of closing set forth in the Purchase Offer.
At such closing, the Selling Warrantholder will deliver certificates for such
Offered Shares against payment of the purchase price therefor, and the
Purchasing Stockholders, or the Company, as the case may be, will acquire their
respective Pro Rata Amount of the Offered Shares, or the remaining Offered
Shares, as the case may be, free and clear of all liens, pledges, encumbrances,
restrictions and security interests of any kind. If the Initial Shareholder
Group and the Company do not purchase all of the Offered Shares, the Selling
Warrantholder may sell the Offered Shares to the Purchaser at any time within
sixty (60) (or such later date as is necessary to receive all approvals required
in connection with such sale, not to exceed 120 days (or 150 days if
Manufacturer Approvals are required)), days after the last day of the First
Offer Period, PROVIDED that such sale shall be made on terms no less favorable
to the Selling Warrantholder than the terms contained in the Purchase Offer and
PROVIDED FURTHER that
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such sale complies with the terms, conditions and restrictions of the Warrants.
The Company will cooperate with the Selling Warrantholder in seeking any
required manufacturer approvals and will permit third parties to conduct
reasonable due diligence in connection with the Selling Warrantholder's attempt
to sell the Offered Shares, PROVIDED such due diligence does not materially
interfere with the Company's operations. In the event that the Offered Shares
are not sold in accordance with the terms of the preceding sentence, the Offered
Shares shall again be subject to all of the conditions and restrictions of this
Section 13.1.
(c) DETERMINATION OF PRO RATA AMOUNT. Each Purchasing Stockholder
shall be obligated to purchase pursuant to this Section 13.1 a number of Offered
Shares as shall equal the product obtained by multiplying (x) the number of
Offered Shares not being purchased by the Company by (y) a fraction, the
numerator of which shall be equal to the number of shares of Voting Common Stock
owned by such Purchasing Stockholder (including the shares of Voting Common
Stock issuable upon conversion of the shares of Class A Preferred Stock owned by
such Purchasing Stockholder) and the denominator of which shall be equal to the
total number of shares of Voting Common Stock owned by all of the Purchasing
Stockholders (including the shares of Voting Common Stock issuable upon
conversion of the shares of Class A Preferred Stock owned by such Purchasing
Stockholders) (the "PRO RATA AMOUNT").
SECTION 13.2 PRE-EMPTIVE RIGHTS. Prior to the Qualified Public
Offering, a Qualified Warrantholder shall have the right, in accordance with
procedures comparable to those set forth in Article VI of the Company's Restated
Certificate of Incorporation applicable to "Qualified Warrantholders" (as such
term is used therein), to purchase a PRO RATA portion of any additional shares
of capital stock issued by the Company deemed to be "New Securities" in
accordance with the Company's Restated Certificate of Incorporation.
SECTION 13.3 IMPROPER TRANSFER. Any attempt to transfer any shares
not in compliance with this Section 13 shall be null and void and neither the
Company nor any transfer agent shall give any effect in the Company's stock
records to such attempted transfer.
SECTION 14. NOTICES. Any notice by the Company, the holder of this
Warrant or the holders of Warrant Shares or Registrable Securities shall be in
writing and shall be deemed to have been duly given if delivered or mailed by
certified mail five days after mailing, return receipt requested (a) if to the
Company, 375 Park Avenue, 22nd Floor, New York, New York 10022, or at such other
address as the Company may designate by notice to each holder of Warrants,
Warrant Shares or Registrable Securities at the time outstanding, (b) if to any
Purchaser that holds Warrants, Warrant Shares or Registrable Securities, at such
Purchaser's address set forth on the signature page to the
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Agreement or at such other address as such Purchaser may designate by notice to
the Company, and (c) if to any other holder of Warrants, Warrant Shares or
Registrable Securities, at the address of such holder as it appears on the
Security Register.
SECTION 15. SUCCESSORS. Except as expressly provided in Sections
3.2, 3.3 and 11.13, this Warrant shall bind and inure to the benefit of the
Company and its permitted successors and assigns hereunder, the Purchasers and
their respective successors and assigns hereunder and, in addition, shall inure
to the benefit of and be enforceable by all holders from time to time of the
Warrants, the Warrant Shares and the Registrable Securities. Without limiting
the generality of the foregoing, the rights and obligations of the Purchasers
and their respective successors and assigns as holders of Warrants and
Registrable Securities (including without limitation rights and obligations as
to registrations and other matters covered by Sections 11, 12 and 13) shall
survive any reorganization, consolidation or merger of the Company with or into
another entity or the sale or conveyance to another person of the property,
assets or business of the Company as an entirety or substantially as an entirety
and such successor or purchasing entity or person, as the case may be, shall
execute such agreements or other instruments as may be reasonably requested by
the holder of this Warrant to give effect to the foregoing.
SECTION 16. APPLICABLE LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 17. BENEFITS OF THIS AGREEMENT. Nothing in this Warrant
shall be construed to give to any person or corporation other than the Company,
the holder of this Warrant and the holders of the Warrant Shares or Registrable
Securities any legal or equitable right, remedy or claim under this Warrant and
this Warrant shall be for the sole and exclusive benefit of the Company, the
holder hereof and the holders of the Warrant Shares and the Registrable
Securities.
SECTION 18. SURVIVAL; INTERPRETATION. All covenants and agreements
of the Company that relate to the Warrant Shares or the Registrable Securities
and all rights and duties of the holders from time to time of the Warrant Shares
or the Registrable Securities in this Warrant (including without limitation all
rights and duties contained in Sections 11, 12 and 13) shall be deemed to
survive any surrender hereof to the Company upon exercise hereof as contemplated
by Section 1. References herein to the Agreement and terms defined therein
shall be deemed to survive the termination of the Agreement. Prior drafts of
this Warrant shall not be used as a basis for interpreting this Warrant.
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SECTION 19. AMENDMENT AND WAIVER. This Warrant may be amended, and
the observance of any term hereof may be waived, only in accordance with Section
9.7 of the Agreement.
SECTION 20. CERTAIN ADDITIONAL AGREEMENTS. Trace International
Holdings, Inc., Aeneas Venture Corporation and AIF II, L.P., who on the date
hereof collectively own more than 92% of shares of the Company's capital stock
owned by the Initial Shareholder Group, have entered into an agreement assuming
and agreeing to perform the terms and conditions of Section 12.1.
SECTION 21. SPECIFIC PERFORMANCE. The rights of the Company, the
holder hereof and the holders of the Warrant Shares and the Registrable
Securities are unique, and, accordingly, each shall, in addition to such other
remedies as may be available to any of them at law or in equity, have the right
to enforce their rights under this Warrant by actions for injunction or specific
performance to the extent permitted by law.
SECTION 22. PRIVATE PLACEMENT NUMBER. If the Warrant Shares to be
issued upon exercise of this Warrant do not already have a CUSIP number assigned
to them by Standard & Poor's CUSIP Service Bureau, the Company shall use its
reasonable efforts to obtain a Private Placement Number issued by Standard &
Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office
of the National Association of Insurance Commissioners) for the Warrant Shares
prior to the issuance of any such Warrant Shares.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its duly authorized officer.
Dated: _________________
UNITED AUTO GROUP, INC.
By:_________________________
Carl Spielvogel
Chairman of the Board and
Chief Executive Officer
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<PAGE>
ELECTION TO PURCHASE
Attn: __________________
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the Warrant to which this Election to Purchase is attached for,
and to purchase thereunder, ____________ shares of Class A Preferred Stock (or
other securities into which such shares are convertible, as specified below) of
the Company provided for therein, and requests that certificates for said shares
(or other securities) be issued in the name of:
(Please Print Name and Address)
and, if said number of shares shall not be all the shares purchasable hereunder,
that a new Warrant certificate for the balance of said shares purchasable under
the said Warrant be registered in the name of the undersigned holder or its
nominee as below indicated and delivered to the address stated below.
Dated: ________________, ______
Class of capital stock requested:___________________
Name of holder or
Nominee (Please Print): ______________________________________________
Address: _____________________________________________________________
Signature: _____________________________________
Signature Guaranteed:
<PAGE>
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(Name and Address of Assignee must be Printed or Typewritten)
the within Warrant with respect to ____ shares, hereby irrevocably constituting
and appointing ______________________ Attorney to transfer said Warrant on the
books of United Auto Group, Inc. with full power of substitution in the
premises.
All notices to be given by the Company to the Warrant holder pursuant to
Section 10 of the within Warrant shall be sent to the assignee at the above
listed address, and, if the number of shares being hereby assigned is less than
all of the shares covered by the within Warrant, then also to the undersigned.
The undersigned requests that the Company execute and deliver, if necessary
to comply with the provisions of Section 3 of the within Warrant, a new Warrant
or, if the number of shares being hereby assigned is less than all of the shares
covered by said Warrant, new Warrants in the name of the undersigned, the
assignee and/or the assignees, as is appropriate.
Dated: __________________, ______
Signature of Registered Holder
<PAGE>
EXHIBIT A
TO WARRANT
[Name of Warrant Holder]
[Address]
Re: CONTINGENT VALUE OBLIGATIONS AGREEMENT
Ladies and Gentlemen:
The Contingent Value Obligations Agreement (this "Agreement") hereby
evidences contingent value obligations ("CVOs") of United Auto
Group, Inc. (the "Company") to you, received by you upon conversion of the
Warrants (as defined below) held by you prior to the date hereof.
1. PURPOSE. The purpose of this Agreement is to provide the holders
of the Warrants (as defined below) with economic benefits substantially similar
to those that would have been realized by the holders of the Warrants in the
event that the Manufacturer Approvals (as defined in the Warrants) had been
obtained and such Warrants had been exercised and the shares of Class A
Preferred Stock (as defined in the Warrants) issued upon such exercise had been
sold.
2. DEFINITIONS.
"BASE VALUE" of each CVO granted under this Agreement shall be
equal to $0.01, subject to adjustment as provided in Section 3(b) hereof.
"BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
"FAIR MARKET VALUE" shall mean the fair market value of the
Company on the Redemption Date, as mutually determined in good faith by the
Board and the holders of a majority of the CVOs, provided that if the Board and
such holders cannot agree on such Fair Market Value, then such Fair Market Value
shall be determined by an independent, nationally recognized investment banking
firm mutually selected by the Company and the holders of a majority of the CVOs.
The cost of such investment banking firm shall be borne equally by the Company
and the holders of the CVOs. In the event that the Company and the holders of a
majority of the CVOs do not agree on such investment banking firm, then the Fair
Market Value shall be determined as follows, which determination shall be final
and binding:
<PAGE>
(i) The Company shall select a qualified investment banking firm
or appraisal firm (the "Investment Banker") and the holders of a majority of the
CVOs shall select a qualified investment banking firm or appraisal firm (the
"Additional Appraiser"), each to appraise the Fair Market Value.
(ii) If the difference between the appraisals of the Investment
Banker and the Additional Appraiser is not greater than 10% of the higher
appraisal, then the average of the two appraisals shall be deemed to be the Fair
Market Value.
(iii) If the difference between the appraisals of the Investment
Banker and the Additional Appraiser is greater than 10% of the higher appraisal,
then the Investment Banker and the Additional Appraiser shall select a third
appraiser (the "Third Appraiser"), and the Fair Market Value shall be determined
by (1) averaging the appraisal of each of the Investment Banker, the Additional
Appraiser and the Third Appraiser, (2) disregarding the appraisal which deviates
most from such average and (3) averaging the remaining two appraisals. The fees
and expenses of the Investment Banker, the Additional Appraiser and the Third
Appraiser shall be borne equally by the Company and such holders.
"FAIR MARKET VALUE PER SHARE" shall mean, on the Redemption Date,
the Fair Market Value, divided by the sum of (i) the total number of shares of
capital stock of the Company (including the number of shares of capital stock of
the Company issuable upon the exercise or conversion of Derivative Securities
(as defined in the Warrants)) outstanding immediately prior to the Redemption
Date and (ii) the total number of CVOs outstanding immediately prior to the
Redemption Date. The Fair Market Value Per Share shall be determined based on
the proportionate share of one share of Class A Preferred Stock of the overall
Fair Market Value of the Company (taking into account all adjustments to the
Applicable Conversion Value (as defined in the Company's Restated Certificate of
Incorporation, as amended) relating to the Class A Preferred Stock from the date
of original issuance of the Warrants).
"MEZZANINE CVOS" shall mean the Contingent Value Obligations
issued upon conversion of the Mezzanine Warrants (as defined in the Warrants).
"REDEMPTION DATE" shall mean the date on which the Company
receives notice of the Redemption Request (as defined below).
"REDEMPTION PRICE" shall mean, with respect to each CVO being
redeemed by the Company upon the exercise of the redemption right set forth in
Section 4 hereof, the amount by which (i) the Fair Market Value Per Share on the
Redemption Date exceeds (ii) the Base Value of such CVO.
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<PAGE>
"REQUIRED CVO HOLDERS" shall mean the holders of at least 66-2/3%
of the sum of the outstanding CVOs and the outstanding Mezzanine CVOs.
"VALUE NOTES" shall mean promissory notes issued by the Company
pursuant to Section 4 hereof containing such terms as shall be agreed to by the
Company and the holders of a majority of the CVOs. If the Company and such
holders cannot agree on the terms of the Value Notes, such terms shall be
determined by an investment banking firm selected by the Company (the cost of
whom shall be borne equally by the Company and such holders).
"WARRANTS" shall mean all warrants originally issued pursuant to
the Warrant Purchase Agreement, dated as of July 10, 1996, among the Company,
J.P. Morgan Capital Corporation and The Equitable Life Assurance Society of the
United States, and all warrants delivered in substitution or exchange for such
warrants. The term "Warrant" means one of the Warrants.
"WARRANT SHARES" shall mean, collectively, the shares of Class A
Preferred Stock acquired pursuant to the exercise of the Warrants and any
securities issued or issuable with respect to such Class A Preferred Stock by
way of stock dividend or other distribution or stock split or in connection with
a combination of shares, conversion, recapitalization, merger, consolidation or
other reorganization or otherwise.
3. ISSUANCE OF CVOS.
(a) CONVERSION OF WARRANTS INTO CVOS. Each Warrant shall be
converted into a number of CVOs equal to the number of Warrant Shares issuable
upon exercise of such Warrant.
(a) ADJUSTMENT OF CVOS. The number and Base Value of CVOs
granted hereunder shall be adjusted in substantially the same manner as the
number and price of Warrant Shares is subject to adjustment as set forth in
Section 8 of the Warrants.
(c) NATURE OF CVOS. The CVOs granted hereunder shall be used
solely as a device for the measurement and determination of the aggregate
principal amount of the Value Notes to be issued to each holder of a CVO as
provided in this Agreement. CVOs shall not constitute or be treated as a trust
fund of any kind or as stock, stock options or other form of equity or security.
A holder of a CVO shall have only those rights set forth in this Agreement with
respect to CVOs granted to it and shall have no rights as a shareholder of the
Company by virtue of having been granted CVOs.
4. REDEMPTION OF CVOS. Upon the written request of the holders of
the Required CVO Holders (the "Redemption Request"), at any time prior to the
Termination Date (as defined
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<PAGE>
in the Warrants), the Company shall be required to redeem, and all of the
holders of outstanding CVOs shall be required to submit for redemption, all, but
not less than all, of the outstanding CVOs for an amount equal to the Redemption
Price, which the Company shall pay by issuing Value Notes to all of the holders
of CVOs in an aggregate principal amount equal to the aggregate Redemption Price
for all outstanding CVOs pursuant to the applicable Contingent Value Obligations
Agreements. The CVOs shall be submitted for redemption contemporaneously with
the Mezzanine CVOs.
5. PURCHASE OF VALUE NOTES. On or prior to the expiration of seven
months after the Redemption Date, either (i) the investment banking firm
determining the terms of the Value Notes pursuant to Section 4 hereof or another
third party identified by the Company shall purchase all of the Value Notes at
par or (ii) the Company, at its option, shall repurchase all or a portion of the
Value Notes at par, provided that if the Company repurchases less than all of
the Value Notes, it will assure that the remaining outstanding Value Notes are
concurrently purchased by a third party at par. On the date such Value Notes
are purchased, the Company shall pay each holder of the CVOs an amount equal to
its proportionate share of the interest accrued on the aggregate principal
amount of the Value Notes from the Redemption Date through the date of such
purchase, which interest shall accrue at a per annum rate equal to the interest
rate per annum payable on six-month U.S. Government Treasury bills on the
Redemption Date, as reported by The Wall Street Journal.
6. CONVERSION INTO WARRANTS. In the event the Manufacturer
Approvals (as defined in the Warrants) are received after the issuance but prior
to the redemption of the CVOs, each holder of such unredeemed CVOs, upon written
notice from the Company, shall be required to convert such CVOs into the
Warrants which were previously converted into such CVOs, and this Agreement
shall terminate and cease to be of any further force or effect.
7. SUCCESSORS. The obligations of the Company under this Agreement
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Company. The Company
agrees that it will make appropriate provision for the preservation of the
rights of the holders of the CVOs under this Agreement in any agreement or plan
which it may enter into or adopt to effect any such merger, consolidation or
reorganization.
8. NOTICE. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery,
delivery by facsimile or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed, if to the Company, to
its principal executive offices located at 375 Park Avenue,
-4-
<PAGE>
22nd Floor, New York, NY 10022, facsimile no. (212) 223-5148, attention: Chief
Executive Officer, and if to any holder of a CVO, to such holder's address or
facsimile number as shown on the records of the Company, as applicable, or at
such other address or facsimile number as such party may designate by written
notice to the Company or such holder, as applicable, given in the manner herein
provided.
9. TRANSFERABILITY. Neither the CVOs nor any rights arising under
this Agreement shall be transferable without the prior written consent of the
Company, other than to an Affiliate (as defined in the Warrants) of the holder
of the CVOs being transferred.
10. AMENDMENT. This Agreement may be amended with the written
consent of the Company and the holders of a majority of the CVOs.
11. GOVERNING LAW. This Agreement is to be governed by and construed
in accordance with the laws of the State of New York, without reference to the
principles of conflicts of laws thereof.
If you are in agreement with the foregoing, please sign in the space
provided below and return an executed copy of this Agreement to us.
Sincerely,
UNITED AUTO GROUP, INC.
By:____________________
Name:
Title:
Accepted and agreed to
as of _____________-, 199__:
[Name of CVO Holder]
By: ___________________
Name:
Title:
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[FORM OF ADDITIONAL WARRANT]
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE BLUE SKY LAWS OF ANY STATE AND MAY
NOT BE SOLD, EXCHANGED, HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN
COMPLIANCE WITH SAID ACT AND WITH SUCH BLUE SKY LAWS. IN ADDITION, THE
SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER
CONTAINED IN THIS WARRANT.
NUMBER OF SHARES: ___________ WARRANT No. ___
PPN: 90944# 12 2
WARRANT TO PURCHASE
CLASS A PREFERRED STOCK OF
UNITED AUTO GROUP, INC.
UNITED AUTO GROUP, INC., a Delaware corporation (the "COMPANY"), HEREBY
CERTIFIES THAT, for value received ______________________ _________________, or
registered assign, is entitled to purchase _________ shares (adjusted as below
provided) of Class A Preferred Stock at any time from the Manufacturer Approval
Date (as defined below) until 5:00 p.m., New York City time, on the Termination
Date (as defined below) or the next succeeding Business Day (as defined below)
if such Termination Date is not a Business Day. As used herein, the term "CLASS
A PREFERRED STOCK" means the Company's Class A Preferred Stock, par value
$0.0001 per share, as constituted on the date of original issue of this Warrant,
and (unless the context otherwise requires) irrespective of the classes into
which such shares of Class A Preferred Stock may be divided, and any shares of
capital stock into which such shares of Class A Preferred Stock may thereafter
be changed or that may be issued in respect of, or in exchange or in
substitution for, such shares of Class A Preferred Stock by reason of any
transaction described in Section 8; PROVIDED, HOWEVER, that in the event that
the Class A Preferred Stock is automatically converted into Voting Common Stock,
par value $0.0001 per share, (the "VOTING COMMON STOCK") of the Company pursuant
to the Company's Restated Certificate of Incorporation, as amended, then all
references in this Warrant to Class A Preferred Stock (other than in Section
11.7 and unless the context otherwise requires) shall be deemed to be a
reference to Voting Common Stock.
This Warrant is one of an issue of warrants (the "WARRANTS") to
purchase Class A Preferred Stock of the Company issued pursuant to the Warrant
Purchase Agreement dated as of July 10, 1996 (the "AGREEMENT"), entered into by
the Company with J.P. Morgan Capital Corporation ("JPMCC") and The Equitable
Life Assurance Society of the United States ("EQUITABLE" and, together
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with JPMCC, the "PURCHASERS"). The holder of this Warrant is entitled to
certain benefits of the Agreement.
SECTION 1. TERM AND EXERCISE; CONTINGENT VALUE OBLIGATIONS.
SECTION 1.1 TERM OF WARRANTS; EXERCISE OF WARRANTS. Subject to the
terms hereof, including, but not limited to, Section 1.2 hereof, the holder of
this Warrant shall have the right, at any time during the period commencing on
the Manufacturer Approval Date (as defined below) and ending at 5:00 p.m., New
York time, on the earlier of the date of effectiveness of the Company's initial
Public Offering (as defined below) and September 22, 2005 (the "TERMINATION
DATE"), to purchase from the Company up to the number of shares of Class A
Preferred Stock which such holder may at the time be entitled to purchase
pursuant to this Warrant, upon written notice to the Company of such holder's
election to exercise this Warrant and upon surrender of this Warrant to the
Company, at its office located at 375 Park Avenue, New York, New York, together
with the purchase form at the end hereof duly completed and signed, accompanied
by payment to the Company of the Warrant Price (as defined in and determined in
accordance with the provisions of Sections 7 and 8) for the number of shares
with respect to which this Warrant is then exercised, PROVIDED, HOWEVER, that
the holder of this Warrant shall be deemed to have given notice to exercise this
Warrant on the date of effectiveness of the Company's initial Public Offering
unless the Company receives from such holder written notice to the contrary
prior to such date. The term "MANUFACTURER APPROVAL DATE" means the date that
all applicable approvals that are required to, and in effect, permit the
exercise of this Warrant and the issuance of all shares of Class A Preferred
Stock that are issuable upon the exercise of this Warrant are received from all
automobile franchisors with whom the Company has entered into franchise or
similar agreements, which approvals shall not by their terms be revocable and
shall not limit or adversely affect the ability of a stockholder to convert
Class A Preferred Stock into Voting Common Stock or of a Regulated Stockholder
to convert Non-voting Common Stock into Voting Common Stock or to convert Voting
Common Stock into Non-voting Common Stock pursuant to the Company's Restated
Certificate of Incorporation, as amended (collectively, the "MANUFACTURER
APPROVALS"). The Company will use its reasonable best efforts to obtain the
Manufacturer Approvals, PROVIDED that approvals by the Company's franchisors
required to effect a Public Offering that are broad enough, in the legal opinion
of outside counsel (reasonably satisfactory to the holders of the Warrants) to
the Company addressed to the holders of the Warrants and in form and substance
reasonably satisfactory to them, to allow the exercise of the Warrants and
issuance of the Warrant Shares will be deemed to be Manufacturer Approvals. The
Company will use its reasonable best efforts to ensure that the provisions in
the Company's franchise agreements with automobile franchisors in respect of the
transfer of shares of
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the Company do not prevent the holders of the Warrants from exercising the
Warrants and selling in the open market, or through exercise of their
registration rights, shares acquired upon exercise of the Warrants. Payment of
the aggregate Warrant Price shall be made, at the election of the holder of this
Warrant, either (i) by certified or cashier's check or wire transfer or (ii) in
lieu of paying the Warrant Price in cash, by electing to receive such number of
shares of Class A Preferred Stock equal to (A) the excess of (x) the fair market
value per share of Voting Common Stock on the date of such exercise multiplied
by the number of shares being purchased pursuant to such exercise over (y) the
aggregate Warrant Price of the shares being purchased pursuant to such exercise,
divided by (B) the fair market value per share of Voting Common Stock on the
date of such exercise. For purposes hereof, "FAIR MARKET VALUE" shall mean (i)
at any time prior to the Company's initial Public Offering, the then current
fair market value per share of such class of capital stock immediately prior to
such sale or issuance, determined in good faith by the Board of Directors of the
Company, and (ii) on the effective date of the registration statement filed in
connection with the Company's initial Public Offering, the price per share to
the public set forth on the cover page of the prospectus included in such
registration statement. As used herein, the term "BUSINESS DAY" means any day
other than a Saturday or Sunday or a day on which commercial banks are required
or authorized by law to be closed in New York, New York. As used herein, the
term "PUBLIC OFFERING" means the sale or issuance of shares of Voting Common
Stock or Derivative Securities pursuant to a registration statement (other than
forms S-4, S-8 or similar forms) which has become effective under the Securities
Act. As used herein, the term "DERIVATIVE SECURITIES" means rights, options,
warrants, convertible securities or options or other rights to purchase
convertible securities or any similar instrument containing the right to
subscribe for, purchase or otherwise acquire shares of capital stock of the
Company.
Upon such surrender of this Warrant, together with any other Warrants
so surrendered, and payment of such Warrant Price as aforesaid, the Company
shall issue and cause to be delivered with all reasonable dispatch, and in any
event within five Business Days thereafter, to or upon the written order of the
holder of this Warrant and in such name or names as such holder may designate, a
certificate or certificates for the number of full shares and any fraction of a
share of Class A Preferred Stock (or, if the Class A Preferred Stock has been
converted into Voting Common Stock pursuant to the Company's Restated
Certificate of Incorporation, as amended, Voting Common Stock) so purchased, or,
at the Company's option, together with cash, as provided in Section 9, with
respect to any fraction of a share of capital stock, otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of such shares of capital stock, as of
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<PAGE>
the close of business on the date of the surrender of this Warrant and payment
of the Warrant Price as aforesaid, notwithstanding that the certificates
representing such shares shall not actually have been delivered or that the
stock transfer books of the Company shall then be closed.
This Warrant shall be exercisable, at the election of the holder of
this Warrant, either in full or from time to time in part. In the event that
this Warrant is exercised with respect to less than the aggregate number of
shares of Class A Preferred Stock this Warrant then entitles such holder to
purchase, the Company shall deliver to or upon the order of such holder hereof a
new Warrant evidencing the rights of such holder to purchase the unpurchased
shares of Class A Preferred Stock then called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant. In the
alternative, at the request of the holder upon any partial exercise of this
Warrant, appropriate notation may be made on this Warrant and the same shall be
returned to such holder.
The term "REGULATED STOCKHOLDER" means (i) any stockholder that is
subject to the provisions of Regulation Y of the Board of Governors of the
Federal Reserve System (12 C.F.R. Part 225) or any successor to such regulation
("REGULATION Y"), so long as such stockholder shall hold, and only with respect
to, the Warrants, Warrant Shares or shares issued upon conversion(s) of the
Warrant Shares, (ii) any stockholder that is subject to regulation under the New
York Insurance Law, so long as such stockholder shall hold, and only with
respect to, the Warrants, Warrant Shares or shares issued upon conversion(s) of
the Warrant Shares, (iii) any Affiliate of a Regulated Stockholder that is a
transferee of any Warrants, Warrant Shares or shares issued upon conversion(s)
of the Warrant Shares, so long as such Affiliate shall hold, and only with
respect to, such Warrants, Warrant Shares or shares issued upon conversion(s) of
the Warrant Shares and (iv) any Person to which such Regulated Stockholder or
any of its Affiliates has transferred such Warrants, Warrant Shares or shares
issued upon conversion(s) of the Warrant Shares, so long as such transferee
shall hold, and only with respect to, any Warrants, Warrant Shares or shares
issued upon conversion(s) of the Warrant Shares transferred by such stockholder
or Affiliates but only if such Person is (or any Affiliate of such Person is)
(A) subject to the provisions of Regulation Y or (B) subject to regulation under
the insurance laws of any jurisdiction.
SECTION 1.2 CONTINGENT VALUE OBLIGATIONS. In the event that the
Manufacturer Approvals are not received by March 22, 1997, then this Warrant
shall be converted into a number of Contingent Value Obligations ("CVOS")
determined pursuant to the Contingent Value Obligations Agreement substantially
in the form of EXHIBIT A hereto to be entered into at such time between the
holder of this Warrant and the Company. If the Manufacturer Approvals are
received with respect to the initial holder hereof, then this Section 1.2 shall
terminate and cease to be of any
4
<PAGE>
force or effect and this Warrant shall no longer be convertible into CVOs under
any circumstance.
SECTION 2. PAYMENT OF TAXES. The Company shall pay all documentary
stamp taxes, if any, attributable to the initial issuance of the shares of Class
A Preferred Stock upon exercise of this Warrant, PROVIDED that the Company shall
not be required to pay any tax or taxes which may be payable with respect to any
secondary transfer of a Warrant or the shares of Class A Preferred Stock issued
upon exercise of any Warrant, and in such case the Company shall not be required
to issue or deliver any certificates for shares of Class A Preferred Stock until
the person requesting the same has paid to the Company the amount of such tax or
has established to the Company's reasonable satisfaction that such tax has been
paid or that no such tax is due.
SECTION 3. TRANSFERABILITY.
SECTION 3.1 REGISTRATION. The Warrants shall be numbered and shall
be registered on the books of the Company maintained for such purpose (the
"SECURITY REGISTER").
SECTION 3.2 TRANSFER. Subject to compliance with Sections 3.3, 12
and 13, this Warrant, the Warrant Shares (as defined below) and all rights
hereunder are transferable upon delivery hereof together with the assignment
form at the end hereof duly completed and signed by the holder hereof or such
holder's duly authorized attorney or representative, or accompanied by proper
evidence of succession, assignment or authority to transfer, PROVIDED that any
transferee of this Warrant or such Warrant Shares shall expressly agree to be
bound by the terms and conditions hereof, and PROVIDED FURTHER that the rights
set forth in Sections 12.1 and 13.2 hereof shall not be transferable or
otherwise assigned by the holder of this Warrant to any person or entity other
than an Affiliate (as defined below) of such holder without the consent of the
Company. Upon any registration of transfer of this Warrant, or part thereof,
the Company shall execute and deliver a new Warrant or Warrants as may be
requested by such holder for the same aggregate number of shares of Class A
Preferred Stock as this Warrant. As used herein, the term "WARRANT SHARES"
shall mean, collectively, the shares of Class A Preferred Stock acquired
pursuant to the exercise of this Warrant, or upon conversion of the shares
acquired pursuant to the exercise of this Warrant, and any securities issued or
issuable with respect to such Class A Preferred Stock by way of stock dividend
or other distribution or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As used herein, the term "TRANSFER" shall mean and include (i) when
used as a verb, the act of selling, pledging, mortgaging, hypothecating, giving,
transferring, creating a security interest, lien or trust (voting or otherwise),
assigning or otherwise encumbering or disposing of, and (ii) when used as a
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noun, any sale, pledge, mortgage, hypothecation, gift, transfer, creation of
security interest, lien or trust, any assignment or other encumbrance or
disposition. As used herein, the term "AFFILIATE" of a specified person means a
person that directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person
specified, and in the case of a specified person who is a natural person, his
spouse, his issue, his parents, his estate and any trust entirely for the
benefit of his spouse and/or issue. The term "CONTROL" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person or entity, whether through the ownership of
voting securities, by contract or otherwise.
SECTION 3.3 LIMITATIONS ON TRANSFER OF THE WARRANTS AND THE WARRANT
SHARES. (a) If, at the time of any transfer of this Warrant or any Warrant
Shares, this Warrant or such Warrant Shares, as the case may be, are not
registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
the Company may require as a condition of allowing such transfer or exchange
that the holder or transferee of this Warrant or such Warrant Shares furnish to
the Company such information as, in the reasonable opinion of counsel to the
Company, is necessary in order to establish that such transfer or exchange may
be made without registration under the Securities Act, including a written
statement that such holder or transferee will not sell or otherwise dispose of
this Warrant or such Warrant Shares purchased or acquired by him in any
transaction which would violate the Securities Act or any other securities laws,
PROVIDED that the disposition thereof shall at all times be within the control
of such holder or transferee.
(b) Notwithstanding anything to the contrary contained herein,
without the prior written consent of the Company, neither this Warrant nor any
Warrant Shares may be transferred to a person or entity (or an Affiliate of such
person or entity (other than an entity engaged principally in the management of
investments for third parties exclusively in a fiduciary capacity)) who owns,
operates, controls, or participates or engages in the ownership, management,
operation or control of, or is connected with as an officer, employee, partner,
director, shareholder, representative, consultant, independent contractor,
guarantor, advisor or in any other manner or otherwise has a financial interest
in the equity of, a proprietorship, partnership, joint venture, association,
firm, corporation or other business organization or enterprise that competes
with the Company or any of its subsidiaries in the business of operating
dealerships for the retail sale of new and/or used automobiles and trucks or
businesses ancillary to the operation of such type of dealerships (including
service and parts operations, body shops, the sale of finance and insurance
products (including after-market items), and the purchase, sale and servicing of
finance contracts for new and/or used vehicles); provided, however, that for
purposes of this paragraph the ownership of
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equity securities representing less than 5% of the outstanding shares of capital
stock (or equivalent ownership) of any business organization or entity shall not
be deemed to constitute the ownership or participation in the ownership of, or a
financial interest in the equity of, such business organization or entity.
SECTION 3.4 LEGEND ON WARRANT SHARES. Each certificate for shares of
Class A Preferred Stock initially issued upon exercise of this Warrant shall
bear the following legend, unless at the time of exercise such shares are
registered under the Securities Act, in which case, such certificate shall bear
only the second sentence of the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the Blue Sky
laws of any State and may not be sold, exchanged, hypothecated or
transferred in any manner except in compliance with said Act and with such
Blue Sky laws. In addition, the securities represented by this certificate
are subject to restrictions on transfer and certain other provisions of the
Warrant issued by United Auto Group, Inc. (the "Company"), dated as of
___________, as the same may be amended from time to time, a copy of which
may be obtained at the offices of the Company."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend shall also bear the above legend unless counsel
for the Company or such other counsel as may be reasonably satisfactory to the
Company renders a written legal opinion to the Company that the securities
represented thereby need no longer be subject to such restriction.
SECTION 4. EXCHANGE OF WARRANT CERTIFICATE. Any Warrant certificate
may be exchanged for another certificate or certificates entitling the holder
thereof to purchase the aggregate number of shares of Class A Preferred Stock
that this certificate then entitles such holder to purchase. Any holder of a
Warrant desiring to exchange such Warrant certificate shall make such request in
writing delivered to the Company, and shall surrender, properly endorsed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the Company
shall execute and deliver one or more new Warrant certificates as so requested.
SECTION 5. MUTILATED OR MISSING WARRANT. In case any Warrant
certificate shall be mutilated, lost, stolen or destroyed, the Company shall, at
the request of the holder thereof, issue and deliver in exchange and
substitution for and upon cancellation of the mutilated certificate or
certificates, or in lieu of and substitution for the certificate or certificates
lost, stolen or destroyed, a new Warrant certificate or certificates of like
tenor and representing an equivalent right or interest, but only upon receipt of
evidence satisfactory to the Company of such loss, theft or destruction of such
Warrant
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and indemnity, if requested, satisfactory to the Company. In the case of any
Purchaser or any other institutional investor holder of a Warrant, such holder's
unsecured agreement of indemnity shall be deemed satisfactory to the Company.
SECTION 6. REQUIREMENT OF AVAILABILITY OF SHARES OF CLASS A PREFERRED
STOCK AND VOTING COMMON STOCK. There are authorized and available for issuance,
and so long as any Warrant remains outstanding the Company shall at all times
keep authorized and available for issuance, such number of shares of the
Company's authorized but unissued Class A Preferred Stock and Voting Common
Stock as will be sufficient to permit the exercise in full of all outstanding
Warrants (and the conversion of all shares of Class A Preferred Stock into
Voting Common Stock). Every transfer agent for the Class A Preferred Stock and
other securities of the Company issuable upon the exercise of the Warrants shall
be irrevocably authorized and directed at all times to keep available such
number of authorized shares and other securities as will be sufficient for such
purpose. The Company shall keep a copy of the Warrants on file with every such
transfer agent for the Class A Preferred Stock and other securities of the
Company issuable upon the exercise of the Warrants. The Company shall supply
any such transfer agent with duly executed stock and other certificates for such
purpose and shall provide or otherwise make available any cash which may be
payable as provided in Section 9.
SECTION 7. WARRANT PRICE. The price per share of Class A Preferred
Stock (the "WARRANT PRICE") at which shares of Class A Preferred Stock shall be
purchasable upon the exercise of the Warrants shall be $0.01, subject to
adjustment pursuant to Section 8.
SECTION 8.1 ADJUSTMENTS AND DISTRIBUTIONS WITH RESPECT TO CLASS A
PREFERRED STOCK. Subject to the terms hereof, the number of shares purchasable
upon the exercise of this Warrant and the Warrant Price shall be subject to
adjustment as follows:
(a) Except in respect of transactions described in subsection (b)
below, in case the Company shall (i) subdivide its outstanding Class A Preferred
Stock, (ii) combine its outstanding Class A Preferred Stock into a smaller
number of shares of Class A Preferred Stock, or (iii) issue by reclassification
of its Class A Preferred Stock, spin-off, split-up, recapitalization, merger,
consolidation or any similar corporate event or arrangement other securities of
the Company, the kind and number of shares of capital stock purchasable upon
exercise of this Warrant immediately prior thereto shall be adjusted so that the
holder of this Warrant shall be entitled to receive the kind and number of
shares or other securities of the Company which it would have owned or would
have been entitled to receive after the happening of any of the events described
above had this Warrant been exercised immediately prior to the happening of such
event or any record date with respect thereto. Any adjustment made
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pursuant to this subsection (a) shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(b) In case the Company shall distribute in any calendar year to all
or substantially all holders of its Class A Preferred Stock evidences of its
indebtedness (including Derivative Securities) or assets (including cash or
other dividends or distributions out of earnings), or securities or rights to
acquire securities of the Company, then, and in each case, the Company shall pay
or distribute to the holder of this Warrant an amount equal to such holder's PRO
RATA share (assuming for such purpose the exercise of this Warrant in full) of
such distributions; and for such purpose any assets (other than cash) or
evidences of indebtedness so distributed shall be valued at the fair market
value thereof determined in good faith by the Board of Directors of the Company.
(c) Whenever the number of shares of Class A Preferred Stock
purchasable upon the exercise of this Warrant is increased or decreased as
provided in this Section 8, the Warrant Price payable upon exercise of this
Warrant shall be adjusted by multiplying the Warrant Price in effect immediately
prior to such adjustment by a fraction, the numerator of which shall be the
number of shares of Class A Preferred Stock purchasable upon exercise of this
Warrant immediately prior to such adjustment, and the denominator of which shall
be the number of shares of Class A Preferred Stock so purchasable immediately
after such adjustment.
(d) Whenever the number of shares of Class A Preferred Stock
purchasable upon the exercise of this Warrant or the Warrant Price is adjusted
as herein provided and whenever any event or transaction shall result in an
adjustment to the Applicable Conversion Value (as defined in the Company's
Restated Certificate of Incorporation, as amended) relating to the Class A
Preferred Stock, the Company shall cause to be promptly mailed to the holder by
first-class mail, postage prepaid, notice of such adjustment or adjustments and,
if requested by such holder, a certificate, prepared by independent public
accountants of nationally recognized standing, showing such adjustment, and
stating in detail the facts upon which such adjustment is based.
(e) It is the intention of the Company that the holder of this
Warrant be protected against dilution to the same extent that holders of Class A
Preferred Stock outstanding on the date of original issuance of this Warrant are
so protected. In case the Company shall take any action affecting its capital
stock, other than an action (i) described in this Section 8 or (ii) which
results in an adjustment to the Applicable Conversion Value relating to the
Class A Preferred Stock, or would result in an adjustment to such Applicable
Conversion Value were any shares of Class A Preferred Stock then outstanding,
and the failure to make any adjustment would not fairly protect the purchase
rights
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represented by this Warrant in accordance with the essential intent and
principle of this Section 8 or the conversion rights of the Class A Preferred
Stock issuable upon exercise of this Warrant, then the number of shares of Class
A Preferred Stock or Voting Common Stock, as the case may be, issuable upon
exercise of this Warrant and the Warrant Price shall be adjusted in such manner
and at such time as the Board of Directors of the Company may in good faith
determine to be equitable in the circumstances.
SECTION 8.2 PRESERVATION OF PURCHASE RIGHTS UPON REORGANIZATION,
CONSOLIDATION, MERGER, ETC. In case of any reorganization, consolidation or
merger of the Company with or into another entity as a result of which the
holders of Class A Preferred Stock become holders of other shares or securities
of the Company or of another entity or person, or such holders receive cash or
other assets, or in case of any sale or conveyance to another person of the
property, assets or business of the Company as an entirety or substantially as
an entirety, the Company or such successor or purchasing entity or person, as
the case may be, shall execute, concurrently with the consummation of such
transaction, with the holder of this Warrant an agreement (in form and substance
reasonably satisfactory to such holder) that such holder shall have the right
thereafter upon payment of the aggregate Warrant Price in effect immediately
prior to such action to purchase upon exercise of this Warrant the kind and
amount of shares and other securities and property which such holder would have
owned or have been entitled to receive after the happening of such
reorganization, consolidation, merger, sale or conveyance had this Warrant been
exercised immediately prior to such action.
The agreements referred to in this Section 8.2 shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 8. The provisions of this Section 8.2
shall similarly apply to successive reorganizations, consolidations, mergers,
sales or conveyances.
SECTION 8.3 STATEMENT ON WARRANTS. This Warrant shall entitle the
holder hereof to purchase such number of shares of Class A Preferred Stock at
such Warrant Price as may be determined in accordance with the terms hereof
after giving effect to any adjustments in the number or kind of shares
purchasable upon the exercise hereof or the Warrant Price, as the case may be,
notwithstanding that this Warrant certificate may continue to express the same
price and number and kind of shares as are initially stated herein.
SECTION 9. FRACTIONAL INTERESTS. The Company shall not be required
to issue a fraction of a share of Class A Preferred Stock on the exercise of any
one or more Warrants. If any fraction of a share would, except for the
provisions of this Section 9, be issuable on the exercise of such Warrant or
Warrants (or specified portions thereof), the Company may, at its
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option, pay an amount in cash equal to the then current market price of a share
of Class A Preferred Stock (as determined in good faith by the Board of
Directors of the Company) multiplied by such fraction.
SECTION 10. NO RIGHTS AS SHAREHOLDER; NOTICES. Except for a holder's
of this Warrant right to receive dividends and distributions as provided in
Section 8.1(b) hereof, nothing contained in this Warrant shall be construed as
conferring upon the holder or its transferees any rights as a shareholder of the
Company, including the right to vote, consent or receive notices as a
shareholder with respect to any meeting of shareholders for the election of
directors of the Company or any other matter. If, however, at any time prior to
the Termination Date and prior to the exercise of this Warrant, any of the
following events shall occur:
(a) any action which would require an adjustment pursuant to
Section 8.2; or
(b) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger or sale of its
property, assets and business as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to each holder of Warrants as provided in Section 14 at least 20
days prior to the date fixed as a record date or the date of closing the
transfer books for the determination of the shareholders entitled to any rights
or for the determination of shareholders entitled to vote on such proposed
dissolution, liquidation or winding up. Such notice shall also set forth such
facts as shall indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the current Warrant Price and the kind
and amount of Warrant Shares and other securities and property deliverable upon
the exercise of the Warrant. Such notice shall also specify the date as of
which the holders of the Company's capital stock of record shall be entitled to
exchange their capital stock of the Company for securities or other property
deliverable upon such reorganization, consolidation, merger, dissolution,
liquidation or winding-up, as the case may be. Notwithstanding the foregoing,
failure to mail or receive such notice or any defect therein or in the mailing
thereof shall not affect the validity of any such action taken. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be.
SECTION 11. REGISTRATION RIGHTS.
SECTION 11.1 DEFINITIONS. As used in this Section 11:
(a) the terms "REGISTER," "REGISTERED" AND "REGISTRATION" refer to a
registration effected by preparing and
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filing a registration statement in compliance with the Securities Act (and any
post-effective amendments filed or required to be filed) and the declaration or
ordering of effectiveness of such registration statement;
(b) the term "REGISTRABLE SECURITIES" means the Warrant Shares, the
Warrant Shares that are subject to issuance upon exercise of the other Warrants
and the Mezzanine Warrant Shares, subject to Section 11.7 hereof. As used
herein, the term "MEZZANINE WARRANTS" shall mean, collectively, the warrants
issued pursuant to the Securities Purchase Agreements, dated as of September 22,
1995 (the "SECURITIES PURCHASE AGREEMENTS"), entered into by the Company with
certain institutional investors named in Schedule A thereto, and the term
"MEZZANINE WARRANT SHARES" shall mean, collectively, the shares of capital stock
acquired pursuant to the exercise of the Mezzanine Warrants, or upon conversion
of the shares acquired pursuant to the exercise of the Mezzanine Warrants, and
any securities issued or issuable with respect to such shares by way of stock
dividend or other distribution or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. Registrable Securities will cease to be such when
(i) a registration statement covering such Registrable Securities has become or
been declared or ordered effective and they have been disposed of pursuant to
such effective registration statement, (ii) they are sold, transferred or
distributed pursuant to and in compliance with Rule 144 (or any similar
provision then in force, but not including Rule 144A) under the Securities Act,
or (iii) they have been otherwise transferred and the Company has delivered new
certificates or other evidences of ownership for them not subject to any stop
transfer order or other restriction on transfer (other than those set forth in
Sections 3.2, 12.2 and 13 hereof) and not bearing a legend restricting transfer
in the absence of an effective registration or an exemption from the
registration requirements of the Securities Act;
(c) the term "HOLDER" means any person owning or having the right to
acquire Registrable Securities;
(d) the term "PRIOR HOLDER" means any person or entity who has been
(or, in the case of clause (ii) below, will be) granted rights pursuant to (i)
the Registration Rights Agreement, dated as of October 15, 1993, as amended,
among the Company and certain parties named therein (the "PRIOR REGISTRATION
RIGHTS AGREEMENT"), or (ii) the Registration Rights Agreement, dated as of
August 1, 1995, among the Company and certain parties named therein (the
"VENTURER REGISTRATION RIGHTS AGREEMENT"), to have shares of Voting Common Stock
registered under the Securities Act, either in respect of issued shares of
Voting Common Stock or shares of Voting Common Stock to be issued upon
conversion of outstanding securities of the Company; and
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(e) the number of shares of "REGISTRABLE SECURITIES THEN OUTSTANDING"
shall be determined by adding the number of shares of Voting Common Stock
outstanding which are, and the number of shares of Voting Common Stock issuable
pursuant to then exercisable or convertible securities (without regard to any
restrictions on the ability of the holders thereof to convert such securities)
which upon issuance would be, Registrable Securities.
SECTION 11.2 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. If, at any time after the earlier to
occur of September 22, 1998 and six (6) months after the Company's initial
Public Offering, the Company shall receive a written request from the Holder or
Holders of in excess of 50% of the Registrable Securities then outstanding and
entitled to registration rights under this Section 11.2 (the "INITIATING
HOLDERS") that the Company effect the registration under the Securities Act with
respect to all or a part of the Registrable Securities, the Company will, within
five days of the receipt thereof, give written notice of such request to all
Holders and shall within sixty (60) days of its receipt of such written request,
file a registration statement on a form deemed appropriate by the Company's
counsel with the Securities and Exchange Commission (the "SEC") covering all the
Registrable Securities which the Holders shall in writing request (given within
twenty (20) days of receipt of the notice given by the Company pursuant to this
Section 11.2(a)) to be included in such registration and the Company shall use
its reasonable best efforts to cause such registration statement to become
effective.
The Company shall not be obligated to effect such registration
pursuant to this Section 11.2(a) (A) after the Company already has effected one
(1) such registration pursuant to this Section 11.2(a), such registration has
been declared or ordered effective and no stop order suspending the
effectiveness of such registration statement has been issued within 60 days of
such effectiveness (PROVIDED that the Company shall be deemed to have effected
such registration if it files a registration statement pursuant to this Section
11.2(a) and such registration statement is subsequently withdrawn because the
Holders request that such registration statement be withdrawn, unless (i) such
request is as a result of the occurrence of an event (other than general
economic or market conditions) that has had a material adverse effect on the
Company's business or (ii) the Company is immediately reimbursed in full for all
costs and expenses incurred by it in connection with such registration), (B) if
a registration statement filed by the Company has been declared or ordered
effective within six (6) months prior to the receipt of a written request from a
Holder or Holders under this Section 11.2(a), (C) if in the good faith judgment
of the Board of Directors of the Company, it would not be in the best interests
of the Company and its stockholders generally for such registration statement to
be filed (in which case the Company
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shall have the right to defer such filing for a period of not more than ninety
(90) days after receipt of the request of the Initiating Holders), PROVIDED that
such deferral will not occur more than once in any 12-month period, or (D) if
the Company is negotiating the material acquisition of a business and the
Company's board of directors has determined in good faith that such negotiations
could reasonably be expected to result in an agreement in principle to acquire
such business (in which case the Company will have the right to defer such
filing until the Company determines that it is no longer necessary to maintain
the confidentiality of such negotiations, but in no event for longer than 90
days, provided that any such deferral will not occur more than once in any 12
month period).
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 11.2(b) below,
include other securities of the Company for its own account or which are held by
officers or directors of the Company or persons or entities who, by virtue of
agreements with the Company, are entitled to include their securities in any
such registration, including Prior Holders (the "OTHER SHAREHOLDERS", PROVIDED,
HOWEVER, that holders of Registrable Securities shall not be deemed Other
Shareholders with respect to such Registrable Securities).
(b) UNDERWRITING. If the Initiating Holders desire to distribute the
Registrable Securities covered by such request by means of an underwriting, they
shall so advise the Company as a part of such request made pursuant to Section
11.2(a) and the Company shall include such information in the written notice
referred to Section 11.2(a). The underwriter or underwriters of such
registration shall be mutually selected by the Company and a majority in
interest of the Initiating Holders. If the Company and a majority in interest
of the Initiating Holders are in good faith unable to agree on the selection of
such underwriter or underwriters, then such underwriter or underwriters shall be
selected by a majority in interest of the Initiating Holders, subject to the
approval of the Company, which approval shall not be unreasonably withheld. The
right of any Holder to registration pursuant to this Section 11.2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein.
If officers or directors of the Company holding other securities of
the Company shall request inclusion in any registration pursuant to this
Section 11.2, or if Other Shareholders request such inclusion, the Holders shall
offer to include the securities of such officers, directors and Other
Shareholders in the underwriting and may condition such offer upon their
participation in the underwriting and on their acceptance of the further
applicable provisions of this Section 11.
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The Holders shall (together with the Company, officers, directors and
Other Shareholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such underwriting
as provided above, but the Company shall not be required to pay any commission
to the underwriter in respect of the sale of Registrable Securities.
Notwithstanding any other provision of this Section 11.2, if the representative
of the underwriters determines that marketing factors require a limitation on
the number of shares to be underwritten, the securities of the Company held by
officers or directors of the Company and the securities held by Other
Shareholders shall be excluded from the underwriting by reason of the
underwriters' marketing limitation to the extent so required by such limitation.
If a further limitation is required, the Company shall so advise all Holders
requesting inclusion in such offering, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders requesting inclusion in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held (or
entitled to be held upon conversion) by each such Holder at the time of filing
the registration statement. No Registrable Securities or any other securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. If any Holder, officer,
director or Other Shareholder who has requested inclusion in such registration
as provided above disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The securities so withdrawn shall also be withdrawn
from registration; PROVIDED, HOWEVER, that, if by the withdrawal of such
Registrable Securities a greater number of Registrable Securities held by other
Holders may be included in such registration (up to a maximum of any limitation
imposed by the underwriters), then the Company shall offer to all Holders who
have included Registrable Securities in the registration the right to include
additional Registrable Securities in the same proportion used in determining the
underwriter limitation in this Section 11.2(b). If the representative of the
underwriters has not limited the number of Registrable Securities, the Company
may include its securities for its own account in such registration if the
underwriter so agrees and if the number of Registrable Securities which would
otherwise have been included in such registration and underwriting will not
thereby be limited.
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SECTION 11.3 COMPANY REGISTRATION.
(a) INCLUSION IN REGISTRATION. If, at any time after the initial
Public Offering, the Company shall determine to register any of its shares of
Voting Common Stock on a form (other than for the registration of securities to
be offered and sold by the Company on any registration form which does not
permit secondary sales or pursuant to (i) an employee benefit plan, (ii) a
dividend or interest reinvestment plan, (iii) other similar plans or (iv)
reclassifications of securities, mergers, consolidations and acquisitions of
assets) which would permit the registration of any Registrable Securities, or
the Company shall be requested to register any of its shares of Voting Common
Stock by any holder of any securities entitled to registration upon such request
(other than the Holders or their nominees), the Company will:
(i) promptly give to the Holders written notice
thereof (which shall include a list of the jurisdictions, if any, in
which the Company intends to qualify such shares of Voting Common
Stock under the applicable blue sky or other state securities laws);
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests made by each of the
Holders, within fifteen (15) days after receipt of the written notice
from the Company described in clause (i) above; PROVIDED, HOWEVER,
that if the offering is underwritten and relates only to shares of
Voting Common Stock to be sold by the Company and the Holders are
advised in writing by the managing underwriter that the sale of
Registrable Securities by the Holders will, due to market conditions,
adversely affect such underwriting, the Holders shall not sell any of
their Registrable Securities included therein until such time as the
managing underwriter may permit, provided that such period of time
will not exceed 120 days from the effective date of such registration.
The Company shall be under no obligation to complete any offering of the shares
of Voting Common Stock it proposes to make and shall incur no liability to any
Holder for its failure to do so.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 11.3(a). In such event the right of the Holders to
registration pursuant to this Section 11.3 shall be conditioned upon the
Holders' participation in such underwriting and the inclusion of
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the Holders' Registrable Securities in the underwriting to the extent provided
herein. The Holders shall (together with the Company, officers, directors and
the Other Shareholders distributing their shares of Voting Common Stock through
such underwriting) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for underwriting by the Company and
shall deliver all documents and opinions required to be delivered thereunder in
respect of their participation as selling shareholders. Notwithstanding any
other provision of this Section 11.3, if the representative of the underwriters
determines that marketing factors require a limitation on the number of shares
of Voting Common Stock to be underwritten, then the Company shall include in the
underwriting only that number of shares, including Registrable Securities, which
the representative believes will not jeopardize the success of the offering (the
shares so included to be apportioned as follows: first, all shares which
stockholders other than the Holders and the Prior Holders seek to include in the
offering shall be excluded from the offering to the extent limitation on the
number of shares included in the underwriting is required, then the number of
shares held by Holders and the Prior Holders that may be included in the
underwriting shall be apportioned PRO RATA among the selling Holders and the
Prior Holders according to the total number of Registrable Securities and shares
entitled to be included therein owned by each selling Holder and Prior Holder,
respectively, or in such other proportions as shall be mutually agreed to by
such selling Holders and Prior Holders, PROVIDED that all of the securities to
be issued by the Company and sold by the Prior Holders who have requested the
registration to which such offering relates pursuant to Section 1.2 of the Prior
Registration Rights Agreement or Section 1.2 of the Venturer Registration Rights
Agreement, as applicable, are included in such offering). If any of the Holders
or any officer, director or Other Shareholder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the representative of the underwriters. Any Registrable Securities
or other securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
(c) NUMBER. The Holders shall be entitled to have their shares
included in an unlimited number of registrations pursuant to this Section 11.3.
SECTION 11.4 FORM S-3. After the Company has qualified for the use
of Form S-3 under the Securities Act for secondary sales, Holders of in excess
of 50% of Registrable Securities shall have the right to request that the
Company effect the registration on Form S-3 with respect to all or part of the
Registrable Securities (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
method of disposition of shares by such holders), subject to the limitations set
forth in the second paragraph of Section 11.2(a) hereof, as applicable,
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PROVIDED, HOWEVER, that the Company shall not be obligated to effect such
registration pursuant to this Section 11.4 after the Company already has
effected two (2) such registrations pursuant to this Section 11.4 (and PROVIDED
that the Company shall be deemed to have effected such a registration if it
files a registration statement pursuant to this Section 11.4 and such
registration statement is subsequently withdrawn because the Holders request
that such registration statement be withdrawn, unless (i) such request is as a
result of the occurrence of an event (other than general economic or market
conditions) that has had a material adverse effect on the Company's business or
(ii) the Company is immediately reimbursed in full for all costs and expenses
incurred by it in connection with such registration), and PROVIDED, FURTHER,
that the Company shall not be required to effect a registration pursuant to this
Section 11.4 unless the Holder or Holders requesting registration propose to
dispose of shares of Registrable Securities having an aggregate price to the
public (after deduction of underwriting discounts and expenses of sale) of more
than $1,000,000. The Company shall give written notice to all Holders of the
receipt of a request for registration pursuant to this Section 11.4 and shall
provide a reasonable opportunity for other Holders to participate in the
registration, PROVIDED that if the registration is for an underwritten offering,
the terms of Section 11.2(b) shall apply to all participants in such offering.
SECTION 11.5 EXPENSES OF REGISTRATION. Except as otherwise provided
herein, in connection with a registration pursuant to this Section 11, the
Company shall pay all registration, filing and qualification fees, accounting
fees and printing expenses of the Company, reasonable fees and disbursements of
counsel for the Company and the reasonable fees and expenses of one counsel for
the selling Holders. All (i) underwriting discounts and commissions, (ii) stock
transfer taxes incurred in respect of the Registrable Securities being sold, and
(iii) legal and accounting fees, expenses and disbursements of the Holders
(except as set forth above), shall be borne and paid ratably by the Holders of
the Registrable Securities included in any such registration based on the number
of Registrable Securities so registered.
SECTION 11.6 REGISTRATION PROCEDURES. In the case of each
registration effected by the Company pursuant to this Section 11, the Company
shall:
(i) furnish to each Holder, prior to the filing thereof with
the SEC, a copy of the registration statement;
(ii) keep such registration effective for a period of one
hundred twenty (120) days or until each Holder has completed the
distribution described in the registration statement relating thereto,
whichever first occurs;
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(iii) furnish each Holder copies of any registration statement
and each preliminary or final prospectus, or supplement or amendment
required to be prepared pursuant hereto, as any Holder may from time to
time reasonably request;
(iv) prepare and promptly file with the SEC and promptly
notify each Holder of the filing of any amendments or supplements to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities
Act, any event with respect to the Company shall have occurred as a result
of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made, in the light
of the circumstances under which they were made, not misleading; and use
its reasonable best efforts to cause each such amendment or supplement to
become effective, as may be necessary to comply with the provisions of the
Securities Act with respect to disposition of all securities covered by
such registration statement;
(v) use its best efforts to qualify as soon as reasonably
practicable the Registrable Securities included in the registration
statement for sale under the securities or blue-sky laws of such states and
jurisdictions within the United States as shall be reasonably requested by
any Holder, PROVIDED that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business, to become
subject to taxation or to file a consent to service of process generally in
any of the aforesaid states or jurisdictions;
(vi) furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 11 on the
date that the registration statement becomes effective, (i) an opinion or
opinions, dated such date, of counsel representing the Company for purposes
of such registration, in form and substance as is customarily given by
company counsel to the underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities, (ii) if the registration is
underwritten, a letter, dated such date, from the independent certified
public accountant of the Company, in form and substance as is customarily
given by independent certified public accountants to underwriters,
addressed to the underwriters and (iii) a letter, dated such date, from
such accountant in form and substance as is customarily given by
independent certified accountants to the selling stockholders in a
secondary public offering,
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addressed to the Holders registering Registrable Securities; and
(vii) apply for listing and use its reasonable best efforts to
list the Registrable Securities being registered on any national securities
exchange on which a class of the Company's equity securities is listed, or
if the Company does not have a class of equity securities listed on a
national exchange, apply for qualification and use its reasonable best
efforts to qualify the Registrable Securities being registered for
inclusion on the automated quotation system of the National Association of
Securities Dealers, Inc.
SECTION 11.7 LIMITATIONS ON REGISTRATION RIGHTS. Anything in this
Warrant or in the Agreement to the contrary notwithstanding, the Company shall
not be required to effect a registration under the Securities Act with respect
to any shares of Class A Preferred Stock or Non-voting Common Stock, but shall
be required, pursuant to Section 11 of this Warrant, to register shares of
Voting Common Stock issuable upon the conversion thereof, PROVIDED that any
Holder of Class A Preferred Stock or Non-voting Common Stock shall not be
required to convert any Class A Preferred Stock or Non-voting Common Stock into
Voting Common Stock until the closing of the sale of Voting Common Stock
pursuant to any requested registration. Except that the Warrant Shares are to
be deemed Registrable Securities, nothing in this Warrant shall be construed to
grant to the holder of this Warrant registration rights that are in addition to
the registration rights granted under the Mezzanine Warrants.
SECTION 11.8 INDEMNIFICATION. (a) The Company shall indemnify each
Holder offering Registrable Securities for sale pursuant to each registration
that has been effected pursuant to this Section 11, the officers, directors,
partners, agents, employees and shareholders of each such Holder, and any
underwriter (as defined in the Securities Act) for each such Holder and each
person, if any, who controls such person or underwriter within the meaning of
the Securities Act or Exchange Act, and, with respect to any indemnity for the
benefit of Equitable, Alliance Corporate Finance Group Incorporated, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement of a material fact contained in any
registration statement under which such Registrable Securities were registered
under the Securities Act, or based on any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse each such Holder, officer, director, partner,
agent, employee, underwriter and controlling person for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; PROVIDED, HOWEVER, that the
Company shall pay for only one firm of counsel for all such Holders and the
Company shall not be
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liable to a Holder in any such case (i) to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission made in reliance upon and in conformity with information furnished
to the Company by any Holder or the underwriter of any Holder and stated to be
specifically for use therein or (ii) in the case of a sale directly by a Holder
of Registrable Securities (including a sale of such Registrable Securities
through any underwriter retained by such Holder engaging in a distribution on
behalf of such Holder), such untrue statement or omission was contained in a
preliminary prospectus and corrected in a final or amended prospectus, and such
Holder failed to deliver a copy of the final or amended prospectus at or prior
to the confirmation of the sale of the Registrable Securities to the person or
entity asserting any such loss, claim, damage or liability.
(b) Each of the Holders shall, if Registrable Securities held by them
are included in the securities as to which such registration is being effected,
severally indemnify the Company, each of its directors and officers who sign
such registration statement, each Affiliate of the Company, each underwriter, if
any, of the Company's securities covered by such registration statement, each
other Holder and each other security holder whose securities are included in
such registration, and each Affiliate thereof against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement of a material fact contained in any such registration
statement under which such Registrable Securities were registered under the
Securities Act, or based on any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such directors, officers, employees,
Affiliates, other Holders or security holders or underwriters for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement or omission is made
in such registration statement in reliance upon and in conformity with
information furnished to the Company by such Holder and stated to be
specifically for use therein; PROVIDED, HOWEVER, that the liability of any
Holder hereunder shall be limited to the amount of net proceeds (after deduction
of all underwriters' discounts and commissions paid by such holder in connection
with the applicable registration) received by such Holder; and PROVIDED,
FURTHER, that the indemnity agreement contained in this Section 11.8(b) shall
not apply (i) to amounts paid in settlement of any such claim, loss, damage or
liability (or actions in respect thereof) if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld, or
(ii) in the case of a sale directly by the Company (including a sale of such
securities through any underwriter retained by the Company to engage in a
distribution on behalf of the Company) in which such untrue statement or
omission was contained in a preliminary prospectus
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and corrected in a final or amended prospectus, and the Company failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the securities to the Person asserting any such
loss, claim, damage or liability.
(c) Each party entitled to indemnification under this Section 11 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and any
claim or any litigation resulting therefrom. In case any action is brought
against an Indemnified Party, and it notifies the Indemnifying Parties of the
commencement thereof, the Indemnifying Party will be entitled to participate in
and, to the extent it so determines, assume the defense thereof; PROVIDED that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or any litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party's expense. After notice
from the Indemnifying Party of its election to so assume the defense thereof,
the Indemnifying Party will not be liable to such Indemnified Party for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof; PROVIDED, HOWEVER, that the Indemnified
Party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the Indemnifying Party, if representation of the Indemnified Party
by the counsel retained by the Indemnifying Party would be inappropriate due to
actual or potential differing interests, as reasonably determined by either
party, between the Indemnified Party and any other party represented by such
counsel in such proceeding. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request and as shall be reasonably required in connection with
the defense of such claim and litigation resulting therefrom.
SECTION 11.9 LOCKUP AGREEMENT. In consideration for the Company
agreeing to its obligations under this Section 11, each Holder agrees in
connection with any registration (other than for the registration of securities
pursuant to (i) an employee benefit plan, (ii) a dividend or interest
reinvestment plan, (iii) other similar plans or (iv) reclassifications of
securities, mergers, consolidations and acquisitions of assets) of the Company's
securities, upon the request of the Company and any underwriter managing any
underwritten primary or secondary offering of the Company's securities, not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Warrants or Registrable Securities without the prior
written consent of the Company and such underwriter, as the case may be, for
such reasonable period of time prior to and after the effective date of such
registration as the Company and such underwriter may specify, PROVIDED that such
period of time will not exceed 180 days, in the case of registration relating to
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the initial Public Offering, and 120 days, in the case of any registration
relating to a Public Offering after the initial Public Offering.
SECTION 11.10 INFORMATION ABOUT THE PURCHASERS. Each Holder shall
promptly furnish to the Company such information regarding itself, its
Affiliates or subsidiaries and the distribution proposed by it as the Company
may reasonably request in writing and as shall be reasonably required in
connection with any registration referred to in this Section 11.
SECTION 11.11 CONDITIONS TO REGISTRATION. As a condition to the
Company's obligation hereunder to cause a registration statement to be filed or
Registrable Securities to be included in a registration statement, each Holder
shall provide such information and execute such documents as may reasonably be
required in connection with such registration. In addition, the Company shall
not be obligated to file a registration statement or to include Registrable
Securities in a registration statement hereunder as to any Holder to the extent
such Registrable Securities can then be sold during a single three-month period
pursuant to Rule 144 (not including Rule 144(k)) under the Securities Act.
SECTION 11.12 RULE 144. With a view to making available the benefits
of certain rules and regulations of the SEC which may permit the sale of the
restricted securities to the public without registration, the Company agrees to
(i) make and keep public information available as those terms are understood and
defined in Rule 144 under the Securities Act at all times from and after ninety
(90) days following the closing date of the first registration under the
Securities Act filed by the Company for an offering of its securities to the
general public, and (ii) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Exchange Act of 1934, as amended, at any time after it has become
subject to such reporting requirements.
SECTION 11.13 TRANSFERABILITY. The registration rights granted in
this Section 11 shall not be assignable in any manner to any transferee of any
of the Warrants or Registrable Securities except in connection with the sale by
the holder of their Warrant or part thereof or the Registrable Securities issued
upon exercise of this Warrant or such securities, as the case may be, in a
transaction not involving a Public Offering.
SECTION 12. TAG-ALONG AND TAKE-ALONG RIGHTS.
SECTION 12.1 TAG-ALONG RIGHT.
(a) TAG-ALONG SALE NOTICE. Subject to Section 20, if the Initial
Shareholder Group (as defined below) at any time receives a bona fide offer (a
"TAG-ALONG OFFER") from a third party to purchase from the Initial Shareholder
Group shares of
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capital stock of the Company or the Initial Shareholder Group otherwise
proposes to sell shares of capital stock of the Company for value, in each
case pursuant to a sale that would constitute a Change in Control (as defined
in the Securities Purchase Agreements) (a "TAG-ALONG SALE"), but other than
in connection with a Public Offering, the Initial Shareholder Group shall be
required to notify (i) prior to the Qualified Public Offering, the original
holder of this Warrant or its Affiliated transferees (provided it or its
Affiliated transferees owns at such time all or a portion of this Warrant or
Warrant Shares), and (ii) after the Qualified Public Offering, the Qualified
Warrantholders (as defined below), not less than fifteen (15) days prior to
such proposed Tag-Along Sale, of such Tag-Along Offer or proposed Tag-Along
Sale and such holder or Qualified Warrantholders, as the case may be, shall
have the option to participate in such Tag-Along Sale as set forth in
paragraph (b) of this Section 12.1. The notice from the Initial Shareholder
Group (the "TAG-ALONG SALE NOTICE") shall include a copy of the Tag-Along
Offer, if in writing, and shall set forth: (A) the number of shares of each
class proposed to be transferred, (B) the name and address of the proposed
purchaser, (C) the proposed amount of consideration and terms and conditions
of payment offered by or to such proposed purchaser, and (D) that the
proposed purchaser has been informed of the "tag-along" rights provided for
in this Section 12.1 and has agreed to purchase shares in accordance with the
terms hereof. For purposes hereof, the term "INITIAL SHAREHOLDER GROUP"
means all of the holders of shares of Voting Common Stock and Class A
Preferred Stock on September 22, 1995 who purchased such shares pursuant to
the Common Stock Purchase Agreement dated October 15, 1993 and the Class A
Preferred Stock Purchase Agreement dated October 15, 1993, respectively, and
the term "QUALIFIED WARRANTHOLDER" means any original holder of a Warrant (or
its Affiliated transferees) who has purchased (and not otherwise transferred)
Warrant Shares or has the right to purchase Warrant Shares and Mezzanine
Warrant Shares, which together constitute more than 50% of all of the Warrant
Shares such holder was entitled to purchase upon exercise of all of the
Warrants issued to such holder pursuant to the Agreement PLUS all of the
Mezzanine Warrant Shares such holder was entitled to purchase upon exercise
of all of the Mezzanine Warrants issued to such holder pursuant to the
Securities Purchase Agreements (in each case, after taking into account all
adjustments to the number of shares underlying such warrants).
(b) TAG-ALONG RIGHT. Each initial holder of Warrants (or its
Affiliated Transferees) prior to the Qualified Public Offering who owns at such
time all or a portion of this Warrant or Warrant Shares and each Qualified
Warrantholder after the Qualified Public Offering shall have the right to
require the proposed purchaser to purchase from it a number of whole shares of
Warrant Shares up to the number of shares equal to the total number of shares to
be sold to the proposed purchaser (including the shares of Voting Common Stock
issuable upon conversion of the Class A Preferred Stock to be sold to the
proposed purchaser),
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multiplied by a fraction, the numerator of which is the number of Warrant Shares
held by it or purchasable upon exercise of Warrants held by it and the
denominator of which is the total number of shares of common stock held (or
entitled to be acquired upon conversion or exercise of convertible securities)
by all of the holders of the Warrants, Warrant Shares, Mezzanine Warrants and
Mezzanine Warrants and the Initial Shareholder Group. Any Warrant Shares
purchased from a Warrantholder pursuant to this Section 12.1 shall be paid for
upon the same terms and conditions (including as to price and type of
consideration) received by the Initial Shareholder Group.
(c) TAG-ALONG NOTICE. If an original Warrantholder (or its
Affiliated transferees) prior to the Qualified Public Offering and a Qualified
Warrantholder after a Qualified Public Offering elects to exercise the tag-along
right provided for in this Section 12.1, it must deliver written notice to the
Initial Shareholder Group (the "TAG-ALONG PARTICIPATION NOTICE") within ten (10)
days following receipt by it of the Tag-Along Sale Notice. If such holder does
not deliver a Tag-Along Participation Notice within such ten-day period it shall
be deemed to have waived its tag-along right with respect to the proposed Tag-
Along Sale. Each Tag-Along Participation Notice shall state the number of
Warrant Shares that such holder proposes to include in such transfer to the
proposed purchaser up to the number of shares determined in accordance with
Section 12.1(b) hereof.
SECTION 12.2 TAKE-ALONG RIGHT.
(a) TAKE-ALONG NOTICE. If the Initial Shareholder Group at any time
prior to a Qualified Public Offering receives a bona fide offer from a third
party (other than an affiliate of the Company, Harvard Private Capital, Inc.,
Apollo Advisors, Inc. or Trace International Holdings, Inc. (provided they are
stockholders of the Company at the time of such sale)) to purchase shares of
capital stock of the Company from the Initial Shareholder Group or the Initial
Shareholder Group otherwise proposes to sell shares of capital stock of the
Company for value (a "TAKE-ALONG SALE"), the Initial Shareholder Group, subject
to paragraph (c) of this Section 12.2, can require the holders of the Warrants
and Warrant Shares to participate in such Take-Along Sale as set forth in
paragraph (b) of this Section 12.2. If the Initial Shareholder Group elects to
exercise the take-along right provided for in this Section 12.2, it must
provide, at least twenty (20) days before the date of consummation of the
proposed Take-Along Sale, notice to the holders of the Warrants and Warrant
Shares setting forth: (i) the number of shares proposed to be transferred, (ii)
the number of Warrant Shares that such holder must include in such transfer to
the proposed purchaser as determined in accordance with paragraph (b) of this
Section 12.2, (iii) the name and address of the proposed purchaser, (iv) the
proposed amount of consideration and terms and conditions of payment offered by
or to such proposed purchaser, and (v) that
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the proposed purchaser has been informed of the "take-along" rights provided for
in this Section 12.2 and has agreed to purchase shares in accordance with the
terms hereof.
(b) TAKE-ALONG RIGHT. The Initial Shareholder Group shall at any
time have the right to require each holder of a Warrant and Warrant Shares to
sell to the proposed purchaser, as applicable, all or a portion of such Warrant
or Warrant Shares up to the sum of the number of shares issuable upon exercise
of such Warrant and such Warrant Shares equal to the total number of shares to
be sold to the proposed purchaser (including the shares of Voting Common Stock
issuable upon conversion of the Class A Preferred Stock to be sold to the
proposed purchaser) multiplied by a fraction, the numerator of which is the
number of Warrant Shares held by such holder after the full exercise of such
holder's Warrants and the denominator of which is the total number of shares of
common stock held (or entitled to be acquired upon conversion or exercise of
convertible securities) by all of the holders of the Warrants, Warrant Shares,
Mezzanine Warrants and Mezzanine Warrant Shares and the Initial Shareholder
Group. Any shares purchased from holders of Warrants and Warrant Shares
pursuant to this Section 12.2 shall be paid for (i) upon the same terms and
conditions (including as to price and type of consideration) received by the
Initial Shareholder Group and (ii) in either all cash or a combination of cash
and securities; PROVIDED, HOWEVER, that if such securities are not or, at the
option of such holders, will no longer be restricted securities (as such term is
defined in Rule 144 of the Securities Act) within 180 days of the date such sale
is consummated or if such securities are otherwise subject to restrictions
pursuant to any shareholders' agreement entered into in connection with such
Take-Along Sale that precludes the transfer of such securities within 180 days
of the date such sale is consummated, or if a reasonably liquid trading market
does not exist for such securities, then, unless the holders of at least 66 2/3%
of the sum of (A) the Warrant Shares outstanding or subject to issuance upon
exercise of the Warrants and (B) the Mezzanine Warrant Shares outstanding or
subject to issuance upon exercise of the Mezzanine Warrants elect to receive
such securities, the Initial Shareholder Group may require each holder of a
Warrant or Warrant Shares to sell Warrant Shares to the proposed purchaser
pursuant to this Section 12 only if the Company or the Initial Shareholder Group
pays such holder an amount in cash equal to the then current fair market value
of such securities as determined in good faith by the Company's Board of
Directors. In the event that such holders of 66 2/3% of such Warrant Shares and
Mezzanine Warrant Shares do not agree with such determination, then the then
current fair market value of such securities shall be determined as follows,
which determination shall be final and binding:
(i) The Company shall select a qualified investment banking
firm or appraisal firm (the "INVESTMENT BANKER") and any such holders may select
their own qualified
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investment banking firm or appraisal firm (the "ADDITIONAL APPRAISER"), each to
appraise the then current fair market value of such securities.
(ii) If the difference between the appraisals of the
Investment Banker and the Additional Appraiser is not greater than 10% of the
higher appraisal, then the average of the two appraisals shall be deemed to be
the then current fair market value of such securities.
(iii) If the difference between the appraisals of the
Investment Banker and the Additional Appraiser is greater than 10% of the higher
appraisal, then the Investment Banker and the Additional Appraiser shall select
a third appraiser (the "THIRD APPRAISER"), and the then current fair market
value shall be determined by (1) averaging the appraisal of each of the
Investment Banker, the Additional Appraiser and the Third Appraiser, (2)
disregarding the appraisal which deviates most from such average and (3)
averaging the remaining two appraisals. The fees and expenses of the Investment
Banker, the Additional Appraiser and the Third Appraiser shall be borne equally
by the Company and such holders, PROVIDED that such holders may pay their share
of such fees and expenses from the proceeds they receive in connection with the
Take-Along Sale.
(c) FAIRNESS OPINION. As a condition precedent to the consummation
of the Take-Along Sale, the Initial Shareholder Group shall furnish to the
holders of the Warrants and Warrant Shares an opinion (in form and substance
reasonably satisfactory to such holders) of an unaffiliated, nationally
recognized investment banking firm as to the fairness of the Take-Along Sale to
such holders from a financial point of view.
SECTION 12.3. IMPROPER TRANSFER. Any attempt to transfer any shares
not in compliance with this Section 12 shall be null and void and neither the
Company nor any transfer agent shall give any effect in the Company's stock
records to such attempted transfer.
SECTION 13. RIGHT OF FIRST REFUSAL AND PRE-EMPTIVE RIGHTS.
SECTION 13.1 RIGHT OF FIRST REFUSAL.
(a) FIRST OFFER NOTICE. Prior to the Qualified Public Offering, no
holder of a Warrant or Warrant Shares shall transfer all or any portion of a
Warrant or any Warrant Shares (collectively, the "OFFERED SHARES") to any person
or entity (other than an Affiliate) unless (x) such holder (the "SELLING
WARRANTHOLDER") has received a bona fide written offer (the "PURCHASE OFFER")
from the proposed transferee of the Offered Shares (the "PURCHASER") to purchase
the Offered Shares, which offer shall be in writing signed by the Purchaser, and
(y) the Selling Warrantholder first offers to sell to the Company and
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each member of the Initial Shareholder Group such number of Offered Shares as is
determined in accordance with paragraph (c) of this Section 13.1. Prior to
making any transfer that is subject to this Section 13.1, the Selling
Warrantholder shall give the Company and each member of the Initial Shareholder
Group written notice (the "OFFER NOTICE") which shall include (x) the identity
of the Purchaser, (y) a copy of the Purchase Offer, and (z) an offer (the "FIRST
OFFER") to sell to the Company and each such member of the Initial Shareholder
Group its Pro Rata Amount (as defined in paragraph (c) below) of the Offered
Shares upon the same terms and conditions as those provided for in the Purchase
Offer. The First Offer shall be irrevocable with respect to the Initial
Shareholder Group for a period of fifteen (15) days following receipt by each
member of the Initial Shareholder Group of the Offer Notice (the "FIRST OFFER
PERIOD") and, with respect to the Company, for a period of twenty (20) days
following receipt by the Company of the Offer Notice.
(b) ACCEPTANCE OF FIRST OFFER. At any time during the First Offer
Period, each member of the Initial Shareholder Group may accept the First Offer
as to its respective Pro Rata Amount of the Offered Shares by giving written
notice to the Selling Warrantholder of such acceptance (each such member of the
Initial Shareholder Group who accepts the First Offer in the manner provided
herein is referred to herein as a "PURCHASING STOCKHOLDER"). In the event that
the Purchasing Stockholders, individually or collectively, do not accept the
First Offer as to all of the Offered Shares, then within five days of the end of
the First Offer Period, the Company may, by giving written notice to the Selling
Warrantholder, accept the First Offer as to all, but not less than all, of the
Offered Shares as to which the Purchasing Stockholders have not accepted the
First Offer. In the event that the Initial Shareholder Group and the Company
accept the First Offer as to all of the Offered Shares, the closing of the sale
of the Offered Shares shall take place within thirty-five (35) days after the
First Offer is accepted by all Purchasing Stockholders, or the Company, as the
case may be, or, if later, the date of closing set forth in the Purchase Offer.
At such closing, the Selling Warrantholder will deliver certificates for such
Offered Shares against payment of the purchase price therefor, and the
Purchasing Stockholders, or the Company, as the case may be, will acquire their
respective Pro Rata Amount of the Offered Shares, or the remaining Offered
Shares, as the case may be, free and clear of all liens, pledges, encumbrances,
restrictions and security interests of any kind. If the Initial Shareholder
Group and the Company do not purchase all of the Offered Shares, the Selling
Warrantholder may sell the Offered Shares to the Purchaser at any time within
sixty (60) (or such later date as is necessary to receive all approvals required
in connection with such sale, not to exceed 120 days (or 150 days if
Manufacturer Approvals are required)), days after the last day of the First
Offer Period, PROVIDED that such sale shall be made on terms no less favorable
to the Selling Warrantholder than the terms contained in the Purchase Offer and
PROVIDED FURTHER that
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such sale complies with the terms, conditions and restrictions of the Warrants.
The Company will cooperate with the Selling Warrantholder in seeking any
required manufacturer approvals and will permit third parties to conduct
reasonable due diligence in connection with the Selling Warrantholder's attempt
to sell the Offered Shares, PROVIDED such due diligence does not materially
interfere with the Company's operations. In the event that the Offered Shares
are not sold in accordance with the terms of the preceding sentence, the Offered
Shares shall again be subject to all of the conditions and restrictions of this
Section 13.1.
(c) DETERMINATION OF PRO RATA AMOUNT. Each Purchasing Stockholder
shall be obligated to purchase pursuant to this Section 13.1 a number of Offered
Shares as shall equal the product obtained by multiplying (x) the number of
Offered Shares not being purchased by the Company by (y) a fraction, the
numerator of which shall be equal to the number of shares of Voting Common Stock
owned by such Purchasing Stockholder (including the shares of Voting Common
Stock issuable upon conversion of the shares of Class A Preferred Stock owned by
such Purchasing Stockholder) and the denominator of which shall be equal to the
total number of shares of Voting Common Stock owned by all of the Purchasing
Stockholders (including the shares of Voting Common Stock issuable upon
conversion of the shares of Class A Preferred Stock owned by such Purchasing
Stockholders) (the "PRO RATA AMOUNT").
SECTION 13.2 PRE-EMPTIVE RIGHTS. Prior to the Qualified Public
Offering, a Qualified Warrantholder shall have the right, in accordance with
procedures comparable to those set forth in Article VI of the Company's Restated
Certificate of Incorporation applicable to "Qualified Warrantholders" (as such
term is used therein), to purchase a PRO RATA portion of any additional shares
of capital stock issued by the Company deemed to be "New Securities" in
accordance with the Company's Restated Certificate of Incorporation.
SECTION 13.3 IMPROPER TRANSFER. Any attempt to transfer any shares
not in compliance with this Section 13 shall be null and void and neither the
Company nor any transfer agent shall give any effect in the Company's stock
records to such attempted transfer.
SECTION 14. NOTICES. Any notice by the Company, the holder of this
Warrant or the holders of Warrant Shares or Registrable Securities shall be in
writing and shall be deemed to have been duly given if delivered or mailed by
certified mail five days after mailing, return receipt requested (a) if to the
Company, 375 Park Avenue, 22nd Floor, New York, New York 10022, or at such other
address as the Company may designate by notice to each holder of Warrants,
Warrant Shares or Registrable Securities at the time outstanding, (b) if to any
Purchaser that holds Warrants, Warrant Shares or Registrable Securities, at such
Purchaser's address set forth on the signature page to the
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Agreement or at such other address as such Purchaser may designate by notice to
the Company, and (c) if to any other holder of Warrants, Warrant Shares or
Registrable Securities, at the address of such holder as it appears on the
Security Register.
SECTION 15. SUCCESSORS. Except as expressly provided in Sections
3.2, 3.3 and 11.13, this Warrant shall bind and inure to the benefit of the
Company and its permitted successors and assigns hereunder, the Purchasers and
their respective successors and assigns hereunder and, in addition, shall inure
to the benefit of and be enforceable by all holders from time to time of the
Warrants, the Warrant Shares and the Registrable Securities. Without limiting
the generality of the foregoing, the rights and obligations of the Purchasers
and their respective successors and assigns as holders of Warrants and
Registrable Securities (including without limitation rights and obligations as
to registrations and other matters covered by Sections 11, 12 and 13) shall
survive any reorganization, consolidation or merger of the Company with or into
another entity or the sale or conveyance to another person of the property,
assets or business of the Company as an entirety or substantially as an entirety
and such successor or purchasing entity or person, as the case may be, shall
execute such agreements or other instruments as may be reasonably requested by
the holder of this Warrant to give effect to the foregoing.
SECTION 16. APPLICABLE LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 17. BENEFITS OF THIS AGREEMENT. Nothing in this Warrant
shall be construed to give to any person or corporation other than the Company,
the holder of this Warrant and the holders of the Warrant Shares or Registrable
Securities any legal or equitable right, remedy or claim under this Warrant and
this Warrant shall be for the sole and exclusive benefit of the Company, the
holder hereof and the holders of the Warrant Shares and the Registrable
Securities.
SECTION 18. SURVIVAL; INTERPRETATION. All covenants and agreements
of the Company that relate to the Warrant Shares or the Registrable Securities
and all rights and duties of the holders from time to time of the Warrant Shares
or the Registrable Securities in this Warrant (including without limitation all
rights and duties contained in Sections 11, 12 and 13) shall be deemed to
survive any surrender hereof to the Company upon exercise hereof as contemplated
by Section 1. References herein to the Agreement and terms defined therein
shall be deemed to survive the termination of the Agreement. Prior drafts of
this Warrant shall not be used as a basis for interpreting this Warrant.
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SECTION 19. AMENDMENT AND WAIVER. This Warrant may be amended, and
the observance of any term hereof may be waived, only in accordance with Section
9.7 of the Agreement.
SECTION 20. CERTAIN ADDITIONAL AGREEMENTS. Trace International
Holdings, Inc., Aeneas Venture Corporation and AIF II, L.P., who on the date
hereof collectively own more than 92% of shares of the Company's capital stock
owned by the Initial Shareholder Group, have entered into an agreement assuming
and agreeing to perform the terms and conditions of Section 12.1.
SECTION 21. SPECIFIC PERFORMANCE. The rights of the Company, the
holder hereof and the holders of the Warrant Shares and the Registrable
Securities are unique, and, accordingly, each shall, in addition to such other
remedies as may be available to any of them at law or in equity, have the right
to enforce their rights under this Warrant by actions for injunction or specific
performance to the extent permitted by law.
SECTION 22. PRIVATE PLACEMENT NUMBER. If the Warrant Shares to be
issued upon exercise of this Warrant do not already have a CUSIP number assigned
to them by Standard & Poor's CUSIP Service Bureau, the Company shall use its
reasonable efforts to obtain a Private Placement Number issued by Standard &
Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office
of the National Association of Insurance Commissioners) for the Warrant Shares
prior to the issuance of any such Warrant Shares.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its duly authorized officer.
Dated: _________________
UNITED AUTO GROUP, INC.
By:_________________________
Carl Spielvogel
Chairman of the Board and
Chief Executive Officer
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ELECTION TO PURCHASE
Attn: __________________________
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the Warrant to which this Election to Purchase is attached for,
and to purchase thereunder, ____________ shares of Class A Preferred Stock (or
other securities into which such shares are convertible, as specified below) of
the Company provided for therein, and requests that certificates for said shares
(or other securities) be issued in the name of:
(Please Print Name and Address)
and, if said number of shares shall not be all the shares purchasable hereunder,
that a new Warrant certificate for the balance of said shares purchasable under
the said Warrant be registered in the name of the undersigned holder or its
nominee as below indicated and delivered to the address stated below.
Dated: _________________, _____
Class of capital stock requested:___________________
Name of holder or
Nominee (Please Print): ____________________________
Address: ___________________________________________
Signature: _____________________________
Signature Guaranteed:
<PAGE>
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(Name and Address of Assignee must be Printed or Typewritten)
the within Warrant with respect to ____ shares, hereby irrevocably constituting
and appointing _________________________ Attorney to transfer said Warrant on
the books of United Auto Group, Inc. with full power of substitution in the
premises.
All notices to be given by the Company to the Warrant holder pursuant to
Section 10 of the within Warrant shall be sent to the assignee at the above
listed address, and, if the number of shares being hereby assigned is less than
all of the shares covered by the within Warrant, then also to the undersigned.
The undersigned requests that the Company execute and deliver, if necessary
to comply with the provisions of Section 3 of the within Warrant, a new Warrant
or, if the number of shares being hereby assigned is less than all of the shares
covered by said Warrant, new Warrants in the name of the undersigned, the
assignee and/or the assignees, as is appropriate.
Dated: __________________, ____
Signature of Registered Holder
<PAGE>
EXHIBIT A
TO WARRANT
[Name of Warrant Holder]
[Address]
Re: CONTINGENT VALUE OBLIGATIONS AGREEMENT
Ladies and Gentlemen:
The Contingent Value Obligations Agreement (this "Agreement") hereby
evidences ____________________ contingent value obligations ("CVOs") of United
Auto Group, Inc. (the "Company") to you, received by you upon conversion of the
Warrants (as defined below) held by you prior to the date hereof.
1. PURPOSE. The purpose of this Agreement is to provide the holders
of the Warrants (as defined below) with economic benefits substantially similar
to those that would have been realized by the holders of the Warrants in the
event that the Manufacturer Approvals (as defined in the Warrants) had been
obtained and such Warrants had been exercised and the shares of Class A
Preferred Stock (as defined in the Warrants) issued upon such exercise had been
sold.
2. DEFINITIONS.
"BASE VALUE" of each CVO granted under this Agreement shall be
equal to $0.01, subject to adjustment as provided in Section 3(b) hereof.
"BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
"FAIR MARKET VALUE" shall mean the fair market value of the
Company on the Redemption Date, as mutually determined in good faith by the
Board and the holders of a majority of the CVOs, provided that if the Board and
such holders cannot agree on such Fair Market Value, then such Fair Market Value
shall be determined by an independent, nationally recognized investment banking
firm mutually selected by the Company and the holders of a majority of the CVOs.
The cost of such investment banking firm shall be borne equally by the Company
and the holders of the CVOs. In the event that the Company and the holders of a
majority of the CVOs do not agree on such investment banking firm, then the Fair
Market Value shall be determined as follows, which determination shall be final
and binding:
<PAGE>
(i) The Company shall select a qualified investment banking
firm or appraisal firm (the "Investment Banker") and the holders of a majority
of the CVOs shall select a qualified investment banking firm or appraisal firm
(the "Additional Appraiser"), each to appraise the Fair Market Value.
(ii) If the difference between the appraisals of the
Investment Banker and the Additional Appraiser is not greater than 10% of the
higher appraisal, then the average of the two appraisals shall be deemed to be
the Fair Market Value.
(iii) If the difference between the appraisals of the
Investment Banker and the Additional Appraiser is greater than 10% of the higher
appraisal, then the Investment Banker and the Additional Appraiser shall select
a third appraiser (the "Third Appraiser"), and the Fair Market Value shall be
determined by (1) averaging the appraisal of each of the Investment Banker, the
Additional Appraiser and the Third Appraiser, (2) disregarding the appraisal
which deviates most from such average and (3) averaging the remaining two
appraisals. The fees and expenses of the Investment Banker, the Additional
Appraiser and the Third Appraiser shall be borne equally by the Company and such
holders.
"FAIR MARKET VALUE PER SHARE" shall mean, on the Redemption Date,
the Fair Market Value, divided by the sum of (i) the total number of shares of
capital stock of the Company (including the number of shares of capital stock of
the Company issuable upon the exercise or conversion of Derivative Securities
(as defined in the Warrants)) outstanding immediately prior to the Redemption
Date and (ii) the total number of CVOs outstanding immediately prior to the
Redemption Date. The Fair Market Value Per Share shall be determined based on
the proportionate share of one share of Class A Preferred Stock of the overall
Fair Market Value of the Company (taking into account all adjustments to the
Applicable Conversion Value (as defined in the Company's Restated Certificate of
Incorporation, as amended) relating to the Class A Preferred Stock from the date
of original issuance of the Warrants).
"MEZZANINE CVOS" shall mean the Contingent Value Obligations
issued upon conversion of the Mezzanine Warrants (as defined in the Warrants).
"REDEMPTION DATE" shall mean the date on which the Company
receives notice of the Redemption Request (as defined below).
"REDEMPTION PRICE" shall mean, with respect to each CVO being
redeemed by the Company upon the exercise of the redemption right set forth in
Section 4 hereof, the amount by which (i) the Fair Market Value Per Share on the
Redemption Date exceeds (ii) the Base Value of such CVO.
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<PAGE>
"REQUIRED CVO HOLDERS" shall mean the holders of at least 66-2/3%
of the sum of the outstanding CVOs and the outstanding Mezzanine CVOs.
"VALUE NOTES" shall mean promissory notes issued by the Company
pursuant to Section 4 hereof containing such terms as shall be agreed to by the
Company and the holders of a majority of the CVOs. If the Company and such
holders cannot agree on the terms of the Value Notes, such terms shall be
determined by an investment banking firm selected by the Company (the cost of
whom shall be borne equally by the Company and such holders).
"WARRANTS" shall mean all warrants originally issued pursuant to
the Warrant Purchase Agreement, dated as of July 10, 1996, among the Company,
J.P. Morgan Capital Corporation and The Equitable Life Assurance Society of the
United States, and all warrants delivered in substitution or exchange for such
warrants. The term "Warrant" means one of the Warrants.
"WARRANT SHARES" shall mean, collectively, the shares of Class A
Preferred Stock acquired pursuant to the exercise of the Warrants and any
securities issued or issuable with respect to such Class A Preferred Stock by
way of stock dividend or other distribution or stock split or in connection with
a combination of shares, conversion, recapitalization, merger, consolidation or
other reorganization or otherwise.
3. ISSUANCE OF CVOS.
(a) CONVERSION OF WARRANTS INTO CVOS. Each Warrant shall be
converted into a number of CVOs equal to the number of Warrant Shares issuable
upon exercise of such Warrant.
(a) ADJUSTMENT OF CVOS. The number and Base Value of CVOs
granted hereunder shall be adjusted in substantially the same manner as the
number and price of Warrant Shares is subject to adjustment as set forth in
Section 8 of the Warrants.
(c) NATURE OF CVOS. The CVOs granted hereunder shall be used
solely as a device for the measurement and determination of the aggregate
principal amount of the Value Notes to be issued to each holder of a CVO as
provided in this Agreement. CVOs shall not constitute or be treated as a trust
fund of any kind or as stock, stock options or other form of equity or security.
A holder of a CVO shall have only those rights set forth in this Agreement with
respect to CVOs granted to it and shall have no rights as a shareholder of the
Company by virtue of having been granted CVOs.
4. REDEMPTION OF CVOS. Upon the written request of the holders of
the Required CVO Holders (the "Redemption Request"), at any time prior to the
Termination Date (as defined in the Warrants), the Company shall be required to
redeem, and all of the holders of outstanding CVOs shall be required to submit
for redemption, all, but not less than all, of the outstanding CVOs for an
amount equal to the Redemption Price, which the Company shall pay by issuing
Value Notes to all of the holders of CVOs in an aggregate principal amount equal
to the aggregate Redemption Price for all outstanding CVOs pursuant to the
applicable Contingent Value Obligations Agreements. The CVOs shall be submitted
for redemption contemporaneously with the Mezzanine CVOs.
5. PURCHASE OF VALUE NOTES. On or prior to the expiration of seven
months after the Redemption Date, either (i) the investment banking firm
determining the terms of the Value Notes pursuant to Section 4 hereof or another
third party identified by the Company shall purchase all of the Value Notes at
par or (ii) the Company, at its option, shall repurchase all or a portion of the
Value Notes at par, provided that if the Company repurchases less than all of
the Value Notes, it will assure that the remaining outstanding Value Notes are
concurrently purchased by a third party at par. On the date such Value Notes
are purchased, the Company shall pay each holder of the CVOs an amount equal to
its proportionate share of the interest accrued on the aggregate principal
amount of the Value Notes from the Redemption Date through the date of such
purchase, which interest shall accrue at a per annum rate equal to the interest
rate per annum payable on six-month U.S. Government Treasury bills on the
Redemption Date, as reported by The Wall Street Journal.
6. CONVERSION INTO WARRANTS. In the event the Manufacturer
Approvals (as defined in the Warrants) are received after the issuance but prior
to the redemption of the CVOs, each holder of such unredeemed CVOs, upon written
notice from the Company, shall be required to convert such CVOs into the
Warrants which were previously converted into such CVOs, and this Agreement
shall terminate and cease to be of any further force or effect.
7. SUCCESSORS. The obligations of the Company under this Agreement
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Company. The Company
agrees that it will make appropriate provision for the preservation of the
rights of the holders of the CVOs under this Agreement in any agreement or plan
which it may enter into or adopt to effect any such merger, consolidation or
reorganization.
8. NOTICE. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery,
delivery by facsimile or upon deposit in the United States Post Office, by
registered or certified mail, postage prepaid, addressed, if to the Company, to
its principal executive offices located at 375 Park Avenue, 22nd Floor, New
York, NY 10022, facsimile no. (212) 223-5148, attention: Chief Executive
Officer, and if to any holder of a CVO, to such holder's address or facsimile
number as shown on the records of the Company, as applicable, or at such other
address or facsimile number as such party may designate by written notice to the
Company or such holder, as applicable, given in the manner herein provided.
9. TRANSFERABILITY. Neither the CVOs nor any rights arising under
this Agreement shall be transferable without the prior written consent of the
Company, other than to an Affiliate (as defined in the Warrants) of the holder
of the CVOs being transferred.
10. AMENDMENT. This Agreement may be amended with the written
consent of the Company and the holders of a majority of the CVOs.
11. GOVERNING LAW. This Agreement is to be governed by and construed
in accordance with the laws of the State of New York, without reference to the
principles of conflicts of laws thereof.
If you are in agreement with the foregoing, please sign in the space
provided below and return an executed copy of this Agreement to us.
Sincerely,
UNITED AUTO GROUP, INC.
By:____________________
Name:
Title:
Accepted and agreed to
as of ________________ , 199__ :
[Name of CVO Holder]
By: ___________________
Name:
Title:
<PAGE>
APPENDIX
[THIS APPENDIX IS FILED FOR CONVENIENCE ONLY
AND DOES NOT CONSTITUTE A PART OF THE ADDITIONAL WARRANT]
TERMS DEFINED IN THE SECURITIES PURCHASE AGREEMENTS
"ATLANTIC AUTO" means Atlantic Auto Finance Corporation, a Delaware
corporation and a Subsidiary of the Company.
"CHANGE IN CONTROL" shall be deemed to have occurred if (a) the
Company shall convey, transfer or lease all or substantially all of its assets
in a single transaction or series of transactions to any Person (other than a
wholly owned Subsidiary) or (b) (i) prior to the consummation of a Qualified
Public Offering, the Initial Shareholders shall cease to own in the aggregate at
least a majority of the issued and outstanding Voting Stock, on a fully diluted
basis, of the Company or (ii) after the consummation of a Qualified Public
Offering a Person (other than an Initial Shareholder) or a "group" of Persons
(other than Initial Shareholders) shall own in the aggregate more of the issued
and outstanding Voting Stock, on a fully diluted basis, of the Company than the
Initial Shareholders; for purposes of this definition, the term "GROUP" shall
have the meaning ascribed thereto in sections 13(d) and 14(d) of the Exchange
Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"INITIAL SHAREHOLDERS" means the shareholders of the Company as of
September 22, 1995 and, if natural persons, members of their immediate families,
or lineal descendants of any thereof, or any combination of any of the
foregoing.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"QUALIFIED PUBLIC OFFERING" means, as at any date, the sale in an
underwritten public offering registered under the Securities Act of shares of
the Company's capital stock resulting in aggregate gross proceeds (before
deducting underwriting commissions and discounts and together with the gross
proceeds of any such underwritten public offering previously consummated) of an
amount at least equal to $30,000,000 pursuant to which the Company has a market
capitalization of at least $100,000,000.
"SUBSIDIARY" means, as to any Person, any corporation or other
business entity a majority of the combined voting power of all Voting Stock of
which is owned by such Person or one or
<PAGE>
more of its Subsidiaries or such Person and one or more of its Subsidiaries,
PROVIDED, that Atlantic Auto shall not constitute a "Subsidiary" of the Company
for any purpose under the Agreements other than Section 5, Section 10.4 therein
and the restrictions (and exceptions thereto) in Section 10.6(a) therein
prohibiting the Company or a Subsidiary from redeeming, purchasing or otherwise
acquiring capital stock of the Company. Unless the context otherwise clearly
requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the
Company.
"VOTING STOCK" means, with respect to any Person, any shares of stock
or other equity interests of any class or classes of such Person whose holders
are entitled under ordinary circumstances (irrespective of whether at the time
stock or other equity interests of any other class or classes shall have or
might have voting power by reason of the happening of any contingency) to vote
for the election of a majority of the directors, managers, trustees or other
governing body of such Person.
2
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is dated as of June 21, 1996, and is entered
into between United Auto Group, Inc. (formerly EMCO Motor Holdings, Inc.), a
Delaware corporation (the "Company"), and Carl Spielvogel ("Executive").
WHEREAS, Executive and the Company entered into an Employment
Agreement dated as of October 18, 1994 (the "Original Agreement");
WHEREAS, on April 3, 1996, Executive and the Company amended the stock
option portion of the Original Agreement; and
WHEREAS, Executive and the Company desire to amend certain other terms
of the Original Agreement and to embody in this Agreement all the terms and
conditions of Executive's employment by the Company as so amended.
NOW, THEREFORE, the parties hereby agree that this Agreement
supersedes and supplants the Original Agreement in all respects and further
agree as follows:
ARTICLE I.
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.1 EMPLOYMENT. The Company shall employ Executive as Chief
Executive Officer and Chairman of the Board of Directors (the "Board") of the
Company. Executive hereby accepts such employment. Executive agrees to devote
substantially all of his business time and efforts to the business of the
Company. Anything herein to the contrary notwithstanding, nothing shall
preclude Executive from (i) serving on the boards of directors of a reasonable
number of other corporations or trade associations and/or charitable
organizations, (ii) engaging in charitable activities and community affairs,
(iii) rendering consulting services to clients on an occasional basis, and (iv)
managing his personal investments and affairs, provided that such activities do
not materially interfere with the proper performance of his duties and
responsibilities as the Company's Chief Executive Officer and Chairman.
1.2 DUTIES AND RESPONSIBILITIES. Executive shall be responsible
for the general management of the affairs of the Company (subject to the day-to-
day operating control of certain of the Company's subsidiaries which the Board
or the Executive Committee thereof (the "Executive Committee") may specifically
allocate to other senior officers of the Company to the extent
<PAGE>
required by agreements to which the Company or any of its subsidiaries are
subject (other than agreements with such senior officers), including franchise
agreements with automobile manufacturers or authorized distributors thereof) and
shall be required to perform such duties and responsibilities as are consistent
with his position and as the Board or the Executive Committee may from time to
time prescribe.
1.3 BOARD AND EXECUTIVE COMMITTEE MEMBERSHIP. During the Term (as
defined in Section 2.1), the Company will nominate Executive for election to the
Board and will use its best efforts to secure Executive's election to the Board
and his appointment as a member of the Executive Committee.
1.4. REPORTING. Executive shall report, in the performance of his
duties, directly to the Board. During the Term, Executive shall be the only
officer of the Company or any subsidiary of the Company required to report
directly to the Board or the Executive Committee, and all other officers of the
Company and its subsidiaries shall report directly, or indirectly through their
superiors, to Executive.
ARTICLE II.
TERM
2.1 TERM. The term of Executive's employment under this Agreement
(the "Term") shall commence on October 18, 1994 and shall continue until
December 31, 2000; provided that (i) the Term shall be renewed for an additional
one-year period as of January 1 of each calendar year commencing with calendar
year 2001 (each, a "Renewal Date"), unless either the Company or Executive gives
written notice, at least ninety (90) days prior to a Renewal Date, of its or his
intention not to so renew the Term, and (ii) the Term may be terminated earlier
as provided in Article V hereof.
ARTICLE III.
COMPENSATION AND EXPENSES
3.1 SALARY, BONUSES AND BENEFITS. As compensation and
consideration for the performance by Executive of his obligations under this
Agreement, Executive shall be entitled to the following (subject, in each case,
to the provisions of Article V hereof):
(a) BASE SALARY. The Company shall pay Executive an annualized
base salary during the Term, payable in accordance with the normal payment
procedures of the Company and subject to such withholdings and other normal
employee deductions as may be required by law, of $750,000 through December 31,
1996 and of $1,000,000 beginning January 1, 1997. The base salary shall be
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<PAGE>
reviewed no less frequently than annually for increase. Determination as to any
increase shall be in the sole discretion of the Board or the Compensation
Committee thereof (the "Compensation Committee").
(b) BONUS. The Company shall pay Executive an annual, fiscal
year bonus during the Term commencing with the year beginning January 1, 1995 in
an amount determined by the Compensation Committee (or in the absence of such a
committee, by the Executive Committee or the Board), provided that (i) if the
Company meets the plan established by the Company prior to each year providing
for certain financial and other performance targets to be agreed upon by the
Compensation Committee (or in the absence of such a committee, by the Executive
Committee or the Board) and Executive, such bonus will be at least equal to 50%
of Executive's base salary, and (ii) in no event shall such bonus exceed an
amount equal to Executive's base salary. The bonus shall be paid within 90 days
after the end of each full fiscal year of the Company during the Term.
(c) STOCK OPTIONS.
(i) On April 3, 1996, the Company amended the option granted to
Executive under the Original Agreement. As so amended, such option (the "First
Option") in the form of Exhibit A hereto entitles Executive to purchase up to
400,000 shares of the Company's Voting Common Stock, par value $0.0001 per share
("Common Stock") at an exercise price of $10.00 per share. Subject to Article V
hereof, the First Option will vest and become exercisable ratably in four
installments as follows: one-fourth of the number of shares covered under the
First Option on each of the first, second, third and fourth anniversaries of
October 18, 1994. The First Option shall terminate on October 18, 2004, subject
to earlier termination as provided in Article V hereof.
(ii) Effective as of the effective date of the registration
statement filed in connection with the IPO (as defined in Section 5.3) (the "IPO
Date"), the Company shall grant to Executive, under the Company's Stock Option
Plan, an option (the "Second Option") in the form of Exhibit B hereto to
purchase up to 100,000 shares of Common Stock at an exercise price equal to the
price per share to the public set forth on the cover of the prospectus relating
to the IPO. Subject to Article V hereof, the Second Option will vest and become
exercisable ratably in four installments as follows: one-fourth of the number
of shares covered under the Second Option on each of the first, second, third
and fourth anniversaries of the IPO Date. The Second Option shall terminate on
the tenth anniversary of the IPO Date, subject to earlier termination as
provided in Article V hereof.
(iii) Effective as of the first anniversary of the IPO Date
(the "Third Grant Date"), the Company shall grant to Executive, under the
Company's Stock Option Plan, an option (the
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<PAGE>
"Third Option" and, collectively with the First Option and the Second Option,
the "Options") in the form of Exhibit B hereto to purchase up to 100,000 shares
of Common Stock at an exercise price per share equal to the Market Price (as
defined below) of one share of Common Stock on the day immediately preceding the
Third Grant Date. Subject to Article V hereof, the Third Option will vest and
become exercisable ratably in four installments as follows: one-fourth of the
number of shares covered under the Third Option on each of the first, second,
third and fourth anniversaries of the Third Grant Date. The Third Option shall
terminate on the tenth anniversary of the Third Grant Date, subject to earlier
termination as provided in Article V hereof.
For purposes of this Section 3.1(c), the term "Market Price"
means (1) the reported last sales price regular way or, if no such reported sale
occurs on such day, the average of the closing bid and asked prices regular way
on such day, in each case on the principal national securities exchange in which
the Common Stock is listed or admitted to trading or on the National Market
System of the Nasdaq Stock Market if the Common Stock is listed thereon, or (2)
if the Common Stock is not listed or admitted to trading on any national
securities exchange or on the National Market System of the Nasdaq Stock Market,
the average of the closing bid and asked prices in the over-the-counter market
on such day as reported by the Nasdaq Stock Market or National Quotation System,
Inc.; in any case where the price cannot be determined as aforesaid on the
relevant day, it shall be determined on the next preceding day on which such
determination can be made as aforesaid.
(iv) The Company and certain of its stockholders are parties to
a stockholders agreement (the "Stockholders Agreement") delivered pursuant to
Sections 4.7 and 5.3 of each of the Preferred Stock Purchase Agreement (the
"Preferred Stock Purchase Agreement"), dated as of October 15, 1993, among the
Company, certain investors named therein, Trace International Holdings, Inc.
("TIHI"), and Ezra P. Mager ("Mager") and the Common Stock Purchase Agreement
(the "Common Stock Purchase Agreement"), dated as of October 15, 1993, among the
Company, TIHI and Mager. For so long as the Stockholders Agreement shall be in
effect, it shall be a condition precedent to the exercise of the Options by
Executive that Executive execute and deliver a counterpart of the Stockholders
Agreement, as a result of which he shall be deemed to be a "Stockholder"
thereunder and bound by all of the applicable provisions of the Stockholders
Agreement.
(v) Upon the request of the Company's underwriters managing any
underwritten public offering of the Common Stock, Executive shall not sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any shares of Common Stock acquired upon exercise of the Options for
such period of time from the effective date of such offering as the Company or
the underwriters may specify, provided
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<PAGE>
that any such restriction on such disposition by Executive shall not exceed 180
days.
(vi) The Options shall not be transferable, except by will or
the laws of descent and distribution, provided that Executive may at any time
transfer all or a portion of the Options to his spouse, any of his descendants
or trusts for the benefit of Executive, his spouse or his descendants, subject
to all of the terms and conditions of the Options.
(vii) Executive shall enter into a stock option agreement with
the Company with respect to the First Option in the form of Exhibit A hereto and
with respect to each of the Second Option and the Third Option in the form of
Exhibit B hereto.
(viii) From the date hereof until the IPO Date, with respect to
the Second Option, and until the Third Grant Date, with respect to the Third
Option, upon any change in the outstanding shares of Common Stock by reason of
any recapitalization, merger, consolidation, spin-off, combination or exchange
of shares or other corporate change, or any distributions to common shareholders
other than ordinary cash dividends, the Company shall make such substitutions or
adjustments as are appropriate and equitable, as to the number or kind of shares
of Common Stock or other securities covered by such Option and the exercise
price thereof.
(d) BENEFIT PLANS. Executive shall participate during the Term
in all employee pension and welfare benefit plans and programs made available to
the Company's senior-level executives generally, as such plans or programs may
be in effect from time to time, including, without limitation, pension, savings
and other retirement plans and programs, in each case to the extent and in the
manner available to all other senior level executives of the Company and subject
to the terms and provisions of such plans or programs. To the extent there is a
period of employment required as a condition for full benefit coverage under any
employee benefit program, to the extent permissible under such program,
Executive shall be deemed to have met such requirement. Notwithstanding the
foregoing, while Executive and his family are covered by the medical and dental
plans of his prior employer, he will not participate in the medical and dental
plans of the Company. Executive and his family are entitled to such coverage
under the medical and dental plans of his prior employer at his prior employer's
expense until December 31, 1996 and thereafter may continue such coverage at his
expense. The Company agrees that whenever Executive is required to pay for such
coverage the Company shall reimburse him for the amount of such payments on a
"tax grossed-up basis" so that Executive will not be "out-of-pocket" on an
after-tax basis with respect to such reimbursement. If for any reason Executive
and his family are no longer covered under his prior employer's medical and
dental plans, he and his family shall thereafter participate in the
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<PAGE>
Company's medical and dental plans as provided in the first two sentences of
this Section 3.1(d).
(e) VACATION. Executive shall be entitled to a paid vacation
in accordance with Company policy during the Term, but not less than four weeks
per year.
3.2 EXPENSES; PERQUISITES. (a) The Company will reimburse
Executive for reasonable business-related expenses incurred by him in connection
with the performance of his duties hereunder during the Term, including the
reasonable legal expenses incurred by Executive in connection with the
negotiation of his employment arrangements with the Company prior to the date
hereof, subject, however, to the Company's policies relating to business-related
expenses as in effect from time to time during the Term.
(b) During the Term, Executive shall be entitled to participate
in any of the Company's executive fringe benefit arrangements in accordance with
the terms and conditions of such arrangements as are in effect from time to time
for the Company's senior-level executives generally.
ARTICLE IV.
EXCLUSIVITY, ETC.
4.1 EXCLUSIVITY. Executive agrees to perform his duties,
responsibilities and obligations hereunder to the best of his ability.
Executive agrees that he will devote substantially all of his business time,
care and attention and best efforts to such duties, responsibilities and
obligations throughout the Term, except as otherwise provided in Section 1.1
hereof. Executive also agrees that during the Term he will not engage in any
other business activities, pursued for gain, profit or other pecuniary
advantage, that are competitive with the activities of the Company or any of its
subsidiaries, except as permitted in Section 4.2 below. Executive agrees that
all of his activities as an employee of the Company shall be in conformity in
all material respects with all policies, rules and regulations and directions of
the Company not inconsistent with this Agreement and which have been expressly
communicated to him, whether orally or in writing.
4.2 OTHER BUSINESS VENTURES. Executive agrees that, so long as he
is employed by the Company, he will not have any financial or other beneficial
interest in any business enterprise which is competitive with any business
engaged in by the Company or any of its subsidiaries. Notwithstanding the
foregoing or anything contained in Section 4.1 hereof, Executive may own,
directly or indirectly, up to one percent (1%) of the outstanding capital stock
of any such business having a class of capital
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<PAGE>
stock which is traded on any U.S. or foreign stock exchange or in the
over-the-counter market.
4.3 CONFIDENTIALITY; NON-COMPETITION. (a) Executive agrees that
he will not, at any time during or after the Term, make use of or divulge to any
other person, firm or corporation any trade or business secret, process, method
or means, or any other confidential information concerning the business or
policies of the Company or any of its subsidiaries or Affiliates (as defined in
Section 5.3 hereof), except (i) as such disclosure or use may be required or
appropriate in connection with his work as an employee of the Company or (ii)
when required to do so by a court of law, by any governmental agency having
supervisory authority over the business of the Company or by any administrative
or legislative body (including a committee thereof) with apparent jurisdiction
to order him to divulge, disclose or make accessible such information. For
purposes of this Agreement, a "trade or business secret, process, method or
means, or any other confidential information" shall mean and include information
treated as confidential or as a trade secret by the Company or any of its
subsidiaries or Affiliates, including but not limited to information regarding
contemplated products, models, compilations, business and financial methods or
practices, marketing, merchandising and selling techniques, customers, vendors,
suppliers, trade secrets, training programs, manuals or materials, technical
information, contracts, systems, procedures, mailing lists, know-how, trade
names, improvements, pricing, price lists, financial or other data (including
the revenues, costs or profits associated with any of the Company's products or
services), business plans, strategy, code books, invoices and other financial
statements, computer programs, software systems, databases, discs and printouts,
other plans (technical or otherwise), customer and industry lists, supplier
lists, correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the
Company or any of its subsidiaries or Affiliates. Executive's obligation under
this Section 4.3(a) shall not apply to any information which is generally known
to the public or hereafter becomes generally known to the public without the
fault of Executive. Executive agrees not to remove from the premises of the
Company, except as an employee of the Company in pursuit of the business of the
Company or except as specifically permitted in writing by the Company, any
document or other object containing or reflecting any such information.
Executive agrees and acknowledges that all of such information, in any form, and
copies and extracts thereof, are and shall remain the sole and exclusive
property of the Company, and upon termination of his employment with the
Company, Executive shall return to the Company the originals and all copies of
any such information provided to or acquired by Executive in connection with the
performance of his duties for the Company, and shall return to the Company all
files, correspondence and/or other communications received, maintained
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and/or originated by Executive during the course of his employment, and no copy
of any such shall be retained by him, except that he may retain his personal
notes, diaries, Rolodexes and correspondence.
(b)(i) Executive acknowledges that the agreements and covenants
contained in this Section 4.3(b) are essential to protect the value of the
Company's business and assets and by virtue of his employment with the Company,
Executive has obtained and will obtain knowledge, contacts, know-how, training,
experience and other information relating to the Company's business operations,
and there is a substantial probability that such knowledge, know-how, contacts,
training, experience and information could be used to the substantial advantage
of a competitor of the Company and to the Company's substantial detriment.
Accordingly, for a period commencing on the date of termination of Executive's
employment with the Company and ending two (2) years from and after such date
(the "Non-Compete Period"), Executive shall not, directly or indirectly, for
himself or on behalf of or in conjunction with any person, partnership,
corporation or other entity, compete, own, operate, control, or participate or
engage in the ownership, management, operation or control of, or be connected
with as an officer, employee, partner, director, shareholder, representative,
consultant, independent contractor, guarantor, advisor or in any other manner or
otherwise have a financial interest in, a proprietorship, partnership, joint
venture, association, firm, corporation or other business organization or
enterprise that competes with the Company (which for this purpose shall mean any
business or enterprise that operates dealerships for the retail sales of new and
used automobiles or trucks and businesses ancillary thereto), provided that such
business or enterprise (A) is or becomes located or otherwise engaged within a
100 mile radius of any automobile or truck dealership or ancillary business in
which the Company, directly or indirectly, has a 50% or greater economic or
voting or otherwise controlling ownership interest at any time during the
Non-Compete Period or (B) is an automobile or truck dealership or group of
affiliated automobile or truck dealerships (and all businesses ancillary
thereto) whose aggregate gross sales during the 12 month period immediately
preceding the date of Executive's termination exceeded $500,000,000, and
provided further that it shall not be a violation of this Section 4.3(b) if (x)
Executive owns up to one percent (1%) of the outstanding capital stock of any
such business having a class of capital stock which is traded on any U.S. or
foreign stock exchange or in the over-the-counter market, (y) Executive owns,
operates, is employed by or is otherwise connected with an advertising agency
that serves automobile dealerships, provided Executive does not personally
perform any work for, or otherwise provide any advice with respect to, any
account that is engaged in competitive activity with the Company, or
(z) Executive is employed by or is a consultant or independent contractor for an
entity that competes with the Company but Executive is employed by or is a
consultant or independent
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contractor for a division or subsidiary of such entity that does not engage in
such competitive activity. During the Non-Compete Period, Executive shall not
interfere with or disrupt, or attempt to interfere with or disrupt, the
relationship, contractual or otherwise, between the Company and any customer,
client, supplier, manufacturer, distributor, consultant, independent contractor
or employee of the Company.
(ii) It is the desire and intent of the parties that the
provisions of this Section 4.3(b) shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular portion of this
Section 4.3(b) shall be adjudicated to be invalid or unenforceable, this
Section 4.3(b) shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of this Section 4.3(b) in the particular jurisdiction
in which such adjudication is made.
(c) Executive agrees that, at any time and from time to time
during and after the Term, he will execute any and all documents which the
Company may reasonably request to effectuate the provisions of this Section 4.3.
ARTICLE V.
TERMINATION
5.1 TERMINATION BY THE COMPANY. Subject to Section 5.6, the
Company shall have the right to terminate Executive's employment at any time,
with or without "Cause." For purposes of this Agreement, "Cause" shall mean:
(a) Executive is convicted of or enters a plea of guilty to any
felony (or equivalent offense not categorized as a "felony") under federal or
state law;
(b) Executive engages in conduct that constitutes gross neglect
(including, without limitation, such neglect which may result from Executive's
compliance with the terms and conditions of any agreements between Executive and
his prior employer) or willful misconduct in carrying out his duties under this
Agreement, resulting, in either case, in material harm to the Company;
(c) Executive refuses to follow the instructions, orders or
directives of the Board or the Executive Committee (including the Chairman
thereof) with respect to his duties and responsibilities hereunder, provided
that such refusal shall constitute Cause only if the instruction, order or
directive in question has been furnished to Executive in writing and provided
further that such refusal shall not constitute Cause if Executive
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has a good faith and reasonable belief, based on advice of counsel, that to
follow such instruction, order or directive would be unlawful; or
(d) Executive commits any other material breach of this
Agreement (other than Section 1.1 hereof and the first and second sentences of
Section 4.1 hereof, without limiting the effect of the foregoing clauses (a),
(b) and (c) of this Section 5.1) that causes material harm to the Company.
Prior to his termination for Cause, Executive shall be given written
notice ("Notice of Cause") by the Board of the intention to terminate him for
Cause, such Notice of Cause (A) to state in detail the particular act or acts or
failure or failures to act that constitute the grounds on which the proposed
termination for Cause is based and (B) to be given within six (6) months of the
Board learning of such act or acts or failure or failures to act. Executive
shall have ten (10) days after the date that Notice of Cause has been given to
Executive in which to cure such conduct, to the extent such cure is possible.
Executive may also, within such 10-day period, request a hearing before the
Board. If so requested, such hearing shall be held on a date set by the Board
at any time within forty-five (45) days after the date such hearing was
requested. If, at any time within thirty (30) days following such hearing, the
Executive is furnished written notice by the Board confirming that, in its
judgment, grounds for Cause on the basis set forth in the Notice of Cause exist,
he shall thereupon be terminated for Cause. If no hearing is requested and the
conduct described above has not been cured within the 10-day period following
the date the Notice of Cause was given by the Company, Executive shall be deemed
terminated for Cause, such termination to be effective as of the day the Notice
of Cause was given by the Company.
5.2 TERMINATION FOR GOOD REASON. "Termination for Good Reason"
shall mean a termination of Executive's employment at his initiative following
the occurrence, without Executive's written consent, of one or more of the
following events:
(a) a reduction in Executive's then current base salary or
target annual bonus opportunity;
(b) the failure to elect or re-elect Executive, or his removal,
as Chairman or Chief Executive Officer of the Company other than as permitted
hereunder;
(c) a material diminution in Executive's duties or the
assignment to Executive of duties which are materially inconsistent with his
position as Chief Executive Officer of the Company;
(d) as a result of a material breach by the Company or the
Chairman of the Executive Committee of Section 1.4 hereof, Executive reasonably
determines in good faith that he
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cannot carry out his duties and responsibilities in the manner originally
contemplated hereunder;
(e) the occurrence of a Change in Control (as defined in
Section 5.3 hereof);
(f) the relocation of the Company's principal office, or
Executive's own office location as assigned to him by the Company, to a location
more than 50 miles from the Borough of Manhattan; or
(g) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by any successor to all or
substantially all of the assets of the Company within 15 days after a merger,
consolidation, sale or similar transaction.
Prior to his termination for Good Reason, Executive shall give written
notice ("Notice of Good Reason") to the Board of his intention to terminate for
Good Reason, such Notice of Good Reason (A) to state in detail the particular
event, act or acts or failure or failures to act that constitute the grounds on
which the proposed termination for Good Reason is based and (B) to be given
within six (6) months of his learning of such event, act or acts or failure or
failures to act. The Company shall have thirty (30) days after the date that
the Notice of Good Reason has been given to the Board in which to cure such
conduct, to the extent such cure is possible. If the Company fails to cure such
conduct, Executive shall then be entitled to terminate his employment for Good
Reason.
5.3 CHANGE IN CONTROL. A "Change in Control" shall mean the
occurrence of any one of the following events:
(a) Prior to an IPO, TIHI or its Affiliates sells or otherwise
disposes to persons or entities who are not Affiliates of TIHI, in one
transaction or a series of related transactions, 85% or more of the Voting Stock
(as defined below) of the Company held by TIHI on the date of this Agreement and
issuable to TIHI pursuant to the Common Stock Purchase Agreement;
(b) any "person," as such term is used in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, becomes a "beneficial owner," as
such term is used in Rule 13d-3 promulgated under that act (other than an
Affiliate of the Company or any "person" who was a "beneficial owner" of 10% or
more of the Voting Stock of the Company on the date hereof or who has received
Voting Stock from Executive), of 50% or more of the Voting Stock of the Company
prior to an IPO and 40% or more of the Voting Stock after an IPO;
(c) the majority of the Board consists of individuals other
than Incumbent Directors, which term means the members of the Board on the date
of this Agreement or otherwise
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designated pursuant to various agreements among the Company's stockholders in
effect on the date hereof; provided that any person becoming a director
subsequent to such date whose election or nomination for election was supported
by a majority of the directors who then comprised the Incumbent Directors shall
be considered to be an Incumbent Director;
(d) all or substantially all of the assets or business of the
Company is disposed of pursuant to a merger, consolidation or other transaction
other than to an Affiliate of the Company (unless the shareholders of the
Company immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, 50% or more of the Voting Stock or
other ownership interests of the entity or entities, if any, that succeed to the
business of the Company); or
(e) the Company combines with another company (other than an
Affiliate of the Company) and is the surviving corporation but, immediately
after the combination, the shareholders of the Company immediately prior to the
combination hold, directly or indirectly, less than 50% of the Voting Stock of
the combined company.
For the purposes of this Agreement, (i) "Affiliate" of a specified
person or other entity shall mean a person or other entity that directly or
indirectly controls, is controlled by, or is under common control with the
person or other entity specified, and in the case of a specified person who is a
natural person, his spouse, his issue, his parents, his estate and any trust
entirely for the benefit of his spouse and/or issue; (ii) "Voting Stock" shall
mean capital stock of any class or classes having voting power under ordinary
circumstances, in the absence of contingencies, to elect the directors of a
corporation; and (iii) "IPO" shall mean the completion of an underwritten sale
of Common Stock or securities convertible into Common Stock of the Company (or
an entity formed by the Company for the purpose of issuing Common Stock (or
securities convertible into Common Stock) in connection with the IPO) pursuant
to a registration statement which has become effective under the Securities Act
of 1933, as amended.
5.4 DEATH. In the event Executive dies during the Term, the Term
shall automatically terminate, such termination to be effective on the date of
Executive's death.
5.5 DISABILITY. In the event that Executive shall suffer a
disability which shall have prevented him from performing his obligations
hereunder for a period of at least 120 consecutive days, the Company shall have
the right to terminate the Term, such termination to be effective upon the
giving of notice thereof to Executive in accordance with Section 6.2 hereof.
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5.6 VOLUNTARY TERMINATION. Executive shall have the right to
terminate his employment at any time. A voluntary termination that is not a
Termination for Good Reason or disability shall be effective upon 60 days prior
written notice to the Company and shall not constitute a breach of this
Agreement.
5.7 EFFECT OF TERMINATION. (a) In the event of termination of
Executive's employment (i) by the Company for Cause, (ii) by Executive other
than for Good Reason, (iii) by reason of Executive's death or disability, or
(iv) by reason of either party's election not to extend the Term as provided in
Section 2.1 hereof, the Company shall pay to Executive (or his beneficiary in
the event of his death) any base salary or bonus earned but not paid to
Executive prior to the effective date of such termination and Executive shall be
entitled to other or additional benefits in accordance with the applicable plans
and programs of the Company.
(b) In the event of termination of Executive's employment (i) by
the Company other than for Cause, or (ii) by Executive for Good Reason, then in
addition to the amounts and other benefits described in Section 5.7(a) hereof,
the Company shall pay Executive $83,333 per month for the remainder of the Term.
For this purpose, the Term shall include an additional one year renewal
described in Section 2.1 hereof only if the termination of employment occurred
after the date by which notice of non-renewal must be given and no such notice
was given. In addition, Executive shall be entitled to continued participation
in all medical, dental and hospitalization coverage and in other employee
benefit plans or programs in which he was participating on the date of the
termination of his employment until the earlier of (A) the end of the period
during which he is receiving salary continuation payments, and (B) the date, or
dates, he receives similar coverage and benefits under the plans and programs of
a subsequent employer (such coverages and benefits to be determined on a
coverage-by-coverage, or benefit-by-benefit, basis).
(c) In the event of termination of Executive's employment for
disability as described in Section 5.5 hereof, then, in addition to the amounts
and other benefits described in Section 5.7(a) hereof, Executive shall be
entitled to continued participation in medical, dental and hospitalization
coverage and in all other employee plans and programs in which he was
participating on the date of termination of his employment due to disability for
a period of two years following such termination.
(d) In the event of termination of Executive's employment due to
death, then, in addition to the amounts and other benefits described in Section
5.7(a) hereof, his estate or beneficiaries shall be entitled to base salary for
a period of 90 days following the date of death.
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(e)(i) In the event of termination of Executive's employment due
to death or by the Company for Cause or by Executive other than for Good Reason
or disability, the Options, to the extent not vested and exercisable on the date
of such termination, shall be immediately forfeited. To the extent the Options
are vested and exercisable on the date of such termination, they may be
exercised (A) in the event of termination by the Company for Cause, for a period
of ninety (90) days after the date of such termination, or (B) in the event of
termination due to death or by Executive (or his beneficiary, estate or other
legal representative) other than for Good Reason or disability, for a period of
one year after the date of such termination.
(ii) In the event of termination of Executive's employment (A)
by the Company other than for Cause, (B) by Executive for Good Reason, or (C) by
reason of Executive's disability, each Option, to the extent not granted or not
vested and exercisable on the date of termination, shall be immediately granted
and vested and exercisable in full, and may be exercised for a period equal to
the shorter of four years after the date of such termination and the remainder
of the original term of such Option.
(iii) If (A) Executive's employment with the Company has not
terminated prior to December 31, 1998, (B) an IPO has not occurred prior to such
date, (C) the Company's measurement on the consumer satisfaction index recorded
by five of the six Manufacturers (as defined below) has exceeded the average
measurement for all automobile dealerships nationwide and in the applicable
region/zone in at least nine of the twelve months (or three of the four quarters
in the event any of the Manufacturers do not provide consumer satisfaction
reports to the Company on a monthly basis) during each year of the Term
commencing January 1, 1996, provided that, for purposes of this Section 5.7, any
dealership acquired by the Company subsequent to the date hereof shall not be
included in the measurement of consumer satisfaction until one year after the
date such dealership is acquired (for purposes of this Section 5.7, the term
"Manufacturers" shall mean General Motors Corp., Chrysler Corporation, Ford
Motor Co., Toyota Motor Sales Corp., Honda Motors Sales Corp. (USA) and Nissan
Motor Sales Corp. (USA)), and (D) the Company's aggregate annual pre-tax
earnings have during the Term commencing January 1, 1995 exceeded 1 1/2% of the
Company's aggregate gross sales achieved during the Term, provided that, for
purposes of this Section 5.7, the annual pre-tax earnings of any dealership
acquired by the Company subsequent to the date hereof shall not be included in
the calculation of the Company's annual pre-tax earnings until one year after
the date such dealership is acquired, then Executive shall have the right for as
long as an IPO has not occurred, for a period of thirty (30) days immediately
after the date that the Warrants (as defined in the Preferred Stock Purchase
Agreement) would become issuable pursuant to Section 8 of the Preferred Stock
Purchase Agreement,
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to surrender the First Option to the Company (the "Put") for a payment equal to
the product of (I) the number of shares of Common Stock subject to the First
Option and for which the First Option has not been exercised (the "Put Shares"),
and (II) the amount by which the Company's "Book Value per Share" exceeds $10.00
(the "Put Price"). The closing (the "Put Closing") for the purchase by the
Company of the Put Shares upon exercise of the Put shall occur at the Company's
principal office, or at such other place as shall be mutually agreeable to
Executive and the Company, within forty-five (45) days after the Executive has
provided the Company with written notice of his intention to exercise the Put
(such date of closing hereinafter referred to as the "Put Closing Date"). On
the Put Closing Date, the Company shall pay to Executive by wire transfer or
certified or official bank check an amount equal to one-third of the Put Price
with respect to the Put Shares, with the remainder of the Put Price to be
evidenced by a promissory note (the "Put Note") in the form of Exhibit B hereto
issued to Executive for all additional amounts then owing to Executive as a
result of the exercise of the Put. The Put Note shall (i) be repaid in two
equal installments of principal, together with all accrued interest thereon, the
first installment of which shall be made eighteen (18) months after the Put
Closing Date, and the second installment of which shall be made three (3) years
after the Put Closing Date, and (ii) bear interest at a rate equal to the
short-term Applicable Federal Rate in effect on the Put Closing Date. For
purposes of this Section 5.7(e), "Book Value per Share" with respect to one
share of Common Stock shall mean, on the date the Company receives written
notice of Executive's election to surrender the First Option (the "Book Value
Determination Date"), the quotient obtained by dividing (A) the Total Net Asset
Value on the Book Value Determination Date by (B) the number of shares of Common
Stock outstanding on a fully-diluted basis on the Book Value Determination Date
and assuming that all outstanding shares of Preferred Stock have been converted
into Common Stock at the conversion rate in effect on the Book Value
Determination Date. For this purpose, "Total Net Asset Value" shall mean the
value, as reflected on the Company's most recent consolidated balance sheet, of
(x) the total assets of the Company, LESS (y) the current liabilities of the
Company, LESS (z) any long-term liabilities and outstanding equity securities
that are senior to the Common Stock.
5.8 NO MITIGATION; NO OFFSET. In the event of any termination of
employment under this Article V, Executive shall be under no obligation to seek
other employment and there shall be no offset against amounts due Executive
under this Agreement on account of any remuneration attributable to any
subsequent employment that he may obtain except as specifically provided in this
Article V.
5.9 NATURE OF PAYMENTS. Any amounts due under this Article V are
in the nature of severance payments considered to be reasonable by the Company
and are not in the nature of a
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penalty, provided that such payments shall be Executive's exclusive remedy
relating to the termination of his employment hereunder.
ARTICLE VI.
MISCELLANEOUS
6.1 INDEMNIFICATION.
(a) The Company agrees that if Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the written request of the Company as a director, officer,
member, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Proceeding is Executive's alleged action
in an official capacity while serving as a director, officer, member, employee
or agent, Executive shall be indemnified and held harmless by the Company to the
fullest extent legally permitted or authorized by the Company's restated
certificate of incorporation or bylaws or resolutions of the Company's Board of
Directors against all cost, expense, liability and loss (including, without
limitation, reasonable attorney's fees, judgments, fines or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
Executive in connection therewith, and such indemnification shall continue as to
Executive even if he has ceased to be a director, officer, member, employee or
agent of the Company or other entity and shall inure to the benefit of
Executive's heirs, executors and administrators. The Company shall advance to
Executive all reasonable costs and expenses incurred by him in connection with a
Proceeding within twenty (20) days after receipt by the Company of a written
request for such advance. Such request shall include an undertaking by
Executive to repay the amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified against such costs and
expenses.
(b) Neither the failure of the Company (including the Board,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of any Proceeding concerning payments of amounts claimed by
Executive under Section 6.1(a) above that indemnification of Executive is proper
because he has met the applicable standard of conduct, nor a determination by
the Company (including the Board, independent legal counsel or stockholders)
that Executive has not met such applicable standard of conduct, shall create a
presumption that Executive has not met the applicable standard of conduct.
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(c) The Company agrees to maintain a directors' and officers'
liability insurance policy covering Executive to the extent the Company provides
such coverage for its other executive officers.
6.2 BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY. (a) This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or sale of all
or substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations and
duties of the Company, as contained in this Agreement, either contractually or
as a matter of law. This Agreement shall also inure to the benefit of, and be
enforceable by, Executive and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to the Executive
hereunder if he had continued to live, all such amounts shall be paid in
accordance with the terms of this Agreement to Executive's beneficiary, devisee,
legatee or other designee, or if there is no such designee, to Executive's
estate. Without limiting the foregoing, Executive shall be entitled, to the
extent permitted under any applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive's death by giving the Company written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
6.3 NOTICES. Any notice required or permitted hereunder shall be
in writing and shall be sufficiently given if personally delivered or if sent by
telegram or telex or by registered or certified mail, postage prepaid, with
return receipt requested, addressed: (a) in the case of the Company to 375 Park
Avenue, New York, New York 10022, Attention: GENERAL COUNSEL, or to such other
address and/or to the attention of such other person as the Company shall
designate by written notice to Executive; and (b) in the case of Executive, to
720 Park Avenue, New York, New York 10022, or to such other address as Executive
shall designate by written notice to the Company. Any notice given hereunder
shall be deemed to have been given at the time of receipt thereof by the person
to whom such notice is given.
6.4 AMENDMENT. This Agreement may not be changed or modified
except by an instrument in writing signed by both of the parties hereto.
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6.5 WAIVER. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a continuing
waiver or as a consent to or waiver of any subsequent breach hereof. Any waiver
must be in writing and signed by Executive or an authorized officer of the
Company, as the case may be.
6.6 HEADINGS. The Article and Section headings herein are for
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.
6.7 GOVERNING LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the internal laws of the State of
New Jersey without reference to the principles of conflict of laws.
6.8 AGREEMENT TO TAKE ACTIONS. Each party hereto shall execute and
deliver such documents, certificates, agreements and other instruments, and
shall take such other actions, as may be reasonably necessary or desirable in
order to perform his or its obligations under this Agreement or to effectuate
the purposes hereof.
6.9 SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
6.10 VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision or provisions of this Agreement, which shall remain in
full force and effect.
6.11 RESOLUTION OF DISPUTES. Any disputes arising under or in
connection with this Agreement shall, at the election of either Executive or the
Company, be resolved by binding arbitration, to be held in New York City in
accordance with the rules and procedures of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. Each party shall bear his or
its own costs of the arbitration or litigation. Pending the resolution of any
arbitration or court proceeding, the Company shall continue payment of all
amounts due Executive under this Agreement and all benefits to which Executive
is entitled at the time the dispute arises.
6.12 ENTIRE AGREEMENT. This Agreement contains the entire
understanding and agreement between the parties concerning the subject matter
hereof and supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between the parties with
respect thereto.
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6.13 REPRESENTATIONS. The Company represents that it is fully
authorized and empowered to enter into this Agreement and that the performance
of its obligations under this Agreement will not violate any agreement to which
it is a party or by which it is bound. Executive represents that there is no
agreement to which he is a party or by which he is bound that would be violated
by the performance of his obligations under this Agreement.
6.13.1 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement
effective as of the date first above written.
UNITED AUTO GROUP, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Philip N. Smith, Jr.
Vice President, Secretary
and General Counsel
/s/ Carl Spielvogel
------------------------------------
Carl Spielvogel
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EXHIBIT A
[FORM OF]
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is dated as of April 3,
1996, and is entered into between United Auto Group, Inc. (formerly EMCO Motor
Holdings, Inc.), a Delaware corporation (the "Company"), and Carl Spielvogel
("Executive").
W I T N E S S E T H:
WHEREAS, Executive and the Company entered into a Stock Option
Agreement dated as of October 18, 1994 (the "Original Agreement");
WHEREAS, on April 3, 1996, Executive and the Company entered into an
amendment to the Original Agreement; and
WHEREAS, the Company is entitled to the services of Executive as set
forth in that certain employment agreement between Executive and the Company,
dated as of June 21, 1996 (as amended, supplemented or otherwise modified from
time to time, the "Employment Agreement"); and
WHEREAS, pursuant to the Employment Agreement, the Company and
Executive agreed to enter into this Agreement in order to embody herein all the
terms and conditions of the First Stock Option (as defined in the Employment
Agreement) as so amended.
NOW, THEREFORE, the parties hereby agree that this Agreement
supersedes and supplants the Original Agreement in all respects and further
agree as follows:
1. GRANT OF OPTIONS. The Company hereby grants to the Executive an
option (the "Option") to purchase, at the exercise price of $10.00 per share, up
to 400,000 shares of the Company's Voting Common Stock, par value $0.0001 per
share ("Common Stock"), such number to be adjusted as provided in Section 7(b).
2. EXERCISABILITY OF OPTIONS. Subject to earlier vesting,
exercisability and forfeiture as provided in Article V of the Employment
Agreement, the Option will vest and become exercisable ratably in four
installments as follows: one-fourth of the number of shares covered thereby on
each of the first, second, third and fourth anniversaries of October 18, 1994.
3. METHOD OF EXERCISING OPTIONS. (a) The Executive may exercise the
Option by delivering to the Company a written notice stating the number of
shares that the Executive has elected to purchase at that time from the Company
and full payment of the purchase price of the shares then to be purchased.
Payment of the purchase price of the shares may be made (i) by certified or bank
<PAGE>
cashier's check payable to the order of the Company, or (ii) in the discretion
of the Board of Directors of the Company or duly authorized committee thereof,
by such other method as may be approved by such board or committee from time to
time.
(b) At the time of exercise, the Executive shall pay to the
Company such amount as is necessary to satisfy the Company's obligation to
withhold Federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of shares thereupon.
4. ISSUANCE OF SHARES. As promptly as practicable after receipt of
notification of exercise, full payment of purchase price and satisfaction of tax
withholding as provided in Section 3, the Company shall issue or transfer to the
Executive the number of shares as to which the Options have been so exercised
and shall deliver to the Executive a certificate or certificates therefor,
registered in his name.
5. TERMS AND CONDITIONS OF EXERCISE. (i) The Option shall have a
term expiring on October 18, 2004, subject to earlier termination as provided in
Article V of the Employment Agreement.
(ii) The Company and certain of its stockholders are parties to
a stockholders agreement (the "Stockholders Agreement") delivered pursuant to
Sections 4.7 and 5.3 of each of the Class A Preferred Stock Purchase Agreement
and the Common Stock Purchase Agreement, each dated as of October 15, 1993. For
so long as the Stockholders Agreement shall be in effect, it shall be a
condition precedent to the exercise of the Option by Executive that Executive
execute and deliver a counterpart of the Stockholders Agreement as a result of
which he shall be deemed to be a "Stockholder" thereunder and bound by all of
the applicable provisions of the Stockholders Agreement.
(iii) Upon the request of the Company's underwriters managing
any underwritten public offering of the Common Stock, Executive shall not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any shares of Common Stock acquired upon exercise of the Option for
such period of time from the effective date of such offering as the Company or
the underwriters may specify, but not to exceed 180 days.
(iv) The Option shall not be transferable, except by will or the
laws of descent and distribution, provided that Executive may at any time
transfer all or a portion of the Option to his spouse, any of his descendants or
trusts for the benefit of Executive, his spouse or his descendants, subject to
all of the terms and conditions of the Option.
(v) Executive's rights with respect to the Option shall be
subject to the terms and provisions of Article V of the Employment Agreement.
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(vi) Whenever the word "Executive" is used in any provision of
this Agreement under circumstances where the provision should logically be
construed to apply to the executors, the administrators, personal
representatives, or the person or persons to whom the Option may be transferred
pursuant to clause (iv) of this Section 5, the word "Executive" shall be deemed
to include such person or persons.
6. RIGHTS AS STOCKHOLDER. The Executive or a transferee of the
Option shall have no rights as a stockholder with respect to any shares of
Common Stock covered by the Option until he shall have become the holder of
record of such shares.
7. RECAPITALIZATIONS, REORGANIZATIONS, ETC. (a) The existence of the
Option shall not affect the power of the Company or its stockholders to
accomplish adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of stock or of options, warrants or rights to
purchase stock or securities ahead of or affecting any of the shares of Common
Stock or the rights thereof or convertible into or exchangeable for shares of
Common Stock, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act.
(b) Upon any change in the outstanding shares of Common Stock by
reason of any recapitalization, merger, consolidation, spin-off, combination or
exchange of shares or other corporate change, or any distributions to common
shareholders other than ordinary cash dividends, the Company shall make such
substitutions or adjustments as are appropriate and equitable, as to the number
or kind of shares of Common Stock or other securities covered by the Option and
the exercise price thereof.
8. NOTICE. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telegram, telex, facsimile transmission or by registered or certified mail,
postage prepaid, with return receipt requested, as follows:
(a) If to the Company:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile: (212) 223-5148
Attn: General Counsel
or to such other address or to the attention of such other person as the Company
shall designate by written notice to the Executive; and
-3-
<PAGE>
(b) If to the Executive:
Mr. Carl Spielvogel
720 Park Avenue
New York, NY 10021
or to such other address as the Executive shall designate by written notice to
the Company. Any notice given hereunder shall be deemed to have been given at
the time of receipt thereof by the party to whom such notice is given.
9. DISPUTES. Any disputes arising under or in connection with this
Agreement shall be resolved as provided in Section 6.11 of the Employment
Agreement.
10. NON-QUALIFIED OPTION. The Option is not an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNITED AUTO GROUP, INC.
By:
Philip N. Smith, Jr.
Vice President, Secretary and
General Counsel
Carl Spielvogel
-5-
<PAGE>
EXHIBIT B
[FORM OF]
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is dated as of ________,
and is entered into between United Auto Group, Inc. (formerly EMCO Motor
Holdings, Inc.), a Delaware corporation (the "Company"), and Carl Spielvogel
("Executive").
W I T N E S S E T H:
WHEREAS, the Company is entitled to the services of Executive as set
forth in that certain employment agreement between Executive and the Company,
dated as of June 21, 1996 (as amended, supplemented or otherwise modified from
time to time, the "Employment Agreement"); and
WHEREAS, pursuant to the Employment Agreement, the Company is granting
the Executive options to purchase shares of voting common stock, par value
$0.0001 per share (the "Common Stock"), of the Company, on the terms and
conditions set forth herein and in the Employment Agreement.
NOW, THEREFORE, the parties hereby agree:
1. GRANT OF OPTIONS. The Company hereby grants to the Executive an
option (the "Option") to purchase, at the exercise price of $_____ per share, up
to 100,000 shares of Common Stock, such number to be adjusted as provided in
Section 3.1(c)(viii) of the Employment Agreement and Section 7(b) hereof.
2. EXERCISABILITY OF OPTIONS. Subject to earlier vesting,
exercisability and forfeiture as provided in Article V of the Employment
Agreement, the Option will vest and become exercisable ratably in four
installments as follows: one-fourth of the number of shares covered thereby on
each of the first, second, third and fourth anniversaries of the date hereof.
3. METHOD OF EXERCISING OPTIONS. (a) The Executive may exercise the
Option by delivering to the Company a written notice stating the number of
shares that the Executive has elected to purchase at that time from the Company
and full payment of the purchase price of the shares then to be purchased.
Payment of the purchase price of the shares may be made (i) by certified or bank
cashier's check payable to the order of the Company, or (ii) in the discretion
of the Board of Directors of the Company or duly
<PAGE>
authorized committee thereof, by such other method as may be approved by such
board or committee from time to time.
(b) At the time of exercise, the Executive shall pay to the
Company such amount as is necessary to satisfy the Company's obligation to
withhold Federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of shares thereupon.
4. ISSUANCE OF SHARES. As promptly as practicable after receipt of
notification of exercise, full payment of purchase price and satisfaction of tax
withholding as provided in Section 3, the Company shall issue or transfer to the
Executive the number of shares as to which the Options have been so exercised
and shall deliver to the Executive a certificate or certificates therefor,
registered in his name.
5. TERMS AND CONDITIONS OF EXERCISE. (i) The Option shall have a
term of ten years from the date hereof, subject to earlier termination as
provided in Article V of the Employment Agreement.
(ii) The Company and certain of its stockholders are parties to
a stockholders agreement (the "Stockholders Agreement") delivered pursuant to
Sections 4.7 and 5.3 of each of the Class A Preferred Stock Purchase Agreement
and the Common Stock Purchase Agreement, each dated as of October 15, 1993. For
so long as the Stockholders Agreement shall be in effect, it shall be a
condition precedent to the exercise of the Option by Executive that Executive
execute and deliver a counterpart of the Stockholders Agreement as a result of
which he shall be deemed to be a "Stockholder" thereunder and bound by all of
the applicable provisions of the Stockholders Agreement.
(iii) Upon the request of the Company's underwriters managing
any underwritten public offering of the Common Stock, Executive shall not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any shares of Common Stock acquired upon exercise of the Option for
such period of time from the effective date of such offering as the Company or
the underwriters may specify, but not to exceed 180 days.
(iv) The Option shall not be transferable, except by will or the
laws of descent and distribution, provided that Executive may at any time
transfer all or a portion of the Option to his spouse, any of his descendants or
trusts for the benefit of Executive, his spouse or his descendants, subject to
all of the terms and conditions of the Option.
(v) Executive's rights with respect to the Option shall be
subject to the terms and provisions of Article V of the Employment Agreement.
-2-
<PAGE>
(vi) Whenever the word "Executive" is used in any provision of
this Agreement under circumstances where the provision should logically be
construed to apply to the executors, the administrators, personal
representatives, or the person or persons to whom the Option may be transferred
pursuant to clause (iv) of this Section 5, the word "Executive" shall be deemed
to include such person or persons.
6. RIGHTS AS STOCKHOLDER. The Executive or a transferee of the
Option shall have no rights as a stockholder with respect to any shares of
Common Stock covered by the Option until he shall have become the holder of
record of such shares.
7. RECAPITALIZATIONS, REORGANIZATIONS, ETC. (a) The existence of the
Option shall not affect the power of the Company or its stockholders to
accomplish adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of stock or of options, warrants or rights to
purchase stock or securities ahead of or affecting any of the shares of Common
Stock or the rights thereof or convertible into or exchangeable for shares of
Common Stock, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act.
(b) Upon any change in the outstanding shares of Common Stock by
reason of any recapitalization, merger, consolidation, spin-off, combination or
exchange of shares or other corporate change, or any distributions to common
shareholders other than ordinary cash dividends, the Company shall make such
substitutions or adjustments as are appropriate and equitable, as to the number
or kind of shares of Common Stock or other securities covered by the Option and
the exercise price thereof.
8. NOTICE. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telegram, telex, facsimile transmission or by registered or certified mail,
postage prepaid, with return receipt requested, as follows:
(a) If to the Company:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile: (212) 223-5148
Attn: General Counsel
or to such other address or to the attention of such other person as the Company
shall designate by written notice to the Executive; and
-3-
<PAGE>
(b) If to the Executive:
Mr. Carl Spielvogel
720 Park Avenue
New York, NY 10021
or to such other address as the Executive shall designate by written notice to
the Company. Any notice given hereunder shall be deemed to have been given at
the time of receipt thereof by the party to whom such notice is given.
9. DISPUTES. Any disputes arising under or in connection with this
Agreement shall be resolved as provided in Section 6.11 of the Employment
Agreement.
10. NON-QUALIFIED OPTION. The Option is not an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNITED AUTO GROUP, INC.
By:
Philip N. Smith, Jr.
Vice President, Secretary and
General Counsel
Carl Spielvogel
-5-
<PAGE>
April 5, 1996
Mr. Ezra P. Mager
141 East 72nd Street
New York, New York
Dear Ezra:
In connection with your resignation last January as an officer and
director of United Auto Group, Inc. and as an officer of Trace International
Holdings, Inc., UAG and Trace agree to certain payments and conditions as
follows:
1. CASH PAYMENTS. UAG agrees to pay you a total of $342,107.82
(subject to withholding of all income and employment taxes required by law to be
withheld), in 22 equal monthly installments, with the first payment due April 9,
1996, each payment due on the last business day of each calendar month, and the
last payment due December 31, 1997. On April 8, 1996 UAG shall also pay to you
$139,622.95 in cash (net of withholding of the type described above). After
January 1, 1996 but, prior to the date hereof, UAG and Trace have paid you an
aggregate of $18,269.23 in cash (net of withholding of the type described
above).
2. BENEFITS. Trace will pay your COBRA premiums until December 31,
1996 for a health insurance plan providing benefits equivalent to the plan
provided to you prior to January 1, 1996. You will continue to be able to use
the car currently used by you and leased by a UAG subsidiary until December 31,
1996. UAG will fund auto insurance coverage for such car during this period at
the same levels as prior to January 1, 1996.
3. REPURCHASE OF TRACE STOCK; M&E PARTNERSHIP. Trace will repurchase
your stock in Trace at your cost, or $250,000, by May 1, 1996. By May 1, 1996,
Trace will purchase your partnership interest in M&E Partnership in accordance
with Section 16 of the M&E Partnership Agreement for $500.
4. UAG STOCK. The Registration Rights Agreement will be amended by
May 1, 1996 so that, with respect to the first demand registration, you will
have priority over the other sellers.
5. ACQUISITION CANDIDATES. Until March 1, 1998 (unless an earlier
date is otherwise specified on Exhibit A hereto), you shall not, directly or
indirectly, discuss with any Acquisition Candidate (as defined below) any
acquisition, disposal, financing or joint venture, in respect of (i) an
Acquisition Candidate or its subsidiaries, (ii) any direct or indirect interests
in an Acquisition Candidate or its subsidiaries or (iii) the material assets of
an Acquisition Candidate or its subsidiaries. Acquisition Candidate means any
person or entity specified in Exhibit A hereto. This rule will
<PAGE>
also prevent such discussions with the affiliates of an Acquisition Candidate or
officers, directors, consultants or employees of any Acquisition Candidate or
its affiliates in respect of the foregoing.
6. SOLICITATION. Until March 1, 1998, you shall not (nor shall you
permit your affiliates to) (i)(x) control, or own, directly or indirectly, an
equity interest in (including any convertible securities or rights to acquire
such equity), or (y) be an officer, director or employee of, or independent
contractor for, or provide services to, any person or entity (or its affiliates)
that employs, at any time any employee of UAG or its subsidiaries earning more
than $50,000 or (ii) solicit the employment of any employee of UAG or its
subsidiaries either for yourself or on behalf of any other person or entity.
7. CONFIDENTIALITY. You shall keep all financial statements of UAG
and its affiliates and financial information in the books and records of UAG and
its affiliates used in creating such financial statements (other than
information already in the public domain (through no fault of yours) or that is
required to be disclosed by law) confidential and shall not use the same for any
purpose (other than in evaluating your investment in UAG's stock).
8. RELEASES. UAG, Trace, you and Marshall S. Cogan have exchanged
general releases in the forms attached hereto.
9. REGISTRATION RIGHTS AGREEMENT AMENDMENT. You shall sign the
amendment to the Registration Rights Agreement substantially in the form
attached.
Yours sincerely,
TRACE INTERNATIONAL HOLDINGS, INC.
By: /s/ Marshall S. Cogan
------------------------------
Marshall S. Cogan
Chief Executive Officer
UNITED AUTO GROUP, INC.
By: /s/ Carl Spielvogel
------------------------------
Carl Spielvogel
Chief Executive Officer
Accepted and agreed to:
/s/ Ezra P. Mager
- -----------------------
Ezra P. Mager
(Attachments)
<PAGE>
Exhibit 10.1.10
- --------------------------------------------------------------------------------
SUBLEASE
BETWEEN
OVERSEAS PARTNERS, INC.,
SUBLANDLORD
AND
EMCO MOTOR HOLDINGS, INC.,
SUBTENANT
- --------------------------------------------------------------------------------
August __, 1994
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
1. PREMISES AND TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. POSSESSION; FURNITURE . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. ADDITIONAL RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. CERTAIN OBLIGATIONS RELATED TO PREMISES . . . . . . . . . . . . . . . . . 5
7. INCORPORATION BY REFERENCE. . . . . . . . . . . . . . . . . . . . . . . . 6
8. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9. ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
10. NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
11. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
12. ATTORNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
13. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . . .10
14. BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
15. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
16. CONFLICT OR INCONSISTENCY . . . . . . . . . . . . . . . . . . . . . . . .12
17. LANDLORD'S CONSENT. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
18. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .13
19. SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
20. QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
21. WAIVERS; CONSENT TO JURISDICTION. . . . . . . . . . . . . . . . . . . . .15
22. TERMINATION OF SUBLEASE . . . . . . . . . . . . . . . . . . . . . . . . .16
23. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
(i)
<PAGE>
EXHIBITS
Exhibit A - Lease
Exhibit B - Premises
Exhibit C - Office Items
Exhibit D - Financial Statements
Exhibit E - Escrow Agreement
(ii)
<PAGE>
SUBLEASE
SUBLEASE made as of the _____ day of
August, 1994, between OVERSEAS PARTNERS,
INC., a New York corporation with offices at
375 Park Avenue, New York, New York 10152
(the "Sublandlord") and EMCO MOTOR HOLDINGS,
INC., a Delaware corporation with offices at
585 Route 440, Jersey City, New Jersey 07304
(the "Subtenant").
W I T N E S S E T H:
Sublandlord, as tenant, and Teachers Insurance and Annuity Association
of America ("Landlord"), as landlord, entered into a Lease, originally dated
January 5, 1990 (a true and complete copy of the Lease, including all Riders
thereto and the Extension and Modification Agreement dated July 13, 1993 (the
"Modification Agreement"), between Landlord and Sublandlord, and all Riders
thereto (in all cases except for the deletion of certain financial provisions
and those provisions not incorporated herein by reference) being attached hereto
as Exhibit A and being sometimes collectively referred to herein as the
"Lease"), whereby Landlord demised to Sublandlord premises situated on the 22nd
floor of the building (the "Building") commonly known as 375 Park Avenue, in the
Borough of Manhattan, City and State of New York, as commonly known as Suite
2201 and shown cross-hatched on the plan attached to the Lease (the "Premises").
Attached hereto as Exhibit A is a true, correct and complete copy of the Lease
(except for the deletion of certain financial provisions not incorporated herein
by reference), and there are no other agreements between Landlord and
Sublandlord relating to the Premises.
Sublandlord desires to sublease to Subtenant and Subtenant desires to
sublease from Sublandlord the Premises.
ACCORDINGLY, in consideration of the mutual covenants hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby expressly acknowledged, the parties hereto hereby agree as
follows:
1. PREMISES AND TERM. Subject to the terms and conditions set forth
herein, and the prior consent of Landlord (as provided in Section 17 hereof),
Sublandlord hereby subleases to Subtenant and Subtenant hereby hires and takes
from Sublandlord the Premises. The term (the "Term") of this Sublease will
commence (the "Commencement Date") on September 1, 1994; PROVIDED, HOWEVER, that
if Sublandlord is able to deliver possession of the Premises to Subtenant prior
to September 1,
<PAGE>
1994, the Commencement Date shall be the later of (a) the date which is five (5)
business days after the date Sublandlord notifies Subtenant that it is prepared
to so deliver possession of the Premises and (b) the date Sublandlord so
delivers possession of the Premises to Subtenant. The Term shall end on June
29, 2000, or on such earlier date upon which the Term expires pursuant to any of
the conditions of limitation or other provisions of this Sublease, or pursuant
to law (the "Expiration Date").
2. USE. The Premises shall be used solely by Subtenant for
executive, administrative and general offices, subject to the provisions of the
Lease.
3. POSSESSION; FURNITURE. (a) Subtenant's obligation to perform
each and every one of the covenants, terms, conditions and agreements contained
in the Lease and incorporated herein pursuant to the terms hereof shall commence
on the Commencement Date. In the event that Sublandlord is delayed or prevented
from delivering possession of the Premises to Subtenant by reasons of acts of
God or any cause whatsoever beyond Sublandlord's reasonable control, neither
party hereto shall be liable to the other party for consequential damages. If
for any reason Sublandlord has not delivered possession of the Premises to
Subtenant on or before October 15, 1994, Subtenant may cancel this Sublease by
notice to Sublandlord and, except as otherwise specified herein, neither party
shall have any further liability to the other party hereunder and any advance
rentals or security deposited by Subtenant with Sublandlord or the Escrow Agent
(as hereinafter defined) shall be returned to Subtenant.
(b) Subtenant acknowledges that it has inspected the Premises and
agrees to take the Premises on an "as-is" basis on the date hereof and further
agrees that Sublandlord shall not be obligated to make any repairs or
alterations whatsoever in or to the Premises. Notwithstanding the foregoing,
prior to the Commencement Date, Sublandlord shall have the Premises cleaned
thoroughly at its sole expense.
(c) The Sublease of the Premises shall include the use of all
furniture (the "Furniture") located in the premises on the date hereof, which
items are listed on Exhibit C attached hereto. In connection therewith,
Subtenant shall be responsible, at its sole cost and expense, for the
maintenance and repair of the Furniture and Subtenant agrees not to remove any
of the Furniture from the Premises without the prior written consent of
Sublandlord. In the event that Subtenant desires to no longer use a piece of
Furniture, it shall so notify Sublandlord in writing. If Sublandlord elects not
to take back such piece of Furniture within ten (10) days after receipt of such
notice, Subtenant shall have the right to sell such piece of Furniture, and the
proceeds of such sale shall be paid to Sublandlord.
- 2 -
<PAGE>
4. RENT. During the Term, Subtenant shall pay to Sublandlord,
exclusive of any amounts for electricity, taxes and any other amounts which
Subtenant is obligated to pay hereunder, Basic Rent, without any notice or
demand and without any reduction, abatement, counterclaim, set off or deduction
of any amount whatsoever, in the aggregate amount of $198,932 per annum for the
period commencing on the Commencement Date to and including the Expiration Date,
payable in equal monthly installments in advance on the 1st day of each month
during the Term to Sublandlord at its offices in lawful money of the United
States which shall be legal tender for payment of all debts, public and private,
at the time of payment. Basic Rent of $16,577.67 for the first month of the
Term shall be paid on the Commencement Date. In the event that the Commencement
Date is any date other than the first day of a month, the Basic Rent for the
second month of the Term shall be appropriately prorated.
5. ADDITIONAL RENT. (a) Subtenant shall also pay to Sublandlord,
as additional rent, all Additional Rent (as defined in the Modification
Agreement) payable from and after the Commencement Date by Sublandlord under the
Lease or otherwise payable in respect of the Premises, including, without
limitation, the amounts due under Article 12 of the Lease (as amended by Rider 4
and Paragraph 3 of the Modification Agreement) and Articles 6 and 17 of the
Modification Agreement, PROVIDED THAT Sublandlord shall pay under the Lease that
amount of additional rent which is imposed prior to the Commencement Date, and
Subtenant shall not be obligated to pay as additional rent those amounts charged
to Sublandlord under the Lease prior to the Commencement Date, and PROVIDED
FURTHER THAT, for purposes solely of calculating the amount owed by Subtenant as
additional rent under this Section 5, Article 17 of the Prime Lease shall be
deemed to be amended to read as follows:
(i) The definition of "Base Tax Factor" shall be deemed amended
to mean the Taxes payable for the Tax Year beginning July 1, 1994; and
(ii) The definition of "Base Operating Factor" shall be deemed
amended to mean the average of the Operating Expenses incurred with respect
to the two operating years beginning January 1, 1994 and concluding
December 31, 1995.
(b) Subtenant and Sublandlord agree that commencing January 1, 1995,
and thereafter until such time as Sublandlord has determined the average of the
Operating Expenses incurred for the operating years commencing January 1, 1994
and concluding December 31, 1995, Subtenant shall, subject to the following
sentence, make the payments required under this Section 5 on the basis of the
average of the Operating Expenses for the operating year commencing January 1,
1994 and concluding December 31, 1994 and the estimated Operating Expenses for
calendar 1995 as shown in Landlord's Operating Statement pursuant to the
following sentence. The parties agree that in connection therewith,
- 3 -
<PAGE>
Subtenant will not be required to make payments hereunder until Landlord has
delivered to Sublandlord (and Sublandlord has sent copies to Subtenant)
Landlord's Operating Statement (as defined in the Lease) setting forth its
statement of Tenant's Projected Operating Share (as defined in the Lease) for
1995. Thereafter, once the Sublandlord has determined the average of the
Operating Expenses Incurred for the two operating years commencing January 1,
1994 and expiring December 31, 1995, it will so notify Subtenant. In the event
that such average amount is greater than the amount Subtenant theretofore paid
based upon the Base Operating Factor being the Operating Expenses Incurred in
the operating year beginning January 1, 1994, Subtenant shall, within five (5)
days of receipt of Sublandlord's notice, remit to Sublandlord an amount equal to
the amount so owing by Subtenant. In the event that such average amount is less
than the amount Subtenant theretofore paid based upon the Base Operating Factor
being the Operating Expenses Incurred in the operating year beginning January 1,
1994, Sublandlord shall, concurrently with the delivery of its notice to
Subtenant, remit to Subtenant an amount equal to the amount theretofore overpaid
by Subtenant.
(c) The amounts payable by Tenant under this Section 5 as additional
rent shall be prorated from the Commencement Date of the Term if such amounts
are payable in respect both to periods prior to the Commencement Date and to
periods thereafter.
(d) The additional rent shall be payable by Subtenant within ten (10)
days after the delivery to Subtenant of a copy of any statement under the Lease
from Landlord to Sublandlord (including any statement delivered after the
expiration of the Term or other termination of this Sublease). Sublandlord
shall have the same remedies for a default in the payment of additional rent as
are provided under this Sublease for default in the payment of Basic Rent.
(e) In the event this Sublease shall expire or terminate on a date
other than the last day of a calendar year, any payment of additional rent to
which Sublandlord is entitled, with respect to the calendar year in which this
Sublease expires or terminates, shall be apportioned and prorated.
(f) If Sublandlord receives any refund or credit pursuant to the
terms of the Lease which relates to the Premises during the Term, Sublandlord
shall credit to Subtenant against the next installment of Basic Rent or any
other charge due hereunder that portion of such refund or credit which relates
to overpayments by Subtenant under this Section 5.
(g) Subtenant shall pay Sublandlord all other amounts payable by
Sublandlord to Landlord during the Term with respect to the Premises and
Subtenant's use thereof, including, without limitation, all amounts payable for
(i) lamps, starters and ballasts (including replacements thereof) used in
lighting fixtures in the Premises pursuant to the Lease, (ii) steam and
- 4 -
<PAGE>
water other than that used for normal drinking, lavatory, cleaning, dishwashing
and toilet facilities as specified in the Lease, (iii) additional cleaning,
elevator, rubbish removal or HVAC pursuant to the Lease and (iv) any fee, charge
or amount incurred in connection with obtaining the consent or approval of
Landlord to any matter.
(h) All costs, charges, fees, amounts and sums payable by Subtenant
to Sublandlord or incurred by Sublandlord and due and payable by Subtenant to
Sublandlord hereunder or under the Lease as incorporated herein by reference
shall be due and payable as additional rent under this Sublease.
(i) Unless and until Subtenant shall default beyond any applicable
grace period provided for herein in the payment of the Basic Rent or additional
rent provided for in this Sublease, Subtenant may pay the Basic Rent and
additional rent by unendorsed checks payable to Sublandlord, subject to
collection. From and after any such monetary default until the same shall be
cured, Sublandlord may, at any time thereafter, require Subtenant to pay the
Basic Rent and additional rent by unendorsed certified or official bank check
drawn on a bank or trust company which is a member of the New York Clearinghouse
Association.
(j) In addition to all other amounts payable hereunder, Subtenant
shall pay to Sublandlord the aggregate amount of $14,556 per year for
electricity (the "Electric Charge"). The Electric Charge shall be payable,
without any notice or demand and without any reduction, abatement, counterclaim,
set-off or deduction of any amount, in equal monthly installments of $1,213 in
advance on the first day of each month during the Term, together with the Basic
Rent for such month. Sublandlord represents to Subtenant that the current
Electrical Inclusion Amount (as defined in the Lease) is $14,556, and
Sublandlord has not received any written notice indicating a change in such
amount. However, the parties hereto acknowledge that the Electric Charge shall
be subject to increase or decrease in accordance with the terms and provisions
of the Lease, but that it is the intent of the parties that the Electric Charge
shall equal the Electrical Inclusion Amount.
6. CERTAIN OBLIGATIONS RELATED TO PREMISES. It is the intent of
Sublandlord and Subtenant that during the Term of this Sublease, that between
Sublandlord and Subtenant, Subtenant shall bear all of the costs and expenses
relating to the Premises which are attributable to facts and circumstances first
occurring during the Term and Sublandlord shall bear all the costs and expenses
relating to the Premises which are attributable to any period before or after
the Term, whether such costs and expenses arise under the Lease or otherwise, so
that Sublandlord is reimbursed or held harmless by Subtenant from and against
all such costs and expenses.
- 5 -
<PAGE>
7. INCORPORATION BY REFERENCE. To the extent not otherwise
inconsistent with the terms, covenants, conditions and provisions specified in
this Sublease, the terms, covenants, conditions and provisions of the Lease are
incorporated herein by reference as though fully set forth herein in full on the
following understandings:
(a) The term "Landlord", as used therein, shall refer to Sublandlord
hereunder, its successors and assigns, and the term "Tenant", as used therein,
shall refer to Subtenant hereunder, and provided appropriate consents are
obtained from Landlord pursuant to the Lease, its successors and assigns.
(b) In any case where Landlord reserves the right or remedy to enter
the Premises, such right or remedy shall inure to the benefit of Landlord as
well as to Sublandlord.
(c) Subtenant acknowledges that Sublandlord is not in a position, nor
shall it be required, to furnish to Subtenant during the Term any water, heat,
electricity, air conditioning, light, power or any other work, facilities,
utilities, materials or services of any kind or nature whatsoever. The
performance by Landlord of its obligations under the Lease shall, for all
purposes of this Sublease, be deemed to be the performance of such obligations
by Sublandlord, and Sublandlord's obligations herein shall be limited to the
extent to which such obligations are performed by Landlord under the Lease. As
set forth in Subparagraph (k) below, Sublandlord shall use reasonable efforts to
request Landlord to perform its obligations under the Lease.
(d) Except as set forth in subparagraph (k) below, Sublandlord's sole
obligation to provide work, services, repairs and restoration or the performance
of other obligations required of Landlord under the Lease, shall be (i) limited
to the extent to which such obligations are performed by Landlord under the
Lease and (ii) to request the same, on the basis of a prior request in writing
by Subtenant, and to use its reasonable efforts, without expending any funds, to
obtain the same from Landlord. The performance by Landlord of its obligations
under the Lease shall, for all purposes hereunder, be deemed to be the
performance of such obligations by Sublandlord under the Lease as incorporated
herein by reference. Sublandlord shall not be liable for any default by
Landlord under any of the provisions of the Lease or for any damages arising out
of any such default.
(e) Subtenant shall perform and comply with all of the terms,
provisions, covenants and conditions of the Lease with respect to the Premises.
Subtenant covenants and agrees that it will not do or suffer or permit anything
to be done or omit to do anything which Subtenant is obligated to do under the
terms of this Sublease which would result in a default under or cause the Lease
to be terminated. Subtenant will indemnify Sublandlord and hold Sublandlord
harmless from any loss or liability and for all costs and expenses, including
reasonable attorneys fees, arising
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out of, by reason of, or resulting from, Subtenant's failure to so perform or
observe any of the covenants, terms, conditions and agreements of the Lease.
(f) Whenever any provision of the Lease which has been incorporated
herein by reference requires Sublandlord, as tenant under the Lease, to take any
action within a certain period of time after notice from Landlord, then, upon
notice from Sublandlord to Subtenant, Subtenant shall take such action within
five (5) days prior to the ending of such period of time or, if such time period
is less than ten (10) days, one-half the number of days in such time period (it
being understood that if the number of days is odd, the extra day shall be
allocated to Subtenant).
(g) In all provisions of the Lease requiring the approval or consent
of Landlord, Subtenant shall be required to obtain the approval or consent of
both Landlord and Sublandlord. In each instance where the approval or consent
of Landlord has been obtained by Subtenant, Sublandlord shall not unreasonably
withhold or delay its approval or consent. Sublandlord's withholding of its
approval or consent shall be deemed to be reasonable if the matter to which
consent or approval is requested (i) increases Sublandlord's costs under the
Lease in any manner and Subtenant does not agree to bear the cost thereof, or
(ii) is likely, in Sublandlord's reasonable judgment, to create a default under
the Lease.
(h) Whenever any provision of the Lease requires Landlord to give
notice to Sublandlord thereunder and such provision has been incorporated herein
by reference (thus requiring Sublandlord to give such notice to Subtenant), such
notice by Sublandlord to Subtenant shall for all purposes hereunder be deemed
timely given if given to Subtenant within five (5) days after receipt by
Sublandlord of such notice from Landlord; provided, that if the matter to which
such notice relates requires action within less than ten (10) days, Sublandlord
shall promptly give a copy of such notice to Subtenant by facsimile
transmission.
(i) To the extent that the provisions of the Lease may conflict or be
inconsistent with the provisions of this Sublease, whether or not such
inconsistency is expressly noted herein, the provisions of this Sublease shall
prevail. Subtenant expressly acknowledges and agrees that in no event
whatsoever shall Sublandlord have any obligations of any nature under this
Sublease or otherwise with respect to work, repairs or services or otherwise
relating to the Premises or this Sublease to be performed by Landlord under the
Lease and all such work, repairs and services to be made and furnished pursuant
to any provision of this Sublease, will in fact be furnished by the Landlord and
not by Sublandlord. Sublandlord shall in no event be liable to Subtenant nor
shall Subtenant's obligations hereunder be impaired or the performance thereof
excused because of any failure or
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delay on Sublandlord's part or on Landlord's part in furnishing any such work or
services or in making any of such repairs. If Landlord shall default in the
performance of any of its covenants, agreements or obligations under the Lease
or if Landlord shall breach any of its representations or warranties under the
Lease, Sublandlord shall have no liability in connection therewith and Subtenant
shall only have the right, at Subtenant's sole cost and expense, but in the name
of Sublandlord, to make demand or institute any appropriate action or proceeding
against Landlord in connection therewith. Subtenant will pay and will indemnify
and hold Sublandlord harmless against any and all loss or liability arising out
of, and for all costs and expenses, including attorneys' fees, incurred in the
prosecution of any proceedings or actions so taken by Subtenant.
(j) Sublandlord shall have under this Sublease as to Subtenant all
rights possessed by Landlord against Sublandlord as tenant under the Lease.
(k) In addition to the foregoing, Sublandlord shall (i) cooperate
with Subtenant in seeking to exercise Sublandlord's rights under the Lease and
to obtain the performance by Landlord of its obligations under the Lease and
(ii) use reasonable efforts to cause Landlord to perform under the Lease.
Subtenant shall have the right to take any action against Landlord in its own
name and for that purpose and only to such extent all the rights of Sublandlord
under the Lease are hereby assigned to Subtenant, and Subtenant shall be
subrogated to such rights. If any action against Landlord in Subtenant's name
shall be barred by reason of lack of privity, nonassignability or otherwise,
Sublandlord shall permit Subtenant to take such action in Sublandlord's name;
provided that Subtenant shall indemnify and hold Sublandlord harmless against
all liability, loss or damage which Sublandlord may incur by reason of such
action and that copies of all papers and notices of all proceedings shall be
given to Sublandlord. If Subtenant receives an abatement or diminution of rent
or any other amount payable in respect to the Premises, Subtenant shall be
entitled, after deducting from such amount all expenses incurred by Subtenant in
connection therewith, to apply the same to the Basic Rent.
(l) Notwithstanding the foregoing, the following Articles of the
Lease and Modification Agreement shall be omitted from this Sublease and shall
not be deemed a part hereof: (i) Articles 11, 23, 25, 27, 33 and Riders 1, 3 and
9 and Paragraph 15 of Rider 6 of the original Lease, (ii) Paragraphs 2, 3, 6 and
9 of the Modification and (iii) Sections 7.01 and 18.05 and Articles 8, 11 and
15 of the Rider to the Modification.
8. INSURANCE. On or before the Commencement Date and so long as
this Sublease remains in effect, Subtenant, at its sole expense, will maintain
with insurers approved by Sublandlord, all insurance required under the Lease.
All such
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insurance policies shall name Landlord and Sublandlord as additional named
insureds. Policies or certificates evidencing the issuance of insurance
required to be maintained pursuant to this Paragraph 8 shall be delivered by
Subtenant to Sublandlord simultaneously herewith and shall provide that no
cancellation thereof shall be effective until at least twenty (20) days after
receipt by Landlord and Sublandlord of written notice thereof.
9. ALTERATIONS. Subtenant shall not make any alterations,
improvements or installations in and to the Premises without the prior written
consent of each of Sublandlord and Landlord; PROVIDED, that where the consent of
Landlord has been obtained by Subtenant, Sublandlord shall not unreasonably
withhold its consent. All alterations and improvements in and to the Premises
made either prior to or during the Term shall be and remain the property of
Sublandlord or Landlord, as the case may be, and shall remain upon and be
surrendered with the Premises as part thereof at the end of the Term.
10 NOTICE. All notices or other communications which are required
hereunder or otherwise delivered in connection herewith shall be in writing and
shall be deemed to have been duly given if personally delivered or if sent by
nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
if to Sublandlord, to:
c/o O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Attention: Jeffrey S. Held, Esq.
Facsimile: (212) 408-2420
Telephone: (212) 408-2400;
if to Subtenant, to:
(a) prior to Commencement Date:
585 Route 440
Jersey City, New Jersey 07304
Attention: Arthur Rawl
Facsimile: (201) 434-2772
Telephone: (201) 433-9297
(b) after Commencement Date:
375 Park Avenue
Suite 2201
New York, NY 10152
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with a copy to:
Morrison & Foerster
1290 Avenue of the Americas
41st Floor
New York, New York 10104
Attention: Andrew Weiner, Esq.
Facsimile: (212) 468-7900
Telephone: (212) 468-8122.
11. SUBORDINATION. This Sublease and all of Subtenant's rights
hereunder are and shall remain in all respects subject and subordinate to all of
the terms and provisions of the Lease. The foregoing provision shall be self-
operative and no further instrument of subordination shall be necessary to
effectuate such provision unless required by Landlord or Sublandlord, in which
event Subtenant shall, upon demand by Landlord or Sublandlord at any time and
from time to time, execute, acknowledge and deliver to Sublandlord and Landlord
any and all instruments that Sublandlord or Landlord may reasonably require to
confirm such subordination of this Sublease and the rights of Subtenant
hereunder.
12. ATTORNMENT. If (a) the Lease should be terminated prior to the
Expiration Date or (b) Landlord should succeed to Sublandlord's estate in the
Premises, then, at Landlord's election, or, at the joint election of Sublandlord
and Landlord, Subtenant shall attorn to and recognize Landlord as Sublandlord
under this Sublease and Subtenant shall promptly execute and deliver any
instrument to Landlord which Landlord may require to reasonably evidence such
attornment, whereupon Sublandlord shall be released from any and all obligations
and liability hereunder, except if such termination or succession in interest is
due to Sublandlord's default. If the term of the Lease is terminated for any
reason prior to the Expiration Date and Landlord shall not elect to have
Subtenant so attorn, this Sublease shall thereupon be terminated ipso facto
without any liability of Sublandlord to Subtenant by reason of such early
termination, except if such termination is due to Sublandlord's default.
References in this Sublease to the "termination" of this Sublease shall include
the Expiration Date and any earlier termination thereof pursuant to the
provisions of this Sublease, the Lease or by law. Any liability of Subtenant to
make any payment under this Sublease which shall have accrued prior to the
termination of this Sublease, shall survive the termination of this Sublease.
13. ASSIGNMENT AND SUBLETTING. (a) Subtenant shall not assign,
mortgage, pledge or otherwise encumber this Sublease (whether by operation of
law or otherwise), nor sublet the Premises or any part thereof, except in
accordance with this Section 13.
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(b) Subject in each instance to the provisions and requirements of
the Lease and the consent of Landlord (if required under the Lease), Subtenant
shall have the right to sublease the Premises or assign this Sublease to the
sole stockholder or a wholly owned subsidiary of Subtenant or to an Affiliate
(as hereinafter defined) of Subtenant; PROVIDED, HOWEVER, that no such
assignment or sublease shall in any respect release Subtenant from its
obligations under this Sublease. As used herein, "Affiliate" shall mean any
person or entity, directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with Subtenant.
(c) Subject in each instance to the provisions and requirements of
the Lease, and the consent of both Landlord (if required under the Lease) and
Sublandlord (which shall not be unreasonably withheld), Subtenant shall have the
right to assign this Sublease or sublease the Premises to a third party that is
not an Affiliate of Subtenant, PROVIDED that any profits to be received from
Subtenant in connection with such an assignment or sublease (after deducting the
reasonable expenses incurred by Subtenant for brokerage fees and preparing the
Premises for such assignment or sublease) shall be split equally between
Sublandlord and Subtenant and shall be paid to Sublandlord immediately upon
receipt by Subtenant, PROVIDED, HOWEVER, that a public offering of equity
securities by Subtenant shall not be deemed to be an assignment of the Sublease
if, after such public offering, the party in control (as such term is defined in
rule 405 promulgated under the Securities Act of 1933, as amended) of the
Subtenant immediately prior to such public offering, either (a) continues to
control the Subtenant, or (b) holds a greater percentage of the outstanding
voting power of the Subtenant than any other shareholder of such Subtenant. No
such assignment or sublease shall in any respect release Subtenant from its
obligations under this Sublease. In the event Subtenant notifies Sublandlord in
writing (the "Section 13 Notice") of its desire to assign this Sublease or
sublease the Premises in accordance with this Section 13(c), Sublandlord shall
notify Subtenant of its decision to grant or withhold consent thereto within ten
(10) Business Days after receipt of (i) the Section 13 Notice and (ii) all
information reasonably requested by Sublandlord in connection with such proposed
assignment or subletting. In the event Sublandlord fails to respond to
Subtenant during such ten (10) Business Day period, such proposed assignment or
subletting shall be deemed approved. Sublandlord's failure to grant its consent
to a proposed assignment or subleasing based solely on the financial condition
of the proposed assignee or sublessee shall be deemed unreasonable if, and only
if, (x) Subtenant remains liable to Sublandlord for all of its obligations under
this Sublease and (y) Subtenant has a net worth at the time of such proposed
assignment equal to or greater than its net worth as of the date hereof.
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14. BROKERS. Each of Subtenant and Sublandlord represents and
warrants that it has dealt with no broker in connection with this Sublease or
the Premises other than Walker, Malloy & Company, Inc., the brokerage affiliate
of Quinlan & Field (the "Broker") and Cushman & Wakefield, Inc. Subtenant shall
indemnify and hold Sublandlord harmless against brokerage fees and any claims,
costs and expenses, including attorneys' fees, incurred by Sublandlord if the
foregoing representation and warranty of Subtenant is not true and Sublandlord
shall indemnify and hold Subtenant harmless against brokerage fees and any
claims, costs and expenses, including attorneys' fees, incurred by Subtenant if
the foregoing representation and warranty of Sublandlord is not true.
Sublandlord shall pay the commission owing to the Broker pursuant to a separate
agreement between Sublandlord and the Broker.
15. INDEMNIFICATION. (a) Subtenant shall indemnify and hold
Sublandlord harmless from and against any and all liability (statutory or
otherwise), claim, suit, demand, damage, judgment, cost, interest and expense,
including, but not limited to, attorneys' fees and charges, which Sublandlord
may incur or pay out, by reason of, or resulting from any breach by Subtenant of
any provision of or representation or warranty contained in, this Sublease or of
the Lease as incorporated herein by reference, or default on the part of
Subtenant hereunder or under the Lease as incorporated herein by reference, or
by reason of any injuries to person or property occurring in, on or about the
Premises, regardless of the cause thereof.
(b) Sublandlord shall indemnify and hold Subtenant harmless fromand
against any and all liability (statutory or otherwise), claim, suit, demand,
damage, judgment, cost, interest and expense, including, but not limited to,
attorneys' fees and charges, which Subtenant may incur or pay out, by reason of,
or resulting from any breach by Sublandlord of any provision of or
representation or warranty contained in, this Sublease or of the Lease as
incorporated herein by reference, or default on the part of Sublandlord
hereunder or under the Lease or resulting from any facts or circumstances first
occurring prior to the Commencement Date.
16. CONFLICT OR INCONSISTENCY. In case of any conflict or
inconsistency between the provisions of the Lease and those of the Sublease, the
provisions of this Sublease shall, as between Sublandlord and Subtenant,
control.
17. LANDLORD'S CONSENT. This Sublease is expressly conditioned upon
Landlord's consent in writing to the same. Sublandlord shall promptly request
Landlord's approval in writing of this Sublease. If Landlord has not signed and
delivered the Consent within thirty (30) days from the date of this Sublease,
either Subtenant or Sublandlord may within thirty (30) days thereafter and prior
to Landlord's signing and delivering the Consent, give written notice to the
other party hereto canceling
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and terminating this Sublease on a date designated in such notice not less than
seven (7) nor more than fourteen (14) days from the date it is given. If,
during the period from the date of the notice to the date designated therein for
cancellation of this Sublease, Sublandlord shall obtain the Consent and shall
deliver a fully executed (except for the signature of Subtenant) duplicate
original of the Consent to Subtenant, then the notice shall be null and void and
the Sublease shall remain in effect. If this Sublease is canceled pursuant to
the provisions of this Section, Subtenant shall have no right or interest in the
Premises and, except as otherwise specified herein, neither party shall have any
further liability to the other hereunder and any advance rentals or security
deposited by Subtenant with Sublandlord shall be returned to Subtenant.
Sublandlord shall submit a request for consent to this Sublease to Landlord with
all required documentation within ten (10) business days after the date hereof.
In connection therewith, Subtenant shall provide Landlord with all information
requested by Landlord in connection with such consent.
18. FINANCIAL STATEMENTS. (a) Subtenant acknowledges that attached
hereto as Exhibit D are true, correct and complete copies of each of the
following financial statements:
(i) the audited balance sheet of Subtenant as at December 31,
1993 and the related audited statements of results of operations, retained
earnings and cash flow for the fiscal year then ended, together with all
notes thereto, accompanied by the unqualified report thereon of Coopers &
Lybrand, Subtenant's independent public accountants (the "Accountants");
and
(ii) the unaudited balance sheet of the Subtenant as at March 31,
1994 and the related statements of results of operations, retained earnings
and cash flow for the three (3) month period then ended, prepared and
certified by the chief financial officer of Subtenant.
Subtenant represents and warrants that all such financial statements
are true, correct and complete in all respects, were prepared in accordance with
the books and records of Subtenant, fairly present the financial position of
Subtenant at and as of the dates indicated and fairly present the results of
operations, retained earnings and cash flow of Subtenant for the periods
indicated and were prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods covered hereby
and in accordance with historical practice.
(b) During the Term, Subtenant shall provide Sublandlord with the
following financial statements (collectively, the "Financial Statements"):
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(i) within 120 days after the end of each of its fiscal years, a
balance sheet of Subtenant as at the end of such fiscal year and statements
of results of operations, retained earnings and cash flow for such year,
all in reasonable detail and certified by the Accountants or another firm
of certified public accountants reasonably acceptable to Sublandlord; and
(ii) within 45 days after the end of each quarter, a condensed
balance sheet of Subtenant as at the last day of such quarterly period,
together with condensed statements of results of operations, retained
earnings and cash flow for such quarter, together with corresponding
cumulative condensed statements from the first day of the current year to
the last day of such quarter, all certified by the chief financial officer
of Subtenant.
All of the Financial Statements will be prepared in accordance with GAAP on a
basis consistent with historical practice.
19. SECURITY. Simultaneously with the execution of this Sublease,
Subtenant is depositing with O'Sullivan Graev & Karabell ("Escrow Agent") a
security deposit in the sum of FIFTY THOUSAND AND 00/100 DOLLARS ($50,000.00)
(the "Security Deposit"). The Security Deposit will be held by Escrow Agent
pursuant to the terms of an Escrow Agreement among Sublandlord, Subtenant and
Escrow Agent, in the form of Exhibit E attached hereto, with the intent being
that the Security Deposit will be released to Sublandlord upon execution and
delivery by Landlord of its consent to this Sublease. If at any time during the
Term Subtenant's net worth (as determined in a manner consistent with
Subtenant's principal financial statements), as reflected on any Financial
Statement, is less than Twenty Million Dollars ($20,000,000), Subtenant shall
within five (5) business days after notice from Sublandlord deposit additional
funds with Sublandlord (or, if applicable, Escrow Agent) sufficient to increase
the Security Deposit to One Hundred Thousand and 00/100 Dollars ($100,000.00).
The Security Deposit is security for the faithful performance and
observance by Subtenant of all of the terms, covenants and conditions of this
Sublease on Subtenant's part to be performed and observed and payment of any and
all other damages for which Subtenant shall be liable by reason of any act or
omission contrary to any of said terms, covenants and conditions. Sublandlord
may use, apply or retain the whole or any part of the Security Deposit for any
Basic Rent, additional rent and any other sums as to which Subtenant may be in
default hereunder beyond any applicable grace period and for any sum which
Sublandlord may expend or may be required to expend by reason of Subtenant's
default in respect of any of the terms, covenants and conditions of this
Sublease, including, without limiting the generality of the foregoing, any and
all damages and deficiencies in the reletting of the Premises, whether such
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damages or deficiencies shall accrue before or after summary proceedings or
other re-entry by Sublandlord, whereupon Subtenant, after notice from
Sublandlord, shall cause an additional cash deposit to be deposited with
Sublandlord so that the Security Deposit at all times during the Term hereof
shall always remain in the amount specified in this Section 19. The parties
acknowledge that Sublandlord's use or retainage of all or any portion of the
Security Deposit shall in no way be an exclusive remedy and Sublandlord shall
have in all instances the right to seek all other remedies available at law or
equity. In the event that Subtenant shall fully and faithfully comply with all
of the terms, provisions, covenants and conditions of this Sublease, the
Security Deposit, or so much thereof as shall not have been applied by
Sublandlord as aforesaid, shall be returned to Subtenant within five (5)
business days after the Expiration Date. The Security Deposit shall be
maintained in an interest bearing account and Subtenant shall be entitled to all
interest earned thereon less the deduction for administrative expenses permitted
pursuant to Section 7-103 of the General Obligations Law. In the event of an
assignment by Sublandlord of its interest under the Lease and an assumption by
the assignee of all of the obligations of Sublandlord under the Lease,
Sublandlord shall have the right to transfer the Security Deposit to the
assignee, and Sublandlord shall thereupon be released by Subtenant from all
liability for the return of such Security Deposit. In such event, Subtenant
shall look solely to such assignee for the return of the Security Deposit. The
foregoing provisions shall apply to every transfer or assignment made of the
Security Deposit. Subtenant covenants that it will not assign or encumber, or
attempt to assign or encumber, the Security Deposit, and that neither
Sublandlord, nor its successors and assigns, shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance.
20. QUIET ENJOYMENT. If, and so long as, Subtenant pays all of the
rent and additional rent due under this Sublease, and keeps, observes and
performs each and every covenant, agreement, term, provision and condition
herein contained or contained in the Lease as incorporated herein, on the part
of Subtenant to be kept, observed and performed, Sublandlord covenants that
Subtenant shall quietly enjoy the Premises without hindrance or molestation by
Sublandlord, subject, however, to the covenants, agreements, terms, provisions
and conditions of this Sublease and the Lease.
21. WAIVERS; CONSENT TO JURISDICTION. Each of Subtenant and
Sublandlord (a) waives any right to a trial by jury in any action to enforce or
defend any matter arising from or related to this Sublease; (b) irrevocably
submits to the jurisdiction of any State or Federal Court located in New York
County, New York, over any action or proceeding to enforce or defend any matter
arising from or relating to this Sublease; (c) irrevocably waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum to
the maintenance of
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any such action or proceeding; (d) agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any other manner provided by law; and
(e) agrees not to institute any legal action or proceeding against the other
party hereto or any of such other party's stockholders, partners, officers,
directors, employees, agents, representatives or property, concerning any matter
arising out of or relating to this Sublease in any court other than one located
in New York County, New York. Each of Subtenant and Sublandlord waives personal
service of the summons and complaint, or other process or papers issued in any
action or proceeding to enforce or defend any matter arising from or related to
this Sublease, and agrees that service of such summons and complaint, or other
process or papers may be made by registered or certified mail addressed to such
party at the address of such party set forth above.
22. TERMINATION OF SUBLEASE. (a) Subtenant shall quit and surrender
the Premises and the Furniture on or before the end of the Term, broom clean, in
good order and condition, ordinary wear and tear, damage and casualty (other
than a casualty caused by the negligence or misconduct of Subtenant or its
employees; agents or representatives) excepted and shall repair any damage
caused by the removal of any of Subtenant's property.
(b) Subtenant acknowledges that possession of the Premises and the
Furniture must be surrendered to Sublandlord at the expiration or sooner
termination of the Term of this Sublease by operation of law or otherwise.
Subtenant agrees to indemnify and save Sublandlord harmless against all costs,
claims, loss or liability of any nature whatsoever (including, without
limitation, reasonable fees and disbursements of attorneys) resulting from, or
arising out of, delay by Subtenant in so surrendering the Premises and
Furniture. Nothing herein contained shall be deemed to permit Subtenant to
retain possession of the Premises or the Furniture after the expiration or
sooner termination of the Term.
23. MISCELLANEOUS. (a) Sublandlord and Subtenant each represent and
warrant to the other that each person executing this Sublease on its behalf is
duly authorized to so execute this Sublease.
(b) This Sublease cannot be waived, modified, terminated or canceled
except by an agreement in writing signed by the party to be charged.
(c) The exercise, validity, construction, operation and effect of the
terms and provisions of this Sublease shall be determined and enforced in
accordance with the laws of the State of New York.
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(d) The captions in this Sublease and the table of contents are
inserted only as a matter of convenience and shall not define, limit, extend or
describe the scope of this Sublease or affect the construction hereof.
(e) If any of the provisions of this Sublease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Sublease, or the application of such
provision or provisions to persons or circumstances other than those as to whom
or which it is held invalid or unenforceable, shall not be affected thereby, and
every provision of this Sublease shall be valid and enforceable to the fullest
extent permitted by law.
(f) This Sublease shall be binding upon and inure to the benefit of
Sublandlord, its successors and assigns. It shall also be binding upon, and
inure to the benefit of Subtenant. It is not assignable by Subtenant, except in
accordance with the provisions of the Lease and this Sublease, and, if
appropriate consents to any assignment are obtained under the Lease and this
Sublease, it shall be binding upon the assignee as to whom such consents are
obtained. Sublandlord shall not assign this Sublease (it being understood that
any event which would constitute an assignment by the tenant under the Lease
shall constitute an assignment by Sublandlord hereunder) unless the assignee
assumes all of the obligations of Sublandlord under this Sublease and in no
event shall Sublandlord be deemed to be released from its obligations hereunder
in connection with any assignment. No partner, shareholder, director or officer
of Sublandlord, or of any partner or shareholder of Sublandlord (collectively,
the "Parties") shall be liable for the performance of Sublandlord's obligations
under this Sublease. Subtenant shall look solely to Sublandlord to enforce
Sublandlord's obligations hereunder and shall not seek any damages against any
of the Parties.
(g) Each right and remedy of Sublandlord under this Sublease is
cumulative and in addition to every other right and remedy of Sublandlord under
this Sublease now or hereafter existing at law or in equity, by statute or
otherwise.
(h) No surrender of possession of the Premises or of any part thereof
or of any remainder of the Term of this Sublease shall release Subtenant from
any of its obligations hereunder unless accepted by Sublandlord in writing.
(i) The receipt and retention by Sublandlord of Basic Rent or
additional rent from anyone other than Subtenant shall not be deemed a waiver of
the breach by Subtenant of any covenant, term, condition or agreement herein
contained, or the acceptance of such other person as a tenant, or a release of
Subtenant from the further keeping, observance or performance by Subtenant of
the covenants, terms, conditions and agreements herein contained. The receipt
and retention by Sublandlord of
- 17 -
<PAGE>
Basic Rent or additional rent with knowledge of the breach of any covenant,
term, condition or agreement herein contained shall not be deemed a waiver of
such breach.
(j) In addition to all other remedies provided for herein and in
equity or by law, if Subtenant shall default (beyond any applicable grace
period) in the observance or performance of any term, covenant, condition or
agreement on Subtenant's part to be observed or performed under or by virtue of
any of the terms or provisions of this Sublease, including any provisions of the
Lease incorporated herein by reference, Sublandlord shall have the right, but
not the obligation, to perform the same for the account of Subtenant, and if
Sublandlord makes any expenditures or incurs any obligations for the payment of
money in connection therewith, including, without limitation, reasonable
attorneys' fees, such sums paid or obligations incurred, with interest at 10%
per annum, shall be paid by Subtenant to Sublandlord within five (5) days of
rendition of a bill or statement to Subtenant therefor.
(k) This Sublease contains all of the covenants, agreements, terms,
conditions and understandings relating to the leasing of the Premises to
Subtenant and Sublandlord's obligations in connection therewith and neither
Sublandlord nor any agent or representative of Sublandlord has made or is
making, and Subtenant in executing and delivering this Sublease is not relying
upon, any warranties, representations, promises or statements whatsoever. All
understandings and agreements, if any, heretofore had between the parties are
merged in this Sublease, which alone fully and completely expresses the
agreement of the parties.
* * *
- 18 -
<PAGE>
IN WITNESS WHEREOF, this Sublease has been duly executed as of the day
and year first hereinabove written.
SUBLANDLORD
OVERSEAS PARTNERS, INC.
By: /s/ Illegible
----------------------
SUBTENANT
EMCO MOTOR HOLDINGS, INC.
By: /s/ E.P. Mager
----------------------
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<PAGE>
Overseas Partners, Inc.
375 Park Avenue
New York, New York 10152
August ___, 1994
Emco Motor Holdings, Inc.
585 Route 440
Jersey City, New Jersey 07304
Ladies and Gentlemen:
Reference is made to that certain Sublease dated as of August _, 1994
(the "Sublease") between Overseas Partners, Inc. ("Sublandlord") and Emco
Holdings, Inc. ("Subtenant"). Sublandlord and Subtenant hereby agree that the
Sublease is hereby amended as follows:
(a) The phrase "September 1, 1994" in the second sentence of
Section 1 of the Sublease is hereby deleted and the following is hereby
substituted therefor: "the later of (a) September 1, 1994, (b) the date on
which Landlord's consent is obtained pursuant to Section 17 hereof and (c)
the date Sublandlord delivers possession of the Premises to Subtenant".
As amended hereby, the Sublease is ratified and confirmed in all
respects.
Very truly yours,
OVERSEAS PARTNERS, INC.
By:
------------------------
Name
President
------------------------
Title
Agreed & Accepted:
EMCO MOTOR HOLDINGS, INC.
By: __________________________
Name
__________________________
Title
<PAGE>
EXHIBIT 10.1.11
[LETTERHEAD OF CHRYSLER CORPORATION]
Office of the General Counsel
Chrysler Corporation
July 24, 1996
Carl Spielvogel
Chairman Chief Executive Officer
United Auto Group, Inc.
375 Park Avenue, 22nd Floor
New York, NY 10152
Dear Mr. Spielvogel:
This letter will confirm my telephone conversation with your counsel
concerning United Auto Group's (UAG) desire to make a public offering of
approximately 40% of its stock. I've been asked whether such an offering would
be a breach of the Sales and Service Agreements, which several UAG subsidiaries
have with Chrysler Corporation.
Paragraph 3 of each Sales and Service Agreement requires Chrysler
Corporation's prior written approval of any change affecting more than 50% of
the ownership interest of the dealer or any change in the ownership interest of
the dealer which may affect its managerial control. The public offering of
approximately 40% of the stock, even if fully diluted, should not affect voting
control; thus, neither of the conditions in Paragraph 3 should be triggered. Of
course, any subsequent transfer of stock among shareholders that could affect
the voting control may trigger the requirement for Chrysler's approval of the
transfer.
Please let me know if you require any additional information.
Very truly yours,
/s/ Judith B. Shumaker-Holland
Judith B. Shumaker-Holland
Senior Staff Counsel
1000 Chrysler Drive
Auburn Mills MI 18326-2766
<PAGE>
AGREEMENT BETWEEN
TOYOTA MOTOR SALES, U.S.A., INC.
AND
UNITED AUTO GROUP, INC.
Agreement, dated July 24, 1996, entered between United Auto Group, Inc. ("UAG"),
a Delaware corporation, with its principal place of business at 375 Park Avenue,
22nd Floor, New York, New York 10152, and Toyota Motor Sales, U.S.A., Inc.
("TMS"), a California corporation, with its principal place of business at 19001
South Western Avenue, Torrance, CA, 90509.
WHEREAS, UAG is currently the owner, directly or through its Affiliates (as
defined in Paragraph 1 below) of four Toyota and one Lexus automobile
dealerships; and
WHEREAS, UAG may wish to acquire, directly or through an Affiliate, additional
Toyota and Lexus dealerships; and
WHEREAS, UAG wants to issue stock in a public offering of securities anticipated
to be traded on the New York Exchange; and
WHEREAS, UAG and TMS have agreed that UAG will not use a public ownership
structure for its Toyota and Lexus dealerships without TMS' prior consent, which
shall be given or withheld in TMS' sole discretion; and
WHEREAS, TMS has advised UAG of TMS' policy limiting the number of commonly
owned or controlled, directly or through an Affiliate (as defined below),
dealerships by a single entity, which is currently as follows:
A. TOYOTA
A single entity shall not hold an ownership interest, directly or
through an Affiliate, in more than: (a) the greater of one (1) or 20%
of the Toyota dealer count in a "Metro" market ("Metro markets are
multiple Toyota dealership markets as defined by TMS; (b) 4% of the
Toyota dealerships in any Toyota Region ("Toyota Region" currently
includes nine TMS Regions, Central Atlantic Toyota, Southeast Toyota,
and Gulf States Toyota); and c) seven (7) Toyota dealerships
nationally.
LEXUS
A single entity shall not hold an ownership interest, directly or
through an Affiliate, in more than: (a) two (2) Lexus dealerships in
any Area ("Area" currently includes Eastern, Southern, Central and
Western); and (b) three (3) Lexus dealerships nationally.
<PAGE>
"Affiliate" of, or a person or entity "affiliated" with, a specified person
or entity, means a person or entity that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the person or entity specified. For the purpose of this
definition, the term "control" (including the terms "controlling,"
"controlled by" and "under common control with" means the possession,
directly or indirectly, or the power to direct or cause the direction of
the management and policies of a person or entity, whether through the
ownership of securities, by contract or otherwise.
B. In order for any entity to acquire additional Toyota or Lexus dealerships,
within the limits of this Agreement, each Toyota or Lexus dealership which
it owns, directly or through an Affiliate, must: a) be in full compliance
with all of the terms of its Dealer Agreement; and b) meet all of the
applicable Toyota or Lexus Market Representation and performance policies.
C. If the purchase of any Toyota or Lexus dealership would result in exceeding
the limits set forth in Paragraph 1 above, TMS will reject a dealer's
application for approval of the ownership transfer until such time as the
dealer shall divest itself of the appropriate number of dealerships to
bring it into compliance with the requirements of this Agreement.
WHEREAS, UAG and TMS are willing to resolve these issues in accordance with the
terms set forth herein,
NOW THEREFORE, UAG and TMS agree as follows:
CHANGE IN OWNERSHIP OF UAG
1. TMS shall have the right to approve any new acquisition in ownership or
voting rights of UAG of twenty percent (20%) or greater by any individual
or entity; PROVIDED HOWEVER, that if TMS reasonably determines that such
individual or entity is unqualified to own a Toyota or Lexus dealership, or
has interests incompatible with TMS, and such transfer is effected, UAG
must, within ninety (90) days from the date of notification by TMS of its
determination, either: a) transfer the assets of its Toyota and Lexus
dealerships to a third party acceptable to TMS; b) voluntarily terminate
its Toyota and Lexus Dealership Agreements; or c) demonstrate that such
individual or entity in fact owns less than 20% of the outstanding shares
of UAG, or does not have 20% of the voting rights in UAG.
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<PAGE>
OWNERSHIP OF CONTIGUOUS DEALERSHIPS
2. UAG shall not own contiguous dealerships (as that term is defined in the
applicable Toyota or Lexus Dealer Agreement or policy) with common
boundaries.
SEPARATE LEGAL ENTITIES FOR EACH TOYOTA AND LEXUS DEALERSHIP
3. UAG shall create separate legal entities for each Toyota and Lexus
dealership which it owns, directly or through an Affiliate, shall obtain a
separate motor vehicle license for each dealership, and shall maintain
separate financial statements for each such dealership. Consistent with
TMS policy, the name "Toyota" or "Lexus," as applicable shall appear in the
d/b/a of each dealership.
FACILITY STANDARDS
4. In no instance shall a Toyota or Lexus dealership or any department(s)
thereof be dualled with any other brand without TMS' prior written
approval.
GENERAL MANAGERS
5. Each Toyota and Lexus dealership owned or controlled by UAG shall have a
qualified, approved (subject to the exception noted in Paragraph 6 below)
General Manager. Each General Manager shall work at the Toyota or Lexus
dealership premises, shall devote all of his/her efforts to the management
of the dealership and shall have no other business interests or management
responsibilities.
APPROVAL OF THE GENERAL MANAGER
6. Whenever UAG nominates a new General Manager candidate for a Toyota or
Lexus dealership, TMS shall have the right to withhold a decision
concerning approval or rejection of the candidate for a period of up to one
year, at its sole discretion; PROVIDED, HOWEVER, that the candidate may
operate in the capacity of General Manager until TMS has approved or
rejected him/her.
LIMITATIONS ON THE AUTHORITY OF THE GENERAL MANAGER
7. UAG shall advise TMS of the limitations, by category and, where applicable,
by specific action, on the authority of the General Manager regarding the
operation of the dealership, and shall provide the name of the individual
at UAG who has such authority with respect to each listed category or
specific action, in accordance with Paragraph 8 below.
-3-
<PAGE>
IDENTIFICATION OF UAG CONTACT OFFICIAL
8. UAG shall identify, in each Toyota and Lexus Dealer Agreement, the UAG
executive (other than the General Manager of the dealership) who will
respond directly to any Toyota or Lexus concerns regarding the operation or
performance of the dealership, which executive will have full authority, in
accordance with UAG management policies, to resolve issues raised by TMS in
connection with the operation of the dealership.
SELLING TOYOTA PRODUCTS
9. UAG shall make available to the customers at its Toyota and Lexus
dealerships, all Toyota products, including vehicles, Genuine Parts and
Accessories, retail financing (whether for purchases or leases) and
extended service contracts.
REPRESENTATION ON TOYOTA AND LEXUS DEALER ORGANIZATIONS
10. No more than one representative each from the Toyota, and, separately,
Lexus, dealerships owned, directly or through an Affiliate, by UAG, may
serve on the National Dealer Council or any future Toyota or Lexus national
board(s) which may be established, and no more than one representative each
may serve on either a Regional or Area Dealer Council, or Toyota or Lexus
Dealer Association Board of Directors.
DEALERSHIP PERSONNEL TRAINING
11. UAG shall not substitute training courses or certification programs of its
own for those provided or sponsored by TMS without the prior approval of
TMS.
PUBLIC OFFERING OF SECURITIES BY UAG
12. TMS shall not object to a public offering of securities by United Auto
Group so long as the limitations on ownership of voting control of UAG
contained in this agreement are not exceeded or breached in any way. In
addition, TMS hereby approves the increase to 100% in equity interest in
each Toyota and Lexus dealership in which subsidiaries of UAG now have a
majority equity interest.
FINANCIAL DISCLOSURES
13. UAG shall provide TMS with copies of all information and materials filed
with the Securities Exchange Commission, including, but not limited to,
quarterly and annual financial statement filings, prospectuses and other
materials related to UAG.
-4-
<PAGE>
PROSPECTUS DISCLAIMER AND INDEMNIFICATION AND
HOLD HARMLESS AGREEMENT
14. UAG shall place in its registration statement and its prospectus, as well
as in any other document offering shares in UAG to public or private
investors, the following disclaimer:
No Manufacturer (as defined in this Prospectus) has been
involved, directly or indirectly, in the preparation of this
Prospectus or in the Offering being made hereby. No Manufacturer
has made any statements or representations in connection with the
Offering or has provided any information or materials that were
used in connection with the Offering, and no Manufacturer has any
responsibility for the accuracy or completeness of this
Prospectus.
UAG shall indemnify and hold harmless TMS pursuant to the terms of the
Indemnification and Hold Harmless Agreement set forth in Attachment 1 to
this Agreement.
SOLE AGREEMENT OF THE PARTIES
15. There are no prior agreements or understandings, either oral or written,
between the Parties affecting this Agreement, except as otherwise specified
or referred to in this Agreement. No change or addition to, or deletion of
any portion of this Agreement shall be valid or binding upon the parties
hereto unless approved in writing signed by an officer of each of the
parties hereto.
SEVERABILITY
16. If any provision of this Agreement should be held invalid or unenforceable
for any reason whatsoever, or conflicts with any applicable law, this
Agreement will be considered divisible as to such provision(s), and such
provision(s) will be deemed amended to comply with such law, or if it
(they) cannot be so amended without materially affecting the tenor of the
Agreement, then it (they) will be deemed deleted from this Agreement in
such jurisdiction, and in either case, the remainder of the Agreement will
be valid and binding.
NO IMPLIED WAIVERS
17. 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 an any time thereafter, nor shall any
waiver by any party of a breach of any provision herein constitute a
-5-
<PAGE>
waiver of any succeeding breach of the same or any other provision, nor
constitute a waiver of the provision itself.
TMS POLICIES
18. This Agreement refers to certain policies and standards. UAG acknowledges
that these policies and standards are prepared by TMS in its sole
discretion based upon TMS' evaluation of the marketplace. TMS may
reasonably amend its policies and standards from time to time.
APPLICABLE LAW
19. This Agreement shall be governed by and construed according to the laws of
California.
BENEFIT
20. This Agreement is entered into by and between TMS and UAG for their sole
and mutual benefit. Neither this Agreement nor any specific provision
contained in it is intended or shall be construed to be for the benefit of
any third party.
NOTICE TO THE PARTIES
21. Any notices permitted or required under the terms of this Agreement shall
be directed to the following respective addresses of the parties, or if
either of the parties shall have specified another address by notice in
writing to the other party, then to the address last specified:
TOYOTA MOTOR SALES, U.S.A., INC.
19001 South Western Avenue
Torrance, California 90509
UNITED AUTO GROUP
375 Park Avenue
22nd Floor
New York, New York 10152
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
UNITED AUTO GROUP, INC.
BY: /s/ Carl Spielvogel
-----------------------------
Carl Spielvogel, Chairman and
Chief Executive Officer
TOYOTA MOTOR SALES, U.S.A., INC.
BY: /s/ Illegible
-----------------------------
-7-
<PAGE>
ATTACHMENT 1
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, made this 24th day of July, 1996 between
United Auto Group, Inc., a Delaware corporaton the address of which is 375 Park
Avenue, 22nd Floor, New York, NY 10152, ("UAG") and Toyota Motor Sales, U.S.A.,
Inc., a California corporation the address of which is 19001 S. Western Avenue,
Torrance, CA 90509 ("TMS").
WITNESSETH
WHEREAS, UAG has been formed to own subsidiary corporations which will
own and operate automobile dealerships; and;
WHEREAS, UAG intends to publicly offer and sell shares of stock ("UAG
Stock") in a public offering pursuant to the Securities Act of 1933 (the "Act");
WHEREAS, TMS has consented to the offer and sale of such UAG stock to
the public; and
WHEREAS, in recognition of TMS' demand for complete protection against
liability and threats of legal action and in order to obtain TMS' consent to the
offer and sale of such shares, UAG wishes to provide in this Agreement for the
indemnification of and the advancing of expenses to TMS as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises made herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as follows:
1. INDEMNITY OF TMS
UAG hereby agrees to indemnify and hold harmless TMS and its
affiliates from and against any and all losses, liabilities, judgments, amounts
paid in settlement, claims, damages and expenses whatsoever (collectively a
"Claim"), including, but not limited to, any and all expenses whatsoever
incurred investigating, preparing or defending against any litigation, commenced
or threatened, to which TMS may become subject under the Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the securities laws of
any state (the "Blue Sky Laws"), any other statute or at common law or otherwise
under the laws of any foreign country, arising in connection with the sale of
the UAG stock. In addition, UAG hereby agrees to indemnify and hold harmless
TMS from any and all claims of the shareholders of UAG with respect to any
matter,
<PAGE>
PROVIDED, that if it is ultimately determined, based upon a final decision of a
court, arbitrator or other authorized panel or a settlement entered into by the
parties to the dispute and consented to by TMS that TMS was liable for such
Claim in whole or in part, the indemnification set forth herein shall be of no
force or effect, and TMS shall immediately reimburse UAG for any expenses
advanced by UAG pursuant to Paragraph 3 of this Agreement.
2. NOTIFICATION AND DEFENSE OF CLAIM
(a) If any litigation is commenced against TMS in respect of
which indemnity may be sought pursuant to this Agreement, TMS shall promptly
notify UAG in writing of the commencement of any such litigation, and UAG shall
then assume the defense of any such litigation, including the employment and
fees of counsel (reasonably satisfactory to TMS) and the payment of all such
expenses.
(b) TMS shall have the right to employ its own counsel in any
such case to oversee the litigation on behalf of TMS, to consult with the
attorneys engaged by UAG as to the proper handling of the litigation and to take
such actions in connection with the litigation as are reasonably necessary to
protect TMS' interests. UAG shall pay the reasonable fees and expenses of not
more than one additional firm of attorneys for TMS.
(c) UAG agrees promptly to notify TMS of the commencement of any
litigation against UAG in connection with the issue and sale of the UAG stock.
UAG and TMS agree to cooperate with each other in the defense of any litigation.
(d) UAG shall not be obligated to indemnify or reimburse TMS
under this Agreement for any amounts paid in settlement of any litigation
effected without UAG's prior written consent. UAG shall not, in the defense of
any such litigation, except with TMS' prior written consent, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to TMS of
a release from all liability in respect to such litigation. Neither UAG nor TMS
shall unreasonably withhold its consent to any proposed settlement.
3. PAYMENT OF EXPENSES
UAG agrees that it will pay and all expenses incurred by TMS in
defending any civil or criminal action, suit or proceeding against TMS in
advance of the time such expenses are due. With respect to legal fees and
disbursements of TMS' attorneys, UAG will pay such attorneys an advance retainer
of up to $20,000 and will pay additional fees and expenses of such attorneys in
increments of not more than $20,000 periodically in advance of the dates that
such fees and expenses are incurred.
-2-
<PAGE>
4. ENFORCEMENT
(a) UAG expressly confirms and agrees that it has entered into
this Agreement and assumes the obligations imposed on it in order to induce TMS
to consent to the offer and sale of UAG stock and acknowledges that TMS is
relying upon this Agreement to grant such consent.
(b) In the event TMS is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, UAG shall reimburse TMS for all of TMS' reasonable fees and expenses in
bringing and pursuing such action.
5. SUBROGATION
(a) In the event of payment under this Agreement, UAG shall be
subrogated to the extent of such payment to all of the rights of recovery of
TMS, which shall execute all papers required and shall do everything that may be
necessary to secure such rights, including the execution of such document
necessary to enable UAG effectively to bring suit to enforce such rights.
(b) UAG shall not be liable under this Agreement to make any
payment in connection with any claim or litigation made against TMS to the
extent TMS has otherwise actually received payment (under any insurance policy
or otherwise) of the amounts otherwise indemnifiable hereunder.
6. MISCELLANEOUS
(a) This Agreement shall be interpreted and construed in
accordance with the laws of the State of California, without giving effect to
the conflict of law rules.
(b) This Agreement shall be binding upon and inure to the
benefit of UAG and TMS and their respective legal representatives, successors
and assigns.
(c) No amendment, modification or termination of this Agreement
shall be effective unless in writing and signed by both parties hereto.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
UNITED AUTO GROUP TOYOTA MOTOR SALES, U.S.A., INC.
By: /s/Carl Spielvogel By: /s/Illegible
---------------------------- ----------------------------
Carl Spielvogel
Title: Chairman and Chief Executive Title:
----------------------------- --------------------------
Officer
-4-
<PAGE>
(LOGO)
LEXUS
DEALER AGREEMENT
<PAGE>
TABLE OF CONTENTS
PAGE
----
I. TERM OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 1
II. OWNERSHIP AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . 2
III. MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
IV. APPROVED DEALER LOCATIONS. . . . . . . . . . . . . . . . . . . . . 3
V. CERTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
VI. ACQUISITION, DELIVERY AND INVENTORY OF LEXUS PRODUCTS. . . . . . . 5
A. APPOINTMENT OF DEALER. . . . . . . . . . . . . . . . . . . . . . . 5
B. AVAILABILITY AND ALLOCATION OF PRODUCT . . . . . . . . . . . . . . 5
C. PRICES AND TERMS OF SALE . . . . . . . . . . . . . . . . . . . . . 5
D. MODE, PLACE AND CHARGES FOR DELIVERY OF PRODUCTS . . . . . . . . . 6
E. DAMAGE CLAIMS AGAINST TRANSPORTATION CARRIERS. . . . . . . . . . . 6
F. DELAY OR FAILURE OF DELIVERY . . . . . . . . . . . . . . . . . . . 6
G. DIVERSION CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . 6
H. CHANGES OF DESIGN, OPTIONS OR SPECIFICATIONS . . . . . . . . . . . 7
I. DISCONTINUANCE OF MANUFACTURE OR IMPORTATION . . . . . . . . . . . 7
J. MINIMUM VEHICLE INVENTORIES. . . . . . . . . . . . . . . . . . . . 7
K. PRODUCT MODIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . 7
VII. DEALER MARKETING OF LEXUS PRODUCTS . . . . . . . . . . . . . . . . 7
A. DEALER'S SALES RESPONSIBILITIES. . . . . . . . . . . . . . . . . . 7
B. EXPORT POLICY. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
C. LEXUS DEALER ASSOCIATION . . . . . . . . . . . . . . . . . . . . . 8
D. USED VEHICLES. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
E. PRIMARY AREA OF RESPONSIBILITY . . . . . . . . . . . . . . . . . . 9
F. EVALUATION OF DEALER'S SALES AND MARKETING PERFORMANCE . . . . . . 9
VIII.. DEALER SERVICE OBLIGATIONS. . . . . . . . . . . . . . . . . . . . 9
A. CUSTOMER SERVICE STANDARDS . . . . . . . . . . . . . . . . . . . . 9
B. NEW MOTOR VEHICLE PRE-DELIVERY SERVICE . . . . . . . . . . . . . . 10
C. WARRANTY AND POLICY SERVICE. . . . . . . . . . . . . . . . . . . . 10
(i)
<PAGE>
IX. USE OF PARTS AND ACCESSORIES IN NON-WARRANTY SERVICE . . . . . . . 11
A. WARRANTY DISCLOSURES AS TO NON-GENUINE PARTS AND ACCESSORIES . . . 11
B. ROADSIDE ASSISTANCE PROGRAM. . . . . . . . . . . . . . . . . . . . 11
C. SERVICE CAMPAIGN INSPECTIONS AND CORRECTIONS . . . . . . . . . . . 11
D. COMPLIANCE WITH SAFETY AND EMISSION CONTROL REQUIREMENTS . . . . . 12
E. COMPLIANCE WITH CONSUMER PROTECTION STATUTES, RULES AND
REGULATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
X. SERVICE AND PARTS ORGANIZATION . . . . . . . . . . . . . . . . . . 13
A. ORGANIZATION AND STANDARDS . . . . . . . . . . . . . . . . . . . . 13
B. SERVICE EQUIPMENT AND SPECIAL TOOLS. . . . . . . . . . . . . . . . 13
C. PARTS STOCKING LEVEL . . . . . . . . . . . . . . . . . . . . . . . 13
D. AFTER-HOURS DELIVERY . . . . . . . . . . . . . . . . . . . . . . . 14
E. ASSISTANCE PROVIDED BY DISTRIBUTOR . . . . . . . . . . . . . . . . 14
F. EVALUATION OF DEALER'S SERVICE AND PARTS PERFORMANCE . . . . . . . 14
XI. CUSTOMER SATISFACTION RESPONSIBILITIES . . . . . . . . . . . . . . 14
A. DEALER'S CUSTOMER SATISFACTION OBLIGATIONS . . . . . . . . . . . . 15
B. EVALUATION OF DEALER'S CUSTOMER SATISFACTION PERFORMANCE . . . . . 16
XII. DEALERSHIP FACILITIES AND IDENTIFICATION . . . . . . . . . . . . . 16
A. FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
B. SERVICE RECEPTION AREA . . . . . . . . . . . . . . . . . . . . . . 17
C. DEALER'S OPERATING HOURS . . . . . . . . . . . . . . . . . . . . . 17
D. SIGNS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
E. EVALUATION OF DEALERSHIP FACILITIES. . . . . . . . . . . . . . . . 17
F. USE OF LEXUS MARKS . . . . . . . . . . . . . . . . . . . . . . . . 18
.
XIII . CAPITAL, CREDIT, RECORDS AND UNIFORM SYSTEMS. . . . . . . . . . . 19
A. NET WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . 19
B. FLOORING AND LINES OF CREDIT . . . . . . . . . . . . . . . . . . . 19
C. PAYMENT TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
D. UNIFORM ACCOUNTING SYSTEM. . . . . . . . . . . . . . . . . . . . . 20
E. RECORDS MAINTENANCE. . . . . . . . . . . . . . . . . . . . . . . . 20
F. EXAMINATION OF DEALERSHIP ACCOUNTS AND RECORDS . . . . . . . . . . 20
G. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(ii)
<PAGE>
H. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . 21
I. DATA TRANSMISSION SYSTEMS. . . . . . . . . . . . . . . . . . . . 21
J. SALES REPORTING. . . . . . . . . . . . . . . . . . . . . . . . . 21
XIV. TRANSFERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
A. SALE OF OWNERSHIP INTEREST IN DEALERSHIP . . . . . . . . . . . . 22
B. RIGHTS OF FIRST REFUSAL OR OPTION TO PURCHASE. . . . . . . . . . 22
XV. SUCCESSION RIGHTS UPON DEATH OR INCAPACITY . . . . . . . . . . . 24
A. SUCCESSION TO OWNERSHIP AFTER DEATH OF OWNER . . . . . . . . . . 24
B. INCAPACITY OF OWNER. . . . . . . . . . . . . . . . . . . . . . . 25
C. NOMINATION OF SUCCESSOR PRIOR TO DEATH OR INCAPACITY OF OWNER. . 26
XVI. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
A. VOLUNTARY TERMINATION BY DEALER. . . . . . . . . . . . . . . . . 26
B. TERMINATION FOR CAUSE. . . . . . . . . . . . . . . . . . . . . . 26
C. NOTICE OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . 30
D. CONTINUANCE OF BUSINESS RELATIONS. . . . . . . . . . . . . . . . 30
E. REPURCHASE PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 30
XVII. MANAGEMENT OF DISPUTES . . . . . . . . . . . . . . . . . . . . . 32
A. ALTERNATIVE DISPUTE RESOLUTION PROGRAMS. . . . . . . . . . . . . 32
B. APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . 33
C. MUTUAL RELEASE . . . . . . . . . . . . . . . . . . . . . . . . . 33
XVIII. DEFENSE AND INDEMNIFICATION. . . . . . . . . . . . . . . . . . . 33
A. DEFENSE AND INDEMNIFICATION BY DISTRIBUTOR . . . . . . . . . . . 33
B. DEFENSE AND INDEMNIFICATION BY DEALER. . . . . . . . . . . . . . 34
C. CONDITIONAL DEFENSE AND/OR INDEMNIFICATION . . . . . . . . . . . 35
D. THE EFFECT OF SUBSEQUENT DEVELOPMENTS. . . . . . . . . . . . . . 36
E. TIME TO RESPOND AND RESPONSIBILITIES OF THE PARTIES. . . . . . . 36
XIX. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 37
A. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
B. NO IMPLIED WAIVERS . . . . . . . . . . . . . . . . . . . . . . . 37
C. SOLE AGREEMENT OF THE PARTIES. . . . . . . . . . . . . . . . . . 37
D. DEALER NOT AN AGENT OR REPRESENTATIVE. . . . . . . . . . . . . . 37
E. ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES . . . . . . . . . . 38
F. NO FRANCHISE FEE . . . . . . . . . . . . . . . . . . . . . . . . 38
(iii)
<PAGE>
G. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 38
H. NEW AND SUPERSEDING DEALER AGREEMENTS. . . . . . . . . . . . . . 38
I. BENEFIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
XX. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
XXI. ADDITIONAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 40
(iv)
<PAGE>
LEXUS DEALER AGREEMENT
This is an Agreement between LEXUS, A Division of TOYOTA MOTOR SALES, U.S.A.,
INC. ("LEXUS" or "DISTRIBUTOR") and Somerset Motors Partnership ("DEALER") doing
business as DiFeo Lexus.
LEXUS GOALS AND COMMITMENTS
LEXUS is committed to creating luxury automobiles which are and will be among
the finest ever built anywhere in the world. LEXUS is equally committed to
setting a new standard for extraordinary customer satisfaction throughout the
ownership cycle. To achieve this goal, LEXUS intends to maintain the finest
dealer network in the industry.
This Agreement embodies the LEXUS commitment to promote fairness within a
harmonious and mutually profitable business relationship between LEXUS and
DEALER. The ultimate goal shared by all parties to this Agreement is the
satisfaction of the LEXUS customer.
PURPOSES OF AGREEMENT
Lexus is the exclusive distributor in the continental United States of LEXUS
Products which are manufactured or approved by TOYOTA MOTOR CORPORATION
("FACTORY"). The principal purposes of this Agreement are to set forth and
affirm the commitment of LEXUS and DEALER to the goals of LEXUS; authorize
DEALER to sell and service LEXUS Products; and identify the rights and
responsibilities of LEXUS and DEALER.
I. TERM OF AGREEMENT
This Agreement is effective on the date signed by LEXUS and shall
continue for a period of one year unless ended earlier by mutual
agreement or terminated as provided herein. This Agreement may not be
extended except by written consent of LEXUS. Any continuation of
business relations between the parties following expiration of this
Agreement shall be on a day-to-day basis and subject to the provisions
of this Agreement. Such a continuation shall not be deemed a waiver
of the right of termination nor shall it imply that either party has
committed to continue to do business with the other at any time in the
future.
Upon the expiration of this Agreement, DISTRIBUTOR shall have no
obligation to renew the Agreement or to extend DEALER a subsequent
Agreement. However, should this Agreement be renewed or any other
form of agreement be offered to DEALER, DISTRIBUTOR reserves the right
to
1
<PAGE>
offer an agreement of a term to be determined at DISTRIBUTOR's sole
discretion.
II. OWNERSHIP AND OFFICERS
This is a personal service Agreement and has been entered into by
LEXUS upon, and in consideration of, DEALER'S representation that only
the following named persons are the owners and officers of DEALER, and
that such persons are committed to achieving the purposes, goals and
commitments of this Agreement:
PERCENT OF
OWNERS NAMES ADDRESS OWNERSHIP
DiFeo Partnership SCT, Inc. 153 East 53rd St., Suite 5900 70%
New York, NY 10022
Somerset Motors, Inc. 585 Route 440 30%
Jersey City, NJ 07304
OFFICERS NAMES ADDRESS TITLE
Ezra P. Mager 40 East 88th St. Chief Executive
New York, NY 10128 Officer
Joseph C. Herman 16 Gateway Chief Executive
Highlands, NJ 07732 Officer
Joseph C. DiFeo 17 Black Point Horseshoe Executive Vice
Rumson, NJ 07760 President
Samuel X. DiFeo 121 Lorraine Ave. Executive Vice
Spring Lake, NJ 07762 President
Donald Betson 89 Van Allen Rd. Chief Financial
Glen Rock, NJ 07452 Officer
Sam C. DiFeo 2219 First Ave. Executive Vice
Spring Lake, NJ 07762 President
2
<PAGE>
III. MANAGEMENT
LEXUS and DEALER agree that qualified dealership management and active,
day-to-day owner involvement are critical to the successful operation of
DEALER. OWNERS agree, and LEXUS enters into this Agreement on the
condition that at least one OWNER will be involved on a full-time basis in
the day-to-day operations of the dealership. If no OWNER is involved on a
full-time basis in DEALER's day-to-day operations, the General Manager
named below shall devote his or her personal services on a full-time basis
to the general management of the dealership.
DEALER appoints Matthew Fava as General Manager. The General Manager has
full managerial authority to make all operating decisions on behalf of
DEALER. DEALER shall make no change in the dealership's ownership or
General Manager without the prior written approval of LEXUS.
IV. APPROVED DEALER LOCATIONS
In order that DISTRIBUTOR may establish and maintain an effective network
of authorized LEXUS dealers, DEALER agrees that it shall conduct its LEXUS
operations only in facilities and at locations herein designated and
approved by DISTRIBUTOR. DISTRIBUTOR hereby designates and approves the
following facilities as the exclusive location(s) for the sale and
servicing of LEXUS Products and the display of LEXUS Marks:
NEW VEHICLE SALES AND USED VEHICLE DISPLAY AND
SHOWROOM SALES
Route 22 East Route 22 East
Bound Brook, NJ 08805 Bound Brook, NJ 08805
SALES AND GENERAL OFFICE BODY AND PAINT
Route 22 East N/A
Bound Brook, NJ 08805
PARTS AND SERVICE OTHER FACILITIES
Route 22 East N/A
Bound Brook, NJ 08805
DEALER shall not modify or change the designated usage or function of any
facility without the prior written consent of LEXUS.
3
<PAGE>
V. CERTIFICATION
By their signatures hereto, the parties certify that they have read and
understood this Agreement, including the Standard Provisions which are
incorporated herein, and agree to abide and be bound by all of its terms
and conditions.
DIFEO LEXUS DEALER
--------------------
DBA
DATE: Sept. 24, 1992 By: /s/ Ezra P. Mager Chief Executive Officer
--------------- ------------------------ -----------------------
SIGNATURE Ezra P. Mager Title
LEXUS, A Division of
TOYOTA MOTOR SALES, U.S.A.,INC.
DATE: Oct. 5, 1992 By: /s/ Shinji Sakai President
--------------- ------------------------ -----------------------
SIGNATURE Shinji Sakai Title
4
<PAGE>
[Standard Provisions Appear Here]
XXI. ADDITIONAL PROVISIONS
In consideration of DISTRIBUTOR'S agreement to appoint DEALER as an
authorized LEXUS dealer, DEALER further agrees:
These Additional Provisions to Lexus Dealer Agreement ("Additional
Provisions") are entered into as of October 5, 1992 among DISTRIBUTOR, DEALER,
DIFEO PARTNERSHIP SCT, INC., a Delaware corporation (hereinafter "DP"), SOMERSET
MOTORS, INC., a New Jersey corporation (hereinafter "SMI"; DP and SMI are
hereinafter collectively referred to as the "Partners"), EMCO MOTOR HOLDINGS,
INC., a Delaware corporation (hereinafter "EMCO"), "21" INTERNATIONAL HOLDINGS,
INC., a Delaware corporation (hereinafter "TIHI"), MARSHALL S. COGAN
(hereinafter "Cogan"), SAMUEL X. DIFEO and JOSEPH C. DIFEO (hereinafter
collectively the "DiFeos"), and form a part of and are incorporated into the
Dealer Agreement.
RECITALS
1. DISTRIBUTOR and DEALER have entered into a Lexus Dealer Agreement
(the "Dealer Agreement") dated as of October 5, 1992.
2. The Partners are the sole partners of DEALER; EMCO is the sole
shareholder of DP; TIHI is the Majority (defined below) shareholder of EMCO;
Cogan is the Majority shareholder of TIHI; and the DiFeos are the sole
shareholders (including ownership by related persons or entities) of SMI. For
purposes of these Additional Provisions, "Majority" means direct or indirect
ownership (including ownership by related persons or entities) of 66 2/3% or
more of the voting power and 40% or more
36
<PAGE>
of the fair market value of the equity securities of the entity in question. A
"related" person is an individual who is a member of the immediate family of the
person in question. A related entity is (a) a corporation or partnership 80% or
more of the interests in which are owned by the person in question or a related
person or (b) a trust benefiting the person in question or a related person or
entity. "Controlled" has the meaning given to it in Rule 405 under the Rules
and Regulations of the Securities Act of 1993, as amended.
3. EMCO, DEALER, the Partners, TIHI, Cogan and the DiFeos are
hereinafter collectively referred to as the "EMCO Parties". DISTRIBUTOR and the
EMCO Parties are hereinafter collectively referred to as the "Parties".
4. The Parties wish to enter into these Additional Provisions for
the purposes of agreeing to be bound by the terms of these Additional
Provisions, which are a part of and are incorporated into the Dealer Agreement.
NOW THEREFORE, in consideration for the mutual agreements contained
herein and in the Dealer Agreement, the Parties agree as follows:
A. GENERAL
1. The Parties acknowledge that DISTRIBUTOR has been provided with
copies of the Master Agreement dated as of March 11, 1992, as amended, between
EMCO, DP, SMI, TIHI, DEALER, the DiFeos and others, the Partnership Agreement of
DEALER dated as of October 1, 1992, the Management Agreement among DEALER, EMCO
37
<PAGE>
and others dated as of October 1, 1992 (the "Management Agreement") and certain
other documentation relating to the relationships between the EMCO Parties and
others (collectively the "Underlying Documentation"). The EMCO Parties agree
that nothing contained in the Underlying Documentation will in any way be deemed
to be consented to by or binding on DISTRIBUTOR, and that the legal rights and
obligations between DISTRIBUTOR, on the one hand, and any of the EMCO Parties,
on the other hand, will be governed exclusively by the Dealer Agreement, these
Additional Provisions and any other agreements executed by both DISTRIBUTOR and
DEALER in connection therewith and herewith.
2. The EMCO Parties acknowledge and agree that if any provision of
these Additional Provisions is violated in any material respect by any of the
EMCO Parties, DISTRIBUTOR will have the right to terminate the Dealer Agreement
on written notice to DEALER.
B. PROVISIONS RELATING TO THE STRUCTURE OF DEALER
1. SINGLE PURPOSE ENTITY. DEALER will be maintained as a separate
legal entity, and will not engage in any business other than operation of a
Lexus dealership and activities related thereto.
2. SINGLE PURPOSE PARTNERS. DP and SMI will be maintained as
separate legal entities, and will not engage in any business other than acting
as partners of DEALER and activities related thereto.
38
<PAGE>
3. NO MERGER, CONSOLIDATION, ETC. Neither DEALER nor either of the
Partners will be merged with or into, or be consolidated with, or acquire
substantially all of the assets of, any other entity.
C. PROVISIONS RELATING TO MANAGEMENT
1. ROLE OF DIFEOS. Samuel X. DiFeo, Joseph C. DiFeo or both of them
will remain actively involved in the management of all aspects of the operations
of DEALER.
a. Both of the DiFeos will be members of the Executive Committee,
Board of Directors or other governing body of DEALER. The DiFeos will have
complete control over all management decisions of DEALER or relating to DEALER,
including day-to-day activities and extraordinary matters, provided, that the
Executive Committee, Board of Directors or other governing body of DEALER may
take part in decisions relating to extraordinary matters, including but not
limited to a change in business location and a sale or liquidation of the
business.
b. The General Manager will report directly to and be responsible
for the DiFeos.
c. Subject to Section C.2., the DiFeos will at all times be the sole
shareholders of SMI (including ownership by related persons or entities), and
SMI will at all times own at least a 25% interest in the profits and capital of
DEALER, provided, that if SMI's interest falls below 30%, any interest below 30%
will be transferred to DP.
39
<PAGE>
d. DISTRIBUTOR may rely on oral or written communications and
agreements from either of the DiFeos as being the binding agreements of DEALER,
without any duty of DISTRIBUTOR to confirm that such communication or agreement
has been approved by the Executive Committee or any other person or entity.
2. SUCCESSORS TO THE DIFEOS. In the event that (a) neither of the
DiFeos wishes to continue his role in the management of DEALER as set forth in
Section C.1., (b) the DiFeos wish to cease being the sole shareholders of SMI
(including ownership of related persons or entities) or (c) SMI wishes to
decrease its ownership in DEALER to less than 25%, such action may be taken only
with the prior written consent of DISTRIBUTOR. Such consent of DISTRIBUTOR may
be conditioned on either (i) transfer of the DiFeos' management responsibilities
and/or ownership interest (direct or indirect) as applicable, in DEALER to an
individual or individuals approved by DISTRIBUTOR, taking into account such
factors as DISTRIBUTOR deems to be relevant and are consistent with applicable
laws or (ii) transfer of not less than 25% of the voting power, profits interest
and capital interest in DEALER to the then General Manager of DEALER, which
transfer may be accomplished by having such General Manager acquire such
interest in increments of not less than 5% per year over a period of not more
than 5 years.
40
<PAGE>
3. ROLE OF GENERAL MANAGER.
a) Matthew Fava, or any subsequent General Manager of DEALER
approved by DISTRIBUTOR, will serve exclusively as General Manager of DEALER on
a full time basis and will not have any management responsibilities with respect
to any other dealership or other business or appear as the General Manager on
any automobile dealership franchise agreement other than that of DEALER.
b) The General Manager will have responsibility for and authority
with respect to the day-to-day operations of DEALER in the ordinary course of
business, under the supervision of the DiFeos (subject to Section C.2.), and
either the DiFeos or the General Manager will have the following authority,
without the need for obtaining the prior approval of any other person:
(i) the authority to hire or terminate any employee of DEALER.
(ii) the authority to order vehicles and other products.
(iii) the authority to place advertising.
(iv) the authority to communicate with DISTRIBUTOR with respect to all
aspects of the business of DEALER.
(v) the authority to approve expenditures by DEALER in the ordinary
course of business in amounts of less than $50,000 per item.
(vi) the authority to approve capital improvements or modifications to
the DEALER'S facilities in
41
<PAGE>
amounts not to exceed $100,000 with respect to any expenditure.
4. MEMBERSHIP OF EXECUTIVE COMMITTEE. There shall be no change in
the membership of the Executive Committee, Board of Directors or other governing
body of DEALER without the prior written approval of DISTRIBUTOR.
D. PROVISIONS RELATING TO CAPITALIZATION AND ACCOUNTING
1. No distributions will be made by DEALER to the Partners if such
distributions would cause DEALER to fail to meet any of DISTRIBUTOR's
capitalization guidelines, including but not limited to net working capital
requirements.
2. The operations and financial results of DEALER will be reported
to DISTRIBUTOR separately from those of any other entity, business or activity,
including but not limited to any of the EMCO Parties and any other dealerships
directly or indirectly owned or controlled by any of the EMCO Parties.
3. DEALER will maintain complete and separate departments for new
and used vehicle sales, service, parts sales, leasing and finance and insurance,
and will provide separate identifiable areas for each department. DEALER will
maintain a separate and permanent personnel staff and separate retail operations
from other dealerships directly or indirectly owned by any of the EMCO Parties.
DEALER shall not combine its used car operation with that of any other entity,
including any other dealerships directly or indirectly owned by any of the EMCO
Parties.
42
<PAGE>
4. DEALER will not transfer assets or liabilities on an intercompany
receivable or payable basis; or place vehicles on consignment to any other
dealership, except on payment terms requiring payment in full within three (3)
business days and in an outstanding amount not to exceed $150,000 at any one
time. Any loan from DEALER to any person or entity controlled by any EMCO Party
will be treated as a distribution by DEALER to the Partners for purposes of
determining compliance with Section D.1.
5. If DEALER transfers assets to any commonly controlled person or
entity for less than fair market value consideration, the excess of the fair
market value of such assets over the consideration paid, if any, will be treated
as a distribution by DEALER to the Partners for purposes of determining
compliance with Section D.1.
6. DEALER will submit to DISTRIBUTOR a consolidated, audited
financial statement of all dealerships controlled by the EMCO Parties on an
annual basis, on or before June 30 of each year for the previous year ended
December 31.
E. PROVISIONS RELATING TO OWNERSHIP
1. CHANGES IN INDIRECT OWNERSHIP. In addition to the right of
DISTRIBUTOR to approve changes in ownership of DEALER as set forth in the Dealer
Agreement, DISTRIBUTOR will also have the right, in compliance with applicable
laws, to approve transfers in ownership of DP, SMI and EMCO, and will have the
right to approve any transfer in ownership of TIHI which results in Cogan no
longer being the Majority shareholder of TIHI.
43
<PAGE>
2. NO PUBLIC OFFERING. (a) The EMCO Parties acknowledge that the
Dealer Agreement is a personal service contract, and that the personal service
nature of the Dealer Agreement was a material inducement to DISTRIBUTOR in
entering into the Dealer Agreement. In light of the foregoing, none of DEALER,
any Partner, or any person or entity directly or indirectly owning an interest
in, or, directly or indirectly, controlling, controlled by or under common
control with (within the meaning of Rule 405 under the Rules and Regulations of
the Securities Act of 1933, as amended), DEALER or any partner of DEALER (as
applicable, the "Issuer") will offer, issue or sell securities that are required
to be registered pursuant to the Securities Act of 1933, as amended ("Public
Securities"), or permit any of their securities to become Public Securities, or
merge or consolidate with any entity the securities of which are Public
Securities without the prior written consent of DISTRIBUTOR, such consent to be
granted or denied in DISTRIBUTOR's sole discretion.
(b) Nothing contained in this Section E.2 will be deemed to prohibit
(i) one or more entities which have issued Public Securities from owning equity
securities of TIHI, provided that Cogan agrees that, subject to compliance with
applicable laws, (A) neither he nor any related person or entity will transfer
any equity security in TIHI to any entity which has issued public securities and
(B) any transfer of equity securities in TIHI by Cogan will contain a specific
restriction prohibiting the transferee (or any subsequent transferee) from
44
<PAGE>
reselling such equity securities to an entity which has issued Public
Securities, or (ii) TIHI from holding an interest in one or more entities which
have issued Public Securities, provided that such entities do not own an
interest in any of the EMCO Parties.
(c) Notwithstanding this Section E.2, in the event that at any time
after the date hereof, DISTRIBUTOR issues a Dealer Agreement to an entity which
owns and operates a Lexus dealership in the United States which specifically
permits the issuance of Public Securities or contains specific restrictions on
the issuance of Public Securities which are different from this Section E.2 in
any material respect, DISTRIBUTOR, upon request by DEALER, agrees to offer
DEALER the option of amending this Section E.2 to contain provisions relating to
issuance of Public Securities which are substantially the same as those which
are contained in the Dealer Agreement of such other dealership.
3. SUCCESSORS AND ASSIGNS. In the event that any interest in any of
the EMCO Parties is transferred in accordance with the provisions of the Dealer
Agreement and these Additional Provisions, as a condition to such transfer the
transferee must agree in writing to be bound by all of the terms and provisions
of the Dealer Agreement and these Additional Provisions, such agreement to be in
form and substance reasonably acceptable to DISTRIBUTOR.
4. COMPETITORS. In no event may any interest in any of the EMCO
Parties be transferred to an entity which is directly
45
<PAGE>
or indirectly engaged in the business of manufacturing and/or distributing
automobiles, or an affiliate thereof.
IN WITNESS WHEREOF, the Parties have executed these Additional
Provisions as of the date first above written.
LEXUS, A DIVISION OF SOMERSET MOTORS PARTNERSHIP
TOYOTA MOTOR SALES, U.S.A.
By: /s/ Ezra P. Mager
-----------------------------
General Partner
By: /s/ Shirji Sakai
--------------------------
Title: President
-----------------------
By: /s/ Ezra P. Mager
-----------------------------
Title:
--------------------------
DIFEO PARTNERSHIP, INC. SOMERSET MOTORS, INC.
By: /s/ Ezra P. Mager By: /s/ Joseph C. DiFeo
-------------------------- -----------------------------
Title: Title:
----------------------- --------------------------
EMCO MOTORS HOLDINGS, INC. "21" INTERNATIONAL HOLDINGS, INC.
By: /s/ Ezra P. Mager By: /s/ Marshall S. Cogan
-------------------------- -----------------------------
Title: Title:
----------------------- --------------------------
/s Marshall S. Cogan /s/ Samuel X. DiFeo
- ----------------------------- --------------------------------
MARSHALL S. COGAN SAMUEL X. DIFEO
/s/ Joseph C. DiFeo
- -----------------------------
JOSEPH C. DIFEO
46
<PAGE>
LEXUS DEALER AGREEMENT
STANDARD PROVISIONS
The following Standard Provisions are expressly incorporated in and made a part
of the LEXUS Dealer Agreement.
VI. ACQUISITION, DELIVERY AND INVENTORY OF LEXUS PRODUCTS
A. APPOINTMENT OF DEALER
DISTRIBUTOR hereby appoints DEALER and grants unto it the non-
exclusive right to buy and resell the LEXUS Products identified
in the LEXUS Product Addendum. DEALER accepts such appointment
and understands that its appointment as a DEALER does not grant
it an exclusive right to sell LEXUS Products in any specified
geographical area.
DEALER shall have the right to purchase LEXUS Products from
DISTRIBUTOR in accordance with the provisions set forth herein
and such other requirements as may be established from time to
time by LEXUS.
B. AVAILABILITY AND ALLOCATION OF PRODUCT
DISTRIBUTOR will allocate LEXUS Products among its dealers in a
fair and equitable manner. DEALER acknowledges and agrees that
DISTRIBUTOR may consider, among other things, DEALER'S service
capacity, customer satisfaction performance, sales performance,
sales potential and facilities in determining the quantity of
Product to offer to DEALER. DISTRIBUTOR will, upon DEALER'S
request, explain the considerations and method used to distribute
LEXUS Products to DEALER.
C. PRICES AND TERMS OF SALE
DISTRIBUTOR, from time to time, shall establish and revise prices
and other terms for the sale of LEXUS Products to DEALER.
Revised prices, terms, or provisions shall apply to any LEXUS
Product not invoiced to DEALER by DISTRIBUTOR at the time the
notice of such change is given to DEALER (in the case of LEXUS
Motor Vehicles), or upon issuance of a new or modified Parts
Price List or through change notices, letters, bulletins, or
revision sheets (in the case of parts, options and accessories),
or at such other times as may be designated in writing by
DISTRIBUTOR.
5
<PAGE>
D. MODE, PLACE AND CHARGES FOR DELIVERY OF PRODUCTS
DISTRIBUTOR shall designate the distribution points and the mode
of transportation and shall select carrier(s) for the delivery of
LEXUS Products to DEALER. DEALER shall pay DISTRIBUTOR such
charges as DISTRIBUTOR in its sole discretion establishes for
such transportation services.
E. DAMAGE CLAIMS AGAINST TRANSPORTATION CARRIERS
DEALER shall promptly notify DISTRIBUTOR of any damage occurring
during transit and shall, if so directed by DISTRIBUTOR, file
claims against transportation carrier for damage. DEALER agrees
to assist DISTRIBUTOR in obtaining recovery against any
transportation carrier or insuree for loss or damage to LEXUS
Products shipped hereunder. DISTRIBUTOR shall not be liable for
loss or damage to LEXUS Products sold hereunder occurring after
delivery thereof to premises of DEALER.
To the extent required by law, DEALER shall notify the purchaser
of a vehicle of any damage sustained by such vehicle prior to
sale. DEALER shall indemnify and hold DISTRIBUTOR harmless from
any liability resulting from DEALER'S failure to so notify such
purchasers.
F. DELAY OR FAILURE OF DELIVERY
DISTRIBUTOR shall not be liable for delay or failure to deliver
LEXUS Products which it has previously agreed to deliver, where
such delay or failure to deliver is the result of any event
beyond the control of DISTRIBUTOR, including but not limited to
any law or regulation of any governmental entity, acts of God,
foreign or civil wars, riots, interruptions of navigation,
shipwrecks, fires, floods, storms, strikes, lockouts or other
labor troubles, embargoes, blockades, or delay or failure of
FACTORY to deliver LEXUS Products.
G. DIVERSION CHARGES
If after shipment DEALER fails or refuses to accept LEXUS
Products that it had agreed to purchase, DEALER shall pay all
charges incurred by DISTRIBUTOR as a result of such diversion.
Such charges shall not exceed the charge of returning any such
product to the point of original shipment by DISTRIBUTOR plus all
charges for demurrage, storage or other charges related to such
diversion.
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DEALER also agrees to assume responsibility for, and shall pay
any and all reasonable charges for, demurrage, storage or other
charges accruing after arrival of shipment at the diversion point
established by DISTRIBUTOR.
H. CHANGES OF DESIGN, OPTIONS OR SPECIFICATIONS
DISTRIBUTOR may change the design or specifications of any LEXUS
Product or the options in any LEXUS Product and shall be under no
obligation to provide notice of same or to make any similar
change upon any product previously purchased by or shipped to
DEALER. No change shall be considered a model year change unless
so specified by DISTRIBUTOR.
I. DISCONTINUANCE OF MANUFACTURE OR IMPORTATION
FACTORY and/or DISTRIBUTOR may discontinue the manufacture,
importation or distribution of all or part of any LEXUS Product,
whether motor vehicle, parts, options, or accessories, including
any model, series, or body style of any LEXUS Motor Vehicle at
any time without any obligation or liability to DEALER by reason
thereof.
J. MINIMUM VEHICLE INVENTORIES
DEALER agrees that it shall, at all times, maintain in showroom
ready condition at least the minimum inventory of LEXUS Motor
Vehicles as may be established by DISTRIBUTOR from time to time.
K. PRODUCT MODIFICATIONS
DEALER agrees that it will not install aftermarket accessories or
make any modifications to LEXUS vehicles that may impair or
adversely affect a vehicle's safety, emissions, structural
integrity or performance.
VII. DEALER MARKETING OF LEXUS PRODUCTS
A. DEALER'S SALES RESPONSIBILITIES
DEALER recognizes that customer satisfaction and the successful
promotion and sale of LEXUS Products are significantly dependent
on DEALER'S advertising and sales promotion activities.
Therefore, DEALER at all times shall:
1. Use its best efforts to promote, sell and service new and
used LEXUS Products;
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Advertise and merchandise LEXUS Products and use current LEXUS
showroom displays;
3. Ensure that its sales personnel meet the educational and
management standards established by DISTRIBUTOR and have
such personnel, as are appropriate, attend all sales
training courses prescribed by DISTRIBUTOR at DEALER'S
expense;
4. Maintain a high standard of ethics in advertising, promoting
and selling LEXUS Products and avoid engaging in any
misrepresentation or unfair or deceptive practices. DEALER
shall discontinue any advertising that DISTRIBUTOR may find
to be injurious to DISTRIBUTOR'S business or reputation or
to the LEXUS Marks, or that are likely to be violative of
applicable laws or regulations;
5. Advertise in the local classified telephone directories
identifying itself as an authorized LEXUS DEALER. Such
ad(s) shall properly display the LEXUS Marks; and
6. Accurately represent to customers the total selling price of
LEXUS Products. DEALER agrees to explain to customers of
LEXUS Products the items that make up the total selling
price and to give the customers itemized invoices and all
other information required by law. DEALER understands and
hereby acknowledges that it may sell LEXUS Products at
whatever price DEALER desires.
B. EXPORT POLICY
DEALER is authorized to sell LEXUS Motor Vehicles only to
customers located in the United States. DEALER agrees that it
will not sell LEXUS Motor Vehicles for resale or use outside the
United States. DEALER agrees to abide by any export policy
established by DISTRIBUTOR.
C. LEXUS DEALER ASSOCIATION
Except where prohibited by law, DEALER will participate in a
LEXUS Dealer Advertising Association. DEALER agrees to cooperate
in the establishment of such an association and to fund its fair
share of advertising and merchandising programs undertaken by the
association.
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D. USED VEHICLES
DEALER agrees to display and sell used vehicles at the Approved
Location(s). DEALER shall maintain for resale an adequate
inventory of used vehicles.
E. PRIMARY AREA OF RESPONSIBILITY
DISTRIBUTOR will assign DEALER a geographic area called a Primary
Market Area ("PMA"), DEALER'S PMA may be altered or adjusted by
DISTRIBUTOR at any time. The PMA is a tool used by DISTRIBUTOR
to evaluate DEALER'S performance of its obligations. DEALER
agrees that it has no right or interest in any PMA that
DISTRIBUTOR, in its sole discretion, may designate. As permitted
by local law, DISTRIBUTOR may add new dealers to, or relocate
dealers in or into the PMA assigned to DEALER.
F. EVALUATION OF DEALER'S SALES AND MARKETING PERFORMANCE
DISTRIBUTOR periodically will evaluate DEALER'S sales and
marketing performance under this Agreement. DEALER'S evaluation
will be based on such reasonable criteria as DISTRIBUTOR may
establish including, without limitation, comparisons of DEALER'S
sales with those of other LEXUS dealers. DISTRIBUTOR will review
such evaluations with DEALER and DEALER shall take prompt
corrective action, if required, to improve its performance.
VIII. DEALER SERVICE OBLIGATIONS
A. CUSTOMER SERVICE STANDARDS
DEALER and DISTRIBUTOR agree that the success and future growth
of the LEXUS franchise is substantially dependent upon the
customers' ability to obtain responsive, high-quality vehicle
servicing. Therefore, DEALER agrees to:
1. Take all reasonable steps to provide service of the highest
quality for all LEXUS Motor Vehicles, regardless of where
purchased and whether or not under warranty;
2. Ensure that the customer is advised of the necessary repairs
and his or her consent is obtained prior to the initiation
of any repairs;
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3. Ensure that necessary repairs on LEXUS Motor Vehicles are
accurately diagnosed and professionally performed; and
4. Assure that the customer is treated courteously and fairly
at all times.
B. NEW MOTOR VEHICLE PRE-DELIVERY SERVICE
DEALER agrees that, prior to delivery of a new LEXUS Motor
Vehicle to a customer, it shall perform, if directed by
DISTRIBUTOR, pre-delivery service on each LEXUS Motor Vehicle in
accordance with LEXUS standards. DISTRIBUTOR shall reimburse
DEALER for such pre-delivery service according to such directives
and the applicable provisions of the LEXUS Warranty Policies and
Procedures Manual.
C. WARRANTY AND POLICY SERVICE
DEALER acknowledges that the only warranties of DISTRIBUTOR or
FACTORY applicable to LEXUS Products shall be the New Vehicle
Limited Warranty or such other written warranties that may be
expressly furnished by DISTRIBUTOR or FACTORY. Except for its
limited liability under such written warranty or warranties,
DISTRIBUTOR and FACTORY do not assume any other warranty,
obligation or liability. DEALER is not authorized to assume any
additional warranty obligations or liabilities on behalf of
DISTRIBUTOR or FACTORY. Any such additional obligations assumed
by DEALER shall be the sole responsibility of DEALER.
DEALER shall perform warranty and policy service specified by
DISTRIBUTOR, in accordance with the LEXUS Warranty Policies and
Procedures Manual. DISTRIBUTOR agrees to compensate DEALER for
all warranty and policy work, including labor, diagnosis and
Genuine LEXUS Parts and Accessories in accordance with procedures
and at rates to be announced from time to time by DISTRIBUTOR and
in accordance with applicable law. Unless otherwise approved in
advance by DISTRIBUTOR, DEALER shall use only Genuine LEXUS Parts
and Accessories when performing LEXUS warranty repairs. Warranty
and policy service is provided for the benefit of customers and
DEALER agrees that the customer shall not be obligated to pay any
charges for warranty or policy work or any other services for
which DEALER is reimbursed by DISTRIBUTOR, except as required by
law.
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IX. USE OF PARTS AND ACCESSORIES IN NON-WARRANTY SERVICE
Subject to the provisions of Sections VI(k) and VIII(c), DEALER has
the right to sell, install or use for making non-warranty repairs
products that are not Genuine LEXUS Parts or Accessories.
DEALER acknowledges, however, that its customers expect that any parts
or accessories that DEALER sells, installs or uses in the sale, repair
or servicing of LEXUS vehicles are, or meet the high quality standards
of, Genuine LEXUS Parts or Accessories. DEALER agrees that in sales,
repairs or servicing where DEALER does not use Genuine LEXUS Parts or
Accessories, DEALER only will utilize such other parts or accessories
as:
1. Will not adversely affect the mechanical operation of the LEXUS
vehicle being sold, repaired or serviced; and
2. Are equivalent in quality and design to Genuine LEXUS Parts or
Accessories.
DEALER further agrees that it will not offer to sell any parts or
accessories that for reasons of quality or image are reasonably
objected to by LEXUS.
A. WARRANTY DISCLOSURES AS TO NON-GENUINE PARTS AND ACCESSORIES
In order to avoid confusion and to minimize potential customer
dissatisfaction, in any non-warranty instance where DEALER sells,
installs or uses non-Genuine LEXUS Parts or Accessories, DEALER
shall disclose such fact to the customer and shall advise the
customer that the item is not included in warranties furnished by
DISTRIBUTOR or FACTORY. Such disclosure shall be written,
conspicuous and stated on the customer's copy of the service or
repair order or sale document. In addition, DEALER will clearly
explain to the customer the extent of any warranty covering the
parts or accessories involved and will deliver a copy of the
warranty to the customer.
B. ROADSIDE ASSISTANCE PROGRAM
Dealer agrees to participate in the LEXUS Roadside Assistance
Program as specified by DISTRIBUTOR.
C. SERVICE CAMPAIGN INSPECTIONS AND CORRECTIONS
DEALER agrees to perform service campaign inspections and/or
corrections for owners or users
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of all LEXUS Products that qualify for such inspections and/or
corrections. DEALER further agrees to comply with all
DISTRIBUTOR'S directives and with the applicable procedures in
the LEXUS Warranty Policies and Procedures Manual relating to
those inspections and/or corrections. DISTRIBUTOR agrees to
reimburse DEALER for all replacement parts and/or other materials
required and used in connection with such work and for labor
according to such directives and the applicable provisions of the
LEXUS Warranty Policies and Procedures Manual.
D. COMPLIANCE WITH SAFETY AND EMISSION CONTROL REQUIREMENTS
DEALER agrees to comply and operate consistently with all
applicable provisions of the National Traffic and Motor Vehicle
Safety Act of 1966 and the Federal Clean Air Act, as amended,
including applicable rules and regulations issued from time to
time thereunder, and all other applicable federal, state and
local motor vehicle safety and emission control statutes, rules
and regulations.
In the event that the laws of the state in which DEALER is
located require motor vehicle dealers or distributors to install
in new or used motor vehicles, prior to their retail sale, any
safety devices or other equipment not installed or supplied as
standard equipment by FACTORY, then DEALER, prior to the sale of
any LEXUS Motor Vehicle on which such installations are required,
shall properly install such devices or equipment on such LEXUS
Motor Vehicles. DEALER shall comply with state and local laws
pertaining to the installation and reporting of such equipment.
In the interest of motor vehicle safety and emission control,
DISTRIBUTOR and DEALER agree to provide to each other such
information and assistance as may reasonably be requested by the
other in connection with the performance of obligations imposed
on either party by the National Traffic and Motor Vehicle Safety
Act of 1966 and the Federal Clean Air Act, as amended, and their
rules and regulations, and all other applicable federal, state
and local motor vehicle safety and emissions control statutes,
rules and regulations.
E. COMPLIANCE WITH CONSUMER PROTECTION STATUTES, RULES AND
REGULATIONS.
Because certain customer complaints may impose liability upon
DISTRIBUTOR under various repair or
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replace laws or other consumer protection laws and regulations,
DEALER agrees to provide prompt notice to DISTRIBUTOR of such
complaints and take such other steps as DISTRIBUTOR may require.
DEALER will do nothing to affect adversely DISTRIBUTOR'S rights
under such laws and regulations. Subject to any law or any
regulation to the contrary, DEALER shall be liable to DISTRIBUTOR
for any refunds or vehicle replacements provided to customer
where DISTRIBUTOR reasonably establishes that DEALER failed to
carry out vehicle repairs in accordance with DISTRIBUTOR'S
written published policies and procedures or its express oral
instructions subsequently confirmed in writing. DEALER also
agrees to provide applicable required customer notifications and
disclosures as prescribed by repair or replacement laws or other
consumer laws or regulations.
X. SERVICE AND PARTS ORGANIZATION
A. ORGANIZATION AND STANDARDS
DEALER agrees to organize and maintain a complete service and
parts organization of the highest quality, including a qualified
Service Manager, Parts Manager, Diagnostic Specialists,
Technicians and a sufficient complement of qualified customer
relations, service and parts personnel as recommended in the
LEXUS Dealer Facility Planner. DEALER'S personnel will meet the
educational, management and technical training standards
established by DISTRIBUTOR, and will attend all service, parts
and customer satisfaction training courses prescribed by
DISTRIBUTOR at DEALER'S expense.
B. SERVICE EQUIPMENT AND SPECIAL TOOLS
DEALER agrees to acquire and properly maintain adequate service
equipment and such special service tools and instruments as are
specified by DISTRIBUTOR.
C. PARTS STOCKING LEVEL
DEALER agrees to maintain its parts stock at minimum stocking
levels established by DISTRIBUTOR. In consideration for DEALER'S
maintenance of the Dealer Stocking Guide, DISTRIBUTOR grants
DEALER a one hundred percent (100%) obsolescence parts return
policy. For non-stocking guide parts, parts orders will accrue a
five percent (5%) obsolescence eligibility.
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D. AFTER-HOURS DELIVERY
Dealer agrees to provide DISTRIBUTOR, upon request, access to a
secure area for after-hours parts or vehicle delivery.
E. ASSISTANCE PROVIDED BY DISTRIBUTOR
1. SERVICE MANUALS AND MATERIALS
DISTRIBUTOR agrees to make available to DEALER copies of such
service manuals and bulletins, publications and technical data as
DISTRIBUTOR shall deem to be necessary for the needs of DEALER'S
service and parts organization. DEALER shall be responsible for
keeping such manuals, publications and data current and available
for consultation by its employees.
2. FIELD SERVICE PERSONNEL ASSISTANCE
To assist DEALER in handling service responsibilities under this
Agreement, DISTRIBUTOR agrees to make available qualified field
service personnel who will, from time to time, advise and counsel
DEALER on service-related subjects, including service policies,
product and technical adjustments, repair and replacement of
product components, customer relations, warranty administration,
service and parts merchandising, and personnel/management
training.
F. EVALUATION OF DEALER'S SERVICE AND PARTS PERFORMANCE
DISTRIBUTOR will evaluate periodically DEALER'S: (i) service
performance in areas such as customer satisfaction, warranty
administration, service repairs, service management, facilities,
operating procedures, new vehicle pre-delivery service; and (ii)
parts operations, facilities, tools and equipment. DISTRIBUTOR
agrees to review such evaluations with DEALER and DEALER agrees
to take prompt action to improve the service and parts
performance to satisfactory levels as DISTRIBUTOR may require.
Such action shall, if requested by DISTRIBUTOR, include an action
plan by DEALER for improvement of service and parts performance
within a specific time period approved by DISTRIBUTOR.
XI. CUSTOMER SATISFACTION RESPONSIBILITIES
A goal of DISTRIBUTOR and DEALER is to be recognized as marketing the
finest products and providing the best
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service in the automobile industry. The LEXUS name should be
synonymous with the highest level of customer satisfaction.
A. DEALER'S CUSTOMER SATISFACTION OBLIGATIONS
DEALER will be responsible for satisfying LEXUS customers in all
matters except those that are directly related to product design
and manufacturing or are otherwise out of DEALER'S control.
DEALER will take all reasonable steps to ensure that each
customer is completely satisfied with his or her LEXUS Products
and the services and practices of DEALER. DEALER will not engage
in any practice or method of operation if its nature or quality
may impair the reputation of LEXUS or LEXUS Products and it has
been reasonably objected to by DISTRIBUTOR.
1. DEALER'S CUSTOMER SATISFACTION PLAN
DEALER shall provide a detailed plan of DEALER'S customer
satisfaction program to DISTRIBUTOR and shall implement such
program on a continuous basis. This plan shall include an
ongoing system for emphasizing customer satisfaction to all
DEALER'S employees, for training DEALER employees and for
conveying to customers that DEALER is committed to the
highest possible level of customer satisfaction.
2. EMPLOYEE TRAINING
DEALER agrees to participate and to have its employees
participate in LEXUS customer satisfaction training as
required by DISTRIBUTOR, at DEALER'S expense.
3. CUSTOMER SATISFACTION MANAGER
If requested by DISTRIBUTOR, DEALER agrees to employ a full-
time Customer Satisfaction Manager with the necessary
authority to make all decisions regarding customer
satisfaction and to resolve all customer problems.
4. CUSTOMER ASSISTANCE RESPONSE SYSTEM
DEALER agrees to implement a system, approved by
DISTRIBUTOR, that will respond immediately to requests for
customer assistance from DISTRIBUTOR.
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B. EVALUATION OF DEALER'S CUSTOMER SATISFACTION PERFORMANCE
DISTRIBUTOR periodically will evaluate DEALER'S customer
satisfaction performance based on the following considerations an
efforts by DEALER.
1. DISTRIBUTOR will provide DEALER with Owner Satisfaction
Index ("OSI") reports or such other equivalent data as will
permit DEALER to assess its performance and maintain the
highest level of customer satisfaction. DEALER agrees to
review with its employees on a regular basis the results of
the customer satisfaction reports or other data it receives.
2. DEALER agrees to develop and implement specific action plans
to improve results in the event that DEALER is below the
average for other LEXUS dealers. The plans are to be
reviewed with DISTRIBUTOR on a basis that DISTRIBUTOR deems
appropriate. DEALER will use its best efforts to respond on
a timely basis to requests from DISTRIBUTOR to take action
on unsatisfactory customer satisfaction matters and to
commit necessary resources to remedy deficiencies reasonably
specified by DISTRIBUTOR.
XII. DEALERSHIP FACILITIES AND IDENTIFICATION
A. FACILITIES
1. In order for DISTRIBUTOR to establish an effective network
of authorized LEXUS dealers, DEALER shall provide, and at
all times maintain, attractive dealership facilities at the
Approved Location(s) that satisfy the image, size, layout,
interior design, color, equipment and identification
required by DISTRIBUTOR. DEALER'S facility shall meet the
minimum facility standards established by LEXUS.
2. To assist DEALER in planning, building, remodeling, or
maintaining dealership facilities, DISTRIBUTOR will provide
DEALER a LEXUS Dealer Facility Planner and will identify
sources from which DEALER may purchase facility consultation
and planning services, and architectural materials and
furnishings that meet LEXUS standards and guidelines.
DISTRIBUTOR will also make available to DEALER, upon
request, sample copies of building layout
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plans, facility planning recommendations, and an applicable
identification program covering the placement, installation
and maintenance of required signs. In addition,
representatives of DISTRIBUTOR will be available to DEALER
from time to time to counsel and advise DEALER and
dealership personnel in connection with DEALER'S planning
and equipping the dealership premises.
B. SERVICE RECEPTION AREA
DEALER agrees to maintain a service reception area that meets all
requirements set forth in the LEXUS Dealer Facility Planner, that
is consistent with the LEXUS image and that will promote a high
level of customer satisfaction.
C. DEALER'S OPERATING HOURS
DEALER agrees to keep its dealership operations open for business
during all days and hours that are customary and lawful for such
operations in the community or locality in which DEALER is
located and in accordance with industry standards.
D. SIGNS
Subject to applicable governmental statutes, ordinances and
regulations, DEALER agrees to erect, display and maintain, at
Approved Location(s) only and at DEALER'S sole expense, such
standard authorized product and service signs as specified by
DISTRIBUTOR.
E. EVALUATION OF DEALERSHIP FACILITIES
DISTRIBUTOR periodically will evaluate DEALER'S facilities. In
making such evaluations, DISTRIBUTOR may consider, among other
things: the actual building and land provided by DEALER for the
performance of its responsibilities under this Agreement;
compliance with DISTRIBUTOR'S current requirements for dealership
operations; the appearance, condition, layout and signage of the
dealership facilities; and such other factors as in DISTRIBUTOR'S
opinion may relate to DEALER'S performance of its
responsibilities under this Agreement. DISTRIBUTOR will discuss
such evaluations with DEALER and DEALER shall take prompt action
to comply with DISTRIBUTOR'S recommendations and minimum facility
standards.
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F. USE OF LEXUS MARKS
1. USE BY DEALER
DISTRIBUTOR grants to DEALER the non-exclusive privilege of
displaying or otherwise using authorized LEXUS Marks as
specified in the LEXUS Graphic Standards Manual at the
Approved Location(s) in connection with the selling or
servicing of LEXUS Products.
DEALER further agrees that it promptly shall discontinue the
display and use of any such LEXUS Marks, and shall change
the manner in which any LEXUS Marks are displayed and used,
when for any reason it is requested to do so by DISTRIBUTOR.
DEALER may use the LEXUS Marks only at Approved Location(s)
and for such purposes as are specified in this Agreement.
DEALER agrees that such LEXUS Marks may be used as part of
the name under which DEALER'S business is conducted only
with the prior written approval of DISTRIBUTOR.
2. DISCONTINUANCE OF USE
Upon termination, non-renewal, or expiration of this
Agreement, DEALER agrees that it shall immediately:
a. Discontinue the use of the word LEXUS and the LEXUS
Marks, or any semblance of same, including without
limitation, the use of all stationery, telephone
directory listing, and other printed material referring
in any way to LEXUS or bearing any LEXUS Mark;
b. Discontinue the use of the word LEXUS or the LEXUS
Marks, or any semblance of same, as part of its
business or corporate name, and file a change or
discontinuance of such name with appropriate
authorities;
c. Remove all product signs bearing said word(s) or LEXUS
Marks at DEALER'S sole cost and expense;
d. Cease representing itself as an authorized LEXUS
Dealer; and
e. Refrain from any action, including without limitation,
any advertising, stating or
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implying that is authorized to sell or distribute LEXUS
Products.
In the event DEALER fails to comply with the terms and conditions of
this Section, DISTRIBUTOR shall have the right to enter upon DEALER'S
premises and remove, without liability, all such product signs and
identification bearing the word LEXUS or any LEXUS Marks. DEALER
agrees that it shall reimburse DISTRIBUTOR for any costs and expenses
incurred in such removal, including reasonable attorney fees.
XIII. CAPITAL, CREDIT, RECORDS AND UNIFORM SYSTEMS
A. 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 increase the minimum net working capital required, and
DEALER agrees promptly to establish and maintain the increased
amount.
B. FLOORING AND LINES OF CREDIT
DEALER agrees to obtain and maintain at all times a confirmed and
adequate flooring line with a bank or financial institution or
other method of financing acceptable to DISTRIBUTOR to enable
DEALER to perform its obligations pursuant to this Agreement.
DISTRIBUTOR may increase the required amounts of flooring or
lines of credit, and DEALER agrees promptly to establish and
maintain the increased amount.
Subject to the foregoing obligations, DEALER is free to do its
financing business, wholesale, retail or both, with whomever it
chooses and to the extent it desires.
C. PAYMENT TERMS
All monies or accounts due DEALER from DISTRIBUTOR will be
considered net of DEALER'S indebtedness to DISTRIBUTOR.
DISTRIBUTOR may deduct or offset any amounts due or to become due
from DEALER to DISTRIBUTOR, or any amounts held by DISTRIBUTOR,
from or against any sums or accounts due or to become due from
DISTRIBUTOR to DEALER. Any amounts owed by DEALER to DISTRIBUTOR
that are not paid when due shall bear interest as established by
DISTRIBUTOR and permitted by law. Payments by
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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.
D. UNIFORM ACCOUNTING SYSTEM
DEALER agrees to maintain its financial books and records in
accordance with the LEXUS Accounting Manual, as amended from time
to time by DISTRIBUTOR. In addition, DEALER shall furnish to
DISTRIBUTOR complete and accurate financial or operating
information, including without limitation, a financial and/or
operating statement covering the current month and calendar year-
to-date operations and showing the true and accurate condition of
DEALER'S business. DEALER shall promptly furnish to DISTRIBUTOR
copies of any adjusted financial and/or operating statements,
including any and all adjusted, year-end statements prepared for
tax or any other purposes. All such information shall be
furnished by DEALER to DISTRIBUTOR via DISTRIBUTOR'S electronic
communications network and in such a format and at such times as
prescribed by DISTRIBUTOR.
E. RECORDS MAINTENANCE
DEALER agrees to keep complete, accurate and current records
regarding its sale, leasing and servicing of LEXUS Products for a
minimum of five (5) years, exclusive of any retention period
required by any governmental entity. DEALER shall prepare, keep
current and retain records in support of requests for
reimbursement for warrant and policy work performed by DEALER in
accordance with the LEXUS Warranty Policies and Procedures
Manual.
F. EXAMINATION OF DEALERSHIP ACCOUNTS AND RECORDS
DISTRIBUTOR shall have the right at all reasonable times and
during regular business hours to inspect DEALER'S facilities and
to examine, audit and to reproduce all records, accounts and
supporting data relating to the operations of DEALER, including
without limitation, sales reporting, service and repair of LEXUS
Products by DEALER.
G. TAXES
DEALER shall be responsible for and duly pay all sales taxes, use
taxes, excise taxes and other governmental or municipal charges
imposed, levied or based upon the purchase or sale of LEXUS
Products by
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DEALER, and shall maintain accurate records of the same.
H. CONFIDENTIALITY
DISTRIBUTOR agrees that it shall not provide any financial data
or documents submitted to it by DEALER to any third party unless
authorized by DEALER, required by law, or required to generate
composite or comparative data for analytical purposes.
DEALER agrees to keep confidential and not to disclose, directly
or indirectly, any information that DISTRIBUTOR designates as
confidential.
I. DATA TRANSMISSION SYSTEMS
DISTRIBUTOR has established a national, private, centralized
database of information about all LEXUS vehicles and customers.
In order to provide the highest level of service and support and
to facilitate accurate and timely reporting of relevant DEALER
operational and financial data, DEALER shall provide information
to DISTRIBUTOR as specified by DISTRIBUTOR from time to time,
including, but not limited to, customer service, sales, parts
inventory and accounting information. All information shall be
submitted by DEALER via the LEXUS electronic communications
network. DEALER will acquire, install and maintain at its
expense the necessary equipment and systems compatible with the
LEXUS electronic communications network. DISTRIBUTOR will
recommend to DEALER an independent source for purchasing the
required equipment and systems. DEALER, however, may purchase
equipment from any source, provided the equipment meets the LEXUS
electronic communications network specifications.
J. SALES REPORTING
DEALER agrees to accurately report to DISTRIBUTOR, with such
relevant information as DISTRIBUTOR may reasonably require, the
delivery of each new motor vehicle to a purchaser by the end of
the day in which the vehicle is delivered to the purchaser
thereof, and to furnish DISTRIBUTOR with such other reports as
DISTRIBUTOR may reasonably require from time to time.
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XIV. TRANSFERS
A. SALE OF OWNERSHIP INTEREST IN DEALERSHIP
This is a personal services Agreement based upon the personal
skills, service, qualifications and commitment of DEALER'S OWNERS
and General Manager. For this reason, and because DISTRIBUTOR
has entered into this Agreement in reliance upon DEALER'S,
OWNERS' and General Manager's qualifications, DEALER agrees to
obtain DISTRIBUTOR'S prior written approval of any proposed
change in its ownership, General Manager or any proposed
disposition of DEALER'S principal assets.
DISTRIBUTOR shall not be obligated to renew this Agreement or to
execute a new Agreement to a proposed transferee unless DEALER
first makes arrangements acceptable to DISTRIBUTOR to satisfy any
outstanding indebtedness to DISTRIBUTOR.
B. RIGHTS OF FIRST REFUSAL OR OPTION TO PURCHASE
1. RIGHTS GRANTED
If a proposal to sell the dealership's assets or transfer
its ownership is submitted by DEALER to DISTRIBUTOR, or in
the event of the death of the majority owner of DEALER,
DISTRIBUTOR has a right of first refusal or option to
purchase the dealership assets or stock, including any
leasehold interest or realty. DISTRIBUTOR'S exercise of its
right or option under this Section 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 by such
assignee. DISTRIBUTOR may disclose the terms of any pending
buy/sell agreement and any other relevant dealership
performance information to any potential assignee.
DISTRIBUTOR'S rights under this Section will be binding on
and enforceable against any assignee or successor in
interest of DEALER or purchaser of DEALER'S assets.
2. EXERCISE OF DISTRIBUTOR'S RIGHTS
DISTRIBUTOR shall have thirty (30) days from the following
events within which to exercise its option to purchase or
right of first refusal: (i) DISTRIBUTOR'S receipt of all
data
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and documentation customarily required by it to evaluate a
proposed transfer of ownership; (ii) DISTRIBUTOR'S receipt
of notice from DEALER of the death of the majority owner of
DEALER; or (iii) DISTRIBUTOR'S disapproving of any
application submitted by an OWNER'S heirs pursuant to
Section XIV. DISTRIBUTOR'S exercise of its right of first
refusal under this Section neither shall be dependent upon
nor require its prior refusal to approve the proposed
transfer.
3. RIGHT OF FIRST REFUSAL
If DEALER has entered into a bona fide written buy/sell
agreement for its dealership business or assets,
DISTRIBUTOR'S right under this Section is a right of first
refusal, enabling DISTRIBUTOR to assume the buyer's rights
and obligations under such buy/sell agreement, and to cancel
this Agreement and all rights granted DEALER. Upon
DISTRIBUTOR'S request, DEALER agrees to provide other
documents relating to the proposed transfer and any other
information which DISTRIBUTOR deems appropriate, including,
but not limited to, those reflecting other agreements or
understandings between the parties to the buy/sell
agreement. Refusal to provide such documentation or to
state that no such documents exist shall create the
presumption that the buy/sell agreement is not a bona fide
agreement.
4. OPTION TO PURCHASE
In the event of the death of a majority OWNER or if DEALER
submits a proposal which DISTRIBUTOR determines is not bona
fide or in good faith, DISTRIBUTOR has the option to
purchase the principal assets of DEALER utilizing the
dealership business, including real estate and leasehold
interest, and to cancel this Agreement and the rights
granted DEALER. The purchase price of the dealership assets
will be determined by good faith negotiations between the
parties. If an agreement cannot be reached, the purchase
price will be exclusively determined by binding arbitration
in accordance with the commercial arbitration rules of the
American Arbitration Association. The site of the
arbitration shall be the office of the American Arbitration
Association in the locality of DISTRIBUTOR'S principal place
of business.
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5. DEALER'S OBLIGATIONS
Upon DISTRIBUTOR'S exercise of its rights or option and
tender of performance under the buy/sell agreement or upon
whatever terms may be expressed in the buy/sell agreement,
DEALER shall forthwith transfer the affected real property
by warranty deed conveying marketable title free and clear
of all liens, claims, mortgages, encumbrances, tenancies and
occupancies. The warranty deed shall be in proper form for
recording, and DEALER shall deliver complete possession of
the property and deed at the time of closing. DEALER shall
also furnish to DISTRIBUTOR all copies of any easements,
licenses or other documents affecting the property or
dealership operations and shall assign any permits or
licenses that are necessary or desirable for the use of or
appurtenant to the property or the conduct of such dealer
operations. DEALER also agrees to execute and deliver to
DISTRIBUTOR instruments satisfactory to DISTRIBUTOR
conveying title to all personal property, including
leasehold interests, involved in the transfer or sale to
DISTRIBUTOR. If any personal property is subject to any
lien or charge of any kind, DEALER agrees to procure the
discharge and satisfaction thereof prior to the closing of
sale of such property to DISTRIBUTOR.
XV. SUCCESSION RIGHTS UPON DEATH OR INCAPACITY
A. SUCCESSION TO OWNERSHIP AFTER DEATH OF OWNER
In the event that OWNER dies and his or her interest in
dealership passes directly to any person or persons ("Heirs") who
wish to succeed to OWNER'S interest, then OWNER'S legal
representative must notify DISTRIBUTOR within sixty (60) days of
the death of the OWNER of such Heir's or Heirs' intent to succeed
OWNER. The legal representative also must then designate a
proposed General Manager for DISTRIBUTOR approval. The effect of
such notice from OWNER'S legal representative will be to suspend
any notice of termination provided for in Section XVI(B)(4)
issued hereunder.
Upon delivery of such notice, OWNER'S legal representative shall
immediately request any person(s) identified by it as intending
to succeed OWNER and the designated candidate for General Manager
to submit an application and to provide all personal and
financial information that DISTRIBUTOR
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may reasonably and customarily require in connection with its
review of such applications. All requested information must be
provided promptly to DISTRIBUTOR and in no case later than thirty
(30) days after receipt of such request from OWNER'S legal
representative. Upon the submission of all requested
information, DISTRIBUTOR agrees to review such application(s)
pursuant to the then current criteria generally applied by
DISTRIBUTOR in qualifying dealer OWNERS and/or General Managers.
DISTRIBUTOR shall either approve or disapprove the application(s)
within ninety (90) days of full compliance with all DISTRIBUTOR'S
requests for information. If DISTRIBUTOR approves the
application(s), it shall offer to enter into a new LEXUS Dealer
Agreement with OWNER'S Heir(s) in the form then currently in use,
subject to such additional conditions and for such term as
DISTRIBUTOR deems appropriate.
In the event that DISTRIBUTOR does not approve the designated
Heir(s) or designated candidate for Manager, or if the OWNER'S
legal representative withdraws his or her notice of the Heir(s)
intent to succeed as OWNER(S) or if the legal representative or
any proposed OWNERS or General Manager fails to timely provide
the required information, DISTRIBUTOR may reinstate or issue a
notice of termination. Nothing in this Section shall waive
DISTRIBUTOR'S right to exercise its Option to Purchase set forth
in Section XIV herein.
B. INCAPACITY OF OWNER
The parties agree that, as used herein, incapacity shall refer to
any physical or mental ailment that, in DISTRIBUTOR'S opinion,
adversely affects OWNER'S ability to meet his or her obligations
under this Agreement. DISTRIBUTOR may terminate this Agreement
when an incapacitated OWNER also is the General Manager
identified herein.
Prior to the effective date of any notice of termination, an
incapacitated OWNER who is also the General Manager, or his or
her legal representative, may propose a new candidate for the
position of General Manager. Such proposal shall be in writing
and shall suspend any pending notice of termination until
DISTRIBUTOR advises DEALER of its approval or disapproval of the
new candidate. Upon receipt of such notice, DISTRIBUTOR and
DEALER shall follow the qualification procedures set forth in
subsection A above.
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C. NOMINATION OF SUCCESSOR PRIOR TO DEATH OR INCAPACITY OF OWNER
An OWNER owning a majority of DEALER'S stock may nominate a
candidate to assume ownership and/or the position of General
Manager of the dealership upon his or her death or incapacity.
As soon as practicable after such nomination, DISTRIBUTOR will
request such personal financial information from the nominated
OWNER and/or General Manager candidate as it reasonably and
customarily may require in evaluating such candidates.
DISTRIBUTOR shall apply criteria then currently used by
DISTRIBUTOR in qualifying OWNERS and/or General Managers of
authorized dealers. Upon receipt of all requested information,
DISTRIBUTOR shall either approve or disapprove such candidate.
If DISTRIBUTOR initially approves the candidate, said approval
shall remain in effect for the duration of the current Agreement.
DISTRIBUTOR agrees that DEALER may renominate the candidate after
the expiration of this Agreement, and DISTRIBUTOR will approve
such nomination provided: (i) DISTRIBUTOR and DEALER have
entered into a new LEXUS Dealer Agreement; and (ii) the proposed
candidate continues to comply with the then current criteria used
by DISTRIBUTOR in qualifying such candidates. If DISTRIBUTOR
does not initially qualify the candidate, DISTRIBUTOR agrees to
review the reason(s) for its decision with OWNER. OWNER is free
at any time to renew its nomination. However, in such instances,
the candidate must again qualify pursuant to the then current
criteria. OWNER may, by written notice, withdraw a nomination at
any time, even if DISTRIBUTOR has previously qualified said
candidate.
XVI. TERMINATION
A. VOLUNTARY TERMINATION BY DEALER
DEALER may voluntarily terminate this Agreement at any time by
written notice to DISTRIBUTOR. Termination shall be effective
thirty (30) days after receipt of the notice by DISTRIBUTOR,
unless otherwise mutually agreed in writing.
B. TERMINATION FOR CAUSE
1. IMMEDIATE TERMINATION
DEALER and DISTRIBUTOR agree that the following conduct is
within DEALER'S control and is so
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contrary to the goals, purposes and objectives of this
Agreement as to warrant its immediate termination.
Accordingly, DEALER agrees that if it engages in any of the
following types of conduct, DISTRIBUTOR shall have the right
to terminate this Agreement immediately:
a. If DEALER fails to conduct any customary dealership
operations for seven consecutive business days, except
in the event such closure or cessation of operation is
caused by some physical event beyond the control of the
DEALER, such as strikes, civil war, riots, fires,
floods, earthquakes, or other acts of God;
b. If DEALER becomes insolvent, or files any petition
under bankruptcy law, or executes an assignment for the
benefit of creditors, or appoints a receiver or trustee
or another officer having similar powers is appointed
for DEALER and is not removed within thirty (30) days
from his appointment thereto or there is any levy under
attachment or execution or similar process which is not
vacated or removed by payment or bonding within ten
(10) days;
c. If DEALER, or any OWNER or Officer of DEALER is
convicted of any felony;
d. If DEALER or any OWNER, Officer or General Manager of
Dealer makes any material misrepresentation to
DISTRIBUTOR; or
e. If DEALER fails to obtain or maintain any license,
permit or authorization necessary for the conduct by
DEALER of his or her business pursuant to this
Agreement, or such license, permit or authorization is
suspended or revoked.
2. TERMINATION UPON SIXTY DAYS NOTICE
The following conduct violates the terms and conditions of this
Agreement and, if DEALER engages in such conduct, DISTRIBUTOR
shall have the right to terminate this Agreement upon sixty (60)
days notice:
a. Any attempted or actual sale, transfer or assignment by
DEALER of this Agreement or any of the rights granted DEALER
hereunder, or any attempted or actual
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<PAGE>
transfer, assignment or delegation by DEALER of any of the
responsibilities assumed by it under this Agreement without
the prior written approval of DISTRIBUTOR;
b. Any unreasonable removal of the General Manager;
c. Appointment of a new General Manager without the prior
written approval of DISTRIBUTOR;
d. The conducting, directly or indirectly, of any LEXUS dealer
operation other than at the Approved Location(s);
e. Failure of DEALER to pay DISTRIBUTOR for any LEXUS Products;
f. Failure of DEALER to establish or maintain during the
existence of this Agreement the required net working capital
or adequate flooring and lines of credit;
g. Any dispute, disagreement or controversy among managers,
officers or stockholders of DEALER that, in the reasonable
opinion of DISTRIBUTOR, adversely affects the ownership,
operation, management, business, reputation or interests of
DEALER or DISTRIBUTOR;
h. Retention by DEALER of any General Manager, who, in
DISTRIBUTOR'S reasonable opinion, is not competent or, if
previously approved by DISTRIBUTOR, no longer possesses the
requisite qualifications for the position, or who has acted
in a manner contrary to the continued best interest of both
DEALER and DISTRIBUTOR;
i. Impairment of the reputation of financial standing of DEALER
subsequent to the execution of this Agreement;
j. Refusal to permit DISTRIBUTOR to examine or audit DEALER'S
accounting records as provided herein upon receipt by DEALER
from DISTRIBUTOR of written notice requesting such
permission or information;
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k. Failure of DEALER to timely furnish accurate sales or
financial information and related supporting data;
l. Breach or violation by DEALER of any other term or provision
of this Agreement; or
m. Any civil or administrative liability found against DEALER
or any OWNER or Officer of DEALER for any automotive-related
matter which in DISTRIBUTOR'S opinion tends to seriously and
adversely affect the ownership, operation, management,
reputation, business or interests of DEALER, or to impair
the goodwill associated with the LEXUS Marks.
3. TERMINATION FOR FAILURE OF PERFORMANCE
If, upon evaluation of DEALER's performance pursuant to
paragraphs VII(F), X(F), X(B) or XII(E) herein, DISTRIBUTOR
concludes that DEALER has failed to perform adequately its sales,
service or customer satisfaction responsibilities or to provide
adequate dealership facilities, DISTRIBUTOR shall notify DEALER
in writing of such failure(s) and will endeavor to review
promptly with DEALER the nature and extent of such failure(s),
and will grant DEALER 180 days or such other period as may be
required by law to correct such failure(s). If DEALER fails or
refuses to correct such failure(s) or has not made substantial
progress towards remedying such failure(s) at the expiration of
such period, DISTRIBUTOR may terminate this Agreement upon sixty
(60) days notice or such other notice as may be required by law.
4. TERMINATION UPON DEATH OR INCAPACITY
Subject to certain exceptions identified in Section XV,
DISTRIBUTOR may terminate this Agreement in the event of the
death of an OWNER or upon the incapacity of any OWNER who is also
the General Manager identified herein, upon written notice to
DEALER and such OWNER'S legal representative. Termination, upon
either of these events shall be effective ninety (90) days from
the date of such notice.
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C. NOTICE OF TERMINATION
Any notice of termination under this Agreement shall be in
writing and shall be mailed to person(s) designated to receive
such notice, via certified mail, or shall be delivered in person.
Such notice shall be effective upon the date of receipt.
DISTRIBUTOR shall state the grounds on which it relies in its
termination of DEALER, and shall have the right to amend such
notice as appropriate. DISTRIBUTOR'S failure to refer to
additional grounds for termination shall not constitute a waiver
of its right later to rely upon such grounds.
D. CONTINUANCE OF BUSINESS RELATIONS
Upon receipt of any notice of termination or non-renewal, DEALER
agrees to conduct itself and its operation until the effective
date of termination or non-renewal in a manner that will not
injure the reputation or goodwill of the LEXUS Marks or
DISTRIBUTOR.
E. REPURCHASE PROVISIONS
1. DISTRIBUTOR'S Obligations
Upon the expiration or termination of this Agreement,
DISTRIBUTOR shall have the right to cancel any and all
shipments of LEXUS Products scheduled for delivery to DEALER
and DISTRIBUTOR shall repurchase from DEALER the following:
a. New, unused, unmodified and undamaged LEXUS Motor
Vehicles then unsold in DEALER'S inventory. The price
of such Motor Vehicles shall be the same as those at
which they were originally purchased by DEALER, less
all prior refunds or other allowances made by
DISTRIBUTOR to DEALER with respect thereto.
b. New, unused and undamaged LEXUS parts and accessories
then unsold in DEALER'S inventory that are in good and
saleable condition. The prices for such parts and
accessories shall be the prices last established by
DISTRIBUTOR for the sale of identical parts or
accessories to dealers in the area in which DEALER is
located.
c. Special service tools recommended by DISTRIBUTOR and
then owned by DEALER and
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that are especially designed for servicing LEXUS Motor
Vehicles. The prices for such special service tools
will be the price paid by DEALER less appropriate
depreciation, or such other price as the parties may
negotiate.
d. Signs that DISTRIBUTOR has recommended for
identification of DEALER. The price of such signs
shall be the price paid by DEALER less appropriate
depreciation or such other price as the parties may
negotiate.
2. RESPONSIBILITIES OF DEALER
DISTRIBUTOR'S obligations to repurchase the items set forth
in this Section are contingent upon DEALER fulfilling the
following obligations:
a. Within thirty (30) days after the date of expiration or
the effective date of termination of this Agreement,
DEALER shall deliver or mail to DISTRIBUTOR a detailed
inventory of all items referred to in this Section
which it requests DISTRIBUTOR repurchase and shall
certify that such list is true and accurate.
b. DEALER shall be entitled to request repurchase of only
those items which it purchased from DISTRIBUTOR, unless
DISTRIBUTOR agrees otherwise.
c. Products and special service tools to be repurchased by
DISTRIBUTOR from DEALER shall be delivered by DEALER to
DISTRIBUTOR'S place of business at DEALER'S expense.
If DEALER fails to do so, DISTRIBUTOR may transfer such
items and deduct the cost therefor from the repurchase
price.
d. DEALER will execute and deliver to DISTRIBUTOR
instruments satisfactory to DISTRIBUTOR conveying good
and marketable title to the aforesaid items to
DISTRIBUTOR. If such items are subject to any lien or
charge of any kind, DEALER will procure the discharge
in satisfaction thereof prior to their repurchase by
DISTRIBUTOR. DEALER will comply with the requirements
of any state or federal laws
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that relate to the repurchase including bulk sales or
transfer laws.
e. DEALER will remove, at its own expense, all signage
from DEALER'S approved locations including all LEXUS
Marks before it is eligible for payment hereunder.
3. PAYMENT BY DISTRIBUTOR
DISTRIBUTOR will pay DEALER for such items as DEALER may
request be repurchased and that qualify hereunder as soon as
practicable upon DEALER'S compliance with the obligations
set forth herein and upon computation of any outstanding
indebtedness of DEALER to DISTRIBUTOR.
DISTRIBUTOR shall have the right to offset from any amounts
due to DEALER hereunder the total sum of DEALER'S
outstanding indebtedness to DISTRIBUTOR.
If DEALER disagrees with DISTRIBUTOR'S valuation of any item
herein, and DEALER and DISTRIBUTOR have not resolved their
disagreement within sixty (60) days of the effective date of
termination or expiration of this Agreement, DISTRIBUTOR
shall pay to DEALER the amount to which it reasonably
believes DEALER is entitled. DEALER'S exclusive remedy to
recover any additional sums that it believes is due under
this Section shall be by resort to an Alternative Dispute
Resolution program, including arbitration, that is binding
on both parties.
XVII. MANAGEMENT OF DISPUTES
A. ALTERNATIVE DISPUTE RESOLUTION PROGRAMS
1. DISTRIBUTOR and DEALER acknowledge that disputes involving
the performance of this Agreement may from time to time
arise. In order to minimize the effects of such disputes on
their business relationship, the parties agree to
participate in such Alternative Dispute Resolution programs
as may be established by DISTRIBUTOR.
2. Such Alternative Dispute Resolution programs may be
established to resolve disputes in matters including, but
limited to, sales reporting and/or sales credit disputes,
product
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<PAGE>
allocation disputes, DEALER liability for repair/replace
claims, warranty and service campaign reimbursement, sales
contests and merchandising incentive programs, and accounts
of debt between the parties.
3. In all disputes between DEALER and DISTRIBUTOR, the parties
shall first resort to such Alternative Dispute Resolution
programs, including mediation, as may have been established
by DISTRIBUTOR.
4. It is expressly understood that, unless otherwise specified
in this Agreement, the results of any Alternative Dispute
Resolution program will not be binding upon DEALER or
DISTRIBUTOR.
5. The parties' commitment to support and participate in non-
binding Alternative Dispute Resolution programs specifically
is not a waiver of DEALER'S or DISTRIBUTOR'S right to later
resort to litigation before any judicial or administrative
forum.
B. APPLICABLE LAW
This Agreement shall be governed by and construed according to
the laws of the state in which DEALER is located.
C. MUTUAL RELEASE
Each party hereby releases the other from any and all claims and
causes of action that it may have against the other for money
damages arising from any event occurring prior to the date of
execution of this Agreement, except for any accounts payable by
one party to the other as a result of the purchase of any LEXUS
Products, audit adjustments or reimbursement for any services.
This release does not extend to claims which either party does
not know or reasonably suspect to exist in its favor at the time
of the execution of this Agreement.
XVIII. DEFENSE AND INDEMNIFICATION
A. DEFENSE AND INDEMNIFICATION BY DISTRIBUTOR
DISTRIBUTOR agrees to assume the defense of DEALER and to
indemnify and hold DEALER harmless in any lawsuit naming DEALER
as a defendant and involving any LEXUS Product when the lawsuit
also involves allegations of:
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<PAGE>
1. Breach of warranty provided by DISTRIBUTOR, bodily injury or
property damage arising out of an occurrence allegedly
caused solely by a defect or failure to warn of a defect in
design, manufacture or assembly of a LEXUS Product (except
for tires not manufactured by FACTORY), provided that the
defect could not reasonably have been discovered by DEALER
during the pre-delivery service of the LEXUS Product;
2. Any misrepresentation or misleading statement or unfair or
deceptive trade practice of DISTRIBUTOR; or
3. Any damage to a LEXUS Product purchased by DEALER from
DISTRIBUTOR that was repaired by DISTRIBUTOR and where
DEALER had not been notified of such damage in writing prior
to the delivery of the subject vehicle, part or accessory to
a retail Customer; and
Provided:
4. That DEALER delivers to DISTRIBUTOR, in a manner to be
designated by DISTRIBUTOR, within twenty (20) days of the
service of any summons or complaint, copies of such
documents and requests in writing a defense and/or
indemnification therein (except as provided in Paragraph (D)
below);
5. That the complaint does not involve allegations of DEALER
misconduct, including but not limited to, improper or
unsatisfactory service or repair, misrepresentation, or any
claim of DEALER'S unfair or deceptive trade practice;
6. That the LEXUS Product which is the subject of the lawsuit
was not altered by or for DEALER;
7. That DEALER agrees to cooperate fully in the defense of such
action as DISTRIBUTOR may reasonably require; and
8. That DEALER agrees that DISTRIBUTOR may offset any recovery
on DEALER'S behalf against any indemnification that may be
required hereunder.
B. DEFENSE AND INDEMNIFICATION BY DEALER
DEALER agrees to assume the defense of DISTRIBUTOR or FACTORY and
to indemnify and hold them harmless
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in any lawsuit naming DISTRIBUTOR or FACTORY as a defendant when
the lawsuit involves allegations of:
1. DEALER'S alleged failure to comply, in whole or in part,
with any obligations assumed by DEALER pursuant to this
Agreement;
2. DEALER'S alleged negligent or improper repairing or
servicing of a new or used LEXUS Motor Vehicle or equipment,
or such other motor vehicles or equipment as may be sold or
serviced by DEALER;
3. DEALER'S alleged breach of any contract or warranty other
than that provided by DISTRIBUTOR or FACTORY;
4. DEALER'S alleged misleading statements, misrepresentations,
or deceptive or unfair trade practices;
5. Any modification or alteration made by or on behalf of
DEALER to a LEXUS Product, except those made pursuant to the
express instruction or with the express approval of
DISTRIBUTOR; and
Provided:
6. That DISTRIBUTOR delivers to DEALER, within twenty (20) days
of the service of any summons or complaint, copies of such
documents, and requests in writing a defense and/or
indemnification therein (except as provided in Paragraph (D)
below);
7. That DISTRIBUTOR agrees to cooperate fully in the defense of
such action as DEALER may reasonably require; and,
8. That the complaint does not involve allegations of liability
premised upon separate DISTRIBUTOR'S conduct or omissions.
C. CONDITIONAL DEFENSE AND/OR INDEMNIFICATION
In agreeing to defend and/or indemnify each other, DEALER and
DISTRIBUTOR may make their agreement conditional on the continued
existence of the state of facts as then known to such party and
may provide for the withdrawal of such defense and/or
indemnification at such time as facts arise which, if known at
the time of the original request for a
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defense and/or indemnification, would have caused either DEALER
or DISTRIBUTOR to refuse such request.
The party withdrawing from its agreement to defend and/or
indemnify shall give timely notice of its intent to withdraw.
Such notice shall be in writing and shall be effective upon
receipt. The withdrawing party shall be responsible for all
costs and expenses of defense up to the date of receipt of its
notice of withdrawal.
D. THE EFFECT OF SUBSEQUENT DEVELOPMENTS
In the event that subsequent developments in a case make clear
that the allegations which initially preclude a request or an
acceptance of a request for a defense and/or indemnification are
no longer at issue therein or are without foundation, any party
having a right to a defense and/or indemnification hereunder may
tender such request for a defense and indemnification to the
other party. Neither DEALER nor DISTRIBUTOR shall be required to
agree to such subsequent request for a defense and/or
indemnification where that party would be unduly prejudiced by
such delay.
E. TIME TO RESPOND AND RESPONSIBILITIES OF THE PARTIES
DEALER and DISTRIBUTOR shall have sixty (60) days from the
receipt of a request for a defense and/or indemnification to
conduct an investigation to determine whether or not, or under
what conditions, it may agree to defend and/or indemnify pursuant
to this Section.
If local rules require a response to the complaint in the lawsuit
prior to the time provided hereunder for a response to such
request, the requesting party shall take all steps necessary,
including obtaining counsel, to protect its own interest in the
lawsuit until DEALER or DISTRIBUTOR assumes the requested defense
and/or indemnification. In the event that DEALER or DISTRIBUTOR
agrees to assume the defense and/or indemnification of a lawsuit,
it shall have the right to engage and direct counsel of its own
choosing and, except in cases where the request is made pursuant
to Paragraph (D) above, shall have the obligation to reimburse
the requesting party for all reasonable costs and expense,
including actual attorneys' fees, incurred prior to such
assumption.
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XIX. 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 and delivered personally or by certified mail, return
receipt requested, and shall be effective from the date of
mailing. Notices to DEALER shall be directed to DEALER or its
General Manager at DEALER'S Approved Location. Notices to
DISTRIBUTOR shall be directed to the General Manager of DEALER'S
LEXUS Area Office.
B. NO IMPLIED WAIVERS
The failure of either party at any time to require performance by
the other party of any provision herein shall in no way affect
the right of such party to require such performance at any time
thereafter, nor shall any waiver by any party of a breach of any
provision herein constitute a waiver of any succeeding breach of
the same or any other provision, nor constitute a waiver of the
provision itself.
C. SOLE AGREEMENT OF THE PARTIES
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 LEXUS 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. This
Agreement cancels and supersedes all previous agreements between
the parties relating to the subject matters covered herein.
D. DEALER NOT AN AGENT OR REPRESENTATIVE
DEALER is an independent business. This Agreement is not a
property right and does not constitute DEALER the agent or legal
representative of DISTRIBUTOR or FACTORY for any purpose
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 FACTORY
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or to bind DISTRIBUTOR or FACTORY in any manner whatsoever.
E. ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES
This is a personal services agreement and may not be assigned or
sold in whole or in part, directly or indirectly, voluntarily or
by operation of law, without the prior written approval of
DISTRIBUTOR. Any attempted transfer, assignment or sale without
DISTRIBUTOR'S prior written approval 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 this Agreement is
DEALER'S ability, integrity, assurance of personal services and
expressed intention to deal fairly and equitably with DISTRIBUTOR
and the public.
G. SEVERABILITY
If any provision of this Agreement should be held invalid or
unenforceable for any reason whatsoever, or conflicts with any
applicable law, this Agreement will be considered divisible as to
such provisions, and such provisions will be deemed amended to
comply with such law, or if it cannot be so amended without
materially affecting the tenor of the Agreement, then it will be
deemed deleted from this Agreement in such jurisdiction, and in
either case, the remainder of the initial Agreement will be valid
and binding.
H. NEW AND SUPERSEDING DEALER AGREEMENTS
In the event any new and superseding form of dealer agreement is
offered by DISTRIBUTOR to authorized LEXUS dealers generally at
any time prior to the expiration of the term of this Agreement,
DISTRIBUTOR, may, by written notice to DEALER, replace this
Agreement with a new agreement in a new and superseding form for
a term not less than the then unexpired term of this Agreement.
I. BENEFIT
This Agreement is entered into by and between DISTRIBUTOR and
DEALER for their sole and mutual benefit. Neither this Agreement
nor any specified
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provision contained in it is intended or shall be construed to be
for the benefit of any third party.
XX. DEFINITIONS
As used in this Agreement, the parties agree that the following terms
shall be defined exclusively as set forth below:
A. DEALER: The entity that executes the Dealer Agreement and is
authorized by DISTRIBUTOR to sell and service LEXUS Products.
B. OWNER: The persons identified in Section II hereof.
C. GENERAL MANAGER: The person identified in Section III hereof.
D. DEALER FACILITIES: The buildings, improvements, fixtures, and
equipment situated at the Approved Location(s).
E. APPROVED LOCATION(S): The location(s) and any facilities
thereon, designated in Section IV that DISTRIBUTOR has approved
for the dealership operation(s) specified therein.
F. LEXUS MARKS: The various LEXUS trademarks, service marks, names,
logos and designs that DEALER is authorized by DISTRIBUTOR to use
in the sale and servicing of LEXUS Products.
G. LEXUS MOTOR VEHICLES: All motor vehicles identified in the
current LEXUS Product Addendum that DISTRIBUTOR sells to DEALER
for resale.
H. GENUINE LEXUS PARTS AND ACCESSORIES: All LEXUS brand Parts and
Accessories manufactured by or on behalf of DISTRIBUTOR or
FACTORY, or other parts and accessories specifically approved by
FACTORY for use in servicing LEXUS Motor Vehicles and sold by
DISTRIBUTOR to DEALER for resale.
I. LEXUS PRODUCTS: All LEXUS Motor Vehicles, Parts and Accessories
that DISTRIBUTOR, in its sole discretion, sells to DEALER for
resale. The term "LEXUS PRODUCTS" specifically excludes any
motor vehicle, part or accessory imported into the United States
by any individual or company other than DISTRIBUTOR.
39
<PAGE>
MITSUBISHI
MOTOR SALES OF AMERICA, INC.
- --------------------------------------------------------------------------------
DEALER SALES AND SERVICE AGREEMENT
- --------------------------------------------------------------------------------
THIS AGREEMENT is made and entered into by and between MITSUBISHI MOTOR SALES OF
AMERICA, INC., a California corporation, with headquarters at 6400 West Katella
Avenue, Cypress, California 90630 (hereinafter referred to as "MMSA"), and
Rockland Motors Partnership, a New York corporation ____, partnership __X__,
individual ____ , doing business as Rockland Mitsubishi at 73-75 North Highland
Avenue, Nyack, Rockland County, New York 10960 (hereinafter referred to as
"DEALER").
1. BASIS OF AGREEMENT
THIS AGREEMENT provides for the nonexclusive right of DEALER to sell and service
motor vehicles which are listed on the most recent MMSA Product List as issued
by MMSA from time to time, and related parts, accessories and options
distributed in the United States by MMSA. DEALER acknowledges that Mitsubishi
Motors Corporation and other manufacturers supplying motor vehicles to MMSA may
now or in the future distribute motor vehicles or related products in the United
States through distributors other than MMSA, and that entering into THIS
AGREEMENT confers no rights or benefits upon DEALER with respect to the sale or
servicing of such motor vehicles or products.
2. TERM
THIS AGREEMENT shall continue in effect for a period of three (3) years
from its effective date, unless earlier terminated by DEALER pursuant to Section
X.A. of the accompanying MMSA Dealer Sales and Service Agreement Standard
Provisions (hereinafter referred to as the "Standard Provisions")or earlier
terminated by MMSA pursuant to Section X.B. of the Standard Provisions. Unless
earlier terminated by MMSA or DEALER, MMSA shall, not less than three (3) months
prior to the expiration of
-2-
<PAGE>
THIS AGREEMENT, conduct an evaluation of DEALER'S performance to determine
whether DEALER qualifies for renewal of THIS AGREEMENT for an additional three
(3) year term. Criteria considered in such evaluation shall be as set forth in
the Dealer Development Plan then in effect for DEALER. If MMSA determines that
DEALER qualifies for renewal of its MMSA dealership, DEALER and MMSA shall
execute an MMSA Dealer Sales and Service Agreement in the form then used by
MMSA, which agreement will include similar provisions for further
re-qualification and renewal.
If at any time, MMSA determines that a different or revised form of dealer
sales and service agreement would better serve the interests of the parties,
MMSA may, upon a minimum of thirty (30) days' notice to DEALER, terminate THIS
AGREEMENT and offer the new or amended form of agreement to DEALER in its stead.
DEALER must accept the new or amended form of agreement within thirty (30) days
of receipt thereof.
3. OWNERSHIP OF DEALER
MMSA and DEALER recognize that the ability of DEALER to satisfactorily
perform THIS AGREEMENT is conditioned upon the continued active involvement in
and/or ownership of DEALER by the following person(s) in the percentage(s) shown
(hereinafter referred to as the "Owners"):
Involvement
in Management
Percentage of (Active or
Name Title Ownership Inactive)
Rockland Motors Corp. 30% Active
- --------------------------------------------------------------------------------
DiFeo Partnership RCM, Inc. 70% Active
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS AGREEMENT has been entered into by MMSA in reliance upon, and in
consideration of, the personal qualifications and representations of the above-
named Owners. Accordingly, except as otherwise provided herein, no change in
the active involvement in DEALER'S management by the Owners and no change in the
ownership of DEALER by the Owners which results in a change in majority control
or interest shall be permitted by DEALER or any Owner without the prior written
approval of MMSA, which approval shall not be unreasonably withheld.
-3-
<PAGE>
4. MANAGEMENT OF DEALER
DEALER represents that Neale Kuperman exercises the functions of general
manager and Neale Kuperman exercises the functions of Dealer Principal
(hereinafter referred to as the "Executive Managers") of its MMSA dealership and
that each has complete authority to make all decisions on behalf of DEALER with
respect to the dealership operations.
MMSA has entered into THIS AGREEMENT in reliance upon, and in consideration
of, the personal qualifications and representations of the above-named EXECUTIVE
MANAGERS. Accordingly, DEALER agrees that there shall be no change in the
EXECUTIVE MANAGERS without MMSA'S prior written consent. DEALER shall give MMSA
prior written notice of any proposed change in EXECUTIVE MANAGERS (including the
name and qualifications of the person proposed to be appointed as a replacement
EXECUTIVE MANAGER) and MMSA shall have the right, in its sole and reasonable
discretion, to determine whether the proposed candidate possesses the requisite
qualifications and experience for the position.
5. SALES LOCALITY
Subject to and in accordance with the terms and conditions hereof, MMSA has
established the following SALES LOCALITY as the nonexclusive, primary area of
responsibility for DEALER'S promotion and sale of MMSA PRODUCTS:
City of Nyack
------------------------------------------------------------------------
County or Parish of Rockland State of New York
------------------- -------------------------------
Except as may be otherwise required by applicable law, MMSA reserves the
right to sell and/or lease MMSA PRODUCTS to others (including, without
limitation, public or private fleet purchasers and employees of MMSA or its
affiliates) and to enter into MMSA Dealer Sales and Service Agreements with
others within and without the SALES LOCALITY. MMSA and DEALER agree that
additional MMSA DEALERS may be appointed in or near the SALES LOCALITY when MMSA
determines, in accordance with applicable law, that additional MMSA sales and
service facilities are warranted.
Nothing contained in THIS AGREEMENT shall require or be construed to
require DEALER'S approval of MMSA entering into MMSA Dealer Sales and Service
Agreements OR ANY OTHER AGREEMENTS WITH OTHERS WITHIN OR WITHOUT THE SALES
Locality.
6. DEALERSHIP PREMISES
MMSA has approved the following premises as the location of DEALER'S MMSA
sales and service operations (hereinafter referred to as the "DEALERSHIP
PREMISES")
-4-
<PAGE>
MMSA NEW VEHICLE SALES FACILITIES
73-75 North Highland Avenue
- --------------------------------------------------------------------------------
Nyack, New York 10960
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PARTS AND SERVICE FACILITIES
73-75 North Highland Avenue
- --------------------------------------------------------------------------------
Nyack, New York 10960
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SALES AND GENERAL OFFICES
73-75 North Highland Avenue
- --------------------------------------------------------------------------------
Nyack, New York 10960
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USED VEHICLE DISPLAY AND SALES FACILITIES
73-75 North Highland Avenue
- --------------------------------------------------------------------------------
Nyack, New York 10960
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STORAGE FACILITIES
73-75 North Highland Avenue
- --------------------------------------------------------------------------------
Nyack, New York 10960
- --------------------------------------------------------------------------------
170 Route 303 (additional storage)
- --------------------------------------------------------------------------------
N. Nyack, New York 10994
- --------------------------------------------------------------------------------
-5-
<PAGE>
BODY AND PAINT FACILITIES
N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER
N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MMSA and DEALER recognize that DEALER may sell MMSA PRODUCTS to customers
wherever they may be located. However, in order that MMSA may establish and
maintain an effective network of MMSA DEALERS for the sale and servicing of MMSA
PRODUCTS, DEALER specifically agrees that, without the prior written approval of
MMSA, it shall not display MMSA TRADEMARKS or, either directly or indirectly,
establish any place or places of business for the conduct of any of its MMSA
dealership operations, except on the DEALERSHIP PREMISES in the manner and for
the purposes described above.
DEALER shall maintain all requirements and conditions of this MMSA Dealer
Sales and Service Agreement as outlined in DEALER'S most recent Dealer
Development Plan, including but not limited to exclusive facility, management
and capital requirements.
7. LICENSES
DEALER agrees to secure and maintain all licenses required for the
operation of its business as contemplated by THIS AGREEMENT in any state or
jurisdiction where its MMSA dealership operations are to be conducted. If any
such license or licenses are required, THIS AGREEMENT shall not become effective
unless and until all such required licenses have been obtained and DEALER
furnishes MMSA with a copy of all such licenses together with written notice
specifying the date and number, if any, of all such licenses. DEALER shall
notify MMSA immediately in writing if DEALER fails to secure, maintain or renew
any such license. If any required license is suspended or revoked, DEALER shall
notify MMSA immediately in writing of the effective date of such suspension or
revocation.
8. SCOPE OF AGREEMENT
DEALER agrees to be bound by and comply with each and every term of this
MMSA Dealer Sales and Service Agreement, all schedules hereto, the Standard
Provisions, the DEALER DEVELOPMENT
-6-
<PAGE>
PLAN, the most recent PRODUCT LIST and all PRODUCT ADDENDA, the WARRANTY MANUAL
and all other manuals heretofore or hereafter issued by MMSA, all modifications,
extensions or renewals of any of the foregoing, and each and every bulletin or
directive heretofore or hereafter issued to DEALER by MMSA. MMSA may from time
to time deliver to DEALER a PRODUCT ADDENDUM setting forth special terms and
conditions applicable to particular MMSA VEHICLES designated in the PRODUCT
ADDENDUM. Such special terms and conditions shall supersede and control any
inconsistent terms and conditions in THIS AGREEMENT with respect to the MMSA
VEHICLES designated in the PRODUCT ADDENDUM. Each PRODUCT ADDENDUM shall be
effective as of the date specified in the PRODUCT ADDENDUM and shall remain
effective (1) until it is amended or terminated by its own terms or by a new
PRODUCT ADDENDUM, (2) until the MMSA VEHICLES designated in the PRODUCT ADDENDUM
are no longer distributed by MMSA, or (3) until termination of THIS AGREEMENT.
9. DEFINITIONS
Italicized terms used herein shall have the meanings set forth in Section
II of the Standard Provisions.
10. GOVERNING LAW
THIS AGREEMENT shall be governed by, and construed in accordance with, the
laws of the State of California.
11. JURISDICTION
MMSA and DEALER agree that all litigation between MMSA and DEALER which may
arise out of or in connection with THIS AGREEMENT or any transaction between
them shall be subject to the exclusive jurisdiction of the courts of the State
of California or of the federal courts sitting therein, and each hereby consents
to the jurisdiction of such courts. DEALER agrees that any and all process
directed to it in any such litigation may be served upon it outside of
California with the same force and effect as if such service had been made
within California.
12. LEGAL EFFECT
THIS AGREEMENT terminates and supersedes all prior written or oral
agreements and understandings, if any, between MMSA and DEALER, except (1) any
agreements expressly referred to and incorporated herein, (2) any indebtedness
which may be owing by either MMSA or DEALER to the other, and (3) any of
DEALER'S unfilled orders with MMSA for any MMSA PRODUCTS placed with MMSA
pursuant to the provisions of any sales agreement terminated or superseded by
THIS AGREEMENT. Except as herein otherwise provided, upon execution of THIS
AGREEMENT by DEALER and in consideration of MMSA'S entering into THIS AGREEMENT,
DEALER releases MMSA from any and all claims, demands, contracts and liabilities
(including, but not limited to, statutory
-7-
<PAGE>
liabilities), known or unknown, of any kind or nature whatsoever, arising from
or out of or in connection with any such prior agreements, business
transactions, course of dealing, discussions or negotiations between the parties
prior to the effective date hereof. DEALER expressly acknowledges and waives
the application of California Civil Code Section 1542 which provides as follows:
"A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor."
13. NOTICES
Any notice to be given hereunder may be delivered to the party if a sole
proprietor, to a partner of the party if a partnership, or to an officer of the
party if a corporation, or may be given by sending such notice by registered or
certified mail or by telegram or tested telex addressed, if to DEALER, to its
principal office as above stated, and if to MMSA, to its headquarters as above
stated, marked "Attention President." Except as otherwise provided in THIS
AGREEMENT, any notice so given shall be considered to have been given when
delivered or mailed as provided above.
14. AUTHORITY OF DEALER
If DEALER is a partnership or corporation, DEALER shall provide MMSA with a
certified copy of the partnership authorization, corporate resolution or other
document evidencing the authority of DEALER to enter into and adhere to the
terms of THIS AGREEMENT.
15. VALIDITY
No representative of MMSA shall have authority, other than by a writing
signed by the President or an Executive Vice President or two Vice Presidents of
MMSA, to renew, extend or terminate THIS AGREEMENT, or to amend, modify or waive
any provision of THIS AGREEMENT or any performance required hereby, or to make
any agreement which imposes obligations on either MMSA or DEALER not
specifically imposed by THIS AGREEMENT.
-8-
<PAGE>
IN WITNESS OF THE FOREGOING, the parties hereto have executed THIS
AGREEMENT in duplicate. THIS AGREEMENT SHALL NOT BECOME EFFECTIVE UNTIL IT HAS
BEEN SIGNED BY THE PRESIDENT OR AN EXECUTIVE VICE PRESIDENT OR TWO VICE
PRESIDENTS OF MMSA. DEALER WILL BE NOTIFIED IN WRITING BY MMSA WHEN THIS
AGREEMENT HAS BEEN SO SIGNED, WHICH NOTICE WILL SPECIFY THE EFFECTIVE DATE OF
THIS AGREEMENT.
Rockland Motors Partnership
dba Rockland Mitsubishi
- -----------------------------------
(Dealer's Firm Name)
By /s/ Illegible Date 8/29/94
------------------------------- --------------------
Title V.P.
----------------------------
By Date
------------------------------- --------------------
Title
---------------------------- /s/ Illegible
-------------------------
(Witness)
MITSUBISHI MOTOR SALES OF AMERICA, INC.
By Date
------------------------------- --------------------
(President)
OR
By Date
------------------------------- --------------------
(Executive Vice President)
OR
By /s/ Robert LaBass Date October 13, 1994
------------------------------- --------------------
(Vice President)
and
By /s/ Illegible Date October 13, 1994
------------------------------- --------------------
(Vice President)
-9-
<PAGE>
ATTACHMENT 1
DRAFT ONLY
CHANGE IN
MAJORITY OWNERSHIP OR CONTROL, OR MANAGEMENT OF
DEALER
August 20, 1996
Mr. Samuel X. DiFeo
EMCO DiFeo Automative Group
583 Route 440
Jersey City, NJ 07304
Re: ROCKLAND MOTORS PARTNERSHIP dba ROCKLAND MITSUBISHI
Dear Mr. DiFeo:
The Dealer Sales and Service Agreement (the "Dealer Agreement") with
Mitsubishi Motor Sales of America, Inc. ("MMSA") prohibits a change of majority
ownership or control of the Dealer without the prior written approval of MMSA,
which approval will not be unreasonably withheld. The purpose of this
provision, together with the provision requiring MMSA approval for a change in
the Executive Managers of the Dealer, is to preserve the identity of the owners
and managers whose automotive industry experience, reputation and abilities were
the basis for MMSA's decision to award to the Dealer the Mitsubishi automobile
dealership. A failure to observe these provisions can result in termination of
the Dealer Agreement.
Some Mitsubishi Dealers, or one of their parent entities in a chain of
ownership, may consist of entities whose equity securities are, or will in the
future become, publicly traded. The purpose of this letter is to explain in
greater detail what constitutes a change of ownership or control of the Dealer
in that context.
For purposes of this letter, capitalized terms used herein without
definition shall have the meanings ascribed to them in the Dealer Agreement.
Additionally, the following definitions shall apply herein:
"GROUP" shall have the meaning contemplated in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended.
"MAJORITY OWNERSHIP" of a Dealer or other Person shall mean beneficial
ownership or control, directly or indirectly, of either (a) a majority of
the outstanding equity securities of such Dealer or other Person entitled
to vote generally in the election of directors, trustees or
<PAGE>
Rockland Motors Partnership
August 20, 1996
Page 2
members of any other governing body of such Dealer or other Person or (b)
equity securities of such Dealer or other Person representing a majority of
all outstanding votes entitled to be cast in the election of directors,
trustees or members of any other governing body of such Dealer or other
Person.
"PARENT COMPANY" shall mean a Person holding, directly or indirectly,
Majority Ownership of the Dealer.
"PERSON" shall mean to any individual, corporation, partnership,
trust, or other entity.
For a Dealer whose equity securities are publicly traded, and for a Dealer
having one or more Parent Companies with publicly traded equity securities, a
change of majority ownership or control of such Dealer will be deemed to have
occurred upon the happening or existence of any of the following events or
circumstances:
(a) Any Person or Group holding, as of the date hereof, Majority
Ownership of the Dealer or a Parent Company thereof ceases to
hold such Majority Ownership; or
(b) Any Person or Group acquires Majority Ownership of the Dealer or
a Parent Company thereof after the date hereof; or
(c) A majority of the directors, trustees or other members of the
governing body of the Dealer or any Parent Company thereof who
newly assume such positions after the date of the Dealer
Agreement were not nominated to such positions by their
predecessors on such governing body.
You have advised us, through your attorney Laurence Weltman of Willkie
Farr & Gallagher, that several of the minority shareholders in your Parent
Company, United Auto Group, Inc. ("United Auto") are parties to a shareholder
agreement that will be terminated when United Auto consummates a public
entity offering later this year. This is to advise you that, notwithstanding
the foregoing, the termination of such shareholder agreement will not, in and
of itself, constitute a change of majority ownership or control pursuant to
the terms of your Dealer Agreement with us. Further, the existing
shareholders will not be deemed to be a Group solely by virtue of having or
exercising in concert registration rights with respect to their shares in
United Auto.
-2-
<PAGE>
Rockland Motors Partnership
August 20, 1996
Page 3
Please acknowledge your understanding of and agreement with the foregoing
by executing a copy of this letter in the space provided below and returning
such copy to me.
Very truly yours,
MITSUBICHI MOTOR SALES OF
AMERICA, INC.
By: /s/ Illegible
-------------------------------
ACKNOWLEDGED AND AGREED TO:
ROCKLAND MOTORS PARTNERSHIP
by DIFEO PARTNERSHIP RCM, INC.
By: /s/ Carl Spielvogel
-------------------------------
-3-
<PAGE>
EXHIBIT 10.2.3.2
<PAGE>
MITSUBISHI
MOTOR SALES OF AMERICA, INC.
DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
2
<PAGE>
TABLE OF CONTENTS
Page
I. GENERAL OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 1
II. DEFINITIONS . . . . .. . . . . . . . . . . . . . . . . . . . . . . . 1
III. SALES OF MMSA PRODUCTS TO DEALER. . . . . . . . . . . . . . . . 4
A. Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
B. Deliveries . . . . . .. . . . . . . . . . . . . . . . . . . . . 5
1. Mode and Place of Delivery . . . . . . . . . . . . . . . . 5
2. Diversion of Deliveries. . . . . . . . . . . . . . . . . . 5
3. Delay or Failure to Deliver. . . . . . . . . . . . . . . . 5
4. Damage Claims Against Carriers . . . . . . . . . . . . . . 5
C. Prices and Other Terms of Sales . . . . . . . . . . . . . . . . . 6
1. Price Changes. . . . . . . . . . . . . . . . . . . . . . . 6
2. Payment for MMSA Vehicles. . . . . . . . . . . . . . . . . 6
3. Payment for MMSA Products other than MMSA Vehicles . . . . 6
4. Failure of Financing Arrangements. . . . . . . . . . . . . 7
5. Title and Risk of Loss . . . . . . . . . . . . . . . . . . 8
6. Collection of Indebtedness . . . . . . . . . . . . . . . . 8
7. Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . 9
D. Product Warranties. . . . . . . . . . . . . . . . . . . . . . . 9
E. Change of Design, Options or Specifications . . . . . . . . . .10
F. Vehicles Excluded . . . . . . . . . . . . . . . . . . . . . . .10
IV. DEALERSHIP PREMISES. . . . . . . . . . . . . . . . . . . . . . . . .11
A. Responsibilities of Dealer. . . . . . . . . . . . . . . . . . .11
B. Automobile Leasing or Rental Business . . . . . . . . . . . . .11
C. Related Activities of Dealer or Dealer's Owners or
Executive Managers. . . . . . . . . . . . . . . . . . . . . . .12
D. Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . .13
E. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .13
F. Maintaining Operations Open for Business. . . . . . . . . . . .14
i
<PAGE>
G. Minimum Vehicle Inventories . . . . . . . . . . . . . . . . . .14
H. Signs. . . . . . . .. . . . . . . . . . . . . . . . . . . . . .15
I. Electronic Communications System. . . . . . . . . . . . . . . .15
J. Planning Assistance for Dealership Premises . . . . . . . . . .15
V. NET WORKING CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . .16
VI. ACCOUNTS, RECORDS AND REPORTS. . . . . . . . . . . . . . . . . . . .16
A. Uniform Accounting System . . . . . . . . . . . . . . . . . . .16
B. Sales Reporting . . . . . . . . . . . . . . . . . . . . . . . .16
C. Sales and Service Records . . . . . . . . . . . . . . . . . . .17
D. Examination of Accounts and Records . . . . . . . . . . . . . .17
VII. PROMOTING AND SELLING MMSA PRODUCTS . . . . . . . . . . . . . . . .17
A. Responsibilities of Dealer . . . . . . . . . . . . . . . . . .17
B. Sales and Performance Criteria. . . . . . . . . . . . . . . . .18
1. Dealer Development Plan . . . . . . . . . . . . . . . . .18
2. Determination of Minimum Sales Responsibility. . . . . . .18
C. Sales Operations. . . . . . . . . . . . . . . . . . . . . . . .19
1. Sales Organization . . . . . . . . . . . . . . . . . . . .19
2. Representations in the Sales of MMSA Vehicles. . . . . . .20
3. Customer Deposits. . . . . . . . . . . . . . . . . . . . .20
D. Advertising . . . . . . . . . . . . . . . . . . . . . . . . . .20
1. Misleading Advertising . . . . . . . . . . . . . . . . . .20
2. MMSA Dealer Advertising Association. . . . . . . . . . . .21
3. Dealer Cooperative Promotional Fund. . . . . . . . . . . .21
E. Assistance Provided by MMSA . . . . . . . . . . . . . . . . . . .22
1. Sales Training Assistance. . . . . . . . . . . . . . . . .22
2. Field Sales Personnel. . . . . . . . . . . . . . . . . . .22
VIII. SERVICING MMSA VEHICLES. . . . . . . . . . . . . . . . . . . . . .23
A. Responsibilities of Dealer. . . . . . . . . . . . . . . . . . .23
1. Warranty Service . . . . . . . . . . . . . . . . . . . . .23
2. New Motor Vehicle Pre-Delivery Service . . . . . . . . . .23
3. Free Maintenance . . . . . . . . . . . . . . . . . . . . .24
4. Use of Parts . . . . . . . . . . . . . . . . . . . . . . .24
5. Campaign Inspections and Corrections . . . . . . . . . . .25
ii
<PAGE>
6. Compliance With Safety and Emission Control
Requirements . . . . . . . . . . . . . . . . . . . . . . .26
B. Service Operations. . . . . . . . . . . . . . . . . . . . . . . .27
1. Service and Parts Organization . . . . . . . . . . . . . .27
2. Paint and Body Facilities. . . . . . . . . . . . . . . . .27
3. Workshop . . . . . . . . . . . . . . . . . . . . . . . . .27
4. Handling of Service Complaints . . . . . . . . . . . . . .28
5. Stock of Parts . . . . . . . . . . . . . . . . . . . . . .28
6. Parts Inventory Control. . . . . . . . . . . . . . . . . .29
7. Service Rentals. . . . . . . . . . . . . . . . . . . . . .29
C. Assistance Provided by MMSA . . . . . . . . . . . . . . . . . .30
1. Service Training Assistance. . . . . . . . . . . . . . . .30
2. Service Manuals and Materials. . . . . . . . . . . . . . .30
3. Field Service Personnel Assistance . . . . . . . . . . . .30
IX. DISPLAY OF TRADEMARKS, SERVICE MARKS AND TRADE NAMES . . . . . . . .31
X. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . .31
A. Dealer May Terminate This Agreement Upon Thirty (30)
Days Prior Written Notice To MMSA . . . . . . . . . . . . . . .31
B. MMSA May Terminate This Agreement For Cause . . . . . . . . . .31
1. Immediately. . . . . . . . . . . . . . . . . . . . . . . .32
2. By Giving Thirty (30) Days Prior Written Notice
Upon . . . . . . . . . . . . . . . . . . . . . . . . . . .32
3. By Giving Ninety (90) Days Prior Written Notice
Upon . . . . . . . . . . . . . . . . . . . . . . . . . . .35
C. Notice and Effect of Termination. . . . . . . . . . . . . . . .36
D. Establishment of Successor Dealer . . . . . . . . . . . . . . .36
1. Because of the Death of an Owner . . . . . . . . . . . . .36
2. Because of Death or Incapacity of Executive
Manager. . . . . . . . . . . . . . . . . . . . . . . . . .37
3. Evaluation of Successor Dealer . . . . . . . . . . . . . .38
4. Termination of Market Representation . . . . . . . . . . .38
5. Termination of Offer . . . . . . . . . . . . . . . . . . .38
E. Continuance of Business Relations . . . . . . . . . . . . . . .39
F. Discontinuance of Use of Marks. . . . . . . . . . . . . . . . .39
G. Repurchase Provisions . . . . . . . . . . . . . . . . . . . . .40
XI. POLICY REVIEW BOARD . . . . . . . . . . . . . . . . . . . . . . . .42
A. Establishment of Policy Review Board. . . . . . . . . . . . . .42
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B. Appeal of Dealer Appointment to Policy Review Board . . . . . .42
C. Appeal of Termination to Policy Review Board. . . . . . . . . .42
D. Arbitration of Claims by Dealer . . . . . . . . . . . . . . . .43
XII. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . .45
A. Indemnification . . . . . . . . . . . . . . . . . . . . . . . .45
B. No Implied Waivers. . . . . . . . . . . . . . . . . . . . . . .47
C. Waiver of Trial by Jury . . . . . . . . . . . . . . . . . . . .47
D. Dealer Not Agent or Representative. . . . . . . . . . . . . . .47
E. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . .47
F. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .48
G. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
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DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
The following Standard Provisions have been made a part of and are incorporated
by reference in the Mitsubishi Motor Sales of America, Inc. Dealer Sales and
Service Agreement and shall apply to and govern the transactions, dealings, and
relations between MMSA and Dealer.
I. GENERAL OBLIGATIONS
The purpose of this Agreement is to provide for the sale and servicing of
MMSA Products in a manner that will best serve the interests of MMSA,
Dealer, other Authorized MMSA Dealers, and the owners and purchasers of
MMSA Products.
Dealer has entered into this Agreement with confidence in MMSA's integrity
and expressed intention to deal fairly with Dealer and the consuming public
of MMSA Products and services. MMSA has entered into this Agreement with
confidence in Dealer's integrity, ability and expressed intention to deal
fairly with MMSA, other Authorized MMSA Dealers and the consuming public of
MMSA Products and services and with reliance upon Dealer's undertaking to
perform and carry out the duties, obligations and responsibilities of an
Authorized MMSA Dealer as set forth in this Agreement.
Dealer shall engage in no discourteous, deceptive, misleading or unethical
practices and shall actively promote the sale of MMSA Products. Dealer
shall give prompt, efficient and courteous service to all customers of MMSA
Products whether or not those customers purchased MMSA Products from
Dealer.
MMSA will actively assist Dealer in all aspects of Dealer's MMSA dealership
operations. MMSA shall offer suggestions and provide materials designed to
assist Dealer and its personnel, conduct periodic annual evaluations of
Dealer's premises, performance and facilities as described in Section
VII.B.1. hereof, and provide special training programs for the active
participation of Dealer and its sales, service and parts personnel.
II. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
indicated:
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A. MMSA shall mean Mitsubishi Motor Sales of America, Inc., a California
corporation which is the authorized distributor in the United States
of MMSA Products.
B. MMSA VEHICLE shall mean any new passenger car or truck with a Gross
Vehicle Weight Rating of under 7,000 pounds (whether or not
manufactured or supplied by MMC) distributed in the United States by
MMSA and set forth in the Product List.
C. MMSA PARTS AND/OR ACCESSORIES shall mean genuine new parts, components
and accessories, designed primarily for use on MMSA Vehicles and
distributed by MMSA.
D. MMSA PRODUCTS shall mean MMSA Vehicles , MMSA Parts and Accessories,
and other new products (whether or not manufactured or supplied by
MMC) which from time to time may be offered by MMSA to Dealer under
this Agreement.
E. MMSA TRADEMARKS shall mean the trademarks, service marks, design marks
and trade names which are used by MMSA in connection with MMSA
Products, including, without limitation, the names "Mitsubishi" and
"MMSA," and the Mitsubishi three-diamond logo.
F. MMC shall mean Mitsubishi Motors Corporation, a Japanese corporation
which manufactures or supplies to MMSA some or all of the MMSA
VEHICLES.
G. AUTHORIZED MMSA DEALER OR MMSA DEALER shall mean any dealer located in
the United States authorized by MMSA to conduct dealership operations
in connection with the sale of MMSA Products pursuant to an MMSA
Dealer Sales and Service Agreement.
H. OWNERS shall mean the persons named in Section 3 of the MMSA Dealer
Sales and Service Agreement.
I. EXECUTIVE MANAGERS shall mean the persons named in Section 4 of the
MMSA Dealer Sales and Service Agreement.
J. DEALERSHIP PREMISES shall mean the place or places of business
established by Dealer and approved by MMSA in accordance with Section
6 of the MMSA Dealer Sales and Service Agreement.
K. DEALERSHIP FACILITIES shall mean the buildings and other improvements
on the Dealership Premises provided
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by Dealer in accordance with requirements set forth in the Dealer
Development Plan.
L. DEALER DEVELOPMENT PLAN shall mean the written development plan, as
amended from time to time by MMSA, setting forth the criteria relied
upon by MMSA to determine initially whether Dealer qualifies for
appointment as an MMSA Dealer and thereafter to evaluate whether
Dealer's performance hereunder qualifies Dealer for renewal(s) of its
MMSA dealership.
M. GROSS VEHICLE WEIGHT RATING shall mean the value specified by the
manufacturer of MMSA Vehicles as the loaded weight of a single
vehicle.
N. SALES LOCALITY shall mean the locality which is designated in Section
5 of the MMSA Dealer Sales and Service Agreement as the primary area
of Dealer's sales and service responsibility for MMSA Products.
O. WARRANTY MANUAL shall mean the MMSA Warranty Policy and Procedure
Manual, as the same may be amended from time to time by MMSA, which
sets forth policies and procedures concerning warranties on MMSA
Products.
P. PRE-DELIVERY INSPECTION MANUAL shall mean the MMSA Pre-delivery
Inspection Procedures Manual, as the same may be amended from time to
time by MMSA, which sets forth MMSA policies and procedures concerning
the servicing of MMSA Vehicles prior to their delivery to purchasers
of MMSA Vehicles.
Q. INVOICE PRICE shall mean, with respect to each MMSA Product to which
it refers, the price to Dealer for such product as from time to time
established by MMSA.
R. PARTS DISCOUNT AND PURCHASE TERMS SCHEDULE shall mean a listing of the
terms, discounts and conditions relating to the purchase of MMSA Parts
and Accessories supplied by MMSA to Dealer, as amended from time to
time by MMSA.
S. MMSA MASTER PARTS PRICE LIST shall mean a listing of the suggested
list prices and the prices of MMSA Parts and Accessories issued by
MMSA from time to time.
T. POLICY REVIEW BOARD shall mean the MMSA Policy Review Board described
in Section XI hereof.
U. THIS AGREEMENT shall mean the Mitsubishi Motor Sales of America, Inc.
Dealer Sales and Service Agreement, all
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schedules thereto, these Standard Provisions, the Warranty Manual
and the Dealer Development Plan, the most recent Product List and all
Product Addenda, each as amended from time to time, and all other
guides, bulletins or directives issued from time to time by MMSA to
MMSA Dealers.
V. PRODUCT LIST shall mean a list of MMSA Products distributed by MMSA
which shall be provided to Dealers and amended or supplemented by MMSA
from time to time.
W. PRODUCT ADDENDUM or ADDENDA shall mean any addendum to this Agreement
which MMSA may issue to Dealers from time to time setting forth
special terms and conditions governing the sale or servicing only of
the particular vehicles or products designated in the Product
Addendum.
III. SALES OF MMSA PRODUCTS TO DEALER
A. Orders
Dealer shall submit to MMSA firm orders for MMSA Products in such
quantity and variety as are necessary to fulfill Dealer's obligations
under this Agreement. Dealer agrees to submit current orders and
estimated projections of Dealer's future requirements for MMSA
Products at such times and for such periods as MMSA may reasonably
request. Dealer will submit all orders and projections in the format
prescribed by MMSA.
All orders are subject to acceptance by MMSA. MMSA is under no
obligation to accept orders from Dealer and may accept any order in
whole or in part. Acceptance of any order may be by oral or written
notice to Dealer or by shipment of the MMSA Products ordered.
No order may be canceled by Dealer and each order shall remain binding
upon Dealer unless rejected in writing by MMSA.
Except as otherwise provided herein, MMSA agrees to ship MMSA Products
to Dealer only on Dealer's orders. MMSA will use its best efforts to
fill any orders which it has accepted, but nothing contained in this
Agreement shall obligate MMSA to deliver to Dealer any particular
number of MMSA Vehicles or MMSA Parts and Accessories.
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B. Deliveries
1. Mode and Place of Delivery
MMSA shall select the distribution points, carriers and modes of
transportation in effecting delivery of MMSA Products to Dealer.
Dealer agrees to reimburse MMSA for any delivery, freight,
handling and other charges which appear on MMSA's invoice to
Dealer.
2. Diversion of Deliveries
If MMSA is required to divert any MMSA Product ordered by Dealer
because of Dealer's failure or refusal to accept such product,
Dealer agrees to assume responsibility for and pay any charges
incurred by MMSA as a result of such diversion including, without
limitation, charges incurred by MMSA in returning any such
product to the point of original shipment or other distribution
point selected by MMSA, plus all charges for demurrage or storage
related to such diversion.
3. Delay or Failure to Deliver
MMSA shall not be liable for delay or failure to fill orders that
have been accepted, where such delay or failure is the result of
any domestic or foreign laws, regulations, ordinances, rules,
orders or other governmental requests, acts of God, foreign or
civil wars, riots, interruptions of navigation, shipwrecks,
fires, strikes, lockouts or other labor troubles, embargoes,
blockades, delay or failure of MMC, other suppliers of MMSA or
any carrier to deliver MMSA Products, or any other event whether
similar or dissimilar to the foregoing which is beyond the
reasonable control of MMSA.
4. Damage Claims Against CarriersUnless otherwise specified in the
Warranty Manual, MMSA agrees, upon request by Dealer, to assist
Dealer in recovery against any carrier for loss or damage to MMSA
Products shipped hereunder.
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C. Prices and Other Terms of Sales
1. Price Changes
MMSA reserves the right, without prior notice to Dealer, to
change prices, charges and terms of purchase of all MMSA Products
sold under this Agreement and, except as provided in Section
III.C.7. hereof, Dealer or its customer shall have no right of
cancellation or to any refund or credit with respect thereto.
MMSA will charge Dealer for MMSA Products according to the
prices, charges and terms of purchase in effect on the date of
shipment. Prices, charges and terms of purchase for MMSA Parts
and Accessories shall be established from time to time by MMSA in
the MMSA Master Parts Price List and in the Parts Discount and
Purchase Terms Schedule.
2. Payment for MMSA Vehicles
Unless otherwise permitted by MMSA in writing, payment for MMSA
Vehicles shall be by cash draft issued prior to shipment of each
MMSA Vehicle from its port of entry against Dealer's then
applicable wholesale credit line, which line shall be approved
by MMSA and established in Dealer's name with a financial
institution acceptable to MMSA. The minimum amount of such
credit line must be expressly approved by MMSA and must be
sufficient to meet MMSA's estimate of Dealer's anticipated sales
volume, as the same may be revised from time to time in the
Dealer's Development Plan.
MMSA may find it necessary, from time to time, to advise Dealer
that the amount of available credit required of Dealer must be
increased. Such decisions will be based upon criteria reasonably
established by MMSA, including the sufficiency of the existing
credit line and anticipated increases in sales. Dealer agrees to
cooperate fully with MMSA and to arrange promptly for all
required changes in its financial arrangements.
3. Payment for MMSA Products other than MMSA Vehicles
MMSA will invoice Dealer for all MMSA Products other than MMSA
Vehicles purchased by Dealer. Payment for invoices shall be due
by the tenth (10th) day of the month following the month in which
the products covered by the invoice are
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delivered. MMSA reserves the right, at any time with or without
notice to Dealer, to place any and all sales of MMSA Products
other than MMSA Vehicles on a C.O.D. basis, cash in advance basis
or otherwise alter the credit terms available to Dealer.
Dealer's right to return MMSA Products (other than MMSA Vehicles)
shall be governed by the terms and provisions set forth in the
Parts Discount and Purchase Terms Schedule.
4. Failure of Financing Arrangements
It is Dealer's sole responsibility to institute appropriate
controls to ensure the uninterrupted availability of sufficient
funds under its approved credit line with Dealer's financial
institution. Should Dealer fail to pay for, or should any
applicable financing arrangement fail to provide credit for the
payment of, any MMSA Products ordered by Dealer when payment is
due therefor, MMSA may, with respect to any such MMSA Products
(i) cause the same to be stored at the sole risk and expense of
Dealer, or (ii) cause such MMSA Products to be shipped elsewhere
(including returning the same to MMSA) and Dealer shall pay to
MMSA promptly upon demand all expenses sustained by MMSA in
storing, handling and shipping occasioned thereby; or (iii)
without obligation to pay any sum to Dealer, sell such MMSA
Products directly to any other MMSA Dealer, person, firm or
corporation, all expenses or losses occasioned thereby to be
borne by Dealer.
In addition to the foregoing, in the event of an oral or written
refusal by Dealer's financing institution to make payment against
drafts for any MMSA Vehicle ordered by Dealer, MMSA may impose a
fixed administrative charge for each MMSA Vehicle refused. The
amount of such charge, which shall be in addition to otherwise
applicable delivery, storage and demurrage charges, shall reflect
a reasonable estimate of the average administrative cost incurred
by MMSA in arranging for alternative disposition of the MMSA
Vehicle so refused. Furthermore, any failure of Dealer's
financial institution to maintain for a period of sixty (60) or
more days the unrestricted availability to MMSA of Dealer's
credit line in an amount and in accordance with the terms
approved by MMSA shall constitute grounds for termination of this
Agreement under Section X.B.2.(f) hereof.
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"Unrestricted availability" as used in this section shall mean
that upon presentment of MMSA's drafts to Dealer's financial
institution as contemplated hereunder, no approval of Dealer, the
financial institution itself or any other party will be required
before payment to MMSA is made.
5. Title and Risk of Loss
Title and risk of loss or damage to any MMSA Product sold to
Dealer shall pass to Dealer upon (i) its delivery to Dealer, (ii)
its delivery to a common carrier for delivery to Dealer, or (iii)
receipt by MMSA of payment therefor, whichever shall first occur.
MMSA shall retain, and Dealer hereby grants to MMSA, a security
interest in, and the right to retain or repossess, all MMSA
Products sold to Dealer by MMSA until MMSA is paid in full
therefor.
6. Collection of IndebtednessDealer agrees to execute and deliver
and shall, where appropriate, cooperate with MMSA in causing to
be filed with the appropriate authorities any and all statements
and documents required or permitted by the Uniform Commercial
Code and any other local laws for the protection of unpaid
sellers.
Dealer agrees that MMSA may apply toward payment of any amount
due MMSA from Dealer any credit owed to Dealer by MMSA, and MMSA
may, at its option, collect any sums owed by Dealer to MMSA by
making a separate draft or by including any such sums in any
draft issued for the sale of MMSA Products sold under this
Agreement. Dealer will pay the amount of each draft and all
exchange and collection charges. In addition, MMSA may impose an
interest charge for balances thirty (30) days or more overdue.
Such charge shall be assessed at the maximum rate permitted by
law. The foregoing rights of MMSA are in addition to, and not in
lieu of, any rights or remedies it may have by law as an unpaid
seller.
7. Refunds
Should MMSA reduce the Invoice Price of any MMSA Vehicle then in
current production, MMSA will give written notice of such
reduction to Dealer and
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will refund to Dealer an amount equal to the difference
between any higher price paid by Dealer for such MMSA Vehicles
and the reduced price. Such refunds will be payable only for
MMSA Vehicles actually purchased by Dealer at a price higher than
the reduced price and which are new and unsold by Dealer on the
effective date of the price reduction set forth in MMSA's notice
thereof. To be entitled to such refund, Dealer must, within
thirty (30) days after receipt of notice of the price reduction,
make written claim therefor supported by evidence satisfactory to
MMSA.
MMSA shall have no obligation to make refunds or give credits
with respect to:
a) Any MMSA Vehicle used as a demonstrator and not promptly
registered with MMSA by Dealer when assigned to demonstrator
use;
b) Any reduction in the amount of MMSA charges for distribution
and delivery or taxes;
c) Any reduction in the amount of any contribution or any other
sum for advertising or sales promotion; or
d) Any reduction by MMSA in the suggested retail price or
Invoice Price established by MMSA by reason of any law,
order, or regulation of any government or any governmental
agency.
MMSA reserves the right to pay refunds to any financial
institution which has financed the purchase of, and retains a
lien or ownership interest in, any MMSA Vehicle for which
application for refund or credit is made by Dealer.
D. Product Warranties
Dealer understands and agrees that the only warranties applicable to
each new MMSA Product sold to Dealer by MMSA shall be the written
warranty or warranties expressly furnished by MMSA or by the
manufacturer of the MMSA Product and as stated in the Warranty Manual.
Anything in this Agreement to the contrary notwithstanding, all
warranties made by MMSA as set forth in the Warranty Manual shall
survive and, in accordance with their respective terms, continue in
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full force and effect, despite any expiration or termination of this
agreement pursuant to Section X hereof.
E. Change of Design, Options or Specifications
MMSA reserves the right, at any time, to make changes in or
discontinue the supply of any design or specification of MMSA Products
(regardless of whether such products are MMSA Vehicles, MMSA Parts and
Accessories or options), without notice to Dealer and, unless required
by law, without obligation to make any changes with respect to MMSA
Vehicles and MMSA Parts and Accessories or options previously
delivered to Dealer or being imported, manufactured, or sold in
accordance with Dealer's orders. No change shall be considered a
model year change unless so specified by MMSA. Except as specifically
provided in Section III.C.7. hereof, MMSA shall be under no liability
to Dealer on account of any discontinuance or change and shall have no
obligation to Dealer to make any refund on MMSA Products previously
purchased by Dealer, whether or not the price of MMSA Products
previously sold by MMSA is affected thereby. Unless directed in
writing by MMSA or required to do so by law, Dealer shall not alter
any MMSA Product or change or substitute any of its components as sold
by MMSA, except for minor or cosmetic changes which do not affect the
mechanical operation, safety or structural integrity of any MMSA
Product.
F. Vehicles Excluded
Dealer acknowledges that this Agreement confers rights
or benefits with respect to vehicles or products of any kind
not distributed by MMSA, and that Dealer's right to purchase MMSA
Vehicles from MMSA shall at all times be limited to those MMSA
Vehicles listed on the most recent Product List. Without limiting the
generality of the foregoing, Dealer acknowledges that: (1) MMC
distributes in the United States trucks with a Gross Vehicle Weight
Rating of 7,000 pounds or more, truck tractors, buses, other heavy
vehicles, and parts and accessories therefor through a distribution
company known as Mitsubishi Fuso Truck America, Inc. ("MFTA"); (2)
this Agreement confers no right upon Dealer to purchase for resale or
lease, sell service or lease MFTA vehicles or products; (3) MFTA
vehicles are of a separate "line make" from MMSA Vehicles; and (4)
this Agreement confers no right upon Dealers to protest, object or
invoke any other administrative or judicial
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process to bar or delay the establishment of any MFTA dealership
within or without Dealer's Sales Locality.
IV. DEALERSHIP PREMISES
A. Responsibilities of Dealer
MMSA and Dealer recognize the importance of establishing an effective
network of qualified Authorized MMSA Dealers meeting MMSA's
established standards. Accordingly, Dealer agrees that it shall not,
under any circumstance, establish an associate dealer or subdealer for
MMSA Products or establish any MMSA dealership premises or operations
other than those expressly approved by MMSA. Dealer agrees to operate
its MMSA dealership only the Dealership Premises, and to provide and
utilize the Dealership Facilities only in accordance with standards
established by MMSA set forth in the Dealer Development Plan. Dealer
recognizes that if it engages in other business activities in the
Dealership Facilities and/or on the Dealership Premises, the physical
facilities necessary for the sale and servicing of MMSA Products may
be adversely affected. Accordingly, Dealer agrees that it shall not
modify, relocate, change the usage of, reduce or expand the Dealership
Premises or the Dealership Facilities without first consulting with
MMSA and obtaining its written approval of such changes.
B. Automobile Leasing or Rental Business
Dealer may, as part of its MMSA dealership operations, engage in the
leasing of MMSA Vehicles on the Dealership Premises so long as Dealer
complies fully with all standards and requirements established by MMSA
in connection therewith. Dealer, its Owners and Executive Managers
shall not, however, without the prior written consent of MMSA, form or
acquire, directly or indirectly, a separate legal entity for the
purpose of conducting such leasing operations, whether within or
without the Dealership Premises. Nor shall Dealer, its Owners and
Executive Managers acquire for themselves or for members of their
respective families any substantial interest in such separate business
without the prior written consent of MMSA. If MMSA consents to the
operation or substantial ownership of such separate leasing business
by Dealer, its Owners, Executive Managers or their respective
families, such business shall be subject to the provisions of Section
IV.C. hereof.
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C. Related Activities of Dealer or Dealer's Owners or Executive Managers
If Dealer or any of Dealer's Owners or Executive Managers should have
or should acquire, directly or indirectly, for themselves or for
members of their respective families, any substantial interest in an
enterprise the business of which is in any way connected with new or
used MMSA Products (hereinafter referred to as "Related Business"), or
any property which is being used or will be used in connection with
new or used MMSA Products (hereinafter referred to as "Related
Property"), or any beneficial interest in any Related Property, Dealer
will:
1. At the time this Agreement is executed by Dealer, or immediately
upon such acquisition, whichever may be later, require such
Related Business or the holder of legal title or beneficial
interest in the Related Property to execute and deliver to MMSA a
written instrument in which such Related Business or holder shall
assume the following obligations:
a) To refrain from all conduct which might be harmful to the
goodwill of MMSA or to the reputation of MMSA Products or
which might be inconsistent with the public interest;
b) To grant to MMSA, until the expiration or prior termination
of this Agreement, the right, through MMSA's employees and
other designees, to inspect, at all reasonable times during
regular business hours, the premises, as well as the records
and accounts, of such Related Business or holder; and
c) To refrain from any use of any MMSA Trademark.
2. Furnish to MMSA, at the time this Agreement is executed by Dealer
or immediately upon such acquisition, whichever may be later, a
written report setting forth in detail:
a) The ownership of beneficial interests in such Related
Business or Related Property; and
b) The business activities of such Related Business and the use
of such Related Property
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including, among other things, the names of all Authorized
MMSA Dealers with which such Related Business has any
dealings or who use or have any interest in such Related
Property, and the terms of such dealings, use and interests.
3. In the event of any change in the ownership, activities or use of
the Related Business or Related Property, furnish to MMSA a
written report setting forth the details of such change.
4. Furnish to MMSA such other reports concerning the Related
Business or Related Property as MMSA may from time to time
require.
D. Personnel
Dealer agrees that it will employ qualified personnel in such
capacities and in such number as may be specified in the Dealer
Development Plan or as otherwise required by MMSA.
E. Insurance
Dealer shall obtain fire and casualty insurance issued by an insurer
of recognized responsibility satisfactory to MMSA, with coverage for
each occurrence and in an aggregate amount acceptable to MMSA, and
providing coverage for, among other things, death, bodily injury and
property damage claims which may arise in connection with Dealer's
operations. Such insurance shall be maintained in full force and
effect at Dealer's sole cost throughout the term of this Agreement and
all extensions or renewals hereof.
F. Maintaining Operations Open for Business
Since the transportation and maintenance needs of customers served by
Dealer can be properly met only if Dealer keeps the Dealership
Premises open for business, Dealer agrees to maintain its dealership
operations open for business during all days and hours which are
customary and lawful for such operations in the community or locality
in which the Dealership Premises are located. Any unexcused failure
to remain open for business during such hours in excess of five (5)
consecutive business days shall constitute grounds for termination of
this Agreement under Section X.B.1.(a) hereof.
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G. Minimum Vehicle Inventories
Subject to the ability of MMSA to supply MMSA Vehicles ordered by
Dealer, Dealer agrees that it shall, at all times, maintain the
minimum inventory of MMSA Vehicles for immediate sale as set forth in
the Dealer Development Plan from time to time by MMSA after
consultation with Dealer. Dealer also agrees that it shall have
available at all times, for purposes of showroom display and
demonstration, the number of current models of MMSA Vehicles required
of Dealer as determined from time to time by MMSA after consultation
with Dealer. Dealer agrees to maintain all MMSA Vehicles in excellent
condition at all times. Failure of Dealer to maintain the required
minimum number of MMSA Vehicles shall constitute grounds for
termination of this Agreement under Section X.B.2.(n) hereof.
Dealer recognizes that it is the goal of all MMSA Dealers to meet
efficiently the needs of all customers of MMSA Products wherever
located and that, although an MMSA Dealer may attempt to continually
maintain its minimum inventory, occasionally its customers may request
a specific MMSA Vehicle or MMSA Part or Accessory which is not
currently in stock. Accordingly, Dealer agrees to use its best
efforts to cooperate with other MMSA Dealers by providing them with
access to information regarding its parts and MMSA Vehicle inventory
and whenever possible, trading its MMSA Products to satisfy the needs
of a customer of another MMSA Dealer.
H. Signs
Subject to applicable governmental ordinances, regulations and
statutes, Dealer agrees to buy or rent from MMSA or from sources
designated by MMSA and to erect and maintain on the Dealership
Premises, entirely at Dealer's expense, authorized sales and service
signs conforming to the requirements established and approved for
Dealer's use by MMSA. Dealer further agrees to obtain and maintain
any licenses or permits necessary to erect such signs. Failure to
obtain, erect, maintain, repair, illuminate and prominently display
such signs in a manner approved by MMSA shall constitute grounds for
termination of this Agreement under Section X.B.2.(j) hereof.
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I. Electronic Communications System
MMSA has elected to implement an electronic data processing system to
facilitate communications between MMSA and each MMSA Dealer. Such a
system is designed to enable each MMSA Dealer to electronically
transmit current information regarding its sales and service
operations, including without limitation, orders for MMSA Vehicles and
MMSA Parts and Accessories, sales reports, and warranty claims data.
In recognition of the benefits of such a system, Dealer agrees to
acquire and install, at its sole expense, on the Dealership Premises a
dealer computer terminal approved by MMSA and to utilize the system in
accordance with MMSA's instructions.
J. Planning Assistance for Dealership PremisesTo assist Dealer in
planning, establishing and maintaining the Dealership Premises, MMSA
will, if feasible, make available to Dealer upon request, copies of
sample building layout plans, facility planning recommendations and an
identification program covering the placement, installation and
maintenance of recommended signs. In addition, representatives of
MMSA will be available to Dealer from time to time to advise Dealer
and dealership personnel in connection with Dealer's planning of the
Dealership Facilities and Dealership Premises.
V. NET WORKING CAPITAL
Dealer agrees to establish and maintain net working capital in an amount
not less than the minimum net working capital agreed upon by Dealer and
MMSA and specified in the Dealer Development Plan. If, because of changed
conditions, MMSA deems it necessary to increase or decrease the minimum
amount of Dealer's net working capital, the minimum net working capital
required of Dealer under the Dealer Development Plan may be revised by MMSA
after consultation with Dealer. If the amount thereof is increased, Dealer
agrees to meet the new minimum net working capital standard within the time
period reasonably prescribed by MMSA after consultation with Dealer.
VI. ACCOUNTS, RECORDS AND REPORTS
A. Uniform Accounting System
It is for the mutual benefit of Dealer and MMSA that uniform
accounting systems and practices be maintained
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by all Authorized MMSA Dealers. Accordingly, Dealer agrees to
maintain such systems and practices as designated by MMSA in
accordance with the uniform accounting system and practices
established by MMSA for use by all MMSA Dealers. Dealer agrees that
it will furnish to MMSA by the tenth (10th) day of each month, in the
form prescribed by MMSA, true, complete and accurate financial and
operating statements covering the preceding month and showing
calendar-year-to-date operations.
B. Sales Reporting
To assist in the evaluation of current market trends and other
matters, Dealer agrees to:
1. Immediately upon delivery of an MMSA Vehicle to the purchaser
thereof, complete and transmit to MMSA a report of the retail
sale called the "Retail Delivery Report"; and
2. Furnish MMSA with such other reports or records which may
reasonably be required by MMSA.
C. Sales and Service Records
Dealer agrees to keep complete, accurate and current records regarding
the sale and servicing of MMSA Products. In order that policies and
procedures relating to applications for reimbursement for warranty and
policy work may be applied uniformly to all Authorized MMSA Dealers,
Dealer agrees to prepare, keep current and retain records in support
of requests for reimbursement for warranty and policy work performed
by Dealer in accordance with the policies and procedures prescribed in
the Warranty Manual and standards established by MMSA consistent with
said manual.
D. Examination of Accounts and Records
Dealer agrees that it will permit MMSA to make examinations and
audits of its accounts and records at any time during regular
business hours, and in connection therewith, to reproduce and take
for its own use copies of Dealer's records including, without
limitation, records supporting requests for reimbursement for
warranty and policy work performed or to be performed by Dealer. A
report of any such examination will be furnished to Dealer. Failure
to allow authorized personnel of MMSA to examine, audit, reproduce
and take copies for MMSA's use of Dealer's
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records, whether or not located on the Dealership Premises, shall
constitute grounds for termination of this Agreement under Section
X.B.2(m) hereof.
VII. PROMOTING AND SELLING MMSA PRODUCTS
A. Responsibilities of Dealer
Dealer agrees to use its best efforts to promote, sell and service
MMSA Vehicles and MMSA Parts and Accessories in the Sales Locality.
Dealer recognizes that Dealer's fundamental obligation under this
Agreement is to stock, sell and service all models and types of MMSA
Vehicles distributed in the Sales Locality by MMSA. Accordingly,
Dealer expressly assumes responsibility for fulfilling this
obligation, and in connection therewith, Dealer expressly agrees to
develop that sales volume necessary to meet Dealer's Minimum Sales
Responsibility as outlined in this Agreement and as is more
particularly described in the Dealer Development Plan.
B. Sales and Performance Criteria
1. Dealer Development Plan
The parties hereto shall periodically, and in any event at least
annually, review Dealer's performance under this Agreement.
Dealer's performance will be evaluated on the basis of the
performance criteria set forth in the Dealer Development Plan,
which criteria shall include such factors as maintenance of
facilities, service and sale of MMSA Parts and Accessories and
sales performance.
During each such periodic review, MMSA shall note in writing any
deficiencies it finds in Dealer's performance and operations, and
MMSA will offer suggestions for the improvement thereof. MMSA
shall give Dealer a reasonable opportunity to implement its
suggestions and take other steps necessary to cure deficiencies
in Dealer's performance. Dealer agrees to cooperate with MMSA
during such evaluation and to furnish any data regarding the
Dealer's operations which may reasonably be requested by MMSA.
Dealer agrees that it will use its best efforts to meet the
performance standards established from time to time by MMSA and
to cure any deficiencies set forth in its Dealer Development
Plan. Failure by
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Dealer to correct such deficiencies after having had a reasonable
opportunity to do so shall constitute grounds for termination of
this Agreement under Section X.B.3.(a) hereof.
2. Determination of Minimum Sales Responsibility
If Dealer is the only MMSA Dealer located in the Sales Locality,
calculation of Dealer's Minimum Sales Responsibility will be based
upon the ratio of sales and registrations of MMSA Vehicles to sales
and registrations of competitive vehicles and MMSA Vehicles in the
Sales Locality. In metropolitan markets where multiple MMSA Dealers
are located, Dealer (together with all other MMSA Dealers in the Sales
Locality) will be assigned a percentage share of responsibility for
total sales performance in the Sales Locality based upon Dealer's
trading area. MMSA may from time to time change the size and/or
boundaries of Dealer's trading area after appropriate analyses of new
car purchasing patterns in the Sales Locality. Such trading areas
will be used solely for the purpose of determining the percentage of
sales responsibility assigned to Dealer and should not be interpreted
as a market area assigned to Dealer. In evaluating Dealer's
performance, MMSA will consider recent trends in Dealer's sale
performance and any special local conditions which would uniquely
affect Dealer's performance.
To the extent that MMSA for any reason, other than Dealer's failure to
submit orders or arrange payment, delivers to Dealer less than the
number of new MMSA Vehicles that represents Dealer's Minimum Sales
Responsibility, Dealer's Minimum Sales Responsibility set forth in the
Dealer Development Plan will be reduced accordingly.
The term "competitive vehicles" as used in this section shall mean
those new vehicles which are from time to time designated by MMSA as
competitive with MMSA Vehicles. The term "Dealer's trading area" as
used in this section shall mean an area immediately surrounding the
Dealership Premises which is determined by MMSA from time to time
based upon an analysis of census tracts or other geographical
boundaries.
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C. Sales Operations
1. Sales Organization
To enable Dealer to fulfill satisfactorily its responsibilities
under this Agreement, Dealer agrees to organize and maintain the
minimum number of trained sales and customer relations personnel
required by MMSA in the Dealer Development Plan.
2. Representations in the Sales of MMSA Vehicles
Dealer agrees that it will sell all MMSA Vehicles in accordance
with directives issued by MMSA designating model and model year
classifications and will not make any misleading statements or
misrepresentations regarding MMSA Products, including without
limitation, selling as new any MMSA Vehicle which is not in fact
new and unused, misrepresenting the model year or year of
manufacture, or the items or prices of the items making up the
total selling price of any MMSA Vehicle. Dealer shall not make
any statements tending to lead any customer to believe that a
greater portion of the selling price of an MMSA Vehicle
represents destination charges and/or factory handling charges
than the amounts of such items actually charged to and paid for
by Dealer.
3. Customer Deposits
Dealer will hold in trust until completion of sale any down
payment and all other property it may receive from customers in
connection with their purchases of MMSA Products. Dealer will
not sell or place any lien on any property taken as a trade-in
unless at the same time it segregates and holds in trust an
amount equal to the trade-in allowance agreed upon with the
customer for such property until completion of the sale for which
such property was taken as a trade-in. Dealer will ensure that
all purchase order forms signed by its customers contain
provisions binding Dealer to hold all down payments and other
property in the manner specified in this section.
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D. Advertising
1. Misleading Advertising
Both MMSA and Dealer recognize the need for maintaining standards
of ethical advertising of a quality and dignity consonant with
the reputation and standing of MMSA Products in order to maintain
public confidence in, and respect for, Dealer, MMSA and MMSA
Products. Accordingly, neither MMSA nor Dealer will publish or
cause or permit to be published any advertising relating to MMSA
Products likely to mislead or deceive the public or to impair the
goodwill of MMSA or Dealer or the reputation of MMSA Products.
Dealer shall, promptly upon written notice from MMSA, discontinue
any advertising which MMSA, in its sole judgment, considers may
be injurious to Dealer's or MMSA's business, or to the reputation
of MMSA Products, or likely to mislead or deceive the public, or
at variance with the business, advertising or public relations
policies of MMSA.
2. MMSA Dealer Advertising Association
MMSA and Dealer recognize the benefits which may be derived from
a comprehensive joint advertising effort by MMSA Dealers.
Accordingly, MMSA agrees to assist MMSA Dealers in the formation
and effective operation of such cooperative dealer advertising
association. Dealer agrees to cooperate with MMSA in the
establishment of such a group and, once it is established, to
participate actively and contribute to it in accordance with the
bylaws of the association.
The MMSA dealer advertising association will finance its
advertising programs through the assessment of a fixed charge for
each new MMSA Vehicle purchased by member MMSA Dealers. As a
service to the dealer association, MMSA will collect the agreed
upon charge, provided that the dealer association maintains
control over both the amount of the assessment and the manner in
which such funds will be expended.
3. Dealer Cooperative Promotional Fund
MMSA will establish and maintain general advertising programs and
will make sales promotion and campaign materials available to
Dealer to
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promote the sale of MMSA Vehicles. Dealer recognizes that it
will benefit from the simultaneous use by all Authorized MMSA
Dealers of new model announcement literature, catalogs, banners
and like materials and from the economies attendant upon
preparation and purchase by MMSA of such basic sales promotion
literature, parts and service manuals and other materials for all
dealers. Accordingly, Dealer agrees to cooperate in MMSA's
advertising programs and to fully utilize the materials offered
Dealer by MMSA. MMSA's sales promotion services will include the
supply, at no additional cost to Dealer, of new model
announcement and other sales promotion materials, and parts and
service materials as described from time to time in MMSA sales
letters. Dealer agrees to contribute to the cost of MMSA's sales
promotion services an amount established by MMSA from time to
time for each MMSA Vehicle sold by MMSA to Dealer. These amounts
do not include the cost of special campaigns or special
literature not described in MMSA sales letters.
E. Assistance Provided by MMSA
1. Sales Training Assistance
To assist Dealer in the fulfillment of its responsibilities
hereunder, MMSA shall offer general and specialized sales
management and sales training courses for the benefit and use of
Dealer's sales organization. Dealer understands the importance
of having a well trained and knowledgeable staff in the
successful operation of a dealership and, therefore, Dealer
agrees to require the attendance of all its sales personnel at
any special courses, meetings or training sessions offered for
their benefit from time to time by MMSA. Whenever possible, MMSA
will give Dealer thirty (30) days' advance notice of any such
mandatory event so that all sales personnel may make arrangements
to be present. Repeated failure by Dealer's sales personnel
(including but not limited to management) to participate fully in
such programs shall constitute grounds for termination of this
Agreement under Section X.B.2.(i) hereof.
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2. Field Sales PersonnelTo assist Dealer in handling its sales
responsibilities under this Agreement, MMSA agrees to provide
field sales personnel from time to time to advise and counsel
Dealer regarding merchandising, training and sales management.
VIII. SERVICING MMSA VEHICLES
A. Responsibilities of Dealer
Dealer agrees to provide service and parts to all MMSA Vehicles
whether or not under warranty and whether or not the MMSA Vehicle to
be serviced was purchased from Dealer.
1. Warranty Service
Warranty and policy service shall be performed in accordance
with the Warranty Manual and any related bulletins and
directives issued from time to time by MMSA to Dealer. Dealer
shall furnish to the purchaser of each MMSA Product, at the time
each product is delivered, copies of any applicable warranties.
Dealer shall be responsible for the timely submission of warranty
claims in the format required by MMSA. MMSA agrees to compensate
Dealer for all warranty and policy work in accordance with
procedures and rates established from time to time by MMSA and in
accordance with applicable law; and Dealer agrees that such rates
shall constitute full and complete payment to Dealer for such
work. Dealer agrees that where MMSA reimburses Dealer for
warranty or policy work, the customer shall not be obligated to
pay any charges for warranty or policy work except as required by
law.
2. New Motor Vehicle Pre-Delivery Service
Dealer agrees that prior to delivery of each new MMSA Vehicle
to a retail customer, Dealer will conduct pre-delivery service
and inspections in accordance with the Pre-delivery Inspection
Manual. Dealer shall be reimbursed by MMSA for such pre-delivery
service and inspection in accordance with procedures and rates
established from time to time by MMSA and in accordance with
applicable law.
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3. Free Maintenance
In accordance with directives to be issued from time to time by
MMSA, certain maintenance services, excluding lubricant and oil
filter costs, may be free of charge to the customer; if Dealer
delivers an MMSA Vehicle to a customer pursuant to such
directives, Dealer shall be reimbursed according to the terms of
such directives. In the event that such free maintenance
services are performed by another MMSA Dealer upon an MMSA
Vehicle sold by Dealer, Dealer shall pay to such other MMSA
Dealer the charge then in effect as established by MMSA for such
maintenance services. Conversely, in the event that Dealer
performs such free maintenance with respect to an MMSA Vehicle
sold by another MMSA Dealer, Dealer shall be entitled to receive
from such other MMSA Dealer the amount of such charge. All
claims for payment for such charges by or against Dealer shall be
processed through MMSA. All such free maintenance services shall
be performed in conformity with current service policies and
practices as outlined in service manuals, the Pre-delivery
Inspection Manual, the Warranty Manual and warranty bulletins or
technical service bulletins and directives issued from time to
time by MMSA.
4. Use of Parts
Dealer agrees not to use in the repair or servicing of MMSA
Vehicles parts other than MMSA Parts and Accessories or other
parts (including accessories) expressly approved by MMSA unless:
a) the replacement parts are equivalent in quality and design
to MMSA Parts and Accessories or parts expressly approved by
MMSA; or
b) the parts to be replaced are not necessary to the mechanical
operation of the MMSA Vehicle and the replacement parts will
not adversely affect the mechanical operation of the MMSA
Vehicle.
Failure by Dealer to use MMSA Parts and Accessories or parts
expressly approved by MMSA (or other parts equivalent
thereto in quality and design) in accordance with the
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requirements of this section shall constitute grounds for
termination of this Agreement under Section X.B.2.(r)
hereof. In the event of any dispute or litigation between
Dealer and MMSA regarding the use by Dealer of parts other
than MMSA Parts and Accessories or parts expressly approved
by MMSA, Dealer agrees that it shall have the burden of
establishing either:
a. that parts used by it are equivalent in quality and
design to MMSA Parts and Accessories or parts expressly
approved by MMSA; or
b. that the parts replaced were not necessary to the
mechanical operation of the MMSA Vehicle and the replacement
parts would not adversely affect the mechanical operation of
the MMSA Vehicle.
Dealer agrees that it will not represent or offer to sell as
MMSA Parts and Accessories, or parts expressly approved by
MMSA, any parts used by it in the repair or servicing of
MMSA Vehicles which are not in fact genuine MMSA Parts and
Accessories, or parts expressly approved by MMSA.
If Dealer uses parts for the service or repair of MMSA
Vehicles which are not MMSA Parts and Accessories and which
have not otherwise been approved in writing by MMSA for use
in MMSA Vehicles, Dealer does so at its own risk and neither
MMSA nor any manufacturer of MMSA Products will be
responsible to Dealer or any third party for any products
liability, warranty or other claim which may arise as a
result of the installation and/or use of such parts and
Dealer agrees to indemnify and hold MMSA and any
manufacturer of MMSA Products harmless from any such claim
or liability.
5. Campaign Inspections and Corrections
Dealer agrees to perform campaign inspections and/or corrections
for owners and users of all MMSA Products that qualify for such
inspections and/or corrections, regardless of where or from whom
such products were purchased. Dealer further
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agrees to comply with all procedures relating thereto set forth
in the Warranty Manual and applicable bulletins, manuals,
directives and technical data issued from time to time by MMSA to
Dealer. MMSA agrees to reimburse Dealer for all replacement
parts and/or other materials required and used in connection
therewith and for labor in accordance with the applicable
provisions of the Warranty Manual as supplemented by bulletins
and directives issued from time to time by MMSA to Dealers. The
term "campaign inspection and/or correction" as used in this
section shall mean specially designated service operations
initiated by MMSA to be performed by Dealer on specified
vehicles.
6. Compliance With Safety and Emission Control Requirements
Dealer agrees to comply with, and operate consistently with, all
applicable provisions of the National Traffic and Motor Vehicle
Safety Act of 1966, as amended, and the federal Clean Air Act, as
amended, including applicable rules and regulations issued from
time to time thereunder, and all other applicable federal, state
and local motor vehicle safety and emission control requirements.
In the event that the laws of the state in which Dealer is
located require motor vehicle dealers or distributors to install
in new or used motor vehicles, prior to the retail sale thereof,
any safety devices or other equipment not installed or supplied
as standard equipment by MMSA, then Dealer, prior to its sale of
any MMSA Vehicles on which such installations are so required,
shall properly install such equipment on such MMSA Vehicles.
Dealer shall comply with all state and local laws pertaining to
the installation requirements of any such equipment including,
without limitation, the reporting of such installation. MMSA
shall not be liable for any failure of Dealer or its employees to
comply with such state and local laws.
In the interests of motor vehicle safety and emission control,
MMSA agrees to provide to Dealer, and Dealer agrees to provide to
MMSA, such information and assistance as may reasonably be
requested by the other in connection with the
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performance of obligations imposed on either party by the
National Traffic and Motor Vehicle Safety Act of 1966, as
amended, and the federal Clean Air Act, as amended, and the rules
and regulations issued thereunder, and all other applicable
federal, state and local motor vehicle safety and emission
control requirements.
B. Service Operations
1. Service and Parts Organization
Dealer agrees to organize and maintain a complete service and
parts organization, including a qualified service manager, a
qualified parts manager and the minimum number of competent
service and parts personnel established by MMSA in the Dealer
Development Plan.
2. Paint and Body Facilities
If permissible under local government ordinances, regulations and
statutes, Dealer will use its best efforts to provide paint and
body facilities for MMSA Vehicles. Such facilities will be
subject to MMSA's prior written approval and, once approved,
shall become part of the Dealership Premises and subject to the
terms and conditions of this Agreement. If local law does not
permit the operation of such services on the Dealership Premises,
Dealer agrees to enter into a contract for the services of an
independent company in order to provide complete warranty service
for MMSA Vehicles. The company selected by Dealer for paint and
body services must be approved in writing by MMSA.
3. Workshop
In the installation and operation of Dealer's workshop and body
and paint shop, if any, Dealer will comply with such standards
and requirements as MMSA may prescribe from time to time,
particularly with respect to:
a) Procurement and maintenance of general tools and equipment,
including hydraulic hoists and lubricating equipment;
b) Procurement and maintenance of special tools from time to
time designated by MMSA as
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necessary to properly provide warranty and repair services
to MMSA Customers;
c) Use of workshop forms which may be prescribed by MMSA and
use of MMSA customer service promotional material, as well
as procurement and maintenance of at least one complete set
of MMSA service literature; and
d) Proper execution of all service and repair work with respect
to MMSA Products. Failure by Dealer to procure and maintain
necessary special tools, general tools and equipment shall
constitute grounds for termination of this Agreement under
Section X.B.2.(k) hereof.
4. Handling of Service Complaints
Dealer will receive, investigate and handle all complaints
received from MMSA customers with a view to securing and
maintaining the goodwill of the public toward Dealer, MMSA and
MMSA Products. All complaints received by Dealer which cannot be
readily remedied shall be promptly reported in detail to MMSA.
Dealer recognizes that the repeated failure to properly resolve
customer complaints shall constitute grounds for termination of
this Agreement under Section X.B.2.(l) thereof.
5. Stock of Parts
Dealer agrees to carry in stock at all times during the term of
this Agreement an inventory of MMSA Parts and Accessories and
MMSA approved parts and accessories adequate at any given time to
enable Dealer to fulfill customer demands, warranty repairs and
its other service obligations under this Agreement. For this
purpose, Dealer agrees to purchase each year an initial supply of
parts for the new models of MMSA Vehicles. MMSA shall at least
fifteen (15) days prior to the introduction of new models provide
a list of the parts which should be purchased by Dealer. MMSA
shall have the right to audit Dealer's inventory from time to
time and may require changes in the volume and contents thereof.
In addition, Dealer agrees to provide adequate equipment for an
effective parts supply operation. Failure to maintain an
adequate stock of parts in accordance
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with standards and requirements established by MMSA shall
constitute grounds for termination of this Agreement under
Section X.B.2.(o) hereof.
6. Parts Inventory Control
MMSA has elected to implement an electronic data processing parts
inventory control system for the purpose of providing adequate
records regarding the availability of parts. In recognition of
the benefits of such a system, Dealer agrees to acquire and
install, at its sole expense, on the Dealership Premises a
computer terminal for the purpose of utilizing the parts
inventory control system offered by MMSA in accordance with
MMSA's instructions. Alternatively, at the dealer's own
discretion and to meet this requirement, Dealer may use at the
Dealership Premises another inventory control system provided
that (1) it is fully integrated with an automated accounting
system; (2) the inventory control and accounting system software
are already operating and controlling the operation of two or
more other dealerships which are owned by the Dealer, and (3) the
inventory control and accounting software are operated on a
single mainframe computer for all such dealerships. This
requirement shall not apply to Dealer if Dealer began doing
business as an authorized MMSA Dealer prior to November 1, 1985,
provided however, Dealer has already installed on the Dealership
Premises before said date a parts inventory control system
approved by MMSA.
7. Service Rentals
In accordance with standards established by MMSA, Dealer shall
maintain or have available for use by Dealer's service customers
a fleet of rental vehicles adequate to serve the needs of
customers who leave their MMSA Vehicles with Dealer for repair or
servicing.
C. Assistance Provided by MMSA
1. Service Training Assistance
Dealer and MMSA both recognize the importance of providing
consistent, dependable service of the highest quality to MMSA
customers. Accordingly, MMSA agrees to provide service training
assistance
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to Dealer designed to continually improve the level of service
provided by Dealer's service and parts personnel. Since MMSA and
Dealer recognize that the maximum benefit from such training
programs may only be derived if all service and parts employees
attend the programs, Dealer agrees to require the attendance of
all such personnel. MMSA will endeavor to provide at least
thirty (30) days' prior notice of all such mandatory programs to
Dealer. Repeated failure of Dealer's service and parts personnel
including, but not limited to, management, to attend such
sessions shall constitute grounds for termination of this
Agreement under Section X.B.2.(i) hereof.
2. Service Manuals and Materials
MMSA agrees to provide Dealer with one copy of each service
manual or other publication MMSA deems necessary for the
operation of Dealer's service organization. Additional copies
may be purchased by Dealer at its option.
3. Field Service Personnel Assistance
To assist Dealer in handling its service responsibilities under
this Agreement, MMSA agrees to make available field service
personnel who from time to time will advise and counsel Dealer's
personnel on service-related subjects, including product quality,
technical adjustment, repair and replacement of product
components, owner complaints, warranty administration, service
and parts merchandising, training and service management.
IX. DISPLAY OF TRADEMARKS, SERVICE MARKS AND TRADE NAMES
Dealer acknowledges that MMSA is the exclusive owner of, or is authorized
to use and to permit Dealer and others to use, the MMSA Trademarks. During
the term of this Agreement, Dealer is granted a nonexclusive privilege of
displaying and otherwise using the MMSA Trademarks in connection with and
for the purpose of identifying, advertising and selling MMSA Products;
provided, however, that Dealer shall promptly discontinue the display and
use of any such MMSA Trademarks, and shall change the manner in which any
such MMSA Trademarks are displayed and used, whenever requested to do so by
MMSA. Dealer shall not use the MMSA Trademarks or the words "Mitsubishi"
or "MMSA" or any other word confusingly similar to "Mitsubishi" in its
corporate name if Dealer is a
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corporation, or in its partnership name if Dealer is a partnership, or in
its proprietorship name if Dealer is a proprietorship; provided, however,
that if MMSA gives its prior written consent, Dealer may use the words
"Mitsubishi Motors" as part of the trade name under which it conducts its
business. If Dealer uses the words "Mitsubishi Motors" as part of its
trade name, upon the request of MMSA or upon the termination of this
Agreement for any reason whatsoever, Dealer shall cease to use the words
"Mitsubishi Motors" in its trade name and shall take or cause to be taken
all steps to eliminate such words therefrom.
Dealer will do nothing to impair the value of, or contest the right of MMSA
to the exclusive use of, any trademark, design mark, service mark, or trade
name at any time acquired, claimed, used or adopted by MMSA.
X. TERMINATION OF AGREEMENT
A. Dealer May Terminate This Agreement Upon Thirty (30) Days Prior
Written Notice To MMSA.
B. MMSA May Terminate This Agreement For Cause:
1. Immediately-
a) Upon failure of Dealer to keep its MMSA dealership
operations, or any part thereof, open for business for
a period in excess of five (5) consecutive business
days as required under Section IV.F. hereof, except in
the event such closure or cessation of operation is caused
by some physical event beyond the control of Dealer, such
as civil war, riots, fires, floods, earthquakes, or
other acts of God; or
b) Upon any change in location of the Dealership Premises or
upon any change in the amount or usage of the Dealership
Facilities or in the event Dealer directly or indirectly
conducts any of its MMSA dealership operations at any other
location or in any other facilities, without the prior
written consent of MMSA; or
c) Upon the effective date of the expiration or earlier
termination of MMSA's right to distribute MMSA Products.
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2. By Giving Thirty (30) Days Prior Written Notice Upon-
a) Failure of Dealer to obtain or maintain any license, or the
suspension or revocation of any license, necessary for the
conduct by Dealer of its business pursuant to this Agreement; or
b) Failure of Dealer to pay MMSA for any MMSA Products in accordance
with the terms and conditions of this Agreement or the terms and
conditions governing the purchase of such products; or
c) The death of any Owner or upon the death or incapacity of any
Executive Manager (provided that the terms and conditions of
Section X.D. hereof shall apply in any such case); or
d) Any sale, transfer, relinquishment or other change, voluntary or
involuntary, by operation of law or otherwise, of any majority
interest in the direct or indirect ownership or in the management
of Dealer as set forth in Sections 3 and 4, respectively, of the
MMSA Dealer Sales and Service Agreement, without the prior
written consent of MMSA; or
e) The inability of Dealer to generally pay its debts as such debts
become due, or the filing of any voluntary or involuntary
petition under any bankruptcy law, or the execution by Dealer of
an assignment for the benefit of creditors, or the appointment
for Dealer of a receiver or trustee or other officer having
similar powers for Dealer who is not removed within thirty (30)
days from his appointment thereto, or any levy under attachment
or execution or similar process which is not within ten (10) days
vacated or removed by payment or bonding, or the conviction of
Dealer, or any principal officer or manager of Dealer, of any
crime tending to affect adversely the ownership, operation,
management, business or interests of Dealer or MMSA; or
f) Failure of Dealer to establish or maintain the unrestricted
availability of lines of
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credit in the amount set forth in the Dealer Development Plan and
under terms approved by MMSA with financial institutions
acceptable to MMSA for use in connection with Dealer's purchase
and maintenance of its inventory of MMSA Products as required
under the provisions of this Agreement, including, but not
limited to, Sections III.C.2. and III.C.4. hereof; or
g) Impairment of the reputation or financial standing of Dealer or
any of its management subsequent to the execution of this
Agreement, or ascertainment by MMSA subsequent to the execution
of this Agreement of any fact existing at or prior to the time of
execution of this Agreement which tends to impair the reputation
or financial standing of Dealer or any of its management and
which would substantially impair the operation of the dealership;
or
h) Any submission by Dealer to MMSA of a false or fraudulent
dealership application report, statement or claim for
reimbursement, refund, credit, or financial information, or
submission to a customer of a false or fraudulent report or
statement of any kind, including but not limited to statements
concerning pre-delivery preparation, testing, servicing, repair
or maintenance; or
i) Repeated failure of Dealer's sales, service and parts personnel,
including but not limited to management, to fully participate in
any training and/or mandatory promotional programs offered by
MMSA to Dealer as required under Sections VII.E.1. and VIII.C.1.
hereof; or
j) Failure of Dealer to properly obtain, erect, maintain, repair and
illuminate signs and other displays in a manner approved by MMSA
as required under the provisions of this Agreement, including,
but not limited to, Section IV.H. hereof; or
k) Failure of Dealer to procure and maintain an adequate supply of
general and special tools and equipment designated by MMSA as
required under the provisions of this Agreement,
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including, but not limited to, Section VIII.B.3. hereof; or
l) Failure of Dealer to maintain good relations with its customers,
including, but not limited to, failure to notify MMSA of
complaints by customers and repeated failure to properly resolve
customer complaints as required under Section VIII.B.4. hereof;
or
m) Failure of Dealer to permit authorized MMSA representatives to
examine, audit, reproduce and take for MMSA's use copies of
Dealer's records, whether or not located on the Dealership
Premises, as required under Section VI.D. hereof; or
h) Failure of Dealer to maintain the minimum inventory of MMSA
Vehicles, whether for showroom display, demonstration or
immediate sale, as required under Section IV.G. hereof; or
o) Failure of Dealer to maintain an adequate stock of parts as
required under section VIII.B.5. hereof; or
p) Failure of Dealer to accept an amended form of MMSA Dealer Sales
and Service Agreement or renewal thereof within thirty (30) days
after its presentation to Dealer, as required under Section 2 of
the MMSA Dealer Sales and Service Agreement; or
q) Failure of Dealer to promote effectively MMSA Products by using
sales promotional literature offered by MMSA; or
r) Failure of Dealer to use proper parts and accessories in the
repair and servicing of MMSA Vehicles as required under Section
VIII.A.4. hereof.
3. By Giving Ninety (90) Days Prior Written Notice Upon-
a) Failure of Dealer to reach and maintain its Minimum Sales
Responsibility as defined in the Dealer Development Plan or to
correct deficiencies described in the Dealer Development Plan, as
required under Section
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VII.B.1. hereof, or failure of Dealer to otherwise conduct its
business in accordance with any of its obligations or
requirements set forth herein to the satisfaction of MMSA; or
b) Any material or continuing breach or violation by Dealer of any
other term or provision of this Agreement; or
c) Any dispute, disagreement or controversy between or among
partners, managers, officers or stockholders of Dealer which in
the good faith opinion of MMSA adversely affects the ownership,
operation, management, business or interests of Dealer or MMSA,
or the presence in the management of Dealer of any person who in
MMSA's good faith opinion no longer has the requisite
qualifications to discharge his or her responsibilities.
C. Notice and Effect of Termination
The date of any notice of termination shall be the date such notice is
mailed. Any notice of termination by MMSA shall inform Dealer of the
grounds therefor, and any such notice may be withdrawn if during the
applicable notice period Dealer cures to MMSA's satisfaction the
condition or conditions upon which the notice is based. If any period
of advance notice of termination required hereunder is less than that
required by applicable law, such period of advance notice shall be
deemed to be the minimum period required by such laws.
MMSA's election to terminate this Agreement shall be without prejudice
to any other right or remedy which may be available to MMSA hereunder
or under applicable law.
D. Establishment of Successor Dealer
1. Because of the Death of an Owner
In the event of termination of this Agreement by MMSA because of
the death of an Owner, pursuant to Section X.B.2.(c) hereof, the
following provisions shall apply:
a) Subject to the other provisions of this Agreement, MMSA
shall offer an MMSA Interim
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Sales and Service Agreement (a conditional and temporary
sales and service agreement the term of which may not exceed
one (1) year) in the form then used by MMSA to a successor
dealer ("Successor Dealer") comprised of the person
nominated by such deceased Owner as his or her successor,
together with the other Owner(s), provided that:
(i) the nomination was submitted to MMSA in writing, was
consented to by all remaining Owners, and was
approved by MMSA prior to the death of such Owner;
(ii) either (a) there has been no change in the Executive
Managers of Dealer or (b) the provisions of Section
X.D.2. below have been complied with; and
(iii) the Successor Dealer has capital and facilities
substantially in accordance with MMSA's established
standards and requirements therefor at the time the
MMSA Interim Sales and Service Agreement is offered.
b) If the deceased Owner has not nominated a successor in
accordance with this section, but all of the beneficial
interest of the decreased Owner has passed by will or by the
laws of intestate succession directly to the deceased
Owner's spouse and/or children (the "Proposed New Owners"),
subject to the other provisions of this section, MMSA shall
offer an MMSA Interim Sales and Service Agreement in the
form then used by MMSA to a Successor Dealer comprised of
the Proposed New Owners, together with the other Owner(s),
provided that:
(i) Either (a) there has been no change in the
Executive Managers of Dealer or (b) the provisions
of Section X.D.2. below have been complied with;
and
(ii) The Successor Dealer has capital and facilities
substantially in accordance with MMSA's
established standards and requirements therefor at
the time the MMSA Interim Sales and Service
Agreement is offered.
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2. Because of Death or Incapacity of Executive Manager
In the event of the termination of this Agreement by MMSA because
of the death, physical or mental incapacity of an Executive
Manager, subject to the other provisions of this section of this
Agreement, MMSA shall offer an MMSA Interim Sales and Service
Agreement to a Successor Dealer comprised of the Owners, provided
that:
a) Either (i) the Owners have nominated in writing a person to
succeed the deceased or disabled Executive Manager which
nomination was approved by MMSA prior to the event causing
the death, disability or incapacity of such Executive
Manager, or (ii) not later than one (1) month after the
occurrence of such death or disabling event a new Executive
Manager is proposed to MMSA by all of the Owners and such
person is approved by MMSA; and
b) The Successor Dealer has capital and facilities
substantially in accordance with MMSA's established
standards and requirements therefor at the time the MMSA
Interim Sales and Service Agreement is offered.
3. Evaluation of Successor Dealer
During the term of any MMSA Interim Sales and Service Agreement
offered pursuant to Sections X.D.1. or X.D.2. hereof, MMSA will
periodically review the performance of the Successor Dealer using
the standards set forth in the Successor Dealer's Dealer
Development Plan. If such Successor Dealer is able to
satisfactorily meet such standards and desires to continue the
dealership operation, the Successor Dealer will be given an
opportunity to enter into an MMSA Dealer Sales and Service
Agreement and such Successor Dealer shall be thereafter treated
in the same manner as any Authorized MMSA Dealer.
4. Termination of Market RepresentationNotwithstanding anything
stated or implied to the contrary in this Agreement, MMSA shall
not be obligated to offer a dealership agreement to any Successor
Dealer if MMSA notifies Dealer in
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writing prior to the event causing the termination of this
Agreement that MMSA's market representation plans do not provide
for continuation of that Dealership operation in the Sales
Locality.
5. Termination of Offer
Any offer of an MMSA Interim Sales and Service Agreement to a
proposed Successor Dealer made under this section shall
automatically expire if not accepted within thirty (30) days
after presentation by MMSA.
E. Continuance of Business Relations
If, after the effective date of termination or expiration, MMSA
chooses to accept orders from Dealer to fill customers' orders
received prior to such date by Dealer, or if MMSA otherwise transacts
business with Dealer relating to the sale of MMSA Products, all such
transactions will be governed by the terms of this Agreement, so far
as those terms are applicable. Nevertheless, no such acceptance of
orders or other acts by MMSA shall waive termination or constitute a
renewal of this Agreement.
F. Discontinuance of Use of Marks
Upon expiration or termination of this Agreement, Dealer agrees that
it shall immediately:
1. Discontinue the use of the words "Mitsubishi," "MMSA" and all
other MMSA Trademarks, or any semblance of any of the foregoing,
including without limitation, the use of all stationery and other
printed material referring in any way to Mitsubishi, MMSA, or
MMC, any other manufacturer of MMSA Products, or bearing any MMSA
Trademarks; and
2. Discontinue any use of the words "Mitsubishi," "MMSA" or other
MMSA Trademarks, or any semblance of any of the foregoing, as a
part of its trade name, and file a change or discontinuance of
such name with appropriate authorities; and
3. Remove all product signs bearing any MMSA Trademarks from the
Dealership Premises at Dealer's sole cost and expense; and
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4. Not represent itself as an Authorized MMSA Dealer; and
5. Refrain from any action including, without limitation, any
advertising stating or implying that it is authorized to sell or
distribute MMSA Products.
In the event Dealer fails to comply with the terms and conditions of
this Section X.F., MMSA shall have the right to enter upon the
Dealership Premises and remove all such signs bearing any MMSA
Trademarks without liability to Dealer; and Dealer agrees that it
shall reimburse MMSA for any costs and expenses incurred in connection
therewith, including but not limited to reasonable attorneys' fees.
G. Repurchase Provisions
Upon the expiration or termination of this Agreement, MMSA may at its
option purchase from Dealer all or any part of the following:
1. New, unused, undamaged current model year MMSA Vehicles then
unsold in Dealer's inventory. The prices of such vehicles shall
be the lower of (i) the price at which they were originally
purchased by Dealer from MMSA, or (ii) the Invoice Price last
established by MMSA for the sale of identical vehicles to MMSA
Dealers in the area in which Dealer is located, less in either
case all prior refunds or allowances, if any, made by MMSA with
respect thereto, and also less any costs and expenses required to
place the repurchased vehicles in new car condition.
2. New, unused and undamaged MMSA Parts and Accessories then unsold
in Dealer's inventory which are in good and saleable condition,
provided that they are listed in the then current MMSA Master
Parts Price List and have not been superseded by another part or
accessory. All such parts and accessories must be in the
original container bearing a label with the appropriate part
identification number. Should MMSA elect to purchase parts, the
repurchased price shall be the price last established by MMSA for
the sale of identical MMSA Parts or Accessories to MMSA Dealers
in the area in which Dealer is located, less the maximum dealer's
discount available under
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the most favorable purchase terms available to Dealer and also
less handling and packing charges then in effect as established
by MMSA.
If Dealer purchased MMSA Parts and Accessories from sources other
than MMSA, Dealer must present to MMSA evidence of the price
which it paid for such parts before MMSA will consider
repurchasing such parts. In no event shall MMSA pay a price
which exceeds the price for any part as calculated hereinabove.
3. Tools and equipment especially designed for servicing MMSA
Vehicles. The prices for such tools and equipment shall be as
mutually agreed upon by MMSA and Dealer.
4. Signs recommended by MMSA for identification of Dealer. The
prices of such signs shall be as mutually agreed upon by MMSA and
Dealer.
Within thirty (30) days after the date of expiration or termination of
this Agreement, Dealer shall deliver or mail to MMSA a detailed
inventory of all items referred to in subsections 1, 2, 3 and 4 above
and Dealer shall certify the truth thereof. In the event Dealer fails
to supply such a list to MMSA within said period, MMSA shall have the
right to enter the Dealership Premises, without liability to Dealer,
for the purpose of compiling such an inventory list; and Dealer shall
reimburse MMSA for any costs and expenses incurred in connection
therewith. If, upon review of the inventory list, MMSA decides to
purchase any of the items in subsections 1-4 hereinabove, MMSA will,
within a reasonable period of time, provide Dealer with a written
offer specifying the items MMSA wishes to purchase. Dealer shall act
promptly in arranging for the sale and delivery of such items to MMSA.
If Dealer fails to promptly cooperate in effectuating the sale, MMSA
may, at its option, withdraw its offer to repurchase.
Any purchase made hereunder shall be deemed to be only with respect to
those items which were purchased by Dealer from MMSA, unless MMSA by
its notice of such purchase states otherwise. Dealer agrees that
products to be purchased by MMSA from Dealer shall be delivered by
Dealer to MMSA's place of business at Dealer's expense; or, if Dealer
fails to do so, MMSA may transport such products and deduct the costs
therefor from the repurchase price. Dealer agrees to execute
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and deliver to MMSA instruments satisfactory to MMSA conveying title
to the aforesaid property to MMSA. If such property is subject to any
lien or charge of any kind, Dealer agrees to procure the discharge and
satisfaction thereof prior to the repurchase of such property by MMSA.
XI. POLICY REVIEW BOARD
A. Establishment of Policy Review Board
In the interest of maintaining harmonious relations between MMSA and
Dealer and to provide for the resolution of protests, controversies
and claims related to the transactions contemplated under this
Agreement, MMSA shall establish the Mitsubishi Motor Sales of America,
Inc. Policy Review Board (the "Policy Review Board") to be comprised
of two corporate officers and one MMSA Dealer representative. Dealer
agrees to abide by the procedures of the Policy Review Board, as they
may be revised from time to time by MMSA.
B. Appeal of Dealer Appointment to Policy Review Board
If, as a result of a market analysis undertaken by MMSA, MMSA proposes
to appoint an additional MMSA Dealer in the Sales Locality, and if
Dealer objects to such proposed addition, Dealer may file a written
objection to such proposed addition with the Policy Review Board in
accordance with the procedures established therefor within fifteen
(15) days from the date of Dealer's receipt of notice of MMSA's intent
to appoint such additional MMSA Dealer. MMSA will not appoint such
additional dealer until the Policy Review Board has rendered its
decision on the matter and any decision of the Policy Review Board
shall be binding on MMSA but not on Dealer.
C. Appeal of Termination to Policy Review Board
Any protests, controversies or claims by Dealer (whether for damages,
stays of action or otherwise) with respect to any termination of this
Agreement or the settlement of the accounts of Dealer with MMSA after
termination of this Agreement has become effective shall be appealed
by Dealer to the Policy Review Board within fifteen (15) days after
Dealer's receipt of notice of termination or, as to settlement of
accounts after termination, within six (6) months after the
termination has become effective. Appeal to
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the Policy Review Board shall be a condition precedent to Dealer's
right to pursue any other remedy available under this Agreement or
otherwise available under law. MMSA, but not Dealer, shall be bound by
the decision of the Policy Review Board.
D. Arbitration of Claims by Dealer
If Dealer is dissatisfied with a decision of the Policy Review Board
in a case arising under Section XI.C. hereof, Dealer may submit the
matter to binding arbitration as hereinafter provided.
1. Arbitration shall be initiated by Dealer by filing a written
request therefor within fifteen (15) days after Dealer's receipt
of notice of the decision of the Policy Review Board issued under
Section XI.C. hereof. Dealer's written request to arbitrate,
together with the appropriate filing fee, shall be filed by
Dealer with the office of the American Arbitration Association
located nearest to the Dealership Premises, which shall then
become the site of the arbitration proceedings, unless otherwise
agreed to by the parties. The arbitration request shall set
forth a clear and complete statement of the nature of Dealer's
claim and its basis, the amount involved, if any, and the remedy
sought.
2. Arbitration shall be the sole and exclusive remedy of Dealer in
such cases, and the decision and award of the arbitrator shall be
final and binding on both parties.
3. The arbitration shall be conducted in accordance with the
Commercial Rules of the American Arbitration Association then in
effect (hereinafter referred to as the "Commercial Rules") and in
consonance with the United States Arbitration Act (9 U.S.C.
Section 1, et seq.).
4. The arbitration shall be heard by a single, impartial arbitrator
mutually agreeable to the parties, who shall be an attorney at
law admitted to practice for at least five (5) years and selected
from a panel of American Arbitration Association arbitrators. If
the parties shall fail to reach such an agreement within fifteen
(15) days of the Dealer's request to arbitrate, an arbitrator
meeting such qualifications shall be named by the American
Arbitration Association from
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such panel in accordance with the Commercial Rules.
5. If the arbitrator finds that termination of this Agreement by
MMSA would be in accord with the provisions hereof, the standards
set forth in the Automobile Dealer Suits Against Manufacturers
Act, 15 U.S.C. Sections 1221-1225 (the "Dealer's Day in Court
Act"), and any applicable state or local law, the arbitrator
shall render an award in favor of MMSA, the termination shall
become effective on the date of such award, and the termination
shall be expressly recognized by Dealer as having been made by
MMSA without breach by MMSA of this Agreement, the Dealer's Day
in Court Act, or any applicable state or local law. If the
arbitrator shall render an award in favor of Dealer, MMSA's
notice of termination shall be void and shall not be deemed to
constitute a breach of this Agreement. The decision and award of
the arbitrator shall be conclusive as to all matters within the
arbitrator's jurisdiction in all other proceedings between the
parties, their successors or assigns, and judgment upon the award
may be entered in any Court of competent jurisdiction.
6. To facilitate the selection of a competent and experienced
arbitrator, the parties agree to make reasonable arrangements to
compensate the arbitrator for the time spent in the performance
of his or her duties. The compensation shall be commensurate
with the professional standing of the arbitrator and shall be
arranged in conformance with the Commercial Rules. The
compensation of the arbitrator, the administrative fees and
charges of the American Arbitration Association, and the other
expenses of the arbitration shall be borne by the parties as
provided in the Commercial Rules. The arbitrator shall, however,
have discretion in the arbitrator's award to assess such
compensation, administrative fees and charges and other expenses
of the arbitration against either party in such proportions (or
in their entirety) as the arbitrator may determine to be fair and
equitable, provided that in all cases each party shall pay the
fees and disbursements of its own legal counsel.
7. Unless MMSA and Dealer specifically agree to the contrary, and
subject to the Commercial Rules and the procedures of the
American Arbitration
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Association, the arbitration hearing shall be concluded not more
than sixty (60) days after the date of Dealer's written request
to arbitrate.
XII. GENERAL PROVISIONS
A. Indemnification
1. Dealer shall defend and indemnify MMSA and any manufacturer of
MMSA Products and hold each of them harmless from any and all
liabilities that may be asserted or arise by reason or out of:
(a) Dealer's failure or alleged failure to comply, in whole or in
part, with any obligation assumed by Dealer pursuant to this
Agreement; (b) Dealer's negligent or improper, or alleged
negligent or improper, repairing or servicing of new or used MMSA
Vehicles or equipment, or such other motor vehicles or equipment
as may be sold or serviced by Dealer; (c) Dealer's breach, or
alleged breach, of any contract between Dealer and Dealer's
customer; or (d) Dealer's misleading statement or
misrepresentation, or alleged misleading statement or
misrepresentation, either direct or through advertisement, to any
customer of Dealer. This indemnification shall include all
attorneys' fees, court costs and expenses incurred by MMSA and/or
any manufacturer of MMSA Products in defending any claim or suit
asserted as a result of the foregoing.
In the event that any legal action arising out of any of the
foregoing causes or alleged causes is brought against MMSA, any
manufacturer of MMSA Products and/or any of their shareholders,
then Dealer shall undertake, at its sole expense, the defense of
said action on their behalf. Should any tender of such defense
be refused by Dealer, then MMSA, any manufacturer of MMSA
Products and/or any of their shareholders shall conduct such
defense; and Dealer shall be liable to MMSA, any manufacturer of
MMSA Products and/or any of their shareholders for costs of such
defense, including attorneys' fees, together with any judgment or
settlement paid by MMSA, any manufacturer of MMSA Products and/or
any of their shareholders.
Dealer shall have no obligation to indemnify MMSA and/or any
manufacturer of MMSA Products pursuant to this paragraph if the
injury or damage as to
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which indemnification is demanded is alleged to have been caused
or contributed to in any way by any act or omission by MMSA
and/or any manufacturer of MMSA Products.
2. MMSA and/or any manufacturer of MMSA Products shall indemnify
Dealer and hold it harmless from any and all claims for personal
injury or property damage resulting from the alleged
malfunctioning of an MMSA Product claimed to have been caused by
a factory defect or deficiency in design of such product. This
indemnification shall include all attorneys' fees, court costs
and expenses incurred by Dealer in defending any claim or suit
asserted as a result of the foregoing.
In the event that any legal action arising out of any of the
foregoing causes or alleged causes is brought against Dealer
and/or any of their shareholders, then MMSA and/or any
manufacturer of MMSA Products shall undertake, at its sole
expense, the defense of said action on their behalf. Should any
tender of such defense be refused by MMSA and/or any manufacturer
of MMSA Products, the Dealer, and/or any of their shareholders,
shall conduct such defense; and MMSA and/or any manufacturer of
MMSA Products shall be liable to Dealer, and/or any of their
shareholders for costs of such defense, including attorneys'
fees, together with any judgment or settlement paid by Dealer,
and/or any of their shareholders.
MMSA and/or any manufacturer of MMSA Products shall have no
obligation to indemnify Dealer pursuant to this paragraph if the
injury or damage as to which indemnification is demanded is
alleged to have been caused or contributed to in any way by any
act or omission by Dealer, including, but not limited to,
improper or unsatisfactory service or repair, misrepresentation
or any claim of Dealer's unfair or deceptive trade practice.
3. Any party seeking indemnification shall promptly give written
notice to the proposed indemnitor of any lawsuit and provide
copies of any pleadings which have been served, together with all
information then available regarding the circumstances giving
rise to the suit. The proposed indemnitee shall at all times
take all reasonable steps to insure that the defense of such
lawsuit is not prejudiced by its action or
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inaction. The parties shall cooperate fully in the defense of
such lawsuit in such manner and to such extent as the indemnitor
may reasonably require.
B. No Implied Waivers
Any failure of either party at any time to require performance by the
other party of any provision hereof shall in no way affect the full
right to require such performance at any time thereafter, nor shall
any waiver by either party of a breach of any provision hereof
constitute a waiver of any succeeding breach of the same or any other
provision, nor constitute a waiver of the provision itself. The
election by either party of a particular remedy on default (including
but not limited to termination of this Agreement) will not be
exclusive of any other remedy provided hereunder or by applicable law,
and all rights and remedies of the parties hereto will be cumulative.
C. Waiver of Trial by Jury
For all disputes, controversies or claims which may arise between MMSA
and Dealer out of, or in connection with, this Agreement, its
construction, interpretation, effect, performance or nonperformance,
termination or the consequences thereof, or in connection with any
transaction between them contemplated hereby, MMSA and Dealer hereby
waive, to the extent permitted by law, the right to trial by jury.
D. Dealer Not Agent or Representative
This Agreement does not make Dealer the agent or legal representative
of MMSA or any other manufacturer of MMSA Products for any purpose
whatsoever. Dealer is not granted any express or implied right or
authority to assume or to create any obligation or responsibility on
behalf of or in the name of MMSA or any other manufacturer of MMSA
Products or to bind either in any manner whatsoever.
E. Assignment
Neither party may assign this Agreement or any of its interest herein
without the prior written consent of the other party, except that MMSA
may assign this Agreement without such consent to any person, firm or
corporation succeeding to its business and to any subsidiary or
affiliated company of MMSA.
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F. Expenses
Except as provided in this Agreement, MMSA shall not be under any
liability whatsoever for any expenditure made or incurred by Dealer in
connection with Dealer's performance of its obligations pursuant to
this Agreement.
G. Taxes
Dealer agrees that it shall be responsible for and shall duly pay any
and all sales taxes, use taxes, excise taxes, and other governmental
or municipal charges, whenever imposed, levied or based upon the sale
of MMSA Products by MMSA to Dealer and shall maintain accurate records
of same for reporting purposes. Dealer agrees to pay and to hold MMSA
harmless from any sales tax, use tax or similar tax, and any claims or
demands (whether or not lawful) made by tax authorities with respect
to such taxes, applicable with respect to the sale of MMSA Products
from MMSA to Dealer and from Dealer to its customers.
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Exhibit
10.2.7.1
<PAGE>
OLDSMOBILE DIVISION
DEALER SALES AND SERVICE AGREEMENT
Oldsmobile has a long-standing tradition of providing quality, family oriented
vehicles of good value. Building upon its heritage, Oldsmobile's mission is to
be the volume leader in the midsize and large vehicle segments, and to increase
its market share with upscale models in other growth segments. Oldsmobile
intends to fulfill this mission through the joint efforts of Oldsmobile and its
dealers.
The long-term growth and mutual success of Oldsmobile and its dealers also
depends significantly upon the ability and efforts of its dealers. Oldsmobile
expects its dealers to effectively sell, service, and protect the reputation of
Oldsmobile Products and to satisfy the customers of Oldsmobile Products in a
manner that demonstrates a caring attitude toward those customers.
CUSTOMER SATISFACTION
FIRST
Oldsmobile and Dealer recognize that customer satisfaction is essential to our
mutual business success. Therefore, Oldsmobile and Dealer are dedicated to
working together to assure complete satisfaction with our Products and services,
with the goal that each of our customers will remain lifelong members of the
Oldsmobile family.
Oldsmobile commits to advise Dealer no less than on a yearly basis of the
results of any dealer customer satisfaction index generated by Oldsmobile and to
relate such index to local and national geography. In the event that ratings of
the satisfaction of Dealer's customers place Dealer in an unsatisfactory
position relative to comparable indexes, Dealer shall, upon request of
Oldsmobile, cooperate in a comprehensive review of Dealer's performance and
participate in a customer satisfaction improvement program designed by Dealer
and Oldsmobile.
To enhance customer satisfaction, Oldsmobile has implemented the Oldsmobile Edge
programs. Dealer participation is essential to the success of these programs,
and Dealer agrees to participate in these programs. Oldsmobile may modify these
programs from time to time, and Oldsmobile will obtain dealer input before
adopting such modifications.
<PAGE>
COMMUNICATION
SECOND
Oldsmobile and Dealer recognize the importance of good communication in our
business and marketing planning, and in our respective ongoing operations.
Oldsmobile has established the following dealer representative entities to
counsel with Oldsmobile, and may establish from time to time other
representative dealer entities to further enhance our mutual interests.
NATIONAL DEALER COUNCIL
The responsibility of the Oldsmobile National Dealer Council ("Council") is to
develop and maintain a business relationship between Oldsmobile and the dealer
body that fosters the mutual interests of both Dealer and Oldsmobile. The
Council is composed of dealer elected members representing the various
geographical areas of the United States and includes members that represent
large and small volume dealers. The Council meets with Oldsmobile at least
twice annually to discuss matters of mutual interest and importance. Much
progress and improvement has been made over the years as a result of Council
input, and Oldsmobile intends to continue this important link of communication
with its dealers.
In addition to the Council, and recognizing the important contribution of
dealers in fulfilling the Oldsmobile mission, Oldsmobile has established three
advisory committees to obtain dealer input. These committees are comprised of
Oldsmobile Dealer Operators selected by either the Council or Oldsmobile.
Dealer agrees that Dealer Operator will serve on the Council or on an Advisory
Committee when requested.
MARKETING ADVISORY COMMITTEE
The purpose of the Marketing Advisory Committee is to promote the exchange of
ideas and concerns between Oldsmobile and its dealers on topics relating to the
marketing of Oldsmobile Products. Topics may include advertising and incentive
activities, product option packages, special options, point of sale material,
customer satisfaction and similar activities relating to our mutual marketing
objectives.
SERVICE ADVISORY COMMITTEE
The purpose of the Service Advisory Committee is to provide for the exchange of
ideas and concerns between Oldsmobile and its dealers on service related
subjects. Subjects may include warranty coverage, customer satisfaction and
owner loyalty,
-2-
<PAGE>
service merchandising, dealership premises, dealership training, tools and
equipment and service policies and procedures.
PRODUCT ADVISORY COMMITTEE
The purpose of the Product Advisory Committee is to obtain dealer input into
future product programs. Subjects may include product strategies, vehicle
specifications, model lineup changes, specialty vehicle programs and color and
trim selections.
DEALER OPERATOR
THIRD
Dealer agrees that the following Dealer Operator will provide personal services
in accordance with Article 2 of the Standard Provisions:
JOSEPH J. MITOLO
- --------------------------------------------------------------------------------
DEALERSHIP IMAGE AND DESIGN
FOURTH
As the point of customer contact with Oldsmobile's Products, the appearance and
qualify of dealership Premises can affect the way customers perceive
Oldsmobile's Products and Dealer. Dealer, therefore agrees that its dealership
Premises will be properly equipped and maintained, and that the interior and
exterior retail environment and signs will comply with any reasonable
requirements Oldsmobile may establish to promote and preserve the image of
Oldsmobile and its dealers. Oldsmobile will take into account existing economic
and marketing conditions, and consult with the Dealer Marketing and Service
Advisory Committees, in establishing such requirements. To assist Dealer,
Oldsmobile will counsel and advise Dealer concerning facility appearance and
design.
ADVERTISING AND PROMOTIONAL ACTIVITY
FIFTH
Oldsmobile and Dealer agree to promote Oldsmobile Products in the conduct of
their business, refrain from any activity harmful to the reputation of
Oldsmobile Products and maintain uniformly high standards of ethical
advertising. Oldsmobile believes in and supports dealer advertising
associations and encourages Dealer to support and participate in Dealer's local
advertising association.
-3-
<PAGE>
DEALER SALES REVIEW
SIXTH
Oldsmobile will provide to Dealer, at least annually, a written Dealer Sales and
Registration Report ("Report") advising Dealer of Dealer's retail sales index,
Dealer's state ranking, and Oldsmobile's retail registration index and fleet
registration performance in Dealer's Area of Primary Responsibility. Oldsmobile
may modify the sales review process from time to time and will obtain dealer
input before adopting such modifications.
A Retail Sales Index of 100 is the minimum standard for Dealer to be considered
in compliance with its commitment under Article 5.1 to effectively sell and
promote the purchase, lease and use of Oldsmobile Products. Oldsmobile also
expects Dealer to pursue available sales opportunities exceeding the minimum
acceptable standard. Additionally, Oldsmobile expectations for performance in
an area may exceed the minimum acceptable standard for individual dealer
compliance.
DEALER SERVICE REVIEW
SEVENTH
Oldsmobile commits to review at least annually, Dealer's responsibility to
provide efficient and quality service to Oldsmobile owners. The manner in which
that review will be conducted and those items which will be included in the
process will be set forth in the Service Policies and Procedures Manual.
Oldsmobile may modify the service review process from time to time and will
obtain the input of the Service Advisory Committee before adopting such
modifications.
TRAINING
EIGHTH
Oldsmobile and Dealer agree that professional and knowledgeable personnel are
essential to customer satisfaction and to the long-term success of Oldsmobile
and Dealer. Accordingly, Oldsmobile agrees to make available or recommend
product, sales, service and parts, accounting and business management training
for its dealers. Dealer agrees that its personnel will attend training
identified by Oldsmobile as necessary. If Oldsmobile identifies Dealer
deficiencies, Dealer agrees that its personnel will complete courses specified
by Oldsmobile. Oldsmobile agrees to consult with the Marketing and/or Service
Advisory Committee before adopting additional required training and will
consider the Marketing and/or Service Advisory Committee recommendations as to
content and frequency of additional required training. Oldsmobile and Dealer
acknowledge that competent training from other sources is available and that
Dealer may benefit from it.
-4-
<PAGE>
TOOLS AND EQUIPMENT
NINTH
Oldsmobile and Dealer acknowledge that a properly equipped dealership promotes
customer satisfaction and sale of Oldsmobile Products. Oldsmobile agrees to
provide Dealer with lists of those tools and equipment that Oldsmobile regards
as essential. Dealer agrees that it will acquire and use essential tools and
equipment identified by Oldsmobile. Oldsmobile agrees to consult with the
Service Advisory Committee prior to requiring additional tools other than those
required to service new model Products.
BUSINESS MANAGEMENT RESPONSIBILITY
TENTH
If Dealer is an authorized dealer for more than one division of General Motors,
OLDSMOBILE DIVISION will be primarily responsible for administering the
provisions of the Dealer Agreements relating to the Dealer Statement of
Ownership, Dealership Location and Premises Addendum, and Capital Standard
Addendum. OLDSMOBILE DIVISION will execute those documents for all
divisions.
TERM OF AGREEMENT
ELEVENTH
This Agreement shall expire on OCTOBER 01, 1997, or ninety days after the
death or incapacity of a Dealer Operator or Dealer Owner, whichever occurs
first, unless earlier terminated. Dealer is assured the opportunity to enter
into a new Dealer Agreement with Oldsmobile at the expiration date if Oldsmobile
determines Dealer has fulfilled its obligations under this Agreement.
DISPUTE RESOLUTION PROCESS
TWELFTH
General Motors has long recognized that mutual respect, trust, and confidence
are vital to the relationship between General Motors and each authorized
dealer. In those instances where a dispute arises between Dealer and
Oldsmobile, Dealer is encouraged to present the matter to Oldsmobile management
for review. If the matter is not resolved through management review, Dealer is
encouraged to submit the dispute to the Dispute Resolution Process. Oldsmobile
will provide Dealer with a written copy of the Dispute Resolution Process.
Oldsmobile may modify the Dispute Resolution Process from time to time, and will
obtain dealer input before adopting such modifications.
-5-
<PAGE>
INCORPORATION OF STANDARD PROVISIONS
THIRTEENTH
The "Standard Provisions" (GMMS 1013) are incorporated as a part of this
Agreement.
ADDITIONAL AGREEMENTS AND UNDERSTANDINGS
FOURTEENTH
The following agreements and understandings are hereby incorporated into this
Agreement:
(List any special letters, facility agreements, etc.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IDENTIFICATION OF PARTIES AND EFFECTIVE DATE
FIFTEENTH
This Agreement, effective OCTOBER 02, 1992, is entered into by General
Motors Corporation, Oldsmobile Division ("Oldsmobile"), a Delaware corporation,
and
J & F OLDSMOBILE-ISUZU PARTNERSHIP, a
-X- NEW JERSEY corporation, incorporated on
DECEMBER 18, 1978;
--- proprietorship;
--- partnership;
doing business at 315 CLENDENNY AV ON RT 440
JERSEY CITY, NEW JERSEY 07304 ("Dealer").
EXECUTION OF AGREEMENT
SIXTEENTH
This Agreement and related agreements are valid only if signed:
(a) on behalf of Dealer by its duly authorized representative and, in the case
of this Agreement, by its Dealer Operator; and
-6-
<PAGE>
(b) on behalf of Oldsmobile by its General Sales and Service Manager and his
authorized representative.
J & F OLDSMOBILE-ISUZU PARTNERSHIP
- --------------------------------------------------------------------------------
Dealership Name
OLDSMOBILE DIVISION
General Motors Corporation
By /s/ Joseph Mitolo 10-2-92 By /s/ D. E. Lahti
-------------------------- ----------------------------------
Dealer Operator Date General Sales and Service Manager
By /s/ Illegible 10-2-92
-----------------------------------
Authorized Representative Date
-7-
<PAGE>
OLDSMOBILE DIVISION
MOTOR VEHICLE ADDENDUM
TO
GENERAL MOTORS CORPORATION
DEALER SALES AND SERVICE AGREEMENT
J & F OLDSMOBILE-ISUZU PARTNERSHIP
- --------------------------------------------------------------------------------
Dealer Firm Name
JERSEY CITY, NEW JERSEY
----------------------------------
City, State
Effective November 1, 1990, Dealer, as an authorized Oldsmobile dealer, has a
non-exclusive right to buy the following new Motor Vehicles marketed by
Oldsmobile Division of General Motors Corporation:
PASSENGER CARS
ACHIEVA, CUTLASS CIERA, CUTLASS SUPREME, EIGHTY-EIGHT ROYALE, NINETY-EIGHT
LIGHT DUTY TRUCK
BRAVADA, SILHOUETTE
This Motor Vehicle Addendum shall remain in effect unless and until superseded
by a new Motor Vehicle Addendum furnished Dealer by Oldsmobile. This Motor
Vehicle Addendum cancels and supersedes any previous Motor Vehicle Addendum
furnished Dealer by Oldsmobile.
OLDSMOBILE DIVISION
General Motors Corporation
By__________________________________
Signature Date
/s/ Illegible 10/2/92
------------------------------------
OLDSMOBILE ZONE MANAGER
(Dealer should file this Motor Vehicle Addendum with Dealer's current Dealer
Agreement.)
<PAGE>
NOTICE OF
AREA OF PRIMARY RESPONSIBILITY
TO
GENERAL MOTORS CORPORATION
DEALER SALES AND SERVICE AGREEMENT
Effective OCTOBER 02, 1992, the communities and area described below, shall
be Dealer's Area of Primary Responsibility for the undersigned division of
General Motors.
IN THE STATE OF: NEW JERSEY IN THE COUNTY OF: BERGEN
THE FOLLOWING WHOLE OR PARTIAL COMMUNITIES:
CLIFF PARK CLIFFSIDE PARK FAIRVIEW
IN THE STATE OF: NEW JERSEY IN THE COUNTY OF: BERGEN
AS DESCRIBED BY THE FOLLOWING U.S. CENSUS TRACTS:
63.00 181.00 182.00
IN THE STATE OF: NEW JERSEY IN THE COUNTY OF: HUDSON
THE FOLLOWING WHOLE OR PARTIAL COMMUNITIES:
BAYONNE BERGEN BERGEN POINT BERGENLINE
CASTLE POINT FORTY THIRD STRE GENERAL LAFAYETT GREENVILLE
GUTTENBERG HOBOKEN HUDSON CITY HUDSON HEIGHTS
JACKSON AVENUE JERSEY CITY JOURNAL SQUARE MEADOWVIEW
MILITARY OCEAN T MONITOR NORTH BERGEN PAMRAPO
PARK AVENUE SECAUCUS SUMMIT AVENUE TAURUS
TYLER PARK UNION CITY UPTOWN WASHINGTONSTREE
WEEHAWKEN WEST NEW YORK WEST SIDE WOODCLIFF
IN THE STATE OF: NEW JERSEY IN THE COUNTY OF: HUDSON
THE ENTIRE COUNTY LESS THE FOLLOWING U.S. CENSUS TRACTS:
58.02 103.99 123.00 124.00
125.00 126.00 127.00 128.00
129.00 130.00 131.00 132.00
133.00 134.00 135.00 136.00
[COUNTY CONTINUED ON FOLLOWING PAGE(S)]
<PAGE>
NOTICE OF
AREA OF PRIMARY RESPONSIBILITY
TO
GENERAL MOTORS CORPORATION
DEALER SALES AND SERVICE AGREEMENT
[COUNTY CONTINUED FROM PRECEDING PAGE(S)]
IN THE STATE OF: NEW JERSEY IN THE COUNTY OF: HUDSON
THE ENTIRE COUNTY LESS THE FOLLOWING U.S. CENSUS TRACTS:
137.00 138.00 139.00
The Area of Primary Responsibility will be employed by Division to review the
effectiveness of Dealer's performance under the Dealer Agreement, and for other
matters relating to Dealership Operations. The Area of Primary Responsibility
described herein will continue in effect until changed by written notice to
Dealer.
J & F OLDSMOBILE - ISUZU PARTNERSHIP
- --------------------------------------------------------------------------------
Dealer Firm Name
JERSEY CITY, NEW JERSEY
- --------------------------------------
City, State
OLDSMOBILE DIVISION
GENERAL MOTORS CORPORATION
By /s/ Illegible
------------------------------------
OLDSMOBILE ZONE MANAGER Date
<PAGE>
DEALER STATEMENT OF OWNERSHIP
J & F OLDSMOBILE - ISUZU PARTNERSHIP
- --------------------------------------------------------------------------------
Dealer Firm Name
JERSEY CITY, NEW JERSEY
- ---------------------------------------------
City, State
- --- a proprietorship, -X- a partnership or --- a corporation incorporated on
DECEMBER 18, 1978
in the State of NEW JERSEY
The undersigned Dealer hereby certifies that the following information is true,
accurate and complete, as of OCTOBER 02, 1992
<TABLE>
<CAPTION>
Names and Titles of
all individuals,
beneficiaries of
trusts or other
entities owning 5% or
more of Dealer and
entitled to receive
dividends or profits
from Dealer as a If a Corporation, Show
result of ownership Active Number of Shares and Class
in Value of the Owner- Percentage
Dealer- ship Interest of Each of
(Identify Holding ship Type* Voting Person Listed Based Ownership
Company owners on GMMS (Yes or Number or (Yes or on Dealership's of Record
1014-4) No) Shares Class No) Current Net Worth in Dealer
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JOSEPH J. MITOLO YES $ 66,525 7.50%
PRESIDENT
'21' INT'L HOLDINGS, INC. NO $ 603,160 68.00%
SAM C. DIFEO NO $ 199,575 22.50%
VICE-PRESIDENT
EZRA P. MAGER NO $ 17,740 2.00%
$ %
$ %
TOTAL XXX $ 887,000 100.00%
</TABLE>
* Indicate various classes of common or preferred stock issued. State Par Value
of each share of preferred stock.
Remarks:
J & F OLDSMOBILE-ISUZU PARTNERSHIP
- --------------------------------------------------------------------------------
Dealer Firm Name
By /s/ Joseph Mitolo 10/2/92 By /s/ Illegible 10/2/92
------------------------------------ ---------------------------------
OLDSMOBILE DIVISION
GENERAL MOTORS CORPORATION
<PAGE>
J & F OLDSMOBILE - ISUZU PARTNERSHIP
- --------------------------------------------------------------------------------
Dealer Firm Name
JERSEY CITY, NEW JERSEY
---------------------------------
City, State
List below any person named on Page 1 that has any ownership in, or is active in
the management of, any other entity that merchandises General Motors Automotive
products.
Name Firm Name, Address and Position and Product Line(s)
'21' INT'L HOLDINGS, INC. DIFEO VOLKSWAGEN OF BRIDGEWATER
BOUND BROOK NJ
OLDSMOBILE PASS CAR
SAM C. DIFEO CROWN CADILLAC-OLDSMOBILE, INC.
WATCHUNG NJ
PRESIDENT
OLDSMOBILE PASS CAR CADILLAC PASS CAR
EZRA P. MAGER DIFEO VOLKSWAGEN OF BRIDGEWATER
BOUND BROOK NJ
OLDSMOBILE PASS CAR
List below any person named on Page 1 that has any ownership in, or is active in
the management of, any other entity that merchandises motor vehicles other than
those marketed by General Motors.
Name Firm Name, Address and Position and Product Line(s)
JOSEPH J. MITOLO J & F ISUZU
JERSEY CITY ,NEW JERSEY
PRESIDENT
ISUZU
SAM C. DIFEO HUDSON TOYOTA
JERSEY CITY ,NEW JERSEY
PRESIDENT
TOYOTA
SAM C. DIFEO J & F ISUZU
JERSEY CITY ,NEW JERSEY
PRESIDENT
ISUZU
<PAGE>
STATEMENT OF HOLDING COMPANY OWNERSHIP
J & F OLDSMOBILE-ISUZU PARTNERSHIP
- --------------------------------------------------------------------------------
Dealer Firm Name
JERSEY CITY, NEW JERSEY
- --------------------------------------------------------
City, State
INVESTORS PERCENT OF
OWNERSHIP
OTHER INVESTORS 54.76%
MARSHALL S. COGAN 45.24%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
<PAGE>
CAPITAL STANDARD ADDENDUM
TO
GENERAL MOTORS CORPORATION
DEALER SALES AND SERVICE AGREEMENT
This Capital Standard Addendum, effective OCTOBER 02, 1992, is pursuant to
Article 10 of the Dealer Sales and Service Agreement in effect between General
Motors and Dealer.
General Motors has determined that the minimum net working capital
(standard) necessary for this Dealer to adequately conduct Dealership Operations
consistent with the Dealer's responsibilities is $687,000.00.
Dealer has established, or will, within a reasonable time, establish and
maintain actual dealer net working capital in an amount not less than the
minimum amount specified above.
GENERAL MOTORS
DEALER CAPITAL STANDARD PROGRAM
General Motors Corporation has endeavored, through the General Motors Capital
Standard Program, to help dealers develop sound financial positions. Over the
years, this Program has contributed substantially to the effectiveness and
relative permanency of General Motors dealers as a whole.
The purpose of the General Motors Dealers Capital Standard Program is to
establish the minimum amount of regularly needed net working capital which
should be provided by the owners through capital stock, other investment and
earnings.
A minimum net working capital standard is established for each dealer based on
the dealership operations it is expected to conduct under its Dealer Sales and
Service Agreement(s). Dealer having actual net working capital equal to the
standard established for the dealership operations contemplated at its
dealership location should have net working capital sufficient to operate
through normal variations in the business cycle, provided its management
prudently maximizes the use of those funds.
Net working capital, as it is commonly understood, is the difference between
current assets and current liabilities without reference to the source from
which the working capital has been obtained. As used herein, however, the
actual dealer net working capital to be compared to the standard shall be
determined by arriving at the sum of Total Current Assets plus Driver Training
Vehicles, Lease and Rental Units and Total Accumulated LIFO Writedown minus the
sum of Total Liabilities excluding those listed below.
Those liabilities which are not subtracted are:
1. Long term notes payable which are qualified long term debt. Qualified
long term debt is defined by the following criteria:
a. The note must be payable to an owner of Dealer.
b. Principal payments must be restricted to profits.
c. The amount to be excluded is limited to 50% of the standard.
This exception is made because an owner would be less inclined to collect
on a note payable at maturity than an outside creditor when payment of such
a note would place the dealership in financial jeopardy.
2. Long term notes payable secured by real property.
This exception is made because dealers are not required to own land and
buildings which they use. Many dealers, however, elect to acquire and hold
title to all or a portion of such real property, thereby investing a
portion of the total equity capital in land and buildings which would
otherwise be available for working capital purposes.
J & F OLDSMOBILE - ISUZU PARTNERSHIP
- --------------------------------------------------------------------------------
DEALER FIRM NAME
JERSEY CITY, NEW JERSEY
- --------------------------------------------------
City, State
OLDSMOBILE DIVISION
GENERAL MOTORS CORPORATION
By /s/ 10/2/92
---------------------------------------
OLDSMOBILE ZONE MANAGER Date
<PAGE>
LOCATION AND PREMISES ADDENDUM
TO
GENERAL MOTOTS CORPORATION
DEALER SALES AND SERVICE AGREEMENT
The undersigned Dealer and the undersigned Division of General Motors
Corporation, acting for itself and the other Division(s), if any, identified on
Page 4, hereby agree that as of the effective date shown below:
1. Part I on Page 3 hereof, entitled "Description of Premises,"
identifies the Location and describes the Premises at which Dealer is
authorized to conduct Dealership Operations under the Dealer
Agreement(s). Dealer also represents that Part I accurately reflects
the terms under which it occupies the premises and the manner in which
each is used for GM Dealership Operations.
2. Part II beginning on Page 4 hereof, entitled "Premises Space
Analysis," sets forth the actual space Dealer represents it uses in GM
Dealership Operations, and the actual space at the same locations used
by Dealer for a purpose other than GM Dealership Operations.
All changes in the Location and Premises that may be agreed upon by Dealer and
General Motors pursuant to provisions of Article 4.4 of the Dealer Agreement(s)
requirements shall be reflected in a new Location and Premises Addendum executed
by Dealer and General Motors.
J&F OLDSMOBILE - ISUZU PARTNERSHIP
- --------------------------------------------------------------------------------
Dealer Firm Name
JERSEY CITY, NEW JERSEY
- ------------------------------------------------------
City, State
OLDSMOBILE DIVISION
GENERAL MOTORS CORPORATION
By /s/ Jospeh Mitolo
----------------------------
Signature Title
By By /s/ Illegible
---------------------------- -------------------------
Signature Title OLDSMOBILE ZONE MANAGER
10/2/92 10/2/92
- ------------------------------ -------------------------
Date Date
Identify any special letters in effect or special or unusual circumstances
relating to Dealership Premises:
(Turn to page 2 for instructions for completing this form)
<PAGE>
INSTRUCTIONS FOR COMPLETING
LOCATION AND PREMISES ADDENDUM
Page 1 - When pages 3 and 4 are completed, page 1 of the Addendum should be
signed and dated by Dealer.
Page 3 - "LOCATION, USE AND OWNERSHIP OF PREMISES"
Column A - Indicate the STREET ADDRESS and USE of each separate location
used by Dealer in the GM Dealership Operation. Also indicate the distance
of each separate location from the main location, in tenths of miles. A
"separate" location is one that is not immediately adjacent to the
dealership main location.
Column B - Indicate by "X" whether the premises at each location are owned
and carried as a dealership asset or leased.
Column C - If premises are leased, indicate for each such location the name
of the lessor, the beginning and expiration date of the lease, the annual
rental and the terms of any renewal options.
SECTION D - Provide total roofed and unroofed square footage as indicated.
Page 4 - Part II - "PREMISES SPACE ANALYSIS"
In Columns A and C, indicate the actual number of stalls available in each
of the departments listed on lines 1 thru 8, used for operations under GM
Agreement(s). In Columns B and D, indicate the stalls used for operations
under "Other" product agreements. The following should be taken into
consideration when completing each line:
Line 1 - Specify the number of stalls in building and lot used for the
display of new cars and trucks ready for sale.
Line 2 - Number of stalls used for the display of used cars and trucks,
including used vehicles awaiting reconditioning and wholesaling.
Line 3 - Show productive service stalls available in building.
Line 4 - Number of stalls used for sheet metal repairs, panel refinishing,
frame straightening and all other body related services.
Line 5 and 6 - Number of stalls for service reception and customer parking.
Line 7 - Number of stalls in building and lot used for new vehicle storage.
Line 8 - Number of stalls devoted to employe and demo parking and
miscellaneous activities not included in line 1 above.
Line 9 - Total of lines 1 - 8.
Line 10 and 11 - Specify, in square feet, in Column A the space used for
operations under your GM Agreement and in Column C the space used for
"Other" operations.
Line 12 - Total of Lines 10 and 11.
<PAGE>
GENERAL PROVISIONS
GM PULSAT NETWORK
EQUIPMENT INSTALLATION AGREEMENT
1. Consents. As used herein, "landowner" means each fee titleholder and all
other persons holding an interest in the Dealer's dealership premises where
Pulsat Equipment is to be installed ("Premises"), including land and
improvements, which interest affects Dealer's occupation and possession of the
Premises, and their respective successors and assigns. Dealer will obtain from
each landowner its consent to this Equipment Installation Agreement and to the
installation, maintenance, removal and operation of the Pulsat Equipment
pursuant to this Equipment Installation Agreement, and to any changes required
to be made to the Premises as deemed necessary by GM in order to provide
adequate support and any necessary power wiring or any electrical equipment.
Such consent of landowners will acknowledge the clear and unencumbered title to
said Pulsat Equipment in GM and the right to remove the Pulsat Equipment as
provided herein. Dealer is responsible for any changes associated with such
consent. In the event Dealer is unable to obtain the consent of any landowner
in the form provided by or satisfactory to GM within ten days from the date of
execution hereof, then this Agreement will become voidable at the option of GM,
and upon GM's exercise of such option the parties will be released from all
obligations hereunder.
2. Installation Restrictions. It is agreed with respect to each piece of
Equipment subject to this Agreement that:
(a) It will comply with all applicable state and local laws, ordinances
and regulations, and all required installation permits therefore must be
obtained from the appropriate governmental authorities.
(b) In GM's judgment, it must be practicable from both an engineering and
a financial standpoint to install the Pulsat Equipment at the Premises.
Dealers will cooperate with and assist GM in accomplishing installation of the
Pulsat Equipment within the foregoing limitations. If no Equipment offered by
GM will meet the foregoing limitations, this Agreement will become null and void
and the parties will be released from all obligations hereunder.
3. Installations. Pulsat Equipment will be installed at such date and time as
may be reasonably scheduled by GM; GM will not be liable for any delays in
commencing or completing the installation thereof.
GM agrees to install the Pulsat Equipment upon the Premises in accordance with
the specifications set forth herein. Dealer agrees to allow GM to remove or
relocate any existing equipment which may interfere with or be duplicative of
Pulsat Equipment. Upon termination of this Agreement GM will not be responsible
for the replacement of any equipment so removed or relocated. Dealer will
provide normal power and any telephone hookup required for use of the Equipment.
4. Additional Equipment/Services. The basic Equipment configuration, basic
installation and basic maintenance provided without separate charge by GM are
described further in written procedures provided by GM from time to time, and
are subject to change if changes are made for dealers in general. Any agreement
or services required by Dealer in addition to the basic levels provided herein
are subject to a separate charge. GM offerings of additional equipment and
services for use with the GM Pulsat Network, and charges therefore, are also
described in the written procedures. Any charges hereunder will be calculated
in accord with GM's then published schedule of
<PAGE>
(2)
charges, which is subject to change from time to time, and will be debited to
Dealer's open account.
Additional installation services may include such things as additional cable,
special footings, and related work required for a non-standard installation
resulting from inability to locate the satellite dish in close proximity to the
other Equipment or to mount it in a standard fashion, removal of unrelated
antennas, installation of an electrical outlet for operation of the Equipment,
or installation of additional television hookups within the Premises for
receiving the satellite video signal.
Installation of the Pulsat Equipment establishes Dealer's Premises as a node on
the GM Pulsat Network. To receive video applications, Dealer must provide the
necessary television and video recording equipment. To use the data
communications applications, Dealer must obtain hardware and software from an
authorized dealer systems provider and have a service agreement with GM for
access to GM's host computer.
5. GM's Property. All Pulsat Equipment installed pursuant to this Agreement
will be appropriately marked and identified as the property of GM (including its
affiliates). Dealer will ensure that such stickers, labels or plaques as become
affixed to the Equipment so as to mark and identify it as property of GM are not
removed, damaged or obscured. Dealer agrees to take such measures and
precautions as are necessary to ensure that Equipment remains on Dealer's
Premises as installed and is protected from damage, deterioration and other
abuse.
Upon GM's request Dealer will execute such documents as GM may require for
filing in public records to give notice that the Pulsat Equipment is the
property of GM bailed to Dealer. Dealer will take such further actions as GM
may from time to time require so as to protect GM's interest in the Equipment.
GM may inspect the Equipment at the Premises at any time during Dealer's normal
business hours.
6. Equipment Relocations. No Equipment subject to this Agreement will be
relocated except as expressly authorized by GM. Authorization by GM of any
relocation will be evidenced by a writing, which will be made part of this
Agreement effective as of the date noted thereon. The expense of any authorized
relocation will be borne by Dealer. In the event of any unauthorized
relocation, GM will have the option of restoring the Equipment to the location
specified herein, or of inspecting the Equipment as relocated and taking such
measures as GM deems appropriate to bring such Equipment into compliance with
GM's installation specifications, and in either such event Dealer will bear the
expense thereof.
7. Dealership Relocation. In the event Dealer relocates its dealership
operations to new premises, GM will have the option either of terminating this
Agreement without any further obligation or liability to Dealer hereunder, or
amending this Agreement to cover the new location, in which case this Agreement
will be amended accordingly and the new landowner consents obtained as
appropriate, and the expense of removing the Equipment from the old location and
of installing it at the new location will be borne by Dealer.
8. Termination. This Agreement will automatically terminate and be of no force
and effect, without notice, upon the termination by GM or Dealer of Dealer's
Dealer Sales and Service Agreement(s) with GM, the non-renewal of such Dealer
Sales and Service Agreement(s) upon the expiration of its term, the termination
of Dealer's DCS Service Agreement with GM, or if for any
<PAGE>
(3)
reason Dealer vacates the Premises or ceases to operate them in the regular
course of business for the sale and service of GM vehicles as an authorized
dealer. Upon such termination Dealer will remain responsible for any damage to
the Equipment until it is removed.
This Agreement will not operate or be construed to extend, or imply intention to
extend, Dealer's Dealer Sales and Service Agreement(s) with GM beyond its
expiration or in any way whatsoever affect the rights and obligations of either
of the parties to such Dealer Sales and Service Agreement(s).
9. Taxes and Permits. GM will report and pay any personal property taxes
applicable to its property bailed to Dealer under this Agreement. Dealer will
cooperate with and assist GM in identifying any applicable personal property
taxes.
Dealer will cooperate with and assist GM in obtaining any permits or licenses
required for installation of the Equipment. Thereafter, Dealer will be
responsible for and obtain and maintain any permits or licenses necessary for
the Equipment. If Dealer fails for any reason to maintain such permits or
licenses, GM may do so and charge the cost of said permits or licenses, or any
other such cost due to such failure, to Dealer.
10. Ordinance Changes. Dealer will notify GM of any changes in local
ordinances or regulations which affect the Equipment subject to this Agreement.
GM will perform any alterations or relocations necessary to comply with said
changes at Dealer's expense.
11. Dealer's Use of Equipment. Dealer agrees to use the Equipment only in
connection with authorized transmissions over the GM Pulsat Network and in
accordance with written procedures provided by GM from time to time. Dealer
further agrees to use the video programming only in connection with Dealer
business under its GM Dealer Sales and Service Agreement. Dealer will take no
action which may interfere with normal operation of the Equipment or increase
the expense of operating or maintaining the Equipment. No banners, signs,
lights, or other materials of any kind whatsoever will be attached or affixed to
the Equipment or any part thereof, including the satellite dish and its
supporting structure.
12. No assignments by Dealers. This Agreement may not be assigned by Dealer
except with the express prior written consent of GM. Any attempt by Dealer to
assign this Agreement without consent will be deemed a void assignment and
constitute default by Dealer of the terms and conditions hereof.
13. Operation and Maintenance. Dealer will use its best efforts to keep the
Equipment in good working order and condition and operate the Equipment in
accordance with written procedures provided by GM from time to time, which may
include routine maintenance procedures. Dealer will notify GM promptly whenever
the Equipment requires any repairs or services. GM will be responsible for
providing and paying for all such repairs or services; however, Dealer will
reimburse GM for any repairs or services which become necessary as a result of
abuse, misuse, or negligent use of the Equipment or failure to comply with
procedures prescribed by GM. Dealer will provide GM and its contractor with
access to the Premises and Equipment as required for repairs or services.
14. Equipment Damage or Destruction. In the event of damage to or destruction
of Pulsat Equipment by any cause whatsoever, GM may rebuild, replace or restore
said Equipment.
<PAGE>
(4)
Dealer will be solely responsible for damages to or destruction of Equipment
caused by or resulting from any act, omission or negligence of Dealer, its
agents, invitees, employes or guests. Dealer will promptly reimburse GM for the
cost to GM to repair or replace Pulsat Equipment when damages result from
Dealer's or its agents', invitees', employees' or guests' act, omission or
negligence.
GM will carry at its expense Comprehensive General Liability Insurance on the
Equipment in the amount of at least two million ($2,000,000) dollars, combined
single limit. The maintenance of such insurance by GM will in no way limit or
release Dealer from liability as more particularly set forth herein. GM will
furnish a Certificate of Insurance upon request to any landowner.
IN NO EVENT WILL GM BE LIABLE TO DEALER OR THIRD PARTIES FOR ANY INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES SUCH AS BUT NOT LIMITED TO LOSS OF ANTICIPATED
PROFITS, OTHER ECONOMIC LOSS, LOSS OF USE OF EQUIPMENT OR MATERIALS, COST OF
SUBSTITUTE EQUIPMENT OR MATERIALS, OR DOWNTIME COST(S) IN CONNECTION WITH OR
ARISING OUT OF THE FURNISHING, FUNCTIONING OR USE OF ANY ITEM OF EQUIPMENT OR
SERVICE PROVIDED FOR IN THIS AGREEMENT.
15. Equipment Removal. It is agreed that the Pulsat Equipment is and at all
times pertinent hereto will remain personal property, owned by GM (including its
affiliates), and that even though attached or connected to real estate it will
not become or be deemed to be real estate improvements, fixtures or
appurtenances.
GM will have the right, at the expiration or termination of this Agreement, to
remove all Equipment bailed to Dealer pursuant hereto. GM will not be required
to remove any satellite dish foundations or footings in their entirety, but only
to grade level. In the case of a roof-mounted satellite dish, removal will be
deemed complete when any structure is removed to several inches above the roof
level, even though columns or supports may extend below. GM will endeavor to
complete the removal within ninety days following termination of this Agreement
or following GM's receipt of a written request therefore from Dealer or a
landowner in lawful possession of the Premises.
16. Defaults by Dealer. In the event Dealer is in default of any provision of
this Agreement for a period of sixty days, then GM may, at its option, terminate
this Agreement, remove the Pulsat Equipment from the Premises and be relieved of
all obligations to Dealer under this Agreement. Any waiver or non-enforcement
by GM of a breach of this Agreement on the part of Dealer will not constitute a
waiver of any further or future breach by Dealer. In the event of termination
of this Agreement pursuant to this section, Dealer will be responsible for any
damage to the Equipment until it is removed.
17. Advance Notice By Dealer. Dealer agrees to notify GM in writing at least
thirty days in advance of any impending sale, mortgage, or property lease
expiration of the real estate and improvements used by Dealer as dealership
facilities.
18. Equipment and Service Changes by GM. GM will have the right (but not the
duty) to change the Pulsat Equipment installed pursuant to this Agreement, and
related services, if similar changes are made for dealers in general. GM will
have the further right (but not the duty) to change the size, style, design,
specifications and type of Equipment or relocate any or all Equipment installed
pursuant to this Agreement if in the opinion of GM such change or
<PAGE>
(5)
relocation is desirable to promote better performance. Any additional or
replacement equipment will be deemed Pulsat Equipment under this Agreement.
19. Assignment or Delegation By GM. All obligations under this Agreement to be
performed by GM may, at GM's option, be performed by parties with whom GM has
contracted for such performance or such parties as may be designated by GM to
perform the obligations. GM reserves the right to assign this Agreement.
20. Notices. All notices required by or permitted under this Agreement will be
in writing and will be deemed received when sent by certified or registered mail
properly addressed to the other party at the business address shown on the
Equipment Installation Agreement, or when actually delivered to the other party.
Either party may substitute for itself a new address by due notice to the other
party.
21. General. This Agreement, including these General Provisions and GM's
written procedures described herein, constitutes the full understanding of the
parties, and a complete and exclusive statement of the terms and conditions of
their agreement pertaining to the Pulsat Equipment. It cancels and supersedes
all prior understandings and agreements between them, whether express or
implied, pertaining to Dealer's acquisition and use of the Equipment. No
understanding or agreement which purports to modify or supplement this Agreement
will be binding unless hereafter made in writing and signed by the parties to be
bound thereby. This Agreement is binding on the parties and their respective
successors and permitted assigns. It is governed in all respects by the laws of
the State of Michigan. If any term, condition or provision of this Agreement or
the application thereof is judicially or otherwise determined to be invalid or
unenforceable, or if the parties mutually agree in writing to any revision of
this Agreement, the remainder of this Agreement and the application thereof will
not be affected, and this Agreement will otherwise remain in full force and
effect.
<PAGE>
[PULSAT LOGO]
GM PULSAT NETWORK
EQUIPMENT INSTALLATION AGREEMENT
This Agreement is made between General Motors Corporation ("GM") and the party
identified below as "Dealer." Reference is made to (1) Dealer's Dealer Sales
and Service Agreement(s) for GM vehicles, (2) Dealer's DCS Service Agreement and
any other service agreement(s) pertaining to transmittal of authorized data over
the GM Pulsat Network. Where Dealer is not the landowner, this Agreement is
signed by Dealer's authorized representative in conjunction with a Consent and
Agreement of Landowner providing the landowner's consent for installation and
removal of the Equipment. This Agreement is effective upon signature by an
authorized Dealer representative and a GM Pulsat Network authorized
representative.
1. Dealer agrees to the installation, maintenance, removal and
operation of the Equipment described herein ("Pulsat Equipment" or
"Equipment"), which Equipment is bailed to Dealer in accord with this Agreement,
including the General Provisions attached hereto.
2. No separate charge is made to Dealer for a basic Equipment
configuration, Dealer's use of the Equipment in connection with the GM Pulsat
Network, basic installation, or basic GM provided maintenance. The basic
Equipment configuration, installation and GM provided maintenance are described
below and in the General Provisions. If the Dealer requires Equipment or
services other than or in addition to the basic levels, they are also described
below and will be subject to a separate charge.
3. Dealer acknowledges the Equipment is the property of GM
(including affiliated companies) held by Dealer in bailment. Upon termination
of the Agreement GM may remove from the installation premises all of the
Equipment installed hereunder, and GM's only obligations upon such removal will
be those described in the General Provisions.
Dealer 315 CLENDENNY AV ON RT 40
-------------------------
Address: JERSEY CITY, NEW JERSEY 07304
-----------------------------
Business Management Division (BMD): OLDSMOBILE DIVISION
-------------------------
Premises of Installation (if different from above): BMD Dealer
Code: 02015
-----
------------------------------
------------------------------
Basic Equipment: Optional Equipment/Services:
Digital Interface Unit (DIU) ___ Antenna De-icer
Integrated Receiver Decoder (IRD) ___ Extended Maintenance
Very Small Aperture Terminal (VSAT)___ ____________________
____________________
GM Pulsat Coordinator:
Name:______________________________________ Phone: _____________________
Alternate:_________________________________ Phone: _____________________
J & F OLDSMOBILE-ISUZU PARTNERSHIP
----------------------------------
Dealer Firm Name GENERAL MOTORS CORPORATION
By /s/ Joseph Mitolo 10/2/92 By /s/ Illegible
------------------------------------- --------------------------------
Signature and Title Date General Director, Dealer Systems
By /s/ Illegible 10/2/92
------------------------------------- --------------------------------
uthorized Representative Date
After signing above, mail document to: GM Pulsat Network, Administrative
Offices, P. O. Box 500, Troy, MI 48007-0500
<PAGE>
PART I
DESCRIPTION OF PREMISES
J & F OLDSMOBILE - ISUZU PARTNERSHIP
---------------------------------------------
Dealer Firm Name
JERSEY CITY, NEW JERSEY OCTOBER 02, 1992
- ------------------------------------- -------------------------------
City, State Date of this GMMS
(Mo., Day, Yr.)
JANUARY 1973 JANUARY 1979
- ------------------- ------------------- -------------------------------
Facts Dealer Number Date Main Facility Date Main Facility Remodeled or
Constructed(Mo., Yr.) Added to (Mo., Yr.)
LOCATION, USE AND OWNERSHIP OF PREMISES
<TABLE>
<CAPTION>
<S> <C> <C>
A Identify by street address each separate B Indicate by C IF LEASED, INDICATE:
dealership location and describe how each (X) Whether Name of Lessor:
is used for GM operations. Specify: Beginning and Expiration
NEW VEHICLE SALES, USED VEHICLE Date of Lease
SALES, SERVICE, PARTS, OFFICE, Premises Are
NEW VEHICLE STORAGE, BODY SHOP,
etc. Also
indicate distance of each separate Annual Rental: $
location from main location. Dealer Leased Renewal Option: Term and
Asset Annual Rental
MAIN 315 CLENDENNY AV ON RT 440 X J&S EQUITY
JERSEY CITY, NEW JERSEY 06-01-1983 THRU 05-31-1993
NEW DISP. USED DISP, MECHANICAL, SERV $180,000
RECP, PARK-CUST, GEN OFFICE, PARTS 10 YEAR WITH 10 YEAR
2 45 BENNETT
JERSEY CITY, NEW JERSEY J&S EQUITY ASSOC.
SERV RECP, PARK-CUST, EMP PK/MSC X 06-01-1983 THRU 05-31-1993
0.1 MILES FROM MAIN SAME AS MAIN FACILITY
3 34-30 BENNETT STREET
JERSEY CITY, NEW JERSEY ADELE MIRTO
11-01-1987 THRU 10-31-1990
USED DISP, SERV RECP, NEW STORAGE X $36,000
0.1 MILES FROM MAIN
4 27-37 BENNETT STREET
JERSEY CITY, NEW JERSEY ADELE MIRTO
11-01-1987 THRU 10-31-1990
SERV RECP, PARK-CUST, EMP PK/MSC X $12,000
0.1 MILES FROM MAIN
5 599 RT. 440
JERSEY CITY, NEW JERSEY J & S FORD
NEW STORAG X $36,000
0.1 MILES FROM MAIN
6
MILES FROM MAIN
</TABLE>
TOTAL DEALERSHIP IN SQUARE FEET
D GM Use Other Use Total Area
------------ --------------- ----------------
Total Building 22,074 14,350 36,424
Total Lot 37,000 4,000 41,000
Grand Total 59,074 18,350 77,424
<PAGE>
(Location and Premises Addendum continued)
PART II
PREMISES SPACE ANALYSIS
J & F OLDSMOBILE - ISUZU PARTNERSHIP
------------------------------------------
Dealer Firm Name
JERSEY CITY, NEW JERSEY OCTOBER 02, 1992
- ---------------------------------------- ----------------------------
City, State Date of GMMS 1016 (Mo., Day, Yr.)
<TABLE>
<CAPTION>
Actual Space in Number of Stalls TOTAL
Lot
DEPARTMENTAL ALLOCATION Building (Do not include building)
GM Use Other Use GM Use Other Use (A+B+C+D)
(A) (B) (C) (D) (E)
<S> <C> <C> <C> <C> <C>
(1) New Vehicle Display 8 6 14
(2) Used Vehicle Display 67 67
(3) Productive Service - Mechanical 17 9 26
(4) Productive Service - Body
(5) Service Reception 5 1 6
(6) Parking Customer 70 22 92
(7) New Vehicle Storage 400 100 500
(8) Employee Parking and
Miscellaneous 35 5 40
(9) Total of Lines (1) through (8) 30 16 572 127 745
Actual Space in Square Feet TOTAL
GM Use Other Use (A + B)
(A) (B) (E)
(10) General Office 3,000 1,400 4,400
(11) Parts 6,000 2,950 8,950
(12) Total of Lines (10) and (11) 9,000 4,350 13,350
CAR LINES HANDLED
General Motors Division(s) Non-GM Lines Handled
OLDSMOBILE
</TABLE>
GM space requirements are currently under review and updated GM space
requirements will be published in the Service Policy and Procedures
Manual.
<PAGE>
SUCCESSOR ADDENDUM
TO
GENERAL MOTORS CORPORATION
DEALER SALES AND SERVICE AGREEMENT
This Successor Addendum is effective OCTOBER 22, 1992 and
---------------------------------------
is executed pursuant to the provisions of Article 12.1 of the current Dealer
Agreement in effect between the undersigned Dealer and Division of General
Motors.
On the basis of the information provided by Dealer, in connection with the
Request for Execution of Successor Addendum, Division and Dealer Agree that:
1. Subject to paragraphs 2 and 3 below, the proposed dealer operator(s)
for purposes of designating and establishing a proposed successor
dealer as provided in Article 12.1 of the Dealer Agreement shall be
JOSEPH C. DIFEO
---------------------------------------------------------------
---------------------------------------------------------------
2. If more than one current Dealer Operator is named in 1 above,
a. the remaining Dealer Operator alone shall have the right to
designate a proposed successor dealer, or ___ Yes
b. all of the proposed dealer operators who remain or
survive,including the remaining Dealer Operator, shall acting
together have such rights, ___ Yes
3. The following person(s), if any, shall be proposed owner(s) (indicate
"none", if applicable):
NONE
- -------------------------------------------------------------------
- -------------------------------------------------------------------
4. Dealer may cancel an executed Successor Addendum at any time prior to
the death of any party named as Dealer Operator in Paragraph THIRD of
this Agreement. General Motors may cancel an executed Successor
Addendum only if the proposed dealer operator no longer complies with
the requirements of Article 12.1.1. The parties may execute a new and
superseding Successor Addendum by mutual agreement. If Division has
previously notified Dealer that it does not plan to continue
Dealership Operations at the Dealership Location, Division shall have
no obligation to execute a Successor Addendum, except for a renewal of
an existing Successor Addendum with the same proposed dealer operator
provided Dealer and the Proposed Dealer Operator comply with the
requirements of Article 12.1.1.
5. This Addendum shall become null and void upon the execution of a new
Dealer Agreement by Dealer and Division.
6. This Successor Addendum cancels and supersedes any previous Successor
Addendum between the parties.
J & F OLDSMOBILE - ISUZU PARTNERSHIP
--------------------------------------------------------------------
Dealer Firm Name
JERSEY CITY, NEW JERSEY
----------------------------------------------------------
City, State
OLDSMOBILE DIVISION
General Motors Corporation
By /s/ Joseph Mitolo, President By /s/ Illegible
----------------------------------- -------------------------------------
Signature and Title Date OLDSMOBILE ZONE MANAGER Date
The undersigned, as all Dealer Operator(s) and Owner(s) of Dealer, hereby
individually signify their concurrence with the above agreements and waive any
rights in conflict with the above agreements they may have or acquire under
either the Dealer Agreement or applicable law.
/s/ Jospeh Mitolo
- ------------------------------------- ----------------------------------------
DATE DATE
/s/ Sam C. DiFeo
- ------------------------------------- ----------------------------------------
DATE DATE
-27-
<PAGE>
[LETTERHEAD OF OLDSMOBILE]
October 2, 1992
J & F Oldsmobile-Isuzu Partnership
315 Clendenny Avenue, Route 440
Jersey City, New Jersey 07304
Attention: Joseph J. Mitolo
Samuel C. DiFeo
Ezra P. Mager
Marshall S. Cogan
Gentlemen:
This "Letter Agreement" will confirm our discussions regarding your request that
Oldsmobile Division approve the ownership of your dealer entity J & F
Oldsmobile-Isuzu Partnership (30%) and DiFeo Partnership, Inc. (70%) - through a
holding company arrangement. This holding company arrangement is shown in
Exhibit 1.
The General Motors Corporation Dealer Sales and Service Agreement is a personal
service contract requiring that the person named as Dealer Operator in Paragraph
THIRD, Mr. Joseph J. Mitolo will actively exercise full managerial authority in
the Dealership Operations, and that all Owners of Dealer will each continue to
own, both of record and beneficially, the percentage of ownership set forth in
the Dealer Statement of Ownership. In order to maintain the reputation and
goodwill of Oldsmobile and its dealer network, Oldsmobile retains the right to
identify and approve each party participating in the financial ownership and
general management of dealerships selling and servicing its automotive product.
Experience has shown that successful dealerships, in general, are those in which
the individual or individuals who operate the dealership enjoy the financial
benefits resulting from their successful management. It has also been found
that a dealership cannot generally be operated satisfactorily where the handling
of operating details are subject to actual or potential interference by parties
who are solely financial participants.
Further, it has been Oldsmobile's policy for many years to be able to identify
and approve each party participating in the financial ownership and general
management of dealerships franchised by Oldsmobile Division.
<PAGE>
Jersey City, New Jersey
Page Two
October 2, 1992
For reasons such as these, Oldsmobile has had an operating policy that provides
that Oldsmobile may approve ownership of a dealer entity by a corporation or
holding company, with the express provision that there be no change in the
composition of the financial interests and/or ownership comprising such
corporation or holding company unless such change has first been accepted and
approved by Oldsmobile in writing.
Further, that the Dealer Operator shall own an unencumbered interest in the
dealer company and/or of the holding company that is at least equivalent to 15%
of the greater of:
(a) The total equity investment of the dealer entity (excluding real estate);
-OR-
(b) The sum of the dealer entity's net working capital standard amount, plus
all fixed and other assets (excluding real estate) net of depreciation.
You have represented and certified to Oldsmobile that J & F Oldsmobile Corp.
will hold a 30% ownership in the DiFeo Oldsmobile Partnership and that EMCO
Motor Holding, Inc. a subsidiary of "21" International Holdings, Inc., will hold
a 70% ownership in Difeo Oldsmobile Partnership.
As evidenced by Attachment "A", Joseph J. Mitolo and Samuel C. DiFeo are sole
owners of J & F oldsmobile Corp. respectively.
It is represented and certified to Oldsmobile that EMCO Motor Holdings, Inc.,
70% owner of DiFeo Partnership, Inc., is owner by two stockholders: Ezra Mager,
and "21" International Holdings, Inc. as evidenced by Attachment "B".
It is further represented and certified to Oldsmobile that Marshall S. Cogan
personally holds a 45.24% equity ownership and 76.51% voting control in "21"
International Holdings, Inc. as evidenced by Attachment "C".
After considering all matters relevant to your request, Oldsmobile hereby
approves the ownership of the DiFeo Oldsmobile Partnership by J & F Oldsmobile
Corp. (30%) and EMCO Motor Holding, Inc. (70%), subject to the conditions and
understandings in the Supplemental Agreement to General Motors Dealer Sales and
Service Agreement.
-2-
<PAGE>
Jersey City, New Jersey
Page Three
October 2, 1992
Also, further subject to condition and understanding that the ownership of the
stock, J & F Oldsmobile, Corp. and EMCO Motor Holdings, Inc. set forth on the
"ownership attachments" hereto, will not be changed without the PRIOR written
approval of Oldsmobile, which will be evidenced solely by means of acceptable
replacement "ownership attachments" duly signed on behalf of Oldsmobile. It is
recognized that failure to obtain such prior written approval will constitute
cause for termination of the Dealer Agreement under Article 12.2.1. thereof. J
& F Oldsmobile, Corp. and EMCO Motor Holdings, Inc. agree to maintain accurate
records reflecting the owners and managers of the DiFeo Oldsmobile Partnership
and to provide new "ownership attachments" to Dealer and Oldsmobile upon
request.
Further, GM prior written approval is not required when there are ownership
changes in "21" International Holdings, Inc. provided there is no change in
Marshall S. Cogan's equity ownership and/or voting control in "21" International
Holdings, Inc. GM prior written approval is required for all changes in
Marshall S. Cogan's equity ownership and/or voting control in "21" International
Holdings, Inc.
By affixing your signatures to the Attachments "A", "B" and "C", you are
agreeing to all the terms and conditions as set forth in this "Letter
Agreement".
Very truly yours,
Oldsmobile Division
General Motors Corporation
/s/ J.J. Zubor
---------------
J.J. Zubor
Zone Manager
-3-
<PAGE>
ATTACHMENT "C" TO LETTER AGREEMENT
With Oldsmobile Division
Dated: October 2, 1992
- --------------------------------------------------------------------------------
In accordance with provisions of the Letter Agreement dated October 2, 1992
between Oldsmobile Division, General Motors Corporation, and "21" International
Holding, Inc., the undersigned hereby represents and certifies to Oldsmobile
Division that the following information pertaining to record and/or beneficial
ownership of the capital stock of "21" International Holding, Inc. is true,
accurate, and complete.
Shares Owned Type or Book
Owner Of Record Beneficially Class Value $
- ----- ------------------------ --------- -------
See Attached Schedule ------------------------- --------- --------
of Owners ----------- ----------- ---------- --------- --------
- --------------------- ----------- ---------- --------- --------
- --------------------- ----------- ---------- --------- --------
T O T A L S ----------- ---------- $ 52,300,000
-----------------------
DECEMBER 31, 1991
By:/s/ M.S. Cogan
---------------------------
Marshall S. Cogan, Chairman
Date:
----------------------------
OWNERSHIP OF ABOVE HOLDING COMPANY AS OF DECEMBER 31, 1992, IS ACCEPTED AS
REPRESENTED ABOVE.
OLDSMOBILE DIVISION
General Motors Corporation
By:/s/ J.J. Zubor
----------------
J.J. Zubor
<PAGE>
ATTACHMENT "B" TO LETTER AGREEMENT
With Oldsmobile Division
Dated: October 2, 1992
- --------------------------------------------------------------------------------
Statement of Ownership
EMCO Motor Holdings, Inc.
As of October 2, 1992
In accordance with provisions of the Letter Agreement dated October 2, 1992
between Oldsmobile Division, General Motors Corporation, and DiFeo Oldsmobile
Partnership, the undersigned hereby represents and certifies to Oldsmobile
Division that the following information pertaining to record and/or beneficial
ownership of the capital stock of EMCO Motor Holdings, Inc. - 100% owner of
DiFeo Partnership, Inc. - is true, accurate, and complete.
Shares Owned Type or Book
Owner Of Record Beneficially Class Value $
- ----- ------------------------ --------- -------
Ezra P. Mager 3.0% 17,740
- --------------------- ---------- -------- --------- -------
"21" International 97.0% 603,160
- --------------------- ---------- -------- --------- -------
Holdings, Inc.
- --------------------- ---------- -------- --------- -------
T O T A L S 100.0% $620,900
---------- -------- --------- -------
By:/s/ Ezra P. Mager OCTOBER 2, 1992
------------------------------
Ezra P. Mager, Pres/Sec/Treas.
/s/ M. S. Cogan By:
--------------------------- ---------------------------
Marshall S. Cogan, Chairman
Date: October 2, 1992
-------------------------
OWNERSHIP OF ABOVE HOLDING COMPANY AS OF OCTOBER 2, 1992, IS ACCEPTED AS
REPRESENTED ABOVE.
OLDSMOBILE DIVISION
General Motors Corporation
By: /s/ J.J. Zubor
-----------------
J.J. Zubor
<PAGE>
ATTACHMENT "A" TO LETTER AGREEMENT
With Oldsmobile Division
Dated: October 2, 1992
- --------------------------------------------------------------------------------
Statement of Ownership
J & F Oldsmobile, Corp.
As of 10/2/92
In accordance with provisions of the Letter Agreement dated October 2, 1992
between Oldsmobile Division, General Motors Corporation, and DiFeo Oldsmobile
Partnership, the undersigned hereby represents and certifies to Oldsmobile
Division that the following information pertaining to record and/or beneficial
ownership of the capital stock of J & F Oldsmobile, Corp. is true, accurate, and
complete.
Shares Owned Type or Book
Owner Of Record Beneficially Class Value $
- ----- ------------------------ --------- -------
Samuel C. DiFeo 75 75% Common 66,525
- -------------------- ---------- ----------- --------- -------
Joseph J. Mitolo 25 25% Common 199,575
- -------------------- ---------- ----------- --------- -------
- -------------------- ---------- ----------- --------- -------
- -------------------- ---------- ----------- --------- -------
T O T A L S $ 266,100
---------- ----------- ----------------------
OCTOBER 2, 1992
By: /s/ Joseph J. Mitolo
--------------------
Joseph J. Mitolo
Sam C. DiFeo
--------------------
Sanuel C. DiFeo
OWNERSHIP OF ABOVE CORPORATION AS OF OCTOBER 2, 1992, IS ACCEPTED AS REPRESENTED
ABOVE.
OLDSMOBILE DIVISION
General Motors Corporation
By: /s/ J.J. Zubor
----------------
J. J. Zubor
<PAGE>
Jersey City, New Jersey
Page Four
October 2, 1992
Agreed this 2nd day of October, 1992
DiFeo Oldsmobile Partnership
By: /s/ Joseph J. Mitolo
-----------------------
Joseph J. Mitolo
/s/ Samuel C. DiFeo
-----------------------
Samuel C. DiFeo
/s/ Marshall S. Cogan
-----------------------
Marshall S. Cogan
/s/ Ezra P. Mager
-----------------------
Ezra P. Mager
J & F Oldsmobile, Corp.
By: /s/ Samuel C. DiFeo
-----------------------
Samuel C. DiFeo
/s/ Joseph C. Mitolo
-----------------------
Joseph C. Mitolo
DiFeo Partnership, Inc. "21" International Holdings, Inc.
By: /s/ Marshall S. Cogan By: /s/ Marshall S. Cogan
----------------------- --------------------------
Marshall S. Cogan Marshall S. Cogan
/s/ Ezra P. Mager
-----------------------
Ezra P. Mager
EMCO Motor Holdings, Inc.
By: /s/ Marshall S. Cogan
-----------------------
Marshall S. Cogan
/s/ Ezra P. Mager
-----------------------
Ezra P. Mager
<PAGE>
[LETTERHEAD OF OLDSMOBILE]
October 2, 1992
J & F Oldsmobile Partnership
315 Clendenny Avenue, Route 440
Jersey City, New Jersey 07304
Attention: Joseph J. Mitolo
Samuel C. DiFeo
Marshall S. Cogan
Ezra P. Mager
Gentlemen:
This Supplemental Agreement ("Agreement") is entered into between DiFeo
Oldsmobile Partnership, J & F Oldsmobile, Corp. DiFeo Partnership, Inc., EMCO
Motor Holdings, Inc. (EMCO), and "21" international Holdings, Inc. (THHI) and
General Motors Corporation, Oldsmobile Division.
WHEREAS, Oldsmobile has entered into a General Motors Corporation Dealer Sales
and Service Agreement ("Dealer Agreement") with DiFeo Partnership ("The
Partnership").
WHEREAS, "The Partnership" is the Dealer and J & F Oldsmobile, Corp. and DiFeo
Partnership, Inc. are the Dealer Owners as those terms are identified in the
Dealer Agreements; and
WHEREAS, the Division has entered into the Dealer Agreement in consideration for
the reliance upon certain understandings, assurances and representatives which
parties hereto wish to document;
NOW, THEREFORE, the parties agree as follows:
1. For purposes of the Dealer Agreements, including Paragraph Third and
Article 12.2 Joseph J. Mitolo shall be considered a Dealer Operator. The
Divisions have relied and will rely upon the personal qualifications and
management skills of Joseph J. Mitolo as Executive V-P of the Partnership. The
Partnership and EMCO represent that Joseph J. Mitolo with the concurrence of the
Executive Committee, has complete and irrevocable authority to make all
decisions, and enter into any and all necessary business commitments on behalf
of The Partnership and may take all actions normally required of a Dealer
Operator pursuant to Paragraph Third and Article 2 of the Dealer Agreement.
Neither The Partnership nor EMCO will revoke, modify or amend such authority
without prior written approval of Oldsmobile which will act on behalf of all
Divisions in administering this Agreement.
<PAGE>
2. Mr. Joseph J. Mitolo's removal or withdrawal as Dealer Operator without
prior written consent shall constitute grounds for termination of dealer
Agreement. However, the Division recognizes that Mr. Mitolo's employment
responsibilities with The Partnership may change, as described in Section 1(d)
of the Employment Agreement, making it impractical for him to continue to
fulfill his responsibilities as Dealer Operator. In this event, or in the event
Mr. Mitolo leaves the employ of The Partnership or transfers his interests in
The Partnership pursuant to Sections 7.03 and 70.4 of Master Agreements and
Articles 7.2, 7.3 and 7.4 of the Partnership Agreement; then The Partnership
shall have the opportunity to propose a replacement Dealer Operator. the
Division will comparable to those of Mr. Mitolo The Partnership shall make every
effort to obtain the consent of the Division to proposed replacement dealer
Operator prior to Mr. Mitolo's withdrawal: if such is not practical in the
circumstances, The Partnership shall notify Oldsmobile writing within 10 days
following Mr. Mitolo's withdrawal. Within 60 days of that withdrawal, The
Partnership will submit to Oldsmobile a plan to replace Mr. Mitolo with
qualified Dealer Operator acceptable to Oldsmobile. the replacement Dealer
Operator must assume his responsibilities no later than 120 days following Mr.
Mitolo's withdrawal.
3. DiFeo Partnership, Inc. is wholly-owned subsidiary of EMCO, which in turn,
is a subsidiary or TIHI. DiFeo Partnership, Inc. hereby represents that its
representatives and assurances herein are within its authority to make and do
not contravene any directive, policy or procedure of EMCO or TIHI. DiFeo
Partnership, Inc. hereby represents that EMCO and TIHI are aware of and concur
with the representation of DiFeo Partnership, Inc. are herein.
4. Any change at all in ownership of DiFeo Partnership or EMCO or any change
in Marshall Cogan's equity ownership and/or voting control in TIHI shall be
considered a change in ownership of Dealer under terms of the Dealer Agreements,
and all applicable provisions of those Dealer Agreements will apply to any such
change.
5. Given the ultimate control which EMCO and TIHI have over DiFeo Partnership.
Inc. and J & F Oldsmobile, Corp. and, thus, J & F Oldsmobile - Isuzu
Partnership, and the Divisions strong interest in assuring that those who own
and control its dealers have interests consistent with those of the Divisions, J
& F Oldsmobile Isuzu Partnership, J & F Oldsmobile, Corp. and DiFeo Partnership,
Inc. agree that if an ownership interest is acquired in TIHI by a person or
entity which notifies TIHI via schedule 13D filed with the Securities and
Exchange Commission, The Partnership, J & F Oldsmobile, Corp. and DiFeo
Partnership, Inc. shall advise Oldsmobile in writing, providing a copy of that
Schedule. In the event that Item 4 of that Schedule discloses that the person
or entity acquiring such ownership interest intends or may intend either:
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<PAGE>
(a) an acquisition of additional securities of TIHI or (b) an extraordinary
corporate transaction such as a merger, reorganization or liquidation, involving
TIHI or any of its subsidiaries or (c) a sale or transfer of material amount of
assets of TIHI or any of its subsidiaries or (d) any change in the present Board
of Directors or management of TIHI or (e) any other material change in TIHI
business or corporate structure or (f) any action similar to those noted above,
then, if the Divisions reasonably conclude that such person or entity does not
have interests compatible with those of General Motors, or is otherwise not
qualified to have an ownership interest in a General Motors dealership, the
Partnership, J & F Oldsmobile, Corp. and DiFeo Partnership, Inc. agree that
within one year of receipt of written notice from Oldsmobile of this fact, they
will, (1) transfer The Partnership's assets to a third party acceptable to the
Division (2) voluntarily terminate The Partnership's Dealer Agreements, or (3)
provide evidence to Oldsmobile such person or entity no longer has such
ownership interest in TIHI. However, The Partnership, J & F Oldsmobile, Corp.
and DiFeo Partnership, Inc. will have six additional months to accomplish 1,2,
or 3 above if at the end of one year. Oldsmobile concludes that The
Partnership, J & F Oldsmobile, Corp. and DiFeo Paernership's assets to a third
party acceptable to the Division, and the Partnership is otherwise effectively
fulfilling its obligations under its Dealer Agreement.
6. The executive Committee and Officers of The Partnership ad the Directors
and Officers of J & F Oldsmobile, Corp. DiFeo Partnership, Inc., EMCO, and TIHI
has all passed resolutions affirming the representations herein, copies of which
are attached hereto.
7. The parties agree that this Agreement shall Supplement the terms of the
dealer Agreements in accordance with Article 17.1 of the Dealer Agreements.
8. In the event that the policies of General Motors Corporation with regard to
the issues addresses herein should be modified, the parties agree to review such
modifications to determine modification to this Addendum is appropriate.
IN WITNESS WHEREOF, the parties have executed this Agreement this 2nd day of
October, 1992.
GENERAL MOTORS CORPORATION DiFEO OLDSMOBILE PARTNERSHIP
OLDSMOBILE DIVISION
By:/s/ By: /s/ Joseph J. Mitolo
________________________ ----------------------
Joseph J. Mitolo
/s/ Ezra P. Mager
----------------------
Ezra P. Mager
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<PAGE>
Its: /s/ Sam C. DiFeo /s/ Marshall S. Cogan
---------------------------- ----------------- ----------------------
Sam C. DiFeo Marshall S. Cogan
"21" International Holdings EMCO Motor Holdings, Inc.
By:/s/ Marshall S. Cogan By:/s/ Marshall S. Cogan
----------------------- -----------------------
Marshall S. Cogan Marshall S. Cogan
Chairman Chairman
/s/ Ezra P. Mager
-----------------------
Ezra P. Mager, Pres
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<PAGE>
[LETTERHEAD OF OLDSMOBILE]
December 20, 1993
Mr. George Lowrance
EMCO DiFeo Automotive Group
585 Route 440
Jersey City, NJ 07304
Dear Mr. Lowrance:
This will acknowledge your letters dated October 4, 1993 regarding your request
for a change in the ownership of EMCO Motor Holdings, Inc. for Fair Cadillac-
Oldsmobile-Isuzu Partnership, DiFeo Oldsmobile Partnership and J & F Oldsmobile-
Isuzu Partnership t/a DiFeo Oldsmobile.
Enclosed find executed new Attachment "B" Letter Agreements reflecting capital
stock and ownership changes in EMCO Motor Holdings, Inc. for each partnership.
Please have the respective officers of EMCO sign and date the Letter Agreements
and return to my attention. Upon completion of all required signatures, I will
forward you copies for the dealership records.
Should you have any questions, please contact me personally.
Sincerely,
/s/ M. A. LoBianco
M. A. LoBianco
Business Management Manager
MAL/mg
cc: J. J. Zubor
<PAGE>
ATTACHMENT "B" TO LETTER AGREEMENT
With Oldsmobile Division
Revision Date: 12/14/1993
- --------------------------------------------------------------------------------
Statement of Ownership
EMCO Motor Holdings, Inc.
As of 12/14/93
In accordance with provisions of the Letter Agreement dated October 2, 1992,
between Oldsmobile Division, General Motors Corporation, and J & F Oldsmobile
- -Isuzu-Partnership t/a DiFeo Oldsmobile, the undersigned hereby represents and
certifies to Oldsmobile Division that the following information pertaining to
record and/or beneficial ownership of the capital stock of EMCO Motor Holdings,
Inc. - 100% owner of DiFeo Partnership, Inc. - is true, accurate and complete.
Shares Owned Type or Book
Owner Of Record Beneficially Class Value $
- ----- ---------- ------------ --------- -------
Ezra P. Mager 156,250 1.56% Common
"21" International 3,437,500 34.36% Common
Holdings, Inc.
Reserved "Options" 1,500,838 15.00% Common
OTHERS - see attached 4,911,000 49.08% Preferred
Schedule
T O T A L S 10,005,588 100.0% $ 77,860,000
By:/s/ Marshall S. Cogan Date: Dec 22, 1993
---------------------------
Marshall S. Cogan, Chairman
By:/s/ Joseph Herman By:/s/ E Mager
------------------------------ ------------------------------
Joseph C. Herman, Executive VP Ezra P. Mager, Pres/Sec/Treas.
OWNERSHIP OF ABOVE HOLDING COMPANY AS OF JAN 3, 1994, IS ACCEPTED AS REPRESENTED
ABOVE.
OLDSMOBILE DIVISION
General Motors Corporation
By:/s/ J.J. Zubor
------------------
J.J. Zubor
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<PAGE>
SUPPLEMENTAL AGREEMENT TO
GENERAL MOTORS CORPORATION
DEALER SALES AND SERVICE AGREEMENT
This Supplemental Agreement ("Agreement") is entered into among J&F Oldsmobile-
Isuzu Partnership ("Dealer"), DiFeo Partnership, Inc. and UAG Northeast, Inc.
(each a "Dealer Owner" and collectively "Dealer Owners"), United Auto Group,
Inc. ("Public Company") and General Motors Corporation, Chevrolet Motor
Division, acting on behalf of itself, and _________N/A__________ (collectively
"Divisions").
WHEREAS, the Divisions have each entered into a General Motors Corporation
Dealer Sales and Service Agreement ("Dealer Agreement") with Dealer permitting
Dealer to conduct Dealership Operations on behalf of Divisions from approved
locations identified in the Dealer Agreement;
WHEREAS, the organization and ownership structure of Dealer and Dealer Owners
are such that the terms of the Dealer Agreement are not wholly adequate to
address the legitimate business needs and concerns of the Dealer, Dealer Owners
and Divisions; and
WHEREAS, Dealer, Dealer Owners and the Divisions have entered into their
respective Dealer Agreements in consideration for and reliance upon certain
understandings, assurances and representations which the parties hereto wish to
document;
NOW, THEREFORE, the parties agree as follows:
1. For purposes of the Dealer Agreement, including Paragraph Third and
Article 2, [individual to be approved by GM] shall be considered as Dealer
Operator. The Divisions have relied and will rely upon the personal
qualifications and management skills of Dealer Operator who also serves as
executive manager of the Dealer. Dealer and Dealer Owners hereby represent
that Dealer Operator has complete and irrevocable authority to make all
decisions, and enter into any and all necessary business commitments
required in the normal course of conducting Dealership Operations on behalf
of Dealer and may take all actions normally required of a Dealer Operator
pursuant to Paragraph Third and Article 2 of the Dealer Agreement. Neither
Dealer nor Dealer Owners will revoke, modify or amend such authority
without the prior written approval of Divisions. Because of the unique
structure of Dealer, the 20% ownership requirement contained in Article 2
shall not apply to Dealer Operator.
2. The removal or withdrawal of Dealer Operator without Divisions' prior
written consent shall constitute grounds for termination of the Dealer
Agreements subject to applicable law. However, the Divisions recognize
that employment responsibilities of the Dealer Operator with
<PAGE>
Dealer and/or Dealer Owners may change, making it impractical for the
Dealer Operator to continue to fulfill his/her responsibilities as Dealer
Operator. In that case, or in the event Dealer Operator leaves the employ
of Dealer and/or Dealer Owners, Dealer shall have the opportunity to
propose a replacement Dealer Operator. The Divisions will not unreasonably
withhold approval of any such proposal, provided the proposed replacement
has the skills and qualifications to act as Dealer Operator pursuant to the
standard policies and procedures of General Motors Corporation.
Dealer shall make every effort to obtain the consent of the Divisions to a
proposed replacement Dealer Operator prior to the removal or withdrawal of
the approved Dealer Operator. If that is not practical, Dealer shall
notify Division in writing within 10 days following the withdrawal of the
approved Dealer Operator. Within 60 days of that withdrawal, Dealer will
submit to Division a plan and appropriate applications to replace Dealer
Operator with a qualified replacement acceptable to Division. The
replacement Dealer Operator must assume his/her responsibilities no later
than 90 days following the withdrawal of the approved Dealer Operator.
3. All of the partnership interests of Dealer are owned by Dealer Owners,
which, in turn, are wholly-owned subsidiaries of Public Company. Dealer,
Dealer Owners and Public Company hereby warrant that the representations
and assurances of each herein are within their respective authority to make
and do not contravene any directive, policy or procedure of Dealer, Dealer
Owners or Public Company. The parties hereto acknowledge that the
provisions of this Agreement shall not be applicable until such time as
Public Company completes a public offering of its stock.
4. Any material change in ownership of Dealer or of Dealer Owners, or any
event with respect to Public Company described in Paragraph 5 below, shall
be considered a change in ownership of Dealer under the terms of the Dealer
Agreements, and all applicable provisions of those Dealer Agreements will
apply to any such change. The Divisions have executed the Dealer
Agreements in reliance upon the ownership and management structure and any
material change in such structure (other than changes in ownership of
Public Company, which are discussed in Paragraph 5 below), shall be the
basis for a review of the agreements between us and whether changes and
modifications are required and whether the business relationship between us
should continue or terminate.
5. Given the ultimate control Dealer Owners have over Dealer, the control of
Dealer Owners by Public Company, and the Divisions' strong interest in
assuring that those who own
-2-
<PAGE>
and control their Dealers have interests consistent with those of the
Divisions, Dealer, Dealer Owners and Public Company agree that if an
ownership interest is acquired in Public Company by a person or entity
which notifies Public Company via Schedule 13D filed with the Securities
and Exchange Commission, Dealer shall advise Division in writing, and
attach a copy of that Schedule. In the Event Item 4 of that Schedule
discloses that the person or entity acquiring such ownership interest owns
or controls twenty percent (20%) of Public Company and intends or may
intend either: (a) an acquisition of additional securities of Public
Company or (b) an extraordinary corporate transaction such as a merger,
reorganization or liquidation, involving Public Company or any of its
subsidiaries or (c) a sale or transfer of a material amount of assets of
Public Company or any of its subsidiaries or (d) any change in the present
Board of Directors or management of Public Company or (e) any other
material change in Public Company's business or corporate structure or (f)
any action similar to those noted above, then, if the Divisions reasonably
conclude that such person or entity does not have interests compatible with
those of General Motors, or is otherwise not qualified to have an ownership
interest in a General Motors dealership, Dealer and Dealer Owners agree
that within 90 days of receipt of written notice from Division of this
fact, it will: (i) transfer the assets associated with Dealer to a third
party acceptable to the Division, (ii) voluntarily terminate the Dealer
Agreements in effect with Dealer, or (iii) provide evidence to Divisions
that such person or entity no longer has such an ownership interest in
Public Company. Should Dealer enter into an agreement to transfer its
assets to a third party, the right of first refusal described in Article
12.3 shall apply to any such transfer.
6. Dealer, Dealer Owners, Public Company and General Motors stipulate and
agree that the dispute resolution process for the appropriate General
Motors Division shall be the initial, exclusive source of resolution of any
dispute regarding the General Motors Dealer Agreement(s) and this
Supplemental Agreement including, but not limited to, involuntary
termination of the Dealer Agreement(s) and/or approval of Dealer Owner or
Public Company for additional investment in or ownership of General Motors
dealerships. Upon final determination through such dispute resolution,
each party shall have recourse to a review de novo by the appropriate state
court or administrative agency consistent with the provisions of state law.
The parties agree that should a party making such appeal lose the issues
presented on appeal, then that party shall pay the reasonable expenses,
including reasonable attorneys' fees, of the other party for the defense of
such de novo review. The parties further agree that if a dispute is
specific to a particular division, the appropriate divisional dispute
resolution
-3-
<PAGE>
mechanism will be used for the resolution of that particular matter.
7. Dealer, Dealer Owners and Public Company further stipulate and agree that
if Dealer, Dealer Owners, General Motors and the public are to realize the
potential benefits that Dealer, Dealer Owners and Public Company represent
to be the result of General Motors approving the ownership structure
proposed by Dealer Owners, then an integral component of the participation
by Dealer, Dealer Owners and Public Company is their agreement that all
such dealerships owned by Dealer Owners or Public Company shall fully
comply with General Motors Network 2000 Channel Strategy including proper
franchise alignment and facilities that are properly located and that are
in compliance with appropriate divisional image programs. The Channel
Strategy as it relates to Dealer is set forth in a memorandum dated
October 5, 1995, from Ronald L. Zarrella to all GM dealers, a copy of
which is attached hereto and in a facsimile from General Motors Corporation
to Dealer dated April 1, 1996.
Dealer and Dealer Owners further stipulate and agree that within 12 months
of the acquisition of any General Motors dealership that is not consistent
with the Channel Strategy, Dealer and Dealer Owners will have complied with
the Channel Strategy for that location. If Dealer and Dealer Owners fail
to do so within the time provided, then Dealer will terminate the
representation of such products as reasonably required by General Motors to
comply with the Channel Strategy. If such termination is required, General
Motors will compensate Dealer and Dealer Owners the total sum of Fifty
Thousand Dollars ($50,000) for each Dealer Agreement so terminated.
8. Dealer and Dealer Owners agree that all such dealerships shall be solely
for the exclusive representation of General Motors products and related
services and in no event shall be used for the display, sale or promotion
of any new vehicle other than those of General Motors Corporation or Saturn
Corporation.
Dealer and Dealer Owners agree that should Dealer cease to provide
exclusive representation of General Motors products, based on the proper
franchise alignment as determined by the Channel Strategy, then that shall
constitute good cause in and of itself for the termination of the Dealer
Agreements then in effect with Dealer and Dealer shall voluntarily
terminate the Dealer Agreements then in effect.
9. In the event of any termination of the Dealer Agreement or any transaction
or event that would, in effect, discontinue Dealership Operations from that
location, Dealer Owners agree to provide General Motors with: (a) a right
of first refusal on any bona fide offer to purchase the dealership
-4-
<PAGE>
facilities, (b) an assignment of any existing lease or lease options that
are available, or if desired by the Divisions, Dealer Owners agree to enter
into good faith negotiations for the sale or lease of the facility to the
Divisions or their assignee.
10. Dealer and Dealer Owners agree to provide to Divisions a list of the
officers and key management of Dealer and Dealer Owners along with those
individuals' key responsibilities in regard to the control and management
of Dealer. Dealer and Dealer Owners agree to propose to Divisions any
material changes in the individuals or their responsibilities. Such
proposal should be provided to the Divisions in writing sixty (60) days
prior to such change and shall include sufficient information to permit
Divisions to evaluate the proposed change consistent with normal policies
and procedures. For purposes of this Agreement, the term "key management"
shall mean Carl Spielvogel - Chairman and CEO, Arthur J. Rawl - Executive
Vice President and Chief Financial Officer, and George Lowrance - Executive
Vice President, Secretary and General Counsel.
11. Dealer Owners recognize that customers benefit from competition in the
marketplace and agree that any proposal to acquire additional GM
dealerships shall be subject to and considered consistent with the terms of
General Motors Multiple Dealer Investor/Multiple Dealer Operator policies
as set forth in NAO Bulletin 94-11, a copy of which has been provided to
Dealer Owners.
12. Dealer Owners agree that all General Motors dealerships in which Dealer
Owners maintain an investment will use Electronic Funds Transfer (E.F.T.)
for settlement of the dealership obligations to General Motors and that
General Motors will have right of offset for any unpaid debit balances for
any General Motors dealership in which Dealer Owners maintain or maintained
an investment at the time the indebtedness occurred and the right to
collect those amounts from the account for any other General Motors
dealership in which Dealer Owners maintain an investment.
13. Dealer and Dealer Owners agree that Dealer shall maintain, at all times,
sufficient working capital to meet or exceed the minimum net working
capital standards for the Dealer as determined from time to time by the
Divisions consistent with the normal practices and procedures of the
Divisions. Dealer and Dealer Owners shall provide such documentation as
reasonably requested by the Divisions to assure compliance with that
requirement. Dealer Owners shall submit an annual audited consolidated
balance sheet for the combined dealership operations of Dealer Owners.
-5-
<PAGE>
14. The parties agree that this Agreement shall supplement the terms of the
Dealer Agreements in accordance with Article 17.11 of the Dealer
Agreements.
15. In the event that the policies of General Motors Corporation with regard to
the issues addressed herein should be modified, the parties agree to review
such modifications to determine whether modification to this Agreement is
appropriate.
16. Nothing in this Agreement or the Dealer Agreement shall be construed to
confer any rights upon any person not a party hereto or thereto, nor shall
it create in any party an interest as a third party beneficiary of this
Agreement or the Dealer Agreement. Dealer and Dealer Owners hereby agree
to indemnify and hold harmless General Motors Corporation, its directors,
officers, employees, subsidiaries, agents and representatives from and
against all claims, actions, damages, expenses, costs and liability arising
from or in connection with any action by a third party in its capacity as a
stockholder of Public Company other than through a derivative stockholder
suit authorized by the Board of Directors of Public Company.
17. This Agreement is intended to modify and adapt certain provisions of the
Dealer Agreement and is intended to be incorporated as part of the Dealer
Agreement. In the event that any provision of this Agreement are in
conflict with other provisions of the Dealer Agreement Standard Provisions,
the provisions contained in this Supplemental Agreement shall govern.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of this 23 day
of July, 1996.
J&F Oldsmobile-Isuzu Partnership DiFeo Partnership, Inc.
/s/ Carl Spielvogel /s/ Carl Spielvogel
- ---------------------- ----------------------
By: Carl Spielvogel By: Carl Spielvogel
Title: Chairman and CEO Title: Chairman and CEO
Date: Date:
United Auto Group, Inc. UAG Northeast, Inc.
/s/ Carl Spielvogel /s/ Carl Spielvogel
- ---------------------- ----------------------
By: Carl Spielvogel By: Carl Spielvogel
Title: Chairman and CEO Title: Chairman and CEO
Date: Date:
General Motors Corporation
Chevrolet Division
/s/ G. M. Desmond
- ----------------------
By: G. M. Desmond
Title: Director, Dealer Organization
Date: June 12, 1996
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<PAGE>
STANDARD PROVISIONS
DEALER
SALES AND SERVICE
AGREEMENT
GENERAL MOTORS CORPORATION
<PAGE>
TABLE OF CONTENTS FOR STANDARD PROVISIONS
PAGE
PURPOSE OF AGREEMENT....................................................... 1
ARTICLE 1. APPOINTMENT AS AUTHORIZED DEALER............................... 2
ARTICLE 2. DEALER OPERATOR................................................ 2
ARTICLE 3. DEALER OWNER................................................... 2
ARTICLE 4. AUTHORIZED LOCATIONS........................................... 2
4.1. Dealer Network Planning........................................... 2
4.2. Area of Primary Responsibility.................................... 3
4.3. Establishment of Additional Dealers............................... 3
4.4. Facilities........................................................ 4
4.4.1. Location................................................... 4
4.4.2. Change in Location or Use of Premises...................... 4
4.4.3. Size....................................................... 5
4.4.4. Dealership Image and Design................................ 5
4.4.5. Dealership Equipment....................................... 5
ARTICLE 5. DEALER'S RESPONSIBILITY TO PROMOTE, SELL AND SERVICE PRODUCTS. 6
5.1. Responsibility to Promote and Sell................................ 6
5.2. Responsibility to Service......................................... 7
5.3. Customer Satisfaction............................................. 8
5.4. Business Planning................................................. 8
ARTICLE 6. SALE OF PRODUCTS TO DEALERS.................................... 8
6.1. Sale of Motor Vehicles to Dealer.................................. 8
6.2. Sale of Parts and Accessories to Dealer........................... 9
6.3. Prices and Other Terms of Sale.................................... 9
6.3.1. Motor Vehicles............................................. 9
6.3.2. Parts and Accessories...................................... 9
6.4. Inventory......................................................... 10
6.4.1. Motor Vehicle Inventory.................................... 10
6.4.2. Parts and Accessories...................................... 10
6.5. Warranties on Products............................................ 10
ARTICLE 7. SERVICE OF PRODUCTS............................................ 11
7.1. Service for Which Division Pays................................... 11
7.1.1. New Motor Vehicle Pre-Delivery Inspections and
Adjustments................................................ 11
7.1.2. Warranty and Special Policy Repairs........................ 11
7.1.3. Campaign Inspections and Corrections....................... 11
7.1.4. Payment for Pre-Delivery Adjustments, Warranty, Campaign
and Transportation Damage Work............................. 11
7.2. Parts, Accessories, and Body Repairs.............................. 12
7.2.1. Warranty and Policy Repairs................................ 12
i
<PAGE>
7.2.2. Representations and Disclosures as to Parts and
Accessories................................................ 12
7.2.3. Body Repairs............................................... 12
7.2.4. Tools and Equipment........................................ 12
ARTICLE 8. TRAINING....................................................... 12
ARTICLE 9. REVIEW OF DEALER'S SALES AND SERVICE PERFORMANCE............... 13
ARTICLE 10. CAPITALIZATION................................................ 13
ARTICLE 11. ACCOUNTS AND RECORDS.......................................... 14
11.1. Uniform Accounting System........................................ 14
11.2. Examination of Accounts and Records.............................. 14
11.3. Confidentiality of Dealer Data................................... 14
ARTICLE 12. CHANGES IN MANAGEMENT AND OWNERSHIP........................... 14
12.1. Succession Rights Upon Death or Incapacity....................... 15
12.1.1. Successor Addendum........................................ 15
12.1.2. Absence of Successor Addendum............................. 16
12.1.3. Successor Dealer Requirements............................. 16
12.1.4. Term of New Dealer Agreement.............................. 16
12.1.5. Limitation on Offers...................................... 16
12.1.6. Cancellation of Addendum.................................. 17
12.2. Other Changes in Ownership or Management......................... 17
12.3. Right of First Refusal to Purchase............................... 18
12.3.1. Creation and Coverage..................................... 18
12.3.2. Purchase Price and Other Terms of Sale.................... 18
12.3.3. Consummation.............................................. 19
12.3.4. Assignment................................................ 19
12.3.5. Transfer Involving Family Members and Dealer Management... 19
ARTICLE 13. BREACHES AND OPPORTUNITY TO REMEDY............................ 20
13.1. Certain Acts or Events........................................... 20
13.2. Failure of Performance by Dealer................................. 21
ARTICLE 14. TERMINATION OF AGREEMENT...................................... 22
14.1. By Dealer........................................................ 22
14.2. By Agreement..................................................... 22
14.3. Failure to be Licensed........................................... 22
14.4. Incapacity of Dealer Operator.................................... 22
14.5. Acts or Events................................................... 23
14.6. Reliance on Any Applicable Termination Provision................. 24
14.7. Transactions After Termination................................... 24
14.7.1. Effect on Orders.......................................... 24
14.7.2. Termination Deliveries.................................... 24
14.7.3. Effect of Transactions After Termination.................. 24
ARTICLE 15. TERMINATION ASSISTANCE........................................ 25
15.1. Deferral of Effective Date....................................... 25
15.2. Purchase of Personal Property.................................... 25
ii
<PAGE>
15.2.1. Division's Obligations.................................... 25
15.2.2. Dealer's Responsibilities................................. 26
15.2.3. Payment................................................... 27
15.2.4. Assignment of Rights...................................... 27
15.3. Assistance on Premises........................................... 27
15.3.1. Division's Obligation..................................... 27
15.3.2. Owned Premises............................................ 28
15.3.3. Leased Premises........................................... 28
15.3.4. Rent and Price............................................ 29
15.3.5. Limitations on Obligation to Provide Assistance........... 29
ARTICLE 16. DISPUTE RESOLUTION PROCESS.................................... 30
ARTICLE 17. GENERAL PROVISIONS............................................ 30
17.1. No Agent or Legal Representative Status.......................... 30
17.2. Responsibility for Operations.................................... 30
17.3. Taxes............................................................ 31
17.4. Indemnification by General Motors................................ 31
17.5. Trademarks and Service Marks..................................... 32
17.6. Notices.......................................................... 33
17.7. No Implied Waivers............................................... 33
17.8. Assignment of Rights or Delegation of Duties..................... 33
17.9. No Third Party Benefit Intended.................................. 34
17.10. Accounts Payable................................................ 34
17.11. Sole Agreement of Parties....................................... 34
17.12. Applicable Law.................................................. 34
17.13. Superseding Dealer Agreements................................... 35
GLOSSARY................................................................... 36
iii
<PAGE>
STANDARD PROVISIONS
The following Standard Provisions are part of Division's Dealer Sales and
Service Agreement (Form GMMS 1012).
PURPOSE OF AGREEMENT
The purpose of this Agreement is to promote a relationship between Division
and its Dealers which encourages and facilitates cooperation and mutual effort
to satisfy customers, and permits Division and its dealers to fully realize
their opportunities for business success. Division has established a network of
authorized dealers operating at approved locations to effectively sell and
service its Products and to build and maintain consumer confidence and
satisfaction in Dealer and Division. Consequently, Division relies upon each
Dealer to provide appropriate skill, capital, equipment, staff and facilities to
properly sell, service, protect the reputation, and satisfy the customers of
Division's Products in a manner that demonstrates a caring attitude toward those
customers. At the same time, Dealer relies upon Division to provide sales and
service support and to continually strive to enhance the quality and
competitiveness of its Products.
This mutual dependence requires a spirit of cooperation, trust and
confidence between Division and its dealers. To facilitate attainment of
cooperation, trust and confidence, and to provide Division with the benefit of
dealer advice regarding many decisions which affect dealer business operations,
Division has established mechanisms to obtain dealer input in the decision-
making process. These mechanisms are described in Division's Dealer Sales and
Service Agreement.
This Agreement (i) authorizes Dealer to sell and service Division's
Products and represent itself as a Division Dealer; (ii) states the terms under
which Dealer and Division agree to do business together; (iii) states the
responsibilities of Dealer and Division to each other and to customers; and
(iv) reflects the mutual dependence of the parties in achieving their business
objectives.
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ARTICLE 1. APPOINTMENT AS AUTHORIZED DEALER
Division appoints Dealer as a non-exclusive dealer of Division Products.
Dealer has the right to buy Products and the obligation to market and service
those Products in accordance with this Agreement and related documents.
ARTICLE 2. DEALER OPERATOR
This is a Personal Services Agreement, entered into in reliance on the
qualifications of Dealer Operator identified in Paragraph Third, and on Dealer's
assurance that Dealer Operator will provide personal services by exercising full
managerial authority over Dealership Operations. Dealer Operator will have an
unencumbered ownership interest in Dealer of at least 15 percent at all times.
A Dealer Operator must be a competent business person, an effective manager,
must have demonstrated a caring attitude toward customers, and should have a
successful record as a merchandiser of automotive products and services or
otherwise have demonstrated the ability to manage a dealership. The experience
necessary may vary with the potential represented by each dealer location.
ARTICLE 3. DEALER OWNER
Division enters into this Agreement in reliance on the qualifications of
dealer owner(s) identified in the Dealer Statement of Ownership. Division and
Dealer agree each dealer owner will continue to own, both of record and
beneficially, the percentage stated in the Dealer Statement of Ownership, unless
a change is made in accordance with Article 12.
ARTICLE 4. AUTHORIZED LOCATIONS
4.1. DEALER NETWORK PLANNING
Because Division distributes its Products through a network of authorized
dealers operating from approved locations, those dealers must be appropriate in
number, located properly, and have proper facilities to represent and service
Division's Products competitively and to permit each dealer
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the opportunity to achieve a reasonable return on investment if it fulfills its
obligations under its Dealer Agreement. Through such a dealer network, the
Division can maximize the convenience of customers in purchasing Products and
having them serviced. As a result, customers, dealers, and the Division all
benefit.
To maximize the effectiveness of its dealer network, Division agrees to
monitor marketing conditions and strive, to the extent practicable, to have
dealers appropriate in number, size and location to achieve the objectives
stated above. Such marketing conditions include Division's sales and
registration performance, present and future demographic and economic
considerations, competitive dealer networks, the ability of Division's existing
dealers to achieve the objectives stated above, the opportunities available to
existing dealers, and other appropriate circumstances.
4.2. AREA OF PRIMARY RESPONSIBILITY
Dealer is responsible for effectively selling, servicing and otherwise
representing Division's Products in the area designated in a Notice of Area of
Primary Responsibility. Division retains the right to revise Dealer's Area of
Primary Responsibility at Division's sole discretion consistent with dealer
network planning objectives. If Division determines that marketing conditions
warrant a change in Dealer's Area of Primary Responsibility, it will advise
Dealer in writing of the proposed change, the reasons for it, and will consider
any information the Dealer submits. Dealer must submit such information in
writing within 30 days of receipt of notice of the proposed change. If Division
thereafter decides the change is warranted, it will issue a revised Notice of
Area of Primary Responsibility.
4.3. ESTABLISHMENT OF ADDITIONAL DEALERS
Division reserves the right to appoint additional dealers but Division will
not exercise this right without first analyzing dealer network planning
considerations.
Prior to establishing an additional dealer within Dealer's Area of Primary
Responsibility, Division will advise Dealer in writing and give Dealer thirty
days to present relevant information
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before Division makes a final decision. Division will advise Dealer of the
final decision, which will be made solely by Division pursuant to its business
judgment. Nothing in this Agreement is intended to require Dealer's consent to
the establishment of an additional dealer.
Neither the appointment of a dealer at or within three miles of a former
dealership location as a replacement for the former dealer nor the relocation of
an existing dealer will be considered the establishment of an additional Dealer
for purposes of this Article 4.3. Such events are within the sole discretion of
Division, pursuant to its business judgment.
4.4. FACILITIES
4.4.1. LOCATION
Dealer agrees to conduct Dealership Operations only from the approved
location(s) within its Area of Primary Responsibility. The Location and
Premises Addendum identifies Dealer's approved location(s) and facilities
("Premises"). If more than one location is approved, Dealer agrees to conduct
from each location only those Dealership Operations authorized in the Addendum
for such location.
4.4.2. CHANGE IN LOCATION OR USE OF PREMISES
If Dealer wants to make any change in location(s) or Premises, or in the
uses previously approved for those Premises, Dealer will give Division written
notice of the proposed change, together with the reasons for the proposal, for
Division's evaluation and final decision in light of dealer network planning
considerations. No change in location or in the use of Premises, including
addition of any other vehicle lines, will be made without Division's prior
written authorization.
Before Division requires any changes in Premises, it will consult with
Dealer, indicate the rationale for the change, and solicit Dealer's views on the
proposal. If, after such review with Dealer, Division determines a change in
premises or location is appropriate, the Dealer will be allowed a reasonable
time to implement the change. Any such changes will be reflected in a new
Location and Premises Addendum or other written agreement executed by Dealer and
Division.
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Nothing herein is intended to require the consent or approval of any dealer
to a proposed relocation of any other dealer.
4.4.3. SIZE
Dealer agrees to provide Premises at its approved location(s) that will
promote the effective performance and conduct of Dealership Operations, and the
Division's image and goodwill. Consistent with Division's dealer network
planning objectives and Division's interest in maintaining the stability and
viability of its dealers, Dealer agrees that its facilities will be sized in
accordance with Division's requirements for that location.
Division agrees to establish and maintain a clearly stated policy for
determining reasonable dealer facility space requirements and to periodically
re-evaluate those requirements to ensure that they continue to be reasonable.
4.4.4. DEALERSHIP IMAGE AND DESIGN
The appearance of Dealer's Premises is important to the image of Dealer and
Division, and can affect the way customers perceive Division's Products and its
dealers generally. Dealer therefore agrees that its premises will be properly
equipped and maintained, and that the interior and exterior retail environment
and signs will comply with any reasonable requirements Division may establish to
promote and preserve the image of Division and its dealers.
Division will monitor developments in automotive and other retailing to
ensure that Division's image and facility requirements are responsive to changes
in the marketing environment.
Division will take into account existing economic and marketing conditions,
and consult with dealers as described in Division's Dealer Sales and Service
Agreement, in establishing such requirements.
4.4.5. DEALERSHIP EQUIPMENT
Effective performance of Dealer's responsibilities under this Agreement
requires that the dealership be reasonably equipped to communicate with
customers and the Division and to properly
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diagnose and service Products. Accordingly, Dealer agrees to provide for use in
the Dealership Operations any equipment reasonably designated by Division as
necessary to Dealer's effective performance under this Agreement. Division will
make such designations only after having consulted with dealers as described in
Division's Dealer Sales and Service Agreement.
ARTICLE 5. DEALER'S RESPONSIBILITY TO PROMOTE,
SELL AND SERVICE PRODUCTS
5.1. RESPONSIBILITY TO PROMOTE AND SELL
5.1.1. Dealer agrees to effectively, ethically and lawfully sell and
promote the purchase, lease and use of Products by consumers located in its Area
of Primary Responsibility. To achieve this objective, Dealer agrees to:
(a) maintain an adequate force of trained sales personnel;
(b) explain to Product purchasers the items which make up the
purchase price and provide purchasers with itemized invoices;
(c) not charge customers for services for which Dealer is reimbursed
by General Motors;
(d) include in customer orders only equipment or accessories
requested by customer or required by law; and
(e) ensure that the customer's purchase and delivery experience are
satisfactory.
If Dealer modifies or sells a modified new Motor Vehicle, or installs any
equipment, accessory or part not supplied by General Motors, or sells any non-
General Motors service contract for a Motor Vehicle, Dealer will disclose this
fact on the purchase order and bill of sale, indicating that the modification,
equipment, accessory or part is not warranted by General Motors or, in the case
of a service contract, the coverage is not provided by General Motors or an
affiliate.
5.1.2. Dealer is authorized to sell new Motor Vehicles only to customers
located in the United States. Dealer agrees that it will not sell new Motor
Vehicles for resale or principal use outside
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the United States. Dealer also agrees not to sell any new Motor Vehicles which
were not originally manufactured for sale and distribution in the United States.
5.1.3. Division will conduct general advertising programs to promote the
sale of Products for the mutual benefit of Division and dealers. Division will
make available to Dealer advertising and sales promotion materials from time to
time and advise Dealer of any applicable charges.
5.2. RESPONSIBILITY TO SERVICE
5.2.1. Dealer agrees to maximize customer satisfaction by providing
courteous, convenient, prompt, efficient and quality service to owners of Motor
Vehicles, regardless of from whom the Vehicles were purchased. All service will
be performed and administered in a professional manner and in accordance with
all applicable laws and regulations, and this Agreement, including the Service
Policies and Procedures Manual, as amended from time to time.
5.2.2. Dealer agrees to maintain an adequate service and parts
organization as recommended by Division, including a competent, trained service
and parts manager(s), trained service and parts personnel and, where service
volume or other conditions make it advisable, a consumer relations manager.
5.2.3. Dealer and Division will each provide the other with such
information and assistance as may reasonably be requested by the other to
facilitate compliance with applicable laws, regulations, investigations and
orders relating to Products.
5.2.4. To build and maintain consumer confidence in, and satisfaction
with, Dealer and Division, Dealer will comply with Divisional procedures for the
investigation and resolution of Product-related complaints.
5.2.5. Division will make available to Dealer current service and parts
manuals, bulletins, and technical data publications relating to Motor Vehicles.
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5.3. CUSTOMER SATISFACTION
Dealer and Division recognize that appropriate care for the customer will
promote customer satisfaction with Division's Products and its dealers, which is
critically important to our current and future business success. Dealer
therefore agrees to conduct its operations in a manner which will promote
customer satisfaction with the purchase and ownership experience. Division
agrees to provide Dealer with reasonable support to assist Dealer's attainment
of customer satisfaction. At its discretion, Division will monitor the
satisfaction of Dealer's customers, and report the results to Dealer. Any
written response from Dealer concerning a customer satisfaction report issued to
Dealer will become a part of the report.
5.4. BUSINESS PLANNING
To enable Dealer to most effectively meet its obligations under this
Agreement, and to enable Division to effectively support Dealer's efforts,
Dealer agrees to develop and implement a Business Plan if such is required by
Division.
ARTICLE 6. SALE OF PRODUCTS TO DEALERS
6.1. SALE OF MOTOR VEHICLES TO DEALER
Division will periodically furnish Dealer one or more Motor Vehicle Addenda
specifying the current model types or series of new Motor Vehicles which Dealer
may order under this Agreement. Division may change a Motor Vehicle Addendum by
furnishing a superseding one, or may cancel an Addendum at any time.
Division will endeavor to distribute new Motor Vehicles among its dealers
in a fair and equitable manner. Many factors affect the availability and
distribution of Motor Vehicles to dealers, including component availability and
production capacity, sales potential in Dealer's Area of Primary Responsibility,
varying consumer demand, weather and transportation conditions, governmental
regulations, and other conditions beyond the control of General Motors.
Division reserves to itself
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discretion in accepting orders and distributing Motor Vehicles, and its
judgments and decisions are final. Upon written request, Division will advise
Dealer of the total number of new Motor Vehicles, by series, sold to Dealers in
Dealer's Zone or Branch during the preceding month.
6.2. SALE OF PARTS AND ACCESSORIES TO DEALER
New, reconditioned or remanufactured automotive parts and accessories
marketed by General Motors and listed in current Dealer Parts and Accessories
Price Schedules or supplements furnished to Dealer are called Parts and
Accessories.
Orders for Parts and Accessories will be submitted and processed according
to written procedures established by General Motors or other designated
suppliers.
6.3. PRICES AND OTHER TERMS OF SALE
6.3.1. MOTOR VEHICLES
Prices, destination charges, and other terms of sale applicable to
purchases of new Motor Vehicles will be those established according to Vehicle
Terms of Sale Bulletins furnished periodically to Dealer.
Prices, destination charges, and other terms of sale applicable to any
Motor Vehicle may be changed at any time. Except as otherwise provided in
writing, changes apply to Motor Vehicles not shipped to Dealer at the time the
changes are made effective.
Dealer will receive written notice of any price increase before any Motor
Vehicle to which such increase applies is shipped, except for initial prices for
a new model year or for any new model or body type. Dealer has the right to
cancel or modify the affected orders by delivering written notice to Division
within 10 days after its receipt of the price increase notice.
6.3.2. PARTS AND ACCESSORIES
Prices and other terms of sale applicable to Parts and Accessories are
established by General Motors according to the Parts and Accessories Terms of
Sale Bulletin furnished to Dealer.
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Prices and other terms of sale applicable to Parts and Accessories may be
changed by General Motors at any time. Such changes apply to Parts and
Accessories not shipped to Dealer at the time changes become effective.
6.4. INVENTORY
6.4.1. MOTOR VEHICLE INVENTORY
Dealer recognizes that customers expect Dealer to have a reasonable
quantity and variety of current model Motor Vehicles in inventory. Accordingly,
Dealer agrees to order and stock and Division agrees to make available, subject
to Article 6.1, a mix of models and series of Motor Vehicles identified in the
Motor Vehicle Addendum in quantities adequate to enable Dealer to fulfill its
obligations in its Area of Primary Responsibility.
6.4.2. PARTS AND ACCESSORIES
Dealer agrees to stock sufficient Parts and Accessories made available by
General Motors to perform warranty repairs and policy adjustments and meet
customer demand.
6.5. WARRANTIES ON PRODUCTS
General Motors warrants new Motor Vehicles and Parts and Accessories
(Products) as explained in documents provided with the Products or in the
Service Policies and Procedures Manual.
EXCEPT AS OTHERWISE PROVIDED BY LAW, THE WRITTEN GENERAL MOTORS WARRANTIES
ARE THE ONLY WARRANTIES APPLICABLE TO PRODUCTS. WITH RESPECT TO DEALERS, SUCH
WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES OR LIABILITIES, EXPRESS OR
IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR ANY LIABILITY FOR COMMERCIAL LOSSES BASED UPON NEGLIGENCE
OR MANUFACTURER'S STRICT LIABILITY. EXCEPT AS MAY BE PROVIDED UNDER AN
ESTABLISHED GENERAL MOTORS PROGRAM OR PROCEDURE, GENERAL MOTORS NEITHER ASSUMES
NOT AUTHORIZES ANYONE TO ASSUME FOR IT ANY OTHER OBLIGATION OR LIABILITY IN
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CONNECTION WITH PRODUCTS, AND GENERAL MOTORS MAXIMUM LIABILITY IS TO REPAIR OR
REPLACE THE PRODUCT.
ARTICLE 7. SERVICE OF PRODUCTS
7.1. SERVICE FOR WHICH DIVISION PAYS
7.1.1. NEW MOTOR VEHICLE PRE-DELIVERY INSPECTIONS AND ADJUSTMENTS
Because new vehicle delivery condition is critical to customer
satisfaction, Dealer agrees to perform specified pre-delivery inspections and
adjustments on each new Motor Vehicle and verify completion according to
procedures identified in the Service Policies and Procedures Manual.
7.1.2. WARRANTY AND SPECIAL POLICY REPAIRS
Dealer agrees to perform (i) required warranty repairs on each qualified
Motor Vehicle at the time of pre-delivery service and when requested by owner,
and (ii) special policy repairs approved by Division. When the vehicle is
returned to the owner, Dealer will provide owner a copy and explanation of the
repair document reflecting all services performed.
7.1.3. CAMPAIGN INSPECTIONS AND CORRECTIONS
Division will notify Dealer of suspected unsatisfactory conditions on
Products and issue campaign instructions. Dealer agrees to inspect and correct
suspected unsatisfactory conditions on Products in accordance with the
instructions. Dealer will also determine that campaign inspections and
corrections have been made on new and used Motor Vehicles in its inventory prior
to sale, and follow-up on Products on which campaigns are outstanding.
Division may ship, and Dealer agrees to accept, unordered parts and
materials required for campaigns. Upon campaign completion, Dealer will receive
credit for excess parts and materials so shipped if they are returned or
disposed of according to Division's instructions.
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7.1.4. PAYMENT FOR PRE-DELIVERY ADJUSTMENTS, WARRANTY, CAMPAIGN AND
TRANSPORTATION DAMAGE WORK
For Dealer's performance of services, pre-delivery inspections and
adjustments, warranty repairs, special policy repairs, campaign inspections and
corrections, and transportation damage repairs, Division will provide or pay
Dealer for the Parts and other materials required and will pay Dealer a
reasonable amount for labor. Payment will be made according to policies in the
Service Policies and Procedures Manual. Dealer will not impose any charge for
such service on owners or users except where a deductible or pro-rata charge
applies.
7.2. PARTS, ACCESSORIES, AND BODY REPAIRS
7.2.1. WARRANTY AND POLICY REPAIRS
Dealer agrees to use only genuine GM or General Motors approved Parts and
Accessories in performing warranty repairs, special policy repairs, and any
other repairs paid for by Division, in accordance with the applicable provisions
of the Service Policies and Procedures Manual.
7.2.2. REPRESENTATIONS AND DISCLOSURES AS TO PARTS AND ACCESSORIES
In servicing vehicles marketed by General Motors, Dealer agrees to disclose
the use of non-General Motors parts and accessories as set forth in Article
5.1.1.
7.2.3. BODY REPAIRS
Dealer agrees to provide quality body repair service for Motor Vehicles.
Dealer can provide this service through its own body shop, or by arrangement
with an alternate repair establishment.
7.2.4. TOOLS AND EQUIPMENT
Dealer agrees to provide essential service tools as required by Division
and other tools and equipment as necessary to fulfill its responsibilities to
properly diagnose and service Products.
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ARTICLE 8. TRAINING
Properly trained personnel are essential to the success of Dealer and
Division, and to providing customers with a satisfactory sales and service
experience. Division agrees to make available or recommend to Dealer product,
sales, service and parts, accounting and business management training courses
for Dealer personnel. Division will make such training available as
conveniently in time and location as practical circumstances permit. Division
will assist Dealer in determining training requirements and periodically will
require that Dealer have personnel attend specific courses. Dealer agrees to
comply with any such reasonable training requirements and pay any specified
training charges. Division will consult with dealers as described in Division's
Dealer Sales and Service Agreement prior to determining the training courses or
programs from which an individual Dealer's requirements under this Article may
be established. Specific minimum service training requirements will be
described in Division's Service Policies and Procedure Manual.
Division will make available personnel to advise and counsel Dealer
personnel on sales, service, parts and accessories, and related subjects.
ARTICLE 9. REVIEW OF DEALER'S SALES AND SERVICE PERFORMANCE
Dealer's performance of its obligations is essential to the effective
representation of Division's Products, and to the reputation and goodwill of
Dealer, Division, and other Division dealers. Periodically, Division will
review various aspects of Dealer's sales and service performance. Division and
Dealer will use the review process to identify areas in which improvements or
changes are necessary so that Dealer can take prompt action to achieve
acceptable performance.
ARTICLE 10. CAPITALIZATION
The Capital Standard Addendum reflects the minimum net working capital
necessary for Dealer to conduct Dealership Operations. Dealer agrees to
maintain at least this level of net working
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capital. Division will issue a new Addendum if changes in operating conditions
or Divisional guidelines indicate capital needs have changed materially.
To avoid damage to goodwill which could result if Dealer is financially
unable to fulfill its commitments, Dealer agrees to have and maintain a separate
line of credit from a financial institution available to finance its purchase of
new vehicles. The amount of the line of credit will be sufficient for Dealer to
meet its obligations under Article 6.4.
ARTICLE 11. ACCOUNTS AND RECORDS
11.1. UNIFORM ACCOUNTING SYSTEM
A uniform accounting system facilitates an evaluation of Dealer business
management practices and the impact of Division's policies and practices.
Division therefore agrees to maintain, and Dealer agrees to use and maintain
records in accordance with, a uniform accounting system set forth in an
accounting manual furnished to Dealer.
Dealer also agrees to timely submit true and accurate applications or
claims for payments, discounts or allowances; true and correct orders for
Products and reports of sale and delivery; and any other reports or statements
required by Division, in the manner specified by Division, and to retain such
records for at least two years.
11.2. EXAMINATION OF ACCOUNTS AND RECORDS
Dealer agrees to permit any designated representative of Division to
examine, audit, and take copies of any of the accounts and records Dealer is to
maintain under the accounting manual and this Agreement. Dealer agrees to make
such accounts and records readily available at its facilities during regular
business hours. Division agrees to furnish Dealer with a list of any reproduced
records.
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11.3. Confidentiality of Dealer Data
Division agrees not to furnish any personal or financial data submitted to
it by Dealer to any non-affiliated entity unless authorized by Dealer, required
by law, or pertinent to judicial or administrative proceedings, or to
proceedings under the Dispute Resolution Process.
ARTICLE 12. CHANGES IN MANAGEMENT AND OWNERSHIP
The parties recognize that customers and authorized dealers, as well as
shareholders and employees of General Motors, have a vital interest in the
continued success and efficient operation of Division's dealer network.
Accordingly, Division has the responsibility of continuing to administer the
network to ensure that dealers are owned and operated by qualified persons able
to meet the requirements of this Agreement.
12.1. SUCCESSION RIGHTS UPON DEATH OR INCAPACITY
12.1.1. SUCCESSOR ADDENDUM
Dealer can apply for a Successor Addendum designating a proposed dealer
operator and/or owners of a successor dealer to be established if this Agreement
expires or is terminated because of death or incapacity. Division will execute
the Addendum provided Dealer is meeting its obligations under this Agreement and
under any Dealer Agreement which Dealer may have with other Divisions of General
Motors for the conduct of Dealership Operations at the approved location; and
the proposed dealer operator is, and will continue to be, employed full-time by
Dealer or a comparable automotive dealership, and is already qualified or is
being trained to qualify as a dealer operator; and provided all other proposed
owners are acceptable.
Division may refuse to enter into a Successor Addendum with Dealer if
Division has previously notified Dealer it does not plan to continue Dealership
Operations at the approved location, except for renewal of an existing Successor
Addendum where the same proposed dealer operator continues to be qualified.
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Upon expiration of this Agreement, Division will, upon Dealer's request,
execute a new Successor Addendum provided a new and superseding dealer agreement
is executed with Dealer, and Dealer, the proposed dealer operator and dealer
owners are then qualified as described above.
12.1.2. ABSENCE OF SUCCESSOR ADDENDUM
If this Agreement expires or is terminated because of death or incapacity
and Dealer and Division have not executed a Successor Addendum, the Dealer
Operator or, if there is not a remaining Dealer Operator, the remaining dealer
owners may propose a successor dealer to continue the operations identified in
this Agreement. The proposal must be made to Division in writing at least 30
days prior to the expiration or termination of this Agreement, including any
deferrals.
12.1.3. SUCCESSOR DEALER REQUIREMENTS
Division will accept a proposal to establish a successor dealer submitted
by a proposed dealer operator under this Article 12.1 provided:
(a) the proposed successor dealer and the proposed dealer operator
are ready, willing and able to meet the requirements of a new dealer
agreement at the approved location(s);
(b) Division approves the proposed dealer operator and all proposed
owners not previously approved for the existing Dealership Operations;
(c) all outstanding monetary obligations of Dealer to General Motors
have been satisfied; and
(d) Dealer has not been previously notified that Division may
discontinue Dealership Operations at that location.
12.1.4. TERM OF NEW DEALER AGREEMENT
The dealer agreement offered a successor dealer will be for a three-year
term. Division will notify the successor dealer in writing at least 90 days
prior to the expiration date whether the successor dealer has performed
satisfactorily and, if so, that Division will offer a new dealer agreement.
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12.1.5. LIMITATION ON OFFERS
Dealer will be notified in writing of the decision on a proposal to
establish a successor dealer submitted under Article 12.1 within 60 days after
Division has received from Dealer all applications and information reasonably
requested by Division. Division may condition its offer of a dealer agreement
on the relocation of dealership operations to an approved location by successor
dealer within a reasonable time. Division's offer of a new dealer agreement
under this Article 12.1 will automatically expire if not accepted in writing by
the proposed successor dealer within 60 days after it receives the offer.
12.1.6. CANCELLATION OF ADDENDUM
Dealer may cancel an executed Successor Addendum at any time prior to the
death of a Dealer Operator or Dealer Owner, or the incapacity of Dealer
Operator. Division may cancel an executed Successor Addendum only if the
proposed dealer operator is no longer qualified under Article 12.1.1.
12.2. OTHER CHANGES IN OWNERSHIP OR MANAGEMENT
If Dealer proposes a change in Dealer Operator, a change in ownership, or a
transfer of the dealership business or its principal assets to any person
conditioned upon Division's entering into a dealer agreement with that person,
Division will consider Dealer's proposal and not arbitrarily refuse to approve
it, subject to the following:
12.2.1. Dealer agrees to give Division prior written notice of any
proposed change or transfer described above. Dealer understands that if any
such change is made prior to Division's approval of the proposal, termination of
this Agreement will be warranted and Division will have no further obligation to
consider Dealer's proposal.
12.2.2. Division agrees to consider Dealer's proposal, taking into
account factors such as (a) the personal, business, and financial qualifications
of the proposed dealer operator and owners, and (b) whether the proposed change
is likely to result in a successful dealership operation with acceptable
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management, capitalization, and ownership which will provide satisfactory sales,
service, and facilities at an approved location, while promoting and preserving
competition and customer satisfaction.
12.2.3. Division will notify Dealer in writing of Division's decision on
Dealer's proposal within 60 days after Division had received from Dealer all
applications and information reasonably requested by Division. If Division
disagrees with the proposal, it will specify its reasons.
12.2.4. Any material change in Dealer's proposal, including change in
price, facilities, capitalization, proposed owners, or dealer operator, will be
considered a new proposal, and the time period for Division to respond shall
recommence.
12.2.5. Division's prior written approval is not required where the
transfer of equity ownership or beneficial interest to an individual is (a) less
than ten percent in a calendar year, and (b) between existing dealer owners
previously approved by Division where there is no change in majority ownership
or voting control. Dealer agrees to notify Division within 30 days of the date
of the change and to execute a new Dealer Statement of Ownership.
12.2.6. Division is not obligated to approve any proposed changes in
management or ownership under this Article unless Dealer makes arrangements
acceptable to Division to satisfy any indebtedness of Dealer to General Motors.
12.3. RIGHT OF FIRST REFUSAL TO PURCHASE
12.3.1. CREATION AND COVERAGE
If Dealer submits a proposal for a change of ownership under Article 12.2,
Division will have a right of first refusal to purchase the dealership assets
regardless of whether the proposed buyer is qualified to be a dealer. If
Division chooses to exercise this right, it will do so in its written response
to Dealer's proposal. Division will have a reasonable opportunity to inspect
the assets, including real estate, before making its decision.
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12.3.2. PURCHASE PRICE AND OTHER TERMS OF SALE
(a) BONA FIDE AGREEMENT
If Dealer has entered into a bona fide written buy/sell agreement, the
purchase price and other terms of sale will be those set forth in such agreement
and any related documents, unless Dealer and Division agree to other terms.
Upon Division's request, Dealer agrees to provide all documents relating to
the proposed transfer. If Dealer refuses to provide such documentation or state
in writing that such documents do not exist, it will be presumed that the
agreement is not bona fide.
(b) ABSENCE OF BONA FIDE AGREEMENT
In the absence of a bona fide written buy/sell agreement, the purchase
price of the dealership assets will be determined by good faith negotiations by
Dealer and Division. If agreement cannot be reached within a reasonable time,
the price and other terms of sale will be established by arbitration according
to the rules of the American Arbitration Association.
12.3.3. CONSUMMATION
Dealer agrees to transfer the property by Warranty Deed, where possible,
conveying marketable title free and clear of liens and encumbrances. The
Warranty Deed will be in proper form for recording and Dealer will deliver
complete possession of the property when the Deed is delivered. Dealer will
also furnish copies of any easements, licenses or other documents affecting the
property and assign any permits or licenses necessary for the conduct of
Dealership Operations.
12.3.4. ASSIGNMENT
Division's rights under this section may be assigned to any third party
("Assignee"). If there is an assignment, Division will guarantee full payment
of the purchase price by the Assignee. Division shall have the opportunity to
discuss the terms of the buy/sell agreement with a potential Assignee.
Division's rights under this Article are binding on and enforceable against
any Assignee or successor in interest of Dealer or purchaser of Dealer's assets.
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12.3.5 TRANSFER INVOLVING FAMILY MEMBERS AND DEALER MANAGEMENT
When the proposed change of ownership involves a transfer by a dealer owner
solely to a member or members of his or her immediate family, or to a qualifying
member of Dealer's Management, the Division's right of first refusal will not
apply. An "immediate family member" shall be the spouse, child, grandchild,
spouse of a child or grandchild, brother, sister or parent of the dealer owner.
A "qualifying member of Dealer's Management" shall be an individual who has been
employed by Dealer for at least two years and otherwise qualifies as a dealer
operator.
ARTICLE 13. BREACHES AND OPPORTUNITY TO REMEDY
13.1. CERTAIN ACTS OR EVENTS
The following acts or events, which are within the control of Dealer or
originate from action taken by Dealer or its management or owners, are material
breaches of this Agreement. If Division learns that any of the acts or events
has occurred, it may notify the Dealer in writing. If notified, Dealer will be
given the opportunity to respond in writing within 30 days of receipt of the
notice, explaining or correcting the situation to Division's satisfaction.
13.1.1. The removal, resignation, withdrawal, or elimination from Dealer
for any reason of any Dealer Operator or dealer owner without Division's prior
written approval.
13.1.2. 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 contrary to the terms of
this Agreement.
13.1.3. Any change, whether voluntary or involuntary, in the record or
beneficial ownership of Dealer as set forth in the Dealer Statement of Ownership
furnished by Dealer, unless permitted by Article 12.2.5 or pursuant to
Division's written approval.
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13.1.4. Any undertaking by Dealer or any of its owners to conduct, either
directly or indirectly, any of the Dealership Operations at any unapproved
location.
13.1.5. Any sale, transfer, relinquishment, or discontinuance of use by
Dealer of any of the Dealership Premises or other principal assets required in
the conduct of the Dealership Operations, without Division's prior written
approval.
13.1.6. Any dispute among the owners or management personnel of Dealer
which, in Division's opinion, may adversely affect the Dealership Operations or
the interests of Dealer or Division.
13.1.7. Refusal by Dealer to timely furnish sales, service or financial
information and related supporting data, or to permit Division's examination or
audit of Dealer's accounts and records.
13.1.8. A finding by a government agency or court of original
jurisdiction or a settlement arising from charges that Dealer, or a predecessor
of Dealer owned or controlled by the same person, had committed a misdemeanor or
unfair or deceptive business practice which, in Division's opinion, may
adversely affect the reputation or interests of Dealer or Division.
13.1.9. Willful failure of Dealer to comply with the provisions of any
laws or regulations relating to the sale or service of Products.
13.1.10. Submission by Dealer of false applications or reports, including
false orders for Products or reports of delivery or transfer of Products.
13.1.11. Failure of Dealer to maintain the line of credit required by
Article 10.
13.1.12. Failure of Dealer to timely pay its obligations to General
Motors.
13.1.13. Any other material breach of Dealer's obligations under this
Agreement not otherwise identified in this Article 13 or in Article 14.
If Dealer's response demonstrates that the breach has been corrected, or
otherwise explains the circumstances to Division's satisfaction, then Division
shall confirm this fact in writing to Dealer.
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If, however, Dealer's response does not demonstrate that the breach has
been corrected, or explain the circumstances to Division's satisfaction,
termination is warranted and Division may terminate this Agreement upon written
notice to Dealer. Termination will be effective 60 days following Dealer's
receipt of the notice.
13.2. FAILURE OF PERFORMANCE BY DEALER
If Division determines that Dealer's Premises are not acceptable, or that
Dealer has failed to adequately perform its sales or service responsibilities,
including those responsibilities relating to customer satisfaction and training,
Division will review such failure with Dealer.
As soon as practicable thereafter, Division will notify Dealer in writing
of the nature of Dealer's failure and of the period of time (which shall not be
less than six months) during which Dealer will have the opportunity to correct
the failure.
If Dealer does correct the failure by the expiration of the period,
Division will so advise the Dealer in writing.
If, however, Dealer does not correct the failure by the expiration of the
period, Division may terminate this Agreement by giving dealer 90 days advance
written notice.
ARTICLE 14. TERMINATION OF AGREEMENT
14.1. BY DEALER
Dealer has the right to terminate this Agreement without cause at any time
upon written notice to Division. Termination will be effective 30 days after
Division's receipt of the notice, unless otherwise mutually agreed in writing.
14.2. BY AGREEMENT
This Agreement may be terminated at any time by written agreement between
Division and Dealer.
Termination assistance will apply only as specified in the written
termination agreement.
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14.3. FAILURE TO BE LICENSED
If Division or Dealer fails to secure or maintain any license required for
the performance of obligations under this Agreement or such license is suspended
or revoked, either party may immediately terminate this Agreement by giving the
other party written notice.
14.4. INCAPACITY OF DEALER OPERATOR
Because this is a Personal Services Agreement, Division may terminate this
Agreement by written notice to Dealer if Dealer Operator is so physically or
mentally incapacitated that the Dealer Operator is unable to actively exercise
full managerial authority. The effective date of termination will be stated in
such written notice and will be not less than three months after receipt of such
notice.
14.5. ACTS OR EVENTS
If Division learns that any of the following has occurred, it may terminate
this Agreement by giving Dealer written notice of termination. Termination will
be effective on the date specified in the notice.
14.5.1. Conviction in a court of original jurisdiction of Dealer, or a
predecessor of Dealer owned or controlled by the same person, or any Dealer
Operator or dealer owner of any felony.
14.5.2. Insolvency of Dealer; or filing by or against Dealer of a
petition in bankruptcy; or filing of a proceeding for the appointment of a
receiver or trustee for Dealer, provided such filing or appointment is not
dismissed or vacated within thirty days; or execution by Dealer of an assignment
for the benefit of creditors or any foreclosure or other due process of law
whereby a third party acquires rights to the operation, ownership or assets of
Dealer.
14.5.3. Failure of Dealer to conduct customary sales and service
operations during customary business hours for seven consecutive business days.
14.5.4. Any misrepresentation to General Motors by Dealer or by any
Dealer Operator or owner in applying for this Agreement, or in identifying the
Dealer Operator, or record or beneficial ownership of Dealer.
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14.5.5. Submission by Dealer of false applications or claims for any
payment, credit, discount, or allowance, including false applications in
connection with incentive activities, where the false information was submitted
to generate a payment to Dealer for a claim which would not otherwise have
qualified for payment.
Termination for failure to correct other breaches will be according to the
procedures outlined in Article 13.
14.6. RELIANCE ON ANY APPLICABLE TERMINATION PROVISION
The terminating party may select the provision under which it elects to
terminate without reference in its notice to any other provision that may also
be applicable. The terminating party subsequently also may asset other grounds
for termination.
14.7. TRANSACTIONS AFTER TERMINATION
14.7.1. EFFECT ON ORDERS
If Dealer and Division do not enter into a new Dealer Agreement when this
Agreement expires or is terminated, all of Dealer's outstanding orders for
products will be automatically cancelled except as provided in this Article
14.7.
Termination of this Agreement will not release Dealer or Division from the
obligation to pay any amounts owing the other, nor release Dealer from the
obligation to pay for Special Vehicles if Division has begun processing such
orders prior to the effective date of termination.
14.7.2. TERMINATION DELIVERIES
If this Agreement is voluntarily terminated by Dealer or expires or is
terminated because of the death or incapacity of a Dealer Operator or death of a
Dealer Owner, without a termination or expiration deferral, Division will use
its best efforts consistent with its distribution procedures to furnish Dealer
with Motor Vehicles to fill Dealer's bona fide retail orders on hand on the
effective date of termination or expiration, not to exceed, however, the total
number of Motor Vehicles invoiced to Dealer for retail sale during the three
months immediately preceding the effective date of termination.
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14.7.3. EFFECT OF TRANSACTIONS AFTER TERMINATION
Neither the sale of Products to Dealer nor any other act by Division or
Dealer after termination of this Agreement will be construed as a waiver of the
termination.
ARTICLE 15. TERMINATION ASSISTANCE
15.1. DEFERRAL OF EFFECTIVE DATE
If this Agreement is scheduled to expire or terminate because of the death
or incapacity of a Dealer Operator or the death of a Dealer Owner and Dealer
requests an extension of the effective date of expiration or termination thirty
days prior to such date, Division will defer the effective date for up to a
total of eighteen months after such death or incapacity occurs to assist Dealer
in winding up its Dealership Operations.
15.2. PURCHASE OF PERSONAL PROPERTY
15.2.1. DIVISION'S OBLIGATIONS
If this Agreement expires or is terminated and Division does not offer
Dealer or a replacement dealer that has substantially the same ownership (more
than 50 percent including total family ownership) a new Dealer Agreement,
Division will offer to purchase the following items of personal property (herein
called Eligible Items) from Dealer at the prices indicated:
(a) New and unused Motor Vehicles of the current model year purchased
by Dealer from Division at a price equal to the net prices and charges that
were paid to General Motors;
(b) Any signs owned by Dealer of a type recommended in writing by
Division and bearing any Marks at a price agreed upon by Division and
Dealer. If Division and Dealer cannot agree on a price, they will select a
third party who will set the price;
(c) Any essential tools recommended by Division and designed
specifically for service of Motor Vehicles that Division offered for sale
during the three years preceding termination at
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prices established in accordance with the applicable pricing formula in
the Service Policies and Procedures Manual; and
(d) Unused and undamaged Parts and Accessories that (i) are still in
the original, resalable merchandising packages and in unbroken lots (in the
case of sheet metal, a comparable substitute for the original package may
be used); (ii) are listed for sale in the then current Dealer Parts and
Accessories Price Schedules (except "discontinued" or "replaced" Parts and
Accessories); and (iii) were purchased by Dealer either directly from
General Motors or from an outgoing dealer as a part of Dealer's initial
Parts and Accessories inventory. Prices will be those dealer prices in
effect at the time General Motors receives the Parts and Accessories, less
any applicable allowances whether or not any such allowances were made to
Dealer when Dealer purchased the Parts and Accessories. In addition, an
allowance of five percent of dealer price for packing costs and
reimbursement for transportation charges to the destination specified by
General Motors will be credited to Dealer's account.
15.2.2. DEALER'S RESPONSIBILITIES
Division's obligation to purchase Eligible Items is subject to Dealer
fulfilling its responsibility under this subsection.
Within fifteen days following the effective date of termination or
expiration of this Agreement, Dealer will furnish Division with a list of
vehicle identification numbers and such other information as Division may
request pertaining to eligible Motor Vehicles. Dealer will deliver the eligible
Motor Vehicles to a destination determined by Division that will be in a
reasonably proximity to Dealer's Premises.
Within two months following the effective date of termination or expiration
of this Agreement, Dealer will mail or deliver to General Motors a complete and
separate list of each of the Eligible Items other than Motor Vehicles. Dealer
will retain the Eligible Items until receipt of written shipping
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instructions from General Motors. Within thirty days after receipt of
instructions, Dealer will ship the Eligible Items, transportation charges
prepaid, to the destinations specified in the instructions.
Dealer will take action and execute and deliver such instruments as
necessary to (a) convey to Division and General Motors good and marketable title
to all Eligible Items to be purchased, (b) comply with the requirements of any
applicable state law relating to bulk sales or transfer, and (c) satisfy and
discharge any liens or encumbrances on Eligible Items prior to their delivery to
Division and General Motors.
15.2.3. PAYMENT
Subject to Article 17.10, Division will pay for the Eligible Items as soon
as practicable following their delivery to the specified destinations. Payment
may be made directly to anyone having a security or ownership interest in the
Eligible Items.
If Division has not paid Dealer for the Eligible Items within two months
after delivery, and if Dealer has fulfilled its termination obligations under
this Agreement, Division will, at Dealer's written request, estimate the
purchase price of the unpaid Eligible Items and all other amounts owed Dealer by
General Motors. After deducting the amounts estimated to be owing General
Motors and its subsidiaries by Dealer, Division will advance Dealer 75 percent
of the net amount owed Dealer and will pay the balance, if any, as soon as
practicable thereafter.
15.2.4. ASSIGNMENT OF RIGHTS
If Division has decided to appoint a replacement dealer at Dealer's
location, Dealer may sell its Eligible Items and if approved in writing by
Division, assign its rights under this Article 15.2 to a designated replacement
dealer provided the replacement dealer assumes Dealer's obligations under this
Article.
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15.3. ASSISTANCE ON PREMISES
15.3.1. DIVISION'S OBLIGATION
Subject to Article 17.10, Division agrees to give Dealer assistance in
disposing of the Premises if (i) this Agreement expires for any reason or is
terminated by Division under Articles 13.2 or 14.4 and (ii) Dealer is not
offered a new Dealer Agreement. Such assistance shall be given only on Premises
that are described in the Location and Premises Addendum and only if:
(a) they are used solely for Dealership Operations (or similar
dealership operations under agreements with other Divisions of General
Motors which will be terminated simultaneously with this Agreement); and
(b) they are not substantially in excess of space requirements at the
time of termination or, if they are substantially in excess, they became
excessive because of a reduction in the requirements applicable to Dealer's
facilities.
Any Dealer request for such assistance must be in writing and received by
Division within thirty days of the expiration or termination of this Agreement.
Premises that consist of more than one parcel of property or more than one
building, each of which is separately usable, distinct and apart from the whole
or any other part with appropriate ingress or egress, shall be considered
separately under this Article 15.3.
15.3.2. OWNED PREMISES
Division will provide assistance on owned Premises by either (a) locating a
purchaser who will offer to purchase the Premises at a reasonable price, or (b)
locating a lessee who will offer to lease the Premises. If Division does not
locate a purchaser or lessee within a reasonable time, Division will itself
either purchase or, at its option, lease the Premises for a reasonable term at a
reasonable rent. If the cause of termination or expiration is a death or the
incapacity of the Dealer Operator, Division may instead pay Dealer a sum equal
to a reasonable rent for a period of twelve months immediately following the
effective date of termination or expiration of this Agreement.
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15.3.3. LEASED PREMISES
Division will provide assistance on leased Premises by either:
(a) locating a tenant(s), satisfactory to lessor, who will sublet for
the balance of the lease or assume it; or
(b) arranging with the lessor for the cancellation of the lease
without penalty to Dealer; or
(c) reimbursing Dealer for the lesser of the rent specified in the
lease or settlement agreement or a reasonable rent for a period equal to
the lesser of twelve months from the effective date or termination or
expiration of the balance of the lease term.
Upon request, Dealer will use its best efforts to effect a settlement of
the lease with the lessor subject to Division's prior approval of the terms.
Division is not obligated to reimburse Dealer for rent for any month during
which the Premises are occupied by Dealer or anyone else after the first month
following the effective date of termination or expiration.
15.3.4. RENT AND PRICE
Division and Dealer will fix the amount of a reasonable rent and a
reasonable price for the Premises by agreement at the time Dealer requests
assistance. The factors to be considered in fixing those amounts are:
(a) the adequacy and desirability of the Premises for a dealership
operation; and
(b) the fair market value of the Premises. If Division and Dealer
cannot agree, the fair market value will be determined by the median
appraisal of three qualified real estate appraisers, of whom Dealer and
Division will each select one and the two selected will select the third.
The cost of appraisals will be shared equally by Dealer and Division.
15.3.5. LIMITATIONS ON OBLIGATION TO PROVIDE ASSISTANCE
Division will not be obligated to provide assistance on Premises if Dealer:
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(a) fails to accept a bona fide offer from a prospective purchaser,
sublessee or assignee;
(b) refuses to execute a settlement agreement with the lessor if the
agreement would be without cost to Dealer;
(c) refuses to use its best efforts to effect a settlement when
requested by Division; or
(d) refuses to permit Division to examine Dealer's books and records
if necessary to verify claims of Dealer under this Article.
Any amount payable by Division as rental reimbursement or reasonable rent
shall be proportionately reduced if the Premises are leased or sold to another
party during the period for which such amount is payable. Payment of rental
reimbursement or reasonable rent is waived by Dealer if it does not file its
claim therefor within two months after the expiration of the period covered by
the payment. Upon request, Dealer will support its claim with satisfactory
evidence of its accuracy and reasonableness.
ARTICLE 16. DISPUTE RESOLUTION PROCESS
Division and Dealer agree that mutual respect, trust and confidence are
vital to the relationship between Division and Dealer. So that such respect,
trust and confidence can be maintained, and differences that may develop between
Dealer and Division may be resolved amicably, Division and Dealer agree to
resolve disputes in accordance with the Dispute Resolution Process, a copy of
which has been provided to Dealer.
ARTICLE 17. GENERAL PROVISIONS
17.1. NO AGENT OR LEGAL REPRESENTATIVE STATUS
This Agreement does not make either party the agent or legal representative
of the other for any purpose, nor does it grant either party authority to assume
or create any obligation on behalf of or in the name of the others. No
fiduciary obligations are created by this Agreement.
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17.2. RESPONSIBILITY FOR OPERATIONS
Except as provided in this Agreement, Dealer is solely responsible for all
expenditures, liabilities and obligations incurred or assumed by Dealer for the
establishment and conduct of its operations.
17.3. TAXES
Dealer is responsible for all local, state, federal, or other applicable
taxes and tax returns related to its dealership business and will hold General
Motors harmless from any related claims or demands made by any taxing authority.
17.4. INDEMNIFICATION BY GENERAL MOTORS
General Motors will assume the defense of Dealer and indemnify Dealer
against any judgment for monetary damages or rescission of contract, less any
offset recovered by Dealer, in any lawsuit naming Dealer as a defendant relating
to any Product that has not been altered when the lawsuit concerns:
17.4.1. Breach of the General Motors warranty related to the Product,
bodily injury or property damage claimed to have been caused solely by a defect
in the design, manufacture, or assembly of a Product by General Motors (other
than a defect which should have been detected by Dealer in a reasonable
inspection of the Product);
17.4.2. Failure of the Product to conform to the description set forth in
advertisements or product brochures distributed by General Motors because of
changes in standard equipment or material component parts unless Dealer received
notice of the changes prior to retail delivery of the affected Product by
Dealer; or
17.4.3. Any substantial damage to a Product purchased by Dealer from
General Motors which has been repaired by General Motors unless Dealer has been
notified of the repair prior to retail delivery of the affected Product.
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If General Motors reasonably concludes that allegations other than those
set forth in 17.4.1, 17.4.2, or 17.4.3 above are being pursued in the lawsuit,
General Motors shall have the right to decline to accept the defense or
indemnify dealer or, after accepting the defense, to transfer the defense back
to Dealer and withdraw its agreement to indemnify Dealer.
Procedures for requesting indemnification, administrative details, and
limitations are contained in the Service Policies and Procedures Manual under
"Indemnification." The obligations assumed by General Motors are limited to
those specifically described in this Article and in the Service Policies and
Procedures Manual and are conditioned upon compliance by Dealer with the
procedures described in the Manual. This Article shall not affect any right
either party may have to seek indemnification or contribution under any other
contract or by law and such rights are hereby expressly preserved.
17.5. TRADEMARKS AND SERVICE MARKS
General Motors or affiliated companies are the exclusive owners or
licensees of the various trademarks, service marks, names and designs ("Marks")
used in connection with Products and services.
Dealer is granted the non-exclusive right to display Marks in the form and
manner approved by Division in the conduct of its dealership business. Dealer
agrees to permit any designated representative of Division upon the Premises
during regular business hours to inspect Products or services in connection with
Marks.
Dealer will not apply to register any Marks either alone or as part of
another mark, and will not take any action which may adversely affect the
validity of the Marks or the goodwill associated with them.
Dealer agrees to purchase and sell goods bearing Marks only from parties
authorized or licensed by Division or General Motors.
Marks may be used as part of the Dealer's name with Division's written
approval.
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Dealer agrees to change or discontinue the use of any Marks upon Division's
request.
Dealer agrees that no company owned by or affiliated with Dealer or any of
its owners may use any Mark to identify a business without Division's written
permission.
Upon termination of this Agreement, Dealer agrees to immediately
discontinue, at its expense, all use of Marks. Thereafter, Dealer will not use,
either directly or indirectly, any Marks or any other confusingly similar marks
in a manner that Division determines is likely to cause confusion or mistake or
deceive the public.
Dealer will reimburse Division for all legal fees and other expenses
incurred in connection with action to require Dealer to comply with this Article
17.5.
17.6. NOTICES
Any notice required to be given by either party to the other in connection
with this Agreement will be in writing and delivered personally or by first
class or express mail or by facsimile. Notices to Dealer will be directed to
Dealer or its representatives at Dealer's principal place of business and,
except for indemnification requests made pursuant to Article 17.4, notices by
Dealer will be directed to the appropriate Zone or Branch Manager of the
Division(s) of General Motors.
17.7. NO IMPLIED WAIVERS
The delay or failure of either party to require performance by the other
party or the waiver by either party of a breach of any provision of this
Agreement will not affect the right to subsequently require such performance.
17.8. ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES
Dealer has not paid any fee for this Agreement. Neither this Agreement nor
any right granted by this Agreement is a property right.
Except as provided in Article 12, neither this Agreement nor the rights or
obligations of Dealer may be sold, assigned, delegated or otherwise transferred.
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Division may assign this Agreement and any rights, or delegate any
obligations, under this Agreement to any affiliated or successor company, and
will provide Dealer written notice of such assignment or delegation. Such
assignment or delegation shall not relieve Division of liability for the
performance of its obligations under this Agreement.
17.9. NO THIRD PARTY BENEFIT INTENDED
This Agreement is not enforceable by any third parties and is not intended
to convey any rights or benefits to anyone who is not a party to this Agreement.
17.10. ACCOUNTS PAYABLE
All monies or accounts due Dealer are net of Dealer's indebtedness to
Division, General Motors and its subsidiaries. In addition, Division may deduct
any amounts due or to become due from Dealer to Division or General Motors, or
any amounts held by Division, from any sums or accounts due or to become due
from Division, General Motors or its subsidiaries.
17.11. SOLE AGREEMENT OF PARTIES
Except as provided in this Agreement, Division has made no promises to
Dealer, Dealer Operator, or dealer owner and there are no other agreements or
understandings, either oral or written, between the parties affecting this
Agreement or relating to any of the subject matters covered by this Agreement.
Except as otherwise provided herein, this Agreement cancels and supersedes
all previous agreements between the parties that relate to any matters covered
herein, except as to any monies which may be owing between the parties.
No agreement between Division and Dealer which relates to matters covered
herein, and no change in, addition to (except the filling in of blank lines) or
erasure of any printed portion of this Agreement, will be binding unless
permitted under the terms of this Agreement or related documents, or approved in
a written agreement executed as set forth in Division's Dealer Sales and Service
Agreement.
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17.12. APPLICABLE LAW
This Agreement is governed by the laws of the State of Michigan. However,
if performance under this Agreement is illegal under a valid law of any
jurisdiction where such performance is to take place, performance will be
modified to the minimum extent necessary to comply with such law if it was
effective as of the effective date of this Agreement.
17.13. SUPERSEDING DEALER AGREEMENTS
If Division offers a superseding form of dealer agreement to Division's
dealers generally at any time prior to expiration of this Agreement, Division
may terminate this Agreement by prior written notice to Dealer, provided
Division offers Dealer a dealer agreement in the superseding form for a term of
not less than the unexpired term of this Agreement.
Unless otherwise agreed in writing, the rights and obligations of Dealer
that may otherwise become applicable upon termination or expiration of the term
of this Agreement shall not be applicable if Division and Dealer execute a
superseding dealer agreement, and the matured rights and obligations of the
parties hereunder shall continue under the new agreement.
Dealer's performance under any prior agreement may be considered in an
evaluation of Dealer's performance under this or any succeeding agreement.
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GLOSSARY
1. AREA OF PRIMARY RESPONSIBILITY -- The geographic area designated by
Division from time to time in a Notice of Area of Primary
Responsibility.
2. DEALER -- The corporation, partnership or proprietorship that signs
the Dealer Agreement with Division.
3. DEALER AGREEMENT -- The Dealer Sales and Service Agreement, including
the Agreement proper that is executed, the Standard Provisions, all of
the related Addenda, the Accounting and Service Policies and
Procedures Manuals, and the Terms of Sale Bulletins.
4. DEALERSHIP OPERATIONS -- All operations contemplated by the Dealer
Agreement. These operations include the sale and service of Products
and any other activities undertaken by Dealer related to Products,
including rental and leasing operations, used vehicle sales and body
shop operations and finance and insurance operations whether conducted
directly or indirectly by Dealer.
5. DIVISION -- The unit of General Motors Corporation that has entered
into a Dealer Agreement with Dealer authorizing it to market and
service Division's Motor Vehicles.
6. GENERAL MOTORS -- General Motors Corporation.
7. MOTOR VEHICLES -- All current model types or series of new motor
vehicles specified in any Motor Vehicle Addendum and all past General
Motors motor vehicles marketed through Motor Vehicle Dealers.
8. PRODUCTS -- Motor Vehicles, Parts and Accessories.
9. SERVICE POLICIES AND PROCEDURES MANUAL -- The Manual issued
periodically which details certain administrative and performance
requirements for Dealer service under the Dealer Agreement.
10. SPECIAL VEHICLES -- Motor Vehicles that have limited marketability
because they differ from standard specifications or incorporate
special equipment.
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Chrysler Corporation
SALES AND
SERVICE
AGREEMENT
ADDITIONAL TERMS
AND PROVISIONS
<PAGE>
INDEX
PAGE
11 SELLING, SERVICE, COMPLIANCE, FACILITIES AND
LOCATION, FINANCES, PERSONNEL AND SIGNAGE....................... 2
(a) SELLING..................................................... 2
(b) SERVICE..................................................... 5
(c) COMPLIANCE.................................................. 8
(d) FACILITIES AND LOCATION..................................... 8
(i) DEALER's Responsibilities.............................. 8
(ii) Changes in Facilities or Location...................... 10
(e) FINANCES.................................................... 10
(f) PERSONNEL................................................... 11
(g) SIGNAGE..................................................... 12
12 ADVERTISING..................................................... 12
13 REPORTS, RECORDS AND BUSINESS SYSTEMS........................... 13
14 ORDERS.......................................................... 15
15 DELIVERY........................................................ 15
16 ACCEPTANCE OF SHIPMENTS......................................... 16
17 OTHER CHARGES................................................... 16
18 DELAY OR FAILURE TO FILL ORDERS................................. 17
19 OPTION TO REPURCHASE DAMAGED VEHICLES........................... 17
20 CLAIMS FOR DAMAGE OR SHORTAGE................................... 18
21 PRICES, CHARGES, TERMS OF PURCHASE AND PAYMENT.................. 18
22 CHANGE IN PRICE................................................. 19
23 SALE AND SUPPLY OF PARTS........................................ 21
24 COLLECTION OF INDEBTEDNESS...................................... 22
25 TITLE........................................................... 23
26 WARRANTY AND INDEMNIFICATION
FOR PRODUCT LIABILITY LITIGATION................................ 23
(a) WARRANTY.................................................... 23
(b) INDEMNIFICATION FOR PRODUCT LIABILITY LITIGATION............ 24
(c) REPAIR/REPLACE REQUIREMENTS................................. 25
27 CHANGE OF MODELS, PARTS AND ACCESSORIES
DECLARED OBSOLETE OR DISCONTINUED............................... 26
28 TERMINATION..................................................... 26
29 REPURCHASE OBLIGATIONS UPON TERMINATION......................... 32
30 DISPOSITION OF DEALER'S PREMISES................................ 34
31 TRANSACTIONS AFTER TERMINATION.................................. 38
32 SUCCESSORS TO DEALER............................................ 38
33 SURVIVING SPOUSE'S FINANCIAL INTEREST........................... 40
34 SALE OF DEALERSHIP ASSETS OR OWNERSHIP INTERESTS................ 41
35 USE OF TRADE NAMES, TRADEMARKS, LOGOS, ETC...................... 44
36 DEALER IS NOT AGENT............................................. 45
37 INABILITY TO PERFORM............................................ 45
38 ASSIGNMENT...................................................... 46
39 NON-WAIVER...................................................... 46
40 SEVERABILITY.................................................... 46
41 TITLES.......................................................... 47
42 INTERPRETATION.................................................. 47
43 NOTICES......................................................... 47
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CHRYSLER CORPORATION
SALES AND SERVICE AGREEMENT
ADDITIONAL TERMS AND PROVISIONS
The following additional terms and provisions apply to and are
part of the Chrysler Corporation Sales and Service Agreement(s)
to which DEALER is a signatory:
11 SELLING, SERVICE,
COMPLIANCE, FACILITIES
AND LOCATION, FINANCES,
PERSONNEL AND SIGNAGE
(a) SELLING
DEALER shall use its best efforts to promote energetically and sell
aggressively and effectively at retail (which includes lease and rental
units) each and every model of CC vehicles identified in the aforementioned
Motor Vehicle Addendum and CC vehicle parts, accessories and other CC
products and services, to private and fleet customers in DEALER's Sales
Locality. DEALER will sell the number of new CC vehicles necessary to
fulfill DEALER's Minimum Sales Responsibility for each passenger car line or
truck line represented by the vehicles listed on the Motor Vehicle Addendum,
as defined below.
DEALER's Minimum Sales Responsibility for each such line will be determined
as follows: From time to time, but at least once a year for each such line,
CC will compute the ratio of the number of new CC passenger cars
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and/or trucks registered in the most recent whole or partial calendar
year-to-date period for which registration figures are available in the CC
Sales Zone in which DEALER is located to the total number of new passenger
cars or, if CC deems it appropriate, the total number of those new passenger
cars or trucks which CC, in its sole discretion, determines to be competitive
with any or all of its passenger cars or trucks so registered in that Zone
during the same period. The ratio thus obtained will be applied to the
comparable category of the total number of new passenger cars or competitive
passenger cars and/or trucks, as appropriate, registered during the same
period in Dealer's Sales Locality. The resulting number will be DEALER's
Minimum Sales Responsibility for each of said lines during this same period,
subject to adjustment as described below.
Upon DEALER's written request, CC may adjust DEALER's Minimum Sales
Responsibility, if appropriate in CC's judgment, to take into account
extraordinary local conditions to the extent, in CC's opinion, such
conditions are beyond DEALER's control and have affected DEALER's sales
performance differently from the sales performance of other new vehicle
dealers in DEALER's Sales Locality or other like vehicle line CC dealers in
the Sales Zone in which DEALER is located.
If DEALER's Sales Locality is shared by one or more other CC dealer(s) of the
same line, DEALER's Minimum Sales Responsibility for such line will be the
number of new vehicles DEALER must sell
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in order to achieve DEALER's fair share of the Minimum Sales Responsibility
for all such CC dealers in the Sales Locality. The Minimum Sales
Responsibility for the total CC dealers of the same line in the Sales
Locality will be determined by using the same method described above in this
Paragraph 11(a). CC will determine DEALER's fair share by assessing the
relative importance of DEALER's immediate area of influence as compared with
the Sales Locality as a whole.
This assessment will then be converted to a percentage which will represent
DEALER's fair share of the Minimum Sales Responsibility for the Sales
Locality.
Registration figures used in these computations will be new vehicle
registrations as reported by any recognized reporting organization selected
by CC. If vehicle registration data is not reasonably available, CC may use
other records, generally accepted in the industry, for the purpose of
determining motor vehicle purchases and to establish DEALER's Minimum Sales
Responsibility. To the extent that registration figures or other records
generally accepted in the automotive industry for purposes of determining
motor vehicle purchases are not reasonably available for purposes of
considering any of the factors specified herein, CC may rely on other records
and data developed by CC that reasonably depict purchases of motor vehicles
in an applicable area to establish DEALER's Minimum Sales Responsibility.
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(b) SERVICE
DEALER shall service CC vehicles actively and effectively and provide and
maintain, for servicing CC vehicles, adequate facilities equipped with the
basic tools common to the trade and with special tools and equipment peculiar
to CC products and necessary for servicing and repairing specified CC
vehicles properly, efficiently and competitively. DEALER shall comply with
parts, service and warranty guides established by CC from time to time, make
a sincere effort to satisfy service customers, and render prompt, efficient
and courteous service to all owners or lessees of all CC vehicles badged
Chrysler, Plymouth or Dodge regardless of where such vehicle was purchased or
leased. DEALER shall perform all pre-delivery and road-ready services
recommended by CC on new CC vehicles DEALER sells.
After six (6) quarters of operation, including operation under any preceding
CC Dealer Agreement, DEALER shall, at all times during this Agreement, meet
its minimum service satisfaction requirements by maintaining a rating on
Chrysler Corporation's Customer Satisfaction Index, Prep-It-Right and
Deliver-It-Right evaluations (as determined by Chrysler Corporation from time
to time, based upon surveys conducted of DEALER's customers) which is equal
to or greater than the average Customer Satisfaction Index, Prep-It-Right and
Deliver-It-Right ratings for the national Sales Level Group (as those groups
are determined by CC from time to time) in which DEALER is included within
DEALER's
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Sales Zone (as said Sales Zone is determined by CC from time to time). CC
will review, at least once a year, DEALER's performance under the Customer
Satisfaction Index and DEALER's Prep-It-Right and Deliver-It-Right ratings.
DEALER shall supply to all purchasers from DEALER of new CC vehicles a copy
of CC's appropriate new vehicle warranty; make such certifications and
verifications of odometer readings and maintenance and service performed on
vehicles badged Chrysler, Plymouth or Dodge, or other matters as may be
required under the terms of the CC vehicle warranty and as CC may from time
to time otherwise prescribe; and provide owners of CC vehicles badged
Chrysler, Plymouth or Dodge all warranty service and campaign inspections or
corrections to which they may be entitled in accordance with the policies and
procedures set forth in Chrysler Corporation's Warranty Policy and Procedure
Manual and in bulletins and documents relating to service that CC may, from
time to time, supply to DEALER. The provisions of said Warranty Policy and
Procedure Manual, including any revisions thereto which shall be furnished to
DEALER by CC from time to time, constitute a part of this Agreement with the
same force and effect as if set forth in its entirety herein.
DEALER shall comply with all policies, procedures, directives and rulings of
the Chrysler Corporation Customer Arbitration Board.
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CC has placed its trust and confidence in the integrity and fidelity of
DEALER and, therefore, CC shall compensate DEALER for services claimed to
have been performed by DEALER under CC's warranties or campaign inspections
and corrections if claimed in accordance with CC's then current policies and
procedures described above. DEALER agrees to comply with all such policies
and procedures including, but not limited to, policies and procedures
relating to the keeping of books and records respecting claims DEALER may
make for compensation for service DEALER performs under CC's warranties or
campaign inspections and corrections. DEALER agrees that CC may inspect
DEALER's books and records regarding any warranty service or other claims for
compensation DEALER may submit to CC. CC may charge DEALER's account for
claims which have been disallowed as a result of such inspection.
DEALER shall perform all warranty, pre-delivery, road-ready, campaign
inspections and corrections, and other services hereunder as an independent
contractor and not as the agent of CC and shall assume responsibility for and
hold CC harmless from, all claims (including, but not limited to, claims
resulting from the negligent or willful acts or omissions of DEALER) against
CC arising out of or in connection with DEALER's performance of such service.
If DEALER modifies any CC vehicle or installs on any CC vehicle any
equipment, part or accessory that has not been supplied or
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approved by CC, or sells any CC vehicle which has been modified after leaving
the possession, custody or control of CC, or sells a non-Chrysler Corporation
service contract in connection with the sale of any CC vehicle, DEALER shall
disclose to the customer in writing that the modification, equipment,
accessory or part is not supplied or approved by CC and is not included in
warranties furnished by CC or, in the case of a service contract, the
coverage is not provided by Chrysler Corporation, its parent, subsidiaries or
its affiliates. DEALER will write such disclosure on the purchase order and
on the customer's bill of sale. Notwithstanding the foregoing, DEALER may
not use parts which have not been authorized by CC in performing repairs
under CC warranties.
(c) COMPLIANCE
DEALER shall comply with all applicable federal, state and local laws, rules
or regulations in the operation of the dealership.
(d) FACILITIES AND LOCATION
(i) DEALER's Responsibilities
DEALER shall provide facilities for the sale and service of CC products and
related activities ("Dealership Operations") at the location set forth in the
aforementioned Dealership Facilities and Location Addendum. The entire
Dealership Facilities including, but not in limitation of the foregoing, new
and used vehicle display area, salesrooms, service area, parts and
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accessories area, building exterior and grounds will be satisfactory to CC as
to appearance and layout, and will be maintained and used as set forth in the
Dealership Facilities and Location Addendum. DEALER shall at all times
maintain the Dealership Facilities so that they are of adequate capacity to
accommodate DEALER's total vehicle sales volume and are relatively equivalent
in their attractiveness, level of maintenance, overall appearance and use to
those facilities maintained by DEALER's principal competitors.
DEALER shall conduct its Dealership Operations only from the dealership
location and dealership facilities above mentioned and in the manner and at
least during the hours usual in the trade in DEALER's Sales Locality. DEALER
shall not, except as provided for in subparagraph 11(d)(ii) hereunder, either
directly or indirectly, establish any place or places of business for the
conduct of its Dealership Operations other than at the Dealership Facilities
and Dealership Operations location as set forth in the Dealership Facilities
and Location Addendum.
If all of the Dealership Facilities are not at the same location, DEALER
shall not utilize any separate portion of the Dealership Facilities for the
conduct of any Dealership Operations other than as specified in the current
Dealership Facilities and Location Addendum. The Dealership Facilities and
Location Addendum shall identify any other purposes for which the
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Dealership Facilities are to be used and the actual space and areas to be
allocated for such purposes.
(ii) Changes in Facilities or Location
DEALER shall not make any change in the location of Dealership Operations or
make any change in the area and use of Dealership Facilities without the
prior written approval of CC. Any written approval of a change in the
location or in the area or use of Dealership Facilities shall be valid only
if in the form of a new Dealership Facilities and Location Addendum or a
separate written agreement signed by DEALER and one of the authorized
representatives of CC identified in Paragraph 10 hereinabove.
(e) FINANCES
DEALER shall maintain and employ in connection with DEALER's business such
net working capital, net worth, and wholesale credit and retail financing
arrangements necessary for DEALER to carry out successfully DEALER's
undertakings pursuant to this Agreement and in accordance with guides
therefor as may be issued by CC from time to time. At no time shall DEALER's
net working capital be less than the amount specified in the Minimum Working
Capital Agreement executed in conjunction with this Agreement and
incorporated herein by reference, or the amount thereafter established by any
superseding Minimum Working Capital Agreement.
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(f) PERSONNEL
DEALER shall employ in accordance with the volume of DEALER's business such
number of competent technicians in DEALER's repair shops as may be required
to assure prompt, satisfactory and competitive customer service for all
owners of CC vehicles who may request such service from DEALER. In
particular and without limitation to the generality of the foregoing, DEALER
shall cause its service personnel to receive such training from time to time
required by CC to maintain their technical expertise to render competent
customer service, including the use of improved methods of repair, or the
repair of new parts or systems, developed by CC.
Failure to comply with the service training requirements of the immediately
preceding subparagraph of this Paragraph 11(f) may result in suspension of
deliveries of CC vehicles until DEALER complies with such training
requirements. Protracted failure to comply with such training requirements
may result in termination of this Agreement pursuant to Paragraph 28
hereunder. The immediately foregoing sentence shall not be construed as in
any way limiting the general applicability of Paragraph 28 to any of the
other provisions of this Paragraph 11.
DEALER shall employ and maintain for its retail business a number of trained
and competent new and used motor vehicle sales, lease, service, parts and
general management personnel that are sufficient for DEALER to carry out
successfully all of DEALER's
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undertakings in this Agreement. In particular and without limitation of the
generality of the foregoing, DEALER shall cause its sales personnel to
receive such training from time to time as may be required by CC to maintain
their sales expertise to render satisfactory sales.
(g) SIGNAGE
DEALER shall display and maintain brand signs, fascia and other signage in
compliance with the policies and guidelines of Chrysler Corporation's
Dealership Identification Program, including any modification or revisions to
such policies and guidelines, which shall from time to time be furnished to
DEALER by CC.
12 ADVERTISING
CC, in promoting the sale and lease of its products by DEALER and other CC
dealers, shall seek to advertise in the most effective manner to develop
public interest and confidence in its dealers and products.
DEALER shall engage in advertising and sales promotion programs and shall use
effective showroom displays to help fulfill DEALER's responsibility to
promote CC products and services vigorously and aggressively. In advertising
in support of DEALER's selling, leasing and servicing CC products, DEALER
shall advertise only in a manner that will develop customer confidence
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in DEALER and CC products and shall not use any advertising tending to
mislead or deceive the public or violate any applicable federal, state or
local laws, rules or regulations, nor shall DEALER disparage CC or any
company, or products of such company, directly involved in the manufacture of
CC vehicles. DEALER shall discontinue any advertising that CC may find to be
injurious to CC's business or likely to deceive the public or violative of
any applicable federal, state or local laws, rules or regulations.
DEALER shall at all times be a member in good standing of the Dealer
Advertising Association, for the lines set forth in the Motor Vehicle
Addendum, which covers a geographical area that encompasses, in whole or
significant part, DEALER's Sales Locality and which has been approved by CC.
13 REPORTS, RECORDS AND
BUSINESS SYSTEMS
DEALER shall submit to CC for confidential use by CC and its affiliates, in
such manner, in such form, and at such times as CC may reasonably request,
complete and accurate reports of sales and stocks of new and used vehicles on
hand and other reports, including monthly financial statements and operating
reports.
DEALER shall use and keep accurate and current at all times a uniform
accounting system and will follow accounting practices, satisfactory to CC,
which will enable CC to develop comparative
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information in order, among other things, to provide business management
assistance to dealers for the mutual benefit of DEALER and CC. DEALER agrees
that CC may at any time for confidential use inspect DEALER's books and
records to determine whether they are kept in such manner that the data shown
in them can be used in CC's business management assistance to dealers, to
assess DEALER's financial condition, and to verify invoices or other claims
DEALER may render to CC. CC may, during the course of such inspection, make
copies of such books and records and retain such copies for CC's confidential
use.
DEALER shall maintain an electronic data storage, transmission and
communication system in the manner and form required from time to time by CC.
CC and its affiliates shall not, without approval of DEALER, disclose the
contents of DEALER's financial records to persons not a party or an affiliate
of a party to this Agreement except when required by compulsory process from
a court, government agency or arbitrator, or when CC, in its discretion,
considers it appropriate to disclose said financial records in an
adjudicatory or arbitration proceeding involving the parties to this
Agreement.
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14 ORDERS
CC shall ship specified CC vehicles, parts and accessories to DEALER only on
DEALER's order.
DEALER shall submit to CC, in the manner and form required by CC, current
orders for CC vehicles, parts and accessories, and estimates of DEALER's
future vehicle requirements at such times and for such periods as CC
reasonably may request for the mutual benefit of all CC dealers and CC. All
orders are subject to acceptance by CC, which acceptance may be in whole or
in part.
Except as otherwise allowed by this Agreement, CC shall use its best efforts
to fill accepted orders for specified CC vehicles, parts and accessories.
Notwithstanding the foregoing, in the event that demand exceeds supply of
specified CC vehicles, DEALER acknowledges that CC has the right to allocate
such supply in any reasonable manner CC deems fit in any geographical market.
15 DELIVERY
CC may deliver specified CC vehicles by rail, truck, boat or any other means
of transport, or deliver them for driveaway, endeavoring, when exceptional
circumstances arise and the cost is not increased, to meet DEALER's
preference as to mode of transportation. CC may deliver specified CC
vehicles to a carrier that CC selects, for shipment to DEALER at DEALER's
place of business or to the city or town where DEALER's place of
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business is located (or to the nearest practicable unloading point) "to CC's
order, notify DEALER," or may deliver such vehicles at any other point that
CC may establish.
CC may deliver parts and accessories to DEALER by delivering them to a
carrier that CC selects for shipment to the city or town where DEALER's place
of business is located, or by delivering them to DEALER at any point that CC
may establish.
16 ACCEPTANCE OF SHIPMENTS
If DEALER requests diversion of CC products shipped to DEALER or if CC is
required to divert any CC products because DEALER fails, refuses or is unable
to accept delivery of such products, or if there is a failure to pay as
required for the products that DEALER has ordered, or a failure to accept
C.O.D. shipments of products DEALER has ordered, CC may divert the shipments
and charge DEALER the demurrage, transport, storage and other expense arising
by reason of any such diversion.
17 OTHER CHARGES
DEALER shall be responsible for and will pay any and all charges for
demurrage, storage or other charges accruing after arrival of shipment at the
distribution point established by CC.
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18 DELAY OR FAILURE
TO FILL ORDERS
CC shall not be liable for delay or failure to fill orders that have been
accepted, where such delay or failure is the result of any event beyond the
control of CC including, but not in limitation of the generality of the
foregoing, any law, regulation or administrative or judicial order, or any
acts of God, wars, riots, wrecks, fires, strikes, lockouts, other labor
troubles, embargoes, blockades, delay or failure of any other supplier or
carrier of CC to deliver or make delivery of CC products, or any material
shortage or curtailment of production, including those due to economic
conditions, or any discontinuance of manufacture or sale of products by CC or
its suppliers. Furthermore, CC will not be liable for delay or failure to
fill orders when such delay or failure is pursuant to any provision under
this Agreement.
19 OPTION TO REPURCHASE
DAMAGED VEHICLES
DEALER shall notify CC if any new and unused CC vehicle in DEALER's
possession has sustained major damage as defined in the Warranty Policy and
Procedure Manual. To preserve the quality and value of new CC vehicles
ordered for the public, CC shall have the option to divert such a vehicle
prior to delivery to DEALER or repurchase from DEALER all or any of such
vehicles at a price equal to the net purchase price paid by DEALER to CC.
DEALER agrees to assign its rights under any insurance contract
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related to the repurchased CC vehicles to CC. CC shall make appropriate
payment for repurchased CC vehicles directly to any lien holder or, if there
is no lien, directly to DEALER.
20 CLAIMS FOR DAMAGE
OR SHORTAGE
CC shall not be liable for loss of or damage to CC products sold hereunder
occurring after delivery thereof to DEALER, DEALER's agent, or a carrier
within the North American Continent for shipment to DEALER, as provided in
Paragraph 15 of this Agreement. Should any products sold under this
Agreement be delivered in damaged condition or with shortages, claims for
said damages or shortages shall be made in accordance with CC's then current
policies and procedures. To the extent required by law, DEALER shall notify
the purchaser of a vehicle of any damage sustained by such vehicle prior to
sale. DEALER shall indemnify and hold CC harmless from any liability
resulting from DEALER's failure to so notify such purchasers.
21 PRICES, CHARGES, TERMS OF
PURCHASE AND PAYMENT
CC shall notify DEALER from time to time of the prices, charges and terms of
purchase for products sold under this Agreement and shall charge DEALER for
such products according to the prices, charges and terms of purchase in
effect at the date of shipment. CC reserves the right, without prior notice,
to change prices,
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charges and terms of purchase for any product sold under this Agreement.
DEALER shall pay CC for products sold under this Agreement in lawful money of
the United States of America by such method and/or in such manner as CC may
announce from time to time or approve in writing, with collection charges, if
any, added.
If not included in the price, DEALER shall pay all excise or other taxes
which may be levied on the products purchased hereunder or on the sale,
shipment, ownership or use thereof. Further, DEALER certifies as of the date
of each purchase hereunder that all products purchased hereunder are
purchased for resale, retail lease or demonstration purposes.
22 CHANGE IN PRICE
Should CC reduce the wholesale price at factory of any CC vehicle (not
including accessories and optional equipment) of a particular yearly model,
line and body style then currently in production, CC shall refund to DEALER
in cash or by a credit against DEALER's indebtedness to CC, for each new,
unused and unsold CC vehicle (not including demonstrators) of that particular
model, line and body style that at the time of the reduction is in DEALER's
stock or in transit to DEALER, an amount equal to the difference between the
reduced wholesale price and the wholesale price paid to CC by DEALER.
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If, at the time of the official model introduction date (as determined by CC)
of a new yearly model, CC announces a wholesale price of any CC vehicle (not
including accessories and optional equipment) of any particular body style
and line of the new model which is below the wholesale price of a vehicle of
the same body style and line of the discontinued yearly model, CC shall
refund to DEALER in cash or by credit against DEALER's indebtedness to CC an
amount equal to the difference between the reduced wholesale price and the
wholesale price of the same body style and line of the discontinued yearly
model. Such refund will apply only to new, unused and unsold CC vehicles
(not including demonstrators) of the particular body style and line of the
discontinued yearly model that on the official model introduction date (as
determined by CC) of the new yearly model is in DEALER's stock or in transit
to DEALER, unless CC determines that the line or particular body style of the
new yearly model is so changed in size, design, equipment, specifications or
price as, for all practical purposes, to make the line a new and different
line or to make the particular body style a new and different body style of
the discontinued yearly model.
Notwithstanding the provisions of the two paragraphs immediately above, in
any case where items considered standard equipment on a current vehicle or on
a vehicle of the discontinued yearly model are not included as standard
equipment on the corresponding vehicle with a reduced wholesale price or on
the corresponding
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vehicle of the new model, any wholesale price decrease resulting from the
exclusion of such standard equipment will not be included in any refund under
this paragraph 22.
In order to qualify for a refund in either case set forth above, DEALER must
make a written claim, supported by adequate evidence, within thirty (30) days
of the effective date of the reduction in price or the official model
introduction date of the new yearly model.
Should CC increase the wholesale price of any CC vehicle, said price increase
will not apply to an order submitted to CC by DEALER prior to the date the
notification of such price increase was issued if the order was submitted for
the specific purpose of fulfilling a valid and legitimate purchase agreement
between DEALER and a retail purchaser and if such an order was properly
identified in the manner required by CC and was delivered to the ordering
retail purchaser.
23 SALE AND SUPPLY OF PARTS
DEALER shall not represent, sell, offer for sale or use in repairing CC
vehicles, parts which are represented as new or remanufactured Chrysler
Corporation or Mopar parts or parts which are represented to be manufactured
or produced by any company directly involved in the manufacture of the
vehicles specified in the Motor Vehicle Addendum to this Agreement, unless
such parts are in fact manufactured, remanufactured or designed for or by
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Chrysler Corporation, Mopar or a company directly involved in the manufacture
of said specified vehicles and are properly identified as Chrysler
Corporation or Mopar parts or parts of said directly involved companies with
the respective consent of each of the aforementioned organizations.
DEALER at all times shall keep on hand in DEALER's place of business the
number and assortment of Chrysler Corporation or Mopar parts, that, in CC's
judgment, is necessary to meet the service requirements of DEALER's CC
customers and to meet all of DEALER's obligations under this Agreement.
24 COLLECTION OF
INDEBTEDNESS
CC may apply to any amount owed by DEALER to CC or to any of CC's affiliates
any credit owing to DEALER by CC or any of its affiliates. As used in this
Agreement, "affiliate" means Chrysler Corporation and any of its subsidiaries
or their subsidiaries, or any other corporation, partnership or other legal
entity which has an ownership interest in CC or any corporation, partnership
or other legal entity in which CC has an ownership interest, or any
subsidiary thereof.
Should DEALER assign its right to amounts owed to DEALER by CC to any third
party, prior to executing such an assignment DEALER shall notify such third
party of CC's first priority right to such credits.
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25 TITLE
Title to products CC sells to DEALER hereunder and risk of loss will pass to
DEALER on delivery of the products to DEALER, DEALER's agent, or the carrier,
whichever occurs first. However, CC retains a lien for payment on the
products so sold until paid for in full, in cash. CC will receive negotiable
instruments only as conditional payment.
26 WARRANTY AND
INDEMNIFICATION FOR
PRODUCT LIABILITY
LITIGATION
(a) WARRANTY
CC's warranty on new CC vehicles, as in effect from time to time, will be as
set forth in Chrysler Corporation's Warranty Policy and Procedure Manual. CC
shall supply sufficient copies of CC's then current CC vehicle warranty to
DEALER to permit DEALER, in accordance with DEALER's obligation under
Paragraph 11 of this Agreement, to provide a copy to each purchaser from
DEALER of a new CC vehicle. EXCEPT FOR THE CC WARRANTY, THERE ARE NO OTHER
EXPRESS OR IMPLIED WARRANTIES MADE OR DEEMED TO HAVE BEEN MADE TO ANY PERSON
BY CC APPLICABLE TO PRODUCTS SOLD UNDER THIS AGREEMENT. THE CC WARRANTY WILL
BE EXPRESSLY IN LIEU OF ANY OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT
NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE; AND THE REMEDIES SET FORTH IN SUCH WARRANTY
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WILL BE THE ONLY REMEDIES AVAILABLE TO ANY PERSON WITH RESPECT TO PRODUCTS
SOLD HEREUNDER. CC neither assumes nor authorizes any other person,
including DEALER, to assume for CC any other obligation or liability in
regard to such products.
(b) INDEMNIFICATION FOR PRODUCT
LIABILITY LITIGATION
If a product liability lawsuit is filed naming DEALER as a defendant and it
is determined that the bodily injury or property damage alleged by the
plaintiff was caused solely by a design defect or a defect created by CC in
the manufacture or assembly of a CC vehicle, part or accessory, which latter
defect was not reasonably susceptible of discovery by DEALER in either
DEALER's new car preparation or subsequent servicing during the warranty
period, then CC shall indemnify and hold DEALER harmless from losses, damages
and expenses, including reasonable attorneys' fees, resulting from such
product liability lawsuit. As used in this Paragraph 26(b), a "product
liability lawsuit" shall mean a lawsuit seeking damages for bodily injury or
property damage allegedly sustained in a motor vehicle accident, and which
injury or damage is alleged to have been caused in any part by a defect in
the design, manufacture or assembly of a CC vehicle, part or accessory.
Whenever DEALER intends to request CC to indemnify DEALER with respect to a
product liability lawsuit, DEALER shall file with the court an appropriate
response which will prevent a default
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judgment from being taken against DEALER, and DEALER shall, within thirty
(30) business days after service of the complaint, notify CC in writing and
shall provide at that time copies of any pleadings which may have been
served, together with all information then available regarding the
circumstances giving rise to such product liability lawsuit. Any such
notices shall be sent by certified mail to the attention of the Office of the
General Counsel, Chrysler Corporation, Post Office Box 1919, Detroit,
Michigan 48288 or such other address as CC may designate in writing to
DEALER. Upon such request for indemnification, CC shall have the option,
upon reasonable notice to DEALER, to retain counsel and assume full control
over the defense of the lawsuit. If CC is prevented by DEALER from
exercising this option, CC's obligation hereunder to indemnify DEALER shall
be rendered null and void and be of no force or effect.
(c) REPAIR/REPLACE REQUIREMENTS
This provision shall apply if DEALER is located in a state which has in
effect or hereafter adopts or enacts any law or regulation imposing liability
on a motor vehicle manufacturer, importer, distributor and/or dealer for sale
of a vehicle presumed under such law or regulation to be defective by reason,
inter alia, of repeated unsuccessful attempts to repair such vehicle within a
specified period of time or by reason of such vehicle being unavailable and
out of service to the purchaser for a specified period of time.
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DEALER shall make a good faith effort to immediately notify CC in writing of
the existence of any vehicle which may become subject to such law or
regulation prior to a presumption of liability arising under such law or
regulation from the inability to repair or correct a nonconformity or
condition of a vehicle.
27 CHANGE OF MODELS, PARTS
AND ACCESSORIES DECLARED
OBSOLETE OR
DISCONTINUED
CC at any time may discontinue any or all models, lines or body styles and
may revise, change or modify their construction or classification. All
DEALER orders for specified CC vehicles shall refer to models, lines and body
styles in production at the time CC receives the orders unless DEALER
specifies otherwise. CC at any time may declare obsolete or discontinue any
or all parts, accessories and other merchandise. CC may act under this
Paragraph 27 without notice and, except as set forth in Paragraph 22 of this
Agreement, without any obligation to DEALER by reason of DEALER's previous
purchases.
28 TERMINATION
(a) DEALER may terminate this Agreement on not less than thirty (30) days
written notice.
(b) CC may terminate this Agreement on not less than sixty (60) days
written notice for the following reasons:
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(i) in accordance with CC's ordinary and customary procedures, upon the
failure of DEALER to fully perform any of DEALER's undertakings under
Paragraph 11(a) of this Agreement or failure of DEALER to meet its minimum
service satisfaction requirements set forth in Paragraph 11(b) of this
Agreement within one hundred and eighty (180) days after notification by CC
that DEALER has not fully performed the aforementioned undertakings,
obligations or requirements, or
(ii) the failure of DEALER to perform fully any of DEALER's undertakings or
obligations as set forth in this Agreement including, but without limiting
the generality of the foregoing, the undertakings and obligations set forth
in Paragraphs 11(b) through 11(g) or Paragraphs 12, 13, 14, 23, 26(c) or 35
of this Agreement, or
(iii) the death of any person listed in Paragraph 2 of this Agreement
(other than the death of DEALER if DEALER is a sole proprietorship) or the
failure of any such person so listed to continue active and substantial
personal participation in the management of the Dealership Operation as
required by Paragraph 2, or
(iv) a misrepresentation of or change, whether voluntary or by operation of
law, in the ownership if DEALER is an individual, or of the ownership
interests listed in Paragraph 3 of this
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Agreement resulting in a transfer of control or majority interest in the
capital stock or partnership interest of DEALER, unless CC has given prior
written approval to such change, or
(v) any material misrepresentation by any of DEALER's owners or executives
as to any fact relied upon by CC in entering into this Agreement, or
(vi) a disagreement, dispute or controversy between or among principals,
partners, managers, officers or stockholders of DEALER that, in the opinion
of CC, may adversely affect the operation, management or business of DEALER,
or
(vii) the conviction of DEALER or any individual named in Paragraph 2 or 3
herein of any crime that, in CC's opinion, may affect adversely the operation
or business of DEALER or the name, goodwill or reputation of Chrysler
Corporation, CC products, or DEALER, or
(viii) the failure of DEALER to pay any indebtedness of DEALER to CC in
accordance with the applicable terms and conditions required by CC, or
(ix) impairment of the reputation or financial standing of DEALER or any of
DEALER's owners or executives or discovery by CC of any facts existing prior
to or at the time of signing this
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Agreement which, in CC's opinion, tend to impair such reputation or financial
standing, or
(x) any submission by DEALER to CC of a false or fraudulent application or
claim, or any claim or statements in support thereof, for payment including,
but not limited to, pre-delivery inspection or adjustments, warranty repairs,
special policy or campaign adjustments or repairs performed by DEALER, sales
incentives, parts compensation, or any other discount, allowance, refund or
credit under any plan, provision or other program offered by CC, whether or
not DEALER offers or makes to CC or CC seeks or obtains from DEALER
restitution of any payments made to DEALER on the basis of any such false or
fraudulent application, claim or statement, or
(xi) conduct by DEALER which, in DEALER's dealings with customers or the
public, is fraudulent or constitutes a deceptive or unfair act or practice, or
(xii) DEALER's failure to comply with requirements set forth in the
National Traffic and Motor Vehicle Safety Act of 1966 or any other
legislation or regulation pertaining to safety, air pollution or noise
control which may be imposed on automobile dealers or with reasonable
requests of CC made in conjunction with action being taken on its part to
comply with the aforementioned statutory or regulatory requirements, or
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(xiii) the notification of termination or termination, for any reason, of
any other Chrysler Corporation Dealer Agreement(s) which may be in effect
between DEALER and Chrysler Corporation, or
(xiv) the failure of DEALER to comply fully with the policies, procedures,
directives and rulings of the CC Customer Arbitration Board, or
(xv) CC offers a new Sales and Service Agreement to all of its dealers
selling the line(s) of vehicles set forth on the Motor Vehicle Addendum.
Termination by CC will not be effective unless the President or a Vice
President or the National Dealer Placement Manager of Chrysler Corporation
signs the notice.
(c) Notwithstanding the provisions above, this Agreement will terminate
automatically without notice from either party on:
(i) the death of DEALER, if DEALER is a sole proprietorship, or
(ii) an attempted or actual assignment or transfer of this Agreement or an
attempted or actual transfer of a substantial portion of dealership assets by
DEALER without the prior written consent of CC, or
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(iii) an assignment by DEALER for the benefit of creditors, or
(iv) the insolvency of DEALER, or the preparation of any petition by or
for DEALER for voluntary institution of any proceeding under the Bankruptcy
Act or under any State insolvency law, whether or not such petition is ever
filed; or the involuntary institution against DEALER of any proceeding under
the Bankruptcy Act or under any State insolvency law which is not vacated
within ten (10) days from the institution thereof; or the appointment of a
receiver or other officer having similar powers for DEALER or DEALER's
business which is not removed within ten (10) days from his/her appointment;
or any levy under attachment, execution or similar process which is not
within ten (10) days vacated or removed by payment or bonding, or
(v) the discontinuance by CC of the production or distribution of all CC
vehicles listed on the Motor Vehicle Addendum, or
(vi) the failure of DEALER to fully conduct its Dealership Operations for
seven (7) consecutive business days, or
(vii) the loss, termination or expiration of any license or permit
required by law for DEALER to perform DEALER's obligations under this
Agreement or otherwise conduct business as a new vehicle dealer for CC
products.
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Termination of this Agreement will cancel all unfilled orders for vehicles,
parts and accessories.
The obligations of the parties to this Agreement as set forth in Paragraphs
9, (or Paragraph 7 in a Term Agreement), 21, 24, 26(a), 26(b), 29, 30, 31 and
35 shall remain in full force and effect after the effective date of
termination.
29 REPURCHASE OBLIGATIONS UPON TERMINATION
Except when termination of this Agreement will be followed by CC issuing to
DEALER, or to DEALER's successors, assigns, heirs or devisees, a new
agreement of any sort for the sale and service of CC vehicles, including, but
not in limitation of the generality of the foregoing, such an agreement with
a term of limited duration, CC agrees to buy and DEALER agrees to sell, free
and clear of any liens and encumbrances, within ninety (90) days after the
effective date of any termination under Paragraph 28:
(a) All new, unused and unsold specified CC vehicles (not including
demonstrators), unmodified and in good, undamaged condition, of the yearly
model current at the effective date of termination that were purchased by
DEALER from CC and that are on the effective date of termination the property
of and in the possession, custody and control of DEALER. The repurchase
price will be the dealer net invoice price at the time of DEALER's
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purchase of each such vehicle from CC, less any applicable rebates, incentive
payments, adjustments or allowances paid or credited by CC to DEALER. CC
shall not be required to repurchase CC vehicles built on DEALER's special
order to other than CC standard specifications.
(b) All new, unused and undamaged CC parts that are priced and identified
as eligible for return in Chrysler Corporation's then current parts lists and
that were purchased by DEALER from CC and are on the effective date of
termination the property of and in possession, custody and control of DEALER,
at current listed prices (exclusive of transportation charges). CC shall add
to such current listed prices (exclusive of transportation charges) an
allowance of five percent (5%) of such prices for packing and crating by
DEALER and a credit for transportation charges paid by DEALER to ship such
parts to the destination CC designates. CC shall subtract from such current
listed prices (exclusive of transportation charges) all maximum allowable
discounts and the cost of any necessary refinishing, reconditioning or
repacking to restore the parts to their original salable condition, and CC's
cost of determining whether such parts are free and clear of all liens and
encumbrances. Prior to purchase by CC, DEALER shall deliver the parts
(tagged and inventoried in accordance with CC's instructions) for inspection
F.O.B. at any point CC may designate. CC's determination of the quantity and
value of the parts returned will be conclusive unless DEALER notifies CC in
writing within
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fifteen (15) days of receiving the check or statement of account for such
parts returned of any error made in such determination.
(c) All new, unused and undamaged CC accessories or accessories packages
for the yearly model current at the effective date of termination, complete
as supplied to and purchased by DEALER from CC during the twelve (12) months
immediately preceding the effective date of termination and that are on the
effective date of termination the property of and in the possession, custody
and control of DEALER at the prices then applicable (less maximum allowable
discounts) and current at the effective date of termination, exclusive of
transportation charges. CC shall add to such currently applicable prices an
allowance of five percent (5%) of such prices (less maximum allowable
discounts) for packing and crating by DEALER and a credit for transportation
charges paid by DEALER in shipping such accessories to the destination CC
designates. CC shall subtract from such currently applicable prices (less
maximum allowable discounts) the cost of necessary refinishing,
reconditioning or repackaging of such accessories or accessories packages to
restore them to their original salable condition and CC's cost of determining
whether such accessories or accessories packages are free and clear of all
liens and encumbrances. Prior to purchase by CC, DEALER will deliver the
accessories or accessories packages, tagged and inventoried in accordance
with CC's instructions, for inspection F.O.B. at any point CC may designate.
CC's determination of the quantity and value of the
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accessories or accessories packages returned will be conclusive unless DEALER
notifies CC in writing within fifteen (15) days of receiving the check or
statement of account for such accessories or accessories packages returned of
any error made in such determination.
(d) All signs of a type required by CC belonging to DEALER, showing the
name "Chrysler Corporation" or one of the designated trade names applicable
only to CC products or CC's affiliated companies. CC shall pay to DEALER for
such signs the fair market value or the price for which DEALER purchased such
signs, whichever is lower. CC shall have the right, upon termination of this
Agreement, to enter DEALER's premises peacefully and remove all such signs.
(e) Special tools (in complete sets), of a type recommended by CC, adapted
only to the servicing of CC vehicles and purchased by DEALER during the
thirty-six (36) months immediately preceding the effective date of
termination at a price and under terms and conditions to be agreed upon by CC
and DEALER.
CC will pay DEALER for any items purchased pursuant to this Paragraph 29
within ninety (90) days of CC's receipt and acceptance of said items, subject
to Paragraph 24 of this Agreement.
30 DISPOSITION OF DEALER'S PREMISES
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On termination of this Agreement by CC on sixty (60) days' written notice
pursuant to Paragraph 28 hereof, except when termination results because
DEALER's facilities have been closed for seven (7) consecutive business days
or from a person named in Paragraph 2 of this Agreement ceasing to
participate in the management of DEALER, CC shall take the following action
respecting DEALER's premises as defined below (herein called the Premises),
if DEALER so requests, and provided that DEALER has paid to CC all monies
owing to CC:
(a) If, on DEALER's receipt of notice of termination, DEALER owns the
Premises:
CC shall assist DEALER in effecting an orderly and equitable disposition of
the Premises by a sale or lease. If necessary to effect such disposition,
CC, at its option, within a reasonable time shall lease the Premises from
DEALER for at least one (1) year or purchase the Premises, or cause them to
be leased or purchased, on fair and equitable terms. In such event, DEALER
and CC shall agree on the value or rental value of the Premises for the
purpose of either a sale or lease. If DEALER and CC are unable to so agree,
each shall appoint a disinterested qualified real estate appraiser and the
two so appointed will agree on the value or rental value of the Premises, as
the case may be. If the two appraisers are unable to agree, they shall
select a third disinterested qualified real estate appraiser who shall
determine such value. The value or rental value so determined shall be
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final and binding on both DEALER and CC. If one or more appraisals are
necessary, DEALER and CC shall share equally the cost of such appraisals.
(b) If, on DEALER's receipt of notice of termination, DEALER is leasing
the Premises:
CC shall assist DEALER in effecting an orderly and equitable disposition of
DEALER's leasehold interest in the Premises. If necessary to effect such
disposition, CC, at its option, within a reasonable time, for the remainder
of the lease or for twelve (12) months, whichever period is shorter, shall
(1) sublet the Premises from DEALER, or (2) take an assignment of the lease
of the Premises from DEALER, or (3) pay DEALER monthly or otherwise, as the
parties may agree, the lower of the rental specified in the lease or the fair
rental value of the Premises determined in the manner provided in (a) above;
provided, however, that DEALER may receive such payments under only one
dealer agreement with Chrysler Corporation or any of their affiliates or
subsidiaries.
(c) If DEALER owns part of the Premises and leases part of them, section
(a) above will apply to the part owned and section (b) above to the part
leased.
CC shall have no obligation to DEALER under this Paragraph 30 if, after
receipt of notice of termination, (1) DEALER in any way encumbers the
Premises or DEALER's interest in them or takes any
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other action respecting the Premises that would adversely affect any of CC's
obligations under this Paragraph 30, or performance thereof, or (2) DEALER
receives and refuses a bona fide offer to purchase, lease or sublet all or
substantially all of the Premises at a price and on terms that CC believes
are fair, or (3) DEALER's lease of the Premises or part thereof is continued,
renewed or extended by DEALER's act or failure to act, or (4) DEALER fails or
refuses to use DEALER's best efforts to sell, lease or sublease the Premises
or to notify CC of any offer to buy, lease or sublease the Premises; or if,
after the effective date of termination of this agreement, (a) the Premises
or part hereof are used or occupied by anyone for any purpose, or (b) DEALER,
if a proprietor, or any of the persons named in Paragraph 3 of this agreement
is in the business of selling and/or servicing new or used motor vehicles in
the Sales locality referred to in this agreement or the general area
surrounding it, or (c) DEALER, if a proprietor, or any of the persons named
in Paragraph 3 of this agreement occupies or could, in CC's opinion, occupy
all or substantially all of the Premises for any business in which one or
more of them engages.
"Premises" as used in this Paragraph 30 means the place or places of business
in the Sales Locality (1) that DEALER uses exclusively to carry out DEALER's
obligations in selling and servicing new products under this agreement or
jointly under this and any other agreement or agreements with CC on the date
of
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DEALER's receipt of notice of termination and (2) are set forth in the
Dealership Facilities and Location Addendum (Addenda).
To receive CC's assistance as set forth in this Paragraph 30, DEALER must
have operated continuously as a CC dealer for the twelve (12) months
immediately preceding the effective date of termination and must have given
CC a written request for such assistance within thirty (30) days after
DEALER's receipt of the notice of termination of this Agreement. On receipt
of such request from DEALER, CC will initiate compliance with its obligations
under this Paragraph 30. If under section (b) above CC elects to make
monthly payments, then DEALER shall make written application for them on such
forms and at such times as CC reasonably may require. If DEALER requests
assistance under this Paragraph 30, then CC, at all reasonable times, shall
have full access to the Premises and DEALER's books and records pertaining to
the Premises.
31 TRANSACTIONS AFTER TERMINATION
After the effective date of termination, if CC, in its discretion, elects to
fill retail orders of DEALER or otherwise transacts business related to the
sale of CC products with DEALER, all such transactions will be governed by
the same terms that this Agreement provides, so far as those terms are
applicable. Notwithstanding any such transactions, CC shall not be deemed to
have waived or rescinded the termination or have renewed this Agreement.
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32 SUCCESSORS TO DEALER
On termination of this Agreement by reason of the death of DEALER if an
individual, or on termination by CC because of the death of any of the
persons named in Paragraph 2 of this Agreement if DEALER is a partnership or
corporation:
(a) If DEALER had so requested in writing (signed by DEALER if an
individual or by those persons representing a majority of the ownership
interest in DEALER if DEALER is a partnership or corporation), delivered to
CC during the lifetime of such decedent, CC shall offer a Chrysler
Corporation Sales and Service Agreement (limited to a two (2) year term) to
any person DEALER has nominated in such written requests to CC as the person
DEALER desires to continue DEALER's business after such death, provided that
such nominated person has demonstrated operating qualifications satisfactory
to CC in the course of active, substantial and continuing participation in
the management of DEALER's organization, and possesses or is able to acquire
within a reasonable time after such death, capital and facilities that are
satisfactory to CC, and will be able to exercise as much control over the
operations and affairs of the dealership as the deceased exercised. Such
Chrysler Corporation Sales and Service Agreement(s) shall be limited to a
term of two (2) years and subject to earlier termination as provided therein.
At least ninety (90) days before the expiration of the two (2) year term
referred to above, CC shall determine if the person granted said
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two (2) year agreement possesses the required capital and facilities
and has satisfactorily performed the obligations under said two (2) year
agreement. This determination will be based on said person's performance
during the aforementioned two (2) year period to qualify for the standard
Chrysler Corporation Sales and Service Agreement then in effect. If CC
determines that said person possesses all such qualifications, then CC shall
offer such standard agreement to said person.
(b) CC shall, if DEALER has not nominated a successor under this Paragraph
32 and has not named a person whose surviving spouse may hold a financial
interest under Paragraph 33, review the qualifications of any remaining
person named in Paragraph 2 of this Agreement. If any such person possesses
operating qualifications satisfactory to CC and possesses or is able to
acquire within a reasonable time facilities and capital necessary to qualify
as a CC dealer, CC shall offer such person a Chrysler Corporation Sales and
Service Agreement or Term Sales and Service Agreement, as CC deems
appropriate. If more than one such person qualifies, CC will select the
person or persons to whom an agreement will be offered.
33 SURVIVING SPOUSE'S FINANCIAL INTEREST
On termination of this Agreement by reason of the death of DEALER, if an
individual, or on termination by CC because of the death of any of the
persons named in Paragraph 2 of this Agreement if DEALER is a partnership or
corporation, the
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surviving spouse of the person who died may hold a financial interest in any
successor dealership, provided that the following conditions are met:
(a) Prior to the death referred to above, DEALER had delivered to CC a
notice in writing signed by all the persons named in Paragraph 2 of this
Agreement naming the deceased person (who must also be named in Paragraph 2
of this Agreement) as the person whose surviving spouse may hold the
financial interest. DEALER may name only one person but may, on written
notice to CC, signed as above, change the person named.
(b) Within sixty (60) days of the date of such death, the surviving spouse
executes with the person or persons who will be named in Paragraph 2 of the
CC Sales and Service Agreement(s) between CC and the successor dealership a
written agreement in which the surviving spouse agrees not to participate in
any way in the management or operation of the successor dealership. Such
agreement shall be delivered to CC within fifteen (15) days after it has been
signed by both parties. Notwithstanding the immediately foregoing provisions
of this Paragraph 33(b), such an agreement not to participate need not be
made if CC has approved the surviving spouse as a person to be named in
Paragraph 2 of the CC Sales and Service Agreement(s) between CC and the
successor dealership.
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Nothing contained herein will obligate CC to enter into a sales and service
agreement with the surviving spouse or any person not otherwise acceptable to
CC or require CC to continue this or any other agreement with the surviving
spouse or any other person for any period of time beyond the time when CC
would have a right to terminate such an agreement in accordance with the
terms thereof. "Successor dealership" as used in this Paragraph 33 means a
dealership (1) that qualifies for and enters into a Chrysler Corporation
Sales and Service Agreement with CC, (2) that possesses and has the right to
use the physical assets and organization that remain after the death first
referred to in this Paragraph 33, and (3) in which the surviving spouse
retains or acquires the financial interest as referred to above.
34 SALE OF DEALERSHIP ASSETS OR OWNERSHIP INTERESTS
CC acknowledges that DEALER may at any time negotiate for the sale of its
assets, and any of the owners of DEALER may at any time negotiate the sale of
their ownership interests in DEALER, with any purchaser on such terms as may
be agreed upon by them and the prospective purchaser. Any such sale,
however, will not create any obligation of CC to do business with any such
purchaser.
DEALER acknowledges that, in connection with any such sale to any such
purchaser, this Agreement is not assignable without the written consent of
CC. If the proposed purchase and sale arrangement contemplates or is
conditioned upon the prospective
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purchaser being granted by CC an agreement similar to this Agreement, DEALER
shall provide CC written notice thereof prior to any completion or closing of
the transactions contemplated by such purchase and sale arrangement and the
prospective purchaser shall apply to CC, on forms provided by CC, for such an
agreement. In order that CC can determine whether effective dealership
operations will result if the prospective purchaser's application is
approved, CC may, in processing the application, without liability to DEALER
or any such owners, counsel with the prospective purchaser regarding any
matters including, but not limited to, matters relating to the investments in
the proposed dealership operations, the management and the facilities that
may be required by CC.
If DEALER or such owners have notified CC, and the prospective purchaser has
made application as provided above, CC shall consider and process such
application, together with the applications of any others for such an
agreement, in accordance with its established procedures and CC shall not
unreasonably withhold its approval of such an application. Any such approval
shall be conditioned upon payment in full by DEALER of all of DEALER's
obligations to CC, which payment shall be made as CC's option on or before
the sale to the prospective purchaser. If CC decides not to continue
authorized dealership operations at DEALER's premises, however, no such
application will be considered or processed by CC and CC shall so notify
DEALER or such owners and the prospective purchaser.
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Notwithstanding the foregoing provision of Paragraph 34, even if the
prospective purchaser of DEALER's assets or ownership interests in DEALER
meets CC's qualifications for appointment as a dealer, CC may, at its
discretion, offer to purchase DEALER's assets or ownership interest in DEALER
on the same terms as said qualified prospective purchaser. If CC makes such
an offer, DEALER shall sell the dealership assets to CC on the aforementioned
same terms. However, if CC has not made such an offer within fifteen (15)
business days after CC's receipt of the aforementioned application and all
necessary information, CC shall be deemed to have declined to offer to
purchase DEALER's assets or ownership interests in DEALER. Within fifteen
(15) days after CC has communicated its offer to purchase DEALER's assets or
ownership interest in DEALER, as described above, DEALER may withdraw, by
written notification to CC, its proposal to sell said assets or ownership
interest to any purchaser, in which case CC's aforementioned offer to
purchaser will be null and void. Additionally, DEALER may request in writing
that CC predetermine whether a proposed purchaser would be acceptable to CC
prior to entering into an agreement to sell DEALER's assets or ownership
interests. If such a request is made, CC shall make such determination. If
CC determines that the proposed purchaser is acceptable to CC, CC shall
decline to make an offer to purchase such assets or ownership interest. Such
determination of acceptability and declination will not act to deny CC its
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right not to approve the proposed purchase and sale arrangement as set forth
above.
35 USE OF TRADE NAMES, TRADEMARKS, LOGOS, ETC.
DEALER may use in DEALER's corporate, firm or trade name in a manner CC
approves in writing any trade name applicable to those CC products set forth
in the Motor Vehicle Addendum. DEALER shall discontinue immediately the use
of any such trade names in DEALER's corporate, firm or trade name when CC so
requests in writing and DEALER shall take such steps as may be necessary or
appropriate, in CC's opinion, to change such corporate, firm or trade name so
as to eliminate any trade name of CC products therefrom.
Except as specifically allowed herein, DEALER shall not use, in any manner,
the trademarks, trade names, insignias or the like of CC, its divisions,
affiliates or subsidiaries without CC's explicit and prior written consent.
DEALER shall discontinue immediately any and all use of any such trademark,
trade name, insignias or the like when CC so requests in writing. On
termination of this Agreement, DEALER shall discontinue immediately using any
trade names applicable to CC vehicles or other products in DEALER's
corporate, firm or trade name or using any trade names, trademarks or
insignias adopted or used by CC or its divisions, affiliates or subsidiaries,
and will take such steps as may be necessary or appropriate, in CC's opinion,
to change such corporate, firm or trade name so as to eliminate any
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trade names applicable to CC products therefrom, and will discontinue using
any signs, stationery or advertising containing any such trade names,
trademarks or insignias or anything else that might make it appear that
DEALER is an authorized dealer for CC vehicles or products.
36 DEALER IS NOT AGENT
This Agreement does not create the relationship of principal and agent
between CC and DEALER, and under no circumstances is either party to be
considered the agent of the other.
37 INABILITY TO PERFORM
In addition to any other exemption from liability specifically provided for
in this Agreement, neither DEALER nor CC will be liable for failure to
perform its part of this Agreement when the failure is due to fire, flood,
strikes or other labor disputes, accident, war, riot, insurrection, acts of
government, governmental regulation or other circumstances beyond the control
of the parties.
38 ASSIGNMENT
DEALER may not assign or transfer this Agreement, or any part hereof, or
delegate any duties or obligations under this Agreement without the written
consent of CC, executed by the President or a Vice President or the National
Dealer Placement Manager of Chrysler Corporation.
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39 NON-WAIVER
The waiver by either party of any breach or violation of or default under any
provision of this Agreement will not operate as a waiver of such provision or
of any subsequent breach or violation thereof or default thereunder.
40 SEVERABILITY
If any provision of this Agreement should be held invalid or unenforceable
for any reason whatsoever or to violate any law of the United States, the
District of Columbia or any State, this Agreement is to be considered
divisible as to such provision, and such provision is to be deemed deleted
from this Agreement or, in the event that it should be held to violate only
the laws of the District of Columbia or of any State, to be inapplicable
within the territory thereof, and the remainder of this Agreement will be
valid and binding as if such provision were not included herein or as if it
were included herein only with respect to territories outside of such
District or State, as the case may be. Notwithstanding the foregoing, when,
in the absence of this Paragraph 40, Federal law would otherwise be deemed to
preempt a state law which purports to limit or prohibit any right, obligation
or duty under any provision of this Agreement, then this Paragraph 40 shall
not be construed to delete any such provision of this Agreement and the
parties hereto will be
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subject to the terms of such provision as if such a state law did not exist.
41 TITLES
The titles appearing in this Agreement have been inserted for convenient
reference only and do not in any way affect the construction, interpretation
or meaning of the text.
42 INTERPRETATION
In the event of a dispute hereunder, the terms of this Agreement shall be
construed in accordance with the laws of the State of Michigan.
43 NOTICES
Unless otherwise specifically required by the terms of this Agreement, any
notice required or permitted under this Agreement must be in writing and will
be sufficient if delivered personally, or sent through the United States mail
system, postage prepaid, addressed, as appropriate, either to DEALER at the
place of business designated in this Agreement, or at such other address as
DEALER may designate in writing to CC, or to Chrysler Corporation at Post
Office Box 857, Detroit, Michigan 48288 or such other address as CC may
designate in writing to DEALER.
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RECEIVABLES PURCHASE AGREEMENT
Dated as of June 28, 1995
ATLANTIC AUTO FUNDING CORPORATION, a Delaware corporation (the
"Buyer"), and ATLANTIC AUTO FINANCE CORPORATION, a Delaware corporation (the
"Originator"), agree as follows:
PRELIMINARY STATEMENTS. (1) Certain terms which are capitalized and
used throughout this Agreement (in addition to those defined above) are defined
in Article I of this Agreement.
(2) The Originator in its ordinary course of business finances the
cost of new Automobiles purchased by Obligors;
(3) The Buyer is a special-purpose Subsidiary of the
Originator established to purchase or otherwise acquire Eligible
Receivables and Related Security;
(4) The Originator wishes from time to time to offer to sell to the
Buyer Eligible Receivables and Related Security; and
(5) The Buyer desires to purchase or otherwise procure such Eligible
Receivables and Related Security from the Originator;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"AFFILIATE" means, with respect to a Person, another Person that
directly or indirectly controls, is controlled by or is under common control
with such first Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the possession, directly
or indirectly, of the power to vote ten percent (10%) or
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more of the Securities having voting power for the election of directors of such
Person or otherwise to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting Securities or
by contract or otherwise.
"AGENT" means CNAI.
"AUTOMOBILE" means the new or used automobile or light-duty truck that
is purchased by the Obligor to which a particular Receivable relates.
"BANK" means Citibank, N.A., a national banking association.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
Section 101 ET SEQ.), as amended from time to time, or any successor statute.
"BUSINESS DAY" means any day other than a Saturday, Sunday or public
holiday or the equivalent for banks in New York City.
"CNAI" means Citicorp North America, Inc., a Delaware corporation.
"COLLECTIONS" means with respect to each Purchased Receivable, without
limitation, all (i) payments received and collected on such Purchased
Receivable, (ii) net proceeds received by virtue of the liquidation of such
Purchased Receivable, (iii) retained proceeds received under any property
damage, casualty or other insurance policy with respect to such Purchased
Receivable, (iv) proceeds received under the VSI Policy, (v) interest of the
Buyer in any property damage, casualty or other insurance policies as the same
relate to the Automobile securing such Purchased Receivable and (vi) other
proceeds relating to such Purchased Receivable or its Contract File.
"COMMITTED RECEIVABLES PURCHASE AGREEMENT" means the receivables
purchase agreement or agreements between the Buyer and the Liquidity Banks.
"COMPANY DOCUMENTS" shall mean the Expense and Tax-Sharing Agreement.
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"CONTRACT" means, with respect to each Receivable, the note, retail
sales installment contract or other evidence of the Obligor's obligation to
repay Indebtedness to the Originator, executed by such Obligor in connection
with the purchase of an Automobile.
"CONTRACT FILE" means, with respect to each Receivable, the original
Contract, either a copy of the application to the appropriate state authorities
for a Title to the related Automobile or a standard assurance in the form
commonly used in the industry relating to the provision of Title and when issued
to the appropriate state authorites, the related Title (but only to the extent
that Title documents are required under applicable state law to be held by a
secured party in order to perfect such secured party's security interest in the
related Automobile), all original instruments modifying the terms and conditions
of the Receivable and the original endorsements or assignments of such Contract.
"CREDIT AND COLLECTION POLICY" means the Credit and Collection Policy
of the Originator for the Contracts and the Receivables as described in EXHIBIT
A, as modified in compliance with SECTION 5.02(c).
"CUSTODIAL AGREEMENT" means that certain custodial agreement dated the
date hereof by and among the Originator, the Buyer, the Agent and the Custodian.
"CUSTODIAN" means Safesite National Business Records Management, Inc.,
a Delaware corporation.
"CXC" means CXC Incorporated, a Delaware corporation.
"CXC RECEIVABLES PURCHASE AGREEMENT" means the receivables purchase
agreement or agreements between the Buyer and CXC.
"DEFAULTED RECEIVABLE" means a Receivable (i) with respect to which
any payment thereon has remained unpaid more than ninety (90) days past the due
date therefor or (ii) charged off as uncollectible by the Originator. A
Receivable shall be deemed to be a Defaulted Receivable upon the earlier to
occur of the events specified in clauses (i) and (ii) of the preceding sentence.
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"DELINQUENT RECEIVABLE" means a Receivable that is not a Defaulted
Receivable and (i) with respect to which any payment thereon has remained unpaid
more than 60 days past the due date therefor or (ii) which has been classified
as delinquent by the Originator.
"ELIGIBLE RECEIVABLE" means a Receivable:
(i) the Obligor of which is a U.S. resident;
(ii) which is not a Delinquent Receivable or a Defaulted
Receivable;
(iii) which is due and payable in full in 75 months or less;
(iv) which, together with the related Contract, constitutes
"chattel paper" within the meaning of Section 9-105 of the UCC;
(v) which is denominated in Dollars and payable in the United
States;
(vi) which, together with the related Contract, represents the
legal, valid and binding obligation of the related Obligor under such
Contract and is not subject to any dispute, offset, counterclaim or
defense, except as provided for under state or federal consumer
protection law;
(vii) which, together with the related Contract, does not
contravene applicable laws, rules or regulations concerning, without
limitation, such matters as usury, consumer protection, truth in lending,
fair credit billing and equal credit opportunity;
(viii) which arose under a Contract for the retail sale of an
Automobile where such Automobile has already been delivered and the Obligor
thereof is not in default under the terms of such Contract;
(ix) which satisfies all applicable requirements of the
Originator's Credit and Collection Policy;
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(x) with respect to which the related Obligor received a Fair Isaac
Score (as defined in the Credit and Collection Policy) of at least 160;
(xi) which, together with the related Contract, has not been
assigned or pledged by the Originator, except pursuant to the terms of this
Agreement, with respect to which the Originator has good and marketable
title, and with respect to which the Originator is the sole legal and
beneficial owner and has full right to transfer, sell and encumber the same
free and clear of any Lien except as created in favor of the Buyer pursuant
to the terms of this Agreement;
(xii) with respect to which there is no default, breach, violation or
event of acceleration existing under the related Contract, and there is no
event which, with the passage of time, or with notice and the expiration of
any grace or cure period, would constitute a default, breach, violation or
event of acceleration, and the Originator has not waived any default,
breach, violation or event of acceleration;
(xiii) with respect to which the related Contract contains
customary and enforceable provisions so as to render the rights and
remedies of the holder thereof against the property subject to such
Contract adequate for the realization of the benefits of the security
provided thereby, including all the rights of a secured party under the UCC
as in effect in the state in which the related Obligor resides or such
Contract was executed;
(xiv) with respect to which the related Contract is not secured by
any collateral, except the Lien with respect to the corresponding
Automobile as noted on the related Title;
(xv) with respect to which, at the time a Lien with respect to the
Automobile was granted by,the related Obligor, the Automobile was and is
free of material damage and is in good repair;
(xvi) with respect to which the Originator is the lienholder of
record on the related Title; and
(xvii) with respect to which the related Obligor maintains casualty
and liability insurance for the
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Automobile in accordance with the Credit and Collection Policy.
"EXPENSE AND TAX-SHARING AGREEMENT" means the Office Space,
Administrative and Office Support Services, and Tax Allocation Agreement dated
as of the date hereof between the Originator and the Buyer.
"FACILITY DOCUMENTS" shall mean collectively, this Agreement, the
Lock-Box Agreements, the Custodial Agreement, the Support Agreement, the Company
Documents and all other agreements, documents and instruments delivered pursuant
thereto or in connection therewith.
"INDEBTEDNESS" means (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, debentures, notes or other similar instruments,
(iii) obligations to pay the deferred purchase price of property or services,
(iv) obligations as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, and (v) obligations under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (iv)
above.
"INITIAL PURCHASE DATE" means the date the first Purchase is made
pursuant to this Agreement.
"LICENSE AGREEMENT" means the Remote Outsourcing Agreement dated as of
July 15, 1994 between Systematics Financial Services, Inc. and the Originator.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other), preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever in
respect of any property of a Person, whether granted voluntarily or imposed by
law, and includes the interest of a lessor under a capital lease or under any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement or similar notice (other
than a financing statement filed by a "true" lessor or consignor
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pursuant to Section 9-408 of the UCC), naming the owner of such property as
debtor, under the UCC or other comparable law of any jurisdiction.
"LIQUIDITY BANKS" means the banks identified as such in the Committed
Receivables Purchase Agreement.
"LOAN AGREEMENT" means the Loan Agreement dated as of the date hereof
among the Bank, the Buyer, in its capacity as Borrower thereunder, and the
Originator, in its capacity as Servicer thereunder.
"LOCK-BOX ACCOUNT" means an account maintained for the purpose of
receiving Collections.
"LOCK-BOX AGENT" means at any time CNAI or such other Person(s) then
authorized pursuant to the Loan Agreement and, upon its execution and delivery,
the Receivables Purchase Agreement to act as lock-box agent on behalf of the
Bank and the Purchasers, as applicable, and their respective assignees.
"LOCK-BOX AGREEMENT" means an agreement, in substantially the form of
EXHIBIT B, among the Originator, the Buyer and a Lock-Box Bank which agreement
sets forth the rights of the Lock-Box Agent, the Originator, the Buyer and the
Lock-Box Bank with respect to the disposition and application of the Collections
received into the applicable Lock-Box Account.
"LOCK-BOX BANK" means any of the banks holding one or more lock-box
accounts for receiving Collections.
"OBLIGOR" means the obligor and any co-obligor(s) under a Receivable.
"OUTSTANDING BALANCE" means, with respect to any date and any
Receivable, the then outstanding principal amount of such Receivable. For the
avoidance of doubt, it is understood that in no event shall the definition of
"Outstanding Balance" include any amount in respect of (i) finance charges and
income with respect to any such Receivable or (ii) prepaid dealer reserves or
other marketing expenses with respect to any such Receivable.
"PERMITTED SECURITIZATION TRANSACTION" means a transfer by the
Borrower of Receivables (i) pursuant to the Receivables Purchase Agreement and
(ii) by way of a term securitization
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transaction, provided that (x) upon the effectiveness of such transaction and
the application of the proceeds therefrom to prepay loans made under the Loan
Agreement secured immediately prior to the effectiveness of such transaction by
the Purchased Receivables subject to such transaction, no prepayment of loans is
required under Section 2.03(a) of the Loan Agreement and (y) the parties to such
transaction enter into intercreditor arrangements with the Agent, the Bank and
the Purchasers reasonably satisfactory to each of the Agent, the Bank and the
Purchasers.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, government (or any agency or political subdivision thereof) or other
entity.
"PURCHASE" means a purchase of Purchased Receivables, Related Security
with respect to such Purchased Receivables and Collections with respect thereto
by the Buyer from the Originator pursuant to SECTIONS 2.01 and 2.02.
"PURCHASE DATE" means the Initial Purchase Date and thereafter, each
Business Day of each week.
"PURCHASE NOTICE" means a notice, in substantially the form of EXHIBIT
C, furnished by the Originator to the Buyer pursuant to SECTION 2.02.
"PURCHASE PERCENTAGE" shall mean initially 100%; PROVIDED, HOWEVER,
that the Purchase Percentage may change from time to time to reflect historic
loss experience of the Originator's Receivable portfolio, as agreed upon by the
Originator and the Buyer. The Buyer shall notify the Bank and the Agent of any
change in the Purchase Percentage.
"PURCHASED ASSETS" means, at any time, all then outstanding Purchased
Receivables, Related Security with respect to such Purchased Receivables and
Collections with respect to, and other proceeds of, such Purchased Receivables.
"PURCHASED RECEIVABLE" means any Receivable which appears on any list
of Receivables at any time hereafter submitted to and accepted by the Buyer
pursuant to SECTION 2.02, whether purchased by the Buyer or contributed to the
capital of the Buyer. Once a Receivable appears on any such list it shall
remain a Purchased Receivable; PROVIDED HOWEVER, that with
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respect to any Receivable that is repurchased by the Originator pursuant to
SECTION 7.02, following the Buyer's receipt of the repurchase price for such
Receivable, "PURCHASED RECEIVABLE" shall not include the Receivable so
repurchased.
"PURCHASER" means CXC or the Liquidity Banks, as applicable and their
respective successors and assigns.
"RECEIVABLES" means the indebtedness evidenced by the Contracts,
whether constituting accounts, general intangibles, contract rights, chattel
paper or instruments.
"RECEIVABLES PURCHASE AGREEMENT" means, collectively, (i) the CXC
Receivables Purchase Agreement and (ii) the Committed Receivables Purchase
Agreement.
"RECORDS" means, with respect to each Purchased Receivable, all
factory invoices and work orders describing the related Automobile, the bill of
sale and guaranty of title, insurance policies, tax receipts, property and
casualty insurance policies or binders naming the Servicer as loss payee or
additional named insured, as is appropriate, insurance premium receipts, ledger
sheets, payment records, insurance claim files and correspondence, all
documentation in connection with any modification, release, accommodation,
cosigning or guaranty of the Purchased Receivable and all other documents and
instruments, including all books, records, files, tapes, correspondence and
other information or materials (including, without limitation, computer
programs, tapes, discs, punch cards, data processing software and related
property and rights) relating to the Purchased Receivable, the Contract, the
Title and the Automobile relating to the Purchased Receivable and this
Agreement.
"RELATED SECURITY" means, with respect to any Receivable, (i) the
related Contract File, (ii) the related Automobile, (iii) all related Records
and (iv) all proceeds of the foregoing.
"SECURITIES" means any limited, general or other partnership interest,
or any stock, shares, voting trust certificates, bonds, debentures, notes or
other evidences of indebtedness, secured or unsecured, convertible, subordinated
or otherwise, or any certificates of interest, shares, or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire any of the foregoing.
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"SERVICER" means at any time the Person(s) then authorized pursuant to
the Loan Agreement and, upon its execution and delivery, the Receivables
Purchase Agreement to act as servicer with respect to the Purchased Receivables.
"SUBSIDIARY" means any corporation or other entity of which Securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions are at the
time directly or indirectly owned or controlled by such Person, one or more of
the other subsidiaries of such Person or any combination thereof.
"SUPPORT AGREEMENT" means the support agreement of UAG in favor of the
Buyer to be entered into concurrently with the Buyer's execution of this
Agreement.
"TERMINATION DATE" means the earlier of (i) that Business Day which
the Buyer designates as the Termination Date by notice to the Originator at
least five Business Days prior to such Business Day, (ii) the occurrence of a
Termination Event and (iii) June 28, 1999 (or such other date as the Originator
and the Buyer may agree in writing.
"TERMINATION EVENT" means the occurrence of any of the following
events:
(a) UAG's cumulative net losses, commencing with the fiscal quarter
beginning on January 1, 1995, as reflected in the consolidated statements of
income and retained earnings as of the end of each fiscal quarter of UAG shall
exceed $6,000,000, PROVIDED, that for the fiscal quarters ending on June 30,
1995 and September 30, 1995, cumulative net losses shall be measured for the
four fiscal quarters ended on the last day of each such quarter;
(b) UAG's net worth, as set forth in UAG's annual audited financial
statements, shall be less than $28,000,000;
(c) The net worth of the Originator and its consolidated subsidiaries,
as set forth in the Originator's annual audited financial statements, shall be
less than $2,400,000, PROVIDED, that, for purposes of the foregoing, net
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worth shall be computed excluding intercompany transactions, dealer reserves,
capitalized excess servicing fees and the effects of gains on sale for
securitization transactions;
(d) UAG shall fail to pay any principal of or premium or interest on
any indebtedness in a principal amount of at least $1,000,000 when the same
becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such indebtedness, or any other event shall occur or condition shall
exist under any agreement or instrument relating to any such indebtedness and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such indebtedness;
PROVIDED, that a Termination Event shall not occur hereunder unless UAG receives
written notice that any of the foregoing events shall have occurred and fails to
cure the foregoing within 15 days following receipt of such notice;
(e) There shall occur a "Change in Control" (as defined below) of
UAG; "Change of Control" shall mean (i) the sale of all or substantially all of
the assets of UAG to an entity not controlled by UAG, (ii) prior to UAG's
"Qualified Public Offering" (as defined below), a reduction in the ownership by
the shareholders of the voting stock of UAG as of the date hereof (the "Initial
Shareholder Group") to less than a majority of UAG's outstanding voting stock,
or (iii) after the Qualified Public Offering, the ownership of another Person or
group of Persons of a greater number of shares of UAG's voting stock than owned
by the Initial Shareholder Group; "Qualified Public Offering" shall mean a
public offering of UAG's capital stock pursuant to which UAG receives gross
proceeds of $30,000,000 or more (when aggregated with all prior public
offerings) and has a market valuation in excess of $100,000,000;
(f) Both of Richard Harrison and Harry Hardy shall cease to be
actively involved in the day-to-day management of the Originator, except as a
result of death or illness;
(g) There shall occur any event which may be reasonably expected to
have a material adverse effect on the Originator or UAG or may be reasonably
expected to cause a
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material adverse change in the condition or prospects, financial condition or
business of the Originator or UAG; or
(h) There shall occur a breach of the Support Agreement by UAG.
"TITLE" means, with respect to each Receivable, the original
certificate or other instrument or registration evidencing ownership of the
related Automobile, which certificate, other instrument or registration shall
have the Lien of the Originator noted thereon or a UCC financing statement
signed by the Obligor and filed in the appropriate jurisdiction evidencing the
perfection of the Lien granted by the Obligor to the Originator and assigned to
the Buyer or its designee as provided herein.
"UAG" means United Auto Group, Inc., a Delaware corporation.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the specified jurisdiction.
"VSI POLICY" means the vendors single interest physical damage
insurance policy maintained with respect to the Receivables, a copy of which is
attached as EXHIBIT D.
SECTION 1.02. OTHER TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles. All terms used in Article 9 of the UCC in the State of
New York, and not specifically defined herein, are used herein as defined in
such Article 9.
SECTION 1.03. COMPUTATION OF TIME PERIODS. Unless otherwise stated
in this Agreement, in the computation of a period of time from a specified date
to a later specified date, the word "from" means "from and including" and the
words "to" and "until" each means "to but excluding."
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ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. GENERAL TERMS. (a) On the terms and conditions
hereinafter set forth, from the date the condition precedent to the initial
Purchase in SECTION 3.01 is satisfied to the Termination Date, the Originator
will offer to sell to the Buyer on each Purchase Date all right, title and
interest of the Originator in, to and under all Eligible Receivables then
existing, Related Security with respect to such Eligible Receivables and
Collections with respect thereto and the Buyer in its sole discretion may
purchase all or any portion of such Eligible Receivables, Related Security and
Collections from the Originator. Nothing in this Agreement shall be deemed to
be or construed as a commitment by the Buyer to purchase any Purchased Assets at
any time.
(b) It is the intention of the parties hereto that each Purchase of
Eligible Receivables, Related Security and Collections made hereunder shall
constitute a "sale of chattel paper," as such term is used in Article 9 of the
UCC, which sales are absolute, irrevocable and without recourse except as
specifically provided herein and provide the Buyer with the full benefits of
ownership of the Purchased Receivables and such related Purchased Assets.
Neither the Originator nor the Buyer intends the transactions contemplated
hereunder to be, or for any purpose to be characterized as, loans from the Buyer
to the Originator secured by such assets. If at any time a court characterizes
the Purchases hereunder as loans by the Buyer to the Originator, then the
Originator hereby pledges, grants a security interest in and assigns to the
Buyer, all of the Originator's right and title to and interest in the Purchased
Receivables, the Related Security and Collections related thereto as security
for such loans and for the payment and performance of all obligations of the
Originator hereunder. In view of the intention of the parties hereto that the
Purchases of Eligible Receivables, Related Security and Collections made
hereunder shall constitute sales of such Purchased Receivables, Related Security
and Collections rather than a loan secured by such Purchased Receivables,
Related Security and Collections, the Originator agrees to note on its financial
statements that such Purchased Receivables, Related Security and Collections
have been sold to the Buyer.
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SECTION 2.02. PURCHASES FROM THE ORIGINATOR. (a) Each Purchase shall
be made on a Purchase Date, provided, that a Purchase Notice requesting such
Purchase is received by the Buyer by the close of business on such Purchase
Date. Each such Purchase Notice shall list all Eligible Receivables of the
Originator and shall specify the Purchase Price therefor. The Buyer shall
promptly thereafter notify the Originator whether the Buyer has determined to
purchase all or any portion of such Eligible Receivables.
(b) The purchase price (the "PURCHASE PRICE") for the new Purchased
Receivables noted on a Purchase Notice (together with the related Purchased
Assets) payable with respect to any Purchase Date shall be an amount equal to
the product of the Outstanding Balance of such Purchased Receivables on the
Purchase Date and the Purchase Percentage on such date plus interest accrued on
such Purchased Receivables as of such date.
(c) Subject to paragraph (d) below, the Purchase Price for the
Purchased Assets sold by the Originator under this Agreement shall be payable in
full in cash by the Buyer, in each case on the Business Day following the date
of each such Purchase, except that the Buyer may, with respect to any Purchase,
offset against such Purchase Price any amounts owed by the Originator to the
Buyer hereunder and which remain unpaid. Subject to paragraph (d) below, on the
Business Day following the date of each such Purchase, the Buyer shall, upon
satisfaction of the applicable conditions set forth in Article III, make
available to the Originator the Purchase Price in same day funds.
(d) If, on the Business Day following the date of any Purchase, the
Buyer has insufficient funds to pay in full the Purchase Price owed on such day,
then the amount of the difference between the Purchase Price and such available
funds shall, at option of the Originator (as evidenced by written notice by the
Originator to the Buyer on such date (which notice may be a standing
instruction)) be deemed to be (i) a capital contribution from the Originator to
the Buyer, (ii) a loan by the Originator to the Buyer (a "SUBORDINATED LOAN"),
evidenced by the Subordinated Note of the Buyer substantially in the form
attached hereto as EXHIBIT E or (iii) any combination of capital contribution
and Subordinated Loan. Any Subordinated Loan hereunder shall be fully
subordinated to every other obligation of the Buyer.
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SECTION 2.03. COLLECTIONS; LOCK-BOX ACCOUNTS. In connection with the
Purchases of Purchased Receivables hereunder, the Originator hereby transfers
and assigns to the Buyer all the Originator's right, title to and interest in
each Lock-Box Account. In connection with such transfer and assignment, the
Originator hereby agrees to instruct each Obligor of a Purchased Receivable to
remit payment on the Purchased Receivables to the Lock-Box Accounts. The
Originator further agrees that it will not make any change in its instructions
to Obligors regarding payments to be made to any Lock-Box Account. The
Originator agrees that if it shall receive any Collections, the Originator shall
hold such Collections in trust for the benefit of the Buyer and remit such
Collections to the Buyer by depositing such Collections into the Lock-Box
Account within one Business Day following the Originator's receipt thereof.
Notwithstanding the foregoing, the Servicer shall be entitled to make
withdrawals from the Lock-Box Accounts in accordance with the Loan Agreement
and, upon its execution and delivery, the Receivables Purchase Agreement until
the Lock-Box Agent shall have instructed the Lock-Box Banks to the contrary in
accordance with the Lock-Box Agreements. The account numbers of all Lock-Box
Accounts, together with the names and addresses of all the Lock-Box Banks
maintaining such Lock-Box Accounts, are specified in EXHIBIT F.
SECTION 2.04. TRANSFER OF RECORDS TO THE BUYER. (a) In connection with
the Purchases of Purchased Receivables hereunder, the Originator hereby sells,
transfers, assigns and otherwise conveys to the Buyer all of the Originator's
right and title to and interest in the Records relating to all Purchased
Receivables, without the need for any further documentation in connection with
any Purchase. In connection with such transfer, the Originator, to the extent
permitted under the License Agreement, hereby grants to the Buyer and the
Servicer an irrevocable, non-exclusive license to use, without royalty or
payment of any kind, all software used by the Originator to account for the
Purchased Receivables, to the extent necessary to administer the Purchased
Receivables, whether such software is owned by the Originator or is owned by
others and used by the Originator under license agreements with respect thereto.
The license granted hereby shall be irrevocable, and shall terminate when all
Purchased Receivables have been collected or charged off as uncollectible.
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(b) The Originator shall take such action requested by the Buyer
and/or the Servicer, from time to time hereafter, that may be necessary or
appropriate to ensure that the Buyer has (i) an enforceable ownership interest
in the Records relating to the Purchased Receivables and (ii) an enforceable
right (whether by license or sublicense or otherwise) to use all of the computer
software used to account for the Purchased Receivables and/or to recreate such
Records.
SECTION 2.05. PERFECTION OF LIENS; FURTHER ASSURANCES. Upon the
request of the Buyer, the Originator shall, at its expense, promptly execute and
deliver all further instruments and documents, and take all further action
(including, without limitation, the execution and filing of such financing or
continuation statements, or amendments thereto or assignments thereof), that may
be necessary or desirable, or that the Buyer may request, in order to perfect
and protect any ownership or security interest granted or purported to be
granted to the Buyer hereunder or to enable the Buyer to exercise and enforce
its rights and remedies hereunder with respect to any Purchased Assets
(including, without limitation, the security interest of the Buyer in the
Automobiles securing the Purchased Receivables). The Originator hereby
authorizes the Buyer to file one or more financing or continuation statements,
and amendments thereto and assignments thereof, relative to all or any part of
the Purchased Assets now existing or hereafter arising without the signature of
the Originator where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the Purchased
Assets or any part thereof shall be sufficient as a financing statement. The
Originator will furnish to the Buyer from time to time statements and schedules
further identifying and describing the Purchased Assets and such other reports
in connection with the Purchased Assets as the Buyer may reasonably request, all
in reasonable detail.
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ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial
Purchase shall be subject to the condition precedent that the Buyer shall have
received the following, each in form and substance satisfactory to the Buyer:
(a) The Company Documents executed by the Buyer and the Originator;
(b) Acknowledgment copies of proper UCC-1 Financing Statements
executed by the Originator, as may be necessary or, in the opinion of the Buyer,
desirable under the UCC of all appropriate jurisdictions or any comparable law
to perfect the Buyer's interests in all Purchased Receivables and Related
Security in which an interest may be assigned to it hereunder;
(c) Certified copies of Requests for Information or Copies (Form UCC-
11) (or a similar search report certified by a party acceptable to the Buyer),
dated a date reasonably near to the date hereof, listing all effective financing
statements which name the Originator (under its present name and any previous
names) as debtor and which are filed in the jurisdictions in which filings were
made pursuant to subsection (b) of this SECTION 3.01, together with copies of
such financing statements;
(d) A copy of the resolutions of the Board of Directors of the
Originator approving this Agreement, the Company Documents and the other
Facility Documents to be delivered by it hereunder and the transactions
contemplated hereby, certified by its Secretary or Assistant Secretary;
(e) The Certificate of Incorporation of the Originator certified by
the Secretary of State of Delaware;
(f) A certificate of the Secretary or Assistant Secretary of the
Originator certifying (i) the names and true signatures of the officers
authorized on its behalf to sign this Agreement, the Company Documents and the
other Facility Documents to be delivered by it hereunder (on which certificate
the Buyer may conclusively rely until such time as the Buyer shall receive from
the Originator a revised certificate meeting the requirements of this subsection
(f)) and (ii) a copy of the Originator's by-laws;
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(g) An opinion of Nixon, Hargrave, Devans & Doyle, special counsel
for the Originator, in form and substance satisfactory to the Buyer and the
Agent, as to such matters as the Buyer and the Agent may reasonably request;
(h) The Support Agreement shall have been duly executed and delivered
by each of UAG and the Originator and shall be in full force and effect; and
(i) The Custodial Agreement shall have been duly executed and
delivered by each of the Originator, the Buyer, the Custodian and the Agent and
shall be in full force and effect.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL PURCHASES. Each Purchase
(including the initial Purchase) by the Buyer from the Originator shall be
subject to the further conditions precedent that (a) with respect to any such
Purchase, not later than the close of business on the date of such Purchase, the
Originator shall have delivered (i) to the Buyer, in form and substance
satisfactory to the Buyer, a completed Purchase Notice dated the date of such
Purchase and containing such additional information as may be reasonably
requested by the Buyer and (ii) to the Custodian the original copy of the
related Contract File and (b) on the date of such Purchase the representations
and warranties contained in SECTION 4.01 shall be correct on and as of such date
as though made on and as of such date (and the Originator by accepting the
Purchase Price for such Purchase shall be deemed to have certified to such
effect).
SECTION 3.03. EFFECT OF PAYMENT OF PURCHASE PRICE. Upon the payment
of the Purchase Price for any Purchase, (whether in cash, through a capital
contribution or a Subordinated Loan), title to the Purchased Receivables and the
other related Purchased Assets shall vest in the Buyer, whether or not the
conditions precedent to such Purchase were in fact satisfied; PROVIDED, HOWEVER,
that the Buyer shall not be deemed to have waived any claim it may have under
this Agreement for the failure by the Originator in fact to satisfy any such
condition precedent.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR. The
Originator represents and warrants as follows:
(a) DUE INCORPORATION AND GOOD STANDING. The Originator is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction named at the beginning hereof and is duly qualified to
do business, and is in good standing, in every jurisdiction in which the nature
of its business requires it to be so qualified.
(b) DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery and
performance by the Originator of this Agreement and all other agreements,
instruments and documents to be delivered hereunder, and the transactions
contemplated hereby and thereby, are within the Originator's corporate powers,
have been duly authorized by all necessary corporate action, do not contravene
(i) the Originator's charter or by-laws, (ii) any law, rule or regulation
applicable to the Originator, (iii) any contractual restriction contained in any
material indenture, loan or credit agreement, lease, mortgage, security
agreement, bond, note, or other agreement or instrument binding on or affecting
the Originator or its property or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting the Originator or its property, and
do not result in or require the creation of any Lien upon or with respect to any
of its properties (other than in favor of the Buyer as contemplated hereunder);
and no transaction contemplated hereby requires compliance with any bulk sales
act or similar law. This Agreement has been duly executed and delivered on
behalf of the Originator.
(c) GOVERNMENTAL CONSENT. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Originator of this Agreement or any other agreement, document or instrument
to be delivered hereunder.
(d) ENFORCEABILITY OF FACILITY DOCUMENTS. This Agreement and each
other Facility Document to be delivered by the
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Originator in connection herewith constitute the legal, valid and binding
obligation of the Originator enforceable against the Originator in accordance
with their respective terms.
(e) NO LITIGATION. There are no actions, suits or proceedings
pending, or to the knowledge of the Originator threatened, against or affecting
the Originator or any of its Subsidiaries, or the property of the Originator or
any of its Subsidiaries, in any court, or before any arbitrator of any kind, or
before or by any governmental body, which may materially adversely affect the
financial condition of the Originator or the Originator and its consolidated
Subsidiaries taken as a whole or (ii) the ability of the Originator to perform
its obligations under this Agreement or (iii) the collectibility of the
Purchased Receivables. Neither the Originator nor any of its Subsidiaries is in
default with respect to any order of any court, arbitrator or governmental body.
(f) USE OF PROCEEDS. No proceeds of any Purchase will be used by the
Originator to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(g) ELIGIBILITY OF PURCHASED RECEIVABLES; PERFECTION OF INTEREST IN
PURCHASED RECEIVABLES. (i) As of the date of Purchase hereunder of each
Purchased Receivable, such Purchased Receivable will satisfy the conditions of
the definition of "Eligible Receivable."
(ii) Prior to the Buyer's Purchase of each Purchased Asset hereunder,
the Originator is or will be the lawful owner of, and have good title to, such
Purchased Asset free and clear of any Lien and upon each Purchase by the Buyer
of Purchased Assets hereunder, the Buyer shall acquire a valid and perfected
first priority ownership interest in each Purchased Receivable then existing or
thereafter arising and in the Related Security and Collections with respect
thereto, in each case free and clear of any Lien. All such Purchases of
Purchased Receivables and related Purchased Assets constitute true and valid
sales, and all such Purchases of Purchased Receivables and related Purchased
Assets constitute true and valid transfers and assignments of all of the
Originator's right, title and interest in, to and under such Purchased Assets
(and not merely a pledge of such Purchased Receivables and related Purchased
Assets for security purposes), enforceable against creditors of the Originator.
No such Purchased Assets shall constitute property of the Originator; and
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no effective financing statement or other instrument similar in effect covering
any Purchased Receivable, the Related Security, Collections or any other
Purchased Assets shall at any time be on file in any recording office except
such as may be filed in favor of the Buyer (or its assignees) in accordance with
this Agreement.
(h) ACCURACY OF INFORMATION. No Purchase Notice, information,
exhibit, financial statement, document, book, record or report furnished or to
be furnished by the Originator to the Buyer in connection with this Agreement is
or shall be inaccurate in any material respect as of the date it is or shall be
dated or (except as otherwise disclosed to the Buyer, as the case may be, at
such time) as of the date so furnished, or contains or shall contain any
material misstatement of fact or omits or shall omit to state a material fact or
any fact necessary to make the statements contained therein not misleading.
(i) LOCATION OF CHIEF EXECUTIVE OFFICE AND RECORDS. The chief place
of business and chief executive office of the Originator are located at the
address of the Originator referred to in SECTION 8.02 hereof and the locations
of the offices where the Originator keeps all the Records are listed on EXHIBIT
G (or at such other locations, notified to the Buyer in accordance with SECTION
5.01(e), in jurisdictions where all action required by SECTION 6.03 has been
taken and completed).
(j) SEPARATE CORPORATE EXISTENCE. The Originator is entering into
the transactions contemplated by this Agreement in reliance on the Buyer's
identity as a separate legal entity from the Originator and each of its
Affiliates, and acknowledges that the Buyer and the other parties to the
Facility Documents are similarly entering into the transactions contemplated
by the other Facility Documents in reliance on the Buyer's identity as a
separate legal entity from the Originator and each such other Affiliate.
(k) TAXES. The Originator has filed or caused to be filed all
federal, state and local tax returns which are required to be filed by it, and
has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the Originator has set aside
adequate reserves on its books in accordance with generally
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accepted accounting principles and which have not given rise to any Liens.
(l) SOLVENCY. The Originator: (i) is not "insolvent" (as such term
is defined in Section 101(32)(A) of the Bankruptcy Code, (ii) is able to pay its
debts as they mature; and (iii) does not have unreasonably small capital for the
business in which it is engaged or for any business or transaction in which it
is about to engage.
(m) NO FRAUDULENT CONVEYANCE. The transactions contemplated by this
Agreement and by each of the Facility Documents are being consummated by the
Originator in furtherance of the Originator's ordinary business, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. By its receipt of the Purchase Prices
hereunder and its ownership of the capital stock of the Buyer, the Originator
shall have received reasonably equivalent value for the Purchased Receivables
sold or otherwise conveyed to the Buyer under this Agreement.
SECTION 4.02. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants as follows:
(a) DUE INCORPORATION AND GOOD STANDING. The Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction named at the beginning hereof and is duly qualified to do business,
and is in good standing, in every jurisdiction in which the nature of its
business requires it to be so qualified.
(b) DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery and
performance by the Buyer of this Agreement and all other agreements, instruments
and documents to be delivered hereunder, and the transactions contemplated
hereby and thereby, are within the Buyer's corporate powers, have been duly
authorized by all necessary corporate action, do not contravene (i) the Buyer's
charter or by-laws, (ii) any law, rule or regulation applicable to the Buyer,
(iii) any contractual restriction contained in any material indenture, loan or
credit agreement, lease, mortgage, security agreement, bond, note, or other
agreement or instrument binding on or affecting the Buyer or its property or
(iv) any order, writ, judgment, award, injunction or decree binding on or
affecting the Buyer or its property, and do
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not result in or require the creation of any Lien upon or with respect to any of
its properties; and no transaction contemplated hereby requires compliance with
any bulk sales act or similar law. This Agreement has been duly executed and
delivered on behalf of the Buyer.
(c) GOVERNMENTAL CONSENT. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Buyer of this Agreement or any other agreement, document or instrument to be
delivered hereunder.
(d) ENFORCEABILITY OF FACILITY DOCUMENTS. This Agreement and each
other Facility Document to be delivered by the Buyer in connection herewith
constitute the legal, valid and binding obligation of the Buyer enforceable
against the Buyer in accordance with their respective terms.
ARTICLE V
GENERAL COVENANTS OF THE ORIGINATOR
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE ORIGINATOR. The Originator
will, unless the Buyer shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with
all applicable laws, rules, regulations and orders with respect to it, its
business and properties and all Receivables and related Contracts.
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction in which the nature of its business
requires it to be so qualified.
(c) AUDITS. At any time and from time to time upon prior written
notice to the Originator and during regular business hours, permit the Buyer, or
its agents or representatives, (i) to examine and make copies of and abstracts
from all Records, and (ii) to visit the offices and properties of the Originator
for the purpose of examining such Records, and to
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discuss matters relating to the Purchased Receivables or the Originator's
performance hereunder with any of the officers or employees of the Originator
having knowledge of such matters.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing the Purchased Receivables in the event of
the destruction of the originals thereof) and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Purchased Receivables (including, without limitation, records
adequate to permit the daily identification of all Collections of and
adjustments to each Purchased Receivable).
(e) LOCATION OF RECORDS. Keep its chief place of business and chief
executive office, and the offices where it keeps the Records, at the address(es)
of the Originator referred to in SECTION 4.01(i), or, in any such case, upon 30
days' prior written notice to the Buyer, at such other locations within the
United States where all action required by SECTION 6.03 shall have been taken
and completed.
(f) CREDIT AND COLLECTION POLICY. Comply in all material respects
with its Credit and Collection Policy in regard to each Purchased Receivable and
the related Contract.
(g) NATURE OF BUSINESS. Engage principally in, directly or
indirectly through the ownership of its Subsidiaries, the business of financing
the cost of new Automobiles purchased by Obligors.
(h) MAINTENANCE OF INSURANCE. (i) Maintain and keep in force
insurance in amounts and with companies as is customary for companies engaged in
the same business as that of the Originator.
(i) SEPARATE IDENTITY. Take all actions required to maintain the
Buyer's status as a separate legal entity, including, without limitation, (i)
not holding the Buyer out to third parties as other than an entity with assets
and liabilities distinct from the Originator and the Originator's other
Subsidiaries; (ii) not holding itself out to be responsible for the debts of the
Buyer or, other than by reason of owning capital
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stock of the Buyer, for any decisions or actions relating to the business and
affairs of the Buyer; (iii) cause any financial statements consolidated with
those of the Buyer to state that the Buyer is a separate corporate entity with
its own separate creditors who, in any liquidation of the Buyer, will be
entitled to be satisfied out of the Buyer's assets prior to any value in the
Buyer becoming available to the Buyer's equity holders; (iv) taking such other
actions as are necessary on its part to ensure that all corporate procedures
required by its and the Buyer's respective certificates of incorporation and by-
laws are duly and validly taken; (v) keeping correct and complete records and
books of account and corporate minutes; and (vi) not acting in any other manner
that could foreseeably mislead others with respect to the Buyer's separate
identity.
(j) SOFTWARE. Use its reasonable efforts to enable each of the Buyer
and the Servicer (whether by license, sublicense, assignment or otherwise) to
use all of the computer software used to account for the Purchased Receivables
to the extent necessary to administer the Purchased Receivables.
SECTION 5.02. NEGATIVE COVENANTS OF THE ORIGINATOR. The Originator
will not, without the written consent of the Buyer:
(a) SALES, LIENS, ETC. AGAINST RECEIVABLES AND RELATED ASSETS.
Except pursuant to the Loan Agreement and a Permitted Securitization Transaction
and as otherwise provided herein, sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist, any Lien upon
or with respect to, any Purchased Receivable, Related Security or Collections,
or upon or with respect to any Lock-Box Account to which any Collections of any
Purchased Receivable are sent, or assign any right to receive income in respect
thereof.
(b) EXTENSION OR AMENDMENT OF RECEIVABLES. Except to the extent
permitted in the Loan Agreement and, upon execution and delivery of the
Receivables Purchase Agreement, in the Receivables Purchase Agreement, in each
case in its capacity as Servicer thereunder, extend, amend or otherwise modify,
the terms of any Purchased Receivable, or amend, modify or waive, any term or
condition of any Contract related thereto.
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(c) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Make any
change in the character of its business or in the Credit and Collection Policy
without prior notice to and approval by the Buyer; PROVIDED, HOWEVER, that the
Buyer will be deemed to have approved any such change unless it shall have
disapproved of such change within ten (10) Business Days of its receipt of such
notice.
(d) CHANGE IN CORPORATE NAME. Make any change to its corporate name
or use any trade names, fictitious names, assumed names or "doing business as"
names unless, prior to the effective date of any such name change or use, the
Originator delivers to the Buyer such Financing Statements (Form UCC-1 and UCC-
3) executed by the Originator which the Buyer may reasonably request to reflect
such name change or use, together with such other documents and instruments that
the Buyer may request in connection therewith.
(e) ACCOUNTING TREATMENT. Prepare any financial statements or other
statements which shall account for the transactions contemplated by this
Agreement in any manner other than as the sale of the Purchased Assets by the
Originator to the Buyer.
(f) NONPETITION COVENANT. Notwithstanding any prior termination of
this Agreement, the Originator and the Buyer shall not, prior to the date which
is one year and one day after the termination of this Agreement, with respect to
the Buyer, acquiesce, petition or otherwise invoke or cause the Buyer to invoke
the process of any governmental authority for the purpose of commencing or
sustaining a case against the Buyer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Buyer or any
substantial part of its property or ordering the winding-up or liquidation of
the affairs of the Buyer.
(g) SUBORDINATED NOTE. The Originator shall not transfer the
Subordinated Note to any Person.
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ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. DESIGNATION OF SERVICER. Pursuant to the Loan
Agreement, the Originator has been appointed as the Servicer thereunder and the
Originator has accepted such appointment thereunder. Upon the execution and
delivery of the Receivables Purchase Agreement, the Originator will be appointed
as Servicer thereunder and will accept such appointment thereunder. As part of
the consideration for the Purchases hereunder, the Originator hereby
acknowledges and consents to such appointments as Servicer and agrees to perform
each of the duties and obligations of the Servicer pursuant to the terms of the
Loan Agreement and the Receivables Purchase Agreement, as applicable. Subject
to the terms of the Loan Agreement and the Receivables Purchase Agreement, the
Buyer may at any time, upon ten Business Days' prior written notice, designate
as Servicer any Person to succeed the Originator or any successor Servicer.
SECTION 6.02. RIGHTS OF THE BUYER. At any time:
(a) The Buyer may notify the Obligors of Purchased Receivables, or
any of them, of the Buyer's ownership interest in Purchased Assets and direct
such Obligors, or any of them, that payment of all amounts payable under any
Purchased Receivable be made directly to the Buyer or its designee.
(b) The Originator shall, at the Servicer's or Buyer's request and at
the Originator's expense, give notice of the Buyer's interest in Purchased
Receivables to each Obligor and direct that payments be made directly to the
Buyer or its designee.
(c) The Originator shall, at the Buyer's request, assemble all
Records which the Buyer reasonably believes are necessary or appropriate for the
administration and enforcement of the Purchased Receivables, and shall make the
same available to the Buyer at a place selected by the Buyer or its designee.
(d) The Originator hereby authorizes the Buyer and the Servicer to
take any and all steps in the Originator's name and on behalf of the Originator
necessary or desirable, in the determination of the Buyer and/or the Servicer,
to collect all
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amounts due under any and all Purchased Receivables, including, without
limitation, endorsing the Originator's name on checks and other instruments
representing Collections and enforcing such Purchased Receivables and the
Related Security.
SECTION 6.03. FURTHER ACTION EVIDENCING TRANSFERS. The Originator
agrees that from time to time, at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action that
the Buyer may reasonably request in order to perfect, protect or more fully
evidence the Buyer's interest in the Purchased Assets (including, without
limitation, the security interest of the Buyer in the Automobiles securing the
Purchased Receivables), or to enable the Buyer to exercise or enforce any of its
rights hereunder. Without limiting the generality of the foregoing, the
Originator will mark its master data processing records evidencing such
Purchased Receivables and Related Security with a legend, acceptable to the
Buyer, evidencing that the Buyer has acquired an ownership interest therein as
provided in this Agreement and, upon the request of the Buyer, will execute and
file such financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments or notices, as may be necessary
or appropriate or as the Buyer may reasonably request. The Originator hereby
authorizes the Buyer to file one or more financing or continuation statements,
and amendments thereto and assignments thereof, relative to all or any of the
Purchased Receivables and the Purchased Assets now existing or hereafter arising
without the signature of the Originator where permitted by law. A carbon,
photographic or other reproduction of this Agreement or any financing statement
covering the Purchased Receivables and the other Purchased Assets, or any part
thereof, shall be sufficient as a financing statement. If the Originator fails
to perform any of its agreements or obligations under this Agreement, the Buyer
may (but shall not be required to) itself perform, or cause performance of, such
agreement or obligation, and the expenses of the Buyer incurred in connection
therewith shall be payable by the Originator upon the Buyer's demand therefor;
PROVIDED, HOWEVER, prior to taking any such action, the Buyer shall give notice
of such intention to the Originator and provide the Originator with a reasonable
opportunity to take such action itself.
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ARTICLE VII
INDEMNIFICATION; REPURCHASES
SECTION 7.01. INDEMNITIES BY THE ORIGINATOR. (a) Without limiting any
other rights which the Buyer may have hereunder or under applicable law, the
Originator hereby agrees to indemnify the Buyer, from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or incurred
by the Buyer relating to or resulting from any of the following (excluding,
however, (i) Indemnified Amounts to the extent resulting from gross negligence
or willful misconduct on the part of the Buyer or (ii) recourse (except with
respect to payment and performance obligations provided for in this Agreement)
for uncollectible Purchased Receivables) :
(i) reliance on any representation or warranty made or deemed made by
the Originator (or any of its officers) under or in connection with this
Agreement, any Purchase Notice or any other information or report delivered
by the Originator pursuant hereto, which shall have been false or incorrect
in any material respect when made or deemed made or delivered;
(ii) the failure by the Originator to comply with any term, provision
or covenant contained in this Agreement, or any agreement executed in
connection with this Agreement or with any applicable law, rule or
regulation with respect to any Purchased Receivable, the Related Security
or the other Purchased Assets, or the nonconformity of any Purchased
Receivable, the Related Security or the other Purchased Assets with any
such applicable law, rule or regulation;
(iii) the failure to vest and maintain vested in the Buyer or to
transfer to the Buyer an interest in the Receivables which are, or are
purported to be, Purchased Receivables, together with all Collections,
Related Security and the other Purchased Assets, free and clear of any Lien
(except in favor of the Buyer or its assignees) whether existing at the
time of the Purchase of such Receivable or at any time thereafter;
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(iv) the failure to file, or any delay in filing (other than solely as
a result of the action or inaction of the Buyer), financing statements or
other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws against the Originator with respect
to any Receivables or Related Security which are, or are purported to be,
Purchased Assets, whether at the time of any Purchase or at any subsequent
time;
(v) any failure of the Originator, as Servicer or otherwise, to
perform its duties or obligations in accordance with the provisions of
Article VI; and
(vii) any products liability claim or personal injury or property
damage suit or other similar or related claim or action of whatever sort
arising out of or in connection with the Automobile that is the subject of
any Contract.
Any amounts subject to the indemnification provisions of this SECTION 7.01 shall
be paid by the Originator to the Buyer within two Business Days following
Buyer's demand therefor.
SECTION 7.02. REPURCHASE OF RECEIVABLES. (a) If, with respect to any
Purchased Receivable, (i) such Receivable did not constitute an Eligible
Receivable on the date such Receivable became a Purchased Receivable (or if,
within three Business Days of any Purchase, the Buyer notifies the Originator
that any Receivable which became a Purchased Receivable on the date of such
Purchase is not an Eligible Receivable) or the Originator shall have breached
any representation or warranty made hereunder with respect to such Receivable,
(ii) such Receivable, after the date such Receivable became a Purchased
Receivable, became subject to any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment of such
Receivable (including without limitation, a defense based on such Receivable or
the related Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms) or (iii) the
Originator shall at any time breach any covenant made herein with respect to any
such Receivable (a Purchased Receivable described in any of clauses (i), (ii) or
(iii) above being referred to as an "Ineligible Purchased Receivable"), then the
Originator shall on the next succeeding Purchase Date, upon the Buyer's demand,
repurchase such Ineligible Purchased Receivable for the
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repurchase price specified in the following sentence. Upon the Buyer's demand,
the Originator shall, on the Purchase Date coinciding with such repurchase, pay
to the Buyer an amount equal to the Outstanding Balance of such Purchased
Receivable plus accrued interest thereon as of such Purchase Date. The proceeds
of any such repurchase shall be paid to the Buyer by depositing such proceeds
into the Lock-Box Account. Any such repurchase shall be made without recourse
or warranty, express or implied, by the Buyer.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. AMENDMENTS, ETC. No amendment to or waiver of any
provision of this Agreement nor consent to any departure by the Originator,
shall in any event be effective unless the same shall be in writing and signed
by (i) the Originator and the Buyer (with respect to an amendment) or (ii) the
Buyer (with respect to a waiver or consent by it) or the Originator (with
respect to a waiver or consent by it), as the case may be, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given. This Agreement contains a final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire agreement (together with
the exhibits hereto) among the parties hereto with respect to the subject matter
hereof, superseding all prior oral or written understandings.
SECTION 8.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telex communication and communication by facsimile copy) and mailed,
telexed, transmitted or delivered, as to each party hereto, at its address set
forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall be effective, upon receipt,
or in the case of delivery by mail, five days after being deposited in the
mails, or, in the case of notice by telex, when telexed against receipt of
answer back, or in the case of notice by facsimile copy, when verbal
communication of receipt is obtained, in each case addressed as
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aforesaid, except that notices and communications pursuant to Article II shall
not be effective until received.
SECTION 8.03. NO WAIVER; REMEDIES. No failure on the part of the
Buyer to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 8.04. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be
binding upon and inure to the benefit of the Originator, the Buyer and their
respective successors and permitted assigns (which successors of the Originator
shall include a trustee in bankruptcy). The Originator may not assign any of
its rights and obligations hereunder or any interest herein without the prior
written consent of the Buyer. The Buyer may assign at any time its rights and
obligations hereunder and interests herein to any other Person without the
consent of the Originator. The Originator agrees that any assignee of the Buyer
(to the extent of its interest so assigned) shall have the right to enforce this
Agreement and to exercise directly all of the Buyer's rights and remedies under
this Agreement, and the Originator agrees to cooperate fully with any such
assignee in the exercise of such rights and remedies. This Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until such
time, after the Termination Date, as the Purchased Receivables shall have been
collected or charged off as uncollectible; PROVIDED, HOWEVER, that the rights
and remedies with respect to any breach of any representation and warranty made
by the Originator pursuant to Article IV and the indemnification and payment
provisions of Article VII and this Article VIII shall be continuing and shall
survive any termination of this Agreement.
SECTION 8.05. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
INTERESTS OF THE BUYER IN THE PURCHASED ASSETS OR REMEDIES HEREUNDER OR
THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK. THE ORIGINATOR
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HEREBY AGREES TO THE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE
OF NEW YORK, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO
THE ORIGINATOR AT THE ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE
SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE
BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. THE ORIGINATOR HEREBY WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE ORIGINATOR AND THE BUYER ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM
IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL
BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY. WITH RESPECT TO THE FOREGOING
CONSENT TO JURISDICTION, THE ORIGINATOR HEREBY WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 8.05 SHALL AFFECT THE
RIGHT OF THE BUYER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR AFFECT THE RIGHT OF THE BUYER TO BRING ANY ACTION OR PROCEEDING AGAINST THE
ORIGINATOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 8.06. COSTS, EXPENSES AND TAXES. (a) In addition to the rights
of indemnification under Article VII hereof, the Originator agrees to pay on
demand all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic auditing and any
requested amendments, waivers or consents) of this Agreement and the other
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Buyer (and the
Bank and the Agent) with respect thereto and with respect to advising the Buyer
(and the Bank and the Agent) as to its rights and remedies under this Agreement,
and the other agreements executed pursuant hereto and all costs and expenses,
if any (including reasonable counsel fees and expenses), in connection with the
enforcement of this Agreement and the other agreements and documents to be
delivered hereunder.
(b) In addition, the Originator shall pay any and all stamp, sales,
excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement
or the other
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agreements and documents to be delivered hereunder, and agrees to indemnify the
Buyer and its assignees against any liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees.
SECTION 8.07. EXECUTION IN COUNTERPARTS; SEVERABILITY. This Agreement
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BUYER: ATLANTIC AUTO FUNDING CORPORATION
By /s/ Suzanne A. O'Connor
-------------------------------
Name: Suzanne A. O'Connor
Title: Vice President
800 Perinton Hills Office Park
Fairport, New York 14450
Telecopy No.
ORIGINATOR: ATLANTIC AUTO FINANCE CORPORATION
By /s/ Richard J. Harrison
-------------------------------
Name: Richard J. Harrison
Title: President
800 Perinton Hills Office Park
Fairport, New York 14450
Telecopy No.
<PAGE>
EXECUTION COPY
LOAN AND SECURITY AGREEMENT
Dated as of June 28, 1995
ATLANTIC AUTO FUNDING CORPORATION, a Delaware corporation (the
"Borrower"), ATLANTIC AUTO FINANCE CORPORATION, a Delaware corporation
("Atlantic Auto" or the "Servicer"), and CITIBANK, N.A., a national banking
association (the "Bank"), agree as follows:
ARTICLE I
DEFINITIONS
Section A. DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
"ADVANCE RATE" means (i) prior to the Initial CXC Purchase, eighty
percent (80%) and (ii) thereafter, ninety three percent (93%); PROVIDED,
HOWEVER, that such percentage, in the case of clause (ii) only, shall in no
event exceed 100% minus the Aggregate Reserve Percentage (as defined in the
Receivables Purchase Agreement).
"AAFC PURCHASE AGREEMENT" means the Receivables Purchase Agreement
between Atlantic Auto, as originator, and the Borrower, as buyer, pursuant to
which the Borrower shall purchase all of Atlantic Auto's right, title and
interest in and to the Receivables, including the assignment to the Borrower of
the Contract and Title relating to each Receivable.
"AFFILIATE" means, with respect to a Person, another Person that
directly or indirectly controls, is controlled by or is under common control
with such first Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the possession, directly
or indirectly, of the power to vote ten percent (10%) or more of the Securities
having voting power for the election of directors of such Person or otherwise to
direct or cause the direction of the management and policies of that Person,
whether
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through the ownership of voting Securities or by contract or otherwise.
"AGENT" means CNAI.
"AGING RECEIVABLE REPORT" means a monthly report delivered pursuant to
SECTION 4.01(h) in the form attached hereto as EXHIBIT A.
"AUTOMOBILE" means the new or used automobile or light-duty truck that
is purchased by the Obligor to which a particular Receivable relates.
"BASE RATE" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall at all
times be equal to the highest of:
(i) the rate of interest announced publicly by Citibank, N.A. in New
York, New York from time to time, as Citibank, N.A.'s base rate; and
(ii) the sum (adjusted to the nearest one quarter of one percent
(0.25%) or, if there is no nearest one quarter of one percent (0.25%), to
the next higher one quarter of one percent (0.25%)) of (A) one half of one
percent (0.50%) per annum PLUS (B) the rate per annum obtained by dividing
(I) the latest three-week moving average of secondary market morning
offering rates in the United States for three-month certificates of deposit
of major United States money market banks, such three-week moving average
(adjusted to the basis of a year of 360 days) being determined weekly on
each Monday (or, if such day is not a Business Day, on the next succeeding
Business Day) for the three-week period ending on the previous Friday (or,
if such day is not a Business Day, on the next preceding Business Day) by
Citibank, N.A. on the basis of such rates reported by certificate of
deposit dealers to, and published by, the Federal Reserve Bank of New York,
or, if such publication shall be suspended or terminated, on the basis of
quotations for such rates received by Citibank, N.A. from three (3) New
York certificate of deposit dealers of recognized standing selected by
Citibank, N.A., by (II) a percentage equal to 100% minus the average of the
daily percentages specified
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during such three-week period by the Federal Reserve Board (or any
successor) for determining the maximum reserve requirement (including, but
not limited to, any emergency, supplemental or other marginal reserve
requirement) for Citibank, N.A. in respect of liabilities which consist of
or which include (among other liabilities) three-month Dollar nonpersonal
time deposits in the United States PLUS (C) the average during such three-
week period of the annual assessment rates estimated by Citibank, N.A. for
determining the then current annual assessment payable by Citibank, N.A. to
the Federal Deposit Insurance Corporation (or any successor) for insuring
Dollar deposits of Citibank, N.A. in the United States; and
(iii) the sum of (A) one half of one percent (0.50%) per annum PLUS (B)
the Federal Funds Rate in effect from time to time during such period.
"BORROWING" means a borrowing consisting of Loans made on the same
day.
"BORROWING BASE" means, with respect to any date, the product of (i)
the Outstanding Balance of Eligible Receivables as of such date and (ii) the
Advance Rate as of such date.
"BORROWING BASE CERTIFICATE" means a certificate, in substantially the
form of EXHIBIT B, setting forth the Outstanding Balance of Eligible
Receivables.
"BUSINESS DAY" means a day which is not a Saturday or Sunday or a
legal holiday and on which banks are not required or permitted by law or other
governmental action to close in New York, New York.
"CLOSING DATE" means the date on which this Agreement is executed by
the parties hereto and becomes effective.
"CNAI" means Citicorp North America, Inc., a Delaware corporation.
"COLLATERAL" shall have the meaning ascribed to such term in SECTION
5.01.
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"COLLECTIONS" means with respect to each Receivable, without
limitation, all (i) payments received and collected on such Receivable, (ii) net
proceeds received by virtue of the liquidation of such Receivable (including
pursuant to a sale by the Borrower of such Receivable under the Receivables
Purchase Agreement or a Permitted Securitization Transaction), (iii) retained
proceeds received under any property damage, casualty or other insurance policy
with respect to such Receivable, (iv) proceeds received under the VSI Policy,
(v) interest of the Borrower in any property damage, casualty or other insurance
policies as the same relate to the Automobile securing such Receivable and (vi)
other proceeds relating to such Receivable or its Contract File.
"COMMITTED RECEIVABLES PURCHASE AGREEMENT" means the receivables
purchase agreement or agreements between the Borrower and the Liquidity Banks.
"CONTRACT" means, with respect to each Receivable, the note, retail
sales installment contract or other evidence of the Obligor's obligation to
repay Debt to the Borrower (as assignee of Atlantic Auto), executed by such
Obligor in connection with the purchase of an Automobile.
"CONTRACT FILE" means, with respect to each Receivable, the original
Contract, either a copy of the application to the appropriate state authorities
for a Title to the related Automobile or a standard assurance in the form
commonly used in the industry relating to the provision of Title and when issued
by the appropriate state authorities, the related Title (but only to the extent
that Title documents are required under applicable state law to be held by a
secured party in order to perfect such secured party's security interest in the
related Automobile), all original instruments modifying the terms and conditions
of the Receivable and the original endorsements or assignments of such Contract.
"CREDIT AND COLLECTION POLICY" means the Credit and Collection Policy
of Atlantic Auto for the Contracts and the Receivables as set forth on EXHIBIT
C.
"CUSTODIAL AGREEMENT" means that certain custodial agreement dated the
date hereof by and among Atlantic Auto, the Borrower, the Agent and the
Custodian.
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"CUSTODIAN" means Safesite National Business Records Management, Inc.,
a Delaware corporation.
"CUSTODIAN'S CONFIRMATION" means the Custodian's certificate in the
form of EXHIBIT A to the Custodian's Agreement confirming that it has received
(i) an itemized schedule of the Receivables (which shall also briefly describe
each related Contract File) and (ii) the Contract File with respect to each such
Receivable.
"CXC" means CXC Incorporated, a Delaware corporation.
"CXC RECEIVABLES PURCHASE AGREEMENT" means the receivables purchase
agreement or agreements between the Borrower and CXC.
"DEBT" means (i) indebtedness for borrowed money, (ii) obligations
evidenced by bonds, debentures, notes or other similar instruments, (iii)
obligations to pay the deferred purchase price of property or services, (iv)
obligations as lessee under leases which shall have been or should be, in
accordance with GAAP, recorded as capital leases, and (v) obligations under
direct or indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) through (iv) above.
"DEFAULT" means an event which, with the giving of notice or lapse of
time, or both, would constitute an Event of Default.
"DEFAULTED RECEIVABLE" means a Receivable (i) with respect to which
any payment thereon has remained unpaid more than ninety (90) days past the due
date therefor or (ii) charged off as uncollectible by the Servicer. A
Receivable shall be deemed to be a Defaulted Receivable upon the earlier to
occur of the events specified in clauses (i) and (ii) of the preceding sentence.
"DOLLARS" and "$" mean the lawful money of the United States.
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"ELIGIBLE RECEIVABLE" means any Receivable with respect to which the
representations and warranties contained in SECTION 5.03(a) are true and correct
at all times and which have not been sold by the Borrower to the Purchaser
pursuant to the Receivables Purchase Agreement.
"EVENT OF DEFAULT" means any of the occurrences set forth in SECTION
6.01 after the expiration of any applicable grace period and the giving of any
applicable notice, in each case as expressly provided in SECTION 6.01.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day in New York, New York, for the next preceding
Business Day) in New York, New York by the Federal Reserve Bank of New York, or
if such rate is not so published for any day which is a Business Day in New
York, New York, the average of the quotations for such day on such transactions
received by the Bank from three federal funds brokers of recognized standing
selected by the Bank.
"FINANCING AGREEMENTS" means, without limitation, the Custodial
Agreement, the Support Agreement, the AAFC Purchase Agreement and the
Receivables Purchase Agreement.
"FUNDING DATE" means, with respect to any Loan, the date of funding of
such Loan.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accounting Standards Board or in such other
statements by such other entity as may be in general use by significant segments
of the accounting profession as in effect on the date hereof (unless otherwise
specified herein as in effect on another date or dates).
"INITIAL CXC PURCHASE" means the first purchase of Receivables by CXC
from the Borrower pursuant to the Receivables Purchase Agreement.
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"INTERCREDITOR AGREEMENT" means the intercreditor agreement among the
Bank, CXC, the Liquidity Banks, the Surety and the Custodian to be entered into
concurrently with the Borrower's execution of the Receivables Purchase
Agreement.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other), preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever in
respect of any property of a Person, whether granted voluntarily or imposed by
law, and includes the interest of a lessor under a capital lease or under any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement or similar notice (other
than a financing statement filed by a "true" lessor or consignor pursuant to
Section 9-408 of the UCC), naming the owner of such property as debtor, under
the UCC or other comparable law of any jurisdiction.
"LIQUIDITY BANKS" means the banks identified as such in the Committed
Receivables Purchase Agreement.
"LOAN DOCUMENTS" means this Agreement, the Note, and any other
document or instrument executed and delivered by the Borrower to the Bank in
connection with this Agreement.
"LOANS" means all loans made to the Borrower pursuant to SECTION
2.01(a).
"LOCK-BOX ACCOUNT" means an account maintained for the purpose of
receiving Collections.
"LOCK-BOX AGENT" means at any time CNAI or such other Person(s) then
authorized pursuant to this Agreement and, upon its execution and delivery, the
Receivables Purchase Agreement to act as lock-box agent on behalf of the Bank
and the Purchasers, as applicable, and their respective assignees.
"LOCK-BOX AGREEMENT" means an agreement, in substantially the form of
EXHIBIT D, among the Lock-Box Agent, Atlantic Auto, the Borrower and a Lock-Box
Bank which agreement sets forth the rights of the Lock-Box Agent, Atlantic Auto,
the Borrower and
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the Lock-Box Bank with respect to the disposition and application of the
Collections received into the applicable Lock-Box Account.
"LOCK-BOX BANK" means any of the banks holding one or more lock-box
accounts for receiving Collections.
"NET WORTH" means with respect to any Person (i) total consolidated
assets of such Person MINUS (ii) total consolidated liabilities of such Person.
"NOTE" has the meaning ascribed to such term in SECTION 2.01(c).
"NOTICE OF BORROWING" means a Notice of Borrowing attached hereto as
EXHIBIT E and made a part hereof with respect to any proposed borrowing of a
Loan pursuant to SECTION 2.01(b).
"OBLIGATIONS" means all loans, advances, debts, liabilities,
obligations, covenants and duties of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other instrument, due to the
Bank from Borrower, arising under this Agreement, the Note, the other Loan
Documents, whether or not for the payment of money, whether arising by reason of
an extension of credit, loan, indemnification or in any other manner, whether
direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now or hereafter arising and however acquired,
together with all interest, charges, expenses, attorneys' fees and other sums
chargeable to the Borrower under this Agreement.
"OBLIGOR" means the obligor and any co-obligor(s) under a Receivable.
"ORIGINATOR RECEIVABLES" means any Automobile loan receivable
originated by Atlantic Auto other than the Receivables.
"OUTSTANDING BALANCE" means, with respect to any date and any
Receivable, the then outstanding principal amount of such Receivable. For the
avoidance of doubt, it is understood that in no event shall the definition of
"Outstanding Balance" include any amount in respect of (i) finance charges and
income with respect to any such Receivable or (ii) prepaid dealer reserves or
other marketing expenses with respect to any such Receivable.
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"PERMITTED SECURITIZATION TRANSACTION" means a transfer by the
Borrower of Receivables (i) pursuant to the Receivables Purchase Agreement and
(ii) by way of a term securitization transaction, provided that (x) upon the
effectiveness of such transaction and the application of the proceeds therefrom
to prepay Loans secured immediately prior to the effectiveness of such
transaction by the Receivables subject to such transaction, no prepayment of
Loans is required under SECTION 2.03(a) of this Agreement and (y) the parties to
such transaction enter into intercreditor arrangements with the Agent, the Bank
and the Purchasers reasonably satisfactory to each of the Agent, the Bank and
the Purchasers.
"PERSON" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"PURCHASER" means CXC or the Liquidity Banks, as applicable and their
respective successors and assigns.
"RECEIVABLES" means the indebtedness evidenced by the Contracts
assigned by Atlantic Auto to the Borrower pursuant to the AAFC Purchase
Agreement, whether constituting accounts, general intangibles, contract rights,
chattel paper or instruments.
"RECEIVABLES PURCHASE AGREEMENT" means, collectively, (i) the CXC
Receivables Purchase Agreement and (ii) the Committed Receivables Purchase
Agreement.
"RECORDS" means, with respect to each Receivable, all factory invoices
and work orders describing the related Automobile, the bill of sale and guaranty
of title, insurance policies, tax receipts, property and casualty insurance
policies or binders naming the Servicer as loss payee or additional named
insured, as is appropriate, insurance premium receipts, ledger sheets, payment
records, insurance claim files and correspondence, all documentation in
connection with any modification, release, accommodation, cosigning or guaranty
of the Receivable and all other documents and instruments, including all books,
records, files, tapes, correspondence and other information or materials
(including, without limitation, computer programs, tapes, discs, punch cards,
data processing software and
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related property and rights) relating to the Receivable, the Contract, the Title
and the Automobile relating to the Receivable and this Agreement.
"RELATED SECURITY" means, with respect to any Receivable, (i) the
related Contract File, (ii) the related Automobile, (iii) all related Records
and (iv) all proceeds of the foregoing.
"SECURITIES" means any limited, general or other partnership interest,
or any stock, shares, voting trust certificates, bonds, debentures, notes or
other evidences of indebtedness, secured or unsecured, convertible, subordinated
or otherwise, or any certificates of interest, shares, or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire any of the foregoing, but shall not
include any evidence of the Obligations.
"SUBSIDIARY" means any corporation or other entity of which Securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned or controlled by such Person, one or more of
the other subsidiaries of such Person or any combination thereof.
"SUPPORT AGREEMENT" means the support agreement of UAG in favor of the
Borrower to be entered into concurrently with the Borrower's execution of the
AAFC Purchase Agreement.
"SURETY" means Capital Markets Assurance Corporation, a New York
corporation.
"TAXES" has the meaning ascribed to such term in SECTION 2.07(a).
"TERMINATION DATE" means the earliest of (i) July 5, 1996, (ii) the
date this Agreement is terminated pursuant to SECTION 7.11 and (iii) the date
the Committed Receivables Purchase Agreement is terminated; PROVIDED, HOWEVER,
that if the Initial CXC Purchase does not occur by September 1, 1995, then April
1, 1996 shall be substituted for the date specified in clause (i) of this
definition.
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"TITLE" means, with respect to each Receivable, the original
certificate or other instrument or registration evidencing ownership of the
related Automobile, which certificate, other instrument or registration shall
have the Lien of Atlantic Auto noted thereon or a UCC financing statement signed
by the Obligor and filed in the appropriate jurisdiction evidencing the
perfection of the Lien granted by the Obligor to Atlantic Auto and assigned to
the Borrower as provided herein.
"UAG" means United Auto Group, Inc., a Delaware corporation.
"UCC" means the Uniform Commercial Code as enacted in the State of New
York, as it may be amended from time to time.
"UCC AGENT" means at any time CNAI or such other Person(s) then
authorized pursuant to this Agreement and, upon its execution and delivery, the
Receivables Purchase Agreement to act as assignee of the Borrower on behalf of
the Bank and the Purchasers, as applicable, and their respective assignees under
UCC financing statements filed pursuant to this Agreement.
"VSI POLICY" means the vendors single interest physical damage
insurance policy maintained with respect to the Receivables, a copy of which is
attached as EXHIBIT F.
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
SECTION 1.021. LOANS.
(a) AVAILABILITY. The Bank in its sole and absolute discretion and
subject to the terms and conditions hereinafter set forth, may make loans (each
individually, a "Loan" and, collectively, the "Loans") to the Borrower from time
to time during the period from the date hereof to the Business Day immediately
preceding the Termination Date, up to an aggregate outstanding principal amount
equal to the lesser of (i) Five Million Dollars ($5,000,000) or (ii) the
Borrowing Base in effect at such time. Subject to the provisions hereof, the
Borrower may repay any outstanding Loan made to it on any day which is a
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Business Day and any amounts so repaid may be readvanced to the Borrower, up to
the amount available under this SECTION 2.01(a) at such time, in the sole and
absolute discretion of the Bank.
(b) NOTICE OF BORROWING. When the Borrower desires to borrow under
this SECTION 2.01, it shall deliver to the Bank a Notice of Borrowing, signed by
it, no later than 10:00 a.m. (New York time) on the proposed Funding Date. Such
Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be
a Business Day), (ii) the amount of the proposed Borrowing and (iii)
instructions for the disbursement of the proceeds of the proposed Borrowing.
Loans made on any Funding Date shall be in minimum amount of $10,000. Any
Notice of Borrowing (or telephonic notice in lieu thereof) given pursuant to
this SECTION 2.01(b) shall be irrevocable. Each submission by the Borrower to
the Bank of a Notice of Borrowing and each acceptance by the Borrower of the
proceeds of each Loan made hereunder shall constitute a representation and
warranty by the Borrower, as of the Funding Date, that (a) the representations
and warranties made in Article III shall be true and correct on and as of the
date of the Loans, before and after giving effect to such Loans and to the
application of the proceeds therefrom, as though made on and as of such date
(other than representations and warranties which expressly speak as of a
different date) and (b) no event shall have occurred and be continuing, or would
result from the Loans, or from the application of the proceeds therefrom, which
would constitute a Default or an Event of Default in effect on, and as of the
date of, such Loans. Each submission by the Borrower to the Bank of a Notice of
Borrowing shall be accompanied by a Borrowing Base Certificate and a Custodian's
Confirmation.
(c) PROMISE TO REPAY. The Borrower hereby agrees to pay when due the
principal amount of each Loan which is made to it, and further agrees to pay
when due all unpaid interest accrued thereon, in accordance with the terms of
this Agreement and the Note. The Borrower shall execute and deliver to the Bank
a promissory note to evidence the Loans owing to the Bank, substantially in the
form of EXHIBIT G hereto (such promissory note and all amendments thereto,
replacements thereof and substitutions therefor being collectively referred to
as the "Note").
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SECTION 1.022. USE OF PROCEEDS. The Borrower shall apply proceeds of
the Loans to purchase Receivables from Atlantic Auto pursuant to the AAFC
Purchase Agreement, repay outstanding Loans and pay transaction costs associated
therewith.
SECTION 1.023. REPAYMENTS; PREPAYMENTS.
(a) Whenever the aggregate principal amount of Loans outstanding
exceeds the Borrowing Base, a mandatory prepayment of principal shall be made in
the amount of such excess. Such prepayments shall be applied to the Obligations
as set forth in SECTION 2.03(d) and shall be accompanied by a payment of all
interest accrued and unpaid through the date of such mandatory prepayment and
allocable to the amount so prepaid.
(b) The entire remaining outstanding principal balance of the Loans,
together with any accrued and unpaid interest and any other Obligations
hereunder, shall be due and payable on the Termination Date and following an
Event of Default as provided in SECTION 6.01.
(c) The Borrower may, at any time and from time to time, prepay or
repay any Loan, in whole or in part, without premium or penalty, upon at least
one Business Day's notice to the Bank stating the proposed date and principal
amount of the prepayment, and if such notice is given the Borrower shall prepay
such Loan, together with accrued interest to the date of such prepayment on the
principal amount prepaid; PROVIDED, HOWEVER, that each partial prepayment shall
be in an aggregate principal amount not less than $10,000.
(d) All payments of any amounts due under any provision of this
Agreement shall be applied in the following order: FIRST to payment of interest
due and owing allocable to the portion of principal paid; SECOND to the then
outstanding principal balance of the Loans in the order in which they were first
made; and THIRD to the remaining balance of the Obligations.
SECTION 1.024. INTEREST AND FEES.
(a) RATE OF INTEREST. All Loans and the outstanding principal
balance of all other Obligations shall bear interest on the unpaid principal
amount thereof from the date such Loans are
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made and such other Obligations are due and payable until paid in full, except
as otherwise provided in SECTION 2.04(c), at a rate per annum equal to the sum
of the Base Rate, as in effect from time to time as interest accrues PLUS one
half of one percent (0.50%) per annum.
(b) INTEREST PAYMENTS. (i) Interest accrued on each Loan shall be
payable in arrears (A) on the first day of each calendar month, commencing on
the first such day following the making of such Loan and (B) if not theretofore
paid in full, at maturity (whether by acceleration or otherwise) of such Loan.
(ii) Interest accrued on the principal balance of all other
Obligations shall be payable in arrears (A) on the first day of each calendar
month, commencing on the first such day following the incurrence of such
Obligation and (B) if not theretofore paid in full, at the time such other
Obligation becomes due and payable (whether by acceleration or otherwise).
(c) DEFAULT INTEREST. Notwithstanding the rate of interest specified
in SECTION 2.04(a) or elsewhere in this Agreement, effective immediately upon
(i) the occurrence of an Event of Default described in SECTION 6.01(a) or (b) or
(ii) the occurrence of any other Event of Default and notice from the Bank of
the effectiveness of this SECTION 2.04(c), and for as long thereafter as such
Event of Default shall be continuing, the principal balance of all Loans, and
the principal balance of all other Obligations, shall bear interest at a rate
which is two percent (2%) per annum in excess of the Base Rate PLUS one half of
one percent (0.50%) per annum.
(d) UNUSED LINE FEE. The Borrower shall pay to the Bank a fee (the
"Unused Line Fee"), accruing at the rate of one-half of one percent (0.50%) per
annum on the amount from time to time by which $5,000,000 exceeds the
outstanding principal amount of the Loans, for the period commencing on the
Closing Date and ending on the Termination Date, payable monthly, in arrears, on
the first Business Day of each calendar month, commencing on the first such
Business Day after the Closing Date, and on the Termination Date.
SECTION 1.025. INCREASED COSTS. If, after the date hereof, due to
any increase in capital adequacy or reserve requirements or other charges or
costs imposed by any
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governmental authority, the Bank shall determine in good faith that there has
been a direct increase in the cost to the Bank of making, funding, renewing or
maintaining the Loans or a reduction in the yield received by the Bank thereon,
then the Borrower shall from time to time, upon the Bank's written demand to
such effect, pay to the Bank additional amounts sufficient to compensate the
Bank for such increased cost or such reduction in the yield to the Bank. Such
demand shall be accompanied by a detailed statement as to the amount of such
increased cost or reduction in yield, which statement shall be conclusive and
binding for all purposes, absent manifest error. If such increased costs are
incurred as a result of the Bank's selection of a particular lending office, the
Bank shall take reasonable efforts to make, fund and maintain its Loans through
another lending office of the Bank in another jurisdiction, if the making,
funding or maintaining of such Loans through such other office of the Bank does
not, in the judgment of the Bank, otherwise materially adversely affect such
Loans of the Bank.
SECTION 1.026. PAYMENTS AND COMPUTATIONS. (a) The Borrower shall make
each payment hereunder and under the Note of principal of and interest on the
Loans and other Obligations, without condition or reservation of right, in
immediately available funds, not later than 1:00 P.M. (New York City time) on
the day when due in Dollars to the Bank at its address referred to in SECTION
7.02.
(b) The Borrower hereby authorizes the Bank, if and to the extent
payment is not made when due hereunder or under the Note, to charge from time to
time against any or all of the Borrower's accounts with the Bank any amount so
due.
(c) All computations of interest shall be made by the Bank on the
basis of a year of 360 days and the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
is payable. Each determination by the Bank of an interest rate hereunder shall
be conclusive and binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Note shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of the time shall in such case
be included in the computation of payment of interest.
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SECTION 1.027. TAXES.
(a) PAYMENT OF TAXES. Any and all payments by the Borrower
hereunder or under the Note or other document evidencing any Obligations
shall be made free and clear of and without reduction for any and all present
or future taxes, levies, imposts, deductions, charges, withholdings, and all
stamp or documentary taxes, excise taxes, ad valorem taxes and other taxes
imposed on the value of the property, charges or levies which arise from the
execution, delivery or registration, or from payment or performance under,
any of the Loan Documents and all other liabilities with respect thereto
excluding taxes imposed on or measured by net income or overall gross
receipts and capital and franchise taxes now or hereafter imposed on the Bank
by (i) the United States, (ii) the governmental authority of the jurisdiction
in which the Bank's applicable domestic lending office is located or any
political subdivision thereof or (iii) the governmental authority in which
the Bank is organized, managed and controlled or any political subdivision
thereof (all such non-excluded taxes, levies, imposts, deductions, charges
and withholdings being hereinafter referred to as "Taxes"). If the Borrower
shall be required by law to withhold or deduct any Taxes from or in respect
of any sum payable hereunder or under the Note or such document to the Bank,
(x) the sum payable to the Bank shall be increased as may be necessary so
that after making all required withholding or deductions (including
withholding or deductions applicable to additional sums payable under this
SECTION 2.07) the Bank receives an amount equal to the sum it would have
received had no such withholding or deductions been made, (y) the Borrower
shall make such withholding or deductions and (z) the Borrower shall pay the
full amount withheld or deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) INDEMNIFICATION. The Borrower will indemnify the Bank against,
and reimburse the Bank on demand for, the full amount of all Taxes
(including, without limitation, any Taxes imposed by any governmental
authority on amounts payable under this SECTION 2.07 and any additional
income or franchise taxes resulting therefrom) incurred or paid by the Bank
or any bank holding company parent of the Bank and any liability (including
penalties, interest, and out-of-pocket expenses paid to third parties)
arising therefrom or with respect thereto, whether or
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not such Taxes were lawfully payable. A certificate as to any additional amount
payable to any Person under this SECTION 2.07 shall be submitted to the Borrower
and shall, unless the Borrower within ten (10) Business Days after its receipt
of such certificate shall dispute the additional amount payable, be final,
conclusive and binding upon all parties hereto. In connection with any such
dispute, the Bank agrees, within a reasonable time after receiving a written
request from the Borrower, to provide the Borrower with documentation supporting
its calculation of such additional amounts payable; PROVIDED, HOWEVER, that the
Bank shall not be required to disclose to the Borrower any tax returns of the
Bank or any bank holding company parent of the Bank or any other confidential
information relating to the Bank or such bank holding company parent. In
addition, the Bank agrees, within a reasonable time after receiving a written
request from the Borrower, to provide the Borrower with such certificates as are
reasonably required, and take such other actions as are reasonably necessary to
claim such exemptions as the Bank may be entitled to claim in respect of all or
a portion of any Taxes which are otherwise required to be paid or deducted or
withheld pursuant to this SECTION 2.07 in respect of any payments under this
Agreement or under the Note.
(c) RECEIPTS. Within thirty (30) days after the date of any payment
of Taxes by the Borrower, it will furnish to the Bank, at its address referred
to in SECTION 7.02, the original or a certified copy of a receipt or other
documentation reasonably satisfactory to the Bank, evidencing payment thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 1.031. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as follows:
(a) The Borrower is duly incorporated, validly existing and in good
standing under the laws of Delaware, has the corporate power and authority
to own its assets and to transact the business in which it is now engaged
or proposed to be engaged and is duly qualified as a foreign corporation
and in good standing under the laws of each
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other jurisdiction where the nature and extent of the business transacted
by it or the ownership of its assets makes such authorization necessary.
(b) The execution, delivery and performance by the Borrower of the
Loan Documents and each Financing Agreement to which it is a party have
been duly authorized by all necessary corporate actions and do not and will
not (i) contravene its charter or by-laws; (ii) violate any provision of,
or require any filing, registration, consent or approval under, any law,
rule, regulation, order, writ, judgment, injunction, decree, determination
or award having applicability to the Borrower; (iii) result in a breach of
or constitute a default or require any consent under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound or
affected; or (iv) cause the Borrower to be in default (with or without
notice or lapse of time or both) under any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award or any
such indenture, agreement, lease or instrument.
(c) Each of the Loan Documents and each of the Financing Agreements
to which it is a party has been duly executed and delivered by the Borrower
and constitutes its legal, valid and binding obligation enforceable against
it in accordance with its terms, except as such enforcement may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and general principles of equity (regardless of whether
such enforceability is considered in a proceeding at law or in equity).
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Borrower of this
Agreement, the Note, the other Loan Documents or any Financing Agreement to
which it is a party.
(e) Except as disclosed on SCHEDULE 3.01(e) hereto, there is no
pending or threatened action, proceeding or
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investigation affecting the Borrower before any court, commission, agency
or instrumentality of the federal or any state or municipal government or
any agency or subdivision thereof or before any arbitration which may
materially adversely affect the financial condition or operations of the
Borrower or which purports to affect the legality, validity or
enforceability of this Agreement, the Note or the other Loan Documents or
any of the Financing Agreements.
(f) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning
of Regulation U issued by the Board of Governors of the Federal Reserve
System), and no proceeds of the Loans will be used to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.
(g) The Borrower has filed all tax returns (federal, state and local)
required to be filed and paid all taxes shown thereon to be due, including
interest and penalties, or has filed for and/or received valid extensions
of time for such filings or payments. No assessments have been made
against the Borrower by any taxing authority nor has any penalty or
deficiency been asserted by any such authority which has not been paid
unless the validity thereof is being contested in good faith by appropriate
proceedings.
(h) No representation or warranty of the Borrower contained in this
Agreement, any other Loan Document, any Financing Agreement or in any
certificate, document or other written materials including, without
limitation, financial information delivered by the Borrower to the Bank in
connection therewith contains any untrue statement of material fact or
omits to state a material fact necessary in order to make the statements
contained therein not misleading.
(i) The Borrower is not an "investment company" or a company
"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
(j) The AAFC Purchase Agreement creates a valid sale, transfer and
assignment to the Borrower of, and the Borrower is the legal and beneficial
owner of, all right, title and
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interest of Atlantic Auto in and to the Receivables now existing and
hereafter-created and the proceeds thereof. Subject to the terms of the
Intercreditor Agreement, the Bank has a perfected, first-priority security
interest in each Receivable and no further action is required to perfect
such security interest, other than the possession by the Custodian of the
Contracts and Titles relating to each Receivable, which possession is
evidenced by the Custodian's Confirmations.
SECTION 1.032. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The
Servicer represents and warrants as follows:
(a) The Servicer is duly incorporated, validly existing and in good
standing under the laws of Delaware, has the corporate power and authority
to own its assets and to transact the business in which it is now engaged
or proposed to be engaged and is duly qualified as a foreign corporation
and in good standing under the laws of each other jurisdiction where the
nature and extent of the business transacted by it or the ownership of its
assets makes such authorization necessary.
(b) The execution, delivery and performance by the Servicer of this
Agreement and each Financing Agreement to which it is a party have been
duly authorized by all necessary corporate actions and do not and will not
(i) contravene its charter or by-laws; (ii) violate any provision of, or
require any filing, registration, consent or approval under, any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award having applicability to the Servicer; (iii) result in a breach of or
constitute a default or require any consent under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which the
Servicer is a party or by which it or its properties may be bound or
affected; or (iv) cause the Servicer to be in default (with or without
notice or lapse of time or both) under any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award or any
such indenture, agreement, lease or instrument.
(c) Each of this Agreement and each of the Financing Agreements to
which it is a party has been duly executed and
<PAGE>
delivered by the Servicer and constitutes its legal, valid and binding
obligation enforceable against it in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Servicer of this
Agreement, or any Financing Agreement to which it is a party.
(e) The consolidated balance sheets of the Servicer as at December
31, 1994, and the related consolidated statements of income and retained
earnings of the Servicer for the fiscal period then ended, copies of which
have been furnished to the Bank, fairly present the financial condition of
the Servicer as at such date and the results of the operations of the
Servicer for the period ended on such date, all in accordance with GAAP,
and since December 31, 1994, there has been no material adverse change in
such condition or operations which would materially adversely affect the
ability of the Servicer to perform its obligations under this Agreement or
any Financing Agreement to which it is a party.
(f) Except as disclosed on SCHEDULE 3.02(f), there is no pending or
threatened action, proceeding or investigation affecting the Servicer
before any court, commission, agency or instrumentality of the federal or
any state or municipal government or any agency or subdivision thereof or
before any arbitration which may materially adversely affect the financial
condition or operations of the Servicer or which purports to affect the
legality, validity or enforceability of this Agreement or any of the
Financing Agreements.
(g) The Servicer has filed all tax returns (federal, state and local)
required to be filed and paid all taxes shown thereon to be due, including
interest and penalties, or has filed for and/or received valid extensions
of time
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for such filings or payments. No assessments have been made against the
Servicer by any taxing authority nor has any penalty or deficiency been
asserted by any such authority which has not been paid unless the validity
thereof is being contested in good faith by appropriate proceedings.
(h) No representation or warranty of the Servicer contained in this
Agreement, any Financing Agreement to which it is a party or in any
certificate, document or other written materials including, without
limitation, financial information delivered by the Servicer to the Bank in
connection therewith contains any untrue statement of material fact or
omits to state a material fact necessary in order to make the statements
contained therein not misleading.
ARTICLE IV
COVENANTS OF THE BORROWER AND THE SERVICER
SECTION 1.041. AFFIRMATIVE COVENANTS. Until the later of (i) the
date on which all of the Obligations have been paid in full and (ii) the
Termination Date, each of the Borrower and the Servicer shall, unless the Bank
shall otherwise consent in writing:
(a) CORPORATE MAINTENANCE. At all times maintain its corporate
existence and preserve and keep in full force and effect its rights,
privileges and franchises necessary to its business.
(b) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with
(i) all applicable laws, rules, regulations and orders and (ii) all
indentures, or loan or credit agreements or any other agreement, lease or
instrument to which it is a party or by which it or its properties may be
bound or affected.
(c) TAXES. Duly file all tax returns with respect to it and its
property which are required to be filed, duly pay all taxes (including all
quarterly tax assessments) due and payable by it and all assessments and
other governmental charges imposed on it or on any of its property or
assets or
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in respect of any of its business, income or property before any penalty
accrues thereon; PROVIDED that no such taxes, assessments and governmental
charges above need be paid if being contested in good faith by appropriate
proceedings diligently instituted and conducted and if such reserve or
other appropriate provision, if any, as shall be required in conformity
with GAAP shall have been made therefor.
(d) BOOKS AND RECORDS. Keep proper books of record and account in
which entries in conformity with GAAP shall be made of all dealings and
transactions in relation to their businesses and activities.
(e) FURTHER ASSURANCES.
(i) Execute and deliver from time to time to the Bank all such
further documents and instruments and do all such other acts and
things as may be reasonably required by the Bank to enable the Bank to
exercise and enforce its rights hereunder and under the other
documents referred to herein and to perfect, continue the perfection
of, preserve and protect its lien on the Collateral.
(ii) From time to time, at its own expense, (x) take whatever
action is reasonably requested by the Bank or its legal counsel to
preserve, protect or perfect the security interest in the Collateral
granted pursuant to ARTICLE V, including, without limitation,
executing UCC financing statements, endorsing notes, executing
additional security documents or delivering possession of Collateral
to the Custodian, (y) appear in and defend any action or proceeding
which may affect the Borrower's title to the Collateral or the
security interest granted hereunder and (z) perform such acts as the
Bank shall reasonably deem necessary or appropriate to effectuate the
purposes of this Agreement.
(f) LITIGATION. Give the Bank prompt notice of any suit at law or in
equity against it, except where damages of less than $100,000 are sought
(exclusive of claims covered by insurance policies unless the applicable
insurance carrier has disclaimed coverage or has reserved the right to
disclaim coverage on such claims).
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(g) MATERIAL ADVERSE EFFECT. Notify the Bank of the occurrence of
any event which may be reasonably expected to have a material adverse
effect on or may be reasonably expected to cause a material adverse change
in the condition or prospects, financial condition or business, of it, as
soon as it becomes aware of such event.
(h) REPORTING REQUIREMENTS. Furnish to the Bank:
(i) As soon as available and in any event within 30 days after
the end of each calendar month in each fiscal year, (x) in the case of
the Borrower, a balance sheet of the Borrower as of the end of such
month and a statement of income of the Borrower for such month and for
the period commencing at the end of the previous fiscal year and
ending with the end of such month, certified by the chief financial
officer of the Borrower and (y) in the case of the Servicer,
consolidated balance sheets of the Servicer and its Subsidiaries as of
the end of such month and consolidated statements of income of the
Servicer and its Subsidiaries for such month and for the period
commencing at the end of the previous fiscal year and ending with the
end of such month, certified by the chief financial officer of the
Servicer;
(ii) As soon as available and in any event within 120 days after
the end of its fiscal year (x) in the case of the Borrower, a copy of
its financial statements for such year and a balance sheet for the
twelve month period then ended, a statement of income, cash flow and
changes in shareholder equity of the Borrower for such fiscal year,
together with comparative information for the previous fiscal year,
and copies of all reports and management letters, if any, from the
independent certified public accountants to the Borrower, which
reports and letters shall be reasonably satisfactory to the Bank, all
certified by the chief financial officer of the Borrower and (y) in
the case of the Servicer, a copy of its consolidated financial
statements for such year and consolidated balance sheets for the
twelve month period then ended, consolidated statements of income,
cash flow and
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changes in shareholder equity of the Servicer and its Subsidiaries for
such fiscal year, together with comparative information for the
previous fiscal year, and copies of all reports and management
letters, if any, from the independent certified public accountants to
the Servicer, which reports and letters shall be reasonably
satisfactory to the Bank, all certified by the chief financial officer
of the Servicer;
(iii) Promptly upon obtaining knowledge of the occurrence of each
Default and Event of Default continuing on the date of such statement,
a statement of the chief financial officer of the Borrower or the
Servicer, as applicable, setting forth details of such Default or
Event of Default and the action which the Borrower or the Servicer, as
applicable, has taken and proposes to take with respect thereto;
(iv) In the case of the Borrower only, (x) at least once every
ten (10) Business Days, a Borrowing Base Certificate, together with
such supporting documents as the Bank requests (provided that this
reporting requirement may be satisfied for such a period by the
Borrower's delivery of a Borrowing Base Certificate in accordance with
SECTION 2.01(b) in connection with a Borrowing during such period) and
(y) on or before the tenth day of each calendar month (or such more
frequent period as the Bank shall determine in its sole discretion), a
schedule of activity for the Receivables for the preceding calendar
month, which sets forth (1) the aggregate principal amount of
Receivables, (2) an Aging Receivable Report setting forth the
aggregate principal amount of Receivables which are delinquent and the
number of days payments on such Receivables are delinquent, and (3)
any other pertinent information reasonably requested by the Bank, all
certified as being true, accurate and complete by the chief financial
officer of the Borrower.
(v) Promptly upon receipt thereof, copies of any notices,
reports (financial or other) or other information required to be
delivered to the Borrower by Atlantic Auto pursuant to the AAFC
Purchase Agreement,
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by UAG pursuant to the Support Agreement or by the Custodian pursuant
to the Custodial Agreement;
(vi) Such other information respecting the condition or
operations, financial or otherwise, of the Borrower or the Servicer,
as applicable, as the Bank may from time to time reasonably request;
and
(vii) together with each delivery of any financial statement
pursuant to subsection (i) and (ii) hereof, a certificate from the
chief financial officer of the Borrower or the Servicer, as
applicable, containing a statement that no Default or Event of Default
has occurred and is continuing on the date of such certificate, or if
any such Default or Event of Default has occurred, setting forth
details of such Default or Event of Default and the action which the
Borrower or the Servicer, as applicable, has taken and proposes to
take with respect thereto.
(i) COMPLIANCE WITH FINANCING AGREEMENTS. Comply promptly with any
and all covenants and provisions of the Financing Agreements to which it is
a party.
(j) MAINTENANCE OF INSURANCE.
(i) In the case of the Servicer only, maintain and keep in force
insurance in amounts and with companies as is customary for companies
engaged in the same business as that of the Servicer.
(ii) In the case of the Borrower only, pay or cause to be paid
all annual insurance premiums with respect to the VSI Policy and all
charges and fees relating thereto.
(k) MAINTENANCE OF INDEPENDENT DIRECTOR. The Borrower will maintain
at least one independent director who is not an officer, director or
employee of (i) Atlantic Auto or (ii) any Affiliate thereof, or a parent,
child, spouse or sibling of any such Person; PROVIDED, HOWEVER, that if
such independent director dies or resigns the Borrower shall have thirty
(30) Business Days to replace that person with another independent
director; PROVIDED, FURTHER, HOWEVER,
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that until any such independent director shall have been replaced the
Borrower shall take no action requiring the vote or consent of its
independent director.
SECTION 1.042. NEGATIVE COVENANTS OF THE BORROWER. Until the later of
(i) the date on which all of the Obligations have been paid in full and (ii) the
Termination Date, the Borrower will not, without the written consent of the
Bank:
(a) Merge or consolidate with or into, or convey, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to, acquire all or substantially all of the assets of,
any Person or division of any Person or materially change the nature or
conduct of its business as conducted on the date hereof other than pursuant
to or as permitted by this Agreement and any Financing Agreement.
(b) Incur, create, assume, suffer to exist or otherwise become liable
with respect to any Debt other than the Loans, its obligations under any
Financing Agreement, its obligations under any Permitted Securitization
Transaction and Debt for operational expenses of the Borrower in an amount
not to exceed $25,000.
(c) Amend, modify or otherwise change any of the terms or provisions
in its articles/certificate of incorporation, its by-laws, any document
setting forth the designation, amount, relative rights, limitations and
preferences of any class or series of its capital stock, and in each case,
any equivalent documents, as in effect on the date hereof.
(d) (i) Cancel or terminate the AAFC Purchase Agreement or the
Custodial Agreement or consent to or accept any cancellation or termination
of either agreement, (ii) amend or otherwise modify any term or condition
of the AAFC Purchase Agreement or the Custodial Agreement or give any
consent, waiver or approval under either agreement, (iii) waive any default
under or breach of the AAFC Purchase Agreement or the Custodial Agreement
or (iv) take any other action under the AAFC Purchase Agreement or the
Custodial Agreement not required by the terms thereof.
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(e) Use the proceeds of any Loan for any purpose other than the
purchase of Receivables, repayment of the outstanding Loans and the payment
of any transaction costs associated therewith.
(f) Except in accordance with the Credit and Collection Policy and in
the ordinary course of business, compromise, extend, release or adjust
payments on any Contracts or Receivables, accept a conveyance of an
Automobile in full or partial satisfaction of any Contract or Receivable,
or release the Lien noted on any Title to any Automobile securing any
Receivable unless, after excluding each Receivable with respect to which
any such action has been taken from the calculation of the Borrowing Base,
the Borrowing Base exceeds the aggregate principal amount of Loans
outstanding.
(g) Change the location of its chief executive office and principal
place of business from 800 Perinton Hills Office Park, Fairport, New York
14450 or change its name, identity or corporate structure to such an extent
that any financing statement filed in connection with this Agreement would
become misleading, unless the Borrower shall have given the Bank at least
30 days' prior written notice thereof and prior to effecting any such
change, taken such steps as the Bank may deem necessary or desirable to
continue the perfection and priority of the Liens in favor of the Bank
granted in connection herewith.
(h) (i) Fail to do all things necessary to maintain its existence as
a corporation separate and apart from Atlantic Auto and any Affiliate of
Atlantic Auto, and any Affiliate of the Borrower, including, without
limitation, conducting business correspondence in its own name, holding
regular meetings of, or obtaining regular written consents from, its Board
of Directors and maintaining appropriate books and records; (ii) suffer any
limitation on the authority of its own directors and officers to conduct
its business and affairs in accordance with their independent business
judgment, or authorize or suffer any Person other than its own directors
and officers to act on its behalf with respect to matters (other than
matters customarily delegated to others under powers of attorney) for which
a corporation's own directors and officers would customarily
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be responsible; (iii) fail to (A) subject to the terms of the Custodial
Agreement, maintain or cause to be maintained by an agent of the Borrower
under the Borrower's control physical possession of all its books and
records, (B) maintain capitalization adequate for the conduct of its
business, (C) account for and manage its liabilities separately from those
of any other Person, including, without limitation, payment of all payroll
and other administrative expenses and taxes from its own assets, (D)
segregate and identify separately all of its assets from those of any other
Person, and (E) maintain offices through which its business is conducted
separate from those of Atlantic Auto and any Affiliates of Atlantic Auto
and any Affiliates of the Borrower (PROVIDED that, to the extent that the
Borrower and any of its Affiliates have offices in the same location, there
shall be a fair and appropriate allocation of overhead costs and expenses
among them, and each such entity shall bear its fair share of such
expenses); or (iv) commingle its funds with those of Atlantic Auto or any
Affiliate of Atlantic Auto or any Affiliates of the Borrower except to the
extent permitted by ARTICLE V, or use its funds for other than the
Borrower's uses.
SECTION 1.043. NEGATIVE COVENANTS OF THE SERVICER. Until the later of
(i) the date on which all of the Obligations have been paid in full and (ii) the
Termination Date, the Servicer will not, without the written consent of the
Bank:
(a) Merge or consolidate with or into, or convey, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to, acquire all or substantially all of the assets of,
any Person or division of any Person or materially change the nature or
conduct of its business as conducted on the date hereof.
(b) Amend, modify or otherwise change any of the terms or provisions
in its articles/certificate of incorporation, its by-laws, any document
setting forth the designation, amount, relative rights, limitations and
preferences of any class or series of its capital stock, and in each case,
any equivalent documents, as in effect on the date hereof.
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(c) Compromise, extend, release or adjust payments on any Contracts
or Receivables, accept a conveyance of an Automobile in full or partial
satisfaction of any Contract or Receivable, or release the Lien noted on
any Title to any Automobile securing any Receivable, except to the extent
permitted in SECTION 4.02(f) with respect to the Borrower.
ARTICLE V
COLLATERAL; ADMINISTRATION AND COLLECTION
Section 1.051. SECURITY INTEREST.
To secure the prompt and complete payment, observance
and performance of all of the Obligations, subject to the terms of the
Intercreditor Agreement, the Borrower hereby grants to the Bank a security
interest in all of the Borrower's right, title and interest in and to the
following property, whether now owned or existing or hereafter arising or
acquired and wheresoever located (the "Collateral"):
(a) All of the Borrower's right, title and interest in and to the
Receivables and the Related Security with respect to such Receivables.
(b) All Records relating to the Receivables, the Contracts, the
Titles, and the Automobiles, whether now or hereafter delivered to, or in
the possession, custody or control of, the Custodian, Atlantic Auto and/or
the Bank.
(c) All guarantees, indemnities, warranties, insurance policies and
proceeds thereof and other agreements or arrangements of whatever character from
time to time supporting or securing payment of the Receivables whether pursuant
to the related Contract or otherwise.
(d) All right, title and interest of the Borrower in and to the Lock-
Box Accounts, and any and all items deposited therein and all investments
held therein; PROVIDED, HOWEVER, that the Bank shall have no interest in
any collections of Originator Receivables deposited in the Lock-Box
Accounts.
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(e) Any and all interest of the Borrower in and under the AAFC
Purchase Agreement and the Support Agreement.
(f) All Collections and other cash and non-cash proceeds of the
foregoing items (a) - (d) and the documents pertaining thereto, together
with whatever is receivable or received when any of items (a) - (d) or the
proceeds thereof are sold, collected or exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary and also including,
without limitation, all rights to payment with respect to any cause of
action affecting or relating to the foregoing and all additions thereto,
substitutions therefor and replacements thereof.
Section 1.052. POWER OF ATTORNEY. Subject to the terms and
provisions of this Agreement and the Intercreditor Agreement, at any time,
without notice and at the expense of the Borrower, the Bank may, and the
Borrower hereby appoints the Bank its true attorney-in-fact (such agency being
coupled with an interest) for such purposes, upon the occurrence of an Event of
Default, perform any obligation of the Borrower hereunder in the Borrower's name
or otherwise.
Section 1.053. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
COLLATERAL. (a) The Borrower represents and warrants with respect to each
Receivable identified on each Borrowing Base Certificate as an "Eligible
Receivable", as of the date of such Borrowing Base Certificate, as follows:
(i) The Obligor of such Receivable is a U.S. resident.
(ii) Such Receivable is not a Defaulted Receivable.
(iii) Such Receivable is evidenced by a Contract which matures in 75
months or less.
(iv) Such Receivable arose pursuant to a Contract which constitutes
"chattel paper" within the meaning of Section 9-105 of the UCC.
(v) Such Receivable is denominated in Dollars and payable in the
United States.
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(vi) Such Receivable arose under a Contract which represents the
legal, valid and binding obligation of the related Obligor under such
Contract and is not subject to any dispute, offset, counterclaim or
defense, except as provided for under state or federal consumer protection
law.
(vii) Such Receivable and related Contract do not contravene
applicable laws, rules or regulations concerning, without limitation, such
matters as usury, consumer protection, truth in lending, fair credit
billing and equal credit opportunity.
(viii) Such Receivable arose under a Contract for the retail sale of
an Automobile where such Automobile has already been delivered and the
Obligor under such Contract is not in default under the terms of the
Contract.
(ix) Such Receivable satisfies all applicable requirements of
Atlantic Auto's Credit and Collection Policy.
(x) The related Obligor received a Fair Isaac Score (as defined in
the Credit and Collection Policy) of at least 160.
(xi) Such Receivable or Contract has not been assigned or pledged by
Atlantic Auto or the Borrower except pursuant to the terms of the AAFC
Purchase Agreement and this Agreement, the Borrower has good and marketable
title thereto, and the Borrower is the sole legal and beneficial owner
thereof and has full right to transfer, sell and encumber the same free and
clear of any Lien except as created in favor of the Bank pursuant to the
terms of this Agreement and as contemplated by the Intercreditor Agreement.
(xii) To the best of the Borrower's knowledge, after diligent
inquiry, there is no default, breach, violation or event of acceleration
existing under the related Contract, and there is no event which, with the
passage of time, or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of
acceleration, and the Borrower has not waived any default, breach,
violation or event of acceleration.
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(xiii) The related Contract contains customary and enforceable
provisions so as to render the rights and remedies of the holder thereof
against the property subject to such Contract adequate for the realization
of the benefits of the security provided thereby, including all the rights
of a secured party under the Uniform Commercial Code as in effect in the
state in which the related Obligor resides or such Contract was executed.
(xiv) The related Contract is not secured by any collateral, except
the Lien with respect to the corresponding Automobile as noted on the
related Title.
(xv) At the time a Lien with respect to the Automobile was granted by
the related Obligor, the Automobile was and is free of material damage and
is in good repair.
(xvi) Atlantic Auto is the lienholder of record on the related Title.
(xvii) The related Obligor maintains casualty and liability insurance
for the Automobile in accordance with the Credit and Collection Policy.
(b) In addition, the Borrower represents and warrants with respect to
the Collateral as follows:
(i) The Custodian's Confirmation required to be delivered under
SECTION 2.01(b) has been delivered to the Bank prior to each advance made
hereunder and Atlantic Auto has retained (i) all documents relating to the
Receivables not delivered to the Custodian and (ii) a copy of each Contract
File.
(ii) The Borrower's chief executive office and principal place of
business are located at 800 Perinton Hills Office Park, Fairport, New York
14450 and Atlantic Auto's chief executive office and principal place of
business are located at 800 Perinton Hills Office Park, Fairport, New York
14450.
(iii) The origination and collection practices used by Atlantic Auto
with respect to each Receivable have been, and
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are, in all respects legal and prudent and comply with all requirements of
the Credit and Collection Policy.
(iv) The transfer, assignment and conveyance of the Contracts by
Atlantic Auto to the Borrower pursuant to the AAFC Purchase Agreement are
not subject to any bulk transfer or similar statutory provisions in effect
in any applicable jurisdiction.
Section 1.054. COVENANTS WITH RESPECT TO THE COLLATERAL.
(a) Each of the Borrower and the Servicer shall comply with any and
all requirements of any federal, state or local law applicable to the Contracts,
including, without limitation, all consumer protection laws.
(b) The Borrower shall keep the Collateral, or cause the Collateral
to be kept, in accordance with safe and sound business practices.
(c) The Borrower shall not sell, assign, pledge, grant or suffer to
exit any Lien on, transfer, dispose of or otherwise encumber any of the
Collateral except for (i) the Liens securing the Obligations and (ii) sales of
Receivables pursuant to the Receivables Purchase Agreement or a Permitted
Securitization Transaction.
Section 1.055. RELEASE OF RECEIVABLES AND LIENS WITH RESPECT TO
AUTOMOBILES. (a) Whether or not an Event of Default exists, in the event that
any Receivable is to be paid or prepaid in full, the Custodian shall release the
corresponding Contract and Title to the Servicer for further delivery to the
Obligor under such Receivable; PROVIDED, HOWEVER, that the Servicer hereby
agrees (i) to hold any such Contract and Title in trust for the benefit of the
Bank and to segregate such Contract and Title from any other property belonging
to the Servicer until such Receivable has been paid or prepaid in full and such
payment has been deposited in a Lock-Box Account; and (ii) to return such
Contract and Title to the Custodian within twenty (20) days of the Custodian's
release thereof if such Receivable has not been paid or prepaid by such time.
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(b) Whether or not an Event of Default exists, in the event that the
Borrower requests of the Bank and the Custodian that any Contracts which are to
be canceled in connection with a foreclosure, deed in lieu of foreclosure or
other similar proceeding, be delivered to the Servicer prior to such event, the
Custodian shall release such Contracts and all related documents to the
Servicer; PROVIDED, HOWEVER, that the Servicer hereby agrees to segregate and
hold such Contracts and related documents together with all proceeds thereof in
trust for the benefit of the Bank, and such Contracts, related documents and
proceeds thereof shall remain Collateral hereunder.
(c) In connection with any sale by the Borrower of any Receivable
pursuant to the Receivables Purchase Agreement or a Permitted Securitization
Transaction, the Bank shall release its Lien in such Receivable and the
related Contract and Title upon the terms and subject to the conditions set
forth in the Intercreditor Agreement; PROVIDED, HOWEVER, that nothing in this
SECTION 5.05(c) shall be deemed to constitute a release by the Bank of (i)
its Lien on the proceeds received by the Borrower for the sale, purported
sale or other transfer of any such Receivable pursuant to the Receivables
Purchase Agreement or (ii) any Lien or other interest or right the Bank has
in any "Unsold Receivables" (as defined in the Intercreditor Agreement) and
the proceeds thereof, including without limitation, collections of Unsold
Receivables which are at any time deposited in any Lock-Box Account.
Section 1.056. LOCK-BOX AGENT; UCC AGENT. (a) CNAI is hereby
designated as the Lock-Box Agent. Each of Atlantic Auto and the Borrower agrees
to enter into a Lock-Box Agreement with each Lock-Box Bank and the Lock-Box
Agent on or prior to the Closing Date or as promptly thereafter as practicable
and, in any event, no later than August 5, 1995.
(b) CNAI is hereby designated as the UCC Agent.
Section 1.057. DESIGNATION OF SERVICER. The servicing, administering
and collection of the Receivables shall be conducted by the Person (the
"Servicer") so designated from time to time in accordance with this SECTION
5.07. Until the Borrower or the Bank, as applicable, gives notice to Atlantic
Auto of the designation of a new Servicer, Atlantic Auto is hereby designated
as, and hereby agrees to perform the duties and obligations of,
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the Servicer pursuant to the terms hereof. The Borrower, in accordance with
Section 6.01 of the AAFC Purchase Agreement and with the prior written consent
of the Bank, at any time prior to the occurrence of an Event and the Bank at any
time following the occurrence of an Event of Default, may designate as Servicer
any Person to succeed Atlantic Auto or any successor Servicer, on the condition
that any such Person so designated shall agree to perform the duties and
obligations of the Servicer pursuant to the terms hereof. The Servicer may,
with the prior consent of the Borrower and the Bank, subcontract with any other
Person for servicing, administering or collecting the Receivables, provided that
the Servicer shall remain liable for the performance of the duties and
obligations of the Servicer pursuant to the terms hereof. The charges, fees or
reimbursements for services provided by the Servicer hereunder shall be
determined by mutual agreement of the Servicer and the Borrower and shall be
paid by the Borrower. The Bank's exercise of any of its rights with respect to
the Servicer created under this SECTION 5.07 shall in each case be subject to
the terms of the Intercreditor Agreement.
Section 1.058. DUTIES OF THE SERVICER. (a) The Servicer shall take or
cause to be taken all such actions as may be necessary or advisable to collect
each Receivable from time to time, all in accordance with applicable laws, rules
and regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy. Each of the Borrower and the Bank hereby appoints
as its agent the Servicer, from time to time designated pursuant to SECTION
5.07, to enforce its respective rights and interests in and under the
Receivables, the Related Security and Collections with respect thereto.
Atlantic Auto (so long as it is Servicer) will at all times apply the same
standards and follow the same procedures with respect to the decision to
commence, and in prosecuting and litigating with respect to Receivables as it
applies and follows with respect to Originator Receivables. In no event shall
the Servicer be entitled to make the Bank or the Borrower a party to any
litigation without the Bank's express prior written consent.
(b) On each day prior to the Termination Date, the Servicer shall set
aside and hold in trust for the Bank (to the extent of its interest therein
determined in accordance with the Intercreditor Agreement) all Collections of
Receivables received on such day. Subject to the terms of the Intercreditor
Agreement, within two (2) Business days of deposit into the Lock-
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Box Account of such Collections the Servicer shall identify such Collections and
apply such Collections in the following order of priority:
(i) if such Collections are collections of Originator Receivables,
the Servicer shall remit such collections to Atlantic Auto in accordance
with Section 5.08(d);
(ii) if such Collections are Collections of Receivables and payment of
any amount is due the Bank under any provision of this Agreement, the
Servicer shall apply such Collections to the payment of such amount in
accordance with SECTION 2.03(d); and
(iii) all Collections remaining after giving effect to clauses (i)
and (ii) above shall be remitted to (x) if no Event of Default has occurred
and is continuing, the Borrower or (y) if an Event of Default has occurred
and is continuing, the Bank to prepay outstanding Loans in accordance with
SECTION 2.03(d).
(c) Provided that the Termination Date shall not have occurred,
Atlantic Auto, while it is Servicer, may, in accordance with the Credit and
Collection Policy and in the ordinary course of business, amend, modify or waive
any term or condition of any Contract unless such amendment, modification or
waiver relates to a negative change in the related Obligor's creditworthiness or
inability to make any payment under the related Contract. Atlantic Auto shall
deliver to the Servicer, and the Servicer shall hold in trust for the Borrower
and the Bank in accordance with their respective interests (determined in
accordance with the Intercreditor Agreement), all Records. Notwithstanding
anything to the contrary contained herein but subject to the terms of the
Intercreditor Agreement, following the occurrence of an Event of Default, the
Bank shall have the absolute and unlimited right to direct the Servicer (whether
the Servicer is Atlantic Auto or otherwise) to commence or settle any legal
action to enforce collection of any Receivable or to foreclose upon or repossess
any Related Security.
(d) The Servicer shall as soon as practicable following receipt turn
over to Atlantic Auto the collections of any Originator Receivable less, in the
event Atlantic Auto is not the Servicer, all reasonable and appropriate out-of-
pocket
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costs and expenses of such Servicer of servicing, collecting and administering
the Originator Receivables to the extent not covered by the servicer fee
received by it. The Servicer, if other than Atlantic Auto, shall as soon as
practicable upon demand deliver to Atlantic Auto all records in its possession
relating to Originator Receivables and copies of Records in its possession
relating to Receivables. The Servicer's authorization under this Agreement
shall terminate after the Termination Date on such date as the Receivables shall
have been collected or charged off as uncollectible.
(e) Notwithstanding anything to the contrary contained in this
ArticleV, the Servicer, if the Bank or its designee, shall have no obligation to
collect, enforce or take any other action described in this Article V with
respect to any Originator Receivable other than to deliver to Atlantic Auto the
collections and documents with respect to any such Originator Receivable as
described in the first two sentences of SECTION 5.08(d) and to exercise the same
degree of care with respect to such collections and documents in its possession
as it would with respect to its own property.
Section 1.059. RIGHTS OF THE BANK. (a) Subject to the terms of the
Intercreditor Agreement, the Bank is hereby authorized at any time to instruct
the Lock-Box Agent to notify any or all of the Lock-Box Banks to remit all
Collections of Receivables deposited in such Lock-Box Accounts directly to the
Lock-Box Agent. The Lock-Box Agent agrees that it will identify and apply
Collections in accordance with SECTION 5.08(b) if the Bank exercises the
foregoing right. Each of the Servicer and the Borrower agrees to supply the
Lock-Box Agent with all Records necessary for the Lock-Box Agent to perform its
obligation set forth in the preceding sentence.
(b) Subject to the terms of the Intercreditor Agreement, at any time
following the designation of a Servicer other than Atlantic Auto pursuant to
SECTION 5.07:
(i) The Bank may notify at any time the Obligors of Receivables,
or any of them, of its interest in such Receivables and direct such
Obligors, or any of them, that payment of all amounts payable under
any Receivable be made directly to the Bank or its designee.
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(ii) Atlantic Auto shall, at the Bank's request and at Atlantic
Auto's expense, give notice of the Bank's interest in Receivables to
each Obligor and direct that payments be made directly to the Bank or
its designee.
(iii) Atlantic Auto shall, at the Bank's request, (A) assemble all
Records which the Bank reasonably believes are necessary or appropriate for
the administration and enforcement of the Receivables, and shall make the
same available to the Bank at a place selected by the Bank or its designee,
and (B) segregate all cash, checks and other instruments received by it from
time to time constituting Collections of Receivables in a manner acceptable
to the Bank and shall, promptly upon receipt, remit all such cash, checks
and instruments, duly endorsed or with duly executed instruments of
transfer, to the Bank or its designee.
(iv) Atlantic Auto hereby authorizes the Bank to take any and all
steps in Atlantic Auto's name and on behalf of Atlantic Auto necessary
or desirable, in the determination of the Bank, to collect all amounts
due under any and all Receivables, including, without limitation,
endorsing Atlantic Auto's name on checks and other instruments
representing Collections and enforcing such Receivables and the
related Contracts.
Section 5.10. RESPONSIBILITIES OF THE BORROWER. Anything herein to
the contrary notwithstanding, the Borrower shall (i) perform all of its
obligations under the Contracts related to the Receivables and the exercise by
the Bank of its rights hereunder shall not relieve the Borrower from such
obligations and (ii) pay when due any taxes, including without limitation,
sales, excise and personal property taxes payable in connection with the
Receivables, unless the Borrower is contesting the payment of such taxes in good
faith and by appropriate proceedings.
Section 5.11. APPLICATION OF PAYMENTS. To the extent the Servicer
receives a payment from an Obligor of a Receivable with respect to which the
Obligor has not identified the Receivable to which such payment should be
applied (a payment in
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the exact amount of an outstanding invoice being sufficient identification), the
Servicer shall use its best efforts to contact such Obligor to confirm the
Receivable to which such Obligor intended that such payment be applied.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 1.061. EVENTS OF DEFAULT. If any of the following Events of
Default shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of the Note when the
same becomes due and payable; or
(b) The Borrower shall fail to pay any interest on the Note or any
other amount payable with respect to which the Borrower has knowledge
hereunder or under any of the other Loan Documents when the same becomes
due and payable and such non-payment continues for a period of more than
five (5) days; or
(c) Any representation or warranty made by the Borrower herein
(other than those made in SECTION 5.03(a)), in the other Loan Documents, in
any Financing Agreement to which it is party or in any certificate,
agreement or written statement contemplated by or made and delivered to the
Bank in connection with this Agreement shall prove to have been incorrect
in any material respect when made; or
(d) The Borrower shall default in the performance or compliance with
any term contained in this Agreement (other than as covered by paragraphs
(a), (b) or (c) of this SECTION 6.01) or any default or event of default
shall occur under any of the other Loan Documents or any Financing
Agreement to which it is a party and such default or event of default
continues for a period of more than thirty (30) days after notice thereof;
or
(e) The Borrower shall fail to pay any principal of or premium or
interest on any Debt (but excluding indebtedness evidenced by the Note) in
a principal amount of at least
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$100,000 when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Debt; or any other event
shall occur or condition shall exist under any agreement or instrument
relating to any such Debt and shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the effect of
such event or condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), redeemed, purchased or defeased, or an offer to
prepay, redeem, purchase or defease such Debt shall be required to be made,
in each case prior to the stated maturity thereof; or
(f) The Borrower shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors;
or any proceeding shall be instituted by or against the Borrower seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of the Borrower or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, custodian or
other similar official for the Borrower or for any substantial part of its
property and, in the case of any such proceeding instituted against the
Borrower (but not instituted by the Borrower), either such proceeding shall
remain undismissed or unstayed for a period of 45 days, or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, the Borrower or for any
substantial part of its property) shall occur; or the Borrower shall take
any corporate action to authorize any of the actions set forth above in
this subsection (f); or
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(g) Any judgment or order for the payment of money in excess of
$100,000 (excluding amounts covered by insurance) shall be rendered against
the Borrower and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall
be any period of ten consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; or
(h) At any time, for any reason, (i) any Loan Document ceases to be
in full force and effect or the Borrower seeks to repudiate its obligations
thereunder and the Liens intended to be created thereby are, or the
Borrower seeks to render such Liens, invalid and unperfected, or (ii) Liens
in favor of the Bank contemplated by the Loan Documents shall, at any time,
for any reason, be invalidated or otherwise cease to be in full force and
effect, or such Liens shall be subordinated or shall not have the priority
contemplated by this Agreement or the other Loan Documents; or
(i) The Borrower shall fail to be a wholly-owned Subsidiary of
Atlantic Auto; or
(j) The Net Worth of the Borrower shall be less than $100,000; or
(k) Any representation or warranty made by the Servicer herein, in
any Financing Agreement to which it is a party or in any certificate,
agreement or written statement contemplated by or made and delivered to the
Bank in connection with this Agreement shall prove to have been incorrect
in any material respect when made; or
(l) The Servicer shall default in the performance or compliance with
any term contained in this Agreement (other than as covered by paragraph
(k) of this SECTION 6.01) or any default or event of default shall occur
under any Financing Agreement to which it is a party and such default or
event of default continues for a period of more than thirty (30) days after
notice thereof; or
(m) The Servicer shall fail to pay any principal of or premium or
interest on any Debt in a principal amount of at least $100,000 when the
same becomes due and payable
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(whether by scheduled maturity, required prepayment, acceleration, demand
or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Debt; or any other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and shall continue after
the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or
to permit the acceleration of, the maturity of such Debt; or any such Debt
shall be declared to be due and payable, or required to be prepaid (other
than by a regularly scheduled required prepayment), redeemed, purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated maturity
thereof; or
(n) The Servicer shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors;
or any proceeding shall be instituted by or against the Servicer seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of the Servicer or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, custodian or
other similar official for the Servicer or for any substantial part of its
property and, in the case of any such proceeding instituted against the
Servicer (but not instituted by the Servicer), either such proceeding shall
remain undismissed or unstayed for a period of 45 days, or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, the Servicer or for any
substantial part of its property) shall occur; or the Servicer shall take
any corporate action to authorize any of the actions set forth above in
this subsection (n); or
(o) (i) The occurrence of a default, breach or failure of condition by
the Borrower or Atlantic Auto under any
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<PAGE>
Financing Agreement to which the Borrower or Atlantic Auto is a party which
(unless such default otherwise constitutes an Event of Default pursuant to
another provision of this SECTION 6.01) is not remedied within the
applicable cure period contained therein, if any; or (ii). the Borrower or
Atlantic Auto for any reason fails to remain a party to the AAFC Purchase
Agreement or any other Financing Agreement to which the Borrower or
Atlantic Auto is a party on the date hereof; or
(p) (i) Any of the Financing Agreements, or any Lien or priority
claim granted thereunder shall terminate, cease to be effective or cease to
be the legal, valid, binding and enforceable obligation of the Borrower,
Atlantic Auto or any servicer or subservicer, as applicable, thereunder; or
(ii) the Borrower shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability (it being
understood that the Borrower may, in good faith, question the accuracy of
any mathematical calculation of an amount owed thereunder); or
(q) The VSI Policy shall cease to be in full force and effect; or
(r) Atlantic Auto ceases to be qualified to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of any of the
Receivables or the AAFC Purchase Agreement or the ability of Atlantic Auto
to perform its duties hereunder or under the AAFC Purchase Agreement; or
(s) The occurrence of an Event of Termination (as defined in the
Committed Receivables Purchase Agreement) under the Committed Receivables
Purchase Agreement which is not remedied within the applicable cure period
specified therein, if any; or
(t) (i) The Support Agreement shall terminate, cease to be effective
or cease to be the legal, valid, binding and enforceable obligation of UAG;
(ii) UAG shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability; or (iii) UAG
shall default in the performance or compliance with any term
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<PAGE>
contained in the Support Agreement which is not remedied within the
applicable cure period contained therein, if any;
then, and in any such event, the Bank may, by notice to the Borrower, declare
the Note, all interest thereon and all of the Obligations to be forthwith due
and payable, whereupon the Note, all such interest and all of the Obligations
shall become and be forthwith due and payable, without presentment, demand,
protest, or further notice of any kind, all of which are hereby expressly waived
by the Borrower; PROVIDED, HOWEVER, that in the event of an actual or deemed
entry of an order for relief with respect to the Borrower or the Servicer under
the Federal Bankruptcy Code, the Loans, the Note, all such interest and all the
Obligations shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower. Notwithstanding any other rights the Bank may
have under applicable law and hereunder, the Borrower agrees that upon the
occurrence and during the continuance of an Event of Default, the Bank shall
have the right to take any or all of the following actions at the same or
different times: with or without legal process and with or without previous
notice or demand for performance, to take possession of the Collateral and
without liability for trespass to enter any premises where the Collateral may be
located for the purpose of taking possession of or removing the Collateral and
to apply (including by way of set-off) any of the Collateral or any other
property of the Borrower held by the Bank or thereafter coming into the Bank's
possession (including account balances of the Borrower) to a reduction of the
Obligations of the Borrower and, generally, to exercise any and all rights
afforded to a secured party under the UCC or other applicable law.
ARTICLE VII
MISCELLANEOUS
SECTION 1.071. AMENDMENTS, ETC. No amendment or waiver of any provision of this
Agreement or the Note, nor consent to any departure by the Borrower or the
Servicer therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Bank, and then such waiver or consent shall be
effective only in
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<PAGE>
the specific instance and for the specific purpose for which given.
SECTION 1.072. NOTICES, ETC. (a) All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered, if to the Borrower, at its address at 800 Perinton Hills
Office Park, Fairport, New York 14450, Attention: Robert Anderson, Secretary
and Treasurer, Telecopier No. 716/421-1954; if to the Servicer, at its address
at 800 Perinton Hills Office Park, Fairport, New York 14450, Attention: Suzanne
O'Connor, Treasurer, Telecopier No. 716/421-1954; and if to the Bank, at its
address at 399 Park Avenue, New York, New York 10043, Attention: Reinhard
Kleinschmitt, Telecopier No. (212) 758-6272; or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
party. All such notices and communications shall, when mailed, telecopied,
telegraphed, telexed or cabled, be effective when deposited in the mails,
telecopied, delivered to the telegraph company, confirmed by telex answerback or
redelivered to the cable company, respectively, except that notices to the Bank
pursuant to the provisions of Article II shall not be effective until received
by the Bank. The Bank shall be entitled to rely conclusively on any written
notice sent to it by telecopy.
(b) The Borrower agrees to indemnify and hold harmless each
Indemnitee from and against any and all claims, damages, liabilities,
obligations, losses, penalties, actions, judgments, suits, costs, disbursements
and expenses of any kind or nature (including, without limitation, reasonable
fees and disbursements of counsel to any such Indemnitee) which may be imposed
on, incurred by or asserted against any such Indemnitee in any manner relating
to or arising out of any action taken or omitted by such Indemnitee in good
faith in reliance on any notice or other written communication in the form of a
telecopy or facsimile purporting to be from the Borrower; PROVIDED that the
Borrower shall not have any obligation under this SECTION 7.02(b) to an
Indemnitee with respect to any indemnified matter caused by or resulting from
the gross negligence or willful misconduct of that Indemnitee as finally
determined by a court of competent jurisdiction.
SECTION 1.073. NO WAIVER; REMEDIES. No failure on the part of the
Bank to exercise, and no delay in exercising, any
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<PAGE>
right hereunder or under the Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 1.074. ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistently applied.
SECTION 1.075. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay
on demand all reasonable costs and expenses in connection with the preparation,
execution, delivery, administration, modification and amendment of this
Agreement, the Note and the other Loan Documents, including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel for the Bank with
respect thereto and with respect to advising the Bank as to its rights and
responsibilities under this Agreement. The Borrower further agrees to pay after
an Event of Default on demand all costs and expenses, if any (including
reasonable counsel fees and expenses), (i) in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this
Agreement, the Note and the other Loan Documents, including, without limitation,
reasonable counsel fees and expenses in connection with the enforcement of
rights under this SECTION 7.05; (ii) in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or in any insolvency or bankruptcy proceeding; and (iii)
in commencing, defending or intervening in any litigation or in filing a
petition, complaint, motion or other pleadings in any legal proceeding relating
to the Obligations, the Collateral, the Borrower and related to or arising out
of the transactions contemplated hereby or by any of the other Loan Documents.
In addition, the Borrower shall pay any and all stamp and other taxes (other
than those taxes excluded pursuant to SECTION 2.07) payable or determined to be
payable in connection with the execution and delivery of this Agreement, the
Note and the other Loan Documents to be delivered hereunder, and agrees to save
the Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes.
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<PAGE>
SECTION 1.076. RIGHT OF SET-OFF. Subject to the terms and conditions
of the Intercreditor Agreement, upon the occurrence and during the continuance
of an Event of Default, the Bank is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by the Bank to or for the
credit or the account of the Borrower against any and all of the Obligations of
the Borrower now or hereafter existing, whether or not the Bank shall have made
any demand under this Agreement, the Note or any other Loan Document and
although such Obligations may be unmatured. The Bank agrees promptly to notify
the Borrower after any such set-off and application, PROVIDED that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this SECTION 7.06 are in addition to
other rights and remedies (including, without limitation, other rights of set-
off) which the Bank may have.
SECTION 1.077. BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may assign all or a portion of its rights and
obligations under this Agreement to an institution with a comparable credit
rating upon notice to the Borrower and the Bank may at any time create a
security interest in all or any portion of its rights under this Agreement
(including, without limitation, Obligations owing to it and the Note held by it)
in favor of any Federal Reserve bank in accordance with Regulation A of the
Federal Reserve Board.
SECTION 1.078. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 1.079. ENTIRE AGREEMENT; SEVERABILITY OF PROVISIONS. This
Agreement, taken together with all of the other Loan Documents, embodies the
entire agreement and understanding of the parties hereto and all prior
agreements and understandings, written and oral, relating to the subject matter
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<PAGE>
hereof. In case any provision in or obligation under this Agreement or the
other Loan Documents shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 7.10 INDEMNIFICATION. The Borrower agrees to indemnify the
Bank and its Affiliates and each of their respective stockholders, directors,
officers, agents, attorneys and employees, and the successors and assigns of the
foregoing (collectively, "Indemnitees"), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against any Indemnitee in any way relating
to or arising out of the Loan Documents, any Financing Agreement or any related
transactions (whether actual or proposed), or any action taken or omitted by the
Bank under the Loan Documents or any Financing Agreement, PROVIDED that the
Borrower shall not be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the breach by the Bank of any agreement contained
herein or the gross negligence or wilful misconduct of such Indemnitee as
finally determined by a court of competent jurisdiction. The foregoing
agreements shall survive the making and repayment of the Loans.
SECTION 7.11. TERMINATION OF AGREEMENT. This Agreement may be
terminated by either the Bank or the Borrower upon 3 days' prior written notice
to the other party hereto, and, in the case of termination by the Borrower,
payment in full of the Obligations on the Termination Date. No such termination
shall affect the obligations of the Borrower with respect to the Loans hereunder
outstanding at the time of such termination.
SECTION 7.12. GOVERNING LAW. This Agreement and the Note shall be
governed by, and construed in accordance with, the laws of the State of New York
(including, without limitation, Section 5-1401 of the General Obligations Law of
New York but otherwise without regard to conflicts of laws principles).
SECTION 7.13. CERTAIN CONSENTS AND WAIVERS OF THE BORROWER.
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<PAGE>
(a) PERSONAL JURISDICTION. EACH OF THE BORROWER, THE SERVICER AND
THE BANK IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY,
TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT
SITTING IN NEW YORK, NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF
MATTERS HEARD IN SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH THIS AGREEMENT, ANY LOAN DOCUMENT OR ANY FINANCING
AGREEMENT, WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE
EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE BORROWER, THE
SERVICER AND THE BANK AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH OF THE
BORROWER AND THE SERVICER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(b) SERVICE OF PROCESS. EACH OF THE BORROWER AND THE SERVICER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER'S OR THE
SERVICER'S, AS APPLICABLE, NOTICE ADDRESS SPECIFIED HEREIN, SUCH SERVICE TO
BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. EACH OF THE BORROWER AND THE
SERVICER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR
ANY FINANCING AGREEMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT OF THE BANK TO BRING PROCEEDINGS AGAINST THE BORROWER OR
THE SERVICER IN THE COURTS OF ANY OTHER JURISDICTION.
(c) WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE BANK
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY FINANCING AGREEMENT.
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<PAGE>
SECTION 7.14. EFFECTIVENESS OF THIS AGREEMENT. This Agreement shall
become effective when the Borrower, the Servicer and the Bank have executed this
Agreement and the Bank shall have received each of the documents set forth on
the List of Closing Documents attached hereto as EXHIBIT H.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
ATLANTIC AUTO FUNDING CORPORATION
By:/s/Suzanne A. O'Connor
--------------------------
Name: Suzanne A. O'Connor
Title: Vice President
ATLANTIC AUTO FINANCE CORPORATION,
as Servicer
By:/s/Richard J. Harrison
--------------------------
Name: Richard J. Harrison
Title: President
CITIBANK, N.A.
By:/s/Christopher J. Kiernan
--------------------------
Name: Christopher J. Kiernan
Title: Vice President
Acknowledged and Accepted:
CITICORP NORTH AMERICA, INC.
By:/s/Reinhard Kleinschmitt
---------------------------
Name: Reinhard Kleinschmitt
Title: Vice President
<PAGE>
EXHIBIT D
FORM OF LOCKBOX AGREEMENT
This Agreement, effective as of July __, 1995 is by and among Atlantic
Auto Finance Corporation ("Atlantic"), Atlantic Funding Corporation ("AFC"),
Citicorp North America, Inc., acting in its capacity as agent (the "Agent") and
______________________ (the "Lockbox Bank").
1. Pursuant to a Receivables Purchase Agreement dated as of June 28,
1995 between Atlantic and AFC (the "AFC Purchase Agreement"), Atlantic has sold,
and will hereafter sell, certain of Atlantic's auto loan receivables
("Receivables") to AFC. Pursuant to certain loan, security and purchase
agreements (collectively, the "Citicorp Agreements") entered into, or to be
entered into, among AFC, Atlantic, Citibank, N.A. ("Citibank"), CXC
Incorporated, certain other financial institutions and the Agent (collectively,
the "Secured Parties"), AFC has granted a security interest or transferred an
ownership interest in the Receivables, including all proceeds thereof, to the
Secured Parties. Atlantic has agreed to act as the servicer of the Receivables
under the Citicorp Agreements (in such capacity, the "Servicer").
2. In order to provide for the orderly collection and processing of
the proceeds of the Receivables, Atlantic has established a Post Office Box with
the United States Post Office (the "Lockbox"). In addition, Atlantic has
established account no. ____________ at the Lockbox Bank (the "Account") into
which collections remitted to the Lockbox are to be deposited. In connection
with the AFC Purchase Agreement, Atlantic has transferred exclusive ownership
and control of the Lockbox and the Account to AFC and in connection with the
Citicorp Agreements, AFC has transferred exclusive ownership and control of the
Account and the Lockbox to the Agent for the benefit of the Secured Parties.
3. The monies, checks, instruments and other items of payment mailed
to the Lockbox and the funds deposited into the Account will not be subject to
deduction, set-off, banker's lien, or any other similar right in favor of the
Lockbox Bank or in favor of any person other than the Agent, except that
returned or dishonored items may be charged back to the Account and netted
<PAGE>
against collections in accordance with the Lockbox Bank's usual practices. It
is understood and agreed that all fees and charges associated with the
establishment, maintenance and operation of the Lockbox, the Account and this
Agreement shall be the responsibility of Atlantic.
4. Notwithstanding the transfer of ownership and control of the
Lockbox and the Account described above, unless and until the Lockbox Bank is
otherwise notified by the Agent as hereinafter set forth, the Lockbox Bank shall
(i) collect and deposit into the Lockbox Account all monies, checks, instruments
and other items of payment received in the Lockbox; (ii) transfer all funds
deposited and collected in the Account pursuant to the instructions of Atlantic;
and (iii) permit Atlantic and/or the Agent to obtain upon request any
information relating to the Account and the Lockbox, including, without
limitation, any information regarding the balance or activity of the Account.
The Agent may, at any time by written notice to the Lockbox Bank, terminate the
authority of Atlantic to direct transfers of funds in the Account pursuant to
CLAUSE (II) above. Atlantic, AFC and the Agent hereby authorize and direct the
Lockbox Bank, upon its receipt of such notice from the Agent, to remit by wire
transfer to, or at the direction of, the Agent all funds in the Account from
time to time in accordance with instructions from the Agent, and from and after
the date of any such notice, the Agent shall be entitled to exercise any and all
rights in respect of or in connection with the Account and the Lockbox. Under
no circumstances shall the Lockbox Bank be obligated to make any independent
inquiry whatsoever as to the Agent's right or authority to give the Lockbox Bank
any instruction, order or direction with respect to the Lockbox or the items
received therein, or as to the use the Agent makes of any monies deposited to
the Account as herein provided.
5. This Agreement may not be terminated at any time by Atlantic, AFC
or by Atlantic in its separate capacity as servicer for AFC or for the Agent,
but may be terminated by either the Lockbox Bank upon 30 days' prior written
notice to the Agent or by the Agent upon 30 days' prior written notice to the
Lockbox Bank.
6. The Lockbox Bank will not assign or transfer its rights or
obligations hereunder (other than to the Agent) without the prior written
consent of the other parties hereto. Subject to the preceding sentence, this
Agreement shall inure to the
<PAGE>
benefit of and be binding upon all parties hereto and their respective
successors and assigns.
7. Any change, amendment, modification or waiver of this Agreement
or any provision hereof will not be effective unless such change, amendment,
modification or waiver is in writing and signed by all parties hereto.
8. All notices, demands, instructions and other communications
required or permitted to be given to or made upon any party hereto shall be
effective if communicated in writing and personally delivered or sent by
registered, certified, express or regular mail, postage prepaid, return receipt
requested, or by telex, telecopy (receipt promptly confirmed by telephone) or
prepaid telegram (with messenger delivery specified in the case of a telegram)
or by telephone (promptly confirmed in writing) and shall be deemed to be given
for purposes of this Agreement on the day that such communication is delivered
to the intended recipient thereof in accordance with the provisions of this
paragraph. Unless otherwise specified in a notice sent or delivered in
accordance with the foregoing provisions of this paragraph, notices, demands,
instructions and other communications shall be given to or made upon the
respective parties hereto at their respective addresses (or to their respective
telex, telecopy or telephone numbers) indicated below, or at such other address
as any party hereto may notify to the other parties in accordance with the
provisions of this paragraph.
9. This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered will be an original hereof, and it
will not be necessary in making proof of this Agreement to produce or account
for more than one counterpart hereof.
10. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, including, without limitation, Section
5-1401 of the General Obligations Law but otherwise without regard to conflict
of laws principles.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.
ATLANTIC AUTO FINANCE CORPORATION
By: _____________________________
Title: __________________________
Address:
ATLANTIC FUNDING CORPORATION
By: _____________________________
Title: __________________________
Address:
CITICORP NORTH AMERICA, INC.,
as Agent
By: _____________________________
Title: Vice President
Address: 450 Mamaroneck Avenue
Harrison, New York 10528
LOCKBOX BANK
By: _______________________
Title: ____________________
Address:
<PAGE>
EXHIBIT G
[FORM OF NOTE]
ATLANTIC AUTO FUNDING CORPORATION
$5,000,000 June 28, 1995
New York, New York
For value received, the undersigned, ATLANTIC AUTO FUNDING
CORPORATION, a Delaware corporation (the "Borrower"), promises to pay to the
order of Citibank, N.A. (the "Bank"), on the "Termination Date" (as defined in
the "Loan Agreement" referred to below), the lesser of (i) the principal amount
of FIVE MILLION DOLLARS ($5,000,000) or (ii) the unpaid principal amount of all
amounts loaned by the Bank to the Borrower as Loans under the Loan Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount of all Loans from the date advanced until paid at the rates (which shall
not exceed the maximum rate permitted by applicable law) and at the times
determined in accordance with the provisions of that certain Loan and Security
Agreement dated as of June 28, 1995 among the Borrower, Atlantic Auto Finance
Corporation, as Servicer, and the Bank (as amended, restated, supplemented or
otherwise modified from time to time, the "Loan Agreement").
This Note is issued pursuant to, and is entitled to the benefits of,
the Loan Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Loans evidenced hereby are
made and are to be repaid. Terms defined in the Loan Agreement and not
otherwise defined herein are used herein with the meanings so defined.
All payments of principal and interest in respect of this Note shall
be made to the Bank not later than 1:00 p.m. (New York time) on the date and at
the place due, to the Bank's Account in lawful money of the United States of
America in immediately available funds.
This Note may be prepaid at the option of the Borrower as provided in
SECTION 2.03(c) of the Loan Agreement and must be prepaid as provided in SECTION
2.03(a) of the Loan Agreement.
<PAGE>
THE LOAN AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Upon the occurrence of any one or more of certain Events of Default,
the unpaid balance of the principal amount of this Note may become, and upon the
occurrence and continuation of any one or more of certain other Events of
Default, such unpaid balance may be declared to be, due and payable in the
manner, upon the conditions and with the effect provided in the Loan Agreement.
No reference herein to the Loan Agreement and no provisions of this
Note, the Loan Agreement or the other Loan Documents shall alter or impair the
obligation of the Borrower, which is absolute and unconditional, to pay the
principal of and interest on this Note at the place, at the respective times,
and in the currency herein prescribed.
The Borrower promises to pay all costs and expenses, including
reasonable attorneys' fees and disbursements incurred in the collection and
enforcement of this Note or any appeal of a judgment rendered thereon all in
accordance with the provisions of the Loan Agreement. The Borrower hereby
waives diligence, presentment, protest, demand and notice of every kind except
as required pursuant to the Loan Agreement and to the full extent permitted by
law the right to plead any statute of limitations as a defense to any demands
hereunder.
This Note is secured and reference is made to the Loan Documents for
the terms and conditions governing the collateral security for the Obligations
of the Borrower hereunder.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed
and delivered by its duly authorized officer, as of the day and year and at the
place first above written.
ATLANTIC AUTO FUNDING CORPORATION
By_____________________________
Name:
Title:
<PAGE>
Execution Copy
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT ("Agreement") is executed as of this 28th day of
June, 1995 by United Auto Group, Inc., a Delaware corporation ("UAG") in favor
of Atlantic Auto Funding Corporation, a Delaware corporation ("AFC") (AFC and
its respective successors and assigns are referred to herein as the "AFC
Parties").
PRELIMINARY STATEMENTS
1. AFC and Atlantic Auto Finance Corporation, a Delaware corporation
("Atlantic") have executed that certain Receivables Purchase Agreement of even
date herewith (the "AAFC Purchase Agreement") pursuant to which AFC may, from
time to time, purchase Eligible Receivables from Atlantic;
2. Atlantic is a subsidiary of UAG; and
3. It is a condition precedent to the initial Purchase by AFC under
the AAFC Purchase Agreement that UAG execute this Agreement and deliver it to
AFC.
4. It is intended by the parties hereto that this Agreement not
create any recourse against Atlantic or UAG for the payment of any uncollectible
Purchased Receivable.
In consideration of the execution of the AAFC Purchase Agreement by
AFC, and for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged by UAG, UAG agrees as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 DEFINITIONS. Unless otherwise defined in this Agreement,
all defined terms used in this Agreement, including the Preliminary Statements
hereof, shall have the meanings ascribed to such terms in the AAFC Purchase
Agreement.
ARTICLE II.
PERFORMANCE SUPPORT OBLIGATION
SECTION 2.1 PERFORMANCE SUPPORT OBLIGATION. UAG hereby
unconditionally and irrevocably guarantees for the benefit of each of the AFC
Parties, the due and punctual performance, observance and payment by Atlantic
and its respective successors
<PAGE>
and assigns of all of the terms, covenants, conditions, agreements, undertakings
and obligations on the part of Atlantic (whether individually or as Servicer or
otherwise) to be paid, performed or observed under Sections 2.02, 2.03, 2.04,
2.05, 3.03, 4.01 and 8.06 and Articles V, VI and VII of the AAFC Purchase
Agreement (all such terms, covenants, conditions, agreements, undertakings and
obligations on the part of Atlantic to be paid, performed or observed being
collectively called the "Atlantic Obligations"); PROVIDED, HOWEVER, for purposes
of this Agreement, the "Atlantic Obligations" shall not include (a) any
obligation of Atlantic under Section 7.02(i) of the AAFC Purchase Agreement to
repurchase any Purchased Receivable if the request to make such repurchase
occurs more than 12 months after the breach of a representation and warranty as
described in such Section 7.02(i) except there shall be no such time limit
applicable with respect to any breach of the representation and warranty
contained in Section 4.01(g) of the AAFC Purchase Agreement and (b) Atlantic's
obligations to repurchase any Purchased Receivable under Section 7.02(ii) or
(iii) of the AAFC Purchase Agreement. In the event that Atlantic shall fail in
any manner whatsoever, to perform, observe, or pay any of the Atlantic
Obligations when the same shall be required to be performed, observed or paid,
then UAG will itself duly and punctually perform, observe and pay, or cause to
be duly and punctually performed, observed or paid the Atlantic Obligations, and
it shall not be a condition to the accrual of the obligation of UAG hereunder to
perform, observe or pay any Atlantic Obligation (or to cause the same to be
performed, observed or paid) that any AFC Party shall have first made any
request of or demand upon or given any notice to UAG or to Atlantic or its
respective successors and assigns or have initiated any action or proceeding
against UAG or Atlantic or any of their respective successors and assigns in
respect thereof. Any AFC Party may proceed to enforce the obligations of UAG
under this Section 2.1 without first pursuing or exhausting any right or remedy
which any AFC Party may have against Atlantic, any other Person, the Purchased
Receivables or any other property. Each AFC Party hereby acknowledges that the
Atlantic Obligations do not (i) include any obligation of Atlantic to repurchase
the Purchased Receivables acquired by AFC under the AAFC Purchase Agreement,
except as described in Section 7.02 of the AAFC Purchase Agreement or (ii)
create recourse against Atlantic or UAG for the payment of any uncollectible
Purchased Receivable.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF UAG. UAG hereby
represents and warrants as follows:
i) UAG is a corporation duly organized, validly existing and in good
standing under the laws of the State of
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Delaware and is duly qualified to do business, and in good standing, in every
jurisdiction where the nature of its business requires it to be so qualified.
(ii) The execution, delivery and performance by UAG of this
Agreement and the other instruments and documents to be delivered
hereunder, and the transactions contemplated hereby, are within UAG's
corporate powers, have been duly authorized by all necessary corporate
action, do not contravene (A) UAG's charter or by-laws, (B) any law, rule
or regulation applicable to UAG, (C) any contractual restriction contained
in any indenture, loan or credit agreement, lease, mortgage, security
agreement, bond, note or other agreement or instrument binding on UAG or
its property or (D) any order, writ, judgment, award, injunction or decree
binding on UAG or its property, and do no result in or require the creation
of any Lien upon or with respect to any of its properties.
(iii) This Agreement has been duly executed and delivered on
behalf of UAG and is the legal, valid and binding agreement of UAG
enforceable against UAG in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization and other similar
laws of general applicability relating to or affecting creditor creditor's
rights and general principles of equity.
(iv) UAG is the registered and beneficial owner of each class of
the issued and outstanding capital stock of Atlantic.
ARTICLE IV.
COVENANTS
SECTION 4.1. REPORTING COVENANTS. UAG covenants and agrees that,
until this Agreement is terminated pursuant to Section 5.7, UAG will deliver to
AFC:
(a) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of UAG, a
consolidated balance sheet of UAG and its consolidated Subsidiaries as at the
end of such quarter and the related consolidated statements of income and
retained earnings of UAG and its consolidated Subsidiaries for such quarter and
the then elapsed portion of the fiscal year, certified by the chief financial
officer or the chief accounting officer of UAG; and
(b). as soon as available and in any event within 90 days after the
end of each fiscal year of UAG, a copy of the consolidated balance sheets of UAG
and its consolidated Subsidiaries as of the end of such year and the related
consolidated statements of income and retained earnings of UAG
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<PAGE>
and its consolidated Subsidiaries for such year each reported on by nationally
recognized public accountants.
SECTION 4.2 STOCK OWNERSHIP AND MERGER RESTRICTIONS. UAG
covenants and agrees that, until this Agreement is terminated pursuant to
Section 5.7, UAG will continue to be the direct or indirect beneficial owner of
each class of the issued and outstanding capital stock of Atlantic (except for
such capital stock owned by management of Atlantic). UAG shall not merge or
consolidate with any Person unless (i) UAG shall be the surviving entity of any
such merger or consolidation or (ii) such surviving entity expressly assumes the
obligations of UAG hereunder.
SECTION 4.3. DISTRIBUTIONS. UAG covenants and agrees that, until
this Agreement is terminated pursuant to Section 5.7, UAG will not pay any
dividend or make any distribution, directly or indirectly, on account of any
shares of any class of its capital stock now or hereafter outstanding (any of
the foregoing being a "Restricted Payment"), except UAG may make Restricted
Payments on a pro rata basis to all of its shareholders which, in the aggregate,
do not exceed fifty percent (50%) of UAG's cumulative net income during the
period commencing with the fiscal year beginning on January 1, 1995 through the
date of the most recent consolidated statements of income and retained earnings
delivered pursuant to Section 4.1(b) above.
ARTICLE V.
MISCELLANEOUS
SECTION 5.1. VALIDITY OF OBLIGATIONS. UAG agrees that its
obligations under this Agreement shall be unconditional, irrespective of (i) the
validity, enforceability, avoidance, subordination, discharge, or disaffirmance
by any Person (including a trustee in bankruptcy) of the Atlantic Obligations,
any Purchased Receivable or the AAFC Purchase Agreement, (ii) the absence of any
attempt to collect any Purchased Receivables from the Obligor related thereto or
any guarantor, or to collect the Atlantic Obligations from Atlantic or any other
Person, (iii) the waiver, consent, extension, forbearance or granting of any
indulgence by any of the AFC Parties with respect to any provision of any
instrument evidencing the Atlantic Obligations or any Purchased Receivable, (iv)
any change of the time, manner or place of performance of, or in any other term
of any of the Atlantic Obligations or any Purchased Receivable, including
without limitation, any amendment to or modification of the AAFC Purchase
Agreement, (v) any law, regulation or order of any jurisdiction affecting any
term of any of the Atlantic Obligations, any Purchased Receivable, or rights of
any of the AFC Parties with respect thereto, (vi) the failure by any of the AFC
Parties to take any steps to perfect and maintain perfected its respective
interest in any Purchased Receivable or other property acquired by any of the
AFC Parties from Atlantic or in
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<PAGE>
any security or collateral related to the Atlantic Obligations, (vii) any
exchange or release of any Purchased Receivable or other property acquired by
the AFC Parties from Atlantic, (viii) any failure to obtain any authorization or
approval from or other action by or to notify or file with, any governmental
authority or regulatory body required in connection with the performance of the
obligations hereunder by UAG or (ix) any impossibility or impracticability of
performance, illegality, force majeure, any act of government, or other
circumstances which might constitute a default available to, or a discharge of
Atlantic or UAG, or any other circumstance, event or happening whatsoever
whether foreseen or unforeseen and whether similar to or dissimilar to anything
referred to above. UAG further agrees that its obligations under this Agreement
shall not be limited by any valuation, estimation or disallowance made in
connection with any proceedings involving Atlantic filed under the Bankruptcy
Code, whether pursuant to Section 502 of the Bankruptcy Code or any other
Section thereof. UAG further agrees that none of the AFC Parties shall be under
any obligation to marshall any assets in favor of or against or in payment of
any or all of the Atlantic Obligations. UAG further agrees that, to the extent
that Atlantic makes a payment or payments to any of the AFC Parties, which
payment or payments (or any part thereof) are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to
Atlantic, its estate, trustee or receiver or any other party, including, without
limitation, UAG, under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such payment or repayment, the Atlantic
Obligation or part thereof which had been paid, reduced or satisfied by such
amount shall be reinstated and continued in full force and effect as of the date
such initial payment, reduction or satisfaction occurred. UAG waives all set-
offs and counterclaims and all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor and notices of
acceptance of this Agreement. UAG's obligations under this Agreement shall not
be limited if the AFC Parties are precluded for any reason (including without
limitation, the application of the automatic stay under Section 362 of the
Bankruptcy Code) from enforcing or exercising any right or remedy with respect
to the Atlantic Obligations, and UAG shall pay to the AFC Parties, upon demand,
the amount of the Atlantic Obligations that would otherwise have been due and
payable had such rights and remedies been permitted to be exercised.
SECTION 5.2. IRREVOCABILITY. UAG agrees that its obligations
under this Agreement shall be irrevocable. In the event that under applicable
law (notwithstanding UAG's agreement regarding the irrevocable nature of its
obligations hereunder), UAG shall have the right to revoke this Agreement, this
Agreement shall continue in full force and effect until a written revocation
hereof specifically referring hereto, signed by UAG is actually received by AFC
at [address]. Any such revocation shall not affect the right of any of the AFC
Parties to enforce their
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<PAGE>
respective rights under this Agreement with respect to (i) any Atlantic
Obligation (including any Atlantic Obligation that is contingent or unmatured)
which arose on or prior to the date the aforementioned revocation was received
by AFC or (ii) any Purchased Receivable which was a Purchased Receivable on the
date the aforementioned revocation was received by AFC. If any of the AFC
Parties acquire Purchased Receivables or take other action in reliance on this
Agreement after any such revocation by UAG but prior to the receipt by AFC of
said written notice, the rights of the AFC Parties with respect thereto shall be
the same as if such revocation had not occurred. Without limiting the
foregoing, this Agreement may not be revoked at any time on or after the
Termination Date.
SECTION 5.3. WAIVER. UAG hereby waives promptness, diligence,
notice of acceptance, notice of default by Atlantic, notice of the incurrence of
any Atlantic Obligation and any other notice with respect to any of the Atlantic
Obligations and this Agreement, the AAFC Purchase Agreement, and any other
document related thereto and any requirement that the AFC Parties exhaust any
right or take any action against Atlantic, any other Person or any property.
UAG warrants to the AFC Parties that it has adequate means to obtain from
Atlantic on a continuing basis, all information concerning the financial
condition of Atlantic and the collectibility of the Purchased Receivables, and
that is it not relying on the AFC Parties to provide such information either now
or in the future.
SECTION 5.4. SUBROGATION. UAG will not exercise or assert any
rights which it may acquire by way of subrogation under this Agreement unless
and until all of the Atlantic Obligations shall have been paid and performed in
full and the Termination Date shall have occurred under the AAFC Purchase
Agreement. If any payment shall be made to UAG on account of any subrogation
rights at any time prior to the occurrence of the events described in the
preceding sentence, each and every amount so paid will be held in trust for the
benefit of the AFC Parties and forthwith be paid to AFC to be credited and
applied to the Atlantic Obligations to the extent then unsatisfied, in
accordance with the terms of the AAFC Purchase Agreement or any document
delivered in connection therewith.
SECTION 5.5 COSTS AND EXPENSES. UAG shall pay all reasonable
costs and expenses including, without limitation, all court costs and reasonable
attorneys' fees and expenses paid or incurred by any of the AFC Parties in
connection with (a) the collection of all or any part of the obligations of UAG
hereunder, (b) the enforcement of any term or provision of this Agreement or (c)
the prosecution or defense of any action by or against any of the AFC Parties in
connection with this Agreement or the AAFC Purchase Agreement, whether involving
Atlantic, UAG or any other Person including a trustee in bankruptcy.
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<PAGE>
SECTION 5.6. BINDING EFFECT; ASSIGNABILITY. This Agreement shall
be binding upon UAG and upon the successors and assigns of UAG and shall inure
to the benefit of the successors and assigns of the AFC Parties; all references
herein to UAG and to Atlantic shall be deemed to include their respective
successors and assigns. The successors and assigns of Atlantic shall include,
without limitation, a receiver, trustee or debtor-in-possession of or for
Atlantic. UAG may not assign any of its rights and obligations hereunder or any
interest herein without the prior written consent of AFC, such consent not to be
unreasonably withheld. AFC may assign at any time its rights and obligations
hereunder and interests herein to any other Person without the consent of UAG or
Atlantic. UAG agrees that any assignee of AFC (to the extent of its interest so
assigned) shall have the right to enforce this Agreement and to exercise
directly all of AFC's rights and remedies under this Agreement, and UAG agrees
to cooperate fully with any such assignee in the exercise of such rights and
remedies. All references to the singular shall be deemed to include the plural
where the context so requires.
SECTION 5.7. TERMINATION. This Agreement shall terminate after
the latest to occur of (i) the date on which all the Atlantic Obligations are
paid and/or performed in full, (ii) the Termination Date under the AAFC Purchase
Agreement, and (iii) the date on which UAG has satisfied in full its obligations
hereunder.
SECTION 5.8. INTEGRATION; CONDITIONS. This Agreement contains a
final and complete integration of all prior expressions of the parties hereto
with respect to the subject matter hereof, superseding all prior oral or written
understandings. No course of dealing, course of performance or trade usage and
no parol evidence shall be used to supplement or modify any term hereof. This
Agreement is fully effective as of the date set forth above.
SECTION 5.9. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT
SHALL BE INTERPRETED AND THE RIGHTS AND REMEDIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK. UAG HEREBY AGREES TO THE
JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK, AND
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO UAG AT THE
ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN
THE U.S. MAILS, POSTAGE PREPAID. UAG HEREBY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE BETWEEN UAG AND ANY AFC PARTY ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
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BENCH TRIAL WITHOUT A JURTY. UAG HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 5.9 SHALL AFFECT THE RIGHT OF
ANY AFC PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF ANY AFC PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST UAG
OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 5.10. SEVERABILITY. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under such law, such provision shall be ineffective to the extent
of such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
SECTION 5.11. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed by UAG as
of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ Arthur J. Rawl
---------------------------
Name: Arthur J. Rawl
Title: Exec V.P. & CFO
375 Park Avenue, 22nd Floor
New York, New York 10152
Acknowledged and accepted
this 28th day of June, 1995.
ATLANTIC AUTO FUNDING CORPORATION
By: /S/ SUZANNE A. O'CONNOR
-----------------------------------
Name: Suzanne A. O'Connor
Title: Vice President, Treasurer
800 Perinton Hills Office Park
Fairport, New York 14450
Telecopy No.: 716-421-1954
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<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
PURCHASE AGREEMENT
between
ATLANTIC AUTO FINANCE CORPORATION,
as Originator,
and
ATLANTIC AUTO SECOND FUNDING CORPORATION,
as Buyer,
Dated as of June 14, 1996
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Computation of Time Periods . . . . . . . . . . . . . . . . . 14
ARTICLE II
TRANSFERS AND SETTLEMENTS
SECTION 2.1. General Terms . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.2. Purchases from the Originator . . . . . . . . . . . . . . . . 15
SECTION 2.3. Transfers and Assignments . . . . . . . . . . . . . . . . . . 15
SECTION 2.4. Protection of Ownership of the Buyer. . . . . . . . . . . . . 17
SECTION 2.5. Optional Retransfer; Retransfer of Liquidated
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.6. Mandatory Repurchase Under Certain Circumstances. . . . . . . 18
SECTION 2.7. Dilution. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.8. Transfers by Buyer. . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.9. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of Originator. . . . . . . . . 19
SECTION 3.2. Representations and Warranties of the Originator
With Respect to Each Sale of Receivables. . . . . . . . . . . 22
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Closing . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.2. Conditions to Purchases . . . . . . . . . . . . . . . . . . . 26
SECTION 4.3. Effect of Payment of Purchase Price . . . . . . . . . . . . . 27
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ARTICLE V
COVENANTS
SECTION 5.1. Covenants of the Originator . . . . . . . . . . . . . . . . . 28
SECTION 5.2. Negative Covenants of the Originator. . . . . . . . . . . . . 33
ARTICLE VI
INDEMNIFICATION
SECTION 6.1. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.2. Tax Indemnification . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.3. Additional Costs. . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 6.4. Other Costs and Expenses. . . . . . . . . . . . . . . . . . . 38
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.2. Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.4. Governing Law; Submission to Jurisdiction;
Integration . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7.5. Severability; Counterparts, Waiver of Setoff. . . . . . . . . 40
SECTION 7.6. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7.7. Waiver of Confidentiality . . . . . . . . . . . . . . . . . . 40
Exhibit A Form of Purchase Notice
Exhibit B Schedule of Litigation
Exhibit C Schedule of Location of Records
Exhibit D VSI Policy
Exhibit E Form of Compliance Certificate
Exhibit F Schedule of Corporate Names, Trade Names or Assumed Names
Exhibit G Permitted Lockbox Banks and Permitted Lockboxes
Exhibit H Credit and Collection Policy
Exhibit I Form of Subordinated Note
Schedule 1 Schedule of Receivables
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PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of June 14, 1996 (as amended,
supplemented or otherwise modified and in effect from time to time, this
"AGREEMENT"), by and between ATLANTIC AUTO SECOND FUNDING CORPORATION, a
Delaware corporation, as buyer (the "BUYER") and ATLANTIC AUTO FINANCE
CORPORATION, a Delaware corporation, as originator (the "ORIGINATOR").
R E C I T A L S :
- - - - - - - -
WHEREAS, subject to the terms and conditions of this Agreement, the
Originator desires to sell from time to time to the Buyer, and the Buyer desires
to purchase from time to time from the Originator certain retail automotive
installment sales contracts and related property and proceeds (the
"Receivables"), subject to the terms and conditions of this Agreement;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"ADDITIONAL COSTS" shall have the meaning specified in Section 6.3(a).
"ADVERSE CLAIM" shall mean a Lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, another Person
or a Subsidiary of such other Person. A Person shall be deemed to control
another Person if the controlling Person owns, directly or indirectly, 10% or
more of any class of voting securities of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of
stock or otherwise.
"AMOUNT FINANCED" with respect to a Receivable means the amount
advanced under the Receivable toward the purchase price of the Financed Vehicle
and any related costs, exclusive of
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any amounts allocable to the premium for physical damage insurance force-placed
by the Originator covering the Financed Vehicle and of prepaid Dealer reserves
and other marketing expenses.
"ANNUAL PERCENTAGE RATE" or "APR" of a Receivable means the annual
rate of Finance Charges stated in the Receivable.
"BANK" shall mean Morgan Guaranty Trust Company of New York, a New
York banking corporation, and its successors and assigns.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which banking institutions or trust companies in The City of New
York are authorized or obligated by law, executive order or governmental decree
to be closed.
"CLOSING DATE" shall mean June 14, 1996.
"COLLECTIONS" shall mean, with respect to each Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all recoveries and cash proceeds of Related Security with respect to
such Receivable, Repurchase Amounts and proceeds received under the VSI Policy.
"CONTRACT" shall mean, with respect to any Receivable, any and all
instruments, agreements, invoices or other writings pursuant to which such
Receivable arises, or which evidences such Receivable including, but not limited
to, the retail installment sales contracts related thereto.
"CONTRACT FILE" shall mean, with respect to each Receivable, the
original Contract, either a copy of the application to the appropriate state
authorities for a Title to the related Financed Vehicle or a standard assurance
in the form commonly used in the industry relating to the provision of the Title
and when issued by the appropriate state authorities, the related Title (but
only to the extent that Title documents are required under applicable state law
to be held by a secured party in order to perfect such secured party's security
interest in the related Financed Vehicle), all original instruments modifying
the terms and conditions of the Receivable and the original endorsements or
assignments of such Contract.
"CREDIT AND COLLECTION POLICY" shall mean the Originator's credit and
collection policies and practices relating to the Contracts and the Receivables
existing on the date hereof in the form of Exhibit H hereto, as the same may
from
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time to time be amended, supplemented or otherwise modified in the ordinary
course of the Originator's business.
"CUSTODIAL AGREEMENT" shall mean the Custodial Agreement dated as of
June 14, 1996, by and among the Originator, the Buyer, the Bank and the
Custodian, as the same may be amended from time to time.
"CUSTODIAN" shall mean Safesite National Business Records Management,
Inc., a Delaware corporation, and its successors and assigns.
"CUSTODIAN CONFIRMATION" means the Custodian's certificate in the form
of EXHIBIT A to the Custodial Agreement confirming that it has received (i) an
itemized schedule of the Receivables (which shall also briefly describe each
related Contract File) and (ii) the Contract File with respect to each such
Receivable.
"DEALER" means the dealer who sold a Financed Vehicle and who
originated and assigned the respective Receivable to the Originator under an
existing agreement between such Dealer and the Originator.
"DEALER RECOURSE" shall mean, with respect to a Receivable, all
recourse rights against the Dealer which originated the Receivable and any
successor Dealer.
"DOLLARS" or "$" shall mean the lawful currency of the United States
of America.
"ELIGIBLE RECEIVABLE" shall mean, on the applicable Purchase Date on
which ownership thereof is first acquired by the Buyer, a Receivable:
(i) (a) which shall have been originated in the United States of
America to an Obligor domiciled in the United States by a Dealer for the
retail sale of a Financed Vehicle in the ordinary course of such Dealer's
business, shall have been fully and properly executed by the parties
thereto, shall have been purchased by the Originator from such Dealer under
an existing dealer agreement which agreement shall be consistent with the
Originator's customary business practices and shall be in a form acceptable
to the Buyer, which Receivable in turn shall have been validly assigned by
such Dealer to the Originator, and then shall be transferred and assigned
to the Buyer, (b) which shall have created or shall create a valid,
subsisting, and enforceable first priority security interest in favor of
the Originator in the Financed Vehicle, which in turn shall be assigned to
the Buyer, (c) which shall contain customary and enforceable
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provisions such that the rights and remedies of the holder thereof shall be
adequate for the realization against the collateral of the benefits of the
security and (d) which arises under a Contract which shall provide for
level monthly payments (PROVIDED that the payment in the first or last
month in the life of the Receivable may be minimally different from the
level payment) that fully amortize the financed amount over no greater than
66 payments;
(ii) with respect to which the Originator is the lienholder of record
on the related Title;
(iii) as to which the Contract File was delivered to the Custodian
prior to the purchase thereof by the Buyer from the Originator, except that
if the original certificate of title shall have been applied for and not
yet received at the time of such purchase, then such certificate shall have
been delivered to the Custodian within 180 days of such purchase;
(iv) as to which only one original executed Contract exists;
(v) as to which the related Obligor is not the United States of
America or any state or any agency, department, subdivision or
instrumentality thereof;
(vi) which shall not have been originated in, or shall be subject to
the laws of, any jurisdiction under which the transfer of such Receivable
under this Agreement shall be unlawful, void or voidable;
(vii) which is denominated and payable only in Dollars in the United
States of America;
(viii) which is less than 30 days delinquent;
(ix) which when transferred by the Originator to the Buyer was
selected at random from the Originator's retail installment sale contracts
at the time of such transfer, but conformed to certain requirements set
forth herein or otherwise agreed by the Originator and the Buyer;
(x) which is "chattel paper" within the meaning of Section 9-105 of
the Relevant UCC;
(xi) which arises under a Contract which, together with such
Receivable, (A) is in full force and effect and constitutes the legal,
valid and binding obligation of the related Obligor, enforceable against
such Obligor in
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accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally, (B) is evidenced by only one original executed
copy, (C) is not the subject of any rescission, setoff, counterclaim or
other defense and (D) shall not have been satisfied, subordinated, or
rescinded;
(xii) which arises under a Contract which (A) does not require the
Obligor under such Contract to consent to the transfer of the rights and
duties of the Originator under such Contract and (B) does not contain a
confidentiality provision that purports to restrict the ability of the
Buyer to exercise its rights under this Agreement, including, without
limitation, its right to review the Contract;
(xiii) no provision of which has been waived by the Originator,
except in accordance with the Credit and Collection Policy;
(xiv) which, together with the Contract related thereto, complied on
the date of its origination and now complies in all material respects with
all requirements of applicable Federal, state and local laws and
regulations thereunder, including, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal
Trade Commission Act, the Magnuson-Moss Warranty Act, Regulations B and Z
of the Federal Reserve Board, various state "lemon laws" designed to
prevent fraud in the sale of used vehicles and various state adaptations of
the National Consumer Act and of the Uniform Consumer Credit Code, and
other consumer credit laws and equal credit opportunity and disclosure
laws;
(xv) which satisfies in all material respects all applicable
requirements of the Credit and Collection Policy on the applicable Purchase
Date; and
(xvi) as to which the Originator shall be in full compliance in all
material respects with all of its obligations thereunder and under the
related Contract and any other agreements or instruments relating thereto;
PROVIDED that breach of any notice provision shall not be deemed to cause
this condition to be unsatisfied unless such breach causes the related
Contract to be unenforceable.
(xvii) which directs payment thereof to be sent to a Permitted
Lockbox;
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(xviii) which is owned solely by the Originator free and clear of all
Liens;
(xix) which, together with the aggregate of the Principal Balances of
other Receivables payable by the same Obligor or any party related to such
Obligor, does not exceed $150,000;
(xx) with respect to which the initial payment in respect thereof is
due no more than 3 months after the date on which the Receivable was
originated;
(xxi) with respect to which the Originator, in accordance with its
Credit and Collection Policy, has required that the Obligor has obtained an
Insurance Policy covering the Financed Vehicle;
(xxii) with respect to which all filings (including Relevant UCC
filings) necessary in any jurisdiction to give the Buyer a first priority
perfected ownership interest in such Receivable have been made;
(xxiii) with respect to which the Obligor was not noted in the
related Records as being (i) the subject of a bankruptcy, insolvency or
similar proceeding or (ii) if the Obligor is a natural person, deceased;
(xxiv) which, if at the time of the creation of such Receivable the
related Financed Vehicle was a used automobile or light-duty truck, such
Receivable, together with similar Eligible Receivables, shall not exceed
70% of the aggregate Principal Balance of Eligible Receivables transferred
to the Buyer hereunder; and
(xxv) which is covered under the VSI Policy.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and any rule or regulation issued
thereunder.
"ERISA AFFILIATE" means, with respect to the Originator, any Person
which is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Internal Revenue Code of which the Originator is a member, or
(ii) solely for the purposes of potential liability under Section 302(c)(11) of
ERISA and Section 412(c)(11) of the Internal Revenue Code and the lien created
under Section 302(f) of ERISA and Section 412(n) of the Internal Revenue Code,
described in Section 414(m) or (o) of the Internal Revenue Code of which the
Originator is a member.
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"EVENT OF TERMINATION" shall, with respect to the Originator, mean (i)
with respect to any Plan, a reportable event, as defined in Section 4043(b) of
ERISA, as to which the PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of
such event, or (ii) the withdrawal of the Originator or any ERISA Affiliate from
a Plan during a plan year in which it is a substantial employer, as defined in
Section 4043(b) of ERISA, or (iii) the failure by the Originator or any ERISA
Affiliate to meet the minimum funding standard of Section 412 of the Internal
Revenue Code or Section 302 of ERISA with respect to any Plan, including,
without limitation, the failure to make on or before its due date a required
installment under Section 412(m) of the Internal Revenue Code or Section 302(e)
of ERISA, or (iv) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Originator or any ERISA
Affiliate to terminate any Plan, or (v) the adoption of an amendment to any Plan
that pursuant to Section 401(a)(29) of the Internal Revenue Code or Section 307
of ERISA would result in the loss of tax-exempt status of the trust of which
such Plan is a part if the Originator or an ERISA Affiliate fails to timely
provide security to the Plan in accordance with the provisions of said Sections,
or (vi) the institution by the PBGC of proceedings under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan,
or (vii) the receipt by the Originator or any ERISA Affiliate of a notice from a
Multiemployer Plan that action of the type described in the previous clause (vi)
has been taken by the PBGC with respect to such Multiemployer Plan, or (viii)
the complete or partial withdrawal from a Multiemployer Plan by the Originator
or any ERISA Affiliate that results in liability under Section 4201 or 4204 of
ERISA (including the obligation to satisfy secondary liability as a result of a
purchaser default), or (ix) the receipt by the Originator or any ERISA Affiliate
of notice from a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA, or (x) any event or circumstance exists
which may reasonably be expected to constitute grounds for the Originator or any
ERISA Affiliate to incur liability under Title IV of ERISA or under Sections
412(c)(11) or 412(n) of the Internal Revenue Code with respect to any Plan.
"EXPENSE AND TAX-SHARING AGREEMENT" shall mean the Office Space,
Administrative and Office Support Services, and Tax Allocation Agreement dated
as of June 14, 1996, between the Originator and the Buyer.
"FACILITY DOCUMENTS" shall mean collectively, this Agreement, each
Supplemental Conveyance, the Transfer and Administration Agreement, the Lockbox
Agreement, the Custodial
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Agreement, the Support Agreement, the Expense and Tax-Sharing Agreement and all
other agreements, documents and instruments delivered pursuant thereto or in
connection therewith.
"FINANCE CHARGES" shall mean, with respect to a Contract, any finance,
interest or similar charges owing by the Obligor pursuant to such Contract.
"FINANCED VEHICLE" shall mean, with respect to a Receivable, the new
or used automobile or light-duty truck, together with all accessories thereto,
securing the related Obligor's indebtedness thereunder.
"INDEMNIFIED AMOUNTS" shall have the meaning specified in Section 6.1.
"INITIAL PURCHASE DATE" means the date the first Purchase is made
pursuant to this Agreement.
"INSURANCE POLICY" shall mean, with respect to a Receivable, any
insurance policy benefiting the holder of the Receivable providing loss or
physical damage, credit life, credit disability, theft, mechanical breakdown or
similar coverage with respect to the Financed Vehicle or the Obligor.
"LIEN" shall mean a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
which attach to the respective Receivable by operation of law as a result of any
act or omission by the related Obligor.
"LOCKBOX ACCOUNT" shall mean a demand deposit account identified on
Exhibit G hereto maintained with a Permitted Lockbox Bank pursuant to the
Lockbox Agreement for the purpose of depositing payments made by the Obligors or
such other account of which the Originator may have notified the Buyer from time
to time.
"LOCKBOX AGREEMENT" shall mean the agreement relating to lockbox
services in connection with a Permitted Lockbox and related Lockbox Account
which are in form and substance satisfactory to the Buyer, which have been
executed and delivered by the Originator to a Permitted Lockbox Bank.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to the Originator,
a material adverse effect on (i) the financial condition or operations of the
Originator and its Subsidiaries, taken as one enterprise, (ii) the ability of
the Originator to perform its obligations under this Agreement, (iii) the
legality, validity or enforceability of this Agreement, (iv) the Buyer's
ownership of the Receivables or (v) the collectibility of the
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Receivables or of any significant portion of the Receivables, other than, in the
case of clauses (i) through (v), such Material Adverse Effects which are the
direct result of actions or omissions of the Buyer.
"OBLIGOR" shall mean any Person obligated to make payments pursuant to
a Contract.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED LOCKBOX" shall mean a post office box identified on Exhibit
G hereto maintained by a Permitted Lockbox Bank for the purpose of receiving
payments made by the Obligors or such other post office box as the Originator
may identify to the Buyer from time to time.
"PERMITTED LOCKBOX BANK" shall mean a bank identified on Exhibit G
hereto or such other bank as the Originator may identify to the Buyer from time
to time.
"PERSON" shall mean any corporation (including a business trust),
natural person, firm, joint venture, joint stock company, partnership, trust,
unincorporated organization, enterprise, government or any department or agency
of any government.
"PLAN" means any employee benefit or other plan which is or was at any
time during the current year or immediately preceding five years established or
maintained by the Originator or any ERISA Affiliate and which is covered by
Title IV of ERISA, other than a Multiemployer Plan.
"POTENTIAL TERMINATION EVENT" shall mean an event which, but for the
lapse of time or the giving of notice or both, would constitute a Termination
Event.
"PRINCIPAL BALANCE" of a Receivable, as of the close of business on
the last day of a calendar month, means the Amount Financed MINUS the sum of (i)
that portion of all amounts paid by or on behalf of the related Obligor
allocable to principal using the Simple Interest Method, (ii) any payments made
by the Originator and allocable to principal pursuant to Section 2.7, and (iii)
any payment of the Repurchase Amount with respect to the Receivable allocable to
principal.
"PROCEEDS" shall mean "proceeds" as defined in Section 9-306(l) of the
Relevant UCC.
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"PURCHASE" means a purchase of Receivables, Related Security with
respect to such Receivables and Collections with respect thereto by the Buyer
from the Originator pursuant to Section 2.1 and 2.2.
"PURCHASE DATE" means the Initial Purchase Date and thereafter, each
Business Day on which a Purchase occurs.
"PURCHASE NOTICE" means a notice, in substantially the form of Exhibit
A, furnished by the Originator to the Buyer pursuant to Section 2.2.
"PURCHASE PRICE" shall have the meaning specified in Section 2.2(b)
hereof.
"PURCHASED ASSETS" shall mean, the Buyer's (a) ownership interest in
(i) each and every Receivable identified on Schedule 1 hereto, (ii) all Related
Security with respect to each such Receivable, (iii) all Collections with
respect thereto, and (iv) all Proceeds of the foregoing and (b) interest in the
Support Agreement.
"RECEIVABLE" shall mean any retail installment sale contract arising
out of or in connection with the sale of new or used automobiles or light-duty
trucks and includes the right of payment of any Finance Charges and other
obligations of the Obligor with respect thereto, originated by dealers or the
Originator and sold by the Originator to the Buyer hereunder, which shall appear
on Schedule 1 hereto (which Schedule 1 may be in the form of a computer file or
microfiche list), as amended or modified on each Purchase Date and otherwise
from time to time pursuant to the terms hereof.
"RECORDS" shall mean, with respect to each Receivable, all factory
invoices and work orders describing the related Financed Vehicle, the bill of
sale and guaranty of title, insurance policies, tax receipts, property and
casualty insurance policies or binders naming the Originator as loss payee or
additional named insured, as is appropriate, insurance premium receipts, ledger
sheets, payment records, insurance claim files and correspondence, all
documentation in connection with any modification, release, accommodation,
consigning or guaranty of the Receivable and all other documents and
instruments, including all books, records, files, tapes, correspondence and
other information or materials (including, without limitation, computer
programs, tapes, discs, punch cards, data processing software and related
property and rights) relating to the Receivable, the Contract, the Title and the
Financed Vehicle relating to the Receivable and this Agreement.
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"REGULATION D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be amended, supplemented or
otherwise modified and in effect from time to time.
"REGULATORY CHANGE" shall mean any change after the date of this
Agreement in United States (federal, state or municipal) or foreign laws or
regulations (including Regulation D) or the adoption or making after such date
of any interpretations, directives or requests applying to a class of banks
(including the Bank) of or under any United States (federal, state or municipal)
or foreign, laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"RELATED SECURITY" shall mean, with respect to any Receivable:
(i) all of the Originator's interest in the Financed Vehicle, and all
of the Originator's interest in all insurance contracts with respect
thereto;
(ii) all of the Originator's interest in all other security interest
or liens and property subject thereto from time to time, if any, purporting
to secure payment of the Contract related thereto, whether pursuant to such
Contract or otherwise, together with all financing statements signed by an
Obligor and security agreements describing any collateral securing such
Contract;
(iii) all of the Originator's interest in all guaranties, insurance
and other agreements or arrangements of whatever character from time to
time supporting or securing payment of such Receivable, whether pursuant to
the Contract related to such Receivable or otherwise;
(iv) all of the Originator's interest in Dealer Recourse and all
service contracts and other contracts and agreements associated with such
Receivable;
(v) all of the Originator's interest in Contract Files and all
Records related to such Receivable; and
(vi) all proceeds of the foregoing.
"RELEVANT UCC" shall mean the Uniform Commercial Code as in effect
from time to time in all applicable jurisdictions.
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"REPURCHASE AMOUNT" shall mean the amount described in Section 2.5(a)
and payable in accordance with Sections 2.5, 2.6 and 3.2 (the last paragraph
thereof).
"RESPONSIBLE OFFICER" shall mean, with respect to any Person, the
chief executive officer, principal financial officer, treasurer or controller of
such Person.
"SECTION 6.2 COSTS" shall have the meaning specified in Section 6.2.
"SECTION 6.3 COSTS" shall have the meaning specified in Section
6.3(c).
"SERVICER" shall mean, initially, the Originator, and any successor
Servicer designated pursuant to the Transfer and Administration Agreement.
"SIMPLE INTEREST METHOD" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the APR multiplied by
the unpaid principal balance, multiplied by the quotient obtained by calculating
the period of time elapsed since the preceding payment of interest was made and
dividing such period of time by 360, provided that each monthly period shall be
deemed to have 30 days.
"SUBORDINATED LOAN" shall have the meaning specified in Section 2.2(d)
hereof.
"SUBORDINATED NOTE" shall have the meaning specified in Section 2.2(d)
hereof.
"SUBSIDIARY" shall mean, for any Person, any corporation or other
business organization 50% or more of the outstanding voting securities of which
shall at the time be owned or controlled, directly or indirectly, by such Person
or by one or more such corporations or organizations or by such Person and one
or more such corporations or organizations, and any partnership of which such
Person or any such corporation or organization is a general partner.
"SUPPORT AGREEMENT" shall mean the Support Agreement dated as of
June 14, 1996, executed by UAG in favor of the Buyer, and any amendments or
modifications thereto.
"TERMINATION DATE" means the earliest of (i) that Business Day which
the Buyer designates as the Termination Date by notice to the Originator at
least five Business Days prior to such Business Day, (ii) the occurrence of a
Termination Event and
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(iii) June 13, 1997 ( or such other date as the Originator and the Buyer may
agree in writing).
"TERMINATION EVENT" means the occurrence of any of the following
events:
(a) The net worth of the Originator and its consolidated
subsidiaries, as set forth in the Originator's annual audited financial
statements, shall be less than $2,400,000;
(b) UAG shall fail to pay any principal of or premium or interest on
any indebtedness in a principal amount of at least $1,000,000 when the same
becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such indebtedness, or any other event shall occur or condition shall
exist under any agreement or instrument relating to any such indebtedness and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such even or condition is to
accelerate, or to permit the acceleration of, the maturity of such indebtedness;
PROVIDED, that a Termination Event shall not occur hereunder unless UAG receives
written notice that any of the foregoing events shall have occurred and fails to
cure the foregoing within 15 days following receipt of such notice;
(c) There shall occur a "Change in Control" (as defined below) of
UAG; "Change of Control" shall mean (i) the sale of all or substantially all of
the assets of UAG to an entity not controlled by UAG, (ii) prior to UAG's
"Qualified Public Offering" (as defined below), a reduction in the ownership by
the shareholders of the voting stock of UAG as of the date hereof (the "Initial
Shareholder Group") to less than a majority of UAG's outstanding voting stock,
or (iii) after the Qualified Public Offering, the ownership of another Person or
group of Persons of a greater number of shares of UAG's voting stock than owned
by the Initial Shareholder Group; "Qualified Public Offering" shall mean a
public offering of UAG's capital stock pursuant to which UAG receives gross
proceeds of $30,000,000 or more (when aggregated with all prior public
offerings) and has a market valuation in excess of $100,000,000;
(d) Both of Richard Harrison and Harry Hardy shall cease to be
actively involved in the day-to-day management of the Originator, except as a
result of death or illness;
(e) There shall occur any event which may be reasonably expected to
have a material adverse effect on the Originator or UAG or may be reasonably
expected to cause a
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material adverse change in the condition or prospects, financial condition or
business of the Originator or UAG; or
(f) There shall occur a breach of the Support Agreement by UAG.
"TITLE" means, with respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
registrar of titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Title"
shall mean only a certificate or notification issued to a secured party.
"TRANSFER AND ADMINISTRATION AGREEMENT" shall mean the Transfer and
Administration Agreement dated as of June 14, 1996 by and among the Originator,
the Buyer, as transferor, and the Bank, as transferee.
"UAG" shall mean United Auto Group, Inc., a Delaware corporation, and
its successors and assigns.
"VSI POLICY" means the vendors single interest physical damage
insurance policy maintained with respect to the Receivables, a copy of which is
attached hereto as EXHIBIT D.
SECTION 1.2. COMPUTATION OF TIME PERIODS. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding."
ARTICLE II
TRANSFERS AND SETTLEMENTS
SECTION 2.1. GENERAL TERMS. On the terms and conditions hereinafter
set forth, from the date the conditions precedent to the initial Purchase in
Section 4.1 are satisfied to the Termination Date, the Originator will sell to
the Buyer on each Purchase Date all right, title and interest of the Originator
in, to and under the Receivables which the Originator has determined to sell
hereunder, Related Security with respect to such Receivables and Collections
with respect thereto and the Buyer in its sole discretion may purchase such
Receivables, Related Security and Collections from the Originator. Nothing in
this Agreement shall be deemed to be or construed as a commitment by the Buyer
to purchase any Purchased Assets at any time.
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SECTION 2.2. PURCHASES FROM THE ORIGINATOR. (a) Each Purchase shall
be made on a Purchase Date, provided, that a Purchase Notice requesting such
Purchase is received by the Buyer by the close of business on such Purchase Date
and provided that all conditions to purchase specified in Section 4.2 are
satisfied. Each such Purchase Notice shall include a schedule of all
Receivables proposed to be sold by the Originator on such Purchase Date and
shall specify the Purchase Price therefor. The Buyer shall promptly thereafter
notify the Originator whether the Buyer has determined to purchase such
Receivables.
(b) The purchase price (the "PURCHASE PRICE") for the Receivables
listed in a Purchase Notice (together with the related Purchased Assets) payable
with respect to any Purchase Date shall be an amount equal to the aggregate
Principal Balance of such Receivables plus accrued Finance Charges on such
Receivables as of such date.
(c) Subject to paragraph (d) below, the Purchase Price for the
Purchased Assets sold by the Originator under this Agreement shall be payable in
full in cash by the Buyer, in each case on the Business Day following the date
of each such Purchase, except that the Buyer may, with respect to any Purchase,
offset against such Purchase Price any amounts owed by the Originator to the
Buyer hereunder and which remain unpaid. Subject to paragraph (d) below, on the
Business Day following the date of each such Purchase, the Buyer shall, upon
satisfaction of the applicable conditions set forth in Article IV, make
available to the Originator the Purchase Price in same day funds.
(d) If, on the Business Day following the date of any Purchase, the
Buyer has insufficient funds to pay in full the Purchase Price owed on such day,
then the amount of the difference between the Purchase Price and such available
funds shall, at option of the Originator (as evidenced by written notice by the
Originator to the Buyer on such date (which notice may be a standing
instruction)) be deemed to be (i) a capital contribution from the Originator to
the Buyer, (ii) a loan by the Originator to the Buyer (a "SUBORDINATED LOAN"),
evidenced by the Subordinated Note (the "SUBORDINATED NOTE") of the Buyer
substantially in the form attached hereto as Exhibit I or (iii) any combination
of capital contribution and Subordinated Loan. Any Subordinated Loan hereunder
shall be fully subordinated to every other obligation of the Buyer.
SECTION 2.3. TRANSFERS AND ASSIGNMENTS. The Originator hereby
assigns, transfers and conveys to the Buyer and its successors and assigns all
of the Originator's right, title, and interest, whether now owned or hereafter
acquired, in and to (i) the Receivables, (ii) the Related Security with respect
to such Receivables, (iii) all Collections, including all cash
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collections and other cash proceeds of the Receivables, exclusive of any amounts
allocable to the premium for physical damage insurance force-placed by the
Originator covering any related Financed Vehicle, (iv) all monies from time to
time on deposit in the Lockbox Accounts relating to the Receivables and (v) all
cash and non-cash proceeds of any of the foregoing. It is the intention of the
parties hereto that each Purchase of Receivables, Related Security and
Collections made hereunder shall constitute a "sale of chattel paper," as such
term is used in Article 9 of the UCC, which sales are absolute, irrevocable and
without recourse except as specifically provided herein and provide the Buyer
with the full benefits of ownership of the Receivables and such related
Purchased Assets. In the event that such assignment, transfer or conveyance is
deemed to constitute a pledge rather than an assignment of the aforementioned
property, the Originator does hereby grant to the Buyer a first priority
perfected security interest therein. The possession by the Buyer or its
transferee of notes and such other goods, letters of credit, advises of credit,
money, documents, chattel paper or certificated securities shall be deemed to be
"possession by the secured party," for purposes of perfecting the security
interest pursuant to the Relevant UCC (including, without limitation, Section
9-305 thereof). Notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed to be notifications to, or acknowledgments, receipts or
confirmations from, bailees or agents (as applicable) of the Buyer or its
transferee for the purpose of perfecting such security interest under applicable
laws. The foregoing conveyance does not constitute an assumption by the Buyer
or its successors and assigns of any obligations of the Originator to Obligors
or to any other Person in connection with Receivables or under any agreement or
instrument relating to the Receivables.
In connection with such transfer, the Originator agrees to record and
file, at its own expense, financing statements with respect to the Receivables
now existing and hereafter created for the transfer of chattel paper and general
intangibles (each as defined in Article 9 of the Relevant UCC) meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect the transfer and assignment of the interest in the
Receivables to the Buyer, and to deliver a file-stamped copy of such financing
statements or other evidence of such filing satisfactory to the Buyer on or
prior to the applicable Purchase Date.
In connection with such transfer, the Originator further agrees to
deliver to the Custodian the Contract Files relating to the Receivables.
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The Originator shall maintain its books and records so that such
records that refer to a Receivable shall indicate clearly that the Originator's
right, title and interest in such Receivable has been sold to the Buyer.
Indication of the Buyer's interest in a Receivable shall be deleted from or
modified on the Originator's records when, and only when, the Receivable shall
have been paid in full or the Buyer's interest in such Receivable shall have
been repurchased or repaid by the Originator hereunder. In addition, the
Originator shall maintain its computer systems so that the Originator's master
computer records (including any back-up archives) that refer to a Receivable
shall indicate clearly that such Receivable has been sold to the Buyer pursuant
to this Agreement and that an interest in such Receivable has been transferred
and assigned by the Buyer to the Bank. The Originator agrees to deliver to the
Buyer a list, which may be a computer file or microfiche list, containing a true
and complete schedule of all such Receivables, identified by account number and
by Principal Balance as of the origination date of such Receivable. Such file
or list shall be marked as the "Receivables Schedule" and Schedule 1 to this
Agreement, delivered to the Buyer as confidential and proprietary, and is hereby
incorporated into and made a part of this Agreement.
SECTION 2.4. PROTECTION OF OWNERSHIP OF THE BUYER. The Originator
agrees that from time to time, at its expense, it will promptly execute and
deliver all instruments and documents and take all action that the Buyer may
reasonably request in order to perfect or protect the Purchased Assets or to
enable the Buyer to exercise or enforce any of its rights hereunder. Without
limiting the foregoing, the Originator will, upon the request of the Buyer, in
order to accurately reflect this transaction, execute and file such financing or
continuation statements or amendments thereto or assignments thereof (as
permitted pursuant to Section 7.6 hereof) as may be reasonably requested by the
Buyer and mark its master data processing records with a notation describing the
acquisition by the Buyer of the Purchased Assets, as the Buyer may reasonably
request. To the fullest extent permitted by applicable law, the Buyer shall be
permitted to sign and file continuation statements and amendments thereto and
assignments thereof without the Originator's signature in such cases where the
Originator is obligated hereunder to sign such statements, amendments or
assignments if, after written notice to the Originator, the Originator shall
have failed to sign such continuation statements, amendments or assignments
within ten (10) Business Days after receipt of such notice from the Buyer.
Carbon, photographic or other reproduction of this Agreement or any financing
statement shall be sufficient as a financing statement. The Originator shall
neither change its name, identity or corporate structure (within the meaning of
Section 9-402(7) of any applicable enactment of the Relevant UCC), nor relocate
its
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chief executive office or any office where Records are kept unless it shall
have: (i) given the Buyer at least fifteen (15) days' prior notice thereof and
(ii) delivered to the Buyer all financing statements, instruments and other
documents requested by the Buyer in connection with such change or relocation.
SECTION 2.5. OPTIONAL RETRANSFER; RETRANSFER OF LIQUIDATED
RECEIVABLES. (a) Subject to the next succeeding sentence, the Originator shall
have the right to repurchase all of the existing Receivables if, at any time,
the aggregate Principal Balance of the Receivables falls below $3,500,000 (or
such higher amount as the parties hereto may agree from time to time). The
Originator shall be entitled to effectuate such reconveyance on the 15th day of
each month (or if such 15th day is not a Business Day, the next succeeding
Business Day) provided prior written notice has been given to the Buyer at a
repurchase amount equal to the aggregate Principal Balance of the Receivables on
such repurchase date plus accrued and unpaid Finance Charges thereon through
such day (the "REPURCHASE AMOUNT").
(b) The Originator has the option, to be exercised in its sole and
absolute discretion, to repurchase any Liquidated Receivable (as defined in the
Transfer and Administration Agreement), on the 15th day of each month (or if
such 15th day is not a Business Day, the next succeeding Business Day) provided
prior written notice has been given to the Buyer by paying to the Buyer the
Repurchase Amount.
(c) If, on any day with respect to any Receivable which (i) has
become a Liquidated Receivable, as to which the Buyer has been paid the
Principal Balance with respect to such Liquidated Receivable or (ii) has been
repurchased by the Originator pursuant to Section 2.5(a) or (b), 2.6 or 3.2 (the
last paragraph thereof) or repaid in full pursuant to Section 2.7, then, in such
event and upon payment of all amounts due hereunder (if all Receivables have
been repurchased or repaired), the Buyer shall, on such day and at the expense
of the Originator, (i) retransfer to the Originator all of its right, title and
interest in, to and under such Receivable and all Related Security and
Collections with respect thereto, and all Proceeds of the foregoing and (ii)
execute any and all instruments, certificates and other documents reasonably
necessary to effect such retransfer.
SECTION 2.6. MANDATORY REPURCHASE UNDER CERTAIN CIRCUMSTANCES. (a)
The Originator shall repurchase from the Buyer all Receivables if at any time
upon written advice of counsel, the Buyer shall cease to have a first priority
perfected security interest in the Receivables, free and clear of any lien
(except for liens arising from or relating to the financial
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condition of the Obligor), within three days of notice thereof by the Buyer. The
Repurchase Amount shall be paid by the Originator to the Buyer in connection
with such repurchase.
(b) The Originator shall repurchase from the Buyer any Receivables as
to which the Buyer has not received a Custodian Confirmation within fifteen (15)
Business Days of the Purchase Date on which such Receivable was sold to the
Buyer hereunder, or the Settlement Date next following receipt of notice of
failure to receive such Custodian Confirmation, at the Repurchase Amount.
SECTION 2.7. DILUTION. If the Principal Balance of a Receivable is
either (i) reduced or cancelled as a result of any (a) refunded item included in
the Amount Financed, such as extended warranty protection plan costs or
Insurance Policy premiums, (b) defective or rejected Financed Vehicle, goods or
services, any cash discount or of any adjustment by the Originator, or (ii)
reduced or cancelled as a result of a set off in respect of any claim by any
Person (whether such claim arises out of the same or a related transaction or an
unrelated transaction), the Originator shall pay to the Buyer on such day the
amount of such reduction or, if such transferred Receivable is cancelled, the
amount of the Principal Balance thereof, together with the Finance Charges
accrued thereon through such day.
SECTION 2.8. TRANSFERS BY BUYER. The Originator acknowledges and
agrees that (a) the Buyer will, pursuant to the Transfer and Administration
Agreement, sell the Purchased Assets and assign its rights under this Agreement
to the Bank and (b) the representations and warranties contained in this
Agreement and the rights of the Buyer under this Agreement are intended to
benefit the Bank. The Originator hereby consents to all such sales and
assignments.
SECTION 2.9. FEES. Notwithstanding any limitation on recourse
contained in this Agreement, the Originator shall pay the Buyer the Commitment
Fees (as defined in the Transfer and Administration Agreement) as the same
become due and payable by the Buyer to the Bank pursuant to the Transfer and
Administration Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF ORIGINATOR. The
Originator represents and warrants to the Buyer on and as of the Closing Date
that:
(a) CORPORATE EXISTENCE AND POWER. The Originator is a corporation
duly organized, validly existing and in good standing under the laws of the
State of its incorporation, and has all corporate power and all governmental
licenses, authorizations, consents and approvals required to carry on its
business relating to the Originator's purchasing and selling of receivables
relating to sales of automobiles and light-duty trucks in each jurisdiction in
which its business is now conducted.
(b) DUE QUALIFICATION. The Originator shall be duly qualified to do
business as a foreign corporation in good standing, and shall have obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(c) CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION. The
execution, delivery and performance by the Originator of this Agreement and each
other Facility Document are within the Originator's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official (except as
contemplated by Section 2.4), and do not contravene or violate, or constitute a
default under, any provision of applicable law or to the best of Originator's
knowledge any order rule, or regulation applicable to the Originator or of the
Certificate of Incorporation or Bylaws of the Originator or of any agreement of
a material nature, judgment, injunction, order, decree or other instrument
binding upon the Originator or result in the creation or imposition of any lien
on assets of the Originator (except as contemplated by Section 2.4). The
Originator has obtained all approvals and releases of security interests from
its creditors as are necessary to sell, transfer and assign the Purchased Assets
to the Buyer hereunder.
(d) BINDING EFFECT. This Agreement and the other Facility Documents
constitute the legal, valid and binding obligations of the Originator,
enforceable against the Originator in accordance with their respective terms,
subject to the effect of bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally.
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(e) ACCURACY OF INFORMATION. All information heretofore furnished by
the Originator for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and such other information hereafter
furnished by the Originator to the Buyer will be, true and accurate in every
material respect, on the date such information is stated or certified.
(f) ACTIONS, SUITS. Except as set forth in Exhibit B, there are no
actions, suits or proceedings pending, or to the knowledge of the Originator
threatened, against or affecting the Originator or their respective properties,
in or before any court, arbitrator or other body, which (i) may have a Material
Adverse Effect, (ii) assert the invalidity of this Agreement, any of the other
Facility Documents or any material amount of Receivables or (iii) seek to
prevent the consummation of the transactions contemplated hereby or thereby.
(g) PLACE OF BUSINESS. The chief place of business and chief
executive office of the Originator are located at 800 Perinton Hills Office
Park, Fairport, New York 14450, and the offices where the Originator keeps all
the Records, are located at the addresses described on Exhibit C or such other
locations notified to the Buyer in accordance with Section 2.4 in jurisdictions
where all action required by Section 2.4 has been taken and completed. Since
its incorporation, the Originator has not merged or consolidated with any other
corporation or been the subject of any bankruptcy proceeding.
(h) NAMES. Except as described in Exhibit F, the Originator has not
used any corporate names, tradenames or assumed names other than its name set
forth on the signature pages of this Agreement.
(i) USE OF PROCEEDS. No proceeds of any Purchase made hereunder will
be used for a purpose which violates, or would be inconsistent with regulations
G, T, U or X promulgated by the Board of Governors of the Federal Reserve System
from time to time.
(j) NO TERMINATION EVENT. No Termination Event or Potential
Termination Event has occurred on or before the Closing Date or Purchase Date,
as applicable.
(k) FINANCIAL CONDITION. The Originator is not insolvent or the
subject of any bankruptcy proceeding and the transfer of the Receivables on such
day will not be made in contemplation of the occurrence thereof.
(l) TAXES. The Originator has filed all income tax returns (federal,
state and local) and all other material tax
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returns which are required to be filed by them and has paid all taxes due
pursuant to such returns or pursuant to any assessment received by it except for
any such tax assessment, charge or levy the payment of which is being contested
in good faith and by proper proceedings.
(m) BOOKS AND RECORDS. The Originator has indicated on its books and
records (including any computer files), that the Purchased Assets are the
property of the Buyer.
(n) PERMITTED LOCKBOX BANKS. The names and addresses of all
Permitted Lockbox Banks, together with the numbers of all Lockbox Accounts at
such Permitted Lockbox Banks and the addresses of all related Permitted
Lockboxes, are specified in Exhibit G (or such other Permitted Lockbox Banks,
Lockbox Accounts and/or Permitted Lockboxes as have been notified by the
Originator to the Buyer).
(o) INVESTMENT COMPANY. The Originator is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(p) SEPARATE CORPORATE EXISTENCE. The Originator is entering into
the transactions contemplated by this Agreement in reliance on the Buyer's
identity as a separate legal entity from the Originator and each of its
Affiliates, and acknowledges that the Buyer and the other parties to the
Facility Documents are similarly entering into the transactions contemplated by
the other Facility Documents in reliance on the Buyer's identity as a separate
legal entity from the Originator and each such other Affiliate.
(q) NO FRAUDULENT CONVEYANCE. The transactions contemplated by this
Agreement and by each of the Facility Documents are being consummated by the
Originator in furtherance of the Originator's ordinary business, with no
contemplation of insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors. By its receipt of the Purchase Prices
hereunder and its ownership of the capital stock of the Buyer, the Originator
shall have received reasonably equivalent value for the Receivables sold or
otherwise conveyed to the Buyer under this Agreement.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR WITH
RESPECT TO EACH SALE OF RECEIVABLES. By selling Receivables to the Buyer on
each Purchase Date, the Originator represents and warrants to the Buyer as of
each such Purchase Date and only as to Receivables sold by the Originator to the
Buyer hereunder on such Purchase Date (in addition to its other
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representations and warranties contained herein or made pursuant hereto) that:
(a) STATEMENTS. All information set forth on the related Purchase
Notice relating to such Receivables is true and correct as of such date of
Purchase.
(b) ASSIGNMENT. This Agreement vests in the Buyer, all the right,
title and interest of the Originator in and to the Purchased Assets, and
constitutes a valid sale of the Purchased Assets, enforceable against, and
creating an interest prior in right to, all creditors of and purchasers from
such Originator, subject to all applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and general principles of equity,
regardless of whether enforcement is sought in a proceeding in equity or at law.
(c) GOOD TITLE; PERFECTION. The original Title for each Financed
Vehicle shows the Originator as the original secured party and as the holder of
a first priority security interest in the related Financed Vehicle. Immediately
prior to the transfer hereunder, the Originator shall be the legal and
beneficial owner of the Receivables and Related Security with respect thereto,
free and clear of any Adverse Claim and each Receivable shall be secured by a
first perfected security interest in the related Financed Vehicle in favor of
the Originator. This Agreement is effective to, and shall transfer to the
Buyer, a valid and perfected first priority ownership or security interest in
each Receivable and in the Related Security and Collections (to the extent
provided by Section 9-306 of the Relevant UCC) with respect thereto and the
documents entered into in connection therewith, free and clear of any Adverse
Claim (except as created by this Agreement). On or prior to the date hereof,
all financing statements and other documents required to be recorded or filed in
order to perfect and protect the Buyer's interest in the Purchased Assets
against all creditors of and transferees from the Originator will have been duly
filed in each filing office necessary for such purpose and all filing fees and
taxes, if any, payable in connection with such filings shall have been paid in
full. No effective financing statement and other instrument similar in effect
covering any Contract relating to a Receivable or the Related Security or
Collections with respect thereto is on file in any recording office, except
those filed pursuant to this Agreement or the Transfer and Administration
Agreement.
(d) ELIGIBLE RECEIVABLES. Each Receivable transferred to the Buyer
is an Eligible Receivable.
(e) BINDING EFFECT OF RECEIVABLES AND CONTRACT. Each Receivable and
related Contract constitutes a legal, valid and
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binding obligation of the related Obligor enforceable in accordance with its
terms against such Obligor subject to the effect of bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights and remedies generally and general principles of equity.
(f) CREDIT AND COLLECTION POLICY. The Originator has complied in all
material respects with the Credit and Collection Policy in regard to each
Receivable and related Contract. The Originator has not extended or modified
the terms of any Receivable or the related Contract except in accordance with
the Credit and Collection Policy.
(g) INSURANCE POLICIES. The Originator, in accordance with its
normal and customary procedures, shall have determined that the Obligor has
obtained or agreed to obtain an Insurance Policy covering the Financed Vehicle,
and the Obligor is required under the terms of its related Contract to maintain
such Insurance Policy.
(h) FILINGS. On or prior to each Purchase Date, all financing
statements and other documents required to be recorded or filed in order to
perfect and protect the Purchased Assets against all creditors of and purchasers
from the Originator and all other Persons whatsoever will have been duly filed
in each filing office necessary for such purpose and all filing fees and taxes,
if any, payable in connection with such filings shall have been paid in full.
(i) MAINTENANCE OF RECORDS. The Originator maintains at its chief
executive office or shall cause the Servicer to maintain at its chief executive
office the complete Records for each Receivable.
To the extent that any of the statements and representations made in
Section 3.1(e) or Section 3.2(a), (c), (d), (e), (f), (g) or (i) shall prove to
have been untrue or incorrect with respect to any Receivable at the time made
and, if the Originator is unable to remedy such untrue or incorrect statement or
representation within ten (10) days of the Originator's receipt of notice of
such untrue or incorrect statement or representation, such a finding shall not
result in a Termination Event hereunder, but the Originator shall reacquire such
Receivables from the Buyer for an amount equal to the Repurchase Amount at the
time of such repurchase, and (i) all such reconveyed Receivables shall no longer
constitute Receivables hereunder and (ii) following such reacquisition by the
Originator, the Buyer shall have no further remedy against the Originator with
respect to such reconveyed Receivables.
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ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. CONDITIONS TO CLOSING. On or prior to the Closing Date,
the Originator shall deliver to the Buyer the following documents and
instruments, all of which shall be in form and substance acceptable to the
Buyer:
(a) A Certificate of the Secretary of the Originator certifying (i)
the names and signatures of the officers authorized on its behalf to execute
this Agreement and any other documents to be delivered by it hereunder (on which
Certificate the Buyer may conclusively rely until such time as the Buyer shall
receive from the Originator a revised Certificate meeting the requirements of
this clause (a)(i)), (ii) a copy of the Articles of Incorporation of the
Originator certified as of the date reasonably near the date hereof by the
Secretary of State of the Originator's jurisdiction of incorporation, (iii) a
copy of the By-laws of the Originator, as amended, (iv) a copy of resolutions of
the Board of Directors (or any executive committee designated by the Board of
Directors) of the Originator approving the transactions contemplated hereby,
(v) a certificate as of a date reasonably near the date hereof of the Secretary
of State of the Originator's jurisdiction of incorporation certifying the
Originator's good standing under the laws of such jurisdiction, and
(vi) certificates of qualification as a foreign corporation issued by the
Secretary of State or other similar official of each jurisdiction where such
qualification is material to the transactions contemplated by this Agreement and
either certificates of the appropriate state official in each jurisdiction
specified by the Buyer or search reports by parties acceptable to the Buyer as
to the absence of any tax liens against the Originator under the laws of such
jurisdiction, each such certificate or report to be dated a date reasonably near
the date hereof;
(b) An incumbency and authorization certificate of the Originator in
such form as the Buyer may reasonably request;
(c) Acknowledgment copies of proper financing statements (Form
UCC-1), dated a date reasonably near to the date hereof naming the Originator as
the transferor (debtor) of the Receivables and the Buyer as transferee (secured
party) or other similar instruments or documents as may be necessary or in the
opinion of the Buyer desirable under the Relevant UCC or any comparable law to
perfect the Buyer's fractional undivided ownership interest in the Receivables;
(d) Acknowledgment copies of proper financing statements (Form
UCC-3), if any, necessary to release all
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security interests and other rights of any Person in the Receivables and Related
Security previously granted by the Originator;
(e) Certified copies of request for information or copies (Form
UCC-11) (or a similar search report certified by parties acceptable to the
Buyer) dated a date reasonably near the date hereof listing all effective
financing statements which name the Originator (under its present name or any
previous or "doing business" name) as transferor or debtor and which are filed
in jurisdictions in which the filings were made pursuant to item (c) above
together with copies of such financing statements (none of which shall cover any
Receivables or related Contracts);
(f) Favorable opinions of Nixon, Hargrave, Devans & Doyle, special
counsel for the Originator, addressed to the Originator and the Buyer as to
corporate enforceability, true sale, substantive consolidation, fraudulent
conveyance, perfection and tax matters, in forms reasonably acceptable to the
Buyer;
(g) The Purchase Notice for the initial Purchase hereunder;
(h) A form of Contract or Contracts;
(i) An executed copy of the Subordinated Note;
(j) Copies of Lockbox Agreements and any amendments thereto and all
other agreements previously given or entered into with each of the Permitted
Lockbox Banks; and
(k) An executed copy of the Custodial Agreement;
(l) An executed copy of the Expense and Tax-Sharing Agreement;
(m) The fully executed VSI Policy; and
(n) Such other documents as the Buyer may reasonably request.
SECTION 4.2. CONDITIONS TO PURCHASES. The Buyer's obligation to
Purchase on any Purchase Date pursuant to Sections 2.1 and 2.2 hereof shall be
subject to satisfaction of the following applicable conditions precedent:
(a) the truth and correctness of:
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(i) the representations and warranties in Section 3.1 hereof as of
such Purchase Date, as though made on and as of such date, and
(ii) the representations and warranties in Section 3.2 of this
Agreement, but only as to the Receivables sold hereunder by the Originator
to the Buyer on such Purchase Date;
(b) the requirement that no Termination Event or Potential
Termination Event shall exist or shall occur as a result of such purchase;
(c) the Originator shall have delivered to the Buyer any necessary
modifications or additions to Schedule I hereto;
(d) the Originator shall have delivered to the Buyer a Purchase
Notice;
(e) the Originator shall have taken any actions necessary or
advisable to maintain the Buyer's perfected security interest in the Purchased
Assets (including in the Receivables purchased on such Purchase Date);
(f) the satisfactory completion by the Buyer of any due diligence
determined necessary by the Buyer with respect to the Receivables and the
related Obligors and Contracts;
(g) the Originator shall have delivered to the Buyer an executed
Support Agreement;
(h) the receipt by the Buyer of any approvals, opinions or other
documents as the Buyer shall have reasonably requested.
SECTION 4.3. EFFECT OF PAYMENT OF PURCHASE PRICE. Upon the payment
of the Purchase Price for any Purchase, (whether in cash, through a capital
contribution or a Subordinated Loan), title to the Receivables and the other
related Purchased Assets shall vest in the Buyer, whether or not the conditions
precedent to such Purchase were in fact satisfied; PROVIDED, HOWEVER, that the
Buyer shall not be deemed to have waived any claim it may have under this
Agreement for the failure by the Originator in fact to satisfy any such
condition precedent.
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ARTICLE V
COVENANTS
SECTION 5.1. COVENANTS OF THE ORIGINATOR. At all times during the
term of this Agreement, unless the Buyer shall otherwise consent in writing:
(a) FINANCIAL REPORTING. The Originator will maintain a system of
accounting established and administered in accordance with generally accepted
accounting principles, and furnish to the Buyer:
(i) ANNUAL REPORTING. Within 120 days after the close of each of its
fiscal years, a copy of its consolidated financial statements for such year
and consolidated balance sheets as of the end of such year, consolidated
statements of income, cash flow and changes in shareholder equity of the
Originator and its Subsidiaries for such fiscal year, together with
comparative information for the previous fiscal year, and copies of all
reports and management letters, if any, from the independent certified
public accountants to the Originator, which reports and letters shall be
reasonably satisfactory to the Buyer, all certified by the chief financial
officer of the Originator;
(ii) MONTHLY REPORTING. Within 30 days following the close of each
calendar month, consolidated balance sheets of the Originator and its
Subsidiaries as of the end of such month and consolidated statements of
income of the Originator and its Subsidiaries for such month and for the
period commencing at the end of the previous fiscal year and ending with
the end of such month, certified by the chief financial officer of the
Originator;
(iii) COMPLIANCE CERTIFICATE. Together with the annual report
required above, a compliance certificate in substantially the form of
Exhibit E hereto signed by its chief accounting officer or treasurer of the
Originator stating that no Termination Event or Potential Termination Event
exists, or if any Termination Event or Potential Termination Event exists,
stating the nature and status thereof.
(iv) NOTICE OF CANCELLATION OF VSI POLICY. As soon as a Responsible
Officer of the Originator becomes aware thereof, the Originator shall
notify the Buyer of receipt of notice from the issuer of the VSI Policy of
such issuer's intention to cancel, not to renew or to conditionally renew
the VSI Policy, and the action which the Originator proposes to take to
replace such policy.
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(v) NOTICE OF TERMINATION EVENTS OR POTENTIAL TERMINATION EVENTS. As
soon as possible, and in any event within five (5) days after a Responsible
Officer of the Originator obtains knowledge of the occurrence of each
Termination Event or Potential Termination Event, a statement of the chief
financial officer or chief accounting officer of the Originator setting
forth details of such Termination Event or Potential Termination Event and
the action which the Originator proposes to take with respect thereto.
(vi) NOTICE OF MATERIAL ADVERSE CHANGE. As soon as any Responsible
Officer of the Originator becomes aware thereof, the Originator shall give
the Buyer notice of any event which may have a Material Adverse Effect.
(vii) OTHER INFORMATION. Such other information (including non-
financial information) as the Buyer may from time to time reasonably
request.
(b) CONDUCT OF BUSINESS. The Originator will do all things necessary
to remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and will maintain all requisite
authority to conduct its business in each jurisdiction in which its business
requires such authority.
(c) COMPLIANCE WITH LAWS. The Originator will comply in all material
respects with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject and which are
applicable to all Receivables.
(d) FURNISHING OF INFORMATION AND INSPECTION OF RECORDS. The
Originator will furnish to the Buyer, within ten (10) Business Days after
receiving a request therefor, such information with respect to the Receivables
as the Buyer may reasonably request, including, without limitation, listings
identifying the Principal Balance for each Receivable. The Originator will from
time to time on a reasonable basis during regular business hours with prior
written notice permit the Buyer, or its agents or representatives, to visit the
offices of the Originator at the Buyer's expense unless a Potential Termination
Event or a Termination Event shall have occurred for the purpose of discussing
matters relating to Receivables or the Originator's performance hereunder with
any of the officers, directors, employees or independent public accountants of
the Originator having knowledge of such matters.
(e) FULFILLMENT OF OBLIGATIONS. The Originator will duly observe and
perform, or cause to be observed or performed, all material obligations and
undertakings on its part to be
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observed and performed under or in connection with this Agreement and the
Receivables, will duly observe and perform all material provisions, covenants
and other promises required to be observed by it under the Contracts related to
the Receivables, will do nothing to materially impair the rights, title and
interest of the Buyer in and to the Purchased Assets and will pay when due (or
contest in good faith) any taxes, including without limitation any sales tax,
excise tax or other similar tax or charge, payable in connection with the
Receivables and their creation and satisfaction.
(f) LITIGATION. As soon as possible, and in any event within ten
Business Days of the knowledge of any Responsible Officer, the Originator shall
give the Buyer notice of (i) any litigation, investigation or proceeding against
the Originator which may exist at any time which, in the reasonable judgment of
the Originator, could reasonably be expected to have a Material Adverse Effect
and (ii) any material adverse development in any such previously disclosed
litigation.
(g) FEES, TAXES AND EXPENSES. The Originator shall pay all filing
fees, stamp taxes, other taxes (other than taxes imposed directly on the overall
net income of the Buyer) and expenses, including the fees and expenses set forth
in Sections 2.9 and 6.4 hereof, if any, which may be incurred on account of or
arise out of this Agreement and the documents and transactions entered into
pursuant to this Agreement.
(h) NO OTHER BUSINESS. The Originator shall engage in no business
other than the business contemplated under its Certificate of Incorporation.
(i) MAINTENANCE OF VSI POLICY. The Originator shall maintain in
effect the VSI Policy or other similar insurance policy reasonably acceptable to
the Buyer with respect to all Receivables transferred under this Agreement.
(j) SUBORDINATED NOTE. The Originator shall not transfer the
Subordinated Note to any person.
(k) COPIES OF REPORTS, FILINGS, ETC. The Originator shall furnish to
the Buyer, as soon as practicable after the issuance, sending or filing thereof,
copies of all proxy statements, financial statements, reports and other
communications which the Originator sends to its security holders generally,
and, if the Originator is required to file reports with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended,
copies of all regular, periodic and special reports which the Originator files
with the Securities and Exchange Commission or with any
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securities exchange on Forms 10-K, 10-Q, 8-K or any successor forms thereto.
(l) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Originator will
maintain and implement administrative and operating procedures, including,
without limitation, an ability to recreate records evidencing Receivables in the
event of the destruction of the originals thereof), and keep and maintain, or
obtain, as and when required, all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the daily
identification of all Collections of and adjustments to each existing
Receivable). The Originator will give the Buyer prompt notice of any material
change in the administrative and operating procedures referred to in the
previous sentence, to the extent such change is likely to have a Material
Adverse Effect.
(m) CUSTOMER LIST. The Originator shall at all times maintain a
current list (which may be stored on magnetic tapes or disks) of all Obligors
under Contracts related to Receivables, including the name, address, telephone
number and account number of each such Obligor. The Originator shall deliver or
cause to be delivered a copy of such list to the Buyer as soon as practicable
following the Buyer's request.
(n) ADMINISTRATIVE AND OPERATING PROCEDURES. The Originator shall
maintain and implement administrative and operating procedures adequate to
permit the identification of the Receivables and all collections and adjustments
attributable thereto and shall comply in all material respects with the Credit
and Collection Policy in regard to each Receivable and related Contract.
(o) INSURANCE. The Originator shall keep insured by financially
sound and reputable insurers all property of a character usually insured by
corporations engaged in the same or similar business similarly situated against
loss or damage of the kinds and in the amounts customarily insured against by
such corporations and carry such other insurance as is usually carried by such
corporations.
(p) ERISA EVENTS.
(i) Promptly upon becoming aware of the occurrence of any Event of
Termination which together with all other Events of Termination occurring
within the prior 12 months involve a payment of money by or a potential
aggregate liability of the Originator or any ERISA Affiliate or any
combination of such entities in excess of $5,000,000, the Originator shall
give the Buyer a written notice specifying
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the nature thereof, what action the Originator or any ERISA Affiliate has
taken and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto.
(ii) Promptly upon receipt thereof, the Originator shall furnish to
the Buyer copies of (i) all notices received by the Originator or any ERISA
Affiliate of the PBGC's intent to terminate any Plan or to have a trustee
appointed to administer any Plan; (ii) all notices received by the
Originator or any ERISA Affiliate from the sponsor of a Multiemployer Plan
pursuant to Section 4202 of ERISA involving a withdrawal liability in
excess of $5,000,000; and (iii) all funding waiver requests filed by the
Originator or any ERISA Affiliate with the Internal Revenue Service with
respect to any Plan, the accrued benefits of which exceed the present value
of the plan assets as of the date the waiver request is filed by more than
$5,000,000, and all communications received by the Originator or any ERISA
Affiliate from the Internal Revenue Service with respect to any such
funding waiver request.
(q) SEPARATE IDENTITY. The Originator shall take all actions
required to maintain the Buyer's status as a separate legal entity, including,
without limitation, (i) not holding the Buyer out to third parties as other than
an entity with assets and liabilities distinct from the Originator and the
Originator's other Subsidiaries; (ii) not holding itself out to be responsible
for the debts of the Buyer or, other than by reason of owning capital stock of
the Buyer, for any decisions or actions relating to the Buyer; (iii) prepare
separate financial statements for the Buyer (which shall be audited by
independent accountants); (iv) cause any financial statements consolidated with
those of the Buyer to state that the Buyer is a separate corporate entity with
its own separate creditors who, in any liquidation of the Buyer, will be
entitled to be satisfied out of the Buyer's assets prior to any value in the
Buyer becoming available to the Buyer's equity holders; (v) taking such other
actions as are necessary on its part to ensure that all corporate procedures
required by its and the Buyer's respective certificates of incorporation and by-
laws are duly and validly taken; (vi) keeping correct and complete records and
books of account and corporate minutes; and (vii) not acting in any other manner
that could foreseeably mislead others with respect to the Buyer's separate
identity.
(r) SOFTWARE. The Originator shall use its reasonable efforts to
enable each of the Buyer, any agent of the Buyer and the Servicer (whether by
license, sublicense, assignment or otherwise) to use all of the computer
software used to account for the Receivables to the extent necessary to
administer the Receivables.
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(s) CUSTODIAN CONFIRMATION. With respect to each Receivable sold on
a Purchase Date, the Originator shall cause the Custodian to deliver to the
Buyer a Custodian Confirmation within two (2) Business Days of the related
Purchase Date.
SECTION 5.2. NEGATIVE COVENANTS OF THE ORIGINATOR. During the term
of this Agreement, unless the Buyer shall otherwise consent in writing:
(a) NAME CHANGE, OFFICES, RECORDS AND BOOKS OF ACCOUNTS. The
Originator shall not change its name, identity or corporate structure (within
the meaning of Section 9-402(7) of the Relevant UCC) nor relocate its chief
executive office or any office where Records are kept unless it shall have: (i)
given the Buyer at least fifteen (15) days, prior written notice thereof and
(ii) delivered to the Buyer all financing statements, instruments and other
documents requested by the Buyer in connection with such change or relocation.
The Originator shall at all times maintain its chief executive office within a
jurisdiction in the United States and in which Article 9 of the Relevant UCC is
in effect and in the event it moves its chief executive office to a location
which may charge taxes, fees, costs, expenses or other charges to perfect the
interests of the Buyer in the Receivables, it shall pay all taxes, fees, costs,
expenses and other charges associated with perfecting interests of the Buyer in
the Receivables and any other costs and expenses incurred in order to maintain
the enforceability of this Agreement and the interest of the Buyer in the
Receivables.
(b) TRANSFERS, LIENS, ETC. Except for the Adverse Claims of the
Buyer created by this Agreement and except as provided in the Lockbox Agreement,
the Originator shall not transfer, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Adverse Claim (including,
without limitation, the filing of any financing statement) upon or with respect
to any Receivable, related Contract, Related Security, Collections, Permitted
Lockbox or Lockbox Account, or upon or with respect to any account to which any
Collections of any Receivable are sent, or assign any right to receive income in
respect thereto.
(c) STATEMENT FOR AND TREATMENT OF SALES. The Originator shall not
prepare any tax returns or reports or financial statements for financial
accounting or reporting purposes which shall account for the transactions
contemplated herein in any manner other than as a sale of the Purchased Assets
to the Buyer unless such sale or treatment is prohibited by GAAP or is not
reportable for tax purposes due to the filing by the Originator of tax returns
on a consolidated basis with those of the Buyer.
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(d) NO RESCISSIONS OR MODIFICATIONS. The Originator shall not
reduce, rescind or cancel any Receivable or related Contract or modify any terms
or provisions thereof, except in accordance with the Credit and Collection
Policy.
(e) CONSOLIDATIONS MERGERS AND SALES OF ASSETS. The Originator shall
not (i) consolidate or merge with or into any other Person or (ii) sell, lease
or otherwise transfer all or substantially all of its assets to any other
Person; PROVIDED that the Originator may merge with another Person if (A) the
Originator is the corporation surviving such merger and (B) immediately after
and giving effect to such merger, no Termination Event or Potential Termination
Event shall have occurred and be continuing.
(f) NO CHANGES. The Originator shall not (i) make any change in the
character of its business or in the Credit and Collection Policy, which change
would, in either case, impair the collectibility of any material amount of the
Receivables or make any material change in the Credit and Collection Policy or
in its current payment terms with respect to Receivables without prior written
notification to and consent of the Buyer; provided, however, that the Buyer
shall be deemed to have approved any such change unless it shall have
disapproved of such change within ten (10) Business Days of its receipt of such
notice and (ii) change, terminate or waive or consent to any such change,
termination or waiver of any provision of the Custodial Agreement without the
prior written consent of the Buyer; provided, however, that the Buyer shall be
deemed to have approved any such change unless it shall have disapproved of such
change within ten (10) Business Days of its receipt of such notice.
(g) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. The Originator shall
not make any change in its instructions to Obligors regarding payments to be
made with respect to the Receivables (other than changes with respect to the
mailing addresses for remittances) unless the Buyer shall have received, at
least ten (10) Business Days before the proposed effective date therefor,
written notice of such change.
(h) CHANGE IN PAYMENTS OR DEPOSITS OF PAYMENTS. Except with the
prior written notice to the Buyer, the Originator shall not add or terminate any
Person as a Permitted Lockbox Bank from those Persons listed in Exhibit G
hereto, make or permit any change in the location of any Permitted Lockbox or
the location or account number of any Lockbox Account.
(i) ERISA MATTERS. The Originator shall not permit any event or
condition which is described in any of clauses (i) through (vi), clause (viii)
or clause (x) of the definition of Event of Termination to occur or exist with
respect to any Plan
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or Multiemployer Plan if such event or condition, together with all other events
or conditions described in the definition of Event of Termination occurring
within the prior 12 months involve the payment of money by or an incurrence of
liability of the Originator or any ERISA Affiliate in an amount in excess or
$10,000,000.
(j) NONPETITION COVENANT. Notwithstanding any prior termination of
this Agreement, the Originator and the Buyer shall not, prior to the date which
is one year and one day after the termination of this Agreement, with respect to
the Buyer, acquiesce, petition or otherwise invoke or cause the Buyer to invoke
the process of any governmental authority for the purpose of commencing or
sustaining a case against the Buyer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Buyer or any
substantial part of its property or ordering the winding-up or liquidation of
the affairs of the Buyer.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1. INDEMNIFICATION. Without limiting any other rights
which the Buyer may have hereunder or under applicable law, the Originator
hereby agrees to indemnify the Buyer and its officers, directors, agents and
assigns (the "Indemnified Parties"; each, an "Indemnified Party") from and
against any and all damages, losses, claims, liabilities, costs and expenses
(other than in respect of taxes, which shall be governed by Section 6.2),
including reasonable attorneys, fees and disbursements (all of the foregoing
being collectively referred to as "INDEMNIFIED AMOUNTS") awarded against or
incurred by any of them arising out of or as a result of any of the
circumstances described below, provided, however, that in no event shall the
Originator indemnify any Indemnified Party for (i) Indemnified Amounts resulting
from the gross negligence or willful misconduct on the part of such Indemnified
Party or (ii) recourse for uncollectible Receivables. The Originator shall
indemnify the Indemnified Parties for Indemnified Amounts relating to or
resulting from:
(a) reliance on any representation or warranty made by the Originator
(or any officers of the Originator) under or in connection with this Agreement,
any Facility Document or any other information or report delivered by the
Originator pursuant hereto, which shall have been false or incorrect in any
material respect when made or deemed made;
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(b) the failure by the Originator to comply in all material respects
with any applicable law, rule or regulation with respect to any Receivable or
the related Contract, or the nonconformity of any Receivable or the related
Contract with any such applicable law, rule or regulation;
(c) the failure as a result of acts or failures to act on the part of
the Originator or the Servicer, to vest and maintain vested in the Buyer or its
assignee, the Purchased Assets free and clear of any Adverse Claim;
(d) the failure to file, or delay in filing, financing statements or
other similar instruments or documents under the Relevant UCC or other
applicable laws with respect to any Receivable;
(e) any dispute, claim, offset or defense (which dispute, claim,
offset or defense is made in "good faith") (other than discharge in bankruptcy
of an Obligor) of an Obligor to the payment of any Receivable (including,
without limitation, a defense based on such Receivable or the related Contract
not being a legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms), or any other claim resulting from the
sale of merchandise or services related to such Receivable or the furnishing or
failure to furnish such merchandise or services; for the purposes of this
subsection, the term "good faith" shall mean a dispute, claim, offset or defense
that is based on reasonable factual allegations which are likely to survive a
motion to dismiss or which are not interposed for the purposes of hindering or
delaying an Obligor's payment of the Receivable or which is not based
principally on procedural or technical grounds (including, without limitation,
improper service of process, statute of limitations, etc.);
(f) any failure of the Originator to perform its duties or
obligations in accordance with the provisions of this Agreement or the
transactions contemplated by this Agreement; or
(g) any products liability claim or personal injury or property
damage suit arising out of or in connection with merchandise or services which
are the subject of any Receivable.
SECTION 6.2. TAX INDEMNIFICATION.
(a) The Originator hereby agrees to pay, and to indemnify the
Indemnified Parties from and against, any taxes which may at any time be
asserted in respect of this transaction or the subject matter hereof (including,
without limitation, any sales, gross receipts, general corporation, personal
property, privilege or license taxes, but not including any federal or (except
as provided below) other income or franchise taxes
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imposed upon an Indemnified Party, with respect to its net income or profits
arising out of the transactions contemplated hereby (all such excluded taxes,
the "Excluded Taxes")), whether arising by reason of the acts to be performed by
the Originator or the Buyer hereunder or imposed against the Originator or any
Indemnified Party, the property involved or otherwise. If any tax, fee or
similar charge is imposed or with respect to any payment for the account of any
Indemnified Party provided for in this Agreement by any State or political
subdivision thereof (other than Excluded Taxes), the Originator will, upon
demand by such Indemnified Party, pay an amount necessary to make such
Indemnified Party whole, taking into account any tax consequences to such
Indemnified Party of the payment of such tax and the receipt of the indemnity
provided for by this Section 6.2, including the effect of such tax or refund on
the amount of tax measured by net income or profits which is or was payable by
such Indemnified Party in the jurisdiction in which its principal executive
office is located.
SECTION 6.3. ADDITIONAL COSTS.
(a) The Originator shall pay to the Buyer, from time to time on
demand of the Buyer, such amounts as the Buyer may reasonably determine to be
necessary to compensate it for any increase in costs which determines are
attributable to its acquiring and funding the Receivables under this Agreement
or the Transfer and Administration Agreement, or any reduction in any amount
receivable by the Buyer in respect of any such acquisition or funding (such
increases in costs, payments and reductions in amounts receivable being herein
called "ADDITIONAL COSTS") resulting from any Regulatory Change which (i)
changes the method or basis of taxation of any amounts payable to the Buyer
under this Agreement or payable by the Buyer in connection with the financing of
the purchase of the Receivables or (ii) imposes any other condition affecting
this Agreement (or any of such extensions of credit or liabilities). The Buyer
will notify the Originator of any event that will entitle Buyer to compensation
pursuant to this Section 6.3(a) no later than fifteen (15) Business Days after
it obtains knowledge thereof.
(b) Determinations and allocations by the Buyer for purposes of this
Section 6.3 shall be conclusive, provided that such determinations and
allocations are made in good faith and on a reasonable basis, reasonable
evidence (including an explanation of the applicable Regulatory Change and an
accounting for any amounts demanded) of which shall be provided to the
Originator upon request.
(c) The Buyer agrees to promptly notify the Originator if the Buyer
receives notice of any potential tax liability for which the Originator may be
liable pursuant to Sections 6.2 or
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6.3 hereof. The Buyer further agrees that the Originator shall bear no cost
(including costs relating to penalties and interest) relating to the failure of
the Buyer to file in a timely manner any tax returns required to be filed by the
Buyer in accordance with applicable statutes and regulations.
SECTION 6.4. OTHER COSTS AND EXPENSES. The Originator shall pay on
demand all costs and expenses in connection with the preparation, execution,
delivery and administration of this Agreement and any other documents delivered
hereunder or contemplated hereby, including, without limitation, reasonable fees
and out-of-pocket expenses of legal counsel for the Buyer (which such counsel
may be employees of the Buyer) with respect thereto and with respect to advising
the Buyer as to its rights and remedies under this Agreement or the Transfer and
Administration Agreement, and all costs and expenses, if any, including
reasonable counsel fees and expenses in connection with the enforcement or
amendment of this Agreement and the other documents delivered hereunder or
contemplated hereby. The Originator shall reimburse the Buyer on demand for all
other costs and expenses incurred by the Buyer or any agent or assign of the
Buyer ("OTHER COSTS"); including, without limitation, the cost of the Buyer's
auditors auditing the Originator's books, records and procedures, and the
reasonable fees and out-of-pocket expenses of counsel for the Buyer or any
counsel for any agent or assign of the Buyer with respect to advising the Buyer
or such agent or assign as to matters relating to the Buyer's operation.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. SURVIVAL. The indemnification and payment provisions of
Article VI shall be continuing and shall survive any termination of this
Agreement, subject to applicable statutes of limitation; PROVIDED FURTHER,
HOWEVER, that any such indemnification or payment claim must be presented to the
Originator within ten (10) Business Days after the Buyer receives notice or
otherwise becomes aware of such claim.
SECTION 7.2. WAIVERS; AMENDMENTS. No failure or delay on the part of
the Buyer in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other further exercise thereof or the
exercise of any other power, right or remedy. The rights and remedies herein
provided shall be cumulative and nonexclusive of any rights or remedies provided
by law. Any provision of this Agreement may be amended if, but only if, such
amendment is in writing and is signed by the parties hereto.
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SECTION 7.3. NOTICES. Except as provided below, all communications
and notices provided for hereunder shall be in writing (including bank wire,
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other party at its address or telecopy number set forth hereunder
or at such other address or telecopy number as such party may hereafter specify
for the purposes of notice to such party. Each such notice or other
communication shall be effective if given by facsimile, when such facsimile is
transmitted to the facsimile number specified in this Section 7.3 and the
appropriate written confirmation is received or, if given by any other means,
when received at the address specified in this Section 7.3. The Originator
further agrees to deliver promptly to the Buyer a written confirmation of each
telephonic notice signed by an authorized officer of the Originator. However,
the absence of such confirmation shall not affect the validity of such notice.
IF TO THE BUYER:
ATLANTIC AUTO SECOND FUNDING CORPORATION
P.O. Box 1502
800 Perinton Hills Office Park
Fairport, New York 14450
Telephone: (716) 421-2982
Telecopy: (716) 421-1954
Attention: President
IF TO THE ORIGINATOR:
ATLANTIC AUTO FINANCE CORPORATION
P.O. Box 1502
800 Perinton Hills Office Park
Fairport, New York 14450
Telephone: (716) 421-2985
Telecopy: (716) 421-1954
Attention: President
SECTION 7.4. GOVERNING LAW; SUBMISSION TO JURISDICTION; INTEGRATION.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York. The Originator hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State Court sitting in New York, New York for
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. The Originator and the Buyer hereby
irrevocably waive, to the fullest extent they may effectively do so, any
objection which they may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a
39
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court has been brought in an inconvenient forum. Nothing in this Section 7.4
shall affect the right of the Buyer to bring any action or proceeding against
the Originator or its properties in the courts of other jurisdictions. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire understanding among the parties hereto with respect to the
subject matter hereof superseding all prior oral or written understandings.
SECTION 7.5. SEVERABILITY; COUNTERPARTS, WAIVER OF SETOFF. This
Agreement may be executed in any number.of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The Originator hereby agrees to waive any right of setoff
which it may have or to which it may be entitled against the Buyer and its
assets.
SECTION 7.6. ASSIGNMENTS. This Agreement shall be binding on the
parties hereto and their respective successors and assigns; PROVIDED, HOWEVER,
that the Originator may not assign any of its rights or delegate any of its
duties hereunder without the prior written consent of the Buyer. No provision
of this Agreement shall in any manner restrict the ability of the Buyer to
assign, participate, grant security interests in, or otherwise transfer any
portion of the Purchased Assets. Any transfer in contravention of this Section
7.6 shall be null and void and shall not confer upon the transferee thereof any
of the rights under this Agreement.
SECTION 7.7. WAIVER OF CONFIDENTIALITY. The Buyer and the
Originator shall hold all non-public information obtained pursuant to this
Agreement and the transactions contemplated hereby or effected in connection
herewith in accordance with customary procedures for handling confidential
information of this nature and in any event may make disclosure (a) reasonably
required by a bona fide transferee, (b) necessary in order to obtain any
consents, approvals, waivers or other arrangements required to permit the
execution, delivery and performance by the Originator of this Agreement, or
(c) as required or requested by any governmental body, agency or
instrumentality, regulatory authority, court, tribunal or arbitrator or pursuant
to legal process or required by applicable law.
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IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be executed and delivered by their duly authorized officers as of
the date hereof.
ATLANTIC AUTO SECOND FUNDING CORPORATION,
as Buyer
By: /s/ Suzanne A. O'Connor
---------------------------
Name:
Title:
ATLANTIC AUTO FINANCE CORPORATION,
as Originator
By: /s/ Richard J. Harrison
----------------------------
Name:
Title:
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- --------------------------------------------------------------------------------
TRANSFER AND ADMINISTRATION AGREEMENT
among
ATLANTIC AUTO SECOND FUNDING CORPORATION,
as Transferor,
ATLANTIC AUTO FINANCE CORPORATION,
as Servicer,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as transferee Bank
Dated as of June 14, 1996
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms . . . . . . . . . . . . . . 1
SECTION 1.2. Computation of Time Periods . . . . . . . . . . . 23
ARTICLE II
TRANSFERS AND SETTLEMENTS
SECTION 2.1. Commitment. . . . . . . . . . . . . . . . . . . . 23
SECTION 2.2. Transfers and Assignments . . . . . . . . . . . . 24
SECTION 2.3. Increase of Aggregate Net Investment. . . . . . . 25
SECTION 2.4. Additional Receivables. . . . . . . . . . . . . . 26
SECTION 2.5. Selection of Tranche Periods and
Tranche Rates . . . . . . . . . . . . . . . . . . 26
SECTION 2.6. Discount and Other Costs and Expenses . . . . . . 27
SECTION 2.7. Protection of Ownership of the Bank . . . . . . . 28
SECTION 2.8. Allocation and Application of Collections . . . . 28
SECTION 2.9. Servicer Advances . . . . . . . . . . . . . . . . 31
SECTION 2.10. Payments and Computations, Etc. . . . . . . . . . 31
SECTION 2.11. Reports . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.12. Optional Purchase; Retransfer of
Liquidated Receivables. . . . . . . . . . . . . . 32
SECTION 2.13. Mandatory Repurchase Under
Certain Circumstances . . . . . . . . . . . . . . 32
SECTION 2.14. Interest Rate Cap Agreement . . . . . . . . . . . 33
SECTION 2.15. Fees. . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.16. Dilution. . . . . . . . . . . . . . . . . . . . . 33
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of
Transferor. . . . . . . . . . . . . . . . . . . . 33
SECTION 3.2. Representations and Warranties of
the Transferor With Respect to Each
Sale of Receivables . . . . . . . . . . . . . . . 36
SECTION 3.3. Representations and Warranties of
Servicer. . . . . . . . . . . . . . . . . . . . . 38
i
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PAGE
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Closing . . . . . . . . . . . . . . 40
SECTION 4.2. Conditions to Purchase of Net
Investment Additional Amounts and
Additional Receivables. . . . . . . . . . . . . . 42
ARTICLE V
COVENANTS
SECTION 5.1. Covenants of the Transferor . . . . . . . . . . . 43
SECTION 5.2. Negative Covenants of the Transferor. . . . . . . 47
SECTION 5.3. Covenants of the Servicer . . . . . . . . . . . . 49
SECTION 5.4. Negative Covenants of the Servicer. . . . . . . . 54
ARTICLE VI
PROTECTION OF THE BANK;
ADMINISTRATION AND COLLECTIONS
SECTION 6.1. Maintenance of Information and
Computer Records. . . . . . . . . . . . . . . . . 56
SECTION 6.2. Protection of the Interests of the Bank . . . . . 56
SECTION 6.3. Maintenance of Contract Files,
Writings and Records; Release of
Receivables . . . . . . . . . . . . . . . . . . . 58
SECTION 6.4. Information . . . . . . . . . . . . . . . . . . . 59
SECTION 6.5. Performance of Undertakings Under
the Receivables . . . . . . . . . . . . . . . . . 59
SECTION 6.6. Administration and Collections. . . . . . . . . . 59
SECTION 6.7. Complete Servicing Transfer . . . . . . . . . . . 61
SECTION 6.8. Lockboxes . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.9. Servicer Default. . . . . . . . . . . . . . . . . 63
SECTION 6.10. Servicer Indemnification of
Affected Parties. . . . . . . . . . . . . . . . . 65
SECTION 6.11. AAFC Not to Resign as Servicer. . . . . . . . . . 65
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1. Termination Events. . . . . . . . . . . . . . . . 66
SECTION 7.2. Remedies Upon the Occurrence of a
Termination Event . . . . . . . . . . . . . . . . 68
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PAGE
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Indemnification . . . . . . . . . . . . . . . . . 68
SECTION 8.2. Tax Indemnification . . . . . . . . . . . . . . . 69
SECTION 8.3. Additional Costs. . . . . . . . . . . . . . . . . 70
SECTION 8.4. Other Costs and Expenses. . . . . . . . . . . . . 71
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Term of Agreement . . . . . . . . . . . . . . . . 71
SECTION 9.2. Waivers; Amendments . . . . . . . . . . . . . . . 71
SECTION 9.3. Notices . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9.4. Governing Law; Submission to
Jurisdiction; Integration . . . . . . . . . . . . 73
SECTION 9.5. Severability; Counterparts, Waiver
of Setoff . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.6. Assignments . . . . . . . . . . . . . . . . . . . 73
SECTION 9.7. Waiver of Confidentiality . . . . . . . . . . . . 74
SECTION 9.8. Characterization of the Transactions
Contemplated by this Agreement. . . . . . . . . . 74
SECTION 9.9. No Petition . . . . . . . . . . . . . . . . . . . 74
Exhibit A Form of Tranche Selection Notice
Exhibit B Schedule of Litigation
Exhibit C Schedule of Location of Records
Exhibit D Form of Monthly Report
Exhibit E Form of Compliance Certificate
Exhibit F Schedule of Corporate Names, Trade Names or Assumed Names
Exhibit G Permitted Lockbox Banks and Permitted Lockboxes
Exhibit H Credit and Collection Policy
Exhibit I Form of Increase Date Notice
Exhibit J Form of Supplemental Conveyance
Exhibit K Form of Addition Date Statement
Schedule 1 Schedule of Receivables
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TRANSFER AND ADMINISTRATION AGREEMENT
TRANSFER AND ADMINISTRATION AGREEMENT, dated as of June 14, 1996 (as
amended, supplemented or otherwise modified and in effect from time to time,
this "AGREEMENT"), by and between ATLANTIC AUTO SECOND FUNDING CORPORATION, a
Delaware corporation, as transferor (the "TRANSFEROR"), ATLANTIC AUTO FINANCE
CORPORATION, a Delaware corporation, as servicer (the "SERVICER" or "AAFC") and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking corporation, as
transferee (the "BANK").
R E C I T A L S :
WHEREAS, subject to the terms and conditions of this Agreement, the
Transferor desires to transfer and assign from time to time to the Bank, and the
Bank desires to acquire from time to time from the Transferor a fractional
undivided interest in certain retail automotive installment sales contracts and
related property and proceeds (the "Receivables") which the Transferor acquires
from time to time from AAFC, subject to the terms and conditions of this
Agreement;
WHEREAS, the Servicer has agreed to undertake the collection and
servicing responsibilities in respect of the Receivables;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"AAFC PORTFOLIO LOSS" shall mean, with respect to any Collection
Period, the aggregate Principal Balance of AAFC Portfolio Receivables that would
be treated as Liquidated Receivables hereunder during such Collection Period net
of all proceeds that would be treated as Liquidation Proceeds hereunder
(including estimated Liquidation Proceeds) received (or estimated to be
received) with respect to any AAFC Portfolio Receivable during such Collection
Period.
"AAFC PORTFOLIO RECEIVABLES" shall mean all receivables (including the
Receivables) serviced by AAFC.
"ADDITIONAL COSTS" shall have the meaning specified in Section 8.3(a).
"ADDITION DATE" shall mean, with respect to the transfer of interests
in Additional Receivables to the Bank, the
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date of transfer of such interests in Receivables pursuant to Section 2.4.
"ADDITION DATE STATEMENT" shall mean the statement prepared by the
Servicer with respect to each Addition Date pursuant to Section 2.4(b)(iii).
"ADDITIONAL RECEIVABLES" shall mean those Receivables designated by
the Transferor as additional Receivables to be included as Receivables under
this Agreement pursuant to Section 2.4.
"ADJUSTED POOL BALANCE" for any date of determination shall mean the
aggregate Principal Balance of the Receivables as of the close of business on
the last day of the prior Collection Period, plus the aggregate of all amounts
received as payments of principal in respect of Receivables (whether by or on
behalf of the Obligors or from the Transferor) during the prior Collection
Period, plus the aggregate Principal Balance of Additional Receivables
designated since such day as shown in an Addition Date Statement, minus the
aggregate Principal Balance of Liquidated Receivables as of the close of
business on the last day of the prior Collection Period.
"ADVANCE" shall mean the amount, as of any day on which Discount is
payable, that the Servicer advances on a Receivable pursuant to Section 2.9.
"ADVERSE CLAIM" shall mean a Lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, another Person
or a Subsidiary of such other Person. A Person shall be deemed to control
another Person if the controlling Person owns, directly or indirectly, 10% or
more of any class of voting securities of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of
stock or otherwise.
"AGGREGATE NET INVESTMENT" shall mean (a) from the initial Increase
Date to the first Settlement Date after the initial Increase Date, the initial
Net Investment Additional Amount plus any Net Investment Additional Amounts from
the initial Increase Date to such Settlement Date, and (b) at any time
thereafter, the Aggregate Net Investment as of the prior Settlement Date PLUS
any Net Investment Additional Amounts since the prior Settlement Date LESS the
aggregate amount of Collections paid to the Bank to reduce such Aggregate Net
Investment pursuant to Section 2.8.
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"AGGREGATE UNPAIDS" shall mean, at any time, an amount equal to the
sum of (i) the aggregate accrued and unpaid Discount with respect to all Tranche
Periods at such time, (ii) the Aggregate Net Investment at such time, and (iii)
all fees and other amounts (including Early Collection Fees) owed (whether due
or accrued) hereunder by the Transferor or AAFC to the Bank at such time.
"AMOUNT FINANCED" with respect to a Receivable means the amount
advanced under the Receivable toward the purchase price of the Financed Vehicle
and any related costs, exclusive of any amounts allocable to the premium for
physical damage insurance force-placed by AAFC covering the Financed Vehicle and
of prepaid Dealer reserves and other marketing expenses.
"ANNUAL PERCENTAGE RATE" or "APR" of a Receivable means the annual
rate of Finance Charges stated in the Receivable.
"AVAILABLE SUBORDINATED AMOUNT" shall mean, as of any day, the lesser
of (x) the Maximum Subordinated Amount and (y) the Available Subordinated Amount
for the previous Collection Period adjusted for all amounts applied in reduction
or reinstatement thereof pursuant to Section 2.8(c) on the Settlement Date for
such Collection Period; PROVIDED, HOWEVER, that on the initial Increase Date,
the Available Subordinated Amount shall equal the Maximum Subordinated Amount;
and PROVIDED FURTHER, that on each subsequent Increase Date, the Available
Subordinated Amount shall be reset at the Maximum Subordinated Amount determined
on such Increase Date (after giving effect to the increase of the Aggregate Net
Investment on such Increase Date).
"BANK" shall mean Morgan Guaranty Trust Company of New York, a New
York banking corporation, and its successors and assigns.
"BANK FINANCE CHARGE COLLECTIONS" shall mean, with respect to any
Settlement Date, an amount equal to (A) the product of (i) the Bank Percentage
for the immediately preceding Collection Period and (ii) Finance Charge
Collections for such Collection Period PLUS (B) the product of (i) the Bank
Percentage for the immediately preceding Collection Period and (ii) any Interest
Rate Cap Payments MINUS (C) any Collections applied to pay Discount during the
related Collection Period pursuant to Section 2.8(b) MINUS (D) the product of
(i) the Bank Percentage for the immediately preceding Collection Period and (ii)
the Servicing Fee for such Collection Period.
"BANK PERCENTAGE" shall mean, with respect to any Collection Period:
(a) when used with respect to Principal Collections at any time
and Finance Charge Collections prior to the Termination Date, the
percentage equivalent of a fraction (carried out to seven decimal places
and rounded
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upward), the numerator of which shall be the Aggregate Net Investment at
the end of the immediately preceding Collection Period and the denominator
of which shall be the Adjusted Pool Balance at the end of the preceding
Collection Period; and
(b) when used with respect to Finance Charge Collections on and
after the Termination Date, 100%; and
PROVIDED, that with respect to any Collection Period in which the Aggregate Net
Investment is increased pursuant to Section 2.3, the numerator in (a) above
shall be the Aggregate Net Investment as of the date of such increase for the
period from and including the date of such increase to and including the last
day of such Collection Period.
"BANK PRINCIPAL COLLECTIONS" shall mean, with respect to any
Settlement Date, an amount equal to the product of (i) Bank Percentage for the
immediately preceding Collection Period and (ii) the Principal Collections for
such Collection Period.
"BUSINESS DAY" shall mean (i) with respect to any matters relating to
the Eurodollar Rate, a day on which banks are open for business in The City of
New York and on which dealings in Dollars are carried on in the London interbank
market and (ii) for all other purposes, any day other than a Saturday, Sunday or
other day on which banking institutions or trust companies in The City of New
York are authorized or obligated by law, executive order or governmental decree
to be closed.
"CBR TRANCHE" shall mean a Tranche as to which Discount is calculated
at the Corporate Base Rate.
"CBR TRANCHE PERIOD" shall mean, with respect to a CBR Tranche, prior
to the Termination Date, a period commencing on a Business Day selected by the
Servicer pursuant to this Agreement and ending on the earlier of (i) the day on
which such CBR Tranche is converted to a Eurodollar Tranche and (ii) the next
succeeding Settlement Date, and except as set forth in Section 2.5(b), after the
Termination Date, a period determined by the Bank. If such CBR Tranche Period
would end on a day which is not a Business Day, such CBR Tranche Period shall
end on the next succeeding Business Day.
"CLOSING DATE" shall mean June 14, 1996.
"COLLECTION ACCOUNT" shall mean the Collection Account established and
maintained pursuant to Section 6.6(c) hereof.
"COLLECTION PERIOD" shall mean, with respect to any Settlement Date,
the calendar month immediately preceding the month of such Settlement Date.
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<PAGE>
"COLLECTIONS" shall mean, with respect to each Receivable, all cash
collections and other cash proceeds of such Receivable received by the Servicer
or in a Permitted Lockbox or the Collection Account, including, without
limitation or without duplication, (a) all Finance Charge Collections,
(b) Principal Collections, (c) recoveries and cash proceeds of Related Security
with respect to such Receivable, (d) proceeds received under the VSI Policy and
(e) Interest Rate Cap Payments.
"COMMITMENT" shall mean the obligation of the Bank to acquire a
fractional undivided interest in the Receivables represented by the Transferred
Interest in a principal amount at any time outstanding not to exceed the Maximum
Commitment.
"COMMITMENT FEE" shall mean a per annum fee, payable quarterly in
arrears on the last day of each calendar quarter during the term of this
Agreement and on the Termination Date, equal to the product of (a) the average
daily amount by which the Maximum Commitment exceeds the Aggregate Net
Investment during such calendar quarter and (b) .25%.
"COMPLETE SERVICING TRANSFER" shall have the meaning specified in
Section 6.7(g) hereof.
"CONDITION" shall mean either an Excess Spread Condition or an
Incremental Enhancement Condition.
"CONTRACT" shall mean, with respect to any Receivable, any and all
instruments, agreements, invoices or other writings pursuant to which such
Receivable arises, or which evidences such Receivable including, but not limited
to, the retail installment sales contracts related thereto.
"CONTRACT FILE" shall mean, with respect to each Receivable, the
original Contract, either a copy of the application to the appropriate state
authorities for a Title to the related Financed Vehicle or a standard assurance
in the form commonly used in the industry relating to the provision of the Title
and when issued by the appropriate state authorities, the related Title (but
only to the extent that Title documents are required under applicable state law
to be held by a secured party in order to perfect such secured party's security
interest in the related Financed Vehicle), all original instruments modifying
the terms and conditions of the Receivable and the original endorsements or
assignments of such Contract.
"CORPORATE BASE RATE" shall mean, for any day, prior to the occurrence
of a Termination Event, the higher of (i) the prime rate announced from time to
time by the Bank in effect on such day, or (ii) (x) the rate equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day
5
<PAGE>
that is a Business Day, the average of the quotations for such day for such
transactions received by the Bank from three Federal funds brokers of recognized
standing selected by it, plus (y) one-half of one percent (1/2%). At all times
after the occurrence of a Termination Event, "Corporate Base Rate" means a rate
per annum equal to the higher of clauses (i) and (ii)(x) in the preceding
sentence plus two percent (2%). The Corporate Base Rate applicable to any CBR
Tranche shall be the weighted average Corporate Base Rate on each day during the
related CBR Tranche Period.
"CREDIT AND COLLECTION POLICY" shall mean AAFC's credit and collection
policies and practices relating to the Contracts and the Receivables existing on
the date hereof in the form of Exhibit H hereto, as the same may from time to
time be amended, supplemented or otherwise modified in the ordinary course of
AAFC's business.
"CUSTODIAL AGREEMENT" shall mean the Custodial Agreement dated as of
June 14, 1996, by and among AAFC, the Transferor, the Bank and the Custodian, as
the same may be amended from time to time.
"CUSTODIAN" shall mean Safesite National Business Records Management,
Inc., a Delaware corporation, and its successors and assigns.
"CUSTODIAN CONFIRMATION" means the Custodian's certificate in the form
of EXHIBIT A to the Custodial Agreement confirming that it has received (i) an
itemized schedule of the Receivables (which shall also briefly describe each
related Contract File) and (ii) the Contract File with respect to each such
Receivable.
"DEALER" means the dealer who sold a Financed Vehicle and who
originated and assigned the respective Receivable to AAFC under an existing
agreement between such Dealer and AAFC.
"DEALER RECOURSE" shall mean, with respect to a Receivable, all
recourse rights against the Dealer which originated the Receivable and any
successor Dealer.
"DELINQUENCY RATIO" shall mean, for any period of determination, the
ratio (expressed as a percentage) of (i) the aggregate Principal Balance of AAFC
Portfolio Receivables that are Delinquent Receivables as of the last day of the
period of determination to (ii) the aggregate Principal Balance of AAFC
Portfolio Receivables as of the last day of such period.
"DELINQUENT RECEIVABLE" shall mean an AAFC Portfolio Receivable as to
which any payment is more than 60 days past due, but excluding any Liquidated
Receivables or AAFC Portfolio Receivables that would be treated as Liquidated
Receivables.
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"DETERMINATION DATE" shall mean the eighth Business Day but not later
than the 10th day of each calendar month, commencing July 10, 1996.
"DISCOUNT" shall mean, with respect to any Tranche Period:
TR x TA x AD
--
B
Where:
TR = the Tranche Rate applicable to such Tranche Period.
TA = the portion of the Aggregate Net Investment allocated to such Tranche
Period.
AD = the actual number of days in such Tranche Period.
B = 360 days, except in the case of a CBR Tranche, in which case B = 365
or 366 days, as appropriate.
PROVIDED, HOWEVER, that no provision of this Agreement shall require the payment
or permit the collection of Discount in excess of the maximum permitted by
applicable law; PROVIDED FURTHER, HOWEVER, that Discount shall not be considered
paid by any distribution if at any time such distribution is rescinded or must
be returned for any reason.
"DOLLARS" or "$" shall mean the lawful currency of the United States
of America.
"EARLY COLLECTION FEE" shall mean, for any Tranche Period (other than
a CBR Tranche Period) during which the Aggregate Net Investment allocated to
such Tranche Period is reduced, or which is terminated prior to the end of the
period for which it was originally scheduled to last (the amount of such
reduction or, in the case of a termination of a Tranche Period, the amount of
the Aggregate Net Investment allocated to such Tranche Period being herein
referred to as the "ALLOCATED AMOUNT"), the sum of (a) the excess, if any, of
(i) the Discount that would have accrued during the remainder of such Tranche
Period subsequent to the date of such reduction or termination on the Allocated
Amount if such reduction or termination had not occurred over (ii) the sum of
(A) to the extent the Allocated Amount is allocated to another Tranche Period,
the Discount actually accrued on the portion of Allocated Amount so allocated
during the remainder of such Tranche Period, and (B) to the extent the Allocated
Amount is not allocated to another Tranche Period, the income, if any, actually
received by the Bank from investing the portion of the Allocated Amount not so
allocated, and (b) in the case of a reduced or terminated Eurodollar Tranche, a
$200 administrative fee.
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"ELIGIBLE ACCOUNT" shall mean either (i) a segregated trust account
with the trust department of a depository institution organized under the laws
of the United States of America or any State thereof or the District of Columbia
(or any domestic branch of a foreign bank), having a long-term deposit rating of
at least Baa3 by Moody's, having trust powers and acting as trustee for funds
deposited in such account, or (ii) a segregated deposit account with a
depository institution organized under the laws of the United States of America
or any State thereof (or any domestic branch of a foreign bank) the long-term
deposit obligations of which are rated Aa3 or higher by Moody's and the short-
term debt obligations of which are rated "A-1+" by S&P and "P-1" by Moody's.
"ELIGIBLE INTEREST CAP AGREEMENT" as of any date means an interest
rate cap agreement that meets all of the following conditions: (i) it is on the
standard ISDA form; (ii) it has a maturity date that is no earlier than 12
months after the date described in clause (ii) of the definition of "Termination
Date"; (iii) it is issued by a bank or other financial institution whose short
term unsecured debt obligations are rated A-1+/P-1 by S&P and Moody's,
respectively, and that is otherwise acceptable to the Bank; (iv) it (together
with any Interest Rate Caps previously delivered) has a notional principal
amount equal to the aggregate scheduled balances on the Receivables (whether or
not Collections are received) on such date; (v) it has a capped interest rate
equal to 8.5% per annum; (vi) it provides that any payments made by the
counterparty shall be made directly to the Collection Account; (vii) it provides
that it may not be amended, terminated, waived or assigned by the counterparty
without the prior written consent of the Bank; and (viii) it is otherwise in
form and substance reasonably satisfactory to the Bank.
"ELIGIBLE INVESTMENTS" shall mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) obligations of the United States or any agency thereof, provided
such obligations are guaranteed as to the timely payment of principal and
interest by the full faith and credit of the United States;
(b) general obligations of or obligations guaranteed by any state of
the United States or the District of Columbia that at the time of
acquisition thereof are assigned the highest rating by S&P and Moody's;
(c) interests in any money market mutual fund which at the date of
investment in such fund has the highest fund rating by each of Moody's and
S&P which has issued a rating for such fund (which, for S&P, shall mean a
rating of AAAm or AAAmg);
(d) commercial paper which at the date of investment has ratings of at
least A-1+ by S&P and P-1 by Moody's;
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(e) certificates of deposit, demand or time deposits, Federal funds or
banker's acceptances issued by any depository institution or trust company
incorporated under the laws of the United States or of any state thereof
(or any U.S. branch or agency of a foreign bank) and subject to supervision
and examination by Federal or state banking authorities, provided that the
short-term unsecured deposit obligations of such depository institution or
trust company at the date of investment are then rated at least P-1 by
Moody's and A-1+ by S&P; and
(f) demand or time deposits of, or certificates of deposit issued by,
any bank, trust company, savings bank or other savings institution, which
deposits are fully insured by the Federal Deposit Insurance Corporation,
provided that the long-term unsecured debt obligations of such bank, trust
company, savings bank or other savings institution are rated at the date of
investment at least Aa2 by Moody's and AA- by S&P.
"ELIGIBLE RECEIVABLE" shall mean, on the applicable Addition Date and
Increase Date on which an interest therein is first acquired by the Bank, a
Receivable:
(i)(a) which shall have been originated in the United States of
America to an Obligor domiciled in the United States by a Dealer for the
retail sale of a Financed Vehicle in the ordinary course of such Dealer's
business, shall have been fully and properly executed by the parties
thereto, shall have been purchased by the Transferor from AAFC pursuant to
the Purchase Agreement, which AAFC in turn shall have purchased from such
Dealer under an existing dealer agreement which agreement shall be
consistent with AAFC's customary business practices and shall be in a form
acceptable to the Bank, which Receivable in turn shall have been validly
assigned by such Dealer to AAFC, and, in turn shall have been validly
assigned pursuant to the Purchase Agreement by AAFC to the Transferor in
accordance with its terms, and then shall be transferred and assigned to
the Bank, (b) which shall have created or shall create a valid, subsisting,
and enforceable first priority security interest in favor of AAFC in the
Financed Vehicle, which security interest has been assigned pursuant to the
Purchase Agreement by AAFC to the Transferor, which in turn shall be
assigned to the Bank, (c) which shall contain customary and enforceable
provisions such that the rights and remedies of the holder thereof shall be
adequate for the realization against the collateral of the benefits of the
security and (d) which arises under a Contract which shall provide for
level monthly payments (PROVIDED that the payment in the first or last
month in the life of the Receivable may be minimally different from the
level payment) that fully amortize the financed amount over no greater than
66 payments;
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(ii) with respect to which AAFC is the lienholder of record on the
related Title;
(iii) as to which the Contract File was delivered to the Custodian
prior to the purchase thereof by the Transferor from AAFC, except that if
the original certificate of title shall have been applied for and not yet
received at the time of such purchase, then such certificate shall have
been delivered to the Custodian within 180 days of such purchase;
(iv) as to which only one original executed Contract exists;
(v) as to which the related Obligor is not the United States of
America or any state or any agency, department, subdivision or
instrumentality thereof;
(vi) which shall not have been originated in, or shall be subject to
the laws of, any jurisdiction under which the transfer of such Receivable
under this Agreement shall be unlawful, void or voidable;
(vii) which is denominated and payable only in Dollars in the United
States of America;
(viii) which is less than 30 days delinquent;
(ix) which when transferred by AAFC to the Transferor was selected at
random from AAFC's retail installment sale contracts at the time of such
transfer, but conformed to certain requirements set forth herein or
otherwise agreed by the Transferor and the Bank;
(x) which is "chattel paper" within the meaning of Section 9-105 of
the Relevant UCC;
(xi) which arises under a Contract which, together with such
Receivable, (A) is in full force and effect and constitutes the legal,
valid and binding obligation of the related Obligor, enforceable against
such Obligor in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally, (B) is evidenced by only one
original executed copy, (C) is not the subject of any rescission, setoff,
counterclaim or other defense and (D) shall not have been satisfied,
subordinated, or rescinded;
(xii) which arises under a Contract which (A) does not require the
Obligor under such Contract to consent to the transfer of the rights and
duties of the Transferor or AAFC under such Contract and (B) does not
contain a confidentiality provision that purports to restrict the
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ability of the Bank to exercise its rights under this Agreement, including,
without limitation, its right to review the Contract;
(xiii) no provision of which has been waived by AAFC or the
Transferor, except in accordance with the Credit and Collection Policy;
(xiv) which, together with the Contract related thereto, complied on
the date of its origination and now complies in all material respects with
all requirements of applicable Federal, state and local laws and
regulations thereunder, including, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal
Trade Commission Act, the Magnuson-Moss Warranty Act, Regulations B and Z
of the Federal Reserve Board, various state "lemon laws" designed to
prevent fraud in the sale of used vehicles and various state adaptations of
the National Consumer Act and of the Uniform Consumer Credit Code, and
other consumer credit laws and equal credit opportunity and disclosure
laws;
(xv) which satisfies in all material respects all applicable
requirements of the Credit and Collection Policy on the applicable Addition
Date or Increase Date; and
(xvi) as to which AAFC shall be in full compliance in all material
respects with all of its obligations thereunder and under the related
Contract and any other agreements or instruments relating thereto; PROVIDED
that breach of any notice provision shall not be deemed to cause this
condition to be unsatisfied unless such breach causes the related Contract
to be unenforceable.
(xvii) which directs payment thereof to be sent to a Permitted
Lockbox;
(xviii) which is owned solely by the Transferor free and clear of all
Liens, except for the Lien arising in connection with this Agreement;
(xix) which, together with the aggregate of the Principal Balances of
other Receivables payable by the same Obligor or any party related to such
Obligor, does not exceed $150,000;
(xx) with respect to which the initial payment in respect thereof is
due no more than 3 months after the date on which the Receivable was
originated;
(xxi) with respect to which AAFC, in accordance with its Credit and
Collection Policy, has required that the Obligor has obtained an Insurance
Policy covering the Financed Vehicle;
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(xxii) with respect to which all filings (including Relevant UCC
filings) necessary in any jurisdiction to give the Bank a first priority
perfected ownership interest in such Receivable have been made;
(xxiii) with respect to which the Obligor was not noted in the related
Records as being (i) the subject of a bankruptcy, insolvency or similar
proceeding or (ii) if the Obligor is a natural person, deceased;
(xxiv) which, if at the time of the creation of such Receivable the
related Financed Vehicle was a used automobile or light-duty truck, such
Receivable, together with similar Eligible Receivables, shall not exceed
70% of the aggregate Principal Balance of Eligible Receivables transferred
to the Bank hereunder; and
(xxv) which is covered under the VSI Policy.
"ENGAGEMENT FEE" shall mean the fee payable on the Closing Date by
AAFC in an amount equal to the greater of $350,000 or 1% of the Maximum
Commitment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and any rule or regulation issued
thereunder.
"ERISA AFFILIATE" means, with respect to AAFC, any Person which is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Internal Revenue Code of which AAFC is a member, or (ii) solely for the
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Internal Revenue Code and the lien created under Section
302(f) of ERISA and Section 412(n) of the Internal Revenue Code, described in
Section 414(m) or (o) of the Internal Revenue Code of which AAFC is a member.
"EURODOLLAR RATE" shall mean, with respect to any Eurodollar Tranche
Period, a rate per annum determined by the Bank equal to the sum of (a) 0.75%
and (b) the quotient (expressed as a percentage and rounded upwards, if
necessary, to the nearest 1/16 of 1%) obtained by dividing (i) LIBOR for such
Eurodollar Tranche Period by (ii) 100% minus the LIBOR Reserve Percentage for
such Eurodollar Tranche Period, if any.
"EURODOLLAR TRANCHE" shall mean a Tranche as to which Discount is
calculated at the Eurodollar Rate.
"EURODOLLAR TRANCHE PERIOD" shall mean, with respect to a Eurodollar
Tranche, a period greater than or equal to seven days commencing on a Business
Day requested by the Servicer and agreed to by the Bank in accordance with
Section 2.5. If such Eurodollar Tranche Period would end on a day which is not
a Business Day, such Eurodollar Tranche Period shall end on the next succeeding
Business Day, unless such extension would cause
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the last day of such Eurodollar Tranche Period to occur in the next following
calendar month, in which event the last day of such Eurodollar Tranche Period
shall occur on the next preceding Business Day.
"EVENT OF TERMINATION" shall, with respect to AAFC, mean (i) with
respect to any Plan, a reportable event, as defined in Section 4043(b) of ERISA,
as to which the PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the occurrence of such
event, or (ii) the withdrawal of AAFC, as the case may be, or any ERISA
Affiliate from a Plan during a plan year in which it is a substantial employer,
as defined in Section 4043(b) of ERISA, or (iii) the failure by AAFC or any
ERISA Affiliate to meet the minimum funding standard of Section 412 of the
Internal Revenue Code or Section 302 of ERISA with respect to any Plan,
including, without limitation, the failure to make on or before its due date a
required installment under Section 412(m) of the Internal Revenue Code or
Section 302(e) of ERISA, or (iv) the distribution under Section 4041 of ERISA of
a notice of intent to terminate any Plan or any action taken by AAFC or any
ERISA Affiliate to terminate any Plan, or (v) the adoption of an amendment to
any Plan that pursuant to Section 401(a)(29) of the Internal Revenue Code or
Section 307 of ERISA would result in the loss of tax-exempt status of the trust
of which such Plan is a part if AAFC or an ERISA Affiliate fails to timely
provide security to the Plan in accordance with the provisions of said Sections,
or (vi) the institution by the PBGC of proceedings under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan,
or (vii) the receipt by AAFC or any ERISA Affiliate of a notice from a
Multiemployer Plan that action of the type described in the previous clause (vi)
has been taken by the PBGC with respect to such Multiemployer Plan, or (viii)
the complete or partial withdrawal from a Multiemployer Plan by AAFC or any
ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA
(including the obligation to satisfy secondary liability as a result of a
purchaser default), or (ix) the receipt by AAFC or any ERISA Affiliate of notice
from a Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated
under Section 4041A of ERISA, or (x) any event or circumstance exists which may
reasonably be expected to constitute grounds for AAFC or any ERISA Affiliate to
incur liability under Title IV of ERISA or under Sections 412(c)(11) or 412(n)
of the Internal Revenue Code with respect to any Plan.
"EXCESS SPREAD CONDITION" shall be deemed to have occurred if the
weighted average Tranche Rate with respect to any Collection Period shall be
greater than 7.25%.
"EXCESS SPREAD PERCENTAGE" shall mean, for any Settlement Date, (i)
the weighted average APR of the Receivables (taking into account any Interest
Rate Cap maintained pursuant to Section 2.14 hereof) as of the last day of the
immediately preceding Collection Period, minus (ii) the weighted average
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Tranche Rate with respect to the related Collection Period, minus (iii) 1.00%,
minus (iv) the Loss Ratio for such Collection Period.
"EXPENSE AND TAX-SHARING AGREEMENT" shall mean the Office Space,
Administrative and Office Support Services, and Tax Allocation Agreement dated
as of June 14, 1996, between AAFC and the Transferor.
"FACILITY DOCUMENTS" shall mean collectively, this Agreement, each
Supplemental Conveyance, the Purchase Agreement, the Lockbox Agreements, the
Custodial Agreement, the Support Agreement, the Expense and Tax-Sharing
Agreement and all other agreements, documents and instruments delivered pursuant
thereto or in connection therewith.
"FINANCE CHARGE COLLECTIONS" shall mean as to any Collection Period,
the sum of the following amounts with respect to such Collection Period: (i)
that portion of Collections with respect to the Receivables that are properly
designated in the Contracts as Finance Charges, (ii) Liquidation Proceeds to the
extent allocable to interest due thereon in accordance with the Servicer's
customary servicing procedures, and (iii) the Repurchase Amount of each
Receivable that was repurchased or repaid pursuant to Section 2.12, 2.13, 2.16
or 3.2 (the last paragraph thereof) during the related Collection Period to the
extent attributable to accrued interest thereon.
"FINANCE CHARGES" shall mean, with respect to a Contract, any finance,
interest or similar charges (other than any Supplemental Servicing Fee) owing by
the Obligor pursuant to such Contract.
"FINANCED VEHICLE" shall mean, with respect to a Receivable, the new
or used automobile or light-duty truck, together with all accessories thereto,
securing the related Obligor's indebtedness thereunder.
"INCREASE DATE" shall mean any Business Day prior to the Termination
Date on which the Aggregate Net Investment is increased pursuant to Section 2.3
hereof.
"INCREASE DATE NOTICE" shall mean the notice delivered by the
Transferor with respect to each Increase Date pursuant to Section 2.3 hereof.
"INCREMENTAL ENHANCEMENT CONDITION" shall mean, on any date of
determination, (i) the annualized average of the Portfolio Loss Ratios for any
three consecutive Collection Periods shall exceed 2.5% or (ii) the average of
the Delinquency Ratios for any three consecutive Collection Periods shall exceed
2.0%; PROVIDED, HOWEVER, that an Incremental Enhancement Condition shall no
longer be deemed to be continuing if (x) with respect to the Incremental
Enhancement Condition referred to in clause (i), the annualized average of the
Portfolio Loss Ratios
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for any three consecutive Collection Periods subsequent to the occurrence of
such Condition shall be less than 2.5%, and (y) with respect to the Incremental
Enhancement Condition referred to in clause (ii), the average of the Delinquency
Ratios for any three Collection Periods subsequent to the occurrence of such
Condition shall be less than 2.0%. Notwithstanding the foregoing, for any date
of determination with respect to the first or the second Collection Period
following the initial Increase Date, the Incremental Enhancement Condition shall
be determined on the basis of the annualized average of the Portfolio Loss
Ratios or the average of the Delinquency Ratios, as applicable, for such
Collection Period or Collection Periods as the case may be.
"INDEMNIFIED AMOUNTS" shall have the meaning specified in Section 8.1.
"INSURANCE POLICY" shall mean, with respect to a Receivable, any
insurance policy benefiting the holder of the Receivable providing loss or
physical damage, credit life, credit disability, theft, mechanical breakdown or
similar coverage with respect to the Financed Vehicle or the Obligor.
"INTEREST RATE CAP" shall mean the Eligible Interest Cap Agreement
entered into by the Transferor for the benefit of the Bank with the Interest
Rate Cap Provider pursuant to Section 2.14.
"INTEREST RATE CAP PAYMENT" shall mean, on each Settlement Date, any
payment made by the Interest Rate Cap Provider to the Collection Account.
"INTEREST RATE CAP PROVIDER" shall mean the counterparty to the
Interest Rate Cap, in its capacity as obligor under the Interest Rate Cap.
"LIBOR" shall mean, for any Eurodollar Tranche Period, the rate per
annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) at which
deposits in Dollars are offered to the Bank by first-class banks in the London
interbank market at approximately 11:00 a.m. (London time) two (2) Business Days
prior to the first day of such Eurodollar Tranche Period, such United States
dollar deposits in immediately available funds for a period, and in an amount,
comparable to the Eurodollar Tranche Period and principal amount of such
Eurodollar Tranche.
"LIBOR RESERVE PERCENTAGE" shall mean, for any Eurodollar Tranche and
any Eurodollar Tranche Period therefor, the maximum reserve percentage, if any,
applicable to the Bank under Regulation D during such Tranche Period (or if more
than one percentage shall be applicable, the daily average of such percentages
for those days in such Tranche Period during which any such percentage shall be
applicable) for determining the Bank's reserve requirement (including any
marginal, supplemental or emergency reserves) with respect to liabilities or
assets
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having a term comparable to such interest period consisting or included in the
computation of Eurocurrency Liabilities (as defined in Regulation D of the Board
of Governors of the Federal Reserve System). Without limiting the effect of the
foregoing, but without duplicating the provisions of Section 8.3, the LIBOR
Reserve Percentage shall reflect any other reserves required to be maintained by
the Bank by reason of any Regulatory Change against (a) any category of
liabilities which includes deposits by reference to which LIBOR is to be
determined or (b) any category of extensions of credit or other assets which
include LIBOR-based credits or assets.
"LIEN" shall mean a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
which attach to the respective Receivable by operation of law as a result of any
act or omission by the related Obligor.
"LIQUIDATED RECEIVABLE" shall mean a Receivable which, by its terms,
is delinquent more than 120 days or, with respect to Receivables that are
delinquent less than 120 days, the Servicer has (i) determined, in accordance
with its customary servicing procedures, that eventual payment in full is
unlikely, (ii) repossessed the Financed Vehicle, (iii) received notification
that the Obligor is the subject of a bankruptcy, insolvency or similar
proceeding or (iv) allocated a reserve for possible loss or recognized an
estimated or actual loss.
"LIQUIDATION PROCEEDS" shall mean the monies collected from whatever
source, on a Liquidated Receivable, net of the sum of any amounts expended by
the Servicer for the account of the Obligor, plus any amounts required by law to
be remitted to the Obligor; PROVIDED, HOWEVER, that the Liquidation Proceeds
with respect to any Receivable shall in no event be less than zero.
"LOCKBOX ACCOUNT" shall mean a demand deposit account identified on
Exhibit G hereto maintained with a Permitted Lockbox Bank pursuant to the
Lockbox Agreement for the purpose of depositing payments made by the Obligors or
such other account of which the Transferor may have notified the Bank from time
to time.
"LOCKBOX AGREEMENT" shall mean the agreement relating to lockbox
services in connection with a Permitted Lockbox and related Lockbox Account
which are in compliance with Section 6.8 hereof and otherwise in form and
substance satisfactory to the Bank, which have been executed and delivered by
AAFC to a Permitted Lockbox Bank.
"LOSS RATIO" shall mean, as of any date of determination and for any
Collection Period, a fraction, expressed as a percentage, the numerator of which
equals the Portfolio Loss for such Collection Period and the denominator of
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which equals the aggregate Principal Balance of all Receivables as of the first
day of such Collection Period.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to either the
Transferor or AAFC, as applicable, a material adverse effect on (i) the
financial condition or operations of the Transferor or AAFC and its
Subsidiaries, as the case may be, taken as one enterprise, (ii) the ability of
the Transferor or AAFC, as the case may be, to perform its obligations under
this Agreement, (iii) the legality, validity or enforceability of this
Agreement, (iv) the Bank's interest in the Receivables or in any significant
portion thereof, or (v) the collectibility of the aggregate amount of
Receivables or of any significant portion of the Receivables, other than, in the
case of clauses (i) through (v), such Material Adverse Effects which are the
direct result of actions or omissions of the Bank.
"MAXIMUM COMMITMENT" shall mean $35,000,000, or such other amount
agreed to by the Transferor and the Bank.
"MAXIMUM SUBORDINATED AMOUNT" shall mean, on any date of
determination, (a) as long as no Incremental Enhancement Condition shall have
occurred and be continuing, the difference between (i) the Aggregate Net
Investment divided by 1 minus .15 and (ii) the Aggregate Net Investment, and
(b) if an Incremental Enhancement Condition shall have occurred and be
continuing, the difference between (i) the Aggregate Net Investment divided by 1
minus .225 and (ii) the Aggregate Net Investment.
"MONTHLY REPORT" shall mean a report prepared by the Servicer in
substantially the form of Exhibit D hereto.
"MOODY'S" shall mean Moody's Investors Service, Inc., together with
its successors.
"MULTIEMPLOYER PLAN" means, with respect to AAFC, a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA which is or was at any time
during the current year or the immediately preceding five years contributed to
by AAFC or any ERISA Affiliate on behalf of its employees and which is covered
by Title V of ERISA.
"NET INVESTMENT ADDITIONAL AMOUNTS" on any Increase Date shall mean
the amount paid by the Bank to the Transferor, which amount shall equal the
maximum amount requested by the Transferor in the Increase Date Notice that
(i) allows the conditions set forth in Section 4.2(h) hereof to be satisfied and
(ii) when added to the Aggregate Net Investment, is not greater than the Maximum
Commitment on such Increase Date.
"OBLIGOR" shall mean any Person obligated to make payments pursuant to
a Contract.
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"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED LOCKBOX" shall mean a post office box identified on Exhibit
G hereto maintained by a Permitted Lockbox Bank for the purpose of receiving
payments made by the Obligors or such other post office box as the Servicer may
identify to the Bank from time to time.
"PERMITTED LOCKBOX BANK" shall mean a bank identified on Exhibit G
hereto or such other bank as the Servicer may identify to the Bank from time to
time.
"PERSON" shall mean any corporation (including a business trust),
natural person, firm, joint venture, joint stock company, partnership, trust,
unincorporated organization, enterprise, government or any department or agency
of any government.
"PLAN" means any employee benefit or other plan which is or was at any
time during the current year or immediately preceding five years established or
maintained by AAFC or any ERISA Affiliate and which is covered by Title IV of
ERISA, other than a Multiemployer Plan.
"POOL BALANCE" for any date of determination shall mean the aggregate
Principal Balance of the Receivables as of the close of business on the last day
of the prior Collection Period, plus the aggregate of all amounts received as
payments of principal in respect of Receivables (whether by or on behalf of the
Obligors or from the Transferor) during the prior Collection Period, plus the
Principal Balance of Additional Receivables designated since such day as shown
in an Addition Date Statement.
"PORTFOLIO LOSS" shall mean, with respect to any Collection Period,
the aggregate Principal Balance of Liquidated Receivables during such Collection
Period net of all Liquidation Proceeds (including estimated Liquidation
Proceeds) received (or estimated to be received) during such Collection Period.
"PORTFOLIO LOSS RATIO" shall mean, as of any date of determination and
for any Collection Period, a fraction, expressed as a percentage, the numerator
of which equals the AAFC Portfolio Loss for such Collection Period and the
denominator of which equals the aggregate Principal Balance of all AAFC
Portfolio Receivables as of the first day of such Collection Period.
"POTENTIAL TERMINATION EVENT" shall mean an event which, but for the
lapse of time or the giving of notice or both, would constitute a Termination
Event.
"PRINCIPAL BALANCE" of a Receivable, as of the close of business on
the last day of a Collection Period, means the Amount
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Financed MINUS the sum of (i) that portion of all amounts paid by or on behalf
of the related Obligor allocable to principal using the Simple Interest Method,
(ii) any payments made by the Transferor and allocable to principal pursuant to
Section 2.16, and (iii) any payment of the Repurchase Amount with respect to the
Receivable allocable to principal.
"PRINCIPAL COLLECTIONS" means, for any Settlement Date, the sum of the
following amounts with respect to the preceding Collection Period: (i) that
portion of all Collections on Receivables allocable to principal, (ii)
Liquidation Proceeds attributable to principal in accordance with the Servicer's
customary servicing procedures, (iii) to the extent attributable to principal,
the Repurchase Amount of each Receivable that was repurchased pursuant to
Sections 2.12, 2.13 or 3.2 (the last paragraph thereof) during the related
Collection Period, (iv) to the extent allocable to principal, any payments by
the Transferor pursuant to Section 2.16, and (v) any prepayment (whether partial
or in full) with respect to the Receivables allocable to principal.
"PRINCIPAL DISTRIBUTION AMOUNT" shall mean, with respect to any
Settlement Date, the Bank Percentage of: (i) the amount of all payments and
prepayments, if any, allocated to principal during the related Collection
Period; (ii) the principal portion of all payments by the Transferor pursuant to
Section 2.16 received during the related Collection Period; and (iii) the
portion of the Repurchase Amount allocated to principal during the related
Collection Period.
"PROCEEDS" shall mean "proceeds" as defined in Section 9-306(l) of the
Relevant UCC.
"PURCHASE AGREEMENT" shall mean the Purchase Agreement dated as of
June 14, 1996, by and between AAFC, as seller, and the Transferor, as buyer.
"RECEIVABLE" shall mean any retail installment sale contract arising
out of or in connection with the sale of new or used automobiles or light-duty
trucks and includes the right of payment of any Finance Charges and other
obligations of the Obligor with respect thereto, originated by dealers or AAFC
and sold by AAFC to the Transferor under the Purchase Agreement, which shall
appear on Schedule 1 hereto (which Schedule 1 may be in the form of a computer
file or microfiche list), as amended or modified on each Addition Date and
otherwise from time to time pursuant to the terms hereof.
"RECORDS" shall mean, with respect to each Receivable, all factory
invoices and work orders describing the related Financed Vehicle, the bill of
sale and guaranty of title, insurance policies, tax receipts, property and
casualty insurance policies or binders naming the Servicer as loss payee or
additional named insured, as is appropriate, insurance premium receipts, ledger
sheets, payment records, insurance claim files
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and correspondence, all documentation in connection with any modification,
release, accommodation, consigning or guaranty of the Receivable and all other
documents and instruments, including all books, records, files, tapes,
correspondence and other information or materials (including, without
limitation, computer programs, tapes, discs, punch cards, data processing
software and related property and rights) relating to the Receivable, the
Contract, the Title and the Financed Vehicle relating to the Receivable and this
Agreement.
"REGULATION D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be amended, supplemented or
otherwise modified and in effect from time to time.
"REGULATORY CHANGE" shall mean any change after the date of this
Agreement in United States (federal, state or municipal) or foreign laws or
regulations (including Regulation D) or the adoption or making after such date
of any interpretations, directives or requests applying to a class of banks
(including the Bank) of or under any United States (federal, state or municipal)
or foreign, laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"RELATED SECURITY" shall mean, with respect to any Receivable:
(i) all of the Transferor's interest in the Financed Vehicle, and all
of the Transferor's interest in all insurance contracts with respect
thereto;
(ii) all of the Transferor's right, title and interest in, to and
under the Purchase Agreement with respect to such Receivable, including,
without limitation, all amounts due or to become due to the Transferor from
AAFC under such Agreement and all rights, remedies, powers, privileges and
claims of the Transferor against AAFC under the Purchase Agreement with
respect to such Receivable (whether arising pursuant to the terms of the
Purchase Agreement or otherwise available to the Transferor at law or in
equity);
(iii) all of the Transferor's interest in all other security interest
or liens and property subject thereto from time to time, if any, purporting
to secure payment of the Contract related thereto, whether pursuant to such
Contract or otherwise, together with all financing statements signed by an
Obligor and security agreements describing any collateral securing such
Contract;
(iv) all of the Transferor's interest in all guaranties, insurance and
other agreements or arrangements of whatever character from time to time
supporting or
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securing payment of such Receivable, whether pursuant to the Contract
related to such Receivable or otherwise;
(v) all of the Transferor's interest in Dealer Recourse and all
service contracts and other contracts and agreements associated with such
Receivable;
(vi) all of the Transferor's interest in Contract Files and all
Records related to such Receivable; and
(vii) all proceeds of the foregoing.
"RELEVANT UCC" shall mean the Uniform Commercial Code as in effect
from time to time in all applicable jurisdictions.
"REPURCHASE AMOUNT" shall mean the amount described in Section 2.12(a)
and payable in accordance with Sections 2.12, 2.13 and 3.2 (the last paragraph
thereof).
"RESPONSIBLE OFFICER" shall mean, with respect to any Person, the
chief executive officer, principal financial officer, treasurer or controller of
such Person.
"S&P" shall mean Standard & Poor's Rating Group, together with its
successors.
"SECTION 8.2 COSTS" shall have the meaning specified in Section 8.2.
"SECTION 8.3 COSTS" shall have the meaning specified in Section
8.3(c).
"SERVICER" shall mean, initially, AAFC, and any successor Servicer
designated pursuant to Section 6.7.
"SERVICER DEFAULT" shall have the meaning specified in Section 6.9.
"SERVICING FEE" shall mean, with respect to each Collection Period, a
fee equal to 1/12 of 1.0% of the daily weighted average Pool Balance during such
Collection Period, payable from the Collection Account to the Servicer from
available Collections in accordance with Section 2.8(c).
"SETTLEMENT DATE" shall mean the fifteenth (15th) day of each calendar
month or, if such day is not a Business Day, the next succeeding Business Day.
"SIMPLE INTEREST METHOD" means the method of allocating a fixed level
payment to principal and interest, pursuant to which the portion of such payment
that is allocated to interest is equal to the product of the APR multiplied by
the unpaid principal balance, multiplied by the quotient obtained by calculating
the period of time elapsed since the preceding payment of interest was made and
dividing such period of time by
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360, provided that each monthly period shall be deemed to have 30 days.
"SUBSIDIARY" shall mean, for any Person, any corporation or other
business organization 50% or more of the outstanding voting securities of which
shall at the time be owned or controlled, directly or indirectly, by such Person
or by one or more such corporations or organizations or by such Person and one
or more such corporations or organizations, and any partnership of which such
Person or any such corporation or organization is a general partner.
"SUPPLEMENTAL CONVEYANCE" shall mean the Supplemental Conveyance
required to be delivered on each Addition Date pursuant to Section 2.4(b)(ii)
hereof.
"SUPPLEMENTAL SERVICING FEE" shall mean, on each Settlement Date, all
late fees, prepayment charges and other administrative fees and expenses or
similar charges allowed by applicable law with respect to the Receivables,
collected (from whatever source) on the Receivables during the preceding
Collection Period.
"SUPPORT AGREEMENT" shall mean the Support Agreement dated as of June
14, 1996, executed by UAG in favor of the Transferor, and any amendments or
modifications thereto.
"TERMINATION DATE" shall mean the earlier to occur of (i) the
occurrence of a Termination Event and the Bank's delivery of a notice of
termination pursuant to Section 7.2 and (ii) June 13, 1997, or such later date
agreed to between the Bank and the Transferor.
"TERMINATION EVENT" shall mean an event described in Section 7.1.
"TITLE" means, with respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
registrar of titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Title"
shall mean only a certificate or notification issued to a secured party.
"TRANCHE" shall mean a portion of the Aggregate Net Investment
allocated to a Tranche Period pursuant to Section 2.5.
"TRANCHE PERIOD" shall mean a CBR Tranche Period or a Eurodollar
Tranche Period.
"TRANCHE RATE" shall mean the Corporate Base Rate or the Eurodollar
Rate.
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"TRANCHE SELECTION NOTICE" shall mean a written notice provided by the
Servicer to the Bank pursuant to Section 2.5(a) in substantially the form of
Exhibit A hereto.
"TRANSFEROR" shall mean Atlantic Auto Second Funding Corporation, a
Delaware corporation, and its successors and permitted assigns.
"TRANSFEROR AMOUNT" shall mean the positive difference, if any,
between the Pool Balance and the Aggregate Net Investment.
"TRANSFEROR FINANCE CHARGE COLLECTIONS" shall mean with respect to any
Collection Period, the Transferor Percentage of the sum of (i) Finance Charge
Collections and (ii) Interest Rate Cap Payments, if any, for such Collection
Period MINUS the Transferor Percentage of the Servicing Fee for such Collection
Period.
"TRANSFEROR PERCENTAGE" shall mean, with respect to any Collection
Period, 100% MINUS the Bank Percentage for such Collection Period.
"TRANSFEROR PRINCIPAL COLLECTIONS" shall mean with respect to any
Collection Period, the Transferor Percentage of Principal Collections for such
Collection Period.
"TRANSFERRED INTEREST" shall mean, the Bank's (a) fractional undivided
interest in (i) each and every Receivable identified on Schedule 1 hereto, (ii)
all Related Security with respect to each such Receivable, (iii) all Collections
with respect thereto, and (iv) all Proceeds of the foregoing and (b) interest in
the Purchase Agreement and the Support Agreement.
"UAG" shall mean United Auto Group, Inc., a Delaware corporation, and
its successors and assigns.
"VSI POLICY" means the vendors single interest physical damage
insurance policy maintained with respect to the Receivables, a copy of which is
attached as EXHIBIT D to the Purchase Agreement.
SECTION 1.2. COMPUTATION OF TIME PERIODS. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding."
ARTICLE II
TRANSFERS AND SETTLEMENTS
SECTION 2.1. COMMITMENT. Upon the terms and subject to the
conditions herein set forth, the Bank agrees to purchase a
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fractional undivided interest in the Receivables represented by the Transferred
Interest from time to time during the period from and including the Closing Date
to but excluding the Termination Date in an aggregate principal amount at any
one time outstanding not to exceed the Maximum Commitment.
SECTION 2.2. TRANSFERS AND ASSIGNMENTS. The Transferor hereby
assigns, transfers and conveys to the Bank and its successors and assigns a
fractional undivided interest in all of the Transferor's right, title, and
interest, whether now owned or hereafter acquired, in and to (i) the Receivables
listed on Schedule 1 hereto and all Additional Receivables that become
Receivables pursuant to Section 2.4, (ii) the Related Security with respect to
such Receivables, (iii) all Collections, including all cash collections and
other cash proceeds of the Receivables, exclusive of any amounts allocable to
the premium for physical damage insurance force-placed by AAFC covering any
related Financed Vehicle, (iv) the Interest Rate Cap and all Interest Rate Cap
Payments, if any, (v) all monies from time to time on deposit in the Lockbox
Accounts relating to the Receivables and the Collection Account, (vi) all cash
and non-cash proceeds of any of the foregoing, (vii) the Purchase Agreement and
(viii) the Support Agreement. In the event that such assignment, transfer or
conveyance is deemed to constitute a pledge rather than an assignment of the
aforementioned property, the Transferor does hereby grant to the Bank a first
priority perfected security interest therein. The possession by the Bank or its
transferee of notes and such other goods, letters of credit, advises of credit,
money, documents, chattel paper or certificated securities shall be deemed to be
"possession by the secured party," for purposes of perfecting the security
interest pursuant to the Relevant UCC (including, without limitation, Section
9-305 thereof). Notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed to be notifications to, or acknowledgments, receipts or
confirmations from, bailees or agents (as applicable) of the Bank or its
transferee for the purpose of perfecting such security interest under applicable
laws. The foregoing conveyance does not constitute an assumption by the Bank or
its successors and assigns of any obligations of the Transferor to Obligors or
to any other Person in connection with Receivables or under any agreement or
instrument relating to the Receivables.
In connection with such transfer, the Transferor agrees to record and
file, at its own expense, financing statements with respect to the Receivables
now existing and hereafter created for the transfer of chattel paper and general
intangibles (each as defined in Article 9 of the Relevant UCC) meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect the transfer and assignment of the undivided interest
in the Receivables to the Bank, and to deliver a file-stamped copy of such
financing statements or other evidence of such filing satisfactory to the Bank
on or prior to the Closing Date.
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In connection with such transfer, the Transferor further agrees to
deliver or cause AAFC to deliver to the Custodian the Contract Files relating to
the Receivables.
The Transferor shall maintain its books and records so that such
records that refer to a Receivable shall indicate clearly that an interest in
such Receivable has been transferred to the Bank. Indication of the Bank's
interest in a Receivable shall be deleted from or modified on the Transferor's
records when, and only when, the Receivable shall have been paid in full or the
Bank's interest in such Receivable shall have been repurchased or repaid by the
Transferor or the Servicer hereunder. In addition, the Servicer shall maintain
its computer systems so that the Servicer's master computer records (including
any back-up archives) that refer to a Receivable shall indicate clearly that
such Receivable has been sold to the Transferor pursuant to the Purchase
Agreement and that an interest in such Receivable has been transferred and
assigned to the Bank. Indication of the Bank's undivided interest in a
Receivable shall be deleted from or modified on the Servicer's computer system
when, and only when, the Receivable shall have been paid in full or the Bank's
undivided interest in such Receivable shall have been repurchased or repaid by
the Transferor or the Servicer hereunder. The Servicer agrees to deliver to the
Bank a list, which may be a computer file or microfiche list, containing a true
and complete schedule of all such Receivables, identified by account number and
by Principal Balance as of the origination date of such Receivable. Such file
or list shall be marked as the "Receivables Schedule" and Schedule 1 to this
Agreement, delivered to the Bank as confidential and proprietary, and is hereby
incorporated into and made a part of this Agreement.
SECTION 2.3. INCREASE OF AGGREGATE NET INVESTMENT. On any Increase
Date, but no more than twice during any weekly period, the Transferor may
request by delivery of an Increase Date Notice in the form of Exhibit I hereto
(which Notice may be incorporated into the Addition Date Statement if an
Increase Date and Addition Date will occur on the same day) that the Bank
increase its Aggregate Net Investment by acquiring from the Transferor on such
Increase Date a specified additional undivided interest in the Receivables
(including any Additional Receivables) in a specified amount equal to no less
than $500,000 ($1,000,000 in the case of the initial Increase Date) (each such
amount, the "NET INVESTMENT ADDITIONAL AMOUNT"); PROVIDED, HOWEVER, that if such
Increase Date is also a Settlement Date, then the Net Investment Additional
Amount may be in an amount equal to the amount, if any, by which the Aggregate
Net Investment would be reduced by the distributions pursuant to Section
2.8(c)(5) on such Settlement Date; and PROVIDED FURTHER, HOWEVER, that in no
event shall the Net Investment Additional Amount on any Increase Date, together
with the Aggregate Net Investment (before giving effect to such Net Investment
Additional Amount), exceed the Maximum Commitment. Subject to satisfaction of
the conditions precedent to the obligation of the Bank to purchase the Net
Investment Additional Amount set forth
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in Section 4.2, the Bank shall pay to the Transferor an amount equal to the Net
Investment Additional Amount and the Transferor shall, automatically upon
receipt of such payment, transfer to the Bank, without recourse, an additional
undivided interest in Receivables equal to such Net Investment Additional
Amount. The Net Investment Additional Amount paid by the Bank to the Transferor
on the initial Increase Date shall be equal to the maximum amount requested by
the Transferor that allows the condition set forth in Section 4.2(h) to be
satisfied.
SECTION 2.4. ADDITIONAL RECEIVABLES.
(a) The Transferor may at any time prior to the Termination Date
designate additional Eligible Receivables to be included as Receivables
hereunder ("ADDITIONAL RECEIVABLES").
(b) Designation of Additional Receivables on any Addition Date shall
occur upon the satisfaction in any order of the following conditions:
(i) On or before the Business Day preceding such Addition Date, the
Transferor shall give the Bank notice of the addition of such Additional
Receivables, specifying such Addition Date and the aggregate Principal
Balance of such Additional Receivables as of such Addition Date;
(ii) On or prior to such Addition Date, the Transferor, the Servicer
and the Bank shall have executed a supplemental conveyance in substantially
the form of Exhibit J to this Agreement (a "SUPPLEMENTAL CONVEYANCE");
(iii) On or prior to such Addition Date, the Transferor or the
Servicer shall have delivered to the Bank a completed Addition Date
Statement in the form of Exhibit K hereto, which Addition Date Statement
shall specify, among other things, the sum of the Pool Balance as
determined in the most recent Monthly Report, the aggregate Principal
Balance of Additional Receivables added since the date of such Monthly
Report and the aggregate Principal Balance of Additional Receivables to be
added on such Addition Date; and
(iv) On or prior to such Addition Date, all of the applicable
conditions set forth in Section 4.2 hereof shall have been satisfied.
SECTION 2.5. SELECTION OF TRANCHE PERIODS AND TRANCHE RATES.
(a) At all times hereafter, but prior to the Termination Date, the Servicer
shall, subject to availability as described and the limitations described below,
request Tranche Periods and Tranche Rates applicable thereto and allocate the
Aggregate Net Investment to one or more selected Tranche Periods, so that the
aggregate amounts allocated to outstanding Tranche
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Periods at all times shall equal the Aggregate Net Investment; PROVIDED,
HOWEVER, that at no time other than the thirty day period immediately preceding
a term securitization transaction shall there be more than three (3) CBR
Tranches outstanding. The Servicer shall, in the case of a Tranche Rate based
on the Eurodollar Rate, three (3) Business Days prior to the issuance of a
particular Tranche or Tranches and in the case of a Tranche Rate based on the
Corporate Base Rate, on the day such Tranche is requested, give the Bank
irrevocable written notice of such instructions in the form attached hereto as
Exhibit A (each such notice, a "TRANCHE SELECTION NOTICE"); PROVIDED, HOWEVER,
that (i) if no such notice is given, the Tranche Period shall be 30 days (or
such lesser number of days as remain to the Termination Date) or (ii) if the
Bank determines, in its sole discretion, that the Tranche Period requested by
the Servicer is unavailable or uneconomical, the Bank may select any other
Tranche Period; PROVIDED that prior to effecting such selection, the Bank shall
use its best efforts to consult with and obtain the consent of the Servicer.
After its receipt of any such Tranche Selection Notice, the Bank shall promptly
confirm to the Servicer the Tranche Rate(s), the Tranche Period(s) and the
amount of the Aggregate Net Investment allocated to each such Tranche. Each
Tranche Period requested by the Servicer and approved by the Bank shall end on a
Business Day. In the case of any Tranche Period scheduled to end after the
Termination Date, such Tranche Period shall end instead on such Termination
Date.
(b) Upon the occurrence and continuation of a Termination Event, the
Bank may, in its sole discretion, at any time or from time to time, by written
notice to the Servicer, declare any Tranche Period to be terminated and allocate
the amount of Aggregate Net Investment allocated to the Tranche for such Tranche
Period to one or more other Tranches and Tranche Periods as the Bank shall
select. The Bank shall be entitled to Early Collection Fees and indemnification
from the Transferor in accordance with Section 8.1 in the event that a Tranche
Period is ended before its scheduled final day due to the occurrence of a
Termination Event.
(c) At all times on and after the Termination Date occurring for the
reason set forth in clause (i) of the definition of such term, the Bank may
declare the Tranche Rates applicable to the Aggregate Net Investment to be equal
to the Corporate Base Rate plus 2%.
SECTION 2.6. DISCOUNT AND OTHER COSTS AND EXPENSES. The Transferor
hereby agrees to pay to the Bank as and when due in accordance with this
Agreement, the Discount. Discount based on the Tranche Rate shall accrue with
respect to each Tranche on each day occurring during the Tranche Period related
thereto. Discount accrued on each Tranche shall be payable on the last day of
the applicable Tranche Period. If any amount hereunder shall be payable on a
day which is not a Business Day, such amount shall be payable on the next
succeeding Business Day (unless the amount is payable in respect of a Tranche,
the Tranche Rate of
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which is determined by reference to the Eurodollar Rate, and the next succeeding
Business Day is in the next calendar month, in which event the amount shall be
payable on the next preceding Business Day). Discount shall be calculated for
the actual days elapsed on the basis of a year of 360 days for all Tranche
Periods other than those calculated by reference to the Corporate Base Rate, and
or the basis of a 365- or 366-day year, as the case may be, for the CBR Tranche
Period. Nothing in this Agreement shall limit in any way the obligations of the
Transferor to pay the amounts set forth in this Section 2.6.
SECTION 2.7. PROTECTION OF OWNERSHIP OF THE BANK. The Transferor
agrees that from time to time, at its expense, it will promptly execute and
deliver all instruments and documents and take all action that the Bank may
reasonably request in order to perfect or protect the Transferred Interest or to
enable the Bank to exercise or enforce any of its rights hereunder. Without
limiting the foregoing, the Transferor will, upon the request of the Bank, in
order to accurately reflect this transaction, execute and file such financing or
continuation statements or amendments thereto or assignments thereof (as
permitted pursuant to Section 9.6 hereof) as may be reasonably requested by the
Bank and mark its master data processing records with a notation describing the
acquisition by the Bank of the Transferred Interest, as the Bank may reasonably
request. To the fullest extent permitted by applicable law, the Bank shall be
permitted to sign and file continuation statements and amendments thereto and
assignments thereof without the Transferor's signature in such cases where the
Transferor is obligated hereunder to sign such statements, amendments or
assignments if, after written notice to the Transferor, the Transferor shall
have failed to sign such continuation statements, amendments or assignments
within ten (10) Business Days after receipt of such notice from the Bank.
Carbon, photographic or other reproduction of this Agreement or any financing
statement shall be sufficient as a financing statement. The Transferor shall
neither change its name, identity or corporate structure (within the meaning of
Section 9-402(7) of any applicable enactment of the Relevant UCC), nor relocate
its chief executive office or any office where Records are kept unless it shall
have: (i) given the Bank at least fifteen (15) days' prior notice thereof and
(ii) delivered to the Bank all financing statements, instruments and other
documents requested by the Bank in connection with such change or relocation.
SECTION 2.8. ALLOCATION AND APPLICATION OF COLLECTIONS.
(a) GENERAL SETTLEMENT PROCEDURES. The Servicer shall remit to the
Collection Account all Collections (other than Repurchase Amounts and repayments
pursuant to Section 2.16) within two Business Days of receipt thereof. The
Servicer and the Transferor shall deposit or cause to be deposited in the
Collection Account the Repurchase Amounts and repayments pursuant to Section
2.16 when such obligations are due.
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(b) PAYMENT OF DISCOUNT. The Transferor hereby agrees to pay to the
Bank, from Finance Charge Collections and moneys retained in the Collection
Account on prior Settlement Dates pursuant to Section 2.8(c), Advances, if any,
and other funds contributed by the Transferor or the Servicer, on the last day
of each Tranche Period, in accordance with the terms of this Agreement, all
amounts due and payable with respect to the accrued Discount on such day.
(c) SERVICER ALLOCATIONS. On each Settlement Date, the Servicer shall
prior to 12:00 noon, New York City time, cause to be made the following
distributions and transfers in the amounts set forth in the related Monthly
Report in the following priority from the aggregate Collections on the
Receivables:
(1) from Finance Charge Collections in respect of prior
Collection Periods, to reimburse the Servicer for any Advances made with
respect to the preceding Collection Period and any unreimbursed Advances
from prior Collection Periods; PROVIDED, HOWEVER, that if a Termination
Event has occurred and is continuing and AAFC is the Servicer, such
Advances shall be reimbursed pursuant to clause (10) below; PROVIDED
FURTHER, HOWEVER, that the Servicer may, in its sole discretion, defer the
reimbursement of any such Advances to a future Settlement Date;
(2) from Finance Charge Collections remaining in respect of the
preceding Collection Period, to the Servicer in payment of the Servicing
Fee for the preceding Collection Period and any unpaid Servicing Fees from
prior Collection Periods;
(3) from Bank Finance Charge Collections, Advances (if any) and
Collections retained in the Collection Account from prior Settlement Dates
pursuant to clause (4) below, to pay to the Bank any Discount due on such
Settlement Date;
(4) from Bank Finance Charge Collections remaining and Advances
(if any), to retain in the Collection Account any accrued and unpaid
Discount through the related Determination Date;
(5)(A) on each Settlement Date prior to the Termination Date,
from Bank Principal Collections and Bank Finance Charge Collections
remaining, to the Bank in an amount equal to the Principal Distribution
Amount to be used to reduce the Aggregate Net Investment until such time as
the Aggregate Net Investment shall be reduced to zero, PROVIDED that if the
conditions specified in Section 4.2 hereof shall have been satisfied on
such Settlement Date, the amount equal to the Principal Distribution Amount
shall be treated as a Net Investment Additional Amount and therefore, paid
to the Transferor (such that after such treatment and payment, the
Aggregate Net Investment remains
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unchanged); and (B) on each Settlement Date on or after the Termination
Date, from Bank Principal Collections and Bank Finance Charge Collections
remaining, to the Bank to be used to reduce the Aggregate Net Investment
until such time as the Aggregate Net Investment shall be reduced to zero;
(6) to the Bank, from and to the extent of remaining Bank Finance
Charge Collections and Bank Principal Collections, an amount equal to the
aggregate Principal Balance with respect to Liquidated Receivables;
(7) to the Transferor, the remaining Bank Finance Charge
Collections, if any;
(8) to the Transferor, the Transferor Finance Charge Collections;
(9) to the Transferor, the Transferor Principal Collections; and
(10) if as a result of a Termination Event, no distribution was
made to the Servicer pursuant to clause (1) above, from the Collections
remaining, to reimburse the Servicer for any Advances made with respect to
the preceding Collection Period and any unreimbursed Advances from prior
Collection Periods.
If on any Settlement Date the Bank Finance Charge Collections,
Advances, if any, and Bank Principal Collections are insufficient to pay the sum
of the amounts to be distributed or retained in the Collection Account on such
Settlement Date pursuant to clauses (3), (4) and (5) above or in the event there
remains unpaid any aggregate Principal Balance of Liquidated Receivables after
the payment pursuant to clause (6) above, the Servicer shall deduct the amount
of such shortfall or unpaid amount from the amounts to be distributed to the
Transferor first pursuant to clause (7) above and second pursuant to clause (8)
above and third pursuant to clause (9) above, in each case up to the amount
described therein and subject to an aggregate amount on any Settlement Date
equal to the Available Subordinated Amount for such Settlement Date. Any
amounts so deducted shall (i) be applied to the shortfall in the order set forth
above, (ii) reduce the amounts distributable to the Transferor and (iii) reduce
the Available Subordinated Amount, but only to the extent of the amounts
deducted pursuant to clause (9) above. The Available Subordinated Amount on any
Settlement Date shall be increased by the amounts available to the Transferor
pursuant to clauses (7), (8) and (9) above on such Date (after giving effect to
the preceding sentence). Any amounts constituting the Supplemental Servicing
Fee shall be paid to the Servicer as additional servicing compensation.
(d) If on any Settlement Date an Incremental Enhancement Condition has
occurred, then Servicer shall deduct from the amounts payable to the Transferor
pursuant to (c) above
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and shall distribute to the Bank as a reduction of the Aggregate Net Investment
any such amount to the extent necessary to cause the Bank's Percentage to equal
77.5%.
SECTION 2.9. SERVICER ADVANCES. If, on any date on which Discount is
due and payable or on any Settlement Date when accrued and unpaid Discount is
required to be retained, Finance Charge Collections in respect of Receivables in
the Collection Account or in the possession of the Servicer are insufficient to
pay the Discount due or to be accrued on such date, then the Servicer may make
an advance in the amount of such shortfall (each such advance, an "ADVANCE") and
such Advance shall either be paid to the Bank on such date to the extent
Discount is due and payable on such date or retained in the Collection Account
to the extent Discount is not due and payable on such date. On each Settlement
Date, the Servicer shall be entitled to reimbursement, in accordance with
Section 2.8(c)(1) or (10), for any Advances not previously reimbursed, without
interest, from subsequent Finance Charge Collections.
SECTION 2.10. PAYMENTS AND COMPUTATIONS, ETC. All amounts to be paid
or deposited to the Bank by the Transferor or the Servicer hereunder shall be
paid or deposited to Account Number 001-39-968 maintained at the office of
Morgan Guaranty Trust Company of New York, New York, New York, For Credit to:
Morgan Guaranty Trust Company of New York - Delaware Branch until otherwise
notified by the Bank in accordance with the terms hereof, no later than 2:00
p.m. (New York time) on the day when due in immediately available funds. The
Transferor shall, to the extent permitted by law, pay to the Bank, upon demand,
interest on all amounts not paid or deposited when due to the Bank hereunder at
a rate equal to 1% per annum plus the Corporate Base Rate of interest as
announced by Morgan Guaranty Trust Company of New York from time to time. All
computations of interest hereunder shall be made on the basis of a year of 360
days (365 or 366 days, as applicable, for a CBR Tranche Period) for the actual
number of days (including the first but excluding the last day) elapsed.
SECTION 2.11. REPORTS. On or prior to each Determination Date, the
Servicer shall prepare and forward to the Bank a Monthly Report in substantially
the form of Exhibit D hereto, calculated as of the close of business of the
Transferor on the last day of the preceding Collection Period. The Servicer
shall include in the Monthly Report a determination of whether any Condition
shall be deemed to have occurred during the preceding calendar month or whether
any Condition shall be continuing during such preceding Collection Period, shall
describe any such Condition, and shall evidence the calculation used to make
such determination. The Transferor shall, or cause the Servicer to, furnish to
the Bank at any time and from time to time, such other or further information in
respect of the Receivables as are required hereunder or as the Bank may
reasonably request.
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SECTION 2.12. OPTIONAL PURCHASE; RETRANSFER OF LIQUIDATED
RECEIVABLES. (a) Subject to the next succeeding sentence, the Transferor shall
have the right to repurchase all of the existing Receivables if, at any time,
the Pool Balance of the Receivables falls below 10% of the Maximum Commitment.
The Transferor shall be entitled to effectuate such reconveyance on the next
Settlement Date following written notice to the Bank at a repurchase amount
equal to the aggregate Principal Balance of the Receivables being purchased on
such Settlement Date plus accrued and unpaid Finance Charges thereon through
such Settlement Date (the "REPURCHASE AMOUNT").
(b) The Transferor has the option, to be exercised in its sole and
absolute discretion, to repurchase any Liquidated Receivable, by paying to the
Servicer on the next Settlement Date the Repurchase Amount.
(c) The Transferor shall have the right, at any time and from time to
time, to repurchase all or any portion of the Receivables, upon at least ten
(10) Business Days' notice to the Bank stating the proposed date of such
repurchase and the aggregate Principal Balance of Receivables to be repurchased,
in connection with, and from the proceeds of, any term securitization
transaction. The Transferor shall effectuate such repurchase by paying the Bank
the Repurchase Amount.
(d) If, on any day with respect to any Receivable which (i) has become
a Liquidated Receivable which has been repurchased pursuant to Section 2.8(c),
or (ii) has been repurchased by the Transferor pursuant to Section 2.12(a) or
(b), 2.13 or 3.2 (the last paragraph thereof) or repaid in full pursuant to
Section 2.16, then, in such event and upon payment of any Aggregate Unpaids (if
all Receivables have been repurchased or repaid), the Bank shall, on such day
and at the expense of the Transferor, (i) retransfer to the Transferor all of
its right, title and interest in, to and under such Receivable and all Related
Security and Collections with respect thereto, and all Proceeds of the foregoing
and (ii) execute any and all instruments, certificates and other documents
reasonably necessary to effect such retransfer. Each Monthly Report delivered
by the Servicer shall state the aggregate Principal Balance of the repurchased
and reconveyed Receivables for the preceding Collection Period.
(e) The Servicer shall apply all Repurchase Amounts received pursuant
to Section 2.12, 2.13 or 3.2 (the last paragraph thereof) and all payments
received from the Transferor pursuant to Section 2.16 as Principal Collections
and Finance Charge Collections, as the case may be, in accordance with Section
2.8.
SECTION 2.13. MANDATORY REPURCHASE UNDER CERTAIN CIRCUMSTANCES.
(a)The Transferor shall repurchase from the Bank all Receivables if at any time
upon written advice of counsel, the Bank shall cease to have a first priority
perfected security
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interest in the Receivables, free and clear of any lien, within three days of
notice thereof by the Bank. The Repurchase Amount shall be paid by the
Transferor to the Bank in accordance with Section 2.8.
(b) The Transferor shall repurchase from the Bank any Receivable with
respect to which the Bank has not received a Custodian Confirmation within
fifteen (15) Business Days after such Receivable has been designated as a
Receivable hereunder. Such repurchase shall be effectuated by the Transferor on
the Settlement Date next following notice by the Bank that the Custodian's
Certificate has not been received by payment to the Bank of the Repurchase
Amount.
SECTION 2.14. INTEREST RATE CAP AGREEMENT. On the Settlement Date
immediately following receipt of a Monthly Report that indicates that an Excess
Spread Condition shall have occurred, the Transferor shall, unless the Bank
instructs otherwise, be obligated to provide at its own expense an Interest Rate
Cap. In addition, the Transferor shall be required to provide an Interest Rate
Cap on an Increase Date or an Addition Date, if required by the Bank pursuant to
Section 4.2(j). Payments made by the counterparty to such Interest Rate Cap
shall be treated as Finance Charge Collections.
SECTION 2.15. FEES. Notwithstanding any limitation on recourse
contained in this Agreement, the Transferor shall pay the Commitment Fees as the
same become due and payable.
SECTION 2.16. DILUTION. If the Principal Balance of a Receivable is
either (i) reduced or cancelled as a result of any (a) refunded item included in
the Amount Financed, such as extended warranty protection plan costs or
Insurance Policy premiums, (b) defective or rejected Financed Vehicle, goods or
services, any cash discount or of any adjustment by the Transferor, or (ii)
reduced or cancelled as a result of a set off in respect of any claim by any
Person (whether such claim arises out of the same or a related transaction or an
unrelated transaction), the Transferor shall pay to the Servicer on such day the
amount of such reduction or, if such transferred Receivable is cancelled, the
amount of the Principal Balance thereof, together with the Finance Charges
accrued thereon through such day.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF TRANSFEROR. The
Transferor represents and warrants to the Bank on and as of the Closing Date, as
of each Increase Date and as of each Addition Date that:
(a) CORPORATE EXISTENCE AND POWER. The Transferor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate power and all governmental licenses,
authorizations, consents and approvals required to carry on its business
relating to the Transferor's purchasing and selling of receivables relating to
sales of automobiles and light-duty trucks in each jurisdiction in which its
business is now conducted.
(b) DUE QUALIFICATION. The Transferor shall be duly qualified to do
business as a foreign corporation in good standing, and shall have obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(c) CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION. The
execution, delivery and performance by the Transferor of this Agreement and each
other Facility Document are within the Transferor's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official (except as
contemplated by Section 2.7), and do not contravene or violate, or constitute a
default under, any provision of applicable law or to the best of Transferor's
knowledge any order rule, or regulation applicable to the Transferor or of the
Certificate of Incorporation or Bylaws of the Transferor or of any agreement of
a material nature, judgment, injunction, order, decree or other instrument
binding upon the Transferor or result in the creation or imposition of any lien
on assets of the Transferor (except as contemplated by Section 2.7). The
Transferor has obtained all approvals and releases of security interests from
its creditors as are necessary to sell, transfer and assign the Transferred
Interest to the Bank hereunder.
(d) BINDING EFFECT. This Agreement and the other Facility Documents
constitute the legal, valid and binding obligations of the Transferor,
enforceable against the Transferor in accordance with their respective terms,
subject to the effect of bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally.
(e) ACCURACY OF INFORMATION. All information heretofore furnished by
the Transferor for purposes of or in connection with this Agreement or any
transaction contemplated
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hereby is, and all Increase Date Notices, Addition Date Statements and such
other information hereafter furnished by the Transferor to the Bank will be,
true and accurate in every material respect, on the date such information is
stated or certified.
(f) ACTIONS, SUITS. Except as set forth in Exhibit B, there are no
actions, suits or proceedings pending, or to the knowledge of the Transferor
threatened, against or affecting the Transferor or their respective properties,
in or before any court, arbitrator or other body, which (i) may have a Material
Adverse Effect, (ii) assert the invalidity of this Agreement, any of the other
Facility Documents or any material amount of Receivables or (iii) seek to
prevent the consummation of the transactions contemplated hereby or thereby.
(g) PLACE OF BUSINESS. The chief place of business and chief
executive office of the Transferor are located at 800 Perinton Hills Office
Park, Fairport, New York 14450, and the offices where the Transferor keeps all
the Records, are located at the addresses described on Exhibit C or such other
locations notified to the Bank in accordance with Section 2.7 in jurisdictions
where all action required by Section 2.7 has been taken and completed. Since
its incorporation, the Transferor has not merged or consolidated with any other
corporation or been the subject of any bankruptcy proceeding.
(h) NAMES. Except as described in Exhibit F, the Transferor has not
used any corporate names, tradenames or assumed names other than its name set
forth on the signature pages of this Agreement.
(i) USE OF PROCEEDS. No proceeds of the Net Investment Additional
Amounts will be used for a purpose which violates, or would be inconsistent with
regulations G, T, U or X promulgated by the Board of Governors of the Federal
Reserve System from time to time.
(j) NO TERMINATION EVENT. No Termination Event or Potential
Termination Event has occurred on or before the Closing Date or Addition Date,
as applicable.
(k) FINANCIAL CONDITION. The Transferor is not insolvent or the
subject of any bankruptcy proceeding and the transfer of the Receivables on such
day will not be made in contemplation of the occurrence thereof.
(l) TAXES. The Transferor has filed all income tax returns (federal,
state and local) and all other material tax returns which are required to be
filed by them and has paid all taxes due pursuant to such returns or pursuant to
any assessment received by it except for any such tax assessment, charge or levy
the payment of which is being contested in good faith and by proper proceedings.
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(m) BOOKS AND RECORDS. The Transferor has indicated on its books and
records (including any computer files), that the Transferred Interest in the
Receivables is the property of the Bank.
(n) PERMITTED LOCKBOX BANKS. The names and addresses of all Permitted
Lockbox Banks, together with the numbers of all Lockbox Accounts at such
Permitted Lockbox Banks and the addresses of all related Permitted Lockboxes,
are specified in Exhibit G (or such other Permitted Lockbox Banks, Lockbox
Accounts and/or Permitted Lockboxes as have been notified by the Transferor to
the Bank pursuant to Section 6.8).
(o) INVESTMENT COMPANY. The Transferor is not an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(p) FRAUD. There is no fraud on its part or, to its knowledge, on the
part of any other party to any of the Facility Documents, in connection with the
transactions contemplated by this Agreement or any of the other Facility
Documents.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR WITH
RESPECT TO EACH SALE OF RECEIVABLES. By selling to the Bank Net Investment
Additional Amounts on each Increase Date and fractional undivided interests in
Additional Receivables on each Addition Date, the Transferor represents and
warrants to the Bank as of each such date and only as to Receivables in which an
interest is first sold by the Transferor to the Bank hereunder on such date (in
addition to its other representations and warranties contained herein or made
pursuant hereto) that:
(a) STATEMENTS. All information set forth on the related Addition Date
Statement, Increase Date Notice and/or Monthly Report, as the case may be,
relating to such Receivables is true and correct as of such date of purchase.
(b) ASSIGNMENT. This Agreement vests in the Bank, all the right,
title and interest of the Transferor in and to the Transferred Interest, and
constitutes a valid sale of the Transferred Interest, enforceable against, and
creating an interest prior in right to, all creditors of and purchasers from
such Transferor, subject to all applicable bankruptcy, insolvency and similar
laws affecting creditors' rights generally and general principles of equity,
regardless of whether enforcement is sought in a proceeding in equity or at law.
(c) GOOD TITLE; PERFECTION. The original Title for each Financed
Vehicle shows AAFC as the original secured party and as the holder of a first
priority security interest in the related Financed Vehicle. Pursuant to the
Purchase Agreement, AAFC sold, transferred and assigned to the Transferor its
security interest in the Receivable and related Financed Vehicle, such that
immediately prior to the transfer hereunder, the
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Transferor shall be the legal and beneficial owner of the Receivables and
Related Security with respect thereto, free and clear of any Adverse Claim and
each Receivable shall be secured by a first perfected security interest in the
related Financed Vehicle in favor of the Transferor. This Agreement is
effective to, and shall transfer to the Bank, a valid and perfected first
priority ownership or security interest in each Receivable and in the Related
Security and Collections (to the extent provided by Section 9-306 of the
Relevant UCC) with respect thereto and the documents entered into in connection
therewith, free and clear of any Adverse Claim (except as created by this
Agreement). On or prior to the date hereof, all financing statements and other
documents required to be recorded or filed in order to perfect and protect the
Bank's interest in the Transferred Interest against all creditors of and
transferees from the Transferor will have been duly filed in each filing office
necessary for such purpose and all filing fees and taxes, if any, payable in
connection with such filings shall have been paid in full. No effective
financing statement and other instrument similar in effect covering any Contract
relating to a Receivable or the Related Security or Collections with respect
thereto is on file in any recording office, except those filed pursuant to this
Agreement.
(d) ELIGIBLE RECEIVABLES. Each Receivable transferred to the
Transferor is an Eligible Receivable.
(e) BINDING EFFECT OF RECEIVABLES AND CONTRACT. Each Receivable and
related Contract constitutes a legal, valid and binding obligation of the
related Obligor enforceable in accordance with its terms against such Obligor
subject to the effect of bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights and remedies generally and
general principles of equity.
(f) CREDIT AND COLLECTION POLICY. The Transferor has complied in all
material respects with the Credit and Collection Policy in regard to each
Receivable and related Contract. The Transferor has not extended or modified
the terms of any Receivable or the related Contract except in accordance with
the Credit and Collection Policy.
(g) INSURANCE POLICIES. The Transferor, in accordance with its normal
and customary procedures, shall have determined that the Obligor has obtained or
agreed to obtain an Insurance Policy covering the Financed Vehicle, and the
Obligor is required under the terms of its related Contract to maintain such
Insurance Policy.
(h) FILINGS. On or prior to each date on which a purchase occurs, all
financing statements and other documents required to be recorded or filed in
order to perfect and protect the Transferred Interest against all creditors of
and purchasers from the Transferor and all other Persons whatsoever will have
been duly filed in each filing office necessary for such purpose
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and all filing fees and taxes, if any, payable in connection with such filings
shall have been paid in full.
(i) MAINTENANCE OF RECORDS. The Transferor maintains at its chief
executive office or shall cause the Servicer to maintain at its chief executive
office the complete Records for each Receivable.
To the extent that any of the statements and representations made in
Section 3.1(e) or Section 3.2(a), (c), (d), (e), (f), (g) or (i) shall prove to
have been untrue or incorrect with respect to any Receivable at the time made
and, if the Transferor is unable to remedy such untrue or incorrect statement or
representation within ten (10) days of the Transferor's receipt of notice of
such untrue or incorrect statement or representation, such a finding shall not
result in a Termination Event hereunder, but the Transferor shall reacquire such
Receivables from the Bank for an amount equal to the Repurchase Amount at the
time of such repurchase, and (i) all such reconveyed Receivables shall no longer
constitute Receivables hereunder and (ii) following such reacquisition by the
Transferor, the Bank shall have no further remedy against the Transferor with
respect to such reconveyed Receivables.
SECTION 3.3. REPRESENTATIONS AND WARRANTIES OF SERVICER. AAFC, as
initial Servicer, represents and warrants to the Bank on and as of the Closing
Date, as of each Increase Date and as of each Addition Date, and any successor
Servicer by its appointment hereunder, represents and warrants to the Bank, on
and as of the date of its appointment, as of each Increase Date and as of each
Addition Date after its appointment, that:
(a) CORPORATE EXISTENCE AND POWER. The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and has all corporate power and all governmental licenses,
authorizations, consents and approvals required to carry on its business in each
jurisdiction in which its business is now conducted.
(b) DUE QUALIFICATION. The Servicer shall be duly qualified to do
business as a foreign corporation in good standing, and shall have obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(c) CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION. The
execution, delivery and performance by the Servicer of this Agreement and each
of the Facility Documents to which it is a party are within the Servicer's
corporate powers, have been duly authorized by all necessary corporate action,
require no action by or in respect of, or filing with, any governmental body,
agency or official (except as contemplated by Section 2.7), and do not
contravene or violate, or constitute a default under, any provision of
applicable law or to the best of
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Servicer's knowledge any order rule, or regulation applicable to the Servicer or
of the Articles of Incorporation or Bylaws of the Servicer or of any agreement
of a material nature, judgment, injunction, order, decree or other instrument
binding upon the Servicer or result in the creation or imposition of any lien on
assets of the Servicer or any of its Subsidiaries (except as contemplated by
Section 2.7).
(d) BINDING EFFECT. This Agreement and each of the Facility Documents
to which the Servicer is a party constitute the legal, valid and binding
obligations of the Servicer, enforceable against the Servicer in accordance with
their respective terms, subject to the effect of bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally.
(e) ACCURACY OF INFORMATION. All information heretofore furnished by
the Servicer to the Bank for purposes of or in connection with this Agreement or
any transaction contemplated hereby is, and all Increase Date Notices and
Addition Date Statements and such other information hereafter furnished by the
Servicer to the Bank will be, true and accurate in every material respect, on
the date such information is stated or certified.
(f) ACTIONS, SUITS. Except as set forth in Exhibit B, there are no
actions, suits or proceedings pending, or to the knowledge of the Servicer
threatened, against or affecting the Servicer or its Subsidiaries or their
respective properties, in or before any court, arbitrator or other body, which
(i) may have a Material Adverse Effect, (ii) assert the invalidity of this
Agreement, any Facility Document, the Contracts or any material amount of
Receivables or (iii) seek to prevent the consummation of the transactions
contemplated hereby or thereby.
(g) CREDIT AND COLLECTION POLICY. The Servicer has complied in all
material respects with the Credit and Collection Policy in regard to each
Receivable and related Contract. The Servicer has not extended or modified the
terms of any Receivable or the related Contract except in accordance with the
Credit and Collection Policy.
(h) NO SERVICER DEFAULT OR TERMINATION EVENT. No event has occurred
and is continuing which constitutes a Servicer Default, a Termination Event or a
Potential Termination Event as of such date.
(i) ERISA. No event or condition is occurring or exists with respect
to any Plan or Multiemployer Plan concerning which the Servicer would be under
an obligation to furnish a report to the Bank in accordance with Section 5.3(s).
(j) NO CHANGE IN ABILITY TO SERVICE. With respect to AAFC only, since
the date hereof, there has been no material
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adverse change in the ability of the Servicer to service and collect the
Receivables and the Related Security and Collections.
(k) FINANCIAL CONDITION. The Servicer is not insolvent or the subject
of any bankruptcy proceeding.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. CONDITIONS TO CLOSING. On or prior to the Closing Date,
the Transferor shall deliver to the Bank the following documents and
instruments, all of which shall be in form and substance acceptable to the Bank:
(a) A Certificate of the Secretary of each of the Transferor and AAFC
certifying (i) the names and signatures of the officers authorized on its behalf
to execute this Agreement and the Purchase Agreement and any other documents to
be delivered by it hereunder (on which Certificate the Bank may conclusively
rely until such time as the Bank shall receive from the Transferor or AAFC, as
applicable, a revised Certificate meeting the requirements of this clause
(a)(i)), (ii) a copy of the Articles of Incorporation of each of the Transferor
and AAFC, certified as of the date reasonably near the date hereof by the
Secretary of State of the State of such party's jurisdiction of incorporation,
(iii) a copy of the By-laws of each of the Transferor and AAFC, as amended, (iv)
a copy of resolutions of the Board of Directors (or any executive committee
designated by the Board of Directors) of each of the Transferor and AAFC
approving the transactions contemplated hereby, (v) a certificate as of a date
reasonably near the date hereof of the Secretary of State of such party's
jurisdiction of incorporation certifying each of the Transferor's and AAFC's
good standing under the laws of such jurisdiction, and (vi) evidence of the
filing of application for qualification as a foreign corporation with the
offices of the Secretaries of State or other similar official of each
jurisdiction where such qualification is material to the transactions
contemplated by this Agreement;
(b) An incumbency and authorization certificate of each of the
Transferor and AAFC in such form as the Bank may reasonably request;
(c) Acknowledgment copies of proper financing statements (Form UCC-1),
dated a date reasonably near to the date hereof naming the Transferor as the
transferor (debtor) of the Receivables and the Bank as transferee (secured
party) or other similar instruments or documents as may be necessary or in the
opinion of the Bank desirable under the Relevant UCC or any comparable law to
perfect the Bank's fractional undivided ownership interest in the Receivables;
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(d) Acknowledgment copies of proper financing statements (Form UCC-1),
dated a date reasonably near to the date hereof, naming AAFC as the transferor
(debtor) of the Receivables and the Transferor as transferee (secured party) or
other similar instruments or documents as may be necessary or in the opinion of
the Bank desirable under the Relevant UCC or other comparable law to perfect the
Transferor's interest in the Receivables;
(e) Acknowledgment copies of proper financing statements (Form UCC-3),
if any, necessary to release all security interests and other rights of any
Person in the Receivables and Related Security previously granted by the
Transferor;
(f) Certified copies of request for information or copies (Form
UCC-11) (or a similar search report certified by parties acceptable to the Bank)
dated a date reasonably near the date hereof listing all effective financing
statements which name the Transferor or AAFC (under its present name or any
previous or "doing business" name) as transferor or debtor and which are filed
in jurisdictions in which the filings were made pursuant to item (c) or (d)
above together with copies of such financing statements (none of which shall
cover any Receivables or related Contracts);
(g) Favorable opinions of Nixon, Hargrave, Devans & Doyle, special
counsel for the Transferor and AAFC, addressed to the Transferor, AAFC and the
Bank as to corporate enforceability, true sale, substantive consolidation and
perfection matters, in forms reasonably acceptable to the Bank;
(h) A comfort letter from Coopers & Lybrand, Transferor's accountants,
addressed to the Bank, as to such matters as the Bank may reasonably request;
(i) On or prior to the initial Increase Date, (i) an executed copy of
the Support Agreement and (ii) favorable Opinion of Wilkie, Farr & Gallagher,
special counsel to UAG, addressed to UAG and the Bank as to corporate matters
and enforceability of the Support Agreement against UAG, in a form reasonably
acceptable to the Buyer;
(j) A form of Contract or Contracts;
(k) An executed copy of the Purchase Agreement and the executed
Subordinated Note described therein;
(l) Receipt of the Engagement Fee;
(m) Evidence of the establishment of the Collection Account;
(n) Copies of Lockbox Agreements and any amendments thereto and all
other agreements previously given or entered into with each of the Permitted
Lockbox Banks; and
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(o) An executed copy of the Custodial Agreement;
(p) An executed copy of the Expense and Tax-Sharing Agreement;
(q) The fully executed VSI Policy; and
(r) Such other documents as the Bank may reasonably request.
SECTION 4.2. CONDITIONS TO PURCHASE OF NET INVESTMENT ADDITIONAL
AMOUNTS AND ADDITIONAL RECEIVABLES. The Bank's obligation to purchase Net
Investment Additional Amounts on any Increase Date pursuant to Section 2.3
hereof and the Transferor's right to designate Additional Receivables on each
Addition Date shall be subject to satisfaction of the following applicable
conditions precedent:
(a) the truth and correctness of:
(i) the representations and warranties in Section 3.1 hereof and in
Section 3.1 of the Purchase Agreement as of such Increase Date or Addition
Date, as applicable, as though made on and as of such date, and
(ii) the representations and warranties in Section 3.2 of this
Agreement and Section 3.2 of the Purchase Agreement, but only as to the
Receivables in which an interest is first sold by the Transferor to the
Bank hereunder on such date;
(b) compliance with the covenants and agreements in Articles II, V and
VI hereof and in Articles II and V of the Purchase Agreement;
(c) in the case of an Increase Date, the requirement that no
Termination Event or Potential Termination Event shall exist or shall occur as a
result of such purchase;
(d) the Transferor or the Servicer shall have delivered to the Bank
any necessary modifications or additions to Schedule I hereto;
(e) the Servicer shall have delivered to the Bank an Increase Date
Notice or an Addition Date Statement and an executed Supplemental Conveyance, as
applicable;
(f) the Transferor and the Servicer shall have taken any actions
necessary or advisable to maintain the Bank's perfected security interest in the
Transferred Interest (including in Additional Receivables);
(g) the satisfactory completion by the Bank of any due diligence
determined necessary by the Bank with respect to the Receivables and the related
Obligors and Contracts;
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(h) in the case of each Increase Date, as of such Increase Date, both
before and after giving effect to the purchase of the Net Investment Additional
Amount, the Adjusted Pool Balance shall not be less than the sum of (i) the
Aggregate Net Investment and (ii) the Maximum Subordinated Amount;
(i) if as of such Increase Date or Addition Date, as the case may be,
after giving effect to the designation of Additional Receivables, if any, an
Excess Spread Condition shall occur, then the Transferor shall, unless the Bank
instructs otherwise, provide an Interest Rate Cap; and
(j) the receipt by the Bank of any approvals, opinions or other
documents as the Bank shall have reasonably requested.
ARTICLE V
COVENANTS
SECTION 5.1. COVENANTS OF THE TRANSFEROR. At all times from the date
hereof to the date on which the Aggregate Unpaids shall be equal to zero, unless
the Bank shall otherwise consent in writing:
(a) FINANCIAL REPORTING. The Transferor will maintain a system of
accounting established and administered in accordance with generally accepted
accounting principles, and furnish to the Bank:
(i) ANNUAL REPORTING. Within 120 days after the close of each of its
fiscal years (x) in the case of the Transferor, a copy of its financial
statements for such year and a balance sheet as of the end of such year, a
statement of income, cash flow and changes in shareholder equity of the
Transferor for such fiscal year, together with comparative information for
the previous fiscal year, and copies of all reports and management letters,
if any, from the independent certified public accountants to the
Transferor, which reports and letters shall be reasonably satisfactory to
the Bank, all certified by the chief financial officer of the Transferor
and (y) in the case of AAFC, a copy of its consolidated financial
statements for such year and consolidated balance sheets as of the end of
such year, consolidated statements of income, cash flow and changes in
shareholder equity of AAFC and its Subsidiaries for such fiscal year,
together with comparative information for the previous fiscal year, and
copies of all reports and management letters, if any, from the independent
certified public accountants to AAFC, which reports and letters shall be
reasonably satisfactory to the Bank, all certified by the chief financial
officer of AAFC;
(ii) MONTHLY REPORTING. Within 30 days following the close of each
calendar month (x) in the case of the
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Transferor, a balance sheet of the Transferor as of the end of such month
and a statement of income of the Transferor for such month and for the
period commencing at the end of the previous fiscal year and ending with
the end of such month, certified by the chief financial officer of the
Transferor and (y) in the case of AAFC, consolidated balance sheets of AAFC
and its Subsidiaries as of the end of such month and consolidated
statements of income of AAFC and its Subsidiaries for such month and for
the period commencing at the end of the previous fiscal year and ending
with the end of such month, certified by the chief financial officer of
AAFC;
(iii) COMPLIANCE CERTIFICATE. Together with the annual report
required above, a compliance certificate in substantially the form of
Exhibit E hereto signed by its chief accounting officer or treasurer of the
Transferor and the Servicer stating that no Termination Event, Potential
Termination Event or Servicer Default exists, or if any Termination Event,
Potential Termination Event or Servicer Default exists, stating the nature
and status thereof.
(iv) NOTICE OF TERMINATION EVENTS, POTENTIAL TERMINATION EVENTS OR
SERVICER DEFAULTS. As soon as possible, and in any event within five (5)
days after a Responsible Officer of the Transferor obtains knowledge of the
occurrence of each Termination Event, Potential Termination Event or
Servicer Default, a statement of the chief financial officer or chief
accounting officer of the Transferor setting forth details of such
Termination Event or Potential Termination Event or Servicer Default, and
the action which the Transferor proposes to take with respect thereto.
(v) NOTICE OF CANCELLATION OF VSI POLICY. As soon as a Responsible
Officer of the Transferor becomes aware thereof, the Transferor shall
notify the Bank of receipt of notice from the issuer of the VSI Policy of
such issuer's intention to cancel, not to renew or to conditionally renew
the VSI Policy, and the action which the Transferor proposes to take to
replace the policy.
(vi) NOTICE OF MATERIAL ADVERSE CHANGE. As soon as any Responsible
Officer of the Transferor becomes aware thereof, the Transferor shall give
the Bank notice of any event which may have a Material Adverse Effect with
respect to the Transferor or AAFC.
(vii) OTHER INFORMATION. Such other information (including non-
financial information) as the Bank may from time to time reasonably request.
(b) CONDUCT OF BUSINESS. The Transferor will do all things necessary
to remain duly incorporated, validly existing and in good standing as a domestic
corporation in its
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jurisdiction of incorporation and will maintain all requisite authority to
conduct its business in each jurisdiction in which its business requires such
authority.
(c) COMPLIANCE WITH LAWS. The Transferor will comply in all material
respects with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject and which are
applicable to all Receivables.
(d) FURNISHING OF INFORMATION AND INSPECTION OF RECORDS. The
Transferor will furnish to the Bank, within ten (10) Business Days after
receiving a request therefor, such information with respect to the Receivables
as the Bank may reasonably request, including, without limitation, listings
identifying the Principal Balance for each Receivable. The Transferor will from
time to time on a reasonable basis during regular business hours with prior
written notice permit the Bank, or its agents or representatives, to visit the
offices of the Transferor at the Bank's expense unless a Potential Termination
Event or a Termination Event shall have occurred for the purpose of discussing
matters relating to Receivables or the Transferor's performance hereunder with
any of the officers, directors, employees or independent public accountants of
the Transferor having knowledge of such matters.
(e) FULFILLMENT OF OBLIGATIONS. The Transferor will duly observe and
perform, or cause to be observed or performed, all material obligations and
undertakings on its part to be observed and performed under or in connection
with this Agreement, the Purchase Agreement and the Receivables, will duly
observe and perform all material provisions, covenants and other promises
required to be observed by it under the Contracts related to the Receivables,
will do nothing to materially impair the rights, title and interest of the Bank
in and to the Transferred Interest and will pay when due (or contest in good
faith) any taxes, including without limitation any sales tax, excise tax or
other similar tax or charge, payable in connection with the Receivables and
their creation and satisfaction.
(f) ENFORCEMENT. The Transferor shall take all action necessary and
appropriate to enforce its rights and claims under the Purchase Agreement.
(g) LITIGATION. As soon as possible, and in any event within ten
Business Days of the knowledge of any responsible officer, the Transferor shall
give the Bank notice of (i) any litigation, investigation or proceeding against
the Transferor which may exist at any time which, in the reasonable judgment of
the Transferor, could reasonably be expected to have a Material Adverse Effect
and (ii) any material adverse development in any such previously disclosed
litigation.
(h) FEES, TAXES AND EXPENSES. The Transferor shall pay all filing
fees, stamp taxes, other taxes (other than taxes imposed directly on the overall
net income of the Bank) and
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expenses, including the fees and expenses set forth in Sections 2.15 and 8.4
hereof, if any, which may be incurred on account of or arise out of this
Agreement and the documents and transactions entered into pursuant to this
Agreement.
(i) NO OTHER BUSINESS. The Transferor shall engage in no business
other than the business contemplated under its Certificate of Incorporation.
(j) SEPARATE CORPORATE EXISTENCE. The Transferor shall:
(i) Maintain a principal executive and administrative office through
which its business is conducted separate from those of AAFC. To the extent
that the Transferor and any of its stockholders or Affiliates have offices
in the same location, there shall be a fair and appropriate allocation of
overhead costs among them, and each such entity shall bear its fair share
of such expense.
(ii) Conduct its affairs strictly in accordance with its Certificate
of Incorporation and observe all necessary, appropriate and customary
corporate formalities, including, but not limited to, conducting business
in its own name and through its duly authorized officers or agents, holding
all regular and special stockholders' and directors' meetings appropriate
to authorize all corporate action, keeping separate and accurate minutes of
its meetings, passing all resolutions or consents necessary to authorize
actions taken or to be taken, and maintaining accurate and separate books,
records, accounts and financial statements, including, but not limited to,
intercompany transaction accounts, separate stationery and other business
forms.
(iii) Maintain its own deposit account or accounts, separate from
those of any Affiliate, with commercial banking institutions. The funds of
the Transferor will not be diverted to any other Person or for other than
corporate uses of the Transferor, nor will such funds (other than
Collections on Receivables deposited in a Permitted Lockbox or in a Lockbox
Account) be commingled with the funds on AAFC or any other Affiliate of
AAFC.
(iv) Provide for its own operating expenses and liabilities from its
own funds. To the extent that it jointly contracts with any of its
stockholders or Affiliates to do business with vendors or service providers
or to share overhead expenses, the costs incurred in so doing shall be
allocated fairly among such entities, and each such entity shall bear its
fair share of such costs. To the extent that the Transferor contracts or
does business with vendors or service providers where the goods and
services provided are partially for the benefit of any other Person, the
costs incurred in so doing shall be fairly allocated to or among such
entities for whose benefits the goods and services are
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provided, and each such entity shall bear its fair share of such costs.
All material transactions between the Transferor and any of its Affiliates
shall be in writing and only on an arm's length basis.
(v) Except for the "Subordinated Loan" described in the Purchase
Agreement, to have no intercompany loans made by the Transferor to any of
its Affiliates or made by any of its Affiliates to the Transferor. The
Subordinated Loan shall bear interest at an arm's length rate.
(vi) To have at least one officer responsible for managing the
Transferor's day-to-day operations. To the extent that it shares the same
officers or other employees as any of its stockholders or Affiliates, the
salaries of and the expenses related to providing benefits to such officers
and other employees shall be fairly allocated among such entities, and each
such entity shall bear its fair share of the salary and benefit costs
associated with all such common officers and employees.
(vii) Ensure that any financial reports required of such Transferor
shall comply with generally accepted accounting principles and shall be
issued separately from, but may be consolidated with, any reports prepared
for any of its Affiliates.
(viii) Ensure that at all times it has adequate capital and liquidity
to engage in the transactions contemplated in its Certificate of
Incorporation.
(ix) To the extent that the Transferor shares tax liability with any
Affiliate, such tax liabilities will be allocated among the Transferor and
such Affiliates on an arm's length basis.
(x) To guarantee no debts or obligations of any Affiliates of
Transferor, or indemnify any Person for losses resulting from such debts or
obligations of any Affiliate.
SECTION 5.2. NEGATIVE COVENANTS OF THE TRANSFEROR. During the term
of this Agreement, until the Aggregate Unpaids shall be equal to zero, unless
the Bank shall otherwise consent in writing:
(a) NAME CHANGE, OFFICES, RECORDS AND BOOKS OF ACCOUNTS. The
Transferor shall not change its name, identity or corporate structure (within
the meaning of Section 9-402(7) of the Relevant UCC) nor relocate its chief
executive office or any office where Records are kept unless it shall have: (i)
given the Bank at least fifteen (15) days, prior written notice thereof and (ii)
delivered to the Bank all financing statements, instruments and other documents
requested by the Bank in connection with such change or relocation. The
Transferor shall at all times maintain its chief executive office within a
jurisdiction in the United
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States and in which Article 9 of the Relevant UCC is in effect and in the event
it moves its chief executive office to a location which may charge taxes, fees,
costs, expenses or other charges to perfect the interests of the Bank in the
Receivables, it shall pay all taxes, fees, costs, expenses and other charges
associated with perfecting interests of the Bank in the Receivables and any
other costs and expenses incurred in order to maintain the enforceability of
this Agreement and the interest of the Bank in the Receivables.
(b) TRANSFERS, LIENS, ETC. Except for the Adverse Claims of the Bank
created by this Agreement, the Transferor shall not transfer, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Adverse Claim (including, without limitation, the filing of any
financing statement) upon or with respect to any Receivable, related Contract,
Related Security, Collections, Permitted Lockbox or Lockbox Account, or upon or
with respect to any account to which any Collections of any Receivable are sent,
or assign any right to receive income in respect thereto.
(c) CAPITAL STOCK. The Transferor shall not issue any capital stock
except to AAFC or create any Subsidiary. The Transferor shall not pay any
dividends to AAFC if such payment would be prohibited under the General
Corporation Law of the State of Delaware.
(d) STATEMENT FOR AND TREATMENT OF SALES. Subject to Section 9.8, the
Transferor shall not prepare any financial statements for financial accounting
or reporting purposes which shall account for the transactions contemplated
herein in any manner other than as a sale of the Transferred Interest to the
Bank unless such sale or treatment is prohibited by GAAP or sale treatment is
recharacterized by the Securities and Exchange Commission.
(e) NO RESCISSIONS OR MODIFICATIONS. The Transferor shall not reduce,
rescind or cancel any Receivable or related Contract or modify any terms or
provisions thereof, except in accordance with the Credit and Collection Policy
or otherwise with the prior written consent of the Bank.
(f) CONSOLIDATIONS MERGERS AND SALES OF ASSETS. The Transferor shall
not (i) consolidate or merge with or into any other Person or (ii) sell, lease
or otherwise transfer all or substantially all of its assets to any other
Person; PROVIDED that the Transferor may merge with another Person if (A) the
Transferor is the corporation surviving such merger and (B) immediately after
and giving effect to such merger, no Termination Event or Potential Termination
Event shall have occurred and be continuing.
(g) NO CHANGES. The Transferor shall not (i) make any change in the
character of its business or in the Credit and Collection Policy, which change
would, in either case, impair the
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collectibility of any material amount of the Receivables or make any material
change in the Credit and Collection Policy or in its current payment terms with
respect to Receivables without prior written notification to and consent of the
Bank; provided, however, that the Bank shall be deemed to have approved any such
change unless it shall have disapproved of such change within ten (10) Business
Days of its receipt of such notice and (ii) change, terminate or waive or
consent to any such change, termination or waiver of any provision of the
Custodial Agreement without the prior written consent of the Bank; provided,
however, that the Bank shall be deemed to have consented to any such change,
termination or waiver unless it shall have disapproved such change, termination
or waiver within ten (10) Business Days of receipt of notice thereof.
(h) SEPARATE BUSINESS. Except for amounts in the Lockbox Accounts
which are collections on all AAFC Portfolio Receivables, the Transferor shall
not permit its assets to be commingled with those of AAFC or any Affiliate of
AAFC. The Transferor shall maintain separate corporate records and books of
account from those of AAFC and its Affiliates, and the Transferor shall conduct
its business from an office separate from that of AAFC. The Transferor will
conduct its business solely in its own name and will cause AAFC and its
Affiliates to conduct their business solely in their own names so as not to
mislead others as to the identity of the entity with which those others are
concerned. The Transferor will provide for its own operating expenses and
liabilities from its own funds, except that the organizational expenses of the
Transferor may be paid by AAFC. The Transferor will not hold itself out, or
permit itself to be held out, as having agreed to pay, or as being liable for,
the debts of AAFC or any of its Affiliates, and the Transferor shall cause AAFC
and its Affiliate not to hold themselves out, or permit themselves to be held
out, as having agreed to pay, or as being liable for, the debts of the
Transferor. The Transferor will maintain an arm's length relationship with AAFC
and its Affiliates with respect to any transactions between the Transferor, on
the one hand, and AAFC or its Affiliates on the other.
(i) CERTIFICATE OF INCORPORATION. The Transferor will not amend or
repeal any provision of the Third, Fifth, Seventh, Tenth, Eleventh or Twelfth
Articles of its Certificate of Incorporation without the consent of the Bank.
SECTION 5.3. COVENANTS OF THE SERVICER. At all times from the date
hereof to the date on which the Aggregate Unpaids shall be equal to zero, unless
the Bank shall otherwise consent in writing:
(a) NOTICE OF TERMINATION EVENTS, POTENTIAL TERMINATION EVENTS OR
SERVICER DEFAULTS. As soon as possible, and in any event within five (5) days
after the Servicer obtains knowledge of the occurrence of each Termination
Event, Potential Termination Event or Servicer Default, the Servicer will
furnish
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to the Bank a statement of the chief financial officer or chief accounting
officer of the Transferor setting forth details of such Termination Event or
Potential Termination Event or Servicer Default, and the action which the
Transferor proposes to take with respect thereto.
(b) CONDUCT OF BUSINESS. The Servicer will do all things necessary to
remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and will maintain all requisite
authority to conduct its business in each jurisdiction in which its business
requires such authority.
(c) COMPLIANCE WITH LAWS. The Servicer will comply in all material
respects with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject and which are
applicable to the Receivables.
(d) NOTICE OF MATERIAL ADVERSE CHANGE. As soon as any responsible
officer of the Servicer becomes aware thereof, the Servicer shall give the Bank
notice of any event which may have a Material Adverse Effect.
(e) COPIES OF REPORTS, FILINGS, ETC. The Servicer shall furnish to
the Bank, as soon as practicable after the issuance, sending or filing thereof,
copies of all proxy statements, financial statements, reports and other
communications which the Servicer sends to its security holders generally, and,
if the Servicer is required to file reports with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended, copies
of all regular, periodic and special reports which the Servicer files with the
Securities and Exchange Commission or with any securities exchange on Forms
10-K, 10-Q, 8-K or any successor forms thereto.
(f) LITIGATION. As soon as possible, and in any event within ten
Business Days of the knowledge of any responsible officer thereof, the Servicer
shall give the Bank notice of (i) any litigation, investigation or proceeding
against the Servicer which may exist at any time which, in the reasonable
judgment of the Servicer, could reasonably be expected to have a material
adverse effect and (ii) any material adverse development in any such previously
disclosed litigation.
(g) FURNISHING OF INFORMATION AND INSPECTION OF RECORDS. The Servicer
will furnish to the Bank, within ten (10) Business Days after receiving a
request therefor, such information with respect to the Receivables as the Bank
may reasonably request, including, without limitation, listings identifying the
Principal Balance for each Receivable. The Servicer will from time to time on a
reasonable basis during regular business hours with prior written notice permit
the Bank, or its agents or representatives, (i) to examine and make copies of
and abstracts from all Records and (ii) to visit the offices and properties of
the Servicer for the purpose of examining such
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Records, and to discuss matters relating to Receivables or the Servicer's
performance hereunder with any of the officers, directors, employees or
independent public accountants of the Servicer having knowledge of such matters,
which examinations and visits shall be at the expense of the Bank unless a
Servicer Default, Termination Event or Potential Termination Event shall have
occurred. Nothing in this Section 5.3(g) shall affect the obligation of the
Servicer to observe any applicable law prohibiting the disclosure of information
regarding the Obligors, and the failure of the Servicer to provide access to
information as a result of this obligation shall not constitute a breach of this
Section 5.3(g).
(h) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Servicer will
maintain and implement administrative and operating procedures, including,
without limitation, an ability to recreate records evidencing Receivables in the
event of the destruction of the originals thereof), and keep and maintain, or
obtain, as and when required, all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the daily
identification of all Collections of and adjustments to each existing
Receivable). The Servicer will give the Bank prompt notice of any material
change in the administrative and operating procedures referred to in the
previous sentence, to the extent such change is likely to have a Material
Adverse Effect.
(i) FULFILLMENT OF OBLIGATIONS. The Servicer will duly observe and
perform, or cause to be observed or performed, all material obligations and
undertakings on its part to be observed and performed under or in connection
with this Agreement, the Purchase Agreement and the Receivables, will duly
observe and perform all material provisions, covenants and other promises
required to be observed by it under the Contracts related to the Receivables,
will do nothing to materially impair the rights, title and interest of the Bank
in and to the Transferred Interest and will pay when due any taxes, including
without limitation any sales tax, excise tax or other similar tax or charge,
payable in connection with the Receivables and their creation and satisfaction.
(j) CUSTOMER LIST. The Servicer shall at all times maintain a current
list (which may be stored on magnetic tapes or disks) of all Obligors under
Contracts related to Receivables, including the name, address, telephone number
and account number of each such Obligor. The Servicer shall deliver or cause to
be delivered a copy of such list to the Bank as soon as practicable following
the Bank's request.
(k) TOTAL SYSTEMS FAILURE. The Servicer shall promptly notify the
Bank of any total systems failure and shall advise the Bank of the estimated
time required to remedy such total systems failure and of the estimated date on
which a Monthly Report can be delivered. Until a total systems failure
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is remedied, the Servicer shall (i) furnish to the Bank such periodic status
reports and other information relating to such total systems failure as the Bank
may reasonably request and (ii) promptly notify the Bank if the Servicer
believes that such total systems failure cannot be remedied by the estimated
date, which notice shall include a description of the circumstances which gave
rise to such delay, the action proposed to be taken in response thereto, and a
revised estimate of the date on which a Monthly Report can be delivered. The
Servicer shall promptly notify the Bank when a total systems failure has been
remedied.
(l) FURTHER INFORMATION. The Servicer shall furnish or cause to be
furnished to the Bank such other information as promptly as practicable, and in
such form and detail, as the Bank may reasonably request.
(m) ADMINISTRATIVE AND OPERATING PROCEDURES. The Servicer shall
maintain and implement administrative and operating procedures adequate to
permit the identification of the Receivables and all collections and adjustments
attributable thereto and shall comply in all material respects with the Credit
and Collection Policy in regard to each Receivable and related Contract.
(n) INSURANCE. The Servicer shall keep insured by financially sound
and reputable insurers all property of a character usually insured by
corporations engaged in the same or similar business similarly situated against
loss or damage of the kinds and in the amounts customarily insured against by
such corporations and carry such other insurance as is usually carried by such
corporations.
(o) MODIFICATION OF SYSTEMS. The Servicer agrees, promptly after the
replacement or any material modification of any computer, automation or other
operating systems (in respect of hardware or software) used to perform its
services as Servicer or to make any calculations or reports hereunder, to give
notice of any such replacement or modification to the Bank.
(p) FEES, TAXES AND EXPENSES. The Servicer shall pay all filing fees,
stamp taxes, other taxes (other than taxes imposed directly on the overall net
income of the Bank) and expenses, including the fees and expenses set forth in
Sections 2.15 and 8.4 hereof, if any, which may be incurred on account of or
arise out of this Agreement and the documents and transactions entered into
pursuant to this Agreement.
(q) COLLECTIONS. The Servicer shall instruct all Obligors to cause
all Collections to be mailed to or otherwise deposited in a Permitted Lockbox.
(r) PERFORMANCE AND COMPLIANCE WITH CONTRACTS. The Servicer shall, or
if AAFC is no longer the Servicer, AAFC shall, timely and fully perform and
comply with all material provisions,
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covenants and other promises required to be observed by it under the Contracts
related to the Receivables.
(s) ERISA EVENTS. As long as AAFC is the Servicer,
(i) Promptly upon becoming aware of the occurrence of any Event of
Termination which together with all other Events of Termination occurring
within the prior 12 months involve a payment of money by or a potential
aggregate liability of the Servicer or any ERISA Affiliate or any
combination of such entities in excess of $5,000,000, the Servicer shall
give the Bank a written notice specifying the nature thereof, what action
the Servicer or any ERISA Affiliate has taken and, when known, any action
taken or threatened by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto.
(ii) Promptly upon receipt thereof, the Servicer shall furnish to the
Bank copies of (i) all notices received by the Servicer or any ERISA
Affiliate of the PBGC's intent to terminate any Plan or to have a trustee
appointed to administer any Plan; (ii) all notices received by the Servicer
or any ERISA Affiliate from the sponsor of a Multiemployer Plan pursuant to
Section 4202 of ERISA involving a withdrawal liability in excess of
$5,000,000; and (iii) all funding waiver requests filed by the Servicer or
any ERISA Affiliate with the Internal Revenue Service with respect to any
Plan, the accrued benefits of which exceed the present value of the plan
assets as of the date the waiver request is filed by more than $5,000,000,
and all communications received by the Servicer or any ERISA Affiliate from
the Internal Revenue Service with respect to any such funding waiver
request.
(t) SEPARATE IDENTITY. As long as AAFC is the Servicer, AAFC shall
take all actions required to maintain the Transferor's status as a separate
legal entity, including, without limitation, (i) not holding the Transferor out
to third parties as other than an entity with assets and liabilities distinct
from AAFC and AAFC's other Subsidiaries; (ii) not holding itself out to be
responsible for the debts of the Transferor or, other than by reason of owning
capital stock of the Transferor, for any decisions or actions relating to the
Transferor; (iii) cause any financial statements consolidated with those of the
Transferor to state that the Transferor is a separate corporate entity with its
own separate creditors who, in any liquidation of the Transferor, will be
entitled to be satisfied out of the Transferor's assets prior to any value in
the Transferor becoming available to the Transferor's equity holders; (iv)
taking such other actions as are necessary on its part to ensure that all
corporate procedures required by its and the Transferor's respective
certificates of incorporation and by-laws are duly and validly taken; (v)
keeping correct and complete records and books of account and corporate minutes;
and (vi) not
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acting in any other manner that could foreseeably mislead others with respect to
the Transferor's separate identity.
(u) SOFTWARE. The Servicer shall use its reasonable efforts to enable
each of the Transferor, any agent of the Bank and any successor Servicer
(whether by license, sublicense, assignment or otherwise) to use all of the
computer software used to account for the Receivables to the extent necessary to
administer the Receivables.
(v) MAINTENANCE OF VSI POLICY. As long as AAFC is the Servicer, the
Servicer shall maintain in effect the VSI Policy or other similar insurance
policy reasonably acceptable to the Bank with respect to all Receivables
transferred under this Agreement.
(w) CUSTODIAN CONFIRMATION. With respect to each Additional
Receivable designated as such on an Addition Date, the Servicer shall cause the
Custodian to deliver to the Bank a Custodian Confirmation within two (2)
Business Days of the related Addition Date.
SECTION 5.4. NEGATIVE COVENANTS OF THE SERVICER. During the term of
this Agreement, and until the Aggregate Unpaids shall be equal to zero, unless
the Bank shall otherwise consent in writing:
(a) NAME CHANGE, OFFICES, RECORDS AND BOOKS OF ACCOUNTS. The Servicer
shall not change its name, identity or corporate structure (within the meaning
of Section 9-402(7) of the Relevant UCC) nor relocate its chief executive office
or any office where Records are kept unless it shall have: (i) given the Bank at
least fifteen (15) days, prior written notice thereof and (ii) delivered to the
Bank all financing statements, instruments and other documents requested by the
Bank in connection with such change or location. The Servicer shall at all
times maintain its chief executive offices within a jurisdiction in the United
States and in which Article 9 of the Relevant UCC is in effect and in the event
it moves its chief executive office to a location which may charge taxes, fees,
costs, expenses or other charges to perfect the interests of the Bank in the
Receivables, it shall pay all taxes, fees, costs, expenses and other charges
associated with perfecting interests of the Bank in Receivables and any other
costs and expenses incurred in order to maintain the enforceability of this
Agreement and the interest of the Bank in the Receivables.
(b) TRANSFERS, LIENS, ETC. Except for the Adverse Claims of the Bank
created by this Agreement and except as provided in the Lockbox Agreement, the
Servicer shall not transfer, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Adverse Claim (including,
without limitation, the filing of any financing statement) upon or with respect
to any Receivable, related Contract, Related Security, Collections, Permitted
Lockbox or Lockbox Account, or upon or with respect to any account to which
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any Collections of any Receivable are sent, or assign any right to receive
income in respect thereto.
(c) RESCISSION, EXTENSION OR AMENDMENT OF RECEIVABLES. The Servicer
shall not extend, amend or otherwise modify the terms of any Receivable, or
rescind, amend, modify or waive any term or condition of any Contract related
thereto, other than in accordance with the Credit and Collection Policy.
(d) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. The Servicer
shall not make any change in the character of its business that would be
reasonably likely to result in a Material Adverse Effect.
(e) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. The Servicer shall
not make any change in its instructions to Obligors regarding payments to be
made to it (other than changes with respect to the mailing addresses for
remittances) unless the Bank shall have received, at least ten (10) Business
Days before the proposed effective date therefor, written notice of such change.
(f) CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Servicer shall
not (i) consolidate or merge with or into any other Person or (ii) sell, lease
or otherwise transfer all or substantially all of its assets to any other
Person; PROVIDED that the Servicer may merge with another Person if (A)(i) the
Servicer is the corporation surviving such merger or (ii) the Person with whom
the Servicer is merged into or consolidated with is an Affiliate and the
surviving corporation assumes in writing all duties and liabilities of the
Servicer hereunder and (B) immediately after and giving effect to such merger,
no Termination Event or Potential Termination Event shall have occurred and be
continuing.
(g) NO CHANGES. The Servicer shall not make any change in the
character of its business or in the Credit and Collection Policy, which change
would, in either case, impair the collectibility of any material amount of the
Receivables or make any material change in the Credit and Collection Policy
without prior written notification to and consent of the Bank; provided,
however, that the Bank shall be deemed to have approved any such change unless
it shall have disapproved of such change within ten (10) Business Days of its
receipt of such notice.
(h) CHANGE IN PAYMENTS OR DEPOSITS OF PAYMENTS. Except with the prior
written notice to the Bank, the Servicer shall not add or terminate any Person
as a Permitted Lockbox Bank from those Persons listed in Exhibit G hereto, make
or permit any change in the location of any Permitted Lockbox or the location or
account number of any Lockbox Account, or make any change in the instructions to
its Obligors regarding payments to be made to the Transferor or Servicer or
payments to be made to any Permitted Lockbox.
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(i) ERISA MATTERS. As long as AAFC is the Servicer, the Servicer
shall not permit any event or condition which is described in any of clauses (i)
through (vi), clause (viii) or clause (x) of the definition of Event of
Termination to occur or exist with respect to any Plan or Multiemployer Plan if
such event or condition, together with all other events or conditions described
in the definition of Event of Termination occurring within the prior 12 months
involve the payment of money by or an incurrence of liability of AAFC or any
ERISA Affiliate in an amount in excess or $10,000,000.
ARTICLE VI
PROTECTION OF THE BANK;
ADMINISTRATION AND COLLECTIONS
SECTION 6.1. MAINTENANCE OF INFORMATION AND COMPUTER RECORDS. The
Transferor will, or will cause the Servicer to, hold in trust and keep safely
for the Bank all evidence of the Bank's right, title and interest in and to the
Transferred Interest in the Receivables. The Transferor will, or will cause the
Servicer to, place an appropriate code or notation in its Records to indicate
that the Bank has a fractional undivided interest in each and every Receivable.
SECTION 6.2. PROTECTION OF THE INTERESTS OF THE BANK.
(a) The Transferor and the Servicer shall, from time to time and at
Transferor's sole expense, do and perform any and all necessary acts and execute
any and all necessary documents including, without limitation, the obtaining of
additional search reports, the delivery of further opinions of counsel, the
execution, amendment or supplementation of any financing statements,
continuation statements and other instruments and documents for filing under the
provisions of the Relevant UCC of any applicable jurisdiction, the execution,
amendment or supplementation of any instrument of transfer and the making of
notations on the Records of the Transferor or AAFC as may be requested by the
Bank in order to effect the purposes of this Agreement and the sale of
Transferred Interest hereunder, to protect or perfect the Bank's right, title
and interest in the Transferred Interest (other than a Receivable which has been
repurchased pursuant to Section 2.12 or 2.13 or repaid in full pursuant to
Section 2.16), together with Related Security and all Collections with respect
thereto, against all Persons whomsoever or to enable the Bank to exercise or
enforce any of their respective rights hereunder; PROVIDED, HOWEVER, that the
Bank's right to request changes in the lockbox arrangements will be subject to
the provisions of the Lockbox Agreements and prior to a Termination Event, the
Bank will not request that title to the Financed Vehicles be transferred to the
Bank.
(b) To the fullest extent permitted by applicable law, the Transferor
hereby irrevocably grants to the Bank an
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irrevocable power of attorney, with full power of substitution, coupled with an
interest, to sign and file in the name of the Transferor, or in its own name,
such financing statements and continuation statements and amendments thereto or
assignments thereof as the Bank deems necessary to protect or perfect the
Transferred Interest; PROVIDED, HOWEVER, that such power of attorney may only be
exercised if (i) the Servicer fails to perform any act required hereunder after
receiving written notice of such failure from the Bank or (ii)(A) a Servicer
Default or (B) a Termination Event shall have occurred and be continuing.
(c) Twice during each calendar year, at such times as are reasonably
convenient to the Transferor or the Servicer, as the case may be, at the
Transferor's expense, and upon reasonable request and written notice by the Bank
to the Transferor or the Servicer, as the case may be, the Transferor or the
Servicer, as the case may be, shall permit such Person as the Bank may designate
to conduct audits or visit and inspect any of the properties of the Transferor
or the Servicer where Records are located, as the case may be, to examine the
Records, internal controls and procedures maintained by the Transferor or
Servicer, as the case may be, and take copies and extracts therefrom, and to
discuss the Transferor's or the Servicer's, as the case may be, affairs with its
officers and employees and, upon written notice to the Transferor, independent
accountants; PROVIDED, HOWEVER, that after the occurrence and continuation of a
Servicer Default, a Potential Termination Event or a Termination Event, the
Bank, or such Person as they may designate, shall be permitted to take the
forgoing actions without being subject to any limitation on the number of
audits, visits or inspections which may be conducted during a calendar year.
The Transferor or the Servicer, as the case may be, hereby authorizes such
officers, employees and independent accountants to discuss with the Bank the
affairs of the Transferor or the Servicer, as the case may be. The Transferor
shall reimburse the Bank for all reasonable fees, costs and expenses incurred by
or on behalf of the Bank in connection with the foregoing actions promptly upon
receipt of a written invoice therefor. Any audit provided for herein shall be
conducted in accordance with Transferor's or the Servicer's, as the case may be,
rules respecting safety and security on its premises and without materially
disrupting operations.
(d) Subject to the limitations set forth herein, the Bank shall have
the right to do all such acts and things as it may deem reasonably necessary to
protect the interests of the Bank, including, without limitation, confirmation
and verification of the existence, amount and status of the Receivables;
PROVIDED, HOWEVER, that prior to the occurrence and continuation of a Servicer
Default, a Potential Termination Event or a Termination Event the Bank will not,
without consent of the Transferor, which consent shall not be unreasonably
withheld, contact an Obligor.
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SECTION 6.3. MAINTENANCE OF CONTRACT FILES, WRITINGS AND RECORDS;
RELEASE OF RECEIVABLES.
(a) With respect to each Receivable in which the Bank owns a
fractional undivided interest, the Transferor will cause the Custodian to keep
at its chief executive office designated in advance to the Bank, the Contract
Files with respect to the Receivables.
(b) The Transferor will at all times until completion of a Complete
Servicing Transfer keep or cause to be kept at its or the Servicer's chief
executive office, each writing or Record which evidences, and which is necessary
or desirable to establish or protect, including such books of account and other
Records as will enable the Bank or its designee to determine at any time the
status of, the interest of the Bank in each Receivable. AAFC shall at its own
expense prepare and maintain the Records in electronically readable form in such
format as AAFC customarily maintains its records; PROVIDED, HOWEVER, that upon a
Complete Servicing Transfer, AAFC shall within 15 days of such Complete
Servicing Transfer prepare such Records in such format as may be required to
permit or facilitate the transfer of such Records to the successor Servicer.
(c) In the event that any Receivable is to be paid or prepaid in
full, the Transferor shall cause the Custodian to release the corresponding
Contract and Title to the Servicer for further delivery to the Obligor under
such Receivable; PROVIDED, HOWEVER, that the Servicer hereby agrees (i) to hold
any such Contract and Title in trust for the benefit of the Bank and to
segregate such Contract and Title from any other property belonging to the
Servicer until such Receivable has been paid or prepaid in full and such payment
has been deposited in a Lockbox Account or into the Collection Account; and (ii)
to return such Contract and Title to the Custodian within twenty (20) days of
the Custodian's release thereof if such Receivable has not been paid or prepaid
by such time.
(d) In the event that the Transferor requests of the Bank and the
Custodian that any Contracts which are to be canceled in connection with a
foreclosure, deed in lieu of foreclosure or other similar proceeding, be
delivered to the Servicer prior to such event, the Custodian shall release such
Contracts and all related documents to the Servicer; PROVIDED, HOWEVER, that the
Servicer hereby agrees to segregate and hold such Contracts and Related Security
in trust for the benefit of the Bank.
(e) In connection with any repurchase or repayment by the Transferor
or Servicer of any Receivable pursuant to this Agreement, the Bank shall release
its Lien in such Receivable and the related Contract and Title upon the terms
and subject to the conditions set forth herein.
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SECTION 6.4. INFORMATION. AAFC will furnish or cause to be furnished
to the Bank such additional information with respect to the Receivables
(including but not limited to AAFC's procedures for selecting Receivables for
sale and AAFC's standards and procedures for granting credit) as the Bank may
reasonably request. AAFC will also furnish to the Bank all modifications,
adjustments or supplements to the Credit and Collection Policy; PROVIDED,
HOWEVER, the Transferor shall not, without the Bank's prior written consent,
alter the Credit and Collection Policy as in effect from time to time unless
such alteration is in compliance with Section 5.4(g) hereof.
SECTION 6.5. PERFORMANCE OF UNDERTAKINGS UNDER THE RECEIVABLES. The
Servicer will at all times observe and perform, or cause to be observed and
performed, all material obligations and undertakings to the Obligors arising in
connection with each Receivable or related Contract and will not take any action
or cause any action to be taken to materially impair the rights of the Bank to
its Transferred Interest.
SECTION 6.6. ADMINISTRATION AND COLLECTIONS.
(a) GENERAL. Until a Complete Servicing Transfer shall have occurred,
AAFC will be responsible for the administration, servicing and collection of the
Receivables; PROVIDED, HOWEVER, that upon written approval by the Bank such
duties may be delegated by AAFC to any of AAFC's Affiliates or a third party
(without material impairment of AAFC's obligations as Servicer). AAFC agrees to
exercise or cause such Affiliate or third party to exercise the same degree of
skill and care and apply the same standards, policies, procedures and diligence
that it applies to the performance of the same functions with respect to
accounts owned by AAFC.
(b) ADMINISTRATION. The Servicer shall, to the full extent permitted
by law, have the power and authority, on behalf of the Bank, to take such action
in respect of any Receivable as the Servicer may deem advisable, including the
resale of any repossessed, returned or rejected Receivables or the Financed
Vehicles related thereto and any actions in connection with agreements with
Dealers and Insurance Policies; PROVIDED, HOWEVER, that the Servicer may not
under any circumstances compromise, rescind, cancel, adjust or modify (including
by extension of time for payment or granting any discounts, allowances or
credits) the Principal Balance of the related Contract for any Receivable (other
than a Receivable which has been repurchased pursuant to Section 2.12 or 2.13 or
repaid in full pursuant to Section 2.16), except in accordance with the Credit
and Collection Policy or otherwise with the prior written consent of the Bank.
(c) COLLECTION ACCOUNT. The Servicer shall establish and maintain the
Collection Account for the purpose of receiving and disbursing all Collections
on the Receivables, all payments of Discount made by the Transferor pursuant to
this Agreement,
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all Advances made by the Servicer pursuant to this Agreement, all Interest Rate
Cap Payments and all other payments to be made into the Collection Account. The
Servicer shall advise the Bank in writing of the location of the Collection
Account. The Collection Account will be an Eligible Account maintained in the
name of AAFC, as servicer, for the benefit of the Bank, and shall be used only
for the collection of the amounts and for application of such amounts as
described in Section 2.8 of this Agreement. In the event there shall have been
deposited in the Collection Account any amount not required to be deposited
therein and so identified to the Bank, such amount shall be withdrawn from the
Account, any provision herein to the contrary notwithstanding, and any such
amounts shall not be deemed to be a part of the Collection Account. If the
Collection Account ceases to be an Eligible Account, the Servicer shall within
ten days of receipt of notice of such change in eligibility transfer the
Collection Account to an account meeting the requirements of an Eligible
Account.
The Servicer may invest (or cause the investment of) the funds in the
Collection Account in Eligible Investments, held in the name of the Bank, which
shall mature no later than the Business Day preceding the date on which such
amounts are required to be distributed to the Bank. As long as no Termination
Event shall have occurred and be continuing, any income or other gain from such
Eligible Investments shall be paid to the Servicer as an addition to the
Servicing Fee.
The Servicer and the Transferor agree to take all actions reasonably
necessary, including the filing of appropriate financing statements and the
giving of proper registration instructions relating to any investments, to
protect the Bank's interest in the Collection Account and any Eligible
Investments acquired with moneys therein.
(d) ENFORCEMENT PROCEEDINGS. In the event of a default under any
Receivable before a Termination Event, the Servicer shall, at the Transferor's
sole expense, to the full extent permitted by law, have the power and authority,
on behalf of the Bank, to take or cause to be taken any action in respect of any
such Receivable as the Servicer may deem advisable; PROVIDED, HOWEVER, that the
Servicer or the Transferor, as the case may be, shall take no enforcement action
(judicial or otherwise) with respect to such Receivable (other than a Receivable
which has been repurchased or repaid pursuant to Section 2.12, 2.13, 2.16 or 3.2
(the last paragraph thereof)), except in accordance with the Credit and
Collection Policy or otherwise with the written consent of the Bank. The
Servicer or the Transferor, as the case may be, will apply or will cause to be
applied at all times before a Termination Event the same standards and follow
the same procedures with respect to deciding to commence, and in prosecuting,
litigation on such Receivable as is applied and followed with respect to like
accounts not owned by the Bank. In no event shall the Servicer or the
Transferor, as the case may be, be entitled to make or authorize any Person
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to make the Bank a party to any litigation without the Bank's express prior
written consent.
(e) OBLIGATIONS OF THE BANK. Following the occurrence and
continuation of a Servicer Default, a Potential Termination Event or a
Termination Event, the Bank may, but shall have no obligation to, take any
action or commence any proceeding to realize upon any Receivable, any such
action or commencement of proceeding to be at the sole expense of the
Transferor. At such time as the Servicer or the Transferor, as the case may be,
has any obligation to pursue the collection of Receivables and the Bank
possesses any documents necessary therefor, the Bank agrees to furnish such
documents to the Servicer or the Transferor, as the case may be, to the extent
and for the period necessary for the Servicer or the Transferor, as the case may
be, to comply with its obligations hereunder.
SECTION 6.7. COMPLETE SERVICING TRANSFER.
(a) GENERAL. If at any time a Servicer Default shall have occurred
and be continuing, the Bank may by notice in writing to AAFC, terminate AAFC's
capacity as Servicer in respect of the Receivables (such termination referred to
herein as a "COMPLETE SERVICING TRANSFER"). After a Complete Servicing
Transfer, the Bank may administer, service and collect the Receivables itself,
and in such event, may retain the Servicing Fee for its own account, in any
manner it sees fit, including, without limitation, by compromise, extension or
settlement of such Receivables. Alternatively, the Bank may engage affiliated
or unaffiliated contractors to perform all or any part of the administration,
servicing and collection of the Receivables and require the Transferor to pay to
such contractors all or a portion of the Servicing Fee in consideration thereof.
(b) TRANSITION. AAFC, within ten (10) Business Days after receiving a
notice pursuant to Section 6.7(a) hereof, shall, at AAFC's sole expense, (x)
deliver to the Bank or its designated agent (i) a schedule of the Receivables in
which the Bank has a Transferred Interest indicating as to each such Receivable
information as to the related Obligor, the Principal Balance as of such date of
the related Contract and the location of the evidences of such Receivable and
related Contract, together with such other information as the Bank may
reasonably request and (ii) all evidence of such Receivables and related
Contracts and such other Records related thereto (including, without limitation,
true copies of any computer tapes and data in computer memories), (y) permit the
Bank access to AAFC's files and other Records in order to effect an orderly
transfer, and (z) take all reasonable actions as are necessary to sublicense to,
or purchase a license for, the Bank or its designated agent, at AAFC's expense,
any software (which software may be different from that used by AAFC) that
relates to, and is necessary for the servicing of, the Receivables, in each case
as the Bank may reasonably deem necessary to enable it to protect and enforce
its rights and the rights of the Bank to the Transferred Interest.
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After any such delivery, AAFC will not hold or retain any executed counterpart
or any document evidencing such Receivables or related Contracts without clearly
marking the same to indicate conspicuously that the same is not the original and
that transfer thereof does not transfer any rights against the related Obligor
or any other Person.
(c) COLLECTIONS. If at any time there shall be a Complete Servicing
Transfer, AAFC will cause to be transmitted and delivered directly to the Bank
or its designated agent forthwith upon receipt and in the exact form received,
all Collections (properly endorsed, where required, so that such items may be
collected by the Bank) on account of their Transferred Interest in any
Receivables. All such Collections consisting of cash shall not be commingled
with other items or monies of AAFC for a period longer than two Business Days.
If the Bank or its designated agent receives items or monies that are not
payments on account of the Bank's interest in any Receivables, such items or
monies shall be held in trust by the Bank for the Transferor's benefit and
delivered promptly to AAFC after being so identified by the Bank or its
designated agent. AAFC hereby irrevocably grants during the term of this
Agreement the Bank or its designated agent, if any, an irrevocable power of
attorney, with full power of substitution, coupled with an interest, to take in
the name of AAFC all steps and actions permitted to be taken under this
Agreement with respect to any Receivable which the Bank, in its reasonable
discretion, may deem necessary or advisable to negotiate or otherwise realize on
any right of any kind held or owned by AAFC or transmitted to or received by the
Bank or its designated agent (whether or not from the Transferor or any Obligor)
in connection with the Bank's Transferred Interest; PROVIDED, HOWEVER, that such
power of attorney may not be exercised without the prior written consent of
AAFC, unless (A)(i) a Servicer Default or (ii) a Termination Event shall have
occurred and be continuing or (B) the Servicer fails to perform any act required
hereunder after receiving written notice of such failure from the Bank. The
Bank will provide such periodic accountings and other information related to the
disposition of funds so collected as AAFC may reasonably request.
(d) COLLECTION AND ADMINISTRATION AT EXPENSE OF THE TRANSFEROR. Each
of the Transferor and AAFC agrees that in the event of a Complete Servicing
Transfer, it will reimburse the Bank for all reasonable out-of-pocket expenses
(including, without limitation, attorneys' and accountants' and other third
parties' fees and expenses, expenses incurred by the Bank, expenses of
litigation or preparation therefor, and expenses of audits and visits to the
offices of the Transferor and AAFC) incurred by the Bank in connection with and
following the transfer of functions following a Complete Servicing Transfer.
(e) PAYMENTS BY OBLIGORS. At any time, and from time to time
following a Complete Servicing Transfer, or if a Termination Event shall have
occurred and be continuing, AAFC
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shall permit during business hours such Persons as the Bank may designate to
open and inspect all mail received by AAFC at any of its offices reasonably
expected to contain Collections or other information related to the Receivables,
and to remove therefrom any and all Collections or other correspondence from
Obligors or the Servicer in respect of Receivables. The Bank shall be entitled
to notify the Obligors of Receivables to make payments directly to the Bank of
amounts due thereunder at any time and from time to time following the
occurrence of (i) a Termination Event or (ii) a Complete Servicing Transfer.
SECTION 6.8. LOCKBOXES. AAFC hereby agrees (i) to instruct all
Obligors to cause all Collections on account of Receivables to be mailed
directly to a Permitted Lockbox; (ii) to use its best effort not to suffer or
permit any funds other than such Collections and collections on all AAFC
Portfolio Receivables to be mailed to Permitted Lockboxes or deposited into
related Lockbox Accounts; (iii) to make the necessary bookkeeping entries to
reflect such Collections on the Records pertaining to such Receivables; (iv) to
apply all such Collections as provided in this Agreement; (v) not to amend or
modify any term of any Lockbox Agreement without the prior written notice to the
Bank to such amendment or modification; and (vi) not to amend or modify any
term, with respect to the disposition of such Collections or any other amounts
received by the Servicer or any Permitted Lockbox Bank, of this Agreement (other
than any Lockbox Agreement) without the prior written notice to the Bank to such
amendment or modification. The Servicer further represents and warrants and
covenants and agrees as follows: each Lockbox Account shall be maintained with
a Permitted Lockbox Bank; each Lockbox Account shall be a segregated account and
the funds deposited in such Lockbox Account from time to time shall not be
commingled with any other funds of AAFC or the Transferor (other than funds
related to AAFC Portfolio Receivables); the location of each Permitted Lockbox
and each related Lockbox Account shall not be changed without prior notice to
the Bank; funds deposited in each Lockbox Account and attributable to the
Receivables shall be transferred to the Collection Account not later than the
second Business Day after such funds are deposited in each such Lockbox Account;
each Lockbox Account shall be insured by the Federal Deposit Insurance
Corporation to the full extent permitted by law. AAFC shall not enter into any
Lockbox Agreement or other lockbox servicing agreement which does not contain
the foregoing provisions and terms, unless such deviation is consented to by the
Bank.
SECTION 6.9. SERVICER DEFAULT. A "SERVICER DEFAULT" shall mean the
occurrence and continuance of one or more of the following events or conditions:
(a) the Servicer shall fail to remit or fail to cause to be remitted
to the Bank on any day any Collections or Discount required to be remitted to
the Bank on such day, and such failure shall continue for three (3) Business
Days; or
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(b) the Servicer shall fail to deposit, or pay or fail to cause to be
deposited or paid when due any other amount due hereunder, and any such failure
shall continue for three (3) Business Days after written notice thereof by the
Bank to the Servicer; or
(c) any representation, warranty, certification or statement made by
the Servicer under this Agreement or in any agreement, certificate, report,
appendix, schedule or document furnished by the Servicer to the Bank pursuant to
or in connection with this Agreement shall prove to have been false or
misleading in any respect material to this Agreement or the transactions
contemplated hereby as of the time made (including by omission of material
information necessary to make such representation, warranty, certification or
statement not misleading), and shall, at the time of such determination,
continue to have a material adverse effect on this Agreement or the Servicer's
ability to perform its obligations under this Agreement; or
(d) the Servicer (if not the Bank) shall fail to perform or observe
any other term, covenant, agreement or undertaking applicable to it contained
herein and such failure shall continue for fifteen (15) Business Days after
either (i) any responsible officer of the Servicer becomes aware thereof or
(ii) written notice thereof to the Servicer by the Bank; or
(e) there shall be pending any litigation, arbitration, investigation
or proceeding, or any material adverse development in any such litigation shall
have occurred, which is likely to materially adversely affect the financial
position or results of operations of the Servicer or impair the ability of the
Servicer to perform its obligations under this Agreement; or
(f) there shall have occurred any event which materially adversely
affects the ability of the Servicer to service and collect Receivables or the
ability of the Servicer to perform hereunder; or
(g)(i) the Servicer or any of its Subsidiaries shall generally not
pay its debts as such debts become due or shall admit in writing its inability
to pay its debts generally or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Servicer or
any of its Subsidiaries seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or any substantial part of
its property, or (ii) the Servicer or any of its Subsidiaries shall take any
corporate action to authorize any of the actions set forth in clause (i) above
in this subsection (g);
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(h) the entry of any judgment or decree against the Servicer if the
aggregate amount of all judgments and decrees then outstanding against it for
which insurance is not available and the collection of which has not been
stayed, exceeds $1,000,000; or
(i) as long as AAFC is the Servicer, AAFC or any of its Subsidiaries
shall fail to pay any debt in excess of $5,000,000 of AAFC or any of its
Subsidiaries, as the case may be, or any interest or premium on such debt, in
either case, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such debt; or any other default under any agreement or instrument
relating to any such debt or any other event, shall occur and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument if the effect of such default or event is to accelerate, or to permit
the acceleration of, the maturity of such debt; or any such debt shall be
declared to be due and payable or required to be prepaid (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof.
SECTION 6.10. SERVICER INDEMNIFICATION OF AFFECTED PARTIES. The
Servicer shall indemnify and hold harmless the Bank and its assigns (and its
directors, officers, employees and agents), from and against any loss,
liability, expense, damage or injury suffered or sustained by reason of any
breach by the Servicer of any of its representations, warranties or covenants
contained in this Agreement, including any judgment, award, settlement,
reasonable attorneys fees and other costs or expenses incurred in connection
with the defense of any actual action, proceeding or claim; PROVIDED, HOWEVER,
that the Servicer shall not indemnify the Bank and its assigns if such acts or
omissions were attributable to fraud, gross negligence, breach of fiduciary duty
or willful misconduct by the Bank. Any indemnification pursuant to this Section
shall be had only from the assets of the Servicer. The provisions of this
Section shall survive the termination of this Agreement.
SECTION 6.11. AAFC NOT TO RESIGN AS SERVICER. AAFC shall not resign
from the obligations and duties hereby imposed on it as Servicer under this
Agreement except upon determination that the performance of its duties under
this Agreement shall no longer be permissible under applicable law. Notice of
any such determination permitting the resignation of AAFC shall be communicated
to the Bank at the earliest practicable time (and, if such communication is not
in writing, shall be confirmed in writing at the earliest practicable time) and
any such determination shall be evidenced by an opinion of counsel to such
effect delivered to the Bank concurrently with or promptly after such notice.
No such resignation shall become effective until the Bank or a successor
Servicer shall (i) have taken the actions required by Section 6.7 to effect the
termination of the
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responsibilities and rights of the predecessor Servicer under the Agreement,
including the transfer to the successor Servicer for administration by it of all
cash amounts that shall at the time be held by the predecessor Servicer for
deposit, or shall thereafter be received with respect to a Receivable and the
delivery of the files relating to the Receivables, and the related accounts and
records maintained by the Servicer, and (ii) have assumed the responsibilities
and obligations of AAFC hereunder in writing.
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1. TERMINATION EVENTS. The occurrence of any one or more
of the following events shall constitute a Termination Event:
(a) the Transferor shall fail to perform or observe any term,
covenant, agreement or undertaking hereunder (other than as referred to in
clause (c) below) and such failure shall remain unremedied for fifteen (15)
Business Days after written notice thereof has been given to the Transferor by
the Bank; or
(b) any representation, warranty, certification or statement made by
the Transferor in this Agreement or in any other document delivered pursuant
hereto or contemplated herein shall prove to have been incorrect in any material
respect when made or deemed made; or
(c) the Transferor or AAFC shall fail to make or shall fail to cause
to be paid to the Bank any Collections or Discount required to be made by it
hereunder when due and, in the case of Discount, such failure shall continue for
three (3) Business Days; or
(d) The Transferor or AAFC shall fail to pay or fail to cause to be
paid when due any other amount due hereunder and such failure shall continue
unremedied for three (3) Business Days, or the Transferor or AAFC shall fail to
obtain an Eligible Interest Cap Agreement when required; or
(e)(i) the Transferor shall fail to pay any indebtedness when due
which would be reasonably likely to have a Material Adverse Effect; or (ii) any
indebtedness, the acceleration of which would be reasonably likely to have a
Material Adverse Effect, shall be declared to be due and payable or required to
be prepaid (other than by a regularly scheduled payment) prior to the date of
maturity thereof other than any acceleration arising out of a good faith
dispute; PROVIDED, HOWEVER, that in all instances the Transferor shall have the
opportunity to cure any such event leading to acceleration within fifteen (15)
days of receipt of notice of such acceleration; or
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(f)(i) the Transferor or AAFC shall generally not pay its debts as
such debts become due or shall admit in writing its inability to pay its debts
generally or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Transferor seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it or any
substantial part of its property, or (ii) the Transferor shall take any
corporate action to authorize any of the actions set forth in clause (i) above
in this subsection (f); or
(g) a Servicer Default shall have occurred and be continuing; or
(h) the institution of any litigation, arbitration proceedings or
governmental proceeding involving the Transferor or the Receivables which may
have a Material Adverse Effect on the condition (financial or otherwise) of the
Transferor; or
(i) the entry of any judgment or decree against the Transferor for
which insurance or uncontested indemnification is not available and the
collection of which has not been stayed; or
(j) the Excess Spread Percentage for any calendar month shall be 2.0%
or less; or
(k) the annualized average of the Portfolio Loss Ratios for any three
(3) consecutive calendar months shall exceed 4.0%; or
(l) the Delinquency Ratio, computed for the immediately preceding
Collection Period, shall exceed 2.75%; or
(m) a change in the ownership of the voting stock of the Transferor or
50% of the voting stock of AAFC shall have occurred; or
(n) the Adjusted Pool Balance shall at any time be less than the sum
of the Aggregate Net Investment and the Maximum Subordinated Amount at such time
and continues to be so for three (3) Business Days following either (i) the
Transferor's becoming aware thereof or (ii) the Transferor's being notified
thereof by the Bank; or
(o) there shall have occurred a Material Adverse Effect; or
(p) the Available Subordinated Amount shall be less than the Maximum
Subordinated Amount on such date; or
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(q) there shall have occurred an Event of Termination; or
(r) there shall have occurred and be continuing a "Termination Event"
under the Purchase Agreement or a default or event of default under any of the
other Facility Documents.
SECTION 7.2. REMEDIES UPON THE OCCURRENCE OF A TERMINATION EVENT.
(a) If a Termination Event occurs, (i) the Bank may, by notice to the
Transferor, terminate its obligation to purchase any interest in Receivables and
declare all outstanding Tranche Periods to be ended and designate the Tranche
Rate applicable to the Aggregate Net Investment plus all accrued and unpaid
Discounts, and (ii) if the Transferor is AAFC or any Affiliate thereof at such
time, the Bank may terminate AAFC or any Affiliate thereof as Servicer
hereunder; PROVIDED that, in the case of a Termination Event under Section
7.1(f), such obligations of the Bank hereunder shall be automatically terminated
without any action on the part of the Bank and all Tranche Periods shall be
ended.
(b) Upon any termination of the Bank's obligations pursuant to this
Section 7.2, the Bank shall have, in addition to all rights and remedies under
this Agreement or otherwise, all other rights and remedies provided under the
UCC of the applicable jurisdiction and under other applicable laws, which rights
shall be cumulative.
(c) The parties hereto acknowledge that this Agreement is, and is
intended to be, a contract to extend financial accommodations to the Transferor
within the meaning of Section 365(e)(2)(B) of the Federal Bankruptcy Code (11
U.S.C. Section 365(e)(2)(B)) (or any amended or successor provision thereof or
any amended or successor code).
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. INDEMNIFICATION. Without limiting any other rights
which the Bank may have hereunder or under applicable law, the Transferor hereby
agrees to indemnify the Bank and its officers, directors, agents and employees
from and against any and all damages, losses, claims, liabilities, costs and
expenses (other than in respect of taxes, which shall be governed by Section
8.2), including reasonable attorneys, fees and disbursements (all of the
foregoing being collectively referred to as "INDEMNIFIED AMOUNTS") awarded
against or incurred by any of them arising out of or as a result of any of the
circumstances described below; PROVIDED, HOWEVER, that in no event shall the
Transferor indemnify the Bank and its officers, directors, agents and employees
for (i) Indemnified Amounts resulting from the gross negligence or willful
misconduct on the part of the Bank or (ii) recourse for uncollectible
Receivables.
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The Transferor shall indemnify the Bank and its officers, directors, agents and
employees for Indemnified Amounts relating to or resulting from:
(a) reliance on any representation or warranty made by the Transferor
or AAFC (or any officers of the Transferor or AAFC) under or in connection with
this Agreement, any Facility Document or any other information or report
delivered by the Transferor or AAFC pursuant hereto, which shall have been false
or incorrect in any material respect when made or deemed made;
(b) the failure by the Transferor or AAFC to comply in all material
respects with any applicable law, rule or regulation with respect to any
Receivable or the related Contract, or the nonconformity of any Receivable or
the related Contract with any such applicable law, rule or regulation;
(c) the failure as a result of acts or failures to act on the part of
the Transferor, AAFC or the Servicer, to vest and maintain vested in the Bank,
the Transferred Interest in the Receivables free and clear of any Adverse Claim;
(d) the failure to file, or delay in filing, financing statements or
other similar instruments or documents under the Relevant UCC or other
applicable laws with respect to any Receivable;
(e) any dispute, claim, offset or defense (which dispute, claim,
offset or defense is made in "good faith") (other than discharge in bankruptcy
of an Obligor) of an Obligor to the payment of any Receivable (including,
without limitation, a defense based on such Receivable or the related Contract
not being a legal, valid and binding obligation of such Obligor enforceable
against it in accordance with its terms), or any other claim resulting from the
sale of merchandise or services related to such Receivable or the furnishing or
failure to furnish such merchandise or services. For the purposes of this
subsection, the term "good faith" shall mean a dispute, claim, offset or defense
that is based on reasonable factual allegations which are likely to survive a
motion to dismiss or which are not interposed for the purposes of hindering or
delaying an Obligor's payment of the Receivable or which is not based
principally on procedural or technical grounds (including, without limitation,
improper service of process, statute of limitations, etc.);
(f) any failure of the Transferor or AAFC to perform their respective
duties or obligations in accordance with the provisions of this Agreement or any
Facility Document; or
(g) any products liability claim or personal injury or property damage
suit arising out of or in connection with merchandise or services which are the
subject of any Receivable.
SECTION 8.2. TAX INDEMNIFICATION.
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The Transferor hereby agrees to pay, and to indemnify the Bank from
and against, any taxes which may at any time be asserted in respect of this
transaction or the subject matter hereof (including, without limitation, any
sales, gross receipts, general corporation, personal property, privilege or
license taxes, but not including any federal or (except as provided below) other
income or franchise taxes imposed upon the Bank, with respect to its net income
or profits arising out of the transactions contemplated hereby (all such
excluded taxes, the "Excluded Taxes")), whether arising by reason of the acts to
be performed by the Transferor or AAFC hereunder or imposed against the
Transferor or AAFC or the Bank, the property involved or otherwise. If any tax,
fee or similar charge is imposed or with respect to any payment for the account
of the Bank provided for in this Agreement by any State or political subdivision
thereof (other than Excluded Taxes), the Transferor will, upon demand by the
Bank, pay an amount necessary to make the Bank whole, taking into account any
tax consequences to the Bank of the payment of such tax and the receipt of the
indemnity provided for by this Section 8.2, including the effect of such tax or
refund on the amount of tax measured by net income or profits which is or was
payable by the Bank in the jurisdiction in which its principal executive office
is located.
SECTION 8.3. ADDITIONAL COSTS.
(a) The Transferor shall pay to the Bank, from time to time on demand
of the Bank, such amounts as the Bank may reasonably determine to be necessary
to compensate it for any increase in costs which any such party determines are
attributable to its acquiring the Transferred Interest or maintaining any
Tranche under this Agreement, or any reduction in any amount receivable by the
Bank hereunder in respect of any such Tranche or such obligation (such increases
in costs, payments and reductions in amounts receivable being herein called
"ADDITIONAL COSTS") resulting from any Regulatory Change which (i) changes the
method or basis of taxation of any amounts payable to the Bank under this
Agreement in respect of any such Tranche or (ii) imposes any other condition
affecting this Agreement (or any of such extensions of credit or liabilities).
The Bank will notify the Transferor of any event that will entitle such Person
to compensation pursuant to this Section 8.3(a) no later than fifteen (15)
Business Days after it obtains knowledge thereof.
(b) Determinations and allocations by the Bank for purposes of this
Section 8.3 shall be conclusive, provided that such determinations and
allocations are made in good faith and on a reasonable basis, reasonable
evidence (including an explanation of the applicable Regulatory Change and an
accounting for any amounts demanded) of which shall be provided to the
Transferor upon request.
(c) The Bank agrees to promptly notify the Transferor if the Bank
receives notice of any potential tax assessment by
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any federal, state or local tax authority for which the Transferor may be liable
pursuant to Sections 8.2 or 8.3 hereof. The Bank further agrees that the
Transferor shall bear no cost (including costs relating to penalties and
interest) relating to the failure of the Bank to file in a timely manner any tax
returns required to be filed by the Bank in accordance with applicable statutes
and regulations.
SECTION 8.4. OTHER COSTS AND EXPENSES. The Transferor shall pay on
demand all costs and expenses in connection with the preparation, execution,
delivery and administration of this Agreement, the Purchase Agreement and any
other documents to be delivered hereunder, including, without limitation,
reasonable fees and out-of-pocket expenses of legal counsel for the Bank (which
such counsel may be employees of the Bank) with respect thereto and with respect
to advising the Bank as to its rights and remedies under this Agreement or the
Purchase Agreement, and all costs and expenses, if any, including reasonable
counsel fees and expenses in connection with the enforcement or amendment of
this Agreement and the other documents delivered hereunder. The Transferor
shall reimburse the Bank on demand for all other costs and expenses incurred by
the Bank or any shareholder of the Bank ("OTHER COSTS"); including, without
limitation, the cost of the Bank's auditors auditing the Transferor's or AAFC's
books, records and procedures, and the reasonable fees and out-of-pocket
expenses of counsel for the Bank or any counsel for any shareholder of the Bank
with respect to advising the Bank or such shareholder as to matters relating to
the Bank's operation.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. TERM OF AGREEMENT. This Agreement shall terminate
following the Termination Date when the Aggregate Net Investment has been
reduced to zero, all accrued Discount has been paid in full and all other
Aggregate Unpaids have been paid in full; PROVIDED, HOWEVER, that the
indemnification and payment provisions of Article VIII and Section 6.10 shall be
continuing and shall survive any termination of this Agreement, subject to
applicable statutes of limitation; PROVIDED FURTHER, HOWEVER, that any such
indemnification or payment claim must be presented to the Transferor or AAFC
within ten (10) Business Days after the Bank receives notice or otherwise
becomes aware of such claim.
SECTION 9.2. WAIVERS; AMENDMENTS. No failure or delay on the part of
the Bank in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other further exercise thereof or the
exercise of any other power, right or remedy. The rights and remedies herein
provided shall be cumulative and nonexclusive of any rights or remedies provided
by law. Any provision of this Agreement may be
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amended if, but only if, such amendment is in writing and is signed by the
parties hereto.
SECTION 9.3. NOTICES. Except as provided below, all communications
and notices provided for hereunder shall be in writing (including bank wire,
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other party at its address or telecopy number set forth hereunder
or at such other address or telecopy number as such party may hereafter specify
for the purposes of notice to such party. Each such notice or other
communication shall be effective if given by facsimile, when such facsimile is
transmitted to the facsimile number specified in this Section 9.3 and the
appropriate written confirmation is received or, if given by any other means,
when received at the address specified in this Section 9.3. However, anything in
this Section 9.3 to the contrary notwithstanding, the Transferor hereby
authorizes the Bank to effect any Tranche Period and Tranche Rate selections
based on telephonic notices made by any Person which the Transferor has
indicated in writing from time to time as an authorized agent of the Transferor
for such purpose, which Person the Bank in good faith believes is such an
authorized person. The Transferor further agrees to deliver promptly to the
Bank a written confirmation of each telephonic notice signed by an authorized
officer of the Transferor. However, the absence of such confirmation shall not
affect the validity of such notice. If the written confirmation differs in any
material respect from the action taken by the Bank, the records of the Bank
shall govern absent manifest error.
IF TO THE BANK:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Telephone: (302) 634-5493
Telecopy: (302) 634-5490
Attention: Asset Finance Group
IF TO THE TRANSFEROR:
ATLANTIC AUTO SECOND FUNDING CORPORATION
P.O. Box 1502
800 Perinton Hills Office Park
Fairport, New York 14450
Telephone: (716) 421-2982
Telecopy: (716) 421-1954
Attention: President
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IF TO AAFC:
ATLANTIC AUTO FINANCE CORPORATION
P.O. Box 1502
800 Perinton Hills Office Park
Fairport, New York 14450
Telephone: (716) 421-2985
Telecopy: (716) 421-1954
Attention: President
SECTION 9.4. GOVERNING LAW; SUBMISSION TO JURISDICTION; INTEGRATION.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York. The Transferor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State Court sitting in New York, New York for
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. The Transferor and AAFC hereby
irrevocably waive, to the fullest extent they may effectively do so, any
objection which they may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. Nothing in
this Section 9.4 shall affect the right of the Bank to bring any action or
proceeding against the Transferor or AAFC or their respective properties in the
courts of other jurisdictions. This Agreement contains the final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire understanding among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.
SECTION 9.5. SEVERABILITY; COUNTERPARTS, WAIVER OF SETOFF. This
Agreement may be executed in any number.of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The Transferor and AAFC hereby agree to waive any right of
setoff which it may have or to which it may be entitled against the Bank and its
assets.
SECTION 9.6. ASSIGNMENTS.
(a) This Agreement shall be binding on the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that the Transferor may
not assign any of its rights or delegate any of its duties hereunder without the
prior written
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consent of the Bank. No provision of this Agreement shall in any manner
restrict the ability of the Bank to assign, participate, grant security
interests in, or otherwise transfer any portion of the Transferred Interest.
Any transfer in contravention of this Section 9.6(a) shall be null and void and
shall not confer upon the transferee thereof any of the rights under this
Agreement.
(b) The Bank may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or more Persons (each a
"PARTICIPANT"), without the consent of the Transferor, participating interests
in its Transferred Interest, its obligation to purchase fractional undivided
ownership interests in the Receivables or any other interest of the Bank
hereunder. Notwithstanding any such sale by the Bank of a participating
interest to a Participant, the Bank's rights and obligations under this
Agreement shall remain unchanged, the Bank shall remain solely responsible for
the performance of its obligations hereunder, and the Transferor, AAFC and the
Servicer (to the extent provided herein) shall continue to deal solely and
directly with the Bank in connection with the Bank's rights and obligations
under this Agreement. The Bank agrees that any agreement between the Bank and
any such Participant in respect of such participating interest shall not
restrict the Bank's right to agree to any amendment, supplement, waiver or
modification to this Agreement.
SECTION 9.7. WAIVER OF CONFIDENTIALITY. The Bank, the Transferor and
AAFC shall hold all non-public information obtained pursuant to this Agreement
and the transactions contemplated hereby or effected in connection herewith in
accordance with customary procedures for handling confidential information of
this nature and in any event may make disclosure (a) reasonably required by a
bona fide transferee, including without limitation any Participant,
(b) necessary in order to obtain any consents, approvals, waivers or other
arrangements required to permit the execution, delivery and performance by the
Transferor and AAFC of the Facility Documents, or (c) as required or requested
by any governmental body, agency or instrumentality, regulatory authority,
court, tribunal or arbitrator or pursuant to legal process or required by
applicable law.
SECTION 9.8. CHARACTERIZATION OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT. The Transferor, AAFC and the Bank agree to treat the
transactions contemplated by this Agreement as a financing for tax purposes and
as a sale for accounting purposes and further agree to file on a timely basis
all federal and other tax returns consistent with such treatment.
SECTION 9.9. NO PETITION. The Bank agrees that, prior to the date
which is one year and one day after the date upon which all obligations of the
Transferor to the Bank hereunder are paid in full, it will not institute
against, or join any other Person in instituting against, the Transferor any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding
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<PAGE>
or other similar proceeding under the laws of the United States or any state of
the United States.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Transfer and
Administration Agreement to be executed and delivered by their duly authorized
officers as of the date hereof.
ATLANTIC AUTO SECOND FUNDING
CORPORATION,
as Transferor
By: /s/ Suzanne A. O'Connor
------------------------
Name:
Title:
ATLANTIC AUTO FINANCE CORPORATION,
as Servicer
By: /s/ Richard J. Harrison
-------------------------
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
as Bank
By: /s/ Richard A. Burke
-------------------------
Name: Richard A. Burke
Title: Associate
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POOLING AND SERVICING AGREEMENT
RELATING TO
ATLANTIC AUTO GRANTOR TRUST 1996-A
among
ATLANTIC AUTO THIRD FUNDING CORPORATION
as Seller
ATLANTIC AUTO FINANCE CORPORATION
as Servicer
and
THE CHASE MANHATTAN BANK
as Trustee, Backup Servicer and Collateral Agent
_____________________
Dated as of June 20, 1996
____________________
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Usage of Terms. . . . . . . . . . . . . . . . . . . .19
Section 1.3. Calculations. . . . . . . . . . . . . . . . . . . . .19
Section 1.4. Section References. . . . . . . . . . . . . . . . . .19
Section 1.5. Action by or Consent of Certificateholders. . . . . .19
Section 1.6. No Recourse . . . . . . . . . . . . . . . . . . . . .19
Section 1.7. Material Adverse Effect . . . . . . . . . . . . . . .19
ARTICLE II CREATION OF TRUST. . . . . . . . . . . . . . . . . . . . .20
Section 2.1. Creation of Trust . . . . . . . . . . . . . . . . . .20
ARTICLE III CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY TRUSTEE; ORIGINAL
ISSUANCE OF CERTIFICATES.. . . . . . . . . . . . . . . . .20
Section 3.1. Conveyance of Receivables . . . . . . . . . . . . . .20
Section 3.2. Custody of Receivable Files . . . . . . . . . . . . .21
Section 3.3. Conditions to Acceptance by Trustee . . . . . . . . .23
Section 3.4. Representations and Warranties of Seller. . . . . . .24
Section 3.5. RESERVED. . . . . . . . . . . . . . . . . . . . . . .30
Section 3.6. Repurchase of Receivables Upon Breach of
Representation and Warranty . . . . . . . . . . . . .30
Section 3.7. Nonpetition Covenant. . . . . . . . . . . . . . . . .31
Section 3.8. Collecting Lien Certificates Not Delivered on the
Closing Date. . . . . . . . . . . . . . . . . . . . .31
ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES. . . . . . . .31
Section 4.1. Duties of the Servicer. . . . . . . . . . . . . . . .31
Section 4.2. Collection of Receivable Payments; Modification and . .
Amendment of Receivables; Lockbox Agreements. . . . .33
Section 4.3. Realization on Defaulted Receivables. . . . . . . . .35
Section 4.4. Insurance . . . . . . . . . . . . . . . . . . . . . .36
Section 4.5. Maintenance of Security Interests in Vehicles . . . .37
Section 4.6. Covenants, Representations and Warranties of
Servicer. . . . . . . . . . . . . . . . . . . . . . .38
Section 4.7. Purchase of Receivables Upon Breach of Covenant or . .
Representation and Warranty . . . . . . . . . . . . .40
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PAGE
Section 4.8. Total Servicing Fee; Payment of Certain Expenses
by Servicer . . . . . . . . . . . . . . . . . . . . .40
Section 4.9. Servicer's Certificate. . . . . . . . . . . . . . . .41
Section 4.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event. . . . . . . . . . . . . . . . . .42
Section 4.11. Annual Independent Accountants' Report. . . . . . . .42
Section 4.12. Access to Certain Documentation and Information
Regarding Receivables . . . . . . . . . . . . . . . .43
Section 4.13. Monthly Tape. . . . . . . . . . . . . . . . . . . . .43
Section 4.14. Retention and Termination of Servicer . . . . . . . .44
Section 4.15. Fidelity Bond . . . . . . . . . . . . . . . . . . . .45
ARTICLE V DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS. . . . . .45
Section 5.1. Accounts. . . . . . . . . . . . . . . . . . . . . . .45
Section 5.2. Collections . . . . . . . . . . . . . . . . . . . . .46
Section 5.3. Application of Collections. . . . . . . . . . . . . .47
Section 5.4. Additional Deposits . . . . . . . . . . . . . . . . .47
Section 5.5. Distributions . . . . . . . . . . . . . . . . . . . .47
Section 5.6. Net Deposits. . . . . . . . . . . . . . . . . . . . .50
Section 5.7. Statements to Certificateholders. . . . . . . . . . .50
Section 5.8. Optional Deposits by the Certificate Insurer. . . . .52
ARTICLE VI THE SPREAD ACCOUNT AND THE POLICY. . . . . . . . . . . . .52
Section 6.1. Spread Account. . . . . . . . . . . . . . . . . . . .52
Section 6.2. Policy. . . . . . . . . . . . . . . . . . . . . . . .52
Section 6.3. Withdrawals from Spread Account . . . . . . . . . . .52
Section 6.4. Claims Under Policy . . . . . . . . . . . . . . . . .53
Section 6.5. Preference Claims; Direction of Proceedings . . . . .54
Section 6.6. Surrender of Policy . . . . . . . . . . . . . . . . .55
ARTICLE VII THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . .55
Section 7.1. The Certificates. . . . . . . . . . . . . . . . . . .55
Section 7.2. Authentication of Certificates. . . . . . . . . . . .55
Section 7.3. Registration of Transfer and Exchange of
Certificates. . . . . . . . . . . . . . . . . . . . .55
Section 7.4. Mutilated, Destroyed, Lost or Stolen Certificates . .60
Section 7.5. Persons Deemed Owners . . . . . . . . . . . . . . . .61
Section 7.6. Access to List of Certificateholders' Names
and Addresses . . . . . . . . . . . . . . . . . . . .61
Section 7.7. Maintenance of Office or Agency . . . . . . . . . . .61
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PAGE
ARTICLE VIII THE SELLER . . . . . . . . . . . . . . . . . . . . . . . .62
Section 8.1. Liability of Seller . . . . . . . . . . . . . . . . .62
Section 8.2. Merger or Consolidation of, or Assumption of
the Obligations of Seller; Amendment of Certificate
of Incorporation. . . . . . . . . . . . . . . . . . .62
Section 8.3. Limitation on Liability of Seller and Others. . . . .63
Section 8.4. Seller May Own Certificates . . . . . . . . . . . . .63
Section 8.5. Seller Not to Incur Debt. . . . . . . . . . . . . . .64
ARTICLE IX THE SERVICER . . . . . . . . . . . . . . . . . . . . . . .64
Section 9.1. Liability of Servicer; Indemnities. . . . . . . . . .64
Section 9.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer . . .65
Section 9.3. Limitation on Liability of Servicer, Backup Servicer
and Others. . . . . . . . . . . . . . . . . . . . . .66
Section 9.4. Delegation of Duties. . . . . . . . . . . . . . . . .67
Section 9.5. Servicer and Backup Servicer Not to Resign. . . . . .67
ARTICLE X SERVICER TERMINATION EVENTS. . . . . . . . . . . . . . . .68
Section 10.1. Servicer Termination Event. . . . . . . . . . . . . .68
Section 10.2. Consequences of a Servicer Termination Event. . . . .70
Section 10.3. Appointment of Successor. . . . . . . . . . . . . . .71
Section 10.4. Notification to Certificateholders. . . . . . . . . .72
Section 10.5. Waiver of Past Defaults . . . . . . . . . . . . . . .72
ARTICLE XI THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . .72
Section 11.1. Duties of Trustee . . . . . . . . . . . . . . . . . .72
Section 11.2. Trustee's Assignment of Administrative Receivables
and Warranty Receivables. . . . . . . . . . . . . . .74
Section 11.3. Certain Matters Affecting the Trustee . . . . . . . .74
Section 11.4. Trustee Not Liable for Certificates or Receivables. .75
Section 11.5. Trustee May Own Certificates. . . . . . . . . . . . .76
Section 11.6. Trustee's Fees and Expenses; Indemnification. . . . .76
Section 11.7. Eligibility Requirements for Trustee. . . . . . . . .77
Section 11.8. Resignation or Removal of Trustee . . . . . . . . . .77
Section 11.9. Successor Trustee . . . . . . . . . . . . . . . . . .78
Section 11.10. Merger or Consolidation of Trustee. . . . . . . . . .79
Section 11.11. Appointment of Co-Trustee or Separate Trustee . . . .79
Section 11.12. Representations and Warranties of Trustee . . . . . .80
Section 11.13. Tax Returns . . . . . . . . . . . . . . . . . . . . .81
Section 11.14. Trustee May Enforce Claims Without Possession of
Certificates. . . . . . . . . . . . . . . . . . . . .81
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PAGE
Section 11.15. Suit for Enforcement. . . . . . . . . . . . . . . . .81
Section 11.16. Rights to Direct Trustee. . . . . . . . . . . . . . .82
ARTICLE XII TERMINATION. . . . . . . . . . . . . . . . . . . . . . . .82
Section 12.1. Termination of the Trust. . . . . . . . . . . . . . .82
Section 12.2. Optional Purchase of All Receivables. . . . . . . . .83
ARTICLE XIII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . .83
Section 13.1. Amendment . . . . . . . . . . . . . . . . . . . . . .83
Section 13.2. Protection of Title to Trust. . . . . . . . . . . . .85
Section 13.3. Limitation on Rights of Certificateholders. . . . . .86
Section 13.4. Governing Law . . . . . . . . . . . . . . . . . . . .88
Section 13.5. Severability of Provisions. . . . . . . . . . . . . .88
Section 13.6. Assignment. . . . . . . . . . . . . . . . . . . . . .88
Section 13.7. Certificates Nonassessable and Fully Paid . . . . . .88
Section 13.8. Third-Party Beneficiaries . . . . . . . . . . . . . .88
Section 13.9. Financial Security as Controlling Party . . . . . . .88
Section 13.10. Counterparts. . . . . . . . . . . . . . . . . . . . .89
Section 13.11. Notices . . . . . . . . . . . . . . . . . . . . . . .89
Section 13.12. Successors and Assigns. . . . . . . . . . . . . . . .89
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SCHEDULES
Schedule A -- Schedule of Receivables
EXHIBITS
Exhibit A -- Form of Class A Certificate
Exhibit B -- Form of Class B Certificate
Exhibit C -- Form of Lockbox Agreement
Exhibit D -- Form of Spread Account Agreement
Exhibit E -- Form of Servicer's Certificate
Exhibit F -- Form of Policy
Exhibit G -- Form of Representation Letter
Exhibit H -- Receivables Purchase Agreement and Assignment
Exhibit I -- Lockbox Agreement
Exhibit J -- Servicer's Request for Release
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THIS POOLING AND SERVICING AGREEMENT (this "AGREEMENT"), dated as of
June 20, 1996, is made with respect to the formation of the Atlantic Auto
Grantor Trust 1996-A, among Atlantic Auto Third Funding Corporation, a Delaware
corporation, as Seller (the "SELLER"), Atlantic Auto Finance Corporation, a
Delaware corporation ("ATLANTIC" and, in its capacity as Servicer, the
"SERVICER") and The Chase Manhattan Bank, a New York banking corporation, as
Trustee ("CHASE," and in such capacity, the "TRUSTEE"), as Backup Servicer (in
such capacity, the "BACKUP SERVICER") and as Collateral Agent (in such capacity,
the "COLLATERAL AGENT").
WHEREAS, the Seller wishes to establish a trust and provide for the
allocation and sale of the beneficial interests therein and the maintenance and
distribution of the trust estate;
WHEREAS, the Servicer has agreed to service the Receivables, which
constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when executed
and authenticated by the Trustee, valid instruments, and to make this Agreement
a valid agreement, in accordance with their and its terms, have been done; and
WHEREAS, Chase is willing to serve in the capacity of Trustee and
Backup Servicer hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Seller, the Servicer, the Trustee and the
Backup Servicer hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. All terms defined in the Spread Account
Agreement (as defined below) shall have the same meaning in this Agreement.
Whenever capitalized and used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
AAFC: Atlantic Auto Funding Corporation, a wholly-owned subsidiary of
Atlantic.
AAFC ASSIGNMENT: The AAFC Assignment dated July 19, 1996, by AAFC in
favor of Atlantic.
ACCOUNTANTS' REPORT: The report of a firm of nationally recognized
independent accountants described in Section 4.11.
<PAGE>
ADMINISTRATIVE RECEIVABLE: With respect to any Monthly Period, a
Receivable which the Servicer is required to purchase pursuant to Section 4.7.
ADJUSTED COMPENSATING INTEREST: Shall have the meaning set forth in
Section 4.8(b).
AFFILIATE: With respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
AGGREGATE PRINCIPAL BALANCE: With respect to any Determination Date,
the sum of the Principal Balances (computed as of the related Record Date) for
all Receivables (other than (i) any Receivable that became a Liquidated
Receivable during the related Monthly Period and (ii) any Receivable that became
a Purchased Receivable on the immediately preceding Deposit Date).
AMOUNT AVAILABLE: With respect to any Distribution Date, the sum of
(i) the Available Funds for the immediately preceding Determination Date, plus
(ii) the Deficiency Claim Amount, if any, received by the Trustee from the
Collateral Agent with respect to such Distribution Date, plus (iii) the Policy
Claim Amount, if any, received by the Trustee from the Certificate Insurer with
respect to such Distribution Date.
AMOUNT FINANCED: With respect to a Receivable, the aggregate amount
advanced under such Receivable toward the purchase price of the Financed Vehicle
and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs.
ANNUAL PERCENTAGE RATE OR APR: With respect to a Receivable, the rate
per annum of finance charges stated in such Receivable as the "annual percentage
rate" (within the meaning of the Federal Truth-in-Lending Act). If after the
Closing Date, the rate per annum with respect to a Receivable as of the Closing
Date is reduced as a result of (i) an insolvency proceeding involving the
Obligor or (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940,
Annual Percentage Rate or APR shall refer to such reduced rate.
ANNUAL TRUSTEE'S FEE: Shall have the meaning set forth in Section
11.6.
ATLANTIC: shall have the meaning set forth in the first paragraph of
this Agreement.
AVAILABLE FUNDS: With respect to any Determination Date, the sum of
(i) the Collected Funds for such Determination Date; (ii) all Purchase Amounts
deposited in the Collection Account on the related Deposit Date and (iii) any
Adjusted Compensating Interest actually deposited by the Servicer into the
Collection Account on such Determination Date.
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AVERAGE DEFAULT RATE: With respect to any Determination Date, the
arithmetic average of the Default Rate for such Determination Date and the
Default Rates for the two immediately preceding Determination Dates.
AVERAGE DELINQUENCY RATIO: With respect to any Determination Date,
the arithmetic average of the Delinquency Ratio for such Determination Date and
the Delinquency Ratios for the two immediately preceding Determination Dates.
AVERAGE NET LOSS RATE: With respect to any Determination Date, the
arithmetic average of the Net Loss Rate for the related Monthly Period and the
Net Loss Rates for the two immediately preceding Monthly Periods.
BACKUP SERVICER: Shall have the meaning set forth in the first
paragraph of this Agreement.
BUSINESS DAY: Any day other than a Saturday, Sunday, legal holiday or
other day on which banking institutions in New York, New York or any other
location of any Servicer, Trustee or Collateral Agent are authorized or
obligated by law, executive order or governmental decree to be closed.
CALENDAR QUARTER: The three-month period ending on the last day of
March, June, September or December.
CERTIFICATE: Any one of the Class A Certificates or Class B
Certificates executed by the Trustee on behalf of the Trust in substantially the
form set forth in Exhibit A or B, respectively.
CERTIFICATE INSURER: Financial Security Assurance Inc., a monoline
insurance company incorporated under the laws of the State of New York, or any
successor thereto, as issuer of the Policy.
CERTIFICATE MAJORITY: As of any date of determination, Holders of
Class A Certificates and Class B Certificates representing a majority of the sum
of the Class A Certificate Balance and the Class B Certificate Balance, or if
there are no Class A Certificates outstanding, holders of Class B Certificates
representing a majority of the Class B Certificate Balance as of such date.
CERTIFICATEHOLDER OR HOLDER: The Person in whose name a Certificate
is registered in the Certificate Register.
CERTIFICATE REGISTER AND CERTIFICATE REGISTRAR: The register
maintained and the registrar appointed pursuant to Section 7.3.
CLASS: A class of Certificates.
CLASS A CERTIFICATE: Any one of the Certificates executed by the
Trust and authenticated by the Trustee in substantially the form set forth in
Exhibit A hereto.
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<PAGE>
CLASS A CERTIFICATE BALANCE: Initially, $45,837,000 and, thereafter,
the initial Class A Certificate Balance reduced by all amounts distributed to
the Class A Certificateholders and allocable to principal.
CLASS A CERTIFICATE FACTOR: As of any Distribution Date, a six-digit
decimal figure equal to the Class A Certificate Balance as of the close of
business on such Distribution Date divided by the initial Class A Certificate
Balance as of the Cut-off Date.
CLASS A DISTRIBUTABLE AMOUNT: On any Distribution Date, the sum of
the Class A Principal Distributable Amount and the Class A Interest
Distributable Amount.
CLASS A INTEREST CARRYOVER SHORTFALL: As of the close of business on
any Distribution Date, the excess of the Class A Interest Distributable Amount
for such Distribution Date plus (without duplication) any outstanding Class A
Interest Carryover Shortfall from the preceding Distribution Date plus interest
on such outstanding Class A Interest Carryover Shortfall, to the extent
permitted by law, at the Class A Pass-Through Rate from such preceding
Distribution Date through the current Distribution Date, over the amount of
interest that the holders of the Class A Certificates actually received on such
current Distribution Date.
CLASS A INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of (i) for the initial Distribution Date, twenty-six
(26) days of interest and for any Distribution Date thereafter, thirty (30) days
of interest, in any case calculated on the basis of a 360-day year consisting of
twelve 30-day months, at the Class A Pass-Through Rate on the Class A
Certificate Balance as of the close of business on the last day of the preceding
Monthly Period and (ii) any outstanding Class A Interest Carryover Shortfall.
CLASS A PASS-THROUGH RATE: 6.70% per annum, calculated on the basis
of a 360-day year consisting of twelve 30-day months.
CLASS A PERCENTAGE: 97%.
CLASS A PRINCIPAL CARRYOVER SHORTFALL: As of the close of business on
any Distribution Date, the excess of the Class A Principal Distributable Amount
plus any outstanding Class A Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal that the holders of the Class A
Certificates actually received on such current Distribution Date.
CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, without duplication, the sum of the Class A Percentage of (i)
the principal portion of all Collected Funds received during the immediately
preceding Monthly Period (other than Liquidated Receivables and Purchased
Receivables) including the principal portion of all prepayments, (ii) the
Principal Balance of all Receivables that became Liquidated Receivables during
the related Monthly Period (other than Purchased Receivables), (iii) the
principal portion of the Purchase Amount of all Receivables that became
Purchased Receivables as of the immediately preceding Record Date, plus, in the
sole discretion of the Certificate Insurer,
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the principal portion of the Purchase Amount as of the immediately preceding
Record Date of all the Receivables that were required to be purchased pursuant
to Sections 3.6 and 4.7 as of the immediately preceding Record Date but were not
so purchased and (iv) the aggregate amount of Cram Down Losses that shall have
occurred during the related Monthly Period. With respect to the Final
Distribution Date, the amount described in the preceding paragraph or, if
greater, the amount necessary to reduce the Class A Certificate Balance to zero
on such Final Distribution Date.
CLASS B CERTIFICATE: Any one of the Certificates executed by the
Trust and authenticated by the Trustee in substantially the form set forth in
Exhibit B hereto.
CLASS B CERTIFICATE BALANCE: Initially, $1,417,958.27 and,
thereafter, the initial Class B Certificate Balance, reduced by (x) all amounts
distributed to Class B Certificateholders and allocable to principal and (y) on
any Distribution Date on which (i) the sum of the Class A Certificate Balance
and the Class B Certificate Balance as of such Distribution Date, after taking
into account all distributions to be made on such Distribution Date, exceeds
(ii) the Pool Balance with respect to the immediately preceding Monthly Period,
the amount of such excess.
CLASS B CERTIFICATE FACTOR: As of any Distribution Date, a six-digit
decimal figure equal to the Class B Certificate Balance as of the close of
business on such Distribution Date divided by the initial Class B Certificate
Balance.
CLASS B DISTRIBUTABLE AMOUNT: On any Distribution Date, the sum of
the Class B Principal Distributable Amount and the Class B Interest
Distributable Amount.
CLASS B INTEREST CARRYOVER SHORTFALL: As of the close of business on
any Distribution Date, the excess of the Class B Interest Distributable Amount
for such Distribution Date plus (without duplication) any outstanding Class B
Interest Carryover Shortfall from the preceding Distribution Date plus interest
on such outstanding Class B Interest Carryover Shortfall, to the extent
permitted by law, at the Class B Pass-Through Rate from such preceding
Distribution Date through the current Distribution Date, over the amount of
interest that the holders of the Class B Certificates actually received or was
deposited in the Class B Sub-account on such current Distribution Date.
CLASS B INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of (i) for the initial Distribution Date,
twenty-six (26) days of interest and for any Distribution Date thereafter,
thirty (30) days of interest, in any case calculated on the basis of a
360-day year consisting of twelve 30-day months, at the Class B Pass-Through
Rate on the Class B Certificate Balance as of the close of business on the
last day of the preceding Monthly Period LESS the portion thereof, if any,
deposited in the Class B Sub-account pursuant to Section 5.5(a)(vii) on such
Distribution Date and (ii) any outstanding Class B Interest Carryover
Shortfall.
CLASS B PASS-THROUGH RATE: 9.20% per annum, calculated on the basis
of a 360-day year consisting of twelve 30-day months.
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CLASS B PERCENTAGE: 3%.
CLASS B PRINCIPAL CARRYOVER SHORTFALL: As of the close of business on
any Distribution Date, the excess of the Class B Principal Distributable Amount
plus any outstanding Class B Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal that the holders of the Class B
Certificates actually received or that was deposited in the Class B Sub-account
on such current Distribution Date.
CLASS B PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, without duplication, the Class B Percentage of: the sum of
(a) (i) the principal portion of all Collected Funds received during the
immediately preceding Monthly Period (other than Liquidated Receivables and
Purchased Receivables) including the principal portion of all prepayments, (ii)
the Principal Balance of all Receivables that became Liquidated Receivables
during the related Monthly Period (other than Purchased Receivables), (iii) the
principal portion of the Purchase Amount of all Receivables that became
Purchased Receivables as of the immediately preceding Record Date, and (iv) the
aggregate amount of Cram Down Losses that shall have occurred during the related
Monthly Period LESS (b) the portion thereof, if any, deposited in the Class B
Sub-account pursuant to Section 5.5(a)(vii) on such Distribution Date.
CLASS B SUB-ACCOUNT: The Class B Sub-account of the Spread Account.
CLEARING AGENCY: An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934.
CLOSING DATE: July 19, 1996.
COLLATERAL AGENT: The Collateral Agent named in the Spread Account
Agreement, and any successor thereto pursuant to the terms of the Spread Account
Agreement.
COLLATERAL INSURANCE: Shall have the meaning set forth in Section
4.4(b).
COLLECTED FUNDS: With respect to any Determination Date, the amount
of funds in the Collection Account representing collections on the Receivables
during the related Monthly Period, including all Liquidation Proceeds collected
during the related Monthly Period (but excluding any Purchase Amounts).
COLLECTION ACCOUNT: The account designated as the Collection Account
in, and which is established and maintained pursuant to, Section 5.1.
COLLECTION RECORDS: All manually prepared or computer generated
records relating to collection efforts or payment histories with respect to the
Receivables.
COMPENSATING INTEREST: With respect to all Receivables for which the
Scheduled Payment for any Monthly Period is received prior to the date on which
such Scheduled Payment is due or for which any prepayment is otherwise received,
an amount equal to the aggregate of the positive differences, if any, with
respect to each such Receivable between (x)
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the sum of (a) 30 days' interest at an interest rate equal to the weighted
average of the Class A Pass-Through Rate and the Class B Pass-Through Rate
(weighted by relative Class A Certificate Principal Balance and Class B
Certificate Principal Balance) on the Principal Balance of each such
Receivable as of the first day of the related Monthly Period and (b) the
product of (i) one twelfth of (A) the sum of the Servicing Fee Rate and (B)
the per annum rate at which the Premium (as such term is defined in the
Insurance Agreement) is calculated pursuant to the Premium Letter and (ii)
the Principal Balance of such Receivable as of the first day of the related
Monthly Period and (y) the product of (i) the interest actually paid by the
related Obligor with respect to such Receivable with respect to such Monthly
Period and (ii) a fraction, the numerator of which is the sum of (a) such
weighted average of the Class A Pass-Through Rate and the Class B
Pass-Through Rate referred to in (x)(a) above, (b) the Servicing Fee Rate and
(c) the per annum rate at which the Premium (as such term is defined in the
Insurance Agreement) is calculated pursuant to the Premium Letter, and the
denominator of which is the APR of such Receivable.
COMPUTER TAPE OR LISTING: The computer tape or listing generated on
behalf of the Seller which provides information relating to the Receivables and
which was used by the Seller and Atlantic in selecting the Receivables conveyed
to the Trust hereunder.
CORPORATE TRUST OFFICE: The principal office of the Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the Closing Date is located at 4 Chase Metrotech Center - 3rd Floor,
Brooklyn, New York 11245. The telecopy number for the Corporate Trust Office on
the Closing Date is (718) 242-3529.
CRAM DOWN LOSS: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
the scheduled payments to be made on a Receivable, an amount equal to the excess
of the principal balance of such Receivable immediately prior to such order over
the principal balance of such Receivable as so reduced or the net present value
(using as the discount rate the higher of the APR on such Receivable or the rate
of interest, if any, specified by the court in such order) of the scheduled
payments as so modified or restructured. A "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
CUSTODIAN: Initially Safesite Records Management Corporation, as
Custodian on behalf of the Trustee pursuant to the Custodial Agreement or any
successor thereto.
CUSTODIAL AGREEMENT: The Custodial Agreement dated as of June 20,
1996, among the Custodian, the Seller, the Trustee and the Servicer, and
acknowledged by the Certificate Insurer.
CUSTODIAL RECEIVABLE FILES: Shall have the meaning set forth in
Section 3.2(a).
CUT-OFF DATE: The close of business on June 20, 1996.
CUT-OFF DATE PRINCIPAL BALANCE: $47,254,958.27.
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CXC: CXC Incorporated, a Delaware corporation.
CXC ASSIGNMENT: That certain Assignment dated July 19, 1996, by CXC,
in favor of Atlantic.
DEALER: A seller of new or used automobiles or light trucks that
originated one or more of the Receivables and sold the respective Receivable,
directly or indirectly, to Atlantic.
DEALER AGREEMENT: An agreement by and among Atlantic and a Dealer
relating to the sale of retail installment sale contracts and installment notes
to Atlantic and all documents and instruments relating thereto.
DEALER ASSIGNMENT: With respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to Atlantic.
DEALER UNDERWRITING GUIDE: Means the underwriting manual used by
Atlantic in the purchase of Receivables as amended from time to time.
DEFAULT RATE: With respect to any Determination Date and based on
such information provided in the Servicer's Certificate under Section 4.9(b),
the product of (x) twelve and (y) a fraction (i) the numerator of which is the
sum of (a) the aggregate Principal Balances (as of the related Record Date) of
all Receivables which became Defaulted Receivables during the related Monthly
Period and (b) the aggregate Principal Balances (as of the related repurchase
date) of Receivables that became Purchased Receivables during the related
Monthly Period that were more than 30 days delinquent with respect to $25.00 or
more of a Scheduled Payment at the time of such repurchase hereunder and (ii)
the denominator of which is a fraction (a) the numerator of which is the sum of
(l) the aggregate Principal Balances of the Receivables as of the first day of
the related Monthly Period and (2) the aggregate Principal Balances of the
Receivables as of the Record Date and (b) the denominator of which is two.
DEFAULTED RECEIVABLE: With respect to any Determination Date, a
Receivable with respect to which: (i) $25.00 or more of a Scheduled Payment is
more than 90 days delinquent, (ii) the Servicer has repossessed the related
Financed Vehicle (and any applicable redemption period has expired) or (iii)
such Receivable is in default and the Servicer has determined in good faith that
payments thereunder are not likely to be resumed; PROVIDED, HOWEVER, that a
Receivable shall not be a Defaulted Receivable if the Servicer has determined in
good faith that insurance proceeds with respect to such Receivable are likely to
be paid.
DEFICIENCY CLAIM AMOUNT: Shall have the meaning set forth in Section
6.3(a).
DEFICIENCY CLAIM DATE: With respect to any Distribution Date, the
fourth Business Day immediately preceding such Distribution Date.
DEFICIENCY NOTICE: Shall have the meaning set forth in Section
6.3(a).
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DELINQUENCY RATIO: With respect to any Determination Date, a fraction
(a) the numerator of which is equal to the aggregate Principal Balances (as of
the related Record Date) of all Receivables that were more than 30 days
delinquent with respect to $25.00 or more of a Scheduled Payment and (b) the
denominator of which is equal to the aggregate Principal Balances of the
Receivables as of the related Record Date.
DEPOSIT DATE: With respect to any Monthly Period, the Business Day
immediately preceding the related Determination Date.
DEPOSITORY: The depository designated for the book-entry Certificates
or a nominee thereof.
DETERMINATION DATE: With respect to a Monthly Period, the sixth
Business Day prior to the related Distribution Date.
DISTRIBUTION AMOUNT: With respect to a Distribution Date, the sum of
(i) the Available Funds for such Distribution Date, plus (ii) the Deficiency
Claim Amount, if any, received by the Trustee with respect to such Distribution
Date.
DISTRIBUTION DATE: With respect to a Monthly Period, the 15th day of
the next succeeding calendar month, or if such 15th day is not a Business Day,
the next succeeding Business Day, commencing August 15, 1996.
DRAW DATE: With respect to any Distribution Date, the third Business
Day (as defined in the Policy) immediately preceding such Distribution Date.
ELECTRONIC LEDGER: The electronic master record of the retail
installment sales contracts or installment loans of the Servicer.
ELIGIBLE ACCOUNT: (i) A segregated trust account that is maintained
with a depository institution acceptable to the Certificate Insurer (so long as
an Insurer Default shall not have occurred and be continuing), or (ii) a
segregated direct deposit account maintained with a depository institution or
trust company organized under the laws of the United States of America, or any
of the States thereof, or the District of Columbia, having a certificate of
deposit, short-term deposit or commercial paper rating of at least A-1+ by
Standard & Poor's and P-1 by Moody's and (so long as an Insurer Default shall
not have occurred and be continuing) acceptable to the Certificate Insurer. In
either case, such depository institution or trust company shall have been
approved by the Controlling Party (as defined in the Spread Account Agreement),
acting in its discretion, by written notice to the Collateral Agent.
ELIGIBLE INVESTMENTS: Any one or more of the following types of
investments:
(i) direct interest-bearing obligations of, and interest-bearing
obligations guaranteed as to timely payment of principal and interest by,
the United States or any agency or instrumentality of the United States the
obligations of which are backed by the full faith and credit of the United
States;
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(ii) demand or time deposits in, certificates of deposit of, or
bankers' acceptances issued by any depository institution or trust company
organized under the laws of the United States or any State and subject to
supervision and examination by federal and/or state banking authorities
(including, if applicable, the Trustee or any agent of the Trustee acting
in their respective commercial capacities); PROVIDED that the short-term
unsecured debt obligations of such depository institution or trust company
at the time of such investment, or contractual commitment providing for
such investment, are rated AAA by Standard & Poor's and Aaa by Moody's;
(iii) repurchase obligations pursuant to a written agreement
(1) with respect to any obligation described in clause (i) above, where the
Trustee has taken actual or constructive delivery of such obligation in
accordance with Section 5.1, and (2) entered into with a depository
institution or trust company organized under the laws of the United States
or any State thereof, the deposits of which are insured by the Federal
Deposit Insurance Corporation and the short-term unsecured debt obligations
of which are rated "A-1+" by Standard & Poor's and "P-1" by Moody's
(including, if applicable, the Trustee or any agent of the Trustee acting
in their respective commercial capacities);
(iv) securities bearing interest or sold at a discount issued by
any corporation incorporated under the laws of the United States or any
State whose long-term unsecured debt obligations are rated AAA by Standard
& Poor's and Aaa by Moody's at the time of such investment or contractual
commitment providing for such investment; PROVIDED, HOWEVER, that
securities issued by any particular corporation will not be Eligible
Investments to the extent that an investment therein will cause the then
outstanding principal amount of securities issued by such corporation and
held as part of the Collection Account to exceed 10% of the Eligible
Investments held in the Collection Account (with Eligible Investments held
in the Collection Account valued at par);
(v) commercial paper that (1) is payable in United States
dollars and (2) is rated A-1+ by Standard & Poor's and Prime-1 by Moody's;
(vi) subject to the prior written consent of the Certificate
Insurer, money market mutual funds registered under the Investment Company
Act of 1940, as amended, having a rating, at the time of such investment,
from each of the Rating Agencies in the highest investment category granted
thereby; and
(vii) any other demand or time deposit, obligation, security
or investment as may be acceptable to the Certificate Insurer, as evidenced
by the prior written consent of the Certificate Insurer, as may from time
to time be confirmed in writing to the Trustee by the Certificate Insurer
upon notification to each of Moody's and Standard and Poor's.
ELIGIBLE SERVICER: Atlantic, the Backup Servicer or another Person
which at the time of its appointment as Servicer, in the opinion of the
Certificate Insurer, (i) is servicing
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a portfolio of motor vehicle retail installment sales contracts and/or motor
vehicle installment loans, (ii) is legally qualified and has the capacity to
service the Receivables, (iii) has demonstrated the ability professionally and
competently to service a portfolio of motor vehicle retail installment sales
contracts and/or motor vehicle installment loans similar to the Receivables with
reasonable skill and care, and (iv) is qualified and entitled to use, pursuant
to a license or other written agreement, and agrees to maintain the
confidentiality of, the software which the Servicer uses in connection with
performing its duties and responsibilities under this Agreement or otherwise has
available software which is adequate to perform its duties and responsibilities
under this Agreement.
FINAL DISTRIBUTION DATE: The Distribution Date in September 2002.
FINANCED VEHICLE: A new or used automobile or light truck, van or
mini-van together with all accessories thereto, securing or purporting to secure
an Obligor's indebtedness under a Receivable.
FRACTIONAL UNDIVIDED INTEREST: The fractional undivided interest in
the Trust that is evidenced by a Certificate.
GUARANTEED DISTRIBUTIONS: Shall have the meaning set forth in the
Policy.
INDEMNIFICATION AGREEMENT: The Indemnification Agreement, dated as of
June 20, 1996, among the Certificate Insurer, the Seller and Donaldson, Lufkin &
Jenrette Securities Corporation.
INDEPENDENT ACCOUNTANTS: Shall have the meaning set forth in Section
4.11(a).
INITIAL PURCHASER AGREEMENT: The Purchase Agreement, dated as of July
19, 1996, between the Seller and the initial purchaser of the Class A
Certificates.
INSURANCE AGREEMENT: The Insurance and Indemnity Agreement, dated as
of June 20, 1996, among the Certificate Insurer, the Seller and Atlantic.
INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default" as
defined in the related Insurance Agreement.
INSURANCE POLICY: With respect to a Receivable, any insurance policy
(including the insurance policies described in Section 3.4(a)(xxiii)) benefiting
the holder of the Receivable providing loss or physical damage, credit life,
credit disability, theft, mechanical breakdown or similar coverage with respect
to the Financed Vehicle or the Obligor.
INSURER DEFAULT: The occurrence and continuance of any of the
following events:
(a) The Certificate Insurer shall have failed to make a payment
required under the Policy in accordance with its terms;
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(b) The Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
United States Bankruptcy Code or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (ii) made a general assignment for the benefit of its
creditors, or (iii) had an order for relief entered against it under the
United States Bankruptcy Code or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization which is final and nonappealable; or
(c) A court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent or receiver for the Certificate Insurer or for
all or any material portion of its property or (ii) authorizing the taking
of possession by a custodian, trustee, agent or receiver of the Certificate
Insurer (or the taking of possession of all or any material portion of the
property of the Certificate Insurer).
LIEN: Any security interest, lien, charge, pledge, preference, equity
or encumbrance of any kind, including tax liens, mechanics' liens and any liens
that attach by operation of law.
LIEN CERTIFICATE: With respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
LIQUIDATED RECEIVABLE: With respect to any Monthly Period, a
Receivable as to which (i) more than 60 days have elapsed since the Servicer
repossessed the Financed Vehicle, (ii) the Servicer has determined in good faith
that all amounts it expects to recover have been received, (iii) $25.00 or more
of a Scheduled Payment shall have become more than 120 days delinquent, or in
the case of an Obligor who is subject to bankruptcy proceedings, more than 210
days delinquent or (iv) the Financed Vehicle has been sold and the proceeds
received. Any Receivable that becomes a Purchased Receivable on or before the
related Deposit Date shall not be a Liquidated Receivable.
LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, all
amounts realized with respect to such Receivable (other than amounts withdrawn
from the Spread Account and drawings under the Policy) net of amounts that are
required to be refunded to the Obligor on such Receivable; PROVIDED, HOWEVER,
that the Liquidation Proceeds with respect to any Receivable shall in no event
be less than zero.
LOCKBOX ACCOUNT: An account maintained by the Lockbox Bank pursuant
to Section 4.2(d).
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LOCKBOX AGREEMENT: The Amended and Restated Lockbox Agreement, dated
as of June 14, 1996, among Atlantic, AAFC, Atlantic Auto Second Funding
Corporation, Citicorp North America Inc., Morgan Guaranty Trust Company of New
York and the Lockbox Bank, as supplemented by the Assignment thereto dated July
19, 1996 among Atlantic, the Seller, the Lockbox Bank, the Trustee and the
Certificate Insurer, each in the form attached as Exhibit C hereto, or any other
agreement, in form and substance acceptable to the Certificate Insurer, or if an
Insurer Default shall have occurred and be continuing, to a Certificate
Majority.
LOCKBOX BANK: Marine Midland Bank or any other depository institution
named by the Servicer and, so long as an Insurer Default shall not have occurred
and be continuing, acceptable to the Certificate Insurer, or, if an Insurer
Default shall have occurred and be continuing, to a Certificate Majority.
MONTHLY PERIOD: A calendar month. With respect to a Determination
Date or a Distribution Date, the calendar month preceding the month in which
such Determination Date or Distribution Date occurs (such calendar month being
referred to as the "related" Monthly Period with respect to such Determination
Date or Distribution Date). Any amount stated "as of the close of business of
the last day of a Monthly Period" shall give effect to the following
calculations as determined as of the end of the day on such last day: (i) all
applications of collections, and (ii) all distributions.
MONTHLY RECORDS: All records and data maintained by the Servicer with
respect to the Receivables, including the following with respect to each
Receivable: the account number; the originating Dealer; Obligor name; Obligor
address; Obligor home phone number; Obligor business phone number; original
Principal Balance; original term; Annual Percentage Rate; current Principal
Balance; current remaining term; origination date; first payment date; final
scheduled payment date; next payment due date; date of most recent payment;
new/used classification; collateral description; days currently delinquent;
number of contract extensions (months) to date; amount of Scheduled Payment;
current Insurance Policy expiration date; and past due late charges.
MOODY'S: Moody's Investors Service, Inc., or any successor thereto.
NET LOSS RATE: For any Monthly Period, the product, expressed as a
percentage, of twelve multiplied by a fraction, the numerator of which is equal
to (i) the sum of (a) the aggregate of the Principal Balances as of the related
Record Date of all Receivables that became Liquidated Receivables during the
related Monthly Period and (b) the amount of any Cram Down Losses during such
Monthly Period less (ii) the Liquidation Proceeds received by the Trust with
respect to Receivables which became Liquidated Receivables in prior Monthly
Periods, and the denominator of which is equal to the average of the Aggregate
Principal Balance as of the related Record Date and the Aggregate Principal
Balance as of the first day of the related Monthly Period.
NOTICE OF CLAIM: A written or telecopied notice from the Trustee to
the Certificate Insurer, substantially in the form of Exhibit A to the Policy.
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OBLIGOR: The purchaser or the co-purchasers of the Financed Vehicle
and any other Person or Persons who are primarily or secondarily obligated to
make payments under a Receivable.
OFFERING MEMORANDUM: The Offering Memorandum, dated July 12, 1996
relating to the Class A Certificates.
OFFICER'S CERTIFICATE: A certificate signed by the chairman of the
board, the vice chairman, the president, the chief financial officer or any
executive vice president.
OPINION OF COUNSEL: A written opinion of counsel reasonably
acceptable to the Certificate Insurer, which opinion is acceptable in form and
substance to the Trustee and, if such opinion or a copy thereof is required by
the provisions of this Agreement to be delivered to the Certificate Insurer, to
the Certificate Insurer.
OUTSTANDING AMOUNT: The sum of the Class A Certificate Balance and
the Class B Certificate Balance.
PARTICIPANT: A broker, dealer, bank or other financial institution or
other Person for whom from time to time a Depository effects book-entry
transfers and pledges of securities deposited with the Depository.
PERSON: Any legal person, including any individual, corporation,
partnership, joint venture, estate, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof, or any other entity.
POLICY: The financial guaranty insurance policy number 50489N issued
by the Certificate Insurer to the Trustee for the benefit of the Class A
Certificateholders, including any endorsements thereto.
POLICY CLAIM AMOUNT: Shall have the meaning set forth in Section
6.4(a).
POLICY PAYMENTS ACCOUNT: The account designated as the Policy
Payments Account in, and which is established and maintained pursuant to,
Section 5.1.
POOL BALANCE: As of the close of business on the last day of a
Monthly Period, the aggregate Principal Balance of the Receivables (excluding
Purchased Receivables and Liquidated Receivables).
POOL FACTOR: With respect to any Distribution Date, a six digit
decimal figure equal to, as applicable, the Class A Certificate Balance as of
such Distribution Date (after giving effect to distributions of principal on
such date) divided by the Class A Certificate Balance as of the Closing Date, or
the Class B Certificate Balance as of such Distribution Date (after giving
effect to distributions of principal on such date) divided by the Class B
Certificate Balance as of the Closing Date.
PREFERENCE CLAIM: Shall have the meaning set forth in Section 6.5(b).
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PREMIUM LETTER: The premium letter, dated the Closing Date among the
Certificate Insurer, Atlantic, the Seller and the Trustee relating to the
payment of certain fees and expenses of the Certificate Insurer.
PRINCIPAL BALANCE: With respect to any Receivable, as of any date,
the Amount Financed minus (i) that portion of all amounts received on or prior
to such date and allocable to principal in accordance with the terms of the
Receivable, and (ii) any Cram Down Loss in respect of such Receivable.
PURCHASE AMOUNT: With respect to a Receivable, the Principal Balance
and all accrued and unpaid interest on the Receivable as of the date of
purchase.
PURCHASED RECEIVABLE: As of any Record Date, any Receivable that
became a Warranty Receivable or Administrative Receivable as of such Record Date
(or which the Seller or the Servicer has elected to purchase as of an earlier
Record Date, as permitted hereunder) and as to which the Purchase Amount has
been deposited in the Collection Account by the Seller, Atlantic or the
Servicer, as applicable, on or before the related Deposit Date.
RATING AGENCY: Each of Moody's and Standard & Poor's, so long as
such Persons maintain a rating on the Certificates; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Certificates, such other
nationally recognized statistical rating organization selected by the Seller and
(so long as an Insurer Default shall not have occurred and be continuing)
acceptable to the Certificate Insurer.
RECEIVABLE: A retail installment sale contract or promissory note
(and related security agreement) for a new or used automobile, light-duty truck,
van or mini-van (and all accessories thereto) that is included in the Schedule
of Receivables, and all rights and obligations under such contract, but not
including (i) any Liquidated Receivable (other than for purposes of calculating,
as applicable, the Class A Principal Distributable Amount and the Class B
Principal Distributable Amount hereunder), or (ii) any Purchased Receivable on
or after the Record Date immediately preceding the Deposit Date on which payment
of the Purchase Amount is made in connection therewith pursuant to Section 5.4.
RECEIVABLE FILE: The documents, electronic entries, instruments and
writings listed in Section 3.2 pertaining to a particular Receivable.
RECEIVABLES PURCHASE AGREEMENT: The Receivables Purchase Agreement
and Assignment, dated as of June 20, 1996, between Atlantic and the Seller
relating to the purchase by the Seller from Atlantic of the Receivables as set
forth in Exhibit I.
RECORD DATE: With respect to any Determination Date or Distribution
Date, the last day of the immediately preceding calendar month.
REGISTRAR OF TITLES: With respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
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RELATED DOCUMENTS: The Certificates, the Receivables Purchase
Agreement, the Indemnification Agreement, the Spread Account Agreement, the
Insurance Agreement, the AAFC Assignment, the CXC Assignment, the Lockbox
Agreement, the Premium Letter and the Custodial Agreement. The Related
Documents to be executed by any party are referred to herein as "such party's
Related Documents," "its Related Documents" or by a similar expression.
REPURCHASE EVENTS: The occurrence of a breach of any of the Seller's
or the Servicer's representations and warranties in this Agreement which
requires the repurchase of a Receivable by the Seller or the Servicer pursuant
hereto or Atlantic pursuant to the Receivables Purchase Agreement.
REQUIRED DEPOSIT RATING: A rating on short-term unsecured debt
obligations of "P-1" by Moody's and at least "A-1+" by Standard & Poor's (or
such other rating as may be acceptable to the Rating Agencies and, so long as an
Insurer Default shall not have occurred and be continuing, the Certificate
Insurer) so as to not affect the rating on the Certificates.
REQUISITE AMOUNT: Shall have the meaning set forth in the Spread
Account Agreement.
RESPONSIBLE OFFICER: When used with respect to the Trustee, any
officer of the Trustee assigned by the Trustee to administer its corporate
trust affairs relating to the Trust. When used with respect to any other
Person that is not an individual, the President, any Vice-President or
Assistant Vice-President or the Controller of such Person, or any other
officer or employee having similar functions.
SCHEDULE OF RECEIVABLES: The schedule of all retail installment sales
contracts and promissory notes originally held as part of the Trust which is
attached as Schedule A.
SCHEDULED PAYMENT: With respect to any Monthly Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor in such Monthly Period. If after the Closing Date, the Obligor's
obligation under a Receivable with respect to a Monthly Period has been modified
so as to differ from the amount specified in such Receivable as a result of (i)
the order of a court in an insolvency proceeding involving the Obligor, (ii)
pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940 or (iii)
modifications or extensions of the Receivable permitted by Section 4.2(b), the
Scheduled Payment with respect to such Monthly Period shall refer to the
Obligor's payment obligation with respect to such Monthly Period as so modified.
SELLER: Shall have the meaning set forth in the first paragraph of
this Agreement.
SELLER SUB-ACCOUNT: The Seller Sub-account of the Spread Account.
SELLER SUB-ACCOUNT SPREAD DEPOSIT AMOUNT: Means as of any
Distribution Date the lesser of (i) the positive difference if any between (a)
the Requisite Amount as of the related Determination Date and (b) the amount on
deposit in the Seller Sub-account of the
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Spread Account (after giving effect to any withdrawals from the Seller
Sub-account on such Distribution Date); and (ii) the positive difference, if
any, between (a) Available Funds (after giving effect to any distributions
pursuant to Section 5.5(a) (i) through (v)) and (b) the sum of the Class B
Interest Distributable Amount, the Class B Principal Distributable Amount and
the Class B Principal Carryover Shortfall, if any, in each case for such
Distribution Date.
SERIES: The Certificates issued pursuant to this Agreement.
SERVICER: Shall have the meaning set forth in the first paragraph of
this Agreement.
SERVICER EXTENSION NOTICE: The notice delivered pursuant to Section
4.14.
SERVICER RECEIVABLE FILES: Shall have the meaning set forth in
Section 3.2(b).
SERVICER'S CERTIFICATE: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in accordance
with Section 4.9, substantially in the form attached hereto as Exhibit E.
SERVICER TERMINATION EVENT: An event described in Section 10.1.
SERVICING FEE: With respect to any Monthly Period, the fee payable to
the Servicer for services rendered during such Monthly Period, which shall be
equal to one-twelfth of the Servicing Fee Rate multiplied by the Aggregate
Principal Balance as of the last day of the immediately proceeding Monthly
Period.
SERVICING FEE RATE: 1% per annum, payable monthly at one-twelfth of
the annual rate.
SERVICING PROCEDURES MANUAL: Means the servicing manual used by
Atlantic in the servicing of the Receivables as amended from time to time.
SIMPLE INTEREST METHOD: The method of allocating a fixed level
payment on an obligation between principal and interest, pursuant to which the
portion of such payment that is allocated to interest is equal to the product of
the fixed rate of interest on such obligation multiplied by the period of time
(expressed as a fraction of a year, based on a 30 day month and 360 days in the
calendar year) elapsed since the preceding payment under the obligation was
made.
SIMPLE INTEREST RECEIVABLE: A Receivable under which the portion of
the payment allocable to interest and the portion allocable to principal is
determined in accordance with the Simple Interest Method.
SPREAD ACCOUNT: The Spread Account established and maintained
pursuant to the Spread Account Agreement. The Spread Account shall in no event
be deemed part of the Trust Property. The Spread Account will be pledged by the
Seller to the Trustee, in its
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capacity as Seller and as agent of the Class B Certificateholders to the extent
they have an interest therein.
SPREAD ACCOUNT AGREEMENT: The Master Spread Account Agreement, dated
as of June 20, 1996, among the Seller, the Certificate Insurer, the Collateral
Agent and the Trustee substantially in the form attached hereto as Exhibit D, as
the same may be amended, supplemented or otherwise modified in accordance with
the terms thereof.
STANDARD & POOR'S: Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, or any successor thereto.
SUPPLEMENTAL SERVICING FEE: With respect to any Monthly Period, (i)
all administrative fees, expenses and charges paid by or on behalf of Obligors,
including late fees, prepayment fees and liquidation fees collected on the
Receivables during such Monthly Period and (ii) the net realized earnings on all
investments of funds deposited in the Collection Account.
THIS AGREEMENT: Shall have the meaning set forth in the first
paragraph of this Agreement.
TOTAL SERVICING FEE: The sum of the Servicing Fee and the
Supplemental Servicing Fee.
TRIGGER EVENT: Shall have the meaning set forth in the Spread Account
Agreement.
TRUST: Shall have the meaning set forth in Section 2.1.
TRUST PROPERTY: The property and proceeds of every description
conveyed pursuant to Section 3.1, together with certain moneys paid after the
Cut-off Date through the Closing Date, the Policy, the Collection Account
(including all Eligible Investments therein and all proceeds therefrom), the
Lockbox Account and certain other rights under this Agreement. Although the
Seller, on behalf of itself in respect of the Seller Sub-account and on behalf
of the Class B Certificateholders in respect of the Class B Sub-account, has
pledged the Spread Account to the Trustee and the Certificate Insurer pursuant
to the Spread Account Agreement, the Spread Account shall not under any
circumstances be deemed to be a part of or otherwise includable in the Trust or
the Trust Property.
TRUSTEE: Shall have the meaning set forth in the first paragraph of
this Agreement.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
WARRANTY RECEIVABLE: With respect to any Monthly Period, a Receivable
which the Seller has become obligated to repurchase pursuant to Section 3.6 or
3.2.
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Section 1.2. USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."
Section 1.3. CALCULATIONS. All calculations of the amount of
interest accrued on the Certificates and all calculations of the amount of the
Servicing Fee shall be made on the basis of a 360-day year consisting of twelve
30-day months. All references to the Principal Balance of a Receivable as of a
Record Date shall refer to the close of business on such day.
Section 1.4. SECTION REFERENCES. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
Section 1.5. ACTION BY OR CONSENT OF CERTIFICATEHOLDERS. Whenever
any provision of this Agreement refers to action to be taken, or consented to,
by Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consent given, by
Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Certificateholders, any Certificate registered in the name of
the Seller, Atlantic or any Affiliate thereof shall be deemed not to be
outstanding and the Fractional Undivided Interest evidenced thereby shall not be
taken into account in determining whether the requisite Fractional Undivided
Interest necessary to effect any such action or consent has been obtained;
PROVIDED, HOWEVER, that, solely for the purpose of determining whether the
Trustee is entitled to rely upon any such action or consent, only Certificates
which the Trustee actually knows to be so owned shall be so disregarded.
Section 1.6. NO RECOURSE. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing delivered
in connection herewith or therewith, against any stockholder, officer, or
director, as such, of the Seller, Atlantic, the Servicer or the Trustee or of
any predecessor or successor of the Seller, Atlantic, the Servicer or the
Trustee.
Section 1.7. MATERIAL ADVERSE EFFECT. Whenever a determination is to
be made under this Agreement as to whether a given event, action, course of
conduct or set of facts or circumstances could or would have a material adverse
effect on the Trust or the Certificateholders (or any similar or analogous
determination), such determination shall be made without taking into account the
insurance provided by the Policy. Whenever a determination is to be made under
this Agreement whether a breach of a representation, warranty or covenant has or
could have a material adverse effect on a Receivable or the interest therein of
the Trust, the Certificateholders or the Certificate Insurer (or any similar or
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analogous determination), such determination shall be made by the Certificate
Insurer in its sole discretion, or, if an Insurer Default shall have occurred
and be continuing, by a Certificate Majority.
ARTICLE II
CREATION OF TRUST
Section 2.1. CREATION OF TRUST. The Seller does hereby create and
establish, pursuant to the laws of the State of New York and this Agreement a
trust (the "TRUST"), which for convenience shall be known as "Atlantic Auto
Grantor Trust 1996-A."
ARTICLE III
CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY TRUSTEE;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 3.1. CONVEYANCE OF RECEIVABLES. (a) Subject to the terms and
conditions of this Agreement, the Seller hereby sells, transfers, assigns, and
otherwise conveys to the Trustee, in trust for the benefit of the
Certificateholders, without recourse (but without limitation of its obligations
in this Agreement), all of the right, title and interest of the Seller in and to
the Receivables, all moneys at any time paid or payable thereon or in respect
thereof after the Cut-off Date (including amounts due on or before the Cut-off
Date but received by Atlantic or the Seller after the Cut-off Date), an
assignment of security interests of Atlantic in the Financed Vehicles, the
Insurance Policies and any proceeds from any Insurance Policies relating to the
Receivables, the Obligors or the Financed Vehicles, including rebates of
premiums, all Collateral Insurance relating to the Receivables, rights of
Atlantic against Dealers with respect to the Receivables under the Dealer
Agreements and the Dealer Assignments, all items contained in the Receivable
Files, any and all other documents that Atlantic keeps on file in accordance
with its customary procedures relating to the Receivables, the Obligors or the
Financed Vehicles, property (including the right to receive future Liquidation
Proceeds) that secures a Receivable and that has been acquired by or on behalf
of the Trust pursuant to liquidation of such Receivable, all of which have been
conveyed to the Seller pursuant to the Receivables Purchase Agreement, together
with all rights of the Seller under the Receivables Purchase Agreement and all
proceeds of the foregoing. It is the intention of the Seller that the transfer
and assignment contemplated by this Agreement shall constitute a sale of the
Receivables and other Trust Property from the Seller to the Trust and the
beneficial interest in and title to the Receivables and the other Trust Property
shall not be part of the Seller's estate in the event of the filing of a
bankruptcy petition by or against the Seller under any bankruptcy law. In the
event that, notwithstanding the intent of the Seller, the transfer and
assignment contemplated hereby is held not to be a sale, this Agreement shall
constitute a grant of a security interest in the property referred to in this
Section 3.1 for the benefit of the Certificateholders. The execution and
delivery of this Agreement shall constitute an acknowledgment by the Seller that
it intends to establish (for Federal tax
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purposes) a trust, rather than an association taxable as a corporation. The
powers granted and obligations undertaken in this Agreement shall be construed
so as to further such intent.
(b) The Seller hereby directs the Trustee to, and the Trustee does
hereby, accept the Trust Property conveyed by the Seller pursuant to this
Section 3.1. The Trustee declares that the Trustee shall hold such Trust
Property upon the trusts herein set forth for the benefit of all present and
future Certificateholders, subject to the terms and provisions of this
Agreement.
Section 3.2. CUSTODY OF RECEIVABLE FILES. (a) In connection with the
sale, transfer and assignment of the Receivables and the other Trust Property to
the Trust pursuant to this Agreement, the Seller shall deliver to the Custodian,
on behalf of the Trustee, the following documents or instruments in its
possession which shall be delivered to the Custodian on or before the Closing
Date with respect to each Receivable (the "Custodial Receivable Files"):
(i) the fully executed original of the Receivable (together with
any agreements modifying the Receivable, including without limitation any
extension agreements) :
(a) without any stamp or endorsement; or
(b) in the case of any Receivable previously endorsed to any
party other than the Trust or the Trustee, the Receivable
shall be endorsed by the Custodian, "Pay to the order of The
Chase Manhattan Bank, as Trustee under the Pooling and
Servicing Agreement, dated as of June 20, 1996, among
Atlantic Auto Finance Corporation, as Servicer, Atlantic
Auto Third Funding Corporation, as Seller and The Chase
Manhattan Bank, as Trustee" and signed in the name of
Atlantic; or
(c) in the case of any Receivable endorsed on an allonge to any
party other than the Trust or the Trustee, the allonge shall
be removed; and
(ii) the Lien Certificate, or, if not yet received, a copy of an
application therefor or a written representation from the Dealer certifying
as to the application therefor, showing Atlantic as secured party and such
documents, if any, that Atlantic keeps on file in accordance with its
customary procedures indicating that the Financed Vehicle is owned by the
Obligor and subject to the interest of Atlantic as first lien holder or
secured party.
(b) In connection with the sale, transfer and assignment of the
Receivables and other Trust Property to the Trust pursuant to this Agreement,
the Servicer shall retain, on behalf of the Trustee, the following documents or
instruments in its possession with respect to
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each Receivable (the "Servicer Receivables Files" and, collectively with the
Custodial Receivables Files, the "Receivables Files"):
(i) documents evidencing or relating to any Insurance Policy;
and
(ii) the original credit application of each Obligor, on
Atlantic's customary form, or on a form approved by Atlantic for such
Application.
The Servicer agrees that it shall duly discharge its duties of
receiving and holding the Servicer Receivable Files in accordance with this
Agreement. As to any matters not expressly provided for by this Agreement with
respect to the Servicer Receivable Files, the Servicer shall be required to act
or to refrain from acting (and shall be fully protected in so acting) upon the
written instructions of the Trustee, provided that the Trustee shall only
deliver such written instructions following its receipt of the prior written
consent of the Certificate Insurer with respect to such instructions.
The Servicer acknowledges that with respect to each Receivable
identified in the Schedule of Receivables (i) it has possession of the
applicable Servicer Receivables File and (ii) such Servicer Receivables File
contains the documents referred to in this Section 3.2(b). The Servicer
declares that it holds and will continue to hold such files and any amendments,
replacements or supplements thereto as Servicer on behalf of the Trustee in
trust for the use and benefit of all present and future Certificateholders and
the Certificate Insurer, as their interests may appear. If at a later date the
Servicer is unable to locate a file for a Receivable, or finds that a file is
unrelated to the Receivables identified in the Schedule of Receivables or that
any of the documents referred to in this Section 3.2(b) are not contained in a
Servicer Receivable File, the Servicer shall inform the Seller, the Trustee and
the Certificate Insurer promptly, in writing, of the failure to locate a file
with respect to such Receivable (or of the failure of any of the aforementioned
documents to be included in the Servicer Receivable File) or shall return to the
Seller any file unrelated to a Receivable identified in the Schedule of
Receivables (it being understood that the Servicer's obligation to review the
contents of any Servicer Receivable File shall be limited as set forth in the
preceding sentence). Unless such defect with respect to such Servicer
Receivable File shall have been cured by the 30th day following discovery
thereof by the Servicer, the Seller shall repurchase any such Receivable as of
such 30th day. In consideration of the purchase of the Receivable, the Seller
shall remit the Purchase Amount, in the manner specified in Section 5.4. The
sole remedy of the Trustee, the Trust, or the Certificateholders with respect to
a breach pursuant to this Section 3.2(b) shall be to require the Seller to
purchase the Receivable. Upon receipt of the Purchase Amount and written
instructions from the Servicer, the Servicer shall release to the Seller or its
designee the related Servicer Receivable File and shall execute and deliver all
reasonable instruments to transfer or assign, without recourse, as are prepared
by the Seller and delivered to the Trustee and are necessary to vest in the
Seller or such designee as directed by the Seller, title to the Receivable.
Without in any way limiting the respective rights of the Trustee, the
Certificate Insurer and the Backup Servicer under Section 4.12 or otherwise set
forth in this Agreement, at any time and from time to time upon the giving of
twenty-four (24) hours' notice, during
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normal business hours, the Trustee, the Certificate Insurer and the Backup
Servicer and any of their respective agents, employees or representatives
(including, without limitation, an independent accounting firm performing an
audit of the Servicer), shall have the right (i) to visit the office of the
Servicer where the Servicer Receivable Files are kept, (ii) to examine the
facilities for the storage and safekeeping thereof, (iii) to review the
procedures with which such documents are stored and catalogued, (iv) to examine
and make copies of and abstracts from such documents, and (v) to discuss matters
relating to the Servicer Receivable Files and the Servicer's performance
hereunder with any of the officers or employees of the Servicer having knowledge
of such matters.
(c) Upon payment in full of any Receivable, the Servicer will notify
the Custodian and the Trustee by an Officer's Certificate (which certification
shall include a statement to the effect that all amounts received in connection
with such payments which are required to be deposited in the Collection Account
pursuant to Section 3.1 have been so deposited) and shall request delivery by
the Custodian of the Receivable and Custodial Receivable File to the Servicer.
From time to time as appropriate for servicing and enforcing any Receivable, the
Servicer shall, upon written notice and delivery to the Trustee of a receipt
signed by an employee of the Servicer (authorized under the Custodial Agreement)
in the form of Exhibit J attached hereto, direct the Custodial Receivable File
to be released by the Custodian to the Servicer. The Custodian may rely and
shall be protected when acting or refraining from acting upon any certificate,
request or receipt under this Section. The Servicer's receipt of a Receivable
and/or Custodial Receivable File shall obligate the Servicer to return the
original Receivable and the related Custodial Receivable File to the Custodian
when its need by the Servicer has ceased unless the Receivable shall be
liquidated or repurchased as described in Section 3.6 or 4.7.
Section 3.3. CONDITIONS TO ACCEPTANCE BY TRUSTEE. As conditions to
the execution and delivery of the Certificates by the Trustee on the Closing
Date, the Trustee shall have received the following on or before the Closing
Date:
(a) the Schedule of Receivables certified by the President,
Controller or Treasurer of the Seller;
(b) copies of resolutions of the Board of Directors of the Seller
approving the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, certified by a Secretary or an Assistant
Secretary of the Seller;
(c) copies of resolutions of the Board of Directors of the Servicer
approving the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, certified by a Secretary or an Assistant
Secretary of the Servicer;
(d) evidence that all filings (including, without limitation, UCC
filings) required to be made by any Person and actions required to be taken
or performed by any Person in any jurisdiction to give the Trustee a first
priority perfected lien on, or ownership interest in, the Receivables and
the other Trust Property have been made, taken or performed; and
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(e) an executed copy of the Policy and Spread Account Agreement.
Section 3.4. REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller
hereby makes the following representations and warranties to the other parties
hereto and the Certificate Insurer on which the Trustee relies in accepting the
Receivables and the other Trust Property in trust and issuing the Certificates
and upon which the Certificate Insurer relies in issuing the Policy. Unless
otherwise specified, such representations and warranties are made as of the
Closing Date, but shall survive the sale, transfer, and assignment of the
respective Receivables to the Trustee.
(a)(i) CHARACTERISTICS OF RECEIVABLES. Each Receivable (A)
was originated by a Dealer for the retail sale of a Financed Vehicle in the
ordinary course of such Dealer's business and, such Dealer had all
necessary licenses and permits to originate Receivables in the state where
such Dealer was located, was fully and properly executed by the parties
thereto, was purchased by Atlantic from such Dealer under an existing
Dealer Agreement with Atlantic and was validly assigned by such Dealer to
Atlantic, (B) contains customary and enforceable provisions such as to
render the rights and remedies of the holder thereof adequate for
realization against the collateral security, and (C) is a fully amortizing
Simple Interest Receivable which provides for level monthly payments
(provided that the payment in the first Monthly Period and the final
Monthly Period of the life of the Receivable may be minimally different
from the level payment) which, if made when due, shall fully amortize the
Amount Financed over the original term.
(ii) NO FRAUD OR MISREPRESENTATION. Each Receivable was
originated by a Dealer to an Obligor and was sold by the Dealer to Atlantic
without any fraud or material misrepresentation on the part of such Dealer
in either case or on the part of the Obligor.
(iii) COMPLIANCE WITH LAW. All requirements of applicable
federal, state and local laws, and regulations thereunder (including,
without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's
Regulations "B" and "Z", the Soldiers' and Sailors' Civil Relief Act of
1940, the New York Motor Vehicle Retail Installment Sales Act, and state
adaptations of the National Consumer Act and of the Uniform Consumer Credit
Code and other consumer credit laws and equal credit opportunity and
disclosure laws) in respect of all of the Receivables, each and every sale
of Financed Vehicles and the sale of any physical damage, credit life and
credit accident and health insurance and any extended service contracts,
have been complied with in all material respects, and each Receivable and
the sale of the Financed Vehicle evidenced by each Receivable and the sale
of any physical damage, credit life and credit accident and health
insurance and any extended service contracts complied at the time it was
originated or made and now complies in all material respects with all
applicable legal requirements.
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(iv) ORIGINATION. Each Receivable was originated in the United
States and, at the time of origination materially conformed to all
requirements of the Dealer Underwriting Guide applicable to such
Receivable.
(v) BINDING OBLIGATION. Each Receivable represents the genuine,
legal, valid and binding payment obligation of the Obligor thereon,
enforceable by the holder thereof in accordance with its terms, except (A)
as enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting the enforcement of creditors' rights generally
and by equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a proceeding in
equity or at law and (B) as such Receivable may be modified by the
application after the Cut-off Date of the Soldiers' and Sailors' Civil
Relief Act of 1940, as amended; and all parties to each Receivable had full
legal capacity to execute and deliver such Receivable and all other
documents related thereto and to grant the security interest purported to
be granted thereby.
(vi) NO GOVERNMENT OR EMPLOYEE OBLIGORS. None of the
Receivables shall be due from (i) the United States of America or any State
or from any agency, department, subdivision or instrumentality thereof or
(ii) any employee of Atlantic or any employee of any Affiliate of Atlantic.
(vii) OBLIGOR BANKRUPTCY. At the Cut-off Date, no Obligor
had been identified on the records of Atlantic as being the subject of a
current bankruptcy proceeding.
(viii) SCHEDULE OF RECEIVABLES. The information pertaining to
each Receivable set forth in the Schedule of Receivables and in the
Offering Memorandum was true and correct in all material respects as of the
close of business on the Cut-off Date and at the Closing Date.
(ix) MARKED RECORDS. By the Closing Date, Atlantic will have
caused the portions of Atlantic's servicing records relating to the
Receivables to be clearly and unambiguously marked to show that the
Receivables constitute part of the Trust Property and are owned by the
Trust in accordance with the terms of the Agreement.
(x) COMPUTER TAPE OR LISTING. The Computer Tape or Listing
made available by Atlantic to the Trustee on the Closing Date was complete
and accurate as of the Cut-off Date and includes a description of the same
Receivables that are described in the Schedule of Receivables.
(xi) CHATTEL PAPER. Each Receivable constitutes chattel paper
within the meaning of the UCC.
(xii) ONE ORIGINAL. There is only one original executed copy
of each Receivable.
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(xiii) RECEIVABLE FILES COMPLETE. There exists a Receivable File
pertaining to each Receivable and such Receivable File contains, without
limitation, (a) a fully executed original of the Receivable, (b) a
certificate of insurance, application form for insurance signed by the
Obligor, or a signed representation letter from the Obligor named in the
Receivable pursuant to which the Obligor has agreed to obtain physical
damage insurance for the related Financed Vehicle, (c) the original Lien
Certificate or, for a period of up to 180 days following the Closing Date,
a copy of an application therefor or a representation from the Dealer
certifying as to the application therefor, together with an assignment of
the Lien Certificate executed by Atlantic to the Seller and a further
assignment of the Lien Certificate executed by the Seller to the Trustee
(which assignments may be in blanket form) and (d) an original credit
application signed by the Obligor. Each of such documents which is
required to be signed by the Obligor has been signed by the Obligor in the
appropriate spaces, PROVIDED, HOWEVER, with respect to clause (d) above,
the original signature may appear on an accompanying credit application
form of Atlantic. All blanks on any form described in clause (a), (b), (c)
and (d) above have been properly filled in and each form has otherwise been
correctly prepared. Notwithstanding the above, a copy of the complete
Receivable File for each Receivable, which fulfills the documentation
requirements of the Dealer Underwriting Guide as in effect at the time of
purchase is in the possession of the Servicer.
(xiv) RECEIVABLES IN FORCE. No Receivable has been
satisfied, subordinated or rescinded, and the Financed Vehicle securing
each such Receivable has not been released from the lien of the related
Receivable in whole or in part. No provisions of any Receivable have been
waived, altered or modified in any respect since its origination, except by
instruments or documents identified in the Receivable File held by the
Custodian. No Receivable has been modified as a result of application of
the Soldiers' and Sailors' Civil Relief Act of 1940, as amended.
(xv) LAWFUL ASSIGNMENT. No Receivable was originated in, or is
subject to the laws of, any jurisdiction the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under this Agreement or pursuant to transfers of the
Certificates. The Seller has not entered into any agreement with any
account debtor that prohibits, restricts or conditions the assignment of
any portion of the Receivables.
(xvi) GOOD TITLE. No Receivable has been sold, transferred,
assigned or pledged by the Seller to any Person other than the Trustee;
immediately prior to the conveyance of the Receivables to the Trust
pursuant to this Agreement, the Seller was the sole owner thereof and had
good and indefeasible title thereto, free of any Lien and, upon execution
and delivery of this Agreement by the Seller, the Trustee shall have good
and indefeasible title to and will be the sole owner of such Receivables,
free of any Lien. No Dealer has a participation in, or other right to
receive, proceeds of any Receivable. None of Atlantic, AAFC or the Seller
has taken any action to convey any right to any Person that would result in
such Person having a right to payments
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received under the related Insurance Policies or the related Dealer Agreements
or Dealer Assignments or to payments due under such Receivables.
(xvii) SECURITY INTEREST IN FINANCED VEHICLE. Each Receivable
created or shall create a valid, binding and enforceable first priority
security interest in favor of Atlantic in the Financed Vehicle. The Lien
Certificate for each Financed Vehicle shows, or if a new or replacement
Lien Certificate is being applied for with respect to such Financed Vehicle
the Lien Certificate will be received within 180 days of the Closing Date
and will show, Atlantic named as the original secured party under each
Receivable as the holder of a first priority security interest in such
Financed Vehicle. With respect to each Receivable for which the Lien
Certificate has not yet been returned from the Registrar of Titles,
Atlantic has received written evidence from the related Dealer that such
Lien Certificate showing Atlantic as first lien holder has been applied
for. If the Receivable was originated in a state in which a filing or
recording is required of the secured party to perfect a security interest
in motor vehicles, such filings or recordings have been duly made to show
Atlantic named as the original secured party under the related Receivable.
Atlantic's security interest has been validly assigned by Atlantic to the
Seller pursuant to the Receivables Purchase Agreement and by the Seller to
the Trustee pursuant to this Agreement. Immediately after the sale,
transfer and assignment thereof to the Trustee for the benefit of the
Trust, each Receivable will be secured by an enforceable and perfected
first priority security interest in the Financed Vehicle in favor of the
Trust as secured party, which security interest is prior to all other liens
upon and security interests in such Financed Vehicle which now exist or may
hereafter arise or be created (except, as to priority, for any lien for
taxes, labor or materials affecting a Financed Vehicle). As of the Cut-off
Date there were no Liens or claims for taxes, work, labor or materials
affecting a Financed Vehicle which are or may be Liens prior or equal to
the lien of the related Receivable.
(xviii) ALL FILINGS MADE. All filings (including, without
limitation, UCC filings) required to be made by any Person and actions
required to be taken or performed by any Person in any jurisdiction to give
the Trustee a first priority perfected lien on, or ownership interest in,
the Receivables and the proceeds thereof and the other Trust Property have
been made, taken or performed.
(xix) NO IMPAIRMENT. None of Atlantic, AAFC or the Seller
has done anything to convey any right to any Person that would result in
such Person having a right to payments due under the Receivable or
otherwise to impair the rights of the Trust and the Certificateholders in
any Receivable or the proceeds thereof.
(xx) RECEIVABLE NOT ASSUMABLE. No Receivable is assumable
by another Person in a manner which would release the Obligor thereof from
such Obligor's obligations to the Seller with respect to such Receivable.
(xxi) NO DEFENSES. No Receivable is subject to any right of
rescission, set off, counterclaim or defense and no such right has been
asserted or threatened with respect to any Receivable.
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(xxii) NO DEFAULT. There has been no default, breach,
violation or event permitting acceleration under the terms of any
Receivable (other than payment delinquencies of not more than 30 days) and
no condition exists or event has occurred and is continuing that with
notice, the lapse of time or both would constitute a default, breach,
violation or event permitting acceleration under the terms of any
Receivable, and there has been no waiver of any of the foregoing. As of
the Cut-off Date, no Financed Vehicle had been repossessed.
(xxiii) INSURANCE. At the time of the origination of each
Receivable, the related Financed Vehicle was covered by a comprehensive and
collision insurance policy as evidenced pursuant to clause (xiii) above (i)
in an amount at least equal to the lesser of (a) its maximum insurable
value or (b) the principal amount due from the Obligor under the related
Receivable, (ii) naming Atlantic and its successors and assigns as loss
payee and (iii) insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage. Each Receivable requires the Obligor
to maintain physical loss and damage insurance, naming Atlantic and its
successors and assigns as additional insured parties, and each Receivable
permits the holder thereof to obtain physical loss and damage insurance at
the expense of the Obligor if the Obligor fails to do so.
(xxiv) RECEIVABLES. (i) Each Receivable had a remaining
maturity, as of the Cut-off Date, of at least 5 months but not more than 66
months; (ii) each Receivable had an original maturity of at least 11 months
but not more than 66 months; (iii) each Receivable had an original
principal balance of at least $1,881.00 and not more than $58,190.32; (iv)
each Receivable had a Principal Balance as of the Cut-off Date of at least
$763.69 and not more than $56,500.77; (v) each Receivable has an Annual
Percentage Rate of at least 8.50% and not more than 19.99%; (vi) no
Receivable was more than 30 days past due as of the Cut-off Date; (vii) no
funds have been advanced by the Seller, the Servicer, any Dealer, or anyone
acting on behalf of any of them in order to cause any Receivable to qualify
under subclause (vi) of this clause (xxiv); (viii) no Receivable has a
final scheduled payment date before November 24, 1996 or after January 2,
2002; (ix) the Principal Balance of each Receivable set forth in Schedule
of Receivables is true and accurate in all material respects as of the
Cut-off Date; and (x) as of the Cut-off Date, 48.23% of the aggregate
Principal Balance for all the Receivables is attributable to loans for the
purchase of new Financed Vehicles, and 51.77% of the aggregate Principal
Balance for all the Receivables is attributable to loans for the purchase
of used Financed Vehicles.
(xxv) NO ADVERSE SELECTION. No selection procedures adverse
to the Certificateholders or to the Certificate Insurer have been utilized
in selecting such Receivable from all other similar Receivables originated
by Atlantic.
(b) ORGANIZATION AND GOOD STANDING. The Seller has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had
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at all relevant times, and now has, power, authority and legal right to
acquire, own and sell the Receivables and the other property transferred to
the Trust.
(c) DUE QUALIFICATION. The Seller is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such
qualification.
(d) POWER AND AUTHORITY. The Seller has the power and authority to
execute and deliver this Agreement and the Related Documents to which it is
a party and to carry out its terms and their terms, respectively; the
Seller has full power and authority to sell and assign the Trust Property
to be sold and assigned to and deposited with the Trustee by it and has
duly authorized such sale and assignment to the Trustee by all necessary
corporate action; and the execution, delivery and performance of this
Agreement and the Related Documents to which it is a party have been duly
authorized by the Seller by all necessary corporate action.
(e) VALID SALE; BINDING OBLIGATIONS. This Agreement, when duly
executed and delivered, shall effect a valid sale, transfer and assignment
of the Receivables and the other Trust Property, enforceable against the
Seller and creditors of and purchasers from the Seller; and this Agreement
and the Related Documents to which it is a party, when duly executed and
delivered, shall constitute legal, valid and binding obligations of the
Seller enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally
and by equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(f) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and the Related Documents to which it is a party and the
fulfillment of the terms of this Agreement and the Related Documents to
which it is a party shall not conflict with, result in any breach of any of
the terms and provisions of or constitute (with or without notice, lapse of
time or both) a default under, the certificate of incorporation or by-laws
of the Seller, or any indenture, agreement, mortgage, deed of trust or
other instrument to which the Seller is a party or by which it is bound, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of
trust or other instrument, other than this Agreement, or violate any law,
order, rule or regulation applicable to the Seller of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or any of
its properties.
(g) NO PROCEEDINGS. There are no material proceedings or
investigations pending or, to the Seller's knowledge, threatened against
the Seller, AAFC or Atlantic, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality
having jurisdiction over the Seller, AAFC or Atlantic or
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its properties (i) asserting the invalidity of this Agreement or any of the
Related Documents, (ii) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this
Agreement or any of the Related Documents, (iii) seeking any determination
or ruling that might materially and adversely affect the performance by the
Seller or Atlantic of its respective obligations under, or the validity or
enforceability of, this Agreement or any of the Related Documents, (iv)
involving the Seller, AAFC or Atlantic and which might adversely affect the
federal income tax or other federal, state or local tax attributes of the
Certificates, or (v) that could have a material adverse effect on the
Receivables.
(h) APPROVALS. All approvals, authorizations, consents, orders or
other actions of any person, corporation or other organization, or of any
court, governmental agency or body or official, required in connection with
the execution and delivery by the Seller of this Agreement and the
consummation of the transactions contemplated hereby have been or will be
taken or obtained on or prior to the Closing Date.
(i) CHIEF EXECUTIVE OFFICE. The chief executive office of the Seller
is at 800 Perinton Hills Office Park, Fairport, New York 14450.
Section 3.5. RESERVED
Section 3.6. REPURCHASE OF RECEIVABLES UPON BREACH OF REPRESENTATION
AND WARRANTY. The Seller, the Servicer or the Trustee, as the case may be,
shall inform the other parties to this Agreement and the Certificate Insurer
promptly, in writing, upon the discovery of any breach of the Seller's
representations and warranties pursuant to Section 3.4(a); PROVIDED, HOWEVER,
that the failure to give any such notice shall not derogate from any obligation
of the Seller; PROVIDED, FURTHER, that, the Trustee and the Backup Servicer
shall have no duty to inquire into or to investigate the breach of any such
representations and warranties. Unless the breach shall have been cured by the
last day of the first full calendar month following the discovery by or notice
to the Seller of the breach, the Seller shall have an obligation, and the
Trustee shall (provided that it either has made such discovery or has received
such notice thereof) enforce such obligation of the Seller, and, if necessary,
to the extent that the Seller fails to effect its repurchase obligation, the
obligation of Atlantic under the Receivables Purchase Agreement (the right to
enforce such obligation has been transferred to the Trustee hereunder), to
repurchase any such Receivable with respect to which such breach has a material
adverse effect on such Receivable or the interest therein of the Trust, the
Certificateholders or the Certificate Insurer. Such repurchase shall be made by
the last day of the first full calendar month following the discovery by or
notice to the Seller of the breach. The Trustee shall promptly notify the
Certificate Insurer in writing of any failure by the Seller or Atlantic to so
repurchase any Receivable. In consideration of the purchase of the Receivable,
the Seller shall remit, or the Seller shall cause Atlantic to remit, the
Purchase Amount, in the manner specified in Section 5.4. The sole remedy of the
Trustee, the Trust, or the Certificateholders with respect to a breach of the
Seller's representations and warranties pursuant to Section 3.4(a) shall be to
require the Seller to repurchase Receivables pursuant to this Section 3.6 or, to
enforce the obligation of Atlantic to the Seller to repurchase such Receivables
pursuant to the Receivables Purchase Agreement.
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In addition to the foregoing and notwithstanding whether the related
Receivable shall have been purchased by the Seller or Atlantic, the Seller shall
indemnify the Trustee, the Backup Servicer, the Collateral Agent, the
Certificate Insurer, the Trust and the Certificateholders against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third-party claims arising out of the events or facts giving rise to
a breach of the representations and warranties set forth in Section 3.4(a).
Section 3.7. NONPETITION COVENANT. Until one year plus one day shall
have elapsed since the termination of Trust in accordance with Section 12.1,
none of the Seller, the Servicer, the Trustee, nor Atlantic shall petition or
otherwise invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Seller or the Trust under
any federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Seller or the Trust or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the Seller
or the Trust.
Section 3.8. COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE
CLOSING DATE. In the case of any Receivable in respect of which written
evidence from the Dealer selling the related Financed Vehicle that the Lien
Certificate for such Financed Vehicle showing Atlantic as first lienholder has
been applied for from the Registrar of Titles and such evidence was delivered to
the Custodian on the Closing Date in lieu of a Lien Certificate, the Servicer
shall use its best efforts to collect such Lien Certificate from the Registrar
of Titles as promptly as practicable. If such Lien Certificate showing Atlantic
as first lienholder is not received by the Custodian within 180 days after the
Closing Date and, notwithstanding the Servicer's continued efforts to obtain
such Lien Certificate, a loss occurs as a result of the failure to receive the
Lien Certificate within 180 days, then the representation and warranty in
Section 3.4(a)(xvii) in respect of such Receivable shall be deemed to have been
incorrect in a manner that materially and adversely affects such Receivable, the
Certificateholders, the Certificate Insurer and the Trust.
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 4.1. DUTIES OF THE SERVICER. (a) The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables, and perform the
other actions required by the Servicer under this Agreement. The Servicer
agrees that its servicing of the Receivables shall be carried out in accordance
with customary and usual procedures of institutions which service motor vehicle
retail installment sales contracts and, to the extent more exacting, the degree
of skill and attention that the Servicer exercises from time to time with
respect to all comparable motor vehicle receivables that it services for itself
or others in accordance with Atlantic's Servicing Procedures Manual as in effect
at the current time for servicing all its other comparable motor vehicle
receivables. The Servicer's duties shall include, without limitation,
collection and
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posting of all payments, responding to inquiries of Obligors on the Receivables,
investigating delinquencies, sending payment statements to Obligors, reporting
any required tax information to Obligors, policing the collateral, complying
with the terms of the Lockbox Agreement, accounting for collections and
furnishing monthly and annual statements to the Trustee and the Certificate
Insurer with respect to distributions, and performing the other duties specified
herein. The Servicer shall also administer and enforce all rights and
responsibilities of the holder of the Receivables provided for in the Dealer
Agreements (and shall maintain possession of the Dealer Agreements, to the
extent it is necessary to do so), the Dealer Assignments and the Insurance
Policies, to the extent that such Dealer Agreements, Dealer Assignments and
Insurance Policies relate to the Receivables, the Financed Vehicles or the
Obligors. To the extent consistent with the standards, policies and procedures
otherwise required hereby, the Servicer shall follow its customary standards,
policies, and procedures and shall have full power and authority, acting alone,
to do any and all things in connection with such managing, servicing,
administration and collection that it may deem necessary or desirable. Without
limiting the generality of the foregoing, the Servicer is hereby authorized and
empowered by the Trustee to execute and deliver, on behalf of the
Certificateholders and the Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Receivables and with
respect to the Financed Vehicles; PROVIDED, HOWEVER, that notwithstanding the
foregoing, the Servicer shall not, except pursuant to an order from a court of
competent jurisdiction, release an Obligor from payment of any unpaid amount
under any Receivable or waive the right to collect the unpaid balance of any
Receivable from the Obligor, except that the Servicer may forego collection
efforts if the amount subject to collection is DE MINIMIS and if it would forego
collection in accordance with its customary procedures. The Servicer is hereby
authorized to commence, in its own name or in the name of the Trustee (provided
the Servicer has obtained the Trustee's consent, which consent shall not be
unreasonably withheld), a legal proceeding to enforce a Receivable pursuant to
Section 4.3 or to commence or participate in any other legal proceeding
(including, without limitation, a bankruptcy proceeding) relating to or
involving a Receivable, an Obligor or a Financed Vehicle. If the Servicer
commences or participates in such a legal proceeding in its own name, the
Trustee shall thereupon be deemed to have automatically assigned such Receivable
to the Servicer solely for purposes of commencing or participating in any such
proceeding as a party or claimant, and the Servicer is authorized and empowered
by the Trustee to execute and deliver in the Servicer's name any notices,
demands, claims, complaints, responses, affidavits or other documents or
instruments in connection with any such proceeding. The Trustee shall furnish
the Servicer with any powers of attorney and other documents which the Servicer
may reasonably request in writing and which the Servicer deems necessary or
appropriate and take any other steps which the Servicer may deem necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties under this Agreement. The Servicer hereby makes, constitutes, and
appoints, the Trustee acting through its duly appointed officers or any of them,
its true and lawful attorney, for it and in its name and on its behalf, for the
sole and exclusive purpose of authorizing said attorney to execute and deliver
as attorney-in-fact or otherwise, any and all documents and other instruments
and to do or accomplish all other acts or things necessary or appropriate to
show the Trustee as lienholder or secured party on the related Lien Certificates
relating to a Financed Vehicle.
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Section 4.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATION AND
AMENDMENT OF RECEIVABLES; LOCKBOX AGREEMENTS. (a) Consistent with the
standards, policies and procedures required by this Agreement, the Servicer
shall make reasonable efforts to collect all payments called for under the terms
and provisions of the Receivables as and when the same shall become due, and
shall follow such collection procedures as it follows with respect to all
comparable automobile receivables that it services for itself or others and
otherwise act with respect to the Receivables, the Dealer Agreements, the Dealer
Assignments, the Insurance Policies and the other Trust Property in such manner
as will, in the reasonable judgment of the Servicer, maximize the amount to be
received by the Trust with respect thereto. The Servicer is authorized in its
discretion to waive any prepayment charge, late payment charge or any other
similar fees that may be collected in the ordinary course of servicing any
Receivable.
(b) The Servicer may at any time agree to a modification or amendment
of a Receivable in order to change the Obligor's regular due date to a date
within 30 days in which such due date occurs.
(c) The Servicer may grant payment extensions on, or other
modifications or amendments to, a Receivable (including those modifications
permitted by Section 4.2(b)) in accordance with its customary procedures if the
Servicer believes in good faith that such extension, modification or amendment
is necessary to avoid a default on such Receivable, will maximize the amount to
be received by the Trust with respect to such Receivable, and is otherwise in
the best interests of the Trust; PROVIDED, HOWEVER, that unless, as to clauses
(i), (ii), (iii) and (iv) below (so long as no Insurer Default shall have
occurred and be continuing) it is otherwise agreed in writing by the Certificate
Insurer:
(i) the aggregate period of all extensions on a Receivable shall
not exceed six months, and in no event may any Receivable be extended more
than three months in any twelve-month period;
(ii) in no event may a Receivable be extended by the Servicer
beyond the Monthly Period immediately preceding the Final Distribution
Date;
(iii) so long as an Insurer Default shall not have occurred
and be continuing, the Servicer shall not amend or modify a Receivable
(except as provided in Section 4.2(b) and this Section 4.2(c)) without the
written consent of the Certificate Insurer;
(iv) as of any Record Date the number of Receivables the term of
which have been extended during the preceding 12-month period shall not
exceed 3.0% of the number of Receivables which comprise the pool of
Receivables underlying the Class A Certificate Balance and the Class B
Certificate Balance at the beginning of the preceding 12-month period;
(v) no such extension, modification or amendment shall be
granted more than 90 days after the Closing Date if such action would have
the effect of
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causing such Receivable to be deemed to have been exchanged for another
Receivable within the meaning of Section 1001 of the Internal Revenue Code
of 1986, as amended, or any proposed, temporary or final Treasury
Regulations issued thereunder; and
(vi) if an Insurer Default shall have occurred and be continuing,
the Servicer may not extend or modify any Receivable (other than as
permitted by Section 4.2(b)).
(d) The Servicer shall use its best efforts to cause Obligors to make
all payments on the Receivables, whether by check or by direct debit of the
Obligor's bank account, to be made directly to the Lockbox Bank pursuant to the
Lockbox Agreement. Amounts received by a Lockbox Bank in respect of the
Receivables may initially be deposited into a demand deposit account maintained
by the Lockbox Bank as agent for the Trust and for other owners of automobile
receivables serviced by the Servicer. The Servicer shall use its best efforts
to cause the Lockbox Bank to deposit all payments on the Receivables in the
Lockbox Account no later than the Business Day after receipt, and to cause all
amounts credited to the Lockbox Account on account of such payments to be
transferred to the Collection Account, no later than the second Business Day
after receipt of such payments. The Lockbox Account shall be a demand deposit
account held by the Lockbox Bank, or at the request of the Certificate Insurer
(unless an Insurer Default shall have occurred and be continuing) an Eligible
Account satisfying clause (i) of the definition thereof. Any payments on the
Receivables inadvertently received by the Servicer shall be deposited directly
into the Lockbox Account and the Servicer shall cause the Lockbox Bank to
deposit all such payments on the Receivables into the Collection Account no
later than the second Business Day after receipt of such payments by the
Servicer.
Prior to the Closing Date, the Servicer shall have notified each
Obligor that makes its payments on the Receivables by check to make such
payments thereafter directly to the Lockbox Bank (except in the case of Obligors
that have already been making such payments to the Lockbox Bank).
Notwithstanding any Lockbox Agreement, or any of the provisions of
this Agreement relating to the Lockbox Agreement, the Servicer shall remain
obligated and liable to the Trustee and Certificateholders for servicing and
administering the Receivables and the other Trust Property in accordance with
the provisions of this Agreement without diminution of such obligation or
liability by virtue thereof.
In the event the Servicer shall for any reason no longer be acting as
such, the Backup Servicer or successor Servicer shall thereupon assume all of
the rights and, from the date of assumption, all of the obligations of the
outgoing Servicer under the Lockbox Agreement. The Backup Servicer or any other
successor Servicer shall not be liable for any acts, omissions or obligations of
the Servicer prior to such succession. In such event, the successor Servicer
shall be deemed to have assumed all of the outgoing Servicer's interest therein
and to have replaced the outgoing Servicer as a party to each such Lockbox
Agreement to the same extent as if such Lockbox Agreement had been assigned to
the successor Servicer, except that the outgoing Servicer shall not thereby be
relieved of any liability, or obligations
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on the part of the outgoing Servicer to the Lockbox Bank under such Lockbox
Agreement. The outgoing Servicer shall, upon request of the Trustee, but at the
expense of the outgoing Servicer, deliver to the successor Servicer all
documents and records relating to each such Agreement and an accounting of
amounts collected and held by the Lockbox Bank and otherwise use its best
efforts to effect the orderly and efficient transfer of any Lockbox Agreement to
the successor Servicer. In the event that the Certificate Insurer (so long as
an Insurer Default shall not have occurred and be continuing) or a Certificate
Majority (if an Insurer Default shall have occurred and be continuing) elects to
change the identity of the Lockbox Bank, the Servicer, at its expense, shall
cause the Lockbox Bank to deliver, at the direction of the Certificate Insurer
(so long as an Insurer Default shall not have occurred and be continuing) or a
Certificate Majority (if an Insurer Default shall have occurred and be
continuing) to the Trustee or a successor Lockbox Bank, all documents and
records relating to the Receivables and all amounts held (or thereafter
received) by the Lockbox Bank (together with an accounting of such amounts) and
shall otherwise use its best efforts to effect the orderly and efficient
transfer of the lock box arrangements and the Servicer shall notify the Obligors
to make payments to the Lockbox established by the successor.
Section 4.3. REALIZATION ON DEFAULTED RECEIVABLES. (a) Consistent
with the standards, policies and procedures required by this Agreement, the
Servicer shall use reasonable efforts consistent with its customary servicing
procedures to repossess (or otherwise comparably convert the ownership of) and
liquidate any Financed Vehicle securing a Receivable with respect to which the
Servicer has determined that payments thereunder are not likely to be resumed,
as soon as is practicable after default on such Receivable but in no event shall
the repossession be commenced later than the date on which $25.00 or more of a
Scheduled Payment has become more than 120 days delinquent, and the Servicer
shall use reasonable efforts consistent with its customary servicing procedures
to liquidate such Financed Vehicle within 60 days of the date of repossession.
The Servicer is authorized to follow such customary practices and procedures as
it shall deem necessary or advisable, consistent with the standard of care
required by Section 4.1, which practices and procedures may include reasonable
efforts to realize upon any recourse to Dealers, selling the related Financed
Vehicle at public or private sale, the submission of claims under an Insurance
Policy and other actions by the Servicer in order to realize upon such a
Receivable. The foregoing is subject to the provision that, in any case in
which the Financed Vehicle shall have suffered damage, the Servicer shall not
expend funds in connection with any repair or towards the repossession of such
Financed Vehicle unless it shall determine in its discretion that such repair
and/or repossession shall increase the proceeds of liquidation of the related
Receivable by an amount greater than the amount of such expenses. All amounts
received upon liquidation of a Financed Vehicle shall be remitted directly by
the Servicer into the Lockbox Account and the Servicer shall cause the Lockbox
Bank to deposit all such payments on the Receivables into the Collection Account
no later than the second Business Day after receipt thereof by the Servicer.
The Servicer shall be entitled to recover all reasonable expenses incurred by it
in the course of repossessing and liquidating a Financed Vehicle, but only out
of the cash proceeds of such Financed Vehicle, any deficiency obtained from the
Obligor or any amounts received from the related Dealer, which amounts may be
retained by the Servicer (and shall not be required to be deposited in the
Collection Account) to the extent of such
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expenses. The Servicer shall recover such reasonable expenses based on the
information contained in the Servicer's Certificate delivered on the related
Determination Date. The Servicer shall pay on behalf of the Trust any personal
property taxes assessed on repossessed Financed Vehicles; the Servicer shall be
entitled to reimbursement of any such tax from Liquidation Proceeds with respect
to such Receivable.
(b) If the Servicer elects to commence a legal proceeding to enforce
a Dealer Agreement or Dealer Assignment, the act of commencement shall be deemed
to be an automatic assignment from the Trustee to the Servicer of the rights
under such Dealer Agreement and Dealer Assignment for purposes of collection
only. If, however, in any enforcement suit or legal proceeding, it is held that
the Servicer may not enforce a Dealer Agreement or Dealer Assignment on the
grounds that it is not a real party in interest or a Person entitled to enforce
the Dealer Agreement or Dealer Assignment, the Trustee, at the Servicer's
expense, or the Seller, at the Seller's expense, shall take such steps as the
Servicer deems necessary to enforce the Dealer Agreement or Dealer Assignment,
including bringing suit in its name or the name of the Seller or of the Trustee
for the benefit of the Certificateholders. All amounts recovered shall be
remitted directly by the Servicer into the Lockbox Account and the Servicer
shall cause the Lockbox Bank to deposit all such payments on the Receivables
into the Collection Account no later than the second Business Day after receipt
thereof by the Servicer.
Section 4.4. INSURANCE. (a) The Servicer may sue to enforce or
collect upon the Insurance Policies, in its own name, if possible, or as agent
of the Trust. If the Servicer elects to commence a legal proceeding to enforce
an Insurance Policy, the act of commencement shall be deemed to be an automatic
assignment of the rights of the Trust under such Insurance Policy to the
Servicer for purposes of collection only. If, however, in any enforcement suit
or legal proceeding it is held that the Servicer may not enforce an Insurance
Policy on the grounds that it is not a real party in interest or a holder
entitled to enforce the Insurance Policy, the Trustee, on behalf of the Trust,
at the Servicer's expense, or the Seller, at the Seller's expense, shall take
such steps as the Servicer deems necessary to enforce such Insurance Policy,
including bringing suit in its name or the name of the Trustee for the benefit
of the Certificateholders.
(b) The Servicer shall maintain a vendor's single interest or other
collateral protection insurance policy with respect to all Financed Vehicles
("COLLATERAL INSURANCE") which policy by its terms insures against physical
damage in the event any Obligor fails to maintain physical damage insurance with
respect to the related Financed Vehicle. Atlantic will be named insured under
all policies of Collateral Insurance and Atlantic will be named as the loss
payee. Each Financed Vehicle was covered by Collateral Insurance providing
coverage upon repossession of such Financed Vehicle. The Servicer shall
maintain Collateral Insurance at all times unless, so long as no Insurer Default
shall have occurred and be continuing, the Certificate Insurer otherwise
consents in writing.
(c) Costs incurred by the Servicer in maintaining such Collateral
Insurance shall be paid by the Servicer. The Servicer will cause Atlantic to be
named as named insured and Atlantic to be named as loss payee under all policies
of Collateral Insurance.
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Section 4.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES. (a)
Consistent with the policies and procedures required by this Agreement, the
Servicer shall take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle on
behalf of the Trust, including but not limited to obtaining the execution by the
Obligors and the recording, registering, filing, re-recording, re-filing, and
re-registering of all security agreements, financing statements and continuation
statements as are necessary to maintain the first priority security interest
granted by the Obligors under the respective Receivables to Atlantic. The
Trustee hereby authorizes the Servicer, and the Servicer agrees, to take any and
all steps necessary to re-perfect such security interest on behalf of the Trust
as necessary because of the relocation of a Financed Vehicle or for any other
reason. In the event that the assignment of a Receivable to the Trustee on
behalf of the Trust is insufficient, without a notation on the related Financed
Vehicle's certificate of title, or without fulfilling any additional
administrative requirements under the laws of the state in which the Financed
Vehicle is located, to perfect a security interest in the related Financed
Vehicle in favor of the Trust, the parties hereto agree that Atlantic's
designation as the secured party on the certificate of title is in its capacity
as agent of the Trust.
(b) So long as an Insurer Default shall not have occurred and be
continuing, upon the occurrence of an Insurance Agreement Event of Default, the
Certificate Insurer may instruct the Trustee and the Servicer to take or cause
to be taken such action as may, in the opinion of counsel to the Certificate
Insurer, be necessary or desirable to perfect or re-perfect the security
interests in the Financed Vehicles securing the Receivables in the name of the
Trustee on behalf of the Trust by amending the title documents of such Financed
Vehicles or by such other reasonable means as may, in the opinion of counsel to
the Certificate Insurer, be necessary or prudent. If an Insurer Default shall
have occurred and be continuing, upon the occurrence of a Servicer Termination
Event, the Trustee and the Servicer shall take or cause to be taken such action
as may, in the opinion of counsel to the Trustee, be necessary to perfect or
reperfect the security interests in the Financed Vehicles securing the
Receivables in the name of the Trustee on behalf of the Trust by amending the
title documents of such Financed Vehicles or by such other reasonable means as
may, in the opinion of counsel to the Trustee, be necessary or prudent.
Atlantic hereby agrees to pay all expenses related to such perfection or
re-perfection and to take all action necessary therefor. In addition, prior to
the occurrence of an Insurance Agreement Event of Default, the Certificate
Insurer may (unless an Insurer Default shall have occurred and be continuing)
instruct the Trustee and the Servicer to take or cause to be taken such action
as may, in the opinion of counsel to the Certificate Insurer, be necessary to
perfect or re-perfect the security interest in the Financed Vehicles underlying
the Receivables in the name of the Trustee, including by amending the title
documents of such Financed Vehicles or by such other reasonable means as may, in
the opinion of counsel to the Certificate Insurer, be necessary or prudent;
PROVIDED, HOWEVER, that (unless an Insurer Default shall have occurred and be
continuing) if the Certificate Insurer requests that the title documents be
amended prior to the occurrence of an Insurance Agreement Event of Default, the
out-of-pocket expenses of the Servicer or the Trustee in connection with such
action shall be reimbursed to the Servicer or the Trustee, as applicable, by the
Certificate Insurer.
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Section 4.6. COVENANTS, REPRESENTATIONS AND WARRANTIES OF SERVICER.
The Servicer hereby makes the following representations, warranties and
covenants to the other parties hereto and the Certificate Insurer on which the
Trustee shall rely in accepting the Receivables in trust and issuing the
Certificates and on which the Certificate Insurer shall rely in issuing the
Policy.
(a) The Servicer covenants to the Trustee, the Certificate Insurer
and the Certificateholders as follows:
(i) LIENS IN FORCE. The Financed Vehicle securing each
Receivable shall not be released in whole or in part from the security
interest granted by the Receivable, except upon payment in full of the
Receivable or as otherwise contemplated herein.
(ii) NO IMPAIRMENT. The Servicer shall do nothing to impair the
rights of the Trust or the Certificateholders in the Receivables, the
Dealer Agreements, the Dealer Assignments, the Insurance Policies or the
other Trust Property.
(iii) NO AMENDMENTS. The Servicer shall not extend or otherwise
amend the terms of any Receivable, except in accordance with Section 4.2.
(iv) SERVICING OF RECEIVABLES. The Servicer shall service the
Receivables as required by the terms of this Agreement and in material
compliance with the current Servicing Procedures Manual for servicing all
its other comparable motor vehicle receivables.
(b) The Servicer represents and warrants to the Trustee, the
Certificate Insurer and the Certificateholders as of the Closing Date as to
itself:
(i) ORGANIZATION AND GOOD STANDING. The Servicer has been duly
organized and is validly existing and in good standing under the laws of
its jurisdiction of organization, with power, authority and legal right to
own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and now has, power, authority and legal right to enter into
and perform its obligations under this Agreement.
(ii) DUE QUALIFICATION. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business (involving
the servicing of the Receivables as required by this Agreement) requires or
shall require such qualification.
(iii) POWER AND AUTHORITY. The Servicer has the power and
authority to execute and deliver this Agreement and its Related Documents
and to carry out its terms and their terms, respectively, and the
execution, delivery and performance of this Agreement and the Servicer's
Related Documents have been duly authorized by the Servicer by all
necessary corporate action.
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(iv) BINDING OBLIGATION. This Agreement and the Servicer's
Related Documents shall constitute legal, valid and binding obligations of
the Servicer enforceable in accordance with their respective terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
or other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(v) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the Servicer's Related Documents, and
the fulfillment of the terms of this Agreement and the Servicer's Related
Documents, shall not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse of
time) a default under, the articles of incorporation or bylaws of the
Servicer, or any indenture, agreement, mortgage, deed of trust or other
instrument to which the Servicer is a party or by which it is bound or any
of its properties are subject, or result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than this Agreement, or violate any law, order, rule or regulation
applicable to the Servicer of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or any of its
properties, or in any way materially adversely affect the interest of the
Certificateholders or the Trust in any Receivable, or affect the Servicer's
ability to perform its obligations under this Agreement.
(vi) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the Servicer,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Servicer or
its properties (A) asserting the invalidity of this Agreement or any of the
Related Documents, (B) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this
Agreement or any of the Related Documents, (C) seeking any determination or
ruling that might materially and adversely affect the performance by the
Servicer of its obligations under, or the validity or enforceability of,
this Agreement or any of the Related Documents, (D) involving the Servicer
and which might adversely affect the federal income tax or other federal,
state or local tax attributes of the Certificates, or (E) that could have a
material adverse effect on the Receivables.
(vii) APPROVALS. All approvals, authorizations, consents,
orders or other actions of any person, corporation or other organization,
or of any court, governmental agency or body or official, required in
connection with the execution and delivery by the Servicer of this
Agreement and the consummation of the transactions contemplated hereby have
been or will be taken or obtained on or prior to the Closing Date.
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(viii)NO CONSENTS. The Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement.
(ix) COLLATERAL INSURANCE. As of the Closing Date, the Servicer
maintained Collateral Insurance which policy by its terms insured against
physical damage in the event any Obligor fails to maintain physical damage
insurance with respect to the related Financed Vehicle. Atlantic is named
as named insured under all policies of Collateral Insurance and Atlantic is
named as loss payee. As of the Closing Date, each Financed Vehicle was
covered by Collateral Insurance providing coverage upon repossession of
such Financed Vehicle.
(x) CHIEF EXECUTIVE OFFICE. The chief executive office of
Atlantic is located at 800 Perinton Hills Office Park, Fairport, New York,
14450.
Section 4.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT OR
REPRESENTATION AND WARRANTY. The Seller, the Servicer or the Trustee, as the
case may be, shall inform the other parties to this Agreement and the
Certificate Insurer promptly, in writing, upon the discovery of any breach of
the Servicer's covenants pursuant to Section 4.5(a) or 4.6(a); PROVIDED,
HOWEVER, that the failure to give any such notice shall not derogate from any
obligation of the Servicer hereunder to repurchase any Receivable; PROVIDED,
FURTHER, that, the Trustee and the Backup Servicer shall have no duty to inquire
into or to investigate the breach of any such representations and warranties.
Unless the breach shall have been cured by the last day of the first full
calendar month following the discovery by or notice to the Servicer of the
breach, the Servicer shall have an obligation, and the Trustee shall (provided
that it either has made such discovery or has received such notice thereof)
enforce such obligation of the Servicer, to repurchase any Receivable with
respect to which such breach has a material adverse effect (as determined
pursuant to Section 1.7 hereof) on such Receivable or the interest therein of
the Trust, the Certificateholders or the Certificate Insurer. The Trustee shall
notify the Certificate Insurer promptly, in writing, of any failure by the
Servicer to so repurchase any Receivable. In consideration of the purchase of
the Receivable, the Servicer shall remit the Purchase Amount in the manner
specified in Section 5.4.
In addition to the foregoing and notwithstanding whether the related
Receivable shall have been purchased by the Servicer, the Servicer shall
indemnify the Seller, the Trustee, the Backup Servicer, the Collateral Agent,
the Certificate Insurer, the Trust and the Certificateholders against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third party claims arising out of the events or facts giving rise to
a breach of the covenants or representations and warranties set forth in Section
4.5(a) or 4.6.
Section 4.8. TOTAL SERVICING FEE; PAYMENT OF CERTAIN EXPENSES BY
SERVICER. (a) On each Distribution Date, the Servicer shall be entitled to
receive out of the Collection Account the Servicing Fee and any Supplemental
Servicing Fee for the related Monthly Period pursuant to Section 5.5. Except as
specifically provided in this Agreement, the Servicer shall
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be required to pay all expenses incurred by it in connection with its activities
under this Agreement (including taxes imposed on the Servicer, expenses incurred
in connection with distributions and reports to Certificateholders and the
Certificate Insurer and all other fees and expenses of the Trust including taxes
levied or assessed against the Trust, and claims against the Trust in respect of
indemnification not expressly stated under this Agreement to be for the account
of the Trust). The Servicer shall be liable for the fees and expenses of the
Trustee, the Backup Servicer, the Collateral Agent, the Lockbox Bank (and any
fees under the Lockbox Agreement) and the Independent Accountants.
(b) On or prior to each Determination Date, the Servicer shall
deposit into the Collection Account, out of its own funds without any right of
reimbursement therefor, an amount (the "Adjusted Compensating Interest") equal
to the positive difference, if any, between (i) Compensating Interest for the
prior Monthly Period and (ii) the sum of (x) the amount on deposit in the Seller
Sub-account Account on such Determination Date and (y) to the extent that the
Seller or an Affiliate thereof is the registered owner of the Class B
Certificates, the amount on deposit in the Class B Sub-account.
Section 4.9. SERVICER'S CERTIFICATE. (a) No later than 10:00 a.m.
New York City time on each Determination Date, the Servicer shall deliver to the
Trustee, the Backup Servicer, the Certificate Insurer, the Collateral Agent and
each Rating Agency a Servicer's Certificate executed by a Responsible Officer of
the Servicer containing, among other things, (i) all information necessary to
enable the Trustee to make any withdrawal and deposit required by Section 6.3,
to give any notice required by Sections 6.3 or 6.4 and make the distributions
required by Section 5.5, (ii) all information necessary to enable the Trustee to
send the statements to Certificateholders and the Certificate Insurer required
by Section 5.7, (iii) a listing of all Warranty Receivables and Administrative
Receivables purchased as of the related Deposit Date, identifying the
Receivables so purchased, and (iv) all information necessary to enable the
Trustee to reconcile all deposits to, and withdrawals from, the Collection
Account for the related Monthly Period and Distribution Date, including the
accounting required by Section 5.6. Receivables purchased by the Servicer or by
the Seller or Atlantic on the related Deposit Date and each Receivable which
became a Liquidated Receivable or which was paid in full during the related
Monthly Period shall be identified by account number (as set forth in the
Schedule of Receivables). A copy of such certificate may be obtained by any
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
(b) In addition to the information required by Section 4.10(a), the
Servicer shall include in the copy of the Servicer's Certificate delivered to
the Certificate Insurer (i) the Delinquency Ratio, Average Delinquency Ratio,
Default Rate, Average Default Rate, Net Loss Rate and Average Net Loss Rate for
such Determination Date, (ii) whether any Trigger Event has occurred as of such
Determination Date, (iii) whether any Trigger Event that may have occurred as of
a prior Determination Date is Deemed Cured as of such Determination Date, and
(iv) whether to the knowledge of the Servicer an Insurance Agreement Event of
Default has occurred.
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Section 4.10. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF SERVICER
TERMINATION EVENT. (a) The Servicer shall deliver to the Trustee, the Backup
Servicer, the Certificate Insurer, the Certificateholders and each Rating
Agency, on or before March 31 (or 90 days after the end of the Servicer's fiscal
year, if other than December 31) of each year, beginning on the first March 31
(or other applicable date) next following the date that is six months after the
Closing Date, an Officer's Certificate, dated as of December 31 (or other
applicable date) of the prior year, stating that (i) a review of the activities
of the Servicer during the preceding 12-month period (or such other period as
shall have elapsed from the Closing Date to the date of the first such
certificate) and of its performance under this Agreement has been made under
such officer's supervision, and (ii) to such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such period, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and the
nature and status thereof.
(b) The Servicer shall deliver to the Trustee, the Backup Servicer,
the Certificate Insurer, the Collateral Agent, the Certificateholders and each
Rating Agency, promptly after having obtained knowledge thereof, but in no event
later than two Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under Section 10.1(a). The
Seller or the Servicer shall deliver to the Trustee, the Backup Servicer, the
Certificate Insurer, the Collateral Agent, the Servicer or the Seller (as
applicable), the Certificateholders and each Rating Agency promptly after having
obtained knowledge thereof, but in no event later than two Business Days
thereafter, written notice in an Officer's Certificate of any event which with
the giving of notice or lapse of time, or both, would become a Servicer
Termination Event under any other clause of Section 10.1.
Section 4.11. ANNUAL INDEPENDENT ACCOUNTANTS' REPORT. (a) The
Servicer shall, at its expense, cause a firm of nationally recognized
independent certified public accountants (the "Independent Accountants"), who
may also render other services to the Servicer or to the Seller, to deliver to
the Trustee, the Backup Servicer, the Certificate Insurer, the
Certificateholders and each Rating Agency, on or before March 31 (or 90 days
after the end of the Servicer's fiscal year, if other than December 31) of each
year, beginning on the first March 31 (or other applicable date) after the date
that is six months after the Closing Date (but in no event later than December
31, 1997), with respect to the twelve months ended the immediately preceding
December 31 (or other applicable date) (or such other period as shall have
elapsed from the Closing Date to the date of such certificate), a statement (the
"Accountant's Report") addressed to the Board of Directors of the Servicer, to
the Trustee, the Backup Servicer and to the Certificate Insurer, to the effect
that such firm has audited the financial statements of the Servicer and issued
its report thereon and that such audit (1) was made in accordance with generally
accepted auditing standards, and accordingly included such tests of the
accounting records and such other auditing procedures as such firm considered
necessary in the circumstances; (2) included an examination of documents and
records relating to the servicing of automobile installment sales contracts
under this Agreement and under pooling and servicing
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agreements covered thereby, including this Agreement); (3) included an
examination of the delinquency and loss statistics relating to the Servicer's
portfolio of automobile installment sales contracts; and (4) except as
described in the statement, disclosed no exceptions or errors in the records
relating to such serviced automobile and light truck loans that, in the firm's
opinion, generally accepted auditing standards requires such firm to report.
The Accountants' Report shall further state that (1) a review in accordance
with agreed upon procedures was made of three randomly selected Servicer's
Certificates for the Trust; (2) except as disclosed in the Report, no
exceptions or errors in the Servicer's Certificates so examined were found;
and (3) the delinquency and loss information relating to the Receivables
contained in the Servicer Certificates were found to be accurate.
(b) The Accountants' Report shall also indicate that the firm is
independent of the Seller and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
(c) A copy of the Accountants' Report may be obtained by any
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
Section 4.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES. The Servicer shall provide to representatives of the
Trustee, the Backup Servicer and the Certificate Insurer reasonable access to
the documentation regarding the Receivables. Each of the Seller and Servicer
will permit any authorized representative or agent designated by the Trustee or
the Certificate Insurer to visit and inspect any of the properties of the Seller
or Servicer, as the case may be, to examine the corporate books and financial
records of the Seller or Servicer, as the case may be, its records relating to
the Receivables, and make copies thereof or extracts therefrom and to discuss
the affairs, finances, and accounts of the Seller or Servicer, as the case may
be, with its principal officers, as applicable, and its independent accountants.
Any expense incident to the exercise by the Trustee or the Certificate Insurer
of any right under this Section 4.12 shall be borne by Atlantic, so long as
Atlantic is the Servicer. The Servicer shall provide such access to any
Certificateholder only in such cases where the Servicer is required by
applicable statutes or regulations (whether applicable to the Servicer or to
such Certificateholder) to permit such Certificateholder to review such
documentation. In each case, such access shall be afforded without charge but
only upon reasonable request and during normal business hours. Nothing in this
Section 4.12 shall derogate from the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the Servicer to provide access as provided in this Section 4.12
as a result of such obligation shall not constitute a breach of this Section
4.12. Any Certificateholder, by its acceptance of a Certificate (or by
acquisition of its beneficial interest therein), shall be deemed to have agreed
to keep confidential and not to use for its own benefit any information obtained
by it pursuant to this Section 4.12, except as may be required by applicable
law.
Section 4.13. MONTHLY TAPE. On or before the fourth Business Day,
but in no event later than the fifth calendar day, of each month, the Servicer
will deliver to the Trustee, and the Backup Servicer a computer tape or a
diskette (or any other electronic transmission acceptable to the Trustee and
the Backup Servicer) in a format acceptable to the Trustee and
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the Backup Servicer containing information with respect to the Receivables as
of the preceding Record Date necessary for preparation of the Servicer's
Certificate relating to the immediately succeeding Determination Date. The
Backup Servicer shall use such tape or diskette (or other electronic
transmission acceptable to the Trustee and the Backup Servicer), along with
certain other information available to the Trustee and Backup Servicer, to
verify the information on the Servicer's Certificate (other than certain
information related to the allocation of amounts collected during the related
Monthly Period) delivered by the Servicer, and the Backup Servicer shall
certify to the Certificate Insurer that it has verified the Servicer's
Certificate in accordance with this Section 4.13 and shall notify the
Servicer and the Certificate Insurer of any discrepancies, in each case, on
or before the second Business Day following the Determination Date. In the
event that the Backup Servicer reports any discrepancies, the Servicer and
the Backup Servicer shall attempt to reconcile such discrepancies prior to
the related Deficiency Claim Date, but in the absence of a reconciliation,
the Servicer's Certificate shall control for the purpose of calculations and
distributions with respect to the related Distribution Date. In the event
that the Backup Servicer and the Servicer are unable to reconcile
discrepancies with respect to a Servicer's Certificate by the related
Distribution Date, the Servicer shall cause the Independent Accountants, at
the Servicer's expense, to audit the Servicer's Certificate and, prior to the
fourth Business Day, but in no event later than the fifth calendar day, of
the following month, reconcile the discrepancies. The effect, if any, of
such reconciliation shall be reflected in the Servicer's Certificate for such
next succeeding Determination Date.
In addition, the Servicer shall, if so requested by the Certificate
Insurer (unless an Insurer Default shall have occurred and be continuing, in
which case, by the Certificate Majority) deliver to the Backup Servicer its
Collection Records and its Monthly Records within one Business Day of demand
therefor and a computer tape containing as of the close of business on the date
of demand all of the data maintained by the Servicer in computer format in
connection with servicing the Receivables.
Other than the duties specifically set forth in this Agreement, the
Backup Servicer shall have no obligations hereunder, including, without
limitation, to supervise, verify, monitor or administer the performance of the
Servicer. The Backup Servicer shall have no liability for any actions taken or
omitted by the Servicer. The duties and obligations of the Backup Servicer
shall be determined solely by the express provisions of this Agreement and no
implied covenants or obligations shall be read into this Agreement against the
Backup Servicer.
Section 4.14. RETENTION AND TERMINATION OF SERVICER. The Servicer
hereby covenants and agrees to act as such under this Agreement for an initial
term, commencing on the Closing Date and ending on September 30, 1996, which
term shall be extendible by the Certificate Insurer for successive quarterly
terms ending on each successive December 31, March 31, June 30 and September 30
(or, pursuant to revocable written standing instructions from time to time to
the Servicer and the Trustee, for any specified number of terms greater than
one), until the termination of the Trust. Each such notice (including each
notice pursuant to standing instructions, which shall be deemed delivered at the
end of successive quarterly terms for so long as such instructions are in
effect) (a "SERVICER EXTENSION NOTICE") shall be
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delivered by the Certificate Insurer to the Trustee and the Servicer. The
Servicer hereby agrees that, as of the date hereof and upon its receipt of any
such Servicer Extension Notice, the Servicer shall become bound, for the initial
term beginning on the date hereof and for the duration of the term covered by
such Notice, to continue as the Servicer subject to and in accordance with the
other provisions of this Agreement. Until such time as an Insurer Default shall
have occurred and be continuing, the Trustee agrees that if as of the fifteenth
day prior to the last day of any term of the Servicer the Trustee shall not have
received any Servicer Extension Notice from the Certificate Insurer, the Trustee
will, within five days thereafter, give written notice of such non-receipt to
the Certificate Insurer, the Backup Servicer (or any alternate successor
servicer appointed by the Certificate Insurer pursuant to Section 10.3(b)) and
the Servicer and the Servicer's term shall not be extended unless a Servicer
Extension Notice is received on or before the last day of such term.
Section 4.15. FIDELITY BOND. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as custodian of
funds and documents in respect of consumer contracts on behalf of institutional
investors.
ARTICLE V
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
Section 5.1. ACCOUNTS. The Servicer shall establish the Collection
Account in the name of the Trustee for the benefit of the Certificateholders and
the Policy Payments Account in the name of the Trustee for the benefit of the
Class A Certificateholders and the Certificate Insurer. Each of the Collection
Account and the Policy Payments Account shall be an Eligible Account and
initially shall be a segregated trust account established with the Trustee and
maintained with the Trustee. All amounts held in the Collection Account shall,
to the extent permitted by applicable laws, rules and regulations, be invested,
as directed in writing by the Servicer, in Eligible Investments that mature not
later than one Business Day prior to the Distribution Date for the Monthly
Period to which such amounts relate. Any such written direction shall certify
that any such investment is authorized by this Section 5.1. Investments in
Eligible Investments shall be made in the name of the Trustee on behalf of the
Trust, and such investments shall not be sold or disposed of prior to their
maturity. The Trustee may trade with itself or an Affiliate in the purchase or
sale of Eligible Investments. Any investment of funds in the Collection Account
shall be made in Eligible Investments held by a financial institution with
respect to which (a) such institution has noted the Trustee's interest therein
by book entry or otherwise and (b) a confirmation of the Trustee's interest has
been sent to the Trustee by such institution, provided that such Eligible
Investments are (i) specific certificated securities (as such term is used in
the New York UCC) and (ii) either (A) in the possession of such institution or
(B) in the possession of a clearing corporation as such term is used in the New
York UCC, registered in the name of such clearing corporation, not endorsed for
collection or surrender or any other purpose not involving transfer, not
containing any evidence of a right or interest inconsistent with the Trustee's
security interest therein, and held by such clearing corporation in an account
of such institution. Subject to the other provisions hereof, the Trustee shall
have sole control over each such investment and the
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income thereon, and any certificate or other instrument evidencing any such
investment, if any, shall be delivered directly to the Trustee or its agent,
together with each document of transfer, if any, necessary to transfer title to
such investment to the Trustee in a manner which complies with this Section 5.1.
All interest, dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Collection Account, shall be deposited in the
Collection Account, and, in the case of the Collection Account, distributed on
the next Distribution Date pursuant to Section 5.5. The Seller shall deposit in
the Collection Account, an amount equal to any net loss on such investments
immediately as realized. Amounts in Policy Payments Account shall not be
invested.
Section 5.2. COLLECTIONS. (a) Pursuant to the Lockbox Agreement, the
Lockbox Bank shall remit to the Collection Account within two Business Days of
receipt thereof (i) all payments by or on behalf of the Obligors and (ii) all
Liquidation Proceeds, both as collected during the Monthly Period. In addition,
the Servicer shall remit all payments by or on behalf of the Obligors received
by the Servicer with respect to the Receivables (other than Purchased
Receivables), and all Liquidation Proceeds, no later than the Business Day
following receipt directly (without deposit into any intervening account) into
the Lockbox Account and the Servicer shall cause the Lockbox Bank to deposit all
such payments on the Receivables into the Collection Account no later than the
second Business Day after receipt of such payments. Within one Business Day of
the initial issuance of the Certificates, the Lockbox Bank shall deposit into
the Collection Account the foregoing amounts received during the current Monthly
Period through such date of issuance, to the extent not deposited into the
Collection Account pursuant to the last sentence of this Section 5.2. On the
Closing Date, the Seller or Servicer shall deposit into the Collection Account
all proceeds received from the sale of the Class A Certificates in excess of all
amounts required to release the Receivables from the existing financing
arrangements and to pay certain transaction fees and expenses and make the
Initial Spread Account Deposit. Within one Business Day after the Closing Date,
the Servicer or the Seller shall compute all payments by or on behalf of the
Obligors on the Receivables and any Liquidation Proceeds and proceeds of
Insurance Policies realized in respect of a Financed Vehicle and received by
Atlantic, the Seller or the Servicer in the Lockbox or otherwise after the
Cut-off Date and on or prior to the Closing Date and shall instruct the Trustee
to release to the Seller any excess of proceeds deposited into the Collection
Account on the Closing Date over the computed amount, or, in the case of a
shortfall, deposit the amount of such shortfall into the Collection Account.
(b) The Servicer will be entitled to be reimbursed from amounts on
deposit in the Collection Account with respect to a Monthly Period for amounts
previously deposited in the Collection Account but later determined by the
Servicer or the Lockbox Bank to have resulted from mistaken deposits or postings
or checks returned for insufficient funds. The amount to be reimbursed
hereunder shall be paid to the Servicer on the related Distribution Date
pursuant to Section 5.5(a)(i) upon certification by the Servicer of such amounts
and the provision of such information to the Trustee and the Certificate Insurer
as may be necessary in the opinion of the Trustee and the Certificate Insurer to
verify the accuracy of such certification. In the event that the Certificate
Insurer has not received evidence satisfactory to it of the Servicer's
entitlement to reimbursement pursuant to this Section 5.2(b), the Certificate
Insurer shall (unless an Insurer Default shall have occurred and be continuing)
give
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the Trustee notice to such effect, following receipt of which the Trustee shall
not make a distribution to the Servicer in respect of such amount pursuant to
Section 5.5, or if the Servicer prior thereto has been reimbursed pursuant to
Section 5.5 or Section 5.6, the Trustee shall withhold such amounts from amounts
otherwise distributable to the Servicer on the next succeeding Distribution
Date.
Section 5.3. APPLICATION OF COLLECTIONS. For the purposes of this
Agreement, all collections for a Monthly Period shall be applied by the Servicer
as follows:
(a) With respect to each Receivable (other than a Purchased
Receivable), payments by or on behalf of the Obligor (other than of
Supplemental Servicing Fees with respect to such Receivable, to the extent
collected) shall be applied to interest and principal in accordance with
the Simple Interest Method. Any prepayment of principal during each
Monthly Period shall be immediately applied to reduce the principal balance
of the Receivable during such Monthly Period.
(b) With respect to each Receivable that has become a Purchased
Receivable on any Deposit Date, the Purchase Amount shall be applied, for
purposes of this Agreement only, to interest and principal on the
Receivable in accordance with the terms of the Receivable as if the
Purchase Amount had been paid by the Obligor on the Record Date. The
Servicer shall not be entitled to any Supplemental Servicing Fees with
respect to such a Receivable. Nothing contained herein shall relieve any
Obligor of any obligation relating to any Receivable.
(c) All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder shall be deposited in the Collection
Account and paid to the Servicer in accordance with Section 5.5(a)(i).
(d) All payments by or on behalf of an Obligor received with respect
to any Purchased Receivable after the Record Date immediately preceding the
Deposit Date on which the Purchase Amount was paid by the Seller, Atlantic
or the Servicer shall be paid to the Seller, Atlantic or the Servicer,
respectively, and shall not be included in the Available Funds.
Section 5.4. ADDITIONAL DEPOSITS. On or before each Deposit Date,
the Servicer, the Seller or Atlantic shall deposit into the Collection Account
the aggregate Purchase Amounts with respect to Administrative Receivables and
Warranty Receivables, respectively. All such deposits of Purchase Amounts shall
be made in immediately available funds. On or before each Draw Date, the
Trustee shall remit to the Collection Account any amounts delivered to the
Trustee by the Collateral Agent.
Section 5.5. DISTRIBUTIONS. (a) On each Distribution Date, the
Trustee shall (x) distribute all amounts deposited by the Certificate Insurer
under Section 5.8 as directed by the Certificate Insurer, and (y) (based solely
on the information contained in the Servicer's Certificate delivered with
respect to the related Determination Date) distribute the following amounts and
in the following order of priority:
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(i) first, from the Distribution Amount, to the Servicer, the
Servicing Fee for the related Monthly Period, any Supplemental Servicing
Fees for the related Monthly Period, and any amounts specified in Section
5.2(b), to the extent the Servicer has not reimbursed itself in respect of
such amounts pursuant to Section 5.6;
(ii) second, from the Distribution Amount, to any Lockbox Bank,
Trustee, Backup Servicer or Collateral Agent, any accrued and unpaid fees
(in each case, to the extent such Person has not previously received such
amount from the Servicer or Atlantic);
(iii) third, from the Amount Available, to the Class A
Certificateholders, the Class A Interest Distributable Amount for such
Distribution Date;
(iv) fourth, from the Amount Available, to the Class A
Certificateholders, the sum of (x) the Class A Principal Distributable
Amount for such Distribution Date and (y) the Class A Principal Carryover
Shortfall, if any, for such Distribution Date;
(v) fifth, from the Distribution Amount, to the Certificate Insurer,
to the extent of any amounts owing to the Certificate Insurer under the
Insurance Agreement and not paid, whether or not Atlantic is also obligated
to pay such amounts;
(vi) sixth, from Available Funds, to the Collateral Agent for deposit
in the Seller Sub-account, the Seller Sub-account Spread Deposit Amount;
(vii) seventh, from Available Funds, to the Collateral Agent for
deposit in the Class B Sub-account, the amount, if any, by which the
Requisite Amount with respect to the related Determination Date exceeds the
sum of amounts on deposit in the Seller Sub-account and the Class B
Sub-account of the Spread Account (after giving effect to all deposits and
withdrawals from the Spread Account with respect to such Distribution
Date);
(viii) eighth, from Available Funds, to the Class B
Certificateholders, the Class B Interest Distributable Amount for such
Distribution Date;
(ix) ninth, from Available Funds, to the Class B Certificateholders,
the sum of (x) the Class B Principal Distributable Amount for such
Distribution Date and (y) the Class B Principal Carryover Shortfall, if
any, for such Distribution Date;
(x) tenth, to the Seller Sub-account, to the extent of any remaining
Available Funds;
(xi) eleventh, to the Class B Certificateholders (A) from the Class B
Sub-account, any amounts released pursuant to priority first of priority
SEVENTH of section 3.03(b) of the Spread Account Agreement and (B) from the
Seller Sub-account, any amounts released pursuant to priority second of
priority SEVENTH of Section 3.03(b) of the Spread Account Agreement to the
extent of any prior withdrawals from
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the Class B Sub-account previously distributed to any other person other
than the Class B Certificateholders; and
(xii) twelfth, from the Seller Sub-account, from amounts released
under priority second of priority SEVENTH of Section 3.03(b) of the Spread
Account Agreement after distribution of all amounts pursuant to clause (xi)
above, to the Seller any remaining amount after the payment of any amounts
payable to the Trustee pursuant to Section 11.3(d) hereof and not
previously reimbursed pursuant to such provision.
(b) Subject to Section 12.1 respecting the final payment upon
retirement of each Certificate, and provided that the Trustee has received the
applicable Servicer's Certificate, on each Distribution Date the Trustee shall
distribute to each Certificateholder of record on the preceding Record Date
either (i) by wire transfer, in immediately available funds to the account of
such holder at a bank or other entity having appropriate facilities therefor, if
such Certificateholder holds Certificates representing at least $[5] million in
Class A Certificate Balance or Class B Certificate Balance as of the Closing
Date, and if such Certificateholder shall have provided to the Trustee
appropriate instructions not later than [15] days prior to such Distribution
Date, (ii) by check mailed to such Certificateholder at the address of such
Holder appearing in the Certificate Register, or (iii) if the registered
Certificateholder is the nominee of a Depositor, by wire transfer in immediately
available funds to the account designated by such Certificateholder, such
Holder's Fractional Undivided Interest of either the Class A Distributable
Amount or the Class B Distributable Amount, as applicable, to the extent funds
therefore are distributed under Section 5.5(a).
Notwithstanding the foregoing, any Class B Certificateholder may
direct the Trustee, in writing, to deposit any or all distributions to which
such Class B Certificateholder would otherwise be entitled to receive pursuant
to clause (viii) or (ix) above into the Class B Sub-account of the Spread
Account.
(c) Each Certificateholder, by its acceptance of its Certificate,
will be deemed to have consented to the provisions of paragraph (a) above
relating to the priority of distributions, and will be further deemed to have
acknowledged that no property rights in any amount or the proceeds of any such
amount shall vest in such Certificateholder until such amounts have been
distributed to such Certificateholder pursuant to such provisions.
In furtherance of and not in limitation of the foregoing, each Class B
Certificateholder by acceptance of its Class B Certificate, specifically
acknowledges that no amounts shall be received by it, nor shall it have any
right to receive any amounts unless and until such amounts have been released
pursuant to Section 3.03(b) of the Spread Account Agreement or are otherwise
available from remaining Available Funds, for distribution to such Class B
Certificateholder, pursuant to paragraph (a) above. Each Class B
Certificateholder, by its acceptance of its Class B Certificate, further
specifically acknowledges that it has no right to or interest in any moneys at
any time held pursuant to the Spread Account Agreement or pursuant hereto prior
to the release of such moneys as aforesaid, such moneys being held in trust for
the benefit of the Class A Certificateholders and
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the Certificate Insurer, as their interests may appear prior to such release.
Notwithstanding the foregoing, in the event that it is ever determined that the
moneys held in the Spread Account constitute a pledge of collateral, then the
provisions of this Agreement and the Spread Account Agreement shall be
considered to constitute a security agreement and the Seller and the Class B
Certificateholders hereby grant to the Collateral Agent a first priority
perfected security interest in such amounts, to be applied as set forth in
Section 3.03(b) of the Spread Account Agreement in the case of Spread Account
moneys. In addition, each Class B Certificateholder, by acceptance of its Class
B Certificate, hereby appoints the Seller as its agent to pledge a first
priority perfected security interest in the Class B Sub-account and any amounts
held therein from time to time to the Collateral Agent for the benefit of the
Trustee and the Certificate Insurer pursuant to the Spread Account Agreement and
agree to execute and deliver such instruments of conveyance, assignment, grant,
confirmation, etc., as well as any financing statements, in each case as the
Certificate Insurer shall consider reasonably necessary in order to perfect the
Collateral Agent's Security Interest in the Collateral (as such terms are
defined in the Spread Account Agreement).
Section 5.6. NET DEPOSITS. The Servicer may make the remittances to
be made by it pursuant to Sections 5.2 and 5.4 net of amounts (which amounts may
be netted prior to any such remittance for a Monthly Period) to be distributed
to it pursuant to Sections 4.8 and 5.2(b) and (subject to payment by the
Servicer of amounts otherwise payable pursuant to Section 5.5(a)(ii)) 5.5(a)(i),
for so long as no Servicer Termination Event has occurred and is continuing;
PROVIDED, HOWEVER, that the Servicer shall account for all of such amounts in
the related Servicer's Certificate as if such amounts were deposited and
distributed separately; and, PROVIDED, FURTHER, that if an error is made by the
Servicer in calculating the amount to be deposited or retained by it, with the
result that an amount less than required is deposited in the Collection Account,
the Servicer shall make a payment of the deficiency to the Collection Account,
immediately upon becoming aware, or receiving notice from the Trustee, of such
error.
Section 5.7. STATEMENTS TO CERTIFICATEHOLDERS. (a) On each
Distribution Date, the Trustee shall include with each distribution to each
Certificateholder, a statement (which statement shall also be provided to the
Certificate Insurer and to each Rating Agency) based on information in the
Servicer's Certificate delivered on the related Determination Date pursuant to
Section 4.9, setting forth for the Monthly Period relating to such Distribution
Date the following information:
(i) in the case of the Class A and Class B Certificateholders, the
amount of such distribution allocable to principal and in the case of the
Class B Certificates, the amount deposited in the Class B Sub-account with
respect to principal;
(ii) in the case of the Class A and Class B Certificateholders, the
amount of such distribution allocable to interest and in the case of the
Class B Certificates, the amount deposited in Class B Sub-account with
respect to interest;
(iii) the amount of such distribution payable out of amounts
withdrawn from the Spread Account or pursuant to a claim on the Policy;
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(iv) the Class A Certificate Balance and the Class B Certificate
Balance, as applicable (after giving effect to distributions made on such
Distribution Date);
(v) the amount of fees paid by the Trust with respect to such Monthly
Period;
(vi) the amount of the Class A Interest Carryover Shortfall, Class A
Principal Carryover Shortfall, Class B Interest Carryover Shortfall Class B
Principal Carryover Shortfall, if any, on such Distribution Date and the
change in such amounts from those of the prior Distribution Date;
(vii) the Class A Certificate Factor, Class A Certificate Balance,
Class B Certificate Factor and Class B Certificate Balance as of such
Distribution Date;
(viii)the Delinquency Ratio, Average Delinquency Ratio, Default Rate,
Average Default Rate, Net Loss Rate and Average Net Loss Rate for such
Determination Date;
(ix) whether any Trigger Event has occurred as of such Determination
Date;
(x) whether any Trigger Event that may have occurred as of a prior
Determination Date is Deemed Cured (as defined in the Spread Account
Agreement), as of such Determination Date;
(xi) whether an Insurance Agreement Event of Default has occurred;
and
(xii) the Pool Factor (after giving effect to distributions made on
such Distribution Date).
Each amount set forth pursuant to subclauses (i) (such amounts broken down by
Class of Certificate), (ii) (such amounts broken down by Class of Certificate),
(v) and (vi) above shall be expressed as a dollar amount per $1,000 of original
principal balance of a Certificate of the related Class.
(b) Within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of this Agreement, the
Trustee shall mail, to each Person who at any time during such calendar year
shall have been a Holder of a Certificate, a statement containing the sum of the
amounts set forth in clauses (i), (ii), and (v) (separately indicating amounts
in respect of the Class A Certificates and the Class B Certificates) and such
other information, requested in writing by the Servicer, if any, as the Servicer
determines is necessary to permit the Certificateholder to ascertain its share
of the gross income and deductions of the Trust (exclusive of the Supplemental
Servicing Fee), for such calendar year or, in the event such Person shall have
been a Holder of a Certificate during a portion of such calendar year, for the
applicable portion of such year, for the purposes of such Certificateholder's
preparation of federal income tax returns. The Trustee shall furnish such
statements to the Internal Revenue Service annexed to Form 1041 in the manner
and at the time provided by the Code and applicable Regulations thereunder.
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Section 5.8. OPTIONAL DEPOSITS BY THE CERTIFICATE INSURER. The
Certificate Insurer shall at any time, and from time to time, with respect to a
Distribution Date, have the option (but shall not be required, except as
provided in Section 6.4 and in accordance with the terms of the Policy) to
deliver amounts to the Trustee for deposit into the Collection Account for any
of the following purposes: (i) to provide funds in respect of the payment of
fees or expenses of any provider of services to the Trust with respect to such
Distribution Date, (ii) to distribute as a component of the Class A Principal
Distributable Amount to the extent that the Class A Certificate Balance as of
the Determination Date preceding such Distribution Date exceeds the Class A
Percentage of the Aggregate Principal Balance as of such Determination Date, or
(iii) to include such amount as part of the Class A Distributable Amount for
such Distribution Date to the extent that without such amount a draw would be
required to be made on the Policy.
ARTICLE VI
THE SPREAD ACCOUNT AND THE POLICY
Section 6.1. SPREAD ACCOUNT. The Seller agrees, simultaneously with
the execution and delivery of this Agreement, to execute and deliver the Spread
Account Agreement and, pursuant to the terms thereof, to deposit $472,549.58 in
the Seller Sub-account of the Spread Account. Although the Seller, on behalf of
itself and the Class B Certificateholders, has pledged the Spread Account to the
Collateral Agent and the Certificate Insurer pursuant to the Spread Account
Agreement, the Spread Account shall not under any circumstances be deemed to be
part of or otherwise includable in the Trust or the Trust Property.
Section 6.2. POLICY. Atlantic, the Servicer, and the Seller agree,
simultaneously with the execution and delivery of this Agreement, to cause the
Certificate Insurer to issue the Policy for the benefit of the Trust in
accordance with the terms thereof.
Section 6.3. WITHDRAWALS FROM SPREAD ACCOUNT. (a) in the event that
the Servicer's Certificate with respect to any Determination Date shall state
that the amount of the Available Funds with respect to such Determination Date
is less than the sum of the amounts payable on the related Distribution Date
pursuant to clauses (i) through (v) of Subsection 5.5(a) (such deficiency being
a "DEFICIENCY CLAIM AMOUNT") then on the Deficiency Claim Date immediately
preceding such Distribution Date, the Trustee shall deliver to the Collateral
Agent, the Certificate Insurer, the Fiscal Agent, if any, and the Servicer, by
hand delivery, telex or facsimile transmission, a written notice (a "DEFICIENCY
NOTICE") specifying the Deficiency Claim Amount for such Distribution Date.
Such Deficiency Notice shall direct the Collateral Agent to remit such
Deficiency Claim Amount (to the extent of the funds available to be distributed
pursuant to the Spread Account Agreement) to the Trustee for deposit in the
Collection Account.
(b) Any Deficiency Notice shall be delivered by 10:00 a.m., New York
City time, on the fourth Business Day preceding such Distribution Date. The
amounts distributed
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by the Collateral Agent to the Trustee pursuant to a Deficiency Notice shall be
deposited by the Trustee into the Collection Account pursuant to Section 5.4.
Section 6.4. CLAIMS UNDER POLICY. (a) In the event that the Trustee
has delivered a Deficiency Notice with respect to any Determination Date, the
Trustee shall determine on the related Draw Date whether the sum of (i) the
amount of Available Funds with respect to such Determination Date (as stated in
the Servicer's Certificate with respect to such Determination Date) plus (ii)
the amount of the Deficiency Claim Amount, if any, to be delivered by the
Collateral Agent to the Trustee pursuant to a Deficiency Notice delivered with
respect to such Distribution Date (as stated in the certificate delivered on the
immediately preceding Deficiency Claim Date by the Collateral Agent pursuant to
Section 3.03(a) of the Spread Account Agreement) would be insufficient, after
giving effect to the distributions required by Section 5.5(a)(i)-(ii), to pay
the Guaranteed Distributions for the related Distribution Date, then in such
event the Trustee shall furnish to the Certificate Insurer no later than 12:00
noon New York City time on the related Draw Date a completed Notice of Claim in
the amount of the shortfall in amounts so available to pay the Guaranteed
Distributions with respect to such Distribution Date (the amount of any such
shortfall being hereinafter referred to as the "POLICY CLAIM AMOUNT"). Amounts
paid by the Certificate Insurer under the Policy shall be deposited by the
Trustee into the Policy Payments Account and thereafter into the Collection
Account for payment to Class A Certificateholders on the related Distribution
Date (or promptly following payment on a later date as set forth in the Policy).
(b) Any notice delivered by the Trustee to the Certificate Insurer
pursuant to subsection 6.4(a) shall specify the Policy Claim Amount claimed
under the Policy and shall constitute a "Notice of Claim" under the Policy. In
accordance with the provisions of the Policy, the Certificate Insurer is
required to pay to the Trustee the Policy Claim Amount properly claimed
thereunder by 12:00 noon, New York City time, on the later of (i) the third
Business Day (as defined in the Policy) following receipt on a Business Day (as
defined in the Policy) of the Notice of Claim, and (ii) the applicable
Distribution Date. Any payment made by the Certificate Insurer under the Policy
shall be applied solely to the payment of the Class A Certificates, and for no
other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each
Certificateholder any Policy Claim Amount from the Certificate Insurer and (ii)
deposit the same in the Policy Payments Account and thereafter into the
Collection Account for disbursement to the Class A Certificateholders as set
forth in clauses (iii) and (iv) of subsection 5.5(a). Any and all Policy Claim
Amounts disbursed by the Trustee from claims made under the Policy shall not be
considered payment by the Trust or from the Spread Account with respect to such
Class A Certificates, and shall not discharge the obligations of the Trust with
respect thereto. The Certificate Insurer shall, to the extent it makes any
payment with respect to the Class A Certificates, become subrogated to the
rights of the recipients of such payments to the extent of such payments.
Subject to and conditioned upon any payment with respect to the Class A
Certificates by or on behalf of the Certificate Insurer, the Trustee shall
assign to the Certificate Insurer all rights to the payment of interest or
principal with respect to the Class A Certificates which are then due for
payment to the extent of all payments made by the
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Certificate Insurer and the Certificate Insurer may exercise any option, vote,
right, power or the like with respect to the Class A Certificates to the extent
that it has made payment pursuant to the Policy. To evidence such subrogation,
the Certificate Registrar shall note the Certificate Insurer's rights as
subrogee upon the register of Class A Certificateholders upon receipt from the
Certificate Insurer of proof of payment by the Certificate Insurer of any
Guaranteed Distributions.
(d) The Trustee shall be entitled to enforce on behalf of the Class A
Certificateholders the obligations of the Certificate Insurer under the Policy.
Notwithstanding any other provision of this Agreement, the Class A
Certificateholders are not entitled to institute proceedings directly against
the Certificate Insurer.
Section 6.5. PREFERENCE CLAIMS; DIRECTION OF PROCEEDINGS. (a) In the
event that the Trustee has received a certified copy of an order of the
appropriate court that any Guaranteed Distribution paid on a Class A Certificate
has been avoided in whole or in part as a preference payment under applicable
bankruptcy law, the Trustee shall so notify the Certificate Insurer, shall
comply with the provisions of the Policy to obtain payment by the Certificate
Insurer of such avoided payment, and shall, at the time it provides notice to
the Certificate Insurer, notify Holders of the Class A Certificates by mail
that, in the event that any Class A Certificateholder's payment is so
recoverable, such Class A Certificateholder will be entitled to payment pursuant
to the terms of the Policy. Pursuant to the terms of the Policy, the
Certificate Insurer will make such payment on behalf of the Class A
Certificateholder to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy named in the Order (as defined in the Policy) and not to the
Trustee or any Class A Certificateholder directly (unless a Class A
Certificateholder has previously paid such payment to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy, in which case the Certificate
Insurer will make such payment to the Trustee for distribution to such Class A
Certificateholder upon proof of such payment reasonably satisfactory to the
Certificate Insurer).
(b) The Trustee shall promptly notify the Certificate Insurer of any
proceeding or the institution of any action (of which the Trustee has actual
knowledge) seeking the avoidance as a preferential transfer under applicable
bankruptcy, insolvency, receivership, rehabilitation or similar law (a
"PREFERENCE CLAIM") of any distribution made with respect to the Class A
Certificates. Each Holder, by its purchase of Class A Certificates, and the
Trustee hereby agree that so long as an Insurer Default shall not have occurred
and be continuing, the Certificate Insurer may at any time during the
continuation of any proceeding relating to a Preference Claim direct all matters
relating to such Preference Claim including, without limitation, (i) the
direction of any appeal of any order relating to any Preference Claim and (ii)
the posting of any surety, supersedeas or performance bond pending any such
appeal at the expense of the Certificate Insurer, but subject to reimbursement
as provided in the Insurance Agreement. In addition, and without limitation of
the foregoing, as set forth in Section 6.4(c), the Certificate Insurer shall be
subrogated to, and each Class A Certificateholder and the Trustee hereby
delegate and assign, to the fullest extent permitted by law, the rights of the
Trustee and each Class A Certificateholder in the conduct of any proceeding with
respect to a Preference Claim, including, without limitation, all rights of any
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party to an adversary proceeding action with respect to any court order issued
in connection with any such Preference Claim.
Section 6.6. SURRENDER OF POLICY. The Trustee shall surrender the
Policy to the Certificate Insurer for cancellation upon its expiration in
accordance with the terms thereof.
ARTICLE VII
THE CERTIFICATES
Section 7.1. THE CERTIFICATES. (a) The Class A Certificates and the
Class B Certificates shall be issued in denominations of $1,000 initial
principal amount and integral multiples of $1,000 thereof, except that one Class
B Certificate shall be issued in a denomination that includes any residual
amount. The Certificates shall be executed on behalf of the Trustee by manual
or facsimile signature of any Responsible Officer of the Trustee having such
authority under the Trustee's seal imprinted or otherwise affixed thereon and
authenticated on behalf of the Trustee by the manual or facsimile signature of
any other Responsible Officer of the Trustee. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall be
valid and binding obligations of the Trust, notwithstanding that such
individuals or any of them have ceased to be so authorized prior to the
authentication and delivery of such Certificates.
Section 7.2. AUTHENTICATION OF CERTIFICATES. The Trustee shall cause
the Certificates to be authenticated on behalf of the Trust, authenticated, and
delivered to or upon the order of the Seller, signed by its chairman of the
board, its vice chairman, its chief financial officer, its president, any vice
president, its treasurer, or any assistant treasurer, its secretary or any
assistant secretary, without further corporate action by the Seller, in exchange
for the Receivables and the other Trust Property, simultaneously with the sale,
assignment and transfer to the Trustee of the Receivables, and the delivery to
the Custodian on behalf of the Trustee of the Receivable Files and the other
Trust Property. Such Certificates shall be duly executed by the Trustee, in
authorized denominations equaling in the aggregate the Cut-off Date Principal
Balance and evidencing the entire ownership of the Trust. No Certificate shall
entitle its holder to any benefit under the Agreement, or shall be valid for any
purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit A or Exhibit B
hereto executed by the Trustee by manual signature of an authorized signatory;
such authentication shall constitute conclusive evidence that such Certificate
shall have been duly authenticated and delivered hereunder. All Certificates
shall be dated the date of their authentication and shall be numbered in the
manner determined by the Trustee.
Section 7.3. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
(a) The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 7.7, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and of
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transfers and exchanges of Certificates as herein provided. The Trustee shall
be the initial Certificate Registrar. In the event that, subsequent to the
Cut-off Date, the Trustee notifies the Servicer that it is unable to act as
Certificate Registrar, the Servicer shall appoint another bank or trust company,
having an office or agency located in New York, New York, agreeing to act in
accordance with the provisions of this Agreement applicable to it, and otherwise
acceptable to the Trustee, to act as successor Certificate Registrar under this
Agreement.
The Certificates have not been registered under the Securities Act or
any state securities law. The Certificate Registrar shall not register the
transfer of any Class A Certificate or Class B Certificate unless such resale or
transfer is pursuant to an effective registration statement under the Securities
Act (as certified to the Trustee by the Seller) or is to the Seller or unless it
shall have received (i) a representation letter substantially in the form of
Exhibit G hereto or (ii) such other representations (or an Opinion of Counsel)
satisfactory to the Seller or the Certificate Registrar to the effect that such
resale or transfer is made (A) to a person who the seller reasonably believes is
a qualified institutional buyer in a transaction meeting the requirements of
Rule 144A, in a transaction meeting the requirements of Rule 144 under the
Securities Act, or in accordance with another exemption from registration
requirements of the Securities Act (and based upon an opinion of counsel if the
Issuer or the Seller so requests) or (B) pursuant to an effective registration
statement, and in each case, in accordance with any applicable securities laws
of any State of the United States or any other applicable jurisdiction, and the
purchaser will, and each subsequent holder is required to, notify any subsequent
purchaser from it of the resale restrictions set forth above. Until the earlier
of (i) such time as the Certificates shall be registered pursuant to a
registration statement filed under the Securities Act and (ii) the date three
years from the later of the date of the original authentication and delivery of
the Certificates and the date any Certificate was acquired from the Seller or
any affiliate of the Seller, the Certificates shall bear a legend as follows:
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED STATES
TO A PERSON WHO THE SELLER
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REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE
SECURITIES ACT, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 OR (c) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
CERTIFICATE REGISTRAR OR SELLER SO REQUESTS), (2) TO THE
SELLER OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAW OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY TO THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
The Certificate Registrar shall not register the initial purchase of the
Certificates unless it shall have received a Purchaser Representation Letter in
the form of Exhibit G. Neither the Seller, the Servicer, the Trust, Atlantic
nor the Trustee is obligated to register the Certificates of any Class under the
Securities Act or to take any other action not otherwise required under the
Agreement to permit the transfer of Certificates without registration.
So long as the Certificates are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act, the Servicer will provide to
each holder of such restricted securities and to each prospective purchaser (as
designated by such holder) of such restricted securities, upon the request of
such holder or prospective purchaser, any information required to be provided by
Rule 144A(d)(4) under the Securities Act.
Notwithstanding anything to the contrary herein, the Certificate
Registrar shall not register the transfer of any Certificate unless it shall
have received either (a) a representation letter substantially in the form of
Exhibit G hereto or (b) an Opinion of Counsel from the prospective transferee of
such Certificate, acceptable to, and in form and substance satisfactory to, the
Seller, to the effect that (i) such transferee will not acquire such Certificate
with the assets of any "employee benefit plan" as defined in Section 3(3) of
ERISA, (ii) no "prohibited transaction" under ERISA or the Code will occur in
connection with such prospective transferee's acquisition of the Certificate or
(iii) the acquisition of the Certificate is subject to a statutory or
administrative exemption, specified in such letter or opinion, from the
"prohibited transaction" provisions of ERISA and the Code.
(b) Upon surrender for registration of transfer of any Certificate at
the Corporate Trust Office, the Trustee shall, subject to Section 7.3(a),
execute, authenticate, and
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deliver, in the name of the designated transferee or transferees, one or more
new Certificates in authorized denominations of a like aggregate amount dated
the date of authentication by the Trustee. At the option of a Holder,
Certificates may be exchanged for other Certificates of authorized denominations
of a like Class or dollar aggregate amount upon surrender of the Certificates to
be exchanged at the Corporate Trust Office.
(c) Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Certificate Registrar duly executed by
the holder or his attorney duly authorized in writing. Each Certificate
surrendered for registration of transfer or exchange shall be cancelled and
subsequently disposed of by the Trustee.
(d) The Class A Certificates shall be issued in the form of one or
more type- written Class A Certificates representing book-entry Class A
Certificates, to be delivered to the Trustee as custodian for the Depository,
which is acting as the initial Clearing Agency. The provisions of this Section
7.3(d) shall control the registration and transfer of Class A Certificates in
book-entry form notwithstanding any other provisions of this Agreement. The
Class A Certificates shall initially be registered on the Certificate Register
in the name of Cede & Co., the nominee of the Depository, and no Class A
Certificateholder will receive a physical Class A Certificate representing such
Class A Certificateholder's interest in the Class A Certificates, except as
provided in this Section:
(i) the rights of beneficial owners will be exercised only
through the Depository and will be limited to those established by law and
agreements between such beneficial owners and the Depository and/or the
Participants.
(ii) If at any time the Depository for the book-entry Class A
Certificates notifies the Trustee that it is unwilling or unable to
continue as Depository for the book-entry Class A Certificates, or if at
any time the Depository for the book-entry Class A Certificates shall give
notice to the Trustee that such Depository has ceased to be a Clearing
Agency, after prompt written notice to the Certificate Insurer, the Trustee
with the prior written consent of the Certificate Issuer shall appoint a
successor Depository with respect to the book-entry Class A Certificates.
If a successor Depository for the book-entry Class A Certificates is not
appointed by the Trustee within 90 days after the Trustee receives such
notice or becomes aware of such ineligibility, representation of a portion
or all of the Class A Certificates, as the case may be, by the book-entry
Class A Certificates shall no longer be effective and, in exchange for the
book-entry Class A Certificates, the Trustee shall give written notice to
the Certificate Insurer and shall execute and deliver to such Persons as
are designated by the Depository, physical Class A Certificates in
authorized denominations, registered in such names as the Depository shall
designate, with the legend (or such legends as may be applicable thereto in
accordance with Section 7.3 hereof), in an aggregate principal balance
equal to the principal balance of the book-entry Class A Certificates.
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(iii) If at any time the Trustee has, pursuant to this Agreement,
instituted or joined in or has been directed to institute or join in any
judicial proceeding in a court to enforce the rights of the Certificate
Insurer or the Class A Certificateholders, and the Trustee has been advised
by legal counsel that in connection with such proceeding it is necessary or
appropriate for the Trustee to obtain possession of the Class A
Certificates, the Trustee may, in its sole discretion, determine that the
Class A Certificates represented by the book-entry Class A Certificates
shall no longer be represented by such book-entry Class A Certificates. In
such event, the Trustee shall execute and deliver to such Persons as are
designated by the Depository, in exchange for the book-entry Class A
Certificates, physical Class A Certificates, in authorized denominations,
registered in such names as the Depository shall designate, in an aggregate
principal balance equal to the principal balance of the book-entry Class A
Certificates.
(iv) Every Class A Certificate delivered upon registration of
transfer of, or in exchange for or in lieu of, a book-entry Class A
Certificates or any portion thereof, whether pursuant to this Section or
otherwise, shall be delivered in the form of, and shall be, a book-entry
Class A Certificates in accordance with the rules of the Depository and no
further certification shall be required, unless such Class A Certificate is
registered in the name of a Person other than the Depository for such
book-entry Class A Certificates or a nominee thereof.
(v) the Certificate Registrar and the Trustee will be entitled
to deal with the Clearing Agency for all purposes of this Agreement
(including the payment of principal of and interest on the Class A
Certificates and the giving of instructions or directions hereunder) as the
sole holder of the Class A Certificates, and shall have o obligation to the
beneficial owners.
(vi) whenever this Agreement requires or permits actions to be
taken subsequent to the occurrence and continuance of an Insurer Default
based upon instructions or directions of Certificateholders of Class A
Certificates evidencing a specified percentage of the Outstanding Amount of
the Class A Certificates, the Clearing Agency will be deemed to represent
such percentage only to the extent that it has received instructions to
such effect from beneficial owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the
beneficial interest in the Class A Certificates and has delivered such
instructions to the Trustee.
(vii) without the prior written consent of the Seller, the
Certificate Insurer and the Trustee, no such Class A Certificate may be
transferred by the Depository except to a successor Depository that agrees
to hold such Class A Certificate for the account of the beneficial owners
or except upon the election of the Beneficial Owner thereof or a subsequent
transferee to hold such Class A Certificate in physical form in accordance
with Section 7.3 hereof.
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Neither the Trustee nor the Certificate Registrar shall have any
responsibility to monitor or restrict the transfer of beneficial ownership in
any Class A Certificate an interest in which is transferable through the
facilities of the Depository.
(e) All Certificates issued upon any registration of transfer or
exchange of Certificates shall be the valid obligations of the Trust, evidencing
the same rights, and entitled to the same benefits under this Agreement, as the
Certificates surrendered upon such registration of transfer or exchange.
(f) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by, the
Certificateholder thereof or such Certificateholder's attorney duly authorized
in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Certificate Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Certificate Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Exchange Act.
(g) No service charge shall be made to a Certificateholder for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates.
(h) The preceding provisions of this Section notwithstanding, the
Trustee shall not be required to make, and the Certificate Registrar need not
register, transfers or exchanges of Certificates selected for redemption or of
any Certificate for a period of 15 days preceding the due date for any payment
with respect to the Certificate.
(i) The Certificates and this Agreement may be amended or
supplemented from time to time without the consent of any of the
Certificateholders but with the prior written consent of the Certificate Insurer
(unless an Insurer Default shall have occurred and be continuing) to modify
restrictions on and procedures for resale and other transfers of the
Certificates of any class to reflect any change in applicable law or regulations
(or the interpretation thereof) or practices relating to the resale or transfer
of restricted securities generally.
(j) There shall be only one legal or beneficial owner of the Class B
Certificates at any time unless the transferor thereof has provided an Opinion
of Counsel to the Certificate Registrar and the Certificate Insurer that the
holding of the Class B Certificates by more than one legal or beneficial owner
will not cause the Trust to fail to qualify as a grantor trust or the owners of
the Class B Certificates to be treated as owners of a separate association
taxable as a corporation.
Section 7.4. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If
(a) any mutilated Certificate is surrendered to the Certificate Registrar, or
the Certificate Registrar
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receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Certificate Registrar, the
Trustee and (unless an Insurer Default shall have occurred and be continuing)
the Certificate Insurer such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Certificate
Registrar or the Trustee that such Certificate has been acquired by a bona fide
purchaser, the Trustee on behalf of the Trust shall execute and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor and Fractional Undivided Interest.
In connection with the issuance of any new Certificate under this Section 7.4,
the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee and the Certificate
Registrar) connected therewith. Any duplicate Certificate issued pursuant to
this Section 7.4 shall constitute complete and indefeasible evidence of
ownership in the Trust, as if originally issued, whether or not the lost, stolen
or destroyed Certificate shall be found at any time.
Section 7.5. PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer, the Trustee, the Certificate Registrar
and any agent of the Trustee or the Certificate Registrar may treat the Person
in whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Section 5.5 and for all other
purposes whatsoever, and neither the Trustee, the Certificate Registrar, the
Certificate Insurer nor any agent of the Trustee, the Certificate Registrar or
the Certificate Insurer shall be affected by any notice to the contrary.
Section 7.6. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Trustee shall furnish or cause to be furnished to the Servicer
or (unless an Insurer Default shall have occurred and be continuing) the
Certificate Insurer, within 10 days after receipt by the Trustee of a written
request therefor from such party, a list, in such form as such party may
reasonably require, of the names and addresses of the Certificateholders as of
the most recent Record Date for payment of distributions to Certificateholders.
If three or more Certificateholders, or one or more Certificateholders
evidencing not less than 25% of the Class A Certificate Balance and the Class B
Certificate Balance (hereinafter referred to as "APPLICANTS"), apply in writing
to the Trustee, and such application states that the Applicants desire to
communicate with other Certificateholders of such Class with respect to their
rights under this Agreement or under the Certificates and is accompanied by a
copy of the communication that such Applicants propose to transmit, then the
Trustee shall, within five Business Days after the receipt of such application,
afford such Applicants access, during normal business hours, to the current list
of Certificateholders. Every Certificateholder, by receiving and holding a
Certificate, agrees with the Servicer and the Trustee that neither the Servicer
nor the Trustee shall be held accountable by reason of the disclosure of any
such information as to the names and addresses of the Certificateholders under
this Agreement, regardless of the source from which such information was
derived.
Section 7.7. MAINTENANCE OF OFFICE OR AGENCY. The Trustee shall
maintain in New York, New York, an office or offices or agency or agencies where
Certificates may be surrendered for registration of transfer or exchange and an
office in New York, New York where notices and demands to or upon the Trustee in
respect of the Certificates and this
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Agreement may be served. The Trustee initially designates the Corporate Trust
Office as specified in this Agreement as its office for such purposes. The
Trustee shall give prompt written notice to the Servicer and to
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
ARTICLE VIII
THE SELLER
Section 8.1. LIABILITY OF SELLER. The Seller shall be liable
hereunder only to the extent of the obligations in this Agreement specifically
undertaken by the Seller and the representations made by the Seller. The Seller
shall indemnify, defend, and hold harmless the Trustee from and against any
loss, liability or reasonable expense incurred by reason of (a) the Seller's
willful misfeasance, bad faith, or negligence in the performance of its duties
under this Agreement, or by reason of reckless disregard of its obligations and
duties under this Agreement or (b) the Seller's violation of Federal or State
securities laws in connection with the sale of the Certificates.
Indemnification under this Section 8.1 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Seller shall have made any indemnity payments to the Trustee pursuant to
this Section 8.1 and the Trustee thereafter shall collect any of such amounts
from others, the Trustee shall repay such amounts to the Seller, without
interest.
Section 8.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF SELLER; AMENDMENT OF CERTIFICATE OF INCORPORATION. (a) The
Seller shall not merge or consolidate with any other Person or permit any other
Person to become the successor to the Seller's business without (so long as an
Insurer Default shall not have occurred and be continuing) the prior written
consent of the Certificate Insurer and if an Insurer Default has occurred and is
continuing, the Certificate Majority. Any Person (i) into which the Seller may
be merged or consolidated, (ii) which may result from any merger or
consolidation to which the Seller shall be a party, or (iii) which may succeed
to the properties and assets of the Seller substantially as a whole, which
Person in any of the foregoing cases (x) has a certificate of incorporation
containing provisions relating to limitations on business and other matters
substantively identical to those contained in the Seller's certificate of
incorporation, and (y) executes an agreement of assumption to perform every
obligation of the Seller under this Agreement, shall be the successor to the
Seller under this Agreement without the execution or filing of any document or
any further act on the part of any of the parties to this Agreement. The Seller
shall provide prompt notice of any merger, consolidation or succession pursuant
to this Section 8.2 to the Trustee, the Certificate Insurer, the
Certificateholders and each Rating Agency. Notwithstanding the foregoing, as a
condition to the consummation of the transactions referred to in clauses (i),
(ii) and (iii) above, (w) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Section 3.4 shall have been
breached (for purposes hereof, such representations and warranties shall speak
as of the date of the consummation of such transaction) and no event that, after
notice or lapse of time,
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or both, would become a Servicer Termination Event shall have occurred and be
continuing, (x) the Seller shall have delivered to the Trustee and the
Certificate Insurer an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 8.2 and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with, (y) the Seller shall have delivered to the Certificate Insurer
and the Trustee an Opinion of Counsel, stating, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and protect
the interest of the Trustee in the Trust Property and reciting the details of
the filings or (B) no such action shall be necessary to preserve and protect
such interest, and (z) immediately after giving effect to such transaction, no
Insurance Agreement Event of Default and no event that, after notice or lapse of
time, or both, would become an Insurance Agreement Event of Default shall have
occurred and be continuing. The Seller shall provide notice of any merger,
consolidation or succession pursuant to this Section 8.2 to each Rating Agency
and shall have received confirmation from each Rating Agency that the then
current rating of the Certificates will not be downgraded as a result of such
merger, consolidation or succession. Notwithstanding anything herein to the
contrary, the execution of the foregoing agreement of assumption and compliance
with clauses (w), (x), (y) and (z) above shall be conditions to the consummation
of the transactions referred to in clause (i), (ii) or (iii) above.
(b) The Seller hereby agrees that it shall not (i) take any action
prohibited by Article III of its certificate of incorporation or (ii) without
the prior written consent of the Trustee and (so long as an Insurer Default
shall not have occurred and be continuing) the Certificate Insurer and without
giving prior written notice to the Rating Agencies, amend Article III, V, VI,
VII, IX, X, XI or XII of its certificate of incorporation.
Section 8.3. LIMITATION ON LIABILITY OF SELLER AND OTHERS. The
Seller and any director or officer or employee or agent of the Seller may rely
in good faith on the written advice of counsel or on any document of any kind
prima facie properly executed and submitted by any Person respecting any matters
arising under this Agreement. The Seller shall not be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
obligations as Seller of the Receivables under this Agreement and that in its
opinion may involve it in any expense or liability.
Section 8.4. SELLER MAY OWN CERTIFICATES. Each of the Seller and any
Affiliate of the Seller may in its individual or any other capacity become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Seller or an Affiliate thereof except as otherwise specifically
provided herein. Certificates so owned by or pledged to the Seller or such
Affiliate shall have an equal and proportionate benefit under the provisions of
this Agreement, without preference, priority, or distinction as among all of the
Certificates; PROVIDED, HOWEVER, that any Certificates owned by the Seller or
any Affiliate thereof, during the time such Certificates are owned by them,
shall be without voting rights for any purpose set forth in this Agreement and
will not be entitled to the benefits of the Policy. The Seller shall notify the
Trustee and the Certificate Insurer promptly after it or any of its Affiliates
become the owner or pledgee of a Certificate.
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Section 8.5. SELLER NOT TO INCUR DEBT. The Seller shall not incur
any debt under Article III or Article X of its certificate of incorporation in a
manner which would result in the withdrawal of or reduction of the then current
rating of the Class A Certificates by either of the Rating Agencies.
ARTICLE IX
THE SERVICER
Section 9.1. LIABILITY OF SERVICER; INDEMNITIES. (a) The Servicer
shall be liable hereunder only to the extent of the obligations in this
Agreement specifically undertaken by the Servicer and the representations made
by the Servicer and to the extent not covered in Section 3.04 of the Insurance
Agreement.
(b) The Servicer shall defend, indemnify and hold harmless the
Trustee, the Backup Servicer, the Collateral Agent, the Certificate Insurer,
their respective officers, directors, agents and employees, the Trust, and the
Certificateholders from and against any and all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel and expenses of litigation arising out of or resulting from the use,
ownership or operation by the Servicer or any Affiliate thereof of any Financed
Vehicle.
(c) The Servicer shall defend, indemnify and hold harmless the Trust,
the Trustee, the Backup Servicer, the Collateral Agent, the Certificate Insurer,
their respective officers, directors, agents and employees, and the
Certificateholders from and against any taxes that may at any time be asserted
against the Trust, the Trustee or the Certificateholders with respect to the
transactions contemplated in this Agreement, including, without limitation, any
sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but not including any taxes asserted with respect
to, and as of the date of, the sale of the Receivables and the other Trust
Property to the Trustee or the issuance and original sale of the Certificates,
or asserted with respect to ownership of the Receivables, or federal or other
income taxes arising out of distributions on the Certificates) and costs and
expenses in defending against the same.
(d) The Servicer shall indemnify, defend and hold harmless the Trust,
the Trustee, the Backup Servicer, the Certificate Insurer, the Collateral Agent,
their respective officers, directors, agents and employees and the
Certificateholders from and against any and all costs, expenses, losses, claims,
damages, and liabilities to the extent that such cost, expense, loss, claim,
damage, or liability arose out of, or was imposed upon the Trustee, the Trust,
the Certificate Insurer or the Certificateholders through the breach of this
Agreement, the negligence, willful misfeasance, or bad faith of the Servicer in
the performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement.
(e) The Servicer shall indemnify, defend, and hold harmless the
Trustee, its officers, directors, agents and employees, from and against all
costs, taxes (other than income
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taxes on fees and expenses payable to the Trustee), expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties contained in this Agreement,
except to the extent that such cost, taxes (other than income taxes), expense,
loss, claim, damage or liability (A) is due to the willful misfeasance, bad
faith or gross negligence of the Trustee, or (B) arises from the Trustee's
breach of any of its representations or warranties set forth in Section 11.12;
PROVIDED, HOWEVER, that amounts payable under this paragraph shall be increased
by the amount of income taxes actually paid by the Trustee in respect of any
indemnity payment unless the Trustee received or can reasonably be expected to
receive a tax deduction for the related loss or cost.
(f) For purposes of this Section 9.1, in the event of the termination
of the rights and obligations of the Servicer (or any successor thereto pursuant
to Section 9.2) as Servicer pursuant to Section 10.1, or a resignation by such
Servicer pursuant to this Agreement, such Servicer shall be deemed to be the
Servicer pending appointment of a successor Servicer pursuant to Section 10.3.
The provisions of this Section 9.1(f) shall in no way affect the survival
pursuant to Section 9.1(g) of the indemnification by the Servicer provided by
Sections 9.1(b) through 9.1(e).
(g) Indemnification under this Article shall survive the termination
of this Agreement and shall include reasonable fees and expenses of counsel and
expenses of litigation. If the Servicer shall have made any indemnity payments
pursuant to this Article and the recipient thereafter collects any of such
amounts from others, the recipient shall promptly repay such amounts collected
to the Servicer, without interest. Notwithstanding any other provision of this
Agreement, the obligations of the Servicer described in this Section shall not
terminate or be deemed released upon the resignation or termination of Atlantic
as the Servicer and shall survive any termination of this Agreement.
Section 9.2. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER. (a) The Servicer shall not
merge or consolidate with any other Person, convey, transfer or lease
substantially all its assets as an entirety to another Person, or permit any
other Person to become the successor to the Servicer's business unless, after
the merger, consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity shall be an Eligible Servicer and shall be capable
of fulfilling the duties of the Servicer contained in this Agreement. Any Person
(i) into which the Servicer may be merged or consolidated, (ii) resulting from
any merger or consolidation to which the Servicer shall be a party, (iii) which
acquires by conveyance, transfer, or lease substantially all of the assets of
the Servicer, or (iv) succeeding to the business of the Servicer, in any of the
foregoing cases shall execute an agreement of assumption to perform every
obligation of the Servicer under this Agreement and, whether or not such
assumption agreement is executed, shall be the successor to the Servicer under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties to this Agreement, anything in this Agreement
to the contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained
herein shall be deemed to release the Servicer from any obligation. The
Servicer shall provide prior written notice of any merger, consolidation or
succession pursuant to this Section 9.2(a) to the Seller, the Trustee, the
Certificate Insurer, the Certificateholders and each Rating Agency.
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Notwithstanding the foregoing, as a condition to the consummation of the
transactions referred to in clauses (i), (ii) and (iii) above, (x) immediately
after giving effect to such transaction, no representation or warranty made
pursuant to Section 4.6 shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the consummation of
such transaction) and no event that, after notice or lapse of time, or both,
would become an Insurance Agreement Event of Default, shall have occurred and be
continuing, (y) the Servicer shall have delivered to the Trustee and the
Certificate Insurer an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 9.2(a) and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with, and (z) the Servicer shall have delivered to the Trustee and the
Certificate Insurer an Opinion of Counsel, stating, in the opinion of such
counsel, either (A) all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary to preserve
and protect the interest of the Trustee in the Trust Property and reciting the
details of the filings or (B) no such action shall be necessary to preserve and
protect such interest.
(b) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Backup Servicer, or (iv)
succeeding to the business of the Backup Servicer, in any of the foregoing cases
shall execute an agreement of assumption to perform every obligation of the
Backup Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this Agreement to the
contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall
be deemed to release the Backup Servicer from any obligation.
Section 9.3. LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND
OTHERS. Neither the Servicer, the Backup Servicer nor any of the directors or
officers or employees or agents of the Servicer or Backup Servicer shall be
under any liability to Atlantic, the Trust or the Certificateholders, except as
provided in this Agreement, for any action taken or for refraining from the
taking of any action pursuant to this Agreement; PROVIDED, HOWEVER, that this
provision shall not protect the Servicer, the Backup Servicer or any such Person
against any liability that would otherwise be imposed by reason of a breach of
this Agreement or willful misfeasance, bad faith or negligence (excluding errors
in judgment) in the performance of duties (including negligence with respect to
the Servicer's indemnification obligations hereunder), by reason of reckless
disregard of obligations and duties under this Agreement or any violation of law
by the Servicer, Backup Servicer or such Person, as the case may be; FURTHER
PROVIDED, that this provision shall not affect any liability to indemnify the
Trustee for costs, taxes, expenses, claims, liabilities, losses or damages paid
by the Trustee in its individual capacity. The Servicer, the Backup Servicer
and any director, officer, employee or agent of the Servicer or Backup Servicer
may rely in good faith on the advice of counsel or on any document of any kind
PRIMA FACIE properly executed and submitted by any Person respecting any matters
arising under this Agreement. The Backup Servicer shall not be
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required to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if the repayment of such funds or adequate written
indemnity against such risk or liability is not reasonably assured to it in
writing prior to the expenditure or risk of such funds or unicorns of financial
liability.
Section 9.4. DELEGATION OF DUTIES. (a) So long as Atlantic is the
Servicer, the Servicer may delegate duties under this Agreement to any
sub-servicer willing to such accept such delegation and to perform such
duties (including any Affiliate of the Servicer) in accordance with the
customary procedures of the Servicer; PROVIDED, HOWEVER, that after the date
of this Agreement the Servicer shall not delegate any material duties
currently performed by Alltel Information Services, Inc. or Atlantic to any
sub-servicer, without the prior written consent of the Certificate Insurer,
the Trustee and the Backup Servicer. Any such delegation or subcontracting
by the Servicer shall not relieve the Servicer of its liability and
responsibility with respect to such duties and shall not constitute a
resignation within the meaning of Section 9.5 hereof. So long as no Insurer
Default shall have occurred and be continuing, neither Atlantic nor any other
party acting as Servicer hereunder shall appoint any sub-servicer hereunder
without the prior written consent of the Certificate Insurer, the Trustee and
the Backup Servicer.
(b) Any such delegation or subcontracting by the Servicer shall be
deemed to be between the Servicer and the sub-servicer alone. The Trustee, the
Trust, the Certificate Insurer and the Certificateholders shall not be deemed
parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to such delegation or subcontracting.
Section 9.5. SERVICER AND BACKUP SERVICER NOT TO RESIGN. Subject to
the provisions of Section 9.2, neither the Servicer nor the Backup Servicer
shall resign from the obligations and duties imposed on it by this Agreement as
Servicer or Backup Servicer except upon a determination that by reason of a
change in legal requirements the performance of its duties under this Agreement
would cause it to be in violation of such legal requirements in a manner which
would result in a material adverse effect on the Servicer or the Backup
Servicer, as the case may be, and the Certificate Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or a Certificate Majority (if
an Insurer Default shall have occurred and be continuing) does not elect to
waive the obligations of the Servicer or the Backup Servicer, as the case may
be, to perform the duties which render it legally unable to act or to delegate
those duties to another Person. Any such determination permitting the
resignation of the Servicer or Backup Servicer shall be evidenced by an Opinion
of Counsel to such effect delivered and acceptable to the Trustee and the
Certificate Insurer (unless an Insurer Default shall have occurred and be
continuing). No resignation of the Servicer shall become effective until, so
long as no Insurer Default shall have occurred and be continuing, the Backup
Servicer or an entity acceptable to the Certificate Insurer shall have assumed
the responsibilities and obligations of the Servicer or, if an Insurer Default
shall have occurred and be continuing, the Backup Servicer or a successor
Servicer that is an Eligible Servicer shall have assumed the responsibilities
and obligations of the Servicer. No resignation of the Backup Servicer shall
become effective until, so long as no Insurer Default shall have occurred and be
continuing, an entity acceptable to the Certificate Insurer shall have assumed
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the responsibilities and obligations of the Backup Servicer or, if an Insurer
Default shall have occurred and be continuing, a Person that is an Eligible
Servicer shall have assumed the responsibilities and obligations of the Backup
Servicer; PROVIDED, HOWEVER, that in the event a successor Backup Servicer is
not appointed within 60 days after the Backup Servicer has given notice of its
resignation as permitted by this Section 9.5, the Backup Servicer may petition a
court for its removal.
ARTICLE X
SERVICER TERMINATION EVENTS
Section 10.1. SERVICER TERMINATION EVENT. For purposes of this
Agreement, each of the following shall constitute a "SERVICER TERMINATION
EVENT":
(a) any failure by the Servicer or, so long as Atlantic or an
Affiliate of Atlantic is the Servicer, the Seller to deliver to the Trustee
for distribution to Certificateholders or deposit in the Spread Account any
proceeds or payment required to be so delivered under the terms of the
Certificates or this Agreement (including deposits of the Purchase Amount
pursuant to Section 3.6 or Section 4.7) that continues unremedied for a
period of two Business Days (one Business Day with respect to payment of
Purchase Amounts) after written notice is received by the Servicer from the
Trustee or (unless an Insurer Default shall have occurred and be
continuing) the Certificate Insurer or after discovery of such failure by a
Responsible Officer of the Servicer (but in no event later than five
Business Days after the Servicer is required to make such delivery or
deposit);
(b) failure by the Servicer to deliver to the Trustee and (so long as
an Insurer Default shall not have occurred and be continuing) to the
Certificate Insurer the Servicer's Certificate required by Section 4.9
within one (1) Business Day after the date such certificate is required to
be delivered;
(c) failure on the part of the Servicer to observe its covenants and
agreements set forth in Section 9.2(a);
(d) failure on the part of the Servicer or, so long as Atlantic or an
Affiliate of Atlantic is the Servicer, the Seller, duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer or, so long as Atlantic or an Affiliate of Atlantic is the
Servicer, the Seller, as the case may be, set forth in the Certificates or
in this Agreement, (or, as to Atlantic, if Atlantic or an Affiliate of
Atlantic is the Servicer, the Receivables Purchase Agreement) which failure
continues unremedied for a period of 30 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Trustee or the Certificate Insurer
(or, if an Insurer Default shall have occurred and be continuing, any
Certificateholder);
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(e) the entry of a decree or order for relief by a court or
regulatory authority having jurisdiction in respect of the Servicer (or, if
Atlantic or an Affiliate of Atlantic is the Servicer, the Seller) in an
involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or another present or future, federal or state, bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Servicer
(or, if Atlantic or an Affiliate of Atlantic is the Servicer, the Seller)
or of any substantial part of their respective properties or ordering the
winding up or liquidation of the affairs of the Servicer (or, if Atlantic
or an Affiliate of Atlantic is the Servicer, the Seller) or the
commencement of an involuntary case under the federal bankruptcy laws, as
now or hereinafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law and such case is not dismissed within
60 days;
(f) the commencement by the Servicer (or, if Atlantic or an Affiliate
of Atlantic is the Servicer, the Seller) of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other
present or future, federal or state, bankruptcy, insolvency or similar law,
or the consent by the Servicer (or, if Atlantic or an Affiliate of Atlantic
is the Servicer, the Seller) to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Servicer (or, if Atlantic or an Affiliate of
Atlantic is the Servicer, the Seller) or of any substantial part of its
property or the making by the Servicer (or, if Atlantic or an Affiliate of
Atlantic is the Servicer, the Seller) of an assignment for the benefit of
creditors or the failure by the Servicer (or, if Atlantic or an Affiliate
of Atlantic is the Servicer, the Seller) generally to pay its debts as such
debts become due or the taking of corporate action by the Servicer (or, if
Atlantic or an Affiliate of Atlantic is the Servicer, the Seller) in
furtherance of any of the foregoing;
(g) any representation, warranty or statement of the Servicer (or, if
Atlantic or an Affiliate of Atlantic is the Servicer, the Seller) made in
this Agreement or any certificate, report or other writing delivered
pursuant hereto shall prove to be incorrect in any material respect as of
the time when the same shall have been made (excluding, however, any
representation or warranty set forth in Section 3.4(a)), and the
incorrectness of such representation, warranty or statement has a material
adverse effect on the Trust and, within 30 days after written notice
thereof shall have been given to the Servicer (or, if Atlantic or an
Affiliate of Atlantic is the Servicer, the Seller) by the Trustee or the
Certificate Insurer (or, if an Insurer Default shall have occurred and be
continuing, a Certificateholder), the circumstances or condition in respect
of which such representation, warranty or statement was incorrect shall not
have been eliminated or otherwise cured;
(h) so long as an Insurer Default shall not have occurred and be
continuing, the Certificate Insurer shall not have delivered a Servicer
Extension Notice pursuant to Section 4.14;
(i) so long as an Insurer Default shall not have occurred and be
continuing, (x) an Insurance Agreement Event of Default shall have occurred
or (y) an Insurance
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Agreement Event of Default with respect to another Series (as defined in
the Insurance Agreement) shall have occurred;
(j) if the Certificate Insurer shall request that the Servicer
terminate the Lockbox Agreement and establish a new Lockbox Agreement and
the Servicer fails to promptly expedite such new Lockbox Agreement and
within 30 days after written notice thereof shall have been given to the
Servicer by the Certificate Insurer, the new Lockbox Agreement shall not
have been established; or
(k) a claim is made under the Policy.
Section 10.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT. If a
Servicer Termination Event shall occur and be continuing, so long as no Insurer
Default shall have occurred and be continuing, the Certificate Insurer (or, if
an Insurer Default shall have occurred and be continuing, any of the Trustee or
the Holders of Certificates evidencing not less than a Certificate Majority), by
notice given in writing to the Servicer (and to the Trustee if given by the
Certificate Insurer or the Certificateholders) may terminate all of the rights
and obligations of the Servicer under this Agreement. On or after the receipt
by the Servicer of such written notice, or, if the Certificate Insurer shall not
have delivered a Servicer Extension Notice pursuant to Section 4.14, all
authority, power, obligations and responsibilities of the Servicer under this
Agreement, whether with respect to the Certificates or the Trust Property or
otherwise, automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer or such other successor servicer
selected by the Certificate Insurer pursuant to Section 10.3(b); PROVIDED,
HOWEVER, that the Backup Servicer or any other successor servicer shall have no
liability with respect to any obligation which was required to be performed by
the prior Servicer prior to the date that the Backup Servicer or any other
successor servicer becomes the Servicer or any claim of a third party based on
any alleged action or inaction of the prior Servicer. Each successor servicer
is authorized and empowered by this Agreement to execute and deliver, on behalf,
and at the expense of, of the prior Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Receivables
and the other Trust Property and related documents to show the Trustee as lien
holder or secured party on the related Lien Certificates, or otherwise. The
prior Servicer agrees to cooperate with the Backup Servicer or any other
successor servicer in effecting the termination of the responsibilities and
rights of the prior Servicer under this Agreement, including, without
limitation, the transfer to the Backup Servicer or any other successor servicer
for administration by it of all cash amounts that shall at the time be held by
the prior Servicer for deposit, or have been deposited by the prior Servicer, in
the Collection Account or thereafter received with respect to the Receivables
and the delivery to the Backup Servicer or any other successor servicer of all
Receivable Files, Monthly Records and Collection Records and a computer tape in
readable form containing all information necessary to enable the Backup Servicer
or a successor Servicer to service the Receivables and the other Trust Property.
If requested by the Certificate Insurer (unless an Insurer Default shall have
occurred and be continuing), the Backup Servicer or successor Servicer shall
terminate the Lockbox Agreement and direct the Obligors to make all payments
under the Receivables
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directly to the Servicer (in which event the Servicer shall process such
payments in accordance with Section 4.2(e)), or to a lock box established by the
Servicer at the direction of the Certificate Insurer (unless an Insurer Default
shall have occurred and be continuing), at the Servicer's expense. The Trustee
and the Backup Servicer may set off and deduct any amounts owed by the
terminated Servicer from any amounts payable to the terminated Servicer pursuant
to the preceding sentence. The terminated Servicer shall grant the Trustee, the
Backup Servicer and the Certificate Insurer reasonable access to the terminated
Servicer's premises at the Servicer's expense.
Section 10.3. APPOINTMENT OF SUCCESSOR. (a) On and after (i) the
time the Servicer receives a notice of termination pursuant to Section 10.2 or
(ii) upon the resignation of the Servicer pursuant to Section 9.5 or (iii) the
receipt by the Backup Servicer (or any alternate successor Servicer appointed by
the Certificate Insurer pursuant to Section 10.3(b)), of written notice from the
Certificate Insurer that the Certificate Insurer is not extending the Servicer's
term pursuant to Section 4.14, the Backup Servicer shall be the successor in all
respects to the Servicer in its capacity as servicer under this Agreement and
the transactions set forth or provided for in this Agreement, and shall be
subject to all the responsibilities, restrictions, duties, liabilities and
termination provisions relating thereto placed on the Servicer by the terms and
provisions of this Agreement; PROVIDED, HOWEVER that the Backup Servicer shall
not be liable for any acts, omissions or obligations of the Servicer prior to
such succession or for any breach by the Servicer of any of its representations
and warranties contained in this Agreement or in any related document or
agreement. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
If a successor Servicer is acting as Servicer hereunder, it shall be subject to
termination under Section 10.2 upon the occurrence of any Servicer Termination
Event applicable to it as Servicer.
(b) The Certificate Insurer may (so long as an Insurer Default shall
not have occurred and be continuing) exercise at any time its right to appoint
as Backup Servicer or as successor to the Servicer, a Person other than the
Person serving as Backup Servicer at the time, and (without limiting its
obligations under the Policy) shall have no liability to the Trustee, Atlantic,
the Seller, the Person then serving as Backup Servicer, any Certificateholder or
any other Person if it does so. Notwithstanding the above, if the Backup
Servicer shall be legally unable or unwilling to act as Servicer and an Insurer
Default shall have occurred and be continuing, the Backup Servicer, the Trustee
or a Certificate Majority may petition a court of competent jurisdiction to
appoint any Eligible Servicer as the successor to the Servicer. Pending such
appointment, the Backup Servicer shall act as successor Servicer unless it is
legally unable to do so, in which event the outgoing Servicer shall continue to
act as Servicer until a successor has been appointed and accepted such
appointment. Subject to Section 9.5, no provision of this Agreement shall be
construed as relieving the Backup Servicer of its obligation to succeed as
successor Servicer upon the termination of the Servicer pursuant to Section 10.2
or the resignation of the Servicer pursuant to Section 9.5. If upon the
termination of the Servicer pursuant to Section 10.2 or the resignation of the
Servicer pursuant to Section 9.5, the Certificate Insurer appoints a successor
Servicer other than the Backup Servicer, the Backup Servicer shall not be
relieved of its duties as Backup Servicer hereunder.
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(c) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under the Agreement if the Servicer had not resigned
or been terminated hereunder. If any successor Servicer is appointed for any
reason, the Certificate Insurer and such successor Servicer may agree on
additional compensation to be paid to such successor Servicer, which additional
compensation shall be payable out of funds on deposit in the Spread Account. In
addition, any successor Servicer shall be entitled, out of funds in the Spread
Account, to reasonable transition expenses incurred in acting as successor
Servicer.
Section 10.4. NOTIFICATION TO CERTIFICATEHOLDERS. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to this
Article X, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register and to each Rating Agency.
Section 10.5. WAIVER OF PAST DEFAULTS. So long as no Insurer Default
shall have occurred and be continuing, the Certificate Insurer (or, if an
Insurer Default shall have occurred and be continuing, a Certificate Majority)
may, on behalf of all Holders of Certificates, waive any default by the Servicer
in the performance of its obligations hereunder and its consequences. Upon any
such waiver of a past default, such default shall cease to exist, and any
Servicer Termination Event arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
ARTICLE XI
THE TRUSTEE
Section 11.1. DUTIES OF TRUSTEE. (a) Subject to paragraph (c) of
this Section 11.1, the Trustee, both prior to and after the occurrence of a
Servicer Termination Event, undertakes to perform as Trustee such duties and
only such duties as are specifically set forth in this Agreement.
(b) The Trustee, upon receipt of any resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that are specifically required to be furnished pursuant to any
provisions of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act (other than errors in judgment) or its own bad faith or willful
misfeasance; PROVIDED, HOWEVER, that:
(i) the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Agreement, the Trustee shall not
be liable except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement
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against the Trustee and, in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Agreement;
(ii) the Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer of the Trustee, unless it shall be
proven that the Trustee was negligent in performing its duties in
accordance with the terms of this Agreement;
(iii) the Trustee shall not be liable for any action taken, suffered
or omitted to be taken by it in good faith and reasonably believed by it to
be authorized or within the discretion or rights or powers conferred upon
it by this Agreement; and
(iv) the Trustee shall not be liable for any action it takes or omits
to take in good faith at the direction of the Certificate Insurer (or,
after an Insurer Default shall have occurred and be continuing, a
Certificate Majority); PROVIDED THAT the Trustee shall not be authorized
hereunder to comply with any direction which is not authorized by the terms
of this Agreement.
(d) Notwithstanding any other provision of this Agreement, the
Trustee shall not be required to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties under this
Agreement, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement except during such time,
if any, as the Backup Servicer shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement.
(e) The Trustee shall not be charged with knowledge of any failure by
the Servicer to comply with the obligations of the Servicer referred to in this
Agreement, or of any failure by the Seller to comply with the obligations of the
Seller referred to in this Agreement, unless a Trustee officer obtains actual
knowledge of such failure (it being understood that knowledge of the Servicer is
not attributable to the Trustee unless the Trustee has become the successor
servicer) or the Trustee receives written notice of such failure from the
Servicer or the Seller, as the case may be, or the Certificate Insurer (or, if
an Insurer Default shall have occurred and be continuing, the Holders of
Certificates evidencing not less than 25% of the sum of the Class A Certificate
Balance and the Class B Certificate Balance, or, if there are no Class A
Certificates then outstanding, by Holders of Class B Certificates evidencing not
less than 25% of the Class B Certificate Balance).
(f) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the security interests
created or existing under any Receivable or Financed Vehicle or to impair the
value of any Receivable or Financed Vehicle.
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Section 11.2. TRUSTEE'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES AND
WARRANTY RECEIVABLES. With respect to all Administrative Receivables and all
Warranty Receivables purchased by the Servicer, the Seller or Atlantic, the
Trustee shall take any and all actions reasonably requested by the Seller,
Atlantic or Servicer, at the expense of the Person whose obligation was to
repurchase the Administrative Receivable or Warranty Receivables, as the case
may be, to assign, without recourse, representation or warranty, to the Seller,
Atlantic or the Servicer, as applicable, including, without limitation, all the
items conveyed to the Trustee pursuant to Section 3.1(a) with respect to such
purchased Receivable, all moneys due thereon, the security interests in the
related Financed Vehicles, proceeds from any Insurance Policies, proceeds from
recourse against Dealers on such Receivables and the interests of the Trust in
certain rebates of premiums and other amounts relating to the Insurance Policies
and any documents relating thereto, such assignment being an assignment outright
and not for security; and the Seller, Atlantic or the Servicer, as applicable,
shall thereupon own such Receivable, and all such security and documents, free
of any further obligation to the Trustee or the Certificateholders with respect
thereto. Each of the Servicer, the Trustee and the Seller shall cooperate with
respect to the orderly transfer of the servicing to the party purchasing the
Administrative Receivable or Warranty Receivable, as the case may be, hereunder,
and each of the Servicer, the Trustee and the Seller shall cooperate with such
party to ensure that the purchasing party is subrogated to the rights of each
such Person with respect to such Receivable.
Section 11.3. CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as
otherwise provided in Section 11.1(c):
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) the Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of any
action taken or suffered or omitted by it under this Agreement in good
faith and in accordance with such Opinion of Counsel;
(c) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation under this Agreement or in relation to this
Agreement, at the request, order or direction of any of the
Certificateholders or the Certificate Insurer, pursuant to the provisions
of this Agreement, unless such Certificateholders or the Certificate
Insurer shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities that may be incurred therein or
thereby; PROVIDED, HOWEVER, that the Trustee shall, upon the occurrence of
a Servicer Termination Event (that has not been cured), exercise the rights
and powers vested in it by this Agreement with reasonable care and skill;
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(d) the Trustee shall not be bound to make any investigation into the
facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing to do so by
the Certificate Insurer or (if an Insurer Event of Default shall have
occurred and be continuing) by Holders of Certificates evidencing not less
than 25% of the sum of the Class A Certificate Balance and the Class B
Certificate Balance, or, if there are no Class A Certificates then
outstanding, by Holders of Class B Certificates evidencing not less than
25% of the Class B Certificate Balance; PROVIDED, HOWEVER, that if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation
is, in the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of this Agreement, the Trustee may
require reasonable indemnity against such cost, expense or liability as a
condition to so proceeding; the reasonable expense of every such
examination shall be paid by the Person making such request or, if paid by
the Trustee, shall be reimbursed by the Person making such request upon
demand;
(e) the Trustee may execute any of the trusts or powers under this
Agreement or perform any duties under this Agreement ether directly or by
or through agents or attorneys or custodians. The Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by the Trustee. The Trustee shall not be
responsible for any misconduct or negligence attributable to the acts or
omissions of the Servicer;
(f) the Trustee may rely, as to factual matters relating to the
Seller or the Servicer, on an Officer's Certificate of a Responsible
Officer of the Seller or Servicer, respectively; and
(g) the Trustee shall not be required to take any action or refrain
from taking any action under this Agreement, or any Related Document
referred to herein, nor shall any provision of this Agreement, or any such
Related Document be deemed to impose a duty on the Trustee to take action,
if the Trustee shall have been advised by counsel that such action is
contrary to the terms of this Agreement, or any Related Document or is
contrary to law.
Section 11.4. TRUSTEE NOT LIABLE FOR CERTIFICATES OR RECEIVABLES.
The Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the authentication of the
Certificates) or of any Receivable or Related Document, except to the extent
otherwise expressly provided herein. The Trustee shall at no time (except
during such time, if any, as it is acting as successor Servicer) have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any security interest in any Financed Vehicle or any
Receivable, or the perfection and priority of such a security interest or the
maintenance of any such perfection and priority, or for or with respect to the
efficiency of the Trust or its ability to generate the payments to be
distributed to Certificateholders under this Agreement, including, without
limitation, the existence, condition, location and ownership of any Financed
Vehicle; the existence and enforceability of
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any insurance thereon; the existence of any Receivable or any computer or other
record thereof (it being understood that the Trustee has not reviewed and does
not intend to review such matters, the sole responsibility for such review being
vested in the Seller and the Servicer as applicable); the completeness of any
Receivable; the receipt by the Servicer of any Receivable; the performance or
enforcement of any Receivable; the compliance by the Seller and the Servicer
with any covenant or the breach by the Seller and the Servicer of any warranty
or representation made under this Agreement or in any related document and the
accuracy of any such warranty or representation prior to the Trustee's receipt
of notice or other discovery of any noncompliance therewith or any breach
thereof, any investment of moneys by or at the direction of the Servicer or any
loss resulting therefrom (it being understood, however, that the Trustee shall
remain responsible for any Trust Property that it may hold directly); the acts
or omissions of the Seller, the Servicer or any Obligor; any action of the
Servicer taken in the name of the Trustee; the accuracy, content or completeness
of any offering documents used in connection with the sale of the Certificates
or any action by the Trustee taken at the instruction of the Servicer, the
Seller, the Certificate Insurer or the Certificateholders holding the requisite
percentage of Certificates; PROVIDED, HOWEVER, that the foregoing shall not
relieve the Trustee of its obligation to perform its duties under this
Agreement, whether as Trustee or as Backup Servicer. The Trustee shall not be
accountable for the use or application by the Seller of any of the Certificates
or of the proceeds of such Certificates, or for the use or application of any
funds paid to the Servicer in respect of the Receivables prior to the time such
funds are deposited in the Collection Account.
Section 11.5. TRUSTEE MAY OWN CERTIFICATES. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights as it would have if it were not Trustee and may deal with
the Seller and the Servicer in banking transactions with the same rights as it
would have if it were not Trustee.
Section 11.6. TRUSTEE'S FEES AND EXPENSES; INDEMNIFICATION. The
Servicer in a separate agreement (the "FEE LETTER") has covenanted and agreed to
pay to the Trustee, and the Trustee shall be entitled to, certain annual and
activity fees (the "ANNUAL TRUSTEE'S FEE") (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services, including services as Backup Servicer, rendered by it in the
execution of the trusts created by this Agreement and in the exercise and
performance of any of the powers and duties under this Agreement of the Trustee.
To the extent not covered by Article IX, the Seller and the Servicer shall
indemnify, defend, and hold harmless the Trustee and the Backup Servicer from
and against all costs, expenses, losses, claims, damages and liabilities arising
out of or incurred in connection with the acceptance of the performance of the
trusts and duties contained in this Agreement, except to the extent that such
cost, expense, loss, claim, damage or liability is due to the bad faith or gross
negligence (except for errors in judgment) of the Trustee or the Backup
Servicer, respectively. In addition, the Servicer in Section 9.1 has agreed to
indemnify the Trustee with respect to certain matters, and the
Certificateholders in their individual capacity under Section 11.3(c) or (d) may
agree to indemnify the Trustee under certain circumstances. The provisions of
this Section 11.6 shall (i) not be in limitation of the Fee Letter entered into
in connection with this Agreement between the Servicer and the Trustee, (ii)
shall not terminate or be deemed released upon the
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resignation or termination of Atlantic as the Servicer and (iii) shall survive
any termination of this Agreement.
Section 11.7. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee
under this Agreement shall at all times be a corporation duly organized and
validly existing under the laws of its jurisdiction of incorporation authorized
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $50,000,000 and subject to supervision or examination by
federal or state authority, and (so long as an Insurer Default shall not have
occurred and be continuing) satisfactory to the Certificate Insurer, and at all
times (if each of Moody's and Standard & Poor's then has a rating outstanding on
the Certificates) with a long-term debt rating from Moody's of "Baa3" or higher
or otherwise acceptable to Moody's and a long-term debt rating from Standard &
Poor's of "BBB" or higher or otherwise acceptable to Standard & Poor's. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purpose of this Section 11.7, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 11.7, the Trustee shall resign immediately in the manner and with the
effect specified in Section 11.8.
Section 11.8. RESIGNATION OR REMOVAL OF TRUSTEE. (a) Subject to the
provisions of subsection (c) of this Section 11.8, the Trustee may at any time
resign and be discharged from the trusts created by this Agreement by giving
written notice thereof to the Servicer. Upon receiving such notice of
resignation, the Servicer, with the consent of the Certificate Insurer (unless
an Insurer Default shall have occurred and be continuing), shall promptly
appoint a successor Trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the resigning Trustee and one copy to the
successor Trustee. If no successor Trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the Certificate Insurer may appoint a successor Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee. If no successor Trustee shall have been so appointed and
have accepted appointment within 60 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 11.8 and shall fail to resign
after written request therefor by the Servicer, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent or
a receiver of the Trustee or of its property shall be appointed or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Servicer or (so long as an Insurer Default shall not have occurred and be
continuing) the Certificate Insurer may remove the Trustee. If the Trustee is
removed under the authority of the immediately preceding sentence, the Servicer
or the Certificate Insurer, as the case may be, shall promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee. The Servicer shall
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also pay all fees due and owing to the outgoing Trustee. Any successor trustee
shall (so long as an Insurer Default shall not have occurred and be continuing)
be acceptable to the Certificate Insurer.
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 11.8 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 11.9.
(d) If the Trustee and the Backup Servicer shall be the same Person
and the rights and obligations of the Backup Servicer shall have been terminated
pursuant to Section 10.2, then the Certificate Insurer (or, if an Insurer
Default shall have occurred and be continuing, a Certificate Majority) shall
have the option, by 60 days' prior notice in writing to the Seller, the Servicer
and the Trustee, to remove the Trustee, and the Certificate Insurer shall not
have any liability to the Trustee, Atlantic, the Seller, the Servicer or any
Certificateholder in connection with such removal.
Section 11.9. SUCCESSOR TRUSTEE. (a) Any successor Trustee appointed
as provided in Section 11.8 shall execute, acknowledge and deliver to the
Servicer and the Certificate Insurer, and to its predecessor Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor trustee, without any further act, deed or conveyance (except as
provided below), shall become fully vested with all the rights, powers, duties
and obligations of its predecessor under this Agreement, with like effect as if
originally named as Trustee; but, on request of the Servicer and the Certificate
Insurer, or the successor trustee, such predecessor Trustee shall, upon payment
of its charges then unpaid, execute and deliver an instrument transferring to
such successor trustee all of the rights, powers and trusts of the Trustee so
ceasing to act, and shall duly assign, transfer and deliver to such successor
trustee all property and money held by such trustee so ceasing to act hereunder.
Upon request of any such successor trustee, the Seller, on behalf of the Trust,
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor trustee all such rights, powers and trusts.
The predecessor Trustee shall deliver to the successor Trustee all documents and
statements held by it under this Agreement or any Related Document; and the
predecessor Trustee and the other parties to the Related Documents shall amend
any Related Document to make the successor Trustee the successor to the
predecessor Trustee thereunder; and the Servicer and the predecessor Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Trustee all such rights, powers, duties and obligations. No successor
Trustee shall accept appointment as provided in this Section 11.9 unless at the
time of such acceptance such successor Trustee shall be eligible under the
provisions of Section 11.7. Upon acceptance of appointment by a successor
Trustee as provided in this Section 11.9, the Seller shall mail notice by
first-class mail of the successor of such Trustee and the address of the
successor Trustee's corporate trust office under this Agreement to each Rating
Agency, the Certificate Insurer and all Holders of Certificates at their
addresses as shown in the Certificate Register. If the Seller fails to mail
such notice within 10 days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Seller.
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Section 11.10. MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation
into which the Trustee may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Trustee
shall be a party, or any corporation succeeding to the business of the Trustee,
shall be the successor of the Trustee under this Agreement, provided such
corporation shall be eligible under the provisions of Section 11.7, without the
execution or filing of any instrument or any further act on the part of any of
the parties to this Agreement, anything in this Agreement to the contrary
notwithstanding. The Trustee or its successor hereunder shall provide the
Servicer and the Certificate Insurer with prompt notice of any such transaction.
Section 11.11. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Property or any Financed Vehicle may at the time be located, the
Trustee, with the consent of the Servicer not to be unreasonably withheld, and
(so long as an Insurer Default shall not have occurred and be continuing) the
Certificate Insurer, shall have the power and may execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as
co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust Property, and to vest in such
Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust Property, or any part thereof, and,
subject to the other provisions of this Section 11.11, such powers, duties,
obligations, rights and trusts as the Servicer, the Trustee and (so long as an
Insurer Default shall not have occurred and be continuing) the Certificate
Insurer may consider necessary or desirable. If the Servicer shall not have
consented to such appointment within 15 days after the receipt by it of a
request to do so, or if a Servicer Termination Event shall have occurred and be
continuing, the consent of the Servicer shall not be required. No co-trustee or
separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee under Section 11.7 and no notice to
Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 11.9. Every separate trustee and co-trustee
shall, to the extent permitted by law, be appointed and act subject to the
following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed by the Trustee, the Trustee
shall be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the holding of
title to the Trust Property or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
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(iii) the Servicer, the Trustee and, provided no Insurer Default
shall have occurred and be continuing, the Certificate Insurer acting
jointly may at any time accept the resignation of or remove any separate
trustee or co-trustee.
(b) Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee and a
copy thereof given to the Servicer.
(c) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 11.12. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. Each of
the Trustee and Backup Servicer represents and warrants as of the date of this
Agreement that:
(a) it is either (i) a banking corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation or (ii) a national banking association duly organized,
validly existing and in good standing under the laws of the United States
of America;
(b) it has full power, authority and legal right to execute, deliver
and perform this Agreement, and has taken all necessary action to authorize
the execution, delivery and performance by it of this Agreement;
(c) the execution, delivery and performance by it of this Agreement
(i) do not violate any provision of any law or regulation governing the
banking and trust powers of it or any order, writ, judgment, or decree of
any court, arbitrator, or governmental authority applicable to it or any of
its assets, (ii) do not violate any provision of its corporate charter or
by-laws, or (iii) to the best of its knowledge do not violate any provision
of, or constitute, with or without notice or lapse of time, a default
under, or result in the creation or imposition of any lien on any of the
Trust Property pursuant to the provisions of any mortgage, indenture,
contract, agreement or other undertaking other than this Agreement to which
it is a party;
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(d) the execution, delivery and performance by it of this Agreement
do not require the authorization, consent or approval of, the giving of
notice to, the filing or registration with, or the taking of any other
action in respect of, any governmental authority or agency regulating its
banking and corporate trust activities;
(e) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding agreement of it, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of rights of creditors of federally-insured depository
institutions and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law;
(f) Trustee does not have actual knowledge that any Receivable is
subject to a security interest; and
(g) Trustee hereby covenants and agrees to obtain the prior written
consent of the Certificate Insurer before taking any action under the
Custody Agreement.
Section 11.13. TAX RETURNS. In the event the Trust shall be required
to file tax returns, the Servicer shall prepare or shall cause to be prepared
any tax returns required to be filed by the Trust and shall remit such returns
to the Trustee for signature at least five Business Days before such returns are
due to be filed. The Trustee, upon request, shall furnish the Servicer with all
such information known to the Trustee as may be reasonably required in
connection with the preparation of all tax returns of the Trust, and shall
execute such returns and cause such returns to be filed on or prior to the date
on which such returns are due.
Section 11.14. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
Section 11.15. SUIT FOR ENFORCEMENT. If a Servicer Termination Event
shall occur and be continuing, the Trustee, in its discretion may (but shall
have no duty or obligation so to proceed), subject to the provisions of Section
11.1, proceed to protect and enforce its rights and the rights of the
Certificateholders under this Agreement by a suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the execution of
any power granted in this Agreement or for the enforcement of any other legal,
equitable or other remedy as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee or the
Certificateholders.
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Section 11.16. RIGHTS TO DIRECT TRUSTEE. Subject to Section 11.3(c),
the Certificate Insurer (or, if an Insurer Default shall have occurred and be
continuing, a Certificate Majority) shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; PROVIDED,
HOWEVER, that subject to Section 11.1, the Trustee shall have the right to
decline to follow any such direction if the Trustee being advised by counsel
determines that the action so directed may not lawfully be taken, or if the
Trustee in good faith shall, by a Responsible Officer, determine that the
proceedings so directed would be in violation of this Agreement or any of the
Related Documents or would subject it to personal liability against which it has
not been provided reasonable indemnity or (in the case of directions provided by
a Certificate Majority) be unduly prejudicial to the rights of
Certificateholders not parties to such direction; and provided further that
nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with such
direction by the Certificate Insurer or the Certificateholders.
ARTICLE XII
TERMINATION
Section 12.1. TERMINATION OF THE TRUST. (a) The respective
obligations and responsibilities of the Seller, the Servicer and the Trustee
created by this Agreement and the Trust created by this Agreement shall
terminate upon the latest of (i) the maturity or other liquidation of the last
Receivable (including the purchase as of any Record Date by the Seller or the
Servicer at its option of the corpus of the Trust as described in Section 12.2)
and the subsequent distribution to Certificateholders pursuant to Section 5.5 of
the amount required to be deposited pursuant to Section 12.2 or (ii) the payment
to Certificateholders of all amounts required to be paid to them pursuant to
this Agreement and the payment to the Certificate Insurer of all amounts payable
or reimbursable to it pursuant to this Agreement and the Insurance Agreement.
In either case, there shall be delivered to the Trustee and the Certificate
Insurer an Opinion of Counsel that all applicable preference periods under
federal, state and local bankruptcy insolvency and similar laws have expired
with respect to the payments pursuant to clause (ii); PROVIDED, HOWEVER, that in
no event shall the trust created by this Agreement continue beyond the
expiration of 21 years from the death of the last survivor of the descendants
living on the date of this Agreement of Rose Kennedy of the Commonwealth of
Massachusetts; and provided, further, that the rights to indemnification under
Sections 9.1 and 11.6 shall survive the termination of the Trust. The Servicer
shall promptly notify the Trustee and the Certificate Insurer of any prospective
termination pursuant to this Section 12.1.
(b) Notice of any final distribution, specifying the Distribution
Date upon which the Certificateholders may surrender their Certificates to the
Trustee for payment of the final distribution and retirement of the
Certificates, shall be given promptly by the Trustee by letter to
Certificateholders mailed not earlier than the 1st day and not later than the
10th day of the month of such final distribution specifying (i) the Distribution
Date upon which final
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payment of the Certificates shall be made upon presentation and surrender of
Certificates at the office of the Trustee therein specified, (ii) the amount of
any such final payment, and (iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Trustee
therein specified. The Trustee shall give such notice to the Certificate
Registrar and a copy of such notice to the Certificate Insurer at the time such
notice is given to Certificateholders. In the event such notice is given, the
Servicer or the Trustee, as the case may be, shall make deposits into the
Collection Account in accordance with Section 5.4, or, in the case of an
optional purchase of Receivables pursuant to Section 12.2, shall deposit the
amount specified in Section 12.2. Upon presentation and surrender of the
Certificates, the Trustee shall cause to be distributed to Certificateholders
amounts distributable on such Distribution Date pursuant to Section 5.5.
(c) In the event that all of the Certificateholders shall not
surrender their Certificates for retirement within six months after the date
specified in the above mentioned written notice, the Trustee shall have a second
written notice to the remaining Certificateholders to surrender their
Certificates for retirement and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for retirement, the Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of their Certificates, and the
cost thereof shall be paid out of the funds and other assets that remain subject
to this Agreement. As soon as practicable after the termination of the Trust,
the Trustee shall surrender the Policy to the Certificate Insurer for
cancellation.
Section 12.2. OPTIONAL PURCHASE OF ALL RECEIVABLES. On each
Determination Date as of which the Aggregate Principal Balance is less than 10%
of the Aggregate Principal Balance as of the Cut-off Date, the Servicer and the
Seller each shall have the option to purchase the corpus of the Trust (with the
consent of the Certificate Insurer, if such purchase would result in a claim on
the Policy or would result in any amount owing to the Certificate Insurer
remaining unpaid). To exercise such option, the Servicer or the Seller, as the
case may be, shall pay the aggregate Purchase Amounts for the Receivables, plus
the appraised value of any other property (including the right to receive any
future recoveries) held as part of the Trust, such appraisal to be conducted by
an appraiser mutually agreed upon by the Servicer or the Seller, as the case may
be, and the Certificate Insurer (or the Trustee, if an Insurer Default shall
have occurred and be continuing), and shall succeed to all interests in and to
the Trust Property. The fees and expenses related to such appraisal shall be
paid by the party exercising the option to purchase.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1. AMENDMENT. (a) This Agreement may be amended by the
Seller, the Servicer and the Trustee, with the prior written consent of the
Certificate Insurer (so long
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as an Insurer Default shall not have occurred and be continuing) but without the
consent of any of the Certificateholders, (i) to cure any ambiguity or (ii) to
correct or supplement any provisions in this Agreement; PROVIDED, HOWEVER, that
such action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of the Certificateholders; PROVIDED,
FURTHER, that if an Insurer Default has occurred and is continuing, such action
shall not amend, modify or limit the Certificate Insurer's rights under (i)
Section 5.5(a), (ii) any rights to indemnification to which the Certificate
Insurer is entitled hereunder or (iii) any defined terms used in preceding
clause (i) or (ii).
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer and the Trustee with the prior written consent of the
Certificate Insurer (so long as an Insurer Default shall not have occurred and
be continuing) and with the consent of a Certificate Majority (which consent of
any Holder of a Certificate given pursuant to this Section 13.1(b) or pursuant
to any other provision of this Agreement shall be conclusive and binding on such
Holder and on all future Holders of such Certificate and of any Certificate
issued upon the transfer thereof or in exchange thereof or in lieu thereof
whether or not notation of such consent is made upon the Certificate) for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement, or of modifying in any manner the rights of
the Holders of Certificates; PROVIDED, HOWEVER, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions that shall be
required to be made on any Certificate or the Class A Pass-Through Rate or the
Class B Pass-Through Rate or (b) reduce the aforesaid percentage required to
consent to any such amendment or any waiver hereunder, without the consent of
the Holders of all Certificates then outstanding, PROVIDED, FURTHER, that if an
Insurer Default has occurred and is continuing, such action shall not amend,
modify or limit the Certificate Insurer's rights under (i) Section 5.5(a), (ii)
any rights to indemnification to which the Certificate Insurer is entitled
hereunder or (iii) any defined terms used in preceding clause (i) or (ii).
(c) Prior to the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment or
consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder.
(e) It shall not be necessary for the consent of Certificateholders
pursuant to Section 13.1(b) to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents (and any other
consents of Certificateholders provided for in this Agreement) and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe, including
the establishment of record dates.
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(f) Prior to the execution of any amendment to this Agreement, the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement, in addition to the Opinion of Counsel referred to in Section 13.2(i).
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Agreement or otherwise.
Section 13.2. PROTECTION OF TITLE TO TRUST. (a) The Seller or the
Servicer or both shall execute and file such financing statements and cause to
be executed and filed such continuation and other statements, all in such manner
and in such places as may be required by law fully to preserve, maintain and
protect the interest of the Trust, the Trustee and the Certificate Insurer under
this Agreement in the Trust Property and in the proceeds thereof. The Seller or
the Servicer or both shall deliver (or cause to be delivered) to the Trustee and
the Certificate Insurer file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed by the Seller in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Trustee and the
Certificate Insurer (so long as an Insurer Default shall not have occurred and
be continuing) at least 60 days prior written notice thereof, and shall promptly
file appropriate amendments to all previously filed financing statements and
continuation statements.
(c) Each of the Seller and the Servicer shall give the Trustee and
the Certificate Insurer at least 60 days prior written notice of any relocation
of its principal executive office if, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement. The Servicer shall at all times maintain each office from which it
services Receivables and its principal executive office within the United States
of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale under this Agreement of the Receivables to the
Trustee, the Servicer's master computer records (including any backup archives)
that refer to any Receivable indicate clearly (with reference to the particular
grantor trust) that the Receivable is owned by the Trust. Indication of the
Trust's ownership of a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, the Receivable has been paid in
full or repurchased by Atlantic, the Seller or the Servicer.
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(f) If at any time the Seller or the Servicer proposes to sell, grant
a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they refer in any manner whatsoever to any Receivable,
indicate clearly that such Receivable has been sold and is owned by the Trust
unless such Receivable has been paid in full or repurchased by Atlantic, the
Seller or the Servicer.
(g) The Servicer shall permit the Trustee, the Backup Servicer, the
Certificate Insurer, the Seller and their respective agents, at any time to
inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Receivables or any other portion of the Trust Property.
(h) The Servicer shall furnish to the Trustee, the Backup Servicer,
the Seller and the Certificate Insurer at any time upon request a list of all
Receivables then held as part of the Trust, together with a reconciliation of
such list to the Schedule of Receivables and to each of the Servicer's
Certificates furnished before such request indicating removal of Receivables
from the Trust. The Trustee shall hold any such list and Schedule of
Receivables for examination by interested parties during normal business hours
at the Corporate Trust Office upon reasonable notice by such Persons of their
desire to conduct an examination.
(i) The Seller and the Servicer shall deliver to the Trustee and the
Certificate Insurer simultaneously with the execution and delivery of this
Agreement and of each amendment thereto and upon the occurrence of the events
giving rise to an obligation to give notice pursuant to Section 13.2(b) or (c),
an Opinion of Counsel (a) stating that, in the opinion of such Counsel, all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the interest of the Trustee in
the Receivables and the other Trust Property, and reciting the details of such
filing or referring to prior Opinions of Counsel in which such details are
given, (b) stating that, in the opinion of such counsel, no such action is
necessary to preserve and protect such interest, or (c) stating in the opinion
of such counsel, any action which is necessary to preserve and protect such
interest during the following 12-month period.
(j) The Servicer shall deliver to the Trustee and the Certificate
Insurer, within 90 days after the beginning of each calendar year beginning with
the first calendar year beginning more than three months after the Closing Date,
an Opinion of Counsel, either (a) stating that, in the opinion of such counsel,
all financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or (b)
stating that, in the opinion of such counsel, no action shall be necessary to
preserve and protect such interest.
Section 13.3. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. (a) The
death or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the
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Trust, nor otherwise affect the rights, obligations and liabilities of the
parties to this Agreement or any of them.
(b) No Certificateholder shall have any right to vote (except as
provided in this Section 13.3 or Section 10.2, 10.5 or 13.1) or in any manner
otherwise control the operation and management of the Trust, or the obligations
of the parties to this Agreement, nor shall anything set forth in this
Agreement, or contained in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
person by reason of any action taken by the parties to this Agreement pursuant
to any provision of this Agreement or any Related Document.
(c) So long as no Insurer Default has occurred and is continuing,
except as otherwise specifically provided herein, whenever Class A
Certificateholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Class A Certificateholders if the
Certificate Insurer agrees to take such action or give such consent or approval.
If an Insurer Default shall have occurred and is continuing, no
Certificateholder shall have any right by virtue or by availing itself of any
provisions of this Agreement to institute any suit, action, or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as provided in this Agreement and unless also
the Holders of Certificates evidencing not less than 25% of the sum of the Class
A Certificate Balance and the Class B Certificate Balance, or, if there are no
Class A Certificates then outstanding, by Holders of Class B Certificates
evidencing not less than 25% of the Class B Certificate Balance shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee under this Agreement and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 30 days
after its receipt of such notice, request, and offer of indemnity, shall have
neglected or refused to institute any such action, suit, or proceeding and
during such 30-day period, no request or waiver inconsistent with such written
request has been given to the Trustee pursuant to and in compliance with this
Section 13.3 or Section 10.5; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb, or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder, or to enforce
any right under this Agreement, except in the manner provided in this Agreement
and for the equal, ratable, and common benefit of all Certificateholders. For
the protection and enforcement of the provisions of this Section 13.3, each and
every Certificateholder and the Trustee shall be entitled to such relief as can
be given either at law or in equity. Nothing in this Agreement shall be
construed as giving the Certificateholders any right to make a claim under the
Policy.
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Section 13.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
Section 13.5. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
Section 13.6. ASSIGNMENT. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in Section 8.2 or Section 9.2
and as provided in the provisions of the Agreement concerning the resignation of
the Servicer and the Backup Servicer, this Agreement may not be assigned by
Atlantic, the Seller or the Servicer without the prior written consent of the
Trustee and the Certificate Insurer (or, if an Insurer Default shall have
occurred and be continuing the Trustee and a Certificate Majority).
Section 13.7. CERTIFICATES NONASSESSABLE AND FULLY PAID.
Certificateholders shall not be personally liable for obligations of the
Trust, the Fractional Undivided Interests represented by the Certificates
shall be non-assessable for any losses or expenses of the Trust or for any
reason whatsoever, and Certificates upon authentication thereof by the
Trustee pursuant to Section 7.2 are and shall be deemed fully paid.
Section 13.8. THIRD-PARTY BENEFICIARIES. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as otherwise provided in this Article
XIII, no other Person shall have any right or obligation hereunder. The
Certificate Insurer and its successors and assigns shall be a third-party
beneficiary to the provisions of this Agreement, and shall be entitled to rely
upon and directly enforce such provisions of this Agreement so long as no
Insurer Default shall have occurred and be continuing. Except as expressly
stated otherwise herein or in the Related Documents, any right of the
Certificate Insurer to direct, appoint, consent to, approve of, or take any
action under this Agreement, shall be a right exercised by the Certificate
Insurer in its sole and absolute discretion. The Certificate Insurer may
disclaim any of its rights and powers under this Agreement (but not its duties
and obligations under the Policy) upon delivery of a written notice to the
Trustee.
Section 13.9. FINANCIAL SECURITY AS CONTROLLING PARTY. Each
Certificateholder by purchase of the Certificates held by it acknowledges that
the Trustee on behalf of the Trust, as partial consideration of the issuance of
the Policy, has agreed that the Certificate Insurer shall have certain rights
hereunder for so long as no Insurer Default shall have occurred and be
continuing. So long as an Insurer Default has occurred and is continuing, any
provision giving the Certificate Insurer the right to direct, appoint or consent
to, approve of, or take any
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action under this Agreement shall be inoperative during the period of such
Insurer Default and such right shall instead vest in the Certificate Majority.
The Certificate Insurer may disclaim any of its rights and powers under this
Agreement (but not its duties and obligations under the Policy) upon delivery of
a written notice to the Trustee. The Certificate Insurer may give or withhold
any consent hereunder in its sole and absolute discretion.
Section 13.10. COUNTERPARTS. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute but
one and the same instrument.
Section 13.11. NOTICES. All demands, notices and communications
under this Agreement shall be in writing, personally delivered or mailed by
certified mail-return receipt requested, and shall be deemed to have been duly
given upon receipt (a) in the case of Atlantic, the Seller and for so long as
Atlantic is the Servicer, the Servicer, at the following address: Atlantic Auto
Finance Corporation, 800 Perinton Hills Office Park, Fairport, New York, 14450
(b) in the case of the Trustee, and, for so long as the Trustee is the Backup
Servicer, the Backup Servicer, at the Corporate Trust Office, (c) in the case of
each Rating Agency, 99 Church Street, New York, New York 10007 (for Moody's) and
26 Broadway, New York, New York 10004 (for Standard & Poor's), and (d) in the
case of the Certificate Insurer, Financial Security Assurance, Inc., 350 Park
Avenue, New York, New York 10022, Attention: Surveillance Department, Re:
Atlantic Auto Grantor Trust 1996-A, or at such other address as shall be
designated by any such party in a written notice to the other parties. Any
notice required or permitted to be mailed to a Certificateholder shall be given
by first class mail, postage prepaid, at the address of such Holder as shown in
the Certificate Register, and any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given, whether
or not the Certificateholder receives such notice.
Section 13.12. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the parties hereof and their respective successors and assigns, and
shall inure to the benefit of and be enforceable by the parties hereof and their
respective successors and assigns permitted hereunder. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Trustee, and the Certificateholders and their respective permitted
successors and assigns, if any. Any request, notice, direction, consent, waiver
or other instrument or action by any Certificateholder shall bind its successors
and assigns.
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IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have
caused this Pooling and Servicing Agreement to be duly executed by their
respective officers, effective as of the day and year first above written.
ATLANTIC AUTO THIRD FUNDING CORPORATION,
as Seller
By /s/ Richard Harrison
---------------------------------
Name: Richard Harrison
Title: President
ATLANTIC AUTO FINANCE CORPORATION,
as Servicer
By /s/ Richard Harrison
---------------------------------
Name: Richard Harrison
Title: President
THE CHASE MANHATTAN BANK
as Trustee as Backup Servicer and
Collateral Agent
By /s/ John Mynttinen
---------------------------------
Name: John Mynttinen
Title: Second Vice President
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EXECUTION COPY
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- --------------------------------------------------------------------------------
INSURANCE AND INDEMNITY AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
ATLANTIC AUTO THIRD FUNDING CORPORATION
and
ATLANTIC AUTO FINANCE CORPORATION
Dated as of June 20, 1996
Atlantic Auto Grantor Trust 1996-A
6.70% Asset Backed Certificates, Class A
$45,837,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions. . . . . . . . . . . . . . . . . 2
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of Atlantic
and the Seller . . . . . . . . . . . . . . 2
Section 2.02. Affirmative Covenants of Atlantic and the
Seller . . . . . . . . . . . . . . . . . . 10
Section 2.03. Negative Covenants of Atlantic and the
Seller. . . . . . . . . . . . . . . . . . . 17
ARTICLE III.
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. Issuance of the Policy . . . . . . . . . . . 20
Section 3.02. Payment of Fees and Premium. . . . . . . . . 21
Section 3.03. Reimbursement Obligation . . . . . . . . . . 22
Section 3.04. Indemnification. . . . . . . . . . . . . . . 23
Section 3.05. Subrogation. . . . . . . . . . . . . . . . . 25
ARTICLE IV.
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of Agreement. . . . . . 26
Section 4.02. Obligation Absolute. . . . . . . . . . . . . 26
Section 4.03. Assignments; Reinsurance; Third-Party
Rights . . . . . . . . . . . . . . . . . . 27
Section 4.04. Liability of Financial Security. . . . . . . 28
ARTICLE V.
EVENTS OF DEFAULT; REMEDIES
Section 5.01. Events of Default. . . . . . . . . . . . . . 29
Section 5.02. Remedies; Waivers. . . . . . . . . . . . . . 30
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PAGE
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Amendments, Etc. . . . . . . . . . . . . . . 32
Section 6.02. Notices. . . . . . . . . . . . . . . . . . . 32
Section 6.03. Payment Procedure. . . . . . . . . . . . . . 33
Section 6.04. Severability . . . . . . . . . . . . . . . . 33
Section 6.05. Governing Law. . . . . . . . . . . . . . . . 34
Section 6.06. Consent to Jurisdiction. . . . . . . . . . . 34
Section 6.07. Consent of Financial Security. . . . . . . . 35
Section 6.08. Counterparts . . . . . . . . . . . . . . . . 35
Section 6.09. Trial by Jury Waived . . . . . . . . . . . . 35
Section 6.10. Limited Liability. . . . . . . . . . . . . . 35
Section 6.11. Entire Agreement . . . . . . . . . . . . . . 35
Section 6.12 Non-petition Covenant. . . . . . . . . . . . 36
Appendix I - Definitions
Annex I - Form of Financial Guaranty Insurance Policy
Appendix II - Conditions Precedent to Issuance of the Policy
Appendix A - Opinions of Counsel
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INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT dated as of June 20, 1996, by and among
FINANCIAL SECURITY ASSURANCE INC. ("FINANCIAL SECURITY"), ATLANTIC AUTO THIRD
FUNDING CORPORATION (the "SELLER") and ATLANTIC AUTO FINANCE CORPORATION
("ATLANTIC").
INTRODUCTORY STATEMENTS
A. On the Closing Date, (i) CXC will convey certain of the Receivables and
certain other property related thereto to AAFC pursuant to the CXC Assignment,
(ii) AAFC will simultaneously sell all of its right, title and interest in and
to the Receivables and certain other property related thereto to Atlantic
pursuant to the AAFC Assignment, (iii) Atlantic will simultaneously sell all of
its right, title and interest in and to the Receivables and such other property
related thereto to the Seller pursuant to the Receivables Purchase Agreement,
(iv) the Seller will simultaneously sell to the Trust all of its right, title
and interest in and to the Receivables and such other property related thereto
pursuant to the Pooling and Servicing Agreement and (v) CNAI and CXC will
simultaneously release their respective liens on certain of the Receivables and
certain other property related thereto pursuant to the Loan and Security
Agreement, the Intercreditor Agreement and the CXC Receivables Purchase
Agreement.
B. The Securities will evidence in the aggregate an undivided ownership
interest of 97% of the Trust. The Seller has requested that Financial Security
issue a financial guaranty insurance policy guarantying certain distributions of
the principal of and interest on the Securities (including any such
distributions subsequently avoided as a preference under applicable bankruptcy
law) upon the terms and subject to the conditions provided herein.
C. It is contemplated that Atlantic and/or the Seller or any other
Affiliate of Atlantic may in the future enter into one or more additional
pooling and servicing agreements, sale and servicing agreements, indentures,
receivables purchase agreements or other financing documents (each, a
"Securitization Agreement") pursuant to which Atlantic, the Seller or such other
Affiliate of Atlantic will sell or pledge all or a portion of its right, title
and interest in and to pools of Receivables and/or other financial assets or
property to a trust or other Person and in connection therewith Financial
Security in its discretion may issue additional policies with respect to certain
guaranteed distributions or scheduled payments with respect to the
<PAGE>
corresponding additional securities, certificates, notes or other obligations
issued or arising under a Securitization Agreement.
D. The parties hereto desire to specify the conditions precedent to the
issuance of the Policy, the terms of payment of premium in respect of the
Policy, the indemnity and reimbursement to be provided to Financial Security in
respect of amounts paid by Financial Security under the Policy or otherwise and
certain other matters.
In consideration of the premises and of the agreements herein contained,
Financial Security, Atlantic and the Seller hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. DEFINITIONS. All terms defined in the Pooling and Servicing
Agreement or in the Spread Account Agreement shall have the same meanings in
this Agreement. Unless otherwise specified, if a word or phrase defined in the
Pooling and Servicing Agreement or in the Spread Account Agreement can be
applied with respect to one or more Series, such a word or phrase shall be used
herein as applied to Series 1996-A. In addition, capitalized terms used herein
shall have the meanings provided in Appendix I hereto unless the context
otherwise requires.
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. REPRESENTATIONS AND WARRANTIES OF ATLANTIC AND THE SELLER.
Atlantic represents, warrants and covenants, as of the date hereof and the Date
of Issuance, with respect to itself, with respect to the Seller, and otherwise
as follows, and the Seller represents, warrants and covenants, as of the date
hereof and the Date of Issuance, with respect to itself and otherwise, as
follows:
(a) DUE ORGANIZATION AND QUALIFICATION. Each of Atlantic and the
Seller is a Delaware corporation, duly organized, validly existing and in good
standing under the laws of Delaware. Each of Atlantic and the Seller is duly
qualified to do business, is in good standing and has obtained all necessary
licenses, permits, charters, registrations and approvals (together, "APPROVALS")
necessary for the conduct of its business as currently conducted and as
described in the Offering Document and the performance of its obligations under
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the Transaction Documents to which it is party, in each jurisdiction in which
the failure to be so qualified or to obtain such approvals would render any
Receivable unenforceable in any respect or would otherwise have a material
adverse effect upon the Transaction.
(b) POWER AND AUTHORITY. Each of Atlantic and the Seller has all
necessary power and authority to conduct its business as currently conducted and
as described in the Offering Document, to execute, deliver and perform its
obligations under the Transaction Documents to which it is party and to
consummate the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
the Transaction Documents by each of Atlantic and the Seller have been duly
authorized by all necessary action and do not require any additional approvals
or consents or other action by or any notice to or filing with any Person.
(d) NONCONTRAVENTION. None of the execution and delivery of the
Transaction Documents by the Seller or by Atlantic, the consummation of the
transactions contemplated thereby or the satisfaction of the terms and
conditions of the Transaction Documents,
(i) conflicts with or results in any breach or violation of any
provision of the Certificate of Incorporation or the Bylaws of the Seller
or of Atlantic, respectively, or any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award currently in effect
having applicability to the Seller or Atlantic, as the case may be, or any
of their respective properties, including regulations issued by an
administrative agency or other governmental authority having supervisory
powers over the Seller or Atlantic, as the case may be,
(ii) constitutes a default by the Seller or Atlantic, as the
case may be, under or a breach of any provision of any loan agreement,
mortgage, indenture or other agreement or instrument to which the Seller or
Atlantic, as the case may be, or any of their respective Subsidiaries or
Affiliates is a party or by which it or any of its or their properties is
or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or in
respect of any of the assets of the Seller or Atlantic or any of their
respective Subsidiaries or Affiliates except as otherwise expressly
contemplated by the Transaction Documents.
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(e) LEGAL PROCEEDINGS. There is no action, proceeding or
investigation, by or before any court, governmental or administrative agency or
arbitrator against or affecting all or any of the Receivables, Atlantic, the
Seller or any of their respective Subsidiaries or Affiliates, or any properties
or rights of Atlantic, the Seller, or any of their respective Subsidiaries or
Affiliates, pending or threatened, which, in any case, if decided adversely,
could result in a Material Adverse Change with respect to Atlantic, the Seller,
or any Receivable.
(f) VALID AND BINDING OBLIGATIONS. Each of the Transaction Documents
to which Atlantic or the Seller is a party when executed and delivered by
Atlantic or by the Seller, as the case may be, will constitute the legal, valid
and binding obligations of such Person, enforceable in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equitable principles. The Securities,
when executed, authenticated and delivered in accordance with the Pooling and
Servicing Agreement, will be validly issued and outstanding and entitled to the
benefits of the Pooling and Servicing Agreement and, together with the Class B
Certificates will evidence the entire beneficial ownership interest in the
Trust.
(g) FINANCIAL STATEMENTS. The Financial Statements of each of
Atlantic and UAG, copies of which have been furnished to Financial Security, (i)
are, as of the dates and for the periods referred to therein, complete and
correct in all material respects, (ii) present fairly the financial condition
and results of operations of Atlantic and UAG, respectively, as of the dates and
for the periods indicated and (iii) have been prepared in accordance with
generally accepted accounting principles consistently applied, except as noted
therein (subject as to interim statements to normal year-end adjustments).
Since the date of the most recent Financial Statements, there has been no
material adverse change in such financial condition or results of operations.
Except as disclosed in the Financial Statements, neither Atlantic nor UAG is
subject to any contingent liabilities or commitments that, individually or in
the aggregate, have a material possibility of causing a Material Adverse Change
in respect of Atlantic or UAG, as the case may be.
(h) ERISA. No Accumulated Funding Deficiency, whether or not waived,
has occurred with respect to any Plan. No Plan has been terminated, and no
Commonly Controlled Entity has withdrawn from any Multiemployer Plan which could
result in any liability under ERISA of a Commonly Controlled Entity. No
Reportable Event or other event or condition has occurred which could result in
the termination of any Plan by the PBGC. No Plan has an Underfunding greater
than $100,000. The aggregate amount
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of Underfunding for all Underfunded Plans does not exceed $100,000. The
liability to which the Commonly Controlled Entities would become subject under
ERISA if they were to withdraw completely from all Multiemployer Plans as of the
most recent valuation date is not in excess of $100,000. The Multiemployer
Plans are neither in Reorganization (as defined in Section 4241 of ERISA) nor
Insolvent (as defined in Section 4245 of ERISA). Each of the Seller and
Atlantic is in compliance with ERISA and has not incurred and does not
reasonably expect to incur any liabilities to the PBGC (other than premiums due
to the PBGC) in connection with any Plan or Multiemployer Plan.
n (i) ACCURACY OF INFORMATION. None of the Provided Documents contain
any statement of a material fact with respect to Atlantic, the Seller or the
Transaction that was untrue or misleading in any material respect when made
(except insofar as any Provided Document was corrected or superseded by a
subsequent Provided Document and Financial Security has not detrimentally relied
on the original thereof). Since the furnishing of the Provided Documents, there
has been no change, nor any development or event involving a prospective change
known to Atlantic or to the Seller, that would render any of the Provided
Documents untrue or misleading in any material respect. There is no fact known
to Atlantic or to the Seller which has a material possibility of causing a
Material Adverse Change with respect to Atlantic, the Seller or the Receivables.
(j) COMPLIANCE WITH SECURITIES LAWS. The offer and sale of the
Securities comply in all material respects with all requirements of law,
including all applicable registration requirements of securities laws. Without
limitation of the foregoing, the Offering Document does not contain any untrue
statement of a material fact and does not omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading; PROVIDED that
no representation is made with respect to information included in an Offering
Document and furnished by Financial Security in writing expressly for use
therein (all such information so furnished being referred to herein as
"FINANCIAL SECURITY INFORMATION"), it being understood that, in respect of the
initial Offering Document, the Financial Security Information is limited to the
information included under the caption "THE CERTIFICATE INSURER" and the
financial statements of Financial Security appended thereto. Neither the Trust
nor the Trust Property is to be registered as an "investment company" under the
Investment Company Act. The Pooling and Servicing Agreement is not required to
be qualified under the Trust Indenture Act.
(k) TRANSACTION DOCUMENTS. Each of the representations and warranties
of Atlantic or of the Seller
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contained in the Transaction Documents is true and correct in all material
respects and each of Atlantic and the Seller hereby makes each such
representation and warranty made by it to, and for the benefit of, Financial
Security as if the same were set forth in full herein.
(l) NO CONSENTS. No consent, license, approval or authorization from,
or registration, filing or declaration with, any regulatory body, administrative
agency, or other governmental instrumentality, nor any consent, approval, waiver
or notification of any creditor, lessor or other nongovernmental person, is
required in connection with the execution, delivery and performance by Atlantic
or by the Seller of this Agreement or by Atlantic or the Seller of any other
Transaction Document to which such Person is a party, except (in each case) such
as have been obtained and are in full force and effect.
(m) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed or proposed to be employed by Atlantic or by the Seller in the conduct
of their respective businesses violates any law, regulation, judgment,
agreement, order or decree applicable to it which, if enforced, would result in
a Material Adverse Change with respect to such Person.
(n) SPECIAL PURPOSE ENTITY.
(i) The capital of the Seller is adequate for the business and
undertakings of the Seller.
(ii) Other than with respect to the ownership by Atlantic of the
stock of the Seller and the transactions as provided in the Receivables
Purchase Agreement, the Pooling and Servicing Agreement, the Premium
Letter, and the Spread Account Agreement, the Seller is not engaged in any
business transactions with Atlantic or any of its Affiliates.
(iii) At least one director of the Seller shall be a person who
is not, and will not be, a director, officer, employee or holder of any
equity securities of Atlantic or any of its Affiliates.
(iv) The Seller's funds and assets are not, and will not be,
commingled with the funds of any other Person except as explicitly
permitted under the Transaction Documents.
(v) The articles of incorporation and/or bylaws of the Seller
require it to maintain (A) correct and complete minute books and records of
account, and (B) minutes of the meetings and other proceedings of its
shareholders and board of directors.
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(o) SOLVENCY; FRAUDULENT CONVEYANCE. Each of Atlantic and the Seller
is solvent and will not be rendered insolvent by the Transaction and, after
giving effect to such Transaction, neither Atlantic nor the Seller will be left
with an unreasonably small amount of capital with which to engage in its
business. Neither Atlantic nor the Seller intends to incur, or believes that it
has incurred, debts beyond its ability to pay such debts as they mature.
Neither Atlantic nor the Seller is contemplating the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the appointment of a
receiver, liquidator, conservator, trustee or similar official in respect of
Atlantic or the Seller, as the case may be, or any of their respective assets.
The amount of consideration being received by the Seller upon the sale of the
Securities constitutes reasonably equivalent value and fair consideration for
the interest in the portion of the Trust Property evidenced by the Securities.
The amount of consideration being received by the Seller upon the sale of the
Receivables and the Other Trust Property to the Trust constitutes reasonably
equivalent value and fair consideration for such Receivables and Other Trust
Property. The amount of consideration being received by Atlantic upon the sale
of the Receivables and Other Conveyed Property (as such term is defined in the
Receivables Purchase Agreement) by Atlantic to the Seller constitutes reasonably
equivalent value and fair consideration to Atlantic for the Receivables.
Atlantic is not transferring the Receivables and Other Conveyed Property (as
such term is defined in the Receivables Purchase Agreement) to the Seller, as
provided in the Transaction Documents, with any intent to hinder, delay or
defraud any of the creditors of Atlantic. The Seller is not transferring the
Receivables and the Other Trust Property to the Trust or selling the Securities,
as provided in the Transaction Documents, with any intent to hinder, delay or
defraud any of the Seller's creditors.
(p) INVESTMENT COMPANY ACT COMPLIANCE. Neither Atlantic nor the
Seller is required to be registered as an "investment company" under the
Investment Company Act. Neither Atlantic nor the Seller is subject to the
information reporting requirements of the Securities Exchange Act.
(q) GOOD TITLE; VALID TRANSFER; ABSENCE OF LIENS; SECURITY INTEREST.
(i) Immediately prior to the sale of the Receivables and certain
related property by AAFC to Atlantic pursuant to the AAFC Assignment on the
Closing Date, AAFC was the owner of, and had good and marketable title to,
such Receivables and related property free and clear of all Liens and
Restrictions on Transferability, and had full right, power and lawful
authority to assign, transfer and pledge such Receivables and related
property pursuant to the terms
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of the AAFC Assignment. The AAFC Assignment constitutes a valid sale,
transfer and assignment of such Receivables and related property to
Atlantic, enforceable against the creditors of and purchasers of AAFC. In
the event that, in contravention of the intention of the parties, the
transfer by AAFC of such Receivables and related property to Atlantic is
characterized as other than a sale, such transfer shall be characterized as
a secured financing, and Atlantic shall have a valid and perfected first
priority security interest in such Receivables and related property free
and clear of all Liens and Restrictions on Transferability.
(ii) Immediately prior to the sale of the Receivables and Other
Conveyed Property (as such term is defined in the Receivables Purchase
Agreement) by Atlantic to the Seller pursuant to the Receivables Purchase
Agreement on the Closing Date, Atlantic was the owner of, and had good and
marketable title to, such Receivables and Other Conveyed Property free and
clear of all Liens and Restrictions on Transferability, and had full right,
power and lawful authority to assign, transfer and pledge such Receivables
and Other Conveyed Property pursuant to the terms of the Receivables
Purchase Agreement. The Receivables Purchase Agreement constitutes a valid
sale, transfer and assignment of such Receivables and Other Conveyed
Property to the Seller, enforceable against the creditors of and purchasers
of Atlantic. In the event that, in contravention of the intention of the
parties, the transfer by Atlantic of such Receivables and Other Conveyed
Property to the Seller is characterized as other than a sale, such transfer
shall be characterized as a secured financing, and the Seller shall have a
valid and perfected first priority security interest in such Receivables
and Other Conveyed Property free and clear of all Liens and Restrictions on
Transferability.
(iii) Immediately prior to the sale of the Receivables and the
Other Trust Property to the Trust pursuant to the Pooling and Servicing
Agreement on the Closing Date, the Seller was the owner of, and had good
and marketable title to, such Receivables and Other Trust Property free and
clear of all Liens and Restrictions on Transferability, and had full right,
power and lawful authority to assign, transfer and pledge such Receivables
and the Other Trust Property. The Pooling and Servicing Agreement
constitutes a valid sale, transfer and assignment of the Receivables and
Other Trust Property to the Trust, enforceable against creditors of and
purchasers of the Seller. In the event that, in contravention of the
intention of the parties, the transfer of the Receivables and the Other
Trust Property by the Seller to the Trust is characterized as other than a
sale, such transfer shall be
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characterized as a secured financing, and the Trust shall have a valid and
perfected first priority security interest in the Receivables and Other
Trust Property free and clear of all Liens and Restrictions on
Transferability.
(r) PERFECTION OF LIENS AND SECURITY INTEREST. On the Closing Date,
the assignment to, or Lien and security interest in favor of, (i) the
Seller with respect to the Receivables and the Other Conveyed Property (as
such term is defined in the Receivables Purchase Agreement) will be
perfected by the delivery of the Receivable Files for the Receivables to
the Seller (for immediate delivery of the Custodial Receivable Files to the
Custodian), the filing of financing statements on Form UCC-1 in each
jurisdiction where such recording or filing is necessary for the perfection
thereof and delivery to the Seller of the CXC Assignment by CXC, the AAFC
Assignment by AAFC and a release letter of CNAI effecting the release of
the Lien and security interest and/or ownership interest of each of CXC,
AAFC and CNAI in the Receivables and such Other Conveyed Property, and (ii)
the Trustee with respect to the Receivables and the Other Trust Property
will be perfected by the delivery of the Custodial Receivables Files for
the Receivables to the Custodian, the filing of financing statements on
Form UCC-1 in each jurisdiction where such recording or filing is necessary
for the perfection thereof, the delivery to the Trustee of the CXC
Assignment by CXC, the AAFC Assignment by AAFC and a release letter of CNAI
effecting the release of the Lien and security interest and/or ownership
interest of each of CXC, AAFC and CNAI in the Receivables and Other Trust
Property and the establishment of the Collection Account and the Lockbox
Account in accordance with the provisions of the Transaction Documents, and
no other filings in any jurisdiction or any other actions (except as
expressly provided herein) are necessary to perfect the Seller's first
priority Lien on and security interest in the Receivables and such Other
Conveyed Property as against any third parties or the Trustee's first
priority Lien on and security interest in the Receivables and Other Trust
Property as against any third parties.
(s) SECURITY INTEREST IN FUNDS AND INVESTMENTS. Assuming the
retention of funds in the Trust Accounts and the acquisition of Eligible
Investments in accordance with the Transaction Documents, such funds and
Eligible Investments will be subject to a valid and perfected, first priority
security interest in favor of the Trustee. Assuming the retention of funds in
the Spread Account and the acquisition of Eligible Investments in accordance
with the Spread Account Agreement, such funds and Eligible Investments will be
subject to a valid and
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perfected, first priority security interest in favor of the Collateral Agent on
behalf of Financial Security.
(t) TAXES. Each of Atlantic and the Seller, and each of their
respective Subsidiaries, has filed all federal and state tax returns which are
required to be filed and paid all taxes, including any assessments received by
it, to the extent that such taxes have become due. Any taxes, fees and other
governmental charges payable by the Seller or Atlantic in connection with the
Transaction, the execution and delivery of the Transaction Documents and the
issuance of the Securities have been paid or shall have been paid at or prior to
the Date of Issuance.
(u) SELLER STOCK. The shares of stock of the Seller which have been
pledged pursuant to the Stock Pledge Agreement constitute all of the issued and
outstanding shares of the Seller.
Section 2.02. AFFIRMATIVE COVENANTS OF ATLANTIC AND THE SELLER. Atlantic
hereby agrees with respect to itself and with respect to the Seller, and the
Seller hereby agrees with respect to itself, that during the Term of the
Agreement, unless Financial Security shall otherwise expressly consent in
writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. Each of the
Seller and Atlantic shall perform each of its respective obligations under the
Transaction Documents and shall comply with all material requirements of, and
the Securities shall be offered and sold in accordance with, any law, rule or
regulation applicable to it or thereto, or that are required in connection with
its performance under any of the Transaction Documents.
(b) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
Each of Atlantic and the Seller shall keep or cause to be kept in reasonable
detail books and records of account of its assets and business and, (i) in the
case of Atlantic, shall clearly reflect therein the transfer of the Receivables
to the Seller, and (ii) in the case of the Seller, shall clearly reflect therein
the transfer of the Receivables to the Trust. Each of Atlantic and the Seller
shall furnish or cause to be furnished to Financial Security:
(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in
any event within 90 days after the close of each fiscal year of UAG,
Atlantic and the Seller, the audited balance sheets of UAG, Atlantic and
the Seller, as of the end of such fiscal year and the audited statements of
income, changes in equity and cash flows of UAG, Atlantic and the Seller,
for such fiscal year, all in reasonable detail and stating in comparative
form the respective
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figures for the corresponding date and period in the preceding fiscal year,
prepared in accordance with generally accepted accounting principles,
consistently applied, and accompanied by the certificate of UAG's,
Atlantic's and the Seller's independent accountants (who shall be, in each
case, a nationally recognized firm or otherwise acceptable to Financial
Security) and by the certificate specified in Section 2.02(c) hereof.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and
in any event within 45 days after the close of each of the first three
quarters of each fiscal year of UAG, Atlantic and the Seller, the unaudited
balance sheets of UAG, Atlantic and the Seller, as of the end of such
quarter and the unaudited statements of income, changes in equity and cash
flows of UAG, Atlantic and the Seller, for the portion of the fiscal year
then ended, all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the preceding
fiscal year, prepared in accordance with generally accepted accounting
principles, consistently applied (subject to normal year-end adjustments),
and accompanied by the certificate specified in Section 2.02(c) hereof if
such certificate is required to be provided pursuant to such Section.
(iii) ACCOUNTANTS' REPORTS. If a Special Event has occurred,
copies of any reports submitted to UAG, Atlantic and the Seller by their
respective independent accountants in connection with any examination of
the financial statements of UAG, Atlantic or the Seller, promptly upon
receipt thereof.
(iv) OTHER INFORMATION. Promptly upon receipt thereof, copies
of all reports, statements, certifications, schedules, or other similar
items delivered to or by Atlantic or the Seller pursuant to the terms of
the Transaction Documents and, promptly upon request, such other data as
Financial Security may reasonably request; PROVIDED, HOWEVER, that neither
Atlantic nor the Seller shall be required to deliver any such items if
provision by some other party to Financial Security is required under the
Transaction Documents unless such other party fails to deliver such item
and notice of such failure is given to Atlantic or the Seller, as the case
may be. Atlantic and the Seller shall, upon the request of Financial
Security, permit Financial Security or its authorized agents (A) to inspect
the books and records of Atlantic and the Seller as they may relate to the
Securities, the Receivables and the Other Trust Property, the obligations
of Atlantic or of the Seller under the Transaction Documents, the
Transaction and,
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but only following the occurrence of a Special Event, Atlantic's business;
(B) to discuss the affairs, finances and accounts of Atlantic or the Seller
with its respective Chief Operating Officer and Chief Financial Officer (or
a Responsible Officer with responsibilities and functions equivalent
thereto), no more frequently than annually, unless a Special Event has
occurred; and (C) to discuss the affairs, finances and accounts of Atlantic
or the Seller with its independent accountants, PROVIDED that an officer of
Atlantic or the Seller, as the case may be, shall have the right to be
present during such discussions. Such inspections and discussions shall be
conducted during normal business hours and shall not unreasonably disrupt
the business of Atlantic or the Seller, as the case may be. In addition,
Atlantic shall promptly (but in no case more than 30 days following
issuance or receipt by a Commonly Controlled Entity) provide to Financial
Security a copy of all correspondence between a Commonly Controlled Entity
and the PBGC, IRS, Department of Labor or the administrators of a
Multiemployer Plan relating to any Reportable Event or the underfunded
status, termination or possible termination of a Plan or a Multiemployer
Plan. The books and records of Atlantic and the Seller will be maintained
at the respective addresses designated herein for receipt of notices,
unless Atlantic or the Seller shall otherwise advise the parties hereto in
writing.
(v) Atlantic shall provide or cause to be provided to Financial
Security an executed original copy of each document executed in connection
with the Transaction within 10 days after the date of closing.
(vi) Subject to clause (l) of this Section 2.02, promptly after
the filing or sending thereof, copies of all proxy statements, financial
statements, reports and registration statements which Atlantic or the
Seller files, or delivers to, the IRS, the Commission, or any other
federal, state or foreign government agency, authority or body which
supervises the issuance of securities by Atlantic and the Seller or any
national securities exchange.
(c) COMPLIANCE CERTIFICATE. Each of UAG, Atlantic and the Seller
shall deliver to Financial Security concurrently with the delivery of the
financial statements required pursuant to Section 2.02(b)(i) hereof and
concurrently with the delivery of the financial statements required pursuant to
Section 2.02(b)(ii) hereof, a certificate signed by the Chief Financial Officer
(or a Responsible Officer with responsibilities and functions equivalent
thereto) of each of UAG (with respect to (iii) below only), Atlantic and the
Seller stating that:
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(i) a review of Atlantic's and the Seller's respective
performance under the Transaction Documents during such period has been
made under such officer's supervision;
(ii) to the best of such individual's knowledge, no Special
Event, Default or Event of Default has occurred, or if a Special Event,
Default or Event of Default has occurred, specifying the nature thereof
and, if Atlantic or the Seller has a right to cure any such Default or
Event of Default pursuant to Section 5.01, stating in reasonable detail the
steps, if any, being taken by Atlantic or the Seller, as the case may be,
to cure such Default or Event of Default or to otherwise comply with the
terms of the agreement to which such Default or Event of Default relates;
and
(iii) the attached financial reports submitted in accordance with
Section 2.02(b)(i) or (ii) hereof, as applicable, are complete and correct
in all material respects and present fairly the financial condition and
results of operations of UAG, Atlantic and the Seller, as the case may be,
as of the dates and for the periods indicated, in accordance with generally
accepted accounting principles consistently applied (subject as to interim
statements to normal year-end adjustments).
(d) NOTICE OF MATERIAL EVENTS. Each of Atlantic and the Seller shall
promptly inform Financial Security in writing of the occurrence of any of the
following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation (A) against
Atlantic or the Seller pertaining to the Receivables in general, (B) with
respect to a material portion of the Receivables or (C) in which a request
has been made for certification as a class action (or equivalent relief)
that would involve a material portion of the Receivables;
(ii) any change in the location of Atlantic's or the Seller's
principal office or any change in the location of Atlantic's or the
Seller's books and records;
(iii) the occurrence of any Default, Event of Default or Special
Event; or
(iv) any other event, circumstance or condition that has
resulted, or has a material possibility of resulting, in a Material Adverse
Change in respect of Atlantic or the Seller.
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(e) FURTHER ASSURANCES. Each of Atlantic and the Seller will file or
cause to be filed all necessary financing statements, assignments or other
instruments, and any amendments or continuation statements relating thereto,
necessary to be kept and filed in such manner and in such places as may be
required by law to preserve and protect fully the Lien on and first priority
security interest in, and all rights of the Trustee for the benefit of the
Certificateholders and Financial Security with respect to the Receivables and
the Other Trust Property, under the Pooling and Servicing Agreement. In
addition, each of Atlantic and the Seller shall, upon the request of Financial
Security, from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within ten (10) days of such request, such
amendments hereto and such further instruments and take such further action as
may be reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents or to protect the interest of the
Trustee, for the benefit of the Certificateholders and Financial Security, in
the Receivables and the Other Trust Property, free and clear of all Liens and
Restrictions on Transferability except the Lien in favor of the Trustee, for the
benefit of the Certificateholders and Financial Security, and the Restrictions
on Transferability imposed by the Pooling and Servicing Agreement. In addition,
each of Atlantic and the Seller agrees to cooperate with S&P and Moody's in
connection with any review of the Transaction which may be undertaken by S&P and
Moody's after the date hereof.
(f) RETIREMENT OF SECURITIES. Atlantic or the Seller shall cause the
Trustee, upon retirement of the Securities pursuant to the Pooling and Servicing
Agreement or otherwise, to furnish to Financial Security a notice of such
retirement, and, upon retirement of the Securities and the expiration of the
term of the Policy, to surrender the Policy to Financial Security for
cancellation.
(g) THIRD-PARTY BENEFICIARY. Each of Atlantic and the Seller agrees
that Financial Security shall have all rights of a third-party beneficiary in
respect of the Pooling and Servicing Agreement and the Receivables Purchase
Agreement and hereby incorporates and restates its respective representations,
warranties and covenants as set forth therein for the benefit of Financial
Security.
(h) CORPORATE EXISTENCE. Each of Atlantic and the Seller shall
maintain its respective corporate existence and shall at all times continue to
be duly organized under the laws of its jurisdiction of incorporation or
organization and continue to be duly qualified and duly authorized (as described
in Sections 2.01(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its respective
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certificate of incorporation and bylaws or other applicable governing documents.
(i) DISCLOSURE DOCUMENT. (1) Each Offering Document delivered with
respect to the Securities shall clearly disclose that the Policy is not covered
by the property/casualty insurance security fund specified in Article 76 of the
New York Insurance Law. In addition, each Offering Document delivered with
respect to the Securities which includes financial statements of Financial
Security prepared in accordance with generally accepted accounting principles
shall include the following statement immediately preceding such financial
statements:
The New York State Insurance Department recognizes
only statutory accounting practices for determining
and reporting the financial condition and results of
operations of an insurance company, for determining
its solvency under the New York Insurance Law, and for
determining whether its financial condition warrants
the payment of a dividend to its stockholders. No
consideration is given by the New York State Insurance
Department to financial statements prepared in
accordance with generally accepted accounting
principles in making such determinations.
(2) Each Offering Document delivered with respect to the Securities
subsequent to the Date of Issuance shall be in form and substance satisfactory
to Financial Security in its sole discretion as evidenced by Financial
Security's prior written consent to the use thereof.
(j) SPECIAL PURPOSE ENTITY.
(i) The Seller shall conduct its business solely in its own name
through its duly authorized officers or agents so as not to mislead others
as to the identity of the entity with which those officers are concerned,
and particularly will avoid the appearance of conducting business on behalf
of Atlantic or any Affiliate thereof or that the assets of the Seller are
available to pay the creditors of Atlantic or any Affiliate thereof.
Without limiting the generality of the foregoing, all oral and written
communications, including, without limitation, letters, invoices, purchase
orders, contracts, statements and loan applications, will be made solely in
the name of the Seller.
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(ii) The Seller shall maintain corporate records and books of
account separate from those of Atlantic and the Affiliates thereof. The
Seller's books and records shall clearly reflect the transfer of the
Receivables to the Trust and the sale of the Securities each as a sale of
the Seller's interest in the Receivables. The books of account and
corporate records of the Seller will be separate from those of Atlantic and
its Affiliates and will be maintained at the address designated herein for
receipt of notices, unless the Seller shall otherwise advise the parties
hereto in writing.
(iii) The Seller shall obtain proper authorization from its board
of directors of all corporate actions requiring such authorization.
Meetings of the board of directors will be held at least once per annum and
copies of the minutes of each such board meeting shall be delivered to
Financial Security within two weeks of such meeting.
(iv) The Seller shall obtain proper authorization from its
shareholders of all corporate action requiring shareholder approval.
Meetings of the shareholders of the Seller shall be held not less
frequently than one time per annum and copies of each such authorization
and the minutes of each such shareholder meeting shall be delivered to
Financial Security within two weeks of such authorization or meeting, as
the case may be.
(v) Although the organizational expenses of the Seller have
been paid by Atlantic, operating expenses and liabilities of the Seller
shall be paid from its own funds.
(vi) The annual financial statements of the Seller shall
disclose the effects of the Seller's transactions in accordance with
generally accepted accounting principles and shall disclose that the assets
of the Seller are not available to pay creditors of Atlantic or any
Affiliate thereof.
(vii) The resolutions, agreements and other instruments of the
Seller underlying the transactions described in this Agreement and the
other Transaction Documents shall be continuously maintained by the Seller
as official records of the Seller separately identified and held apart from
the records of Atlantic and each Affiliate thereof.
(viii) The Seller shall maintain an arm's-length relationship with
Atlantic and the Affiliates thereof and will not hold itself out as being
liable for the debts of Atlantic or any Affiliate thereof.
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(ix) The Seller shall keep its assets and its liabilities wholly
separate from those of all other entities, including, but not limited to
Atlantic and the Affiliates thereof.
(k) MAINTENANCE OF LICENSES. Atlantic and the Seller shall each
maintain all licenses, permits, charters and registrations which are material to
the performance by Atlantic and the Seller, as the case may be, of its business
or of its respective obligations under this Agreement and each other Transaction
Document.
(l) REGISTRATION STATEMENTS FOR THE SECURITIES. Each of Atlantic and
the Seller shall (i) provide Financial Security with written notice at least 30
days prior to the filing of any registration statement relating to the
Securities, (ii) provide Financial Security with a copy of such registration
statement to be filed at least 15 days prior to such filing, (iii) prior to such
filing, obtain the written consent of Financial Security with respect to the
filing of such registration statement and (iv) provide Financial Security with
any opinions of counsel as Financial Security may request in connection with the
registration of the Securities under the Securities Act, which opinions shall be
addressed to Financial Security and shall be in form and substance satisfactory
to Financial Security.
Section 2.03. NEGATIVE COVENANTS OF ATLANTIC AND THE SELLER. Atlantic
hereby agrees with respect to itself and with respect to the Seller (provided,
that in the case of subparagraph (j) below, Atlantic covenants with respect to
the Seller solely in its capacity as sole shareholder of the Seller and not on
behalf of the Seller), and the Seller hereby agrees with respect to itself that
during the Term of the Agreement, unless Financial Security shall otherwise
expressly consent in writing:
(a) RESTRICTIONS ON LIENS. Neither Atlantic nor the Seller shall (i)
create, incur or suffer to exist, or agree to create, incur or suffer to exist,
or consent to cause or permit in the future (upon the happening of a contingency
or otherwise) the creation, incurrence or existence of any Lien or Restriction
on Transferability on the Receivables or the Other Trust Property except for the
Lien in favor of the Trustee, for the benefit of the Certificateholders and
Financial Security, and the Restrictions on Transferability imposed by the
Pooling and Servicing Agreement or (ii) with respect to the Receivables and the
Other Trust Property, sign or file under the Uniform Commercial Code of any
jurisdiction any financing statement which names either Atlantic or the Seller
as a debtor, or sign any security agreement authorizing any secured party
thereunder to file such financing statement, except in each case any such
instrument solely securing the rights and preserving the Lien of
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the Trustee, for the benefit of the Certificateholders and Financial Security.
(b) IMPAIRMENT OF RIGHTS. Neither Atlantic nor the Seller shall take
any action, or fail to take any action, if such action or failure to take action
may (i) interfere with the enforcement of any rights under the Transaction
Documents that are material to the rights, benefits or obligations of the
Trustee, the Certificateholders or Financial Security, (ii) result in a Material
Adverse Change in respect of the Receivables or (iii) impair the ability of
Atlantic or the Seller to perform its obligations under the Transaction
Documents, including any consolidation or merger with any Person or any transfer
of all or any material amount of Atlantic's or the Seller's assets to any other
Person if such consolidation, merger or transfer would materially impair the net
worth of Atlantic or the Seller or any successor Person obligated, after such
event, to perform Atlantic's or the Seller's obligations under the Transaction
Documents.
(c) WAIVER, AMENDMENTS, ETC. Neither Atlantic nor the Seller shall
waive, modify or amend, or consent to any waiver, modification or amendment of,
any of the provisions of any of the Transaction Documents or, if applicable, the
Seller's certificate of incorporation or bylaws unless Financial Security shall
have consented thereto in writing and such amendment, modification or waiver
shall not, as evidenced by an opinion of counsel addressed to Financial
Security, have a material adverse effect on the interests of any
Certificateholder or Financial Security.
(d) SUCCESSORS. Neither Atlantic nor the Seller shall terminate or
designate, or consent to the termination or designation of, the Servicer, the
Backup Servicer, the Trustee or Collateral Agent or any successor thereto
without the prior written approval of Financial Security.
(e) CREATION OF INDEBTEDNESS; GUARANTEES. The Seller shall not
create, incur, assume or suffer to exist any indebtedness other than
indebtedness guaranteed or approved in writing by Financial Security. Without
the prior written consent of Financial Security, the Seller shall not assume,
guarantee, endorse or otherwise be or become directly or contingently liable for
the obligations of any Person by, among other things, agreeing to purchase any
obligation of another Person, agreeing to advance funds to such Person or
causing or assisting such Person to maintain any amount of capital.
(f) SUBSIDIARIES. The Seller shall not form, or cause to be formed,
any Subsidiaries.
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(g) ISSUANCE OF STOCK. The Seller shall not issue or allow the
issuance of any shares of its capital stock or rights, warrants or options in
respect of its capital stock, other than the shares of common stock which have
been pledged to Financial Security under the Stock Pledge Agreement.
(h) NO MERGERS. (a) The Seller shall not consolidate with or merge
into any Person or transfer all or any material portion of its assets to any
Person or liquidate or dissolve; and (b) Atlantic shall not consolidate with or
merge into any Person or transfer all or any material portion of its assets to
any Person or liquidate or dissolve except, in each case, as permitted by and in
accordance with the terms of Section 9.2 of the Pooling and Servicing Agreement.
(i) OTHER ACTIVITIES. The Seller shall not:
(i) sell, transfer, exchange or otherwise dispose of any of its
assets except as permitted under the Transaction Documents and under the
Seller's certificate of incorporation; or
(ii) engage in any business or activity other than as
contemplated by the Transaction Documents and as permitted under and in
accordance with the Seller's certificate of incorporation.
(j) INSOLVENCY. Neither Atlantic nor the Seller shall commence with
respect to the Seller any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to the
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, corporation or
other relief with respect to it or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or make a general assignment for the benefit of
its creditors. Neither Atlantic nor the Seller shall take any action in
furtherance of, or indicating the consent to, approval of, or acquiescence in
any of the acts set forth above. The Seller shall not admit in writing its
inability to pay its debts.
(k) ERISA. The Seller shall not contribute or incur any obligation to
contribute to, or incur any liability in respect of, any Plan or Multiemployer
Plan.
(l) DIVIDENDS. The Seller shall not declare or make payment of (i)
any dividend or other distribution on or in respect of any shares of its capital
stock, or (ii) any payment on account of the purchase, redemption, retirement or
acquisition
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of any option, warrant or other right to acquire shares of its capital stock
unless (in each case) at the time of such declaration or payment (and after
giving effect thereto) no amount payable by the Seller under any Transaction
Document with respect to any Series is then due and owing but unpaid.
(m) TRANSFER OF SUBORDINATE CERTIFICATES. The Seller shall not sell,
transfer, assign, convey or pledge any Class B Certificate at any time
subsequent to the Date of Issuance to any Person that is an Affiliate of the
Seller, unless, prior to such sale, transfer, assignment, conveyance or pledge,
the Seller delivers to Financial Security an Opinion of Counsel substantially
similar in form and substance to the Opinion of Counsel delivered on the Date of
Issuance as to non-consolidation of the assets and liabilities of (x) the Seller
and Atlantic and (y) the Seller and any such Affiliate (other than Atlantic);
PROVIDED, HOWEVER, that the Seller shall not sell, transfer, assign, convey or
pledge any Class B Certificate at any time subsequent to the Date of Issuance to
any Person that is not an Affiliate of the Seller unless, (i) prior to such
sale, transfer, assignment, conveyance or pledge, such Person delivers to
Financial Security (A) its agreement in writing to the effect that so long as it
has any interest in any Class B Certificate such Person shall not become an
Affiliate of the Seller and (B) its agreement in writing substantially similar
in form and substance to the nonpetition covenant that appears as Section 3.7 of
the Pooling and Servicing Agreement with respect to the Seller, and (ii) the
obligations of the Seller to such Person in connection with such sale, transfer,
assignment, conveyance or pledge shall be recourse only to the extent of amounts
received by the Seller pursuant to Section 3.03(b) of the Spread Account
Agreement.
(n) RELEASE OF LIENS. Each of Atlantic and the Seller shall duly file
on behalf of CXC and CNAI and other relevant parties, in either case no later
than the second Business Day immediately following the Closing Date, the
amendments to, and/or terminations of, UCC financing statements evidencing the
release by CXC, CNAI and other relevant parties of any Liens on the Receivables
and the Other Trust Property that are referred to in clause (m) of Appendix II
hereof.
ARTICLE III.
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. ISSUANCE OF THE POLICY. Financial Security agrees to issue
the Policy subject to satisfaction of the conditions precedent set forth in
Appendix II hereto.
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Section 3.02. PAYMENT OF FEES AND PREMIUM.
(a) LEGAL FEES. Promptly after the Date of Issuance, Atlantic shall
pay or cause to be paid legal fees and disbursements incurred by Financial
Security in connection with the issuance of the Policy.
(b) RATING AGENCY FEES. The initial fees of S&P and Moody's with
respect to the Securities and the transactions contemplated hereby shall be paid
by Atlantic in full on the Date of Issuance, or otherwise provided for to the
satisfaction of Financial Security. All periodic and subsequent fees of S&P or
Moody's with respect to, and directly allocable to, the Securities shall be for
the account of, and shall be billed to, Atlantic. The fees for any other rating
agency shall be paid by the party requesting such other agency's rating, unless
such other agency is a substitute for S&P or Moody's in the event that S&P or
Moody's is no longer rating the Securities, in which case the cost for such
agency shall be paid by Atlantic.
(c) AUDITORS' FEES. Atlantic shall pay on demand any additional fees
of Financial Security's auditors payable in respect of any Offering Document
that are incurred after the Date of Issuance. It is understood that Financial
Security's auditors shall not incur any additional fees in respect of future
Offering Documents except at the request of or with the consent of Atlantic.
(d) PREMIUM. In consideration of the issuance by Financial Security
of the Policy, Financial Security shall be entitled to receive the Premium as
and when due in accordance with the terms of the Premium Letter (i) in the case
of Premium due on or before the Date of Issuance, directly from Atlantic and
(ii) in the case of Premium due after the Date of Issuance, FIRST, from monies
available for such payment in accordance with Section 5.5(a) of the Pooling and
Servicing Agreement and SECOND, to the extent that such monies are insufficient,
from Atlantic. The Premium paid hereunder or under the Pooling and Servicing
Agreement shall be nonrefundable without regard to whether Financial Security
makes any payment under the Policy or any other circumstances relating to the
Securities or provision being made for payment of the Securities prior to
maturity. Although the Premium is fully earned by Financial Security as of the
Closing Date, the Premium shall be payable in periodic installments as provided
in the Premium Letter. Anything herein or in any of the Transaction Documents
notwithstanding, upon the occurrence of an Event of Default, the entire
outstanding balance of further installments of the Premium shall be immediately
due and payable. All payments of Premium shall be made by wire transfer to an
account designated from time to time by Financial Security by written notice to
the Seller and Atlantic.
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Section 3.03. REIMBURSEMENT OBLIGATION. Notwithstanding any of the
following provisions of this Section 3.03 to the contrary, the payment
obligations set forth in Sections 3.03(a), (b), (c) and (d)(v) (to the extent of
advances to the Trust in respect of distributions on the Securities) shall be
non-recourse obligations with respect to Atlantic and shall be payable only from
monies available for such payment in accordance with Section 5.5(a) of the
Pooling and Servicing Agreement (except to the extent that any such payment
obligation arises from a failure to perform or default of Atlantic, the Seller
or any Affiliate thereof under any Transaction Document or by reason of
negligence, willful misconduct or bad faith on the part of Atlantic or the
Seller in the performance of its duties and obligation thereunder or reckless
disregard by Atlantic or the Seller of it duties and obligations thereunder).
Atlantic and the Seller agree to pay to Financial Security the following amounts
as and when incurred:
(a) a sum equal to the total of all amounts paid by Financial Security
under the Policy;
(b) interest on any and all amounts described in this Section 3.03 or
Section 3.02(d) from the date due to Financial Security pursuant to the
provisions hereof until payment thereof in full, payable to Financial Security
at the Late Payment Rate per annum;
(c) any payments made by Financial Security on behalf of, or advanced
to, Atlantic, in its capacity as Servicer, the Trust or the Trustee, including,
without limitation, any amounts payable by Atlantic, in its capacity as
Servicer, the Trust or the Trustee pursuant to the Securities or any other
Transaction Documents; and any payments made by Financial Security as, or in
lieu of, any servicing, management, trustee, custodial or administrative fees
payable, in the sole discretion of Financial Security to third parties in
connection with the Transaction; and
(d) any and all out-of-pocket charges, fees, costs and expenses which
Financial Security may reasonably pay or incur, including, but not limited to,
attorneys' and accountants' fees and expenses, in connection with (i) in the
event of payments under the Policy, any accounts established to facilitate
payments under the Policy, to the extent Financial Security has not been
immediately reimbursed on the date that any amount is paid by Financial Security
under the Policy, or other administrative expenses relating to such payments
under the Policy, (ii) the administration, enforcement, defense or preservation
of any rights in respect of any of the Transaction Documents, including
defending, monitoring or participating in any litigation or proceeding
(including any insolvency or bankruptcy proceeding in respect of any Transaction
participant or any affiliate thereof)
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relating to any of the Transaction Documents, any party to any of the
Transaction Documents or the Transaction, (iii) any amendment, waiver or other
action with respect to, or related to, any Transaction Document whether or not
executed or completed, (iv) any review or investigation made by Financial
Security in those circumstances where its approval or consent is sought under
any of the Transaction Documents, (v) the foreclosure against, sale or other
disposition of any collateral securing any obligations under any of the
Transaction Documents or otherwise in the discretion of Financial Security, or
pursuit of any other remedies under any of the Transaction Documents, to the
extent such costs and expenses are not recovered from such foreclosure, sale or
other disposition, (vi) preparation of bound volumes of the Transaction
Documents, and (vii) any federal, state or local tax (other than taxes payable
in respect of the gross income of Financial Security) or other governmental
charge imposed in connection with the issuance of the Policy.
Financial Security reserves the right to charge a reasonable fee as a condition
to executing any amendment, waiver or consent proposed in respect of any of the
Transaction Documents.
Section 3.04. INDEMNIFICATION.
(a) INDEMNIFICATION BY ATLANTIC AND THE SELLER. In addition to any
and all rights of reimbursement, indemnification, subrogation and any other
rights pursuant hereto or under law or in equity, each of Atlantic and the
Seller, jointly and severally, agrees to pay, and to protect, indemnify and save
harmless, Financial Security and its officers, directors, shareholders,
employees, agents and each Person, if any, who controls Financial Security
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act from and against any and all claims, losses,
liabilities (including penalties), actions, suits, judgments, demands, damages,
costs or expenses (including, without limitation, fees and expenses of
attorneys, consultants and auditors and reasonable costs of investigations) of
any nature arising out of or relating to the transactions contemplated by the
Transaction Documents by reason of:
(i) any statement, omission or action (other than of or by
Financial Security) in connection with the offering, issuance, sale,
remarketing or delivery of the Securities or the Class B Certificates;
(ii) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer, employee or agent
of the Seller or Atlantic, as the case may be;
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(iii) the breach by the Seller or Atlantic, as the case may be,
of any representation, warranty or covenant under any of the Transaction
Documents or the occurrence, in respect of the Seller or Atlantic, as the
case may be, under any of the Transaction Documents of any "event of
default" or any event which, with the giving of notice or the lapse of time
or both, would constitute any "event of default";
(iv) the violation by the Seller or Atlantic of any federal,
state or foreign law, rule or regulation, or any judgment, order or decree
applicable to it; or
(v) any untrue statement or alleged untrue statement of a
material fact contained in any Offering Document or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as
such claims arise out of or are based upon any untrue statement or omission
in the Financial Security Information, it being understood that in respect
of the initial Offering Document, the Financial Security Information is
limited to information included under the caption "THE CERTIFICATE INSURER"
and the financial statements of Financial Security appended thereto.
(b) CONDUCT OF ACTIONS OR PROCEEDINGS. If any action or proceeding
(including any governmental investigation) shall be brought or asserted against
Financial Security, any officer, director, shareholder, employee or agent of
Financial Security or any Person controlling Financial Security (individually,
an "INDEMNIFIED PARTY" and, collectively, the "INDEMNIFIED PARTIES") in respect
of which indemnity may be sought from the Seller and Atlantic (the "INDEMNIFYING
PARTY") hereunder, Financial Security shall promptly notify the Indemnifying
Party in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel satisfactory to Financial Security and the
payment of all expenses. An Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof at
the expense of the Indemnified Party; PROVIDED, HOWEVER, that the fees and
expenses of such separate counsel shall be at the expense of the Indemnifying
Party if (i) the Indemnifying Party has agreed to pay such fees and expenses,
(ii) the Indemnifying Party shall have failed to assume the defense of such
action or proceeding and employ counsel satisfactory to Financial Security in
any such action or proceeding or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party, and the Indemnified Party shall have been advised by
counsel that (A) there may be one or more legal defenses available to it which
are different from or additional to those available to the
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Indemnifying Party and (B) the representation of the Indemnifying Party and the
Indemnified Party by the same counsel would be inappropriate or contrary to
prudent practice (in which case, if the Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying Party
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for the Indemnified Parties, which firm shall be designated in writing by
Financial Security). The Indemnifying Party shall not be liable for any
settlement of any such action or proceeding effected without its written consent
to the extent that any such settlement shall be prejudicial to the Indemnifying
Party but, if settled with its written consent, or if there be a final judgment
for the plaintiff in any such action or proceeding with respect to which the
Indemnifying Party shall have received notice in accordance with this subsection
(b), the Indemnifying Party agrees to indemnify and hold the Indemnified Parties
harmless from and against any loss or liability by reason of such settlement or
judgment.
(c) CONTRIBUTION. To provide for just and equitable contribution if
the indemnification provided by the Indemnifying Party is determined to be
unavailable for any Indemnified Party (other than due to application of this
Section), the Indemnifying Party shall contribute to the losses incurred by the
Indemnified Party on the basis of the relative fault of the Indemnifying Party,
on the one hand, and the Indemnified Party, on the other hand.
Section 1.035. SUBROGATION. Subject only to the priority of payment
provisions of the Pooling and Servicing Agreement, each of the Seller and
Atlantic acknowledges that, to the extent of any payment made by Financial
Security pursuant to the Policy, Financial Security is to be fully subrogated to
the extent of such payment and any additional interest due on any late payment,
to the rights of the Certificateholders to any moneys paid or payable in respect
of the Securities under the Transaction Documents or otherwise. Each of the
Seller and Atlantic agrees to such subrogation and, further, agrees to execute
such instruments and to take such actions as, in the sole judgment of Financial
Security, are necessary to evidence such subrogation and to perfect the rights
of Financial Security to receive any moneys paid or payable in respect of the
Securities under the Transaction Documents or otherwise.
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ARTICLE IV.
FURTHER AGREEMENTS
Section 4.01. EFFECTIVE DATE; TERM OF AGREEMENT. This Agreement shall
take effect on the Date of Issuance and shall remain in effect until the later
of (a) such time as Financial Security is no longer subject to a claim under the
Policy and the Policy shall have been surrendered to Financial Security for
cancellation and (b) all amounts payable to Financial Security and the
Certificateholders under the Transaction Documents and under the Securities have
been paid in full; PROVIDED, HOWEVER, that the provisions of Sections 3.02, 3.03
and 3.04 hereof shall survive any termination of this Agreement.
Section 4.02. OBLIGATION ABSOLUTE. (a) The payment obligations of the
Seller and Atlantic hereunder shall be absolute and unconditional, and shall be
paid strictly in accordance with this Agreement under all circumstances
irrespective of the following:
(i) any lack of validity or enforceability of, or any amendment
or other modifications of, or waiver with respect to, any of the
Transaction Documents, the Securities or the Policy;
(ii) any exchange or release of any other obligations hereunder;
(iii) the existence of any claim, setoff, defense, reduction,
abatement or other right which the Seller or Atlantic may have at any time
against Financial Security or any other Person;
(iv) any document presented in connection with the Policy
proving to be forged, fraudulent, invalid or insufficient in any respect,
including any failure to strictly comply with the terms of the Policy, or
any statement therein being untrue or inaccurate in any respect;
(v) any failure of the Seller to receive the proceeds from the
sale of the Securities;
(vi) any breach by the Seller or Atlantic of any representation,
warranty or covenant contained in any of the Transaction Documents; or
(vii) any other circumstances, other than payment in full, which
might otherwise constitute a defense
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available to, or discharge of the Seller or Atlantic in respect of any
Transaction Document.
(b) The Seller and Atlantic and any and all others who are now or may
become liable for all or part of the obligations of the Seller or Atlantic under
this Agreement agree to be bound by this Agreement and (i) to the extent
permitted by law, waive and renounce any and all redemption and exemption rights
and the benefit of all valuation and appraisement privileges against the
indebtedness, if any, and obligations evidenced by any Transaction Document or
by any extension or renewal thereof; (ii) waive presentment and demand for
payment, notices of nonpayment and of dishonor, protest of dishonor and notice
of protest; (iii) waive all notices in connection with the delivery and
acceptance hereof and all other notices in connection with the performance,
default or enforcement of any payment hereunder except as required by the
Transaction Documents; (iv) waive all rights of abatement, diminution,
postponement or deduction, or to any defense other than payment, or to any right
of setoff or recoupment arising out of any breach under any of the Transaction
Documents, by any party thereto or any beneficiary thereof, or out of any
obligation at any time owing to the Seller or Atlantic; (v) agree that any
consent, waiver or forbearance hereunder with respect to an event shall operate
only for such event and not for any subsequent event; (vi) consent to any and
all extensions of time that may be granted by Financial Security with respect to
any payment hereunder or other provisions hereof and to the release of any
security at any time given for any payment hereunder, or any part thereof, with
or without substitution, and to the release of any Person or entity liable for
any such payment; and (vii) consent to the addition of any and all other makers,
endorsers, guarantors and other obligors for any payment hereunder, and to the
acceptance of any and all other security for any payment hereunder, and agree
that the addition of any such obligors or security shall not affect the
liability of the parties hereto for any payment hereunder.
(c) Nothing herein shall be construed as prohibiting Atlantic or the
Seller from pursuing any rights or remedies it may have against any Person other
than Financial Security in a separate legal proceeding.
Section 4.03. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS.
(a) This Agreement shall be a continuing obligation of the parties
hereto and shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Neither the Seller nor
Atlantic may assign its rights under this Agreement, or delegate any of its
duties hereunder, without the prior written consent of Financial
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Security. Any assignment made in violation of this Agreement shall be null and
void.
(b) Financial Security shall have the right to give participations in
its rights under this Agreement and to enter into contracts of reinsurance with
respect to the Policy upon such terms and conditions as Financial Security may
in its discretion determine; PROVIDED, HOWEVER, that no such participation or
reinsurance agreement or arrangement shall relieve Financial Security of any of
its obligations hereunder or under the Policy.
(c) In addition, Financial Security shall be entitled to assign or
pledge to any bank or other lender providing liquidity or credit with respect to
the Transaction or the obligations of Financial Security in connection therewith
any rights of Financial Security under the Transaction Documents, or with
respect to any real or personal property or other interests pledged to Financial
Security, or in which Financial Security has a security interest, in connection
with the Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or claim,
express or implied, upon any Person, including, particularly, any
Certificateholder, other than Financial Security, against the Seller or
Atlantic, and all the terms, covenants, conditions, promises and agreements
contained herein shall be for the sole and exclusive benefit of the parties
hereto and their successors and permitted assigns. Neither the Trustee nor any
Certificateholder shall have any right to payment from any premiums paid or
payable hereunder or from any other amounts paid by Atlantic or the Seller
pursuant to Section 3.02, 3.03 or 3.04 hereof.
Section 4.04. LIABILITY OF FINANCIAL SECURITY. Neither Financial Security
nor any of its officers, directors or employees shall be liable or responsible
for: (a) the use which may be made of the Policy by the Trustee or for any acts
or omissions of the Trustee in connection therewith or (b) the validity,
sufficiency, accuracy or genuineness of documents delivered to Financial
Security (or its Fiscal Agent) in connection with any claim under the Policy, or
of any signatures thereon, even if such documents or signatures should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged
(unless Financial Security had actual knowledge thereof). In furtherance and
not in limitation of the foregoing, Financial Security (or its Fiscal Agent) may
accept documents that appear on their face to be in order, without
responsibility for further investigation.
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ARTICLE V.
EVENTS OF DEFAULT; REMEDIES
Section 5.01. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) any demand for payment shall be made under the Policy;
(b) any representation or warranty made by the Seller, the Servicer or
Atlantic under any of the Transaction Documents, or in any certificate or report
furnished under any of the Transaction Documents, shall prove to be untrue or
incorrect in any material respect; PROVIDED, HOWEVER, that if the Seller, the
Servicer or Atlantic effectively cures any such defect in any representation or
warranty under any Transaction Document or in any certificate or report
furnished under any Transaction Document within 30 days after such defect arose,
such defect shall not in and of itself constitute an Event of Default hereunder;
(c) (i) the Seller, the Servicer or Atlantic shall fail to pay when
due any amount payable by the Seller, the Servicer or Atlantic under any of the
Transaction Documents; (ii) the Seller, the Servicer or Atlantic shall have
asserted that any of the Transaction Documents to which it is a party is not
valid and binding on the parties thereto; or (iii) any court, governmental
authority or agency having jurisdiction over any of the parties to any of the
Transaction Documents or any property thereof shall find or rule that any
material provision of any of the Transaction Documents is not valid and binding
on the parties thereto;
(d) the Seller, the Servicer or Atlantic shall fail to perform or
observe any other covenant or agreement contained in any of the Transaction
Documents (except for the obligations described under clause (c) above or clause
(l) below) and such failure shall continue for a period of 30 days after written
notice given to the Seller, the Servicer or Atlantic, as the case may be;
(e) Atlantic, the Servicer or the Seller shall fail to pay its debts
generally as they come due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors, or shall institute any proceeding seeking to adjudicate it insolvent
or seeking a liquidation, or shall take advantage of any insolvency act, or
shall commence a case or other proceeding naming it as debtor under the United
States Bankruptcy Code or similar law,
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domestic or foreign, or a case or other proceeding shall be commenced against
any of Atlantic, the Servicer or the Seller under the United States Bankruptcy
Code or similar law, domestic or foreign, or any proceeding shall be instituted
against any of Atlantic, the Servicer or the Seller seeking liquidation of its
assets and such Person shall fail to take appropriate action resulting in the
withdrawal or dismissal of such proceeding within 30 days or there shall be
appointed or any of Atlantic, the Servicer or the Seller shall consent to, or
acquiesce in, the appointment of a receiver, liquidator, conservator, trustee or
similar official in respect of such Person or the whole or any substantial part
of its properties or assets or such Person shall take any corporate action in
furtherance of any of the foregoing;
(f) the Average Delinquency Ratio as of any Determination Date shall
have been equal to or greater than 5.0%;
(g) the Average Default Rate with respect to any Determination Date
shall have been equal to or greater than 10.0%;
(h) the Average Net Loss Rate with respect to any Determination Date
shall have been equal to or greater than 5.0%;
(i) the occurrence of a Servicer Termination Event under the Pooling
and Servicing Agreement;
(j) the occurrence of an "Event of Default" under and as defined in
any Insurance and Indemnity Agreement or similar agreement among Atlantic and/or
the Seller and/or any Affiliate of Atlantic and Financial Security entered into
with respect to another Series;
(k) a notice of termination with respect to the Lockbox Agreement
shall have been delivered and a replacement Lockbox Bank acceptable to Financial
Security shall not have executed a Lockbox Agreement in form and substance
satisfactory to Financial Security within 30 days of such notice; and
(l) the failure of Atlantic or the Seller to comply with Section
2.03(n) of this Insurance Agreement.
Section 5.02. REMEDIES; WAIVERS. (a) Upon the occurrence of an Event of
Default, Financial Security may exercise any one or more of the rights and
remedies set forth below:
(i) declare the Premium Supplement to be immediately due and
payable, and the same shall thereupon be immediately due and payable,
whether or not Financial Security shall have declared an "Event of Default"
or shall
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have exercised, or be entitled to exercise, any other rights or remedies
hereunder;
(ii) exercise any rights and remedies available under the
Transaction Documents in its own capacity or in its capacity as the Person
entitled to exercise the rights of the Certificateholders in respect of the
Securities; or
(iii) take whatever action at law or in equity may appear
necessary or desirable in its judgment to enforce performance of any
obligation of the Seller or Atlantic under the Transaction Documents.
(b) Unless otherwise expressly provided, no remedy herein conferred
upon or reserved is intended to be exclusive of any other available remedy, but
each remedy shall be cumulative and shall be in addition to other remedies given
under the Transaction Documents or existing at law or in equity. No delay or
failure to exercise any right or power accruing under any Transaction Document
upon the occurrence of any Event of Default or otherwise shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle Financial Security to exercise any remedy
reserved to Financial Security in this Article, it shall not be necessary to
give any notice, other than such notice as may be expressly required in this
Article.
(c) If any proceeding has been commenced to enforce any right or
remedy under this Agreement and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to Financial
Security, then and in every such case the parties hereto shall, subject to any
determination in such proceeding, be restored to their respective former
positions hereunder, and, thereafter, all rights and remedies of Financial
Security shall continue as though no such proceeding had been instituted.
(d) Financial Security shall have the right, to be exercised in its
complete discretion, to waive any covenant, Default or Event of Default by a
writing setting forth the terms, conditions and extent of such waiver signed by
Financial Security and delivered to the Seller and Atlantic. Any such waiver
may only be effected in writing duly executed by Financial Security, and no
other course of conduct shall constitute a waiver of any provision hereof.
Unless such writing expressly provides to the contrary, any waiver so granted
shall extend only to the specific event or occurrence so waived and not to any
other similar event or occurrence.
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ARTICLE VI.
MISCELLANEOUS
Section 6.01. AMENDMENTS, ETC. This Agreement may be amended, modified or
terminated only by written instrument or written instruments signed by the
parties hereto. No act or course of dealing shall be deemed to constitute an
amendment, modification or termination hereof.
Section 6.02. NOTICES. All demands, notices and other communications to
be given hereunder shall be in writing (except as otherwise specifically
provided herein) and shall be mailed by registered mail or personally delivered
or telecopied to the recipient as follows:
(a) To Financial Security: Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Re: Atlantic Auto Grantor Trust 1996-A
6.70% Asset Backed Certificates, Class A
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518,
(212) 339-3529
(in each case in which notice or other
communication to Financial Security
refers to an Event of Default, a claim
on the Policy or with respect to which
failure on the part of Financial
Security to respond shall be deemed to
constitute consent or acceptance, then a
copy of such notice or other
communication should also be sent to the
attention of each of the General Counsel
and the Head-Financial Guaranty Group
and shall be marked to indicate "URGENT
MATERIAL ENCLOSED.")
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(b) To the Seller: Atlantic Auto Third Funding
Corporation
c/o Atlantic Auto Finance
Corporation
(for so long 800 Perinton Hills Office Park
as Atlantic is the P.O. Box 1502
Servicer) Fairport, New York 14450
Telecopy No: (716) 421-1954
Confirmation: (716) 421-1955
(c) To Atlantic: Atlantic Auto Finance Corporation
800 Perinton Hills Office Park
P.O. Box 1502
Fairport, New York 14450
Telecopy No: (716) 421-1954
Confirmation: (716) 421-1955
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other party as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. PAYMENT PROCEDURE. In the event of any payment by Financial
Security for which it is entitled to be reimbursed or indemnified as provided
above, each of the Seller and Atlantic agrees to accept the voucher or other
evidence of payment as PRIMA FACIE evidence of the propriety thereof and the
liability therefor to Financial Security. All payments to be made to Financial
Security under this Agreement shall be made to Financial Security in lawful
currency of the United States of America in immediately available funds to the
account number provided in the Premium Letter before 1:00 p.m. (New York, New
York time) on the date when due or as Financial Security shall otherwise direct
by written notice to the Seller and Atlantic. In the event that the date of any
payment to Financial Security or the expiration of any time period hereunder
occurs on a day which is not a Business Day, then such payment or expiration of
time period shall be made or occur on the next succeeding Business Day with the
same force and effect as if such payment was made or time period expired on the
scheduled date of payment or expiration date. Payments to be made to Financial
Security under this Agreement shall bear interest at the Late Payment Rate from
the date due to the date paid.
Section 6.04. SEVERABILITY. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate or
render unenforceable any other provision hereof. The parties hereto
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<PAGE>
further agree that the holding by any court of competent jurisdiction that any
remedy pursued by any party hereto is unavailable or unenforceable shall not
affect in any way the ability of such party to pursue any other remedy available
to it.
Section 6.05. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 6.06. CONSENT TO JURISDICTION. (a) THE PARTIES HERETO HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED
IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN
ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH
ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OR,
TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE PARTIES HERETO AGREE
THAT A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE
SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THE TRANSACTION DOCUMENTS OR THE
SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS.
(b) To the extent permitted by applicable law, the parties hereto
shall not seek and hereby waive the right to any review of the judgment of any
such court by any court of any other nation or jurisdiction which may be called
upon to grant an enforcement of such judgment.
(c) Each of the Seller and Atlantic hereby irrevocably appoints and
designates CT Corporation System, whose address is 1633 Broadway, New York, New
York 10019, as its true and lawful attorney and duly authorized agent for
acceptance of service of legal process. Each of the Seller and Atlantic agrees
that service of such process upon such Person shall constitute personal service
of such process upon it.
(d) Nothing contained in the Agreement shall limit or affect Financial
Security's right to serve process in any other manner permitted by law or to
start legal proceedings relating to
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any of the Transaction Documents against the Seller or Atlantic or its
respective property in the courts of any jurisdiction.
Section 6.07. CONSENT OF FINANCIAL SECURITY. In the event that Financial
Security's consent is required under any of the Transaction Documents, the
determination whether to grant or withhold such consent shall be made by
Financial Security in its sole discretion without any implied duty towards any
other Person, except as otherwise expressly provided therein.
Section 6.08. COUNTERPARTS. This Agreement
may be executed in counterparts by the parties hereto, and all such
counterparts shall constitute one and the same instrument.
Section 6.09. TRIAL BY JURY WAIVED. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION
WITH ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION
DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER.
Section 6.10. LIMITED LIABILITY. No recourse under any Transaction
Document shall be had against, and no personal liability shall attach to, any
officer, employee, director, affiliate or shareholder of any party hereto, as
such, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise in respect of any of the
Transaction Documents, the Securities or the Policy, it being expressly agreed
and understood that each Transaction Document is solely a corporate obligation
of each party hereto, and that any and all personal liability, either at common
law or in equity, or by statute or constitution, of every such officer,
employee, director, affiliate or shareholder for breaches by any party hereto of
any obligations under any Transaction Document is hereby expressly waived as a
condition of and in consideration for the execution and delivery of this
Agreement.
Section 6.11. ENTIRE AGREEMENT. This Agreement, the Premium Letter and
the Policy set forth the entire agreement between the parties with respect to
the subject matter thereof, and this Agreement supersedes and replaces any
agreement or understanding that may have existed between the parties prior to
the date hereof in respect of such subject matter.
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Section 6.12 NON-PETITION COVENANT. Until one year plus one day shall
have elapsed since the termination of the Trust in accordance with Section 12.1
of the Pooling and Servicing Agreement, Financial Security shall not petition or
otherwise invoke the process of any court or governmental authority for the
purpose of commencing or sustaining a case against the Seller or the Trust under
any federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Seller or the Trust or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the Seller
or the Trust.
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year first above written.
FINANCIAL SECURITY ASSURANCE INC.
By: /s/ Claire M. Robinson
------------------------------------
Name: Claire M. Robinson
Title: Managing Director
ATLANTIC AUTO FINANCE CORPORATION
By: /s/ Richard J. Harrison
------------------------------------
Name: Richard J. Harrison
Title: President
ATLANTIC AUTO THIRD FUNDING CORPORATION
By: /s/ Richard J. Harrison
------------------------------------
Name: Richard J. Harrison
Title: President
<PAGE>
APPENDIX I
DEFINITIONS
"AAFC" means Atlantic Auto Funding Corporation, a Delaware corporation and
a wholly owned subsidiary of Atlantic.
"AAFC ASSIGNMENT" means that certain Assignment dated as of July 19, 1996,
by AAFC for the benefit of Atlantic, pursuant to which AAFC transfers all its
rights to the Receivables and other related property to Atlantic.
"ACCUMULATED FUNDING DEFICIENCY" shall have the meaning provided in Section
412 of the Code and Section 302 of ERISA, whether or not waived.
"BUSINESS DAY" means any day other than (a) a Saturday or Sunday or (b) a
day on which banking institutions in the City of New York are authorized or
obligated by law or executive order to be closed.
"CERTIFICATEHOLDERS" means registered holders of the Securities.
"CLASS B CERTIFICATES" means the $1,417,958.27 Asset Backed Certificates,
Class B, issued and executed by the Trust and authenticated by the Trustee, in
substantially the form set forth in Exhibit B to the Pooling and Servicing
Agreement.
"CNAI" means Citibank North America, Inc., a Delaware corporation.
"CODE" means the Internal Revenue Code of 1986, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"COMMISSION" means the Securities and Exchange Commission.
"COMMONLY CONTROLLED ENTITY" means the Seller or Atlantic and each entity,
whether or not incorporated, which is affiliated with the Seller or Atlantic
pursuant to Section 414(b), (c), (m) or (o) of the Code.
"CUSTODIAL AGREEMENT" means the Custodial Agreement dated as of June 20,
1996, among the Custodian, the Trustee and Atlantic, as such agreement may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof.
"CUSTODIAL RECEIVABLES FILES" shall have the meaning set forth in Section
3.2(a) of the Pooling and Servicing Agreement.
Appendix I
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1
<PAGE>
"CXC" means CXC Incorporated, a Delaware corporation.
"CXC ASSIGNMENT" means that certain Assignment dated as of July 19, 1996,
by CXC for the benefit of AAFC, pursuant to which CXC transfers all its rights
to the Receivables and other related property to AAFC.
"CXC RECEIVABLES PURCHASE AGREEMENT" means the Receivables Purchase
Agreement dated as of August 11, 1995, among AAFC, Atlantic, CXC and Citicorp,
North America, Inc. as agent thereunder.
"DATE OF ISSUANCE" means the date on which the Policy is issued as
specified therein.
"DEFAULT" means any event which results, or which with the giving of notice
or the lapse of time or both would result, in an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"EVENT OF DEFAULT" means any event of default specified in Section 5.01 of
this Agreement.
"EXPIRATION DATE" means the final date of the Term of the Policy, as
specified in the Policy.
"FINANCIAL SECURITY" means Financial Security Assurance Inc., a New York
stock insurance company, its successors and assigns.
"FINANCIAL SECURITY INFORMATION" has the meaning provided in Section
2.01(j) of this Agreement.
"FINANCIAL STATEMENTS" means, with respect to Atlantic and UAG, as the case
may be, its balance sheet as of December 31, 1995 and its statements of income,
retained earnings and cash flows for the 12-month period then ended and the
notes thereto and its balance sheet as of March 31, 1996 and its statements of
income, retained earnings and cash flows for the three months then ended and the
notes thereto, if applicable.
"FISCAL AGENT" means the Fiscal Agent, if any, designated pursuant to the
terms of the Policy.
"INDEMNIFICATION AGREEMENT" means the Indemnification Agreement dated as of
June 20, 1996 among Financial Security, the Seller and the Initial Purchaser, as
the same may be amended,
Appendix I
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2
<PAGE>
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
"INITIAL PURCHASER" means Donaldson, Lufkin & Jenrette Securities
Corporation.
"INITIAL PURCHASER AGREEMENT" means the Purchase Agreement dated July 19,
1996, between the Initial Purchaser and the Seller with respect to the purchase
and sale of the Securities, as the same may be amended, Supplemented or
otherwise modified from time to time.
"INSURANCE AGREEMENT" means this Insurance and Indemnity Agreement, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement dated as of
August 11, 1995 by and among CNAI, AAFC and certain other parties named therein.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IRS" means the Internal Revenue Service.
"LATE PAYMENT RATE" means the lesser of (a) the greater of (i) the per
annum rate of interest, publicly announced from time to time by The Chase
Manhattan Bank at its principal office in the City of New York, as its prime or
base lending rate (any change in such rate of interest to be effective on the
date such change is announced by Chemical Bank) plus 3%, and (ii) the then
applicable highest rate of interest on the Securities and (b) the maximum rate
permissible under applicable usury or similar laws limiting interest rates. The
Late Payment Rate shall be computed on the basis of the actual number of days
elapsed over 360 days.
"LIEN" means, as applied to the property or assets (or the income or
profits therefrom) of any Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind or (b) any arrangement, express or implied, under
which such property or assets are transferred, sequestered or otherwise
identified for the purpose of subjecting or making available the same for the
payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.
Appendix I
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3
<PAGE>
"LOAN AND SECURITY AGREEMENT" means the Loan and Security Agreement dated
as of June 28, 1995 among AAFC, Atlantic and CNAI.
"MATERIAL ADVERSE CHANGE" means, (a) in respect of any Person, a material
adverse change in (i) the business, financial condition, results of operations
or properties of such Person or any of its Subsidiaries or Affiliates, or (ii)
the ability of such Person to perform its obligations under any of the
Transaction Documents to which it is a party and (b) in respect of any
Receivable, a material adverse change in (i) the value or marketability of such
Receivable, or (ii) the probability that amounts now or hereafter due in respect
of such Receivable will be collected on a timely basis.
"MOODY'S" means Moody's Investors Service, Inc., a Delaware corporation,
and any successor thereto, and, if such corporation shall for any reason no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized rating agency designated by
Financial Security.
"MULTIEMPLOYER PLAN" means a multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled Entity
makes contributions or has liability.
"NOTICE OF CLAIM" means a Notice of Claim and Certificate in the form
attached as Exhibit A to Endorsement No. 1 to the Policy.
"OFFERING DOCUMENT" means the Confidential Preliminary Offering Memorandum
dated July 8, 1996 and the Confidential Offering Memorandum dated July 12, 1996,
in each case, of the Seller in respect of the Securities and any amendment or
supplement thereto and any other offering document of the Seller or an Affiliate
thereof in respect of the Securities that makes reference to the Policy.
"OTHER TRUST PROPERTY" means the Trust Property exclusive of the Policy.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
"PERSON" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, business or owner trust, partnership or
other organization or entity (whether governmental or private).
Appendix I
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4
<PAGE>
"PLAN" means any pension plan (other than a Multiemployer Plan) covered by
Title IV of ERISA, which is maintained by a Commonly Controlled Entity or in
respect of which a Commonly Controlled Entity has liability.
"POLICY" means the financial guaranty insurance policy, including any
endorsements thereto, issued by Financial Security with respect to the
Securities, substantially in the form attached as Annex I to this Agreement.
"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing Agreement
dated as of June 20, 1996 among the Seller, Atlantic, as Servicer, and the
Trustee on behalf of the Certificateholders, pursuant to which the Securities
are to be issued and the Receivables are to be serviced and administered, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"PREMIUM" means the premium payable in accordance with Section 3.02 of the
Insurance Agreement and the Premium Supplement, if any.
"PREMIUM LETTER" means the side letter among Financial Security, Atlantic,
the Seller and the Trustee dated July 19, 1996 in respect of the premium payable
in consideration of the issuance of the Policy.
"PREMIUM SUPPLEMENT" means a non-refundable premium, in addition to the
premium payable in accordance with Section 3.02 of this Agreement, payable to
Financial Security in monthly installments commencing on the Premium Supplement
Commencement Date and on each monthly anniversary thereof in accordance with the
terms set forth in the Premium Letter.
"PREMIUM SUPPLEMENT COMMENCEMENT DATE" means the date of occurrence of the
Event of Default in respect of which the Premium Supplement shall have been
declared due and payable in accordance with Section 5.02 of this Agreement.
"PROVIDED DOCUMENTS" means the Transaction Documents and any documents,
agreements, instruments, schedules, certificates, statements, cash flow
schedules, number runs or other writings or data furnished to Financial Security
by or on behalf of the Seller, Atlantic or AAFC with respect to itself, its
Subsidiaries or Affiliates or the Transaction.
"RECEIVABLE" has the meaning provided in the Pooling and Servicing
Agreement.
Appendix I
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5
<PAGE>
"RECEIVABLES PURCHASE AGREEMENT" means the Receivables Purchase Agreement
and Assignment dated as of June 20, 1996 between Atlantic and the Seller.
"REPORTABLE EVENT" means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder.
"RESTRICTIONS ON TRANSFERABILITY" means, as applied to the property or
assets (or the income or profits therefrom) of any Person, in each case whether
the same is consensual or nonconsensual or arises by contract, operation of law,
legal process or otherwise, any material condition to, or restriction on, the
ability of such Person or any transferee therefrom to sell, assign, transfer or
otherwise liquidate such property or assets in a commercially reasonable time
and manner or which would otherwise materially deprive such Person or any
transferee therefrom of the benefits of ownership of such property or assets.
"SECURITIES" means the $45,837,000 of Atlantic Auto Grantor Trust 1996-A,
6.70% Asset Backed Certificates, Class A issued pursuant to the Pooling and
Servicing Agreement.
"SECURITIES ACT" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"SERIES 1996-A" or "SERIES 1996-A CERTIFICATES" means the Series of
Certificates issued on the date hereof pursuant to the Pooling and Servicing
Agreement.
"SERIES OF CERTIFICATES" or "SERIES" means the Series 1996-A Certificates
or any, or as the context may require, all, additional series of securities,
certificates, notes or other obligations issued or arising as described in
paragraph C of the Introductory Statements hereto.
"SERVICER RECEIVABLES FILES" shall have the meaning set forth in Section
3.2(b) of the Pooling and Servicing Agreement.
"SERVICER TERMINATION SIDE LETTER" means the letter from Financial Security
to the Servicer, Trustee and Atlantic dated as of July 19, 1996, with regard to
the renewal term of the Servicer.
"S&P" means Standard & Poor's Ratings Group, division of McGraw Hill, Inc.,
and any successor thereto, and, if such entity
Appendix I
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6
<PAGE>
shall for any reason no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized rating
agency designated by Financial Security.
"SPECIAL EVENT" means the occurrence of any one of the following: (a) an
Event of Default under the Insurance Agreement has occurred and is continuing,
(b) a Trigger Event has occurred and is continuing, (c) any legal proceeding or
binding arbitration is instituted with respect to the Transaction or (d) any
governmental or administrative investigation, action or proceeding is instituted
that would, if adversely decided, result in a Material Adverse Change in respect
of Atlantic, the Seller or the Receivables.
"SPREAD ACCOUNT AGREEMENT" means the Master Spread Account Agreement, dated
as of June 20, 1996 among the Seller, the Collateral Agent, the Trustee and
Financial Security, and as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"STOCK PLEDGE AGREEMENT" means the Stock Pledge and Collateral Agency
Agreement dated as of June 20, 1996, among Financial Security, Atlantic and the
Collateral Agent, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof.
"SUBSIDIARY" means, with respect to any Person (herein referred to as the
"parent"), any corporation, partnership, association or other business entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or more than 50% of
the general partnership interests are, at the time any determination is being
made, owned, controlled or held by the parent or (b) that is, at the time any
determination is being made, otherwise controlled, by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent.
"TERM OF THE AGREEMENT" shall be determined as provided in Section 4.01 of
this Agreement.
"TERM OF THE POLICY" has the meaning provided in the Policy.
"TRANSACTION" means the transactions contemplated by the Transaction
Documents, including the transactions described in the Offering Document.
"TRANSACTION DOCUMENTS" means this Agreement, the Indemnification
Agreement, the Custodial Agreement, the Pooling and Servicing Agreement, the
Premium Letter, the Lockbox
Appendix I
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7
<PAGE>
Agreement, the Stock Pledge Agreement, the Receivables Purchase Agreement, the
AAFC Assignment, the CXC Assignment, the Servicer Termination Side Letter and
the Spread Account Agreement.
"TRUST" means the trust created under the Pooling and Servicing Agreement.
"TRUST ACCOUNTS" means the Collection Account, the Policy Payments Account,
and the Lockbox Account.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"TRUSTEE" means The Chase Manhattan Bank, as trustee under the Pooling and
Servicing Agreement, and any successor thereto as trustee under the Pooling and
Servicing Agreement.
"UAG" means United Auto Group, Inc.
"UNDERFUNDED PLAN" means any Plan that has an Underfunding.
"UNDERFUNDING" means, with respect to any Plan, the excess, if any, of (a)
the present value of all benefits under the Plan (based on the assumptions used
to fund the Plan pursuant to Section 412 of the Code) as of the most recent
valuation date over (b) the fair market value of the assets of such Plan as of
such valuation date.
Appendix I
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8
<PAGE>
APPENDIX II
TO INSURANCE AND INDEMNITY AGREEMENT
CONDITIONS PRECEDENT TO ISSUANCE OF THE POLICY
(a) PAYMENT OF INITIAL PREMIUM AND EXPENSES; PREMIUM LETTER. Financial
Security shall have been paid, by or on behalf of Atlantic, a nonrefundable
Premium and shall have been reimbursed, by or on behalf of Atlantic, for other
fees and expenses identified in Section 3.02 of the Insurance Agreement as
payable at closing and Financial Security shall have received a fully executed
copy of the Premium Letter.
(b) TRANSACTION DOCUMENTS. Financial Security shall have received a copy
of each of the Transaction Documents, in form and substance satisfactory to
Financial Security, duly authorized, executed and delivered by each party
thereto. Without limiting the foregoing, the provisions of the Pooling and
Servicing Agreement relating to the payment to Financial Security of Premium due
on the Policy and the reimbursement to Financial Security of amounts paid under
the Policy shall be in form and substance acceptable to Financial Security in
its sole discretion.
(c) CERTIFIED DOCUMENTS AND RESOLUTIONS. Financial Security shall have
received a copy of (i) the certificate of incorporation and bylaws for each of
the Seller, Atlantic and AAFC and (ii) the resolutions of the board of directors
of each of the Seller, Atlantic and AAFC authorizing the issuance of the
Securities (in the case of Atlantic and the Seller only) and the execution,
delivery and performance by the Seller, Atlantic and AAFC of the Transaction
Documents to which it is a party and the transactions contemplated thereby,
certified by a Secretary or Assistant Secretary of the Seller, Atlantic or AAFC
respectively (which certificate shall state that such certificate of
incorporation and bylaws are in full force and effect without modification on
the Date of Issuance).
(d) INCUMBENCY CERTIFICATE. Financial Security shall have received a
certificate of a Secretary or Assistant Secretary of the Seller, Atlantic and
AAFC respectively, certifying the name and signatures of the officers of the
Seller, Atlantic and AAFC, as the case may be, authorized to execute and deliver
the Transaction Documents to which it is a party, respectively, and that all
consents necessary to execute and deliver such documents have been obtained.
(e) REPRESENTATIONS AND WARRANTIES; CERTIFICATE. The representations and
warranties of the Seller and Atlantic, as the case may be, in the Insurance
Agreement shall be true and correct
Appendix II
----------
1
<PAGE>
as of the Date of Issuance with respect to such Person as if made on the Date of
Issuance and Financial Security shall have received a certificate of an
appropriate officer of the Seller and Atlantic, as the case may be, to that
effect.
(f) OPINIONS OF COUNSEL. Financial Security shall have received opinions
of counsel addressed to Financial Security, Moody's and S&P in respect of the
Seller, Atlantic, AAFC, the other parties to the Transaction Documents and the
Transaction in form and substance satisfactory to Financial Security, addressing
such matters as Financial Security may reasonably request, including without
limitation, the items set forth in Appendix A hereto, and the counsel providing
each such opinion shall have been instructed by its client to deliver such
opinion to the addressees thereof.
(g) APPROVALS, ETC. Financial Security shall have received true and
correct copies of all approvals, licenses and consents, if any, required in
connection with the Transaction.
(h) NO LITIGATION, ETC. No suit, action or other proceeding,
investigation, or injunction or final judgment relating thereto, shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with any of the Transaction Documents or the consummation of the
Transaction.
(i) LEGALITY. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court which would make the transactions contemplated by
any of the Transaction Documents, illegal or otherwise prevent the consummation
thereof.
(j) SATISFACTION OF CONDITIONS OF THE INITIAL PURCHASER AGREEMENT. All
conditions in the Initial Purchaser Agreement to the Initial Purchaser's
obligation to purchase the Securities shall have been satisfied.
(k) ISSUANCE OF RATINGS. Financial Security shall have received
confirmation that the risk secured by the Policy constitutes an investment grade
risk by S&P and an insurable risk by Moody's and that the Securities, when
issued, will be rated "AAA" by S&P and "Aaa" by Moody's.
(l) MAINTENANCE OF RECEIVABLES FILES; FILINGS AND RECORDINGS. Financial
Security shall have received evidence satisfactory to it that: (i) the
Custodial Receivables Files are being maintained by and held in the custody of
the Custodian pursuant to the Custodial Agreement; (ii) the Servicer Receivables
Files are being maintained by the Servicer pursuant
Appendix II
----------
2
<PAGE>
to the Pooling and Servicing Agreement; (iii) all filings necessary to perfect
the interest of the Trust in the Receivables and the Other Trust Property have
been made; and (iv) all taxes, fees and other changes payable in connection with
such filings shall have been paid.
(m) Financial Security shall have received the CXC Assignment, the AAFC
Assignment, a release letter by CNAI and such other documents as are requested
by Financial Security in connection with (i) the assignment by CXC to AAFC of
certain of the Receivables and certain other property related thereto pursuant
to the CXC Assignment and the release by CXC of its Lien on such property, (ii)
the assignment by AAFC to Atlantic of the Receivables and certain other property
related thereto pursuant to the AAFC Assignment and the release by AAFC of its
Lien on such property and (iii) the repayment by AAFC of certain indebtedness
owed by AAFC to CNAI under the Loan and Security Agreement and the release by
CNAI of its Lien on certain of the Receivables and certain other property
related thereto pursuant to the Loan and Security Agreement and the
Intercreditor Agreement, in each case in form and substance satisfactory to
Financial Security in its sole discretion, including, without limitation,
delivery to the Trustee for filing of amendments to, and/or terminations of, UCC
financing statements to be filed in such locations as are required to evidence
the release of any Liens of CXC, AAFC, CNAI and other relevant parties, as the
case may be, on the Receivables and the Other Trust Property.
(n) NO DEFAULT. No Default or Event of Default shall have occurred.
(o) ADDITIONAL ITEMS. Financial Security shall have received such other
documents instruments, approvals or opinions requested by Financial Security as
may be reasonably necessary to effect the Transaction, including but not limited
to evidence satisfactory to Financial Security that all conditions precedent, if
any, in the Transaction Documents have been satisfied.
Appendix II
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3
<PAGE>
EXECUTION COPY
MASTER SPREAD ACCOUNT AGREEMENT,
dated as of June 20, 1996
among
ATLANTIC AUTO THIRD FUNDING CORPORATION,
FINANCIAL SECURITY ASSURANCE INC.
and
THE CHASE MANHATTAN BANK,
as Trustee and as Collateral Agent
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Rules of Interpretation. . . . . . . . . . . . . . . . . . 12
ARTICLE II.
REVERSIONARY HOLDERS; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.01. Reversionary Holders.. . . . . . . . . . . . . . . . . . . 12
Section 2.02. Series Supplements.. . . . . . . . . . . . . . . . . . . . 13
Section 2.03. Creation and Grant of Security Interest by
the Seller.. . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.04. Priority.. . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.05. Seller Remains Liable. . . . . . . . . . . . . . . . . . . 15
Section 2.06. Maintenance of Collateral. . . . . . . . . . . . . . . . . 16
Section 2.07. Termination and Release of Rights. . . . . . . . . . . . . 16
Section 2.08. Non-Recourse Obligations of Seller and the
Reversionary Holders.. . . . . . . . . . . . . . . . . . 18
ARTICLE III.
SPREAD ACCOUNTS
Section 3.01. Establishment of Spread Accounts; Initial
Deposits into Spread Accounts. . . . . . . . . . . . . . 18
Section 3.02. Investments. . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.03. Distributions; Priority of Payments. . . . . . . . . . . . 20
Section 3.04. General Provisions Regarding Spread
Accounts.. . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.05. Reports by the Collateral Agent. . . . . . . . . . . . . . 25
ARTICLE IV.
THE COLLATERAL AGENT
Section 4.01. Appointment and Powers.. . . . . . . . . . . . . . . . . . 25
Section 4.02. Performance of Duties. . . . . . . . . . . . . . . . . . . 26
Section 4.03. Limitation on Liability. . . . . . . . . . . . . . . . . . 26
Section 4.04. Reliance upon Documents. . . . . . . . . . . . . . . . . . 27
Section 4.05. Successor Collateral Agent.. . . . . . . . . . . . . . . . 27
Section 4.06. Indemnification. . . . . . . . . . . . . . . . . . . . . . 29
Section 4.07. Compensation and Reimbursement.. . . . . . . . . . . . . . 30
Section 4.08. Representations and Warranties of the
Collateral Agent.. . . . . . . . . . . . . . . . . . . . 30
Section 4.09. Waiver of Setoffs. . . . . . . . . . . . . . . . . . . . . 31
Section 4.10. Control by the Controlling Party.. . . . . . . . . . . . . 31
<PAGE>
ARTICLE V.
COVENANTS OF THE SELLER
Section 5.01. Preservation of Collateral.. . . . . . . . . . . . . . . . 31
Section 5.02. Opinions as to Collateral. . . . . . . . . . . . . . . . . 32
Section 5.03. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.04. Waiver of Stay or Extension Laws; Marshalling
of Assets. . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.05. Noninterference, etc.. . . . . . . . . . . . . . . . . . . 33
Section 5.06. Seller Changes.. . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VI.
CONTROLLING PARTY; INTERCREDITOR PROVISIONS
Section 6.01. Appointment of Controlling Party.. . . . . . . . . . . . . 34
Section 6.02. Controlling Party's Authority. . . . . . . . . . . . . . . 35
Section 6.03. Rights of Secured Parties. . . . . . . . . . . . . . . . . 36
Section 6.04. Degree of Care.. . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII.
REMEDIES UPON DEFAULT
Section 7.01. Remedies upon a Default. . . . . . . . . . . . . . . . . . 37
Section 7.02. Waiver of Default. . . . . . . . . . . . . . . . . . . . . 37
Section 7.03. Restoration of Rights and Remedies.. . . . . . . . . . . . 37
Section 7.04. No Remedy Exclusive. . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII.
MISCELLANEOUS
Section 8.01. Further Assurances.. . . . . . . . . . . . . . . . . . . . 38
Section 8.02. Waiver.. . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.03. Amendments, Waivers. . . . . . . . . . . . . . . . . . . . 38
Section 8.04. Severability.. . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.05. Nonpetition Covenant.. . . . . . . . . . . . . . . . . . . 39
Section 8.06. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 8.07. Term of this Agreement.. . . . . . . . . . . . . . . . . . 41
Section 8.08. Assignments, Third-Party Rights;
Reinsurance. . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.09. Consent of Controlling Party.. . . . . . . . . . . . . . . 42
Section 8.10. Trial by Jury Waived . . . . . . . . . . . . . . . . . . . 42
Section 8.11. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.12. Consents to Jurisdiction.. . . . . . . . . . . . . . . . . 43
Section 8.13. Limitation of Liability. . . . . . . . . . . . . . . . . . 44
Section 8.14. Determination of Adverse Effect. . . . . . . . . . . . . . 44
Section 8.15. Counterparts.. . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.16. Headings.. . . . . . . . . . . . . . . . . . . . . . . . . 44
<PAGE>
MASTER SPREAD ACCOUNT AGREEMENT
MASTER SPREAD ACCOUNT AGREEMENT, dated as of June 20, 1996 (the
"Agreement"), by and among ATLANTIC AUTO THIRD FUNDING CORPORATION, a Delaware
corporation (the "Seller"), FINANCIAL SECURITY ASSURANCE INC., a New York stock
insurance company ("Financial Security") and THE CHASE MANHATTAN BANK, a New
York banking corporation, in its capacities as Trustee under each Securitization
Agreement referred to below, in such capacity as agent for the
Certificateholders and Financial Security with respect to the related Series
(the "Trustee") and as Collateral Agent (as defined below).
RECITALS
1. Atlantic Auto Grantor Trust 1996-A (the "Series 1996-A Trust") was
formed pursuant to a Pooling and Servicing Agreement dated as of June 20, 1996,
as such agreement may be supplemented, amended or modified from time to time
(the "Series 1996-A Securitization Agreement") among the Seller, Atlantic Auto
Finance Corporation, a Delaware corporation ("Atlantic"), in its capacity as
Servicer (the "Servicer"), and the Trustee, in its capacities as Trustee, Backup
Servicer and Collateral Agent.
2. Pursuant to the Series 1996-A Securitization Agreement, the Seller
assigned to the Trustee all of its right, title and interest in and to the
Receivables and certain other property of the Series 1996-A Trust Estate.
3. The Seller requested that Financial Security issue the Series 1996-A
Policy to the Trustee to guarantee payment of the Guaranteed Distributions (as
defined in such Policy) on each Distribution Date in respect of the Series 1996-
A Certificates.
4. In partial consideration of the issuance of the Series 1996-A Policy,
the Seller has agreed that Financial Security shall have certain rights as
Controlling Party, to the extent set forth herein with respect to the
Receivables and the Series 1996-A Trust Estate.
5. In order to secure the performance of the Secured Obligations, the
Seller, in its capacity as the agent of the Reversionary Holders, has agreed to
pledge the Collateral to the Collateral Agent for the benefit of Financial
Security and for the benefit of the Trustees on behalf of the Trusts, upon the
terms and conditions set forth herein.
6. It is contemplated that Atlantic and/or the Seller or any other
Affiliate of Atlantic may in the future enter into one or more additional
Securitization Agreements pursuant to which
<PAGE>
the Seller, Atlantic or such other Affiliate of Atlantic will sell or pledge all
or a portion of its right, title and interest in and to pools of Receivables
and/or other financial assets or property to a Trust or other Person and in
connection therewith Financial Security in its discretion may issue additional
Policies with respect to certain guaranteed distributions or scheduled payments
with respect to the corresponding additional Series. In connection with any
such issuance of additional Policies, it is contemplated that Financial Security
will obtain certain Controlling Party rights with respect to the related Series,
and that, in connection with each such additional Series, the parties hereto
will enter into a Series Supplement hereto pursuant to which Atlantic and/or the
Seller will assign, or cause to be assigned, additional Collateral pursuant to
the terms hereof.
AGREEMENTS
In consideration of the premises, and for other good and valuable
consideration, the adequacy, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. DEFINITIONS. Unless defined in this Agreement, capitalized
terms used in this Agreement shall have the meaning given such terms in the
applicable Securitization Agreement or Series Supplement, as identifiable from
the context in which such term is used. The following terms shall have the
following respective meanings:
"AGREEMENT" means this Master Spread Account Agreement, as amended,
supplemented as otherwise modified from time to time in accordance with the
terms hereof.
"ATLANTIC" means Atlantic Auto Finance Corporation, a Delaware corporation.
"AUTHORIZED OFFICER" means, (i) with respect to Financial Security, the
Chairman of the Board, the President, the Executive Vice President or any
Managing Director of Financial Security, (ii) with respect to the Trustees or
the Collateral Agent, any Vice President, Second Vice President or Trust Officer
thereof, and (iii) with respect to the Seller, the President, any Vice President
or the Controller or any other officer or employee having similar functions.
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<PAGE>
"CERTIFICATEHOLDERS" means the holders of the Certificates of a Series as
more particularly described in the Securitization Agreement with respect to such
Series.
"CERTIFICATES" means the "certificates", "notes" or other obligations
issued or arising under a Securitization Agreement.
"CHASE MANHATTAN BANK" means The Chase Manhattan Bank, a New York banking
corporation.
"COLLATERAL" means the Series 1996-A Collateral, and with respect to any
other Series, all collateral delivered hereunder with respect to each of such
Series, as specified in the related Series Supplement.
"COLLATERAL AGENT" means, initially, Chase Manhattan Bank, in its capacity
as collateral agent on behalf of the Secured Parties, including its successors
in interest, until a successor Person shall have become the Collateral Agent
pursuant to Section 4.05 hereof, and thereafter "Collateral Agent" shall mean
such successor Person.
"COLLATERAL AGENT FEE" means, with respect to the Series 1996-A
Certificates, the annual fee payable to the Collateral Agent for services
rendered as the Collateral Agent, which Collateral Agent Fee is included in the
fees paid to Chase Manhattan Bank pursuant to the Series 1996-A Pooling and
Servicing Agreement.
"COLLECTION ACCOUNT" means the Collection Account applicable to any Series,
as specified in the related Securitization Agreement.
"CONTROLLING PARTY" means, with respect to a Series, at any time, the
Person designated as the Controlling Party at such time pursuant to Section 6.01
hereof.
"DEEMED CURED" means, as of a Determination Date, with respect to a Trigger
Event that has occurred with respect to a Series, that no Trigger Event with
respect to such Series shall have occurred as of such Determination Date or as
of any of the two consecutively preceding Determination Dates.
"DEFAULT" means with respect to any Series, at any time, (i) if Financial
Security is then the Controlling Party with respect to such Series, any
Insurance Agreement Event of Default with respect to such Series, and (ii) if
the Trustee is then the Controlling Party with respect to such Series, any
Servicer Termination Event with respect to such Series.
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<PAGE>
"DEFICIENCY CLAIM DATE" means, with respect to any Distribution Date, the
fourth Business Day preceding such Distribution Date.
"DELIVERY" means with respect to the Collateral:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(l)(i) of the UCC (other
than certificated securities) and are susceptible of physical delivery,
transfer thereof to the Collateral Agent by physical delivery to the
Collateral Agent, indorsed to, or registered in the name of, the Collateral
Agent or its nominee or indorsed in blank and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Collateral to the Collateral
Agent free and clear of any adverse claims, consistent with changes in
applicable law or regulations or the interpretation thereof;
(b) with respect to a "certificated security" (as defined in Section
8-102(1)(a) of the UCC), transfer thereof:
(i) by physical delivery of such certificated security to the
Collateral Agent, provided that if the certificated security is in
registered form, it shall be indorsed to, or registered in the name
of, the Collateral Agent or indorsed in blank;
(ii) by physical delivery of such certificated security to a
"financial intermediary" (as defined in Section 8-313(4) of the UCC)
of the Collateral Agent specially indorsed to or issued in the name of
the Collateral Agent;
(iii) by the sending by a financial intermediary, not a "clearing
corporation" (as defined in Section 8-102(3) of the UCC), of a
confirmation of the purchase and the making by such financial
intermediary of entries on its books and records identifying as
belonging to the Collateral Agent of (A) a specific certificated
security in the financial intermediary's possession, (B) a quantity of
securities that constitute or are part of a fungible bulk of
certificated securities in the financial intermediary's possession, or
(C) a quantity of securities that constitute or are part of a fungible
bulk of securities shown on the account of the financial intermediary
on the books of another financial intermediary; or
-4-
<PAGE>
(iv) by the making by a clearing corporation of appropriate
entries on its books reducing the appropriate securities account of
the transferor and increasing the appropriate securities account of
the Collateral Agent or a Person designated by the Collateral Agent by
the amount of such certificated security, provided that in each case:
(A) the clearing corporation identifies such certificated security for
the sole and exclusive account of the Collateral Agent or the Person
designated by the Collateral Agent, (B) such certificated security
shall be subject to the clearing corporation's exclusive control, (C)
such certificated security is in bearer form or indorsed in blank or
registered in the name of the clearing corporation or custodian bank
or a nominee or either of them, (D) custody of such certificated
security shall be maintained by such clearing corporation or a
"custodian bank" (as defined in Section 8-102(4) of the UCC) or the
nominee of either subject to the control of the clearing corporation
and (E) such certificated security is shown on the account of the
transferor thereof on the books of the clearing corporation prior to
the making of such entries; and such additional or alternative
procedures as may hereafter become appropriate to effect the complete
transfer of ownership of any such Collateral to the Collateral Agent
free and clear of any adverse claims, consistent with changes in
applicable law or regulations or the interpretation thereof;
(c) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book entry regulations, the following
procedures, all in accordance with applicable law, including applicable
federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such property to an appropriate book-entry account
maintained with a Federal Reserve Bank by a financial intermediary which is
also a "depositary" pursuant to applicable federal regulations and issuance
by such financial intermediary of a deposit advice or other written
confirmation of such book-entry registration to the Collateral Agent of the
purchase by the financial intermediary on behalf of the Collateral Agent of
such book-entry security; the making by such financial intermediary of
entries in its books and records identifying such book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations as belonging to the Collateral Agent and indicating that such
financial intermediary holds such book-entry security solely
-5-
<PAGE>
an agent for the Collateral Agent; and such additional or alternative
procedures as may hereafter become appropriate to effect complete transfer
of ownership of any such Collateral to the Collateral Agent free of any
adverse claims, consistent with changes in applicable law or regulations or
the interpretation thereof;
(d) with respect to any item of Collateral that is an "uncertificated
security" (as defined in Section 8-102(1)(b) of the UCC) and that is not
governed by clause (c) above, transfer thereof:
(i) by registration of the transfer thereof to the Collateral
Agent, on the books and records of the issuer thereof;
(ii) by the sending of a confirmation by a financial
intermediary of the purchase, and the making by such financial
intermediary of entries on its books and records identifying as
belonging to the Collateral Agent (A) a quantity of securities
which constitute or are part of a fungible bulk of uncertificated
securities registered in the name of the financial intermediary
or (B) a quantity of securities which constitute or are part of a
fungible bulk of securities shown on the account of the financial
intermediary on the books of another financial intermediary; or
(iii) by the making by a clearing corporation of appropriate
entries on its books reducing the appropriate account of the
transferor and increasing the account of the Collateral Agent or
a person designated by the Collateral Agent by the amount of such
uncertificated security, provided that in each case: (A) the
clearing corporation identifies such uncertificated security for
the sole and exclusive use of the Collateral Agent or the Person
designated by the Collateral Agent, (B) such uncertificated
security is registered in the name of the clearing corporation or
a custodian bank or a nominee of either, and (C) such
uncertificated security is shown on the account of the transferor
on the books of the clearing corporation prior to the making of
such entries; and
(e) in each case of delivery contemplated herein, the Collateral
Agent shall make appropriate notations on its records, and shall cause same
to be made of the records of
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<PAGE>
its nominees, indicating that such securities are held in trust pursuant to
and as provided in this Agreement.
"FINAL TERMINATION DATE" means, with respect to a Series, the date that is
the later of (i) the Insurer Termination Date with respect to such Series and
(ii) the Trustee Termination Date with respect to such Series.
"FINANCIAL SECURITY DEFAULT" means, with respect to any Series, any one of
the following events shall have occurred and be continuing:
(a) Financial Security shall have failed to make a payment required
under the related Policy;
(b) Financial Security shall have (i) filed a petition or commenced
any case or proceeding under any provision or chapter of the United States
Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization,
(ii) made a general assignment for the benefit of its creditors, or
(iii) had an order for relief entered against it under the United States
Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization which
is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a
final and nonappealable order, judgment or decree (i) appointing a
custodian, trustee, agent or receiver for Financial Security or for all or
any material portion of its property or (ii) authorizing the taking of
possession by a custodian, trustee, agent or receiver of Financial Security
(or the taking of possession of all or any material portion of the property
of Financial Security).
"GUARANTEED DISTRIBUTIONS" shall have the meaning set forth in the related
Policy.
"INITIAL SPREAD ACCOUNT DEPOSIT" means, with respect to the Series 1996-A
Certificates, an amount equal to 1% of the Series 1996-A Initial Balance or
$472,549.58.
"INSURANCE AGREEMENT" means, with respect to any Series, the Insurance and
Indemnity Agreement among Financial Security and/or Atlantic and/or the Seller
and such other parties as may be named therein, pursuant to which Financial
Security issued a Policy to the Trustee.
-7-
<PAGE>
"INSURER SECURED OBLIGATIONS" means, with respect to a Series, all amounts
and obligations which may at any time be owed to or on behalf of Financial
Security (or any agents, accountants or attorneys for Financial Security) under
the Insurance Agreement related to such Series or under any Transaction Document
in respect of such Series, regardless of whether such amounts are owed now or in
the future, whether liquidated or unliquidated, contingent or noncontingent.
"INSURER TERMINATION DATE" means, with respect to any Series, the date
which is the latest of (i) the date of the expiration of all Policies issued in
respect of such Series, (ii) the date on which Financial Security shall have
received payment and performance in full of all Insurer Secured Obligations with
respect to such Series and (iii) the latest date any payment referred to above
could be avoided as a preference or otherwise under the United States Bankruptcy
Code or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, as specified in an
Opinion of Counsel delivered to the Collateral Agent and the Trustee.
"LIEN" means any security interest, lien, change, pledge, preference,
equity or encumbrance of any kind, including tax liens, mechanics' liens and any
liens that attach by operation of the law.
"MONTHLY PERIOD" means, with respect to a Determination Date or a
Distribution Date, the calendar month immediately preceding the month in which
such Determination Date or Distribution Date occurs (such calendar month being
referred to as the "related" Monthly Period with respect to such Determination
Date or Distribution Date).
"NON-CONTROLLING PARTY" means with respect to a Series at any time, the
Secured Party that is not the Controlling Party at such time.
"OPINION OF COUNSEL" means a written opinion of counsel acceptable, as to
form, substance and issuing counsel, to the Controlling Party.
"POLICY" means the Series 1996-A Policy and any insurance policy
subsequently issued by Financial Security with respect to a Series.
"REQUISITE AMOUNT" means, with respect to Series 1996-A, as of any
Determination Date after giving effect to any distributions of principal on the
Series 1996-A Class A Certificates to be made on the related Distribution Date,
the greater of (a) the lesser of (i) 1.5% of the Series 1996-A
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<PAGE>
Initial Balance and (ii) the greater of (A) the Series 1996-A Balance as of such
Determination Date and (B) $100,000, and (b) (i) if no Trigger Event shall have
occurred as of such Determination Date and all previous Trigger Events have been
Deemed Cured, and no Insurance Agreement Event of Default shall have occurred as
of such Determination Date, 6% of the Series 1996-A Balance as of such
Determination Date; (ii) if a Trigger Event shall have occurred as of such
Determination Date (and until such Trigger Event is Deemed Cured) and no
Insurance Agreement Event of Default shall have occurred as of such
Determination Date, 12% of the Series 1996-A Balance as of such Determination
Date; or (iii) if an Insurance Agreement Event of Default shall have occurred as
of such Determination Date, an unlimited amount.
"REVERSIONARY HOLDER" has the meaning specified in Section 2.01 hereof.
"SCHEDULED PAYMENTS" shall have the meaning set forth in the related
Policy.
"SECURED OBLIGATIONS" means, with respect to each Series the Insurer
Secured Obligations with respect to such Series and the Trustee Secured
Obligations with respect to such Series.
"SECURED PARTIES" means Financial Security and the Trustee.
"SECURITIZATION AGREEMENT" means, with respect to the Series 1996-A
Certificates, the Series 1996-A Securitization Agreement and, for each other
Series created pursuant to a Securitization Agreement, the "Pooling and
Servicing Agreement", "Sale and Servicing Agreement", "Indenture", "Receivables
Purchase Agreement" or any other financing document related to such Series.
"SECURITY INTERESTS" means, with respect to the Series 1996-A Certificates,
the security interests and Liens in the Series 1996-A Collateral granted
pursuant to Section 2.03 hereof, and, with respect to any other Series, the
security interests and Liens in the related Collateral granted pursuant to the
related Series Supplement.
"SERIES 1996-A BALANCE" means with respect to any Determination Date, the
sum of the Class A Certificate Balance and the Class B Certificate Balance as of
the related Distribution Date, after giving effect to any distributions of
principal to be made on the Class A Certificates and Class B Certificates on
such Distribution Date.
"SERIES 1996-A CERTIFICATES" means the Series of Certificates issued
pursuant to the Series 1996-A Securitization
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<PAGE>
Agreement (any such class of such Series of Certificates referred to herein as
"Series 1996-A Class A Certificates," or "Series 1996-A Class B Certificates").
"SERIES 1996-A CLASS B SUB-ACCOUNT" means the sub-account of the Series
1996-A Spread Account established pursuant to Section 3.01(a) hereof.
"SERIES 1996-A COLLATERAL" has the meaning specified in Section 2.03(a)
hereof.
"SERIES 1996-A INITIAL BALANCE" means $47,254,958.27.
"SERIES 1996-A INSURANCE AGREEMENT" means the Insurance Agreement related
to the Series 1996-A Certificates.
"SERIES 1996-A INSURER SECURED OBLIGATIONS" means the Insurer Secured
Obligations with respect to the Series 1996-A Certificates.
"SERIES 1996-A POLICY" means the Policy issued with respect to the Series
1996-A Class A Certificates.
"SERIES 1996-A REVERSIONARY HOLDERS" has the meaning specified in Section
2.01 hereof.
"SERIES 1996-A SECURED OBLIGATIONS" means the Secured Obligations related
to the Series 1996-A Certificates.
"SERIES 1996-A SECURITIZATION AGREEMENT" has the meaning set forth in the
first recital to this Agreement.
"SERIES 1996-A SELLER SUB-ACCOUNT" means the sub-account of the Series
1996-A Spread Account established pursuant to Section 3.01(a) hereof.
"SERIES 1996-A SPREAD ACCOUNT" has the meaning specified in Section 3.01(a)
hereof.
"SERIES 1996-A TRUST" has the meaning provided in the first recital to this
Agreement.
"SERIES OF CERTIFICATES" or "SERIES" means the Series 1996-A Certificates
or, as the context may require, any other series of Certificates issued or
arising as described in Section 2.02 hereof, or collectively, all such series.
"SERIES SUPPLEMENT" means a supplement hereto executed by the parties
hereto in accordance with Section 2.02 hereof.
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<PAGE>
"SERVICER TERMINATION SIDE LETTER" shall have the meaning set forth in the
Insurance Agreement.
"SPREAD ACCOUNT" has the meaning specified in Section 3.01(a) hereof.
"SPREAD ACCOUNT ELIGIBLE INVESTMENTS" means Eligible Investments held by
the Collateral Agent in a Spread Account and with respect to which the
Collateral Agent has taken Delivery.
"SPREAD ACCOUNT SHORTFALL" means, with respect to any Series and any
Distribution Date, the excess, if any, of (a) the Requisite Amount for such
Series as of the related Determination Date over (b) the amount on deposit in
the related Spread Account after making any withdrawals therefrom required by
priorities FIRST, SECOND, and THIRD of Section 3.03(b) hereof.
"TRANSACTION DOCUMENTS" means, with respect to a Series, this Agreement,
each of the applicable Securitization Agreement, the Insurance Agreement, the
Indemnification Agreement, the Receivables Purchase Agreement, the Lockbox
Agreement, the Premium Letter, the Servicer Termination Side Letter, the
Custodial Agreement, the Initial Purchaser Agreement (as defined in the
Insurance Agreement) the Stock Pledge Agreement (as defined in the Insurance
Agreement) and any other financing document related to such Series.
"TRIGGER EVENT" means, with respect to Series 1996-A, that any one of the
following events shall have occurred and shall not have terminated: (a) the
Average Delinquency Ratio as of any Determination Date is equal to or greater
than 4.0%; or (b) the Average Default Rate with respect to a Determination Date
is equal to or greater than 7.0%; or (c) the Average Net Loss Rate as of any
Determination Date is equal to or greater than 3.5%.
"TRUST" means a trust formed pursuant to a Securitization Agreement.
"TRUST ESTATE" with respect to any Series means the property assigned to
the Trustee or other Person or held in the estate of the Trust, in each case
pursuant to the related Securitization Agreement.
"TRUSTEE" means with respect to any Series, the Trustee named in the
related Securitization Agreement.
"TRUSTEE SECURED OBLIGATIONS" means, with respect to a Series, all amounts
and obligations which Atlantic or the Seller may at any time owe to or on behalf
of the Trustee, the Trust or the Certificateholders under the Securitization
Agreement with respect to such Series.
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"TRUSTEE TERMINATION DATE" means, with respect to any Series, the date
which is the latest of (i) the date on which the Trustee shall have received, as
Trustee for the holders of the Certificates of such Series, payment and
performance in full of all Trustee Secured Obligations arising out of or
relating to such Series and (ii) the date on which all payments in respect of
the Certificates shall have been made and the related Trust shall have been
terminated pursuant to the terms of the related Securitization Agreement and
(iii) the latest date any payment referred to above could be avoided as a
preference or otherwise under the United States Bankruptcy Code or any other
similar federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, as specified in an Opinion of Counsel delivered
to the Collateral Agent and the Trustee.
"UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform Commercial Code in
effect in the relevant jurisdiction, as the same may be amended from time to
time.
"UNREIMBURSED AMOUNTS" has the meaning specified in Section 3.03(b) hereof.
Section 1.02. RULES OF INTERPRETATION. The terms "hereof," "herein" or
"hereunder," unless otherwise modified by more specific reference, shall refer
to this Agreement in its entirety. Unless otherwise indicated in context, the
terms "Article," "Section," "Appendix," "Exhibit" or "Annex" shall refer to an
Article or Section of, or Appendix, Exhibit or Annex to, this Agreement. The
definition of a term shall include the singular, the plural, the past, the
present, the future, the active and the passive forms of such term. A term
defined herein and used herein preceded by a Series designation, shall mean such
term as it relates to the Series designated.
ARTICLE II.
REVERSIONARY HOLDERS; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.01. REVERSIONARY HOLDERS. It is anticipated that each
Securitization Agreement will require that certain amounts be deposited into a
Spread Account. With respect to any Series, the Person or Persons who will
ultimately be entitled to receive distributions of amounts released from the
related Spread Account are the "REVERSIONARY HOLDERS" with respect to such
Spread Account and Series and may be classified into different classes of
Reversionary Holders pursuant to the applicable Securitization Agreement and
Section 3.03 hereof. With respect to the Series 1996-A Certificates, the
Reversionary Holders (the "Series 1996-A Reversionary Holders") shall be the
Seller and the Class B Certificateholders.
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It is intended by the parties hereto that the Collateral shall constitute
property held in trust by the Collateral Agent, to provide for the payment of
the Secured Obligations, and that such Collateral and any property rights
appurtenant thereto shall vest in the related Reversionary Holders only when
such Collateral is released to such Reversionary Holders in accordance with
Section 3.03(b) hereof.
Notwithstanding the foregoing, each Reversionary Holder may treat the
deposit of the related Collateral into the related Spread Account as the receipt
by such Reversionary Holder of such Collateral for federal and state income
taxes, as may be required by law. With respect to the Series 1996-A Collateral,
(i) the Seller shall only treat the deposit of such Collateral into the Series
1996-A Seller Sub-account of the Series 1996-A Spread Account as the receipt by
the Seller of such Collateral for federal and state income taxes, and (ii) the
Class B Certificateholders shall only treat the deposit of such Collateral into
the Series 1996-A Class B Sub-account of the Series 1996-A Spread Account as the
receipt by the Class B Certificateholders of such Collateral for federal and
state income taxes.
The Series 1996-A Securitization Agreement and each other Securitization
Agreement in which the Seller is not itself the sole Reversionary Holder shall
provide that the Seller shall be deemed to be the agent of the related
Reversionary Holders for the purpose of perfecting the Collateral Agent's
Security Interest in the related Collateral. Each Securitization Agreement
shall additionally provide that the Reversionary Holders agree to execute and
deliver such instruments of conveyance, assignment, grant, confirmation, etc.,
as well as any financing statements, in each case, as the Controlling Party
shall consider reasonably necessary in order to perfect the Collateral Agent's
Security Interest in the related Collateral.
Section 2.02. SERIES SUPPLEMENTS. The parties hereto agree that the
Seller will have the option to enter into a Series Supplement hereto with
respect to each Series, the Secured Obligations with respect to which are to be
secured by Collateral held pursuant to the provisions of this Agreement. The
parties will enter into a Series Supplement only if the following conditions
shall have been satisfied:
(i) The Seller shall have sold or pledged all or a portion of its
right, title and interest in and to a pool of Receivables and/or other
financial assets or property to a Trust or other Person pursuant to a
Securitization Agreement;
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(ii) Financial Security shall have issued a Policy in respect of the
Guaranteed Distributions or Scheduled Payments, as the case may be, with
respect to the senior class of the Series issued or arising pursuant to
such Securitization Agreement; and
(iii) Pursuant to the related Series Supplement the related
Collateral specified herein shall be administered by the Collateral Agent
substantially on the terms set forth in Section 2.03 hereof.
Section 2.03. CREATION AND GRANT OF SECURITY INTEREST BY THE SELLER.
(a) To secure the performance of the Series 1996-A Secured Obligations and
the Secured Obligations with respect to each other Series to the extent provided
herein, the Seller, including in its capacity as agent on behalf of the
Reversionary Holders, hereby pledges, assigns, grants, transfers and conveys to
the Collateral Agent, on behalf of and for the benefit of the Secured Parties, a
lien on and security interest in (which lien and security interest is intended
to be prior to all other Liens), all of its right, title and interest in and to
the following (all being collectively referred to herein as the "Series 1996-A
Collateral" and constituting Collateral hereunder):
(i) the amounts distributed to the Series 1996-A Spread Account
pursuant to Sections 5.5(a)(vi), 5.5(a)(vii) and 5.5(a)(x) of the Series
1996-A Securitization Agreement and all rights and remedies that the
Reversionary Holders may have to enforce such distributions, whether under
the Series 1996-A Securitization Agreement or otherwise;
(ii) the Series 1996-A Spread Account established pursuant to Section
3.01 hereof, and each other account established by the Seller and
maintained by the Collateral Agent (including, without limitation, the
Initial Spread Account Deposit related thereto and all additional monies,
checks, securities, investments and other documents from time to time held
in or evidencing any such accounts);
(iii) all of the Seller's right, title and interest in its capacity
as a Series 1996-A Reversionary Holder and as agent for all other Series
1996-A Reversionary Holders, in and to investments made with proceeds of
the property described in clauses (i) and (ii) above or made with amounts
on deposit in the Series 1996-A Spread Account; and
(iv) all distributions, revenues, products, substitutions, benefits,
profits and proceeds, in whatever form, of any of the foregoing.
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(b) To effectuate the provisions and purposes of this Agreement, including
for the purpose of perfecting the security interests granted hereunder, the
Seller represents and warrants that it has, prior to the execution of this
Agreement, executed and delivered for filing Series 1996-A on the Series 1996-A
Closing Date an appropriate Uniform Commercial Code financing statement in form
sufficient to assure that upon the filing of such financial statement the
Collateral Agent, as agent for the Secured Parties, will have a first priority
perfected security interest in all Series 1996-A Collateral which can be
perfected by the filing of a financing statement. The Seller shall cause such
financing statement to be filed in New York no later than one Business Day
subsequent to the Series 1996-A Closing Date.
Section 2.04. PRIORITY. The Seller intends the security interests in
favor of the Collateral Agent, for the benefit of the Secured Parties, to be
prior to all other Liens in respect of the Collateral, and the Seller shall take
all actions necessary to obtain and maintain, in favor of the Collateral Agent,
for the benefit of the Secured Parties, a first lien on and a first priority
perfected security interest in the Collateral. Subject to the provisions hereof
specifying the rights and powers of the Controlling Party from time to time to
control certain specified matters relating to the Collateral, each Secured Party
shall have all of the rights, remedies and recourse with respect to the
Collateral afforded a secured party under the Uniform Commercial Code, and all
other applicable law in addition to, and not in limitation of, the other rights,
remedies and recourse granted to such Secured Parties by this Agreement or any
other law relating to the creation and perfection of liens on, and security
interests in, the Collateral.
Section 2.05. SELLER REMAINS LIABLE. The Security Interests are granted
as security only and shall not (i) transfer or in any way affect or modify, or
relieve the Seller from, any obligation to perform or satisfy, any term,
covenant, condition or agreement to be performed or satisfied by the Seller
under or in connection with this Agreement, the Insurance Agreement or any other
Transaction Document to which it is a party or (ii) impose any obligation on any
of the Secured Parties or the Collateral Agent to perform or observe any such
term, covenant, condition or agreement or impose any liability on any of the
Secured Parties or the Collateral Agent for any act or omission on its part
relative thereto or for any breach of any representation or warranty on its part
contained therein or made in connection therewith, except, in each case, to the
extent provided herein and in the other Transaction Documents.
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Section 2.06. MAINTENANCE OF COLLATERAL.
(a) SAFEKEEPING. The Collateral Agent agrees to (i) maintain the
Collateral (other than Spread Account Eligible Investments) received by it and
all records and documents relating thereto at the office of the Collateral Agent
specified in Section 8.06 hereof or such other address within the State of New
York (unless all filings have been made to continue the perfection of the
security interest in the Collateral to the extent such security interest can be
perfected by filing a financing statement, as evidenced by an Opinion of Counsel
delivered by the Seller to the Controlling Party), as may be approved by the
Controlling Party and (ii) take Delivery of and maintain the Spread Account
Eligible Investments and all records and documents relating thereto at its
offices within the State of New York. The Collateral Agent shall keep all
Collateral and related documentation in its possession separate and apart from
all other property that it is holding in its possession and from its own general
assets and shall maintain accurate records pertaining to the Spread Account
Eligible Investments and Spread Accounts included in the Collateral in such a
manner as shall enable the Collateral Agent and the Secured Parties to verify
the accuracy of such record-keeping. The Collateral Agent's books and records
shall at all times show that the Collateral is held by the Collateral Agent as
agent of the Secured Parties and is not the property of the Collateral Agent.
The Collateral Agent will promptly report to each Secured Party and the Seller
any failure on its part to hold the Collateral as provided in this Section
2.06(a) and will promptly take appropriate action to remedy any such failure.
(b) ACCESS. The Collateral Agent shall permit each of the Secured
Parties, the Reversionary Holders or their respective duly authorized
representatives, attorneys, auditors or designees, to inspect the Collateral in
the possession of or otherwise under the control of the Collateral Agent
pursuant hereto at such reasonable times during normal business hours as any
such Secured Party or Reversionary Holder may reasonably request upon not less
than two Business Days' prior written notice. The costs and expenses associated
with any such inspection will be paid by the party making such inspection.
Section 2.07. TERMINATION AND RELEASE OF RIGHTS.
(a) On the Insurer Termination Date relating to a Series, the rights,
remedies, powers, duties, authority and obligations conferred upon Financial
Security pursuant to this Agreement in respect of the Collateral related to such
Series (and, to the extent provided herein, in respect of Collateral related to
other Series) shall terminate and be of no further force and effect and all
rights, remedies, powers, duties, authority and obligations
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of Financial Security with respect to such Collateral shall be automatically
released; PROVIDED that any indemnity provided to or by Financial Security
herein shall survive such Insurer Termination Date. If Financial Security is
acting as Controlling Party with respect to a Series on the related Insurer
Termination Date, Financial Security agrees, at the expense of the Seller, to
execute and deliver such instruments as the successor Controlling Party may
reasonably request to effect such release, and any such instruments so executed
and delivered shall be fully binding on Financial Security and any Person
claiming by, through or under Financial Security.
(b) On the Trustee Termination Date related to a Series, the rights,
remedies, powers, duties, authority and obligations, if any, conferred upon the
Trustee pursuant to this Agreement in respect of the Collateral related to such
Series (and, to the extent provided herein, in respect of Collateral related to
other Series) shall terminate and be of no further force and effect and all such
rights, remedies, powers, duties, authority and obligations of the Trustee with
respect to such Collateral shall be automatically released; PROVIDED that any
indemnity provided to the Trustee herein shall survive such Trustee Termination
Date. If the Trustee is acting as Controlling Party with respect to a Series on
the related Trustee Termination Date, the Trustee agrees, at the expense of the
Seller, to execute and deliver such instruments as the Seller may reasonably
request to effectuate such release, and any such instruments so executed and
delivered shall be fully binding on the Trustee.
(c) On the Final Termination Date with respect to a Series, the rights,
remedies, powers, duties, authority and obligations conferred upon the
Collateral Agent and each Secured Party pursuant to this Agreement shall
terminate and be of no further force and effect and all rights, remedies,
powers, duties, authority and obligations of the Collateral Agent and each
Secured Party with respect to the Collateral related to such Series (and, to the
extent provided herein, in respect of Collateral related to other Series) shall
be automatically released, subject to the application of such amounts for
indemnity payments and all other amounts due and payable hereunder. On the
Final Termination Date with respect to a Series, the Collateral Agent agrees,
and each Secured Party agrees, at the expense of the Seller, to execute such
instruments of release, in recordable form if necessary, in favor of the Seller
as the Seller may reasonably request, to deliver any Collateral related to such
Series in its possession to the Seller or as otherwise provided in the related
Securitization Agreement, and to otherwise release the lien of this Agreement
and release and deliver to the Seller or as otherwise provided in the related
Securitization Agreement the Collateral related to such Series.
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Section 2.08. NON-RECOURSE OBLIGATIONS OF SELLER AND THE REVERSIONARY
HOLDERS. Notwithstanding anything herein or in the other Transaction Documents
to the contrary, the parties hereto agree that the obligations of the Seller and
the Reversionary Holders hereunder shall be recourse only to the extent of
amounts deposited in the Spread Accounts. The Seller agrees that it shall not
declare or make payment of (i) any dividend or other distribution on or in
respect of any of its common stock or (ii) any payment on account of the
purchase, redemption, retirement or acquisition of (x) any common stock of the
Seller or (y) any option, warrant or other right to acquire any common stock of
the Seller, unless (in each case) at the time of such declaration or payment
(and after giving effect thereto) no amount payable by Seller or any
Reversionary Holder under any Transaction Document is then due and owing but
unpaid.
ARTICLE III.
SPREAD ACCOUNTS
Section 3.01. ESTABLISHMENT OF SPREAD ACCOUNTS; INITIAL DEPOSITS INTO
SPREAD ACCOUNTS.
(a) On or prior to the Closing Date relating to Series 1996-A, the
Collateral Agent shall establish with respect to such Series, at its office or
at another depository institution or trust company an Eligible Account,
designated, "Spread Account - Atlantic Auto Grantor Trust Series 1996-A - The
Chase Manhattan Bank, as Collateral Agent for Financial Security Assurance Inc.
and another Secured Party" (the "Spread Account", and, with respect to the
Series 1996-A Certificates, the "Series 1996-A Spread Account"). The Series
1996-A Spread Account shall include two separate sub-accounts, which shall be
the Series 1996-A Seller Sub-account and the Series 1996-A Class B Sub-account.
All Spread Accounts established under this Agreement from time to time shall be
maintained at the same depository institution (which depository institution may
be changed from time to time in accordance with this Agreement). If any Spread
Account maintained or established with respect to a Series ceases to be an
Eligible Account, the Collateral Agent shall, within five Business Days,
establish a new Eligible Account for such Series.
(b) No withdrawals may be made of funds in any Spread Account except as
provided in Section 3.03 of this Agreement. Except as specifically provided in
this Agreement, funds in a Spread Account established with respect to a Series
shall not be commingled with funds in a Spread Account established with respect
to another Series or with any other moneys. All moneys deposited from time to
time in such Spread Account and all
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investments made with such moneys shall be held by the Collateral Agent as part
of the Collateral with respect to such Series.
(c) On the Closing Date with respect to a Series, the Collateral Agent
shall deposit the Initial Spread Account Deposit with respect to such Series, if
any, received from the Seller into the related Spread Account, which with
respect to the Series 1996-A Spread Account shall be deposited into the Series
1996-A Seller Sub-account.
(d) Each Spread Account shall be separate from each Trust, and amounts on
deposit therein will not constitute a part of the Trust Estate of any Trust.
Each Spread Account shall be maintained by the Collateral Agent at all times
separate and apart from any other account of the Seller, the Servicer or the
Trust. All income or loss on investments of funds in any Spread Account shall
be reported by the applicable Reversionary Holder as taxable income or loss of
such Reversionary Holder, provided that with respect to the Series 1996-A Spread
Account, (i) all income or loss on investments of funds in the Series 1996-A
Seller Sub-account shall be reported by the Seller as taxable income or loss of
the Seller, and (ii) all income or loss on investments of funds in the Series
1996-A Class B Sub-account shall be reported by the Class B Certificateholders
as taxable income or loss of the Class B Certificateholders.
Section 3.02. INVESTMENTS.
(a) Funds which may at any time be held in the Spread Account established
with respect to a Series shall be invested and reinvested by the Collateral
Agent, at the written direction (including, subject to the provisions hereof,
general standing instructions) of the Seller (unless a Default actually known to
a Authorized Officer of the Collateral Agent shall have occurred and be
continuing, in which case at the written direction of the Controlling Party) or
its designee received by the Collateral Agent by 1:00 P.M. New York City time on
the Business Day prior to the date on which such investment shall be made, in
one or more Spread Account Eligible Investments in the manner specified in
Section 3.02(c) hereof. If no written direction with respect to any portion of
such Spread Account is received by the Collateral Agent, the Collateral Agent
shall invest such funds overnight in such Eligible Investments as the Collateral
Agent may select, provided that the Collateral Agent shall not be liable for any
loss or absence of income resulting from such investments or for investments
made pursuant to written instructions received in accordance with this Section
3.02(a).
(b) Each investment made pursuant to this Section 3.02 on any date shall
mature not later than the Business Day immediately preceding the Distribution
Date next succeeding the day such
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investment is made, except that any investment made on the day preceding a
Distribution Date shall mature on such Distribution Date; PROVIDED that any
investment of funds in any Spread Account maintained with the Collateral Agent
(which shall be qualified as a Spread Account Eligible Investment) in any
investment as to which the Collateral Agent is the obligor, if otherwise
qualified as an Eligible Investment (including any repurchase agreement on which
the Collateral Agent in its commercial capacity is liable as principal) may
mature on the Distribution Date next succeeding the date of such investment.
(c) Subject to the other provisions hereof, the Collateral Agent shall
have sole control over each such investment and the income thereon, and any
certificate or other instrument evidencing any such investment, if any, shall be
delivered directly to the Collateral Agent or its agent, together with each
document of transfer, if any, necessary to transfer title to such investment to
the Collateral Agent in a manner complying with Section 2.06 hereof and the
requirements of the definition of "Spread Account Eligible Investments."
(d) If amounts on deposit in any Spread Account are at any time invested
in a Spread Account Eligible Investment payable on demand, the Collateral Agent
shall (i) consistent with any notice required to be given thereunder, demand
that payment thereon be made on the last day such Spread Account Eligible
Investment is permitted to mature under the provisions hereof and (ii) demand
payment of all amounts due thereunder promptly upon receipt of written notice
from the Controlling Party to the effect that such investment does not
constitute a Spread Account Eligible Investment.
(e) All moneys on deposit in a Spread Account together with any deposits
or securities in which such moneys may be invested or reinvested, and any gains
from such investments, shall constitute Collateral hereunder with respect to the
related Series subject to the Security Interests of the Secured Parties.
(f) Subject to Section 4.03 hereof, the Collateral Agent shall not be
liable by reason of any insufficiency in any Spread Account resulting from any
loss on any Eligible Investment included therein except for losses attributable
to the Collateral Agent's failure to make payments on Eligible Investments as to
which the Collateral Agent, in its commercial capacity, is obligated to make.
Section 3.03. DISTRIBUTIONS; PRIORITY OF PAYMENTS.
(a) On or before each Deficiency Claim Date with respect to any Series,
the Collateral Agent will make the following calculations on the basis of
information (including, without
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limitation, the amount of any Deficiency Claim Amount with respect to any
Series) received pursuant to Section 4.9 of the applicable Securitization
Agreement (or other section referenced in the related Series Supplement), with
respect to each such Series from the Servicer thereunder; PROVIDED, HOWEVER,
that if the Collateral Agent receives notice from Financial Security of the
occurrence of an Insurance Agreement Event of Default with respect to any
Series, such notice shall be determinative for the purposes of determining the
Requisite Amount for such Series:
FIRST, determine the amounts to be on deposit in the respective Spread
Accounts (taking into account amounts to be deposited into the related
Spread Accounts) on the next succeeding Distribution Date which will be
available to satisfy any Deficiency Claim Amount, provided that with
respect to the Series 1996-A Spread Account, such amounts shall be
determined separately for the Series 1996-A Seller Sub-account and the
Series 1996-A Class B Sub-account.
SECOND, determine (i) the amounts, if any, to be distributed from each
Spread Account related to each Series with respect to which there exists a
Deficiency Claim Amount, provided that with respect to the Series 1996-A
Spread Account, such amounts shall be determined separately for the Series
1996-A Seller Sub-account and the Series 1996-A Class B Sub-account, and
(ii) whether, following distribution from the related Spread Accounts to
the respective Trustees for deposit into the respective Collection Account
with respect to which there exists a Deficiency Claim Amount, a Deficiency
Claim Amount will continue to exist with respect to one or more Series.
THIRD, if a Deficiency Claim Amount will continue to exist with
respect to one or more Series other than the Series 1996-A Certificates
following the distributions from the related Spread Accounts contemplated
by paragraph SECOND above, determine the amount, if any, to be distributed
to the Trustee with respect to each Series from unrelated Spread Accounts
other than the Series 1996-A Spread Account in respect of such Deficiency
Claim Amount(s). This determination shall be made in accordance with the
distribution priority scheme set forth in Section 3.03(b) below.
On such Deficiency Claim Date related to a Series, the Collateral Agent
shall deliver a certificate to each Trustee in respect of which the Collateral
Agent has received a Deficiency Notice stating the amount, if any, to be
distributed to such Trustee on the next Distribution Date in respect of such
Deficiency Claim Amount.
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(b) On each Distribution Date, following the deposit into the respective
Spread Accounts (or sub-accounts thereof as specified in the related
Securitization Agreement) of the amounts required to be deposited therein
pursuant to the respective Securitization Agreements and if the Trustee has
received a Deficiency Notice with respect to one or more such Series, or with
respect to priority SIXTH below to the extent the amount referred to therein is
due and owing, the Collateral Agent shall make the following distributions in
the following order of priority:
FIRST, if with respect to any Series there exists a Deficiency Claim
Amount, from the Spread Account related to such Series (which with respect
to the Series 1996-A Spread Account shall be FIRST, from the Series 1996-A
Seller Sub-account and SECOND, from the Series 1996-A Class B Sub-account),
to the Trustee for deposit in the related Collection Account the amount of
such Deficiency Claim Amount.
SECOND, if with respect to any Series other than the Series 1996-A
Certificates there continues to exist a Deficiency Claim Amount after
deposit into the Collection Account of amounts distributed pursuant to
priority FIRST of this Section 3.03(b), from amounts, if any, on deposit in
each unrelated Spread Account other than the Series 1996-A Spread Account
in excess of the related Requisite Amount, an amount in the aggregate up to
the aggregate of the Deficiency Claim Amounts for all Series other than the
Series 1996-A Certificates, for deposit in the respective Collection
Accounts PRO RATA in accordance with the respective Deficiency Claim
Amounts.
THIRD, if with respect to any Series other than the Series 1996-A
Certificates there continues to exist a Deficiency Claim Amount after
deposit into the Collection Account of amounts distributed pursuant to
priority FIRST and SECOND of this Section 3.03(b), from each unrelated
Spread Account other than the Series 1996-A Spread Account PRO RATA in
accordance with amounts on deposit therein, an amount up to the aggregate
of the remaining Deficiency Claim Amounts for all Series other than the
Series 1996-A Certificates, to the respective Trustees for deposit in the
respective Collection Accounts PRO RATA in accordance with the respective
Deficiency Claim Amounts.
FOURTH, if with respect to one or more Series other than the Series
1996-A Certificates there exists a Spread Account Shortfall, from amounts,
if any, (1) on deposit in each Spread Account other than the Series 1996-A
Spread Account in excess of the related Requisite Amount or (2) on
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deposit in any Spread Account other than the Series 1996-A Spread Account
with respect to which the Final Termination Date shall have occurred on
such Distribution Date or a prior Distribution Date, an amount in the
aggregate up to the aggregate of the Spread Account Shortfalls for all
Series other than the Series 1996-A Certificates for deposit into each
Spread Account other than the Series 1996-A Spread Account PRO RATA in
accordance with the respective Spread Account Shortfalls.
FIFTH, if with respect to one or more Series, amounts have been
withdrawn from the related Spread Account pursuant to priority THIRD of
this Section 3.03(b) on such Distribution Date and/or prior Distribution
Dates and such amounts have not been redeposited in full into such Spread
Account pursuant to this priority FIFTH (such amounts in the aggregate for
a Series "Unreimbursed Amounts"), from amounts, if any, (1) on deposit in
each Spread Account other than the Series 1996-A Spread Account in excess
of the related Requisite Amount; or (2) on deposit in any Spread Account
other than the Series 1996-A Spread Account with respect to which the Final
Termination Date shall have occurred on such Distribution Date or a prior
Distribution Date, an amount up to the aggregate of the Unreimbursed
Amounts for all such Series for deposit into each Spread Account other than
the Series 1996-A Spread Account with respect to which there exist
Unreimbursed Amounts PRO RATA in accordance with the respective
Unreimbursed Amounts.
SIXTH, if any amounts are owed to the Trustee, Collateral Agent or
Backup Servicer for reasonable out-of-pocket expenses in connection with
the administration of the Trust, including the expenses incurred in the
transition to a successor Servicer and such amounts have not been paid,
then from amounts (if any) on deposit in the related Spread Account (which
with respect to the Series 1996-A Spread Account shall be first from the
Series 1996-A Seller Sub-account and then from the Series 1996-A Class B
Sub-account), an amount up to the amount so owed, to be paid to the
Trustee, the Collateral Agent and the Backup Servicer.
SEVENTH, any funds in a Spread Account in excess of the applicable
Requisite Amount and any funds in a Spread Account with respect to a Series
for which the Final Termination Date shall have occurred after distribution
pursuant to priorities FIRST through SIXTH will be released to the
Reversionary Holders as provided in the related Securitization Agreement
(or, if the related Securitization Agreement does not so provide, to the
Seller); PROVIDED, HOWEVER, with respect to the Series 1996-A Spread
Account, funds to be released pursuant to this priority SEVENTH shall
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be released FIRST, from the Series 1996-A Class B Sub-account to the extent
of funds on deposit therein for distribution to the Class B
Certificateholders pursuant to Section 5.5(xi)(A) of the Series 1996-A
Securitization Agreement and SECOND, from the Series 1996-A Seller Sub-
account for distribution in the following priority: (i) to the Class B
Certificateholders as required by Section 5.5(xi)(B) of the Series 1996-A
Securitization Agreement; and (ii) to the Seller pursuant to Section
5.5(xii) of the Series 1996-A Securitization Agreement, in each case, free
and clear of the Lien established hereunder.
Section 3.04. GENERAL PROVISIONS REGARDING SPREAD ACCOUNTS.
(a) Promptly upon the establishment (initially or upon any relocation) of
a Spread Account hereunder, the Collateral Agent shall advise the Seller and
each Secured Party in writing of the name and address of the depository
institution or trust company where such Spread Account has been established (if
not Chase Manhattan Bank or any successor Collateral Agent in its commercial
banking capacity), the name of the officer of the depository institution
responsible for overseeing such Spread Account, the account number and the
individuals whose names appear on the signature cards for such Spread Account.
The Seller shall cause each such depository institution or trust company to
execute a written agreement, in form and substance satisfactory to the
Controlling Party, waiving, and the Collateral Agent by its execution of this
Agreement hereby waives (except to the extent expressly provided herein), in
each case to the extent permitted under applicable law, (i) any banker's or
other statutory or similar Lien, and (ii) any right of set-off or other similar
right under applicable law with respect to such Spread Account, and any other
Spread Account, and agreeing, and the Collateral Agent by its execution of this
Agreement hereby agrees, to notify the Seller, the Collateral Agent, and each
Secured Party of any charge or claim against or with respect to such Spread
Account. The Collateral Agent shall give the Seller and each Secured Party at
least ten (10) Business Days' prior written notice of any change in the location
of such Spread Account or in any related account information. If the Collateral
Agent changes the location of any Spread Account, it shall change the location
of the other Spread Accounts, so that all Spread Accounts shall at all times be
located at the same depository institution. Anything herein to the contrary
notwithstanding, unless otherwise consented to by the Controlling Party in
writing, the Collateral Agent shall have no right to change the location of any
Spread Account.
(b) Upon the written request of the Controlling Party, the Seller, or any
Reversionary Holder, the Collateral Agent shall cause, at the expense of the
Seller, the depository institution
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at which any Spread Account is located to forward to the requesting party copies
of all monthly account statements for such Spread Account.
(c) If at any time any Spread Account ceases to be an Eligible Account,
the Collateral Agent shall notify the Controlling Party of such fact and shall
establish within five (5) Business Days of such determination in accordance with
paragraph (a) of this Section, a successor Spread Account thereto, which shall
be an Eligible Account, at another depository institution or trust company
acceptable to the Controlling Party and shall establish successor Spread
Accounts with respect to all other Spread Accounts, each of which shall be an
Eligible Account, at the same depository institution. The Seller shall cause
such depository institution to execute a written agreement under terms provided
for in paragraph (a) of this Section.
(d) No passbook, certificate of deposit or other similar instrument
evidencing a Spread Account shall be issued, and all contracts, receipts and
other papers, if any, governing or evidencing a Spread Account shall be held by
the Collateral Agent.
Section 3.05. REPORTS BY THE COLLATERAL AGENT. The Collateral Agent shall
report to the Seller, Financial Security, the Trustee and the Servicer on a
monthly basis no later than each Distribution Date with respect to the amount on
deposit in each Spread Account and the identity of the investments included
therein as of the last day of the related Monthly Period (all of which with
respect to the Series 1996-A Spread Account shall be reported separately for the
Series 1996-A Seller Sub-account and the Series 1996-A Class B Sub-account), and
shall provide accountings of deposits into and withdrawals from the Spread
Accounts, and of the investments made therein, upon the request of the Seller,
Financial Security or the Servicer (all of which with respect to the Series
1996-A Spread Account shall be reported separately for the Series 1996-A Seller
Sub-account and the Series 1996-A Class B Sub-account).
ARTICLE IV.
THE COLLATERAL AGENT
Section 4.01. APPOINTMENT AND POWERS. Subject to the terms and conditions
hereof, each of the Secured Parties hereby appoints Chase Manhattan Bank as the
Collateral Agent with respect to the Series 1996-A Collateral and the related
Collateral subsequently specified in a Series Supplement, and Chase Manhattan
Bank hereby accepts such appointment and agrees
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to act as Collateral Agent with respect to the Series 1996-A Collateral, and
upon execution of any Series Supplement, shall be deemed to accept such
appointment, and agree to act as Collateral Agent with respect to such
Collateral, in each case, for the Secured Parties, to maintain custody and
possession of such Collateral (except as otherwise provided hereunder) and to
perform the other duties of the Collateral Agent in accordance with the
provisions of this Agreement. Each Secured Party hereby authorizes the
Collateral Agent to take such action on its behalf, and to exercise such rights,
remedies, powers and privileges hereunder, as the Controlling Party may direct
and as are specifically authorized to be exercised by the Collateral Agent by
the terms hereof, together with such actions, rights, remedies, powers and
privileges as are reasonably incidental thereto. The Collateral Agent shall act
upon and in compliance with the written instructions of the Controlling Party
delivered pursuant to this Agreement promptly following receipt of such written
instructions; PROVIDED, HOWEVER, that the Collateral Agent shall not act in
accordance with any instructions (i) which are not authorized by, or in
violation of the provisions of, this Agreement, (ii) which are in violation of
any applicable law, rule or regulation or (iii) for which the Collateral Agent
has not received reasonable indemnity. Receipt of such instructions shall not
be a condition to the exercise by the Collateral Agent of its express duties
hereunder, except where this Agreement provides that the Collateral Agent is
permitted to act only following and in accordance with such instructions.
Section 4.02. PERFORMANCE OF DUTIES. The Collateral Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement
and the other Transaction Documents to which the Collateral Agent is a party as
Collateral Agent or as directed by the Controlling Party in accordance with this
Agreement. The Collateral Agent shall not be required to take any discretionary
actions hereunder except at the written direction and with the indemnification
of the Controlling Party.
Section 4.03. LIMITATION ON LIABILITY. Neither the Collateral Agent nor
any of its directors, officers or employees, shall be liable for any action
taken or omitted to be taken by it or them hereunder, or in connection herewith,
except that the Collateral Agent shall be liable for its negligence, bad faith
or willful misconduct; nor shall the Collateral Agent be responsible for the
validity, effectiveness, value, sufficiency or enforceability against the Seller
of this Agreement or any of the Collateral (or any part thereof).
Notwithstanding any term or provision of this Agreement, the Collateral Agent
shall incur no liability to the Seller or the Secured Parties for any action
taken or omitted by the Collateral Agent in connection with the Collateral,
except for the negligence, bad faith or willful misconduct on the part of the
Collateral Agent, and, further,
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shall incur no liability to the Secured Parties except for negligence, bad faith
or willful misconduct in carrying out its duties to the Secured Parties.
Subject to Section 4.04 hereof, the Collateral Agent shall be protected and
shall incur no liability to any such party in relying upon the accuracy, acting
in reliance upon the contents, and assuming the genuineness of any notice,
demand, certificate, signature, instrument or other document reasonably believed
by the Collateral Agent to be genuine and to have been duly executed by the
appropriate signatory, and (absent any knowledge to the contrary) the Collateral
Agent shall not be required to make any independent investigation with respect
thereto. The Collateral Agent shall at all times be free independently to
establish to its reasonable satisfaction, but shall have no duty to
independently verify, the existence or nonexistence of facts that are a
condition to the exercise or enforcement of any right or remedy hereunder or
under any of the Transaction Documents. The Collateral Agent may consult with
counsel, and shall not be liable for any action taken or omitted to be taken by
it hereunder in good faith and in accordance with the written advice of such
counsel. The Collateral Agent shall not be under any obligation to exercise any
of the remedial rights or powers vested in it by this Agreement or to follow any
direction from the Controlling Party unless it shall have received reasonable
security or indemnity satisfactory to the Collateral Agent against the costs,
expenses and liabilities which might be incurred by it in the exercise thereof.
Section 4.04. RELIANCE UPON DOCUMENTS. In the absence of negligence, bad
faith or willful misconduct on its part, the Collateral Agent shall be entitled
to conclusively rely on any communication, instrument, paper or other document
reasonably believed by it to be genuine and correct and to have been signed or
sent by the proper Person or Persons and shall have no liability in acting, or
omitting to act, where such action or omission to act is in reliance upon any
statement or opinion contained in any such document or instrument.
Section 4.05. SUCCESSOR COLLATERAL AGENT.
(a) MERGER. Any Person into which the Collateral Agent may be converted
or merged, or with which it may be consolidated, or to which it may sell or
transfer its trust business and assets as a whole or substantially as a whole,
or any Person resulting from any such conversion, merger, consolidation, sale or
transfer to which the Collateral Agent is a party, shall (provided it is
otherwise qualified to serve as the Collateral Agent hereunder) be and become a
successor Collateral Agent hereunder and be vested with all of the title to and
interest in the Collateral and all of the trusts, powers, discretions,
immunities, privileges and other matters as was its predecessor without the
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execution or filing of any instrument or any further act, deed or conveyance on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding, except to the extent, if any, that any such action is necessary
to perfect, or continue the perfection of, the security interest of the Secured
Parties in the Collateral.
(b) RESIGNATION. The Collateral Agent and any successor Collateral Agent
may resign only (i) upon a determination that by reason of a change in legal
requirements, the performance of its duties under this Agreement would cause it
to be in violation of such legal requirements in a manner which would result in
a material adverse effect on the Collateral Agent, and the Controlling Party
does not elect to waive the Collateral Agent's obligation to perform those
duties which render it legally unable to act or elect to delegate those duties
to another Person, or (ii) with the prior written consent of the Controlling
Party. The Collateral Agent shall give not less than 60 days' prior written
notice of any such permitted resignation by registered or certified mail to the
other Secured Party and the Seller; PROVIDED, that such resignation shall take
effect only upon the date which is the latest of (i) the effective date of the
appointment of a successor Collateral Agent and the acceptance in writing by
such successor Collateral Agent of such appointment and of its obligation to
perform its duties hereunder in accordance with the provisions hereof,
(ii) delivery of the Collateral to such successor to be held in accordance with
the procedures specified in Article II hereof, and (iii) receipt by the
Controlling Party of an Opinion of Counsel to the effect described in Section
5.02 hereof. Notwithstanding the preceding sentence, if, by the contemplated
date of resignation specified in the written notice of resignation delivered as
described above, no successor Collateral Agent or temporary successor Collateral
Agent has been appointed Collateral Agent or becomes the Collateral Agent
pursuant to subsection (d) hereof, the resigning Collateral Agent may petition a
court of competent jurisdiction in New York, New York for the appointment of a
successor.
(c) REMOVAL. The Collateral Agent may be removed by the Controlling Party
at any time, with or without cause, by an instrument or concurrent instruments
in writing delivered to the Collateral Agent, the other Secured Party and the
Seller. A temporary successor may be removed at any time to allow a successor
Collateral Agent to be appointed pursuant to subsection (d) below. Any removal
pursuant to the provisions of this subsection (c) shall take effect only upon
the date which is the latest of (i) the effective date of the appointment of a
successor Collateral Agent and the acceptance in writing by such successor
Collateral Agent of such appointment and of its obligation to perform its duties
hereunder in accordance with the
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provisions hereof, (ii) delivery of the Collateral to such successor to be held
in accordance with the procedures specified in Article II hereof and
(iii) receipt by the Controlling Party of an Opinion of Counsel to the effect
described in Section 5.02 hereof.
(d) ACCEPTANCE BY SUCCESSOR. The Controlling Party shall have the sole
right to appoint each successor Collateral Agent. Every temporary or permanent
successor Collateral Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor and to each Secured Party and the Seller an
instrument in writing accepting such appointment hereunder and the relevant
predecessor shall execute, acknowledge and deliver such other documents and
instruments as will effectuate the delivery of all Collateral to the successor
Collateral Agent to be held in accordance with the procedures specified in
Article II hereof, whereupon such successor, without any further act, deed or
conveyance, shall become fully vested with all the estates, properties, rights,
powers, duties and obligations of its predecessor. Such predecessor shall,
nevertheless, on the written request of either Secured Party or the Seller,
execute and deliver an instrument transferring to such successor all the
estates, properties, rights and powers of such predecessor hereunder. In the
event that any instrument in writing from the Seller or a Secured Party is
reasonably required by a successor Collateral Agent to more fully and certainly
vest in such successor the estates, properties, rights, powers, duties and
obligations vested or intended to be vested hereunder in the Collateral Agent,
any and all such written instruments shall, at the request of the temporary or
permanent successor Collateral Agent, be forthwith executed, acknowledged and
delivered by the Seller. The designation of any successor Collateral Agent and
the instrument or instruments removing any Collateral Agent and appointing a
successor hereunder, together with all other instruments provided for herein,
shall be maintained with the records relating to the Collateral and, to the
extent required by applicable law, filed or recorded by the successor Collateral
Agent in each place where such filing or recording is necessary to effect the
transfer of the Collateral to the successor Collateral Agent or to protect or
continue the perfection of the security interests granted hereunder.
(e) Any resignation or removal of a Collateral Agent and appointment of a
successor Collateral Agent shall be effected with respect to this Agreement and
all Series Supplements simultaneously, so that at no time is there more than one
Collateral Agent acting hereunder and under all Series Supplements.
Section 4.06. INDEMNIFICATION. The Seller shall indemnify the Collateral
Agent, its directors, officers, employees and
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agents for, and hold the Collateral Agent, its directors, officers, employees
and agents harmless against, any loss, liability or expense (including the costs
and expenses of defending against any claim of liability) arising out of or in
connection with the Collateral Agent's acting as Collateral Agent hereunder,
except such loss, liability or expense as shall result from the negligence, bad
faith or willful misconduct of the Collateral Agent or its officers or agents.
The obligation of the Seller under this Section shall survive the termination of
this Agreement and the resignation or removal of the Collateral Agent. The
Collateral Agent covenants and agrees that the obligations of the Seller
hereunder and under Section 4.07 hereof shall be limited to the extent provided
in Section 2.08 hereof, and further covenants not to take any action to enforce
its rights to indemnification hereunder with respect to the Seller and to
payment under Section 4.07 hereof except in accordance with the provisions of
Section 8.05 hereof, or otherwise to assert any Lien or take any other action in
respect of the Collateral or the Trust Estate of a Series until the applicable
Final Termination Date.
Section 4.07. COMPENSATION AND REIMBURSEMENT. The Seller agrees for the
benefit of the Secured Parties and as part of the Secured Obligations (a) to pay
to the Collateral Agent, on each Distribution Date, the Collateral Agent Fee for
all services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a collateral trustee);
and (b) to reimburse the Collateral Agent upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Collateral Agent in
accordance with any provision of, or carrying out its duties and obligations
under, this Agreement (including the reasonable compensation and fees and the
expenses and disbursements of its agents, any independent certified public
accountants and independent counsel), except any expense, disbursement or
advances as may be attributable to negligence, bad faith or willful misconduct
on the part of the Collateral Agent.
Section 4.08. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL AGENT. The
Collateral Agent represents and warrants to the Seller and to each Secured Party
as follows:
(a) DUE ORGANIZATION. The Collateral Agent is a banking corporation, duly
organized, validly existing and in good standing under the laws of the State of
New York, and is duly authorized and licensed under applicable law to conduct
its business as presently conducted.
(b) CORPORATE POWER. The Collateral Agent has all requisite right, power
and authority to execute and deliver this
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Agreement and to perform all of its duties as Collateral Agent hereunder.
(c) DUE AUTHORIZATION. The execution and delivery by the Collateral Agent
of this Agreement and the other Transaction Documents to which it is a party,
and the performance by the Collateral Agent of its duties hereunder and
thereunder, have been duly authorized by all necessary corporate proceedings and
no further approvals or filings, including any governmental approvals, are
required for the valid execution and delivery by the Collateral Agent, or the
performance by the Collateral Agent, of this Agreement and such other
Transaction Documents.
(d) VALID AND BINDING AGREEMENT. The Collateral Agent has duly executed
and delivered this Agreement and each other Transaction Document to which it is
a party, and each of this Agreement and each such other Transaction Document
constitutes the legal, valid and binding obligation of the Collateral Agent,
enforceable against the Collateral Agent in accordance with its terms, except as
(i) such enforceability may be limited by bankruptcy, insolvency, reorganization
and similar laws relating to or affecting the enforcement of the rights of
creditors of federally insured depository institutions, rights generally and
(ii) the availability of equitable remedies may be limited by equitable
principles of general applicability.
Section 4.09. WAIVER OF SETOFFS. The Collateral Agent hereby expressly
waives any and all rights of setoff that the Collateral Agent may otherwise at
any time have under applicable law with respect to any Spread Account and agrees
that amounts in the Spread Accounts shall at all times be held and applied
solely in accordance with the provisions hereof.
Section 4.10. CONTROL BY THE CONTROLLING PARTY. The Collateral Agent
shall comply with notices and instructions given by the Seller only if
accompanied by the written consent of the Controlling Party, except that if any
Default shall have occurred and be continuing, the Collateral Agent shall act
upon and comply with notices and instructions given by the Controlling Party
alone in the place and stead of the Seller.
ARTICLE V.
COVENANTS OF THE SELLER
Section 5.01. PRESERVATION OF COLLATERAL. Subject to the rights, powers
and authorities granted to the Collateral Agent and the Controlling Party in
this Agreement, the Seller, on behalf of itself and as the agent of the
Reversionary Holders, shall take such action as is necessary and proper with
respect to the Collateral in order to preserve and maintain such Collateral and
to cause (subject to the rights of the Secured Parties) the Collateral Agent to
perform its obligations with respect to
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such Collateral as provided herein. The Seller will do, execute, acknowledge
and deliver, or cause to be done by the Reversionary Holders, or others,
executed, acknowledged and delivered, such instruments of transfer or take such
other steps or actions as may be necessary, or required by the Controlling
Party, to perfect the Security Interests granted hereunder in the Collateral, to
ensure that such Security Interests rank prior to all other Liens and to
preserve the priority of such Security Interests and the validity and
enforceability thereof. Upon any delivery or substitution of Collateral, the
Seller, on behalf of itself and as the agent of the Reversionary Holders, shall
be obligated to execute such documents and perform such actions (or cause the
Reversionary Holders to so execute and perform) as are necessary to create in
the Collateral Agent for the benefit of the Secured Parties a valid first
priority Lien on, and valid and perfected, first priority security interest in,
the Collateral so delivered and to deliver such Collateral to the Collateral
Agent, free and clear of any other Lien, together with satisfactory assurances
thereof, and to pay any reasonable costs incurred by any of the Secured Parties
or the Collateral Agent (including its agents) or otherwise in connection with
such delivery.
Section 5.02. OPINIONS AS TO COLLATERAL. Not more than 90 days nor less
than 30 days prior to (i) each anniversary of the date hereof during the term of
this Agreement and (ii) each date on which the Seller proposes to take any
action contemplated by Section 5.06 hereof, the Seller shall, at its own cost
and expense, furnish to each Secured Party and the Collateral Agent an Opinion
of Counsel with respect to each Series either (a) stating that, in the opinion
of such counsel, such action has been taken with respect to the execution and
filing of any financing statements and continuation statements and other actions
as are necessary to perfect, maintain and protect the lien and security interest
of the Collateral Agent (and the priority thereof), on behalf of the Secured
Parties, with respect to such Collateral against all creditors of, and
purchasers from, the Seller and the Reversionary Holders and reciting the
details of such action, or (b) stating that, in the opinion of such counsel, no
such action is necessary to maintain such perfected lien and security interest.
Such Opinion of Counsel shall further describe each execution and filing of any
financing statements and continuation statements and such other actions as will,
in the opinion of such counsel, be required to perfect, maintain and protect the
lien and security interest of the Collateral Agent, on behalf of the Secured
Parties, with respect to such Collateral against all creditors of, and
purchasers from, the Seller and the Reversionary Holders for a period, specified
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in such Opinion, continuing until a date not earlier than eighteen months from
the date of such Opinion.
Section 5.03. NOTICES. In the event that the Seller acquires knowledge of
the occurrence and continuance of any Insurance Agreement Event of Default or
Servicer Termination Event or of any event of default or like event, howsoever
described or called, under any of the Transaction Documents, the Seller shall
immediately give notice thereof to the Collateral Agent and each Secured Party.
Section 5.04. WAIVER OF STAY OR EXTENSION LAWS; MARSHALLING OF ASSETS.
The Seller, on behalf of itself and as agent for the Reversionary Holders,
covenants, to the fullest extent permitted by applicable law, that neither it
nor any Reversionary Holder will at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any appraisement,
valuation, stay, extension or redemption law wherever enacted, now or at any
time hereafter in force, in order to prevent or hinder the enforcement of this
Agreement or any absolute sale of the Collateral or any part thereof, or the
possession thereof by any purchaser at any sale under Article VII of this
Agreement; and the Seller, on behalf of itself and as agent for the Reversionary
Holders, to the fullest extent permitted by applicable law, for itself, each
Reversionary Holder, and all who may claim under it or them, hereby waives the
benefit of all such laws, and covenants that neither it nor any Reversionary
Holder will hinder, delay or impede the execution of any power herein granted to
the Collateral Agent, but will suffer and permit the execution of every such
power as though no such law had been enacted. The Seller, for itself, each
Reversionary Holder, and all who may claim under it or them, waives, to the
fullest extent permitted by applicable law, all right to have the Collateral
marshalled upon any foreclosure or other disposition thereof.
Section 5.05. NONINTERFERENCE, ETC. The Seller, on behalf of itself and
as agent for the Reversionary Holders, agrees that neither the Seller nor any
Reversionary Holder shall (i) waive or alter any of its rights under the
Collateral (or any agreement or instrument relating thereto) without the prior
written consent of the Controlling Party; or (ii) fail to pay any tax,
assessment, charge or fee levied or assessed against the Collateral, or to
defend any action, if such failure to pay or defend may adversely affect the
priority or enforceability of the Seller's or any Reversionary Holder's right,
title or interest in and to the Collateral or the Collateral Agent's lien on,
and security interest in, the Collateral for the benefit of the Secured Parties;
or (iii) take any action, or fail to take any action, if such action or failure
to take action would interfere with the enforcement of any rights under the
Transaction Documents.
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Section 5.06. SELLER CHANGES.
(a) CHANGE IN NAME, STRUCTURE, ETC. The Seller shall not change its name,
identity or corporate structure unless it shall have given each Secured Party
and the Collateral Agent at least 60 days' prior written notice thereof, shall
have effected any necessary or appropriate assignments or amendments thereto and
filings of financing statements or amendments thereto, and shall have delivered
to the Collateral Agent and each Secured Party an Opinion of Counsel of the type
described in Section 5.02 hereof.
(b) RELOCATION OF THE SELLER. Neither Atlantic nor the Seller shall
change its principal executive office unless it gives each Secured Party and the
Collateral Agent at least 90 days' prior written notice of any relocation of its
principal executive office. If the Seller relocates its principal executive
office or principal place of business from New York, the Seller shall give prior
notice thereof to the Controlling Party and the Collateral Agent and shall
effect whatever appropriate recordations and filings as are necessary and shall
provide an Opinion of Counsel to the Controlling Party and the Collateral Agent,
to the effect that, upon the recording of any necessary assignments or
amendments to previously-recorded assignments and filing of any necessary
amendments to the previously filed financing or continuation statements or upon
the filing of one or more specified new financing statements, and the taking of
such other actions as may be specified in such opinion, the security interests
in the Collateral shall remain, after such relocation, valid and perfected and
first in priority.
ARTICLE VI.
CONTROLLING PARTY; INTERCREDITOR PROVISIONS
Section 6.01. APPOINTMENT OF CONTROLLING PARTY. From and after the
Closing Date of a Series until the Insurer Termination Date related to such
Series, Financial Security shall be the Controlling Party with respect to such
Series and shall be entitled to exercise all the rights given the Controlling
Party hereunder with respect to such Series. From and after the Insurer
Termination Date related to such Series until the Trustee Termination Date
related to such Series, the Trustee shall be the Controlling Party with respect
to such Series. Notwithstanding the foregoing, in the event that a Financial
Security Default shall have occurred and be continuing, the Trustee shall be the
Controlling Party with respect to such Series until the applicable Trustee
Termination Date. If prior to an Insurer Termination Date, the Trustee shall
have become the Controlling Party with respect to a Series as a result of the
occurrence of a Financial Security Default and either such Financial Security
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Default is cured or for any other reason ceases to exist or the Trustee
Termination Date with respect to a Series occurs, then upon such cure or other
cessation or on such Trustee Termination Date, as the case may be, Financial
Security shall, upon notice thereof being duly given to the Collateral Agent,
again be the Controlling Party with respect to such Series.
Section 6.02. CONTROLLING PARTY'S AUTHORITY.
(a) The Seller hereby irrevocably appoints the Controlling Party, and any
successor to the Controlling Party appointed pursuant to Section 6.01 hereof,
its true and lawful attorney, with full power of substitution, in the name of
the Seller, the Secured Parties or otherwise, at the expense of the Seller, to
the extent permitted by law to exercise, at any time and from time to time while
any Insurance Agreement Event of Default has occurred and is continuing, any or
all of the following powers with respect to all or any of the Collateral related
to the relevant Series: (i) to demand, sue for, collect, receive and give
acquittance for any and all monies due or to become due upon or by virtue
thereof, (ii) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto, (iii) to direct the Collateral Agent to sell,
transfer, assign or otherwise deal with the same or the proceeds thereof as
fully and effectively as if the Collateral Agent were the absolute owner
thereof, and (iv) to extend the time of payment of any or all thereof and to
make any allowance or other adjustments with respect thereto.
(b) With respect to each Series and the related Collateral, each Secured
Party hereby irrevocably and unconditionally constitutes and appoints the
Controlling Party with respect to such Series, and any successor to such
Controlling Party appointed pursuant to Section 6.01 hereof from time to time,
as the true and lawful attorney-in-fact of such Secured Party for so long as
such Secured Party is the Non-Controlling Party, with full power of
substitution, to execute, acknowledge and deliver any notice, document,
certificate, paper, pleading or instrument and to do in the name of the
Controlling Party as well as in the name, place and stead of such Secured Party
such acts, things and deeds for and on behalf of and in the name of such Secured
Party under this Agreement with respect to such Series which such Secured Party
could or might do or which may be necessary, desirable or convenient in such
Controlling Party's sole discretion to effect the purposes contemplated
hereunder and, without limitation, exercise full right, power and authority to
take, or defer from taking, any and all acts with respect to the administration
of the Collateral related to such Series, and the enforcement of the rights of
the Secured Parties hereunder with respect to such Series, on behalf of and for
the benefit of such
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Controlling Party and such Non-Controlling Party, as their interests may appear.
Section 6.03. RIGHTS OF SECURED PARTIES. With respect to each Series of
Certificates and the related Collateral, the Non-Controlling Party at any time
expressly agrees that it shall not assert any rights that it may otherwise have,
as a Secured Party with respect to the Collateral, to direct the maintenance,
sale or other disposition of the Collateral or any portion thereof,
notwithstanding the occurrence and continuance of any Insurance Agreement Event
of Default or Servicer Termination Event with respect to such Series or any non-
performance by the Seller or any Reversionary Holder of any obligation owed to
such Secured Party hereunder or under any other Transaction Document, and each
party hereto agrees that the Controlling Party shall be the only Person entitled
to assert and exercise such rights.
Section 6.04. DEGREE OF CARE.
(a) CONTROLLING PARTY. Notwithstanding any term or provision of this
Agreement, the Controlling Party shall incur no liability to the Seller or any
Reversionary Holder for any action taken or omitted by the Controlling Party in
connection with the Collateral, except for any gross negligence, bad faith or
willful misconduct on the part of the Controlling Party and, further, shall
incur no liability to the Non-Controlling Party except for a breach of the terms
of this Agreement or for gross negligence, bad faith or willful misconduct in
carrying out its duties, if any, to the Non-Controlling Party. The Controlling
Party shall be protected and shall incur no liability to any such party in
relying upon the accuracy, acting in reliance upon the contents and assuming the
genuineness of any notice, demand, certificate, signature, instrument or other
document believed by the Controlling Party to be genuine and to have been duly
executed by the appropriate signatory, and (absent manifest error or actual
knowledge to the contrary) the Controlling Party shall not be required to make
any independent investigation with respect thereto. The Controlling Party
shall, at all times, be free independently to establish to its reasonable
satisfaction the existence or nonexistence, as the case may be, of any fact the
existence or nonexistence of which shall be a condition to the exercise or
enforcement of any right or remedy under this Agreement or any of the
Transaction Documents.
(b) THE NON-CONTROLLING PARTY. The Non-Controlling Party shall not be
liable to the Seller or any Reversionary Holder for any action or failure to act
by the Controlling Party or the Collateral Agent in exercising, or failing to
exercise, any rights or remedies hereunder.
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ARTICLE VII.
REMEDIES UPON DEFAULT
Section 7.01. REMEDIES UPON A DEFAULT. If a Default with respect to a
Series has occurred and is continuing, the Collateral Agent shall, at the
written direction of the Controlling Party, take whatever action at law or in
equity as may appear necessary or desirable in the judgment of the Controlling
Party to collect and satisfy all Secured Obligations, including, but not limited
to, foreclosure upon the Collateral and all other rights available to secured
parties under applicable law or to enforce performance and observance of any
obligation, agreement or covenant under any of the Transaction Documents related
to such Series.
Section 7.02. WAIVER OF DEFAULT. The Controlling Party shall have the
sole right, to be exercised in its complete discretion, to waive any Default by
a writing setting forth the terms, conditions and extent of such waiver signed
by the Controlling Party and delivered to the Collateral Agent, the other
Secured Party and the Seller. Any such waiver shall be binding upon the Non-
Controlling Party and the Collateral Agent. Unless such writing expressly
provides to the contrary, any waiver so granted shall extend only to the
specific event or occurrence which gave rise to the Default so waived and not to
any other similar event or occurrence occurring subsequent to the date of such
waiver.
Section 7.03. RESTORATION OF RIGHTS AND REMEDIES. If the Collateral Agent
has instituted any proceeding to enforce any right or remedy under this
Agreement, and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to such Collateral Agent, then and in
every such case the Seller, the Collateral Agent and each of the Secured Parties
and each Reversionary Holder shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Secured Parties shall
continue as though no such proceeding had been instituted.
Section 7.04. NO REMEDY EXCLUSIVE. No right or remedy herein conferred
upon or reserved to the Collateral Agent, the Controlling Party or either of the
Secured Parties is intended to be exclusive of any other right or remedy, and
every right or remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law, in equity or otherwise (but, in each case, shall be subject to
the provisions of this Agreement limiting such remedies), and each and every
right, power and remedy whether specifically herein given or otherwise existing
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<PAGE>
may be exercised from time to time and as often and in such order as may be
deemed expedient by the Controlling Party, and the exercise of or the beginning
of the exercise of any right or power or remedy shall not be construed to be a
waiver of the right to exercise at the same time or thereafter any other right,
power or remedy.
ARTICLE VIII.
MISCELLANEOUS
Section 8.01. FURTHER ASSURANCES. Each party hereto shall take such
action and deliver such instruments to any other party hereto, in addition to
the actions and instruments specifically provided for herein, as may be
reasonably requested or required to effectuate the purpose or provisions of this
Agreement or to confirm or perfect any transaction described or contemplated
herein.
Section 8.02. WAIVER. Any waiver by any party of any provision of this
Agreement or any right, remedy or option hereunder shall only prevent and estop
such party from thereafter enforcing such provision, right, remedy or option if
such waiver is given in writing and only as to the specific instance and for the
specific purpose for which such waiver was given. The failure or refusal of any
party hereto to insist in any one or more instances, or in a course of dealing,
upon the strict performance of any of the terms or provisions of this Agreement
by any party hereto or the partial exercise of any right, remedy or option
hereunder shall not be construed as a waiver or relinquishment of any such term
or provision, but the same shall continue in full force and effect.
Section 8.03. AMENDMENTS, WAIVERS. No amendment, modification, waiver or
supplement to this Agreement or any provision of this Agreement shall in any
event be effective unless the same shall have been made or consented to in
writing by each of the parties hereto and each Rating Agency shall have
confirmed in writing that such amendment will not cause a reduction or
withdrawal of a rating on any Series; PROVIDED, HOWEVER, that, for so long as
Financial Security shall be the Controlling Party with respect to a Series,
amendments, modifications, waivers or supplements hereto relating to such
Series, the related Collateral or Spread Account or any requirement hereunder to
deposit or retain any amounts in such Spread Account or to distribute any
amounts therein as provided in Section 3.03 hereof shall be effective if made or
consented to in writing by Financial Security, the Seller and the Collateral
Agent (the consent of which shall not be withheld or delayed with respect to any
amendment that does not adversely affect the
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<PAGE>
Collateral Agent) but shall in no circumstances require the consent of the
Trustee or the Certificateholders related to such Series or any other Series or
any Reversionary Holder.
Section 8.04. SEVERABILITY. In the event that any provision of this
Agreement or the application thereof to any party hereto or to any circumstance
or in any jurisdiction governing this Agreement shall, to any extent, be invalid
or unenforceable under any applicable statute, regulation or rule of law, then
such provision shall be deemed inoperative to the extent that it is invalid or
unenforceable, and the remainder of this Agreement, and the application of any
such invalid or unenforceable provision to the parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or
unenforceable, shall not be affected thereby nor shall the same affect the
validity or enforceability of any other provision of this Agreement. The
parties hereto further agree that the holding by any court of competent
jurisdiction that any remedy pursued by the Collateral Agent, or any of the
Secured Parties, hereunder is unavailable or unenforceable shall not affect in
any way the ability of the Collateral Agent or any of the Secured Parties to
pursue any other remedy available to it or them (subject, however, to the
provisions of this Agreement limiting such remedies).
Section 8.05. NONPETITION COVENANT. Notwithstanding any prior termination
of this Agreement, each of the parties hereto agrees that it shall not, prior to
one year and one day after the Final Distribution Date with respect to each
Series, acquiesce, petition or otherwise invoke or cause the Seller or the Trust
to invoke the process of the United States of America, any State or other
political subdivision thereof or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
for the purpose of commencing or sustaining a case by or against the Seller or
the Trust under a Federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Seller or the Trust or all or any part of its
property or assets or ordering the winding up or liquidation of the affairs of
the Seller or the Trust. The parties agree that damages will be an inadequate
remedy for breach of this covenant and that this covenant may be specifically
enforced.
Section 8.06. NOTICES. All notices, demands, certificates, requests and
communications hereunder ("notices") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on
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the date personally delivered to an Authorized Officer of the party to which
sent, or (d) on the date transmitted by legible telecopier transmission with a
confirmation of receipt, in all cases addressed to the recipient as follows:
(i) If to the Seller (for so long as Atlantic is the Servicer):
Atlantic Auto Third Funding Corporation
800 Perinton Hills Office Park
P.O. Box 1502
Fairport, New York 14450
Telecopier No.: (716) 421-1954
Confirmation: (716) 421-1955
(ii) If to Financial Security:
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Surveillance Department
Re: Atlantic Grantor Trust 1996-A
6.70% Asset Backed Certificates, Class A
Telecopier No.: (212) 339-3518
(212) 339-3529
Confirmation: (212) 826-0100
(in each case in which notice or other communication to Financial
Security refers to a Default or a claim on the Policy or in which
failure on the part of Financial Security to respond shall be
deemed to constitute consent or acceptance, then with a copy to
the attention of the Senior Vice President Surveillance)
(iii) If to the Trustee:
The Chase Manhattan Bank
4 Chase Metrotech Center - 3rd Floor
Brooklyn, NY 11245
Attention: John Mynttinen
Telecopier No.: (718) 242-3529
Confirmation: (718) 242-5854
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<PAGE>
(iv) If to the Collateral Agent:
The Chase Manhattan Bank
4 Chase Metrotech Center - 3rd Floor
Brooklyn, NY 11245
Attention: John Mynttinen
Telecopier No.: (718) 242-3529
Confirmation: (718) 242-5854
(v) If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Telecopier No.: (212) 553-0344
(vi) If to Standard & Poor's:
Standard & Poor's Ratings Group
26 Broadway
New York, New York 10004
Telecopier No.: (212) 208-1582
A copy of each notice given hereunder to any party hereto shall also be given to
(without duplication) Financial Security, the Seller, the Trustee and the
Collateral Agent. Each party hereto may, by notice given in accordance herewith
to each of the other parties hereto, designate any further or different address
to which subsequent notices shall be sent.
Section 8.07. TERM OF THIS AGREEMENT. This Agreement shall take effect on
the Closing Date of the Series 1996-A Certificates and shall continue in effect
until the last Final Termination Date to occur with respect to each Series. On
such Final Termination Date, this Agreement shall terminate, all obligations of
the parties hereunder shall cease and terminate and the Collateral, if any, held
hereunder and not to be used or applied in discharge of any obligations of the
Seller or Atlantic in respect of the Secured Obligations or otherwise under this
Agreement, shall be released to and in favor of the related Reversionary
Holders, or, if not otherwise identified, to the Seller, provided that the
provisions of Sections 4.06, 4.07 and 8.05 hereof shall survive any termination
of this Agreement and the release of any Collateral upon such termination.
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<PAGE>
Section 8.08. ASSIGNMENTS, THIRD-PARTY RIGHTS; REINSURANCE.
(a) This Agreement shall be a continuing obligation of the parties hereto
and shall (i) be binding upon the parties and their respective successors and
assigns, and (ii) inure to the benefit of and be enforceable by each Secured
Party and the Collateral Agent, and by their respective successors, transferees
and assigns. The Seller may not assign this Agreement, or delegate any of its
duties hereunder, without the prior written consent of the Controlling Party.
(b) Financial Security shall have the right (unless a Financial Security
Default shall have occurred and be continuing) to give participations in its
rights under this Agreement and to enter into contracts of reinsurance with
respect to any Policy issued in connection with a Series of Certificates and
each such participant or reinsurer shall be entitled to the benefit of any
representation, warranty, covenant and obligation of each party (other than
Financial Security) hereunder as if such participant or reinsurer was a party
hereto and, subject only to such agreement regarding such reinsurance or
participation, shall have the right to enforce the obligations of each such
other party directly hereunder; PROVIDED, HOWEVER, that no such reinsurance or
participation agreement or arrangement shall relieve Financial Security of its
obligations hereunder, under the Transaction Documents to which it is a party or
under any such Policy, or shall change the status of Financial Security as a
"Controlling Party". In addition, nothing contained herein shall restrict
Financial Security from assigning to any Person pursuant to any liquidity
facility or credit facility any rights of Financial Security under this
Agreement or with respect to any real or personal property or other interests
pledged to Financial Security, or in which Financial Security has a security
interest, in connection with the transactions contemplated hereby. The terms of
any such assignment or participation shall contain an express acknowledgment by
such Person of the condition of this Section and the limitations of the rights
of Financial Security hereunder.
Section 8.09. CONSENT OF CONTROLLING PARTY. In the event that the
Controlling Party's consent is required under the terms hereof or under the
terms of any Transaction Document, it is understood and agreed that, except as
otherwise provided expressly herein, the determination whether to grant or
withhold such consent shall be made solely by the Controlling Party in its sole
discretion.
Section 8.10. TRIAL BY JURY WAIVED. Each of the parties hereto waives, to
the fullest extent permitted by law, any right it may have to a trial by jury in
respect of any litigation arising directly or indirectly out of, under or in
connection
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<PAGE>
with this Agreement, any of the other Transaction Documents or any of the
transactions contemplated hereunder or thereunder. Each of the parties hereto
(a) certifies that no representative, agent or attorney of any other party has
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver and (b) acknowledges
that it has been induced to enter into this Agreement and the other Transaction
Documents to which it is a party, by among other things, this waiver.
Section 8.11. GOVERNING LAW. This Agreement shall be governed by and
construed, and the obligations, rights and remedies of the parties hereunder
shall be determined, in accordance with the laws of the State of New York.
Section 8.12. CONSENTS TO JURISDICTION. Each of the parties hereto
irrevocably submits to the jurisdiction of the United States District Court for
the Southern District of New York, any court in the state of New York located in
the city and county of New York, and any appellate court from any thereof, in
any action, suit or proceeding brought against it and related to or in
connection with this Agreement, the other Transaction Documents or the
transactions contemplated hereunder or thereunder or for recognition or
enforcement of any judgment and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such suit or action or
proceeding may be heard or determined in such New York State court or, to the
extent permitted by law, in such federal court. Each of the parties hereto
agrees that a final judgment in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. To the extent permitted by applicable law,
each of the parties hereby waives and agrees not to assert by way of motion, as
a defense or otherwise in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement or any of the
other Transaction Documents or the subject matter hereof or thereof may not be
litigated in or by such courts. The Seller hereby irrevocably appoints and
designates Chase Manhattan Bank as its true and lawful attorney and duly
authorized agent for acceptance of service of legal process. The Seller agrees
that service of such process upon such Person shall constitute personal service
of such process upon it. Subject to Section 8.05 hereof, nothing contained in
this Agreement shall limit or affect the rights of any party hereto to serve
process in any other manner permitted by law or to start legal proceedings
relating to any of the Transaction Documents against Atlantic or the Seller or
their respective property in the courts of any jurisdiction.
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<PAGE>
Section 8.13. LIMITATION OF LIABILITY. It is expressly understood and
agreed by the parties hereto that (a) Chase Manhattan Bank is executing this
Agreement not in its individual capacity but solely in its capacities as
collateral agent and trustee of the Trusts pursuant to the Securitization
Agreements and (b) in no case whatsoever shall Chase Manhattan Bank be
personally or corporately liable on, or for any loss in respect of, any of the
statements, representations, warranties, covenants, agreements or obligations of
the Trust hereunder, all such liability, if any, being expressly waived by the
parties hereto.
Section 8.14. DETERMINATION OF ADVERSE EFFECT. Any determination of an
adverse effect on the interest of the Secured Parties or the Certificateholders
shall be made without consideration of the availability of funds under the
Policies.
Section 8.15. COUNTERPARTS. This Agreement may be executed in two or more
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
Section 8.16. HEADINGS. The headings of sections and paragraphs and the
Table of Contents contained in this Agreement are provided for convenience only.
They form no part of this Agreement and shall not affect its construction or
interpretation.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth on the first page hereof.
ATLANTIC AUTO THIRD FUNDING
CORPORATION
By /s/ Richard Harrison
-----------------------------------------------
Name: Richard Harrison
Title: President
FINANCIAL SECURITY ASSURANCE INC.
By /s/ Richard Harrison
-----------------------------------------------
Name: Richard Harrison
Title: President
THE CHASE MANHATTAN BANK
as Trustee
By /s/ John Mynttiner
-----------------------------------------------
Name: John Mynttiner
Title: Second Vice President
THE CHASE MANHATTAN BANK
as Collateral Agent
By /s/ John Mynttiner
-----------------------------------------------
Name: John Mynttiner
Title: Second Vice President
<PAGE>
PERINTON HILLS OFFICE PARK
Standard Lease Agreement
This Lease made as of the 18TH day of MARCH, 1994, between PERINTON HILLS,
a New York Limited Partnership, having an office for the transaction of business
at 250 WillowBrook Office Park, Fairport, New York, 14450, hereinafter called
"Landlord", and EMCO MOTOR HOLDINGS, INC., a Delaware Corporation, having an
office at 153 East 53rd Suite, New York, New York 10022 hereinafter called
"Tenant".
W I T N E S S E T H :
ARTICLE 1
PREMISES AND TERM
SECTION 1.01 Landlord hereby leases to Tenant, and Tenant hereby hires and
takes from the Landlord the following described premises (sometimes herein
referred to as the "Demised Premises") located in the Perinton Hills Office Park
(the "Park") in the Town of Perinton, County of Monroe, in Building 800 No. 800
(the "Demised Premises"),* as shown on Exhibit A attached hereto and made a part
hereof, together with the right in common with other Tenants to use parking
areas and common areas contiguous to or a part of the Building of which the
Demised Premises form a part, (the "Building") to be constructed as set forth
herein and to be used and occupied by the Tenant for offices and for no other
purpose.** [*to consist of 6839 rentable square feet at the commencement of the
demised term] [**Landlord represents that to the best of its knowledge and
belief, the Building and the
<PAGE>
Demised Premises are now and will be at the time of the commencement of the
demised term in compliance with all applicable New York State and Town of
Perinton building codes and ordinances, is in substantial compliance with the
Americans with Disabilities Act and that neither the Building nor the Demised
Premises contain any toxic or "Hazardous Wastes".]
SECTION 1.02 The Demised Premises shall include the area bounded by: the
center line of any walls common to adjacent tenants, the Building Common Area
side of any wall adjoining Building Common Areas (but not the surface thereof),
the line established by the exterior face of the exterior walls of the Building
(but not the surface thereof), the concrete floor surface and the lower surface
of the next higher floor (or roof). Landlord reserves unto itself, its
successors and assigns, the right to install, maintain, use, repair and replace
pipes, ducts, conduits, wires and structural elements leading through the
Demised Premises in locations which will not materially interfere with Tenant's
use of the Demised Premises.*** No right to use any part of the exterior of the
Building and no easement for light or air are included in the Lease of the
Demised Premises hereby made. [***Landlord agrees, in making any said repairs,
replacements, etc., to cause as little disruption or inconvenience to Tenant as
possible.]
SECTION 1.03 "Building Common Areas" shall be defined to mean all areas,
space, equipment, signs and special services provided by Landlord specifically
for the Building or for the
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common or joint use and benefit of all the tenants in the Building, their
employees, agents, customers, visitors and other invitees, including without
limitation hallways, corridors, trash rooms, mechanical and electrical rooms,
storage rooms, stairways, entrances, elevators, rest rooms, lobbies, stairs,
loading docks, pedestrian walks, roofs and basements, janitor's and storage
closets within the Building and all other common rooms and common facilities
within the Building.
SECTION 1.04 Landlord shall, at its cost and expense (except as otherwise
specified), construct the Demised Premises for Tenant's use and occupancy in
accordance with the terms and provisions of Exhibit B which is attached hereto
and made a part hereof. Any work in addition to any of the items specifically
enumerated in said Exhibit B shall be performed by Tenant at its own cost and
expense, or if Landlord installs or constructs any of such additional work in
the Demised Premises at Tenant's request, it shall be paid for by Tenant within
fifteen (15) days after receipt of a bill therefor at cost, plus twenty percent
(20%).
SECTION 1.05 To have and to hold the Demised Premises for a term of five
(5)* lease years, or until such term shall sooner cease and terminate, as
hereinafter provided, said term to commence* on the 1st day of May, 1994, and to
end on the 30th day of April, 1999. In the event the Lease term commences on a
date other than May 1, 1994, then the Lease term will expire five (5) years from
the last day of the first full month after the term
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<PAGE>
commences. [* Notwithstanding the foregoing, Tenant shall not be required to
pay rental prior to the commencement of the demised term and the demised term
shall not commence until the Demised Premises are ready for occupancy (as
defined in Paragraph 5 of Rider 1).]
ARTICLE 2
RENT
SECTION 2.01 Tenant covenants to pay an annual rent as follows:
A. For the period May 1, 1994, through December 31, 1994, the sum of $5207.41
per month;
B. For the period January 1, 1995, through April 30, 1995, the sum of $6924.14
per month;
C. For the period May 1, 1995, through April 30, 1996, the annual rent of
$86,509.20 payable in equal monthly installments of $7209.10;
D. For the period May 1, 1996, through April 30, 1997, the annual rent of
$89,928.72 payable in equal monthly installments of $7494.06 and
E. For the period May 1, 1997, through the end of the demised term, the annual
rent of $107,026.20 payable in equal monthly installments of $8,918.85.
Said rent shall be payable in advance on the first day of each and every
calendar month during the term hereof; except that the rent for the first month
of the term and for any period prior to the first complete calendar month shall
be payable upon execution of this Lease. The last monthly installment payment
shall include rent for the last calendar month plus rent for the remaining days
to the end of the term. Rent for any period of
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<PAGE>
less than one (1) month shall equal 1/30th of the monthly rental for each day of
such period.
SECTION 2.02 The Tenant will pay said rent, in U.S. legal tender, in
advance without setoff, deduction or demand to Landlord at 250 WillowBrook
Office Park, Fairport, New York, 14450, or to such other person or to such other
place as Landlord shall designate in writing.
ARTICLE 3
CARE AND SURRENDER OF PREMISES
SECTION 3.01 The Tenant will take good care of the Demised Premises,
fixtures and appurtenances, and all alterations, additions and improvements to
either; will repair all damage to the same resulting from the negligence or
willful acts of the Tenant, its employees, agents or visitors; will suffer no
waste or injury; will execute and comply* with all laws, rules, orders,
ordinances and regulations at any time issued or enforced by any lawful
authority, applicable to the Tenant's use or occupancy of the Demised Premises;
will repair, at or before the end of the term, all injury done by the
installation or removal of furniture and property and at the end of the term
will quit and surrender the Demised Premises in good order and condition,
subject to normal wear and tear or damage by casualty or the elements. [*
Notwithstanding the foregoing, Tenant, in so complying, shall not be required to
make structural repairs to the Building or the Demised Premises unless caused by
Tenant's SPECIFIC use (i.e.
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unique to Tenant and not reasonably anticipated for a "normal" corporate use).]
ARTICLE 4
ASSIGNMENT, SUBLETTING AND RECAPTURE
SECTION 4.01 The Tenant will not sell, assign, mortgage or transfer this
Lease, or sublet or rent the premises or any part thereof, or permit the same or
any part thereof to be used or occupied by anybody other than the Tenant or the
Tenant's employees, without the prior written consent of the Landlord, which
Landlord agrees not to unreasonably withhold, and the Tenant will not vacate or
abandon the Demised Premises. Any sale, assignment, mortgage, transfer or
subletting of this Lease which is not in compliance with the provisions of this
paragraph and the following paragraphs shall be of no effect and void.
If Tenant shall desire to sublet the Demised Premises, Tenant shall give
written notice thereof to Landlord requesting Landlord's consent thereto which
notice shall set forth a proposed commencement date ("Proposed Effective Date")
of the sublease term, which is not less than 15 nor more than 90 days after the
sending of said notice and attached to said notice shall be a copy of the
proposed sublease agreement and of all agreements collateral thereto. The form
of said sublease agreement shall be subject to Landlord's reasonable approval
and, among other things, the subtenant shall agree to be bound by all of the
terms and provisions contained in this Lease Agreement. Landlord, within 10
business days after receipt of said notice
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<PAGE>
shall give Tenant written notice of Landlord's consent or lack of consent to
Tenant's said request.
If Landlord so withholds said consent by notice thereof** (or if said
sublet shall occur by order of any court), Landlord may, in the same notice,
within 10 business days of Tenant's written notice to sublet, recapture the
space described in the sublease. If such recapture notice is given, it shall
serve to cancel and terminate this lease with respect to the proposed sublease
space, or, if the proposed sublease space covers all the Demised Premises, it
shall serve to cancel and terminate the entire term of this lease, in either
case, as of the Proposed Effective Date as fully and completely as if that date
had been definitely fixed for the expiration of the term of this Lease;
provided, however, that no termination of this Lease with respect to part or all
the Demised Premises shall become effective without the prior written consent,
where necessary, of the holder of each mortgage* to which this Lease is then
subject. If this Lease be terminated pursuant to the foregoing with respect to
less than the entire Demised Premises, the rent, additional rent and the
escalation percentage provisions of this Lease shall be adjusted on the basis of
the proportion of rentable square feet retained by Tenant to the rentable square
feet originally demised and this Lease as so amended shall continue thereafter
in full force and effect. [* When said consent is required by the mortgage
documents.] [**In which case Landlord shall be required to give in said notice
the reasons for not so consenting. If Landlord fails to respond to Tenant's
said notice within five (5)
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<PAGE>
business days of Landlord's receipt of said notice then Landlord shall be deemed
to have consented.]
In the event of any sublease of all or any portion of the Demised Premises
where the rental reserved in the sublease exceeds the rental or pro rata portion
of the rental, as the case may be, for such space reserved in the Lease, Tenant
shall pay the Landlord monthly, as additional rent, at the same time as the
monthly installments of rent hereunder, the excess*** of the rental reserved in
the sublease over the rental reserved in this Lease applicable to the subleased
space. [***After deducting Tenant's reasonable costs incurred in said
subletting (but said costs shall not include fees, etc., paid to Tenant,
Tenant's employees or entities in which Tenant or Tenant's employees have an
ownership interest).]
If this Lease be assigned, sublet or transferred in any manner whatsoever,
such assignment or transfer shall be upon and subject to all of the covenants,
provisions and conditions contained in this Lease and, notwithstanding any
consent by the Landlord to any such assignment or transfer or any subletting by
the Tenant, the Tenant shall continue to be and remain the primary obligaor
hereunder. Any consent by the Landlord to any such assignment, transfer,
subletting or other matter or thing contained in this paragraph shall not in any
way be construed to relieve the Tenant from obtaining the prior consent of the
Landlord to any other or further such assignment, transfer, subletting, matter
or thing.
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ARTICLE 5
ALTERATIONS, ADDITIONS, ETC.
SECTION 5.01 The Tenant will not make or permit anyone to make any
alterations, improvements or additions in or to the Demised Premises,* or
install any equipment of any kind that will require any alteration or addition
to, or the use of, the water, heating, air conditioning or electrical or other
building systems or equipment, without the prior written consent** of the
Landlord and then only by contractors approved by Landlord which approval
Landlord agrees not to unreasonably withhold or delay. Further, a condition
precedent to any contractor performing work, labor or services on or about the
Building or the Demised Premises shall be the receipt by Landlord of a
Certificate of Insurance evidencing that the contractor is appropriately insured
in accordance with the regulations of the Landlord and that the Landlord and
such other parties as Landlord has designated as having an insurable interest
have been named as additional insureds. [*Provided Tenant is not in default
herein, Tenant may make said alterations, improvements and additions without
Landlord's consent provided the aggregate cost of same, in any one lease year,
does not exceed $1,000.00.] [**which consent will not be unreasonably withheld
or delayed.]
SECTION 5.02 If Landlord shall grant its consent, prior to the
commencement of any said alterations, additions or improvements, Tenant shall
provide Landlord Certificates evidencing the insurance coverage and limits
required by Exhibit
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B for all contractor and/or subcontractors working in or about the Building or
the Demised Premises.
SECTION 5.03 For any said alterations, additions or improvements which
exceed $5,000 in cost, Landlord, as a condition of granting its said consent,
may require that Tenant deliver to Landlord a payment bond which will be in
sufficient amount and issued by a reputable bonding company to guarantee payment
of the cost of said alterations, additions or improvements.
If any such alterations or improvements are made without such consent, the
Landlord may correct or remove them, and the Tenant shall be liable for any and
all expense incurred by the Landlord in the performance of this work. Any such
alterations, additions or improvements to the Demised Premises which are made
with the Landlord's prior written consent shall immediately become the property
of the Landlord and shall remain upon and be surrendered with the premises as a
part thereof at the end of the term. The Landlord may however, at or prior to
the end of the term by written notice to such effect, require the Tenant to
remove all or any part of such alterations, additions, or improvements, and in
such event the tenant shall promptly remove the same at its expense and shall,
at or prior to the end of the term, repair all damage to the premises caused by
such removal and return the Demised Premises, at Landlord's option, to the same
condition they were in prior to said alterations, additions, or improvements.
Tenant, at the time requesting Landlord's said
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consent to any said alteration or repair may, in said consent, require Landlord
to then elect whether or not Tenant shall be responsible for so removing said
alterations, additions, or improvements.* [*Tenant shall not be required to
remove any leasehold improvements installed by Landlord, at Landlord's expense,
at or before the commencement of the lease term.]
ARTICLE 6
SIGNS
SECTION 6.01 The Tenant will not premit or suffer any signs,
advertisements or notices to be displayed, inscribed upon or affixed on any part
of the outside or inside of the Demised Premises, or in the Building, except on
the directory board to be provided by the Landlord and on the entrance doors of
the Demised Premises, and then only of such size, color and style as the
Landlord may approve. Tenant agrees to reimburse Landlord for the cost of said
signs but said amount shall not exceed Three Hundred-fifty Dollars ($350.00).
ARTICLE 7
SERVICES
SECTION 7.01 The Demised Premises shall be furnished with a reasonable
amount of electricity for lighting and ORDINARY business applicances (as herein
defined) and, subject to the following, and to any laws, statutes, ordinances or
regulations having jurisdiction thereof, such heat and air conditioning as may
be required for the reasonably comfortable occupation of the
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premises (7:30 a.m. to 6:00 p.m. each Monday through Friday and from 7:30 a.m.
to 1:00 p.m. each Saturday, excluding holidays) and domestic water for a
drinking fountain in the common area of the Building. "Ordinary business
appliances" shall be defined to include only equipment which (i) are maintained
in an "on" or operating mode only during the hours of 7:30 a.m. to 6:00 p.m.,
Monday through Friday and Saturday 7:30 a.m. to 1:00 p.m. and (ii) do not
require more than a 20 amp electrical circuit and (iii) do not consume more than
100 watts when idle or 200 watts when operating. Further, notwithstanding the
provisions of the preceding sentence, Landlord shall not be responsible for
providing air conditioning required due to Tenant having or using within the
Demised Premises any said equipment, heat producing machine or equipment or to
provide air conditioning required due to heat produced by Tenant occupying the
premises with a density exceeding one person for every 150 square feet of
rentable space. Landlord shall not be responsible for any affect and/or
disruption in the heating or air conditioning system serving the Demised
Premises because of the presence of said machines, equipment or said density of
occupation exceeding one person per 150 square feet of rentable space.
Notwithstanding the foregoing but subject to the terms therein contained, Tenant
may have within the Demised Premises word processors, personal computers,
printers, computer terminals, copy machines and a refrigerator. If any said
equipment or "supplemental" air conditioning as hereinafter referred to, the
installation which Landlord hereby
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consents to, consumes electricity greater than the said 100 watts when idle or
200 watts when operating, Landlord may require Tenant, at Tenant's sole cost and
expense to install a separate electrical meter and to pay for the electrical
consumption to operate said equipment and if said equipment produces such heat
so that "supplemental" air conditioning would be reasonably necessary, then
Tenant, at Tenant's sole cost and expense, shall supply and install such
"supplemental" air conditioning the electrical consumption for which shall also
be separately metered and paid for by Tenant as aforesaid. Landlord shall not
be liable for failure to furnish any of the foregoing when such failure is
caused by accidents or conditions beyond the control of Landlord, or by repairs,
labor disputes or labor disturbances, of any character, whether resulting from
or caused by acts of Landlord or otherwise; nor shall Landlord be liable under
any circumstances for loss of or injury to property, however occurring, through
or inconnection with or incidental to the furnishing of any of the foregoing,
nor shall any such failure relieve Tenant from the duty to pay the full amount
of rent herein reserved, or constitute or be construed as a constructive or
other eviction of Tenant.* ** *** [* Notwithstanding the foregoing, Tenant
shall have access to the Demised Premises, 24 hours a day, 7 days a week.] [**
See Rider 1, Paragraph 3.] [*** Tenant will not be charged by Landlord for
after hours air conditioning use.]
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ARTICLE 8
LANDLORD'S REPAIR
SECTION 8.01 Subject to any other provision or term herein to contrary,
Landlord shall maintain in good repair the (a) structural parts of the Building;
(b) electrical, plumbing and sewerage systems serving the Building (except to
the extent there is or will exist within the Demised Premises, running water,
sinks, plumbing, lines and connections, disposal(s), refrigerators, freezer(s),
Tenant agrees to maintain and keep in repair the same at its sole cost and
expense but, if said equipment was supplied by Landlord, Landlord agrees to make
available to Tenant, all manufacturer's warranties applicable to said items);
(c) subject to the provisions of Article 7 above, the heating, ventilating and
air conditioning supplied by Landlord serving the Demised Premises (Tenant, at
its sole cost and expense, shall service and repair any supplemental air
conditioning, heating and ventilating equipment required by Tenant); (d) ceiling
and Landlord supplied lighting in the Demised Premises except Landlord shall be
responsible for supplying and installing bulbs within the Demised Premises only
for the 2'x4' parabolic recessed fluorescent light fixtures referred to herein;
(e) the Building, its common areas, landscaping and snowplowing its parking
facilities and exterior, and all of the Building systems in a manner
commensurate with a "Class A" office building; except Tenant shall be
responsible for and pay for any repairs required due to the negligence, misuse,
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or willful misconduct of Tenant, Tenant's employees, agents, representatives,
contractors, visitors _____________. Landlord shall not be responsible for the
repair or maintenance of any Tenant supplied or Tenant paid for item or
equipment.
ARTICLE 9
NOTICES
SECTION 9.01 In every case, when under the provisions of this Lease, it
shall be necessary or desirable for the Landlord to serve any notice or demand
on the Tenant, such notice or demand shall be served personally or by Certified
Mail, Return Receipt Requested, addressed to the Tenant at the Demised Premises,
and any such notice or demand to be given to the Landlord shall be delivered
personally and by Certified Mail, Return Receipt Requested addressed to the
Landlord at 250 Willow-Brook Office Park, Fairport, New York, 14450; or such
other address as either may designate in writing.
ARTICLE 10
INSPECTION AND SHOWING OF PREMISES
SECTION 10.01 The Landlord shall have the right at all reasonable times
during the term of this Lease to enter the Demised Premises for the purpose of
examining or inspecting the same, providing services or maintenance, or making
such repairs or alterations therein and the Landlord may exhibit the Demised
Premises to prospective new tenants. In exercising its rights under this
paragraph, Landlord agrees, as much as reasonably
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possible, to cause Tenant as little inconvenience as possible and if reasonable,
and unless otherwise directed by Tenant, to conduct such examination, showing or
inspection, during Tenant's normal business hours. See Rider 1, Paragraph 4.
ARTICLE 11
INSURANCE
SECTION 11.01 The Tenant agrees to maintain in full force throughout the
demised term, at its own cost and expense, one or more policies of public
liability and property damage insurance having a combined single limit of One
Million Dollars ($1,000,000.00) which, up to the maximum liability amounts
thereof, insure the Tenant and the Landlord (and such other person(s) designated
by the Landlord having an insurable interest) against liability for injury to
persons occurring (or death) and/or property of any person or persons in the
Demised Premises. The insurance required by this Section shall be primary
insurance and the insurer shall be liable for the full amount of the loss up to
and including the total limit of liability as set forth in the declarations
without the right of contribution from any other insurance coverage held by
Tenant.
SECTION 11.02 During the lease term Tenant shall maintain in full force on
all its fixtures and equipment in the Demised Premises a policy or policies of
fire insurance insuring Landlord and Tenant with standard extended coverage
endorsements to the extent of at least eighty percent (80%) of their insurable
value
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containing the proper co-insurance provisions to prevent Tenant from being a co-
insurer.
SECTION 11.03 All insurance required to be secured by the Tenant in
accordance with this Article 11 shall be obtained from insurance companies
licensed to do business in the State of New York and Certificates of said
insurance shall be furnished by the Tenant to the Landlord each of which
policies shall be endorsed to provide that thirty (30) days notice of
cancellation or amendment will be given to the Landlord. Upon Tenant's failure
to procure such insurance or to cause Tenant's vendors/contractors to procure
said insurance as required in Section 11.07 below, as the case may be, and
deliver the policy or policies or certificates therefor to the Landlord prior to
the commencement of the term hereunder or, in the case of any said
vendors/contractors, prior to the commencement of any said work, labor or
services, or thirty (30) days before the expiration of any policy delivered to
the Landlord, the Landlord may, at its option, obtain such insurance or any of
same and the premium therefor shall be deemed to be and be paid as additional
rent at the next rent payment day.
SECTION 11.04 Landlord shall keep the Building containing the Demised
Premises insured against loss or damage by fire with extended coverage
endorsement in an amount not less than eighty (80%) of the full insurable value
thereof.
SECTION 11.05 Tenant shall not do or permit to be done any act or thing in
or upon the Demised Premises which will
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invalidate or be in conflict with the certificate of occupancy or the terms of
the New York State standard form of fire, boiler, sprinkler, water damage or
other insurance policies covering the building and/or the fixtures, equipment
and property therein. Tenant shall, at its own expense, comply* with all rules,
orders, regulations or requirements of the New York Board of Fire Underwriters
or any other similar body having jurisdiction provided same relate to its use or
occupancy of the Demised Premises and shall not knowingly do or permit anything
to be done in or upon the Demised Premises or bring or keep anything therein or
use the Demised Premises in a manner which increases the rate of insurance upon
the Building or any property or equipment located therein over the rate in
effect at the commencement of the term of this Lease. [* Notwithstanding the
foregoing, Tenant, in so complying, shall not be required to make structural
repairs to the Building or to the Demised Premises unless caused by Tenant's
SPECIFIC use (i.e. unique to Tenant and not reasonably anticipated for a
"normal" corporate use).]
SECTION 11.06 If because of anything done, caused or permitted to be done
or omitted by Tenant the rate of liability, fire, boiler, sprinkler, water
damage or other insurance with all extended coverage on the Building or on the
property and equipment of Landlord or any other tenant or subtenant in the
Building shall be higher than it otherwise would be, Tenant shall reimburse
Landlord and the other tenants and subtenants in the Building for the additional
insurance premiums thereafter paid by Landlord or by other tenants and
subtenants in the Building which
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shall have been charged because of the aforesaid reasons and Tenant shall make
the reimbursement on the first day of the month following such payment by
Landlord or such other tenants or subtenants.
SECTION 11.07 Tenant agrees to cause any vendors*/contractors doing work,
labor or services, on or behalf of Tenant, in or about the Demised Premises to
maintain while performing said work, labor or services, at their own cost and
expense, one or more policies of public liability and property damage insurance
having a combined single limit of One Million Dollars ($1,000,000.00) which, up
to the maximum liability amounts thereof, insure the said vendor/contractor,
Tenant and the Landlord (and such other person(s) designated by the Landlord
having an insurable interest) against liability for injury to persons occurring
(or death) and/or property of any person or persons in or about the Demised
Premises. The insurance required by this Section shall be primary insurance and
the insurer shall be liable for the full amount of the loss up to and including
the total limit of liability as set forth in the declarations without the right
of contribution from any other insurance coverage held by Tenant. [* Except
for moving contractors or construction contractors, etc., said insurance shall
be required only of contractors/vendors who perform services, in any one lease
year, that exceed, or will reasonably exceed, $500 in value.]
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ARTICLE 12
RULES AND REGULATIONS
SECTION 12.01 The Tenant shall observe faithfully and comply strictly
with, the reasonable rules and regulations reasonable promulgated from time to
time by the Landlord, as in the Landlord's reasonable judgment are necessary for
the safety, care and cleanliness of the Building or for the preservation of good
order therein but such rules and regulations shall not affect the substance of
this agreement (as distinguished from the procedural and administrative
considerations of the operation of the Demised Premises, the Building and the
Park). The Landlord shall not be liable to the Tenant for violation of such
rules and regulations by any other Tenant, its servants, employees, agents,
visitors or licensees. The current Rules and Regulations* are attached hereto
and made a part hereof. Landlord shall not be responsible for the non-
observance by any other Tenant of any said Rules and Regulations, or the
covenants or agreements contained in any other lease, by any other Tenant of the
Building, or its agents or employees. [* Which shall be uniform in their
application by Landlord to all Tenants of the Building. Nothing herein shall be
deemed to obligate Landlord to commence a legal action or proceedings against a
Tenant of the Building either to enforce any said Rule or Regulation or to
enjoin their violation.]
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ARTICLE 13
SUBORDINATION
SECTION 13.01 This Lease shall be subordinate and subject at all times to
all ground or underlying leases and to any mortgage covering the Building or
which at any time hereafter shall be made, and to all advances made, or
hereafter to be made, upon the security of any such mortgagee. See Rider 1,
Paragraph 6.
ARTICLE 14
DEFAULT
SECTION 14.01 If the Tenant shall at any time be in default continuing
after fifteen days written notice thereof in the payment of any rent or any
additional rent or any other payments required of Tenant hereunder, or any part
thereof, without demand therefor, or if Tenant, after fifteen days written
notice by Landlord to Tenant, shall be in default in any of the other covenants
and conditions of this Lease to be kept, observed and performed by Tenant, or if
Tenant shall vacate or abandon the premises during the term hereof, or if this
leasehold interest shall be levied on or taken or attempted to be taken by
execution, attachment, or other process of law, or if any execution or
attachment shall be issued against Tenant, or any of Tenant's property in the
Demised Premises, whereby the Demised Premises shall be taken or occupied or
attempted to be taken or occupied by someone other than Tenant, or if a
receiver, assignee
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or trustee shall be appointed for Tenant or Tenant's property, or if this Lease
shall by operation of law devolve upon or pass to any person or persons other
than the Tenant, then in any of said cases, and subject to the provisions in
Section 14.02 below, the Landlord may:
A. [intentionally deleted]
B. enter* into the Demised Premises, remove* Tenant's property and
effects as elsewhere in the Lease provided, take* and hold* possession thereof,
without such entry and possession terminating this Lease or releasing Tenant in
whole or in part from Tenant's obligations to pay rent and all its other
obligations hereunder for the full term. Relet the Demised Premises or any part
or parts thereof, either in the name of or for the account of Landlord or
Tenant, for such rent and for such term and terms as Landlord may see fit, which
term may, at Landlord's option, extend beyond the balance of the term of this
Lease. Landlord shall not be required to accept any tenant offered by Tenant or
to observe any instructions given by Tenant about such reletting. In any such
case Landlord may make such repairs, alterations** and additions** in or to the
Demised Premises and redecorate** the same as it sees fit. Tenant shall pay
Landlord any deficiency between the rent hereby reserved and covenanted to be
paid and the net amount of the rents collected on such reletting, for the
balance of the term of this Lease, as well as any expenses incurred by Landlord
in such reletting, including, but not limited to reasonable attorneys' fees
("reasonableness" shall be based upon the amount of time and
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effort expended by the attorneys without regard to the amount in controversy),
brokers' fees, the expense or repairing, altering** and adding to** and
redecorating** the premises, and otherwise preparing the same for re-rental.
All such costs, other than the rental, shall be paid by Tenant upon demand by
Landlord. Any deficiency in rental shall be paid in monthly installments, upon
statements rendered by Landlord to Tenant, unless Landlord has declared the
entire rental for the balance of the term due, as elsewhere in this Lease
provided. Any suit brought to collect the amount of the deficiency for any one
or more months shall not preclude any subsequent suit or suits to collect the
deficiency for any subsequent months; [*Only in accordance with New York State
statutory law.] [**Notwithstanding the foregoing, said costs shall not exceed
$25,000.00.]
C. require that upon any termination of this Lease, whether by lapse
of time, the exercise of any option by Landlord to terminate the same, or in any
other manner whatsoever, or upon any termination of this Lease, the Tenant shall
at once surrender possession of the Demised Premises to the Landlord and
immediately vacate the same, and remove all effects therefrom, except such as
may not be removed under other provisions of this Lease. If Tenant fails to do
so Landlord may forthwith re-enter said the Demised Premises, with or without
process of law, and repossess itself thereof as in its former estate and expel
and remove Tenant and any other persons and property therefrom, using such force
as may be necessary, without being deemed guilty of trespass, eviction or
forcible entry, without thereby waiving
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Landlord's rights to rent or any other rights given Landlord under this Lease or
at law or in the equity;
D. if the Tenant shall not remove all effects from the Demised
Premises as in this Lease provided, at Landlord's option, Landlord may remove
any or all of said effects in any manner that Landlord shall choose and store
the same without liability for loss thereof and Tenant will pay the Landlord, on
demand, any and all expenses incurred in such removal and also storage of said
effects for any length of time during which the same shall be in Landlord's
possession or in storage; or Landlord may, at its option, without notice, sell
any or all of said effects in such manner and for such price as the Landlord may
deem best and apply the proceeds of such sale upon any amounts due under this
Lease from the Tenant to the Landlord, including the expenses of removal and
sale;
E. [intentionally deleted]
F. in the event of a breach, or threatened breach, by Tenant of any
of the covenants or provisions of this Lease, have the right to enjoin any such
breach or threatened breach; and
G. declare the entire rental for the balance of the term or the
entire term immediately due and payable at once.
SECTION 14.02 Except for the nonpayment of rent, additional rent or any
other charges or payment the responsibility of Tenant to make hereunder, Tenant
shall not be in default upon the occurrence of any of the events referred to in
Section 14.01 above (except for the nonpayment of rent, additional rent or any
other charge or payment the responsibility of Tenant to make
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hereunder) if, during the the said fifteen day notice period, Tenant cures said
default. If, however, the said default shall be of such a nature that the same
cannot be completely cured or remedied within said fifteen day period, then
Tenant shall not be in default if, during the said fifteen day period Tenant
shall have commenced to cure said default and thereafter continuously and
diligently takes such action and actions as are necessary to cure said default
at the earliest possible time but in no event, however, shall the time within
which Tenant shall have to cure said default be extended beyond sixty (60) days
from the giving of the said fifteen days notice.
SECTION 14.03 Except for the fifteen days notice referred to in Section
14.01 above, Tenant expressly waives the service of any demand for payment of
rent. Tenant hereby expressly waives any and all rights of redemption granted
by or under any present or future laws, in the event of eviction or
dispossession of Tenant by Landlord under any provisions of this Lease. No
receipt of monies by the Landlord from or for the account of Tenant or from
anyone in possession or occupancy of the Demised Premises after the termination
in any way of this Lease or after the giving of any notice, shall reinstate,
continue or extend the term of this Lease or affect any notice given to the
Tenant prior to the receipt of such money, it being agreed that after final
judgment for possession of the Demised Premises, the Landlord may receive and
collect any rent or other amounts due Landlord and such payment shall not waive
or affect said notice, said suit or said judgment.
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SECTION 14.04 The Tenant waives a trial by jury of any or all issues
arising in any action or proceeding between the parties hereto, or their
successors, arising out of or in any way connected with this Lease, or any of
its provisions, the Tenant's use or occupancy of the Demised Premises and/or any
claim of injury or damage.
SECTION 14.05 Any and all rights and remedies which Landlord may have
under this Lease and at law or in equity, shall be cumulative and shall not be
deemed inconsistent with each other, and any two or more or all of said rights
and remedies may be exercised at the same time or at different times and from
time to time.
SECTION 14.06 The Tenant covenants and agrees to pay on demand Landlord's
expenses, including reasonable attorneys' fees ("reasonableness shall be based
upon the amount of time and effort expended by the attorneys without regard to
the amount in controversy), incurred in enforcing any obligation of the Tenant
under the Lease or in curing any default by Tenant under this Lease.
SECTION 14.07 If any of the aforesaid provisions or any other provision of
this Lease shall be unenforceable or void, said provisions(s) shall be deemed
eliminated and of no force and effect and the balance of this Lease shall
continue in full force and effect. If any notice is required by law to be
given, such notice shall be given.
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SECTION 14.08 The Landlord shall have the first lien on Tenant's interest
in this Lease to secure the payment and performance of Tenant's obligation
hereunder, prior and preferable to all other liens.
SECTION 14.09 The Tenant shall not permit any mechanics' or materialmen's
liens to be filed against the fee of the real property of which the Demised
Premises from a part nor against the Tenant's leasehold interest in the Demised
Premises. The Landlord shall have the right at all reasonable times to post and
keep posted on the Demised Premises any notice which it deems necessary for
protection from such liens. If any such liens are so filed, the Landlord, at
its election, may pay and satisfy the same and in such event the sums so paid by
the Landlord with maximum permissible interest from the date of payment, but not
to exceed 12% per annum, shall be deemed to be additional rent due and payable
by the Tenant at once without notice or demand.
ARTICLE 15
OCCUPANCY AFTER TERM EXPIRATION
SECTION 15.01 If the Tenant shall continue to occupy the Demised Premises
after the expiration of the said term, with the consent of the Landlord, such
tenancy shall be from month to month, and in no event from year to year, upon
the same terms and conditions, except the monthly rental shall be increased to
125% of the monthly rental for the last month of the demised term.
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ARTICLE 16
EMINENT DOMAIN
SECTION 16.01 If the whole or any part of the Demised Premises or the
Building shall be taken or condemned by any competent authority under power of
eminent domain for a public or quasi public use or purpose, then, at the option
of either party, to be exercised by written notice to the other, the term hereby
granted shall cease from the time when possession of the part so taken shall be
required for such public or quasi public use or purpose, and without an
apportionment of the award, the Tenant hereby assigning to the Landlord all
right and claim to the award. The current rent, however, in such case shall be
apportioned. Landlord's said notice, to be effective, must be given to Tenant
no later than thirty (30) days after Landlord's receipt of the "Notice of
Taking". Tenant's said notice, to be effective, must be given to Landlord no
later than thirty (30) days after Landlord gives Tenant notice of Landlord's
receipt of the "Notice of Taking".
ARTICLE 17
FIRE, CASUALTY, ETC.
SECTION 17.01 In the event that the Building be damaged or destroyed by
fire, the elements or casualty, this Lease shall continue in full force and
effect, but the Landlord, subject to there being adequate insurance proceeds
available to Landlord for the full loss thereof, shall forthwith repair such
damage or
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destruction, provided such repairs can be made under the laws and regulations of
State, County, Federal or Municipal authorities; except that if said building is
so damaged or destroyed to the extent of not less than one-third (1/3) of the
replacement cost thereof, or if said insurance proceeds to Landlord are not so
adequate, as determined by the Landlord, the Landlord, at its option (to be
exercised within ninety (90) days from the date of such damage or destruction),
may terminate this Lease. The Tenant shall be entitled to a proportionate
reduction of rent while such repairs are being made only if the Demised Premises
are untenantable, such proportionate reduction to be based upon the extent that
the Demised Premises, or part thereof, may be untenantable and for the period
that said premises, or part thereof, may be untenantable and no such rent
reduction shall be allowed by reason of inconvenience, annoyance or injury to
the Tenant's business because of such damage or destruction, or the necessity of
repairing any portion of the Building, or the making of such repairs, and the
Landlord shall not be liable to the Tenant because of such inconvenience,
annoyance or injury. Tenant hereby expressly waives the provisions of Section
227 of the Real Property Law and agrees that the foregoing provisions shall
govern and control in lieu thereof.
SECTION 17.02 Landlord shall not be responsible to Tenant for any loss or
theft of property in or from the Demised Premises, or for any loss or theft or
damage of or to any property left with any employee of Landlord, however
occurring. Landlord shall not be liable for any damage caused by water,
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rain, snow or ice, or by breakage, stoppage or leakage of water, gas, heating,
air-conditioning, sewer or other pipes or conduits, or arising from any other
cause, in, upon, about or adjacent to the Demised Premises, or the Building.
ARTICLE 18
ESCALATIONS
SECTION 18.01 The Tenant hereby agrees to pay, as additional rent, a pro
rata portion of the amount by which any of each of the yearly "building
operating costs" incurred by the Landlord during each year occurring during the
term of this Lease, commencing January 1, 1994, exceed the cost of each said
respective building operating cost incurred by the Landlord during the period
January 1, 1993, through December 31, 1993, (the "Operating Year"). The
Tenant's pro rata portion of said amount shall equal the percentage which the
rentable area (as herein defined) of the Demised Premises bears to the rentable
area of the Building or, if applicable, buildings in the Park (said allocation
of costs to be fair and equitable, in accordance with and in proportion to the
gross square footage of the Building so that each building in the Park bears, in
proportion to its respective size, its proportionate share of said cost(s),** as
determined in good faith by the Landlord's architect. A "Building operation
cost"***, **** shall be defined to include the cost to the Landlord of all
utilities, fuel, janitorial services for common areas, janitorial services
for the Demised Premises ("interior cleaning"), lighting of common areas,
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insurance, snow plowing, security, landscaping, repairs to the heating,
ventilating and air conditioning system servicing the Demised Premises and the
Building, elevator maintenance, refuse removal, recycling costs, roof repairs,
* maintenance and service (including but not limited to service contracts) of
security/safety equipment and automatic/electronic and/or magnetic exterior
entrance door locking devices and real estate taxes and other municipal
services rendered by the appropriate municipal authorities or quasi-
governmental authorities payable by the Landlord and allocable to the buildings
and the land on which the buildings stand and adjacent land owned by the
Landlord which is part of the Park. The Landlord, in good faith, shall
conclusively determine the amount of each such yearly building operating
cost(s) and once each year during the term, commencing on January, 1996 shall
notify the Tenant, in writing, of additional rent payable on account of its
pro rata portion of any such increases of each said building operating cost(s)
from the preceding operating year, together with an itemized statement thereof.
For a period of one year after said notification, Tenant shall have the right
to inspect the Landlord's cost records at the office of the Landlord. Thus,
in January ___, 1996, the Landlord shall notify the Tenant of additional rent
payable on account of its pro rata portion of the increase, if any, of any such
costs for the preceding operating year over the year January 1, 1994, through
December 31, 1994. The portion of such additional rent allocable to the months
of the then current
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calendar year (including the month in which such notice is received) which have
then elapsed (computed on the basis of one-twelfth of the Tenant's pro rata
portion of such increase for each elapsed month) shall be due and payable to the
Landlord forthwith; thereafter, the Tenant shall pay, without invoice, on the
first day of each succeeding month one-twelfth of its pro rata portion of such
increase until the expiration of the term. In each of the next following years,
if the Landlord notifies the Tenant of further additional rent payable on
account of its pro rata portion of any further increase of any such costs during
the prior calendar year, such further additional rent shall be payable in like
manner; namely, the Tenant's pro rata portion of such further increase allocable
to the elapsed months of the then current year shall be payable forthwith by the
Tenant, and one-twelfth of the Tenant's pro rata portion of such further
increase shall be payable on the first day of each succeeding month until the
expiration of the term. [*"Roof repairs" shall apply only to reasonable repair
and expense expenditures reasonably a part of ongoing maintenance and shall not
apply to roof "replacement" or other such items.] [**based upon 90% occupancy
of the Building] [***Said "Building operating costs" shall be reasonable and,
to the extent performed by Landlord, shall be at costs which will not exceed
what would be charged by third party vendors/contractors for similar services.]
[****"Building operating cost" will include items capitalized by Landlord but
such repairs shall apply only to reasonable repair
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and expense expenditures reasonably a part of ongoing maintenance and shall not
apply to replacement or such other items. Provided, however, "capitalized
items" shall not be deemed to include (and therefore shall be part of building
operating costs) HVAC compressors, condensing units, fan motors, accumulators or
dryers.]
Computations relating to the increases in real estate taxes shall be
computed on and as if the Building is fully assessed as a completed building at
90% occupancy prior to or at the commencement of the Operating Year and in such
event it is agreed that during any such lease year when the Building is less
than fully assessed as a completed building, for the purpose of calculating real
estate tax escalation charges, the tax RATE(S) existing during the Operating
Year shall be applied to the final assessment AS IF the Building had been fully
assessed during the Operating Year. The resulting amount(s) shall be used for
calculating real estate tax escalations pursuant to this Article.
SECTION 18.02 For purposes of the Lease, real estate taxes shall be
defined as follows: (i) all real estate taxes, including but not limited to
town, county and school taxes payable (adjusted after protest or litigation, if
any) for any part of the term of this Lease, including any extension period
hereof, but exclusive of penalties or discounts, on the Building or the Park to
the extent reasonably allocable to the Building; (ii) any taxes which shall be
levied in lieu of the taxes described in (i) above; (iii) Pure Waters charges,
sewer district charges and any assessments (special or otherwise) made against
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the Building and/or the Park which shall be required to be paid during the
calendar year or fiscal year in respect to which they are being determined, (iv)
any water pollution charges, (v) and any other governmental real estate taxes,
levies, impositions or charges of a similar or dissimilar nature, whether
general, special, ordinary, extraordinary, foreseen or unforeseen which may be
assessed, levied or imposed upon all or any part of the Building and/or the
Park, and (vi) the reasonable expense of contesting the amount or validity of
any such taxes, charges or assessments, such expense (including reasonable
attorneys' fees) to be applicable to the period of the item contested.
SECTION 18.03 Tenant shall pay prior to delinquency all taxes assessed
against or levied upon its occupancy of the Demised Premises, or upon the
fixtures, furnishings, equipment and all other personal property of Tenant
located in the Demised Premises other than those furnished and paid for by
Landlord, if nonpayment thereof shall give rise to a lien on the real estate,
and when possible Tenant shall cause said fixtures, furnishings, equipment and
other personal property to be assessed and billed separately from the property
of Landlord. In the event any or all of Tenant's fixtures, furnishings,
equipment and other personal property, or upon Tenant's occupancy of the Demised
Premises, shall be assessed and taxed with the property of Landlord, Tenant
shall pay to Landlord its share of such taxes within ten (10) days after
delivery to Tenant by Landlord of a statement in writing setting forth the
furnishings, equipment or personal property.
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SECTION 18.04 Should any governmental taxing authority acting under any
present or future law, ordinance or regulation, levy, assess or impose a tax,
excise, surcharge and/or assessment (other than a tax on net rental income or
franchise tax) upon or against the rents payable by Tenant to Landlord, or upon
or against the Building, the Building Common Areas, either by way of
substitution for or in addition to any existing tax on land or buildings or
otherwise, Tenant shall be responsible for and shall pay Tenant's pro rata of
such tax, excise, surcharge and/or assessment.
SECTION 18.05 Should any alteration or improvement performed by Tenant,
during the term of this Lease, cause an increase in assessment, Tenant shall pay
to Landlord the cost of all taxes resulting from such increase in assessment.
Any amount paid separately hereunder by Tenant to Landlord shall be in addition
to any amounts paid by Tenant pursuant to Section 18.02 above.
SECTION 18.06 Nothing herein contained shall require Tenant to pay
municipal, state or federal income taxes assessed against Landlord, municipal,
state, or federal, estate, succession, inheritance or transfer taxes of
Landlord, or corporation franchise taxes imposed upon any corporate owner of the
fee of the Demised Premises'; provided, however, that if at any time during the
term of this Lease or any renewal thereof there shall be levied, assessed and
imposed, (i) a municipal, state or federal tax, assessment, levy, imposition or
charge, wholly or partially as a capital levy, sales tax, use tax, excise tax or
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other tax or charge, on the rents received by Landlord from the Demised
Premises, or (ii) a license fee measured by the rent payable by Tenant under
this Lease, then all such taxes, assessments, levies, impositions or charges or
the part thereof so measured or based (to the extent that such tax, assessment,
levy, imposition or charge would be payable if the Demised Premises were the
only property of Landlord subject to such taxes, assessments, levies,
impositions or charges) shall be paid by Tenant within ten (10) days after
receipt of an invoice therefor from Landlord.
ARTICLE 19
PURE WATERS, POLLUTION AND SEWERAGE
SECTION 19.01 Tenant shall be responsible for and pay upon being billed
therefor by Landlord with Landlord, upon Tenant's written request, exhibiting
receipted bills for the charges, Tenant's pro rata share defined for the purpose
of this paragraph to be that proportion that Tenant's rentable area (which shall
include Tenant's pro rata share of the INTERIOR hallways, if any, but which
shall not be deemed to include the entrance lobby) bears to the total rentable
area of the Building, of all water, Pure Waters District charges, pollution
charges and sewerage charges assessed against the Building for water and
sewerage consumed in, about or for the benefit of the Building including the
land immediately surrounding the Building.
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ARTICLE 20
SURVIVAL OF TENANT'S OBLIGATIONS
SECTION 20.01 The obligation of Tenant to pay the charges referred to in
Article 18 and 19 of this Lease that accrue during the term of this Lease shall
survive the expiration or early termination of this Lease.
ARTICLE 21
ENTIRE AGREEMENT, TIME OF THE
ESSENCE AND NONWAIVER
SECTION 21.01 This Lease contains all the agreements of the parties.
There have been no representations made by the Landlord or understandings made
between the parties other than those set forth in this Lease. This Lease may
not be modified except by written instrument duly executed by the parties
hereto. Receipt of rent with knowledge of a default by the Tenant will not
condone, forgive or waive such default. Failure by the Landlord to enforce any
of the provisions hereof for any length of time shall not be deemed a waiver of
its rights set forth in this Lease, but such waiver may only be made by
instrument in writing and signed by the Landlord. Time is of the essence with
respect to all payments and performances required of the Tenant by the
provisions of this Lease.
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ARTICLE 22
INDEMNIFICATION OF LANDLORD
SECTION 22.01 Tenant shall indemnify, defend and save Landlord harmless
from and against any and all loss, liability, damage or expense including
reasonable attorneys' fees ("reasonableness shall be based upon the amount of
time and effort expended by the attorneys without regard to the amount in
controversy) suffered or incurred by Landlord because of (i) the negligence of
Tenant, or Tenants' agents, contractors and employees, (ii) any act or
occurrence in the Demised Premises, unless caused by the negligence of Landlord,
its agents, contractors or employees, or the intentional act of Landlord (iii)
judgments, citations, fines or other penalties rendered or assessed against
Landlord (with the exception of any claims under any worker's compensation laws)
as a result of Tenant's failure to abide by and to undertake the duty of
compliance on behalf of Landlord with all federal, state and local laws, safety
and health regulations relating to the interior and other portions of the
Demised Premises which Tenant has assumed the duty to maintain pursuant to this
Lease, provided that Landlord agrees to give Tenant prompt notice of any such
violation asserted by any government agency, and (iv) any and all claims and
liabilities which may arise out of or be connected with any improvements,
alterations and additions undertaken by Tenant with regard to the Demised
Premises including any liens for labor and material arising from such work.
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SECTION 22.02 (a) Except as provided in Section 22.02(b) hereof, Landlord
shall indemnify Tenant against loss, liability or damages to third parties as a
result of any personal injury, death, or property damage that occurs in the
Common Area solely as a result of the negligence of the Landlord, its agents,
servants or employees.
(b) The indemnity shall not apply to loss, liability or damages with
respect to vehicles except for vehicles owned or operated by Landlord,
Landlord's employees, or Landlord's agents; to loss, liability or damages with
respect to arrests or apprehensions in the Common Area; to loss, liability or
damages with respect to products; claims under Workers' Compensation laws; or
loss, liability or damages caused by the negligence of Tenant or its agents,
servants or employees.
(c) Landlord shall have the sole right to and shall defend any lawsuits
with respect to claims for loss, liability or damage against which the indemnity
provided in Section 22.02(a) applies and pay any judgments which result from the
lawsuits. "Lawsuits" include arbitration proceedings and administrative
proceedings and all other governmental and quasi-governmental proceedings.
"Liabilities" include the fees and disbursements of attorneys and witnesses.
ARTICLE 23
NONDELIVERY OF PREMISES
SECTION 23.01 In the event of the failure of the Landlord to deliver
possession of the Demised Premises at the time of the
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commencement of the term of this Lease, neither the Landlord nor its agents
shall be liable for any damage caused thereby, nor shall this Lease thereby
become void or voidable, but in such event the Tenant shall not be liable for
any rent until such time as the Landlord can deliver possession. See Rider 1,
Paragraph 5
ARTICLE 24
SECURITY DEPOSIT*
[*See page 26A attached hereto and made a part hereof.]
SECTION 24.01 Tenant has deposited with Landlord the sum of $8,000.00 as
security for the faithful performance and observance by Tenant of the terms,
provisions and conditions of this Lease; it is agreed that in the event Tenant
defaults in respect of any of the terms, provisions and conditions of this
Lease, including but not limited to the payment of rent, Landlord may, at its
option, use, apply or retain the whole or any part of the security so deposited
to the extent required for the payment of any rent or any sum as to which Tenant
is in default or for any sum which Landlord may expend by reason of Tenant's
default in respect of any of the terms, covenants and conditions of this Lease,
including but not limited to, any damages or deficiency in the reletting of the
Demised Premises, whether such damages or deficiency accrued before or after
summary proceedings or other re-entry by Landlord. In the event that Tenant
shall fully and faithfully comply with all of the terms, provisions, covenants
and conditions of this Lease, the security shall be returned, without interest
to Tenant after the date fixed as the end of the
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Lease and within a reasonable time after delivery of entire possession of the
Demised Premises to Landlord. In the event of a sale of the land and/or
Building or leasing of the Building, of which the Demised Premises form a part,
Landlord shall have the right to transfer the security to the vendee or lessee,
and Landlord shall thereupon be released by Tenant from all liability for the
return of such security; and Tenant agrees to look to the new Landlord solely
for the return of said security; and it is agreed that the provisions hereof
shall apply to every transfer or assignment made of the security to a new
Landlord. Tenant further covenants that it will not assign or encumber or
attempt to assign or encumber the monies deposited herein as security and that
neither Landlord nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance.
Notwithstanding the terms and provisions of Article 24 above, Tenant shall
not be required to deposit the said security deposit referred to therein unless
the Demised Premises, or a portion thereof, have been sublet or this Lease has
been assigned. Notwithstanding anything herein to the contrary, no such sublet
or assignment shall be effective until and unless Landlord has received the said
security deposit.
ARTICLE 25
WAIVER OF SUBROGATION
SECTION 25.01 Notwithstanding anything in this Lease contained to the
contrary:
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Landlord shall insure the Building and Tenant shall insure
the Demised Premises and its fixtures and contents, against fire and other cases
included in standard extended coverage by policies which shall include a waiver
by the insurer of all right of subrogation against Landlord or Tenant, their
officers, directors, employees, invitees, and in case of Tenant, its subtenants,
in connection with any loss or damage thereby insured against. Neither party,
nor its officers, directors, employees, agents or invitees, nor, in case of
Tenant, its subtenants (if Tenant shall have sublet in accordance with the terms
herein), shall be liable to the other for loss or damage caused by any risk
covered by such insurance. If the release of either Landlord or Tenant, as set
forth in this paragraph, shall contravene any law with respect to exculpatory
agreements, the liability of the party in question shall be deemed not released
but shall be secondary to the other's insurer.
ARTICLE 26
BROKERAGE
SECTION 26.01 Tenant and Landlord represent and warrant that they have
dealt with no broker, agent or other real estate sales person in connection with
this Lease other than Re/Max Commercial Properties, David Wallace, Broker, the
commission to which shall be paid by Landlord, and that, other than as herein
expressly set forth, no broker, agent or such other person brought about this
transaction. Tenant and Landlord agree to indemnify and hold each other
harmless from and against any
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claims by any other broker, agent or other real estate sales person claiming a
commission or other form of compensation by virtue of this Lease or of having
dealt with Tenant or Landlord with regard to this leasing transaction and should
a claim for such commission or other compensation be made it shall be promptly
paid or bonded by the party who has dealt with the person or entity making such
claim. The provisions of this Article shall survive the termination of this
Lease.
ARTICLE 27
FORCE MAJEURE
SECTION 27.01 Except as otherwise provided in this Lease and except as to
the payment of rent or other monies due under this Lease neither party shall be
responsible for delays or inability to perform its obligations hereunder for
causes beyond the control of such party including acts of other tenants,
governmental restriction, regulation or control, labor dispute, accident,
mechanical breakdown, shortages or inability to obtain labor, fuel, steam,
water, electricity or materials, acts of God, enemy action, civil commotion, or
fire or other casualty.
ARTICLE 28
MISCELLANEOUS PROVISIONS
SECTION 28.01 No receipt of money by Landlord from Tenant after the
termination of this Lease or after the service of any notice or after the
commencement of any suit or after final judgment for possession of the Demised
Premises shall reinstate,
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continue or extend the term of this Lease or affect any such notice, demand or
suit or imply consent for any action for which Landlord's consent is required.
SECTION 28.02 No waiver of any default of Tenant or of Landlord hereunder
shall be implied from any omission by Landlord or Tenant, as the case may be, to
take any action on account of such default if such default persists or be
repeated, and no express waiver shall affect any default other than the default
specified in the express waiver and that only for the time and to the extent
therein stated.
SECTION 28.03 The term "Landlord" as used in this Lease, so far as
covenants or agreements on the part of Landlord are concerned, shall be limited
to mean and include only the owner or owners of Landlord's interest in this
Lease at the time in question, and in the event of any transfer or transfers of
such interest, Landlord herein named (and in case of any subsequent transfer,
the then transferor) shall be automatically freed and relieved from and after
the date of such transfer of all personal liability from events which occur
after the date of transfer. Any such release of Landlord under this paragraph
shall become effective only at such time Landlord's transferee is deemed to be
bound to the terms and provisions of this Lease. It is agreed, however, that
Landlord shall reimburse Tenant for any overpayments of rent made by Tenant
prior to the assignment and any prepayment of rent for months subsequent to the
assignment.
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ARTICLE 29
ESTOPPEL CERTIFICATES
SECTION 29.01 Landlord and Tenant agree that from time to time upon not
less than five (5) days prior request of the other, to deliver to the party
making the request a statement in writing (the "Certificate") certifying (a)
that this Lease is unmodified and in full force and effect (or if there have
been modifications that the same is in full force and effect and modified and
identifying the modifications), (b) the dates to which the rent and other
charges have been paid, and (c) that, so far as the person making the
certificate knows, the other party is not in default under any provision of this
Lease, or if such were not to be the fact, then certifying such default of which
person making the certificate may have knowledge. It is agreed that the
certificate may be relied upon by the party requesting it or by any other person
to which it may be exhibited or delivered. The contents of the certificate
shall be binding on the party on behalf of which it shall have been executed.
ARTICLE 30
QUIET ENJOYMENT
SECTION 30.01 The Landlord covenants and agrees that the Tenant on paying
said rent and performing the covenants aforesaid shall and may peaceably and
quietly hold and enjoy the said Demised Premises for the term aforesaid.
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ARTICLE 31
EXECUTION
SECTION 31.01 This Lease shall not be binding and in effect until a
counterpart hereof has been executed and delivered by the parties each to the
other.
ARTICLE 32
PROVISIONS BINDING, ETC.
SECTION 32.01 This Lease shall bind and inure to the benefit of the
parties hereto and their respective heirs, representatives, successors and
assigns (provided that this Lease shall not inure to the benefit of any assignee
pursuant to an assignment which is not in compliance with the terms of this
Lease).
ARTICLE 33
INVALID PROVISIONS SEVERABLE
SECTION 33.01 If any term or provision of this Lease or the application
thereof to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable shall not be affected thereby and each term and
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
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ARTICLE 34
RENTABLE AREA DEFINED
SECTION 34.01 "Rentable area", as referred to herein, shall be defined as
follows:
a. If the Demised Premises consist of the entire Building
(single Tenant building), then the rentable area shall be calculated by
measuring from the outside face of the exterior walls of the said Building; or
b. If the Demised Premises consist of less than an entire
Building (multi-tenant building), then the rentable area shall be calculated by
measuring from the outside face of all perimeter exterior walls to the center
line of Tenant separating walls, shall include the area of the "vestibule"
entrance area to the Demised Premises, and include a proportionate share of the
common halls, lobbies, public bathrooms, stairwells and elevator core (if any)
of the Building; but said proportionate share shall not increase the rentable
square footage calculated as aforesaid by an amount greater than 10%.
ARTICLE 35
PRONOUNS INTERCHANGEABLE
SECTION 35.01 Feminine, neuter and masculine pronouns, the plural and the
singular, shall be construed to be and shall be interchangeable, in any place or
places herein in which the context may require such interchange.
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ARTICLE 36
RIDER
SECTION 36.01 In the event there are Riders and/or Exhibits attached
hereto they shall be deemed a part hereof and in any case where the provisions
of any said Rider and/or Exhibits shall conflict with or be contrary to the
provisions contained in this, the main portion of this Lease Agreement, the
provision of said Rider(s) and/or Exhibits shall control.
ARTICLE 37
LATE CHARGE: ADDITIONAL RENT
SECTION 37.01 All rental payments, any additional rent herein and any and
all payments due under the provisions of this Lease Agreement from Tenant,
unless herein otherwise specifically referred to, shall be received by Landlord
no later than 4:00 p.m. on the 1st day of each month (in the case of rent and
additional rent) or within fifteen (15) days of being invoiced therefor,
whichever is applicable, after which there shall be a 5% late charge calculated
on the amount then due. In the event, however, that said late charge were to
exceed that permitted by law, the said charge due hereunder shall immediately
and automatically be reduced to the maximum then permitted by law. Any charges
or payments due to Landlord from Tenant arising out of the terms and provisions
of this Lease or as the result of Tenant's occupation of the Demised Premises,
including but not limited to services, labor or materials furnished or performed
at Tenant's request; shall be deemed additional rent hereunder and
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shall be deemed due and payable within fifteen (15) days after a statement is
rendered therefor.
ARTICLE 38
ARTICLE TITLES
SECTION 38.01 The Article titles are inserted as a matter of convenience
and for reference and in no way define, limit or describe the scope or intent of
this Lease nor in any way affect this Lease.
ARTICLE 39
INTERIOR CLEANING
SECTION 39.01 Landlord agrees to provide cleaning services ("interior
cleaning")* for the cleaning of the interior of the Demised Premises in
accordance with Exhibit C which is attached hereto and made a part thereof.
[*included as part of "rent" in Section 2.01 above (subject to increase in
accordance with the provisions of Article 18 above).]
ARTICLE 40
MISCELLANEOUS
SECTION 40.01 This Lease Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York and without the
aid of any canon, custom or rule of law requiring construction against the
draftsman. Landlord and Tenant hereby submit to personal jurisdiction in the
courts of the State of New York for the enforcement of their respective
obligations hereunder, and Landlord and Tenant each waives any
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and all personal rights under the law of any other state or country to object to
jurisdiction within the State of New York for the purposes of an action to
enforce such obligations and the venue for any such actions shall be in Monroe
County, New York.
ARTICLE 41
PROVISIONS, BINDING, ETC.
SECTION 41.01 The conditions, covenants and agreements in this Lease
contained to be kept and performed by the parties hereto shall be binding upon
and inure to the benefit of said respective parties, their legal
representatives, successors and assigns. This Section shall not be construed to
permit any assignment or subletting, unless otherwise permitted in this Lease,
without Landlord's consent. The term "Landlord" as used in this Lease means
only the owner for the time being of the land and building (or the owner of a
Lease of the building) of which the Demised Premises form a part, so that in the
event of any sale or sales of said land and building or of said Lease, or in the
event of a Lease of said, the said Landlord shall be and hereby is entirely
freed and relieved of all covenants and obligations of Landlord hereunder and it
shall be deemed and construed without further agreement between the parities or
their successors in interest, or between the parties and the purchaser, at any
such sale, or the said Tenant of the building, provided that the purchaser or
tenant of the building as of the date of such purchase or lease has assumed and
agreed to carry out any and all covenants and obligations of Landlord hereunder.
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ARTICLE 42
CORPORATE TENANT
SECTION 42.01 If Tenant is a corporation, the persons executing this Lease
on behalf of Tenant hereby covenant, represent and warrant that Tenant is a duly
incorporated or duly qualified (if foreign) corporation and is authorized to do
business in the State of New York (a copy of evidence thereof to be supplied to
Landlord upon request); and that the person or persons executing this Lease on
behalf of Tenant is an officer or are officers of such Tenant, and that he or
they as such officers are duly authorized to execute, acknowledge and deliver
this Lease to Landlord (a copy of a resolution to that effect to be supplied to
Landlord upon request).
ARTICLE 43
LANDLORD'S CONSENT
SECTION 43.01 If at any time during the term of this Lease or any renewal
thereof, Landlord is requested to give its consent and Landlord delays in
granting its consent or determines to withhold such consent, the sole remedy of
Tenant shall be equitable action to compel Landlord to give its consent.
Landlord shall not be liable for any loss, liability, damage or expense,
including attorney's fees that Tenant may suffer or incur as a result of
Landlord's delay in granting such consent or in the event a court subsequently
determines that such consent was unreasonably withheld, or as a result of or in
connection with Tenant's action to compel Landlord to give its consent as
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herein provided.* [*In the event the Landlord withholds its said consent and
there is disagreement between Landlord and tenant as to whether or not
Landlord's said refusal is reasonable, then the matter of Landlord's
reasonableness in so refusing shall be submitted to binding arbitration in
accordance with the Rules of the American Arbitration Association.]
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals as of the date first above written.
PERINTON HILLS
By: /S/ Charles N. Mills
-----------------------------
Charles N. Mills, General
Partner
EMCO MOTOR HOLDINGS, INC.
Date: 4-13-94 By: /S/ E.P. Mager
-----------------------------
(Name and Title)
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STATE OF NEW YORK )
) SS:
COUNTY OF MONROE )
On the 13th day of April, 1994, before me personally came CHARLES N. MILLS,
to me known, who being by me duly sworn, did depose and say that he resides at
Rochester, New York; that he is the General Partner of PERINTON HILLS, the
Limited Partnership described in and which executed the foregoing instrument.
/s/ Debra Ann Motabito
-----------------------------
STATE OF NEW JERSEY )
) SS:
COUNTY OF HUDSON )
On the 11th day of April, 1994, before me personally came EZRA P. MAGER to
me known, who, being by me duly sworn, did depose and say that he resides at 585
Route 440, Jersey City, NJ 07304 that he is the President of EMCO MOTOR
HOLDINGS, INC. the corporation described in, and which executed the foregoing
instrument; that he knows the seal of said corporation; that the0 seal affixed
to said instrument is such corporate seal; that it was so affixed by order of
the board of directors of said corporation; and that he signed his name thereto
by like order.
/S/ Ellen K. Shyne
-----------------------------
-54-
<PAGE>
STATE OF )
) SS:
COUNTY OF )
On the ______ day of ________, 19___, before me personally came
_______________________________________________________ to me known and known to
me to be the individual described in and who executed the foregoing instrument
and duly acknowledged to me that he executed the same.
______________________
-55-
<PAGE>
EXHIBIT B
TO LEASE AGREEMENT BETWEEN
PERINTON HILLS
AND
EMCO MOTOR HOLDINGS, INC.
The Demised Premises shall be completed by Landlord or Tenant, as the case
may be, as hereinafter designated:
A. Work to be completed by the Landlord at Landlord's sole cost and
expense ("Landlord's Work"):
1. Interior finish of walls shall be gypsum wallboard taped and
finished with two (2) coats flat wall paint with one color
through-out;
2. All floors shall be carpeted with standard 26 oz. carpet.
Color to be chosen by Tenant from Landlord available colors. Matching
4" vinyl base;
3. Ceiling shall be 2'x2' tegular tile, glacial finish lay-in
panels in exposed metal tee grid;
4. Interior partitioning* shall be as shown on Exhibit A which
will be attached hereto and made a part hereof;** [*Landlord, at its
sole cost and expense, will provide 1/2 inch soundboard (and "friction
fit" cavity insulation) on three offices and a conference room. The
offices are to be selected in writing within three (3) days of the
execution hereof by Tenant. Further, Landlord shall supply, at its
expense, a refrigerator (with a freezer compartment), sink with
<PAGE>
hot and cold running water and a microwave oven.] [**which Tenant
agrees to supply utilizing Landlord's architect at Landlord's
expense.]
Partitions shall be 2"x3-5/8" studs 24 o.c. with 1/2" gypsum
wallboard, both sides, taped and finished. Partitions shall be
complete with flush wood, solid core oak veneer doors, frames,
trim and Schlage (or equal) hardware;
5. Heating and air conditioning - Subject to Article 7 in the
main body of this Lease Agreement, Landlord shall provide air
conditioning and heating of the Tenant space;
6. Electrical:
-Lighting - Subject to any applicable law, statute, ordinance or
regulation, Landlord shall provide recessed flourescent light
providing an average of 60 foot candles. Light fixtures shall be
2'x4' 3-tube, "deep cell" parabolic fixtures;
-Outlets - Up to 69 wall-mounted 110 volt 20 amp duplex
convenience outlets (non-dedicated). There shall be 12 outlets
per circuit.
7. Landlord shall supply a sink with hot and cold running water
and a base cabinet.
B. "Tenant's Work" shall supplement that work to be performed by
Landlord (herein referred to as "Landlord's Work") as set forth in
Subparagraph A above of this Exhibit B. Any alterations, additions or
improvements which are in
2
<PAGE>
addition to said Landlord's work which Tenant desires to make in the
Demised Premises either before or after the commencement date of this
Lease, shall be performed by Tenant at its sole cost and expense, shall
require written approval from Landlord and shall be herein defined as
"Tenant's Work". Tenant, at its sole cost and expense, shall perform all
labor, services and management and furnish all labor, material, plans and
equipment necessary to complete, in a good, substantial and approved
manner, the work herein described and shall bring the Demised Premises to a
finished condition for the conduct of Tenant's business therein. All of
Tenant's work, even if such work is performed prior to the commencement of
the term of this Lease, shall be performed subject to and in accordance
with all of the terms and provisions of the Lease including but not limited
to the terms and provisions of Article 5, Article 11, Article 12, Section
14.09 and Section 22.01 and, additionally, shall include the following
work, labor, services and material and, as the case may be, shall be
subject to the following general conditions:
1. All additional interior partitions, door bucks, doors and finish
hardware;
2. All architectural millwork including cabinets, counters,
vanities, shelving, paneling and decorative millwork required;
3. Any ventilating work required (other than noted in "A.5" above);
3
<PAGE>
4. All electrical work required (other than noted in "A.6" above)
and all telephones and installation of equipment;
5. Interior furniture, furnishings, office equipment, etc.;
6. Interior Signs - All interior signs shall be installed at the
sole cost of Tenant with only one interior sign being permitted on the
entrance doorway, which sign shall be furnished and installed by Landlord
in accordance with the specifications furnished by Landlord at the expense
of Tenant not to exceed $350.00;
7. All other work not listed under subparagraph A above;
8. All foregoing work shall be in accordance with local building
codes and regulations;
9. Tenant shall, at its own expense, comply with all applicable
statutes, ordinances, rules, orders, laws, regulations and recommendations
of any governmental or quasi-governmental bureau, agency, board or
department and their authorized agents which have jurisdiction over
Tenant's Work, and, with respect to the prevention of fire and the exposure
to liability risks, of the Board of Fire Underwriters, Rating Board and
Landlord's and Tenant's insurance companies. Tenant shall apply for, pay
all fees for, and obtain all necessary permits, licenses and certificates
required by Tenant's Work. A copy of same shall be delivered to Landlord
and shall be posted in a
4
<PAGE>
prominent place within the Demised Premises before Tenant commences its
work;
10. Tenant shall perform its work so as to cause no interference with
the completion of Landlord's Work or other tenants' work;
11. All materials furnished or incorporated in Tenant's Work shall be
new, unused, and of the quality and characteristics customarily used in
first class work of similar nature and character;
12. In fulfillment of its obligations pursuant to Article 11, and in
addition, to the insurance coverage required by Article 11 of this Lease
and the provisions of this Exhibit B, Tenant shall carry and cause its
contractors, subcontractors, etc. to carry in the course of and in
connection with "Tenant's Work", at its/their own expense, and shall name
Landlord and such other entities and persons designated by Landlord as
additional insured, the following insurance coverages in the following
amounts:
a. Comprehensive General Liability including completed
operations, explosions, collapse and underground operations, if any;
broad form property damage including completed operations, protective
liability, contractual liability and indemnity:
$1,000,000 (single limit) - Bodily Injury
and Property
Damage
5
<PAGE>
b. Personal Injury (with employment exclusion deleted and
contractual exclusion deleted):
$1,000,000 - Occ________
[Illegible] and
A________ [Illegible]
c. Auto Liability (including non-owned and hired vehicles):
$500,000 (single limit) - Bodily Injury
$250,000 - Property Damage
d. Statutory Worker's Compensation, Employer's Liability and
Disability Benefits:
Unlimited
Excess Liability, Umbrella Form:
$5,000,000
and any other special insurance as required by Landlord so as to fully
protected Landlord against loss or damage throughout the period during
which the Tenant's work is being performed.
e. All of such insurance shall be written by a casualty
insurance company authorized under the laws of New York State, and
satisfactory to the Landlord. Tenant and said contractors shall
furnish Landlord, prior to commencement of Tenant's Work, certificates
and certified copies of such policies showing that the said insurance
will not be cancelled or changed until after at least thirty (30)
days' written notice to Landlord. In the event of the failure of
Tenant and/or
6
<PAGE>
said contractors, to furnish and maintain such insurance, Landlord
shall have the right to procure and maintain the said insurance for
and in the name of the Tenant and/or said contractors, and Tenant
agrees to pay the cost thereof and to furnish all necessary
information to permit Landlord to procure and maintain such insurance
for the account of the Tenant and/or said contractors. The cost of
such policies shall be paid by Tenant to Landlord as additional rent
upon demand. Compliance by Tenant with the foregoing requirements to
carry insurance and furnish certificates shall not relieve Tenant from
liability under any provisions of this Lease.
13. Tenant shall submit complete drawings and specifications for all
work to be performed by Tenant for Landlord's approval, prior to the start
of such work.
7
<PAGE>
RIDER 1
TO LEASE AGREEMENT BETWEEN
PERINTON HILLS
and
EMCO MOTOR HOLDINGS, INC.
1. Provided Tenant shall have given Landlord not less than six (6)
months' prior written notice thereof, and further provided Tenant is not in
default* in any of the terms and provisions herein, Tenant shall have an option
to terminate this lease effective April 30, 1997. [* material]
2. The annual rental referred to in Section 2.01 above shall include an
allowance for electric and gas consumption (heat, light, air conditioning and
power for the Demised Premises and Tenant's pro rata share of the common areas
of the Building and the parking lot serving the Building) in the amount of
$4,103.04 per year ($.60 x 6839 r.s.f. = $4,103.04). Tenant's said pro rata
share shall be determined by multiplying the cost thereof by a fraction - the
numerator of which shall be its rentable square foot area (6839 r.s.f. at the
commencement of the demised term) and the denominator of which shall be the
total rentable square footage of the Building (15,583.77 r.s.f.). Tenant, at
its cost and expense, shall install a separate electric and, if applicable, gas
meter, to meter the electrical (and gas, etc.) consumption of the Demised
Premises.
3. Unless caused by the negligence of Tenant, Tenant's employees,
contractors, representatives or agents, in the event Landlord fails to deliver
the services referred to in Article 7
<PAGE>
above and in the event said failure to deliver said services to the Demised
Premises is of such an extent that it is unreasonable for Tenant to conduct its
business and if such condition continues for a period of twenty-one (21)
consecutive days from the date of said interruption, then, in that event, Tenant
shall have the option of terminating this Lease Agreement by giving ten (10)
days written notice thereof to Landlord. In the event said interruption of
service is cured prior to the end of said ten (10) day period, Tenant's said
notice shall be deemed null and void and of no force or effect. In the event
the said interruption of service is not so cured prior to the end of the said
ten (10) day period, the demised term will expire at the end of the said ten
(10) day period as if the said date were the original expiration date herein
referred to.
4. Except in cases of emergency, notwithstanding the terms and provisions
of Section 10.01 above, Landlord shall not enter the Demised Premises without
having first given Tenant reasonable advance oral notice thereof. An emergency
shall be defined to be when Landlord or Landlord's employees reasonably believe
that damage to person or property may result unless such entry is made.
5. A. Subject to events beyond Landlord's control or for delays caused
by the action or inaction of Tenant, Tenant's employees, agents, contractors or
representatives, in which event the date referred to below of May 16, 1994 shall
be extended one day for each day said condition continues, in the event the
Demised Premises are not "ready for occupancy" by June 1, 1994
<PAGE>
Tenant may terminate this Lease by giving Landlord ten (10) day's written notice
thereof. If, however, the Demised Premises are "ready for occupancy" prior to
the end of the said ten (10) day period, the said notice shall be null and void
and of no force or effect. Notwithstanding the foregoing, unless delayed by the
action or inaction of Tenants, employees, representatives, contractors, etc., in
the event the Demised Premises are not "ready for occupancy" by July 1, 1994,
Tenant may terminate this Lease by giving Landlord written notice thereof on or
before July 5, 1994. Upon said notice, neither party shall have any further
obligation to the other.
B. The term "ready for occupancy" shall be defined to mean that the
Demised Premises have received valid certificates of occupancy; that the Demised
Premises have been professionally cleaned and are free of trash or debris; and
that the Demised Premises have been finished in accordance with the provisions
of the Lease, subject only to minor "punch list" items which do not separately
or in the aggregate materially affect Tenant's use and occupancy of the Demised
Premises. Notwithstanding the foregoing, the term "ready for occupancy" shall
refer only to Landlord's work and if no certificate of occupancy has been issued
as the result of the action or inaction of Tenant, its representatives, agents,
employees or contractors than the requirement of the issuance of a certificate
of occupancy as herein referred to shall be deemed waived.
6. In reference to the terms and provisions of Article 13 of the Lease,
Landlord agrees to use its best efforts to secure
<PAGE>
on agreement from the mortgagee (and any future lenders) of the Building of
which the Demised Premises form a part which provides that in the event of a
foreclosure by the lender of any said mortgage, Tenant's possession of the
Demised Premises will not be disturbed provided Tenant is then and continuously
thereafter is in full compliance with all of the terms, covenants and conditions
herein contained. Tenant shall be responsible for the payment of any fee
charged by said lender for the said agreement.
PERINTON HILLS
By /s/ Charles N. Mills
-----------------------------
Charles N. Mills,
General Partner
EMCO MOTOR HOLDINGS, INC.
By /s/
-----------------------------
<PAGE>
RULES AND REGULATIONS
1. WINDOW COVERINGS
No window coverings will be installed except "free hanging" (i.e. no
"ties", "tie backs", etc.) draperies in white or LIGHT beige and fully
lined in white. In addition Tenant may have horizontal, narrow slat
"Levolor" blinds in the color "alabaster" and installed inside the window
frame.
2. CARPET PROTECTORS
Carpet protectors must be used beneath all "swivel" type chairs.
3. GARBAGE AND TRASH REMOVAL
All garbage and trash must be removed on a daily basis. It may be placed
in the dumpsters provided by Landlord for that purpose. Landlord will not
be responsible for or accepting unusual amounts of rubbish not associated
with normal daily trash/rubbish requirements of a typical corporate office.
All boxes, etc. shall be "broken down" by Tenant before removal.
4. LIGHTS, ETC.
All lights, typewriters, coffee makers, etc., must be turned off when the
Demised Premises are not in use.
<PAGE>
5. "AFTER HOURS" USE
When using the Demised Premises after normal working hours or on weekends,
Tenant, if the last one leaving the building, shall not leave the building
without first locking the entrance doors and, during said times, IF
PRACTICAL will keep the said doors locked while inside the Demised
Premises.
6. COMMON AREAS
The sidewalks, entrances, passages, vestibules, stairways, corridors and
public parts of the Building of which the Demised Premises form a part
shall not be obstructed or encumbered by Tenant or used by Tenant for any
purpose other than ingress and egress to and from the Demised Premises.
7. MOVE-IN
All moving of furniture and/or equipment, files, etc. from or to the
Demised Premises shall be coordinated with Landlord. All carpets shall be
protected with a hard surface (e.g. plywood, masonite, etc.) throughout the
entire area of the move including all lobby carpets and all carpets within
the Demised Premises. Tenant shall use only movers who are insured in
accordance with Landlord established regulations (not less than $1,000,000
single limit for liability and property damage) and, Landlord and such
other
2
<PAGE>
entities as Landlord designates shall be named as additional insured and
appropriate certificates evidencing said insurance shall be furnished to
Landlord prior to any said moving. Tenant/mover shall protect ALL door
openings, etc. with appropriate coverings to prevent damage and Landlord
shall be given adequate notice to allow Landlord to install "pads" in the
elevator, if applicable. All said moves shall be Monday through Friday
between the hours of 9:00 a.m. and 4:30 p.m. but not on recognized national
holidays.
8. SIGNS
No sign or lettering shall be affixed by Tenant on any part of the outside
of the Demised Premises (including but not limited to the entrance door and
glass sidelight) or any part of the inside of the Demised Premises so as to
be clearly visible from the outside of the Demised Premises. However,
Tenant shall be permitted to have the identification signs on the entrance
door, lobby directory and outside directory in a style and color permitted
by Landlord at Landlord's sole discretion.
9. WINDOWS
Except for the "window coverings" referred to in Paragraph 1 above, the
windows in the Demised Premises shall not be covered or obstructed by
Tenant nor shall any bottles, parcels or other articles be placed on the
windowsills.
3
<PAGE>
10. NOISE
Tenant shall not make or permit to be made, any unseemly or disturbing
noises or interfere with other tenants or those having business with them.
11. LOCKS AND KEYS
No additional locks or bolts of any kind shall be placed upon any of the
doors by Tenant and Tenant shall, upon the termination of this tenancy,
deliver to Landlord all keys to any space within the Building either
furnished to or otherwise procured by Tenant. If more than two (2) keys
for one lock are desired, Landlord will provide the same upon payment by
Tenant.
12. HEAVY EQUIPMENT
Landlord reserves the right to prescribe the weight and position of all
safes and other heavy equipment so as to distribute properly the weight
thereof to prevent any unusual condition from arising. Business machines
and other equipment shall be placed and maintained by Tenant at Tenant's
expense in settings sufficient in Landlord's reasonable judgment to absorb
and prevent unreasonable vibration, noise and annoyance.
4
<PAGE>
13. HEATERS/EXTENSION CORDS
Tenant shall not use ANY electrical extension cords or space heaters.
14. PARKING
All parking areas in or about the Building provided by Landlord shall be
subject to the exclusive control and management of Landlord. Tenants,
their employees, agents and visitors shall park only in areas designated by
Landlord from time to time. No overnight parking is allowed in any of the
parking lots without the prior written consent of Landlord which Landlord
may withhold in its sole discretion. In the event Landlord permits
overnight parking, Tenant shall be responsible for moving said vehicle
every 24 hours if requested by Landlord and Landlord shall not be
responsible for the accumulation of snow around said vehicle as the result
of snowplowing occurring after normal business hours.
15. NON-SMOKING BUILDING
In accordance with the applicable Monroe County ordinances and Landlord
established regulations, there shall be no smoking in the Demised Premises
or the Building.
5
<PAGE>
Exhibit C
INTERIOR CLEANING SPECIFICATIONS
DAILY
Dusting: All horizontal surfaces, including desks and other
personal areas when cleared of papers, personal effects,
etc.
Vacuuming: Common areas and offices.
Refuse: Empty all containers, urns and ashtrays.
Glass: Clean all doors inside and out. Remove smudges and
fingerprints from interior glass.
Cobwebs: Remove.
WEEKLY
Vacuuming: Thoroughly do all offices.
Smudges: Remove, if reasonably possible, from doors,
switchplates, etc.
Refuse: Change liners as needed. Remove properly separated
recyclables from a central location, as needed.
The cleaning specification shall not include the removal or disposal
of "medical" wastes, hazardous or toxic wastes or any other wastes which require
any kind of special or
<PAGE>
unique handling disposal or treatment - all of which will be the responsibility
of Tenant.
<PAGE>
GUARANTY OF LEASE
GUARANTY OF LEASE dated this 13th day of April, 1994, given by
ATLANTIC AUTO FINANCE CORPORATION, a Delaware Corporation, with an office for
the transaction of business at 44 Souther Parkway, Rochester, New York, 14610
(hereinafter called "Guarantor") given to PERINTON HILLS having an address 250
WillowBrook Office Park, Fairport, New York 14450 (hereinafter referred to as
"Landlord").
W I T N E S S E T H:
WHEREAS, simultaneously with the delivery of this Guaranty, Landlord
is leasing to EMCO MOTOR HOLDINGS, INC. A Delaware corporation (hereinafter
referred to as "Tenant"), by a Lease Agreement dated as of March 18, 1994
(hereinafter referred to as the "Lease") premises situate in Building 800,
Perinton Hills Office Park, Fairport, New York, more particularly described in
the Lease; and
WHEREAS, Landlord is unwilling to enter into the Lease unless
Guarantor(s) execute(s) and deliver(s) to Landlord this Guaranty; and
WHEREAS, the execution and delivery hereof and the assumption of
liability hereunder have been in all respects authorized and approved by proper
corporate action on the part of Guarantor (if Guarantor is a corporation), and
Guarantor has full authority and power to execute this Guaranty.
NOW, THEREFORE, in order to induce Landlord to enter into the Lease,
as aforesaid, and, further, in consideration of One Dollar ($1.00) and other
good and valuable consideration paid by Landlord to Guarantor(s), receipt of
which is hereby acknowledged, Guarantor(s) hereby convenant(s), guarantee(s) and
agree(s) as follows:
1. Guarantor(s) jointly and severally, hereby unconditionally and
irrevocably guarantee(s) to Landlord the
<PAGE>
prompt and timely performance and observance by Tenant of all of the terms,
covenants, conditions and agreements to be performed or observed by Tenant under
the Lease throughout the term of the Lease, including any extension and/or
renewal thereof, including, but not limited to the payment of rent and
additional rent by Tenant at the times and in the manner provided in the Lease.
2. Guarantor(s) hereby agree(s) and covenant(s) to Landlord, jointly
and severally, that, if at any time during the term of the Lease or any
extension and/or renewal thereof, Tenant shall default in the due and prompt
performance of any of the covenants, terms, conditions and agreements contained
in the Lease on the part of Tenant to be performed, Guarantor(s) shall perform
such obligation and shall pay the sums to be paid thereunder in the manner and
at the times therein specified and shall pay all damages that may arise as a
consequence of such breach or nonperformance of any such covenant, term,
condition and agreement of the Lease.
3. Any modification of the Lease, or waiver of the performance
thereunder, or the giving by Landlord of any extensions of time for the
performance of any of the obligations of Tenant, or any acceptance of rent after
any default of Tenant or any forbearance of the part of Landlord, or any failure
by Landlord to enforce any of its rights under the Lease, or any assignment of
the Lease, shall not in any way release Guarantor(s) from liability hereunder,
or terminate, affect or diminish the validity of this Guaranty. Notice to
Guarantor(s) of acceptance of this Guaranty, or any such modification,
assignment, waiver, extension, forbearance or failure or of any default by
Tenant is hereby expressly waived.
4. In the event of any bankruptcy, reorganization, winding up or
similar proceedings with respect to Tenant no limitation of Tenant's liability
under the Lease which may now or hereafter by imposed by any federal, state or
other statute, law or regulation applicable to such proceedings, shall in any
way limit the obligation of Guarantor(s) hereunder, which obligation
<PAGE>
is coextensive with Tenant's liability as set forth in the Lease without regard
to any such statutory or legal limitation. Guarantor(s) further agree(s) that
the validity of this Guaranty and the obligations of Guarantor(s) hereunder
shall in no way be terminated, affected or impaired by reason of the
adjudication in bankruptcy of any person or entity obligated under the Lease,
the filing of a petition for any relief under the Bankruptcy Act, or the death
or incapacity of any of the persons constituting Guarantor(s).
5. Guarantor(s) hereby agree(s) and covenant(s) to Landlord, that if
there by any default in the performance of any of the obligations of Tenant
under the Lease, upon the happening of such default or at any time thereafter,
Landlord may have and maintain an action upon this Guaranty against Guarantor(s)
and in like manner may have and maintain successive actions upon this Guaranty
for each and every other default. Guarantor(s) expressly agree(s) that its
their obligations hereunder shall not be exhausted by any such action or by any
number of such successive actions until and unless each of Tenant's agreements
contained in the Lease shall have been fully performed.
6. Guarantor(s) hereby waive(s) notice of the acceptance hereof
presentment, demand for payment, protest, notice of protest and any and all
notices of non-payment, non-performance, or non-observance, or other proof or
notice of demand.
7. Words of any gender used in the Guaranty shall be held to include
any other gender and words in the singular number shall be held to include the
plural where the tense requires.
8. Guarantor(s) agree, jointly and severally, to pay on demand
Landlord's reasonable expenses, including reasonable attorneys' fees
("reasonableness shall be based upon the amount of time and effort expanded by
the attorneys without regard to the amount in controversy"), incurred in
enforcing any obligation of Guarantor(s) pursuant to this agreement of Guaranty.
<PAGE>
9. This Guaranty shall bind Guarantor(s), its their heirs, legal
representatives, executors, administrators, successors and assigns, as the case
may be, and shall inure to the benefit of Landlord and its successors and
assign.
ATLANTIC AUTO FINANCE CORPORATION
By: /s/ Richard J. Harrison
----------------------------
Richard J. Harrison
President
<PAGE>
STATE OF NEW YORK )
SS:
COUNTY OF MONROE )
On the 13th day of April, 1994, before me personally came RICHARD
HARRISON, to me known, who, being by me duly sworn, did depose and say that he
resides at 44 Southern Parkway, Rochester, New York, that he is the President of
ATLANTIC AUTO FINANCE CORPORATION, the corporation described in and which
executed the foregoing instrument; that he signed the foregoing by order of the
Board of Directors of said corporation.
/s/ Debra Ann Motabito
----------------------------
<PAGE>
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 1, 1995
AMONG
UNITED AUTO GROUP, INC.,
LANDERS AUTO SALES, INC.,
STEVE LANDERS,
JOHN LANDERS
AND
BOB LANDERS
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of the Shares............................... 2
1.2 Net Worth Adjustment.......................................... 4
1.3 Additional Payments........................................... 6
1.4 Contingent Payment............................................ 8
1.5 Two-Year Payment.............................................. 9
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
2.1 Organization and Good Standing................................ 10
2.2 Subsidiaries.................................................. 11
2.3 Capitalization................................................ 11
2.4 Authority; Approvals and Consents............................. 11
2.5 Financial Statements.......................................... 13
2.6 Absence of Undisclosed Liabilities............................ 14
2.7 Absence of Material Adverse Effect; Conduct
of Business................................................... 14
2.8 Taxes......................................................... 15
2.9 Legal Matters................................................. 16
2.10 Property...................................................... 17
2.11 Environmental Matters......................................... 18
2.12 Inventories................................................... 21
2.13 Accounts Receivable........................................... 21
2.14 Insurance..................................................... 21
2.15 Contracts; Etc................................................ 22
2.16 Labor Relations............................................... 22
2.17 Employee Benefit Plans........................................ 23
2.18 Other Benefit and Compensation Plans or
Arrangements.................................................. 26
2.19 Transactions with Insiders.................................... 27
2.20 Propriety of Past Payments.................................... 28
2.21 Interest in Competitors....................................... 28
2.22 Brokers....................................................... 29
2.23 Accounts...................................................... 29
2.24 Net Worth of the Companies.................................... 29
2.25 Disclosure.................................................... 29
(i)
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Page
----
3.1 Ownership of Shares; Title.................................... 29
3.2 Authority..................................................... 30
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF UAG
4.1 Organization and Good Standing................................ 30
4.2 Subsidiaries.................................................. 31
4.3 Capitalization................................................ 32
4.4 Authority; Approvals and Consents............................. 32
4.5 Financial Statements.......................................... 33
4.6 Absence of Undisclosed Liabilities............................ 34
4.7 Absence of Material Adverse Effect; Conduct
of Business................................................... 34
4.8 Taxes......................................................... 35
4.9 Legal Matters................................................. 36
4.10 Property...................................................... 37
4.11 Environmental Matters......................................... 37
4.12 Inventories................................................... 39
4.13 Accounts Receivable........................................... 40
4.14 Insurance..................................................... 40
4.15 Contracts; Etc................................................ 40
4.16 Labor Relations............................................... 41
4.17 Employee Benefit Plans........................................ 42
4.18 Other Benefit and Compensation Plans or
Arrangements.................................................. 42
4.19 Transactions with Insiders.................................... 42
4.20 Propriety of Past Payments.................................... 43
4.21 Brokers....................................................... 43
4.22 Acquisition of the Shares for Investment...................... 43
4.23 Disclosure.................................................... 43
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 Access; Confidentiality....................................... 44
5.2 Furnishing Information; Announcements......................... 44
5.3 Antitrust Improvements Act Compliance......................... 45
5.4 Certain Changes and Conduct of Business....................... 45
(ii)
<PAGE>
Page
----
5.5 Contribution or Loan; No Intercompany Payables
or Receivables................................................ 48
5.6 Negotiations.................................................. 49
5.7 Consents; Cooperation......................................... 49
5.8 Additional Agreements......................................... 50
5.9 Interim Financial Statements.................................. 50
5.10 Notification of Certain Matters............................... 50
5.11 Additional Capital Contributions.............................. 51
5.12 Purchase of Chevrolet Dealership.............................. 51
5.13 Observer Rights............................................... 52
5.14 Release of Guarantees......................................... 52
5.15 Key Man Life Insurance........................................ 52
5.16 Assurance by the Stockholders................................. 52
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG TO EFFECT THE CLOSING
6.1 Representations and Warranties; Agreements;
Covenants..................................................... 53
6.2 Authorization; Consents....................................... 53
6.3 Opinions of the Company's and the Stockholders'
Counsel....................................................... 53
6.4 Absence of Litigation......................................... 54
6.5 No Material Adverse Effect.................................... 54
6.6 Working Capital Requirements.................................. 54
6.7 Completion of Due Diligence................................... 55
6.8 Employment Agreements......................................... 55
6.9 Leases........................................................ 55
6.10 Shareholders Agreement........................................ 55
6.11 Registration Rights Agreement................................. 55
6.12 Board Approval................................................ 55
6.13 Certificates.................................................. 55
6.14 Legal Matters................................................. 55
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
7.1 Representations and Warranties; Agreements.................... 56
7.2 Authorization of the Agreement, Consents...................... 56
7.3 Opinions of UAG's Counsel..................................... 56
7.4 Absence of Litigation......................................... 57
7.5 Employment Agreement.......................................... 57
7.6 Leases........................................................ 57
(iii)
<PAGE>
Page
----
7.7 Shareholders Agreement........................................ 57
7.8 Registration Rights Agreement................................. 57
7.9 Certificates.................................................. 57
7.10 Legal Matters................................................. 57
ARTICLE 8
TERMINATION
8.1 Termination................................................... 58
8.2 Effect of Termination......................................... 59
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by the Stockholders........................... 59
9.2 Indemnification by UAG........................................ 59
9.3 Procedures.................................................... 60
9.5 Offset........................................................ 62
9.6 Remedies...................................................... 63
9.7 Definitions................................................... 63
9.8 Indemnifying Stockholders..................................... 63
ARTICLE 10
MISCELLANEOUS
10.1 Survival of Provisions........................................ 64
10.2 Fees and Expenses............................................. 64
10.3 Headings...................................................... 65
10.4 Notices....................................................... 65
10.5 Assignment.................................................... 67
10.6 Entire Agreement.............................................. 67
10.7 Waiver and Amendments......................................... 67
10.8 Counterparts.................................................. 68
10.9 GOVERNING LAW................................................. 68
10.10 Accounting Terms............................................. 68
10.11 Certain Definitions.......................................... 68
10.12 Schedules.................................................... 69
10.13 Severability................................................. 69
10.14 Remedies..................................................... 69
10.15 The Company.................................................. 69
(iv)
<PAGE>
SCHEDULES
---------
Schedule 1.2(a) Accounting Principles
Schedule 2.1 Company Foreign Qualifications and
Assumed Names
Schedule 2.3 Company Capitalization
Schedule 2.4 Company Agreement Conflicts
Schedule 2.5 Company Financial Statements
Schedule 2.6 Company Liabilities
Schedule 2.7(a) Company Material Adverse Effects
Schedule 2.7(b) Company Conduct of Business
Schedule 2.8 Company Taxes
Schedule 2.9(a) Company Litigation
Schedule 2.9(b) Company Compliance with Legal
Requirements and Permits
Schedule 2.10 Company Real Property
Schedule 2.11(a) Company Environmental Compliance
Schedule 2.11(c) Company Environmental Matters
Schedule 2.11(d) Company Environmental Substances
Schedule 2.11(e) Company Environmental Litigation
Schedule 2.14 Company Insurance Policies
Schedule 2.15 Company Agreements
Schedule 2.16(b) Company Employment and Labor Agreements
Schedule 2.16(c) Company Labor Matters
Schedule 2.17(a) Company ERISA Plans
Schedule 2.17(b) Company Multiemployer Plans
Schedule 2.17(e) Company Pension Benefit Plans
Schedule 2.17(g) Company Multiemployer Plan Withdrawal
Liability Amounts
Schedule 2.17(h) Company Welfare Benefit Plan Liability
Amounts
Schedule 2.18(a) Company Compensation Commitments
Schedule 2.19 Company Transactions with Insiders
Schedule 2.20 Company Past Payments
Schedule 2.23 Company Bank Accounts
Schedule 4.1 UAG Foreign Qualifications and
Assumed Names
Schedule 4.2 UAG Subsidiaries
Schedule 4.3 UAG Capitalization
Schedule 4.4 UAG Agreement Conflicts
Schedule 4.5 UAG Financial Statements
Schedule 4.6 UAG Liabilities
Schedule 4.7(a) UAG Material Adverse Effects
Schedule 4.7(b) UAG Conduct of Business
Schedule 4.8 UAG Taxes
Schedule 4.9(a) UAG Litigation
Schedule 4.9(b) UAG Compliance with Legal
Requirements and Permits
Schedule 4.11(a) UAG Environmental Compliance
Schedule 4.11(c) UAG Environmental Matters
(v)
<PAGE>
Schedule 4.11(d) UAG Environmental Substances
Schedule 4.11(e) UAG Environmental Litigation
Schedule 4.15 UAG Agreements
Schedule 4.16(b) UAG Labor Matters
Schedule 4.17 UAG ERISA Plans
Schedule 4.18(a) UAG Compensation Commitments
Schedule 4.19 UAG Transactions with Insiders
Schedule 4.20 UAG Past Payments
Schedule 5.14 Stockholder Personal Guarantees
Schedule 6.6 Minimum Working Capital Amount
Exhibit A -- Form of UAG Note I
Exhibit A-1 -- Form of UAG Note II
Exhibit A-2 -- Form of Working Capital Note
Exhibit B -- Form of UAG Guaranty
Exhibit C -- Form of Steve Landers Employment Agreement
Exhibit D -- Form of John Landers Employment Agreement
Exhibit E -- Form of Lease
Exhibit F -- Form of Shareholders Agreement
Exhibit G -- Form of Registration Rights Agreement
(vi)
<PAGE>
INDEX OF DEFINED TERMS
Page
----
Accounting Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
accumulated funding deficiency . . . . . . . . . . . . . . . . . . . . . . . 25
cquired Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Acquired Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Acquired Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Acquired Entity's Pro Rata Earnings. . . . . . . . . . . . . . . . . . . . . .8
Actual Working Capital Amount. . . . . . . . . . . . . . . . . . . . . . . . 54
Additional Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Additional Payment Deficiency. . . . . . . . . . . . . . . . . . . . . . . . .7
Additional Payment Surplus . . . . . . . . . . . . . . . . . . . . . . . . . .7
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Annual Pre-Tax Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Associate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Base Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Basket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
best efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Closing Date Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . .4
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Company Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Company Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Company Factory Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Company Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 13
Compensation Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 27
complete withdrawal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Contingent Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Contingent Payment Deficiency. . . . . . . . . . . . . . . . . . . . . . . . .9
Contingent Payment Surplus . . . . . . . . . . . . . . . . . . . . . . . .9, 10
Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Earnings Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Employment and Labor Agreements. . . . . . . . . . . . . . . . . . . . . . . 23
Environmental Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Environmental Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ERFA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Estimated Additional Payment . . . . . . . . . . . . . . . . . . . . . . . . .7
(vii)
<PAGE>
Estimated Closing Date Balance Sheet . . . . . . . . . . . . . . . . . . . . 54
Estimated Contingent Payment . . . . . . . . . . . . . . . . . . . . . . . . .9
Event of Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Everett Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . .3
Final Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
H-S-R Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 37
Hazardous substance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
HMTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Initial Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Insider. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ISRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
John Landers Employment Agreement. . . . . . . . . . . . . . . . . . . . . . .3
Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Landers Auto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Landers Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . . . . 60
Landers Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Landers Third Party Claim. . . . . . . . . . . . . . . . . . . . . . . . . . 59
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Mass layoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Minimum Working Capital Amount . . . . . . . . . . . . . . . . . . . . . . . 54
Multi-employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Net Worth Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
NLRB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Observance Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Observer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
OSHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
partial withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
PCB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Pension Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Plant closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
RATFA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(viii)
<PAGE>
Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Registration Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . . .4
Relative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Remedial Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Reviewed Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Reviewer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Shareholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Special wastes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Spivey Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Steven Landers Employment Agreement. . . . . . . . . . . . . . . . . . . . . .3
Stockholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Supplemental Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Third Party Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Total Pre-Tax Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Two-Year Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Two-Year Payment Deficiency. . . . . . . . . . . . . . . . . . . . . . . . . 10
Two-Year Payment Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . 10
UAG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
UAG Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
UAG Compensation Commitments . . . . . . . . . . . . . . . . . . . . . . . . 42
UAG Employment and Labor Agreements. . . . . . . . . . . . . . . . . . . . . 41
UAG Environmental Permits. . . . . . . . . . . . . . . . . . . . . . . . . . 37
UAG ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
UAG Event of Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
UAG Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 33
UAG Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
UAG Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
UAG Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
UAG Insider. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
UAG Note I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
UAG Note II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
UAG Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
UAG Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
UAG Third Party Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
UAG Working Capital Note . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Ultimate parent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Welfare Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Year 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Year 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Year 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
(ix)
<PAGE>
This AMENDED AND RESTATED STOCK PURCHASE AGREEMENT, dated as of July
1, 1995, among United Auto Group, Inc., a Delaware corporation ("UAG"), Landers
Auto Sales, Inc., an Arkansas corporation (the "Company"), and Steve Landers,
John Landers and Bob Landers (each a "Stockholder" and, collectively, the
"Stockholders"), amending and restating the Stock Purchase Agreement, dated as
of January 30, 1995, among UAG, the Company and the Stockholders.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company operates franchise automobile dealerships and
related businesses;
WHEREAS, the Stockholders own all of the issued and outstanding shares
of common stock, no par value, of the Company (the "Common Stock"); and
WHEREAS, UAG desires to purchase 3.33 shares of Common Stock from Bob
Landers and 2.335 shares of Common Stock from each of Steve Landers and John
Landers (such shares being collectively referred to herein as the "Shares"), and
the Stockholders desire to sell the Shares to UAG (in each case upon the terms
and subject to the conditions set forth in this Agreement), such that
immediately after giving effect to such purchase and sale, UAG, Steve Landers
and John Landers will own eighty percent (80%), ten percent (10%) and ten
percent (10%), respectively, of all of the issued and outstanding shares of
Common Stock, on a fully diluted basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF THE SHARES.
(a) PURCHASE AND SALE. Upon the terms and subject to the
conditions set forth in this Agreement, the Stockholders shall sell to UAG, and
UAG shall purchase from the Stockholders, the Shares for an aggregate purchase
price (the "Purchase Price") equal to (i) $18,053,000 less the amount of the
Earnings Adjustment (as determined in accordance with SECTION 1.1(b) below), if
any (the "Base Price") (the Base Price shall be allocated among the Stockholders
as they so determine in their sole discretion), which Base Price is subject to
adjustment after Closing as provided in SECTION 1.2 below (as adjusted, the
"Initial Payment"), (ii) the Additional Payments (if any) made pursuant to
SECTION 1.3 below, (iii) the Contingent Payment (if any) made pursuant to
SECTION 1.4 below, (iv) the Two-Year Payment (if any) made pursuant to SECTION
1.5 below, (v) a promissory note issued by UAG in the principal amount of
$3,287,896 bearing interest at the rate of 8% per annum and maturing on the
fifth anniversary of the Closing, such promissory note being substantially in
the form of EXHIBIT A hereto (the "UAG Note I"), (vi) a promissory note issued
by UAG in the principal amount of $726,619 bearing interest at the rate of 8%
per annum and maturing on the third anniversary of the Closing, such promissory
note being substantially in the form of EXHIBIT A-1 hereto (the "UAG Note II"),
and (vii) if UAG so elects in accordance with SECTION 6.6 hereof, a promissory
note issued by the Company in the principal amount determined in accordance with
SECTION 6.6 hereof bearing interest at the prime rate set by Citibank, N.A. on
the date of such promissory note and maturing on the first anniversary of such
date, such promissory note being substantially in the form of EXHIBIT A-2 hereto
(the "Working Capital Note"). At the Closing referred to in SECTION 1.1(c)
hereof:
(i) The Stockholders shall sell, assign, transfer and
deliver to UAG the Shares representing 80% of the outstanding Common
Stock and deliver the certificates representing such Shares
accompanied by stock powers duly executed in blank; and
(ii) UAG shall accept and purchase the Shares from the
Stockholders and in payment therefor shall deliver to the Stockholders
(A) immediately available funds in an aggregate amount equal to the
Base Price by wire transfer to an account designated in writing by the
Stockholders and (B) the UAG Note I and the UAG Note II.
-2-
<PAGE>
(b) EARNINGS ADJUSTMENT. In the event that the Annual Pre-Tax
Earnings (as defined in SECTION 1.3 hereof) for calendar year 1994 are less than
$7,500,000 (before taking into account any year-end tax adjustments), then the
"Earnings Adjustment" shall be an amount equal to (A) $7,500,000 less the amount
of the Annual Pre-Tax Earnings for calendar year 1994 multiplied by (B) three
(3).
(c) CLOSING. Subject to the conditions set forth in this
Agreement, the purchase and sale of the Shares pursuant to this Agreement (the
"Closing") shall take place at the offices of Willkie Farr & Gallagher, 153 East
53rd Street, New York, New York 10022, or such other location as the parties
shall agree upon, at 10:00 a.m. as soon as practicable following the date on
which all conditions to the obligations of the parties hereunder (other than
those requiring an exchange of certificates, opinions or other documents, or the
taking of other action, at the Closing) have been satisfied or waived. The date
on which the Closing is to occur is herein referred to as the "Closing Date."
The Closing shall be deemed to be effective as of August 1, 1995.
(d) DELIVERIES AT THE CLOSING. Subject to the conditions set
forth in this Agreement, at the Closing:
(i) The Stockholders shall deliver to UAG (A) certificates
representing the Shares bearing the restrictive legend customarily
placed on securities that have not been registered under applicable
federal and state securities laws and accompanied by stock powers as
required by SECTION 1.1(a)(i) hereof, and any other documents that are
necessary to transfer to UAG good title to all the Shares, and (B) all
opinions, certificates and other instruments and documents required to
be delivered by the Stockholders at or prior to the Closing or
otherwise required in connection herewith;
(ii) UAG shall pay and deliver to the Stockholders (A)
funds as required by SECTION 1.1(a)(ii) hereof, (B) a guaranty
substantially in the form of EXHIBIT B hereto (the "UAG Guaranty"),
(C) the UAG Note I, (D) the UAG Note II, and (E) all opinions,
certificates and other instruments and documents required to be
delivered by UAG at or prior to the Closing or otherwise required in
connection herewith;
(iii) The Company shall enter into an Employment Agreement
with each of Steve Landers and John Landers (the "Steve Landers
Employment Agreement" and the "John Landers Employment Agreement,"
respectively) substantially in the form of EXHIBIT C and EXHIBIT D
hereto, respectively, and Dwight Everett (the "Everett Employment
Agreement")
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containing such terms and conditions as shall be agreed upon by the
Company and Dwight Everett.
(iv) The Stockholders, UAG and the Company shall enter into
leases for the real property used in the business of the Company
substantially in the form of EXHIBIT E hereto (collectively, the
"Leases");
(v) UAG, the Company, Steve Landers and John Landers shall
enter into a Shareholders' Agreement substantially in the form of
EXHIBIT F hereto (the "Shareholders Agreement"); and
(vi) Steve Landers and John Landers shall have become a
party to the Registration Rights Agreement among UAG and certain other
parties named therein (the "Registration Rights Agreement"),
substantially in the form of EXHIBIT G hereto.
1.2 NET WORTH ADJUSTMENT.
(a) On or as soon as practicable after the Closing Date, the
Stockholders shall deliver to UAG a consolidated balance sheet of the Company
dated as of the last day of the month immediately preceding the Closing Date
(such balance sheet so delivered is referred to herein as the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet shall be prepared in good faith
on the same basis and in accordance with the accounting principles, methods and
practices used in preparing the Company Financial Statements (as defined in
SECTION 2.5 hereof), subject to the modifications, adjustments and exceptions to
such accounting principles, methods and practices as shall be agreed upon by UAG
and the Stockholders within thirty (30) days (or such other number of days as
the parties shall agree upon) of the date hereof and set forth on SCHEDULE
1.2(a) hereto, and shall also include mutually agreed upon procedures to adjust
for any earnings and/or distributions of the Company between the date of the
Closing Date Balance Sheet and the Closing Date (such accounting principles,
methods and practices as so modified and adjusted, and such procedures, are
referred to herein as the "Accounting Principles"). In connection with the
preparation of the Closing Date Balance Sheet, the Stockholders and the Company
shall permit the Reviewer (as defined below) and other representatives of UAG to
conduct a physical inventory at each location where inventory is held by the
Company. From the results of such inventory and prior to the Closing Date, UAG
and the Stockholders (or the respective representatives thereof) will prepare a
schedule, which shall be signed by each of UAG and the Stockholders, setting
forth the nature and quality of such inventory and such other items as shall be
agreed upon by UAG and the Stockholders.
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(b) Within thirty (30) days after delivery of the Closing Date
Balance Sheet, (i) Coopers & Lybrand or such other accounting firm (the
"Reviewer") selected by UAG shall audit or otherwise review the Closing Date
Balance Sheet in such manner as UAG and the Reviewer deem appropriate, and (ii)
UAG shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet"),
together with the Reviewer's report thereon, to the Stockholders. The Reviewed
Balance Sheet (i) shall be prepared on the same basis and in accordance with the
Accounting Principles and (ii) shall include a schedule showing the computation
of the Final Net Worth (as defined in SECTION 1.2(g)(i) hereof), computed in
accordance with the definition of Net Worth set forth in SECTION 1.2(g)(ii)
hereof. UAG and the Reviewer shall have the opportunity to consult with the
Stockholders, the Company and each of the accountants and other representatives
of the Stockholders and the Company and examine the work papers, schedules and
other documents prepared by the Stockholders, the Company and each of such
accountants and other representatives during the preparation of the Closing Date
Balance Sheet. The Stockholders and the Stockholders' independent public
accountants shall have the opportunity to consult with the Reviewer and examine
the work papers, schedules and other documents prepared by UAG and the Reviewer
during the preparation of the Reviewed Balance Sheet.
(c) The Stockholders shall have a period of forty
five (45) days after delivery of the Reviewed Balance Sheet to present in
writing to UAG all objections the Stockholders may have to any of the matters
set forth or reflected therein, which objections shall be set forth in
reasonable detail. If no objections are raised within such 45-day period, the
Reviewed Balance Sheet shall be deemed accepted and approved by the Stockholders
and a supplemental closing (the "Supplemental Closing") shall take place within
five (5) Business Days following the expiration of such 45-day period, or on
such other date as may be mutually agreed upon in writing by UAG and the
Stockholders.
(d) If the Stockholders shall raise any objection within the 45-
day period, UAG and the Stockholders shall attempt to resolve the matter or
matters in dispute and, if resolved, the Supplemental Closing shall take place
within five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by UAG and the
Stockholders within sixty (60) days after the delivery of the Reviewed Balance
Sheet, then the specific matters in dispute shall be submitted to a firm of
independent public accountants mutually acceptable to UAG and the Stockholders,
which firm shall make a final and binding determination as to such matter or
matters. Such accounting firm shall send its written
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determination to UAG and the Stockholders and the Supplemental Closing, if any,
shall take place five (5) Business Days following the receipt of such
determination by UAG and the Stockholders. The fees and expenses of the
accounting firm referred to in this SECTION 1.2(e) shall be paid one
half by UAG and one half by the Stockholders.
(f) UAG and the Stockholders agree to cooperate with each other
and each other's authorized representatives and with any accounting firm
selected by UAG and the Stockholders pursuant to SECTION 1.2(e) hereof in order
that any and all matters in dispute shall be resolved as soon as practicable.
(g) (i) If the Net Worth as shown on the Reviewed Balance Sheet
as finally determined through the operation of SECTIONS 1.2(a) THROUGH (e)
hereof (such amount being referred to herein as the "Final Net Worth") shall be
less than $7,500,000 (the amount of any such deficiency being referred to herein
as the "Net Worth Deficiency"), the Stockholders shall pay to UAG at the
Supplemental Closing, by wire transfer of immediately available funds to an
account designated in writing by UAG within two (2) Business Days of the date of
the Supplemental Closing, an amount equal to the Net Worth Deficiency, together
with interest on such amount from the Closing Date to the date of the
Supplemental Closing at the prime rate or its equivalent (as announced from time
to time by Citibank, N.A.).
(ii) "Net Worth" computed in connection with the Estimated
Closing Date Balance Sheet, the Closing Date Balance Sheet and the Reviewed
Balance Sheet shall mean the amount by which the total assets (not including
intangible assets) exceed the total liabilities reflected, in each case, on the
balance sheet of Company comprising the Closing Date Balance Sheet or the
Reviewed Balance Sheet, as the case may be. "Net Worth" shall in no event
include the consolidated net earnings of the Company for the period commencing
immediately after the date of the Closing Date Balance Sheet and ending on the
Closing Date.
1.3 ADDITIONAL PAYMENTS.
(a) If the Company, on a combined basis, achieves Annual Pre-Tax
Earnings (as defined below) of at least $8,800,000 in any of the three (3)
successive twelve (12) month periods beginning on the first day of the calendar
month immediately following the Closing Date (such twelve month periods being
referred to herein as "Year 1," "Year 2," and "Year 3," respectively), then, in
consideration for the sale of the Shares by the Stockholders to UAG, the Company
will make an additional payment to the Stockholders in the aggregate amounts set
forth below (each such payment being referred to herein as an "Additional
Payment"), which Additional Payments shall be
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allocated among the Stockholders as they so determine in their sole discretion:
Additional Payment
(% of Annual
Annual Pre-Tax Earnings Pre-Tax Earnings)
----------------------- -----------------
$ 8,800,000 - $10,799,999 6%
$10,800,000 - $11,799,999 7%
$11,800,000 - $12,799,999 8%
$12,800,000 and over 9%
(b) In the event that the Company is required to make an
Additional Payment in either Year 1, Year 2 or Year 3, then the Company shall
pay to the Stockholders an aggregate amount equal to eighty percent (80%) of
UAG's estimate of such Additional Payment (the "Estimated Additional Payment")
within thirty (30) days after the completion of such Year. Within sixty (60)
days after the completion of the review by the Company's certified public
accountants of the financial statements prepared in accordance with SECTION
1.3(c) hereof covering the entire Year for which an Additional Payment must be
paid, (i) if the amount of the Additional Payment shall exceed the amount of the
Estimated Additional Payment (the amount of any such excess being referred to
herein as the "Additional Payment Deficiency"), the Company shall pay to the
Stockholders, by wire transfer of immediately available funds to an account
designated in writing by the Stockholders, an aggregate amount equal to the
Additional Payment Deficiency, and (ii) if the amount of the Additional Payment
shall be less than the amount of the Estimated Additional Payment (the amount of
any such deficiency being referred to herein as the "Additional Payment
Surplus"), the Stockholders shall pay to the Company, by wire transfer of
immediately available funds to an account designated in writing by UAG, an
aggregate amount equal to the Additional Payment Surplus.
(c) For purposes of this ARTICLE I, "Annual Pre-Tax Earnings"
for each of Year 1, Year 2 and Year 3 shall mean the consolidated net earnings
(or losses), before taxes, of the Company, computed in accordance with the
Accounting Principles and reflected on financial statements prepared in
accordance with the Accounting Principles and reviewed by the certified public
accountants of the Company; PROVIDED, HOWEVER, that for purposes of SECTION 1.3
and SECTION 1.4, but not for purposes of SECTION 1.5, Annual Pre-Tax Earnings
shall be calculated giving effect in each Year to the consolidated net earnings
(or losses) (the "Acquired Earnings") derived from the entity or entities (each,
an "Acquired Entity" and, collectively, the "Acquired Entities") acquired
pursuant to SECTION 5.11 hereof, provided that (i) if
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the consideration paid by UAG (or an Affiliate thereof) in the acquisition
pursuant to which UAG contributes $5,000,000 exceeds $5,000,000, then the
Acquired Earnings included in Annual Pre-Tax Earnings shall be equal to an
amount obtained by multiplying the consolidated net earnings (or losses) of the
Acquired Entity obtained in such acquisition by a fraction, the numerator of
which is equal to $5,000,000 and the denominator of which is equal to the
consideration paid in such acquisition, or (ii) if there is more than one
acquisition pursuant to SECTION 5.11 hereof within nine (9) months of the
Closing Date pursuant to which UAG has contributed an aggregate of $5,000,000,
and the total consideration paid by UAG (or an Affiliate thereof) in such
acquisitions exceeds $5,000,000, then the Acquired Earnings included in the
Annual Pre-Tax Earnings with respect to all of the Acquired Entities shall be an
amount equal to the product of (A) the sum of each Acquired Entity's Pro Rata
Earnings (as defined below) and (B) a fraction, the numerator of which is equal
to $5,000,000 and the denominator of which is equal to the total consideration
paid for all of the Acquired Entities. For purposes of this Agreement, the term
"Acquired Entity's Pro Rata Earnings" shall mean, with respect to an Acquired
Entity, an amount equal to the product of (i) the consolidated net earnings (or
losses) of such Acquired Entity and (ii) a fraction, the numerator of which is
equal to the consideration paid for such Acquired Entity and the denominator of
which is equal to the total consideration paid for all Acquired Entities.
Notwithstanding the foregoing, (i) if there is more than one acquisition
pursuant to SECTION 5.11 hereof pursuant to which the total consideration paid
by UAG (or an Affiliate thereof) exceeds $5,000,000 and (ii) the acquisition in
which UAG's aggregate capital contribution equalled $5,000,000 occurred more
than nine (9) months after the Closing Date, then UAG and the Stockholders will
mutually agree on an appropriate allocation of the Acquired Earnings for
purposes of calculating Annual Pre-Tax Earnings in any Year.
1.4 CONTINGENT PAYMENT.
(a) If the total of the Annual Pre-Tax Earnings for Year 1, Year
2 and Year 3 (the "Total Pre-Tax Earnings") exceeds $29,400,000, then, in
consideration for the sale of the Shares by the Stockholders to UAG, UAG will
make an additional payment to the Stockholders in the amount set forth below
(such payment being referred to herein as the "Contingent Payment"), which
Contingent Payment shall be allocated among the Stockholders as they so
determine in their sole discretion:
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Total Pre-Tax Earnings (TE) Contingent Payment
- -------------------------------- ------------------------------
$29,400,000 - $32,399,999 $1,000,000 + [$2,000,000 x [(TE -
$29,400,000) DIVIDED BY $3,000,000]]
$32,400,000 - $38,399,999 $3,000,000 + [.20 x (TE -
$32,400,000)]
$38,400,000 and over $4,200,000 + [.33 x (TE -
$38,400,000)]
For purposes of illustration: If the Total Pre-Tax Earnings are
$30,900,000, then the Contingent Payment would equal $2,000,000 (i.e.,
$1,000,000 + 50% of $2,000,000); if the Total Pre-Tax Earnings are $32,400,000,
then the Contingent Payment would equal $3,000,000; if the Total Pre-Tax
Earnings are $38,400,000, then the Contingent Payment would equal $4,200,000
(i.e., $3,000,000 + 20% of $6,000,000); and if the Total Pre-Tax Earnings are
$41,400,000, then the Contingent Payment would equal $5,200,000 (i.e.,
$4,200,000 + 33% of $3,000,000).
(b) In the event that UAG is required to make a Contingent
Payment, then UAG shall pay to the Stockholders an amount equal to eighty
percent (80%) of UAG's estimate of the Contingent Payment (the "Estimated
Contingent Payment") within sixty (60) days after the completion of Year 3.
Within thirty (30) days after the completion of the review by the Companies'
certified public accountants of the financial statements prepared in accordance
with SECTION 1.3(c) hereof covering Year 3, (i) if the amount of the Contingent
Payment shall exceed the amount of the Estimated Contingent Payment (the amount
of any such excess being referred to herein as the "Contingent Payment
Deficiency"), UAG shall pay to the Stockholders, by wire transfer of immediately
available funds to an account designated in writing by the Stockholders, an
amount equal to the Contingent Payment Deficiency, and (ii) if the amount of the
Contingent Payment shall be less than the amount of the Estimated Contingent
Payment (the amount of any such deficiency being referred to herein as the
"Contingent Payment Surplus"), the Stockholders shall pay to UAG, by wire
transfer of immediately available funds to an account designated in writing by
UAG, an amount equal to the Contingent Payment Surplus.
1.5 TWO-YEAR PAYMENT.
(a) If the total of the Annual Pre-Tax Earnings for Year 1 and
Year 2 (the "Total Two-Year Pre-Tax Earnings") exceeds $21,600,000, then, in
consideration for the sale of the Shares by the Stockholders to UAG, UAG will
make an additional payment to
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the Stockholders equal to $1,000,000 plus an amount, not to exceed $1,000,000,
equal to fifty percent (50%) multiplied by the Total Two-Year Pre-Tax Earnings
less $21,600,000 (such payment being referred to herein as the "Two-Year
Payment"), which Two-Year Payment shall be allocated among the Stockholders as
they so determine in their sole discretion. For purposes of illustration: If
the Total Pre-Tax Earnings are $21,600,000, then the Two-Year Payment would
equal $1,000,000; if the Total Pre-Tax Earnings are $22,600,000, then the Two-
Year Payment would equal $1,500,000; if the Total Pre-Tax Earnings are
$23,600,000, then the Two-Year Payment would equal $2,000,000; and if the Total
Two-Year Pre-Tax Earnings are $24,500,000, then the Two-Year Payment would equal
$2,000,000.
(b) In the event that UAG is required to make a Two-Year
Payment, then UAG shall pay to the Stockholders an amount equal to eighty
percent (80%) of UAG's estimate of the Two-Year Payment (the "Estimated Two-Year
Payment") within sixty (60) days after the completion of Year 2. Within thirty
(30) days after the completion of the review by the Companies' certified public
accountants of the financial statements prepared in accordance with SECTION
1.3(c) hereof covering Year 2, (i) if the amount of the Two-Year Payment shall
exceed the amount of the Estimated Two-Year Payment (the amount of any such
excess being referred to herein as the "Two-Year Payment Deficiency"), UAG shall
pay to the Stockholders, by wire transfer of immediately available funds to an
account designated in writing by the Stockholders, an amount equal to the Two-
Year Payment Deficiency, and (ii) if the amount of the Two-Year Payment shall be
less than the amount of the Estimated Two-Year Payment (the amount of any such
deficiency being referred to herein as the "Two-Year Payment Surplus"), the
Stockholders shall pay to UAG, by wire transfer of immediately available funds
to an account designated in writing by UAG, an amount equal to the Two-Year
Payment Surplus.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders hereby jointly and severally
represent and warrant to UAG as follows:
2.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Arkansas and has the corporate power and authority to own, lease and
operate the properties used in its business and to carry on its business as now
being conducted. The Company is duly qualified to do business and is in good
standing as a foreign corporation in each state and juris-
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diction where qualification as a foreign corporation is required, except for
such failures to be qualified and in good standing, if any, which when taken
together with all other such failures of the Company would not, or could not
reasonably be expected to, in the aggregate have a Material Adverse Effect (as
defined in SECTION 10.11 hereof). SCHEDULE 2.1 hereto lists (i) the states and
other jurisdictions where the Company is so qualified and (ii) the assumed names
under which the Company conducts business. The Company has previously delivered
to UAG complete and correct copies of its charter and by-laws (including
comparable governing instruments with different names), as amended and presently
in effect.
2.2 SUBSIDIARIES. The Company does not have any interest or
investment in any person (as defined in SECTION 10.11 hereof).
2.3 CAPITALIZATION. The authorized stock of the Company and the
number of shares of capital stock which are issued and outstanding are set forth
on SCHEDULE 2.3 hereto. The shares listed on SCHEDULE 2.3 hereto constitute all
the issued and outstanding shares of capital stock of the Company and have been
validly authorized and issued, are fully paid and nonassessable, have not been
issued in violation of any preemptive rights or of any federal or state
securities law and no personal liability attaches to the ownership thereof.
There is no security, option, warrant, right, call, subscription, agreement,
commitment or understanding of any nature whatsoever, fixed or contingent, that
directly or indirectly (i) calls for the issuance, sale, pledge or other
disposition of any shares of capital stock of the Company or any securities
convertible into, or other rights to acquire, any shares of capital stock of the
Company, or (ii) obligates the Company to grant, offer or enter into any of the
foregoing, or (iii) relates to the voting or control of such capital stock,
securities or rights, except as set forth on SCHEDULE 2.3 hereto. The Company
has not agreed to register any securities under the Securities Act of 1933, as
amended (the "Securities Act").
2.4 AUTHORITY; APPROVALS AND CONSENTS. The Company has the corporate
power and authority to enter into this Agreement and the Documents (as defined
in SECTION 10.11 hereof) to which it is a party and to perform its obligations
hereunder and thereunder. The execution, delivery and performance of this
Agreement and the Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized and
approved by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize and approve
this Agreement and the Documents and the transactions contemplated hereby and
thereby. This Agreement has been, and on the Closing Date the Documents will
be, duly executed and delivered by, and constitute a valid
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and binding obligation of, the Company, enforceable against the Company in
accordance with their respective terms. The execution, delivery and performance
by the Company and each Stockholder of this Agreement and the Documents to which
it or he is a party and the consummation of the transactions contemplated hereby
and thereby do not and will not:
(i) contravene any provisions of the Certificate of
Incorporation or By-Laws (including any comparable governing
instrument with a different name) of any Company;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any
right of termination or acceleration in respect of, any Company
Agreement (as defined in SECTION 2.15 hereof) or, except as set forth
on SCHEDULE 2.4 hereto, require any consent or waiver of any party to
any Company Agreement;
(iii) result in the creation of any Security Interest upon,
or any person obtaining any right to acquire, any properties, assets
or rights of the Company (other than the rights of UAG to acquire the
Shares pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements (as
defined in SECTION 2.9 hereof) applicable to the Company or any of
their respective businesses or properties; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority, except
in connection with or in compliance with the provisions of the H-S-R
Act (as defined in SECTION 5.3 hereof) and the Arkansas Securities
Act.
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental administrative or judicial authority is necessary to be
obtained or made by the Company to enable the Company to continue to conduct its
business and operations and use its properties after the Closing in a manner
which is in all material respects consistent with that in which they are
presently conducted.
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2.5 FINANCIAL STATEMENTS. Except as otherwise indicated below,
attached as SCHEDULE 2.5 are true and complete copies of:
(i) (A) the audited consolidated balance sheet of the
Company as of December 31, 1994 (the "Company Balance Sheet"),
and the related consolidated statements of income, stockholders'
equity and cash flow for the fiscal year ended December 31, 1994,
together with the notes thereto, in each case examined by and
accompanied by the report of O'Conner & Drew, independent
certified public accountants, and (B) the consolidated balance
sheet of the Company as of December 31, 1993, and the related
consolidated statements of income, stockholders' equity and cash
flow for the fiscal year ended December 31, 1993, together with
the notes thereto, in each case prepared in accordance with the
agreed upon procedures set forth in the letter dated January 18,
1995, from O'Conner & Drew to the Company and examined by and
accompanied by the report of O'Conner & Drew; and
(ii) the most recent monthly and year-to-date financial
statements provided to each franchisor of the Company (each, a
"Company Factory Statement" and, collectively, the "Company Factory
Statements");
(all the foregoing financial statements (except for the financial statements
referred to in clause (ii) above), including the notes thereto, being referred
to herein collectively as the "Company Financial Statements"). The Company
Financial Statements are in accordance with the books and records of the
Company, fairly present the consolidated financial position, results of
operations, stockholders' equity and changes in financial position of the
Company as of the dates and for the periods indicated, in the case of the
financial statements referred to in clause (i) above in conformity with GAAP
consistently applied (except as otherwise indicated in such statements) during
such periods, and can be legitimately reconciled with the financial statements
and the financial records maintained and the accounting methods applied by the
Company for federal income tax purposes, and the unaudited financial statements
included in the Company Financial Statements indicate all adjustments, which
consist of only normal recurring accruals, necessary for such fair
presentations. The statements of income included in the Company Financial
Statements do not contain any items of special or nonrecurring income except as
expressly specified therein, and the balance sheets included in the Company
Financial Statements do not reflect any write-up or revaluation increasing the
book value of any assets. The books and accounts of the Company are complete
and correct in all material respects and fairly reflect all of the transactions,
items of income and expense and all assets and liabilities of the businesses of
the Company consistent with prior practices of the Company.
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2.6 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have
any liability of any nature whatsoever (whether known or unknown, due or to
become due, accrued, absolute, contingent or otherwise), including, without
limitation, any unfunded obligation under employee benefit plans or arrangements
as described in SECTION 2.18 AND 2.19 hereof or liabilities for Taxes (as
defined in SECTION 2.8 hereof), except for (i) liabilities reflected or reserved
against the most recent Company Financial Statement, (ii) current liabilities
incurred in the ordinary course of business and consistent with past practice
after the date of the Company Balance Sheet which, individually and in the
aggregate, do not have, and cannot reasonably be expected to have, a Material
Adverse Effect, and (iii) liabilities disclosed on SCHEDULE 2.6 hereto. The
Company is not a party to any Company Agreement, or subject to any charter or
by-law provision, any other corporate limitation or any Legal Requirement, which
has, or can reasonably be expected to have, a Material Adverse Effect.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1993, the Company has operated in the
ordinary course of business consistent with past practice, except as set forth
on SCHEDULE 2.7(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of
the Company, and no factor, event, condition, circumstance or
prospective development exists which threatens or may threaten to have
a Material Adverse Effect;
(ii) any material loss, damage, destruction or other
casualty to the property or other assets of the Company, whether or
not covered by insurance;
(iii) any change in any method of accounting or accounting
practice of the Company; or
(iv) any loss of the employment, services or benefits of
any key employee of the Company.
(b) Since December 31, 1993, except as set forth in SCHEDULE
2.7(b) hereto, the Company has not:
(i) incurred any material obligation or liability
(whether absolute, accrued, contingent or otherwise), except in the
ordinary course of business consistent with past practice;
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(ii) failed to discharge or satisfy any lien or pay or
satisfy any obligation or liability (whether absolute, accrued,
contingent or otherwise), other than liabilities being contested in
good faith and for which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of
its property or other assets, except for mechanics' liens and liens
for taxes not yet due and payable;
(iv) sold or transferred any assets or cancelled any
debts or claims or waived any rights, except in the ordinary course of
business consistent with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past practice;
(vii) written down the value of any inventory or written
off as uncollectible any accounts receivable or any portion thereof
not reflected in the Company Financial Statements;
(viii) granted any increase in the compensation or benefits
of employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them;
(ix) made any individual capital expenditure in excess of
$75,000, or aggregate capital expenditures in excess of $200,000, or
additions to property, plant and equipment other than ordinary repairs
and maintenance;
(x) discontinued any franchise or the sale of any
products or product line or program;
(xi) incurred any obligation or liability for the payment
of severance benefits; or
(xii) entered into any agreement or made any commitment to
do any of the foregoing.
2.8 TAXES. The Company and, for any period during all or part of
which the tax liability of any other corporation was determined on a combined or
consolidated basis with the Company any such other corporation, have filed
timely all federal, state, local and foreign tax returns, reports and
declarations required to be filed (or have obtained or timely applied for an
extension
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with respect to such filing) correctly reflecting the Taxes (as defined below)
and all other information required to be reported thereon and have paid, or made
adequate provision for the payment of, all Taxes which are due pursuant to such
returns or pursuant to any assessment received by the Company or any such other
corporation. As used herein, "Taxes" shall mean all taxes, fees, levies or
other assessments, including but not limited to income, excise, property, sales,
franchise, withholding, social security and unemployment taxes imposed by the
United States, any state, county, local or foreign government, or any
subdivision or agency thereof or taxing authority therein, and any interest,
penalties or additions to tax relating to such taxes, charges, fees, levies or
other assessments. Copies of all tax returns for the fiscal years ended since
December 31, 1986 have been furnished to UAG or its representatives and such
copies are accurate and complete as of the date hereof. The Company has also
furnished to UAG correct and complete copies of all notices and correspondence
sent or received since December 31, 1986 by the Company to or from any federal,
state or local tax authorities. The Company has adequately reserved for the
payment of all Taxes with respect to periods ended on, prior to or through the
Closing Date for which tax returns have not yet been filed. In the ordinary
course, the Company makes adequate provision on its books for the payment of all
Taxes (including for the current fiscal period) owed by the Company. Except to
the extent reserves therefor are reflected on the Company Balance Sheet, the
Company is not liable, or will not become liable, for any Taxes for any period
ending on, prior to or through the Closing Date. Except as set forth on
SCHEDULE 2.8 hereto, the Company has not been subject to a federal or state tax
audit of any kind, and no adjustment has been proposed by the Internal Revenue
Service ("IRS") with respect to any return for any subsequent year. With
respect to the audits referred to on SCHEDULE 2.8 hereto, no such audit has
resulted in an adjustment in excess of $50,000. Neither the Company nor any
Stockholder knows of any basis for an assertion of a deficiency for Taxes
against the Company. The Stockholders will cooperate, and will cause their
Affiliates to cooperate, with the Company in the filing of any returns and in
any audit or refund claim proceedings involving Taxes for which the Company may
be liable or with respect to which the Company may be entitled to a refund.
2.9 LEGAL MATTERS.
(a) Except as set forth on SCHEDULE 2.9(a) hereto, (i) there is
no claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, or, to the knowledge of the Company or
any Stockholder, threatened against or affecting, the Company, any of its
officers, directors, employees, agents or Affiliates involving, affecting or
relating to any assets, properties or operations of
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the Company, any ERISA Plan (as defined in SECTION 2.18(a) hereof) or any of
their respective properties or rights before or by any court, arbitrator, panel,
agency or other governmental, administrative or judicial entity, domestic or
foreign, nor is any basis known to any Stockholder, the Company or any of its
directors, officers, employees or agents for any such Claims, and (ii) the
Company is not subject to any judgment, decree, writ, injunction, ruling or
order (collectively, "Judgments") of any governmental, administrative or
judicial authority, domestic or foreign. SCHEDULE 2.9(a) hereto identifies each
Claim and Judgment disclosed thereon which is fully covered by an insurance
policy.
(b) The businesses of the Company are being conducted in
compliance with all laws, ordinances, codes, rules, regulations, standards,
judgments and other requirements of all governmental, administrative or judicial
entities (collectively, "Legal Requirements") applicable to the Company or any
of its respective businesses or properties, except where the failure to be in
such compliance could not have a Material Adverse Effect. The Company holds,
and is in compliance with, all franchises, licenses, permits, registrations,
certificates, consents, approvals or authorizations (collectively, "Permits")
required by all applicable Legal Requirements and where the failure to hold or
be in compliance with such Permits could have a Material Adverse Effect. A list
of all such Permits is set forth on SCHEDULE 2.9(b) hereto.
(c) The Company owns or holds all Permits material to the
conduct of its business. No event has occurred and is continuing which permits,
or after notice or lapse of time or both would permit, any modification or
termination of any Permit.
2.10 PROPERTY. The properties and assets owned by or leased to the
Company are adequate for the conduct of the respective businesses of the Company
as presently conducted. Set forth on SCHEDULE 2.10 hereto is a list of all
interests in real property owned by or leased to the Company (including all
interests in real property owned or leased by any Stockholder used in the
businesses of the Company) and of all options or other contracts to acquire any
such interest (collectively, the "Real Property"). All improvements to the Real
Property ("Improvements") and all machinery, equipment and other tangible
property owned or used by or leased to the Company are in good operating
condition and in good repair, ordinary wear and tear excepted. Such tangible
properties and all Improvements owned or leased by the Company conform in all
material respects with all applicable laws, ordinances, rules and regulations
and other Legal Requirements and such Improvements do not encroach in any
respect on property of others.
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2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 2.11(a) hereto, (i) the
Company, the Real Property, the Improvements and any property formerly owned,
occupied or leased as part of the business of the Company are in full compliance
with all Environmental Laws (as defined below), (ii) the Company has obtained
all Environmental Permits (as defined below), (iii) such Environmental Permits
are in full force and effect, and (iv) the Company is in full compliance with
all terms and conditions of such Environmental Permits. As used herein,
"Environmental Laws" shall mean all applicable requirements of environmental,
public or employee health and safety, public or community right-to-know,
ecological or natural resource laws or regulations or controls, including all
applicable requirements imposed by any law (including without limitation common
law), rule, order, or regulations of any federal, state, or local executive,
legislative, judicial, regulatory, or administrative agency, board, or
authority, or any applicable private agreement (such as covenants, conditions
and restrictions), which relate to, (i) noise, (ii) pollution or protection of
the air, surface water, groundwater, or soil, (iii) solid, gaseous, or liquid
waste generation, treatment, storage, disposal or transportation, (iv) exposure
to Hazardous Materials (as defined below), or (v) regulation of the manufacture,
processing, distribution and commerce, use, or storage of Hazardous Materials.
As used herein, "Environmental Permits" shall mean all permits, licenses,
approvals, authorizations, consents or registrations required under applicable
Environmental Law in connection with the ownership, use and/or operation of the
Company or the Real Property and Improvements of the Company.
As used in this SECTION 2.11, "Hazardous Materials" shall mean,
collectively, (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste," "hazardous substances,"
"hazardous materials," "toxic substances" or similar terms in or pursuant to,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.) ("CERCLA"), as amended
by Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100
State, 1613), the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 et seq.) ("RCRA"), the Occupational Safety and Health Act of 1970
(29 U.S.C. Section 651 et seq.) ("OSHA"), the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq. ("HMTA"), the Arkansas
Remedial Action Trust Fund Act ("RATFA"), Ark. Code Ann. Sections 8-7-501 et
seq., the Arkansas Emergency Response Fund Act ("ERFA"), Ark. Code Ann. Sections
8-7-408 et seq., the Asbestos Law, Ark. Code Ann. Sections 20-27-1003 et seq.,
the Lead Law, Ark. Code Ann. Sections 20-27-601 et seq., the Storage Tank Law,
Ark. Code Ann. Sections 8-7-802 et seq., and in the regulations promulgated
pursuant to such laws, all as amended,
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(ii) those substances listed in the United States Department of Transportation
Table (49 CFR 172.101 and amendments thereto) or by the Environmental Protection
Agency (or any successor agency) as hazardous substances (40 CFR part 302 and
amendments thereto), (iii) any material, waste or substance which is or
contains (A) petroleum, including crude oil or any fraction thereof, natural
gas, or synthetic gas usable for fuel or any mixture thereof, (B) asbestos,
(C) polychlorinated biphenyls, (D) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq.
(33 U.S.C. Section 1321) or listed pursuant to Section 307 of the Clean Water
Act (33 U.S.C. Section 1317), (E) flammable explosives, (F) radioactive
materials, and (iv) such other substances, materials and wastes which are or
become regulated or classified as hazardous, toxic or as "special wastes" under
any Environmental Laws.
(b) The Company and the Stockholders have not violated, done or
suffered any act which could give rise to liability under, and are not otherwise
exposed to liability under, any Environmental Law. No event has occurred with
respect to the Real Property, the Improvements, any property formerly owned,
occupied or leased as part of the business of the Company, or the Company which,
with the passage of time or the giving of notice, or both, would constitute a
violation of or non-compliance with any applicable Environmental Law. The
Company has no contingent liability under any Environmental Law. There are no
liens under any Environmental Law on the Real Property.
(c) Except as set forth on SCHEDULE 2.11(c) hereto, (i) neither
the Company, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased as part of the business of the
Company, nor, to the knowledge of the Stockholders, any property adjacent to the
Real Property is being used or has been used for the treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Materials or as a landfill or other waste disposal site, (ii) none of the Real
Property or portion thereof, the Improvements or any property formerly owned,
occupied or leased as part of the business of the Company has been subject to
investigation by any governmental authority evaluating the need to investigate
or undertake Remedial Action (as defined below) at such property, and (iii) none
of the Real Property, the Improvements or any property formerly owned, occupied
or leased as part of the business of the Company, or any site or location where
the Company sent waste of any kind, is identified on the current or proposed
(A) National Priorities List under 40 C.F.R. 300 Appendix B, (B) Comprehensive
Environmental Response Compensation and Liability Inventory System list, or
(C) any list arising from any statute analogous to CERCLA. As used herein,
"Remedial Action" shall mean any
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action required to (i) clean up, remove or treat Hazardous Materials, (ii)
prevent a release or threat of release of any Hazardous Material, (iii) perform
pre-remedial studies, investigations or post-remedial monitoring and care, (iv)
cure a violation of Environmental Law or (v) take corrective action under
sections 3004(u), 3004(v) or 3008(h) of RCRA or analogous state law.
(d) Except as set forth on SCHEDULE 2.11(d) hereto, there have
been and are no (i) aboveground or underground storage tanks, subsurface
disposal systems, or wastes, drums or containers disposed of or buried on, in or
under the ground or any surface waters, (ii) asbestos, asbestos containing
materials or radon gas, (iii) polychlorinated biphenyls ("PCB") or
PCB-containing equipment, including transformers, or (iv) wetlands (as defined
under any Environmental Law) located within any portion of the Real Property,
nor have any liens been placed upon any portion of the Real Property, the
Improvements or any property formerly owned, occupied or leased as part of the
business of the Company in connection with any actual or alleged liability under
any Environmental Law.
(e) Except as set forth on SCHEDULE 2.11(e) hereto, (i) there is
no pending or threatened claim, litigation, or administrative proceeding, or
known prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving any of the Company, the Real Property, the
Improvements, any property formerly owned, leased or occupied as part of the
business of the Company, any offsite contamination affecting the business of the
Company or any operations conducted at the Real Property, (ii) there are no
ongoing negotiations with or agreements with any governmental authority relating
to any Remedial Action or other environmentally-related claim, (iii) the Company
has not submitted notice pursuant to Section 103 of CERCLA or analogous statute
or notice under any other applicable Environmental Law reporting a release of a
Hazardous Material into the environment, and (iv) the Company has not received
any notice, claim, demand, suit or request for information from any governmental
or private entity with respect to any liability or alleged liability under any
Environmental Law, nor to knowledge of the Stockholders, the Company, has any
other entity whose liability therefor, in whole or in part, may be attributed to
the Company, received such notice, claim, demand, suit or request for
information.
(f) The Stockholders or the Company have provided to UAG all
environmental studies and reports pertaining to the Real Property, the
Improvements, the Company and any property formerly owned, occupied or leased as
part of the businesses of the Company, and has permitted (or will have permitted
as of the Closing Date), the testing of the soil, groundwater, building
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components, tanks, containers and equipment on the Real Property, the
Improvements, any property formerly owned, occupied or leased as part of the
businesses of the Company by UAG or UAG's agents or experts as they have or
shall have deemed necessary or appropriate to confirm the condition of such
properties.
2.12 INVENTORIES. The values at which inventories are carried on the
Company Balance Sheet and Company Factory Statement of the Company reflect the
normal inventory valuation policies of the Company, and, in the case of the
Company Balance Sheet, such values are in conformity with GAAP consistently
applied. All inventories reflected on the Company Balance Sheet and Company
Factory Statement of the Company or arising since the date thereof are currently
marketable and can reasonably be anticipated to be sold at normal mark-ups
within 120 days after the date hereof in the ordinary course of business
(subject to the reserve for obsolete, off-grade or slow-moving items that is set
forth on the Company Balance Sheet), except for spare parts inventory which
inventory is good and usable.
2.13 ACCOUNTS RECEIVABLE. All accounts receivable reflected on the
Company Balance Sheet and Company Factory Statement of the Company or arising
since the date thereof (subject to the reserve for bad debts reflected on such
Company Balance Sheet and Company Factory Statement) are good and have been
collected or are collectible, without resort to litigation or extraordinary
collection activity, within 90 days of the Closing Date, and are subject to no
defenses, set-offs or counterclaims other than normal cash discounts accrued in
the ordinary course of business of the Company.
2.14 INSURANCE. All properties and assets of the Company which are of
an insurable character are insured against loss or damage by fire and other
risks to the extent and in the manner reasonable in light of the risks attendant
to the businesses and activities in which the Company are or have been engaged
and customary for companies engaged in similar businesses or owning similar
assets. Set forth on SCHEDULE 2.14 hereto is a list and brief description
(including the name of the insurer, the type of coverage provided, the amount of
the annual premium for the current policy period, the amount of remaining
coverage and deductibles and the coverage period) of all policies for such
insurance and the Company previously has furnished to UAG true and complete
copies of all such policies. All such policies are in full force and effect,
underwritten by financially sound and reputable insurers, sufficient for all
applicable requirements of law and will not in any way be effected by or
terminated or lapsed by reason of the consummation of the transactions
contemplated by this Agreement and the Documents. No notice of cancellation or
non-renewal with respect to, or disallowance of
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any claim under, any such policy has been received by the Company.
2.15 CONTRACTS; ETC. As used in this Agreement, the term "Company
Agreements" shall mean all mortgages, indenture notes, agreements, contracts,
leases, licenses, franchises, obligations, instruments or other commitments,
arrangements or understandings of any kind, whether written or oral, binding or
non-binding, (including all leases and other agreements referred to on SCHEDULE
2.10 hereto) to which the Company is a party or by which the Company or any of
their respective properties may be bound or affected, including all amendments,
modifications, extensions or renewals of any of the foregoing. Set forth on
SCHEDULE 2.15 hereto is a complete and accurate list of each Company Agreement
which is material to the businesses, operations, assets, condition (financial or
otherwise) or prospects of the Companies. True and complete copies of all
written Company Agreements referred to on SCHEDULE 2.15 and SCHEDULE 2.10 hereto
have heretofore been delivered or made available to UAG, and the Company has
provided UAG with accurate and complete written summaries of all such Company
Agreements which are unwritten. The Company is not, nor, to the knowledge of
the Company and the Stockholders, any other party thereto, is in breach of or
default under any Company Agreement, and no event has occurred which (after
notice or lapse of time or both) would become a breach or default under, or
would permit modification, cancellation, acceleration or termination of, any
Company Agreement or result in the creation of any Security Interest upon, or
any person obtaining any right to acquire, any properties, assets or rights of
the Company in any such case where such breach, default or other event would
have, or could reasonably be expected to have, a Material Adverse Effect. There
are no material unresolved disputes involving any Company under the Company
Agreement.
2.16 LABOR RELATIONS.
(a) The Company has paid or made provision for the payment of
all salaries and accrued wages and has complied in all material respects with
all applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes, and has withheld and paid to the appropriate
governmental authority, or is holding for payment not yet due to such authority,
all amounts required by law or agreement to be withheld from the wages or
salaries of its employees.
(b) Except as set forth on SCHEDULE 2.16(b) hereto, the Company
is not a party to any (i) outstanding employment agreements or contracts with
officers or employees that are not terminable at will, or that provide for the
payment of any bonus
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or commission, (ii) agreement, policy or practice that requires it to pay
termination or severance pay to salaried, non-exempt or hourly employees (other
than as required by law), (iii) collective bargaining agreement or other labor
union contract applicable to persons employed by the Company, nor do the
Stockholders, any Company know of any activities or proceedings of any labor
union to organize any such employees. The Company has furnished to UAG complete
and correct copies of all such agreements ("Employment and Labor Agreements").
The Company has not breached or otherwise failed to comply with any provisions
of any Employment or Labor Agreement, and there are no grievances outstanding
thereunder.
(c) Except as set forth in SCHEDULE 2.16(c) hereto, (i) there is
no unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or
material work stoppage or lockout actually pending or, to the Stockholders' or
the Company's knowledge, threatened, against or affecting the Company, and the
Company has not experienced any strike, material slow down or material work
stoppage, lockout or other collective labor action by or with respect to
employees of the Company, (iii) there is no representation claim or petition
pending before the NLRB or any similar foreign agency and no question concerning
representation exists relating to the employees of the Company, (iv) there are
no charges with respect to or relating to any Company pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices, (v) the Company
has not received formal notice from any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws of an intention to
conduct an investigation of the Company and no such investigation is in progress
and (vi) the consents of the unions that are parties to any Employment and Labor
Agreements are not required to complete the transactions contemplated by this
Agreement and the Documents.
(d) The Company has never caused any "plant closing" or "mass
layoff" as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. Sections 2101-2109, and the
regulations promulgated therein.
2.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth on SCHEDULE 2.17(a) hereto is a true and complete
list of:
(i) each employee pension benefit plan, as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974
("ERISA"), maintained by the Company or
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to which the Company is required to make contributions ("Pension
Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in
Section 3(1) of ERISA, maintained by the Company or to which the
Company is required to make contributions ("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare Benefit Plans
(collectively, "ERISA Plans") have been delivered to UAG together with, as
applicable with respect to each such ERISA Plan, trust agreements, summary plan
descriptions, all IRS determination letters or applications therefor with
respect to any Pension Benefit Plan intended to be qualified pursuant to Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and
valuation or actuarial reports, accountant's opinions, financial statements, IRS
Form 5500s (or 5500-C or 5500-R) and summary annual reports for the last three
years.
(b) With respect to the ERISA Plans:
(i) there is no ERISA Plan which is a "multi-employer"
plan as that term is defined in Section 3(37) of ERISA ("Multiemployer
Plan") other than those listed as such on SCHEDULE 2.17(b);
(ii) no event has occurred or (to the knowledge of the
Company or any Stockholder) is threatened or about to occur which
would constitute a prohibited transaction under Section 406 of ERISA
or under Section 4975 of the Code;
(iii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed
under ERISA and the Code and has timely filed Form 5500e (or 5500-C or
5S00-R) and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local
or foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section
401(a) of the Code, and the trust established thereunder has been
exempt from taxation under Section 501(a) of the Code and is currently
in compliance with applicable federal laws;
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(ii) has been operated, since its inception, in accordance
with its terms and there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review
by the IRS or (to the knowledge of the Company or any Stockholder) no such
action is contemplated or under consideration and the IRS has not asserted
that any Pension Benefit Plan is not qualified under Section 401(a) of the
Code or that any trust established under a Pension Benefit Plan is not
exempt under Section 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and, for the purpose solely of SECTION
2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the
Code:
(i) no liability to the Pension Benefit Guaranty
Corporation ("PBGC") under Sections 4062-4064 of ERISA has been incurred by
the Company since the effective date of ERISA and all premiums due and
owing to the PBGC have been timely paid;
(ii) the PBGC has not notified the Company or any Pension
Benefit Plan of the commencement of proceedings under Section 4042 of ERISA
to terminate any such plan;
(iii) no event has occurred since the inception of any
Pension Benefit Plan or (to the knowledge of the Company or any
Stockholder) is threatened or about to occur which would constitute a
reportable event within the meaning of Section 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code); and
(v) if any of such Pension Benefit Plans were to be
terminated on the Closing Date (A) no liability under Title IV of ERISA
would be incurred by any Company and (B) all benefits accrued to the day
prior to the Closing Date (whether or not vested) would be fully funded in
accordance with the actuarial assumptions and method utilized by such plan
for valuation purposes.
(e) With respect to each Pension Benefit Plan, SCHEDULE 2.17(e)
contains a list of all Pension Benefit Plans to which ERISA has applied which
have been or are being terminated, or for which a termination is contemplated,
and a description of the actions taken by the PBGC and the IRS with respect
thereto.
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(f) The aggregate of the amounts of contributions by the Company to
be paid or accrued under ERISA Plans is not expected to exceed approximately
$250,000 for the current fiscal year. To the extent required in accordance with
GAAP, the Company Balance Sheet reflects in the aggregate an accrual of all
amounts of employer contributions accrued but unpaid by the Company under the
ERISA Plans as of the date of the Company Balance Sheet.
(g) With respect to any Multiemployer Plan (1) the Company has not,
since December 31, 1986, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and S205 of
ERISA; (2) there is no withdrawal liability of the Company under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Company had
occurred under each such Plan as of December 31, 1994; and (3) the Company has
not received notice to the effect that any Multiemployer Plan is either in
reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined in
Section 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Company under Welfare
Benefit Plans with respect to any condition which relates to a claim filed
on or before the Closing Date.
(ii) No claims for benefits are in dispute or litigation.
2.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on SCHEDULE 2.18(a) hereto is a true and complete list
of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance, severance, retirement,
excess benefit or other plan, trust or arrangement which is not an ERISA
Plan, whether written or oral, which any Company maintains or is required
to make contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current or
former officer, director, employee or consultant of the Company pursuant to
which payments may be required to be made at any time following the date
hereof (including, without limitation, any employment, deferred
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compensation, severance, supplemental pension, termination or consulting
agreement or arrangement); and
(iii) each employee of the Company whose aggregate
compensation for the fiscal year ended December 31, 1993 exceeded $50,000.
True and complete copies of all of the written plans, arrangements and
agreements referred to on SCHEDULE 2.18(a) ("Compensation Commitments")
have been provided to UAG together with, where prepared by or for the
Company, any valuation, actuarial or accountant's opinion or other
financial reports with respect to each Compensation Commitment for the last
three years. An accurate and complete written summary has been provided to
UAG with respect to any Compensation Commitment which is unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material
respects in accordance with its terms;
(ii) is not currently under investigation, audit or review
by the IRS or any other federal or state agency and (to the knowledge of
any Company or any Stockholder) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or
foreign Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the
Code; and
(vi) has operated since its inception in material compliance
with the reporting and disclosure requirements imposed under ERISA and the
Code.
2.19 TRANSACTIONS WITH INSIDERS. Set forth on SCHEDULE 2.19 hereto is a
complete and accurate description of all material transactions between the
Company or any ERISA Plan, on the one hand, and any Insider, on the other hand,
that have occurred since January 1, 1987. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholders, any
director, officer, key employee of the Company, and any Affiliate,
Associate or Relative of any of the foregoing persons;
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(ii) the term "Associate" used to indicate a relationship
with any person means (A) any corporation, partnership, joint venture or
other entity of which such person is an officer or partner or is, directly
or indirectly, through one or more intermediaries, the beneficial owner of
10% or more of (1) any class or type of equity securities or other profits
interest or (2) the combined voting power of interests ordinarily entitled
to vote for management or otherwise, and (B) any trust or other estate in
which such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's
spouse, such person's parents, sisters, brothers, children and the spouses
of the foregoing, and any member of the immediate household of such person.
2.20 PROPRIETY OF PAST PAYMENTS. Except as set forth in SCHEDULE 2.20
hereto, no funds or assets of the Company have been used for illegal purposes;
no unrecorded funds or assets of the Company have been established for any
purpose; no accumulation or use of the Company's corporate funds or assets has
been made without being properly accounted for in the respective books and
records of the Company; all payments by or on behalf of the Company have been
duly and properly recorded and accounted for in their respective books and
records; no false or artificial entry has been made in the books and records of
the Company for any reason; no payment has been made by or on behalf of the
Company with the understanding that any part of such payment is to be used for
any purpose other than that described in the documents supporting such payment;
and the Company has not made, directly or indirectly, any illegal contributions
to any political party or candidate, either domestic or foreign. Neither the
IRS nor any other federal, state, local or foreign government agency or entity
has initiated or threatened any investigation of any payment made by the Company
of, or alleged to be of, the type described in this SECTION 2.20.
2.21 INTEREST IN COMPETITORS. Neither the Company nor any Stockholder, nor
any of their officers, directors or key employees or Affiliates, has any
interest, either by way of contract or by way of investment (other than as
holder of not more than 2% of the outstanding capital stock of a publicly traded
person, so long as such holder has no other connection or relationship with such
person) or otherwise, directly or indirectly, in any person other than the
Company that provides any services or designs, produces or sells any product or
product lines or engages in any activity similar to or competitive with any
activity currently proposed to be conducted by the Company.
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2.22 BROKERS. Except for Geneva Capital Markets, Inc. and John Dorey,
neither the Company, nor any director, officer or employee thereof, nor any
Stockholder or any representative of any Stockholder, has employed any broker or
finder or has incurred or will incur any broker's, finder's or similar fees,
commissions or expenses, in each case in connection with the transactions
contemplated by this Agreement or the Documents.
2.23 ACCOUNTS. SCHEDULE 2.23 hereof correctly identifies each bank account
maintained by or on behalf or for the benefit of the Company and the name of
each person with any power or authority to act with respect thereto.
2.24 NET WORTH OF THE COMPANIES. The Net Worth of the Company, as
determined in accordance with the Accounting Principles, will exceed $8,000,000
on the Closing Date.
2.25 DISCLOSURE. Neither the Company nor any Stockholder has made any
material misrepresentation to UAG relating to this Agreement or the Shares and
neither the Company nor any Stockholder has omitted to state to UAG any material
fact relating to this Agreement or the Shares which is necessary in order to
make the information given by or on behalf of the Company or any Stockholder to
UAG or their representatives at or prior to Closing not misleading or which if
disclosed would reasonably affect the decision of a person considering an
acquisition of the Shares. No fact, event, condition or contingency exists or
has occurred which has, or in the future can reasonably be expected to have, a
Material Adverse Effect, which has not been disclosed in the Company Financial
Statements or the Schedules to this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder hereby jointly and severally further represents and
warrants to UAG as follows:
3.1 OWNERSHIP OF SHARES; TITLE. Each Stockholder is the owner of record
and beneficially of the Shares set forth on SCHEDULE 3.1 hereto and has, and
shall transfer to UAG at the Closing, good and marketable title to the Shares
owned by him, free and clear of any and all Security Interests, proxies and
voting or other agreements except as contemplated by the Shareholders Agreement
and restrictions on transfer imposed by applicable securities laws.
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3.2 AUTHORITY. Each Stockholder has all requisite power and authority and
has full legal capacity and is competent to execute, deliver and perform this
Agreement and the Documents to which he is a party and to consummate the
transactions contemplated hereby and thereby (including the disposition of the
Shares to UAG as contemplated by this Agreement). This Agreement has been duly
executed and delivered by each Stockholder and constitutes, and the Documents
when executed and delivered by each Stockholder will constitute, a valid and
binding obligation of each Stockholder, enforceable against each Stockholder in
accordance with its terms. The execution, delivery and performance of this
Agreement and the Documents by each Stockholder and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(i) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any material contract,
agreement, commitment, understanding, arrangement or restriction to which
each Stockholder is a party to or which each Stockholder or any of such
Stockholder's property is subject;
(ii) violate or conflict with any Legal Requirements
applicable to each Stockholder or any of such Stockholder's businesses or
properties; or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF UAG
UAG hereby represents and warrants to the Company and the Stockholders
as follows:
4.1 ORGANIZATION AND GOOD STANDING. UAG is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to own, lease and operate the
properties used in its business and to carry on its business as now being
conducted. UAG is duly qualified to do business and is in good standing as a
foreign corporation in each state and jurisdiction where
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qualification as a foreign corporation is required, except for such failures to
be qualified and in good standing, if any, which when taken together with all
other such failures of UAG and the UAG Subsidiaries (as defined below) would
not, or could not reasonably be expected to, in the aggregate have a material
adverse effect on UAG and the UAG Subsidiaries, taken as a whole. SCHEDULE 4.1
hereto lists (i) the states and other jurisdictions where UAG is so qualified
and (ii) the assumed names under which UAG conducts business. UAG has
previously delivered to Landers Auto complete and correct copies of its charter
and by-laws (including comparable governing instruments with different names),
as amended and presently in effect.
4.2 SUBSIDIARIES. Set forth on SCHEDULE 4.2 hereto is a true and complete
list of all UAG Subsidiaries (as defined below) stating, with respect to each
UAG Subsidiary, its jurisdiction of incorporation, capitalization, equity
ownership and jurisdictions in which it is qualified to do business. As used in
this Agreement, the term "UAG Subsidiary" shall mean any corporation or other
entity in which UAG, directly or indirectly, owns beneficially securities
representing 50% or more of (i) the aggregate equity or profit interests or (ii)
the combined voting power of voting interests ordinarily entitled to vote for
management or otherwise. Each of the UAG Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own,
lease and operate the properties and assets used in its business and to carry on
its business as now being conducted, and is duly qualified to do business and in
good standing as a foreign corporation in each jurisdiction where qualification
as a foreign corporation is required, except for such failures to be qualified
and in good standing, if any, which when taken together with all other such
failures of UAG and the UAG Subsidiaries would not, or could not reasonably be
expected to, in the aggregate have a material adverse effect on UAG and the UAG
Subsidiaries, taken as a whole. All of the outstanding shares of capital stock
of the UAG Subsidiaries have been validly authorized and issued, are fully paid
and non-assessable, have not been issued in violation of any preemptive rights
or of any federal or state securities law, and, except as set forth on SCHEDULE
4.2 hereto, are owned by UAG or a wholly owned UAG Subsidiary of record and
beneficially free and clear of any Security Interest. Except as set forth on
SCHEDULE 4.2 hereto, UAG does not own, directly or indirectly, any ownership,
equity, profits or voting interest in any corporation, partnership, joint
venture or other person, nor has any right, agreement or commitment to purchase
any such interest. UAG has previously delivered to Landers Auto complete and
correct copies of the charter and by-laws (including comparable governing
instruments with different names) of each of the UAG Subsidiaries, as amended
and presently in effect.
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4.3 CAPITALIZATION. The authorized stock of UAG and the number of shares
of capital stock which are issued and outstanding are set forth on SCHEDULE 4.3
hereto. The shares listed on SCHEDULE 4.3 hereto constitute all the issued and
outstanding shares of capital stock of UAG and have been validly authorized and
issued, are fully paid and nonassessable, have not been issued in violation of
any preemptive rights or of any federal or state securities law and no personal
liability attaches to the ownership thereof. There is no security, option,
warrant, right, call, subscription, agreement, commitment or understanding of
any nature whatsoever, fixed or contingent, that directly or indirectly
(i) calls for the issuance, sale, pledge or other disposition of any shares of
capital stock of UAG or any securities convertible into, or other rights to
acquire, any shares of capital stock of UAG, or (ii) obligates UAG to grant,
offer or enter into any of the foregoing, or (iii) relates to the voting or
control of such capital stock, securities or rights, except as set forth on
SCHEDULE 4.3 hereto.
4.4 AUTHORITY; APPROVALS AND CONSENTS. UAG has the corporate power and
authority to enter into this Agreement and the Documents to which it is a party
and to perform its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and the Documents to which it is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized and approved by the Board of Directors of UAG and no
other corporate proceedings on the part of UAG are necessary to authorize and
approve this Agreement and the Documents and the transactions contemplated
hereby and thereby. This Agreement has been, and on the Closing Date the
Documents will be, duly executed and delivered by, and constitute a valid and
binding obligation of, UAG, enforceable against UAG in accordance with their
respective terms. Except as set forth on SCHEDULE 4.4 hereto, the execution,
delivery and performance by UAG of this Agreement and the Documents to which it
is a party and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the Certificate of
Incorporation or By-Laws (including any comparable governing instrument
with a different name) of UAG;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any UAG Agreement (as defined
below) or require any consent or waiver of any party to any UAG Agreement;
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(iii) result in the creation of any Security Interest upon,
or any person obtaining any right to acquire, any properties, assets or
rights of any UAG or any UAG Subsidiary;
(iv) violate or conflict with any Legal Requirements
applicable to UAG or any UAG Subsidiary or any of their respective
businesses or properties; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental administrative or judicial authority is necessary to be
obtained or made by UAG to enable UAG to continue to conduct its business and
operations and use its properties after the Closing in a manner which is in all
material respects consistent with that in which they are presently conducted.
4.5 FINANCIAL STATEMENTS. Attached as SCHEDULE 4.5 are true and complete
copies of the consolidated balance sheet of UAG and its consolidated UAG
Subsidiaries as of December 31 in each of the years 1993 and 1994 (such balance
sheet as of December 31, 1994 being referred to herein as the "UAG Balance
Sheet"), and the related consolidated statements of income, stockholders' equity
and cash flows for the fiscal years ended on such dates, together with the notes
thereto, in each case examined by and accompanied by the report of Coopers &
Lybrand, independent certified public accountants (all the foregoing financial
statements, including the notes thereto, being referred to herein collectively
as the "UAG Financial Statements"). The UAG Financial Statements are in
accordance with the books and records of UAG and the UAG Subsidiaries, fairly
present the consolidated financial position, results of operations,
stockholders' equity and changes in financial position of UAG and the UAG
Subsidiaries as of the dates and for the periods indicated, in each case in
conformity with GAAP consistently applied (except as otherwise indicated in such
statements) during such periods, and can be legitimately reconciled with the
financial statements and the financial records maintained and the accounting
methods applied by UAG and the UAG Subsidiaries for federal income tax purposes,
and the unaudited financial statements included in the UAG Financial Statements
indicate all adjustments, which consist of only normal recurring accruals,
necessary for such fair presentations. The statements of income included in the
UAG Financial Statements do not contain any items of special or
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nonrecurring income except as expressly specified therein, and the balance
sheets included in the UAG Financial Statements do not reflect any write-up or
revaluation increasing the book value of any assets. The books and accounts of
UAG and the UAG Subsidiaries are complete and correct in all material respects
and fairly reflect all of the transactions, items of income and expense and all
assets and liabilities of the businesses of UAG and the UAG Subsidiaries
consistent with prior practices of UAG and the UAG Subsidiaries.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Neither UAG nor any UAG
Subsidiary has any liability of any nature whatsoever (whether known or unknown,
due or to become due, accrued, absolute, contingent or otherwise), including,
without limitation, any unfunded obligation under employee benefit plans or
arrangements as described in SECTION 4.17 AND 4.18 hereof or liabilities for
Taxes (as defined in SECTION 4.8 hereof), except for (i) liabilities reflected
or reserved against the most recent UAG Financial Statement, (ii) current
liabilities incurred in the ordinary course of business and consistent with past
practice after the date of the UAG Balance Sheet which, individually and in the
aggregate, do not have, and cannot reasonably be expected to have, a material
adverse effect on UAG and the UAG Subsidiaries, taken as a whole, and (iii)
liabilities disclosed on SCHEDULE 4.6 hereto. Neither UAG nor any UAG
Subsidiary is a party to any UAG Agreement, or subject to any charter or by-law
provision, any other corporate limitation or any Legal Requirement, which has,
or can reasonably be expected to have, a material adverse effect on UAG and the
UAG Subsidiaries, taken as a whole.
4.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1993, UAG and each UAG Subsidiary has operated
in the ordinary course of business consistent with past practice, except as set
forth on SCHEDULE 4.7(a) hereto, and there has not been:
(i) any material loss, damage, destruction or other
casualty to the property or other assets of UAG or any UAG Subsidiary,
whether or not covered by insurance;
(ii) any change in any method of accounting or accounting
practice of UAG or any UAG Subsidiary; or
(iii) any loss of the employment, services or benefits of any
key employee of UAG or any UAG Subsidiary.
(b) Since December 31, 1993, except as set forth in SCHEDULE 4.7(b)
hereto, neither UAG nor any UAG Subsidiary has:
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(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary course
of business consistent with past practice;
(ii) failed to discharge or satisfy any lien or pay or
satisfy any obligation or liability (whether absolute, accrued, contingent
or otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets, except for mechanics' liens and liens for taxes
not yet due and payable;
(iv) sold or transferred any assets or cancelled any debts
or claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on any material obligation;
(vi) written down the value of any inventory or written off
as uncollectible any accounts receivable or any portion thereof not
reflected in the UAG Financial Statements;
(vii) discontinued any franchise or the sale of any products
or product line or program; or
(viii) entered into any agreement or made any commitment to
do any of the foregoing that has not been terminated.
4.8 TAXES. UAG, each UAG Subsidiary and, for any period during all or
part of which the tax liability of any other corporation was determined on a
combined or consolidated basis with UAG or any UAG Subsidiary, any such other
corporation, have filed timely all federal, state, local and foreign tax
returns, reports and declarations required to be filed (or have obtained or
timely applied for an extension with respect to such filing) correctly
reflecting the Taxes and all other information required to be reported thereon
and have paid, or made adequate provision for the payment of, all Taxes which
are due pursuant to such returns or pursuant to any assessment received by UAG
or any UAG Subsidiary or any such other corporation. Copies of all tax returns
for the fiscal years ended since December 31, 1992 have been furnished to the
Stockholders or their representatives and such copies are accurate and complete
as of the date hereof. UAG has also furnished to the Stockholders correct and
complete copies of all notices and correspondence sent or received since
December 31, 1992 by UAG or the UAG Subsidiaries to or from any
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federal, state or local tax authorities. UAG has adequately reserved for the
payment of all Taxes with respect to periods ended on, prior to or through the
Closing Date for which tax returns have not yet been filed. In the ordinary
course, UAG makes adequate provision on its books for the payment of all Taxes
(including for the current fiscal period) owed by UAG and the UAG Subsidiaries.
Except to the extent reserves therefor are reflected on the UAG Balance Sheet or
on SCHEDULE 4.8 hereto, neither UAG nor any UAG Subsidiary is liable, or will
become liable, for any Taxes for any period ending on, prior to or through the
Closing Date. Neither UAG nor any UAG Subsidiary has been subject to a federal
or state tax audit of any kind, and no adjustment has been proposed by the IRS
with respect to any return for any subsequent year. UAG knows of no basis for
an assertion of a deficiency for Taxes against UAG or any UAG Subsidiary.
4.9 LEGAL MATTERS.
(a) Except as set forth on SCHEDULE 4.9(a) hereto, (i) there are no
Claims pending against, or, to the knowledge of UAG or any UAG Subsidiary,
threatened against or affecting, UAG, any UAG Subsidiary, any of their
respective officers, directors, employees, agents or Affiliates involving,
affecting or relating to any assets, properties or operations of UAG or any UAG
Subsidiary, any UAG ERISA Plan (as defined below) or any of their respective
properties or rights before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, domestic or foreign, nor is any
basis known to UAG, any UAG Subsidiary or any of their directors, officers,
employees or agents for any such Claims, and (ii) neither UAG nor any UAG
Subsidiary is subject to any Judgments of any governmental, administrative or
judicial authority, domestic or foreign. SCHEDULE 4.9(a) hereto identifies each
Claim and Judgment disclosed thereon which is fully covered by an insurance
policy. As used in this Agreement, the term "UAG ERISA Plans" shall mean the
employee pension benefit plans and employee welfare benefit plans set forth on
SCHEDULE 4.17 hereto.
(b) The businesses of UAG and the UAG Subsidiaries are being
conducted in compliance with all Legal Requirements applicable to UAG or any UAG
Subsidiary or any of their respective businesses or properties, except where the
failure to be in such compliance could not have a material adverse effect on UAG
and the UAG Subsidiaries, taken as a whole. Except as set forth on SCHEDULE
4.9(b) hereto, UAG and the UAG Subsidiaries hold, and are in compliance with,
all Permits required by all applicable Legal Requirements and where the failure
to hold or be in compliance with such Permits could have a material adverse
effect on UAG and the UAG Subsidiaries, taken as a whole. A list of all such
Permits is set forth on SCHEDULE 4.9(b) hereto.
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(c) UAG and each UAG Subsidiary owns or holds all Permits material to
the conduct of its business. No event has occurred and is continuing which
permits, or after notice or lapse of time or both would permit, any modification
or termination of any Permit.
4.10 PROPERTY. The properties and assets owned by or leased to UAG and the
UAG Subsidiaries are adequate for the conduct of the respective businesses of
UAG and the UAG Subsidiaries as presently conducted. All improvements (the "UAG
Improvements") to the real property (the "UAG Real Property") owned by or leased
to UAG and each UAG Subsidiary and all machinery, equipment and other tangible
property owned or used by or leased to UAG or any UAG Subsidiary are in good
operating condition and in good repair, ordinary wear and tear excepted. Such
tangible properties and all UAG Improvements owned or leased by UAG or any UAG
Subsidiary conform in all material respects with all applicable laws,
ordinances, rules and regulations and other Legal Requirements and such UAG
Improvements do not encroach in any respect on property of others.
4.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 4.11(a) hereto, (i) UAG and each
UAG Subsidiary, the UAG Real Property, the UAG Improvements and any property
formerly owned, occupied or leased as part of the business of UAG or any UAG
Subsidiary are in full compliance with all Environmental Laws, (ii) UAG and the
UAG Subsidiaries have obtained all UAG Environmental Permits, (iii) such
Environmental Permits are in full force and effect, and (iv) UAG and the UAG
Subsidiaries are in full compliance with all terms and conditions of such UAG
Environmental Permits. As used herein, "UAG Environmental Permits" shall mean
all permits, licenses, approvals, authorizations, consents or registrations
required under applicable Environmental Laws in connection with the ownership,
use and/or operation of UAG and the UAG Subsidiaries or the UAG Real Property
and UAG Improvements. As used in this SECTION 4.11, "Hazardous Materials" shall
mean, in addition to those substances set forth in clauses (ii), (iii) and (iv)
in the second paragraph of SECTION 2.11(a) hereof, those substances included
within the definitions of or identified as "hazardous chemicals," "hazardous
waste," "hazardous substances," "hazardous materials," "toxic substances" or
similar terms in or pursuant to, without limitation, CERCLA, RCRA, OSHA, HMTA,
the Industrial Site Recovery Act (N.J.S.A. 13:1K-6, et seq.) ("ISRA"), the New
Jersey Spill Compensation and Control Act (N.J.S.A. 58:10-23.11, et seq.), the
Solid Waste Management Act (N.J.S.A. 13:1K-1 et seq.), the New Jersey
Underground Storage of Hazardous Substances Act (N.J.S.A. 58:10A-21 et seq.),
any article of the Environmental Conservation Law of New York State, including,
but not limited to, any Title of E.C.L. Article 27,
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and in the Connecticut
Hazardous Waste Law (Conn. Gen. Stat. Section 22a-114, et seq.), and in the
regulations promulgated pursuant to such laws, all as amended.
(b) UAG and the UAG Subsidiaries have not violated, done or suffered
any act which could give rise to liability under, and are not otherwise exposed
to liability under, any Environmental Law. No event has occurred with respect
to the UAG Real Property, the UAG Improvements, any property formerly owned,
occupied or leased as part of the business of UAG or any UAG Subsidiary, or UAG
or any UAG Subsidiary which, with the passage of time or the giving of notice,
or both, would constitute a violation of or non-compliance with any applicable
Environmental Law. UAG and the UAG Subsidiaries have no contingent liability
under any Environmental Law. There are no liens under any Environmental Law on
the UAG Real Property.
(c) Except as set forth on SCHEDULE 4.11(C) hereto, (i) neither UAG,
the UAG Subsidiaries, the UAG Real Property or any portion thereof, the UAG
Improvements or any property formerly owned, occupied or leased as part of the
business of UAG or any UAG Subsidiary, nor, to the knowledge of UAG, any
property adjacent to the UAG Real Property, is being used or has been used for
the treatment, generation, transportation, processing, handling, production or
disposal of any Hazardous Materials or as a landfill or other waste disposal
site, (ii) none of the UAG Real Property or portion thereof, the Improvements or
any property formerly owned, occupied or leased as part of the business of UAG
or any UAG Subsidiary has been subject to investigation by any governmental
authority evaluating the need to investigate or undertake Remedial Action (as
defined below) at such property, and (iii) none of the UAG Real Property, the
UAG Improvements or any property formerly owned, occupied or leased as part of
the business of UAG or any UAG Subsidiary, or any site or location where UAG or
any UAG Subsidiary sent waste of any kind, is identified on the current or
proposed (A) National Priorities List under 40 C.F.R. 300 Appendix B,
(B) Comprehensive Environmental Response Compensation and Liability Inventory
System list, or (C) any list arising from any statute analogous to CERCLA.
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(d) Except as set forth on SCHEDULE 4.11(D) hereto, there have been
and are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or containers disposed of or buried on, in or under
the ground or any surface waters, (ii) asbestos, asbestos containing materials
or radon gas, (iii) polychlorinated biphenyls ("PCB") or PCB-containing
equipment, including transformers, or (iv) wetlands (as defined under any
Environmental Law) located within any portion of the UAG Real Property, nor have
any liens been placed upon any portion of the UAG Real Property, the UAG
Improvements or any property formerly owned, occupied or leased as part of the
business of UAG or any UAG Subsidiary in connection with any actual or alleged
liability under any Environmental Law.
(e) Except as set forth on SCHEDULE 4.11(E) hereto, (i) there is no
pending or threatened claim, litigation, or administrative proceeding, or known
prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving UAG or any UAG Subsidiary, the UAG Real Property,
the UAG Improvements, any property formerly owned, leased or occupied as part of
the business of UAG or any UAG Subsidiary, any offsite contamination affecting
the business of UAG or any UAG Subsidiary or any operations conducted at the UAG
Real Property, (ii) there are no ongoing negotiations with or agreements with
any governmental authority relating to any Remedial Action or other
environmentally-related claim, (iii) neither UAG nor any UAG Subsidiary has
submitted notice pursuant to Section 103 of CERCLA or analogous statute or
notice under any other applicable Environmental Law reporting a release of a
Hazardous Material into the environment, and (iv) neither UAG nor any UAG
Subsidiary has received any notice, claim, demand, suit or request for
information from any governmental or private entity with respect to any
liability or alleged liability under any Environmental Law, nor to knowledge of
UAG and the UAG Subsidiaries, has any other entity whose liability therefor, in
whole or in part, may be attributed to UAG or any UAG Subsidiary, received such
notice, claim, demand, suit or request for information.
(f) UAG and the UAG Subsidiaries have provided to Landers Auto all
environmental studies and reports pertaining to the UAG Real Property, the UAG
Improvements, UAG and the UAG Subsidiaries and any property formerly owned,
occupied or leased as part of the businesses of UAG or any UAG Subsidiary, and
has permitted (or will have permitted as of the Closing Date), the testing of
the soil, groundwater, building components, tanks, containers and equipment on
the UAG Real Property, the UAG Improvements, any property formerly owned,
occupied or leased as part of the businesses of UAG and the UAG Subsidiaries by
Landers Auto or Landers Auto's agents or experts as they have or shall have
deemed necessary or appropriate to confirm the condition of such properties.
4.12 INVENTORIES. The values at which inventories are carried on the UAG
Balance Sheet reflect the normal inventory valuation policies of UAG, and such
values are in conformity with GAAP consistently applied. All inventories
reflected on the UAG Balance Sheet or arising since the date thereof are
currently marketable and can reasonably be anticipated to be sold at normal
mark-ups within 120 days after the date hereof in the ordinary course of
business (subject to the reserve for obsolete, off-
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grade or slow-moving items that is set forth on the UAG Balance Sheet), except
for spare parts inventory which inventory is good and usable.
4.13 ACCOUNTS RECEIVABLE. All accounts receivable reflected on the UAG
Balance Sheet or arising since the date thereof (subject to the reserve for bad
debts reflected on the UAG Balance Sheets) are good and have been collected or
are collectible, without resort to litigation or extraordinary collection
activity, within 90 days of the Closing Date, and are subject to no defenses,
set-offs or counterclaims other than normal cash discounts accrued in the
ordinary course of business of UAG and the UAG Subsidiaries.
4.14 INSURANCE. All properties and assets of UAG and the UAG Subsidiaries
which are of an insurable character are insured against loss or damage by fire
and other risks to the extent and in the manner reasonable in light of the risks
attendant to the businesses and activities in which UAG and the UAG Subsidiaries
are or have been engaged and customary for companies engaged in similar
businesses or owning similar assets.
4.15 CONTRACTS; ETC. As used in this Agreement, the term "UAG Agreements"
shall mean all mortgages, indenture notes, agreements, contracts, leases,
licenses, franchises, obligations, instruments or other commitments,
arrangements or understandings of any kind, whether written or oral, binding or
non-binding, to which UAG or any UAG Subsidiary is a party or by which UAG or
any UAG Subsidiary or any of their respective properties may be bound or
affected, including all amendments, modifications, extensions or renewals of any
of the foregoing. Set forth on SCHEDULE 4.15 hereto is a complete and accurate
list of each UAG Agreement which is material to the businesses, operations,
assets, condition (financial or otherwise) or prospects of UAG and the UAG
Subsidiaries. Neither UAG nor any UAG Subsidiary nor, to the knowledge of UAG
and each UAG Subsidiary, any other party thereto, is in breach of or default
under any UAG Agreement, and no event has occurred which (after notice or lapse
of time or both) would become a breach or default under, or would permit
modification, cancellation, acceleration or termination of, any UAG Agreement or
result in the creation of any Security Interest upon, or any person obtaining
any right to acquire, any properties, assets or rights of UAG or any UAG
Subsidiary in any such case where such breach, default or other event would
have, or could reasonably be expected to have, a material adverse effect on UAG
and the UAG Subsidiaries, taken as a whole. There are no material unresolved
disputes involving UAG or any UAG Subsidiary under any UAG Agreement.
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4.16 LABOR RELATIONS.
(a) UAG and each of the UAG Subsidiaries has paid or made provision
for the payment of all salaries and accrued wages and has complied in all
material respects with all applicable laws, rules and regulations relating to
the employment of labor, including those relating to wages, hours, collective
bargaining and the payment and withholding of taxes, and has withheld and paid
to the appropriate governmental authority, or is holding for payment not yet due
to such authority, all amounts required by law or agreement to be withheld from
the wages or salaries of its employees.
(b) Except as set forth in SCHEDULE 4.16(b) hereto, (i) there is no
unfair labor practice charge or complaint pending before the NLRB, (ii) there is
no labor strike, material slowdown or material work stoppage or lockout actually
pending or, to UAG's or any of the UAG Subsidiaries' knowledge, threatened,
against or affecting UAG or any UAG Subsidiary, and neither UAG nor any UAG
Subsidiary has experienced any strike, material slow down or material work
stoppage, lockout or other collective labor action by or with respect to
employees of UAG or any UAG Subsidiary, (iii) there is no representation claim
or petition pending before the NLRB or any similar foreign agency and no
question concerning representation exists relating to the employees of UAG or
any UAG Subsidiary, (iv) there are no charges with respect to or relating to UAG
or any UAG Subsidiary pending before the Equal Employment Opportunity Commission
or any state, local or foreign agency responsible for the prevention of unlawful
employment practices, (v) neither UAG nor any UAG Subsidiary has received formal
notice from any federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws of an intention to conduct an
investigation of UAG or any UAG Subsidiary and no such investigation is in
progress and (vi) the consents of the unions that are parties to any UAG
Employment and Labor Agreements (as defined below) are not required to complete
the transactions contemplated by this Agreement and the Documents. As used in
this agreement, the term "UAG Employment and Labor Agreements" shall mean all
(i) outstanding employment agreements or contracts with officers or employees
that are not terminable at will, or that provide for the payment of any bonus or
commission, (ii) agreements, policies or practices that require UAG or any UAG
Subsidiary to pay termination or severance pay to salaried, non-exempt or hourly
employees (other than as required by law), (iii) collective bargaining
agreements or other labor union contracts applicable to persons employed by UAG
or any UAG Subsidiary.
(c) Neither UAG nor any UAG Subsidiary has ever caused any "plant
closing" or "mass layoff" as such actions are defined in the Worker Adjustment
and Retraining Notification Act, as
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codified at 29 U.S.C. Sections 2101-2109,
and the regulations promulgated therein.
4.17 EMPLOYEE BENEFIT PLANS. Set forth on SCHEDULE 4.17 hereto is a true
and complete list of:
(i) each employee pension benefit plan, as defined in Section
3(2) of ERISA, maintained by UAG or any UAG Subsidiary or to which UAG or
any UAG Subsidiary is required to make contributions; and
(ii) each employee welfare benefit plan, as defined in Section
3(1) of ERISA, maintained by UAG or any UAG Subsidiary or to which UAG or
any UAG Subsidiary is required to make contributions.
4.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS. Set forth on
SCHEDULE 4.18 hereto is a true and complete list of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance, severance, retirement,
excess benefit or other plan, trust or arrangement which is not a UAG ERISA
Plan, whether written or oral, which UAG or any UAG Subsidiary maintains or
is required to make contributions to; and
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current or
former officer, director, employee or consultant of UAG or any UAG
Subsidiary pursuant to which payments may be required to be made at any
time following the date hereof (including, without limitation, any
employment, deferred compensation, severance, supplemental pension,
termination or consulting agreement or arrangement) (all of the written
plans, arrangements and agreements referred to on SCHEDULE 4.18 are
collectively referred to as the "UAG Compensation Commitments").
4.19 TRANSACTIONS WITH INSIDERS. Set forth on SCHEDULE 4.19 hereto is a
complete and accurate description of all material transactions between UAG or
any UAG Subsidiary or any UAG ERISA Plan, on the one hand, and any UAG Insider,
on the other hand, that have occurred since January 1, 1987. For purposes of
this Agreement, the term "UAG Insider" shall mean any director, officer, key
employee of UAG or any UAG Subsidiary, and any Affiliate, Associate or Relative
of any of the foregoing persons.
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4.20 PROPRIETY OF PAST PAYMENTS. Except as set forth in SCHEDULE 4.20
hereto, no funds or assets of UAG or any UAG Subsidiary have been used for
illegal purposes; no unrecorded funds or assets of UAG or any UAG Subsidiary
have been established for any purpose; no accumulation or use of UAG's or any
UAG Subsidiary's corporate funds or assets has been made without being properly
accounted for in the respective books and records of UAG or any UAG Subsidiary;
all payments by or on behalf of UAG and the UAG Subsidiaries have been duly and
properly recorded and accounted for in their respective books and records; no
false or artificial entry has been made in the books and records of UAG or any
UAG Subsidiary for any reason; no payment has been made by or on behalf of UAG
or any UAG Subsidiary with the understanding that any part of such payment is to
be used for any purpose other than that described in the documents supporting
such payment; and neither UAG nor any UAG Subsidiary has made, directly or
indirectly, any illegal contributions to any political party or candidate,
either domestic or foreign. Neither the IRS nor any other federal, state, local
or foreign government agency or entity has initiated or threatened any
investigation of any payment made by UAG or any UAG Subsidiary of, or alleged to
be of, the type described in this SECTION 4.20.
4.21 BROKERS. Neither UAG nor any UAG Subsidiary, nor any director,
officer or employee thereof, has employed any broker or finder or has incurred
or will incur any broker's, finder's or similar fees, commissions or expenses,
in each case in connection with the transactions contemplated by this Agreement
or the Documents.
4.22 ACQUISITION OF THE SHARES FOR INVESTMENT. UAG is acquiring the Shares
for investment and not with a view toward, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the Shares.
4.23 DISCLOSURE. Neither UAG nor any UAG Subsidiary has made any material
misrepresentation to the Companies or the Stockholders relating to this
Agreement and neither UAG nor any UAG Subsidiary has omitted to state to the
Companies or the Stockholders any material fact relating to this Agreement which
is necessary in order to make the information given by or on behalf of UAG or
any UAG Subsidiary to the Companies or the Stockholders or their representatives
at or prior to Closing not misleading. No fact, event, condition or contingency
exists or has occurred which has, or in the future can reasonably be expected to
have, a material adverse effect on UAG and the UAG Subsidiaries, taken as a
whole, which has not been disclosed in the UAG Financial Statements, the UAG
Balance Sheet, or the Schedules to this Agreement.
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ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY. Between the date hereof and the Closing
Date, the Stockholders and the Company will (i) provide to the officers and
other authorized representatives of UAG full access, during normal business
hours, to any and all premises, properties, files, books, records, documents,
and other information of the Company and will cause their officers to furnish to
UAG and its authorized representatives any and all financial, technical and
operating data and other information pertaining to the businesses and properties
of the Company, and (ii) make available for inspection and copying by UAG true
and complete copies of any documents relating to the foregoing. UAG will hold
in confidence (unless and to the extent compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law) all Confidential Information (as defined below) and will not disclose
the same to any third party except in connection with obtaining financing and
otherwise as may reasonably be necessary to carry out this Agreement and the
transactions contemplated hereby, including any due diligence review by or on
behalf of UAG. If this Agreement is terminated, UAG will promptly return to the
Company, upon the reasonable request of such Company, all Confidential
Information furnished by the Company and held by UAG, including all copies and
summaries thereof. As used herein, "Confidential Information" shall mean all
information concerning the Company obtained by UAG from the Company in
connection with the transactions contemplated by this Agreement, except
information (x) ascertainable or obtained from public information, (y) received
from a third party not employed by or otherwise affiliated with the Company or
(z) which is or becomes known to the public, other than through a breach by UAG
of this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS. The Stockholders and the
Company, on the one hand, and UAG, on the other hand, will, as soon as
practicable after reasonable request therefor, furnish to the other all the
information concerning the Stockholders and the Company or UAG, respectively,
required for inclusion in any statement or application made by UAG or the
Company to any governmental or regulatory body or in connection with obtaining
any third party consent in connection with the transactions contemplated by this
Agreement. Neither the Stockholders nor the Company, on the one hand, or UAG,
on the other hand, or any representative thereof, shall issue any press releases
or otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of the other, except as may be
required by law.
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5.3 ANTITRUST IMPROVEMENTS ACT COMPLIANCE. UAG and the Stockholders and
the Company, as applicable, shall each file or cause to be filed with the
Federal Trade Commission and the United States Department of Justice any
notifications required to be filed by their respective "ultimate parent"
entities under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "H-S-R Act"), and the rules and regulations promulgated thereunder,
with respect to the transactions contemplated herein. The parties shall use
their best efforts to make such filings promptly, to respond to any requests for
additional information made by either of such agencies, to cause the waiting
periods under the H-S-R Act to terminate or expire at the earliest possible date
and to resist vigorously, at their respective cost and expense (including,
without limitation, the institution or defense of legal proceedings), any
assertion that the transactions contemplated herein constitute a violation of
the antitrust laws, all to the end of expediting consummation of the
transactions contemplated herein; PROVIDED, HOWEVER, that if UAG or the
Stockholders shall determine after issuance of any preliminary injunction that
continuing such resistance is not in its or his best interests, UAG or the
Stockholders, as the case may be, may, by written notice to the other party,
terminate this Agreement with the effect set forth in SECTION 8.2 hereof.
5.4 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, the Company shall, and the Stockholders shall cause the Company to,
conduct its businesses solely in the ordinary course consistent with past
practices and, without the prior written consent of UAG, neither the
Stockholders nor the Company will, except as required or permitted pursuant to
the terms hereof, permit the Company to:
(i) make any material change in the conduct of its
businesses and operations or enter into any transaction other than in the
ordinary course of business consistent with past practices;
(ii) make any change in its Certificate of Incorporation or
By-laws, issue any additional shares of capital stock or equity securities
or grant any option, warrant or right to acquire any capital stock or
equity securities or issue any security convertible into or exchangeable
for its capital stock or alter any material term of any of its outstanding
securities or make any change in its outstanding shares of capital stock or
other ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;
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(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any thereof,
except pursuant to transactions in the ordinary course of business
consistent with past practices, (B) issue any securities convertible or
exchangeable for debt securities of the Company, or (C) issue any options
or other rights to acquire from the Company, directly or indirectly, debt
securities of the Company or any security convertible into or exchangeable
for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or
other conveyance of any of its assets or any part thereof, except
transactions pursuant to existing contracts set forth in SCHEDULE 2.16
hereto and dispositions of inventory or of worn-out or obsolete equipment
for fair or reasonable value in the ordinary course of business consistent
with past practices;
(v) subject any of its assets, or any part thereof, to any
lien or suffer such to be imposed other than such liens as may arise in the
ordinary course of business consistent with past practices by operation of
law which will not have, or cannot reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(vi) (A) declare, set aside or pay any dividends or other
distribution (whether in cash, stock, property or any combination thereof)
in respect of any shares of its capital stock which would result in the Net
Worth of the Company to decrease below $8,000,000 (provided, however, that
if the Stockholders pay any such dividend or other such distribution that
has the effect of reducing the Net Worth of the Company on the Closing Date
below $8,000,000, then, in addition to any other rights the Company has
under this Agreement (including Section 1.2 and Article 9 hereof), the
Stockholders shall contribute to the Company, within thirty (30) days of
the Closing Date, an amount equal to $8,000,000 less the Net Worth of the
Company on the Closing Date as set forth on the Estimated Closing Date
Balance Sheet), or (B) declare, set aside or pay any such dividend or other
such distribution from the consolidated net earnings of the Company for the
period commencing immediately after the date of the Closing Date Balance
Sheet and ending on the Closing Date, or (C) redeem, retire, purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock;
(vii) acquire any assets, raw materials or properties, or
enter into any other transaction, other than
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in the ordinary course of
business consistent with past practices;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase
in the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment)
or grant any increase in the compensation payable or to become payable to
any employee, except in accordance with pre-existing contractual provisions
or consistent with past practices;
(ix) make or commit to make any individual material capital
expenditure in excess of $50,000, or aggregate capital expenditures in
excess of $150,000;
(x) pay, loan or advance any amount to, or sell, transfer
or lease any properties or assets to, or enter into any agreement or
arrangement with, any of its Affiliates;
(xi) guarantee any indebtedness for borrowed money or any
other obligation of any other person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance
comparable in amount and scope to coverage maintained by it (or on behalf
of it) on the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any person;
(xiv) make any change in any method of accounting or
accounting principle, method, estimate or practice except for any such
change required by reason of a concurrent change in GAAP or write-down the
value of any inventory or write-off as uncollectible any accounts
receivable except in the ordinary course of business consistent with past
practices;
(xv) settle, release or forgive any material claim or
litigation or waive any material right;
(xvi) make, enter into, modify, amend in any material respect
or terminate any material commitment, bid or expenditure, other than in the
ordinary course of business consistent with past practice;
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(xvii) take any other action that would cause any of the
representations and warranties made by it in this Agreement not to remain
true and correct; or
(xviii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Stockholders and the Company will cause the Company to use their reasonable best
efforts to:
(i) continue to maintain, in all material respects, its
properties in accordance with present practices in a condition suitable for
their current use;
(ii) comply with all applicable Environmental Laws, and, in
the event it shall receive notice that there exists a violation of any
Environmental Law with respect to its operations or any Real Property,
promptly (and in any event within the time period permitted by the
applicable governmental authority) remove or remedy such violation in
accordance with all applicable Environmental Laws;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when due
all taxes, assessments, fees and other charges lawfully levied or assessed
against it unless the validity thereof is contested in good faith and by
appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve its business organization intact and continue
to maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships that
are, at the same time, not economically beneficial to it; and
(vi) continue to conduct their business in the ordinary
course consistent with past practices.
5.5 CONTRIBUTION OR LOAN; NO INTERCOMPANY PAYABLES OR
RECEIVABLES.
(a) Prior to the Closing Date, the Stockholders will contribute or
loan an aggregate of $1,947,000 to the Company (the "Landers Payable").
(b) At the Closing, except for the Landers Payable, there will be no
intercompany payables or intercompany
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receivables due and/or owing between the
Stockholders and their Affiliates (other than the Company), on the one hand, and
the Company, on the other hand.
5.6 NEGOTIATIONS. Until the earlier of 180 days from the date hereof and
the termination of this Agreement pursuant to clause (ii) of SECTION 8.1 hereof,
no Stockholder, nor the Company, nor their officers, directors, employees,
advisors, agents, representatives, Affiliates or anyone acting on behalf of the
Stockholders, the Company or such persons, shall, directly or indirectly,
encourage, solicit, initiate or engage in discussions or negotiations with, or
provide any information to, any person (other than UAG or its representatives)
concerning any merger, sale of assets (other than in the ordinary course of
business), purchase or sale of shares of capital stock or similar transaction
involving the Company. The Stockholders shall promptly communicate to UAG any
inquiries or communications concerning any such transaction (including the
identity of any person making such inquiry or communication) which any
Stockholder may receive or of which any Stockholder may become aware.
5.7 CONSENTS; COOPERATION. Subject to the terms and conditions hereof,
the Stockholders and the Company and UAG will use their respective best efforts
at their own expense:
(i) to obtain prior to the earlier of the date required (if
so required) or the Closing Date, all waivers, permits, licenses,
approvals, authorizations, qualifications, orders and consents of all third
parties and governmental authorities, and make all filings and
registrations with governmental authorities which are required on their
respective parts for (A) the consummation of the transactions contemplated
by this Agreement, (B) the ownership or leasing and operating after the
Closing by the Company of all its material properties and (C) the conduct
after the Closing by the Company of its businesses as conducted by it on
the date hereof;
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby and thereby; and
(iii) to furnish each other such information and assistance
as may reasonably be requested in connection with the foregoing.
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To the extent permitted by law, UAG, on the one hand, and the Stockholders and
the Company, on the other hand, will supply each other with copies of all
correspondence, filings or written communications between UAG, any Stockholder,
the Company or their respective representatives and any governmental authority
or third party from whom consent is required to consummate the transactions
contemplated by this Agreement or members of their respective staffs with
respect to this Agreement and the transactions contemplated hereby.
5.8 ADDITIONAL AGREEMENTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best efforts at its own
expense to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers of the Company shall take all such necessary action.
5.9 INTERIM FINANCIAL STATEMENTS. Within thirty (30) days after the end
of each calendar month after the date of this Agreement, the Company will
deliver to UAG unaudited consolidated balance sheets of the Company, and UAG
will deliver to the Stockholders unaudited consolidated balance sheets of UAG,
in each case as at the end of such calendar month and at the end of the
corresponding calendar month of the preceding fiscal year, together with the
related unaudited consolidated statements of income and cash flow for the fiscal
months then ended. All such financial statements shall fairly present the
financial position, results of operations and cash flow of the Company and UAG,
as applicable, as at the date or for the periods indicated. All unaudited
financial statements delivered pursuant to this SECTION 5.9 shall be prepared on
a basis consistent with the Company Financial Statements and the UAG Financial
Statements, as applicable.
5.10 NOTIFICATION OF CERTAIN MATTERS. Between the date hereof and the
Closing, each party to this Agreement will give prompt notice in writing to the
other party hereto of: (i) any information that indicates that any
representation and warranty of such party contained herein was not true and
correct as of the date hereof or will not be true and correct as of the Closing,
(ii) the occurrence of any event which could result in the failure to satisfy a
condition specified in ARTICLE 6 or ARTICLE 7 hereof, as applicable, (iii) any
notice or other communication from any third person alleging that the consent of
such third person is or may be required in connection with the transactions
contemplated by this Agreement, and (iv) in the case of the Stockholders and the
Company, any notice of, or other
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communication relating to, any default or event which, with notice or lapse of
time or both, would become a default under any Company Agreement. Each party
hereto will (x) promptly advise the other party hereto of any event that has, or
could in the future have, a Material Adverse Effect or material adverse effect
on UAG and the UAG Subsidiaries, taken as a whole, as applicable, (y) confer on
a regular and frequent basis with one or more designated representatives of the
other party to report operational matters and to report the general status of
ongoing operations, and (z) notify the other party of any emergency or other
change in the normal course of business or in the operation of the properties of
the Company and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or adjudicatory
proceedings involving any property of the Company or UAG, as applicable, and
will keep the other party fully informed of such events and permit UAG's
representatives access to all materials prepared in connection therewith. Each
Stockholder shall give prompt notice to UAG of any notice or other communication
from any third person asserting any right, title or interest in any of the
Shares held by such Stockholder (including, without limitation, any threat to
commence, or notice of the commencement of any action or other proceeding with
respect to the Shares) or the occurrence of any other event of which such
Stockholder has knowledge which could result in any failure to consummate the
sale of the Shares as contemplated hereby.
5.11 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) On the Closing Date, UAG shall make a capital contribution to the
Company in an aggregate amount equal to $1,947,000, which amount shall be used
to fund the repayment in full of the Landers Payable.
(b) After the Closing, in order to fund the acquisition of dealerships
as mutually agreed upon by UAG and the Stockholders, UAG agrees to make equity
capital contributions in cash to the Company in an aggregate amount of up to
$5,000,000 (less any amount contributed by UAG or expended by the Company in
connection with the acquisition of the Spivey Interest contemplated by SECTION
5.12 hereof) at such times and in such amounts as UAG and the Stockholders shall
mutually determine.
5.12 PURCHASE OF CHEVROLET DEALERSHIP. In the event that Steve Landers or
John Landers (or an Affiliate thereof) acquire an interest in Spivey Chevrolet,
Inc., whether through the purchase of assets, capital stock or otherwise (the
"Spivey Interest"), the Company shall own, directly or indirectly, 100% of the
Spivey Interest immediately following such acquisition. In the event that the
transactions contemplated by this Agreement are consummated, then Landers
Chevrolet shall be deemed to be a
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"Company" for all purposes under this Agreement (except ARTICLE 1 and SECTION
2.24 hereof).
5.13 OBSERVER RIGHTS. After the Closing Date and for so long as the
Stockholders own in the aggregate at least 15% of the outstanding shares of
capital stock of the Company or 5% of the outstanding shares of capital stock of
UAG (the "Observance Period"), either John Landers or Steve Landers, as they
shall to determine (the "Observer"), shall be permitted to attend and observe,
and participate in all discussions at, all meetings of UAG's Board of Directors,
provided that the Observer shall not have the right to vote on any matter
presented to, or hold an office or other position on, UAG's Board of Directors,
and provided further that the Stockholders shall keep the information and
subject matters discussed at such meetings (whether written or oral)
confidential. During the Observance Period, UAG shall provide the Observer with
written or oral notice of each meeting of UAG's Board of Directors at the same
time and in the same manner as the members of UAG's Board of Directors receive
notice of such meetings. Notwithstanding anything contained in this SECTION
5.13, the Observer's right to attend meetings of UAG's Board of Directors and to
receive information shall be subject to the right of UAG to exclude the Observer
from any meeting (or any portion thereof) of UAG's Board of Directors, or
otherwise preclude the Observer from receiving any information, relating to the
Stockholders or their Affiliates. The Observer shall be reimbursed by the
Company for his reasonable expenses in attending meetings of UAG's Board of
Directors pursuant to this SECTION 5.13.
5.14 RELEASE OF GUARANTEES. UAG shall use its best efforts to cause the
Stockholders to be released from all personal liability relating to the personal
guarantees of the Stockholders set forth on SCHEDULE 5.14 hereto.
5.15 KEY MAN LIFE INSURANCE. The Company, Steve Landers and John Landers
shall each use its best efforts to obtain key man life insurance on the life of
each of Steve Landers and John Landers in the amount of $5,000,000 each (or such
lesser amounts as UAG may determine), on terms satisfactory to UAG.
5.16 ASSURANCE BY THE STOCKHOLDERS. The Stockholders shall cause each
Company to comply with their respective covenants set forth in this Agreement.
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ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG TO EFFECT THE CLOSING
The obligations of UAG required to be performed by it at the Closing
shall be subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, each of which may be waived by UAG as provided herein
except as otherwise required by applicable law:
6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS. Each of the
representations and warranties of the Company and the Stockholders contained in
this Agreement shall be true and correct as of the date hereof and (having been
deemed to have been made again at and as of the Closing) shall be true and
correct as of the Closing. Each of the obligations of the Company and the
Stockholders required by this Agreement to be performed by them at or prior to
the Closing shall have been duly performed and complied with in all respects as
of the Closing. At the Closing, UAG shall have received a certificate, dated
the Closing Date and duly executed by Steve Landers or John Landers and the
chief financial officer of each Company, to the effect that the conditions set
forth in the two preceding sentences have been satisfied.
6.2 AUTHORIZATION; CONSENTS. (a) All corporate action necessary to
authorize the execution, delivery and performance of this Agreement and the
Documents, and the consummation of the transactions contemplated hereby and
thereby shall have been duly and validly taken by the Company. All filings
required to be made under the H-S-R Act in connection with the transactions
contemplated hereby shall have been made and all applicable waiting periods with
respect to each such filing, including any extensions thereof, shall have
expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has entered into a franchise
agreement (or comparable instrument)) required to consummate the transactions
contemplated hereby and all consents or waivers shall have been made or
obtained.
6.3 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDERS' COUNSEL. UAG shall
have been furnished with the opinion of Davidson, Horne & Hollingsworth, counsel
for the Company and the Stockholders, dated the Closing Date, in form and
substance satisfactory to UAG and its counsel, which opinion shall have been
rendered with respect to those matters contained in SECTIONS
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2.1, 2.2, 2.3, 2.4, 2.9, 3.1 AND 3.2 hereof. In rendering the foregoing
opinion, such counsel may rely as to factual matters upon certificates or other
documents furnished by officers and directors of the Company and by government
officials and upon such other documents and data as such counsel deem
appropriate as a basis for their opinions. Such counsel may specify the state
or states in which they are admitted to practice, that they are not admitted to
the Bar in any other state or experts in the law of any other state and that
such opinions are limited to Arkansas and federal laws and the General
Corporation Law of the State of Delaware.
6.4 ABSENCE OF LITIGATION. No order, stay, injunction or decree of any
court of competent jurisdiction in the Untied States shall be in effect (i) that
prevents or delays the consummation of any of the transactions contemplated
hereby or (ii) would impose any limitation on the ability of UAG effectively to
exercise full rights of ownership of the Shares. No action, suit or proceeding
before any court or any governmental or regulatory entity shall be pending (or
threatened by any governmental or regulatory entity), and no investigation by
any governmental or regulatory entity shall have been commenced (and be
pending), seeking to restrain or prohibit (or questioning the validity or
legality of) the consummation of the transactions contemplated by this Agreement
or seeking damages in connection therewith which UAG, in good faith and with the
advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby.
6.5 NO MATERIAL ADVERSE EFFECT. During the period from December 31, 1993
to the Closing Date, there shall not have been any material adverse change in
the assets, properties, business, operations, prospects, net income or financial
condition of the Company.
6.6 WORKING CAPITAL REQUIREMENTS. On the Closing Date, the Stockholders
shall deliver to UAG a consolidated balance sheet of the Company dated as of the
last day of the month immediately preceding the Closing Date (or such later date
as is practicable), in each case prepared in accordance with the Accounting
Principles (the "Estimated Closing Date Balance Sheet"). The Estimated Closing
Date Balance Sheet shall show as of the date thereof, after taking into account
the transactions contemplated by SECTION 5.5 hereof and the payment of any of
the Stockholders' fees, costs and expenses by the Company incurred in connection
with this Agreement, consolidated net working capital of not less than such
amount as shall be agreed upon by UAG and the Stockholders prior to the Closing
Date (the "Minimum Working Capital Amount") and set forth on SCHEDULE 6.6
hereto. If the consolidated net working capital of the Company on the Closing
Date (the "Actual Working Capital Amount") is less than the
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Minimum Working Capital Amount and UAG waives satisfaction of the condition to
Closing set forth in the second sentence of this SECTION 6.6, within thirty (30)
days of the Closing Date, UAG, at its sole option, can require the Stockholders
to loan to the Company an amount up to an amount equal to the Minimum Working
Capital Amount less the Actual Working Capital Amount. In the event UAG elects
to exercise the foregoing option, in consideration therefor, the Company will
issue the Working Capital Note to the Stockholders on the date such loan is made
to the Company.
6.7 COMPLETION OF DUE DILIGENCE. UAG shall have completed their due
diligence examination of the Company and the results of such examination,
including any Phase I or Phase II environmental audits of the Company, shall be
satisfactory to UAG.
6.8 EMPLOYMENT AGREEMENTS. The Company and Steve Landers, John Landers
and Dwight Everett shall have entered into the Steve Landers Employment
Agreement, the John Landers Employment Agreement and the Everett Employment
Agreement, respectively.
6.9 LEASES. The Stockholders and UAG shall have entered into the Leases.
6.10 SHAREHOLDERS AGREEMENT. UAG, Landers Auto, Steve Landers and John
Landers shall have entered into the Shareholders Agreement.
6.11 REGISTRATION RIGHTS AGREEMENT. Steve Landers and John Landers shall
have become a party to the Registration Rights Agreement.
6.12 BOARD APPROVAL. The Board of Directors of UAG shall have approved the
consummation of all of the transactions contemplated by this Agreement and the
Documents.
6.13 CERTIFICATES. The Stockholders and the Company shall have furnished
UAG with such certificates of its officers and others as UAG may reasonably
request to evidence compliance with the conditions set forth in this ARTICLE 6.
6.14 LEGAL MATTERS. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of the
Stockholders and the Company under the provisions of this Agreement, and all
other actions and proceedings required to be taken by or on behalf of the
Stockholders and the Company in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
UAG.
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ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
The obligations of the Stockholders required to be performed by them
at the Closing shall be subject to the satisfaction, at or prior to the Closing,
of each of the following conditions, each of which may be waived by any
Stockholder on behalf of all of the Stockholders as provided herein except as
otherwise required by applicable law:
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS. Each of the
representations and warranties of UAG contained in this Agreement shall be true
and correct as of the date hereof and (having been deemed to have been made
again at and as of the Closing) shall be true and correct as of the Closing.
Each of the obligations of UAG required by this Agreement to be performed by it
at or prior to the Closing shall have been duly performed and complied with in
all respects as of the Closing. At the Closing, the Stockholders shall have
received a certificate, dated the Closing Date and duly executed by the chief
executive officer and chief financial officer of UAG to the effect that the
conditions set forth in the preceding two sentences have been satisfied.
7.2 AUTHORIZATION OF THE AGREEMENT, CONSENTS. (a) All corporate action
necessary to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby shall have been
duly and validly taken by UAG. All filings required to be made under the H-S-R
Act in connection with the transactions contemplated hereby shall have been made
and all applicable waiting periods with respect to each such filing (including
any extensions thereof) shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has entered into a franchise
agreement (or comparable instrument)) required to consummate the transactions
contemplated hereby and all consents or waivers shall have been made or
obtained.
7.3 OPINIONS OF UAG'S COUNSEL. The Stockholders shall have been furnished
with opinions of Willkie Farr & Gallagher, counsel to UAG, and such other local
counsel selected by UAG (and reasonably satisfactory to counsel for the
Stockholders), each dated the Closing Date, in form and substance satisfactory
to the Stockholders, which opinions, when taken together, shall have
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been rendered with respect to those matters contained in SECTIONS 4.1, 4.2, 4.3,
4.4 AND 4.9 hereof. In rendering the foregoing opinions, such counsel may rely
as to factual matters upon certificates or other documents furnished by officers
and directors of UAG and by government officials, and upon such other documents
and data as such counsel deem appropriate as a basis for their opinions. Such
counsel may specify the state or states in which they are admitted to practice,
that they are not admitted to the Bar in any other state or experts in the law
of any other state and that such opinions are limited to New York and federal
laws and the General Corporation Law of the State of Delaware, and in the case
of local counsel selected by UAG, to Arkansas law.
7.4 ABSENCE OF LITIGATION. No order, stay, judgment or decree shall have
been issued by any court and be in effect restraining or prohibiting the
consummation of the transactions contemplated hereby.
7.5 EMPLOYMENT AGREEMENT. The Company and Steve Landers and John Landers
shall have entered into the Steve Landers Employment Agreement and the John
Landers Employment Agreement, respectively.
7.6 LEASES. The Stockholders and UAG shall have entered into the Leases.
7.7 SHAREHOLDERS AGREEMENT. UAG, Landers Auto, Steve Landers and John
Landers shall have entered into the Shareholders Agreement.
7.8 REGISTRATION RIGHTS AGREEMENT. Steve Landers and John Landers shall
have become a party to the Registration Rights Agreement.
7.9 CERTIFICATES. UAG shall have furnished the Stockholders with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this ARTICLE 7 as may be reasonably requested by the
Stockholders.
7.10 LEGAL MATTERS. All certificates, instruments, opinions and other
documents required to be executed or delivered by or on behalf of UAG under the
provisions of this Agreement, and all other actions and proceedings required to
be taken by or on behalf of UAG in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Stockholders.
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ARTICLE 8
TERMINATION
8.1 TERMINATION. This Agreement may be terminated at any time prior to
Closing:
(i) by mutual consent of UAG and the Stockholders;
(ii) by either UAG or the Stockholders if the Closing shall
not have taken place on or prior to August 31, 1995, or such later date as
shall have been approved by UAG and the Stockholders (provided that the
terminating party is not otherwise in material breach of its
representations, warranties, covenants or agreements under this Agreement);
(iii) by UAG or the Stockholders if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG if any of the conditions specified in ARTICLE 6
hereof have not been met or waived by at such time as such condition is no
longer capable of satisfaction (provided UAG is not otherwise in material
breach of its representations, warranties, covenants or agreements under
this Agreement);
(v) by the Stockholders if any of the conditions specified
in ARTICLE 7 hereof have not been met or waived by any Stockholder at such
time as such condition is no longer capable of satisfaction (provided that
neither any Stockholder nor the Company is otherwise in material breach of
his or its representations, warranties covenants or agreements under this
Agreement); or
(vi) by either UAG or the Stockholders if there has been a
material breach on the part of the other of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach has not
been cured within ten (10) Business Days following receipt by the breaching
party of written notice of such breach.
If UAG or the Stockholders shall terminate this Agreement pursuant to the
provisions hereof, such termination shall be effected by notice to the other
party specifying the provision hereof pursuant to which such termination is
made.
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8.2 EFFECT OF TERMINATION. Except (i) for any breach of this Agreement
prior to its termination, (ii) for the obligations contained in SECTIONS 5.1 AND
10.2 hereof and (iii) as set forth in SECTION 9.1 hereof, upon the termination
of this Agreement pursuant to SECTION 8.1 hereof, this Agreement shall forthwith
become null and void and none of the parties hereto or any of their respective
officers, directors, employees, agents, Affiliates, consultants, stockholders or
principals shall have any liability or obligation hereunder or with respect
hereto.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE STOCKHOLDERS. Notwithstanding the Closing or
the delivery of the Shares, each Stockholder, jointly and severally, indemnifies
and agrees to fully defend, save and hold harmless on an after-tax basis UAG,
the Company, and any of their respective officers, directors, employees,
stockholders, advisors, representatives, agents and Affiliates (each a "UAG
Indemnified Party"), if a UAG Indemnified Party (including the Company after the
Closing Date) shall at any time or from time to time suffer any Costs (as
defined in SECTION 9.7 below) arising, directly or indirectly, out of or
resulting from, or shall pay or become obligated to pay any sum on account of,
(i) any and all Events of Breach (as defined below) or (ii) any Claim before or
by any court, arbitrator, panel, agency or other governmental, administrative or
judicial entity, which Claim involves, affects or relates to any assets,
properties or operations of the Company or the conduct of the business of the
Company prior to the Closing Date (a "Landers Third Party Claim"). As used
herein, "Event of Breach" shall be and mean any one or more of the following:
(i) any untruth or inaccuracy in any representation of the Stockholders or the
Company or the breach of any warranty of the Stockholders or the Company
contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to this Agreement by the
Stockholders or the Company (or any representative of the Stockholders or the
Company) to UAG (or any representative of UAG) and any misrepresentation in or
omission from any document furnished to UAG in connection with the Closing, and
(ii) any failure of any Stockholder or the Company duly to perform or observe
any term, provision, covenant, agreement or condition on the part of such
Stockholder or the Company to be performed or observed.
9.2 INDEMNIFICATION BY UAG. Notwithstanding the Closing, UAG indemnifies
and agrees to fully defend, save and hold harmless on an after-tax basis the
Stockholders, the Company, and
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any of their respective officers, directors, employees, stockholders, advisors,
representatives, agents and Affiliates (each a "Landers Indemnified Party"), if
a Landers Indemnified Party shall at any time or from time to time suffer any
Costs arising, directly or indirectly, out of or resulting from, or shall pay or
become obligated to pay any sum on account of, (i) any and all UAG Events of
Breach (as defined below) or (ii) any Claim before or by any court, arbitrator,
panel, agency or other governmental, administrative or judicial entity, which
Claim involves, affects or relates to any assets, properties or operations of
UAG or the conduct of the business of UAG prior to the Closing Date (a "UAG
Third Party Claim"). As used herein, "UAG Event of Breach" shall be and mean
any one or more of the following: (i) any untruth or inaccuracy in any
representation of UAG or the breach of any warranty of UAG contained in this
Agreement, including, without limitation, any misrepresentation in, or omission
from, any statement, certificate, schedule, exhibit, annex or other document
furnished pursuant to this Agreement by UAG (or any representative of UAG) to
the Stockholders (or any representative of the Stockholders) and any
misrepresentation in or omission from any document furnished to the Stockholders
in connection with the Closing, and (ii) any failure of UAG duly to perform or
observe any term, provision, covenant, agreement or condition on the part of UAG
to be performed or observed.
9.3 PROCEDURES. If (i) any Event of Breach occurs or is alleged and a UAG
Indemnified Party asserts that a Stockholder has become obligated to a UAG
Indemnified Party pursuant to SECTION 9.1, or if any Third Party Claim is begun,
made or instituted as a result of which a Stockholder may become obligated to a
UAG Indemnified Party hereunder, or (ii) a UAG Event of Breach occurs or is
alleged and a Landers Indemnified Party asserts that UAG has become obligated to
a Landers Indemnified Party pursuant to SECTION 9.2, or if any UAG Third Party
Claim is begun, made or instituted as a result of which UAG may become obligated
to a Landers Indemnified Party hereunder (for purposes of this ARTICLE 9, any
UAG Indemnified Party and any Landers Indemnified Party is sometimes referred to
as an "Indemnified Party" and UAG and the Stockholders are sometimes referred to
as an "Indemnifying Party," and any UAG Third Party Claim and any Landers Third
Party Claim is sometimes referred to as a "Third Party Claim," in each case as
the context so requires), such Indemnified Party shall give written notice to
the Indemnifying Party of its or his obligation to provide indemnification
hereunder, provided that any failure to so notify the Indemnifying Party shall
not relieve them from any liability that it or he may have to the Indemnified
Party under this ARTICLE 9. If such notice relates to a Third Party Claim, each
Indemnifying Party, jointly and severally, agrees to defend, contest or
otherwise protect such Indemnified Party against any
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such Third Party Claim at his or its sole cost and expense. Such Indemnified
Party shall have the right, but not the obligation, to participate at its own
expense in the defense thereof by counsel of such Indemnified Party's choice and
shall in any event cooperate with and assist the Indemnifying Party to the
extent reasonably possible. If the Indemnifying Party fails timely to defend,
contest or otherwise protect against such Third Party Claim, such Indemnified
Party shall have the right to do so, including, without limitation, the right to
make any compromise or settlement thereof, and such Indemnified Party shall be
entitled to recover the entire Cost thereof from the Indemnifying Party,
including, without limitation, attorneys' fees, disbursements and amounts paid
(or of which such Indemnified Party has become obligated to pay) as the result
of such Third Party Claim. Failure by the Indemnifying Party to notify such
Indemnified Party of its or their election to defend any such Third Party Claim
within fifteen (15) days after notice thereof shall have been given to the
Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its or
their right to defend such Third Party Claim. If the Indemnifying Party assumes
the defense of the particular Third Party Claim, the Indemnifying Party shall
not, in the defense of such Third Party Claim, consent to entry of any judgment
or enter into any settlement, except with the written consent of such
Indemnified Party. In addition, the Indemnifying Party shall not enter into any
settlement of any Third Party Claim (except with the written consent of such
Indemnified Party) which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to such Indemnified Party a full release
from all liability in respect of such Third Party Claim. Notwithstanding the
foregoing, the Indemnifying Party shall not be entitled to control (but shall be
entitled to participate at their own expense in the defense of), and the
Indemnified Party shall be entitled to have sole control over, the defense or
settlement of any Third Party Claim to the extent the Third Party Claim seeks an
order, injunction or other equitable relief against the Indemnified Party which,
if successful, could materially interfere with the business, operations, assets,
condition (financial or otherwise) or prospects of the Indemnified Party.
9.4 LIMITATION ON INDEMNIFICATION.
(a) INDEMNIFICATION BY THE STOCKHOLDERS.
(i) A UAG Indemnified Party shall be entitled to indemnification in
connection with an Event of Breach only if the aggregate Costs incurred or
sustained by all UAG Indemnified Parties exceed the Basket (as defined in
SECTION 9.7 hereof); PROVIDED, HOWEVER, that, notwithstanding the Basket, a UAG
Indemnified Party shall be entitled to indemnification for all Costs incurred or
sustained by such UAG Indemnified Party as a
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result of any untruth or inaccuracy in, or breach of, a representation, warranty
or covenant (or failure to perform or observe any term, agreement or condition)
contained in SECTIONS 1.1, 1.2, 2.3, 2.8, 2.11, 3.1, 5.4(A)(II), 5.4(A)(VI),
5.4(B)(III), 5.5 AND 10.2 hereof.
(ii) The aggregate Costs for which the Stockholders shall be
obligated to indemnify the UAG Indemnified Parties shall not exceed $2,000,000
in the case of Costs incurred or sustained by all UAG Indemnified Parties in
connection with an Event of Breach; PROVIDED, HOWEVER, a UAG Indemnified Party
shall be entitled to indemnification for all Costs incurred or sustained by such
UAG Indemnified Party as a result of any untruth or inaccuracy in, or breach of,
a representation, warranty or covenant (or failure to perform or observe any
term, agreement or condition) contained in Sections 1.1, 1.2, 2.3, 2.8, 2.11,
3.1, 5.4(a)(ii), 5.4(a)(vi), 5.4(b)(iii), 5.5 and 10.2 hereof.
(b) INDEMNIFICATION BY UAG.
(i) A Landers Indemnified Party shall be entitled to indemnification
in connection with a UAG Event of Breach only if the aggregate Costs incurred or
sustained by all Landers Indemnified Parties exceed the Basket; PROVIDED,
HOWEVER, that, notwithstanding the Basket, a Landers Indemnified Party shall be
entitled to indemnification for all Costs incurred or sustained by such Landers
Indemnified Party as a result of any untruth or inaccuracy in, or breach of, a
representation, warranty or covenant (or failure to perform or observe any term,
agreement or condition) contained in SECTIONS 1.1, 4.3, 4.8, 4.11 AND 10.2
hereof.
(ii) The aggregate Costs for which UAG shall be obligated to
indemnify the Landers Indemnified Parties shall not exceed $2,000,000 in the
case of Costs incurred or sustained by all Landers Indemnified Parties in
connection with a UAG Event of Breach; PROVIDED, HOWEVER, a Landers Indemnified
Party shall be entitled to indemnification for all Costs incurred or sustained
by such Landers Indemnified Party as a result of any untruth or inaccuracy in,
or breach of, a representation, warranty or covenant (or failure to perform or
observe any term, agreement or condition) contained in SECTIONS 1.1, 4.3, 4.8,
4.11 AND 10.2 hereof.
9.5 OFFSET. In addition to and not in limitation of all rights of offset
that an Indemnified Party may have under applicable law, the parties agree that,
at any Indemnified Party's option, any or all amounts owing to such Indemnified
Party under this ARTICLE 9 or any other provision of this Agreement or any other
liability of the other parties (or any Affiliate of the other parties) to such
Indemnified Party in
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connection with any of the Documents, may be recovered by the Indemnified Party
by an offset against any or all amounts due to such other parties pursuant to
this Agreement or the Documents.
9.6 REMEDIES. The rights of an Indemnified Party under this ARTICLE 9 are
in addition to such other rights and remedies which such Indemnified Party may
have under this Agreement, applicable law or otherwise.
9.7 DEFINITIONS. For purposes of this ARTICLE 9:
(a) "Basket" shall mean an amount equal to the Net Worth of the
Company as reflected on the Reviewed Balance Sheet less $7,500,000, provided
that in no event shall such amount exceed $500,000 for purposes of this ARTICLE
9. For purposes of determining whether the Basket has been exceeded, none of
the Stockholders' or UAG's representations and warranties shall be deemed to
include any qualifier in respect of a Material Adverse Effect or any other
qualifier in respect of materiality.
(b) "Costs" shall mean all liabilities, losses, costs, damages (not
including consequential damages), expenses, claims, attorneys' fees, experts'
fees, consultants' fees, and disbursements of any kind or of any nature
whatsoever. For purposes of application of the indemnity provisions of this
ARTICLE 9, the amount of any Cost arising from the breach of any representation,
warranty, covenant or agreement shall be the entire amount of any Cost suffered,
paid or required to be paid by the respective Indemnified Party as a result of
such breach and not just that portion of the Cost that exceeds the relevant
level of materiality.
9.8 INDEMNIFYING STOCKHOLDERS. Notwithstanding anything else contained in
this ARTICLE 9 to the contrary, for purposes of this ARTICLE 9, all references
to the term "Stockholder" or "Stockholders" shall be deemed to refer to Steve
Landers and John Landers only, and not Bob Landers, except that the term
"Stockholder" or "Stockholders" shall also be deemed to refer to Bob Landers if
there is an Event of Breach arising out of any untruth or inaccuracy in, or
breach of, a representation or warranty contained in SECTIONS 3.1 AND 3.2
hereof.
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ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
(a) The respective representations, warranties, covenants and
agreements of each of the parties to this Agreement (except covenants and
agreements which are expressly required to be performed and are performed in
full on or before the Closing Date) shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement, subject to
SECTION 10.1(b) below. In the event of a breach of any such representations,
warranties or covenants, the party to whom such representations, warranties or
covenants have been made shall have all rights and remedies for such breach
available to it under the provisions of this Agreement or otherwise, whether at
law or in equity, regardless of any disclosure to, or investigation made by or
on behalf of, such party on or before the Closing Date.
(b) Each of the representations and warranties set forth in ARTICLE
2, ARTICLE 3 and ARTICLE 4 hereof shall be deemed represented and made by the
Stockholders and the Company and UAG, as applicable, at the Closing as if made
at such time and shall survive (and not be affected in any respect by) the
Closing for a period terminating on the later of (i) the date three years after
the Closing Date, and (ii) with respect to any claim asserted with respect to
any breach of such representation or warranty or pursuant to SECTION 9.3 hereof
before the expiration of such representation or warranty, on the date such claim
is finally liquidated or otherwise resolved, except with respect to the
representations and warranties (i) in SECTIONS 2.8 AND 4.6, which shall survive
for six years following the due date (including extensions) of the income tax
returns of the Companies for the first taxable year (as defined in Section
441(b) of the Code) which will end after the Closing Date, (ii) in SECTIONS
2.11, 2.18 AND 4.13, which shall survive the Closing Date for a period of time
equal to any applicable statute of limitations, (iii) in SECTIONS 2.5 AND 4.5,
which shall survive until April 1, 1996, and (iv) in SECTION 3.1, which shall
survive indefinitely.
10.2 FEES AND EXPENSES. Except as otherwise expressly provided in this
Agreement, all legal and other fees, costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby through the Closing
Date shall be paid by the party incurring such fees, costs or expenses;
PROVIDED, HOWEVER, that if the Closing does not occur and SECTION 5.6 hereof is
breached, then the Stockholders or the Company shall pay to UAG, within five (5)
Business Days after receipt of a request therefor, an amount equal to all of the
legal and other
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fees, costs and expenses incurred by UAG in connection with this Agreement and
the transactions contemplated hereby; PROVIDED FURTHER, HOWEVER, that if the
Closing does not occur solely as a result of UAG's failure to obtain the consent
of the automobile manufacturers contemplated by SECTION 7.2(B) hereof, then UAG
shall pay to the Shareholders, within five (5) Business Days after receipt of a
request therefor, an amount equal to all of the legal and other fees, costs and
expenses incurred by the Shareholders in connection with this Agreement and the
transactions contemplated hereby. Notwithstanding the foregoing, any fees,
costs and expenses of, or any liabilities or obligations to, Geneva Capital
Markets, Inc. and/or John Dorey incurred in connection with this Agreement and
the transactions contemplated hereby shall be the sole responsibility of the
Stockholders and in no event will such fees, costs and expenses be the
responsibility of UAG or, after Closing, the Company.
10.3 HEADINGS. The section headings herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be deemed
to limit or otherwise affect any of the provisions hereof.
10.4 NOTICES. All notices or other communications required or permitted
hereunder shall be given in writing and shall be deemed sufficient if delivered
by hand, recognized overnight delivery service or facsimile transmission or
mailed by registered or certified mail, postage prepaid (return receipt
requested), as follows:
If to the Company before the Closing Date:
Landers Auto Sales, Inc.
Congo Exit 118 -- Highway I-30
Benton, Arkansas 72015
Facsimile No.: (501) 778-4077
Attn: Mr. Steve Landers
with a copy to:
Davidson, Horne & Hollingsworth
401 West Capitol
Suite 501
P.O. Box 3363
Little Rock, Arkansas 72203
Facsimile No.: (501) 372-7142
Attn: Garland W. Binns, Jr., Esq.
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If to the Company after the Closing Date (in addition to the foregoing
addresses):
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and
General Counsel
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Facsimile No.: (212) 821-8111
Attn: Peter A. Appel, Esq.
If to any Stockholder:
Mr. Steve Landers
3316 Highway 5
Benton, Arkansas 72015
Facsimile No.: (501) 778-4077
with a copy to:
Davidson, Horne & Hollingsworth
401 West Capitol
Suite 501
P.O. Box 3363
Little Rock, Arkansas 72203
Facsimile No.: (501) 372-7142
Attn: Garland W. Binns, Jr., Esq.
If to UAG:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and
General Counsel
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with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Facsimile No.: (212) 821-8111
Attn: Peter A. Appel, Esq.
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or three (3) days after the date so mailed;
PROVIDED, HOWEVER, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
10.5 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto (and with respect to
the Stockholders, the personal representatives and heirs of the Stockholders)
and their respective successors and permitted assigns, and the provisions of
ARTICLE 9 hereof shall inure to the benefit of the Indemnified Parties referred
to therein; PROVIDED, HOWEVER, that neither this Agreement nor any of the
rights, interests, or obligations hereunder may be assigned by any of the
parties hereto without the prior written consent of the other parties.
Notwithstanding the foregoing, UAG shall have the unrestricted right to assign
this Agreement and to delegate all or any part of its obligations hereunder to
any Affiliate of UAG, but in such event UAG shall remain fully liable for the
performance of all of such obligations in the manner prescribed in this
Agreement.
10.6 ENTIRE AGREEMENT. This Agreement (including the Schedules hereto) and
the Documents embody the entire agreement and understanding of the parties with
respect to the transactions contemplated hereby and supersede all prior written
or oral commitments, arrangements or understandings between the parties with
respect thereto and all prior drafts of this Agreement. There are no
restrictions, agreements, promises, warranties, covenants or undertakings with
respect to the transactions contemplated hereby other than those expressly set
forth herein or in the Documents. Prior drafts of this Agreement shall not be
used as a basis for interpreting this Agreement.
10.7 WAIVER AND AMENDMENTS. Each of the Stockholders, the Company and UAG
may by written notice to the other parties (i) extend the time for the
performance of any of the obligations or other actions of the other parties,
(ii) waive any inaccuracies in the representations or warranties of the other
parties contained in this Agreement, (iii) waive compliance with any of
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the covenants of the other parties contained in this Agreement, (iv) waive
performance of any of the obligations of the other parties created under this
Agreement, or (v) waive fulfillment of any of the conditions to its own
obligations under this Agreement. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach, whether or not similar. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the parties
hereto.
10.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF ARKANSAS.
10.10 ACCOUNTING TERMS. All accounting terms used herein which are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with GAAP.
10.11 CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) "Affiliate" of a specified person shall mean a person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified, and in the
case of a specified person who is a natural person, his spouse, his issue, his
parents, his estate and any trust entirely for the benefit of his spouse and/or
issue.
(b) "best efforts" shall be deemed to not include any obligation on
the part of any person to undertake any liabilities, expend any funds or perform
any acts (except liabilities, expenditures or performance, other than any best
efforts obligations, expressly required to be undertaken by the terms of this
Agreement) which are materially burdensome to such person; PROVIDED, HOWEVER,
that notwithstanding the foregoing, the term "best efforts" shall include an
obligation to take such actions which are normally incident to or reasonably
foreseeable in connection with such obligation or the transactions contemplated
hereby.
(c) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(d) "Documents" shall mean the Steve Landers Employment Agreement,
the John Landers Employment Agreement, the Shareholders Agreement, the UAG
Guaranty, the UAG Note I, the UAG Note II, the Leases and the Registration
Rights Agreement.
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(e) "GAAP" shall mean generally accepted accounting principles which,
for purposes of Sections 1.3 and 1.4 hereof, are in effect in the United States
on the Closing Date.
(f) "Material Adverse Effect" shall mean any change in, or effect on,
the Company (including the business thereof) which is, or might be, materially
adverse to the business, operations, assets, condition (financial or otherwise)
or prospects of such Company.
(g) "person" shall mean and include an individual, corporation,
partnership, joint venture, association, trust, any other unincorporated
organization or entity and a governmental entity or any department or agency
thereto.
10.12 SCHEDULES. Disclosure of any matter in any Schedule hereto or in the
Financial Statements shall not be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule to
this Agreement.
10.13 SEVERABILITY. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
10.14 REMEDIES. None of the remedies provided for in this Agreement,
including termination of this Agreement as set forth in ARTICLE 8,
indemnification as set forth in ARTICLE 9, the payment of certain fees, costs
and expenses as set forth in SECTION 10.2 or specific performance as set forth
in this SECTION 10.14, shall be the exclusive remedy of either party for a
breach of this Agreement. The parties hereto shall have the right to seek any
other remedy in law or equity in lieu of or in addition to any remedies provided
in this Agreement, including an action for damages for breach of contract.
10.15 THE COMPANY. For purposes of this Agreement, any reference to the
"Company" as of a date prior to December 22, 1994 (the date on which Landers
Oldsmobile-GMC, Inc. and Landers Jeep-Eagle, Inc., previously wholly-owned
subsidiaries of the Company, were merged with and into the Company) shall also
be deemed to refer to Landers Oldsmobile-GMC, Inc. and Landers Jeep-Eagle, Inc.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
LANDERS AUTO SALES, INC. UNITED AUTO GROUP, INC.
By: /s/ Steve Landers By: /s/ Carl Spielvogel
--------------------------- --------------------------
Name: Steve Landers Name: Carl Spielvogel
Title: President Title: Chairman and
Chief Executive Officer
THE STOCKHOLDERS:
/s/ Steve Landers
- ------------------------------
Steve Landers
/s/ John Landers
- ------------------------------
John Landers
/s/ Bob Landers
- ------------------------------
Bob Landers
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UNITED AUTO GROUP, INC.
PROMISSORY NOTE
$3,287,896 Little Rock, Arkansas
August 1, 1995
FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged,
United Auto Group, Inc., a Delaware corporation ("UAG"), hereby promises to pay
to Steve Landers and John Landers (collectively, the "Landers"), having an
address at c/o Steve Landers, 3316 Highway 5, Benton, Arkansas 72015, at such
address or at such other place as may be designated in writing by the holders of
this Note, the principal sum of $3,287,896 bearing interest at the rate of 8%
per annum and payable in sixty (60) equal installments of principal and interest
of $66,666.67 on the last day of each month commencing with the last day of the
month immediately following the date hereof until the fifth anniversary of such
date.
This Note is issued pursuant to the Amended and Restated Stock
Purchase Agreement, dated July 1, 1995, among UAG, the Landers and certain other
parties named therein (the "Purchase Agreement"), and is subject to the
provisions, terms and conditions of the Purchase Agreement as well as the
provisions, terms and conditions contained herein.
This Note is non-negotiable and may not be transferred, assigned,
pledged or otherwise disposed of or encumbered by the Landers without the prior
written consent of UAG.
In addition to and not in limitation of all rights of set-off that UAG
may have under applicable law, any amounts claimed by UAG to be owed by the
Landers to UAG (or any affiliate of UAG) under the Purchase Agreement or the
Documents (as defined in the Purchase Agreement) or any other liability of the
Landers (or any affiliate of the Landers) to UAG (or any affiliate of UAG) may
be recovered by UAG by a set-off against any amounts due to the Landers under
this Note.
This Note shall be governed by and construed and enforced in
accordance with the laws of the State of Arkansas.
UNITED AUTO GROUP, INC.
By: /s/Carl Spielvogel
--------------------------------
Name: Carl Spielvogel
Title: Chairman and
Chief Executive Officer
<PAGE>
UNITED AUTO GROUP, INC.
PROMISSORY NOTE
$726,619 Little Rock, Arkansas
August 1, 1995
FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged,
United Auto Group, Inc., a Delaware corporation ("UAG"), hereby promises to pay
to Steve Landers and John Landers (collectively, the "Landers"), having an
address at c/o Steve Landers, 3316 Highway 5, Benton, Arkansas 72015, at such
address or at such other place as may be designated in writing by the holders of
this Note, the principal sum of $726,619 bearing interest at the rate of 8% per
annum and payable in thirty-six (36) equal installments of principal and
interest of $22,770 on the last day of each month commencing with the last day
of the month immediately following the date hereof until the third anniversary
of such date.
This Note is issued pursuant to the Amended and Restated Stock
Purchase Agreement, dated as of July 1, 1995, among UAG, the Landers and certain
other parties named therein (the "Purchase Agreement"), and is subject to the
provisions, terms and conditions of the Purchase Agreement as well as the
provisions, terms and conditions contained herein.
This Note is non-negotiable and may not be transferred, assigned,
pledged or otherwise disposed of or encumbered by the Landers without the prior
written consent of UAG.
In addition to and not in limitation of all rights of set-off that
Landers Auto or UAG may have under applicable law, any amounts claimed by
Landers Auto or UAG to be owed by the Landers to Landers Auto or UAG (or any
affiliate of Landers Auto or UAG) under the Purchase Agreement or the Documents
(as defined in the Purchase Agreement) or any other liability of the Landers (or
any affiliate of the Landers) to Landers Auto or UAG (or any affiliate of
Landers Auto or UAG) may be recovered by Landers Auto or UAG by a set-off
against any amounts due to the Landers under this Note.
This Note shall be governed by and construed and enforced in
accordance with the laws of the State of Arkansas.
UNITED AUTO GROUP, INC.
By: /s/Carl Spielvogel
-------------------------------
Name: Carl Spielvogel
Title: Chairman and
Chief Executive Officer
<PAGE>
GUARANTY
FOR VALUE RECEIVED, United Auto Group, Inc., a Delaware corporation
("UAG"), hereby guarantees collection by Steve Landers and John Landers,
individuals residing in Arkansas (the "Landers"), of the payment obligations of
Landers Auto Sales, Inc., an Arkansas corporation (the "Company") under the
Steve Landers Employment Agreement, the John Landers Employment Agreement and
the Leases (as such terms are defined in the Amended and Restated Stock Purchase
Agreement, dated as of July 1, 1995, among UAG, the Landers, Bob Landers and the
Company). UAG shall, however, have any and all rights of defense, set-off and
counterclaim which are available to the Company.
This guaranty is conditional in that it is a guaranty of collection
only and not a guaranty of payment. Accordingly, UAG shall not be obligated to
make any payment hereunder, and the Landers shall not have recourse against UAG,
until all attempts to collect from the Company have failed.
This guaranty shall be governed by, and the rights and obligations
hereunder shall be determined in accordance with, the laws of the State of
Arkansas.
IN WITNESS WHEREOF, UAG has caused this guaranty to be duly executed
by its duly authorized officer as of this 1st day of August, 1995.
UNITED AUTO GROUP, INC.
By: /s/Carl Spielvogel
------------------------------
Name: Carl Spielvogel
Title: Chairman and
Chief Executive Officer
91430459
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement is dated as of August 1, 1995, and is
entered into between Landers Auto Sales, Inc., an Arkansas corporation (the
"Company"), and Steve Landers, an individual residing in Arkansas ("Executive").
WHEREAS, Executive and the Company desire to embody in this Agreement
the terms and conditions of Executive's employment by the Company.
NOW, THEREFORE, the parties hereby agree:
ARTICLE I
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.01. EMPLOYMENT. The Company shall employ Executive as Chief
Executive Officer and President of the Company. Executive hereby accepts such
employment. Executive agrees to devote his full business time and efforts to
promote the interests of the Company and its subsidiaries.
1.02. DUTIES AND RESPONSIBILITIES. Executive shall be required to
perform such duties and responsibilities as are consistent with his position and
as the Board of Directors of the Company (the "Board"), the Executive Committee
thereof (the "Executive Committee") and/or the Chief Executive Officer of United
Auto Group, Inc. ("UAG") may from time to time prescribe. Notwithstanding the
foregoing, in the event that the Company conducts business on Sundays, Executive
shall be under no obligation to work on any Sunday, and any failure by Executive
to work on Sunday shall not, in and of itself, constitute a breach of this
Agreement.
1.03. BOARD AND EXECUTIVE COMMITTEE MEMBERSHIP. Subject to
Section 3.1 of the Shareholders Agreement, dated the date hereof, among the
Company, UAG, Executive and certain other parties named therein (the
"Shareholders Agreement"), the Company will nominate Executive for election to
the Board and will use its best efforts to secure Executive's election to the
Board and his appointment as a member of the Executive Committee.
1.04. REPORTING. Executive shall report, in the performance of
his duties, directly to the Chief Executive Officer of UAG.
<PAGE>
ARTICLE II
TERM
2.01. TERM. The term of Executive's employment under this
Agreement (the "Term") shall commence on August 1, 1995 and shall continue until
July 31, 2000; provided that (i) the Term shall be renewed for an additional
one-year period as of August 1 of each year commencing with August 1, 2000
(each, a "Renewal Date"), unless either the Company or Executive gives written
notice, at least ninety (90) days prior to a Renewal Date, of its or his
intention not to so renew the Term, and (ii) this Agreement may be terminated
earlier as provided in Section 3.01(a) hereof and in Article V hereof.
2.02. NO VIOLATION. Executive represents and warrants to the
Company that neither the execution and delivery of this Agreement nor the
performance of his duties hereunder violates or will violate the provisions of
any other agreement to which he is a party or by which he is bound.
ARTICLE III
COMPENSATION AND EXPENSES
3.01. SALARY AND BENEFITS. As compensation and consideration for
the performance by Executive of his obligations under this Agreement, Executive
shall be entitled to the following (subject, in each case, to the provisions of
Article V hereof):
(a) SALARY. The Company shall pay Executive a salary during the
first three years of the Term, payable in accordance with the normal payment
procedures of the Company and subject to such withholdings and other normal
employee deductions as may be required by law, at the rate of $327,065 per annum
(or such PRO RATA amount thereof for any period of less than one year). Within
ninety (90) days of the end of the third year of the Term, Executive and the
Company shall agree on a salary to be paid to Executive for the remaining
portion of the Term. If the parties are unable to agree on a salary by the end
of the third year of the Term, then either party may terminate this Agreement
upon written notice to the other party pursuant to Section 6.02 hereof.
(b) BENEFIT PLANS. Executive shall participate during the Term
in such health and major medical insurance plans
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for the benefit of the employees of the Company as may be maintained from time
to time during the Term, if at all, in each case to the extent and in the manner
available to other officers of the Company and subject to the terms and
provisions of such plans or programs.
(c) DISABILITY INSURANCE. The Company shall obtain and maintain
a disability insurance policy providing for the payment of six months of salary
at the rate set forth in Section 3.01(a) hereof in the event this Agreement is
terminated pursuant to Section 5.04 hereof; provided, however, that in no event
shall the Company be required to spend in excess of $10,000 per year for such
insurance.
(d) VACATION. Executive shall be entitled to a paid vacation in
accordance with Company policy during the Term.
3.02. EXPENSES. The Company will reimburse Executive for
reasonable business-related expenses incurred by him in connection with the
performance of his duties hereunder during the Term, subject, however, to the
Company's policies relating to business-related expenses as in effect from time
to time during the Term.
ARTICLE IV
EXCLUSIVITY, ETC.
4.01. EXCLUSIVITY. Executive agrees to perform his duties,
responsibilities and obligations hereunder to the best of his ability.
Executive agrees that he will devote his entire working time, care and attention
and best efforts to such duties, responsibilities and obligations throughout the
Term. Executive also agrees that he will not engage in any other business
activities, pursued for gain, profit or other pecuniary advantage, that are
competitive with the activities of the Company or any of its subsidiaries,
except as permitted in Section 4.02 below. Executive agrees that all of his
activities as an employee of the Company shall be in conformity with all
policies, rules and regulations and directions of the Company not inconsistent
with this Agreement.
4.02. OTHER BUSINESS VENTURES. Executive agrees that, so long as
he is employed by the Company, he will not have any financial or other
beneficial interest in any business enterprise which is engaged in, or
competitive with, any business engaged in by the Company or any of its
subsidiaries. Notwithstanding the foregoing, Executive may own, directly or
indirectly, up to one
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percent (1%) of the outstanding capital stock of any such business having a
class of capital stock which is traded on any national stock exchange or in the
over-the-counter market.
4.03. CONFIDENTIALITY; NON-COMPETITION. (a) Executive agrees
that he will not, at any time during or after the Term, make use of or divulge
to any other person, firm or corporation any trade or business secret, process,
method or means, or any other confidential information concerning the business
or policies of the Company, any of its subsidiaries or their affiliates. For
purposes of this Agreement, a "trade or business secret, process, method or
means, or any other confidential information" shall mean and include information
treated as confidential or as a trade secret by the Company, any of its
subsidiaries or their affiliates, including but not limited to information
regarding contemplated products, models, compilations, business and financial
methods or practices, marketing, merchandising and selling techniques,
customers, vendors, suppliers, trade secrets, training programs, manuals or
materials, technical information, contracts, systems, procedures, mailing lists,
know-how, trade names, improvements, pricing, price lists, financial or other
data (including the revenues, costs or profits associated with any of the
Company's or its subsidiaries' products or services), business plans, strategy,
code books, invoices and other financial statements, computer programs, software
systems, databases, discs and printouts, other plans (technical or otherwise),
customer and industry lists, supplier lists, correspondence, internal reports,
personnel files, sales and advertising material, telephone numbers, names,
addresses or any other compilation of information, written or unwritten, which
is or was used in the business of the Company, any of its subsidiaries or their
affiliates. Executive's obligation under this Section 4.03(a) shall not apply
to any information which is in the public domain or hereafter enters the public
domain without the fault of Executive. Executive agrees not to remove from the
premises of the Company or any of its subsidiaries, except as an employee of the
Company in pursuit of the business of the Company or except as specifically
permitted in writing by the Company, any document or other object containing or
reflecting any such information. Executive agrees and acknowledges that all of
such information, in any form, and copies and extracts thereof, are and shall
remain the sole and exclusive property of the Company, and upon termination of
his employment with the Company, Executive shall return to the Company the
originals and all copies of any such information provided to or acquired by
Executive in connection with the performance of his duties for the Company, and
shall return to the Company all files, correspondence and/or other
communications received, maintained and/or originated by Executive during the
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course of his employment, and no copy of any such shall be retained by him.
(b) Executive acknowledges that the agreements and covenants
contained in this Section 4.03(b) are essential to protect the value of the
Company's and its subsidiaries' and their affiliates' business and assets and by
virtue of his employment with the Company, Executive has obtained and will
obtain knowledge, contacts, know-how, training, experience and other information
relating to the Company's and its subsidiaries' and their affiliates' business
operations, and there is a substantial probability that such knowledge,
know-how, contacts, training, experience and information could be used to the
substantial advantage of a competitor of the Company and its subsidiaries and
their affiliates and to the Company's and its subsidiaries' and their
affiliates' substantial detriment. Accordingly, for a period commencing on the
date of termination of Executive's employment with the Company and ending on the
earlier to occur of three (3) years from and after such date or two years from
and after the fifth anniversary of the date hereof (or such later date of
termination of Executive's employment if the Term is renewed pursuant to Section
2.01 hereof) (the "Non-Compete Period"), Executive shall not, directly or
indirectly, for himself or on behalf of or in conjunction with any person,
partnership, corporation or other entity, compete, own, operate, control, or
participate or engage in the ownership, management, operation or control of, or
be connected with as an officer, employee, partner, director, shareholder,
representative, consultant, independent contractor, guarantor, advisor or in any
other manner or otherwise have a financial interest in, a proprietorship,
partnership, joint venture, association, firm, corporation or other business
organization or enterprise that competes with the Company or any of its
subsidiaries or their affiliates (including any business or enterprise that
operates dealerships for the retail sales of new and used automobiles or trucks
and businesses ancillary thereto), provided that such business or enterprise (A)
is or becomes located or otherwise engaged within a 100 mile radius of any
automobile or truck dealership or ancillary business in which the Company (or
any affiliate thereof), directly or indirectly, has on ownership interest at any
time during the Non-Compete Period or (B) is an automobile or truck dealership
or group of affiliated automobile or truck dealerships (and all businesses
ancillary thereto) whose aggregate gross sales during the 12 month period
immediately preceding the date of Executive's termination exceeded $500,000,000.
During the Non-Compete Period, Executive shall not interfere with or disrupt, or
attempt to interfere with or disrupt, the relationship, contractual or
otherwise, between the Company or any of its subsidiaries or their affiliates
and any
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customer, client, supplier, manufacturer, distributor, consultant, independent
contractor or employee of the Company or any of its subsidiaries or their
affiliates.
(ii) It is the desire and intent of the parties that the
provisions of this Section 4.03(b) shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular portion of this
Section 4.03(b) shall be adjudicated to be invalid or unenforceable, this
Section 4.03(b) shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of this Section 4.03(b) in the particular jurisdiction
in which such adjudication is made.
(c) Executive agrees that, at any time and from time to time
during and after the Term, he will execute any and all documents which the
Company may deem reasonably necessary or appropriate to effectuate the
provisions of this Section 4.03.
ARTICLE V
TERMINATION
5.01. TERMINATION BY THE COMPANY. Subject to Section 5.05, the
Company shall have the right to terminate Executive's employment at any time,
with "Cause." For purposes of this Agreement, "Cause" shall mean: (i)
Executive's failure, neglect or refusal to perform his duties hereunder, which
failure, neglect or refusal shall not have been remedied by Executive within
fifteen (15) days of receipt by Executive of written notice from the Company of
such failure, neglect or refusal, (ii) Executive's refusal to follow the
instructions, orders or directives of the Board, the Executive Committee or the
Chief Executive Officer of UAG with respect to his duties and responsibilities
hereunder, (iii) any willful or intentional act of Executive that has the effect
of injuring the reputation or business of the Company or its affiliates in any
material respect, (iv) any continued or repeated absence from the Company,
unless such absence is (A) approved or excused by the Board or (B) is the result
of Executive's illness, disability or incapacity or a personal or family
emergency, (v) use of illegal drugs by Executive, (vi) conviction of Executive
for, or the entry of a plea (including nolo contendere or its equivalent) by
Executive with respect to, a felony (or equivalent offense not categorized as a
"felony") under federal or state law, (vii) the commission by Executive of an
act of fraud or embezzlement
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against the Company, or (viii) Executive's other material breach of this
Agreement that causes material harm to the Company.
5.02. TERMINATION FOR GOOD REASON. "Termination for Good Reason"
shall mean a termination of Executive's employment at his initiative as promptly
as practicable following the occurrence, without Executive's written consent, of
one or more of the following events: (i) the assignment to Executive of duties
which are materially inconsistent with his position as Chief Executive Officer
of the Company, or (ii) the relocation of Executive's own office location as
assigned to him by the Company to a location more than 30 miles from Little
Rock, Arkansas.
5.03. DEATH. In the event Executive dies during the Term, this
Agreement shall automatically terminate (subject to Section 5.05 hereof), such
termination to be effective on the date of Executive's death.
5.04. DISABILITY. In the event that Executive shall suffer a
disability which shall have prevented him from performing satisfactorily his
obligations hereunder for a period of at least 90 consecutive days, or 180 non-
consecutive days within any 365 day period, the Company shall have the right to
terminate this Agreement (subject to Section 5.05 hereof), such termination to
be effective upon the giving of notice thereof to Executive in accordance with
Section 6.02 hereof.
5.05. EFFECT OF TERMINATION. (a) In the event of termination of
Executive's employment for any reason, the Company shall pay to Executive (or
his beneficiary in the event of his death) any salary earned but not paid to
Executive prior to the effective date of such termination.
(b) The parties hereto acknowledge that the continued employment
of Executive was a significant factor in UAG's valuation of the Company and
UAG's determination to pay the Purchase Price provided for in the Amended and
Restated Stock Purchase Agreement, dated July 1, 1995, among UAG, the Company,
Executive, John Landers and Bob Landers. Accordingly, notwithstanding anything
contained herein to the contrary, in the event Executive's employment is
terminated for any reason, Executive shall pay UAG, in equal monthly
installments for a period equal to the lesser of (i) three years from the date
of termination of Executive's employment and (ii) the number of years and days
remaining in the period commencing on the date hereof and ending on the fifth
anniversary of the date hereof (the "Remaining Term"), an aggregate amount equal
to the product of (A) $375,000 and (B) the sum of (x) the number of full years
comprising the Remaining Term and (y) a fraction, the numerator
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of which is equal to the number of days comprising the stub period between the
last full year of the Remaining Term and the last day of the Remaining Term, and
the denominator of which is equal to 365.
ARTICLE VI
MISCELLANEOUS
6.01. BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY. (a) This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns, including, without limitation, any corporation or person
which may acquire all or substantially all of the Company's assets or business,
or with or into which the Company may be consolidated or merged. This Agreement
shall also inure to the benefit of, and be enforceable by, Executive and his
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any amount
would still be payable to Executive hereunder if he had continued to live, all
such amounts shall be paid in accordance with the terms of this Agreement to
Executive's beneficiary, devisee, legatee or other designee, or if there is no
such designee, to Executive's estate.
6.02. NOTICES. Any notice required or permitted hereunder shall
be in writing and shall be sufficiently given if personally delivered or if sent
by telegram or telex or by registered or certified mail, postage prepaid, with
return receipt requested, addressed: (a) in the case of the Company to c/o
United Auto Group, Inc. 375 Park Avenue, New York, New York 10022, facsimile
no. (212) 223-5148, Attention: General Counsel, or to such other address and/or
to the attention of such other person as the Company shall designate by written
notice to Executive; and (b) in the case of Executive, to 3316 Highway 5,
Benton, Arkansas 72015, facsimile no. (501) 778-4077, or to such other address
as Executive shall designate by written notice to the Company. Any notice given
hereunder shall be effective and deemed to have been given as of the date so
delivered or three (3) days after the date so mailed.
6.03. AMENDMENT. This Agreement may not be changed or modified
except by an instrument in writing signed by both of the parties hereto.
6.04. WAIVER. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a continuing
waiver or as a consent to or waiver of
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<PAGE>
any subsequent breach hereof. Any waiver must be in writing and signed by
Executive or the Company, as the case may be.
6.05. HEADINGS. The Article and Section headings herein are for
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.
6.06. GOVERNING LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the internal laws of the State of
Arkansas without reference to the principles of conflict of laws.
6.07. AGREEMENT TO TAKE ACTIONS. Each party hereto shall execute
and deliver such documents, certificates, agreements and other instruments, and
shall take such other actions, as may be reasonably necessary or desirable in
order to perform his or its obligations under this Agreement or to effectuate
the purposes hereof.
6.08. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
6.09. VALIDITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision or provisions of this Agreement, which
shall remain in full force and effect.
6.10. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement effective as of the date first above written.
LANDERS AUTO SALES, INC.
By: /s/Carl Spielvogel
-----------------------------
Name: Carl Spielvogel
Title: Chairman of the Board
/s/Steve Landers
--------------------------------
Steve Landers
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<PAGE>
[Jeep-Eagle]
LEASE
Between
STEVE LANDERS, JOHN LANDERS AND BOB LANDERS
Lessor,
AND
LANDERS AUTO SALES, INC.,
Lessee.
Premises:
County of Saline, Arkansas
Lease Date:
August 1, 1995
<PAGE>
LEASE
THIS LEASE (this "Lease"), dated as of the 1st day of August, 1995,
is made by and between STEVE LANDERS, JOHN LANDERS AND BOB LANDERS, all of whom
are individuals residing in Benton, Arkansas (collectively, "Lessor") and
LANDERS AUTO SALES, INC., a corporation organized under the laws of the State of
Arkansas, having an address at Congo Exit 118 (7800 Alcoa), Highway I-30,
Benton, Arkansas 72015 ("Lessee").
RECITALS
A. Lessor is the owner of the Demised Premises (hereinafter defined).
B. Lessor desires to lease to Lessee, and Lessee desires to lease from
Lessor, the Demised Premises.
NOW, THEREFORE for good and valuation consideration, the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee agree as
follows:
ARTICLE I.
PREMISES
1.1. DEMISED PREMISES. Lessor hereby leases to Lessee, and Lessee
hereby leases from Lessor, for the Term (hereinafter defined), at the rental,
and upon all of the terms, covenants and conditions set forth herein, the
following (collectively, the "Demised Premises"):
(a) that certain real property located in Township 1 South,
County of Saline, State of Arkansas, described in Exhibit A attached hereto
and made a part hereof, together with any buildings and improvements now or
hereafter located therein or thereon, including, without limitation, the
Jeep-Eagle automobile dealership, showroom and service facility currently
located thereon (collectively, the "Real Property");
(b) All right, title and interest, if any, of Lessor in and to
any land lying in the bed of any street, road or avenue, open or proposed,
in front of or adjoining the Real Property to the center line;
(c) All right, title and interest, if any, of Lessor in and to
any strips and gores of land adjacent to, abutting, or used in connection
with the Real Property, and in and to easements, if any, enuring to the
benefit of the Demised Premises or the fee owner;
<PAGE>
(d) Any appurtenances and hereditaments belonging or in any wise
appertaining to the Real Property; and
(e) Any and all personal property located at the Real Property
owned by Lessor and used in connection with the operation of the Real
Property as an automobile dealership and related uses; and
(f) Any and all leases, tenancies and occupancy agreements in
any way affecting the Real Property.
1.2. COMMON AREAS. Lessee shall have, as appurtenant to the Demised
Premises, the non-exclusive right to use the Common Areas (hereinafter defined)
of any improvements in common with others, subject to the terms and conditions
of this Lease. For purposes of this Lease, "Common Areas" shall mean,
collectively: the sidewalks, driveways, if any, entrances, parking areas,
passages, and other portions of the improvements and/or the land shown on the
site plan, that Lessor makes available from time to time for the common use of
lessees of the improvements.
ARTICLE II.
TERM
2.1. INITIAL TERM. The term of this Lease, (as the same may be
extended, the "Term") shall commence on the date hereof (the "Commencement
Date"), and shall continue for a period of twenty (20) years thereafter (the
"Initial Term").
2.2. RENEWAL OPTIONS. Lessee shall have the option to extend the Term
on all of the terms and provisions contained in this Lease, except for the
payment of rent which is to be negotiated by the parties hereto, for two (2)
successive five (5) year renewal periods (each, a "Renewal Period") following
the expiration of the Initial Term of this Lease, by giving written notice to
Lessor of the exercise of this option to extend the Term not later than ninety
(90) days prior to the expiration of the Initial Term or the first Renewal
Period, as the case may be.
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ARTICLE III.
RENT
3.1. FIXED RENT.
(a) Lessee shall, during the Term, pay to Lessor at such place
as Lessor shall designate in writing, from time to time, annual fixed
rental in the amounts set forth on SCHEDULE A attached hereto and made a
part hereof, subject to adjustment as set forth on SCHEDULE A (hereinafter,
the "FIXED RENT").
(b) The Fixed Rent shall be payable monthly in advance on the
first day of each month in equal monthly installments equal to one-twelfth
(1/12) of the Fixed Rent.
(c) Fixed Rent for any period during the Term which is for less
than one calendar month shall be prorated based on the number of calendar
days in such calendar month that falls within the Term.
3.2. ADDITIONAL RENT. Lessee shall, during the Term, pay to Lessor
at such place as Lessor shall designate in writing, from time to time, and,
except as expressly provided herein, without offset, counterclaim, defense or
demand thereof, additional rent ("Additional Rent") consisting of all other sums
of money that become due from Lessee and payable to Lessor hereunder. Fixed
Rent and Additional Rent are hereinafter collectively referred to as "Rent".
ARTICLE IV.
INTENTIONALLY OMITTED
ARTICLE V.
USE
The Demised Premises shall be used for the operation of automobile dealerships
and ancillary business thereto, general office purposes and/or any other lawful
purposes. Lessee shall obtain, at its sole cost and expense, all licenses,
approvals and permits required for Lessee's use and occupancy of the Demised
Premises. Lessee shall not use or permit the use of the Demised Premises, in
violation of any applicable law, statute, ordinance, code, rule, regulation
order or decree, of any hazardous, toxic
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or dangerous waste, substance or material defined as such in the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, any so-called "Superfund" or "Superlien" law, or
any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material, as now or at any time hereafter in effect.
ARTICLE VI.
COMPLIANCE WITH LAW
6.1. LESSOR REPRESENTATIONS. Lessor represents and warrants to Lessee
that during the Term, the Demised Premises shall, but without regard to the use
for which Lessee will use the Demised Premises, comply with all applicable laws,
statutes, ordinances, rules, regulations and orders of all state, municipal and
local governmental authorities having jurisdiction over the Demised Premises,
including, building and zoning codes, regulations and ordinances and
environmental codes, regulations and laws, including those related to pollution
and contamination (collectively "Governmental Laws"). If it is determined that
this warranty has been violated, then it shall be the obligation of Lessor,
after written notice from Lessee, promptly, at Lessor's sole cost and expense,
to rectify any such violation.
6.2. LESSEE COMPLIANCE. Lessee shall, at Lessee's expense, promptly
comply with all Governmental Laws relating to the Demised Premises in effect
during the Term or any part of the Term regulating the use by Lessee of the
Demised Premises. If it is determined that this covenant has been violated,
then it shall be the obligation of Lessee, after written notice from Lessor, to
promptly, at Lessee's sole cost and expense, to rectify any such violation.
6.3. CONTESTS. Lessee shall have the right, to the extent permitted by
law, at its own expense to contest the validity and/or applicability of any
Governmental Laws relating to the Demised Premises by appropriate proceedings
diligently conducted in good faith, and, notwithstanding the provisions of
PARAGRAPH 6.2 hereof, Lessee's compliance with such contested Governmental Laws
may be postponed or deferred during the pendency of such proceeding so long as
neither the Demised Premises nor any part thereof would, by reason of such non-
compliance be, in the reasonable judgment of Lessor, in danger of
4
<PAGE>
being forfeited or lost and Lessor shall not be subject to any criminal or civil
liability.
ARTICLE VII.
CONDITION OF THE DEMISED PREMISES
Lessee hereby agrees to accept the Demised Premises in accordance with
the terms of this Lease, subject to all Governmental Laws and restrictions of
record governing and regulating the use of the Demised Premises, and accepts
this Lease subject thereto and to all matters disclosed thereby and by any
exhibits attached hereto.
ARTICLE VIII.
MAINTENANCE AND REPAIRS
8.1. LESSEE REPAIR OBLIGATIONS. Lessee shall, at its expense, take
good care of the Demised Premises, the fixtures and appurtenances therein and
any of Lessee's trade fixtures, furnishings, equipment and personal property
(collectively, "Lessee's Property"). Except as provided in PARAGRAPH 8.2,
Lessee shall be responsible for and shall promptly make all repairs, interior
and exterior, structural and nonstructural, ordinary and extraordinary, in and
to the Demised Premises. Lessee, at its expense, shall be responsible for the
repair, maintenance and replacement of all mechanical, electrical, sanitary,
heating, ventilating, air-conditioning and other fixtures and equipment in the
Demised Premises.
8.2. LESSOR REPAIR OBLIGATIONS. Lessor agrees, at its sole cost and
expense, to repair any material defects in the Demised Premises arising from
defective design, labor or material, and to remedy and correct any violation of
Governmental Laws arising out of or relating to the construction of the
improvements or the environmental condition of the Demised Premises on the date
hereof. Neither Lessee's acceptance of the Demised Premises nor Lessee's entry
into possession thereof, nor payments of any monthly installments of Rent, nor
Lessee's performance of any of the other provisions or conditions hereof, shall
relieve Lessor of such responsibility.
5
<PAGE>
ARTICLE IX.
SURRENDER
On the last day of the Term, or on any sooner termination of this
Lease, subject to the terms of ARTICLE 13, Lessee shall surrender the Demised
Premises to Lessor in the same condition as when received by Lessee broom clean,
ordinary wear and tear excepted.
ARTICLE X.
LESSOR'S AND LESSEE'S RIGHTS
If either party fails to perform its obligations hereunder, the other
may at its option (but shall not be required to) put the same in good order,
condition and repair, upon sixty (60) days written notice to the non-performing
party (which written notice shall not be required in the case of an emergency)
and the cost thereof, together with interest thereon at the Lease Interest Rate
(as defined in PARAGRAPH 20.3) shall become due and payable from the non-
performing party to the other party within ten (10) days after demand by the
performing party; PROVIDED, HOWEVER, if the obligation of the non-performing
party is not capable of being performed within such sixty (60) day period and if
the non-performing party is diligently endeavoring to perform such obligation,
the performing party shall not perform such obligation. All such work performed
by the performing party shall be performed in a good and workmanlike manner, in
compliance with all Governmental Laws. Neither Lessee nor Lessor shall perform
any such work until such time as it has received all necessary permits, licenses
and approvals from the applicable state, county and municipal governmental
authorities having jurisdiction over the Demised Premises ("Governmental
Authorities"). If either party performs any such work, such party shall, at all
times, keep the Demised Premises free of liens and encumbrances for labor and
materials.
ARTICLE XI.
ALTERATIONS AND IMPROVEMENTS
11.1. LESSEE ALTERATIONS. Lessee shall have the right, at its own
cost and expense, to make such alterations and changes in and to the Demised
Premises as it shall deem expedient or necessary for its purposes. All such
work shall be done in a
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<PAGE>
good and workmanlike manner, and in accordance with all Governmental Laws.
Lessor shall execute and deliver upon request of Lessee such reasonable
instrument or instruments embodying the approval of Lessor which may be required
by any Governmental Authority for the purpose of obtaining any license, permit
or approval for the making of alterations or changes in, to or upon the Demised
Premises, Lessee agreeing to pay for any such license, permit or approval.
Lessee shall not make any alterations to the Demised Premises until such time as
it has received all required permits, licenses and approvals from the applicable
Governmental Authority.
11.2. REMOVAL OF IMPROVEMENTS. Any and all alterations,
improvements and installations made by Lessee in, to or upon the Demised
Premises, as well as any fixtures installed on the Demised Premises by Lessee,
at Lessee's option, may be removed from the Demised Premises at any time and
from time to time during the Term and shall remain the property of Lessee during
and at the expiration of the Term of this Lease, provided that, if any such
alterations, improvements, installations and/or fixtures are removed by Lessee,
any damage caused by such removal shall be promptly repaired by Lessee at its
sole cost and expense.
ARTICLE XII.
INSURANCE
12.1. Insurance Coverage.
(a) Lessee shall, at Lessee's cost and expense, maintain the
following insurance issued in the names of Lessor and Lessee as their
interests may appear:
(i) a policy of standard fire and extended coverage
insurance on all improvements included in the Demised Premises
with vandalism and malicious mischief endorsements, to the extent
of full replacement value; and
(ii) a policy of general public liability insurance against
claims for personal injury or property damage, with such limits
as may be reasonably requested by Lessor from time to time, but
not more than Two Million Dollars ($2,000,000) in respect of
bodily injury or death
7
<PAGE>
and Two Million Dollars ($2,000,000) for property damage.
(b) All such insurance policies shall provide that any proceeds
shall be made payable into an escrow account maintained by an escrow agent
mutually selected by Lessee and Lessor, who shall distribute same pursuant
to the terms of this Lease and in accordance with the written instructions
of Lessee and the approval of Lessor, which approval by Lessor shall not be
unreasonably withheld, delayed or conditioned.
(c) All such insurance policies may, at the option of Lessee, be
effected by blanket and/or umbrella policies issued to Lessee covering the
Demised Premises and other properties owned or leased by Lessee or its
affiliates.
(d) Lessor shall not obtain or continue to maintain any separate
or additional insurance which is contributing in the event of loss unless
it is properly endorsed and otherwise satisfactory to Lessee in all
respects.
12.2. CERTIFICATES. All insurance provided for under this Lease
shall be effected under valid enforceable policies insured by insurers of
recognized responsibility and who are reasonably acceptable to Lessor and
licensed to do business in the State of Arkansas. Such insurance may be carried
by Lessee as a part of blanket coverage for such insurance covering all premises
owned or leased by Lessee wherever located. Certificates of Insurance
evidencing the current existence of such coverage shall be delivered to Lessor
at least ten days prior to the expiration date of any policy. Renewal
certificates shall be delivered by Lessee to Lessor, together with satisfactory
evidence of payment of the premium on such policies. To the extent obtainable,
all such policies shall contain agreements by the insurers that such policies
shall not be cancelled except upon thirty days' prior written notice to each
named insured and loss payee, including Lessor.
12.3. ADJUSTMENTS. All policies of insurance required herein
shall name Lessor and Lessee as the insureds as their respective interests may
appear. The loss, if any, under said policies referred to in this ARTICLE 12
shall be adjusted with the insurance companies by Lessee to the extent that
Lessee is obligated to repair or restore the Demised Premises pursuant
8
<PAGE>
to ARTICLE 13 hereof and by Lessor in the event that Lessee is not so obligated
to restore.
12.4. PROCEEDS. All proceeds payable by reason of any loss or
damage to the Demised Premises, or any portion thereof, and insured under any
policy of insurance required by this ARTICLE 12 shall be paid to Lessee and
shall be used only for reconstruction or repair, as the case may be, of any
damage to or destruction of the Demised Premises, or any portion thereof. Any
excess proceeds of insurance remaining after the completion of the restoration
or reconstruction of the Demised Premises shall be retained by Lessee. In the
event that, pursuant to the terms of PARAGRAPH 13.3, Lessee is not required or
does not elect to repair and restore and this Lease expires or is terminated,
all such insurance proceeds shall be paid to and retained by Lessor.
ARTICLE XIII.
DAMAGE OR DESTRUCTION
13.1. RESTORATION. Subject to the provisions of PARAGRAPH 13.3
hereof, Lessee covenants that in the event of damage to all or a portion of the
Demised Premises by fire or any other cause, similar or dissimilar, insured or
uninsured, in the event that Lessor approves the distribution of the insurance
proceeds in accordance with Lessee's instructions under PARAGRAPH 12.1(b),
Lessee will promptly, at its sole cost and expense, restore or repair the
Demised Premises so damaged or destroyed as nearly as possible to the condition
it was in immediately prior to such damage or destruction, or with such changes
or alterations as Lessee shall elect to make in conformity with ARTICLE 11
hereof, whether or not any costs or expenses of such restoration exceeds the
amount of the insurance proceeds received in connection with such damage or
destruction. Such restoration, shall be commenced promptly and prosecuted with
reasonable diligence, unavoidable delays excepted.
13.2. NO ABATEMENT. Except as provided in PARAGRAPH 13.3, the
Fixed Rent and all Additional Rent payable hereunder shall not be abated due to
any damage or destruction to the Demised Premises.
13.3. TERMINATION OPTION. Notwithstanding the provisions of
PARAGRAPH 13.1 hereof, in the event that (i) at any time during the Initial Term
or a Renewal Term, Lessor
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unreasonably withholds its approval of the distribution of the insurance
proceeds in accordance with Lessee's instructions, (ii) at any time during the
eighteenth (18th) or nineteenth (19th) years of the Initial Term, all or a
portion of the Demised Premises are damaged to the extent that, in Lessee's
reasonable judgment, the necessary repairs or restoration would not be
substantially completed within nine (9) months from the date of said casualty,
or (iii) at any time during the last year of the Initial Term or at any time
during a Renewal Term, all or a portion of the Demised Premises are damaged,
Lessee may, terminate this Lease upon delivery of written notice to Lessor
within sixty (60) days after the occurrence of the casualty causing such damage
and Lessee shall be released from any liability under this Lease accruing from
and after the date of said casualty. In the event that Lessee terminates this
Lease as provided in the immediately preceding sentence, all insurance proceeds
resulting from said casualty shall be paid to and retained by Lessor.
ARTICLE XIV.
TAXES
14.1. IMPOSITIONS. Lessee covenants and agrees to pay or cause to
be paid, as hereinafter provided, to the Governmental Authority imposing the
same, all of the following items ("Impositions") not later than the date on
which same are due without the payment of any fines, penalties or interest: (a)
real property taxes and assessments assessed and levied against the Demised
Premises or any part thereof, (b) personal property taxes, (c) water, water
meter and sewer rents, rates and charges, and (d) fines, penalties and other
similar or like governmental charges applicable to the foregoing and any
interest or costs with respect thereto only to the extent incurred by reason of
Lessee's wrongful act or omission or Lessee's failure fully and promptly to
comply with any provision of this Lease. Each such Imposition, or installment
thereof, during the Term shall be paid prior to the last day the same may be
paid without fine, penalty, interest or additional cost; provided, however, that
if, by law, any Imposition may at the option of the taxpayer be paid in
installments (whether or not interest shall accrue on the unpaid balance of such
Imposition), Lessee may exercise the option to pay the same in such installments
and shall be responsible for the payment of such installments only.
14.2. EVIDENCE OF PAYMENT. If Lessee is paying any Imposition
directly to the Governmental Authority imposing the same, then Lessee, from
time to time upon the request of Lessor,
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shall furnish to Lessor, within the earlier of (i) ninety (90) days after the
date when such Imposition is due and payable under this Lease, or (ii) thirty
(30) days after the date when an official receipt of the Governmental Authority
imposing the same is received, such official receipt or, if no such receipt has
been received by Lessee, other evidence reasonably satisfactory to Lessor,
evidencing the payment of the Imposition.
14.3. EXCLUDED TAXES. Nothing herein contained shall require
Lessee to pay municipal, state or federal income, inheritance, estate,
succession, transfer or gift taxes of Lessor, or any corporate franchise tax
imposed upon Lessor or any gross income or gross receipts taxes to the extent
the same are imposed on Lessor in lieu of net income taxes or corporate
franchise taxes.
14.4. APPORTIONMENTS. Any Imposition, relating to a fiscal period
of the imposing Governmental Authority, a part of which period is included
within the Term and a part of which is included in a period of time before the
Commencement Date or after the Expiration Date (whether or not such Imposition
shall be assessed, levied, confirmed, imposed upon or in respect of or become a
lien upon the Demised Premises, or shall become payable, during the Term) shall
be apportioned between Lessor and Lessee as of the Commencement Date or
Expiration Date, as the case may be, so that Lessee shall pay that portion of
such Imposition which that part of such fiscal period included in the period of
time after the Commencement Date and before the Expiration Date.
14.5. CONTESTS.
(a) Lessee shall have the right, to the extent permitted by law,
at its own expense to contest the amount or validity, in whole or in part,
of any Imposition by appropriate proceedings diligently conducted in good
faith, and, notwithstanding the provisions of PARAGRAPH 14.1 hereof, the
payment of such contested Imposition may be postponed or deferred so long
as neither the Demised Premises nor any part thereof, nor any part of the
rents, issues and profits thereof, would, by reason of such postponement or
deferment, be, in the reasonable judgment of Lessor, in danger of being
forfeited or lost and Lessor shall not be subject to any criminal or civil
liability.
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(b) Lessee shall have the right, to the extent permitted by law,
and at Lessee's sole cost and expense, to seek a reduction in the valuation
of the Demised Premises assessed for real property tax purposes and to
prosecute any action or proceeding in connection therewith. Lessor shall
fully cooperate with Lessee in any such proceeding.
(c) Lessor shall not be required to join in any proceedings
referred to in PARAGRAPHS 14.5(a) and (b) hereof unless the provisions of
any law, rule or regulation at the time in effect shall require that such
proceedings be brought by and/or in the name of Lessor, in which event,
Lessor shall join and cooperate in such proceedings or permit the same to
be brought in its name, but shall not be liable for the payment of any
costs or expenses in connection with any such proceedings and Lessee shall
reimburse Lessor for any and all reasonable costs or expenses which Lessor
may sustain or incur in connection with any such proceedings.
ARTICLE XV.
UTILITIES AND SERVICES
15.1. LESSOR REPRESENTATION. Lessor represents and warrants that
the Demised Premises are equipped with all plumbing equipment, electrical
facilities and lighting fixtures and equipment, heating, air conditioning,
ventilating, and other appurtenant equipment and facilities necessary or
appropriate for Lessee's use of the Demised Premises or as otherwise required by
Governmental Laws. Lessee will pay, or cause to be paid all changes for
electricity, power, gas, oil, water and other utilities used in connection with
the Demised Premises during the term of this Lease.
15.2. NO SERVICES. Lessor shall not be obligated to furnish or
to pay for utilities or services to the Demised Premises.
ARTICLE XVI.
ASSIGNMENT
Except as expressly permitted in this Lease, Lessee shall not
voluntarily or by operation of law assign all or any part of Lessee's interest
in this Lease, without Lessor's prior written consent, which Lessor shall not
unreasonably withhold, condition or delay. Any attempted assignment without
such
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consent shall be void and shall constitute a breach of this Lease, unless the
same is expressly permitted hereunder. In no event shall (i) any transfer (by
one or more transfers) of a majority of the stock of Lessee, (ii) the merger or
consolidation of Lessee with another corporation, or (iii) the transfer of all
or substantially all of Lessee's assets to another corporation or entity,
constitute an assignment, or attempted assignment of this Lease, provided that,
in all such events in which Lessee survives such transaction, Lessee shall
remain fully liable for the payment of Rent and for the other obligations of
this Lease on the part of Lessee to be performed or observed.
ARTICLE XVII.
DEFAULTS; REMEDIES
17.1. DEFAULTS. If any of the following events shall occur (each,
a "Default" and collectively "Defaults"):
(a) The failure by Lessee to make any payment of Rent or any
other payment required to be made by Lessee hereunder, as and when due,
where such failure shall continue for a period of ten (10) days after
written notice from Lessor to Lessee;
(b) The failure by Lessee to observe or perform any of the
material covenants, conditions to provisions of this Lease to be observed
or performed by Lessee, other than described in PARAGRAPH 17.1(a) above,
where such failure shall continue for a period of thirty (30) days after
written notice thereof from Lessor to Lessee specifying, in reasonable
detail, how Lessee has failed to perform; PROVIDED, HOWEVER, that if
Lessee's Default is such that more than thirty (30) days are reasonably
required for its cure, then Lessee shall not be deemed to be in Default if
Lessee commenced such cure within said 30-day period and thereafter
diligently prosecutes such cure to completion;
then in any of said cases, and without waiving any claims for breach of
agreement, Lessor may
(i) accelerate all Rent owing hereunder upon such Default;
(ii) Take possession of the Demised Premises and lease the
same for the account of Lessee upon such terms as may be acceptable to
Lessor and apply the net proceeds received from such leasing toward
the payment
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of Rent which Lessee herein is obligated to pay and collect the
balance thereof, if any, from Lessee;
(iii) Terminate the Lease and take possession of the Demised
Premises and collect from Lessee all damages sustained by reason of
such Default; or
(iv) Pursue any remedy or remedies which may be available at
law or in equity;
PROVIDED, HOWEVER, that Lessor hereby agrees to use its best efforts to mitigate
any damages sustained or liability incurred by reason of any Default and the
exercise of any remedies in connection therewith.
17.2. LESSEE OBJECTION. Subject to the last sentence of this
PARAGRAPH 17.2., upon the happening of any alleged non-monetary Default on the
part of Lessee, if Lessee within thirty (30) days after receipt of such
appropriate notice as set forth in PARAGRAPH 17.1 from Lessor shall, commence
and thereafter in good faith, diligently prosecute in a court of competent
jurisdiction a proceeding to determine whether or not such non-monetary defaults
or alleged defaults have occurred, then Lessor may not terminate this Lease or
exercise any rights as provided above by law or otherwise unless the final
judgment not subject to further appeal in such court proceedings shall be
adverse to Lessee and Lessee, in such case, within twenty (20) days from the
date of the final judgment in such court proceedings fails to cure such non-
monetary default(s) or, if any such default or defaults cannot reasonably be
cured within such twenty (20) days, if Lessee within said twenty (20) days shall
fail to commence and thereafter diligently and continuously prosecute to
completion the work of curing such non-monetary default or defaults.
Notwithstanding the foregoing, Lessee shall have no rights under this PARAGRAPH
17.2 if, at the time Lessee receives notice of any non-monetary default under
this Lease, the laws of the State of Arkansas otherwise provides for the
injunction of the threatened termination of a lease until a final judgment has
been rendered by a court of competent jurisdiction as to whether or not a non-
monetary default has occurred thereunder.
17.3. VACATING THE DEMISED PREMISES.
(a) In the event of any such termination of this Lease, (i) this
Lease shall be of no further force and effect; and (ii) Lessee covenants
and agrees to surrender and deliver the Demised Premises to Lessor in
accordance
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with ARTICLE 9 hereof immediately upon the termination of the Lease.
(b) It is understood and agreed that at the time of the
termination or at any time thereafter Lessor may rent the Demised Premises,
or any portion thereof for such period and on such term or terms, and for a
term which may expire before or after the expiration of the Term and Lessee
shall have no interest in any income received by Lessor as a result of such
reletting and no title or interest in the Demised Premises whatsoever.
17.4. LESSOR'S SELF-HELP REMEDY. If Lessee shall fail, after
thirty (30) days notice from Lessor, to perform any of the covenants, terms or
conditions required to be performed by Lessee hereunder (except that in the
event of an emergency, the notice shall either be dispensed with or shortened as
reasonably required by the nature of the emergency), in addition to the
provisions of this ARTICLE 17, Lessor may do whatever is reasonably necessary
for the performance thereof for the account and at the expense of Lessee. In
the event Lessor shall pay any money by reason of said failure, Lessee shall
repay any such reasonable sums so paid on its behalf together with interest
thereon at the Lease Interest Rate which shall be deemed Rent, and the same
shall be payable within 30 days after presentation of the request for payment,
accompanied by Lessor's statement submitted to Lessee by Lessor showing in all
reasonable detail the expenses of Lessor, why incurred, to whom payment was made
and the calculations of and supporting bills or records showing Lessor's
expenditures.
17.5. LESSEE'S SELF-HELP REMEDY. If Lessor shall fail, after
thirty (30) days notice from Lessor, to perform any of the covenants, terms or
conditions required to be performed by Lessor hereunder (except that in the
event of an emergency, the notice shall either be dispensed with or shortened as
reasonably required by the nature of the emergency), Lessee may do whatever is
reasonably necessary for the performance thereof for the account and at the
expense of Lessor. In the event Lessee shall pay any money by reason of said
failure, Lessor shall repay any such reasonable sums so paid on its behalf
together with interest thereon at the Lease Interest Rate, and the same shall be
payable within 30 days after presentation of the request for payment,
accompanied by Lessee's statement submitted to Lessor by Lessee showing in all
reasonable detail the expenses of Lessee, why incurred, to whom payment was made
and the calculations of and supporting bills or records showing Lessee's
expenditures. If Lessor shall fail to reimburse Lessee within thirty (30) days
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after receipt of Lessee's request for reimbursement for money expended by Lessee
under this PARAGRAPH 17.5, Lessee may set-off against Rent, next becoming due to
Lessor, such amount together with interest at the Lease Interest Rate from the
date expended until Lessee has recouped the money due it under this PARAGRAPH
17.5.
17.6. EXCLUSIVE REMEDIES. No remedy herein or otherwise conferred
upon or reserved to Lessor or Lessee shall be considered exclusive of any other
remedy, but the same shall be distinct, separate and cumulative and shall be in
addition to every other remedy given under this Lease, or now or hereafter
existing at law or in equity or by statute. Every power and remedy given by
this Lease to Lessor, or Lessee, may be exercised from time to time as often as
occasion may arise, or as may be deemed expedient. No delay or omission of
Lessor or Lessee to exercise any right or power arising from any default on the
part of the other shall impair any such right or power, or shall be construed to
be a waiver of such default or any other default or an acquiescence thereto.
The consent or approval by Lessor or Lessee to or of any act by the other
requiring such consent or approval shall not be deemed to waive or render
unnecessary the consent or approval to or of any subsequent similar acts by
Lessor or Lessee, as the case may be.
17.7. LESSEE TERMINATION RIGHT. (a) Without limiting the
provisions of PARAGRAPH 17.6 and in addition to all other remedies which the
Lessee may have as stated elsewhere in this Lease, at law or in equity,
including the right to seek specific performance or injunctive relief, Lessee
shall have the right, but not the obligation, on notice to Lessor, to terminate
this Lease if Lessor shall fail to perform any of the terms, covenants and
obligations of Lessor herein.
(a) With respect to defaults as to which this Lease does not
provide any grace period or opportunity to cure, Lessor shall have thirty
(30) days after receipt of such notice from Lessee to cure the default
giving rise to Lessee's right to so terminate this Lease.
(b) If Lessor cures the default within said 30-day period this
Lease shall not terminate and shall continue in full force and effect. If
Lessor fails to cure the default within said 30-day period, Lessee shall
give notice to Lessor of Lessor's failure to cure the same and this Lease
shall terminate, as if by passage of time, on the date
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set forth in Lessee's notice of termination; PROVIDED, HOWEVER, that if
Lessor's Default is such that more than thirty (30) days are reasonably
required for its cure, then this Lease shall not terminate if Lessor
commenced such cure within said 30-day period and thereafter diligently
prosecutes such cure to completion and such cure is completed within ninety
(90) days after the occurrence of such default.
ARTICLE XVIII.
CONDEMNATION
18.1. If the Demised Premises or any portion thereof are taken
under the power of eminent domain, or sold under the threat of the exercise of
said power (all of which are herein called ("Condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title to or possession of the Demised Premises of such portion thereof,
whichever first occurs. If (i) more than 20% of the floor area of the Demised
Premises, or more than 20% of the parking area included in the Demised Premises
and used by Lessee, is taken by Condemnation and (ii) in Lessee's judgment, the
Demised Premises cannot be repaired or restored to a condition which would allow
Lessee to use the Demised Premises substantially in the manner that Lessee had
used the Demised Premises prior to said Condemnation, Lessee may, at Lessee's
option, to be exercised in writing within twenty (20) days after Lessor shall
have given Lessee written notice of such taking (or in the absence of such
notice, within twenty (20) days after the condemning authority shall have taken
title to or possession of the Demised Premises or any part thereof) terminate
this Lease as of the later of the date on which the condemning authority takes
title to or possession of the Demised Premises or any part thereof. If Lessee
does not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Demised Premises
remaining, except that the Rent shall be reduced from the date of the taking in
the proportion that the portion of the Demised Premises taken bears to the total
area of the Demised Premises. Any award for the taking of all or any part of
the Demised Premises under the power of eminent domain or any payment made under
threat of the exercise of such power shall be the property of Lessor; PROVIDED,
HOWEVER, that Lessee shall be entitled to any award made as compensation for
diminution in value of the Lessee's leasehold estate, business loss, moving
expenses, loss of or damage to the Lessee's trade fixtures and removable
personal property. In the event that this Lease is not terminated by reason of
such Condemnation, Lessor shall, to the extent of any award received
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by Lessor in connection with such Condemnation, repair any damage to the Demised
Premises caused by such Condemnation except to the extent that Lessee has been
reimbursed therefore by the condemning authority.
18.2. Notwithstanding anything which may be to the contrary in
this ARTICLE 18, in connection with any taking, Lessee shall be entitled to make
a separate claim, and to prove and receive an award for (a) the diminution in
value of Lessee's leasehold estate, (b) the value of Lessee's property to the
extent the same is taken, and (c) any moving allowance and other expenses
permitted by law.
ARTICLE XIX.
INTENTIONALLY OMITTED
ARTICLE XX.
GENERAL PROVISIONS
20.1. ESTOPPEL CERTIFICATES.
(a) Lessee shall at any time upon not less than twenty (20) days
prior written notice from Lessor execute, acknowledge and deliver to Lessor
or any party designated by Lessor a statement in writing (i) certifying
that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to which
the Rent and other charges are paid in advance, if any, (ii) acknowledging,
as of the date of the certificate, that, to its actual knowledge, there are
no uncured Defaults or events which with the giving of notice or the
passage of time or both would constitute a Default or specifying such
Defaults or events, if any are claimed and (iii) any other information
reasonably requested by Lessor. Such statement shall be binding on Lessee
and may be relied upon by Lessor or any other party designated by Lessor to
whom such certificate is delivered.
(b) Lessor shall at any time upon not less than twenty (20) days
prior written notice from Lessee execute, acknowledge and deliver to Lessee
or any party designated by Lessee a statement in writing (i) certifying
that this Lease is unmodified and in full force and effect (or, if
modified,
18
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stating the nature of such modification and certifying that this Lease, as
so modified, is in full force and effect) and the date to which the Rent
and other charges are paid in advance, if any, (ii) acknowledging, as of
the date of the certificate, that, to its actual knowledge, there are no
uncured Defaults or events which with the giving of notice or the passage
of time or both would constitute a Default or specifying such Defaults or
events, if any are claimed and (iii) any other information reasonably
requested by Lessee. Such statement shall be binding on Lessor and may be
relied upon by Lessee or any other party designated by Lessee to whom such
certificate is delivered.
20.2. SEVERABILITY. The invalidity of any provision of this Lease
as determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
20.3. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly
provided herein, any amount due hereunder to either Lessor or Lessee from the
other party which is not paid when due and any amount paid by Lessor or Lessee
on behalf of the other in accordance with the terms hereof shall bear interest
from the date due or the date paid, as applicable, at a rate (the "Lease
Interest Rate") equal to the lesser of (a) 2% in excess of the prime or base
rate of interest announced by Citibank, N.A. at its principal office in New York
City, New York and (b) the maximum rate of interest permitted by applicable law
with respect to said amounts. Payment of such interest shall not excuse or cure
any Default or event of default by Lessee or Lessor under this Lease.
Notwithstanding anything to the contrary contained in this Lease, in no event
shall interest be payable by Lessee with respect to (i) any amounts due and
payable by Lessee during the period in which either John Landers or Steve
Landers are employees of Lessee, (ii) any late charges incurred by Lessee, or
(iii) any amounts upon which late charges are paid by Lessee.
20.4. CAPTIONS. Article and paragraph captions are not a part
hereof and are for convenience of reference only.
20.5. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease
contains the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof. All prior agreements or understandings
pertaining to the subject matter hereof shall be of no force or effect. This
Lease may only be amended or modified in writing, signed by
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the parties in interest at the time of such amendment or modification.
20.6. NOTICES. Any notices required or permitted to be given
hereunder shall be sufficient if given at the addresses of Lessor and Lessee
first set forth above. Notices shall be sufficient if sent by certified mail,
return receipt requested, postage pre-paid; nationally recognized overnight
courier service; or by hand. Notices sent (i) by certified mail, return receipt
requested shall be deemed received three (3) days after deposit in a United
States mail box, postage prepaid, (ii) by nationally recognized overnight
courier service shall be deemed received one (1) business day after delivery to
such courier service; and (iii) by hand shall be deemed delivered upon receipt.
20.7. WAIVERS. No waiver by either party of any term or provision
hereof shall be deemed a waiver of any other provision hereof or of any
subsequent breach by the other of the same or any other provision. Lessor's
consent to or approval of any act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to or approval of any subsequent act by Lessee.
The acceptance of Rent hereunder by Lessor shall not be a waiver of any
preceding breach by Lessee of any provision hereof, other than the failure of
Lessee to pay the particular Rent so accepted, regardless of Lessor's knowledge
of such preceding breach at the time of acceptance of such Rent.
20.8. RECORDING. Lessee shall not record this Lease without
Lessor's prior written consent, and such recordation shall, at the option of
Lessor, constitute a non-curable Default of Lessee hereunder. The parties
hereto shall contemporaneously herewith execute and record, at Lessee's expense,
a Memorandum of Lease in the form attached hereto as Exhibit B.
20.9. CUMULATIVE REMEDIES. No remedy or election hereunder shall
be deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
20.10. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding
upon the parties hereto and their respective successors and assigns. This Lease
shall be governed by the laws of the State in which the Demised Premises is
located.
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20.11. SUBORDINATION.
(a) Provided Lessor obtains and delivers to Lessee a
Subordination, Nondisturbance and Attornment Agreement in the form attached
hereto as Exhibit C (the "SNDA") from the holder of any present or future
mortgage or deed of trust encumbering the Demised Premises (a "Mortgagee"),
then this Lease shall be subject and subordinate to the lien of the
mortgage or deed of trust, specifically referenced in such SNDA.
(b) If at any time a Mortgagee or any party claiming by or
through a Mortgagee shall succeed to the rights of Lessor as lessor under
this Lease, whether through foreclosure action, assignment or deed in lieu
of foreclosure or otherwise (a "Successor Lessor"), at the request of such
Successor Lessor, and upon the written agreement of such Successor Lessor
to accept Lessee's attornment, Lessee shall attorn to and recognize such
Successor Lessor as Lessee's lessor under this Lease. In confirmation of
such attornment, Lessee shall promptly execute, acknowledge and deliver any
instrument that Lessor or such Successor Lessor requests to evidence such
attornment. Upon any such attornment, this Lease shall continue in full
force and effect as, or as if it were, a direct lease between such
Successor Lessor and Lessee upon all of the then executory terms,
conditions and covenants as are set forth in this Lease and which shall be
applicable after such attornment, except that the Successor Lessor shall
not be:
(i) liable for any prior act or omission of Lessor;
(ii) subject to any offsets or defenses which Lessee may
have against Lessor;
(iii) bound by any payment of Rent which Lessee might have
made to Lessor for more than one month in advance of the date the same
was due under this Lease or bound by any security or other deposits
not actually received by such Successor Lessor;
(iv) bound by any obligation to make any payment to Lessee,
or provide any services or perform any repairs, maintenance or
restoration provided for under this Lease to be performed before the
date that the Successor Lessor becomes the lessor of Lessee;
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(v) bound by any obligation to construct any improvements
on the Demised Premises; or
(vi) bound by any modification of this Lease made without
the written consent of such Successor Lessor or the Mortgagee through
which such Successor Lessor is claiming its interest, where such
consent is required under the terms of the documents evidencing its
loan to Lessor, after written notice has been given to Lessee of the
existence of such Successor Lessor or Mortgagee.
(c) If any act or omission of Lessor would give Lessee the
right, immediately or after lapse of a period of time, to cancel or
terminate this Lease, or to claim a partial or total eviction, Lessee shall
not exercise such right until (a) Lessee gives notice of such act or
omission to Lessor and to each Mortgagee whose name and address were
previously furnished to Lessee and (b) a reasonable period of time for
remedying such act or omission elapses following the time when such
Mortgagee becomes entitled under its Mortgage to remedy same (which
reasonable period shall in no event be less than the period to which Lessor
is entitled under this Lease or otherwise, after similar notice, to effect
such remedy or be longer than 45 days after notice from Lessee to Mortgagee
of such act or omission).
20.12. LESSOR'S ACCESS. Subject to Lessee's reasonable security
regulations, Lessor and Lessor's agents shall have the right to enter the
Demised Premises at reasonable times upon reasonable notice for the purpose of
inspecting the same, showing the same to perspective purchasers, Lenders, or
lessees, and making such alterations, repairs, improvements or additions to the
Demised Premises as Lessor deems necessary or desirable. Any time during the
last one hundred twenty (120) days of the Term, Lessor may place on or about the
Demised Premises any ordinary "For Lease" sign.
20.13. CONSENTS. Wherever in this Lease the consent of one party
is required to an act of the other party such consent shall not be unreasonably
withheld, conditioned or delayed.
20.14. QUIET POSSESSION. Upon Lessee paying the Rent reserved
hereunder and observing and performing all of the material covenants, conditions
and provisions on Lessee's party
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to be observed and performed hereunder, Lessee shall have quiet possession of
the Demised Premises for the entire Term hereof subject to all of the provisions
of this Lease.
20.15. SIGNAGE. During the period in which Lessee occupies the
Demised Premises, Lessee shall have the right to place signs on the Demised
Premises. All signs erected or placed on the Demised Premises by Lessee shall
comply with all applicable Governmental Laws.
20.16. BROKERS. Lessor and Lessee each covenant, warrant and
represent to the other that no broker was instrumental in bringing about or
consummating this Lease except for Geneva Companies and that neither Lessor nor
Lessee has had dealings with any broker or other person concerning the leasing
of the Demised Premises other than Geneva Companies. Lessor acknowledges and
agrees that all fees and commissions payable to Geneva Companies shall be paid
solely by Lessor. Lessor and Lessee shall each indemnify and hold the other
harmless against and from any claims for any brokerage commissions or fees, and
all costs, expenses and liabilities in connection therewith, including, without
limitation, attorneys' fees and expenses (a) in connection with such claim if
any broker or other person claims to have had dealings with the indemnifying
party and/or (b) in connection with the enforcement of a party's rights under
this PARAGRAPH 20.16.
20.17. INDEMNITIES.
(a) Lessor shall indemnify, defend and hold harmless Lessee, its
officers, agents, employees, parents, subsidiaries and affiliate
organizations, from and against any claims, suits, loss, costs, (including
attorneys' fees and disbursements and cleanup costs), damages, expenses and
liabilities, including claims by reason of property damage or personal
injury (including death) (collectively referred to as "Claims") arising out
of the ownership or maintenance of the Demised Premises by Lessor or to the
extent the same results from Lessor's actions or inactions arising from any
acts, incidents, events, occurrences, or omissions which occurred or took
place prior to the effective date of this Lease including, but not limited
to, those related to ownership, tenancy, possession, construction,
operation, or use by Lessor or any other party of the Demised Premises or
which result in pollution, contamination or seepage and all matters
relating to environmental waste disposal laws,
23
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regulations, or issues, other than Claims relating to the gross negligence
or wilful misconduct of Lessee, its officers, agents, employees, parents,
subsidiaries and affiliate organizations. This provision shall survive any
termination or expiration of this Lease.
(b) Lessee shall indemnify, defend and hold harmless Lessor, its
officers, agents, employees, parents, subsidiaries and affiliate
organizations, from and against any and all Claims of whatsoever nature
against them individually or collectively, arising out of the use of the
Demised Premises by Lessee, its officers, agents, employees, parents,
subsidiaries and affiliate organizations and the exercise by Lessee of
enjoyment of the privileges herein granted or by reason of any act or
omission of Lessee, its officers, agents, employees, parents, subsidiaries
and affiliate organizations, from or in connection with this Lease,
including, but not limited to, those related to tenancy, possession,
construction, operation, or use by Lessee of the Demised Premises or which
result in pollution, contamination or seepage and all such matters relating
to environmental waste disposal laws, regulations, or issues, other than
Claims arising from the gross negligence or wilful misconduct of Lessor and
other lessees of the Demised Premises and their respective officers,
agents, employees, parents, subsidiaries and affiliate organizations. This
provision shall survive any termination or expiration of this Lease.
20.18. UNAVOIDABLE DELAYS. In the event of any Unavoidable Delays
(hereinafter defined) under this Lease, the time of performance of the covenants
and obligations under this Lease in question shall automatically be extended for
a period of time equal to the aggregate period of the Unavoidable Delays.
"Unavoidable Delays" shall mean delays due to (i) strikes, lockouts, acts of
God, governmental restrictions or preemptions, enemy action, riot, civil
commotion, storms, fire, floods, earthquakes, or the inability to obtain labor
or materials due to governmental restrictions, (ii) the wrongful failure of
either party hereto to grant any consent or approval to the other party hereto,
(iii) fire or other casualty or other causes beyond the control of the parties
hereto and (iv) the breach or default of either party hereto in the performance
of its obligations under this Lease which directly prevents the other party from
proceeding to perform its obligations hereunder.
20.19. AUTHORIZATION. Lessor and Lessee each represent to the
other that all necessary authorizations,
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consents and approvals required in connection with the execution and delivery of
this Lease have been obtained and that the entering into of this Lease does not
violate the organizational documents of such party or any agreement, court order
or law to which such party is subject.
20.20. NO PARTNERSHIP. Nothing contained in this Lease shall be
deemed or construed to create a partnership or joint venture of or between
Lessor and Lessee, or to create any relationship between the parties other than
that of a lessor and a lessee.
20.21. RELEASE OF LIABILITY. Lessor hereby releases Lessee from
all liabilities arising out of loss or damage to the Demised Premises (except
any damage to Lessee's leasehold improvements which Lessee is required to insure
under the terms of this Lease) caused by perils covered under fire and extended
coverage insurance policies or all risk property insurance policies maintained
by Lessor as required herein, other than any such loss or damage caused by the
negligent or wrongful act or failure to act of Lessee, its officers, agents,
employees, parents, subsidiaries and affiliate organizations.
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<PAGE>
20.22. COUNTERPARTS. This instrument may be executed in one or
more counterparts, each of which when taken together shall constitute one and
the same instrument
The parties hereto have executed this Lease as of the date set forth above.
LESSOR:
/s/ Steve Landers
---------------------
Steve Landers
/s/ John Landers
---------------------
John Landers
/s/ Bob Landers
---------------------
Bob Landers
LESSEE:
LANDERS AUTO SALES, INC.
By: /s/ Carl Spielvogel
---------------------
Carl Spielvogel
Chairman and CEO
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Schedule A
FIXED RENT
The annual fixed rental shall be Three Hundred Twenty-Four Thousand and
00/100 Dollars ($324,000).
ADJUSTMENTS
(a) The Fixed Rent shall be adjusted on each Actual Adjustment Date (and
only on an Actual Adjustment Date) by the Actual Adjustment Amount determined on
such Actual Adjustment Date, such adjusted Fixed Rent to be effective until the
next Actual Adjustment Date.
(b) For purposes of this Schedule A, the following terms shall have the
following meanings (any term used in this Schedule A and not otherwise defined
shall have the meaning ascribed to such term in the Lease):
"ACTUAL ADJUSTMENT AMOUNT," with respect to each Adjustment Period, shall
mean an amount equal to the sum of the Yearly Adjustment Amounts accrued in such
Adjustment Period.
"ACTUAL ADJUSTMENT DATE" shall mean each of the fourth, seventh, tenth,
thirteenth, sixteenth and nineteenth anniversaries of the date of the Lease.
"ADJUSTMENT PERIOD" shall mean, as applicable, the four year period ending on
the fourth anniversary of the date of the Lease and each three year period
thereafter through the end of the Initial Term.
"INDEX" shall mean the Consumer Price for all items in the Index entitled:
"Consumer Price Index for the United States Southern Region for All Urban
Consumers (1983--100) (as revised) and issued by the Bureau of Labor Statistics
of the United States Department of Labor. (In the event said Index shall
hereafter be converted to a different Standard reference base or otherwise
revised, the determination of the Percentage Increase (defined below) shall be
made with the use of such conversion factor formula or table for converting said
Index as may be published by the Bureau of Labor Statistics or, if said Bureau
shall not publish the same, then with the use of such conversion factor, formula
or table as may be published by any other Federal authority or, failing such
publication, by any other nationally recognized publisher of similar statistical
information.)
"PERCENTAGE CHANGE," with respect to each year of the Term, shall mean a
fraction, the numerator of which is equal to the Index in effect on the Yearly
Adjustment Date less the Index in
<PAGE>
effect on the immediately preceding Yearly Adjustment Date, and the denominator
of which is equal to the Index in effect on the immediately preceding Yearly
Adjustment Date; provided that in no event shall the Percentage Change in any
year exceed four percent (4%).
"YEARLY ADJUSTMENT AMOUNT," with respect to each Yearly Adjustment Date, shall
mean an amount equal to (A) the Fixed Rent in effect for the year immediately
preceding such Yearly Adjustment Date plus the sum of the Yearly Adjustment
Amounts accrued in the applicable Adjustment Period for which an Actual
Adjustment Amount is being determined multiplied by (B) the Percentage Change
for such year.
"YEARLY ADJUSTMENT DATE," with respect to each year of the Term, shall mean
each anniversary of the date of the Lease through the nineteenth anniversary of
the date of the Lease.
<PAGE>
[Oldsmobile-GMC]
LEASE
Between
STEVE LANDERS, JOHN LANDERS AND BOB LANDERS
Lessor,
AND
LANDERS AUTO SALES, INC.,
Lessee.
Premises:
County of Saline, Arkansas
Lease Date:
August 1, 1995
<PAGE>
LEASE
THIS LEASE (this "Lease"), dated as of the 1st day of August, 1995,
is made by and between STEVE LANDERS, JOHN LANDERS AND BOB LANDERS, all of whom
are individuals residing in Benton, Arkansas (collectively, "Lessor") and
LANDERS AUTO SALES, INC., a corporation organized under the laws of the State of
Arkansas, having an address at Congo Exit 118 (7800 Alcoa), Highway I-30,
Benton, Arkansas 72015 ("Lessee").
RECITALS
A. Lessor is the owner of the Demised Premises (hereinafter defined).
B. Lessor desires to lease to Lessee, and Lessee desires to lease from
Lessor, the Demised Premises.
NOW, THEREFORE for good and valuation consideration, the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee agree as
follows:
ARTICLE I.
PREMISES
1.1 DEMISED PREMISES. Lessor hereby leases to Lessee, and Lessee
hereby leases from Lessor, for the Term (hereinafter defined), at the rental,
and upon all of the terms, covenants and conditions set forth herein, the
following (collectively, the "Demised Premises"):
(a) that certain real property located in Township 2 South,
County of Saline, State of Arkansas, described in Exhibit A attached hereto
and made a part hereof, together with any buildings and improvements now or
hereafter located therein or thereon, including, without limitation, the
Oldsmobile-GMC automobile dealership, showroom and service facility
currently located thereon (collectively, the "Real Property");
(b) All right, title and interest, if any, of Lessor in and to
any land lying in the bed of any street, road or avenue, open or proposed,
in front of or adjoining the Real Property to the center line;
(c) All right, title and interest, if any, of Lessor in and to
any strips and gores of land adjacent to, abutting, or used in connection
with the Real Property, and in and to easements, if any, enuring to the
benefit of the Demised Premises or the fee owner;
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(d) Any appurtenances and hereditaments belonging or in any wise
appertaining to the Real Property; and
(e) Any and all personal property located at the Real Property
owned by Lessor and used in connection with the operation of the Real
Property as an automobile dealership and related uses; and
(f) Any and all leases, tenancies and occupancy agreements in
any way affecting the Real Property.
1.2. COMMON AREAS. Lessee shall have, as appurtenant to the Demised
Premises, the non-exclusive right to use the Common Areas (hereinafter defined)
of any improvements in common with others, subject to the terms and conditions
of this Lease. For purposes of this Lease, "Common Areas" shall mean,
collectively: the sidewalks, driveways, if any, entrances, parking areas,
passages, and other portions of the improvements and/or the land shown on the
site plan, that Lessor makes available from time to time for the common use of
lessees of the improvements.
ARTICLE II.
TERM
2.1. INITIAL TERM. The term of this Lease, (as the same may be
extended, the "Term") shall commence on the date hereof (the "Commencement
Date"), and shall continue for a period of twenty (20) years thereafter (the
"Initial Term").
2.2. RENEWAL OPTIONS. Lessee shall have the option to extend the Term
on all of the terms and provisions contained in this Lease, except for the
payment of rent which is to be negotiated by the parties hereto, for two (2)
successive five (5) year renewal periods (each, a "Renewal Period") following
the expiration of the Initial Term of this Lease, by giving written notice to
Lessor of the exercise of this option to extend the Term not later than ninety
(90) days prior to the expiration of the Initial Term or the first Renewal
Period, as the case may be.
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ARTICLE III.
RENT
3.1. FIXED RENT.
(a) Lessee shall, during the Term, pay to Lessor at such place
as Lessor shall designate in writing, from time to time, annual fixed
rental in the amounts set forth on SCHEDULE A attached hereto and made a
part hereof, subject to adjustment as set forth on SCHEDULE A (hereinafter,
the "FIXED RENT").
(b) The Fixed Rent shall be payable monthly in advance on the
first day of each month in equal monthly installments equal to one-twelfth
(1/12) of the Fixed Rent.
(c) Fixed Rent for any period during the Term which is for less
than one calendar month shall be prorated based on the number of calendar
days in such calendar month that falls within the Term.
3.2. ADDITIONAL RENT. Lessee shall, during the Term, pay to Lessor
at such place as Lessor shall designate in writing, from time to time, and,
except as expressly provided herein, without offset, counterclaim, defense or
demand thereof, additional rent ("Additional Rent") consisting of all other sums
of money that become due from Lessee and payable to Lessor hereunder. Fixed
Rent and Additional Rent are hereinafter collectively referred to as "Rent".
ARTICLE IV.
INTENTIONALLY OMITTED
ARTICLE V.
USE
The Demised Premises shall be used for the operation of automobile
dealerships and ancillary business thereto, general office purposes and/or any
other lawful purposes. Lessee shall obtain, at its sole cost and expense, all
licenses, approvals and permits required for Lessee's use and occupancy of the
Demised Premises. Lessee shall not use or permit the use of the Demised
Premises, in violation of any applicable law, statute, ordinance, code, rule,
regulation order or decree, of any hazardous, toxic
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or dangerous waste, substance or material defined as such in the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, any so-called "Superfund" or "Superlien" law, or
any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material, as now or at any time hereafter in effect.
ARTICLE VI.
COMPLIANCE WITH LAW
6.1. LESSOR REPRESENTATIONS. Lessor represents and warrants to Lessee
that during the Term, the Demised Premises shall, but without regard to the use
for which Lessee will use the Demised Premises, comply with all applicable laws,
statutes, ordinances, rules, regulations and orders of all state, municipal and
local governmental authorities having jurisdiction over the Demised Premises,
including, building and zoning codes, regulations and ordinances and
environmental codes, regulations and laws, including those related to pollution
and contamination (collectively "Governmental Laws"). If it is determined that
this warranty has been violated, then it shall be the obligation of Lessor,
after written notice from Lessee, promptly, at Lessor's sole cost and expense,
to rectify any such violation.
6.2. LESSEE COMPLIANCE. Lessee shall, at Lessee's expense, promptly
comply with all Governmental Laws relating to the Demised Premises in effect
during the Term or any part of the Term regulating the use by Lessee of the
Demised Premises. If it is determined that this covenant has been violated,
then it shall be the obligation of Lessee, after written notice from Lessor, to
promptly, at Lessee's sole cost and expense, to rectify any such violation.
6.3. CONTESTS. Lessee shall have the right, to the extent permitted by
law, at its own expense to contest the validity and/or applicability of any
Governmental Laws relating to the Demised Premises by appropriate proceedings
diligently conducted in good faith, and, notwithstanding the provisions of
PARAGRAPH 6.2 hereof, Lessee's compliance with such contested Governmental Laws
may be postponed or deferred during the pendency of such proceeding so long as
neither the Demised Premises nor any part thereof would, by reason of such non-
compliance be, in the reasonable judgment of Lessor, in danger of
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being forfeited or lost and Lessor shall not be subject to any criminal or civil
liability.
ARTICLE VII.
CONDITION OF THE DEMISED PREMISES
Lessee hereby agrees to accept the Demised Premises in accordance with
the terms of this Lease, subject to all Governmental Laws and restrictions of
record governing and regulating the use of the Demised Premises, and accepts
this Lease subject thereto and to all matters disclosed thereby and by any
exhibits attached hereto.
ARTICLE VIII.
MAINTENANCE AND REPAIRS
8.1. LESSEE REPAIR OBLIGATIONS. Lessee shall, at its expense, take
good care of the Demised Premises, the fixtures and appurtenances therein and
any of Lessee's trade fixtures, furnishings, equipment and personal property
(collectively, "Lessee's Property"). Except as provided in PARAGRAPH 8.2,
Lessee shall be responsible for and shall promptly make all repairs, interior
and exterior, structural and nonstructural, ordinary and extraordinary, in and
to the Demised Premises. Lessee, at its expense, shall be responsible for the
repair, maintenance and replacement of all mechanical, electrical, sanitary,
heating, ventilating, air-conditioning and other fixtures and equipment in the
Demised Premises.
8.2. LESSOR REPAIR OBLIGATIONS. Lessor agrees, at its sole cost and
expense, to repair any material defects in the Demised Premises arising from
defective design, labor or material, and to remedy and correct any violation of
Governmental Laws arising out of or relating to the construction of the
improvements or the environmental condition of the Demised Premises on the date
hereof. Neither Lessee's acceptance of the Demised Premises nor Lessee's entry
into possession thereof, nor payments of any monthly installments of Rent, nor
Lessee's performance of any of the other provisions or conditions hereof, shall
relieve Lessor of such responsibility.
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ARTICLE IX.
SURRENDER
On the last day of the Term, or on any sooner termination of this
Lease, subject to the terms of ARTICLE 13, Lessee shall surrender the Demised
Premises to Lessor in the same condition as when received by Lessee broom clean,
ordinary wear and tear excepted.
ARTICLE X.
LESSOR'S AND LESSEE'S RIGHTS
If either party fails to perform its obligations hereunder, the other
may at its option (but shall not be required to) put the same in good order,
condition and repair, upon sixty (60) days written notice to the non-performing
party (which written notice shall not be required in the case of an emergency)
and the cost thereof, together with interest thereon at the Lease Interest Rate
(as defined in PARAGRAPH 20.3) shall become due and payable from the non-
performing party to the other party within ten (10) days after demand by the
performing party; PROVIDED, HOWEVER, if the obligation of the non-performing
party is not capable of being performed within such sixty (60) day period and if
the non-performing party is diligently endeavoring to perform such obligation,
the performing party shall not perform such obligation. All such work performed
by the performing party shall be performed in a good and workmanlike manner, in
compliance with all Governmental Laws. Neither Lessee nor Lessor shall perform
any such work until such time as it has received all necessary permits, licenses
and approvals from the applicable state, county and municipal governmental
authorities having jurisdiction over the Demised Premises ("Governmental
Authorities"). If either party performs any such work, such party shall, at all
times, keep the Demised Premises free of liens and encumbrances for labor and
materials.
ARTICLE XI.
ALTERATIONS AND IMPROVEMENTS
11.1 LESSEE ALTERATIONS. Lessee shall have the right, at its own cost
and expense, to make such alterations and changes in and to the Demised Premises
as it shall deem expedient or necessary for its purposes. All such work shall
be done in a
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good and workmanlike manner, and in accordance with all Governmental Laws.
Lessor shall execute and deliver upon request of Lessee such reasonable
instrument or instruments embodying the approval of Lessor which may be required
by any Governmental Authority for the purpose of obtaining any license, permit
or approval for the making of alterations or changes in, to or upon the Demised
Premises, Lessee agreeing to pay for any such license, permit or approval.
Lessee shall not make any alterations to the Demised Premises until such time as
it has received all required permits, licenses and approvals from the applicable
Governmental Authority.
11.2. REMOVAL OF IMPROVEMENTS. Any and all alterations,
improvements and installations made by Lessee in, to or upon the Demised
Premises, as well as any fixtures installed on the Demised Premises by Lessee,
at Lessee's option, may be removed from the Demised Premises at any time and
from time to time during the Term and shall remain the property of Lessee during
and at the expiration of the Term of this Lease, provided that, if any such
alterations, improvements, installations and/or fixtures are removed by Lessee,
any damage caused by such removal shall be promptly repaired by Lessee at its
sole cost and expense.
ARTICLE XII.
INSURANCE
12.1. Insurance Coverage.
(a) Lessee shall, at Lessee's cost and expense, maintain the
following insurance issued in the names of Lessor and Lessee as their
interests may appear:
(i) a policy of standard fire and extended coverage
insurance on all improvements included in the Demised Premises
with vandalism and malicious mischief endorsements, to the extent
of full replacement value; and
(ii) a policy of general public liability insurance against
claims for personal injury or property damage, with such limits
as may be reasonably requested by Lessor from time to time, but
not more than Two Million Dollars ($2,000,000) in respect of
bodily injury or death
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and Two Million Dollars ($2,000,000) for property damage.
(b) All such insurance policies shall provide that any proceeds
shall be made payable into an escrow account maintained by an escrow agent
mutually selected by Lessee and Lessor, who shall distribute same pursuant
to the terms of this Lease and in accordance with the written instructions
of Lessee and the approval of Lessor, which approval by Lessor shall not be
unreasonably withheld, delayed or conditioned.
(c) All such insurance policies may, at the option of Lessee, be
effected by blanket and/or umbrella policies issued to Lessee covering the
Demised Premises and other properties owned or leased by Lessee or its
affiliates.
(d) Lessor shall not obtain or continue to maintain any separate
or additional insurance which is contributing in the event of loss unless
it is properly endorsed and otherwise satisfactory to Lessee in all
respects.
12.2. CERTIFICATES. All insurance provided for under this Lease
shall be effected under valid enforceable policies insured by insurers of
recognized responsibility and who are reasonably acceptable to Lessor and
licensed to do business in the State of Arkansas. Such insurance may be carried
by Lessee as a part of blanket coverage for such insurance covering all premises
owned or leased by Lessee wherever located. Certificates of Insurance
evidencing the current existence of such coverage shall be delivered to Lessor
at least ten days prior to the expiration date of any policy. Renewal
certificates shall be delivered by Lessee to Lessor, together with satisfactory
evidence of payment of the premium on such policies. To the extent obtainable,
all such policies shall contain agreements by the insurers that such policies
shall not be cancelled except upon thirty days' prior written notice to each
named insured and loss payee, including Lessor.
12.3. ADJUSTMENTS. All policies of insurance required herein
shall name Lessor and Lessee as the insureds as their respective interests may
appear. The loss, if any, under said policies referred to in this ARTICLE 12
shall be adjusted with the insurance companies by Lessee to the extent that
Lessee is obligated to repair or restore the Demised Premises pursuant
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to ARTICLE 13 hereof and by Lessor in the event that Lessee is not so obligated
to restore.
12.4. PROCEEDS. All proceeds payable by reason of any loss or
damage to the Demised Premises, or any portion thereof, and insured under any
policy of insurance required by this ARTICLE 12 shall be paid to Lessee and
shall be used only for reconstruction or repair, as the case may be, of any
damage to or destruction of the Demised Premises, or any portion thereof. Any
excess proceeds of insurance remaining after the completion of the restoration
or reconstruction of the Demised Premises shall be retained by Lessee. In the
event that, pursuant to the terms of PARAGRAPH 13.3, Lessee is not required or
does not elect to repair and restore and this Lease expires or is terminated,
all such insurance proceeds shall be paid to and retained by Lessor.
ARTICLE XIII.
DAMAGE OR DESTRUCTION
13.1. RESTORATION. Subject to the provisions of PARAGRAPH 13.3
hereof, Lessee covenants that in the event of damage to all or a portion of the
Demised Premises by fire or any other cause, similar or dissimilar, insured or
uninsured, in the event that Lessor approves the distribution of the insurance
proceeds in accordance with Lessee's instructions under PARAGRAPH 12.1(b),
Lessee will promptly, at its sole cost and expense, restore or repair the
Demised Premises so damaged or destroyed as nearly as possible to the condition
it was in immediately prior to such damage or destruction, or with such changes
or alterations as Lessee shall elect to make in conformity with ARTICLE 11
hereof, whether or not any costs or expenses of such restoration exceeds the
amount of the insurance proceeds received in connection with such damage or
destruction. Such restoration, shall be commenced promptly and prosecuted with
reasonable diligence, unavoidable delays excepted.
13.2. NO ABATEMENT. Except as provided in PARAGRAPH 13.3, the
Fixed Rent and all Additional Rent payable hereunder shall not be abated due to
any damage or destruction to the Demised Premises.
13.3. TERMINATION OPTION. Notwithstanding the provisions of
PARAGRAPH 13.1 hereof, in the event that (i) at any time during the Initial Term
or a Renewal Term, Lessor
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unreasonably withholds its approval of the distribution of the insurance
proceeds in accordance with Lessee's instructions, (ii) at any time during the
eighteenth (18th) or nineteenth (19th) years of the Initial Term, all or a
portion of the Demised Premises are damaged to the extent that, in Lessee's
reasonable judgment, the necessary repairs or restoration would not be
substantially completed within nine (9) months from the date of said casualty,
or (iii) at any time during the last year of the Initial Term or at any time
during a Renewal Term, all or a portion of the Demised Premises are damaged,
Lessee may, terminate this Lease upon delivery of written notice to Lessor
within sixty (60) days after the occurrence of the casualty causing such damage
and Lessee shall be released from any liability under this Lease accruing from
and after the date of said casualty. In the event that Lessee terminates this
Lease as provided in the immediately preceding sentence, all insurance proceeds
resulting from said casualty shall be paid to and retained by Lessor.
ARTICLE XIV.
TAXES
14.1. IMPOSITIONS. Lessee covenants and agrees to pay or cause to
be paid, as hereinafter provided, to the Governmental Authority imposing the
same, all of the following items ("Impositions") not later than the date on
which same are due without the payment of any fines, penalties or interest: (a)
real property taxes and assessments assessed and levied against the Demised
Premises or any part thereof, (b) personal property taxes, (c) water, water
meter and sewer rents, rates and charges, and (d) fines, penalties and other
similar or like governmental charges applicable to the foregoing and any
interest or costs with respect thereto only to the extent incurred by reason of
Lessee's wrongful act or omission or Lessee's failure fully and promptly to
comply with any provision of this Lease. Each such Imposition, or installment
thereof, during the Term shall be paid prior to the last day the same may be
paid without fine, penalty, interest or additional cost; provided, however, that
if, by law, any Imposition may at the option of the taxpayer be paid in
installments (whether or not interest shall accrue on the unpaid balance of such
Imposition), Lessee may exercise the option to pay the same in such installments
and shall be responsible for the payment of such installments only.
14.2. EVIDENCE OF PAYMENT. If Lessee is paying any Imposition
directly to the Governmental Authority imposing the same, then Lessee, from
time to time upon the request of Lessor,
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shall furnish to Lessor, within the earlier of (i) ninety (90) days after the
date when such Imposition is due and payable under this Lease, or (ii) thirty
(30) days after the date when an official receipt of the Governmental Authority
imposing the same is received, such official receipt or, if no such receipt has
been received by Lessee, other evidence reasonably satisfactory to Lessor,
evidencing the payment of the Imposition.
14.3. EXCLUDED TAXES. Nothing herein contained shall require
Lessee to pay municipal, state or federal income, inheritance, estate,
succession, transfer or gift taxes of Lessor, or any corporate franchise tax
imposed upon Lessor or any gross income or gross receipts taxes to the extent
the same are imposed on Lessor in lieu of net income taxes or corporate
franchise taxes.
14.4. APPORTIONMENTS. Any Imposition, relating to a fiscal period
of the imposing Governmental Authority, a part of which period is included
within the Term and a part of which is included in a period of time before the
Commencement Date or after the Expiration Date (whether or not such Imposition
shall be assessed, levied, confirmed, imposed upon or in respect of or become a
lien upon the Demised Premises, or shall become payable, during the Term) shall
be apportioned between Lessor and Lessee as of the Commencement Date or
Expiration Date, as the case may be, so that Lessee shall pay that portion of
such Imposition which that part of such fiscal period included in the period of
time after the Commencement Date and before the Expiration Date.
14.5. CONTESTS.
(a) Lessee shall have the right, to the extent permitted by law,
at its own expense to contest the amount or validity, in whole or in part,
of any Imposition by appropriate proceedings diligently conducted in good
faith, and, notwithstanding the provisions of PARAGRAPH 14.1 hereof, the
payment of such contested Imposition may be postponed or deferred so long
as neither the Demised Premises nor any part thereof, nor any part of the
rents, issues and profits thereof, would, by reason of such postponement or
deferment, be, in the reasonable judgment of Lessor, in danger of being
forfeited or lost and Lessor shall not be subject to any criminal or civil
liability.
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(b) Lessee shall have the right, to the extent permitted by law,
and at Lessee's sole cost and expense, to seek a reduction in the valuation
of the Demised Premises assessed for real property tax purposes and to
prosecute any action or proceeding in connection therewith. Lessor shall
fully cooperate with Lessee in any such proceeding.
(c) Lessor shall not be required to join in any proceedings
referred to in PARAGRAPHS 14.5(a) and (b) hereof unless the provisions of
any law, rule or regulation at the time in effect shall require that such
proceedings be brought by and/or in the name of Lessor, in which event,
Lessor shall join and cooperate in such proceedings or permit the same to
be brought in its name, but shall not be liable for the payment of any
costs or expenses in connection with any such proceedings and Lessee shall
reimburse Lessor for any and all reasonable costs or expenses which Lessor
may sustain or incur in connection with any such proceedings.
ARTICLE XV.
UTILITIES AND SERVICES
15.1. LESSOR REPRESENTATION. Lessor represents and warrants that
the Demised Premises are equipped with all plumbing equipment, electrical
facilities and lighting fixtures and equipment, heating, air conditioning,
ventilating, and other appurtenant equipment and facilities necessary or
appropriate for Lessee's use of the Demised Premises or as otherwise required by
Governmental Laws. Lessee will pay, or cause to be paid all changes for
electricity, power, gas, oil, water and other utilities used in connection with
the Demised Premises during the term of this Lease.
15.2. NO SERVICES. Lessor shall not be obligated to furnish or
to pay for utilities or services to the Demised Premises.
ARTICLE XVI.
ASSIGNMENT
Except as expressly permitted in this Lease, Lessee shall not
voluntarily or by operation of law assign all or any part of Lessee's interest
in this Lease, without Lessor's prior written consent, which Lessor shall not
unreasonably withhold, condition or delay. Any attempted assignment without
such
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consent shall be void and shall constitute a breach of this Lease, unless the
same is expressly permitted hereunder. In no event shall (i) any transfer (by
one or more transfers) of a majority of the stock of Lessee, (ii) the merger or
consolidation of Lessee with another corporation, or (iii) the transfer of all
or substantially all of Lessee's assets to another corporation or entity,
constitute an assignment, or attempted assignment of this Lease, provided that,
in all such events in which Lessee survives such transaction, Lessee shall
remain fully liable for the payment of Rent and for the other obligations of
this Lease on the part of Lessee to be performed or observed.
ARTICLE XIII.
DEFAULTS; REMEDIES
17.1. DEFAULTS. If any of the following events shall occur (each,
a "Default" and collectively "Defaults"):
(a) The failure by Lessee to make any payment of Rent or any
other payment required to be made by Lessee hereunder, as and when due,
where such failure shall continue for a period of ten (10) days after
written notice from Lessor to Lessee;
(b) The failure by Lessee to observe or perform any of the
material covenants, conditions to provisions of this Lease to be observed
or performed by Lessee, other than described in Paragraph 17.1(a) above,
where such failure shall continue for a period of thirty (30) days after
written notice thereof from Lessor to Lessee specifying, in reasonable
detail, how Lessee has failed to perform; PROVIDED, HOWEVER, that if
Lessee's Default is such that more than thirty (30) days are reasonably
required for its cure, then Lessee shall not be deemed to be in Default if
Lessee commenced such cure within said 30-day period and thereafter
diligently prosecutes such cure to completion;
then in any of said cases, and without waiving any claims for breach of
agreement, Lessor may
(i) accelerate all Rent owing hereunder upon such Default;
(ii) Take possession of the Demised Premises and lease the
same for the account of Lessee upon such terms as may be acceptable to
Lessor and apply the net proceeds received from such leasing toward
the payment
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of Rent which Lessee herein is obligated to pay and collect the
balance thereof, if any, from Lessee;
(iii) Terminate the Lease and take possession of the Demised
Premises and collect from Lessee all damages sustained by reason of
such Default; or
(iv) Pursue any remedy or remedies which may be available at
law or in equity;
PROVIDED, HOWEVER, that Lessor hereby agrees to use its best efforts to mitigate
any damages sustained or liability incurred by reason of any Default and the
exercise of any remedies in connection therewith.
17.2. LESSEE OBJECTION. Subject to the last sentence of this
PARAGRAPH 17.2., upon the happening of any alleged non-monetary Default on the
part of Lessee, if Lessee within thirty (30) days after receipt of such
appropriate notice as set forth in PARAGRAPH 17.1 from Lessor shall, commence
and thereafter in good faith, diligently prosecute in a court of competent
jurisdiction a proceeding to determine whether or not such non-monetary defaults
or alleged defaults have occurred, then Lessor may not terminate this Lease or
exercise any rights as provided above by law or otherwise unless the final
judgment not subject to further appeal in such court proceedings shall be
adverse to Lessee and Lessee, in such case, within twenty (20) days from the
date of the final judgment in such court proceedings fails to cure such non-
monetary default(s) or, if any such default or defaults cannot reasonably be
cured within such twenty (20) days, if Lessee within said twenty (20) days shall
fail to commence and thereafter diligently and continuously prosecute to
completion the work of curing such non-monetary default or defaults.
Notwithstanding the foregoing, Lessee shall have no rights under this PARAGRAPH
17.2 if, at the time Lessee receives notice of any non-monetary default under
this Lease, the laws of the State of Arkansas otherwise provides for the
injunction of the threatened termination of a lease until a final judgment has
been rendered by a court of competent jurisdiction as to whether or not a non-
monetary default has occurred thereunder.
17.3. VACATING THE DEMISED PREMISES.
(a) In the event of any such termination of this Lease, (i) this
Lease shall be of no further force and effect; and (ii) Lessee covenants
and agrees to surrender and deliver the Demised Premises to Lessor in
accordance
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with ARTICLE 9 hereof immediately upon the termination of the Lease.
(b) It is understood and agreed that at the time of the
termination or at any time thereafter Lessor may rent the Demised Premises,
or any portion thereof for such period and on such term or terms, and for a
term which may expire before or after the expiration of the Term and Lessee
shall have no interest in any income received by Lessor as a result of such
reletting and no title or interest in the Demised Premises whatsoever.
17.4. LESSOR'S SELF-HELP REMEDY. If Lessee shall fail, after
thirty (30) days notice from Lessor, to perform any of the covenants, terms or
conditions required to be performed by Lessee hereunder (except that in the
event of an emergency, the notice shall either be dispensed with or shortened as
reasonably required by the nature of the emergency), in addition to the
provisions of this ARTICLE 17, Lessor may do whatever is reasonably necessary
for the performance thereof for the account and at the expense of Lessee. In
the event Lessor shall pay any money by reason of said failure, Lessee shall
repay any such reasonable sums so paid on its behalf together with interest
thereon at the Lease Interest Rate which shall be deemed Rent, and the same
shall be payable within 30 days after presentation of the request for payment,
accompanied by Lessor's statement submitted to Lessee by Lessor showing in all
reasonable detail the expenses of Lessor, why incurred, to whom payment was made
and the calculations of and supporting bills or records showing Lessor's
expenditures.
17.5. LESSEE'S SELF-HELP REMEDY. If Lessor shall fail, after
thirty (30) days notice from Lessor, to perform any of the covenants, terms or
conditions required to be performed by Lessor hereunder (except that in the
event of an emergency, the notice shall either be dispensed with or shortened as
reasonably required by the nature of the emergency), Lessee may do whatever is
reasonably necessary for the performance thereof for the account and at the
expense of Lessor. In the event Lessee shall pay any money by reason of said
failure, Lessor shall repay any such reasonable sums so paid on its behalf
together with interest thereon at the Lease Interest Rate, and the same shall be
payable within 30 days after presentation of the request for payment,
accompanied by Lessee's statement submitted to Lessor by Lessee showing in all
reasonable detail the expenses of Lessee, why incurred, to whom payment was made
and the calculations of and supporting bills or records showing Lessee's
expenditures. If Lessor shall fail to reimburse Lessee within thirty (30) days
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after receipt of Lessee's request for reimbursement for money expended by Lessee
under this PARAGRAPH 17.5, Lessee may set-off against Rent, next becoming due to
Lessor, such amount together with interest at the Lease Interest Rate from the
date expended until Lessee has recouped the money due it under this PARAGRAPH
17.5.
17.6. EXCLUSIVE REMEDIES. No remedy herein or otherwise conferred
upon or reserved to Lessor or Lessee shall be considered exclusive of any other
remedy, but the same shall be distinct, separate and cumulative and shall be in
addition to every other remedy given under this Lease, or now or hereafter
existing at law or in equity or by statute. Every power and remedy given by
this Lease to Lessor, or Lessee, may be exercised from time to time as often as
occasion may arise, or as may be deemed expedient. No delay or omission of
Lessor or Lessee to exercise any right or power arising from any default on the
part of the other shall impair any such right or power, or shall be construed to
be a waiver of such default or any other default or an acquiescence thereto.
The consent or approval by Lessor or Lessee to or of any act by the other
requiring such consent or approval shall not be deemed to waive or render
unnecessary the consent or approval to or of any subsequent similar acts by
Lessor or Lessee, as the case may be.
17.7. LESSEE TERMINATION RIGHT. (a) Without limiting the
provisions of PARAGRAPH 17.6 and in addition to all other remedies which the
Lessee may have as stated elsewhere in this Lease, at law or in equity,
including the right to seek specific performance or injunctive relief, Lessee
shall have the right, but not the obligation, on notice to Lessor, to terminate
this Lease if Lessor shall fail to perform any of the terms, covenants and
obligations of Lessor herein.
(a) With respect to defaults as to which this Lease does not
provide any grace period or opportunity to cure, Lessor shall have thirty
(30) days after receipt of such notice from Lessee to cure the default
giving rise to Lessee's right to so terminate this Lease.
(b) If Lessor cures the default within said 30-day period this
Lease shall not terminate and shall continue in full force and effect. If
Lessor fails to cure the default within said 30-day period, Lessee shall
give notice to Lessor of Lessor's failure to cure the same and this Lease
shall terminate, as if by passage of time, on the date
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set forth in Lessee's notice of termination; PROVIDED, HOWEVER, that if
Lessor's Default is such that more than thirty (30) days are reasonably
required for its cure, then this Lease shall not terminate if Lessor
commenced such cure within said 30-day period and thereafter diligently
prosecutes such cure to completion and such cure is completed within ninety
(90) days after the occurrence of such default.
ARTICLE XVIII.
CONDEMNATION
18.1. If the Demised Premises or any portion thereof are taken
under the power of eminent domain, or sold under the threat of the exercise of
said power (all of which are herein called ("Condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title to or possession of the Demised Premises of such portion thereof,
whichever first occurs. If (i) more than 20% of the floor area of the Demised
Premises, or more than 20% of the parking area included in the Demised Premises
and used by Lessee, is taken by Condemnation and (ii) in Lessee's judgment, the
Demised Premises cannot be repaired or restored to a condition which would allow
Lessee to use the Demised Premises substantially in the manner that Lessee had
used the Demised Premises prior to said Condemnation, Lessee may, at Lessee's
option, to be exercised in writing within twenty (20) days after Lessor shall
have given Lessee written notice of such taking (or in the absence of such
notice, within twenty (20) days after the condemning authority shall have taken
title to or possession of the Demised Premises or any part thereof) terminate
this Lease as of the later of the date on which the condemning authority takes
title to or possession of the Demised Premises or any part thereof. If Lessee
does not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Demised Premises
remaining, except that the Rent shall be reduced from the date of the taking in
the proportion that the portion of the Demised Premises taken bears to the total
area of the Demised Premises. Any award for the taking of all or any part of
the Demised Premises under the power of eminent domain or any payment made under
threat of the exercise of such power shall be the property of Lessor; PROVIDED,
HOWEVER, that Lessee shall be entitled to any award made as compensation for
diminution in value of the Lessee's leasehold estate, business loss, moving
expenses, loss of or damage to the Lessee's trade fixtures and removable
personal property. In the event that this Lease is not terminated by reason of
such Condemnation, Lessor shall, to the extent of any award received
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by Lessor in connection with such Condemnation, repair any damage to the Demised
Premises caused by such Condemnation except to the extent that Lessee has been
reimbursed therefore by the condemning authority.
18.2. Notwithstanding anything which may be to the contrary in
this ARTICLE 18, in connection with any taking, Lessee shall be entitled to make
a separate claim, and to prove and receive an award for (a) the diminution in
value of Lessee's leasehold estate, (b) the value of Lessee's property to the
extent the same is taken, and (c) any moving allowance and other expenses
permitted by law.
ARTICLE XIX.
INTENTIONALLY OMITTED
ARTICLE XX.
GENERAL PROVISIONS
20.1. ESTOPPEL CERTIFICATES.
(a) Lessee shall at any time upon not less than twenty (20) days
prior written notice from Lessor execute, acknowledge and deliver to Lessor
or any party designated by Lessor a statement in writing (i) certifying
that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to which
the Rent and other charges are paid in advance, if any, (ii) acknowledging,
as of the date of the certificate, that, to its actual knowledge, there are
no uncured Defaults or events which with the giving of notice or the
passage of time or both would constitute a Default or specifying such
Defaults or events, if any are claimed and (iii) any other information
reasonably requested by Lessor. Such statement shall be binding on Lessee
and may be relied upon by Lessor or any other party designated by Lessor to
whom such certificate is delivered.
(b) Lessor shall at any time upon not less than twenty (20) days
prior written notice from Lessee execute, acknowledge and deliver to Lessee
or any party designated by Lessee a statement in writing (i) certifying
that this Lease is unmodified and in full force and effect (or, if
modified,
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stating the nature of such modification and certifying that this Lease, as
so modified, is in full force and effect) and the date to which the Rent
and other charges are paid in advance, if any, (ii) acknowledging, as of
the date of the certificate, that, to its actual knowledge, there are no
uncured Defaults or events which with the giving of notice or the passage
of time or both would constitute a Default or specifying such Defaults or
events, if any are claimed and (iii) any other information reasonably
requested by Lessee. Such statement shall be binding on Lessor and may be
relied upon by Lessee or any other party designated by Lessee to whom such
certificate is delivered.
20.2. SEVERABILITY. The invalidity of any provision of this Lease
as determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
20.3. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly
provided herein, any amount due hereunder to either Lessor or Lessee from the
other party which is not paid when due and any amount paid by Lessor or Lessee
on behalf of the other in accordance with the terms hereof shall bear interest
from the date due or the date paid, as applicable, at a rate (the "Lease
Interest Rate") equal to the lesser of (a) 2% in excess of the prime or base
rate of interest announced by Citibank, N.A. at its principal office in New York
City, New York and (b) the maximum rate of interest permitted by applicable law
with respect to said amounts. Payment of such interest shall not excuse or cure
any Default or event of default by Lessee or Lessor under this Lease.
Notwithstanding anything to the contrary contained in this Lease, in no event
shall interest be payable by Lessee with respect to (i) any amounts due and
payable by Lessee during the period in which either John Landers or Steve
Landers are employees of Lessee, (ii) any late charges incurred by Lessee, or
(iii) any amounts upon which late charges are paid by Lessee.
20.4. CAPTIONS. Article and paragraph captions are not a part
hereof and are for convenience of reference only.
20.5. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease
contains the entire agreement and understanding of the parties hereto with
respect to the subject matter hereof. All prior agreements or understandings
pertaining to the subject matter hereof shall be of no force or effect. This
Lease may only be amended or modified in writing, signed by
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the parties in interest at the time of such amendment or modification.
20.6. NOTICES. Any notices required or permitted to be given
hereunder shall be sufficient if given at the addresses of Lessor and Lessee
first set forth above. Notices shall be sufficient if sent by certified mail,
return receipt requested, postage pre-paid; nationally recognized overnight
courier service; or by hand. Notices sent (i) by certified mail, return receipt
requested shall be deemed received three (3) days after deposit in a United
States mail box, postage prepaid, (ii) by nationally recognized overnight
courier service shall be deemed received one (1) business day after delivery to
such courier service; and (iii) by hand shall be deemed delivered upon receipt.
20.7. WAIVERS. No waiver by either party of any term or provision
hereof shall be deemed a waiver of any other provision hereof or of any
subsequent breach by the other of the same or any other provision. Lessor's
consent to or approval of any act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to or approval of any subsequent act by Lessee.
The acceptance of Rent hereunder by Lessor shall not be a waiver of any
preceding breach by Lessee of any provision hereof, other than the failure of
Lessee to pay the particular Rent so accepted, regardless of Lessor's knowledge
of such preceding breach at the time of acceptance of such Rent.
20.8. RECORDING. Lessee shall not record this Lease without
Lessor's prior written consent, and such recordation shall, at the option of
Lessor, constitute a non-curable Default of Lessee hereunder. The parties
hereto shall contemporaneously herewith execute and record, at Lessee's expense,
a Memorandum of Lease in the form attached hereto as Exhibit B.
20.9. CUMULATIVE REMEDIES. No remedy or election hereunder shall
be deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
20.10. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding
upon the parties hereto and their respective successors and assigns. This Lease
shall be governed by the laws of the State in which the Demised Premises is
located.
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20.11. SUBORDINATION.
(a) Provided Lessor obtains and delivers to Lessee a
Subordination, Nondisturbance and Attornment Agreement in the form attached
hereto as Exhibit C (the "SNDA") from the holder of any present or future
mortgage or deed of trust encumbering the Demised Premises (a "Mortgagee"),
then this Lease shall be subject and subordinate to the lien of the
mortgage or deed of trust, specifically referenced in such SNDA.
(b) If at any time a Mortgagee or any party claiming by or
through a Mortgagee shall succeed to the rights of Lessor as lessor under
this Lease, whether through foreclosure action, assignment or deed in lieu
of foreclosure or otherwise (a "Successor Lessor"), at the request of such
Successor Lessor, and upon the written agreement of such Successor Lessor
to accept Lessee's attornment, Lessee shall attorn to and recognize such
Successor Lessor as Lessee's lessor under this Lease. In confirmation of
such attornment, Lessee shall promptly execute, acknowledge and deliver any
instrument that Lessor or such Successor Lessor requests to evidence such
attornment. Upon any such attornment, this Lease shall continue in full
force and effect as, or as if it were, a direct lease between such
Successor Lessor and Lessee upon all of the then executory terms,
conditions and covenants as are set forth in this Lease and which shall be
applicable after such attornment, except that the Successor Lessor shall
not be:
(i) liable for any prior act or omission of Lessor;
(ii) subject to any offsets or defenses which Lessee may
have against Lessor;
(iii) bound by any payment of Rent which Lessee might have
made to Lessor for more than one month in advance of the date the same
was due under this Lease or bound by any security or other deposits
not actually received by such Successor Lessor;
(iv) bound by any obligation to make any payment to Lessee,
or provide any services or perform any repairs, maintenance or
restoration provided for under this Lease to be performed before the
date that the Successor Lessor becomes the lessor of Lessee;
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(v) bound by any obligation to construct any improvements
on the Demised Premises; or
(vi) bound by any modification of this Lease made without
the written consent of such Successor Lessor or the Mortgagee through
which such Successor Lessor is claiming its interest, where such
consent is required under the terms of the documents evidencing its
loan to Lessor, after written notice has been given to Lessee of the
existence of such Successor Lessor or Mortgagee.
(c) If any act or omission of Lessor would give Lessee the
right, immediately or after lapse of a period of time, to cancel or
terminate this Lease, or to claim a partial or total eviction, Lessee shall
not exercise such right until (a) Lessee gives notice of such act or
omission to Lessor and to each Mortgagee whose name and address were
previously furnished to Lessee and (b) a reasonable period of time for
remedying such act or omission elapses following the time when such
Mortgagee becomes entitled under its Mortgage to remedy same (which
reasonable period shall in no event be less than the period to which Lessor
is entitled under this Lease or otherwise, after similar notice, to effect
such remedy or be longer than 45 days after notice from Lessee to Mortgagee
of such act or omission).
20.12. LESSOR'S ACCESS. Subject to Lessee's reasonable security
regulations, Lessor and Lessor's agents shall have the right to enter the
Demised Premises at reasonable times upon reasonable notice for the purpose of
inspecting the same, showing the same to perspective purchasers, Lenders, or
lessees, and making such alterations, repairs, improvements or additions to the
Demised Premises as Lessor deems necessary or desirable. Any time during the
last one hundred twenty (120) days of the Term, Lessor may place on or about the
Demised Premises any ordinary "For Lease" sign.
20.13. CONSENTS. Wherever in this Lease the consent of one party
is required to an act of the other party such consent shall not be unreasonably
withheld, conditioned or delayed.
20.14. QUIET POSSESSION. Upon Lessee paying the Rent reserved
hereunder and observing and performing all of the material covenants, conditions
and provisions on Lessee's party
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to be observed and performed hereunder, Lessee shall have quiet possession of
the Demised Premises for the entire Term hereof subject to all of the provisions
of this Lease.
20.15. SIGNAGE. During the period in which Lessee occupies the
Demised Premises, Lessee shall have the right to place signs on the Demised
Premises. All signs erected or placed on the Demised Premises by Lessee shall
comply with all applicable Governmental Laws.
20.16. BROKERS. Lessor and Lessee each covenant, warrant and
represent to the other that no broker was instrumental in bringing about or
consummating this Lease except for Geneva Companies and that neither Lessor nor
Lessee has had dealings with any broker or other person concerning the leasing
of the Demised Premises other than Geneva Companies. Lessor acknowledges and
agrees that all fees and commissions payable to Geneva Companies shall be paid
solely by Lessor. Lessor and Lessee shall each indemnify and hold the other
harmless against and from any claims for any brokerage commissions or fees, and
all costs, expenses and liabilities in connection therewith, including, without
limitation, attorneys' fees and expenses (a) in connection with such claim if
any broker or other person claims to have had dealings with the indemnifying
party and/or (b) in connection with the enforcement of a party's rights under
this PARAGRAPH 20.16.
20.17. INDEMNITIES.
(a) Lessor shall indemnify, defend and hold harmless Lessee, its
officers, agents, employees, parents, subsidiaries and affiliate
organizations, from and against any claims, suits, loss, costs, (including
attorneys' fees and disbursements and cleanup costs), damages, expenses and
liabilities, including claims by reason of property damage or personal
injury (including death) (collectively referred to as "Claims") arising out
of the ownership or maintenance of the Demised Premises by Lessor or to the
extent the same results from Lessor's actions or inactions arising from any
acts, incidents, events, occurrences, or omissions which occurred or took
place prior to the effective date of this Lease including, but not limited
to, those related to ownership, tenancy, possession, construction,
operation, or use by Lessor or any other party of the Demised Premises or
which result in pollution, contamination or seepage and all matters
relating to environmental waste disposal laws,
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regulations, or issues, other than Claims relating to the gross negligence
or wilful misconduct of Lessee, its officers, agents, employees, parents,
subsidiaries and affiliate organizations. This provision shall survive any
termination or expiration of this Lease.
(b) Lessee shall indemnify, defend and hold harmless Lessor, its
officers, agents, employees, parents, subsidiaries and affiliate
organizations, from and against any and all Claims of whatsoever nature
against them individually or collectively, arising out of the use of the
Demised Premises by Lessee, its officers, agents, employees, parents,
subsidiaries and affiliate organizations and the exercise by Lessee of
enjoyment of the privileges herein granted or by reason of any act or
omission of Lessee, its officers, agents, employees, parents, subsidiaries
and affiliate organizations, from or in connection with this Lease,
including, but not limited to, those related to tenancy, possession,
construction, operation, or use by Lessee of the Demised Premises or which
result in pollution, contamination or seepage and all such matters relating
to environmental waste disposal laws, regulations, or issues, other than
Claims arising from the gross negligence or wilful misconduct of Lessor and
other lessees of the Demised Premises and their respective officers,
agents, employees, parents, subsidiaries and affiliate organizations. This
provision shall survive any termination or expiration of this Lease.
20.18. UNAVOIDABLE DELAYS. In the event of any Unavoidable Delays
(hereinafter defined) under this Lease, the time of performance of the covenants
and obligations under this Lease in question shall automatically be extended for
a period of time equal to the aggregate period of the Unavoidable Delays.
"Unavoidable Delays" shall mean delays due to (i) strikes, lockouts, acts of
God, governmental restrictions or preemptions, enemy action, riot, civil
commotion, storms, fire, floods, earthquakes, or the inability to obtain labor
or materials due to governmental restrictions, (ii) the wrongful failure of
either party hereto to grant any consent or approval to the other party hereto,
(iii) fire or other casualty or other causes beyond the control of the parties
hereto and (iv) the breach or default of either party hereto in the performance
of its obligations under this Lease which directly prevents the other party from
proceeding to perform its obligations hereunder.
20.19. AUTHORIZATION. Lessor and Lessee each represent to the
other that all necessary authorizations,
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consents and approvals required in connection with the execution and delivery of
this Lease have been obtained and that the entering into of this Lease does not
violate the organizational documents of such party or any agreement, court order
or law to which such party is subject.
20.20. NO PARTNERSHIP. Nothing contained in this Lease shall be
deemed or construed to create a partnership or joint venture of or between
Lessor and Lessee, or to create any relationship between the parties other than
that of a lessor and a lessee.
20.21. RELEASE OF LIABILITY. Lessor hereby releases Lessee from
all liabilities arising out of loss or damage to the Demised Premises (except
any damage to Lessee's leasehold improvements which Lessee is required to insure
under the terms of this Lease) caused by perils covered under fire and extended
coverage insurance policies or all risk property insurance policies maintained
by Lessor as required herein, other than any such loss or damage caused by the
negligent or wrongful act or failure to act of Lessee, its officers, agents,
employees, parents, subsidiaries and affiliate organizations.
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20.22. COUNTERPARTS. This instrument may be executed in one or
more counterparts, each of which when taken together shall constitute one and
the same instrument.
The parties hereto have executed this Lease as of the date set forth above.
LESSOR:
/s/ Steve Landers
---------------------
Steve Landers
/s/ John Landers
---------------------
John Landers
/s/ Bob Landers
---------------------
Bob Landers
LESSEE:
LANDERS AUTO SALES, INC.
By: /s/ Carl Spielvogel
---------------------
Carl Spielvogel
Chairman & CEO
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Schedule A
FIXED RENT
The annual fixed rental shall be Two Hundred Sixteen Thousand and 00/100
Dollars ($216,000).
ADJUSTMENTS
(a) The Fixed Rent shall be adjusted on each Actual Adjustment Date (and
only on an Actual Adjustment Date) by the Actual Adjustment Amount determined on
such Actual Adjustment Date, such adjusted Fixed Rent to be effective until the
next Actual Adjustment Date.
(b) For purposes of this Schedule A, the following terms shall have the
following meanings (any term used in this Schedule A and not otherwise defined
shall have the meaning ascribed to such term in the Lease):
"ACTUAL ADJUSTMENT AMOUNT," with respect to each Adjustment Period, shall
mean an amount equal to the sum of the Yearly Adjustment Amounts accrued in such
Adjustment Period.
"ACTUAL ADJUSTMENT DATE" shall mean each of the fourth, seventh, tenth,
thirteenth, sixteenth and nineteenth anniversaries of the date of the Lease.
"ADJUSTMENT PERIOD" shall mean, as applicable, the four year period ending on
the fourth anniversary of the date of the Lease and each three year period
thereafter through the end of the Initial Term.
"INDEX" shall mean the Consumer Price for all items in the Index entitled:
"Consumer Price Index for the United States Southern Region for All Urban
Consumers (1983--100) (as revised) and issued by the Bureau of Labor Statistics
of the United States Department of Labor. (In the event said Index shall
hereafter be converted to a different Standard reference base or otherwise
revised, the determination of the Percentage Increase (defined below) shall be
made with the use of such conversion factor formula or table for converting said
Index as may be published by the Bureau of Labor Statistics or, if said Bureau
shall not publish the same, then with the use of such conversion factor, formula
or table as may be published by any other Federal authority or, failing such
publication, by any other nationally recognized publisher of similar statistical
information.)
"PERCENTAGE CHANGE," with respect to each year of the Term, shall mean a
fraction, the numerator of which is equal to the Index in effect on the Yearly
Adjustment Date less the Index in
<PAGE>
effect on the immediately preceding Yearly Adjustment Date, and the denominator
of which is equal to the Index in effect on the immediately preceding Yearly
Adjustment Date; provided that in no event shall the Percentage Change in any
year exceed four percent (4%).
"YEARLY ADJUSTMENT AMOUNT," with respect to each Yearly Adjustment Date, shall
mean an amount equal to (A) the Fixed Rent in effect for the year immediately
preceding such Yearly Adjustment Date plus the sum of the Yearly Adjustment
Amounts accrued in the applicable Adjustment Period for which an Actual
Adjustment Amount is being determined multiplied by (B) the Percentage Change
for such year.
"YEARLY ADJUSTMENT DATE," with respect to each year of the Term, shall mean
each anniversary of the date of the Lease through the nineteenth anniversary of
the date of the Lease.
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SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT, dated as of August 1, 1995, among United
Auto Group, Inc., a Delaware corporation ("UAG"), United Landers, Inc., a
Delaware corporation and a wholly owned subsidiary of UAG ("UAG/Landers"),
Landers Auto Sales, Inc., an Arkansas corporation (the "Company"), Steve
Landers, an individual residing in Arkansas ("Steve Landers"), and John Landers,
an individual residing in Arkansas ("John Landers") (Steve Landers and John
Landers are collectively referred to herein as the "Landers Shareholders").
UAG/Landers and the Landers Shareholders, and each other person or entity that
may become a party hereto as contemplated hereby, are hereinafter individually
referred to a "Shareholder" and collectively referred to as the "Shareholders."
W I T N E S S E T H :
WHEREAS, the Company has authorized capital stock of ten shares of
common stock, no par value (the "Common Stock"); and
WHEREAS, immediately prior to consummation of the UAG Purchase (as
defined below), the Landers Shareholders and Bob Landers will each own 3.33
shares of Common Stock, which will constitute all of the issued and outstanding
capital stock of the Company as of such time; and
WHEREAS, the Landers Shareholders, Bob Landers, UAG and the Company
have entered into an Amended and Restated Stock Purchase Agreement, dated as of
July 1, 1995 (the "Stock Purchase Agreement"), pursuant to which UAG has agreed
to purchase (the "UAG Purchase") 3.33 shares of Common Stock from Bob Landers
and 2.335 shares of Common Stock from each of the Landers Shareholders (the
"Shares"), such that immediately after giving effect to the UAG Purchase, UAG
and the Landers Shareholders will own eighty percent (80%) and twenty percent
(20%), respectively, of all of the issued and outstanding shares of Common
Stock, on a fully-diluted basis; and
WHEREAS, immediately after consummation of the UAG Purchase, UAG will
contribute the Shares to UAG/Landers, its wholly owned subsidiary; and
WHEREAS, pursuant to the Stock Purchase Agreement it is a condition
precedent to the obligations of UAG and the Landers Shareholders to consummate
the UAG Purchase that UAG, UAG/Landers, the Company and the Landers Shareholders
shall have entered into this Agreement; and
<PAGE>
WHEREAS, UAG, UAG/Landers, the Company and the Landers Shareholders
desire, INTER ALIA, to (i) make arrangements as to the composition of the
Company's Board of Directors and the executive committee thereof, (ii) make
certain provisions for the management of the Company, and (iii) provide certain
rights and set certain restrictions in connection with the transfer of the
Shareholders' shares of capital stock of the Company;
NOW, THEREFORE, in consideration of the mutual terms, conditions,
covenants and agreements made herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1. CERTAIN DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
"AFFILIATE" shall mean, with respect to any Shareholder, (i) in all cases,
any Person that, directly or indirectly, controls, is controlled by or is under
common control with such Shareholder and (ii) in the case of a Shareholder who
is a natural person, his spouse, his issue, his estate and any trust entirely
for the benefit of his spouse and/or issue. Neither the Company nor any of its
Subsidiaries shall be deemed an Affiliate of any Shareholder. For purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with") as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"APPRAISED VALUE" shall have the meaning specified in Section 5.2(c)
hereof.
"BUSINESS DAY" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday, excluding Federal holdings.
"COMMON STOCK" shall have the meaning specified in the first recital
hereof.
"COMMON STOCK EQUIVALENTS" shall mean all rights, warrants, options,
indebtedness or other securities exercisable or exchangeable for, or convertible
into, directly or indirectly, Common Stock.
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"COMPANY" shall have the meaning set forth in the preamble hereof.
"COMPANY BOARD" shall have the meaning specified in Section 3.1(a) hereof.
"EFFECTIVE DATE" shall have the meaning set forth in Section 2.1 hereto.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"FIRST OFFER" shall have the meaning specified in Section 4.3(a) hereof.
"FIRST OFFER PERIOD" shall have the meaning specified in Section 4.3(a)
hereof.
"FULLY-DILUTED SHARES" shall mean, at any time, the outstanding Common
Stock plus (without duplication) all shares of Common Stock issuable, whether at
such time, upon the passage of time or occurrence of future events, upon the
exercise, conversion or exchange of all then outstanding Common Stock
Equivalents.
"LANDERS DESIGNEE" shall have the meaning specified in Section 3.1(a)
hereof.
"LANDERS EXCHANGED SHARES" shall have the meaning specified in Section
5.1(c) hereof.
"LANDERS INTEREST" shall have the meaning specified in Section 5.1(a)
hereof.
"LANDERS INTEREST PERCENTAGE" shall have the meaning specified in Section
5.1(c) hereof.
"LANDERS INTEREST VALUE" shall have the meaning specified in Section 5.1(b)
hereof.
"LANDERS SHAREHOLDERS" shall have the meaning specified in the preamble
hereof.
"MANAGING UNDERWRITER" shall have the meaning specified in Section 5.1(b)
hereof.
"MINORITY INTEREST PERCENTAGE" shall have the meaning specified in Section
5.1(c) hereof.
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"MINORITY SHARES" shall have the meaning specified in Section 5.1(c)
hereof.
"OFFERED SHARES" shall have the meaning specified in Section 4.3(a) hereof.
"OTHER MINORITY HOLDERS" shall have the meaning specified in Section 5.1(c)
hereof.
"OTHER MINORITY INTEREST" shall have the meaning specified in Section
5.1(c) hereof.
"OUTSTANDING UAG SHARES" shall have the meaning specified in Section 5.1(c)
hereof.
"PERSON" shall mean an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
"PUBLIC FLOAT DATE" shall mean the date on which shares of Common Stock
shall have been sold by the Company or its shareholders pursuant to a Public
Offering.
"PUBLIC OFFERING" shall mean the completion of a sale of Common Stock
pursuant to a registration statement which has become effective under the
Securities Act, excluding registration statements on Form S-4, S-8 or similar
forms.
"PURCHASE OFFER" shall have the meaning specified in Section 4.3(a) hereof.
"PURCHASER" shall have the meaning specified in Section 4.3(a) hereof.
"PUT" shall have the meaning specified in Section 5.2(a) hereof.
"PUT CLOSING" shall have the meaning specified in Section 5.2(a) hereof.
"PUT CLOSING DATE" shall have the meaning specified in Section 5.2(a)
hereof.
"PUT INTEREST" shall have the meaning specified in Section 5.2(a) hereof.
"PUT NOTICE" shall have the meaning specified in Section 5.2(a) hereof.
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"PUT PRICE" shall have the meaning specified in Section 5.2(c) hereof.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"SELLING STOCKHOLDER" shall have the meaning specified in Section 4.3(a)
hereof.
"SHAREHOLDERS" shall have the meaning specified in the preamble hereof.
"SHARES" shall have the meaning specified in the third recital hereof.
"STOCK PURCHASE AGREEMENT" shall have the meaning specified in the third
recital hereof.
"SUBSIDIARY" shall mean (i) a corporation a majority of whose capital stock
with voting power, under ordinary circumstances, to elect directors is at the
time, directly or indirectly, owned by the Company, by a Subsidiary or by the
Company and a Subsidiary or (ii) any other Person (other than a corporation) in
which the Company, a Subsidiary or the Company and a Subsidiary, directly or
indirectly, at the date of determination thereof, has at least a majority
ownership interest.
"SUBSTITUTE DIRECTOR" shall have the meaning specified in Section 3.1(b)
hereof.
"TAG-ALONG OFFER" shall have the meaning specified in Section 4.3(b)
hereof.
"TAG-ALONG PARTICIPATION NOTICE" shall have the meaning specified in
Section 4.3(b) hereof.
"TAG-ALONG SALE" shall have the meaning specified in Section 4.3(b) hereof.
"TAG-ALONG SALE NOTICE" shall have the meaning specified in Section 4.3(b)
hereof.
"TAKE-ALONG SALE" shall have the meaning specified in Section 4.3(c)
hereof.
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"TOTAL EXCHANGED SHARES" shall have the meaning specified in Section 5.1(c)
hereof.
"TOTAL INTEREST PERCENTAGE" shall have the meaning specified in Section
5.1(c) hereof.
"TRANSFER" shall have the meaning specified in Section 4.1(a) hereof.
"UAG" shall have the meaning specified in the preamble hereof.
"UAG COMMON STOCK" shall have the meaning specified in Section 5.1(a)
hereof.
"UAG COMMON STOCK EQUIVALENTS" shall have the meaning specified in Section
5.1(c) hereof.
"UAG COMMON STOCK PRICE" shall have the meaning specified in Section 5.1(b)
hereof.
"UAG DESIGNEE" shall have the meaning specified in Section 3.1(a) hereof.
"UAG EXCHANGE" shall have the meaning specified in Section 5.1(a) hereof.
"UAG EXCHANGE DATE" shall have the meaning specified in Section 5.1(c)
hereof.
"UAG PUBLIC OFFERING" shall have the meaning specified in Section 5.1(c)
hereof.
"UAG PURCHASE" shall have the meaning specified in third recital hereof.
"UAG SHAREHOLDERS AGREEMENT" shall mean the Stockholders' Agreement, dated
as of October 15, 1993, among UAG and certain shareholders of UAG named therein.
"WITHDRAWING DIRECTOR" shall have the meaning specified in Section 3.1(b)
hereof.
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ARTICLE II
EFFECTIVENESS OF AGREEMENT
Section 2.1. EFFECTIVE DATE. This Agreement shall become effective as of
the date and time (the "Effective Date") the UAG Purchase shall have been
consummated, and this Agreement shall have no effect for any purpose unless and
until the UAG Purchase shall have occurred.
ARTICLE III
MANAGEMENT OF THE COMPANY;
ACTIVITIES OF THE SHAREHOLDERS
Section 3.1. BOARD OF DIRECTORS.
(a) NUMBER AND MEMBERSHIP. The Shareholders and the Company shall
take all action within their respective power, including, but not limited to,
the voting of capital stock of the Company, required to cause the Board of
Directors of the Company (the "Company Board") to consist of five (5) members
and to at all times include (i) four (4) designees of UAG (each a "UAG
Designee") and (ii) one (1) designee of the Landers Shareholders (the "Landers
Designee"), provided that the Landers Designee shall be Steve Landers or, in the
event that Steve Landers is no longer employed by the Company, John Landers.
The right of the Landers Shareholders to designate one director under this
Section 3.1(a) shall terminate at such time as (i) the Landers Shareholders and
their Affiliates shall first cease to own at least 50% of the Fully-Diluted
Shares owned by the Landers Shareholders on the Effective Date (after giving
effect to the UAG Purchase and without giving effect to any stock splits or
reclassifications occurring after the Effective Date) or (ii) both Steve
Landers' and John Landers' employment with the Company has terminated.
(b) SUBSTITUTE DIRECTOR. In the event that any director (a
"Withdrawing Director") designated in the manner set forth in Section 3.1(a)
hereof is unable to serve, or once having commenced to serve, is removed or
withdraws from the Company Board (other than as contemplated in Section 3.1(a)
hereof), such Withdrawing Director's replacement (the "Substitute Director") on
the Company Board will be designated by the party who designated the Withdrawing
Director. Subject to the foregoing, any UAG Designee may be removed, with or
without cause, by UAG, and UAG may thereafter designate a replacement for such
director. The Company and each of the Shareholders agree to take all action
within its or his power, including, but not limited to, the
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voting of capital stock of the Company, to cause the election of such Substitute
Director.
(c) VACANCIES. Subject to Section 3.1(a) hereof, in the event any
Shareholder entitled to designate a director or directors pursuant to Section
3.1(a) hereof ceases to be so entitled, the vacancy or vacancies resulting
therefrom shall be filled by the remaining directors or by the Shareholders in
the manner provided by law.
(d) EXECUTIVE COMMITTEE. The Company and the Shareholders shall take
all action within their respective power, including, but not limited to, the
voting of capital stock of the Company, required to cause the Executive
Committee of the Company Board to consist of two UAG Designees and the Landers
Designee and each such designee shall be entitled to serve on such committee for
as long as UAG or the Landers Shareholders, as the case may be, are entitled to
designate such designee as a director pursuant to Section 3.1(a) hereof. It is
agreed by the parties hereto that the Executive Committee of the Company Board
shall initially be comprised of Marshall S. Cogan and Carl Spielvogel as the UAG
Designees and Steve Landers as the Landers Designee.
(e) NO ASSIGNMENT. Notwithstanding anything to the contrary in this
Agreement, the rights of the Landers Shareholders to designate a director of the
Company pursuant to Section 3.1(a) hereof are not transferable, whether by sale
of capital stock or otherwise, to any Person.
Section 3.2. MANAGEMENT.
(a) MANAGEMENT OF THE COMPANY. The Landers Shareholders shall have
responsibility for the day-to-day management of the Company, subject in all
cases to the instructions and requirements of, and the policy guidelines
established by, UAG, the Company Board (or the Executive Committee thereof) or
the Chief Executive Officer of UAG. In connection with the management of the
Company, prior to the 1st day of December of each year, the Landers Shareholders
(or their designee) shall prepare a detailed business plan of the Company
covering the following year's budget and subsequent long-range business
forecasts and projections of operating results, which shall be submitted to the
Executive Committee of the Company Board and the Chief Executive Officer of UAG
for its and his approval. Within forty-five (45) days of the close of each
fiscal quarter of the Company, the Landers Shareholders shall provide the
Executive Committee of the Company Board and the
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Chief Executive Officer of UAG with a comparison of actual year-to-date results
with the corresponding budgeted amounts.
(b) TRANSACTIONS REQUIRING CONSENT OF LANDERS DESIGNEE. For as long
as the Landers Shareholders and their Affiliates own shares of capital stock of
the Company or Common Stock Equivalents representing collectively at least
10% of the Fully-Diluted Shares, prior to the third anniversary of the date
hereof, without the consent of the Landers Designee, which consent shall not be
unreasonably withheld, (A) the Company shall not, and the remaining
Shareholders, severally, shall not permit the Company to:
(i) directly or indirectly declare or pay any dividends or make
distributions in cash, property or securities upon any of its equity
securities to the extent any such dividend or distribution has the effect
of reducing the working capital of the Company to an amount that is less
than 80% of the amount of working capital required by the automobile
manufacturers with whom the Company has entered into franchise agreements;
(ii) directly or indirectly redeem, purchase or otherwise acquire any
equity security of the Company, except for redemptions and purchases
permitted herein or in the Stock Purchase Agreement;
(iii) voluntarily liquidate or dissolve;
(iv) merge or consolidate with any Person; or
(v) sell or dispose of any assets other than in the ordinary course of
business; and
(B) UAG shall not grant registration rights to any future investor
containing terms and conditions more favorable to such future investor than
those terms and conditions applicable to the Landers Shareholders contained in
the Registration Rights Agreement, dated August 1, 1995, among UAG and certain
parties named therein.
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ARTICLE IV
TRANSFER OF SECURITIES
Section 4.1. CONSENT OF UAG.
(a) Subject to the rights of Landers Shareholders contained in
Sections 4.3(b), 5.1 and 5.2 hereof and for as long as UAG/Landers (or an
Affiliate thereof) shall own 35% of the Fully-Diluted Shares, prior to the third
anniversary of the date hereof, no Shareholder other than UAG/Landers shall
directly or indirectly Transfer (as defined below) any shares of capital stock
of the Company now or hereafter at any time owned by such Shareholder or any
interest therein, or the stock certificate or certificates representing any such
shares, or any voting trust certificate or certificates issued with respect to
such shares, without the prior written consent of UAG. Any Transfer effected,
or purported or attempted to be effected, not in accordance with the terms and
conditions of this Section 4.1, or to a Person prohibited by law from holding
shares of capital stock of the Company, shall be void and shall not bind the
Company. As used in this Agreement, the term "Transfer" shall mean and include
(i) when used as a verb, the act of selling, pledging, mortgaging,
hypothecating, giving, transferring, creating a security interest, lien or trust
(voting or otherwise), assigning or otherwise encumbering or disposing of, and
(ii) when used as a noun, any sale, pledge, mortgage, hypothecation, gift,
transfer, creation of security interest, lien or trust, any assignment or other
encumbrance or disposition.
(b) Notwithstanding the provisions of Section 4.1(a) hereof, but
subject to the provisions of Section 4.2(a) and (b) hereof, a Shareholder may
effect a Transfer of shares of capital stock of the Company by will or the laws
of descent and distribution to the legal representative of such Shareholder or
to such Shareholder's spouse, immediate family members or lineal descendants or
a trust the primary beneficiaries of which are such persons.
Section 4.2. GENERAL RESTRICTIONS. No Shareholder (including UAG/Landers
and any other Shareholder permitted to Transfer shares of capital stock of the
Company or any interest therein in accordance with Section 4.1 hereof) shall,
directly or indirectly, Transfer any shares of capital stock of the Company or
any interest therein, whether voluntarily or involuntarily, unless:
(a) (i) such Transfer complies with the provisions of this Agreement,
including Section 4.3 hereof, if applicable, and
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(ii) the transferee (if other than another Shareholder) agrees to be bound by
this Agreement and executes a counterpart hereof and such further documents as
may be necessary, in the opinion of the Company, to make it a party hereto (any
such transferee shall be deemed to be a Shareholder for purposes of this
Agreement); and
(b) such Transfer is made pursuant to either (i) an effective
registration statement under the Securities Act and any applicable state
securities laws, or (ii) an available exemption from the registration
requirements of the Securities Act and such laws and, prior to any such Transfer
(other than a Transfer to another Shareholder), the Person proposing the
Transfer provides to the Company a written opinion of legal counsel satisfactory
in form and substance to the Company and its counsel to the effect that the
proposed Transfer may be effected without registration under the Securities Act
and any applicable state securities laws.
Section 4.3. RIGHT OF FIRST REFUSAL AND CO-SALE RIGHTS AND OBLIGATIONS.
(a) RIGHT OF FIRST REFUSAL.
(i) FIRST OFFER NOTICE. Except as otherwise permitted by Section
4.1(b) hereof, subject to Section 4.1(a) hereof, at any time prior to the Public
Float Date, no Shareholder (other than UAG/Landers (or an Affiliate thereof))
shall transfer all or any of his shares of Common Stock (which shall include all
or any Common Stock Equivalents) (the "Offered Shares") unless (x) such
Shareholder (the "Selling Shareholder") has received a bona fide written offer
(the "Purchase Offer") from the proposed transferee of the Offered Shares (the
"Purchaser") to purchase the Offered Shares, which offer shall be in writing
signed by the Purchaser, and (y) the Selling Shareholder first offers to sell to
UAG the Offered Shares. Prior to making any transfer that is subject to this
Section 4.3(a), the Selling Shareholder shall give UAG written notice (the
"Offer Notice") which shall include (x) the identity of the Purchaser, (y) a
copy of the Purchase Offer, and (z) an offer (the "First Offer") to sell to UAG
the Offered Shares upon the same terms and conditions as those provided for in
the Purchase Offer. The First Offer shall be irrevocable for a period of thirty
(30) days following receipt by UAG of the Offer Notice (the "First Offer
Period").
(ii) ACCEPTANCE OF FIRST OFFER. At any time during the First Offer
Period, UAG may accept the First Offer of the Offered Shares by giving written
notice to the Selling Shareholder of such acceptance . In the event UAG accepts
the First Offer, the closing of the sale of the Offered Shares shall take place
within
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thirty (30) days after the First Offer is accepted by UAG or, if later, the date
of closing set forth in the Purchaser Offer. At such closing, the Selling
Shareholder will deliver certificates for such Offered Shares against payment of
the purchase price therefor, and UAG will acquire the Offered Shares free and
clear of all liens, pledges, encumbrances, restrictions and security interests
of any kind. If UAG does not accept the First Offer, the Selling Shareholder
may sell the Offered Shares to the Purchaser at any time within thirty (30) days
after the last day of the First Offer Period, provided that such sale shall be
made on terms no less favorable to the Selling Shareholder than the terms
contained in the Purchase Offer and provided further that such sale complies
with the terms, conditions and restrictions of this Agreement. In the event
that the Offered Shares are not sold in accordance with the terms of the
preceding sentence, the Offered Shares shall again be subject to all of the
conditions and restrictions of this Section 4.3(a).
(b) TAG-ALONG RIGHT.
(i) TAG-ALONG SALE NOTICE. If, at any time prior to
the earlier to occur of the Public Float Date and the Put Closing Date, UAG (or
an Affiliate thereof) at any time receives a bona fide offer (a "Tag-Along
Offer") from a third party to purchase shares of Common Stock from UAG (or an
Affiliate thereof) or UAG otherwise proposes to sell shares of Common Stock for
value, in each case other than in connection with a Public Offering (a
"Tag-Along Sale"), UAG shall be required to notify the Landers Shareholders, not
less than fifteen (15) days prior to such proposed Tag-Along Sale, of such
Tag-Along Offer or proposed Tag-Along Sale and the Landers Shareholders shall
have the option to participate in such Tag-Along Sale as set forth in clause
(ii) of this Section 4.3(b). The notice from UAG (the "Tag-Along Sale Notice")
shall set forth: (A) the number of shares of Common Stock proposed to be
transferred, (B) the name and address of the proposed purchaser, (C) the
proposed amount of consideration and terms and conditions of payment offered by
or to such proposed purchaser, and (D) that the proposed purchaser has been
informed of the "tag-along" rights provided for in this Section 4.3(b) and has
agreed to purchase shares of Common Stock in accordance with the terms hereof.
(ii) TAG-ALONG RIGHT. Any time prior to the earlier to occur of the
Public Float Date and the Put Closing Date, each Landers Shareholder shall have
the right to require the proposed purchaser to purchase from him a number of
whole shares of Common Stock up to the number of shares equal to the total
number of shares to be sold to the proposed purchaser multiplied by a fraction,
the numerator of which is the number of shares of
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Common Stock held by him and the denominator of which is the total number of
shares of Common Stock held by him and UAG (or an Affiliate thereof). Any
shares of Common Stock purchased from a Landers Shareholder pursuant to this
Section 4.3(b) shall be paid for upon the same terms and conditions (including
as to price and type of consideration) received by UAG.
(iii) TAG-ALONG NOTICE. If a Landers Shareholder elects to exercise
the tag-along right provided for in this Section 4.3(b), he must deliver written
notice to UAG (the "Tag-Along Participation Notice") within five (5) days
following receipt by him of the Tag-Along Sale Notice. If such Landers
Shareholder does not deliver a Tag-Along Participation Notice within such
five-day period he shall be deemed to have waived his tag-along right with
respect to the proposed Tag-Along Sale. Each Tag-Along Participation Notice
shall state the number of shares of Common Stock that such Landers Shareholder
proposes to include in such transfer to the proposed purchaser up to the number
of shares determined in accordance with Section 4.3(b)(ii) hereof.
(c) TAKE-ALONG RIGHT.
(i) TAKE-ALONG NOTICE. If UAG (or an Affiliate thereof) at any time
receives a bona fide offer from a third party to purchase shares of Common Stock
from UAG (or an Affiliate thereof) or UAG (or an Affiliate thereof) otherwise
proposes to sell shares of Common Stock for value (a "Take-Along Sale"), UAG can
require the other Shareholders, to participate in such Take-Along Sale as set
forth in clause (ii) of this Section 4.3(c). If UAG elects to exercise the
take-along right provided for in this Section 4.3(c), it must provide, at least
twenty (20) days before the date of consummation of the proposed Take-Along
Sale, notice to each other Shareholder setting forth: (i) the number of shares
of Common Stock proposed to be transferred, (ii) the number of shares of Common
Stock that such Shareholder must include in such transfer to the proposed
purchaser as determined in accordance with clause (ii) of this Section 4.3(c),
(iii) the name and address of the proposed purchaser, (iv) the proposed amount
of consideration and terms and conditions of payment offered by or to such
proposed purchaser, and (v) that the proposed purchaser has been informed of the
"take-along" rights provided for in this Section 4.3(c) and has agreed to
purchase shares of Common Stock in accordance with the terms hereof.
(ii) TAKE-ALONG RIGHT. UAG shall at any time have the right to
require each other Shareholder to sell to the proposed purchaser a number of
whole shares of Common Stock up to the number of shares equal to the total
number of shares to be sold
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to the proposed purchaser multiplied by a fraction, the numerator of which is
the number of shares of Common Stock held by such other Shareholder and the
denominator of which is the total number of shares of Common Stock held by all
of the Shareholders, including UAG (or an Affiliate thereof). Any shares of
Common Stock purchased from Shareholders other than UAG pursuant to this Section
4.3(c) shall be paid for upon the same terms and conditions (including as to
price and type of consideration) received by UAG.
Section 4.4. LEGENDS ON STOCK CERTIFICATES. For so long as shares of
capital stock of the Company held by a Shareholder are subject to this
Agreement, all certificates representing such shares shall bear the following
legend:
"The securities represented by this certificate are subject to
restrictions on transfer and certain other provisions of the Shareholders'
Agreement, dated as of August 1, 1995, as the same may be amended from time
to time, by and among United Auto Group, Inc., United Landers, Inc.,
Landers Auto Sales, Inc. (the "Company"), Steve Landers, John Landers, Bob
Landers and certain other shareholders of the Company who may from time to
time become parties to such Shareholders' Agreement, a copy of which may be
obtained at the offices of the Company."
Section 4.5. IMPROPER TRANSFERS INEFFECTIVE. Any purported transfer of
Common Stock by a Shareholder which is not permitted by the foregoing provisions
of this Article IV, or which is in violation of such provisions, shall be void
and of no force and effect whatsoever.
ARTICLE V
EXCHANGE; PUT
Section 5.1 EXCHANGE FOR UAG COMMON STOCK.
(a) In the event of an underwritten public offering pursuant to an
effective registration statement under the Securities Act covering the offering
and sale of common stock, par value $.0001 per share, of UAG ("UAG Common
Stock") for the account of UAG on a firm commitment basis (the "UAG Public
Offering"), the Landers Shareholders (and any transferee or Affiliate of the
Landers Shareholders holding shares of Common Stock) shall be required to
exchange all shares of Common Stock beneficially owned by them (and their
transferees and Affiliates) (the "Landers Interest") immediately prior to the
closing of the
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UAG Public Offering for shares of UAG Common Stock under the terms and
conditions set forth below, and UAG shall be required to exchange the Landers
Interest for UAG Common Stock (such exchange is hereinafter referred to as the
"UAG Exchange").
(b) If the parties are required to consummate the UAG Exchange, the
value of UAG (the "UAG Value") and the Company (the "Company Value") shall be
determined by the investment banking firm which is acting as managing
underwriter (the "Managing Underwriter") for the UAG Public Offering and such
determination shall be binding upon the parties hereto. The value of the
Landers Interest (the "Landers Interest Value") shall be an amount equal to (A)
the Company Value multiplied by (B) a fraction, the numerator of which shall be
equal to the aggregate number of shares of Common Stock comprising the Landers
Interest immediately prior to the UAG Exchange, and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to the UAG Exchange. The additional cost which the Managing Underwriter
charges to compute the UAG Value and the Company Value shall be paid by UAG.
(c) The number of shares of UAG Common Stock to which the Landers
Shareholders are entitled upon the consummation of the UAG Exchange (the
"Landers Exchanged Shares") shall be determined by multiplying the Landers
Interest Percentage (as defined below) by the total number of shares of UAG
Common Stock outstanding immediately prior to the closing of the UAG Public
Offering, which such number of shares shall include all shares of UAG Common
Stock issued in respect of the Landers Interest pursuant to this Section 5.1 and
to holders of minority interests (the "Other Minority Holders") in subsidiaries
of UAG (the "Other Minority Interests") pursuant to agreements comparable to the
agreement contained in this Section 5.1 (collectively, the "Minority Shares"),
but shall not include any other shares of UAG Common Stock issuable upon the
exercise, conversion or exchange of all then outstanding rights, warrants,
options, indebtedness or other securities exercisable or exchangeable for, or
convertible into, directly or indirectly, UAG Common Stock (collectively, "UAG
Common Stock Equivalents"). Specifically, the number of Landers Exchange Shares
shall be determined by multiplying (A) the number of Total Exchanged Shares (as
defined below) by (B) a fraction, the numerator of which shall be equal to the
Landers Interest Percentage, and the denominator of which shall be equal to the
Total Interest Percentage (as defined below). For purposes of this Section 5.1,
(i) the "Landers Interest Percentage" shall be determined by dividing the
Landers Interest Value by the UAG Value, (ii) the "Total Interest Percentage"
shall equal the sum of all of the "Minority Interest Percentages," each of which
shall be determined pursuant to the
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agreements between UAG and the Other Minority Holders relating to the exchange
of the Other Minority Interests for shares of UAG Common Stock in connection
with the UAG Public Offering, and (iii) the "Total Exchanged Shares" shall be
determined by dividing (A) the product of (x) the Total Interest Percentage and
(y) the total number of shares of UAG Common Stock outstanding immediately prior
to the closing of the UAG Public Offering (the "Outstanding UAG Shares") (not
including the Minority Shares and any shares of UAG Common Stock issuable upon
the exercise, conversion or exchange of any UAG Common Stock Equivalent) by (B)
an amount equal to 1 minus the Total Interest Percentage. Expressed as a
formula, the number of Landers Exchanged Shares shall be determined as follows:
(TIP X OUS) LIP
--------------- X ---
(1 - TIP) TIP,
where "TIP" refers to the Total Interest Percentage, "OUS" refers to the
Outstanding UAG Shares and "LIP" refers to the Landers Interest Percentage.
(d) The Landers Exchanged Shares shall be issued immediately prior to
the occurrence of the UAG Public Offering and UAG shall not be required to issue
such shares if the UAG Public Offering is not consummated for any reason.
(e) Upon consummation of the UAG Exchange, (i) if the UAG Public
Offering is not a Qualified Public Offering (as such term is defined in UAG's
Amended and Restated Certificate of Incorporation) or the UAG Shareholders
Agreement otherwise remains in full force or effect, then the Landers
Shareholders shall each become a party to the UAG Shareholders Agreement and
(ii) the Landers Shareholders agree to take such actions and to execute such
instruments as UAG may reasonably request to evidence the consummation of the
UAG Exchange and the change in the agreement between the parties hereto as a
result of the UAG Exchange.
Section 5.2 ABILITY TO PUT. (a) If the UAG Public Offering has not
occurred within five years of the date hereof, pursuant to the provisions of
this Section 5.2, the Landers Shareholders shall have the option to sell to UAG,
and thereupon UAG shall have the obligation to purchase, all, but not less than
all, of the number of shares of Common Stock held by the Landers Shareholders
(the shares which are put by the Landers Shareholders pursuant to this Section
5.2 are hereinafter referred to as the "Put Interest") at a price equal to the
Put Price (as defined in Section 5.2(c)) (such option to sell and reciprocal
obligation to purchase are hereinafter referred to as
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the "Put"). In the event the Landers Shareholders intend to exercise the Put,
the Landers Shareholders shall deliver a written notice (the "Put Notice") to
UAG notifying UAG of the Landers Shareholders' desire to exercise the Put. The
closing ("Put Closing") for the purchase by UAG of the Put Interest upon
exercise of the Put shall occur at UAG's principal office, or at such other
place as shall be mutually agreeable to the Landers Shareholders and UAG, within
twenty (20) Business Days after the determination of the Put Price in accordance
with Sections 5.2(c) (such date of closing hereinafter referred to as the "Put
Closing Date").
(b) PUT CLOSING. On the Put Closing Date, (i) UAG shall pay to the
Landers Shareholders by wire transfer or certified or official bank check an
amount equal to the Put Price with respect to the Put Interest and (ii) the
Landers Shareholders shall deliver to UAG such documents and instruments as
shall be effective to vest in UAG all of the Landers Shareholders' right, title
and interest in and to all of the Put Interest, free and clear of all liens,
pledges, encumbrances, restrictions and security interests of any kind.
(c) PUT PRICE. (A) In the event that either Steve Landers or John
Landers is not continuously employed by the Company from the date hereof through
the fifth anniversary of the date hereof pursuant to the terms of his respective
Employment Agreement with the Company, "Put Price" for the Put Interest shall
mean an amount equal to the Put Interest's proportionate share of the
UAG/Landers Net Worth (as defined herein). For purposes of this Section 5.2,
the term "UAG/Landers Net Worth" shall mean the value or amount, as reflected on
UAG/Landers most recent consolidated balance sheet, of (i) the total assets of
the Companies, LESS (ii) the intangible assets of the Companies, LESS (iii) the
current liabilities of the Companies, LESS (iv) the long-term liabilities of the
Companies and any outstanding equity securities that are senior to the Common
Stock, provided that for purposes of this Section 5.1(c), UAG/Landers Net Worth
shall be calculated giving effect to the net worth (as determined in accordance
with the foregoing formula) (the "Acquired Net Worth") of the entity or entities
(each, an "Acquired Entity" and, collectively, the "Acquired Entities") acquired
pursuant to Section 5.11 of the Stock Purchase Agreement, provided that (i) if
the consideration paid by UAG (or an Affiliate thereof) in the acquisition
pursuant to which UAG contributes $5,000,000 exceeds $5,000,000, then the
Acquired Net Worth included in the UAG/Landers Net Worth shall be equal to an
amount obtained by multiplying the net worth of the Acquired Entity obtained in
such acquisition by a fraction, the numerator of which is equal to $5,000,000
and the denominator of which is equal to the
17
<PAGE>
consideration paid in such acquisition, or (ii) if there is more than one
acquisition pursuant to Section 5.11 of the Stock Purchase Agreement pursuant to
which UAG has contributed an aggregate of $5,000,000, and the total
consideration paid by UAG (or an Affiliate thereof) in such acquisitions exceeds
$5,000,000, then the Acquired Net Worth included in the UAG/Landers Net Worth
with respect to all of the Acquired Entities shall be an amount equal to the
product of (A) the sum of each Acquired Entity's Pro Rata Net Worth (as defined
below) and (B) a fraction, the numerator of which is equal to $5,000,000 and the
denominator of which is equal to the total consideration paid for all of the
Acquired Entities. For purposes of this Agreement, the term "Acquired Entity's
Pro Rata Net Worth" shall mean, with respect to an Acquired Entity, an amount
equal to the product of (i) the net worth of such Acquired Entity and (ii) a
fraction, the numerator of which is equal to the consideration paid for such
Acquired Entity and the denominator of which is equal to the total consideration
paid for all Acquired Entities.
(B) In the event that both Steve Landers and John Landers remain
continuously employed by the Company from the date hereof through the fifth
anniversary of the date hereof pursuant to the terms of their respective
Employment Agreements with the Company, "Put Price" for the Put Interest shall
mean the fair market value of the Put Interest determined by mutual agreement of
UAG and the Landers Shareholders. In the event UAG and the Landers Shareholders
are unable to agree on a fair market value, UAG and the Landers Shareholders
shall each submit their respective valuations of the Put to a third party
appraiser selected pursuant to the procedures set forth below who shall
determine a fair market value pursuant to the appraisal procedure set forth
below, which shall be binding upon the parties hereto (the "Appraised Value").
In order to determine the Appraised Value of the Put Interest to be purchased
and sold pursuant to the provisions of this Section 5.2, UAG and the Landers
Shareholders shall mutually agree on an appraiser who shall choose one of the
valuations submitted to it pursuant to this Section 5.2(c)(B) within thirty (30)
days, which shall be binding on UAG and the Landers Shareholders. UAG and the
Landers Shareholders shall share the cost of such appraiser equally. The
appraiser appointed pursuant to this Section 5.2(c)(B) shall be a nationally
recognized investment banking firm or nationally recognized accounting firm
qualified in valuing automobile dealerships similar to the Company and shall be
unaffiliated with either party.
18
<PAGE>
ARTICLE VI
MISCELLANEOUS
Section 6.1. TERM. All provisions of this Agreement shall terminate upon
consummation of the UAG Exchange or, in respect of any Shareholder, when such
Shareholder no longer owns any capital stock of the Company. Notwithstanding
the foregoing, the provisions contained in Article III hereof shall terminate
and cease to be of any further effect on August 1, 2004, unless the Shareholders
agree in writing to extend the effectiveness of such provisions at any time
after August 1, 2002 and prior to August 1, 2004.
Section 6.2. AMENDMENT; WAIVER. This Agreement may be altered or amended
only with the written consent of all of the parties hereto. Any term of this
Agreement and the observance of any term herein may be waived (either generally
or in a particular instance and either retroactively or prospectively) by any
party hereto only with the written consent of such party, provided that any such
waiver by any party hereto shall not operate or be construed as a waiver of any
other term or observance of any term herein, whether or not similar.
Section 6.3. SPECIFIC PERFORMANCE. The parties recognize that the
obligations imposed on them in this Agreement are special, unique and of
extraordinary character, and that in the event of breach by any party, damages
will be an insufficient remedy; consequently, it is agreed that the parties
hereto may have specific performance (in addition to damages) as a remedy for
the enforcement hereof, without proving damages.
Section 6.4. ASSIGNMENT. Except as otherwise expressly provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and permitted assigns of the parties
hereto. This Agreement may be assigned by a Shareholder only in connection with
a Transfer of any shares of Common Stock in accordance with the terms of this
Agreement; PROVIDED, HOWEVER, that the rights of the Landers Shareholders
contained in Sections 3.1, 3.2, 4.3 and 5.2 hereof cannot be assigned or
otherwise transferred in connection with any Transfer of shares of Common Stock
by the Landers Shareholders without the prior written consent of UAG. No
assignment of this Agreement shall relieve the assignor from any liability
hereunder.
Section 6.5. SHARES SUBJECT TO THIS AGREEMENT. All shares of capital
stock of the Company now owned or hereafter acquired
19
<PAGE>
by any of the Shareholders shall be subject to the terms of this Agreement.
Section 6.6. ADDITIONAL SHAREHOLDERS. The Company covenants that it shall
not issue or cause to be issued at any time prior to the Public Float Date any
shares of capital stock of the Company to any Person in any transaction not
involving a Public Offering of such shares, unless as a condition to such
issuance such Person agrees to become a party to this Agreement and to be bound
by all the obligations of a Shareholder under this Agreement. Stock certificates
issued to such Persons shall be marked as provided in Section 4.4 hereof. No
shares of capital stock of the Company shall be transferred on the books of the
Company until all the applicable provisions of this Agreement have been complied
with.
Section 6.7. LEGEND. Certificates evidencing shares of capital stock
shall bear such legends as the Company shall reasonably deem necessary to
protect the rights of the parties hereunder.
Section 6.8. NOTICES. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed, sent by facsimile transmission or sent by
certified, registered, or express mail, postage prepaid, to the parties at the
addresses sent forth below. Notices or other communications given by certified,
registered, or express mail shall be deemed given three (3) Business Days after
the date of mailing. Notices or other communications sent in any other manner
shall be deemed given only when actually received.
If to the Company:
Landers Auto Sales, Inc.
Congo Exit 118 -- Highway I-30
Benton, Arkansas 72015
Facsimile No.: (501) 778-4077
Attn: Mr. Steve Landers
20
<PAGE>
with a copy to:
Davidson, Horne & Hollingsworth
401 West Capitol
Suite 501
P.O. Box 3363
Little Rock, Arkansas 62203
Facsimile No.: (501) 372-7142
Attn: Garland W. Binns, Jr., Esq.
and
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and
General Counsel
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Facsimile No.: (212) 821-8111
Attn: Peter A. Appel, Esq.
If to any Landers Shareholder:
Mr. Steve Landers
3316 Highway 5
Benton, Arkansas 72015
Facsimile No.: (501) 778-4077
with a copy to:
Davidson, Horne & Hollingsworth
401 West Capitol
Suite 501
P.O. Box 3363
Little Rock, Arkansas 62203
Facsimile No.: (501) 372-7142
Attn: Garland W. Binns, Jr., Esq.
21
<PAGE>
If to UAG or UAG/Landers:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and
General Counsel
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Facsimile No.: (212) 821-8111
Attn: Peter A. Appel, Esq.
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or three (3) days after the date so mailed;
PROVIDED, HOWEVER, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
Section 6.9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and which
counterparts together shall constitute one and the same agreement of the parties
hereto.
Section 6.10. SECTION HEADINGS. Headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of this Agreement or any provisions hereof.
SECTION 6.11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ARKANSAS, WITHOUT GIVING
EFFECT TO THE CHOICE-OF-LAW PROVISIONS THEREOF.
Section 6.12. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, discussions, and understandings among such
parties with respect to such subject matter.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
UNITED AUTO GROUP, INC.
By: /s/Carl Spielvogel
--------------------------
Name: Carl Spielvogel
Title: Chairman and
Chief Executive Officer
UNITED LANDERS, INC.
By:/s/ Carl Spielvogel
---------------------------
Name: Carl Spielvogel
Title: Chairman and
Chief Executive Officer
LANDERS AUTO SALES, INC.
By:/s/Steve Landers
---------------------------
Name: Steve Landers
Title: President and
Chief Executive Officer
/s/Steve Landers
------------------------------
Steve Landers
/s/John Landers
------------------------------
John Landers
23
<PAGE>
EXHIBIT 10.4.9
CHRYSLER CORPORATION
EAGLE
SALES AND SERVICE AGREEMENT
United Landers Auto Sales, Inc. d/b/a Landers
- ---------------------------------------------------------------
Chrysler Plymouth Dodge Jeep Eagle
- ---------------------------------------------------------------
located at Alcoa Road at I-30 Benton Arkansas
------------------------------------------------------
(STREET) (CITY) (STATE)
a(n) Corporation hereinafter called DEALER, and
-------------------------
(INDIVIDUAL, CORPORATION
OR PARTNERSHIP)
Chrysler Corporation, a Delaware corporation, hereinafter sometimes referred to
as "CC", have entered into this Chrysler Corporation Eagle Sales and Service
Agreement, hereinafter referred to as "Agreement", the terms of which are as
follows:
_______________________________________________________________________________
INTRODUCTION
The purpose of the relationship established by this Agreement is to provide a
means for the sale and service of specified Eagle vehicles and the sale of CC
vehicle parts and accessories in a manner that will maximize customer
satisfaction and be of benefit to DEALER and CC.
While the following provisions, each of which is material, set forth the
undertakings of this relationship, the success of those undertakings rests on a
recognition of the mutuality of interests of DEALER and CC, and a spirit of
understanding and cooperation by both parties in the day to day performance of
their respective functions. As a result of such considerations, CC has entered
into this Agreement in reliance upon and has placed its trust in the personal
abilities, expertise, knowledge and integrity of DEALER's principal owners and
management personnel, which CC anticipates will enable DEALER to perform the
personal services contemplated by this Agreement.
It is the mutual goal of this relationship to promote the sale and service of
specified CC products by maintaining and advancing their excellence and
reputation by earning, holding and furthering the public regard for CC and all
CC dealers.
_____________________________
<PAGE>
1 PRODUCTS COVERED
DEALER has the right to order and purchase from CC and to sell at retail only
those specific models of CC vehicles, sometimes referred to as "specified CC
vehicles," listed on the Motor Vehicle Addendum, attached hereto and
incorporated herein by reference. CC may change the models of CC vehicles
listed on the Motor Vehicle Addendum by furnishing DEALER a superseding Motor
Vehicle Addendum. Such a superseding Motor Vehicle Addendum will not be deemed
or construed to be an amendment to this Agreement.
________________________________________________________________
2 DEALER'S MANAGEMENT
CC has entered into this Agreement relying on the active, substantial and
continuing personal participation in the management of DEALER's organization by:
NAME POSITION
Steven J. Landers President
----------------- ------------------
----------------- ------------------
DEALER represents and warrants that at least one of the above named individuals
will be physically present at DEALER's facility (sometimes referred to as
"Dealership Facilities") during most of its operating hours and will manage all
of DEALER's business relating to the sale and service of CC products. DEALER
shall not change the personnel holding the above described position(s) or the
nature and extent of his/her/their management participation without the prior
written approval of CC.
________________________________________________________________
3 DEALER'S CAPITAL STOCK OR PARTNERSHIP INTEREST
If DEALER is a corporation or partnership, DEALER represents and agrees that the
persons named below own beneficially the capital stock or partnership interest
of DEALER in the percentages indicated below. DEALER warrants there will be no
change affecting more than 50% of the ownership interest of DEALER, nor will
there be any other change in the ownership interest of DEALER which may affect
the managerial control of DEALER without CC's prior written approval.
-2-
<PAGE>
NAME VOTING STOCK NON-VOTING PARTNERSHIP ACTIVE
STOCK INTEREST YES/NO
Steven J. Landers 10.00 % % % Yes
- ------------------- -------- ---------- ------------ -----
John E. Landers 10.00 % % % Yes
- ------------------- -------- ---------- ------------ -----
United Auto Group,
Inc. 80.00 % % % No
- ------------------- -------- ---------- ------------ -----
% % %
- ------------------- -------- ---------- ------------ -----
% % %
- ------------------- -------- ---------- ------------ -----
TOTAL 100.00 % % %
-------- ---------- ------------ -----
________________________________
4 SALES LOCALITY
DEALER shall have the non-exclusive right, subject to the provisions of this
Agreement, to purchase from CC those new specified CC vehicles, vehicle parts,
accessories and other CC products for resale at the DEALER's facilities and
location described in the Dealership Facilities and Location Addendum, attached
hereto and incorporated herein by reference. DEALER will actively and
effectively sell and promote the retail sale of CC vehicles, vehicle parts and
accessories in DEALER's Sales Locality. As used herein, "Sales Locality" shall
mean the area designated in writing to DEALER by CC from time to time as the
territory of DEALER's responsibility for the sale of CC vehicles, vehicle parts
and accessories, although DEALER is free to sell said products to customers
wherever they may be located. Said Sales Locality may be shared with other CC
dealers of the same line-make as CC determines to be appropriate.
________________________________
5 ADDITIONAL TERMS AND PROVISIONS
The additional terms and provisions set forth in the document entitled "Chrysler
Corporation Sales and Service Agreement Additional Terms and Provisions" marked
"Form 91(J-E)," as may hereafter be amended from time to time, constitute a part
of this Agreement with the same force and effect as if set forth at length
herein, and the term "this Agreement" includes said additional terms and
provisions.
________________________________
6 FORMER AGREEMENTS, REPRESENTATIONS OR STATEMENTS
This Chrysler Corporation Eagle Sales and Service Agreement and other documents,
(or their successors as specifically provided for herein) which are specifically
incorporated herein by reference constitute the entire agreement between the
parties
-3-
<PAGE>
relating to the purchase by DEALER of those new specified CC vehicles, parts and
accessories from CC for resale; and it cancels and supersedes all earlier
agreements, written or oral, between CC and DEALER relating to the purchase by
DEALER of Eagle vehicles, parts and accessories, except for (a) amounts owing by
CC to DEALER, such as payments for warranty service performed and incentive
programs, or (b) amounts owing or which may be determined to be owed, as a
result of an audit or investigation, by DEALER to CC due to DEALER's purchase
from CC of vehicles, parts, accessories and other goods or services, or (c)
amounts DEALER owes to CC as a result of other extensions of credit by CC to
DEALER. No representations or statements, other than those expressly set forth
herein or those set forth in the applications for this Agreement submitted to CC
by DEALER or DEALER's representatives, are made or relied upon by any party
hereto in entering into this Agreement.
________________________________
7 WAIVER AND MODIFICATION
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 the filling in of blank spaces and lines) will be valid or binding on CC
unless approved in writing by the President or a Vice President or the National
Dealer Placement Manager of Chrysler Corporation.
________________________________
8 AMENDMENT
DEALER and CC recognize that this Agreement does not have an expiration date and
will continue in effect unless terminated under the limited circumstances set
forth in Paragraph 28. DEALER and CC further recognize that the passage of
time, changes in the industry, ways of doing business and other unforeseen
circumstances may cause CC to determine that it should amend all Chrysler
Corporation Eagle Sales and Service Agreements. Therefore, CC will have the
right to amend this Agreement to the extent that CC deems advisable, provided
that CC makes the same amendment in Chrysler Corporation Eagle Sales and Service
Agreements generally. Each such amendment will be issued in a notice sent by
certified mail or delivered in person to DEALER and signed by the President or a
Vice President or the National Dealer Placement Manager of Chrysler Corporation.
Thirty-five (35) days after mailing or delivery of such notice to DEALER, this
Agreement will be deemed amended in the manner and to the extent set froth in
the notice.
________________________________
-4-
<PAGE>
9 ARBITRATION
Any and all disputes arising out of or in connection with the interpretation,
performance or non-performance of this Agreement or any and all disputes arising
out of or in connection with transactions in any way related to this Agreement
(including, but not limited to, the validity, scope and enforceability of this
arbitration provision, or disputes under rights granted pursuant to the statutes
of the state in which DEALER is licensed) shall be finally and completely
resolved by arbitration pursuant to the arbitration laws of the United States of
America as codified in Title 9 of the United States Code, Sections 1-14, under
the Rules of Commercial Arbitration of the American Arbitration Association
(hereinafter referred to as the "Rules") by a majority vote of a panel of three
arbitrators. One arbitrator will be selected by DEALER (DEALER's arbitrator).
One arbitrator will be selected by CC (CC's arbitrator). These arbitrators must
be selected by the respective parties within ten (10) business days after
receipt by either DEALER or CC of a written notification from the other party of
a decision to arbitrate a dispute pursuant to this Agreement. Should either CC
or DEALER fail to select an arbitrator within said ten-day period, the party who
so fails to select an arbitrator will have its arbitrator selected by the
American Arbitration Association upon the application of the other party. The
third arbitrator must be an individual who is familiar with business
transactions and be a licensed attorney admitted to the practice of law within
the United States of America, or a judge. The third arbitrator will be selected
by DEALER's and CC's arbitrators. If said arbitrators cannot agree on a third
arbitrator within thirty (30) days from the date of the appointment of the last
selected arbitrator, then either DEALER's or CC's arbitrator may apply to the
American Arbitration Association to appoint said third arbitrator pursuant to
the criteria set forth above. The arbitration panel shall conduct the
proceedings pursuant to the then existing Rules.
Notwithstanding the foregoing, to the extent any provision of the Rules conflict
with any provision of this Paragraph 9, the provisions of this Paragraph 9 will
be controlling.
CC and DEALER agree to facilitate the arbitration by: (a) each party paying to
the American Arbitration Association one-half (1/2) of the required deposit
before the proceedings commence; (b) making available to one another and to the
arbitration panel, for inspection and photocopying all documents, books and
records, if determined by the arbitrator to be relevant to the dispute; (c)
making available to one another and to the arbitration panel personnel directly
or indirectly under their control, for testimony during hearings and prehearing
proceedings if determined by the arbitration panel to be relevant to the
dispute; (d) conducting arbitration hearings to the greatest extent possible on
consecutive business days; and (e) strictly observing the time periods
established by the Rules or by the arbitration panel for the submission of
evidence and of briefs.
-5-
<PAGE>
Unless otherwise agreed to by CC and DEALER, a stenographic record of the
arbitration shall be made and a transcript thereof shall be ordered for each
party, with each party paying one-half (1/2) of the total cost of such recording
and transcription. The stenographer shall be state-certified, if certification
is made by the state, and the party to whom it is most convenient shall be
responsible for securing and notifying such stenographer of the time and place
of the arbitration hearing(s).
If the arbitration provision is invoked when the dispute between the parties is
either the legality of terminating this Agreement or of adding a new CC dealer
of the same line-make or relocating an existing CC dealer of the same line-make,
CC will stay the implementation of the decision to terminate this Agreement or
add such new CC dealer or approve the relocation of an existing CC dealer of the
same line-make until the decision of the arbitrator has been announced,
providing DEALER does not in any way attempt to avoid the obligations of this
Paragraph 9, in which case the decision at issue will be immediately
implemented.
Except as limited hereby, the arbitration panel shall have all powers of law and
equity, which it can lawfully assume, necessary to resolve the issues in dispute
including, without limiting the generality of the foregoing, making awards of
compensatory damages, issuing both prohibitory and mandatory orders in the
nature of injunctions and compelling the production of documents and witnesses
for pre-arbitration discovery and/or presentation at the arbitration hearing on
the merits of the case. The arbitration panel shall not have legal or equitable
authority to issue a mandatory or prohibitory order which: (a) extends or has
effect beyond the subject matter of this Agreement, or (b) will govern the
activities of either party for a period of more than two years; nor shall the
arbitration panel have authority to award punitive, consequential or any damages
whatsoever beyond or in addition to the compensatory damages allowed to be
awarded under this Agreement.
The decision of the arbitration panel shall be in written form and shall include
findings of fact and conclusions of law.
It is the intent and desire of DEALER and CC to hereby and forever renounce and
reject any and all recourse to litigation before any judicial or administrative
forum and to accept the award of the arbitration panel as final and binding,
subject to no judicial or administrative review, except on those grounds set
forth in 9 USC Section 10 and Section 11. Judgment on the award and/or orders
may be entered in any court having jurisdiction over the parties or their
assets. In the final award and/or order, the arbitration panel shall divide all
costs (other than attorney fees, which shall be borne by the party incurring
such fees and other costs specifically provided for herein) incurred in
conducting the arbitration in accordance with what the arbitration panel deems
just and equitable under the
-6-
<PAGE>
circumstances. The fees of DEALER's arbitrator shall be paid by DEALER. The
fees of CC's arbitrator shall be paid by CC.
________________________________
10 SIGNATURE
This Agreement becomes valid only when signed by the President or a Vice
President or the National Dealer Placement Manager of Chrysler Corporation and
by a duly authorized officer or executive of DEALER if a corporation; or by one
of the general partners of DEALER if a partnership; or by DEALER if an
individual.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement which is
finally executed at DETROIT, Michigan, in triplicate, on AUGUST 16, 1995.
UNITED LANDERS AUTO SALES, INC.
d/b/a Landers Chrysler Plymouth
Dodge Jeep Eagle
- -----------------------------------------------
(DEALER, Firm Name and D/B/A/, if applicable)
By /s/ Steven J. Landers
---------------------------------------------
(Individual Duly Authorized to Sign)
President
- -----------------------------------------------
(Title)
CHRYSLER CORPORATION
By /s/ W. S. [ ]
---------------------------------------------
National Dealer Placement Manager
- -----------------------------------------------
(Title)
-7-
<PAGE>
CHRYSLER CREDIT
SECURITY AGREEMENT AND MASTER CREDIT AGREEMENT
(Non-Chrysler Corporation Dealer)
This Security Agreement and Master Credit Agreement (hereinafter called the
"Agreement"), made as of this 25th day of October, 1993, is by and between
Landers Oldsmobile-GMC, Inc., having its principal place of business at 1701 I-
30 Frontage Road, Benton Ar 72015 (hereinafter called "Debtor"), and Chrysler
Credit Corporation, a Delaware corporation, having offices located at 27777
Franklin Rd., Southfield, Michigan 48034-8286 (hereinafter called "Secured
Party").
WHEREAS, Debtor is engaged in business as an authorized dealer of GMC &
Oldsmobile and desires Secured Party to finance the acquisition by Debtor in the
ordinary course of its business of new and unused vehicles sold and distributed
by General Motors Corporation and/or other authorized sellers and of used
vehicles (all such unused and used vehicles being hereinafter collectively
called the "Vehicles").
WHEREAS, Secured Party is willing to provide wholesale financing to Debtor to
finance the acquisition of Vehicles by Debtor by making loans or advances to
Debtor to finance the acquisition by Debtor of Vehicles.
NOW, THEREFORE, in consideration of the mutual premises herein contained and
other good and valuable consideration paid by each party to the other, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
1.0 FINANCING - Secured Party agrees to extend to Debtor wholesale financing by
making loans or advances to Debtor to finance the acquisition by Debtor of
Vehicles from sellers thereof, on the terms and conditions set forth in
Paragraph 2.1 herein or as set forth in the Vehicle financing terms and
conditions as they may be made available to Debtor from time to time by
Secured Party.
For the purposes of this Agreement, loans or advances provided by Secured
Party directly to either Debtor or to the seller of Vehicles to Debtor are
herein called "Advances". Debtor acknowledges that (x) the maximum amount
of Advances which will be made by Secured Party hereunder will be
established from time to time by Secured Party in its sole discretion and
(y) all such Advances shall be made on and shall be subject to the terms
and conditions of this Agreement. It is understood and agreed that the
making of
<PAGE>
any Advance hereunder shall be at the option of Secured Party and shall not
be obligatory, and that the right of Debtor to request that Secured Party
make Advances may be terminated at any time by Secured Party at its
election without notice.
2.0 EVIDENCE OF ADVANCES AND PAYMENT TERMS - Each Advance shall be made at such
time as Debtor shall request in accordance with the then-effective Vehicle
financing terms and conditions referred to above. Debtor will execute and
deliver to Secured Party from time to time its demand promissory notes in
aggregate principal amount equal to that amount agreed to by Debtor and
Secured Party from time to time, such demand promissory notes (the
"Promissory Notes") to evidence the liability of Debtor to Secured Party on
account of all Advances. The maximum liability of Debtor under this
Agreement shall at any time be equal to the aggregate principal amount of
all Advances at the time outstanding hereunder plus interest and such other
amounts as may be due under this Agreement. Debtor will pay to Secured
Party on demand the aggregate principal amount of all Advances from time to
time outstanding, and will pay upon demand the interest due thereon and
such other additional charges as Secured Party shall determine from time to
time.
In consideration of Secured Party's making Advances, Debtor will pay to
Secured Party interest at the rate(s) per annum designated by Secured Party
from time to time on the amount of each Advance made by Secured Party
hereunder from the date of such Advance until the date of repayment to
Secured Party of the full amount thereof. Secured Party will give notice
to Debtor of the interest rate(s) established by it from time to time under
the terms hereof, and each such notice shall constitute an agreement
between Debtor and Secured Party as to the applicability to the Advances of
the interest rate(s) contained therein, to be applicable from the dates
stated in such notice until such interest rate(s) are changed by subsequent
notice given by Secured Party pursuant to this sentence. All interest
accrued on the Advances shall be payable monthly by Debtor, and shall be
due upon receipt by Debtor of the statement of Secured Party setting forth
the amount of such accrued interest.
2.1 Debtor agrees that financing pursuant to this Agreement shall be used
exclusively for the purpose of acquiring Vehicles for Debtor's inventory
and Debtor shall not sell or otherwise dispose of such Vehicles except by
sale in the ordinary course of business. If so requested by Secured Party,
Debtor agrees to maintain a separate bank account into which all cash
proceeds of such sales or other dispositions of such Vehicle will be
deposited. Debtor further agrees that upon the sale of each Vehicle with
respect to which an Advance has been made by Secured Party,
-2-
<PAGE>
Debtor will promptly remit to Secured Party the total amount then
outstanding of Secured Party's Advance on each such Vehicle unless other
terms of repayment have been agreed to by Secured Party. Debtor agrees to
hold in trust for Secured Party and shall forthwith remit to Secured Party,
to the extent of any unpaid and past due indebtedness hereunder, all
proceeds of each Vehicle when received by Debtor, or to allow Secured Party
to make direct collection thereof and credit Debtor with all sums received
by Secured Party.
3.0 SECURITY - Debtor hereby grants to Secured Party a first and prior security
interest in and to each and every Vehicle financed hereunder, whether now
owned or hereafter acquired by way of replacement, substitution, addition
or otherwise, together with all additions and accessions thereto and all
proceeds thereof. Further, Debtor also hereby grants to Secured Party a
security interest in and to all Chattel Paper, Accounts whether or not
earned by performance and including without limitation all amounts due from
the manufacturer or distributor of the Vehicles or any of its subsidiaries
or affiliates, Contract Rights, Documents, Instruments, General
Intangibles, Consumer Goods, Inventory of Automotive Parts, Accessories and
Supplies, Equipment, Furniture, Fixtures, Machinery, Tools, and Leasehold
Improvements, whether now owned or hereafter acquired by way of
replacement, substitution, addition or otherwise, together with all
additions and accessions thereto and all proceeds thereof, as additional
security for each and every indebtedness and obligation of Debtor as set
forth herein. The security interest hereby granted shall secure the
prompt, timely and full payment of (1) all Advances, (2) all interest
accrued thereon in accordance with the terms of this Agreement and the
Promissory Notes, (3) all other indebtedness and obligations of Debtor
under the Promissory Notes, (4) all costs and expenses incurred by Secured
Party in the collection or enforcement of the Promissory Notes or of the
obligations of the Debtor under this Agreement, (5) all monies advanced by
Secured Party on behalf of Debtor for taxes, levies, insurance and repairs
to and maintenance of any Vehicle or other collateral, and (6) each and
every other indebtedness or obligation now or hereafter owing by Debtor to
Secured Party including any collection or enforcement costs and expenses or
monies advanced on behalf of Debtor in connection with any such other
indebtedness or obligations.
3.1 All said security set forth in Paragraph 3.0 shall hereinafter collectively
be called "Collateral". Debtor hereby expressly agrees that the term
"proceeds" as used in Paragraph 3.0 shall include without limitation all
insurance proceeds on the Collateral, money, chattel paper, goods received
in trade including without limitation vehicles received in trade, contract
rights, instruments, documents,
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<PAGE>
accounts whether or not earned by performance, general intangibles, claims
and tort recoveries relating to the Collateral. Notwithstanding that
Advances hereunder are made from time to time with respect to specific
Vehicles, each Vehicle and the proceeds thereof and all other Collateral
hereunder shall constitute security for all obligations of Debtor to
Secured Party secured hereunder.
3.2 Debtor hereby agrees that upon request of the Secured Party it will take
such action and/or execute and deliver to Secured Party any and all
documents (and pay all costs and expenses of recording the same), in form
and substance satisfactory to Secured Party, which will perfect in Secured
Party its security interest in the Collateral in which Secured Party has or
is to have a security interest under the terms of this Agreement.
3.3 Secured Party's security interest in the Collateral shall attach to the
full extent provided or permitted by law to the proceeds, in whatever form,
of any disposition of said Collateral or to any part thereof by Debtor
until such proceeds are remitted and accounted for as provided herein.
Debtor will notify Secured Party before Debtor signs, executes or
authorizes any financing statement regardless of coverage.
3.4 Debtor shall be responsible for all loss and damage to the Collateral and
agrees to keep Collateral insured against loss or damage by fire, theft,
collision, vandalism and against such other risks as Secured Party may
require from time to time. Insurance and policies evidencing such
insurance shall be with such companies, in such amount and such form as
shall be satisfactory to Secured Party. If so requested by Secured Party,
any or all such policies of insurance shall contain an endorsement, in form
and substance satisfactory to Secured Party, showing loss payable to
Secured Party as its interest may appear, and a certificate of insurance
evidencing such coverage will be provided to Secured Party.
4.0 DEBTOR'S WARRANTIES - Debtor warrants and agrees that the Collateral now is
and shall always be kept free of all taxes, liens and encumbrances, except
as specifically disclosed in Paragraph 4.1 below or provided for in
Paragraph 3.0 above, and Debtor shall defend the Collateral against all
other claims and demands whatsoever and shall indemnify, hold harmless and
defend Secured Party in connection therewith. Any sum of money that may be
paid by Secured Party in release or discharge of any taxes, liens or
encumbrances shall be paid to Secured Party on demand as an additional part
of the obligation secured hereunder. Debtor hereby agrees not to mortgage,
pledge or loan (except for designated demonstrators as agreed to in advance
by Secured Party in writing) the Vehicles and shall not license, title,
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<PAGE>
use, transfer or otherwise dispose of them except as provided in this
Agreement. Debtor agrees that it will execute in favor of Secured Party
any form of document which may be required to evidence further Advances by
Secured Party hereunder, and shall execute such additional documents as
Secured Party may at any time request in order to conform or perfect
Debtor's title to or Secured Party's security interest in the Vehicles.
Execution by Debtor of notes, checks or other instruments for the amount
advanced shall be deemed evidence of Debtor's obligation and not payment
therefor until collected in full by Secured Party.
4.1 DISCLOSURE OF TAXES, LIENS AND ENCUMBRANCES -
(IF THERE ARE ANY, LIST THEM HERE; IF NONE, SO STATE.)
- -------------------------------------------------------------------------------
PLACE FILED DATE OF FILING NAME AND ADDRESS OF CREDITOR
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5.0 SIGNATORY AUTHORIZATION - Debtor hereby authorizes Secured Party or any of
its officers, employees, agents or any other person Secured Party may
designate to execute any and all documents pursuant to the terms and
conditions of that certain Power of Attorney and Signatory Authorization of
even date herewith.
6.0 EVENTS OF DEFAULT AND REMEDIES/TERMINATION - Time is of the essence herein
and it is understood and agreed that Secured Party may terminate this
Agreement, refuse to advance funds hereunder, and declare the aggregate of
all Advances outstanding hereunder immediately due and payable upon the
occurrence of any of the following events (each hereinafter called an
"Event of Default"), and that Debtor's liabilities under this sentence
shall constitute additional obligations of Debtor secured under this
Agreement.
(a) Debtor shall fail to make any payment to Secured Party, whether
constituting the principal amount of any Advance, interest thereon or
any other payment due hereunder, when and as due in accordance with
the terms of this Agreement or with any demand permitted to be made by
Secured Party under this Agreement or any Promissory Note, or shall
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<PAGE>
fail to pay when due any other amount owing to Secured Party under any
other agreement between Secured Party and Debtor, or shall fail in the
due performance or compliance with any other term or condition hereof
or thereof, or shall be in default in the payment of any liabilities
constituting indebtedness for money borrowed or the deferred payment
of the purchase price of property or a rental payment with respect to
property material to the conduct of Debtor's business;
(b) A tax lien or notice thereof shall have been filed against any of the
Debtor's property or a proceeding in bankruptcy, insolvency or
receivership shall be instituted by or against Debtor or Debtor's
property or an assignment shall have been made by Debtor for the
benefit of creditors;
(c) In the event that Secured Party deems itself insecure for any reason
or the Vehicles are deemed by Secured Party to be in danger of misuse,
loss, seizure or confiscation or other disposition not authorized by
this Agreement;
(d) Termination of any franchise authorizing Debtor to sell Vehicles;
(e) A misrepresentation by Debtor for the purpose of obtaining credit or
an extension of credit or a refusal by Debtor to execute documents
relating to the Collateral and/or Secured Party's security interest
therein or to furnish financial information to Secured Party at
reasonable intervals or to permit persons designated by Secured Party
to examine Debtor's books or records and to make periodic inspections
of the Collateral; or
(f) Debtor, without Secured Party's prior written consent, shall
guarantee, endorse or otherwise become surety for or upon the
obligations of others except as may be done in the ordinary course of
Debtor's business, shall transfer or otherwise dispose of any
proprietary, partnership or share interest Debtor has in his business,
or all or substantially all of the assets thereof, shall enter into
any merger or consolidation, if a corporation, or shall make any
substantial disbursements or use of funds of Debtor's business, except
as may be done in the ordinary course of Debtor's business, or assign
this Agreement in whole or in part or any obligation hereunder.
Upon the occurrence of an Event of Default, Secured Party may take
immediate possession of said Vehicles without demand or further notice and
without legal process; and for the purpose and furtherance thereof, Debtor
shall, if Secured Party so requests, assemble the Vehicles and make them
available to Secured Party at a reasonably convenient
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<PAGE>
place designated by Secured Party and Secured Party shall have the right,
and Debtor hereby authorizes and empowers Secured Party to enter upon the
premises wherever said Vehicles may be, to remove same. In addition,
Secured Party or its assigns shall have all the rights and remedies
applicable under the Uniform Commercial Code or under any other statute or
at common law or in equity or under this Agreement. Such rights and
remedies shall be cumulative. Debtor hereby agrees that it shall pay all
expenses and reimburse Secured Party for any expenditures, including
reasonable attorneys' fees and legal expenses, in connection with Secured
Party's exercise of any of its rights and remedies under this Agreement.
7.0 INSPECTION: VEHICLES/BOOKS AND RECORDS - It is hereby understood and agreed
by and between Debtor and Secured Party that Secured Party shall have the
right of access to and inspection of the Vehicles and the right to examine
Debtor's books and records, which Debtor warrants are genuine in all
respects. Debtor hereby certifies to Secured Party that all Vehicles and
books and records shall be kept at the principal place of business of
Debtor as hereinabove stated or at such other locations as approved in
writing by Secured Party, and Debtor shall not remove or permit the removal
of the Vehicles or books and records during the pendency of this Agreement
except in the ordinary course of business and as authorized by Secured
Party.
7.1 Debtor agrees to furnish to Secured Party after the end of each month, for
so long as this Agreement shall be effective, balance sheets and statements
of profit and loss for each month with respect to Debtor's business in such
detail and at such times as Secured Party may require from time to time.
8.0 GENERAL - Debtor and Secured Party further covenant and agree that:
8.1 Any provision hereof prohibited by law shall be ineffective to the extent
of such prohibition without invalidating the remaining provisions hereof.
8.2 This Agreement shall be interpreted according to the laws of the State of
Debtor's principal place of business as identified above.
8.3 This Agreement cannot be modified or amended, except in writing by both
parties unless otherwise specifically authorized herein, and shall be
binding and inure to the benefit of each of the parties hereto and their
respective legal representatives, successors and assigns.
8.4 Interest to be paid in connection herewith shall never exceed the maximum
rate allowable by law applicable hereto,
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<PAGE>
as the parties intend to strictly comply with all law relating to usury.
Notwithstanding any provision hereof or any other document in connection
herewith to the contrary, Debtor shall not pay nor will Secured Party
accept payment of any such excessive interest, which excessive interest is
hereby canceled, and Secured Party shall be entitled at its option to
refund any such interest erroneously paid or credit the same to Debtor's
obligations hereunder.
8.5 The terms and provisions of this Agreement and of any other agreement
between Debtor and Secured Party should be construed together as one
agreement; provided, however, in the event of any conflict, the terms and
provisions of this Agreement shall govern such conflict.
8.6 No failure or delay on the part of Secured Party in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power preclude any other or further
exercise thereof or the exercise of any other right or power hereunder.
The remedies herein are in addition to those available in law or equity,
and Secured Party need not pursue any rights it might have as a Secured
Party before pursuing payment and performance by Debtor or any guarantor or
surety.
8.7 This Agreement may not be assigned by Debtor.
9.0 NOTICES - Any notice given hereunder shall be in writing and given by
personal delivery or shall be sent by U.S. Mail, postage prepaid, addressed
to the party to be charged with such notice at the respective address set
forth below:
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TO DEBTOR TO SECURED PARTY
- -------------------------------------------------------------------------------
Landers Oldsmobile-GMC, Inc. Chrysler Credit Corporation
1701 I-30 Frontage Road 10801 Executive Center Drive Suite 101
Benton Ar 72015 Little Rock Ar 72211
- -------------------------------------------------------------------------------
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
Landers Oldsmobile-GMC, Inc.
------------------------------
(Debtor)
/s/ Bob Landers By /s/ Steve Landers
- ------------------------------ ------------------------------------------
(WITNESS)
illegible Title President
- ------------------------------ ---------------------------------------
(WITNESS)
CHRYSLER CREDIT CORPORATION
By illegible
------------------------------------------
Title illegible
---------------------------------------
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<PAGE>
PROMISSORY NOTE
- -------------------------------------------------------------------------------
AMOUNT CITY STATE DATE
$7,100,000.00 Benton Arkansas October 25, 1993
- -------------------------------------------------------------------------------
ON DEMAND, FOR VALUE RECEIVED, the undersigned promise(s) to pay to the order of
CHRYSLER CREDIT CORPORATION, a Delaware Corporation, at its office at 10801
Executive Center Drive, Suite 101, Little Rock Ar 72211 or at such other place
as the holder hereof may direct in writing, the sum of Seven Million One Hundred
Thousand Dollars ($7,100,000.00), in lawful money of the United States of
America, together with interest thereon from the date hereof until paid at the
rate or rates established from time to time, pursuant to paragraph 2.0 of that
certain Security Agreement and Master Credit Agreement dated ______________,
19__, between the undersigned and Chrysler Credit Corporation, which interest
shall be payable monthly in like lawful money; provided, however, that the rate
of interest payable hereunder shall not exceed the maximum rate of interest
permitted by applicable law.
The undersigned agrees to pay reasonable attorneys fees if this note is placed
in the hands of an attorney for collection.
The makers, sureties, guarantors and endorsers hereof severally waive
presentment for payment, protest and notice of protest and non-payment of this
note, and consents to any extension, renewal or postponement of the time of
payment of this note, without notice, at the option of the holder.
- -------------------------------------------------------------------------------
DEALER BY ITS
Landers Oldsmobile-GMC, Inc. /s/ Steve Landers President
- -------------------------------------------------------------------------------
<PAGE>
Exhibit 10.4.17
SECURITY AGREEMENT AND MASTER CREDIT AGREEMENT
This Security Agreement and Master Credit Agreement (hereinafter called the
"Agreement"), made as of this 17th day of MAY, 1989; and effective September 1,
1984 or the date hereof, whichever is later, is by and between LANDERS JEEP-
EAGLE, INC., having its principal place of business at 1800 MILITARY RD.,
BENTON, AR 72015 (hereinafter called "Debtor"), and Chrysler Credit
Corporation, a Delaware corporation, having offices located at 900 Tower Drive,
Troy, Michigan 48098 (hereinafter called "Secured Party").
WHEREAS, Debtor is engaged in business as an authorized dealer of Chrysler
Corporation and desires Secured Party to finance the acquisition by Debtor in
the ordinary course of its business of new and unused vehicles sold and
distributed by Chrysler Corporation and/or other authorized sellers and of used
vehicles (all such unused and used vehicles being hereinafter collectively
called the "Vehicles").
WHEREAS, Secured Party is willing to provide wholesale financing to Debtor to
finance the acquisition of Vehicles by Debtor (1) by agreeing with Chrysler
Corporation to purchase from Chrysler Corporation receivables evidencing credit
sales of Vehicles by Chrysler Corporation to Debtor, and (2) by making loans or
advances to Debtor to finance the acquisition by Debtor of Vehicles from other
sellers.
NOW, THEREFORE, in consideration of the mutual premises herein contained and
other good and valuable consideration paid by each party to the other, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
1.0 FINANCING - Secured Party agrees to extend to Debtor wholesale financing as
follows:
(a) to purchase receivables from Chrysler Corporation
evidencing credit sales of Vehicles by Chrysler
Corporation to Debtor, at 100% of the face amount of
such receivables; or
(b) by making loans or advances to Debtor to finance
the acquisition by Debtor of Vehicles from sellers
thereof, on the terms and conditions set forth in
Paragraph 2.1 herein or as set forth in the Vehicle
financing terms and conditions as they may be made
available to Debtor from time to time by Secured Party.
<PAGE>
For the purposes of this Agreement, amounts applied by Secured Party to
acquire Debtor's receivables from Chrysler Corporation as contemplated by
clause (a) are herein called "Receivable Purchase Advances", and loans or
advances provided by Secured Party directly to either Debtor or to the
seller of Vehicles to Debtor as contemplated by clause (b) are herein
called "Direct Loan Advances", and all such amounts, loans and advances
provided by Secured Party contemplated by clause (a) and clause (b) are
herein collectively called "Advances". Debtor acknowledges that (x) the
maximum amount of Advances which will be made by Secured Party hereunder
will be established from time to time by Secured Party in its sole
discretion and (y) all such Advances shall be made on and shall be subject
to the terms and conditions of this Agreement. It is understood and agreed
that the making of any Advance hereunder shall be at the option of Secured
Party and shall not be obligatory, and that the right of Debtor to request
that Secured Party make Advances may be terminated at any time by Secured
Party at its election without notice.
2.0 EVIDENCE OF ADVANCES AND PAYMENT TERMS - Each Receivable Purchase Advance
shall be evidenced by and made against a Credit Sale Agreement of Chrysler
Corporation delivered to Secured Party, and Secured Party shall be entitled
to make Receivable Purchase Advances against such Credit Sale Agreement
appropriately completed and executed on behalf of Debtor by Chrysler
Corporation by facsimile signature or otherwise under Power of Attorney
given by Debtor, without any duty to inquire as to the continued
effectiveness of such power or to verify with Debtor the amount of, or
Vehicles listed upon, such Credit Sale Agreement and each such Credit Sale
Agreement shall evidence the valid and binding payment obligation of
Debtor. Each Direct Loan Advance shall be made at such time as Debtor
shall request in accordance with the then-effective Vehicle financing terms
and conditions referred to above. Debtor will execute and deliver to
Secured Party from time to time its demand promissory notes in aggregate
principal amount equal to that amount agreed to by Debtor and Secured Party
from time to time, such demand promissory notes (the "Promissory Notes") to
evidence the liability of Debtor to Secured Party on account of all Direct
Loan Advances and to constitute additional evidence of Debtor's obligation
in respect of the receivables underlying the Receivable Purchase Advances.
The maximum liability of Debtor under this Agreement shall at any time be
equal to the aggregate principal amount of all Advances at the time
outstanding hereunder plus interest and such other amounts as may be due
under this Agreement. Debtor will pay to Secured Party on demand the
aggregate principal amount of all Advances from time to time outstanding,
and will pay upon demand the interest due thereon and such other additional
charges as Secured Party shall determine from time to time.
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<PAGE>
Notwithstanding any inconsistent terms of any agreement between Debtor and
Chrysler Corporation in respect of Debtor's liability under any Credit Sale
Agreement, in consideration of Secured Party's making of Receivable
Purchase Advances and Direct Loan Advances, Debtor will pay to Secured
Party interest at the rate(s) per annum designated by Secured Party from
time to time on the amount of each Advance made by Secured Party hereunder
from the date of such Advance until the date of repayment to Secured Party
of the full amount thereof. For the purposes of the preceding sentence,
each Receivable Purchase Advance shall be deemed to have been made by
Secured Party on the date on which payment shall have been made by Secured
Party to Chrysler Corporation for the related receivable of Debtor
purchased by Secured Party from Chrysler Corporation. Secured Party will
give notice to Debtor of the interest rate(s) established by it from time
to time under the terms hereof, and each such notice shall constitute an
agreement between Debtor and Secured Party as to the applicability to the
Advances of the interest rate(s) contained therein, to be applicable from
the dates stated in such notice until such interest rate(s) are changed by
subsequent notice given by Secured Party pursuant to this sentence. All
interest accrued on the Advances shall be payable monthly by Debtor, and
shall be due upon receipt by Debtor of the statement of Secured Party
setting forth the amount of such accrued interest.
2.1 Debtor agrees that financing pursuant to this Agreement shall be used
exclusively for the purpose of acquiring Vehicles for Debtor's inventory
and Debtor shall not sell or otherwise dispose of such Vehicles except by
sale in the ordinary course of business. If so requested by Secured Party,
Debtor agrees to maintain a separate bank account into which all cash
proceeds of such sales or other dispositions of such Vehicle will be
deposited. Debtor further agrees that upon the sale of each Vehicle with
respect to which an Advance has been made by Secured Party, Debtor will
promptly remit to Secured Party the total amount then outstanding of
Secured Party's Advance on each such Vehicle unless other terms of
repayment have been agreed to by Secured Party. Debtor agrees to hold in
trust for Secured Party and shall forthwith remit to Secured Party, to the
extent of any unpaid and past due indebtedness hereunder, all proceeds of
each Vehicle when received by Debtor, or to allow Secured Party to make
direct collection thereof and credit Debtor with all sums received by
Secured Party.
3.0 SECURITY - Debtor hereby grants to Secured Party a first and prior security
interest in and to each and every Vehicle financed hereunder, whether now
owned or hereafter acquired by way of replacement, substitution, addition
or otherwise,
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<PAGE>
together with all additions and accession thereto and all proceeds thereof,
subject only to any prior security interest in a Vehicle financed by a
Receivable Purchase Advance which has been granted by Debtor to Chrysler
Corporation and assigned by Chrysler Corporation to Secured Party in
connection with the making of such Receivable Purchase Advance. The
security interest hereby granted shall secure the prompt, timely and full
payment of (1) all Advances, (2) all interest accrued thereon in accordance
with the terms of this Agreement and the Promissory Notes, (3) all other
indebtedness and obligations of Debtor under the Promissory Notes, (4) all
costs and expenses incurred by Secured Party in the collection or
enforcement of the Promissory Notes or of the receivable underlying any
Receivable Purchase Advance or of the obligations of the Debtor under this
Agreement, (5) all monies advanced by Secured Party on behalf of Debtor for
taxes, levies, insurance and repairs to and maintenance of any Vehicle or
other collateral, and (6) each and every other indebtedness or obligation
now or hereafter owing by Debtor to Secured Party including any collection
or enforcement costs and expenses or monies advanced on behalf of Debtor in
connection with any such other indebtedness or obligations. Nothing in
this Agreement shall require Debtor, in respect of any Receivable Purchase
Advance, to proceed first under the security interest created by this
Agreement or first under the security interest granted by Debtor to
Chrysler Corporation to secure the receivable underlying such Receivable
Purchase Advance and assigned by Chrysler Corporation to Secured Party and
the remedies of Secured Party under each security interests shall be
cumulative.
3.1 All said security set forth in Paragraph 3.0 above shall hereinafter
collectively be called "Collateral", Debtor hereby expressly agrees that
the term "proceeds" as used in Paragraph 3.0 above shall include without
limitation all insurance proceeds on the Collateral, money, chattel paper,
goods received in trade including without limitation vehicles received in
trade, contract rights, instruments, documents, accounts whether or not
earned by performance, general intangibles, claims and tort recoveries
relating to the Collateral. Notwithstanding that Advances hereunder are
made from time to time with respect to specific Vehicles, each Vehicle and
the proceeds thereof and all other Collateral hereunder shall constitute
security for all obligations of Debtor to Secured Party secured hereunder.
3.2 Debtor hereby agrees that upon request of the Secured Party it will take
such action and/or execute and deliver to Secured Party any and all
documents (and pay all costs and expenses of recording the same), in form
and substance satisfactory to Secured Party, which will perfect in Secured
Party its security interest in the Collateral in which
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<PAGE>
Secured Party has or is to have a security interest under the terms of this
Agreement.
3.3 Secured Party's security interest in the Collateral shall attach to the
full extent provided or permitted by law to the proceeds, in whatever form,
of any disposition of said Collateral or to any part thereof by Debtor
until such proceeds are remitted and accounted for as provided herein.
Debtor will notify Secured Party before Debtor signs, executes or
authorizes any financing statement regardless of coverage.
3.4 Debtor shall responsible for all loss and damage to the Collateral and
agrees to keep Collateral insured against loss or damage by fire, theft,
collision, vandalism and against such other risks as Secured Party may
require from time to time. Insurance and polices evidencing such insurance
shall be with such companies, in such amount and such form as shall be
satisfactory to Secured Party. If so requested by Secured Party, any or
all such policies of insurance shall contain an endorsement, in form and
substance satisfactory to Secured Party, showing loss payable to Secured
Party as its interest may appear, and a certificate of insurance evidencing
such coverage will be provided to Secured Party.
4.0 DEBTOR'S WARRANTIES - Debtor warrants and agrees that the Collateral now is
and shall always be kept free of all taxes, liens and encumbrances, except
as specifically disclosed in Paragraph 4.1 below or provided for in
Paragraph 3.0 above, and Debtor shall defend the Collateral against all
other claims and demands whatsoever and shall indemnify, hold harmless and
defend Secured Party in connection therewith. Any sum of money that may be
paid by Secured Party in release or discharge of any taxes, liens or
encumbrances shall be paid to Secured Party on demand as an additional part
of the obligation secured hereunder. Debtor hereby agrees not to mortgage,
pledge or loan (except for designated demonstrators as agreed to in advance
by Secured Party in writing) the Vehicles and shall not license, title,
use, transfer or otherwise dispose of them except as provided in this
Agreement. Debtor agrees that it will execute in favor of Secured Party
any form of document which may be required to evidence further Advances by
Secured Party hereunder, and shall execute such additional documents as
Secured Party may at any time request in order to conform or perfect
Debtor's title to or Secured Party's security interest in the Vehicles.
Execution by Debtor of notes, checks or other instruments for the amount
advanced shall be deemed evidence of Debtor's obligation and not payment
therefor until collected in full by Secured Party.
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<PAGE>
4.1 Disclosure of Taxes, Liens and Encumbrances
(IF THERE ARE ANY, LIST THEM HERE: IF NONE, SO STATE.)
PLACE FILED DATE OF FILING NAME AND ADDRESS OF CREDITOR
None
5.0 SIGNATORY AUTHORIZATION - Debtor hereby authorizes Secured Party or any of
its officers, employees, agents or any other person Secured Party may
designate to execute any and all documents pursuant to the terms and
conditions of that certain Power of Attorney and Signatory Authorization of
even date herewith.
6.0 EVENTS OF DEFAULT AND REMEDIES/TERMINATION - Time is of the essence herein
and it is understood and agreed that Secured Party may, at its option and
notwithstanding any inconsistent terms in any agreement between Debtor and
Chrysler Corporation and/or Secured Party with respect to the receivable
underlying any Receivable Purchase Advance by Secured Party, terminate this
Agreement, refuse to advance funds hereunder, convert outstanding
installment payment obligations to payment on Vehicle sale obligations, and
declare the aggregate of all Advances outstanding hereunder immediately due
and payable upon the occurrence of any of the following events (each
hereinafter called an "Event of Default"), and that Debtor's liabilities
under this sentence shall constitute additional obligations of Debtor
secured under this Agreement.
(a) Debtor shall fail to make any payment to Secured Party, whether
constituting the principal amount of any Advance, interest thereon or
any other payment due hereunder, when and as due in accordance with
the terms of this Agreement or with any demand permitted to be made by
Secured Party under this Agreement or any Promissory Note, or shall
fail to pay when due any other amount owing to Secured Party under any
other agreement between Secured Party and Debtor, or shall fail in the
due performance or compliance with any other term or condition hereof
or thereof, or shall be in default in the payment of any liabilities
constituting indebtedness for money borrowed or the deferred payment
of the purchase price of property or a rental payment with respect to
property material to the conduct of Debtor's business;
(b) A tax lien or notice thereof shall have been filed against any of the
Debtor's property or a proceeding in
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<PAGE>
bankruptcy, insolvency or receivership shall be instituted by or
against Debtor or Debtor's property or an assignment shall have been
made by Debtor for the benefit of creditors;
(c) In the event that Secured Party deems itself insecure for any reason
or the Vehicles are deemed by Secured Party to be in danger of misuse,
loss, seizure or confiscation or other disposition not authorized by
this Agreement;
(d) Termination of any franchise authorizing Debtor to sell Vehicles;
(e) A misrepresentation by Debtor for the purpose of obtaining credit or
an extension of credit or a refusal by Debtor to execute documents
relating to the Collateral and/or Secured Party's security interest
therein or to furnish financial information to Secured Party at
reasonable intervals or to permit persons designated by Secured Party
to examine Debtor's books or records and to make periodic inspections
of the Collateral; or
(f) Debtor, without Secured Party's prior written consent, shall
guarantee, endorse or otherwise become surety for or upon the
obligations of others except as may be done in the ordinary course of
Debtor's business, shall transfer or otherwise dispose of any
proprietary, partnership or share interest Debtor has in his business,
or all or substantially all of the assets thereof, shall enter into
any merger or consolidation, if a corporation, or shall make any
substantial disbursements or use of funds of Debtor's business, except
as may be done in the ordinary course of Debtor's business, or assign
this Agreement in whole or in part or any obligation hereunder.
Upon the occurrence of an Event of Default, Secured Party may take
immediate possession of said Vehicles without demand or further notice and
without legal process; and for the purpose and furtherance thereof, Debtor
shall, if Secured Party so requests, assemble the Vehicles and make them
available to Secured Party at a reasonably convenient place designated by
Secured Party and Secured Party shall have the right, and Debtor hereby
authorizes and empowers Secured Party to enter upon the premises wherever
said Vehicles may be, to remove same. In addition, Secured Party or its
assigns shall have all the rights and remedies applicable under the Uniform
Commercial Code or under any other statute or at common law or in equity or
under this Agreement. Such rights and remedies shall be cumulative.
Debtor hereby agrees that it shall pay all expenses and reimburse Secured
Party for any expenditures, including
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<PAGE>
reasonable attorneys' fees and legal expenses, in connection with Secured
Party's exercise of any of its rights and remedies under this Agreement.
7.0 INSPECTION; VEHICLES/BOOKS AND RECORDS - It is hereby understood and agreed
by and between Debtor and Secured Party that Secured Party shall have the
right of access to and inspection of the Vehicles and the right to examine
Debtor's books and records, which Debtor warrants are genuine in all
respects. Debtor hereby certifies to Secured Party that all Vehicles and
books and records shall be kept at the principal place of business of
Debtor as hereinabove stated or at such other locations as approved in
writing by Secured Party, and Debtor shall not remove or permit the removal
of the Vehicles or books and records during the pendency of this Agreement
except in the ordinary course of business and as authorized by Secured
Party.
7.1 Debtor agrees to furnish to Secured Party after the end of each month, for
so long as this Agreement shall be effective, balance sheets and statements
of profit and loss for each month with respect to Debtor's business in such
detail and at such times as Secured Party may require from time to time.
8.0 GENERAL - Debtor and Secured Party further covenant and agree that:
8.1 Any provision hereof prohibited by law shall be ineffective to the extent
of such prohibition without invalidating the remaining provisions hereof.
8.2 This Agreement shall be interpreted according to the laws of the State of
Debtor's principal place of business as identified above.
8.3 This Agreement cannot be modified or amended, except in writing by both
parties unless otherwise specifically authorized herein, and shall be
binding and inure to the benefit of each of the parties hereto and their
respective legal representatives, successors and assigns.
8.4 Interest to be paid in connection herewith shall never exceed the maximum
rate allowable by law applicable hereto, as the parties intend to strictly
comply with all law relating to usury. Notwithstanding any provision
hereof or any other document in connection herewith to the contrary, Debtor
shall not pay nor will Secured Party accept payment of any such excessive
interest, which excessive interest is hereby canceled, and Secured Party
shall be entitled at its option to refund any such interest erroneously
paid or credit the same to Debtor's obligations hereunder.
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<PAGE>
8.5 The terms and provisions of this Agreement and of any other agreement
between Debtor and Secured Party or Debtor, Secured Party and Chrysler
Corporation or Debtor and Chrysler Corporation with respect to the
Receivable underlying any Receivable Purchase Advance by Secured Party
should be construed together as one agreement; provided, however, in the
event of any conflict, the terms and provisions of this Agreement shall
govern such conflict.
8.6 No failure or delay on the part of Secured Party in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power preclude any other or further
exercise thereof or the exercise of any other right or power hereunder.
The remedies herein are in addition to those available in law or equity,
and Secured Party need not pursue any rights it might have as a Secured
Party before pursuing payment and performance by Debtor or any guarantor or
surety.
8.7 This Agreement may not be assigned by Debtor.
9.0 NOTICES - Any notice given hereunder shall be in writing and given by
personal delivery or shall be sent by U.S. Mail, postage prepaid, addressed
to the party to be charged with such notice at the respective address set
forth below:
TO DEBTOR TO SECURED PARTY
Landers Jeep-Eagle, Inc. Chrysler Credit Corporation
1800 Military Road 10801 Executive Center Dr.
Benton, Arkansas 72015 Little Rock, AR 72211
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
Landers Jeep-Eagle, Inc.
-----------------------------
(DEBTOR)
/s/ [Illegible] By /s/ Steve Landers
- ---------------------------- ---------------------------
(WITNESS)
/s/ [Illegible]
- ----------------------------
(WITNESS) Title Pres.
-----------------------
CHRYSLER CREDIT CORPORATION
By /s/ [Illegible]
--------------------------
Title Br. Mgr.
----------------------
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<PAGE>
Exhibit 10.4.18
CONTINUING GUARANTY
IN CONSIDERATION of and in order to induce Chrysler Credit Corporation
(hereinafter referred to as "Lender") to extend credit in any form whatsoever to
Landers Auto Sales, Inc., 1701 I-30, Frontage Rd., Benton, AR 72015 (hereinafter
referred to as "Debtor") including, but not limited to, (i) the financing of
inventory, fixtures and personal property, (ii) the loan of money in any form
whatsoever, (iii) the purchase, acceptance or discounting of notes, retail
installment contracts, chattel mortgages, security agreements, trust receipts,
leases, instruments or other evidences of indebtedness or contractual
obligations of or from Debtor or endorsed or guaranteed in any manner by Debtor,
(iv) and generally to engage in financial accomodations and do business with
Debtor, the undersigned (hereinafter singularly and collectively referred to as
"Guarantor") hereby covenants and agrees with Lender as follows:
1. Guarantor, as a primary obligor, jointly and severally, hereby
unconditionally guarantees to Lender the full and prompt payment when due of all
indebtedness (as hereafter defined) of Debtor due and to become due the Lender
and the full, prompt and faithful discharge of all present and future
obligations owed to or assigned to Lender. The Lender may have immediate
recourse against Guarantor for full and immediate payment of the Indebtedness at
any time after the Indebtedness, or any part thereof, has not been paid in full
at its maturity (whether at fixed maturity or maturity accelerated by reason of
a demand for payment from Debtor or a default under the terms of the instrument
governing such Indebtedness or any instrument securing the same). The Lender
may have immediate recourse against Guarantor for full and immediate performance
of any other obligation owed or assigned to Lender at any time that Debtor
fails, upon demand, to perform said obligation.
2. The term "Indebtedness" shall mean any and all indebtedness, liabilities
and obligations of every kind, nature and description, owed to Lender by Debtor,
whether direct or indirect, absolute or contingent, whether now due and owing,
or which may hereafter, from time to time, be or become due and owing, whether
heretofore or hereafter created or arising, including all indebtedness evidenced
by any promissory note(s) now or hereinafter executed and delivered by Debtor to
the Lender and any and all renewals, extensions, increases or modifications
thereof, and including, without limitation, reasonable attorney fees, costs and
expenses incurred by Lender in connection with the enforcement of this Guaranty
and any and all obligations of the Debtor.
3. This is a guarantee of payment, and not of collection, and Guarantor
therefore agrees that the Lender shall not be obligated prior to seeking
recourse against or receiving payment from Guarantor, to take any action
whatsoever against Debtor, or, without limiting the generality of the foregoing,
to do any of the following (although the Lender may do so, in whole or in part,
at its sole option), the performance of which are hereby unconditionally waived
by Guarantor:
<PAGE>
(a) Take any steps whatsoever to make demand upon or to collect from Debtor or
to file any claim of any kind against Debtor; or
(b) Take any steps whatsoever to accept, perfect the Lender's interest in,
foreclose upon or realize on collateral security, if any, for the payment of the
Indebtedness, or any other guarantee of the Indebtedness; or
(c) In any other respect exercise any diligence whatever in collecting or
attempting to collect the Indebtedness by any means.
4. Guarantor's liability for payment of the Indebtedness shall be absolute
and unconditional, and nothing whatever except actual full payment to the
Lender of the Indebtedness shall operate to discharge Guarantor's liability
hereunder. Accordingly, Guarantor unconditionally and irrevocably waives each
and every defense which, under principles of guarantee or suretyship law,
would otherwise operate to impair or diminish the liability of Guarantor for
the Indebtedness. Without limiting the generality of the foregoing waiver,
Guarantor agrees that none of the following acts, omissions or occurrences
shall diminish or impair the liability of Guarantor in any respect (all of
which acts, omissions or occurrences may be done without notice to Guarantor
of any kind):
(a) Any extension, modification, indulgence, compromise, settlement or
variation of any of the terms of the Indebtedness;
(b) The discharge, disaffirmance or release of any obligations of the
Debtor or any other person now or hereafter liable on the Indebtedness, by
reason of bankruptcy or insolvency laws or otherwise;
(c) The acceptance or release by the Lender of any collateral security or
other Guaranty, or any settlement, compromise or extension with respect to
any collateral security or other Guaranty or other Guarantor hereunder;
(d) The application or allocation by the Lender of payments, collections or
credits on the Indebtedness or any other obligations of the Debtor to the
Lender;
(e) The creation of any new Indebtedness by Debtor,
(f) The making of a demand, or absence of demand, for payment of the
Indebtedness, or giving, or failing to give, any notice of dishonor or protest
or any other notice;
(g) The death of any Guarantor as to the obligations of such Guarantor's
estate under this Guaranty or of any other Guarantor hereunder;
(h) The validity, legality or enforceability of the Indebtedness or this
Guaranty;
(i) Any law, regulation or decree now or hereafter in effect that might in any
manner affect any of the terms or provisions of the Indebtedness or any of the
rights of Lender under
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<PAGE>
the Indebtedness or this Guaranty as against the Debtor or as against any other
party to any part of the Indebtedness;
(j) The merger or consolidation of Debtor or Guarantor into or with any
corporation or any sale or transfer by the Debtor or Guarantor of all or any
part of its property;
(k) Any other circumstance whatsoever that might in any manner vary the
risk of Guarantor hereunder or otherwise constitute a legal or equitable
discharge of a surety or guarantor.
5. Guarantor unconditionally waives:
(a) Any subrogation to the rights of the Lender against the Debtor, until the
Indebtedness has been paid in full;
(b) Any claim, right or remedy which Guarantor may now have or hereafter
acquire against Debtor, until the Indebtedness have been paid in full;
(c) Any acceptance of this Guaranty;
(d) Any set-offs or counterclaims against the Lender which would otherwise
impair the Lender's rights against Guarantor; and
(e) Any notice of the disposition of any collateral security and any right to
object to the commercial reasonableness of the disposition of any such
collateral security.
6. Guarantor hereby authorizes the Lender to obtain credit reports and
conduct credit and asset investigations on Guarantor so long as any
Indebtedness exists.
7. This Guaranty shall inure to the benefit of the Lender and its successors
and assigns, including each and every holder or owner of any of the Indebtedness
guaranteed hereby. In the event that there shall be more than one such holder
or owner, this Guaranty shall be deemed a separate contract with each holder and
owner. In the event that any person other than the Lender shall become a holder
or owner of any of the Indebtedness, each reference to the Lender hereunder
shall be construed as if it referred to each such holder or owner.
8. This Guaranty shall be binding upon Guarantor and his successors and
assigns, and shall continue in effect until Guarantor shall deliver to the
Lender (and each other holder or owner of the Indebtedness) thirty (30) days
advance written notice of termination, which delivery of notice must be
acknowledged in writing by Lender to be effective; provided that this Guaranty
shall continue in effect thereafter with respect to all Indebtedness in
existence on the effective date of such termination (including all extensions
and renewals thereof and all subsequently accruing interest and other charges
thereon) until all such Indebtedness shall be fully paid.
9. Guarantor agrees that recourse may be had against his earnings and
separate property for all of Guarantor's obligations under this Guaranty.
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<PAGE>
10. Guarantor warrants and represents to the Lender that any and all financial
statements concerning his personal financial condition delivered to the Lender
are true and correct in all material respects as of the date of such statements,
and if such statements are not current, that there has been no material adverse
change in the financial situation of Guarantor from the date of such statement
to the date of deliver of this Guaranty to the Lender. Guarantor acknowledges
that in accepting this Guaranty, the Lender has relied upon any such financial
statements, and Guarantor agrees to provided the Lender a statement of his
current financial condition in a form satisfactory to the Lender at least
annually upon the Lender's request.
11. The liability of each Guarantor executing this Guaranty shall be joint and
several and the term "Guarantor" shall mean each and all such Guarantors.
Masculine terms, as used herein, shall also refer where applicable to the
feminine gender and the neuter gender and the singular reference shall also
include the plural of any word, if the context so requires.
12. No modifications, recision, waiver, release or amendment of any provision
of this Continuing Guaranty shall be made or accepted, except by a written
agreement duly executed by Guarantor and Lender.
13. This Guaranty and all rights and obligations hereunder, including matters
of construction, validity and performance, shall be governed by the laws of the
State in which this Guaranty is executed.
14. THIS GUARANTY IS FREELY AND VOLUNTARILY GIVEN TO THE LENDER BY GUARANTOR,
JOINTLY AND SEVERALLY, WITHOUT ANY DURESS OR COERCION, AND AFTER GUARANTOR,
JOINTLY AND SEVERALLY, HAS EITHER CONSULTED WITH COUNSEL OR BEEN GIVEN AN
OPPORTUNITY TO DO SO, AND GUARANTOR, JOINTLY AND SEVERALLY, HAS CAREFULLY AND
COMPLETELY READ ALL OF THE TERMS AND PROVISIONS OF THIS GUARANTY.
United Landers, Inc.
/s/ George G. Lowrance /s/ Carl Spielvogel
- ---------------------- ------------------------
Attest By: Carl Spielvogel
Its: Chairman & CEO
Date: August 15, 1995
375 Park Avenue
New York, New York 10152
Loan #
-4-
<PAGE>
STOCK PURCHASE AGREEMENT
DATED AS OF NOVEMBER 17, 1995
AMONG
UNITED AUTO GROUP, INC.,
UAG ATLANTA, INC.,
ATLANTA TOYOTA, INC.,
AND
CARL H. WESTCOTT
<PAGE>
This STOCK PURCHASE AGREEMENT, dated as of November 17, 1995, is by
and among United Auto Group, Inc., a Delaware corporation ("UAG"), UAG Atlanta,
Inc., a Delaware corporation ("Sub"), Atlanta Toyota, Inc., a Texas corporation
(the "Company") and Carl H. Westcott ("Selling Stockholder").
W I T N E S S E T H:
WHEREAS, the Company operates franchise automobile dealerships and
related businesses;
WHEREAS, the Selling Stockholder owns all of the issued and
outstanding shares of common stock, par value $.10, of the Company (the "Common
Stock"); and
WHEREAS, Sub is a wholly-owned subsidiary of UAG; and
WHEREAS, Sub desires to purchase 1,000 shares of Common Stock from the
Selling Stockholder (such shares being collectively referred to herein as the
"Shares"), and the Selling Stockholder desires to sell the Shares to Sub (upon
the terms and subject to the conditions set forth in this Agreement), such that
immediately after giving effect to such purchase and sale, Sub will own one
hundred (100%) percent of all of the issued and outstanding shares of Common
Stock, on a fully diluted basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF THE SHARES.
(a) PURCHASE AND SALE. Upon the terms and subject to the conditions
set forth in this Agreement, the Selling Stockholder shall sell to Sub, and Sub
shall purchase from the Selling Stockholder, the Shares for an aggregate
purchase price equal to (i) $9,555,455 (the "Base Price"), which Base Price is
subject to adjustment at Closing as provided in SECTION 1.3 hereof and after
Closing as provided in SECTION 1.2 hereof and (ii) a promissory note (the "Sub
Note") issued by Sub and guaranteed by UAG in the principal amount of $2,100,100
with interest only payable semi-annually at the prime rate set by Citibank, N.A.
on the Closing Date and maturing on the last day of the thirtieth month
following the Closing Date, such promissory note being in a form mutually
acceptable to the parties. At the Closing referred to in SECTION 1.1(b) hereof:
(i) The Selling Stockholder shall sell, assign, transfer and
deliver to Sub the Shares representing 100% of the outstanding Common Stock
and shall deliver the certificates representing such Shares accompanied by
stock powers duly executed in blank; and
(ii) Sub shall accept and purchase the Shares from the Selling
Stockholder and in payment therefor shall deliver to the Selling
Stockholder (A) immediately available funds in an aggregate amount equal to
the Base Price as adjusted as provided in SECTION 1.3 hereof by wire
transfer to an account designated in writing by the Selling Stockholder and
(B) the Sub Note duly executed by Sub.
(b) CLOSING. Subject to the conditions set forth in this Agreement,
the purchase and sale of the Shares pursuant to this Agreement (the "Closing")
shall take place at the offices of Rogers & Hardin, 2700 Cain Tower, Peachtree
Center, 229 Peachtree Street, N.E., Atlanta, Georgia 30303, or such other
location as the parties shall agree upon, at 10:00 a.m. as soon as practicable
following the date on which all conditions to the obligations of the parties
hereunder (other than those requiring an
<PAGE>
exchange of certificates, opinions or other documents, or the taking of other
action, at the Closing) have been satisfied or waived but no later than December
31, 1995. The date on which the Closing is to occur is herein referred to as
the "Closing Date."
(c) DELIVERIES AT THE CLOSING. Subject to the conditions set forth
in this Agreement, at the Closing:
(i) The Selling Stockholder shall deliver to Sub (A)
certificates representing the Shares bearing the restrictive legend
customarily placed on securities that have not been registered under
applicable federal and state securities laws and accompanied by stock
powers as required by SECTION 1.1(a)(i) hereof, and any other documents
that are necessary to transfer to Sub good title to all the Shares, and (B)
all opinions, certificates and other instruments and documents required to
be delivered by the Selling Stockholder at or prior to the Closing or
otherwise required in connection herewith;
(ii) Sub shall pay and deliver to the Selling Stockholder (A)
funds as required by SECTION 1.1(a)(ii) hereof, (B) the Sub Note duly
executed by Sub; (C) a guaranty of the Sub Note and the Lease (as
hereinafter defined) by UAG in a form mutually acceptable to the parties,
executed by UAG and (D) all opinions, certificates and other instruments
and documents required to be delivered by Sub at or prior to the Closing or
otherwise required in connection herewith;
(iii) the Selling Stockholder, Sub and the Company shall enter
into a lease for the real property used in the business of the Company in a
form mutually acceptable to the parties (the "Lease"). The Lease shall be
for a twenty (20) year term commencing on the Closing Date. The initial
lease rate shall be $980,000 per year, payable monthly, and (a) on the
third anniversary of the Closing Date shall increase to $1,080,000 per year
(the "Adjusted Base Rate"), (b) on the tenth anniversary of the Closing
Date (the "Tenth Anniversary") shall increase to an amount equal to the
Adjusted Base Rate plus an amount equal to a percentage of the Adjusted
Base Rate, which percentage shall be three-fourths (3/4) of the percentage
increase in the Consumer Price Index published
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<PAGE>
from time to time by the United States Department of Labor ("CPI") between
the Closing Date and the Tenth Anniversary (such increased lease rate
hereinafter the "Increased Rate"), and (c) on the fifteenth anniversary of
the Closing Date (the "Fifteenth Anniversary") shall increase to an amount
equal to the Increased Rate plus an amount equal to a percentage of the
Increased Rate, which percentage shall be three-fourths (3/4) of the
percentage increase in the CPI between the Tenth Anniversary and the
Fifteenth Anniversary. In no event shall any adjustment in the lease rate
pursuant to SECTIONS 1.1(c) (vi)(b) OR (c) result in a rental rate
exceeding one and one-quarter (1 1/4%) percent of gross sales of the
Company for the calendar year immediately preceding such adjustment.
1.2 NET WORTH ADJUSTMENT.
(a) If the Closing Date is on or before the fifteenth (15th) of any
month, as soon as practicable after the Closing Date, the Selling Stockholder
shall deliver to Sub a balance sheet of the Company dated as of the last day of
the month immediately preceding the Closing Date, and if the Closing Date is
after the fifteenth (15th) of any month, as soon as practicable after the
Closing Date, the Selling Stockholder shall deliver to Sub a balance sheet of
the Company dated as of the last day of the month in which the Closing Date
occurred (such balance sheet so delivered is referred to herein as the "Closing
Date Balance Sheet") . The Closing Date Balance Sheet shall be prepared in good
faith on the same basis and in accordance with the accounting principles,
methods and practices used in preparing the Company Financial Statements (as
defined in SECTION 2.5 hereof), subject to the modifications, adjustments and
exceptions to such accounting principles, methods and practices as may be agreed
upon by Sub and the Selling Stockholder within thirty (30) days (or such other
number of days as the parties shall agree upon) of the date hereof and set forth
on SCHEDULE 1.2(a) hereto, and shall also include mutually agreed upon
procedures to adjust for any earnings and/or distributions of the Company
between the date of the Closing Date Balance Sheet and the Closing Date (such
accounting principles, methods and practices as so modified and adjusted, and
such procedures, are referred to herein as the "Accounting Principles") . In
connection with the preparation of the Closing Date Balance Sheet, the Selling
Stockholder and the Company shall permit the Reviewer (as
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<PAGE>
defined below) and other representatives of Sub to conduct a physical inventory
at each location where inventory is held by the Company. From the results of
such inventory and prior to the Closing Date, Sub and the Selling Stockholder
(or the respective representatives thereof) will prepare a schedule, which shall
be signed by each of Sub and the Selling Stockholder, setting forth the nature
and quality of such inventory and such other items as shall be agreed upon by
Sub and the Selling Stockholder.
(b) Within thirty (30) days after delivery of the Closing Date
Balance Sheet, (i) Coopers & Lybrand or such other national accounting firm (the
"Reviewer") selected by Sub, shall audit or otherwise review the Closing Date
Balance Sheet in such manner as Sub and the Reviewer deem appropriate, and (ii)
Sub shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet"),
together with the Reviewer's report thereon, to the Selling Stockholder. The
Reviewed Balance Sheet (i) shall be prepared on the same basis and in accordance
with the Accounting Principles and (ii) shall include a schedule showing the
computation of the Final Net Worth (as defined in SECTION 1.2(g)(i) hereof),
computed in accordance with the definition of Net Worth set forth in SECTION
1.2(g)(ii) hereof. Sub and the Reviewer shall have the opportunity to consult
with the Selling Stockholder, the Company and each of the accountants and other
representatives of the Selling Stockholder and the Company and examine the work
papers, schedules and other documents prepared by the Selling Stockholder, the
Company and each of such accountants and other representatives during the
preparation of the Closing Date Balance Sheet. The Selling Stockholder and the
Selling Stockholder's independent public accountants shall have the opportunity
to consult with the Reviewer and examine the work papers, schedules and other
documents prepared by Sub and the Reviewer during the preparation of the
Reviewed Balance Sheet.
(c) The Selling Stockholder shall have a period of forty-five (45)
days after delivery to the Selling Stockholder of the Reviewed Balance Sheet to
present in writing to Sub all objections the Selling Stockholder may have to any
of the matters set forth or reflected therein, which objections shall be set
forth in reasonable detail. If no objections are raised within such 45-day
period, the Reviewed Balance Sheet shall be deemed accepted and approved by the
Selling Stockholder and a supplemental closing (the "Supplemental Closing")
shall take
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<PAGE>
place within five (5) Business Days following the expiration of such 45-day
period, or on such other date as may be mutually agreed upon in writing by Sub
and the Selling Stockholder.
(d) If the Selling Stockholder shall raise any objection within the
45-day period, Sub and the Selling Stockholder shall attempt to resolve the
matter or matters in dispute and, if resolved, the Supplemental Closing shall
take place within five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by Sub and the Selling
Stockholder within sixty (60) days after the delivery of the Reviewed Balance
Sheet, then the specific matters in dispute shall be submitted to Ernst & Young
or such other firm of independent public accountants mutually acceptable to Sub
and the Selling Stockholder, which firm shall make a final and binding
determination as to such matter or matters. Such accounting firm shall send its
written determination to Sub and the Selling Stockholder and the Supplemental
Closing, if any, shall take place five (5) Business Days following the receipt
of such determination by Sub and the Selling Stockholder. The fees and expenses
of the accounting firm referred to in this SECTION 1.2(e) shall be paid one half
by Sub and one half by the Selling Stockholder.
(f) Sub and the Selling Stockholder agree to cooperate with each
other and each other's authorized representatives and with any accounting firm
selected by Sub and the Selling Stockholder pursuant to SECTION 1.2 (e) hereof
in order that any and all matters in dispute shall be resolved as soon as
practicable.
(g) (i) If the Net Worth as shown on the Reviewed Balance Sheet as
finally determined through the operation of SECTIONS 1. 2 (a) THROUGH (e) hereof
(such amount being referred to herein as the "Final Net Worth") shall be less
than the required net worth in Section 6.15 (the amount of any such deficiency
being referred to herein as the "Net Worth Deficiency"), the Selling Stockholder
shall pay to Sub at the Supplemental Closing, by wire transfer of immediately
available funds to an account designated in writing by Sub within two (2)
Business Days of the date of the Supplemental
-5-
<PAGE>
Closing, an amount equal to the difference between the Net Worth Deficiency and
$200,000, together with interest on such amount from the Closing Date to the
date of the Supplemental Closing at the prime rate or its equivalent (as
announced from time to time by Citibank, N.A.).
(ii) "Net Worth" computed in connection with the Closing Date
Balance Sheet and the Reviewed Balance Sheet shall mean the amount by which the
total assets exceed the total liabilities reflected, in each case, on the
balance sheet of Company comprising the Closing Date Balance Sheet or the
Reviewed Balance Sheet, as the case may be; provided that, notwithstanding the
foregoing, the effect of any disposition of the Company's Buick dealership and
related assets shall be disregarded for the purposes of computing Net Worth.
1.3 PARKING GARAGE.
The Company is a party to a General Construction Contract Agreement
dated July 12, 1995 (the "Construction Contract") with Excel Building Systems,
Inc. which provides for the construction of a two-story parking deck for the
Company (the "Parking Garage"). The Construction Contract and change orders
attached to a Requisition for Payment dated October 6, 1995 have been supplied
to Sub. Sub and Selling Stockholder acknowledge that the parking structure may
not be completed prior to the Closing. To fund progress payments under the
Construction Contract, the Company has executed a promissory note to NationsBank
dated October 25, 1995 in the principal amount of $450,000 and the Company may
borrow additional amounts to fund amounts due under the Construction Contract.
At the Closing, UAG, Sub and Selling Stockholder agree that the Base Price shall
be reduced by $1,106,700 (plus the cost, if any, of any change orders reflecting
changes required in order for the Company to obtain a certificate of occupancy
for the
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<PAGE>
Parking Garage) and that Sub shall pay or cause the payment of all indebtedness
of the Company to NationsBank incurred to fund the Construction Contract (the
"Construction Debt") and that Sub shall assume and agree to perform the
remaining obligations of the Company under the Construction Contract, including
amounts due for change orders. Change orders subsequent to October 6, 1995 will
be submitted to Sub for approval prior to such orders becoming binding upon the
Company. Sub will not unreasonably withhold approval of change orders approved
by the Company's consulting engineers. After the Closing Date, change orders
reflecting changes required in order for the Company to obtain a certificate of
occupancy for the Parking Garage will be submitted to the Selling Stockholder at
least five days prior to such change orders becoming binding on the Company, and
the Selling Stockholder will be provided with an opportunity to consult with the
Company and its consulting engineers with respect thereto prior to such change
orders becoming binding on the Company. To the extent that such change orders
reflect changes required in order for the Company to obtain a certificate of
occupancy for the Parking Garage (and not attributable to changes in the Parking
Garage that were made (with Sub's approval or after the Closing) or are to be
made for reasons other than being required to obtain a certificate of occupancy
for the Parking Garage), the Selling Stockholder will, upon receipt of written
request therefor, reimburse the Company for reasonable amounts paid by the
Company as a result of such required changes.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLING STOCKHOLDER
Upon delivery of all of the Schedules referred to in this Article 2,
which delivery shall be no later than 30 days after the date hereof, except as
specifically set forth on SCHEDULE 2, the Company and the Selling Stockholder
will be deemed to jointly and severally represent and warrant to Sub and UAG as
follows:
2.1 ORGANIZATION AND GOOD STANDING.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas and has the corporate power
and authority to own, lease and operate the properties used in its business and
to carry on its business as now being conducted. The Company is duly qualified
to do business and is in good standing as a foreign corporation in each state
and jurisdiction where qualification as a foreign corporation is required,
except for such failures to be qualified and in good standing, if any, which
when taken together with all other such failures of the Company would not, or
could not reasonably be expected to, in the aggregate have a Material Adverse
Effect (as defined in SECTION 10.11 hereof). SCHEDULE 2.1 hereto lists (i) the
states and other jurisdictions where the Company is so qualified and (ii) the
assumed names under which the Company conducts business and has conducted
business during the past five
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years. The Company has previously delivered or made available to Sub complete
and correct copies of its articles of incorporation and bylaws as amended and
presently in effect.
2.2 SUBSIDIARIES.
The Company does not have any subsidiaries.
2.3 CAPITALIZATION.
The authorized stock of the Company and the number of shares of
capital stock that are issued and outstanding are set forth on SCHEDULE 2.3
hereto. The shares listed on SCHEDULE 2.3 hereto constitute all the issued and
outstanding shares of capital stock of the Company and have been validly
authorized and issued, are fully paid and nonassessable, have not been issued in
violation of any preemptive rights or of any federal or state securities law and
no personal liability attaches to the ownership thereof. There is no security,
option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition of any
shares of capital stock of the Company or any securities convertible into, or
other rights to acquire, any shares of capital stock of the Company, or (ii)
obligates the Company to grant, offer or enter into any of the foregoing, or
(iii) relates to the voting or control of such capital stock, securities or
rights, except as provided in this Agreement or the Documents or as set forth on
SCHEDULE 2.3 hereto. The Company has not agreed to register any securities
under the Securities Act.
2.4 AUTHORITY; APPROVALS AND CONSENTS.
The Company has the corporate power and authority to enter into this
Agreement and the Documents (as defined in SECTION 10.11 hereof) to which it is
a party and to perform its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and the Documents to which it is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized and approved by the Board of Directors of the Company
and no other corporate proceedings on the part of the Company are necessary to
authorize and approve this Agreement and the Documents and the transactions
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contemplated hereby and thereby. This Agreement has been, and on the Closing
Date the Documents to which the Company is a party will be, duly executed and
delivered by, and constitute a valid and binding obligation of, the Company,
enforceable against the Company in accordance with their respective terms,
except as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally. Except as set forth on SCHEDULE 2.4, the
execution, delivery and performance by the Company and the Selling Stockholder
of this Agreement and the Documents to which it or he is a party and the
consummation of the transactions contemplated hereby and thereby do not and will
not:
(i) contravene any provisions of the Articles of Incorporation
or By-Laws of the Company;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any Company Agreement (as
defined in SECTION 2.15 hereof) or, require any consent or waiver of any
party to any Company Agreement other than agreements the breach or
violation of which could not reasonably be expected to have a Material
Adverse Effect;
(iii) result in the creation of any Security Interest upon, or
any person obtaining any right to acquire, any properties, assets or rights
of the Company (other than the rights of Sub to acquire the Shares pursuant
to this Agreement);
(iv) violate or conflict with any Legal Requirements (as defined
in SECTION 2.9 hereof) applicable to the Company or any of its businesses
or properties; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority.
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Except as set forth on SCHEDULE 2.4 or referred to above, to the
knowledge of the Company, no permit or approval of, or notice to any
governmental, administrative or judicial authority is necessary to be obtained
or made by the Company to enable the Company to continue to conduct its business
and operations and use its properties after the Closing in a manner which is in
all material respects consistent with that in which they are presently conducted
except for the renewal of any permits in the ordinary course of business
(provided that the Company reasonably believes that any such permit will be
renewed).
2.5 FINANCIAL STATEMENTS.
Except as otherwise indicated below, attached as SCHEDULE 2.5 are true
and complete copies of:
(i) (A) the audited balance sheet of the Company as of December
31, 1994, and the related statements of income, stockholders' equity and
cash flow for the fiscal year ended December 31, 1994, together with the
notes thereto, in each case examined by and accompanied by the report of
independent certified public accountants, and (B) the audited balance sheet
of the Company as of December 31, 1993, and the related statements of
income, stockholders' equity and cash flow for the fiscal year ended
December 31, 1994, together with the notes thereto, in each case examined
by and accompanied by the report of independent certified public
accountants; and
(ii) the September 1995 financial statements provided to Toyota
Motor Sales USA, Inc. ("Toyota") and Southeast Toyota, Inc. ("Southeast
Toyota") by the Company (the "Company Factory Statements" and the balance
sheet information included therein being referred to as the "Company
Balance Sheet");
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "Company Financial Statements") . The
Company Financial Statements are in accordance with the books and records of the
Company, fairly present the consolidated financial position and results of
operations of the Company as of the dates and for the periods indicated, in the
case of the financial statements referred to in clause (i) above in conformity
with GAAP consistently applied
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(except as otherwise indicated in such statements) during such periods, and can
be legitimately reconciled with the financial statements and the financial
records maintained and the accounting methods applied by the Company for federal
income tax purposes, and the unaudited financial statements included in the
Company Financial Statements include all adjustments, which consist of only
normal recurring accruals, necessary for such fair presentations. The
statements of income included in the Company Financial Statements do not contain
any items of special or nonrecurring income except as expressly specified
therein, and the balance sheets included in the Company Financial Statements do
not reflect any write-up or revaluation increasing the book value of any assets
except as expressly stated therein. The books and accounts of the Company are
complete and correct in all material respects and fairly reflect all of the
transactions, items of income and expense and all assets and liabilities of the
businesses of the Company consistent with prior practices of the Company.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES.
The Company does not have any liability of any nature whatsoever
(whether known or unknown, due or to become due, accrued, absolute, contingent
or otherwise), including, without limitation, any unfunded obligation under
employee benefit plans or arrangements as described in SECTION 2.17 AND 2.18
hereof or liabilities for Taxes (as defined in SECTION 2.8 hereof), except for
(i) liabilities reflected or reserved in against the most recent Company
Financial Statement, (ii) current liabilities incurred in the ordinary course of
business and consistent with past practice after the date of the Company Balance
Sheet which, individually and in the aggregate, do not have, and cannot
reasonably be expected to have, a Material Adverse Effect, and (iii) liabilities
disclosed on SCHEDULE 2.6 hereto. The Company is not a party to any Company
Agreement,or subject to any articles of incorporation or bylaw provision, any
other corporate limitation or any Legal Requirement which has, or, to the
Company or the Selling Stockholder's knowledge, can reasonably be expected to
have, a Material Adverse Effect.
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2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1994, except as set forth on SCHEDULE 2.7(a)
hereto, the Company has operated in the ordinary course of business consistent
with past practice and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Company and, to the knowledge of the Selling Stockholder and the Company,
no factor, event, condition, circumstance or prospective development exists
which could reasonably be expected to have a Material Adverse Effect;
(ii) any material loss, damage, destruction or other casualty to
the property or other assets of the Company, whether or not covered by
insurance;
(iii) any change in any method of accounting or accounting
practice of the Company; or
(iv) any loss of the employment, services or benefits of any key
employee of the Company.
(b) Since December 31, 1994, except as set forth in SCHEDULE 2.7(b)
hereto, the Company has not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary course
of business consistent with past practice;
(ii) mortgaged, pledged or subjected to any lien any of its
property or other assets except in the ordinary course of business, and
except for mechanics and materialmens liens and liens for taxes not yet due
and payable;
(iii) sold or transferred any assets or cancelled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
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(iv) defaulted on any material obligation;
(v) entered into any material transaction, except in the
ordinary course of business consistent with past practice;
(vi) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not reflected
in the Company Financial Statements except in the ordinary course of
business;
(vii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them;
(viii) discontinued any franchise;
(ix) incurred any obligation or liability to any employee for the
payment of severance benefits of more than $5,000; or
(x) entered into any agreement or made any commitment to do any
of the foregoing.
2.8 TAXES.
The Company and, for any period during all or part of which the tax
liability of any other corporation was determined on a combined or consolidated
basis with the Company any such other corporation, have filed timely all
federal, state, local and foreign tax returns, reports and declarations required
to be filed (or have obtained or timely applied for an extension with respect to
such filing) correctly reflecting the Taxes (as defined below) and all other
information required to be reported thereon and have paid, or made adequate
provision for the payment of, all Taxes which are due pursuant to such returns
or pursuant to any assessment received by the Company or any such other
corporation. As used herein, "Taxes" shall mean all taxes, fees, levies or
other assessments, including but not limited to income, excise, property
(including property taxes paid by the Company pursuant to any lease), sales,
franchise, withholding, social security and unemployment taxes imposed by the
United States, any
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state, county, local or foreign government, or any subdivision or agency thereof
or taxing authority therein, and any interest, penalties or additions to tax
relating to such taxes, charges, fees, levies or other assessments. Copies of
all tax returns for each fiscal year since the formation of the Company have
been furnished or made available to UAG or its representatives and such copies
are accurate and complete as of the date hereof. The Company has also furnished
or made available to UAG correct and complete copies of all notices and
correspondence sent or received since the formation of the Company by the
Company to or from any federal, state or local tax authorities. The Company has
adequately reserved for the payment of all Taxes with respect to periods ended
on, prior to or through the date of the Company Balance Sheet for which tax
returns have not yet been filed. In the ordinary course, the Company makes
adequate provision on its books for the payment of all Taxes (including for the
current fiscal period) owed by the Company. Except to the extent reserves
therefor are reflected on the Company Balance Sheet, the Company is not liable,
or will not become liable, for any Taxes for any period ending on, prior to or
through the date of the Company Balance Sheet. On the Closing Date Balance
Sheet, the Company will have adequately reserved for the payment of any Taxes
for any period ending on, prior to or through the date of the Closing Date
Balance Sheet. Except as set forth on SCHEDULE 2.8 hereto, the Company has not
been subject to a federal or state tax audit of any kind, and no adjustment has
been proposed by the Internal Revenue Service ("IRS") with respect to any return
for any subsequent year. With respect to the audits referred to on SCHEDULE 2.8
hereto, no such audit has resulted in an adjustment in excess of $50,000.
Neither the Company nor the Selling Stockholder knows of any basis for an
assertion of a deficiency for Taxes against the Company. The Selling
Stockholder will cooperate with the Company in the filing of any returns and in
any audit or refund claim proceedings involving Taxes for which the Company may
be liable or with respect to which the Company may be entitled to a refund.
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2.9 LEGAL MATTERS.
(a) Except as set forth on SCHEDULE 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, or, to the knowledge of the Company or
the Selling Stockholder, threatened against or affecting, the Company, any ERISA
Plan (as defined in SECTION 2.18(a) hereof) or any of their respective
properties or rights before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, domestic or foreign, nor is any
basis known to the Selling Stockholder or the Company for any such Claims, and
(ii) the Company is not subject to any judgment, decree, writ, injunction,
ruling or order (collectively, "Judgments") of any governmental, administrative
or judicial authority, domestic or foreign. SCHEDULE 2.9(a) hereto identifies
each Claim and Judgment disclosed thereon which is fully covered by an insurance
policy.
(b) The businesses of the Company are being conducted in compliance
with all laws, ordinances, codes, rules, regulations, standards, judgments and
other requirements of all governmental, administrative or judicial entities
(collectively, "Legal Requirements") applicable to the Company or any of its
respective businesses or properties, except where the failure to be in such
compliance could not reasonably be expected to have a Material Adverse Effect.
The Company holds, and is in compliance with, all franchises, licenses, permits,
registrations, certificates, consents, approvals or authorizations
(collectively, "Permits") required by all applicable Legal Requirements except
where the failure to hold or be in compliance with such Permits could not
reasonably be expected to have a Material Adverse Effect.
(c) The Company owns or holds all Permits material to the conduct of
its business. No event has occurred and is continuing which permits, or after
notice or lapse of time or both would permit, any modification or termination of
any Permit, except where the failure to own or hold such Permit(s) could not
reasonably be expected to have a Material Adverse Effect.
2.10 PROPERTY
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(a) The properties and assets owned by or leased to the Company are
adequate for the conduct of the respective businesses of the Company as
presently conducted. Set forth on SCHEDULE 2.10 hereto is a list of all real
property owned by or leased to the Company (including all real property owned or
leased by the Selling Stockholder used in the businesses of the Company) and of
all options or other contracts to acquire any such interest (collectively, the
"Real Property "). All improvements to the Real Property ("Improvements") and
all machinery, equipment and other tangible property owned or used by or leased
to the Company are fit for the particular purposes for which they are used by
the Company, subject only to normal maintenance and ordinary wear and tear.
Such tangible properties and all Improvements owned or leased by the Company
conform in all material respects with all applicable laws, ordinances, rules and
regulations and other Legal Requirements and such Improvements do not encroach
in any respect on property of others.
(b) (i) The Real Property is currently zoned to permit the conduct of
the respective businesses of the Company as presently conducted. A Certificate
of Occupancy has been issued with respect to the Improvements (other than the
Parking Garage) without special conditions or restrictions.
(ii) To the knowledge of the Company and the Selling Stockholder,
the detention pond on the Real Property has not flooded in the past five years.
(iii) All necessary building permits and other governmental
approvals that the Company was required to obtain on or before the date hereof
have been obtained with respect to construction of the Parking Garage.
(iv) The Improvements and all machinery, equipment and other
tangible property owned or used by or leased to the Company are in good working
order and condition for the particular purposes for which they are used subject
only to normal maintenance and ordinary wear and tear. No notice of any
pending, threatened or contemplated action by any governmental authority or
agency having the power of eminent domain has been given to the Company or the
Selling Stockholder with respect to the Real Property.
2.11 ENVIRONMENTAL MATTERS.
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(a) Except as set forth on SCHEDULE 2.11(a) hereto, (i) the Company,
the Real Property, the Improvements and any property formerly owned, occupied or
leased by the Company are in full compliance with all Environmental Laws (as
defined below), (ii) the Company has obtained all Environmental Permits (as
defined below), (iii) such Environmental Permits are in full force and effect,
and (iv) the Company is in full compliance with all terms and conditions of such
Environmental Permits. As used herein, "Environmental Laws" shall mean all
applicable requirements of environmental, public or employee health and safety,
public or community right-to-know, ecological or natural resource laws or
regulations or controls, including all applicable requirements imposed by any
law (including without limitation common law), rule, order, or regulations of
any federal, state, or local executive, legislative, judicial, regulatory, or-
administrative agency, board, or authority, or any applicable private agreement
(such as covenants, conditions and restrictions), which relate to, (i) noise,
(ii) pollution or protection of the air, surface water, groundwater, or soil,
(iii) solid, gaseous, or liquid waste generation, treatment, storage, disposal
or transportation, (iv) exposure to Hazardous Materials (as defined below), or
(v) regulation of the manufacture, processing, distribution and commerce, use,
or storage of Hazardous Materials. As used herein, "Environmental Permits"
shall mean all permits, licenses, approvals, authorizations, consents or
registrations required under applicable Environmental Law in connection with the
ownership, use and/or operation of the Company or the Real Property and
Improvements of the Company.
As used in this SECTION 2.11, "Hazardous Materials" shall mean,
collectively, (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste," "hazardous substances,"
"hazardous materials," "toxic substances" or similar terms in or pursuant to,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (42 U.S.C. 9601 ET SEQ.) ("CERCLA"), as amended by
Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100
State, 1613), the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 ET SEQ.) ("RCRA") and the Occupational Safety and Health Act of
1970 (29 U.S.C. Section 651 ET SEQ.) ("OSHA"), the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 ET SEQ. ("HMTA"), and in the
regulations promul-
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gated pursuant to such laws, all as amended, (ii) those substances listed in the
United States Department of Transportation Table (49 CFR 172.101 and amendments
thereto) or by the Environmental Protection Agency (or any successor agency) as
hazardous substances (40 CFR part 302 and amendments thereto), (iii) any
material, waste or substance which is or contains (A) petroleum, including crude
oil or any fraction thereof, natural gas, or synthetic gas usable for fuel or
any mixture thereof, (B) asbestos, (C) polychlorinated biphenyls, (D) designated
as a "hazardous substance" pursuant to Section 311 of the Clean Water Act, 33
U.S.C. Section 1251 ET SEQ. (33 U.S.C. Section 1321) or listed pursuant to
Section 307 of the Clean Water Act (33 U.S.C. Section 1317), (E) flammable
explosives, (F) radioactive materials, and (iv) such other substances, materials
and wastes which are or become regulated or classified as hazardous, toxic or as
"special wastes" under any Environmental Laws.
(b) Except as set forth on SCHEDULE 2.11(b), the Company and the
Selling Stockholder have not violated, done or suffered any act which could give
rise to liability under, and are not otherwise exposed to liability under, any
Environmental Law. Except as set forth on SCHEDULE 2.11(b), no event has
occurred with respect to the Real Property, the Improvements, any property
formerly owned, occupied or leased by the Company, which, with the passage of
time or the giving of notice, or both, would constitute a violation of or non-
compliance with any applicable Environmental Law. Except as set forth on
SCHEDULE 2.11(b), the Company has no contingent liability under any
Environmental Law. There are no liens under any Environmental Law on the Real
Property.
(c) Except as set forth on SCHEDULE 2.11(c) hereto, (i) neither the
Company, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Company, nor, to the
knowledge of the Selling Stockholder, any property adjacent to the Real Property
is being used or has been used for the treatment, generation, transportation,
processing, handling, production or disposal of any Hazardous Materials or as a
landfill or other waste disposal site (provided, however, that certain petroleum
products are stored and handled on the Real Property in the ordinary course of
the Company's business in compliance with all Environmental Laws), (ii) none of
the Real Property or portion thereof, the Improve-
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ments or any property formerly owned, occupied or leased by the Company has been
subject to investigation by any governmental authority evaluating the need to
investigate or undertake Remedial Action (as defined below) at such property,
and (iii) none of the Real Property, the Improvements or any property formerly
owned, occupied or leased by the Company, or, to the knowledge of the Company,
any site or location where the Company sent waste of any kind, is identified on
the current or proposed (A) National Priorities List under 40 C.F.R. 300
Appendix B, (B) Comprehensive Environmental Response Compensation and Liability
Inventory System list, or (C) any list arising from any statute analogous to
CERCLA. As used herein, "Remedial Action" shall mean any action required to (i)
clean up, remove or treat Hazardous Materials, (ii) prevent a release or threat
of release of any Hazardous Material, (iii) perform pre-remedial studies,
investigations or post-remedial monitoring and care, (iv) cure a violation of
Environmental Law or (v) take corrective action under sections 3004(u), 3004(v)
or 3008(h) of RCRA or analogous state law.
(d) Except as set forth on SCHEDULE 2.11(d) hereto, there have been
and are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or containers disposed of or buried on, in or under
the ground or any surface waters, (ii) asbestos or asbestos containing materials
or radon gas (except that, as to radon gas, the Company makes no representation
or warranty with respect to the Parking Garage), (iii) polychlorinated biphenyls
("PCB") or PCB-containing equipment, including transformers, or (iv) wetlands
(as defined under any Environmental Law) located within any portion of the Real
Property, nor have any liens been placed upon any portion of the Real Property,
the Improvements or any property formerly owned, occupied or leased by the
Company in connection with any actual or alleged liability under any
Environmental Law.
(e) Except as set forth on SCHEDULE 2.11(e) hereto, (i) there is no
pending or threatened claim, litigation, or administrative proceeding, or known
prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving any of the Company, the Real Property, the
Improvements, any property formerly owned, leased or occupied by the Company,
any offsite contamination affecting the business of the Company or any
operations conducted at the Real Property, (ii) there are no
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ongoing negotiations with or agreements with any governmental authority relating
to any Remedial Action or other environmentally related claim, (iii) the Company
has not submitted notice pursuant to Section 103 of CERCLA or analogous statute
or notice under any other applicable Environmental Law reporting a release of a
Hazardous Material into the environment, and (iv) the Company has not received
any notice, claim, demand, suit or request for information from any governmental
or private entity with respect to any liability or alleged liability under any
Environmental Law, nor to knowledge of the Selling Stockholder and the Company,
has any other entity whose liability therefor, in whole or in part, may be
attributed to the Company, received such notice, claim, demand, suit or request
for information.
(f) The Selling Stockholder or the Company have provided to UAG all
environmental studies and reports obtained by them or known to them pertaining
to the Real Property, the Improvements, the Company and any property formerly
owned, occupied or leased by the Company, and have permitted (or will have
permitted as of the Closing Date), the testing of the soil, groundwater,
building components, tanks, containers and equipment on the Real Property, the
Improvements, any property formerly owned, occupied or leased by the Company by
UAG or UAG's agents or experts as they have or shall have deemed necessary or
appropriate to confirm the condition of such properties.
2.12 INVENTORIES.
The values at which inventories are carried on the Company Balance
Sheet reflect the normal inventory valuation policies of the Company, and such
values are in conformity with GAAP consistently applied. All inventories
reflected on the Company Balance Sheet and Company Factory Statement or arising
since the date thereof are currently marketable and can reasonably be
anticipated to be sold at normal mark-ups within 180 days after the date hereof
in the ordinary course of business (subject to the reserve for obsolete, off-
grade or slow-moving items that is reflected in the Company Balance Sheet or
will be reflected in the Closing Date Balance Sheet), except for spare parts
inventory which inventory is good and usable.
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2.13 ACCOUNTS RECEIVABLE.
All accounts receivable, other than accounts receivable from Jayhawk
Acceptance Corporation, reflected on the Company Balance Sheet are, and all
accounts receivable, other than accounts receivable from Jayhawk Acceptance
Corporation, that will be or will have been reflected on the Closing Date
Balance Sheet will be, good and have been or will have been collected or are
collectible, without resort to litigation, within 120 days of the Closing Date,
and are subject to no defenses, setoffs or counterclaims other than normal cash
discounts accrued in the ordinary course of business (in each case, subject to
any reserves reflected on such balance sheets.)
2.14 INSURANCE.
All material properties and assets of the Company which are of an
insurable character are insured against loss or damage by fire and other risks
to the extent and in the manner reasonable in light of the risks attendant to
the businesses and activities in which the Company is engaged and customary for
companies engaged in similar businesses or owning similar assets. Set forth on
SCHEDULE 2.14 hereto is a list and brief description (including the name of the
insurer, the type of coverage provided, the amount of the annual premium for the
current policy period, the amount of remaining coverage and deductibles and the
coverage period) of all policies for such insurance and the Company previously
has made available to UAG true and complete copies of all such policies. All
such policies are in full force and effect sufficient for all applicable
requirements of law and will not in any way be effected by or terminated or
lapsed by reason of the consummation of the transactions contemplated by this
Agreement and the Documents. No notice of cancellation or non-renewal with
respect to, or disallowance of any claim under, any such policy has been
received by the Company.
2.15 CONTRACTS; ETC.
As used in this Agreement, the term "Company Agreements" shall mean
all mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether
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written or oral, binding or non-binding, (including all leases and other
agreements referred to on SCHEDULE 2.10 hereto) to which the Company is a party
or by which the Company or any of its properties may be bound or affected,
including all amendments, modifications, extensions or renewals of any of the
foregoing. Set forth on SCHEDULE 2.15 hereto is a complete and accurate list of
each Company Agreement which is material to the businesses, operations, assets,
condition (financial or otherwise) or prospects of the Company and involves more
than $50,000 over the life of such Company Agreement. True and complete copies
of all written Company Agreements referred to on SCHEDULE 2.15 and SCHEDULE 2.10
hereto have heretofore been delivered or made available to UAG, and the Company
has provided UAG with accurate and complete written summaries of all such
Company Agreements which are unwritten. Except as set forth on SCHEDULE 2.15,
the Company is not, nor, to the knowledge of the Company and the Selling
Stockholder is, any other party thereto, in breach of or default under any
Company Agreement, and no event has occurred which (after notice or lapse of
time or both) would become a breach or default under, or would permit
modification, cancellation, acceleration or termination of, any Company
Agreement or result in the creation of any Security Interest upon, or any person
obtaining any right to acquire, any properties, assets or rights of the Company
in any such case where such breach, default or other event would have, or could
reasonably be expected to have, a Material Adverse Effect.
2.16 LABOR RELATIONS.
(a) The Company has paid or made provision for the payment of all
salaries and accrued wages and has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes, and has withheld and paid to the appropriate
governmental authority, or is holding for payment not yet due to such authority,
all amounts required by law or agreement to be withheld from the wages or
salaries of its employees.
(b) Except as set forth on SCHEDULE 2.16(b) hereto, the Company is
not a party to any (i) outstanding employment agreements or contracts with
officers or employees that are not terminable at will, or that provide for
payment of any bonus or
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commission in excess of $10,000, (ii) agreement, policy or practice that
requires it to pay termination or severance pay to salaried, non-exempt or
hourly employees (other than as required by law), (iii) collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company, nor does the Selling Stockholder or the Company know of any activities
or proceedings of any labor union to organize any such employees. The Company
has furnished to UAG complete and correct copies of all such agreements
("Employment and Labor Agreements"). The Company has not breached or otherwise
failed to comply with any provisions of any Employment or Labor Agreement,
except where such breach or failure could not reasonably be expected to have a
Material Adverse Effect.
(c) Except as set forth in SCHEDULE 2.16(c) hereto, (i) there is no
unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or
material work stoppage or lockout actually pending or, to the Selling
Stockholder's or the Company's knowledge, threatened, against or affecting the
Company, and the Company has not experienced any strike, material slow down or
material work stoppage, lockout or other collective labor action by or with
respect to employees of the Company, (iii) there is no representation claim or
petition pending before the NLRB or any similar foreign agency and no question
concerning representation exists relating to the employees of the Company, (iv)
there are no charges with respect to or relating to the Company pending before
the Equal Employment Opportunity Commission or any state, local or foreign
agency responsible for the prevention of unlawful employment-practices, (v) the
Company has not received formal notice from any federal, state, local or foreign
agency responsible for the enforcement of labor or employment laws of an
intention to conduct an investigation of the Company and, to the knowledge of
the Company, no such investigation is in progress and (vi) the consents of the
unions that are parties to any Employment and Labor Agreements are not required
to complete the transactions contemplated by this Agreement and the Documents.
(d) The Company has never caused any "plant closing" or "mass
layoff" as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. Sections 2101-2109, and the
regulations promulgated therein.
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2.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth on SCHEDULE 2.17(a) hereto is a true and complete list
of:
(i) each employee pension benefit plan, as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the Company or to which the Company is required to make
contributions ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in Section
3(i) of ERISA, maintained by the Company or to which the Company is
required to make contributions ("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare
Benefit Plans (collectively, "ERISA Plans") have been delivered to or made
available to UAG together with, as applicable with respect to each such ERISA
Plan, trust agreements, summary plan descriptions, all IRS determination letters
or applications therefor with respect to any Pension Benefit Plan intended to be
qualified pursuant to Section 401 (a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and valuation or actuarial reports, accountant's opinions,
financial statements, IRS Form 5500s (or 5500-C or 5500-R) and summary annual
reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on SCHEDULE
2.17(b):
(i) there is no ERISA Plan which is a " multiemployer" plan as
that term is defined in Section 3(37) of ERISA ("Multiemployer Plan");
(ii) no event has occurred or (to the knowledge of the Company
or the Selling Stockholder) is threatened or about to occur which would
constitute a prohibited transaction under Section 406 of ERISA or under
Section 4975 of the Code;
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(iii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed under
ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R)
and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under Section
401(a) of the Code, except as set forth on SCHEDULE 2.17(c):
(i) has been qualified, from its inception, under Section 401(a)
of the Code, and the trust established thereunder has been exempt from
taxation under Section 501(a) of the Code and is currently in compliance
with applicable federal laws;
(ii) has been operated, since its inception, in accordance with
its terms and there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review by
the IRS or (to the knowledge of the Company or the Selling Stockholder) no
such action is contemplated or under consideration and the IRS has not
asserted that any Pension Benefit Plan is not qualified under Section
401(a) of the Code or that any trust established under a Pension Benefit
Plan is not exempt under Section 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and, for the purpose solely of SECTION
2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the
Code, except as set forth on SCHEDULE 2.17(d):
(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been incurred by the Company
since the effective date of ERISA and all premiums due and owing to the
PBGC have been timely paid;
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(ii) the PBGC has not notified the Company or any Pension
Benefit Plan of the commencement of proceedings under Section 4042 of ERISA
to terminate any such plan;
(iii) no event has occurred since the inception of any Pension
Benefit Plan or (to the knowledge of the Company or the Selling
Stockholder) is threatened or about to occur which would constitute a
reportable event within the meaning of Section 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of
the Code); and
(v) if any of such Pension Benefit Plans were to be terminated
on the Closing Date (A) no liability under Title IV of ERISA would be
incurred by the Company and (B) all benefits accrued to the day prior to
the Closing Date (whether or not vested) would be fully funded in
accordance with the actuarial assumptions and method utilized by such plan
for valuation purposes.
(e) With respect to each Pension Benefit Plan, SCHEDULE 2.17(e)
contains a list of all Pension Benefit Plans to which ERISA has applied which
have been or are being terminated, or for which a termination is contemplated,
and a description of the actions taken by the PBGC and the IRS with respect
thereto.
(f) The aggregate of the amounts of contributions by the Company to
be paid or accrued under ERISA Plans is not expected to exceed approximately
$250,000 for the current fiscal year. To the extent required in accordance with
GAAP, the Company Balance Sheet reflects in the aggregate an accrual of all
amounts of employer contributions accrued but unpaid by the Company under the
ERISA Plans as of the date of the Company Balance Sheet.
(g) Except as set forth on SCHEDULE 2.17(g), with respect to any
Multiemployer Plan (1) the Company has not, since its formation, made or
suffered a "complete withdrawal" or "partial withdrawal" as such terms are
respectively defined in Sections 4203 and S205 of ERISA; (2) there is no
withdrawal liability of the Company under any Multiemployer Plan, computed as if
a "complete withdrawal" by the Company had occurred under
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each such Plan as of December 31, 1994; and (3) the Company has not received
notice to the effect that any Multiemployer Plan is either in reorganization (as
defined in Section 4241 of ERISA) or insolvent (as defined in Section 4245 of
ERISA).
(h) With respect to the Welfare Benefit Plans, except as set forth
on SCHEDULE 2.17(h):
(i) There are no liabilities of the Company under Welfare
Benefit Plans with respect to any condition which relates to a claim filed
on or before the date of this Agreement.
(ii) No claims for benefits are in dispute or litigation.
2.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on SCHEDULE 2.18(a) hereto is a true and complete list
of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance, severance, retirement,
excess benefit or other plan, trust or arrangement which is not an ERISA
Plan whether written or oral, which the Company maintains or is required to
make contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current or
former officer, director or consultant of the Company pursuant to which
payments may be required to be made at any time following the date hereof
(including, without limitation, any employment, deferred compensation,
severance, supplemental pension, termination or consulting agreement or
arrangement); and
(iii) each employee of the Company whose aggregate compensation
for the fiscal year ended December 31, 1994 exceeded, and whose aggregate
compensation for the fiscal year ended December 31, 1995 is likely to
exceed, $50,000. True and complete copies of all of the written plans,
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arrangements and agreements referred to on SCHEDULE 2.18(a) ("Compensation
Commitments") have been provided to UAG together with, where prepared by or
for the Company, any valuation, actuarial or accountant's opinion or other
financial reports with respect to each Compensation Commitment for the last
three years. An accurate and complete written summary has been provided to
UAG with respect to any Compensation Commitment which is unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material
respects in accordance with its terms;
(ii) is not currently under investigation, audit or review by
the IRS or any other federal or state agency and (to the knowledge of any
Company or the Selling Stockholder) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or foreign
Taxes;
(iv) has no claims subject to dispute or litigation;
(vi) has met all applicable requirements, if any, of the Code;
and
(v) has operated since its inception in material compliance with
the reporting and disclosure requirements imposed under ERISA and the Code.
2.19 TRANSACTIONS WITH INSIDERS.
Set forth on SCHEDULE 2.19 hereto is a complete and accurate
description of all material transactions between the Company or any ERISA Plan,
on the one hand, and any Insider, on the other hand, that have occurred since
January 1, 1995. For purposes of this Agreement:
(i) the term "Insider" shall mean the Selling Stockholder, any
director or officer of the Company, and any Affiliate, Associate or
Relative of any of the foregoing persons;
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(ii) the term "Associate" used to indicate a relationship with
any person means (A) any corporation, partnership, joint venture or other
entity of which such person is an officer or partner or is, directly or
indirectly, through one or more intermediaries, the beneficial owner of 30%
or more of (1) any class or type of equity securities or other profits
interest or (2) the combined voting power of interests ordinarily entitled
to vote for management or otherwise, and (B) any trust or other estate in
which such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's spouse,
such person's parents, sisters, brothers, children and the spouses of the
foregoing, and any member of the immediate household of such person.
2.20 PROPRIETY OF PAST PAYMENTS.
Except as set forth in SCHEDULE 2.20 hereto, no funds or assets of the
Company have been used for illegal purposes; no unrecorded funds or assets of
the Company have been established for any purpose; no accumulation or use of the
Company's corporate funds or assets has been made without being properly
accounted for in the respective books and records of the Company; all payments
by or on behalf of the Company have been duly and properly recorded and
accounted for in their respective books and records; no false or artificial
entry has been made in the books and records of the Company for any reason; no
payment has been made by or on behalf of the Company with the understanding that
any part of such payment is to be used for any purpose other than that described
in the documents supporting such payment; and the Company has not made, directly
or indirectly, any illegal contributions to any political party or candidate,
either domestic or foreign. Neither the IRS nor any other federal, state, local
or foreign government agency or entity has initiated or threatened any
investigation of any payment made by the Company of, or alleged to be of, the
type described in this SECTION 2.20.
2.21 INTEREST IN COMPETITORS.
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Neither the Company nor the Selling Stockholder, nor any of their
Affiliates, has any interest, either by way of contract or by way of investment
(other than as holder of not more than 2% of the outstanding capital stock of a
publicly traded person, so long as such holder has no other connection or
relationship with such person) or otherwise, directly or indirectly, in any
person other than the Company that is engaged in the retail sale of automobiles
in Georgia.
2.22 BROKERS.
Neither the Company, nor any director, officer or employee thereof,
nor the Selling Stockholder or any representative of the Selling Stockholder,
has employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement or the Documents.
2.23 ACCOUNTS.
SCHEDULE 2.23 hereof correctly identifies each bank account maintained
by or on behalf or for the benefit of the Company and the name of each person
with any power or authority to act with respect thereto.
2.24 DISCLOSURE.
Neither the Company nor the Selling Stockholder has made any material
misrepresentation to UAG relating to the Company or the Shares and neither the
Company nor the Selling Stockholder has omitted to state to UAG any material
fact relating to the Company or the Shares which is necessary in order to make
the information given by or on behalf of the Company or the Selling Stockholder
to UAG not misleading or which if disclosed would reasonably affect the decision
of a person considering an acquisition of the Shares.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE SELLING STOCKHOLDER
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Upon his delivery of SCHEDULE 3.2 to UAG, the Selling Stockholder
shall be deemed to represent and warrant to UAG and Sub as follows:
3.1 OWNERSHIP OF SHARES; TITLE.
The Selling Stockholder is the owner of record and beneficially of the
Shares and has, and shall transfer to Sub at the Closing, good and marketable
title to the Shares, free and clear of any and all Security Interests, proxies
and voting or other agreements except restrictions on transfer imposed by
applicable federal and state securities laws and except as provided in the
Shareholders' Agreement.
3.2 AUTHORITY.
The Selling Stockholder has all requisite power and authority and has
full legal capacity and is competent to execute, deliver and perform this
Agreement and the Documents to which he is a party and to consummate the
transactions contemplated hereby and thereby (including the disposition of the
Shares to Sub as contemplated by this Agreement). This Agreement has been duly
executed and delivered by the Selling Stockholder and constitutes, and the
Documents to which the Selling Stockholder is a party when executed and
delivered by the Selling Stockholder will constitute, a valid and binding
obligation of the Selling Stockholder, enforceable against the Selling
Stockholder in accordance with its terms, except as enforceability may be
limited by general equitable principles, bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally. Except as set
forth on SCHEDULE 3.2, the execution, delivery and performance of this Agreement
and the Documents by the Selling Stockholder and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(i) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any material contract,
agreement, commitment, understanding, arrangement or restriction to which
the Selling Stockholder is a party or to which the Selling
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Stockholder or any of the Selling Stockholder's property is subject;
(ii) violate or conflict with any Legal Requirements applicable
to the Selling Stockholder or any of the Selling Stockholder's businesses
or properties; or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority.
3.3 REAL PROPERTY AND IMPROVEMENTS.
Except as set forth on SCHEDULE 3.3:
(a) The Selling Stockholder owns the Real Property and Improvements
in fee simple, free and clear of all liens, claims and encumbrances, except
those disclosed in SCHEDULE 3.3, none of which currently or, to his knowledge,
in the future will affect the use of the Real Property and Improvements for the
conduct of the respective businesses of the Company as presently conducted. No
assessments have been made against any portion of the Real Property which are
unpaid (except ad valorem taxes for the current year that are not yet due and
payable), whether or not they have become liens. To the Selling Stockholder's
knowledge, there are no disputes concerning the location of the lines and
corners of the Real Property.
(b) No one has been granted any right to purchase or lease the Real
Property or Improvements other than the existing lease in favor of the Company,
which is to be terminated at Closing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UAG AND SUB
Upon delivery of all of the Schedules referred to in this Article 4,
UAG and Sub will be deemed to represent and warrant to the Company and the
Selling Stockholder as follows:
4.1 ORGANIZATION AND GOOD STANDING.
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Each of UAG and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has the corporate power and authority to own, lease and
operate the properties used in its business and to carry on its business as now
being conducted. Each of UAG and each of its subsidiaries is duly qualified to
do business and is in good standing as a foreign corporation in each state and
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when taken
together with all other such failures of UAG and its subsidiaries would not, or
could not reasonably be expected to, in the aggregate have a material adverse
effect on UAG and its subsidiaries, taken as a whole. SCHEDULE 4.1 hereto lists
(i) the states and other jurisdictions where UAG and its subsidiaries are so-
qualified and (ii) the assumed names under which UAG conducts business. UAG has
previously delivered or made available to the Selling Stockholder complete and
correct copies of its certificate of incorporation and by-laws (including
comparable governing instruments with different names), as amended and presently
in effect.
4.2 CAPITALIZATION.
The authorized stock of UAG and the number of shares of capital stock
which are issued and outstanding are set forth on SCHEDULE 4.2 hereto. The
shares listed on SCHEDULE 4.2 hereto constitute all the issued and outstanding
shares of capital stock of UAG and have been validly authorized and issued, are
fully paid and nonassessable, have not been issued in violation of any
preemptive rights or of any federal or state securities law and no personal
liability attaches to the ownership thereof. There is no security, option,
warrant, right, call, subscription, agreement, commitment or understanding of
any nature whatsoever, fixed or contingent, that directly or indirectly (i)
calls for the issuance, sale, pledge or other disposition of any shares of
capital stock of UAG or any securities convertible into, or other rights to
acquire, any shares of capital stock of UAG, or (ii) obligates UAG to grant,
offer or enter into any of the foregoing, or (iii) relates to the voting or
control of such capital stock, securities or rights, except as set forth on
SCHEDULE 4.2 hereto.
4.3 AUTHORITY; APPROVALS AND CONSENTS.
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UAG and Sub have the corporate power and authority to enter into this
Agreement and the Documents to which they are a party and to perform their
respective obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and the Documents to which they are a party and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized and approved by the Board of Directors of UAG and Sub and no
other corporate proceedings on the part of UAG or Sub are necessary to authorize
and approve this Agreement and the Documents and the transactions contemplated
hereby and thereby. This Agreement has been, and on the Closing Date the
Documents will be, duly executed and delivered by, and constitute valid and
binding obligations of, UAG and Sub, enforceable against UAG and Sub in
accordance with their respective terms, except as enforceability may be limited
by general equitable principles, bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally. Except as set
forth on SCHEDULE 4.3 hereto, the execution, delivery and performance by UAG and
Sub of this Agreement and the Documents to which they are a party and the
consummation of the transactions contemplated hereby and thereby do not and will
not:
(i) contravene any provisions of the Certificate of
Incorporation or Bylaws (including any comparable governing instrument with
a different name) of UAG or Sub;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any UAG Agreement (as defined
below) or, require any consent or waiver of any party to any UAG Agreement
other than agreements the breach or violation of which could not reasonably
be expected to have a Material Adverse effect;
(iii) result in the creation of any Security Interest upon, or
any person obtaining any right to acquire, any properties, assets or rights
of UAG or any UAG Subsidiary;
(iv) violate or conflict with any Legal Requirements applicable
to UAG or any UAG Subsidiary or any of their respective businesses or
properties; or
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(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority.
4.4 FINANCIAL STATEMENTS.
Attached as SCHEDULE 4.4 are true and complete copies of:
(i) the consolidated balance sheet of UAG and its subsidiaries
as of December 31 in each of the years 1993 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for
the fiscal years ended on such dates, together with the notes thereto, in
each case examined by and accompanied by the report of Coopers & Lybrand,
independent certified public accountants; and
(ii) the unaudited consolidated balance sheet of UAG and its
subsidiaries as of __________________ (the "UAG Balance Sheet"), and the
unaudited consolidated statements of income, stockholders' equity and cash
flows for the month periods ended on such date, together with the notes
thereto;
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "UAG Financial Statements"). The UAG
Financial Statements are in accordance with the books and records of UAG and its
subsidiaries, fairly present the consolidated financial position, results of
operations, stockholders' equity and changes in financial position of UAG and
its subsidiaries as of the dates and for the periods indicated, in each case in
conformity with GAAP consistently applied (except as otherwise indicated in such
statements) during such periods, and can be legitimately reconciled with the
financial statements and the financial records maintained and the accounting
methods applied by UAG and its subsidiaries for federal income tax purposes, and
the unaudited financial statements included in the UAG Financial Statements
indicate all adjustments, which consist of only normal recurring accruals,
necessary for such fair presentations. The statements of income included in the
UAG Financial Statements do not contain any items of special or nonrecurring
income except as expressly specified therein, and the balance sheets included in
the UAG
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Financial Statements do not reflect any write-up or revaluation increasing the
book value of any assets, except as expressly stated therein. The books and
accounts of UAG and its subsidiaries are complete and correct in all material
respects and fairly reflect all of the transactions, items of income and expense
and all assets and liabilities of the businesses of UAG and its subsidiaries
consistent with prior practices of UAG and its subsidiaries.
4.5 BROKERS.
Neither UAG, Sub nor any of their directors, officers or employees has
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement or the Documents.
4.6 DISCLOSURE.
Neither UAG nor Sub has made any material misrepresentation to the
Selling Stockholder and neither UAG nor Sub has omitted to state to the Selling
Stockholder any material fact relating to UAG or Sub which is necessary in order
to make the information given by UAG or Sub not misleading or which if disclosed
would reasonably affect the decision of a person considering the sale of the
Shares.
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY.
Between the date hereof and the completion of due diligence as set
forth in Section 6.7 hereof, the Selling Stockholder and the Company will (i)
provide to the officers and other authorized representatives of UAG and Sub full
access, during normal business hours, to any and all premises, properties,
files, books, records, documents, and other information of the Company and will
cause the Company's officers to furnish to UAG and its authorized
representatives any and all financial, technical and operating data and other
information pertaining to the businesses and properties of the Company, and (ii)
make available
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for inspection and copying by UAG and Sub true and complete copies of any
documents relating to the foregoing. UAG and Sub will hold, and will cause
their representatives to hold, in confidence (unless and to the extent compelled
to disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law) all Confidential Information (as defined
below) and will not disclose the same to any third party except in connection
with obtaining financing and otherwise as may reasonably be necessary to carry
out this Agreement and the transactions contemplated hereby, including any due
diligence review by or on behalf of UAG and Sub. If this Agreement is
terminated, UAG and Sub will, and will cause their representatives to, promptly
return to the Company, upon the reasonable request of the Company, all
Confidential Information furnished by the Company, including all copies and
summaries thereof. As used herein, "Confidential Information" shall mean all
information concerning the Company obtained by UAG, Sub and their
representatives from the Company in connection with the transactions
contemplated by this Agreement, except information (x) ascertainable or obtained
from public information, (y) received from a third party not employed by or
otherwise affiliated with the Company or (z) which is or becomes known to the
public, other than through a breach by UAG or Sub or any of their
representatives of this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Selling Stockholder and the Company, on the one hand, and UAG and
Sub, on the other hand, will, as soon as practicable after reasonable request
therefor, furnish to the other all the information concerning the Selling
Stockholder and the Company or UAG and Sub, respectively, required for inclusion
in any statement or application made by UAG or Sub or the Company or the Selling
Stockholder to any governmental or regulatory body or to any manufacturer or
distributor or in connection with obtaining any third party consent in
connection with the transactions contemplated by this Agreement. Neither the
Selling Stockholder nor the Company, on the one hand, or UAG or Sub, on the
other hand, or any representative thereof, shall issue any press releases or
otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of the other, except as may be
required by law.
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5.3 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) Except for the sale of the Company's Buick franchise and any
assets related thereto and except for transactions in connection with the
construction of the Company's parking garage and the financing thereof and
except as contemplated below, from and after the date of this Agreement and
until the Closing Date, the Company shall, and the Selling Stockholder shall
cause the Company to, conduct its businesses solely in the ordinary course
consistent with past practices and, without the prior written consent of UAG,
neither the Selling Stockholder nor the Company will, except as required or
permitted pursuant to the terms hereof, permit the Company to:
(i) make any material change in the conduct of its businesses
and operations or enter into any transaction other than in the ordinary
course of business consistent with past practices;
(ii) make any change in its articles of incorporation or by-
laws, issue any additional shares of capital stock or equity securities or
grant any option, warrant or right to acquire any capital stock or equity
securities or issue any security convertible into or exchangeable for its
capital stock or alter any material term of any of its outstanding
securities or make any change in its outstanding shares of capital stock or
other ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any thereof,
except pursuant to transactions in the ordinary course of business
consistent with past practices, (B) issue any securities convertible or
exchangeable for debt securities of the Company, or (C) issue any options
or other rights to acquire from the Company, directly or indirectly, debt
securities of the Company or any security convertible into or exchangeable
for such debt securities;
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(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of its assets or any part thereof, except transactions
pursuant to existing contracts (which will be set forth in SCHEDULE 2.15
hereto) and dispositions in the ordinary course of business consistent with
past practices;
(v) subject any of its assets, or any part thereof, to any lien
or suffer such to be imposed other than such liens as may arise in the
ordinary course of business consistent with past practices;
(vi) declare, set aside or pay any dividends or other
distribution (whether in cash, stock, property or any combination thereof)
in respect of any shares of its capital stock which would result in the Net
Worth of the Company to decrease below $2,216,168 or redeem, retire,
purchase or otherwise acquire, directly or indirectly, any shares of its
capital stock;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of business
consistent with past practices;
(viii) except as may be disclosed to UAG prior to the Closing,
enter into any new (or amend any existing) employee benefit plan, program
or arrangement or any new (or amend any existing) employment, severance or
consulting agreement, grant any general increase in the compensation of
officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or grant any increase
in the compensation payable or to become payable to any employee, except in
accordance with pre-existing contractual provisions or consistent with past
practices;
(ix) make or commit to make any individual material capital
expenditure in excess of $50,000, or aggregate capital expenditures in
excess of $150,000, except in the ordinary course of business and except as
contemplated by the preceding provisions of this SECTION 5.3;
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(x) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of its Affiliates, except in the ordinary course of
business and except as contemplated by the preceding provisions of this
SECTION 5.3;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by it (or on behalf of it) on
the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any person, except in the ordinary course of business;
(xiv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change required
by reason of a concurrent change in GAAP or write-down the value of any
inventory or write-off as uncollectible any accounts receivable except in
the ordinary course of business consistent with past practices;
(xv) settle, release or forgive any material claim or litigation
or waive any material right;
(xvi) make, enter into, modify, amend in any material respect or
terminate any material commitment, bid or expenditure, other than in the
ordinary course of business consistent with past practice;
(xvii) commit itself to do any of the foregoing.
(b) Except for the sale of the Company's Buick franchise and any
assets related thereto and except for transactions in connection with the
construction of the Company's parking garage and the financing thereof, from and
after the date hereof and until the Closing Date, the Selling Stockholder and
the Company will use their reasonable best efforts to cause the Company to:
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(i) continue to maintain, in all material respects, its
properties in accordance with present practices in a condition suitable for
their current use;
(ii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when due
all taxes, assessments, fees and other charges lawfully levied or assessed
against it unless the validity thereof is contested in good faith and by
appropriate proceedings diligently conducted;
(iii) keep its books of account, records and files in the
ordinary course and in accordance with existing practices;
(iv) preserve its business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships that
are, at the same time, not economically beneficial to it; and
(v) continue to conduct its business in the ordinary course
consistent with past practices.
5.4 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
Except as disclosed on SCHEDULE 5.4 (which shall be delivered within
30 days of the date of this Agreement), at the Closing there will be no
intercompany payables or intercompany receivables due and/or owing between the
Selling Stockholder and its Affiliates (other than the Company), on the one
hand, and the Company, on the other hand, other than those incurred in the
ordinary course of business and generally disclosed in the notes to the
Company's audited financial statements.
5.5 NEGOTIATIONS.
Until the earlier of 120 days from the date hereof and the termination
of this Agreement pursuant to SECTION 8.1 hereof, neither the Selling
Stockholder, nor the Company, nor the Company's officers, directors, employees,
advisors, agents, representatives, Affiliates or anyone acting on behalf of the
Selling Stockholder, the Company or such persons, shall, directly or
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indirectly, encourage, solicit, initiate or engage in discussions or
negotiations with, or provide any information to, any person (other than UAG or
its representatives) concerning any merger, sale of assets (other than as
contemplated hereby or in connection with the Company's sale of the Buick
franchise or in the ordinary course of business), purchase or sale of shares of
capital stock or similar transaction involving the Company. The Selling
Stockholder shall promptly communicate to UAG any inquiries or communications
concerning any such transaction (including the identity of any person making
such inquiry or communication) which the Selling Stockholder may receive or of
which the Selling Stockholder may become aware.
5.6 CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Selling Stockholder
and the Company and UAG and Sub will use their respective best efforts at their
own expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses, approvals,
authorizations, qualifications, orders and consents of all third parties
and governmental authorities, and make all filings and registrations with
governmental authorities which are required on their respective parts for
(A) the consummation of the transactions contemplated by this Agreement,
(B) the ownership or leasing and operating after the Closing by the Company
of all its material properties and (C) the conduct after the Closing by the
Company of its businesses as conducted by it on the date hereof; PROVIDED,
HOWEVER, that no such consent shall be required from the Buick Motor
Division of General Motors Corporation.
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby; and
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(iii) to furnish each other such information and assistance as
may reasonably be requested in connection with the foregoing.
5.7 ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts at its own expense to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers of
the Company shall take all such necessary action.
5.8 INTERIM FINANCIAL STATEMENTS.
The Company will deliver to UAG copies of the financial statements
provided to Toyota after the date hereof within five days of their delivery, and
within thirty (30) days after the end of each calendar month after the date of
this Agreement, UAG will deliver to the Company unaudited consolidated balance
sheets of UAG, in each case as at the end of such calendar month, together with
the related unaudited consolidated statements of income and cash flow for the
fiscal month then ended. All such financial statements shall fairly present the
financial position and results of operations of the Company and UAG, as
applicable, as at the date or for the periods indicated. All unaudited
financial statements delivered pursuant to this SECTION 5.8 shall be prepared on
a basis consistent with the Company Financial Statements and the UAG Financial
Statements, as applicable.
5.9 NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this Agreement
will give prompt notice in writing to the other party hereto of: (i) any
information that indicates that any representation and warranty of such party
contained herein was not true and correct as of the date made or will not be
true and correct as of the Closing, (ii) the occurrence of any event which could
result in the failure to satisfy a condition specified in
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ARTICLE 6 or ARTICLE 7 hereof, as applicable, (iii) any notice or other
communication from any third person alleging that the consent of such third
person is or may be required in connection with the transactions contemplated by
this Agreement, and (iv) in the case of the Selling Stockholder and the Company,
any notice of, or other communication relating to, any default or event which,
with notice or lapse of time or both, would become a default under any Company
Agreement set forth on SCHEDULE 2.15. Each party hereto will (x) promptly
advise the other party hereto of any event that has, or could reasonably be
expected in the future to have, a Material Adverse Effect or material adverse
effect on UAG and its subsidiaries, taken as a whole, as applicable, (y) confer
on a regular and frequent basis with one or more designated representatives of
the other party to report operational matters and to report the general status
of ongoing operations, and (z) notify the other party of any emergency or other
change in the normal course of business or in the operation of the properties of
the Company and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or adjudicatory
proceedings involving any property of the Company or UAG, as applicable, and
will keep the other party fully informed of such events and permit UAG's
representatives access to all materials prepared in connection therewith. The
Selling Stockholder shall give prompt notice to UAG of any notice or other
communication from any third person asserting any right, title or interest in
any of the Shares held by the Selling Stockholder (including, without
limitation, any threat to commence, or notice of the commencement of any action
or other proceeding with respect to the Shares) or the occurrence of any other
event of which the Selling Stockholder has knowledge which could result in any
failure to consummate the sale of the Shares as contemplated hereby.
5.10 ASSURANCE BY THE SELLING STOCKHOLDER.
The Selling Stockholder shall use his best efforts to cause the
Company to comply with its respective covenants set forth in this Agreement.
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ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG AND SUB TO EFFECT THE CLOSING
The obligations of Sub required to be performed by it at the Closing
shall be subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, each of which may be waived by Sub as provided herein
except as otherwise required by applicable law:
6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.
Each of the representations and warranties of the Company and the
Selling Stockholder contained in this Agreement shall be true and correct on the
date made and shall be true and correct in all material respects as of the
Closing. Each of the obligations of the Company and the Selling Stockholder
required by this Agreement to be performed by them at or prior to the Closing
shall have been duly performed and complied with in all material respects as of
the Closing. At the Closing, Sub shall have received a certificate, dated the
Closing Date and duly executed by the Selling Stockholder and the chief
financial officer of the Company, to the effect that the conditions set forth in
the two preceding sentences have been satisfied except as specified in such
certificate.
6.2 AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Documents, and the
consummation of the transactions contemplated hereby and thereby shall have been
duly and validly taken by the Company.
(b) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has a franchise agreement (or
comparable instrument) as of the Closing Date other than Buick) required to
consummate the transactions contemplated hereby and all consents or waivers
shall have been made or obtained.
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6.3 OPINIONS OF THE COMPANY'S AND THE SELLING STOCKHOLDER'S COUNSEL.
UAG shall have been furnished with the opinion of counsel for the
Company and the Selling Stockholder, dated the Closing Date, in form and
substance satisfactory to UAG and its counsel. In rendering the foregoing
opinion, such counsel may rely as to factual matters upon certificates or other
documents furnished by officers and directors of the Company and by government
officials and upon such other documents and data as such counsel deem
appropriate as a basis for their opinions. Such counsel may specify the state
or states in which they are admitted to practice, that they are not admitted to
the Bar in any other state or experts in the law of any other state and that
such opinions are limited to Georgia, Texas and federal laws.
6.4 ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or delays
the consummation of any of the transactions contemplated hereby or (ii) would
impose any limitation on the ability of Sub effectively to exercise full rights
of ownership of the Shares. No action, suit or proceeding before any court or
any governmental or regulatory entity shall be pending (or threatened by any
governmental or regulatory entity), and no investigation by any governmental or
regulatory entity shall have been commenced (and be pending), seeking to
restrain or prohibit (or questioning the validity or legality of) the
consummation of the transactions contemplated by this Agreement or seeking
damages in connection therewith which Sub, in good faith and with the advice of
counsel, believes makes it undesirable to proceed with the consummation of the
transactions contemplated hereby.
6.5 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1994 to the Closing Date, there
shall not have been any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Company.
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6.6 WORKING CAPITAL REQUIREMENTS.
On the Closing Date, the Selling Stockholder shall deliver to Sub a
balance sheet of the Company dated as of the most recent practicable date
preceding the Closing Date, prepared in accordance with the Accounting
Principles (the "Estimated Closing Date Balance Sheet"). The Estimated Closing
Date Balance Sheet shall show as of the date thereof, after taking into account
the payment of any of the fees, costs and expenses by the Company incurred in
connection with this Agreement, consolidated net working capital of not less
than $5,454,832.
6.7 COMPLETION OF DUE DILIGENCE.
Sub shall have completed its due diligence examination of the Company,
the Real Property and the Improvements and the results of such examination,
including any Phase I or Phase II environmental audits of the Company, shall be
satisfactory to UAG; PROVIDED, HOWEVER, that, with the exception of due
diligence relating to any environmental issues, such due diligence shall be
completed, and shall be deemed completed, no later than thirty (30) days after
the execution of this Agreement. Sub will pay the costs for a Phase I
environmental audit. If, after obtaining the results of the Phase I
environmental audit, Sub determines that a Phase II environmental audit is
required, the expenses of the Phase II environmental audit shall be paid one-
half by Sub and one-half by the Selling Stockholder.
6.8 LEASE.
The Selling Stockholder and the Company shall have entered into the
Lease.
6.9 BOARD APPROVAL.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement and the
Documents.
6.10 CERTIFICATES.
The Selling Stockholder and the Company shall have furnished Sub with
such certificates of its officers and others
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as Sub may reasonably request to evidence compliance with the conditions set
forth in this ARTICLE 6.
6.11 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of the Selling Stockholder and the
Company under the provisions of this Agreement, and all other actions and
proceedings required to be taken by or on behalf of the Selling Stockholder and
the Company in furtherance of the transactions contemplated hereby, shall be
reasonably satisfactory in form and substance to counsel for UAG and Sub.
6.12 APPROVAL OF MANUFACTURER AND DISTRIBUTOR.
The Selling Stockholder and the Company shall have obtained the
consent, authorization and approval of Toyota and Southeast Toyota on terms no
less favorable to those granted to the Company immediately prior to the
execution of this Agreement.
6.13 EMPLOYMENT AGREEMENT.
The Company and John Smith shall have entered into the John Smith
Employment Agreement.
6.14 SCHEDULES.
The Company and the Selling Stockholder shall have delivered to UAG
all Schedules referred to in ARTICLES 2 AND 3 and such Schedules shall be
acceptable in form and substance to UAG and Sub.
6.15 NET WORTH OF THE COMPANY.
The Net Worth of the Company, as determined in accordance with Section
1.2 hereof, shall not be less than $2,216,168 on the Closing Date.
6.16 ENVIRONMENTAL LAWS.
The Company shall be in compliance with all applicable Environmental
Laws.
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6.17 NONDISTURBANCE AGREEMENT. The Selling Stockholder shall have obtained a
nondisturbance agreement acceptable to the Company and UAG.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE SELLING STOCKHOLDER TO EFFECT THE CLOSING
The obligations of the Selling Stockholder and the Company required to
be performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may be
waived by the Selling Stockholder as provided herein except as otherwise
required by applicable law:
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
Each of the representations and warranties of UAG and Sub contained in
this Agreement shall be true and correct on the date made and shall be true and
correct in all material respects as of the Closing. Each of the obligations of
UAG and Sub required by this Agreement to be performed by it at or prior to the
Closing shall have been duly performed and complied with in all material
respects as of the Closing. At the Closing, the Selling Stockholder shall have
received a certificate, dated the Closing Date and duly executed by the chief
executive officer and chief financial officer of UAG and of Sub to the effect
that the conditions set forth in the preceding two sentences have been satisfied
except as specified in such certificate.
7.2 AUTHORIZATION OF THE AGREEMENT, CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by UAG
and Sub.
(b) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers
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with whom the Company has entered into a franchise agreement (or comparable
instrument)) required to consummate the transactions contemplated hereby and all
consents or waivers shall have been made or obtained.
7.3 OPINIONS OF UAG'S AND SUB'S COUNSEL.
The Selling Stockholder shall have been furnished with the opinion of
Rogers & Hardin, counsel to UAG and Sub, dated the Closing Date, in form and
substance satisfactory to the Selling Stockholder. In rendering the foregoing
opinions, such counsel may rely as to factual matters upon certificates or other
documents furnished by officers and directors of UAG and Sub and by government
officials, and upon such other documents and data as such counsel deems
appropriate as a basis for its opinion. Such counsel may specify the state or
states in which they are admitted to practice, that they are not admitted to the
Bar in any other state or experts in the law of any other state and that such
opinions are limited to Georgia and federal laws and the General Corporation Law
of the State of Delaware.
7.4 ABSENCE OF LITIGATION.
No order, stay, judgment or decree shall have been issued by any court
and be in effect restraining or prohibiting the consummation of the transactions
contemplated hereby.
7.5 LEASE.
The Company and Sub shall have entered into the Lease.
7.6 CERTIFICATES.
UAG and Sub shall have furnished the Selling Stockholder with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this ARTICLE 7 as may be reasonably requested by the
Selling Stockholder.
7.7 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG or Sub under the provisions
of this Agreement, and all other
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actions and proceedings required to be taken by or on behalf of UAG or Sub in
furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel for the Selling Stockholder.
7.8 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1994 to the Closing Date, there
shall not have been any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of UAG.
7.9 BOARD APPROVAL.
The Board of Directors of the Company shall have approved the
consummation of all of the transactions contemplated by this Agreement and the
Documents.
7.10 SCHEDULES.
UAG and Sub shall have delivered to the Selling Stockholder all
Schedules referred to in ARTICLE 4 and such Schedules shall be acceptable in
form and substance to the Selling Stockholder.
7.11 REPAYMENT OF CONSTRUCTION DEBT.
UAG and Sub shall have repaid all of the Construction Debt.
ARTICLE 8
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG, Sub and the Selling Stockholder;
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(ii) by either UAG, Sub, or the Selling Stockholder if the
Closing shall not have taken place on or prior to December 31, 1995, or
such later date as shall have been approved by UAG, Sub and the Selling
Stockholder (provided that the terminating party is not otherwise in
material breach of its representations, warranties, covenants or agreements
under this Agreement);
(iii) by UAG, Sub, or the Selling Stockholder if any court of
competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and non-appealable;
(iv) by UAG or Sub if any of the conditions specified in
ARTICLE 6 hereof have not been met or waived by UAG and Sub at such time as
such condition is no longer capable of satisfaction (provided that neither
UAG nor Sub is otherwise in material breach of its representations,
warranties, covenants or agreements under this Agreement);
(v) by the Selling Stockholder if any of the conditions
specified in ARTICLE 7 hereof have not been met or waived by the Selling
Stockholder at such time as such condition is no longer capable of
satisfaction (provided that neither the Selling Stockholder nor the Company
is otherwise in material breach of his or its representations, warranties
covenants or agreements under this Agreement); or
(vi) by either UAG, Sub or the Selling Stockholder if there has
been a material breach on the part of the other of any representation,
warranty, covenant or agreement set forth in this Agreement, which breach
has not been cured within ten (10) Business Days following receipt by the
breaching party of written notice of such breach.
If UAG, Sub or the Selling Stockholder shall terminate this Agreement
pursuant to the provisions hereof, such termination shall be effected by notice
to the other parties specifying the provision hereof pursuant to which such
termination is made.
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8.2 EFFECT OF TERMINATION.
Except (i) for any breach of this Agreement prior to its termination,
and (ii) for the obligations contained in SECTIONS 5.1 AND 10.2 hereof, and
(iii) as set forth in SECTION 9.1 and SECTION 9.2 hereof, upon the termination
of this Agreement pursuant to SECTION 8.1 hereof, this Agreement shall forthwith
become null and void and none of the parties hereto or any of their respective
officers, directors, employees, agents, Affiliates, consultants, stockholders or
principals shall have any liability or obligation hereunder or with respect
hereto.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE SELLING STOCKHOLDER.
Notwithstanding the Closing or the delivery of the Shares, the Selling
Stockholder indemnifies and agrees to fully defend, save and hold harmless on an
after-tax basis UAG, Sub, the Company, and any of their respective officers,
directors, employees, stockholders, advisors, representatives, agents and
Affiliates (other than the Selling Stockholder) (each a "UAG Indemnified
Party"), if a UAG Indemnified Party (including the Company after the Closing
Date) shall at any time or from time to time suffer any Costs (as defined in
SECTION 9.7 below) arising, directly or indirectly, out of or resulting from, or
shall pay or become obligated to pay any sum on account of any and all Events of
Breach (as defined below). As used herein, "Event of Breach" shall be and mean
any untruth or inaccuracy in any representation of the Selling Stockholder or
the Company or the breach of any warranty of the Selling Stockholder or the
Company contained in ARTICLE 2 OR 3 of this Agreement.
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9.2 INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees to fully
defend, save and hold harmless on an after-tax basis the Selling Stockholder,
and any of his respective advisors, representatives, agents and Affiliates
(other than the Company) (each a "Westcott Indemnified Party"), if a Westcott
Indemnified Party (including the Company prior to Closing) shall at any time or
from time to time suffer any Costs arising, directly or indirectly, out of or
resulting from, or shall pay or become obligated to pay any sum on account of
any and all UAG Events of Breach (as defined below). As used herein, "UAG Event
of Breach" shall be and mean any untruth or inaccuracy in any representation of
UAG or Sub or the breach of any warranty of UAG or Sub contained in ARTICLE 4
of this Agreement.
9.3 PROCEDURES.
If (i) any Event of Breach occurs or is alleged and a UAG Indemnified
Party asserts that the Selling Stockholder has become obligated to a UAG
Indemnified Party pursuant to SECTION 9.1, or if any third party claim is begun,
made or instituted as a result of which the Selling Stockholder may become
obligated to a UAG Indemnified Party under this ARTICLE 9 (a "Westcott Third-
Party Claim") or (ii) a UAG Event of Breach occurs or is alleged and a Westcott
Indemnified Party asserts that UAG has become obligated to a Westcott
Indemnified Party pursuant to SECTION 9.2, or if any third-party claim is begun,
made or instituted as a result of which UAG may become obligated to a Westcott
Indemnified Party under this ARTICLE 9 (a "UAG Third-Party Claim") (for purposes
of this ARTICLE 9, any UAG Indemnified Party and any Westcott Indemnified Party
is sometimes referred to as an "Indemnified Party" and UAG and the Selling
Stockholder are sometimes referred to as an "Indemnifying Party," and any UAG
Third-Party Claim and any Westcott Third-Party Claim is sometimes referred to as
a "Third Party Claim", in each case as the context so requires), such
Indemnified Party shall give written notice to the Indemnifying Party of its or
his obligation to provide indemnification hereunder, provided that any failure
to so notify the Indemnifying Party shall not relieve them from any liability
that it or he may have to the Indemnified Party under this ARTICLE 9. If such
notice relates to a Third Party Claim, each Indemnifying Party, jointly and
severally, agrees to defend, contest or otherwise
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protect such Indemnified Party against any such Third Party Claim at his or its
sole cost and expense. Such Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in the defense thereof by counsel
of such Indemnified Party's choice and shall in any event cooperate with and
assist the Indemnifying Party to the extent reasonably possible. If the
Indemnifying Party fails timely to defend, contest or otherwise protect against
such Third Party Claim, such Indemnified Party shall have the right to do so,
including, without limitation, the right to make any compromise or settlement
thereof, and such Indemnified Party shall be entitled to recover the entire Cost
thereof from the Indemnifying Party, including, without limitation, attorneys'
fees, disbursements and amounts paid (or of which such Indemnified Party has
become obligated to pay) as the result of such Third Party Claim. Failure by
the Indemnifying Party to notify such Indemnified Party of its or their election
to defend any such Third Party Claim within fifteen (15) days after notice
thereof shall have been given to the Indemnifying Party shall be deemed a waiver
by the Indemnifying Party of its or their right to defend such Third Party
Claim. If the Indemnifying Party assumes the defense of the particular third
party claim, the Indemnifying Party shall not, in the defense of such third
party claim, consent to entry of any judgment or enter into any settlement,
except with the written consent of such Indemnified Party which consent shall
not be unreasonably withheld. In addition, the Indemnifying Party shall not
enter into any settlement of any Third Party Claim except with the written
consent of such Indemnified Party) which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to such Indemnified
Party a full release from all liability in respect of such Third Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to
control (but shall be entitled to participate at their own expense in the
defense of), and the Indemnified Party shall be entitled to have sole control
over, the defense or settlement of any third party claim to the extent the Third
Party Claim seeks an order, injunction or other equitable relief against the
Indemnified Party which, if successful, could materially interfere with the
business, operations, assets, condition (financial or otherwise) or prospects of
the Indemnified Party.
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9.4 LIMITATION ON INDEMNIFICATION.
(a) INDEMNIFICATION BY THE SELLING STOCKHOLDER.
(i) The aggregate Costs for which the Selling Stockholder shall
be obligated to indemnify the UAG Indemnified Parties shall not exceed
$11,100,000 in the case of Costs incurred or sustained by all UAG
Indemnified Parties in connection with an Event of Breach.
(b) INDEMNIFICATION BY UAG.
(i) The aggregate Costs for which UAG shall be obligated to
indemnify the Westcott Indemnified Parties shall not exceed $2,000,000 in
the case of Costs incurred or sustained by all Westcott Indemnified Parties
in connection with a UAG Event of Breach.
9.5 EXCLUSIVE REMEDIES FOR BREACH OF REPRESENTATIONS AND WARRANTIES.
Notwithstanding any other provision of this Agreement to the contrary,
(i) neither UAG nor Sub shall be liable for the breach of any representation or
warranty set forth in this Agreement unless the aggregate amount of such
liability exceeds $200,000, in which event UAG shall be fully liable without
regard to such threshold, and (ii) the Selling Stockholder shall not be liable
for any breach of a representation or warranty set forth in this Agreement
unless the aggregate amount of such liability, together with the Net Worth
Deficiency, if any, exceeds $200,000, in which event the Selling Stockholder
shall be fully liable without regard to such threshold.
9.6 DEFINITIONS.
For purposes of this ARTICLE 9, "Costs" shall mean all liabilities,
losses, costs, damages (not including consequential damages), expenses, claims,
attorneys' fees, experts' fees, consultants' fees, and disbursements of any kind
or of any nature whatsoever. For purposes of application of the indemnity
provisions of this ARTICLE 9, the amount of any Cost arising from the breach of
any representation or warranty shall be the entire
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amount of any Cost suffered, paid or required to be paid by the respective
Indemnified Party as a result of such breach.
ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
(a) The respective representations, warranties, covenants and
agreements of each of the parties to this Agreement (except covenants and
agreements which are expressly required to be performed and are performed in
full on or before the Closing Date) shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement, subject to
SECTION 10.1(b) below. In the event of a breach of any such representations,
warranties or covenants, the party to whom such representations, warranties or
covenants have been made shall have, subject to ARTICLE 9 hereof, all rights and
remedies for such breach available to it under the provisions of this Agreement
or otherwise, whether at law or in equity, regardless of any disclosure to, or
investigation made by or on behalf of, such party on or before the Closing Date.
(b) Each of the representations and warranties set forth in ARTICLE
2, ARTICLE 3 and ARTICLE 4 hereof and in any certificate delivered pursuant to
ARTICLE 6 or ARTICLE 7 hereof, shall survive (and not be affected in any respect
by) the Closing for a period terminating on the later of (i) the date two years
after the Closing Date, and (ii) with respect to any claim asserted with respect
to any breach of such representation or warranty or pursuant to SECTION 9.3
hereof before the expiration of such representation or warranty, on the date
such claim is finally liquidated or otherwise resolved, except with respect to
the representations and warranties in SECTIONS 2.11, 2.10(b)(ii) AND 3.3(b),
which shall survive the Closing Date for a period terminating on the later of
(y) the date five years after the Closing Date, and (z) with respect to any
claim asserted with respect to any breach of such representation or warranty or
pursuant to SECTION 9.3 hereof before the expiration of such representation or
warranty, on the date the claim is finally liquidated or otherwise resolved.
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10.2 FEES AND EXPENSES.
Except as otherwise expressly provided in this Agreement, all legal
and other fees, costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby through the Closing Date shall be paid
by the party incurring such fees, costs or expenses; PROVIDED, HOWEVER, that if
the Closing does not occur and SECTION 5.5 hereof is breached, then the Selling
Stockholder or the Company shall pay to UAG, within five (5) Business Days after
receipt of a request therefor, an amount equal to all of the legal and other
fees, costs and expenses incurred by UAG in connection with this Agreement and
the transactions contemplated hereby.
10.3 HEADINGS.
The section headings herein are for convenience of reference only, do
not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
10.4 NOTICES.
All notices or other communications required or permitted hereunder
shall be given in writing and shall be deemed sufficient if delivered by hand,
recognized overnight delivery service or facsimile transmission or mailed by
registered or certified mail, postage prepaid (return receipt requested), as
follows:
If to the Company before the Closing date:
Carl H. Westcott
1303 Marsh Lane
Carrollton, Texas 75006
with a copy to:
John D. Curtis
Two Galleria Tower
Suite 900
13455 Noel Road
Dallas, Texas 75240
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If to the Company after the Closing Date (in addition to the foregoing
addresses):
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and
General Counsel
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Facsimile No.: (404) 525-2224
Attn: Michael Rosenzweig
If to the Selling Stockholder:
Carl H. Westcott
1303 Marsh Lane
Carrollton, Texas 75006
with a copy to:
John D. Curtis
Two Galleria Tower
Suite 900
13455 Noel Road
Dallas, Texas 75240
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<PAGE>
If to UAG or Sub:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and
General Counsel
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Facsimile No.: (404) 525-2224
Attn: Michael Rosenzweig
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or three (3) days after the date so mailed;
PROVIDED, HOWEVER, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
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10.5 ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto (and with respect to the Selling
Stockholder, the personal representatives and heirs of the Selling Stockholder)
and their respective successors and permitted assigns, and the provisions of
ARTICLE 9 hereof shall inure to the benefit of the Indemnified Parties referred
to therein; PROVIDED, HOWEVER, that neither this Agreement nor any of the
rights, interests, or obligations hereunder may be assigned by any of the
parties hereto without the prior written consent of the other parties.
Notwithstanding the foregoing, UAG and Sub shall have the unrestricted right to
assign this Agreement and to delegate all or any part of their obligations
hereunder to any Affiliate of UAG, but in such event UAG shall remain fully
liable for the performance of all of such obligations in the manner prescribed
in this Agreement.
10.6 ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated hereby other than those expressly set forth herein or
in the Documents. Prior drafts of this Agreement shall not be used as a basis
for interpreting this Agreement.
10.7 WAIVER AND AMENDMENTS.
Each of the Selling Stockholder, the Company, UAG and Sub may by
written notice to the other parties (i) extend the time for the performance of
any of the obligations or other actions of the other parties, (ii) waive any
inaccuracies in the representations or warranties of the other parties contained
in this Agreement, (iii) waive compliance with any of the covenants of the other
parties contained in this Agreement, (iv) waive performance of any of the
obligations of the other parties created under this Agreement, or (v) waive
fulfillment of any of the
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conditions to its own obligations under this Agreement. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach, whether or not similar. This
Agreement may be amended, modified or supplemented only by a written instrument
executed by the parties hereto.
10.8 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, all of
which shall be considered one and the same agreement and each of which shall be
deemed an original.
10.9 GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Georgia.
10.10 ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined in
this Agreement shall have the respective meanings given to them in accordance
with GAAP.
10.11 CERTAIN DEFINITIONS.
For purposes of this Agreement:
(a) "Affiliate" of a specified person shall mean a person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified, and in the
case of a specified person who is a natural person, his spouse, his issue, his
parents, his estate and any trust entirely for the benefit of his spouse and/or
issue.
(b) "best efforts" shall be deemed to not include any obligation on
the part of any person to undertake any liabilities, expend any funds or perform
acts (except liabilities, expenditures or performance, other than any best
efforts obligations, expressly required to be undertaken by the terms of this
Agreement) which are materially burdensome to such person; PROVIDED, HOWEVER,
that notwithstanding the foregoing, the term
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"best efforts" shall include an obligation to take such actions which are
normally incident to or reasonably foreseeable in connection with such
obligation or the transactions contemplated hereby.
(c) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(d) "Documents" shall mean the Sub Note, the UAG Guaranty and the
Lease.
(e) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States on the Closing Date.
(f) "Material Adverse Effect" shall mean any change in, or effect on,
the Company (including the business thereof) which is, or could reasonably be
expected to be, materially adverse to the business, operations, assets,
condition (financial or otherwise) or prospects of such Company.
(g) "person" shall mean and include an individual, corporation,
partnership, joint venture, association, trust, any other unincorporated
organization or entity and a governmental entity or any department or agency
thereto.
10.12 SCHEDULES.
Disclosure of any matter in any Schedule hereto or in the Financial
Statements shall not be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule to
this Agreement.
10.13 SEVERABILITY.
If any one or more of the provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
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10.14 REMEDIES.
Except as contemplated by SECTION 9.5 hereof, none of the remedies
provided for in this Agreement, including termination of this Agreement as set
forth in ARTICLE 8, indemnification as set forth in ARTICLE 9, the payment of
certain fees, costs and expenses as set forth in SECTION 10.2 or specific
performance as set forth in this SECTION 10.14, shall be the exclusive remedy of
either party for a breach of this Agreement, the parties hereto having the right
to seek any other remedy in law or equity in lieu of or in addition to any
remedies provided in this Agreement, including an action for damages for breach
of contract.
10.15 TAXES AND COOPERATION.
The parties hereby agree that the accounting records and books of the
Company will be closed on the Closing Date and agree that the pro rata
allocation method provided in Section 1362(e)(2) of the Code will not apply.
The Company will make an election under Section 1362(e)(3) of the Code for
purposes of determining the Company's taxable income or loss to be reported on
the Selling Stockholder's Form K-1, and each party hereto will take all
necessary or proper steps and make any filings or notifications required to
effect such Section 1362(e)(3) election. The parties hereto agree that the
accounting firm that prepared the Company's 1994 tax return will prepare the
Company's final S corporation tax return. The Company agrees that it will make
its books and records available to the Selling Stockholder and his
representatives, upon reasonable notice and at reasonable times, at the Selling
Stockholder's cost and expense, it being understood that the Selling Stockholder
shall be entitled to make copies of any such books and records as shall be
reasonably necessary. In the event the Internal Revenue Service or any other
taxing authority initiates an examination of the Company with respect to a
taxable period that could impact the Selling Stockholder's tax liability for any
year, UAG shall promptly notify the Selling Stockholder of such examination, and
the Selling Stockholder shall have the right to control the defense of the
Company in responding to any proposed adjustments that would impact the Selling
Stockholder.
10.16 TIME IS OF THE ESSENCE.
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Time is of the essence for purposes of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ Ezra P. Mager
------------------------------
Name: Ezra P. Mager
Title: Executive Vice Chairman
UAG ATLANTA, INC.
By: /s/ Ezra P. Mager
--------------------------------
Name: Ezra P. Mager
Title:
-------------------------------
ATLANTA TOYOTA, INC.
By: /s/ Carl H. Westcott
------------------------------
Name: Carl H. Westcott
Title: Chairman
/s/ Carl H. Westcott
----------------------------------
Carl H. Westcott
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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAS BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE ASSIGNED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THIS NOTE
UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL SATISFACTORY TO THE
MAKER THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.
$2,100,100.00 January 16, 1996
PROMISSORY NOTE
UAG ATLANTA, INC., a Delaware corporation (hereinafter called
"Maker"), for value received, promises and agrees to pay to Carl H. Westcott
(hereinafter called "Payee"), in lawful money of the United States of America,
the principal sum of TWO MILLION ONE HUNDRED THOUSAND ONE HUNDRED AND 00/100
DOLLARS ($2,100,100.00) on July 31, 1998, together with interest thereon
(calculated on the basis of a 365 day year, or a 366 day year in the case of a
leap year) from and after the date hereof until maturity at a rate per annum
equal to eight and one-half percent (81/2%) (the "Applicable Rate"), but in no
event in excess of the maximum rate of nonusurious interest allowed from time to
time by law (hereinafter called the "Highest Lawful Rate"). All past due
amounts of principal of, and to the extent permitted by applicable law, unpaid
interest on, this note from time to time outstanding, and all unpaid amounts of
principal of this note during any period in which an Event of Default (as
hereinafter defined) exists or would exist but for the giving of notice or the
passage of time, shall bear interest at the rate equal to the Applicable Rate
plus 5%, but in no event greater than the Highest Lawful Rate. All sums due
under this note are payable to Payee at such address as may be designated in
writing by Payee to the Maker.
ACCRUED INTEREST is due and payable semi-annually commencing on the
last day of the sixth month immediately following the date hereof and on the
last day of each and every sixth consecutive calendar month thereafter and at
maturity; PROVIDED, HOWEVER, that if the principal of this note is prepaid in
whole or in part, all accrued and unpaid interest is due and payable on the date
of such prepayment. If any amount owing under this note is due and payable on a
day that is not a business day, such payment shall instead be due and payable on
the next succeeding business day. Maker has the right to prepay this note in
whole or in part at any time and from time to time without premium or penalty
upon not less than five days' notice to Payee.
SO LONG as any principal or interest remains unpaid on this note,
Maker will comply or cause compliance with each of the following covenants:
<PAGE>
(a) Maker shall, within fifteen (15) days after such are prepared but
in no event later than 120 days after the close of each fiscal year of
United Auto Group, Inc., a Delaware corporation ("UAG"), furnish to Payee
the audited consolidated financial statements of UAG for such period;
provided, however, that if UAG's auditors have not delivered such financial
statements within said 120-day period despite UAG's diligent requests of
them to do so, such added delay shall not constitute a default or an Event
of Default (as hereinafter defined) under this note. In addition, Maker
shall furnish to Payee from time to time (but no more than once in any
given calendar year), within 30 days after a request by Payee, current
unaudited consolidated financial statements of Maker.
(b) Maker shall promptly notify Payee in writing of any Event of
Default under this note or any event that with the giving of notice or the
passage of time or both would constitute an Event of Default under this
note.
FOR PURPOSES of this note, an "Event of Default" shall occur whenever:
(a) default is made in the payment when due of the principal of this note, (b)
default is made in the payment when due of any installment of interest on this
note and such default has not been cured within five days after the date on
which Maker receives written notice of the default from Payee, (c) Maker shall
fail to perform or observe any other term, covenant or agreement contained in
this note and any such failure shall remain unremedied for 10 days after written
notice thereof shall have been given to Maker by Payee, (d) Maker or UAG or any
of UAG's other subsidiaries shall fail to pay when due any principal of or
interest on any indebtedness (other than this note) in excess of $500,000 and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument related to such indebtedness or any other default
under any agreement or instrument related to such indebtedness, or any other
event, shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such default or
event is to accelerate, or to permit the acceleration of, the maturity of such
indebtedness, or any such indebtedness shall be declared to be due and payable,
or required to be prepaid (other than by a regularly schedule required
prepayment), prior to stated maturity thereof, (e) UAG shall sell all or
substantially all of its assets or UAG shall pay a dividend or make a
distribution to holders of its securities generally (other than in shares of
stock or other securities of UAG or rights to purchase stock or other securities
of UAG), which dividend or distribution, together with all other dividends or
distributions by UAG on or after the date hereof, shall result in an amount in
excess of twenty-five percent (25%) of UAG's assets having been distributed to
its shareholders, (f) Maker or UAG institutes proceedings to be adjudicated as
bankrupt or insolvent, or consents to institution of bankruptcy or insolvency
proceedings against it or
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the filing by it of a petition or answer or consent seeking reorganization or
release under the federal Bankruptcy Act or any other applicable federal or
state law, or consents to the filing of any such petition or the appointment of
a receiver, liquidator, assignee, trustee or other similar official of Maker or
UAG, or of any substantial part of its property, or makes an assignment for the
benefit of creditors, or takes corporate action in furtherance of any such
action, or (g) within 60 days after the commencement of an action against Maker
or UAG seeking any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been resolved in favor of Maker or UAG,
as applicable, or all orders or proceedings thereunder affecting the operations
or the business of Maker or UAG, as applicable, stayed, or if the stay of any
such order or proceeding shall thereafter be set aside, or if, within 60 days
after the appointment without the consent or acquiescence of Maker or UAG of any
trustee, receiver or liquidator of Maker or UAG or all or any substantial part
of its properties, such appointment shall not have been vacated.
UPON THE OCCURRENCE and during the continuance of any Event of Default
described in clause (a), (b), (c), (d) or (e) of the foregoing paragraph, Payee
may declare the entire principal amount then outstanding under this note,
together with interest then accrued thereon, to be immediately due and payable.
Upon the occurrence of any Event of Default described in clause (f) or (g) of
the foregoing paragraph, the entire principal amount of all indebtedness then
outstanding under this note, together with interest then accrued thereon, shall
automatically become immediately due and payable.
IT IS the intention of Maker and Payer to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including the laws of the State of
Georgia and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary herein or in any agreement entered into
in connection with or as security for this note, it is agreed that the aggregate
of all consideration which constitutes interest under applicable law that is
taken, reserved, contracted for, charged or received under this note or under
any of the other aforesaid agreements or otherwise in connection with this note
shall under no circumstances exceed the maximum amount of interest allowed by
applicable law, and any excess shall be cancelled automatically and, if
theretofore paid, shall be credited on the note by the holder hereof (or, to the
extent that this note shall have been or would thereby be paid in full, refunded
to the Maker).
IF THE holder hereof expends any effort in any attempt to enforce
payment of all or any part or installment of any sum due the holder hereunder,
or if this note is placed in the hands of an attorney for collection, or if it
is collected through any
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legal proceedings, Maker agrees to pay all reasonable costs, expenses and fees
incurred by the holder, including reasonable attorney's fees.
MAKER AND each surety, guarantor, endorser and other party ever liable
for payment of any sums of money payable on this note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to accelerate,
notice of intent to demand, diligence in collecting, grace, and all other
formalities of any kind, and consent to all extensions without notice for any
period or periods of time and partial payments, before or after maturity, all
without prejudice to the holder.
MAKER AND each surety, guarantor, endorser and other party ever liable
for payment of any sums of money payable on this note jointly and severally do
hereby, to the extent permitted by applicable law, further convey and assign to
the holder hereof and waive and renounce any and all exemption rights which they
may have under or by virtue of the Constitution or laws of Georgia, or any other
state, or the United States, as may be allowed, against this debt or any renewal
thereof.
THIS NOTE has been executed and delivered in and shall be construed in
accordance with and governed by the laws of the State of Georgia and of the
United States of America:
UAG ATLANTA, INC.
By:/s/George Lowrance
-------------------------------
Its: Secretary
---------------------------
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EXHIBIT 10.5.3
GUARANTY
In order to induce Carl Westcott, an individual resident of the State
of Texas ("Westcott"), to sell one hundred percent (100%) percent of the issued
and outstanding shares of common stock of Atlanta Toyota, Inc., a Texas
corporation ("Atlanta Toyota"), to UAG Atlanta, Inc., a Delaware corporation and
a wholly-owned subsidiary of the undersigned ("UAG/Atlanta"), the undersigned
hereby irrevocably, unconditionally and absolutely guarantees the due
performance and punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations of UAG/Atlanta now or hereafter
existing under that certain Promissory Note (the "Note") dated January 16, 1996
payable to the order of Westcott in the original principal amount of $2,100,100
(all such obligations being sometimes hereinafter referred to as the
"Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) incurred by Westcott in enforcing any rights under
this Guaranty.
The undersigned hereby waives promptness, diligence, presentment,
protest, notice of dishonor, demand for payment, extension of time of payment,
notice of acceptance of this Guaranty, notice of non-payment when due of the
Obligations guaranteed hereby and indulgences and notices of every other kind
and hereby consents to any and all forebearances and extensions of time of
payment of the Obligations and to any and all of the changes in the terms,
covenants and conditions thereof hereafter made or guaranteed. The liability of
the undersigned under this Guaranty shall be absolute and unconditional
irrespective of (i) any lack of validity or enforceability of the Note, (ii) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations, or any other amendment or waiver or any consent to
departure from the Note and any other agreement or instrument relating thereto,
(iii) any release or amendment or waiver of or consent to departure from any
other guaranty for all or any of the Obligations, or (iv) any other circumstance
which might otherwise constitute a defense available to, or a discharge of
UAG/Atlanta or a guarantor.
No delay or omission by Westcott in exercising any of his rights,
remedies, powers and privileges hereunder and no course of dealing between
Westcott, on the one hand, and UAG/Atlanta, Atlanta Toyota, the undersigned or
any other person, on the other hand, shall be deemed a waiver by Westcott of any
of his rights, remedies, powers, and privileges, even if such delay or omission
is continuous or repeated; nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise thereof
by Westcott or the exercise of any other right, remedy, power or privilege by
Westcott. No notice or demand on UAG/Atlanta, Atlanta Toyota, the undersigned
or any other person in any instance shall entitle
<PAGE>
UAG/Atlanta, Atlanta Toyota, the undersigned or any other person to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of Westcott's right to any other or further action in any circumstances
without notice or demand.
This Guaranty shall be enforceable without Westcott having to proceed
first against UAG/Atlanta (the right to require Westcott to take action against
UAG/Atlanta as required by O.C.G.A. Section 10-7-24 being hereby expressly
waived) or against any security for the payment of the Obligations, and shall be
effective regardless of the solvency or insolvency of UAG/Atlanta, any
reorganization, merger or consolidation of UAG/Atlanta, or any change in the
composition, nature, personnel or location of UAG/Atlanta.
This Guaranty shall remain in full force and effect, and the
undersigned shall continue to be liable for the payment of the Obligations in
accordance with the terms of the documents and instruments evidencing and
securing the same, notwithstanding the commencement of any bankruptcy,
reorganization or other debtor relief proceeding by or against UAG/Atlanta, and
notwithstanding any modification, discharge or extension of the Obligations, any
modification or amendment of any document or instrument evidencing or securing
any of the Obligations, any stay of the exercise by Westcott of any of his
rights and remedies against UAG/Atlanta with respect to any of the Obligations,
or any cure of any default by UAG/Atlanta under any document or instrument
evidencing or securing any of the Obligations, which may be effected in
connection with any such proceeding, whether permanent or temporary, and
notwithstanding any assent thereto by Westcott.
Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or be invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
The undersigned warrants and represents to Westcott that any financial
statements heretofore delivered by the undersigned to Westcott were true and
correct in all respects as of the date delivered to Westcott.
This Guaranty shall inure to the benefit of Westcott and his
successors and assigns, and shall be binding upon the undersigned and its
successors and assigns. This instrument constitutes the entire agreement as to
the subject matter contemplated hereby.
No amendment or waiver of any provision of this Guaranty nor consent
to any departure by Westcott therefrom shall
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in any event be effective unless the same shall be in writing and signed by
Westcott and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
This instrument has been made and delivered in Georgia and shall be
governed by the laws of Georgia.
WITNESS the undersigned's signature as of the 16th day of January,
1996.
UNITED AUTO GROUP, INC.,
a Delaware corporation
By: /s/George Lowrance
-----------------------------
Its: Secretary
-----------------------------
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AFTER RECORDING RETURN TO:
STEPHEN R. LEEDS, ESQ.
ROGERS & HARDIN
2700 CAIN TOWER, PEACHTREE CENTER
229 PEACHTREE STREET N.E.
ATLANTA, GEORGIA 30303
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") made as of the 3rd day of January,
1996, by and between CARL H. WESTCOTT ("Landlord"), whose address is 1303 Marsh
Lane, Carrollton, Texas 75006 and ATLANTA TOYOTA, INC., a Texas corporation
("Tenant"), whose address is 2345 Pleasant Hill Road, Duluth, Georgia 30136.
W I T N E S S E T H:
FOR AND IN CONSIDERATION of the sum of $10.00 Dollars in hand paid and
of the mutual covenants and conditions contained herein, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. PREMISES. Landlord leases to Tenant and Tenant takes bona
Landlord the following property:
The tract of land containing 9.634 acres, being in Land Lot
231 of the 6th District of Gwinnett County, Georgia, being
more particularly described on EXHIBIT A, attached hereto
and incorporated by reference herein.
together with all improvements thereon and all rights, privileges, easements and
appurtenances pertaining thereto (collectively, the "Premises") upon the terms
contained herein.
2. TERM. The term ("Term") hereof shall begin on the date hereof
and shall end on January 31, 2016, unless extended or sooner terminated as
provided herein.
<PAGE>
3. RENT.
(a) During the first (1st) through the thirty-sixty (36th) month of
the Term, Tenant agrees to pay to Landlord, without demand, deduction, or
offset, as rent for the Premises, the sum of $81,666.67 per month.
(b) During the thirty-seventh (37th) through the one hundred
twentieth (120th) month of the Term, Tenant agrees to pay to Landlord, without
demand, deduction, or offset, as rent for the Premises, the sum of $90,000.00
per month.
(c) During the one hundred twenty-first (121st) through the one
hundred eightieth (180th) month of the Term, Tenant agrees to pay to Landlord,
without demand, deduction, or offset, as rent for the Premises, the greater of
either (i) $90,000.00 per month, or (ii) the First CPI Adjusted Rent Rate per
month (as calculated and defined below).
(d) During the one hundred eighty-first (181st) month of the Term
through the end of the Term, Tenant agrees to pay to Landlord, without demand,
deduction, or offset, as rent for the Premises, the greater of either (i) the
monthly rent provided for in subparagraph 30) above, or (i) the Second CPI
Adjusted Rent Rate per month (as calculated and defined below).
(e) (i) For purposes of this Lease, the following definitions
shall apply:
(A) The term "CONSUMER PRICE INDEX" shall mean the
Consumer Price Index for All Urban Consumers of Atlanta, Georgia
(all items, 1982-
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84=100) published by the Bureau of Labor Statistics, United States Department of
Labor.
(B) The term "Basic Index" shall mean, with respect to
the calculation of the First CPI Adjusted Rent Rate, the Consumer
Price Index most recently published prior to January 3, 1996, and
shall mean, with respect to the calculation of the Second CPI
Adjusted Rent Rate, the Consumer Price Index most recently
published prior to February 1, 2006.
(C) The term "ADJUSTED INDEX" shall mean, with respect
to the calculation of the First CPI Adjusted Rent Rate, the
Consumer Price Index most recently published prior to February 1,
2006, and shall mean, with respect to the calculation of the
Second CPI Adjusted Rent Rate, the Consumer Price Index most
recently published prior to February 1, 2011.
(ii) In computing the First CPI Adjusted Rent Rate, the
pertinent Adjusted Index shall be divided by the pertinent Basic
Index, and the resulting quotient shall be multiplied by seventy-five
hundredths (.75 or 75%). This product shall then be multiplied by the
monthly rental figure determined in accordance with subparagraph 3(b)
above and the product thereof shall equal the First CPI Adjusted Rent
Rate.
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(iii) In computing the Second CPI Adjusted Rent Rate, the
pertinent Adjusted Index shall be divided by the pertinent Basic
Index, and the resulting quotient shall be multiplied by seventy-five
hundredths (.75 or 75%). This product shall then be multiplied by the
monthly rental figure determined in accordance with subparagraph 3(c)
above and the product thereof shall equal the Second CPI Adjusted Rent
Rate.
(iv) In the event that (A) the Consumer Price Index ceases
to use 1982-84=100 as the basis of calculation, or (B) the Consumer
Price Index shall be discontinued for any reason, the Bureau of Labor
Statistics shall be requested to furnish a new index comparable to the
Consumer Price Index together with information which will make
possible the conversion to the new index in computing the adjusted
rent under this subparagraph 3(e). If for any reason the Bureau of
Labor Statistics does not furnish such an index and such information,
the parties hereto shall hereafter accept and use such other index or
comparable statistics on the cost of living for the City of Atlanta,
Georgia as shall be computed and published by an agency of the United
States or by a responsible financial periodical of recognized
authority men to be selected by Landlord and Tenant.
(f) Notwithstanding the foregoing, in no event shall any
monetary adjustment in the annualized rent rate
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pursuant to subparagraphs 3(c) or 3(d) above ever result in the annual rental
being increased to an amount greater than one and one-quarter percent (1.25%) of
all gross sales generated by Tenant from the Premises during the twelve-month
period occurring immediately prior to such increase.
(g) Rent during the Term hereof shall be due and payable at
Landlord's office at the above address on or before the first day of each
calendar month thereof. Any rent payment not received by the fifth (5th)
day of the calendar month shall be subject to a two and one-half percent
(2.5%) late charge, which charge the parties agree is a fair estimation of
the damages which may reasonably be expected to be incurred by Landlord in
connection with receiving such late payment.
(h) If the Term shall commence or end on a day other than the
first day of a calendar month, then the monthly rent for any fractional
months of the Term shall be appropriately prorated.
4. UTILITIES. Tenant shall have all utilities listed in its name
and shall pay all utility bills, including, but not limited to water, sewer,
gas, electricity, fuel, light, and heat bills, for the Premises, and Tenant
shall pay all charges for garbage collection services or other sanitary services
rendered to the Premises or used by Tenant in connection therewith. If Tenant
fails to pay for such services, Landlord may, at its option and after providing
Tenant with at least three (3) days
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prior written notice, pay the same, and the amount of the payment shall be
payable to Landlord as additional rent.
5. USE OF THE PREMISES; ENVIRONMENTAL INDEMNITY. The Premises shall
be used only for the operation of an automobile dealership, service facility,
and body shop facility and for any other purposes which may be agreed to by the
parties. The Premises shall not be used for any illegal purpose, nor in any
manner which may create nuisance or trespass. Furthermore, Tenant shall not
violate way federal or state environmental law, and Tenant agrees to indemnify
and hold harmless Landlord from any and all damages, costs, fines and expenses
that might arise as a result of any such violation and from its placement upon
the Premises of hazardous wastes and toxic substances that are placed on the
Premises after the date hereof. Notwithstanding anything to the contrary
contained in this Paragraph 5, there shall not be deemed to be a nuisance or
trespass and Tenant's obligation to indemnify and hold Landlord harmless shall
not extend to any damages, claims, or liabilities arising as a result of
contaminants existing on the Premises on the date hereof or migrating onto or
beneath the Premises where such contamination is not caused by or attributable
to Tenant.
6. REPRESENTATION. All representations and warranties made by
Landlord in Sections 2.10, 2.11 and 3.3 of that certain Stock Purchase Agreement
(the "SPX') dated November 17, 1995, as amended by that certain Amendment
Agreement dated January 16, 1996, by and among Landlord, United Auto Group, Inc.
and UAG Atlanta, Inc. are hereby incorporated by reference to the same
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effect as if fully set forth herein; provided, however, that such
representations and warranties shall survive only for the period of time
stipulated in the SPA.
7. NO REPAIRS BY LAND. Landlord shall not be obligated to repair or
maintain the Premises, and all repairs, replacements, and maintenance of any
kind shall be the sole responsibility of Tenant.
8. REPAIRS BY TENANT. Tenant accepts the condition of the Premises
as of the date hereof and agrees that the Premises are suited for the uses
specified herein. Tenant shall, throughout the Term, at its expense, maintain
the Premises in good order and repair, including but not limited to repair and
maintenance and, if necessary, replacement of the electrical, heating
ventilation and air conditioning and plumbing systems, as well as the roof and
all structural components of buildings located on the Premises. Tenant further
agrees to care for all landscaping on the Premises, including the mowing of
grass, paving, policing, care of shrubs and general landscaping. If Tenant
fails to properly maintain and repair any portion of the Premises, Landlord may,
following at least three (3) days prior written notice to Tenant maintain the
same including replacing of components and Tenant shall pay to Landlord upon
demand the commercially reasonable costs thereof together with interest on said
amount from the date of payment by Landlord at a rate equal to three percent
(3%) over the prime commercial rate announced from time to time by NationsBank
of Georgia, N.A. (or, if not available, by any other large banking institution
with offices
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situated in Atlanta, Georgia). Tenant agrees to return the Premises to Landlord
in as good condition and repair as when first received by Tenant, natural wear
and tear, damage by storm, fire, lightening; earthquake or other casualties and
condemnation excepted.
9. TAX AND INSURANCE. Tenant shall promptly and on a timely basis
pay as additional rent during the Term all charges for taxes (including, but not
limited to, ad valorem taxes, special assessments and any other governmental
charges) on the Premises, which amounts shall be prorated between Tenant and
Landlord for all periods partially but not entirely within the Term. Tenant
shall also maintain, at all times during the Tenn of this Lease, fire and
extended insurance coverage on the Premises in amounts equal to the full
replacement value of the Premises, and written on policies issued by
underwriters reasonably acceptable to Landlord. Landlord agrees that such
coverages may be provided by blanket policies of insurance covering other
locations in addition to the Premises. All policies shall insure Landlord and
Tenant as their respective interests shall appear and shall contain a
replacement cost endorsement and a mortgagee clause in favor of Landlord's
mortgagee(s). Should Tenant fail to pay such tax expenses or fail to provide
certificates evidencing the required insurance coverage, Landlord may, following
at least three (3) days prior written notice to Tenant, pay any such charges or
secure such coverage, and Tenant shall pay to Landlord upon demand as additional
rent all amounts so expended by Landlord together with
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<PAGE>
interest on said amount from the date of payment by Landlord at a rate equal to
three percent (3%) over the prime commercial rate announced from time to time by
NationsBank of Georgia, N.A. (or, if not available, by any other large banking
institution with offices situated in Atlanta, Georgia).
10. DESTRUCTION OF OR DAMAGE TO THE PREMISES. If the Premises should
be damaged or destroyed by any insured peril whatsoever, all insurance proceeds
shall be delivered to Landlord and Landlord shall proceed with reasonable
diligence to rebuild and repair the Premises to substantially the condition in
which it existed prior to such damage or destruction. If, however, the damage
or destruction (a) shall be complete or (b) shall occur within the last year of
the Term, then either Tenant or Landlord may terminate this Lease as of the date
that such damage or destruction occurs by giving written notice to the other of
such election to terminate within sixty (60) days after the date of such damage
or destruction. The rent payable under this Lease shall be abated beginning on
the date of damage or destruction within the scope of this Paragraph 10 (to the
extent that the Premises are rendered unusable by Tenant) and shall resume upon
recompletion to substantially the condition in which the Premises existed prior
to such damage or destruction. The obligation of Landlord to rebuild the
Premises as required by this Paragraph 10 shall not be affected or diminished in
any may by Landlord's inability to obtain access to any insurance proceeds which
may have been delivered to Landlord's mortgagee.
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<PAGE>
11. INDEMNITY; WAIVER OF SUBROGATION. Tenant agrees to indemnify and
hold harmless Landlord, against all claims, and expenses resulting therefrom,
including reasonable attorneys' fees and court costs, for damage to persons or
property by reason of the use or occupancy of the Premises by Tenant. Tenant
shall periodically provide Landlord with certificates of general liability
insurance naming Landlord as an additional insured, in an amount of not less
than $3,000,000 and with an insurance carrier reasonably satisfactory to
Landlord. The dollar amount of such insurance coverage shall be reviewed
annually, and adjusted if necessary, in order to provide for adequate protection
to both Landlord and Tenant; provided, however, in no event shall any aggregate
percentage increases in Tenant's liability coverage obligations hereunder ever
exceed the cumulative percentage increases in the Consumer Price Index occurring
during the corresponding portion of the Term of this Lease.
Landlord and Tenant each hereby release and waive any right of
recovery against the other for any loss, claim, liability, or damage occurring
on or to the Premises, whether wholly or contributorily caused by the negligence
of the other party, to the extent that the same is compensated by actual receipt
of proceeds from insurance policies covering such loss, claim, liability, or
damage.
12. ALTERATIONS. Tenant shall make no alterations, additions or
improvements to the Premises without the express prior written consent of
Landlord which consent shall not be
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unreasonably withheld, except that Tenant may alter any wall that is not of a
load-bearing nature without the consent of Landlord. In the event Landlord has
not responded to Tenant's written request for alterations within fifteen (15)
days of when received, such alteration shall be deemed to have been approved by
Landlord. Tenant agrees to save Landlord harmless on account of any claim or
lien of mechanics, materialmen or other party, in connection with any
alterations, additions or improvements of or to the Premises performed by
Tenant. Tenant shall furnish such waivers of liens and appropriate affidavits
from the general contractor or subcontractors as Landlord may reasonably
require. Notwithstanding the foregoing, Tenant shall be entitled to make the
following changes without necessity of Landlord's consent: (i) any alterations
required to be made by it pursuant to governmental orders, rules, laws,
regulations, ordinances or requirements, (ii) any changes in its signage, and
(iii) any non-structural alterations costing less than $25,000.00. Tenant shall
have the right to finance any alterations or improvements permitted hereunder
and may pledge its interest in this Lease as security therefor; provided,
however, that any liens granted in connection with such financings shall be
subordinate to both the rights of Landlord under this Lease and to the rights of
any of Landlord's mortgagees.
13. GOVERNMENTAL ORDERS. Tenant agrees, at its own expense, to
promptly comply with all requirements of any public authority made necessary by
reason of Tenant's occupancy of the Premises or which may be necessary for
Tenant's occupancy to
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continue. Landlord shall have no obligation of any kind for such compliance.
14. CONDEMNATION. If all or a substantial part of the Premises is
condemned for any public use or purpose, then the Term shall cease from the date
when possession thereof is taken, and rent shall be prorated as of that date;
provided, however, that Tenant may elect to continue this Lease in full force
and effect notwithstanding any such taking. Any termination shall be without
prejudice to the rights of either Landlord or Tenant to recover compensation and
damage caused by such condemnation from the condemner. Neither Tenant nor
Landlord shall have any rights in any award made to the other by any
condemnation authority notwithstanding the termination of the Lease as herein
provided. If the Lease is not terminated as provided above, then (i) this Lease
shall continue in effect with respect to the remaining portion of the Premises,
in which event the rent payable hereunder during the unexpired portion of the
Term of this Lease shall be adjusted equitably, and (ii) Landlord shall proceed
with reasonable diligence to rebuild and repair the untaken portions of the
Premises to as nearly as reasonably possible their value, condition, and
character as such existed immediately prior to such taking. The obligation of
Landlord to rebuild the Premises as required by this Paragraph 14 shall not be
affected or diminished in any way by Landlord's inability to obtain access to
any condemnation proceeds which may have been delivered to Landlord's mortgagee.
The phrase "substantial part," for purposes of this section shall mean so much
of the Premises, the
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<PAGE>
improvements located thereon, access to the Premises, or any combination of the
foregoing, such that the taking thereof would prevent or substantially impair
the ability of Tenant to operate its business in a manner consistent with the
operation of its business prior to such taking.
15. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord (which consent shall not be unreasonably withheld),
assign this Lease or any interest hereunder, or sublet the Premises or any part
thereof, or permit the use of the Premises by any party other than Tenant. All
requests for assignment or subletting shall be made in writing and delivered to
Landlord. Failure by Landlord to disapprove of any proposed assignment or
subletting within thirty (30) days after receipt of Tenant's written request
shall result in such request being deemed approved. Consent to any assignment
or sublease shall not invalidate this provision, and all later assignments or
subleases shall be made only on the prior written consent of Landlord. Any
assignee of Tenant, at option of Landlord, shall become directly liable to
Landlord for all obligations of Tenant hereunder, but no sublease or assignment
by Tenant shall relieve Tenant of any liability hereunder. Notwithstanding the
foregoing, Tenant shall be entitled to freely assign or sublet its interest in
this Lease to any parent, wholly-owned subsidiary, or other entity, under common
control with Tenant, without the prior written consent of Landlord. Moreover,
the sale or transfer of all or any part of the capital
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stock of Tenant shall not be deemed to be an assignment hereunder.
16. REMOVAL OF FIXTURES. Tenant may (so long as no Event of Default
has occurred and is continuing hereunder), prior to the end of the Term, remove
all trade fixtures and equipment which Tenant has purchased as leasehold
improvements or placed in the Premises subsequent to the date hereof, provided
that Tenant repairs all damage to the Premises caused by the removal. However,
any buildings, fixtures, or other attached property installed by Tenant as
replacements of existing items, or anything that cannot be removed without
substantially changing the character of the Premises, shall become the property
of Landlord.
17. CANCELLATION OF LEASE BY LANDLORD. It shall be an "Event of
Default" hereunder if,
(a) Tenant fails to pay rent, including additional rent herein
reserved, when due, and fails to cure the failure to pay within ten (10)
days after written notice thereof from Landlord;
(b) Tenant fails to perform any of the terms or provisions of
this Lease other than the provision requiring the payment of rent, and
fails to cure the default within thirty (30) days after the date of receipt
of written notice of default from Landlord; provided, however, that if the
nature of the default is such that the same cannot reasonably be cured
within said thirty (30) day period, Tenant shall not be deemed to be in
default if Tenant shall, within such
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period, commence such cure and thereafter diligently prosecute the same to
completion;
(c) Tenant is adjudicated bankrupt;
(d) a permanent receiver is appointed for Tenant's property and
the receiver is not removed within sixty (60) days after written notice
from Landlord to Tenant to obtain the removal;
(e) Tenant or any guarantor of Tenant's obligations under this
Lease files a petition seeking an order for relief under Title 11 of the
United States Code, as amended, or under any similar law or statute of the
United States or any state thereof, or a petition seeking an order for
relief under Title 11 of the United States Code, or any similar law or
statute of the United States or any state thereof, is filed against Tenant
or any guarantor of Tenant's obligations under this Lease and such petition
is not dismissed with prejudice within sixty days from the date of filing;
(f) Tenant makes an assignment for benefit of creditors; or
(g) Tenant's effects should be levied upon or attached under process
against Tenant and not satisfied or dissolved within thirty (30) days after
written notice from Landlord to Tenant to obtain satisfaction thereof.
Upon the occurrence of an Event of Default, Landlord may pursue any right or
remedy against Tenant available at law or in equity. Without limitation to the
foregoing, Landlord, at its option, may at once or within six (6) months
thereafter (so long as such
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Event of Default is continuing), elect to terminate this Lease by written notice
to Tenant; whereupon this Lease shall terminate. Any notice provided in this
section may be given by Landlord, or its attorney, or agent herein named. Upon
termination of the Lease by Landlord, Tenant shall at once surrender possession
of the Premises to Landlord and remove all of Tenant's effects therefrom, or
Landlord shall be entitled to remove all persons and effects therefrom, using
such force as may be necessary without being guilty of trespass, forcible entry
or detainer or other tort.
18. RELETTING BY LANDLORD. If, after an Event of Default, Landlord
has not elected to terminate this Lease, Landlord shall, as Tenant's agent,
without terminating this Lease, enter upon and exercise good faith efforts to
rent the Premises at the best price obtainable by reasonable effort, for any
term Landlord deems proper. Tenant shall be liable to Landlord for the present
value of any deficiency between rent due hereunder and the rent received by
Landlord upon relenting. For purposes of computing the "present value of any
deficiency" in accordance with the provisions of this paragraph, the parties
agree to utilize a discount rate equal to the then prevailing prime rate of
interest charged by leading money center banks as published in "THE WALL STREET
JOURNAL."
19. FINANCIAL STATEMENTS. Within fifteen (15) days after such are
prepared (but in no event later than 120 days after the end of each fiscal
year), Tenant shall deliver to Landlord audited consolidated financial
statements of United Auto
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Group, Inc. ("UAG") prepared in accordance with generally accepted accounting
principles consistently applied by an independent certified public accountant;
provided, however, that if UAG's auditors love not delivered such financial
statements within said 120-day period despite UAG's diligent requests of them to
do so, such added delay shall not constitute a default or an Event of Default
hereunder. In addition, Tenant shall deliver to Landlord from time to time (but
no more than once in any given calendar year), within thirty (30) days after
request, current unaudited financial statements of Tenant prepared in accordance
with generally accepted accounting principles consistently applied by and
certified to be true and correct by Tenant.
20. FOR RENT SIGNS. Landlord may place "FOR RENT" or "FOR SALE
"signs in the Premises one hundred eighty (180) days before the end of the Term.
Landlord may enter the Premises at reasonable hours, and after reasonable
notice, to show the Premises to prospective purchasers or tenants.
21. EFFECT OF TERMINATION OF LEASE. No termination of this Lease
prior to the normal ending thereof, by lapse of time or otherwise, shall affect
Landlord's right to collect rent for the period prior to termination thereof.
22. WARRANTIES OF TITLE AND QUIET POSSESSION. Landlord warrants and
represents that it has good and marketable title to the Premises and has full
right to make this Lease and that Tenant shall have quiet and peaceable
possession of the Premises during the Term so long as no Event of Default is in
existence and continuing hereunder.
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23. SUBORDINATION ATTORNMENT. This Lease is subject and subordinate
to any deed of trust, mortgage, or other security instrument, which presently or
may in the future cover the Premises, and to any increases, renewals,
modifications, consolidations, replacements, and extensions of any of such deed
of trust, mortgage, or security instrument, provided, however, that Tenant's
subordination to any encumbrance arising after the date of this Lease shall be
conditioned upon Landlord's delivery to Tenant of a nondisturbance agreement in
form reasonably satisfactory to Tenant. Tenant shall, however, within ten (10)
days after demand, execute, acknowledge, and deliver to Landlord any further
instruments and certificates evidencing such subordination as Landlord may
reasonably require. If Tenant fails to return such instrument or certificate
within said ten (10) day period due to any reasonable objection(s) as to its
form, Tenant shall not be deemed in default hereunder so long as Tenant
indicates to Landlord the basis of such reasonable objection(s) within said ten
(10) day period.
This Lease is further subject and subordinate to (a) all applicable
ordinances of the city in which the Premises are located, relating to easements,
franchises and other interests or rights upon, across, or appurtenant to the
Premises, and (b) utility easements and agreements, covenants, restrictions, and
other encumbrances, both existing and (subject to the provisions of Paragraph 24
hereof) any future encumbrances.
Notwithstanding the generality of the foregoing, any mortgagee shall
have the right at any time to subordinate any
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deed of trust, mortgage, or other security instrument to this Lease. At any
time, before or after the institution of any proceedings for the foreclosure of
any deed of trust, mortgage, or other security instrument or sale of the
Premises under any such deed of trust, mortgage, or other security instrument,
Tenant shall attorn to such purchaser upon any such sale or the grantee under
any deed in lieu of such foreclosure and shall recognize such purchaser or
grantee as Landlord under this Lease. The agreement of Tenant to attorn
contained in the immediately preceding sentence shall survive any such
foreclosure sale, trustee's sale, or conveyance in lieu thereof. Tenant shall,
upon demand at any time, before or after any foreclosure sale, trustee's sale,
or conveyance in lieu thereof, execute, acknowledge, and deliver to Landlord's
mortgagee any written instruments and certificates evidencing such attornment as
Landlord's mortgagee may reasonably require. Upon Tenant's written request and
notice to Landlord, Landlord shall obtain from any such mortgagee a written
agreement that the rights of Tenant shall remain in full force and effect during
the Term of this Lease so long as Tenant shall continue to recognize and perform
all of the covenants and conditions of this Lease.
24. ESTATE CREATED FUTURE GRANTS. Landlord and Tenant intend for and
agree that this Lease shall create a leasehold estate in the Premises for the
Term. Landlord agrees that, during the Term of this Lease, it will not execute
or join in any conveyances of easements or restrictive covenants or other
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agreements restricting or affecting Tenant's use of the Premises without the
prior written consent of Tenant.
25. HOLDING OVER. If Tenant remains in possession of the Premises
after expiration of the Term, with Landlord's acquiescence and without any
express agreement of parties, Tenant shall be a tenant from month-to-month at a
monthly rent rate equal to 150% of the monthly rental rate in effect at the end
of the Tenn, and there shall be no renewal of this Lease by operation of law.
26. ATTORNEY'S FEES AND HOMESTEAD. In the event either party should
seek to enforce its rights under this Lease through judicial process, the
prevailing party in any such action shall be entitled to collect from the other
party, in addition to all other sums owing hereunder, its reasonable attorney's
fees. Tenant waives all homestead rights and exemptions which it may have under
any law as against any obligation owing under this Lease.
27. RIGHTS CUMULATIVE. All rights hereunder shall be cumulative but
not restrictive to those given by law.
28. SERVICE OF NOTICE. Any notice required or permitted to be
delivered hereunder may be delivered in person or by United States certified
mail, postage prepaid, return receipt requested, or by recognized overnight
courier (e.g. Federal Express or DHL), next day delivery charges prepaid,
addressed to the parties at the addresses indicated above or at such other
addresses as may be specified by written notice delivered in accordance
herewith. Such notices shall be deemed effective three (3) business days
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after deposited in the U.S. mail, or on the next business day if delivered by
overnight courier, or immediately upon delivery in person.
29. WAIVER OF RIGHTS. Neither party's failure to exercise any power
given to them hereunder, or to insist upon strict compliance by the other party
with its obligations hereunder, nor any custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of such party's right
to demand exact compliance with the terms hereof.
30. TIME OF ESSENCE. Time is of the essence under this Lease.
31. SUCCESSORS AND ASSIGNS. This Lease shall apply to, inure to the
benefit of, and be binding upon the parties hereof and their respective
successors, permitted assigns, and legal representatives except as otherwise
expressly provided herein.
32. TRIPLE NET LEASE. This Lease shall be considered a "triple net
lease" so that, except as expressly set forth herein, Tenant shall bear all
responsibility as additional rent for all payments of any kind or nature
relating to the Premises and/or the ownership, leasing, operation, maintenance,
repair and replacement, rebuilding, use or occupation thereof during the Term,
including but not limited to payment of all taxes (except for income, estate,
inheritance or gift taxes of Landlord), insurance, repairs, maintenance,
assessments, or otherwise. Except as expressly set forth herein, (i) Tenant
shall assume with respect to the Premises every obligation relating thereto
which the ownership thereof entails and which, but for this
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Lease, would be borne by Landlord; and (ii) Tenant agrees to indemnify and hold
harmless Landlord for any and all claims, liabilities or costs including
attorneys' fees) arising out of this Lease or Tenant's occupancy; provided,
however, that in no event shall Tenant be responsible for, or be deemed to have
indemnified Landlord against any violation of applicable environmental laws
existing on the date of this Lease.
33. ENTIRE AGREEMENT; CONFLICT. This Lease and the SPA, including
any attachments made a part hereof or thereof, contains the entire agreement
between the parties and no representations, inducements, promises or agreements,
oral or otherwise, between the parties, not embodied herein or in the SPA, shall
be of any force or effect. In the event of any conflict between the terms
contained herein and the terms contained in the SPA, the terms of the SPA shall
control.
34. SEVERABILITY. If any term, provision or clause of this Lease, or
if the application thereof to any person or circumstances, shall to any extent
be invalid or unenforceable, then the remainder of this Lease or the application
of such term, provision or clause to persons or circumstances other than those
to which it is invalid or unenforceable shall not be affected thereby, and each
and every remaining term, provision, clause and application of this Lease shall
be valid and enforceable to the fullest extent permitted by law.
35. EXECUTION IN COUNTERPARTS. This Lease may be executed in two or
more counterparts, each of which shall be
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deemed an original, but all of which taken together shall constitute one and the
same instrument.
36. AMENDMENT. This Lease may not be altered, waived, amended or
extended except by an instrument in writing signed by Landlord and Tenant.
37. HEADINGS. The headings used in this Lease are for the purposes
of convenience only. They shall not be construed to limit or to extend the
meaning of any part of this Lease.
38. GOVERNING LAW. This Lease shall be construed in accordance with
the laws of the State of Georgia, and all obligations of the parties created
hereunder are performable in Gwinnett County, Georgia.
39. FORCE MAJEURE. Wherever a period of time is herein prescribed
for action to be taken by either Landlord or Tenant, such party shall not be
liable or responsible for, and there shall be excluded from the computation of
any such period of time, any delays due to strikes, riots, acts of God,
shortages of labor or materials, wars, governmental laws, regulations or
restrictions or other causes which are beyond the control of Landlord or Tenant,
as the case may be.
40. LIMITATION OF WARRANTIES. LANDLORD AND TENANT EXPRESSLY AGREE
THAT THERE ARE AND SHALL BE NO IMPLIED WARRANTIES OF MERCHANTABILITY,
HABITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT
OF THIS LEASE, AND THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY
SET FORTH IN THIS LEASE OR IN THE SPA.
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<PAGE>
IN WITNESS WHEREOF, the parties herein have hereunto set their hands
and seals, in triplicate, the day and year first above written.
LANDLORD:
/s/Carl H. Westcott
-------------------
Notarized Carl H. Westcott
TENANT:
Atlanta Toyota, Inc.
a Texas Corporation
By: /s/George Lowrance
------------------
Name: George Lowrance
Notarized Title: Secretary
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<PAGE>
EXHIBIT "A"
All that certain tract or parcel of land containing 9.634 acres, lying
and being in Land Lot 231 of the 6th District of Gwinnett County, Georgia, being
more particularly shown on a plat of survey of Precision Planning, Inc., Randall
W. Dixon, G.R.L.S. No. 1678, dated December 18, 1986, and from said plat
described as follows:
BEGINNING on an iron pin (set) located on the Southwestern margin of
the right-of-way of Pleasant Hill Road (a 120 foot right-of-way), said iron pin
being the Northernmost corner of the property herein conveyed as shown and
described on the survey of this property prepared by Precision Planning, Inc.,
as referenced above, said iron pin also being the Northernmost point of the
right-of-way of Old Norcross Road as conveyed by right-of-way deed recorded in
Deed Book 3131, Page 198, Gwinnett County, Georgia, Records, as said deed
defines and illustrates the point of intersection of the Southeastern boundary
of Old Norcross Road and the Southwestern margin of Pleasant Hill Road, and
running thence from said Beginning in a Southeasterly direction along the right
- -of-way of Pleasant Hill Road the following courses and distances: South 53
degrees 36 minutes 34 seconds Ease 382.22 feet; and thence 117.79 feet along the
arc of a curve to the right to an iron pin (set), such curve being subtended by
a cord bearing South 52 degrees 24 minutes 22 seconds East 117.77 feet and
having a radius of 2,804.79 feet; thence with the line of property now or
formerly owned by Pleasant Land Corporation South 61 degrees 53 minutes 21
seconds West 796.81 feet to an iron pin (set); and South 62 degrees 44 minutes
28 seconds West 238.77 feet to an iron pin (set) located on the Southeastern
right-of-way of Franklin Road (a 100 foot right-of-way); thence with the right
- -of-way of Franklin Road in a Northwesterly direction the following courses and
distances: 259.45 feet along the arc of a curve to the left, such curve being
subtended by a cord bearing North 19 degrees 11 minutes 36 seconds West 258.95
feet and having a radius of 1,195.915 feet; thence North 25 degrees 24 minutes
29 seconds West 143.57 feet to an iron pin (set); and North 18 degrees 55
minutes 18 seconds East 107.30 feet to an iron pin (set) located at the
intersection of the rights-of-way of Franklin Road and Old Norcross Road; thence
with the Southeastern right-of-way of Old Norcross Road the following courses
and distances: 113.32 feet along the arc of a curve to the right to an iron pin
(set), such curve being subtended by a cord bearing North 62 degrees 24 minutes
13 seconds East 113.32 feet, and having a radius of 6,346.386 feet; thence North
61 degrees 53 minutes 21 seconds East 538.05 feet to an iron pin (set); and
North 88 degrees 08 minutes 13 seconds East 51.02 feet to the point and place of
BEGINNING.
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<PAGE>
LEASE GUARANTY
The undersigned, in order to induce Carl Westcott, an individual
resident of the State of Texas ("Westcott") to enter into that certain Lease
Agreement (herein so called) dated as of January 3, 1996, between Westcott and
Atlanta Toyota, Inc. ("Atlanta Toyota"), a Texas corporation and a subsidiary of
UAG Atlanta, Inc., a Delaware corporation that is wholly owned by the
undersigned, hereby irrevocably guarantees the collection of all rent and other
obligations of Atlanta Toyota now or hereafter existing under the terms of the
Lease Agreement; provided, however, that the undersigned shall not be obligated
to make any payment under this Guaranty unless and until (i) Westcott has first
attempted to recover from Atlanta Toyota and has obtained a judgment against
Atlanta Toyota, which judgment has been returned unsatisfied in whole or in
part, or (ii) Atlanta Toyota has become bankrupt or insolvent or it is otherwise
apparent that it is useless to proceed against Atlanta Toyota. The undersigned
also agrees to pay any and all reasonable expenses (including reasonable counsel
fees and expenses) incurred by Westcott in enforcing any rights under this
Guaranty.
The undersigned hereby waives presentment, protest, notice of
dishonor, extension of time of payment, notice of acceptance of this Guaranty,
notice of non-payment when due of the obligations guaranteed hereby and
indulgences and notices of every other kind and hereby consents to any and all
forebearances and extensions of time of payment of the obligations guaranteed
hereby and to any and all of the changes in the terms, covenants and conditions
thereof hereafter made or guaranteed. The liability of the undersigned under
this Guaranty shall be absolute and unconditional irrespective of (i) any change
in the time, manner or place of payment of, or in any other term of, all or any
of the obligations guaranteed hereby, or any amendment or waiver or any consent
to departure from the Lease Agreement and any other agreement or instrument
relating thereto, or (ii) any release or amendment or waiver of or consent to
departure from any other guaranty for all or any of the obligations guaranteed
hereby.
No delay or omission by Westcott in exercising any of his rights,
remedies, powers and privileges hereunder and no course of dealing between
Westcott, on the one hand, and Atlanta Toyota, the undersigned or any other
person, on the other hand, shall be deemed a waiver by Westcott of any of his
rights, remedies, powers and privileges, even if such delay or omission is
continuous and repeated; nor shall any single or partial exercise of any right,
remedy, power or privilege preclude any other or further exercise thereof by
Westcott or the exercise of any other right, remedy, power or privilege by
Westcott. No notice or demand on Atlanta Toyota, the undersigned or any other
person in any instance shall entitle Atlanta Toyota, the undersigned or any
other person to any other or further notice or demand in similar or other
circumstances or constitute a waiver of Westcott's right to any other or further
action in any circumstances without notice or demand.
This Guaranty shall be effective regardless of the solvency or
insolvency of Atlanta Toyota, any reorganization, merger or consolidation of
Atlanta Toyota, or any change in the composition, nature, personnel or location
of Atlanta Toyota.
This Guaranty shall remain in full force and effect, and the
undersigned shall continue to be liable for the payment of the obligations under
the Lease Agreement in accordance with the terms of the Lease Agreement and this
Guaranty, notwithstanding the commencement of any bankruptcy, reorganization or
other debtor relief proceedings by or against Atlanta Toyota, and
notwithstanding any modification, discharge
<PAGE>
or extension of the obligations under the Lease Agreement, any modification or
amendment of the Lease Agreement, or any stay of the exercise by Westcott of any
of his rights and remedies against Atlanta Toyota with respect to any of the
obligations under the Lease Agreement.
Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or be invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
The undersigned warrants and represents to Westcott that any financial
statements heretofore delivered by the undersigned to Westcott were true and
correct in all respects as of the date delivered to Westcott.
This Guaranty shall inure to the benefit of Westcott and his
successors and assigns, and shall be binding upon the undersigned and its
successors and assigns. This instrument constitutes the entire agreement as to
the subject matter contemplated hereby.
No amendment or waiver of any provision of this Guaranty nor consent
to any departure by Westcott therefrom shall in any event be effective unless
the same shall be in writing and signed by Westcott and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. This instrument has been made and delivered in the
State of Georgia and shall be governed by the laws of the State of Georgia.
WITNESS the undersigned's signature as of the 16th day of January,
1996.
UNITED AUTO GROUP, INC., a Delaware
Corporation
By: /s/ George Lawrance
---------------------------------
Its: Secretary
--------------------------------
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<PAGE>
WHOLESALE FLOOR PLAN SECURITY AGREEMENT
In the course of business, Atlanta Toyota, Inc., a Texas corporation
("Dealer"), acquires new and used cars, trucks and chassis, including trailers
and semi-trailers, motor homes, campers, camping trailers, as well as equipment
and accessories thereto ("Vehicles"), from manufacturers, distributors and other
sellers. Dealer requests that World Omni Financial Corp. ("WOFCO") finance the
acquisition of such Vehicles and pay the manufacturers, distributors or sellers
therefor. In consideration of WOFCO's financing of Dealer's acquisition of the
Vehicles, and in further consideration of the inducement to WOFCO to make loans
and advances to, to purchase from or otherwise acquire retail installment sales
contracts, conditional sales contracts or other security instruments from, and
to otherwise extend credit or to do business with Dealer, which loans, advances,
purchases, acquisitions, or extension of credit would not have been made but for
the execution of this Wholesale Floor Plan Security Agreement (this
"Agreement"), this Agreement is entered into between WOFCO and Dealer. Dealer
and WOFCO agree to the extension of a line of credit in the amount of Fifteen
Million DOLLARS ($15,000,000.00) from WOFCO to Dealer.
As evidence of the above line of credit, Dealer agrees to execute and
deliver to WOFCO WOFCO's standard form of demand promissory note ("Demand
Promissory Note") of even date in the amount set forth above with documentary
tax stamps attached thereto, if applicable. In addition thereto, all other
taxes due upon the execution of this Agreement or the Demand Promissory Note or
arising out of the transactions evidenced by such documents, if any, will be
paid by Dealer. If the line of credit is increased at any time, Dealer will
deliver to WOFCO additional Demand Promissory Notes in the amounts of such
increases which will bear interest in accordance with their terms. All the
provisions of this Agreement shall apply to the total line of credit to include
any and all increases. Failure on Dealer's part to deliver additional Demand
Promissory Notes shall not impair WOFCO's secured status as to future advances
even though the line of credit set forth above is exceeded.
Dealer agrees to pay to WOFCO upon demand the amount WOFCO advances or
is obligated to advance to the manufacturer, distributor or seller for each
Vehicle with interest at the rate per annum stated in the above described Demand
Promissory Notes. Dealer understands that it may sell and lease at retail in
the ordinary course of business that part of the Collateral (as hereinafter
defined) which consists of inventory. Dealer further agrees that on or before
the soonest of (i) WOFCO's demand therefor, (ii) two days (excluding weekends
and legal holidays) following the date on which each Vehicle is sold or leased,
or (iii) the completion of a WOFCO audit, Dealer will faithfully and promptly
remit to WOFCO the amount WOFCO advanced or has become obligated to advance on
Dealer's behalf to the manufacturer, distributor or seller for the purchase of
the sold or leased Vehicle. If Dealer has not sold or leased any Vehicle for
which any advance was made, and unless and until WOFCO has made demand upon
Dealer for payment of the amount of any advance made by WOFCO to Dealer, then
the advance shall be paid in full on or before March 31 of the year following
the model year of the Vehicle for which the advance was made. On those advances
that have been made to enable Dealer to purchase a Vehicle that has been used as
a
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<PAGE>
"demonstrator," and unless otherwise agreed upon in writing, Dealer shall pay
the entire amount of the advance in accordance with the foregoing or, if
earlier, when the "demonstrator's" odometer reaches 5,000 miles or the Vehicle
is damaged so as to reduce its wholesale value, after repair, below the amount
advanced thereon. Dealer understands that WOFCO, in its sole discretion, may in
writing extend the term of payment of any advance beyond that set forth above,
but any such extension shall not affect WOFCO's right to make demand upon Dealer
for the payment of any advance for which the payment thereof has been extended.
Upon WOFCO's receipt of the amount advanced by WOFCO on Dealer's behalf for the
purchase of the sold or leased Vehicle, WOFCO's security interest in the Vehicle
shall cease and shall no longer exist.
Dealer acknowledges and agrees that the relationship between Dealer
and WOFCO created by this Agreement and the Demand Promissory Note is that of
debtor-creditor and not that of joint venturers, that WOFCO is not a joint
venturer of Dealer pursuant to any other agreement with Dealer and that Dealer
will make no representations to the contrary.
Dealer also agrees that to secure collectively the payment by Dealer
of the amounts of all advances made and obligations to advance incurred by WOFCO
pursuant to this Agreement or the Demand Promissory Notes, and the interest due
thereon, any late fees, costs, attorneys' fees and any other legal expenses
charged hereunder or thereunder, and any other Obligations (as hereinafter
defined), WOFCO is hereby granted a security interest in the Collateral (as
hereinafter defined). WOFCO's security interest in the Collateral shall attach
to the proceeds, in whatever form, including the proceeds of any retail sale or
lease of Vehicles by Dealer and to the proceeds of any other disposition of said
Vehicles or any part thereof, to the fullest extent provided or permitted by
law. This security interest is given not only to secure the payment by Dealer
of such advances and obligations to advance, including those payment and
performance obligations evidenced by the above described Demand Promissory
Notes, but also to secure the payment and performance of any other obligations
Dealer has to WOFCO, whether primary, secondary, direct, indirect, contingent,
sole, joint or several, whether presently existing or hereafter arising under
present or future advances by WOFCO to Dealer, pursuant to this Agreement or
pursuant to any other agreement between WOFCO and Dealer whether presently
existing or hereafter executed, and also any obligations Dealer may have to
third parties which may now or hereafter be purchased by WOFCO, and any and all
extensions or renewals thereof, and also to secure the performance by Dealer of
the promises, warranties and agreements set forth herein (all of the foregoing
hereinafter called "Obligations").
If, for any reason, total payments which may be deemed interest under
any of the Obligations shall be greater than the limit imposed by the usury laws
under applicable law for any interest payment period, then all sums in excess of
those lawfully collectable as interest for that period shall be applied, without
further agreement or notice, first to the reduction of principal until paid in
full with the excess,if any, being then repaid to any Obligor (as hereinafter
defined).
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<PAGE>
The Collateral subject to this Agreement is (a) all inventory of the
Dealer consisting of new and used Vehicles (whether held for sale or lease,
including used Vehicles which are received as "trade-ins"); all additions,
accessories and accessions to any of the foregoing; all general intangibles,
instruments, chattel paper, accounts, books and records, contract rights and
accounts receivable of the Dealer, whether now owned or hereafter acquired by
Dealer, arising out of the sale or lease of any of the foregoing; all
substitutions for any of the foregoing and all returned and repossessed items;
and all proceeds of any of the foregoing, including insurance proceeds; and (b)
to the extent the pledge thereof will not violate, or require the approval of a
third party pursuant to, any other agreement in effect as of the date of this
Agreement to which the Dealer is a party, all inventory, equipment, documents
and all other property of the Dealer, whether now owned or hereafter acquired by
Dealer, including, but not limited to, parts inventory, furniture and fixtures;
all tools, parts and equipment used with, or intended for use with, any of the
foregoing; all additions, accessories and accessions to any of the foregoing;
all general intangibles, instruments, chattel paper, accounts, books and
records, contract rights and accounts receivable of the Dealer, whether now
owned or hereafter acquired by Dealer and whether arising out of the sale or
lease of any of the foregoing or otherwise; all substitutions for any of the
foregoing and all returned and repossessed items; and all proceeds of any of the
foregoing, including insurance proceeds (all of the foregoing herein defined as
the "Collateral").
Dealer's possession of the Vehicles shall be for the purpose of
storing and exhibiting same for retail sale or lease in the regular course of
business. With the exception of used Vehicles, Dealer shall keep the Vehicles
brand new and Dealer shall not use the Vehicles, new or used, illegally,
improperly or for hire. WOFCO shall at all times have the right of access to
and inspection of the Vehicles and the right to examine Dealer's books and
records in any way relating to its business, including those pertaining to the
Vehicles. It is agreed that certain Vehicles financed hereunder may be used as
demonstrators for the purpose of promoting the sale of these and other Vehicles.
Mutually, WOFCO and Dealer will establish in writing the number of new units to
be outstanding as demonstrators at any one time.
Dealer shall, at all times during the shipment of Vehicles, cause them
to be fully insured at Dealer's or the shipper's expense, as the case may be, in
WOFCO's favor and to WOFCO's satisfaction, and, at Dealer's own expense, to
insure the Vehicles at all times thereafter for no less than the actual cash
value of the Vehicles against at least the perils of collision, fire, theft and
the perils contemplated in combined additional coverage and further agree to
maintain liability insurance, all with a financially sound and reputable insurer
acceptable to WOFCO. The insurance policy will name WOFCO as loss payee and as
an additional insured and will include a clause providing for 30 days prior
written notice to WOFCO of cancellation, material change or non-renewal. At all
times, WOFCO will be provided written evidence that the insurance is in force
and WOFCO will be furnished a copy of each current policy in a timely manner.
Dealer agrees to pay promptly when due all taxes, assessments and governmental
charges upon or against Dealer or upon the Collateral or upon Dealer's property
or operations, in each case before the same become delinquent and before
penalties accrue thereon, unless and to the extent that the same are being
contested in good faith by appropriate proceedings, and Dealer shall take
appropriate actions to assure that the Collateral remains free of any lien. In
the event Dealer shall fail to maintain insurance, pay
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<PAGE>
taxes, assessments, costs and expenses which Dealer is required to pay under any
of the terms hereof, or fail to keep the Collateral free from other security
interests, liens or encumbrances, WOFCO may make expenditures for any or all
such purposes and the amount so expended together with interest thereon at the
rate of 18% per annum shall become immediately due and payable by Dealer to
WOFCO as an additional part of the Obligations and shall have the benefit of and
be secured by the security interest herein granted and agreed to. Prior to
default by Dealer hereunder, payments for losses made under any policy of hazard
insurance shall be applied, at Dealer's option, to either replace Collateral or
to reduce the Obligations. After default, payments under any insurance policy
shall be first applied to the Obligations due and owing to WOFCO. After the
Obligations are paid in full, any remainder may be paid to Dealer. WOFCO is
hereby granted a security interest in unearned premiums rebated or returned upon
cancellation of any insurance policy. Dealer hereby grants to WOFCO an
irrevocable power of attorney, which power of attorney shall be coupled with an
interest in the Collateral, and hereby appoints WOFCO to act as Dealer's
attorney-in-fact for Dealer in obtaining, adjusting, settling and cancelling
such insurance and endorsing any draft issued by any insurer in payment of
claims. WOFCO may apply any proceeds of such insurance which may be received by
WOFCO for payment of the Obligations, whether due or not due, in such order of
application as WOFCO may determine.
Dealer represents and warrants that the Collateral is free and clear
of all liens, security interests and other encumbrances at the time of execution
of this Agreement, except for the lien and security interest granted to WOFCO
hereunder, and that the lien and security interest granted to WOFCO hereunder is
a first priority lien on and security interest in the Collateral. Dealer
further covenants that as of the time of each advance made under any Demand
Promissory Note, WOFCO's lien on and security interest in the Collateral shall
be a first priority lien and security interest. Dealer shall not mortgage,
pledge or loan the Collateral and shall not transfer or otherwise dispose of it
except as provided herein. Dealer shall execute in favor of WOFCO any forms or
documents which may be required for the amounts advanced pursuant to this
Agreement, and shall execute such additional documents as WOFCO may at any time
request in order to confirm or perfect title or a security interest in the
Collateral. Execution by Dealer of any instrument for the amount advanced shall
be deemed evidence of Dealer's obligation and not payment therefor. Dealer
hereby grants to WOFCO an irrevocable power of attorney, which power of attorney
shall be coupled with an interest in the Collateral, and hereby appoints WOFCO
or any of WOFCO's officers as Dealer's attorney-in-fact to supply any omitted
information and correct patent errors in any documents executed by Dealer
pursuant to or in furtherance of this Agreement.
Dealer certifies that any information concerning its business
organization or financial condition furnished or that may be furnished in the
future to WOFCO is true and correct and fairly presents the financial condition
of Dealer in accordance with generally accepted accounting principles
consistently applied. Dealer agrees to furnish such information to WOFCO at
such times (on at least a monthly basis) and in such form as WOFCO may request.
Dealer represents and warrants: (a) that its principal place of
business, and if more than one, that its chief executive office is located at
the address of Dealer set forth on the
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<PAGE>
signature page hereof and that such principal place of business or chief
executive office has been maintained at such location, or at such other
locations as indicated on the signature page hereof, since the formation of the
Dealer or any predecessor in interest thereto or for at least seven years,
whichever is longer; and (b) that Dealer has conducted business under its
current corporate name, or if it conducts business under a trade name, that it
has conducted business under its current trade name, and has not conducted
business under any other name, other than the corporate or trade names listed on
the signature page hereof, since the formation of the Dealer or any predecessor
in interest thereto or for at least seven years, whichever is longer.
Dealer covenants to promptly give WOFCO notice in writing: (a) of all
threatened or actual actions or suits and of all investigations or proceedings
by or before any court, arbitrator or any governmental department, board, agency
or other instrumentality, state or federal, affecting Dealer or its properties
which involves potential liability of Dealer in excess of $100,000 in any
individual case; (b) of any material adverse change in the condition (financial
or otherwise) of Dealer; (c) of any notice of intent to seize, levy or assess or
of any actual seizure, levy or assessment upon or against any property of
Dealer; and (d) of any change in Dealer's corporate name or any trade name and
any change in its chief executive office or place(s) of business.
At WOFCO's option, Dealer shall be in default under this Agreement and
under any Demand Promissory Notes upon the happening of any of the following
events or conditions (hereinafter collectively called "Event of Default"),
whether happening to Dealer or any other party primarily, secondarily or
contingently liable on any of the Obligations (hereinafter collectively called
"Obligor" without regard to number or gender):
1. Failure to pay or perform when due any obligation, covenant,
agreement, or liability contained or referred to herein or in any other
agreement between Obligor and WOFCO;
2. Loss, theft, substantial damage, destruction, sale or encumbrance
of any Collateral, except as herein permitted, or the making of any levy,
seizure, garnishment, or attachment thereof or thereon;
3. Obligor makes an assignment for the benefit of creditors, files a
petition in bankruptcy, petitions or applies to any tribunal for the appointment
of a custodian, receiver or trustee for it or a substantial part of its assets,
or commences any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or any such petition or
application is filed against Obligor, or any such proceeding is commenced
against it;
4. Obligor admits in writing its inability, or is generally unable,
to pay its debts as they become due, or Obligor, by any act or omission,
indicates its consent to, approval of or acquiescence in any petition,
application, proceeding or order for relief or the appointment of a custodian,
receiver or trustee for the Obligor or any substantial part of any of its
properties, or suffers any such custodianship, receivership or trusteeship;
-5-
<PAGE>
5. Merger, consolidation, change of voting control or transfer or
sale of substantially all the assets of any corporate Obligor;
6. WOFCO, in good faith, believes that the prospect of payment or
performance of any agreements or obligations between any Obligor and WOFCO or
any other Obligor is impaired or that the Vehicles are in danger of misuse,
loss, seizure or confiscation;
7. There is a change in Dealer's managerial control, including a
change resulting from a management contract or a change in substantially all of
Dealer's executive officers;
8. There occurs a breach or violation of any subordination agreement
or guaranty by any party thereto which has been executed in WOFCO's favor and
given to WOFCO to guaranty any Obligations or to subordinate any of Dealer's
other indebtedness or obligations to the Obligations;
9. Any final judgment(s) for the payment of money in excess of
$100,000 in the aggregate, excluding judgments for claims covered by insurance,
are rendered against the Obligor and the same shall remain undischarged for a
period of 30 consecutive days during which execution shall not be effectively
stayed; or notice of intent to levy by any governmental agency or body (whether
local, state or federal) is issued to or against Obligor or any of its
properties for an amount in excess of $100,000;
10. Any consent, approval, franchise, license or permit of any
governmental agency or of any motor vehicle manufacturer, franchisor or
distributor that is a party to any agreement with Dealer, which is necessary for
the ownership of Dealer's assets or for the operation of its business, is
cancelled, revoked or modified in a manner which materially adversely affects
Dealer or its properties; or
11. Obligor shall default in the performance of any agreement with
any person other than WOFCO if the effect of such default is, or with notice or
the passage of time or both would be, to accelerate the maturity of any
indebtedness, or Obligor shall fail to pay any indebtedness at maturity.
Upon the occurrence of any Event of Default or at any time thereafter,
WOFCO's obligations to make advances hereunder or under any Demand Promissory
Note shall be terminated at WOFCO's option, and WOFCO shall have the right to
terminate this Agreement at WOFCO's option without demand or notice, and in such
event, all Obligations secured hereby, or any of them (notwithstanding any
provisions thereof), shall immediately become due and payable without demand or
notice and WOFCO may take immediate possession of the Collateral without demand,
notice or legal process; and for the purpose and in furtherance thereof, Dealer
shall, if WOFCO so requests, assemble the Collateral and make it available to
WOFCO at a reasonably convenient place designated by WOFCO, and WOFCO shall have
the right (and Dealer hereby authorizes and empowers WOFCO to do so) to enter
upon the premises wherever said Collateral may be and remove same. Dealer shall
hold WOFCO harmless from any claim for trespass or breach of peace in connection
with such
-6-
<PAGE>
entry and removal. In the event WOFCO acquires possession of any Collateral,
WOFCO may, in its sole discretion, sell the Collateral by private or public sale
for the account of Dealer after given reasonable notice of the time and place of
sale to Dealer. Any notice from WOFCO placed in the U.S. Mail, postage prepaid,
addressed to Dealer at its address shown on WOFCO's records at least seven
business days prior to any action or sale shall be reasonable notice to Dealer.
Any proceeds of the disposition of any Collateral may be applied by WOFCO toward
the reasonable expenses of retaking, holding, preparing for sale and selling the
Collateral, next to reasonable attorneys' fees and legal expenses incurred by
WOFCO, and finally to Obligations of Dealer to WOFCO in any order WOFCO may
elect. Dealer shall be liable for any deficiency and WOFCO shall be entitled to
interest thereon at the rate of 18% per annum. In the event of repossession of
the Collateral by WOFCO, then the rights and remedies applicable under the
Uniform Commercial Code in effect in the state which laws shall govern this
Agreement as provided below shall apply, except as permitted to be modified by
agreement and which were so modified herein. In conjunction with or in lieu of
any of the remedies provided for in this paragraph, and at WOFCO's sole option,
Dealer shall allow WOFCO or any agent or designee thereof to enter upon Dealer's
premises for the purpose of taking possession of, holding, and controlling The
disposition of, in any manner deemed appropriate by WOFCO, all Vehicles financed
in whole or in part by WOFCO and constituting a portion of the Collateral, all
title and registration documents, manufacturers' statements or certificates of
origin and keys for any such Vehicles, all to the sole end of further protecting
WOFCO's rights as a secured party hereunder and for no other purpose. Dealer
hereby grants to WOFCO an irrevocable power of attorney, which power of attorney
shall be coupled with an interest in the Collateral, and hereby appoints WOFCO
or any of WOFCO's officers as Dealer's attorney-in-fact to execute on Dealer's
behalf all title and registration documents, all manufacturers' statements or
certificates of origin, and to do any and all things in the name of and on
behalf of Dealer to enable WOFCO to fully exercise its rights in and to the
Collateral as provided in this Agreement and under applicable law.
Dealer shall pay all expenses of every kind for the enforcement of any
of WOFCO's rights mentioned herein or in any Demand Promissory Notes and
reimburse WOFCO for any expenditures, including expenses incurred in realizing
on Collateral, court costs, other legal expenses and reasonable attorneys' fees
(provided, however, that if this Agreement is governed by and construed and
enforced under the laws of the State of Georgia, Dealer shall pay WOFCO's
attorneys' fees at the rate of 15% of principal and interest owing by Dealer to
WOFCO) incurred in consultation or in judicial, administrative or arbitration
proceedings, both at trial and appellate levels, and such expenses shall bear
interest at the rate of 18% per annum until paid and shall be secured hereby.
Dealer understands that WOFCO does not warrant the Vehicles and Dealer
will not be relieved of any Obligation or liability to WOFCO because the
Vehicles are defective or fail to conform to the warranties extended by the
manufacturer or supplier. This Agreement and the Obligations arising from it
shall not be affected by any dispute Dealer may have with any manufacturer,
distributor or shipper of the Vehicles. Specifically, Dealer will not assert
against WOFCO any claim or defense Dealer may have against any manufacturer,
distributor or shipper of the Vehicles. Dealer shall indemnify and hold WOFCO
harmless against any claims or defenses asserted by any consumer or other buyer
of Vehicles in the ordinary course
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<PAGE>
of business by reason of the condition of any Vehicles sold by Dealer, any
representations made by Dealer about the Vehicles, or any violation of any
applicable law or regulation.
Any provision of this Agreement to the contrary notwithstanding, the
line of credit extended hereunder may be cancelled at any time by WOFCO at
WOFCO's election without prior notice or demand, and in such event the Demand
Promissory Notes and all sums for which Dealer shall be indebted to WOFCO under
this Agreement, plus interest, shall immediately become due and payable without
notice.
No waiver of any default or non-exercise of a right hereunder shall
waive any other default, or the same default on a future occasion, or preclude
exercising any other right or the same right on a future occasion. Time is of
the essence. The provisions hereof are cumulative to provisions of any other
agreement between the parties hereto. Singular includes plural, and neuter
includes masculine and feminine. This Agreement is effective as of its date.
WOFCO's rights hereunder shall inure to the benefit of its successors and
assigns, and Dealer's duties shall bind its successors and assigns. If any
provision of this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect under applicable law, the same shall not affect
any other provision of this Agreement and this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein. This Agreement, the Demand Promissory Note and any other agreement or
document executed or delivered pursuant hereto, or in connection or arising with
the loans or transactions contemplated by this Agreement, embody the entire
agreement and understanding between the parties hereto, supersede all prior
agreements and understandings relating to the subject matter hereof, and may not
be modified or varied except in a writing signed by WOFCO and Dealer. In the
event any conflict arises between the terms of this Agreement and the terms of
any other document or agreement between WOFCO and Dealer, the terms of this
Agreement shall govern. WOFCO may assign this Agreement or any of its rights
and powers hereunder, and in the event of such assignment, the assignee shall
have the same rights, duties, remedies and obligations as if originally named
herein in WOFCO's place.
Dealer and WOFCO hereby knowingly, voluntarily and intentionally waive
any right either of them may have to obtain punitive or exemplary damages from
the other based on any rights, claim or action either of them may have against
the other, including, but not limited to, any right, claim or action arising out
of this Agreement, any Demand Promissory Note or any document, agreement or
transaction to which they are both parties.
Except as otherwise specifically set forth herein or agreed to in
writing by WOFCO and Dealer, any action, dispute, claim, or controversy between
or among the parties, whether sounding in contract, tort, or otherwise
("Dispute"), shall be resolved by arbitration as set forth below, and shall
include any Dispute arising out of or in connection with (1) this Agreement, any
Demand Promissory Note, or any related agreements or instruments, (2) all past,
present, and future agreements involving the parties, (3) any transaction
contemplated hereby and all past, present, and future transactions involving the
parties, and (4) any aspect of the past, present, or future relationships of the
parties. Such disputes shall be resolved by binding arbitration in accordance
with Title 9 of the United States Code and the Commercial Arbitration Rules of
the American Arbitration Association. In the event of any inconsistency
-8-
<PAGE>
between such Rules and these arbitration provisions, these provisions shall
supersede such Rules. All statutes of limitations which would otherwise be
applicable shall apply to any arbitration proceeding described herein. In any
arbitration proceeding subject to these provisions, the arbitrators are
specifically empowered to decide (by documents only, or with a hearing, at the
arbitrators' sole discretion) pre-hearing motions which are substantially
similar to pre-hearing motions to dismiss and motions for summary adjudication.
Any arbitration proceeding subject to these provisions shall be conducted in the
state in which the Dealer's place of business for the sale of Vehicles is
located and in the county in such state in which WOFCO's principal place of
business in that state is located. Judgement upon the award rendered may be
entered in any court of appropriate subject matter jurisdiction, which judgement
may be domesticated in any jurisdiction for purposes of enforcement. The
parties to this Agreement expressly subject themselves to the personal
jurisdiction of any such court for the entry of any such judgement and for the
resolution of any dispute, action, or suit arising in connection with the entry
of such judgement. Any Dispute subject to arbitration proceedings in accordance
with this Agreement shall be decided by a majority vote of three arbitrators.
The arbitrators shall have the power to award recovery of all costs and fees
(including attorneys' fees, administrative fees, arbitrators' fees and court
costs) to the prevailing party.
No provision of, nor the exercise of any rights under the preceding
paragraph, shall limit the right of WOFCO (1) to foreclose against Collateral by
the exercise of a power of sale under this Agreement or applicable law, (2) to
exercise self-help remedies including, without limitation, setoff and
repossession, (3) to obtain provisional or ancillary remedies such as injunctive
relief, attachment, or the appointment of a receiver from a court having
jurisdiction before, during, or after the pendency of any arbitration
proceeding, or (4) to otherwise exercise its rights in and to the Collateral or
its remedies as a secured creditor under Article 9 of the Uniform Commercial
Code (as adopted in the state which laws govern the construction and
enforceability of this Agreement, as set forth below) or as set forth in this
Agreement. The institution and maintenance of an action for judicial relief or
pursuit of provisional or ancillary remedies or exercise of self-help remedies
shall not constitute a waiver of the right of any party to submit the Dispute to
arbitration.
In the event it shall be determined for any reason that any Dispute
shall not be subject to arbitration as set forth herein, DEALER HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY in
respect to any litigation arising out of or in connection with (1) this
Agreement, any Demand Promissory Note, or any related agreements or instruments,
(2) all past, present, and future agreements involving the parties, (3) any
transaction contemplated hereby, and all past, present, and future transactions
involving the parties, and (4) any aspect of the past, present, or future
relationships of the parties. This waiver of trial by jury provision is a
material inducement for WOFCO to enter into this Agreement.
This Agreement shall be governed by and construed and enforced under
the laws of the State of Georgia without regard to its conflict of laws
principles.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed under its hand and seal by its duly authorized representative this
day of , 19 .
WORLD OMNI FINANCIAL CORP.
Atlanta Toyota, Inc.
(Dealer's Name)
By: (SEAL)
2345 Pleasant Hill Road
(CORPORATE SEAL) Duluth, GA 30136
(Address of current principal place of business,
or if more than one, current chief executive
office, of Dealer)
By: /s/ Carl Spielvogel (SEAL)
--------------------------------
, President
------------------------------------
Attest: /s/ George Lowrance (SEAL)
-----------------
, Secretary
----------------------------------
(CORPORATE SEAL)
Other corporate and trade names of Dealer (or any predecessor in interest
thereto) and locations of its principal place of business and chief executive
office of Dealer (or any predecessor in interest thereto) during the past seven
years.
____________________ _______________________
(Name) (Name)
____________________ _______________________
____________________ _______________________
(Address) (Address)
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<PAGE>
USED VEHICLE FLOOR PLAN AGREEMENT
(Amendment to Wholesale Floor Plan Security Agreement)
This Agreement is entered into on _________, __96, by and between
WORLD OMNI FINANCIAL CORP., a Florida corporation ("WOFCO") and Atlanta Toyota,
Inc. a Texas corporation D/B/A Atlanta Toyota ("DEALER").
WOFCO and DEALER have previously entered into a Wholesale Floor Plan
Security Agreement (the "Security Agreement") dated _________, 199_. In
consideration of the mutual covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, WOFCO and DEALER hereby amend the Security Agreement as
follows:
1. All capitalized terms used herein shall have the meanings given
to such terms in the Security Agreement.
2. From time to time during the term of the Security Agreement WOFCO
will advance to DEALER upon DEALER'S request up to a total of THREE MILLION
DOLLARS ($3,000,000.00) under the line of credit extended to DEALER pursuant to
the Security Agreement for the purpose of financing DEALER'S acquisition of
qualified used Vehicles. Qualified used Vehicles shall mean used Vehicles that
are clean, and in good condition, have low mileage and are no more than four (4)
years old.
3. Advances made for the purpose of financing qualified used
Vehicles shall be evidenced by a separate Demand Promissory Note in the amount
of $3,000,000.00. Such advances shall represent a revolving loan and DEALER may
borrow up to $3,000,000.00, repay all or any portion of such advances, and
reborrow up to $3,000,000.00, subject to the terms and conditions set forth
herein and in the Security Agreement.
4. DEALER shall give WOFCO written notice of any requested advance
hereunder. Such notice shall specify the proposed date of the advance and the
amount thereof. Subject to confirmation by WOFCO that the amount requested will
not cause the total amounts advanced hereunder to exceed $3,000,000.00, WOFCO
shall make each subsequent advance hereunder on the date proposed by DEALER
therefor (which may be the same banking day if such request is made by DEALER
and is received by WOFCO prior to 11:00 A.M. (Deerfield Beach time), otherwise
no earlier than the following banking day, in the manner agreed upon by WOFCO
and DEALER. WOFCO shall have no duty or obligation to verify or confirm the
authority of the person of DEALER requesting any such
<PAGE>
subsequent advance as long as said person identifies himself as an employee of
DEALER.
5. DEALER shall at all times maintain in inventory qualified used
Vehicles with a collective wholesale value of not less than the amount
outstanding hereunder for the acquisition of used Vehicle inventory. All such
used Vehicles shall be maintained at the DEALER'S location and shall be titled
in the DEALER'S name with no outstanding liens.
6. Except as amended hereby, the Security Agreement, as it may be
amended from time to time, shall govern the terms of all advances made under the
line of credit for the financing of qualified used Vehicles.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed under hand and seal by its duly authorized representative as of the
date and year first written above.
WORLD OMNI FINANCIAL CORP.
BY:________________________(SEAL)
____________________________
(Print Name and Title)
ATLANTA TOYOTA, INC.
BY:/s/ Carl Spielvogel (SEAL)
-----------------------
Attest:
BY:/s/ George Lowrance (SEAL)
-----------------------
Secretary
<PAGE>
DEMAND PROMISSORY NOTE
(Line of Credit)
$15,000,000.00
DATE:____________________________
LOCATION: 2345 Pleasant Hill Road
-----------------------
Duluth, GA 30136
-----------------------
VALUE RECEIVED, the undersigned ("Maker") promises to pay on DEMAND to the order
of WORLD OMNI FINANCIAL CORP., a Florida corporation, together with any
subsequent holder hereof (hereinafter collectively called the "Holder"), the
principal sum of Fifteen Million DOLLARS ($15,000,000.00) or such portion
thereof which shall have been advanced to Maker, with interest as set forth
below on the unpaid balance until paid, and both principal and interest shall be
payable in lawful money of the United States of America at the office of Holder
located at 120 N.W. 12th Avenue Deerfield Beach, FL 33442, or at such other
place as Holder may designate in writing. It is understood and agreed that
additional amounts may be advanced by Holder as provided in the Wholesale Floor
Plan Security Agreement (as hereinafter defined) securing this Demand Prmoissory
Note ("Note") and, if no promissory note reflecting such additional advance is
executed by Maker, such advances will be added to the principal of this Note,
will accrue interest as set forth below from the date of advance until paid and
will otherwise be payable in accordance with the terms of this Note.
All sums due under this Note, including, without limitation, all
principal and interest and all amounts advanced by the Holder of this Note or
any predecessor or assignor (immediate or remote) with respect hereto, shall be
due and payable upon DEMAND or, in the absence of any DEMAND, upon such
additional terms and conditions as are set forth in this Note and in the
Wholesale Floor Plan Security Agreement dated ___________, 19__, between World
Omni Financial Corp. and Maker, including any amendments thereto (the "Wholesale
Floor Plan Security Agreement"), which agreement and amendments, if any, are
incorporated herein by reference.
Accrued interest shall be paid monthly on the 1st day of each month
commencing on ___________, 19__. On that portion of the principal amount of
this Note advanced to enable Maker to acquire new Vehicles (as defined in the
Wholesale Floor Plan Security Agreement), interest shall be a percentage of such
principal amount at an annual rate equal to .75 percent (.75) plus the interest
rate announced from time to time by First Union National Bank of Florida, as the
Prime Rate (the "Prime Rate"), and shall be computed on the basis of the actual
number of days elapsed over a period of 360 days. On that portion of the
principal amount of this Note advanced to enable Maker to acquire used Vehicles
or advanced for any other purpose, other than to enable Maker to acquire new
Vehicles, interest shall be a
-1-
<PAGE>
percentage of such principal amount at an annual rate equal to 1.75 percent
(1.75) over the interest rate announced from time to time by First Union
National Bank of Florida, as the Prime Rate, and shall be computed on the basis
of the actual number of days elapsed over a period of 360 days. Each change in
the interest rate hereunder shall be effective as of the date upon which the
Prime Rate is changed. Interest shall be computed on a daily basis by applying
the interest rate effective on that day as a daily rate to the outstanding
principal balance as of that day. The outstanding principal balance as of any
day shall be the outstanding principal balance hereunder as of the beginning of
the day, plus any advance made pursuant to this loan charged to Maker's account
on that day (exclusive of interest) and less any payments of principal credited
to Maker's account on that day.
The obligation of Maker to make the payments required to be made
hereunder shall be absolute and unconditional and shall not be subject to
diminution or delay by setoff, counterclaim, abatement or otherwise.
Maker shall indicate in writing, at the time of each request for an
advance hereunder, the amount of the requested advance that will be used to
enable Maker to acquire new Vehicles and the amount of the requested advance
that will be used to enable Maker to acquire used Vehicles, which indications
shall be made in accordance with Holder's normal business practices. Holder
shall provide a monthly statement to Maker indicating the amount of the advances
made hereunder that have been made to enable Maker to acquire new Vehicles and
indicating the amount of the advances made hereunder that have been made to
enable Maker to acquire used Vehicles, which monthly statement shall be
controlling in the event of any conflict with any writing provided by Maker.
Each Event of Default as defined in the Wholesale Floor Plan Security
Agreement shall be, and hereby is, incorporated herein by this reference and by
virtue thereof shall be deemed an event of default hereunder (hereinafter, an
"Event of Default").
In the event of default in payment of any installment of principal or
interest hereof or upon the occurrence of any other Event of Default, Holder
may, without notice, declare the remainder of the principal and interest due
hereunder at once due and payable. Failure to exercise this option shall not
constitute a waiver of the right to exercise the same at any other time. The
unpaid principal of this Note and accrued interest, if any, shall bear interest
after default at the rate of 18% per annum until paid.
Acceptance of any payment after its due date shall not be deemed a
waiver of the right to require prompt payment when due of all other sums, and
acceptance of any payment after Holder has declared its entire indebtedness due
and payable shall not
-2-
<PAGE>
cure any Event of Default or operate as a waiver of any right of Holder
hereunder.
Maker, and any sureties, guarantors or endorsers of this Note, hereby
jointly and severally waive presentment for payment, demand for payment,
protest, notice of dishonor, notice of nonpayment or notice of default (or any
other notice of any kind, all of which are hereby expressly waived by Maker and
such sureties, guarantors and endorsers to the fullest extent permitted by law),
and hereby jointly and severally waive all defenses on the grounds of extension
of time for the payment hereof, renewals, waivers, modifications, or
substitutions hereof, releases of Collateral, or substitution or release of any
sureties, guarantors and endorsers hereof which may be given by Holder to them
or either of them or to anyone who has assumed any obligation for the payment of
this Note.
All payments shall be applied first to fees and costs, including
attorneys' fees, if any, next to interest and then to principal, but
notwithstanding any provision in this Note or in any other document executed in
connection with this Note, Maker's total liability during any payment period for
payment of fees, charges or other payments which may be deemed interest shall
not exceed the limits imposed by the usury laws under applicable law. If, for
any reason, total payments which may be deemed interest shall be greater than
the limit imposed by the usury laws under applicable law for any interest
payment period, then all sums in excess of those lawfully collectable as
interest for that period shall be applied, without further agreement or notice,
first to the reduction of principal until paid in full with the excess, if any,
being then repaid to Maker. Holder agrees to accept such sums as a penalty-free
prepayment of principal, unless Holder at any time elects, by notice in writing,
to waive or limit the collection of any sums in excess of those lawfully
collectable as interest rather than accept those sums as a prepayment of
principal. If this Note is accelerated by an Event of Default, any interest on
principal accelerated to maturity in excess of the limits imposed by the usury
laws under applicable law shall be eliminated. This Note may be prepaid in
whole or in part at any time without penalty.
Upon the occurrence of an Event of Default, Holder may employ an
attorney or a law firm to enforce Holder's rights and remedies, including the
right to collect the amounts due under this Note and to protect or foreclose the
Collateral, and Maker, principal, surety, guarantor and endorsers of this Note
hereby agree, jointly and severally, to pay to Holder reasonable attorneys' fees
(provided, however, that if this Demand Promissory Note is governed by and
construed and enforced under the laws of the State of Georgia, Maker shall pay
Holder attorneys' fees at the rate of 15% of principal and interest owing by
Maker to Holder) and costs, whether or not suit be brought, including attorneys'
fees and costs on appeal, plus all other reasonable expenses incurred by Holder
in exercising any of
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<PAGE>
the Holder's rights and remedies upon default, including, without limitation,
courts costs, other legal expenses and attorneys' fees incurred in connection
with consultation, arbitration and litigation, and such fees, costs, and
expenses shall bear interest at the rate of 18% per annum until paid and shall
be secured as provided by the Wholesale Floor Plan Security Agreement.
Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings given to such terms in the Wholesale Floor Plan Security
Agreement.
Holder may pledge, transfer or assign this Note and shall thereupon be
relieved of all duties hereunder and with respect to the Collateral. All rights
and duties of the parties hereto and any sureties, guarantors and endorsers
shall inure to the benefit of and bind their heirs, distributees, legal
representatives, successors and assigns.
This Note is given for the loan of money, and is secured by a security
interest in the Collateral granted pursuant to the Wholesale Floor Plan Security
Agreement and incorporated herein by reference. The provisions of all other
security agreements securing this Note, if any, are incorporated herein by
reference.
This Note may not be changed orally, but only by an agreement in
writing and signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Note is to be governed by and construed and enforced under the
laws of the State of Georgia out regard to its conflict of laws principles.
Maker hereby knowingly, voluntarily and intentionally waives the right
to a trial by jury in respect to any litigation based on this Note, or arising
out of, under, or in connection with any document or agreement executed in
connection with the transactions contemplated hereby, or arising out of, under,
or in connection with any course of conduct, course of dealing, statements
(whether written or oral), or actions of Maker or any other person. This waiver
of trial by jury provision is a material inducement for Holder to enter into the
transactions contemplated by this Note.
IN TESTIMONY WHEREOF, each corporate Maker caused this instrument to
be executed under its hand and seal in its corporate name by its ______________
_________________ President, and caused its
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<PAGE>
corporate seal to be affixed hereto, all by order of its Board of Directors,
first duly given, this day and year first above written.
ATLANTA TOYOTA, INC.
(Corporate Name)
(Corporate Seal)
By: /s/ Carl Spielvogel (SEAL)
---------------------
,as its President
-----------------
ATTEST:
/s/ George Lowrance (SEAL)
- --------------------
, as its Secretary
- --------------------
-5-
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
I hereby certify that on this date before me, an officer duly
authorized in the State aforesaid and in the County aforesaid to take
acknowledgements, personally appeared CARL SPIELVOGEL of Atlanta Toyota, Inc.
(Company Name), who is personally known to me who did/did not take an oath,
who is known to me to be the person who executed the attached Demand Promissory
Note dated ____________________, 19__, in the maximum principal amount of
Fifteen Million Dollars ($15,000,000.00), on behalf of Atlanta Toyota, Inc.
(Company Name), and who acknowledged before me that he/she executed the same.
/s/ Eleanor McKenna
_______________________________________
Notary Public
Eleanor McKenna
_______________________________________
Print Name
My Commission Expires: Oct. 9, 1996
Exhibit B
<PAGE>
ASSIGNMENT OF RIGHTS UNDER
INVENTORY FINANCING PAYMENT AGREEMENT
This Assignment of Rights Under Inventory Financing Payment Agreement
("Assignment") is executed as of the 24 day of May, 1996 by Atlanta Toyota, Inc.
("Dealer") in favor of World Omni Financial Corp. ("WOFC").
Dealer entered into an Inventory Financing Payment Agreement with Fidelity
Warranty Services, Inc. ("FWS") and WOFC pursuant to which Dealer is entitled to
receive certain payments from FWS and/or WOFC. Dealer has also entered into a
Wholesale Floor Plan Financing Agreement and has executed one or more Demand
Promissory Notes in favor of WOFC pursuant to which WOFC provides financing to
Dealer to enable Dealer to acquire motor vehicle inventory for Dealer's motor
vehicle dealership.
In consideration of the sum of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency which is hereby
acknowledged, Dealer hereby grants, bargains, sells, assigns, transfers and sets
over unto WOFC and its assigns, all of Dealer's right, title and interest in and
to Dealer's right to receive (a) JM&A Rate Reduction Payments from FWS under the
Inventory Financing Payment Agreement, and (b) WOFC's Rate Reduction Payments
from WOFC under the Inventory Financing Payment Agreement. The JM&A Rate
Reduction Payments and WOFC Rate Reduction Payments received by WOFC are to be
applied as payments on the above described Demand Promissory Notes.
IN WITNESS WHEREOF, Dealer has executed this Assignment as of the day and
year first written above.
Witnesses: Dealer
/s/ Lauren Dowling Atlanta Toyota, Inc.
- ------------------
/s/ Eric S. Kahn By: /s/ Carl Spielvogel
- ------------------ -----------------------
Name: Carl Spielvogel
-----------------
Title: President
----------------
STATE OF NEW YORK
COUNTY OF NEW YORK
THE FOREGOING instrument was acknowledged before me this 24 day of May,
1996, by Carl Spielvogel, as an authorized representative of Atlanta Toyota a
Texas corporation, on behalf of said corporation, who is personally known to me,
and who did/did not take an oath.
<PAGE>
/s/ Eleanor McKenna
-------------------
Notary Public
---------------------------
Print Name
My Commission expires:
-----
-2-
<PAGE>
Exhibit 10.5.11
INVENTORY FINANCING PAYMENT AGREEMENT
This Inventory Financing Payment Agreement ("Agreement") is entered into as
of the day and year written below by and between the undersigned Dealer
("Dealer"), Fidelity Warranty Services, Inc. ("FWS") and World Omni Financial
Corp. ("WOFC").
Dealer has executed one or more Demand Promissory Notes (collectively the
"Note") in favor of World Omni Financial Corp. ("WOFC") to enable Dealer to
obtain financing for the acquisition of motor vehicle inventory in connection
with Dealer's business as a motor vehicle dealer. In connection with its sale
and lease of new and used motor vehicles, Dealer desires to sell or to continue
to sell motor vehicle mechanical failure service contracts ("Service
Contracts"), maintenance contracts for motor vehicles which are leased ("Lease
Care Contracts"), maintenance contracts for motor vehicles which are purchased
("Car Care Contracts"), and guaranteed auto protection policies ("GAP
Contracts", and the Service Contracts, Lease Care Contracts, Car Care Contracts
and GAP Contracts shall hereinafter be collectively referred to as the "JM&A
Products") that have been issued by Fidelity Warranty Services, Inc. ("FWS")
and/or marketed by Jim Moran & Associates, Inc. In addition, Dealer desires to
sell motor vehicle retail installment sale contracts ("Contracts") and/or
closed-end motor vehicle lease agreements ("Leases") to WOFC, and/or an
affiliate or designee of WOFC, and to obtain motor vehicle wholesale floorplan
financing from WOFC ("Floorplan"), (collectively, Contracts, Leases and
Floorplan hereinafter referred to as "WOFC Products", and collectively the JM&A
Products and WOFC Products shall hereinafter be referred to as the "Products").
FWS and WOFC have instituted a Rate Assistance Program (the "Program") pursuant
to which FWS and/or WOFC will pay to Dealer monthly an amount of money based on
Dealer's monthly interest payments on the Note and on the market penetration
obtained by Dealer in its sale of the JM&A Products and/or WOFC Products
respectively. Dealer desires to participate in the Program in accordance with
the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants set forth herein, Dealer, FWS and WOFC agree as follows:
1. FWS agrees to pay to Dealer for any calendar month an amount of money
equal to the difference between (i) Dealer's monthly interest payment on the
Note calculated in accordance with the applicable interest rate thereon (the
"Note Rate") and (ii) what Dealer's monthly interest payment on the Note would
have been if the Note Rate were reduced in accordance with the JM&A Interest
Rate Schedule attached to this Agreement. When computing the amount represented
by clause (ii) above, the Note Rate shall be reduced in accordance with the JM&A
Interest Rate Schedule based on Dealer's sales of the JM&A Products in the prior
month.
<PAGE>
2. WOFC agrees to pay to Dealer for any calendar month an amount of money
equal to the difference between (i) Dealer's monthly interest payment on the
Note calculated in accordance with the applicable interest rate thereon (the
"Note Rate") and (ii) what Dealer's monthly interest payment on the Note would
have been if the Note Rate were reduced in accordance with the WOFC Interest
Rate Schedule attached to this Agreement. When computing the amount represented
by clause (ii) above, the Note Rate shall be reduced in accordance with the WOFC
Interest Rate Schedule based on Dealer's sales of the WOFC Products in the prior
month.
3. The amount of money FWS is obligated to pay Dealer pursuant to
paragraph 1 for any monthly period shall hereinafter be referred to as a "JM&A
Rate Reduction Payment". The JM&A Rate Reduction Payment calculated for any
calendar month shall be payable within thirty (30) days after the last day of
such month.
4. The amount of money WOFC is obligated to pay Dealer pursuant to
paragraph 2 for any monthly period shall hereinafter be referred to as a "WOFC
Rate Reduction Payment". The WOFC Rate Reduction Payment calculated for any
calendar month shall be payable within thirty (30) days after the last day of
such month.
5. The JM&A Rate Reduction Payment and the WOFC Rate Reduction Payment
shall be calculated for each month commencing with the first calendar month that
begins after the execution of this Agreement. Therefore, all sales of the JM&A
Products and/or WOFC Products by Dealer in the month in which this Agreement is
executed shall be considered for purposes of calculating the JM&A Rate Reduction
Payment and the WOFC Rate Reduction Payment for the next month. Notwithstanding
anything to the contrary, any Dealer who executes this Agreement during the
month of August, 1995 and who had Floorplan from WOFC in July, 1995 shall
receive a JM&A Rate Reduction Payment and/or WOFC Rate Reduction Payment for all
sales of the JM&A Products and/or WOFC Products which occurred during July,
1995.
6. The JM&A Interest Rate Schedule may be amended from time to time in
FWS' absolute and sole discretion. In the event FWS amends the JM&A Interest
Rate Schedule, FWS shall give Dealer thirty (30) days notice of such amendment.
Any amended JM&A Interest Rate Schedule shall become effective for the first
month that begins after such thirty day notice period has expired. The JM&A
Rate Reduction Payment calculated for such month shall be payable within thirty
(30) days after the last day of such month.
7. The WOFC Interest Rate Schedule may be amended from time to time in
WOFC'S absolute and sole discretion. In the event WOFC amends the WOFC Interest
Rate Schedule, WOFC shall give Dealer thirty (30) days notice of such amendment.
Any amendment WOFC Interest Rate Schedule shall become effective for the first
month that begins after such thirty day notice period has expired. The WOFC
Rate Reduction Payment calculated for such
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<PAGE>
month shall be payable within thirty (30) days after the last day of such month.
8. Dealer acknowledges that it is not required to sell any of the
Products in order to obtain Floorplan from WOFC, and that it is not required to
obtain Floorplan from WOFC to sell any of the Products. Dealer may terminate
its sale of any or all of the Products or its Floorplan from WOFC at any time;
provided, however, that if Dealer does not both sell any of the Products and
obtain its Floorplan from WOFC, Dealer shall not be entitled to receive either
JM&A Rate Reduction Payments and/or WOFC Rate Reduction Payments, and this
Agreement shall immediately be terminated. Dealer desires to both sell one or
more of the Products and obtain Floorplan from WOFC in order to obtain the
benefits of this Agreement.
9. Dealer acknowledges that it is entering into this Agreement
voluntarily and without duress and that it was not coerced, intimidated or in
any way required by any person, whether explicitly or implicitly, to sell one or
more of the Products or to obtain Floorplan from WOFC or both. Dealer
acknowledges that the Products are available from a number of other companies
and the Dealer's decision to sell Products and obtain Floorplan from FWS, WOFC
and/or Jim Moran & Associates, Inc. is based on Dealer's separate review and
evaluation.
10. Dealer acknowledges that FWS may discontinue the JM&A Interest Rate
Reduction Program described herein in any time in FWS' absolute and sole
discretion and that WOFC may discontinue the WOFC Interest Rate Reduction
Program described herein at any time in WOFC's absolute and sole discretion. In
the event that FWS discontinues the FWS Interest Rate Reduction Program and WOFC
discontinues the WOFC Interest Rate Reduction Program, then this Agreement shall
be considered to be automatically terminated.
11. This Agreement shall be governed by the laws of the State of Florida.
Dealer, FWS and WOFC hereby agree that any dispute, controversy or claim arising
out of or relating to this Agreement shall be subject to a mandatory mediation
period of thirty (30) days during which time the parties shall (i) appoint a
mutually acceptable mediator with whom they shall cooperate, and (ii) use their
good faith efforts to resolve the dispute. The costs and expenses of the
mediator shall be borne equally by the parties. Should the process of mediation
fail to settle the dispute, the dispute shall be submitted to arbitration in
accordance with the Arbitration Rules of the American Arbitration Association
then in effect and the award rendered by the arbitrator shall be binding as
between the parties, and judgment on such award may be entered in any court
having competent jurisdiction.
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<PAGE>
This Inventory Financing Payment Agreement shall be effective as of the 24
day of May, 96.
FIDELITY WARRANTY DEALER
SERVICES, INC. Atlanta Toyota, Inc.
By: By: /s/ Carl Spielvogel
----------------------- --------------------------
Name: Name: Carl Spielvogel
--------------------- -----------------------
Title: Title: President
-------------------- -----------------------
WORLD OMNI FINANCIAL CORP.
By:
-----------------------
Name:
---------------------
Title:
--------------------
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<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement is dated as of January 16, 1996, and is
entered into between UAG Atlanta, Inc., a Delaware corporation ("UAG/Atlanta"),
Atlanta Toyota, Inc., a Texas corporation (the "Company") and John R. Smith, an
individual resident of the State of Georgia ("Executive").
WHEREAS, Executive and the Company desire to embody in this Agreement
the terms and conditions of Executive's employment by the Company;
NOW, THEREFORE, the parties hereby agree:
ARTICLE 1
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
1.1. EMPLOYMENT. Executive shall be employed as President of the
Company and Vice-President of UAG/Atlanta. Executive hereby accepts such
employment. Executive agrees to devote his full business time and efforts to
promote the interests of the Company and its subsidiaries.
1.2. DUTIES AND RESPONSIBILITIES. Executive shall be required to
perform such duties and responsibilities as are consistent with his position and
as the Board of Directors of the Company (the "Board") and/or the Chief
Executive Officer of United Auto Group, Inc. may from time to time prescribe.
1.3. REPORTING. Executive shall report, in the performance of his
duties, directly to the Chief Executive Officer of UAG/Atlanta.
ARTICLE 2
TERM
2.1. TERM. The term of Executive's employment under this Agreement
(the "Term") shall commence on January 1, 1996 and shall continue until December
31, 1996; provided that this Agreement may be terminated earlier as provided in
Article 5 hereof.
2.2. NO VIOLATION. Executive represents and warrants to the Company
and UAG/Atlanta that neither the execution and delivery of this Agreement nor
the performance of his duties hereunder violates or will violate the provisions
of any other agreement to which he is a party or by which he is bound.
<PAGE>
ARTICLE 3
COMPENSATION AND EXPENSES
3.1. SALARY AND BENEFITS. As compensation and consideration for the
performance by Executive of his obligations under this Agreement, Executive
shall be entitled to the following (subject, in each case, to the provisions of
Article 5 hereof):
(a) SALARY. The Company shall pay Executive a salary payable in
accordance with the normal payment procedures of the Company and subject to such
withholdings and other normal employee deductions as may be required by law, at
the rate of $350,000 per annum (or such PRO RATA amount thereof for any period
of less than one year). In addition, the Company shall pay executive a bonus to
be determined in accordance with the terms of the 1996 Bonus Agreement attached
hereto as Exhibit A.
(b) BENEFIT PLANS. Executive shall participate during the Term in
such health, major medical insurance and other plans for the benefit of the
employees of the Company as may be maintained from time to time during the Term,
if at all, in each case to the extent and in the manner available to other
officers of the Company and subject to the terms and provisions of such plans or
programs.
(c) VACATION. Executive shall be entitled to a paid vacation in
accordance with Company policy during the Term.
ARTICLE 4
EXCLUSIVITY, ETC.
4.1. EXCLUSIVITY. Executive agrees to perform his duties,
responsibilities and obligations hereunder to the best of his ability.
Executive agrees that he will devote his entire working time, care and attention
and best efforts to such duties, responsibilities and obligations throughout the
Term. Executive also agrees that he will not engage in any other business
activities, pursued for gain, profit or other pecuniary advantage, that are
competitive with the activities of the Company or any of its subsidiaries,
except as permitted in Section 4.2 below. Executive agrees that all of his
activities as an employee of the Company shall be in conformity with all
policies, rules and regulations and directions of the Company not inconsistent
with this Agreement.
4.2. OTHER BUSINESS VENTURES. Executive agrees that, so long as he is
employed by the Company, he will not have any financial or other beneficial
interest in any business enterprise which is engaged in, or competitive with,
any business engaged in by the Company or any of its subsidiaries or affiliates.
Notwithstanding the foregoing, Executive may own, directly or indirectly, up to
one percent (1%) of the outstanding capital stock of any such business
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<PAGE>
having a class of capital stock which is traded on any national stock exchange
or in the over-the-counter market.
4.3. CONFIDENTIALITY; NON-INTERFERENCE. (a) Executive agrees that he
will not, at any time during or after the Term, make use of or divulge to any
other person, firm or corporation any trade or business secret, process, method
or means, or any other confidential information concerning the business or
policies of the Company, any of its subsidiaries or their affiliates. For
purposes of this Agreement, a "trade or business secret, process, method or
means, or any other confidential information" shall mean and include information
treated as confidential or as a trade secret by the Company, any of its
subsidiaries or their affiliates, including but not limited to, information
regarding contemplated products or models, unless such information is otherwise
available to Executive or to the public generally; business and financial
methods or practices, marketing, merchandising and selling techniques which were
devised, designed or invented by the Company, any of its subsidiaries or their
affiliates; customers, vendors or suppliers, or lists thereof, where such
information is not generally available to the public; trade secrets of the
Company, any of its subsidiaries or their affiliates; training programs, manuals
or materials other than general business practices generally used in the
business of selling and leasing motor vehicles; the specific terms of contracts
between the Company, any of its subsidiaries or their affiliates and its
customers, vendors and suppliers; systems or procedures which were designed,
devised or invented by the Company, any of its subsidiaries or their affiliates,
and which are unique to them; mailing lists, pricing plans or schemes designed,
devised or invented by the Company, any of its subsidiaries or their affiliates;
price lists, financial data (including the revenues, costs or profits associated
with any of the Company's or its subsidiaries' products or services); specific
business plans or goals of the Company, any of its subsidiaries or their
affiliates, and the strategies designed or devised by the Company, any of its
subsidiaries or their affiliates to achieve or reach those plans or goals; code
books, invoices and other financial statements; computer programs, software
systems or discs and printouts containing such programs or systems, which are
not commonly available to the public and which are customized for the Company,
any of its subsidiaries or their affiliates; databases containing any of the
information set out in this subsection; customer and industry lists compiled by
the Company, any of its subsidiaries or their affiliates; correspondence
containing any of the information set out in this subsection; internal reports;
personnel files; sales and advertising material or any other compilation of
information, written or unwritten, which contains any of the information set out
in this subsection in regard to the business of the Company, any of its
subsidiaries or their affiliates; provided, however, that nothing set forth
herein is intended to prohibit Executive from accepting employment with any
automobile or truck dealership or ancillary business after this Agreement is
terminated, whether the Agreement is terminated by the Company or by Executive.
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<PAGE>
Executive's obligation under this Section 4.3(a) shall not apply to
any information which is in the public domain or hereafter enters the public
domain without the fault of Executive. Executive agrees not to remove from the
premises of the Company or any of its subsidiaries, except as an employee of the
Company in pursuit of the business of the Company or except as specifically
permitted in writing by the Company, any document or other object containing or
reflecting any such information. Executive agrees and acknowledges that all of
such information, in any form, and copies and extracts thereof, are and shall
remain the sole and exclusive property of the Company, and upon termination of
his employment with the Company, Executive shall return to the Company the
originals and all copies of any such information provided to or acquired by
Executive in connection with the performance of his duties for the Company, and
shall return to the Company all files, correspondence and/or other
communications received, maintained and/or originated by Executive during the
course of his employment, and no copy of any such shall be retained by him.
(b) During the Term and thereafter until June 30, 1997, Executive
shall not interfere with or disrupt, or attempt to interfere with or disrupt,
the relationship, contractual or otherwise, between the Company or any of its
subsidiaries or their affiliates and any customer, client, supplier,
manufacturer, distributor, consultant, independent contractor or employee of the
Company or any of its subsidiaries or their affiliates. The provisions of this
Section 4.3(b) shall not apply if the Executive is terminated by the Company
without Cause. For purposes of this Agreement, "Cause" shall mean: (i)
Executive's failure, neglect or refusal to perform his duties hereunder, which
failure, neglect or refusal shall not have been remedied by Executive within
five (5) days of receipt by Executive of written notice from the Company of such
failure, neglect or refusal, (ii) Executive's refusal to follow the
instructions, orders or directives of the Board or UAG/Atlanta Board or the
Chief Executive Officer of United Auto Group with respect to his duties and
responsibilities hereunder, (iii) any willful or intentional act of Executive
that has the effect of injuring the reputation or business of the Company or its
affiliates, (iv) any continued or repeated absence from the Company, unless such
absence is (A) approved or excused by the Board or (B) is the result of
Executive's illness, disability or incapacity or a personal or family emergency,
(v) use of illegal drugs by Executive, (vi) conviction of Executive for, or the
entry of a plea (including nolo contenders or its equivalent) by Executive with
respect to, a felony or any act of fraud, misappropriation or embezzlement under
federal or state law, (vii) the commission by Executive of an act of fraud or
embezzlement against the Company, or (viii) Executive's other material breach of
this Agreement.
(c) It is the desire and intent of the parties that the provisions of
this Section 4.3 shall be enforced to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if
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<PAGE>
any particular portion of this Section 4.3 shall be adjudicated to be invalid or
unenforceable, this Section 4.3 shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of this Section 4.3 in the particular
jurisdiction in which such adjudication is made.
(d) Executive agrees that, at any time and from time to time during
and after the Term, he will execute any and all documents which the Company may
deem reasonably necessary or appropriate to effectuate the provisions of this
Section 4.3.
ARTICLE 5
TERMINATION
5.1. TERMINATION BY THE COMPANY. Subject to Section 5.4, the Company
shall have the right to terminate Executive's employment at any time.
5.2. DEATH. In the event Executive dies during the Term, this
Agreement shall automatically terminate (subject to Section 5.4 hereof), such
termination to be effective on the date of Executive's death.
5.3. DISABILITY. In the event that Executive shall suffer a
disability which shall have prevented him from performing satisfactorily his
obligations hereunder for a period of at least 90 consecutive days, or 180 non-
consecutive days within any 365 day period, the Company shall have the right to
terminate this Agreement (subject to Section 5.5 hereof), such termination to be
effective upon the giving of notice thereof to Executive in accordance with
Section 6.2 hereof.
5.4. EFFECT OF TERMINATION. In the event of termination of
Executive's employment for any reason, the Company shall pay to Executive (or
his beneficiary in the event of his death) any salary earned but not paid to
Executive prior to the effective date of such termination.
ARTICLE 6
MISCELLANEOUS
6.1. BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY. This Agreement
shall inure to the benefit of and be binding upon the Company and its successors
and assigns, including, without limitation, any corporation or person which may
acquire all or substantially all of the Company's assets or business, or with or
into which the Company may be consolidated or merged. This Agreement shall also
inure to the benefit of, and be enforceable by, Executive and his personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
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<PAGE>
If Executive should die while any amount would still be payable to Executive
hereunder if he had continued to live, all such amounts shall be paid in
accordance with the terms of this Agreement to Executive's beneficiary, devisee,
legatee or other designee, or if there is no such designee, to Executive's
estate.
6.2. NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telegram or telex or by registered or certified mail, postage prepaid, with
return receipt requested, addressed: (a) in the case of the Company to c/o
United Auto Group, Inc. 375 Park Avenue, New York, New York 10022, facsimile no.
(212) 223-5148, Attention: General Counsel, or to such other address and/or to
the attention of such other person as the Company shall designate by written
notice to Executive; and (b) in the case of Executive, to John R. Smith c/o
Atlanta Toyota, Inc., 2345 Pleasant Hill Road, Duluth, Georgia 30136 or to such
other address as Executive shall designate by written notice to the Company.
Any notice given hereunder shall be effective and deemed to have been given as
of the date so delivered or three
(3) days after the date so mailed.
6.3. AMENDMENT. This Agreement may not be changed or modified except
by an instrument in writing signed by both of the parties hereto.
6.4. WAIVER. The waiver by either party of a breach of any provision
of this Agreement shall not operate or be construed as a continuing waiver or as
a consent to or waiver of any subsequent breach hereof. Any waiver must be in
writing and signed by Executive or the Company, as the case may be.
6.5. HEADINGS. The Article and Section headings herein are for
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.
6.6. GOVERNING LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the internal laws of the State of
Georgia without reference to the principles of conflict of laws.
6.7. AGREEMENT TO TAKE ACTIONS. Each party hereto shall execute and
deliver such documents, certificates, agreements and other instruments, and
shall take such other actions, as may be reasonably necessary or desirable in
order to perform his or its obligations under this Agreement or to effectuate
the purposes hereof.
6.8. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
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<PAGE>
6.9. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision or provisions of this Agreement, which shall remain in full
force and effect.
6.10. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement effective as of the date first above written.
ATLANTA TOYOTA, INC., a Texas corporation
By: /s/Jeffrey A. Gurske
--------------------------------
Its: Executive
--------------------------------
UAG ATLANTA, INC., a Delaware corporation
By: /s/John R. Smith
--------------------------------
Its: President
--------------------------------
John R. Smith
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<PAGE>
STOCK PURCHASE AGREEMENT
DATED AS OF MARCH 1, 1996
AMONG
UNITED AUTO GROUP, INC.,
UAG ATLANTA II, INC.,
STEVE RAYMAN NISSAN, INC.,
STEVEN L. RAYMAN
AND
RICHARD W. KEFFER, JR.
<PAGE>
This STOCK PURCHASE AGREEMENT, dated as of March 1, 1996 is by and
among United Auto Group, Inc., a Delaware corporation ("UAG"), UAG Atlanta II,
Inc., a Delaware corporation ("Sub"), Steve Rayman Nissan, Inc., a Georgia
corporation (the "Company"), Steven L. Rayman ("Rayman") and Richard W. Keffer,
Jr. ("Keffer") (Rayman and Keffer are referred to hereinafter individually as a
"Stockholder" and collectively as the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Company operates a Nissan automobile dealership and
related businesses in Morrow, Georgia;
WHEREAS, the Stockholders own all of the issued and outstanding shares
of common stock, par value $100.00, of the Company (the "Common Stock");
WHEREAS, Sub is a wholly-owned subsidiary of UAG; and
WHEREAS, Sub desires to purchase 5,000 shares of Common Stock from the
Stockholders (such shares being collectively referred to herein as the
"Shares"), and the Stockholders desire to sell the Shares to Sub (upon the terms
and subject to the conditions set forth in this Agreement), such that
immediately after giving effect to such purchase and sale, Sub will own one
hundred (100%) percent of all of the issued and outstanding shares of Common
Stock, on a fully diluted basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF THE SHARES.
(a) PURCHASE AND SALE. Upon the terms and subject to the conditions
set forth in this Agreement, the Stockholders shall sell to Sub, and Sub shall
purchase from the Stockholders, the Shares for an aggregate purchase price equal
to Eleven
<PAGE>
Million Four Hundred Fifty Thousand Dollars ($11,450,000.00) (the "Base Price"),
which Base Price is subject to adjustment after Closing as provided in SECTION
1.2 hereof. At the Closing referred to in SECTION 1.1(b) hereof:
(i) the Stockholders shall sell, assign, transfer and deliver to
Sub the Shares representing 100% of the outstanding Common Stock, free and
clear of all Liens (as defined in SECTION 10.11), and shall deliver the
certificates representing such Shares accompanied by stock powers duly
executed in blank; and
(ii) Sub shall accept and purchase the Shares from the
Stockholders and in payment therefor shall deliver to the Stockholders
immediately available funds in an aggregate amount equal to the Base Price
by wire transfer to an account designated in writing by the Stockholders or
by certified funds.
(b) CLOSING. Subject to the conditions set forth in this Agreement,
the purchase and sale of the Shares pursuant to this Agreement (the "Closing")
shall take place at the offices of Rogers & Hardin, 2700 Cain Tower, Peachtree
Center, 229 Peachtree Street, N.E., Atlanta, Georgia 30303, or such other
location as the parties shall agree upon, at 10:00 a.m. as soon as practicable
following the date on which all conditions to the obligations of the parties
hereunder (other than those requiring an exchange of certificates, opinions or
other documents, or the taking of other action, at the Closing) have been
satisfied or waived but no later than the earlier of a date ten (10) business
days following the satisfaction of all conditions described in Sections 6.2 and
7.2 or April 30, 1996. The date on which the Closing occurs is herein referred
to as the "Closing Date".
(c) DELIVERIES AT THE CLOSING. Subject to the conditions set forth
in this Agreement, at the Closing:
(i) the Stockholders shall deliver to Sub (A) certificates
representing the Shares bearing the restrictive legend customarily placed
on securities that have not been registered under applicable federal and
state securities laws and accompanied by stock powers as required by
SECTION 1.1(a)(i) hereof, and any other documents that are necessary to
transfer to Sub good title to all the Shares, and (B) all
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<PAGE>
opinions, certificates and other instruments and documents required to be
delivered by the Stockholders at or prior to the Closing or otherwise
required in connection herewith;
(ii) Sub shall pay and deliver to the Stockholders funds as
required by SECTION 1.1(a)(ii) hereof and all opinions, certificates and
other instruments and documents required to be delivered by Sub at or prior
to the Closing or otherwise required in connection herewith;
(iii) Rayman & Keffer Investments ("Landlord"), a Georgia
partnership having the two (2) Stockholders as equal partners, and the
Company shall enter into a lease for the real property used in the business
of the Company in a form mutually acceptable to the parties (the "Lease")
and the Stockholders shall guarantee the performance of the Landlord's
obligations thereunder and UAG shall guarantee the performance and
obligations of Sub thereunder. The Lease shall be for a twenty (20) year
term commencing on the Closing Date. The initial lease rate shall be the
[current lease rate] per year ("Base Rate"), payable monthly, and (x) on
the fifth anniversary of the Closing Date (the "Fifth Anniversary") shall
increase to an amount equal to the Base Rate plus an amount equal to a
percentage of the Base Rate, which percentage shall be three-fourths (3/4)
of the percentage increase in the Consumer Price Index published from time
to time by the United States Department of Labor ("CPI") between the
Closing Date and the Fifth Anniversary (such increased lease rate
hereinafter the "Increased Rate"), and (y) on the tenth anniversary of the
Closing Date (the "Tenth Anniversary") shall increase to an amount equal to
the Increased Rate plus an amount equal to a percentage of the Increased
Rate, which percentage shall be three-fourths (3/4) of the percentage
increase in the CPI between the Fifth Anniversary and the Tenth Anniversary
(such increased lease rate being referred to as the "Second Increased
Rate"), and (z) on the fifteenth anniversary of the Closing Date (the
"Fifteenth Anniversary") shall increase to an amount equal to the Second
Increased Rate plus an amount equal to a percentage of the Second Increased
Rate, which percentage shall be three-fourths (3/4) of the percentage
increase in the CPI between the Tenth Anniversary and the Fifteenth
Anniversary (such increased lease rate being referred to as the "Third
Increased Rate"). The lease shall provide the Company with
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<PAGE>
the option to extend the lease term for an additional five-year period
(the "First Option") commencing on the twentieth anniversary of the Closing
Date ("Twentieth Anniversary") at a rate equal to the Third Increased Rate
plus a percentage of the Third Increased Rate, which percentage shall be
three-fourths (3/4) of the percentage increase in the CPI between the
Fifteenth Anniversary and the Twentieth Anniversary (such increased lease
rate being referred to as the "Fourth Increased Rate"). The lease shall
further provide that, in the event the Company exercises the First Option,
the Company shall have the option to extend the lease term for an additional
five-year period commencing with the twenty-fifth anniversary of the Closing
Date ("Twenty-Fifth Anniversary") at a rate equal to the Fourth Increased
Rate plus a percentage of the Fourth Increased Rate, which percentage shall
be three-fourths (3/4) of the percentage increase in the CPI between the
Twentieth Anniversary and the Twenty-Fifth Anniversary.
1.2 NET WORTH ADJUSTMENT.
(a) As soon as practicable after the Closing Date, the Stockholders
shall deliver to Sub a balance sheet of the Company dated as of the Closing Date
(such balance sheet so delivered is referred to herein as the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet shall be prepared in good faith
on the same basis and in accordance with the accounting principles, methods and
practices used in preparing the Company Financial Statements (as defined in
SECTION 2.5 hereof), subject to the modifications, adjustments and exceptions to
such accounting principles, methods and practices set forth on SCHEDULE 1.2(a)
hereto (such accounting principles, methods and practices as so modified and
adjusted, and such procedures, are referred to herein as the "Accounting
Principles"). In connection with the preparation of the Closing Date Balance
Sheet, the Stockholders and the Company and the Reviewer (as defined below) and
other representatives of Sub will conduct a physical inventory at each location
where inventory is held by the Company. From the results of such inventory and
prior to the Closing Date, Sub and the Stockholders (or the respective
representatives thereof) will prepare a schedule, which shall be signed by each
of Sub and the Stockholders, setting forth the nature and quality of such
inventory and such other items as shall be agreed upon by Sub and
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<PAGE>
the Stockholders to be included in the Closing Date Balance Sheet.
(b) Within forty-five (45) days after delivery of the Closing Date
Balance Sheet, (i) Coopers & Lybrand or such other national accounting firm (the
"Reviewer") selected by Sub, shall audit or otherwise review the Closing Date
Balance Sheet in such manner as Sub and the Reviewer deem appropriate, and (ii)
Sub shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet"),
together with the Reviewer's report thereon, to the Stockholders. The Reviewed
Balance Sheet (i) shall be prepared on the same basis and in accordance with the
Accounting Principles and (ii) shall include a schedule showing the computation
of the Final Net Worth (as defined in SECTION 1.2(g)(i) hereof), computed in
accordance with the definition of Net Worth set forth in SECTION 1.2(g)(ii)
hereof. Sub and the Reviewer shall have the opportunity to consult with the
Stockholders, the Company and each of the accountants and other representatives
of the Stockholders and the Company and examine the work papers, schedules and
other documents prepared by the Stockholders, the Company and each of such
accountants and other representatives during the preparation of the Closing Date
Balance Sheet. The Stockholders and the Stockholders' independent public
accountants shall have the opportunity to consult with the Reviewer and examine
the work papers, schedules and other documents prepared by Sub and the Reviewer
during the preparation of the Reviewed Balance Sheet.
(c) The Stockholders shall have a period of forty-five (45) days
after delivery to the Stockholders of the Reviewed Balance Sheet to present in
writing to Sub all objections the Stockholders may have to any of the matters
set forth or reflected therein, which objections shall be set forth in
reasonable detail. During said forty-five (45) day period, the Stockholders,
their accountants and other representatives of the Stockholders may, at the
office of the Company or the office of the Reviewer, as determined by
Stockholders, examine Reviewer's work papers, schedules, research notes and all
correspondence between Reviewer and Sub or UAG or any representative of Sub or
UAG, which relate to the Closing Date Balance Sheet or Reviewed Balance Sheet
and any entry thereto made, considered or proposed by Reviewer. If no
objections are raised within such 45-day period, the Reviewed Balance Sheet
shall be deemed accepted and approved by the Stockholders and a supplemental
closing (the
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"Supplemental Closing") shall take place within five (5) Business Days following
the expiration of such 45-day period, or on such other date as may be mutually
agreed upon in writing by Sub and the Stockholders.
(d) If the Stockholders shall raise any objection within the 45-day
period, Sub and the Stockholders shall attempt to resolve the matter or matters
in dispute and, if resolved, the Supplemental Closing shall take place within
five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by Sub and the Stockholders
within sixty (60) days after the delivery of the Reviewed Balance Sheet, then
the specific matters in dispute shall be submitted to a firm of independent
certified public accountants having a reputation for special expertise in
automobile dealership accounting and mutually acceptable to Sub and the
Stockholders, which firm shall make a final and binding determination as to such
matter or matters. Such accounting firm shall send its written determination to
Sub and the Stockholders and the Supplemental Closing, if any, shall take place
five (5) Business Days following the receipt of such determination by Sub and
the Stockholders. The fees and expenses of the accounting firm referred to in
this SECTION 1.2(e) shall be paid one half by Sub and one half by the
Stockholders.
(f) Sub and the Stockholders agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected by
Sub and the Stockholders pursuant to SECTION 1.2 (e) hereof in order that any
and all matters in dispute shall be resolved as soon as practicable.
(g) (i) If the Net Worth as shown on the Reviewed Balance Sheet as
finally determined through the operation of SECTIONS 1.2 (a) THROUGH (e) hereof
(such amount being referred to herein as the "Final Net Worth") shall be less
than One Million Eight Hundred Thousand Dollars ($1,800,000.00) (the amount of
any such deficiency being referred to herein as the "Net Worth Deficiency"), the
Stockholders shall pay to Sub at the Supplemental Closing, by wire transfer of
immediately available funds to an account designated in writing by Sub within
two (2) Business Days of the date of the Supplemental Closing, an amount equal
to the Net Worth Deficiency, together with interest on such amount from the
Closing Date to the date of the Supplemental Closing at the
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prime rate or its equivalent (as announced from time to time by Citibank, N.A.).
(i) If the Final Net Worth shall be more than One Million
Eight Hundred Thousand Dollars ($1,800,000.00) (the amount of any such excess
being referred to herein as the "Net Worth Excess"), Sub shall pay to the
Stockholders at the Supplemental Closing, by wire transfer of immediately
available funds to an account designated in writing by the Stockholders within
two (2) Business Days of the date of the Supplemental Closing, an amount equal
to the Net Worth Excess, together with interest on such amount from the Closing
Date to the date of the Supplemental Closing at the prime rate or its equivalent
(as announced from time to time by Citibank, N.A.).
(ii) "Net Worth" computed in connection with the Closing Date
Balance Sheet and the Reviewed Balance Sheet shall mean the amount by which the
total assets exceed the total liabilities reflected, in each case, on the
balance sheet of Company comprising the Closing Date Balance Sheet or the
Reviewed Balance Sheet, as the case may be.
1.3 PURCHASE AND SALE OF THE COMPUTER.
The Computer system presently utilized by Company is separately owned
by Stockholders and accordingly will not appear as an asset of the Company on
the Closing Date Balance Sheet. Sub agrees, as of the Closing Date, to acquire
said Computer System from Stockholders for One Hundred Seventy Five Thousand
Dollars ($175,000) and to make payment therefor in the manner described in
Section 1.1(a)(ii). The Computer System shall be transferred to Sub (or Company
at Sub's election) free and clear of all liens and encumbrances and subject to
all of the other representations and warranties of Stockholders contained in the
Agreement.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgement that certain of
the Schedules referred to in this Article 2 are to be delivered by the Company
and the Stockholders after the execution and delivery of this Agreement, the
Company and the Stockholders hereby jointly and severally represent and warrant
to UAG and Sub as follows:
2.1 ORGANIZATION AND GOOD STANDING.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia and has the corporate power
and authority to own, lease and operate the properties used in its business and
to carry on its business as now being conducted. The Company is duly qualified
to do business and is in good standing as a foreign corporation in each state
and jurisdiction where qualification as a foreign corporation is required,
except for such failures to be qualified and in good standing, if any, which
when taken together with all other such failures of the Company would not, or
could not reasonably be expected to, in the aggregate have a Material Adverse
Effect (as defined in SECTION 10.11 hereof). SCHEDULE 2.1(a) hereto lists (i)
the states and other jurisdictions where the Company is so qualified and (ii)
the assumed names under which the Company conducts business and has conducted
business during the past five years. Attached as SCHEDULE 2.1(b) are complete
and correct copies of the Company's Articles of Incorporation and Bylaws as
amended and presently in effect.
2.2 SUBSIDIARIES.
The Company does not have any interest or investment in any Person (as
defined in SECTION 10.11 hereof).
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2.3 CAPITALIZATION.
The authorized stock of the Company and the number of shares of
capital stock that are issued and outstanding are set forth on SCHEDULE 2.3
hereto. The shares listed on SCHEDULE 2.3 hereto constitute all the issued and
outstanding shares of capital stock of the Company and have been validly
authorized and issued, are fully paid and nonassessable, have not been issued in
violation of any preemptive rights or of any federal or state securities law and
no personal liability attaches to the ownership thereof. There is no security,
option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition of any
shares of capital stock of the Company or any securities convertible into, or
other rights to acquire, any shares of capital stock of the Company, or (ii)
obligates the Company to grant, offer or enter into any of the foregoing, or
(iii) relates to the voting or control of such capital stock, securities or
rights, except as provided in this Agreement. The Company has not agreed to
register any securities under the Securities Act.
2.4 AUTHORITY; APPROVALS AND CONSENTS.
The Company has the corporate power and authority to enter into this
Agreement and the Lease and to perform its obligations hereunder and thereunder.
The execution, delivery and performance of this Agreement and the Lease and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized and approved by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize and
approve this Agreement or the Lease and the transactions contemplated hereby and
thereby. This Agreement has been, and on the Closing Date the Lease will be,
duly executed and delivered by, and constitute a valid and binding obligation
of, the Company, enforceable against the Company in accordance with its terms.
The execution, delivery and performance by the Company and the Stockholders of
this Agreement and the Lease and the consummation of the transactions
contemplated hereby and thereby do not and will not:
(i) contravene any provisions of the Articles of Incorporation
or By-Laws of the Company;
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(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any Company Agreement (as
defined in SECTION 2.15 hereof) or, require any consent or waiver of any
party to any Company Agreement;
(iii) result in the creation of any Lien upon, or any Person
obtaining any right to acquire, any properties, assets or rights of the
Company (other than the rights of Sub to acquire the Shares pursuant to
this Agreement);
(iv) violate or conflict with any Legal Requirements (as
defined in SECTION 2.9 hereof) applicable to the Company or any of its
businesses or properties; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except the Georgia
administrative agency governing the sale of motor vehicles, and except in
connection with or in compliance with the provisions of the H-S-R Act (as
defined in SECTION 5.11 hereof).
Except as referred to above, no permit or approval of, or notice to
any governmental, administrative or judicial authority is necessary to be
obtained or made by the Company to enable the Company to continue to conduct its
business and operations and use its properties after the Closing in a manner
which is in all material respects consistent with that in which they are
presently conducted.
2.5 FINANCIAL STATEMENTS.
Attached as SCHEDULE 2.5 are true and complete copies of:
(i) (A)the reviewed balance sheet of the Company as of
December 31, 1995 (the "Company Balance Sheet"), and the related statements
of income, stockholders' equity and cash flow for the fiscal year ended
December 31, 1995, together with the notes thereto, in each case examined
by and accompanied by the report of independent certified public
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accountants, and (B) the reviewed balance sheet of the Company as of
December 31, 1994, and the related statements of income, stockholders'
equity and cash flow for the fiscal year ended December 31, 1994, together
with the notes thereto, in each case examined by and accompanied by the
report of independent certified public accountants; and
(ii) the most recent monthly and year-to-date financial
statements provided to Nissan Motor Corporation USA (the "Company Factory
Statements");
(the financial statements referred to in clause (i) above, including the notes
thereto, being referred to herein collectively as the "Company Financial
Statements"). The Company Financial Statements, which reflect that Company and
the Stockholders have elected to taxation under Subchapter S of the Internal
Revenue Code of 1986, as amended (the "Code"), are in accordance with the books
and records of the Company, fairly present the consolidated financial position,
results of operations, stockholders' equity and changes in the financial
position of the Company as of the dates and for the periods indicated, in the
case of the financial statements referred to in clause (i) above in conformity
with GAAP consistently applied (except as otherwise indicated in such
statements) during such periods, and can be legitimately reconciled with the
financial statements and the financial records maintained and the accounting
methods applied by the Company for federal income tax purposes, and the
unaudited financial statements included in the Company Financial Statements
include all adjustments, which consist of only normal recurring accruals,
necessary for such fair presentations. The statements of income included in the
Company Financial Statements do not contain any items of special or nonrecurring
income except as expressly specified therein, and the balance sheets included in
the Company Financial Statements do not reflect any write-up or revaluation
increasing the book value of any assets from their acquisition cost except as
expressly stated therein. The books and accounts of the Company are complete
and correct in all material respects and fairly reflect all of the transactions,
items of income and expense and all assets and liabilities of the businesses of
the Company consistent with prior practices of the Company.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES.
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The Company does not have any liability of any nature whatsoever
(whether known or unknown, due or to become due, accrued, absolute, contingent
or otherwise), including, without limitation, any unfunded obligation under
employee benefit plans or arrangements as described in SECTION 2.17 AND 2.18
hereof or liabilities for Taxes (as defined in SECTION 2.8 hereof), except for
(i) liabilities reflected or reserved against in the Closing Date Balance Sheet,
(ii) current liabilities incurred in the ordinary course of business and
consistent with past practice after the date of the Closing Date Balance Sheet
which relate to matters occurring prior to the Closing Date and which,
individually and in the aggregate, do not have, and cannot reasonably be
expected to have, a Material Adverse Effect, and (iii) liabilities disclosed on
SCHEDULE 2.6 hereto. Provided, however, the existence of a liability or
liabilities not reserved against in the Closing Statement Balance Sheet shall
not be deemed a violation of this representation and warranty unless and except
to the extent that there is an increase in the net amount of liabilities
reflected in the Reviewed Balance Sheet. The Company is not a party to any
Company Agreement, or subject to any articles of incorporation or bylaw
provision, any other corporate limitation or any Legal Requirement which has, or
can reasonably be expected to have, a Material Adverse Effect.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1994, except as set forth on SCHEDULE 2.7(a)
hereto, the Company has operated in the ordinary course of business consistent
with past practice and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Company and no factor, event, condition, circumstance or prospective
development exists which threatens or may threaten to have a Material
Adverse Effect;
(ii) any material loss, damage, destruction or other casualty
to the property or other assets of the Company, whether or not covered by
insurance;
(iii) any change in any method of accounting or accounting
practice of the Company; or
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(iv) any loss of the employment, services or benefits of any
key employee of the Company.
(b) Since December 31, 1994, except as set forth in SCHEDULE 2.7(b)
hereto, the Company has not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary course
of business consistent with past practice;
(ii) failed to disclose or satisfy any lien or pay or satisfy
any obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided and liabilities incurred to
acquire vehicles in inventory;
(iii) mortgaged, pledged or subjected to any lien any of its property
or other assets except for floor plan liens, mechanics' liens, and liens
for taxes not yet due and payable;
(iv) sold or transferred any assets or cancelled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past practice;
(vii) through the date illustrated on the last Company Factory
Statement written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not reflected
in the Company Financial Statements;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them;
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(ix) made any individual capital expenditure in excess of
$75,000, or aggregate capital expenditures in excess of $200,000, or
additions to property, plant and equipment other than ordinary repairs and
maintenance;
(x) discontinued any franchise or the sale of any products or
product line;
(xi) incurred any obligation or liability to any employee for the
payment of severance benefits; or
(x) entered into any agreement or made any commitment to do
any of the foregoing.
2.8 TAXES.
The Company and, for any period during all or part of which the tax
liability of any other corporation was determined on a combined or consolidated
basis with the Company any such other corporation, have filed timely all
federal, state, local and foreign tax returns, reports and declarations required
to be filed (or have obtained or timely applied for an extension with respect to
such filing) correctly reflecting the Taxes (as defined below) and all other
information required to be reported thereon and have paid, or made adequate
provision for the payment of, all Taxes which are due pursuant to such returns
or pursuant to any assessment received by the Company or any such other
corporation. As used herein, "Taxes" shall mean all taxes, fees, levies or
other assessments, including but not limited to income, excise, property
(including property taxes paid by the Company pursuant to any lease), sales,
franchise, withholding, social security and unemployment taxes imposed by the
United States, any state, county, local or foreign government, or any
subdivision or agency thereof or taxing authority therein, and any interest,
penalties or additions to tax relating to such taxes, charges, fees, levies or
other assessments. Copies of all tax returns for each fiscal year since the
formation of the Company have been furnished or made available to UAG or its
representatives and such copies are accurate and complete as of the date hereof.
The Company has also furnished or made available to UAG correct and complete
copies of all notices and correspondence sent or received since the formation of
the Company by the Company to or from any federal, state or local tax
authorities. The Company
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has adequately reserved for the payment of all Taxes with respect to periods
ended on, prior to or through the date of the Company Balance Sheet for which
tax returns have not yet been filed. In the ordinary course, the Company makes
adequate provision on its books for the payment of all Taxes (including for the
current fiscal period) owed by the Company. Except to the extent reserves
therefor are reflected on the Company Balance Sheet, the Company is not liable,
or will not become liable, for any Taxes for any period ending on, prior to or
through the date of the Company Balance Sheet. On the Closing Date Balance
Sheet, the Company will have adequately reserved for the payment of any Taxes
for any period ending on, prior to or through the date of the Closing Date
Balance Sheet. Except as set forth on SCHEDULE 2.8 hereto, the Company has not
been subject to a federal or state tax audit of any kind, and no adjustment has
been proposed by the Internal Revenue Service ("IRS") with respect to any return
for any subsequent year. With respect to the audits referred to on SCHEDULE 2.8
hereto, no such audit has resulted in an adjustment in excess of $50,000.
Neither the Company nor the Stockholders knows of any basis for an assertion of
a deficiency for Taxes against the Company. The Stockholders will cooperate
with the Company in the filing of any returns and in any audit or refund claim
proceedings involving Taxes for which the Company may be liable or with respect
to which the Company may be entitled to a refund. Sub and UAG acknowledge that
so long as Company has made a valid election to be taxed under Subchapter S of
the Code, Company's books will not reflect any accrual for unpaid income taxes.
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2.9 LEGAL MATTERS.
(a) Except as set forth on SCHEDULE 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, or, to the knowledge of the Company or
the Stockholders, threatened against or affecting, the Company, any ERISA Plan
(as defined in SECTION 2.18(a) hereof) or any of their respective assets,
properties or rights before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, domestic or foreign, nor is any
basis known to the Stockholders or the Company for any such Claims, and (ii) the
Company is not subject to any judgment, decree, writ, injunction, ruling or
order (collectively, "Judgments") of any governmental, administrative or
judicial authority, domestic or foreign. SCHEDULE 2.9(a) hereto identifies each
Claim and Judgment disclosed thereon which is fully covered by an insurance
policy.
(b) The businesses of the Company are being conducted in compliance
with all laws, ordinances, codes, rules, regulations, standards, judgments and
other requirements of all governmental, administrative or judicial entities
(collectively, "Legal Requirements") applicable to the Company or any of its
respective businesses or properties, except where the failure to be in such
compliance could not reasonably be expected to have a Material Adverse Effect.
The Company holds, and is in compliance with, all franchises, licenses, permits,
registrations, certificates, consents, approvals or authorizations
(collectively, "Permits") required by all applicable Legal Requirements except
where the failure to hold or be in compliance with such Permits could not
reasonably be expected to have a Material Adverse Effect. A list of all such
permits is set forth on SCHEDULE 2.9(b) hereof.
(c) The Company owns or holds all Permits material to the conduct of
its business. No event has occurred and is continuing which permits, or after
notice or lapse of time or both would permit, any modification or termination of
any Permit.
2.10 PROPERTY.
(a) The properties and assets owned by or leased to the Company are
adequate for the conduct of the respective businesses of the Company as
presently conducted. Set forth on SCHEDULE 2.10 hereto is a list of all
interests in real property owned by
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or leased to the Company (including all real property owned or leased by the
Stockholders (directly or indirectly) and used in the businesses of the Company)
and of all options or other contracts to acquire any such interest
(collectively, the "Real Property "). All improvements to the Real Property
("Improvements") and all machinery, equipment and other tangible property owned
or used by or leased to the Company are in good operating condition and in good
repair and are fit for the particular purposes for which they are used by the
Company, subject only to ordinary wear and tear. Such tangible properties and
all Improvements owned or leased by the Company conform in all material respects
with all applicable laws, ordinances, rules and regulations and other Legal
Requirements and such Improvements do not encroach in any respect on property of
others. There are no latent defects with respect to the Improvements. The Real
Property is currently zoned to permit the conduct of the respective businesses
of the Company as presently conducted. A Certificate of Occupancy has been
issued with respect to the Improvements without special conditions or
restrictions. All utilities servicing the Real Property and the Improvements
are provided by publicly-dedicated utility lines and are located within public
rights-of-way and do not cross or encumber any private land. No notice of any
pending, threatened or contemplated action by any governmental authority or
agency having the power of eminent domain has been given to the Company or the
Stockholders with respect to the Real Property.
2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 2.11(a) hereto, (i) the Company,
the Real Property, the Improvements and any property formerly owned, occupied or
leased by the Company are in full compliance with all Environmental Laws (as
defined below), (ii) the Company has obtained all Environmental Permits (as
defined below), (iii) such Environmental Permits are in full force and effect,
and (iv) the Company is in full compliance with all terms and conditions of such
Environmental Permits. As used herein, "Environmental Laws" shall mean all
applicable requirements of environmental, public or employee health and safety,
public or community right-to-know, ecological or natural resource laws or
regulations or controls, including all applicable requirements imposed by any
law (including without limitation common law), rule, order, or regulations of
any federal, state, or local executive, legislative, judicial, regulatory, or
administrative
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agency, board, or authority, or any applicable private agreement (such as
covenants, conditions and restrictions), which relate to, (i) noise, (ii)
pollution or protection of the air, surface water, groundwater, or soil, (iii)
solid, gaseous, or liquid waste generation, treatment, storage, disposal or
transportation, (iv) exposure to Hazardous Materials (as defined below), or (v)
regulation of the manufacture, processing, distribution and commerce, use, or
storage of Hazardous Materials. As used herein, "Environmental Permits" shall
mean all permits, licenses, approvals, authorizations, consents or registrations
required under applicable Environmental Law in connection with the ownership,
use and/or operation of the Company's business or the Real Property or
Improvements.
As used in this SECTION 2.11, "Hazardous Materials" shall mean,
collectively, (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste," "hazardous substances,"
"hazardous materials," "toxic substances" or similar terms in or pursuant to,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (42 U.S.C. 9601 ET SEQ.) ("CERCLA"), as amended by
Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100
State, 1613), the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 ET SEQ.) ("RCRA"), the Occupational Safety and Health Act of 1970
(29 U.S.C. Section 651 ET SEQ.) ("OSHA"), and the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 ET SEQ. ("HMTA"), and in the
regulations promulgated pursuant to such laws, all as amended, (ii) those
substances listed in the United States Department of Transportation Table (49
CFR 172.101 and amendments thereto) or by the Environmental Protection Agency
(or any successor agency) as hazardous substances (40 CFR part 302 and
amendments thereto), (iii) any material, waste or substance which is or contains
(A) petroleum, including crude oil or any fraction thereof, natural gas, or
synthetic gas usable for fuel or any mixture thereof, (B) asbestos, (C)
polychlorinated biphenyls, (D) designated as a "hazardous substance" pursuant to
Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 ET SEQ. (33 U.S.C.
Section 1321) or listed pursuant to Section 307 of the Clean Water Act (33
U.S.C. Section 1317), (E) flammable explosives, (F) radioactive materials, and
(iv) such other substances, materials and wastes which are or become regulated
or classified as hazardous, toxic or as "special wastes" under any Environmental
Laws.
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(b) The Company and the Stockholders have not violated, done or
suffered any act which could give rise to liability under, and are not otherwise
exposed to liability under, any Environmental Law. No event has occurred with
respect to the Real Property, the Improvements or any property formerly owned,
occupied or leased by the Company, which, with the passage of time or the giving
of notice, or both, would constitute a violation of or non-compliance with any
applicable Environmental Law. The Company has no contingent liability under any
Environmental Law. There are no liens under any Environmental Law on the Real
Property.
(c) Except as set forth on SCHEDULE 2.11(c) hereto, (i) neither the
Company, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Company, nor, to the
knowledge of the Company or the Stockholders, any property adjacent to the
Real Property is being used or has been used for the treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Materials or as a landfill or other waste disposal site (provided, however,
that certain petroleum products are stored and handled on the Real Property
in the ordinary course of the Company's business in full compliance with all
Environmental Laws including the existing regulations of the United States
Environmental Protection Agency and the State of Georgia requiring spill
protection, overfill protection and corrosion protection by December 22,
1998), (ii) none of the Real Property or portion thereof, the Improvements or
any property formerly owned, occupied or leased by the Company has been
subject to investigation by any governmental authority evaluating the need to
investigate or undertake Remedial Action (as defined below) at such property,
and (iii) none of the Real Property, the Improvements or any property
formerly owned, occupied or leased by the Company, or, to the knowledge of
the Company or the Stockholders, any site or location where the Company sent
waste of any kind, is identified on the current or proposed (A) National
Priorities List under 40 C.F.R. 300 Appendix B, (B) Comprehensive
Environmental Response Compensation and Liability Inventory System list, or
(C) any list arising from any statute analogous to CERCLA. As used herein,
"Remedial Action" shall mean any action required to (i) clean up, remove or
treat Hazardous Materials, (ii) prevent a release or threat of release of any
Hazardous Material, (iii) perform pre-remedial studies, investigations or
post-remedial monitoring and care, (iv) cure a violation of Environmental Law
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or (v) take corrective action under sections 3004(u), 3004(v) or 3008(h) of RCRA
or analogous state law.
(d) Except as set forth on SCHEDULE 2.11(d) hereto, there have been
and are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or containers disposed of or buried on, in or under
the ground or any surface waters, (ii) asbestos or asbestos containing materials
or radon gas, (iii) polychlorinated biphenyls ("PCB") or PCB-containing
equipment, including transformers, or (iv) wetlands (as defined under any
Environmental Law) located within any portion of the Real Property, nor have any
liens been placed upon any portion of the Real Property, the Improvements or any
property formerly owned, occupied or leased by the Company in connection with
any actual or alleged liability under any Environmental Law.
(e) Except as set forth on SCHEDULE 2.11(e) hereto, (i) there is no
pending or threatened claim, litigation, or administrative proceeding, or known
prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving any of the Company, the Real Property, the
Improvements, any property formerly owned, leased or occupied by the Company,
any offsite contamination affecting the business of the Company or any
operations conducted at the Real Property, (ii) there are no ongoing
negotiations with or agreements with any governmental authority relating to any
Remedial Action or other environmentally related claim, (iii) the Company has
not submitted notice pursuant to Section 103 of CERCLA or analogous statute or
notice under any other applicable Environmental Law reporting a release of a
Hazardous Material into the environment, and (iv) the Company has not received
any notice, claim, demand, suit or request for information from any governmental
or private entity with respect to any liability or alleged liability under any
Environmental Law, nor to knowledge of the Stockholders and the Company, has any
other entity whose liability therefor, in whole or in part, may be attributed to
the Company, received such notice, claim, demand, suit or request for
information.
(f) The Stockholders and the Company have provided to UAG all
environmental studies and reports obtained by them or known to them pertaining
to the Real Property, the Improvements, the Company and any property formerly
owned, occupied or leased by the Company, and have permitted (or will have
permitted as of
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the Closing Date), the testing of the soil, groundwater, building components,
tanks, containers and equipment on the Real Property, the Improvements, and any
property formerly owned, occupied or leased by the Company, by UAG or UAG's
agents or experts as they have or shall have deemed necessary or appropriate to
confirm the condition of such properties.
2.12 INVENTORIES.
The values at which inventories are carried on the Company Balance
Sheet reflect the normal inventory valuation policies of the Company
incorporating the LIFO method for new vehicles, and such values are in
conformity with GAAP consistently applied. All inventories reflected on the
Company Balance Sheet and Company Factory Statement or arising since the date
thereof are currently marketable and can reasonably be anticipated to be sold at
normal mark-ups within 120 days after the date hereof in the ordinary course of
business (subject to the reserve for obsolete, off-grade or slow-moving items
that is reflected in the Company Balance Sheet or will be reflected in the
Closing Date Balance Sheet), except for spare parts inventory which inventory is
good and usable.
2.13 ACCOUNTS RECEIVABLE.
In the aggregate all accounts receivable reflected on the Company
Balance Sheet are, and all accounts receivable that will be or will have been
reflected on the Closing Date Balance Sheet will be, good, and to the extent of
the net amount (I.E., after any reserve for doubtful or uncollectible accounts)
have been or will have been collected or are collectible, without resort to
litigation, within 90 days of the Closing Date, and are subject to no defenses,
setoffs or counterclaims other than normal cash discounts accrued in the
ordinary course of business.
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2.14 INSURANCE.
Except for the lives of key personnel all material properties and
assets of the Company which are of an insurable character are insured against
loss or damage by fire and other risks to the extent and in the manner
reasonable in light of the risks attendant to the businesses and activities in
which the Company is engaged and customary for companies engaged in similar
businesses or owning similar assets. Set forth on SCHEDULE 2.14 hereto is a
list and brief description (including the name of the insurer, the type of
coverage provided, the amount of the annual premium for the current policy
period, the amount of remaining coverage and deductibles and the coverage
period) of all policies for such insurance and the Company has made or will make
available to UAG true and complete copies of all such policies. All such
policies are in full force and effect sufficient for all applicable requirements
of law and will not in any way be effected by or terminated or lapsed by reason
of the consummation of the transactions contemplated by this Agreement and the
Lease. No notice of cancellation or non-renewal with respect to, or
disallowance of any claim under, any such policy has been received by the
Company.
2.15 CONTRACTS; ETC.
As used in this Agreement, the term "Company Agreements" shall mean
all mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding,
(including all leases and other agreements referred to on SCHEDULE 2.10 hereto)
to which the Company is a party or by which the Company or any of its assets or
properties (including the Real Property and the Improvements) may be bound or
affected, including all amendments, modifications, extensions or renewals of any
of the foregoing. Set forth on SCHEDULE 2.15 hereto is a complete and accurate
list of each Company Agreement which is material to the businesses, operations,
assets, condition (financial or otherwise) or prospects of the Company. True
and complete copies of all written Company Agreements referred to on SCHEDULE
2.15 and SCHEDULE 2.10 hereto, exclusive of individual vehicle titles and/or
manufacturer's certificates of origin and floor plan liens applicable to
individual vehicles, have been delivered or made available to UAG, and the
Company has provided UAG with accurate
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and complete written summaries of all such Company Agreements which are
unwritten. Except as set forth on SCHEDULE 2.15, the Company is not, nor, to
the knowledge of the Company and the Stockholders is, any other party thereto,
in breach of or default under any Company Agreement, and no event has occurred
which (after notice or lapse of time or both) would become a breach or default
under, or would permit modification, cancellation, acceleration or termination
of, any Company Agreement or result in the creation of any Lien upon, or any
Person obtaining any right to acquire, any properties, assets or rights of the
Company in any such case where such breach, default or other event would have,
or could reasonably be expected to have, a Material Adverse Effect. There are
no material unresolved disputes involving any Company under any Company
Agreement.
2.16 LABOR RELATIONS.
(a) The Company has paid or made provision for the payment of all
salaries and accrued wages and has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes, and has withheld and paid to the appropriate
governmental authority, or is holding for payment not yet due to such authority,
all amounts required by law or agreement to be withheld from the wages or
salaries of its employees.
(b) Except as described in Section 6.13 and as set forth on SCHEDULE
2.16(b) hereto, the Company is not a party to any (i) outstanding employment
agreements or contracts with officers or employees that are not terminable at
will, or that provide for payment of any bonus or commission, (ii) agreement,
policy or practice that requires it to pay termination or severance pay to
salaried, non-exempt or hourly employees (other than as required by law), (iii)
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company, nor do the Stockholders or the Company know of
any activities or proceedings of any labor union to organize any such employees.
The Company has furnished to UAG complete and correct copies of all such
agreements ("Employment and Labor Agreements"). The Company has not breached or
otherwise failed to comply with any provisions of any Employment or Labor
Agreement.
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(c) Except as set forth in SCHEDULE 2.16(c) hereto, (i) there is no
unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or
material work stoppage or lockout actually pending or, to the Stockholders' or
the Company's knowledge, threatened, against or affecting the Company, and the
Company has not experienced any strike, material slow down or material work
stoppage, lockout or other collective labor action by or with respect to
employees of the Company, (iii) there is no representation claim or petition
pending before the NLRB or any similar foreign agency and no question concerning
representation exists relating to the employees of the Company, (iv) there are
no charges with respect to or relating to the Company pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment-practices, (v) the Company
has not received formal notice from any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws of an intention to
conduct an investigation of the Company and, to the knowledge of the Company, no
such investigation is in progress and (vi) the consents of the unions that are
parties to any Employment and Labor Agreements are not required to complete the
transactions contemplated by this Agreement and the Documents.
(d) The Company has never caused any "plant closing" or "mass layoff"
as such actions are defined in the Worker Adjustment and Retraining Notification
Act, as codified at 29 U.S.C. Sections 2101-2109, and the regulations
promulgated therein.
2.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth on SCHEDULE 2.17(a) hereto is a true and complete list
of:
(i) each employee pension benefit plan, as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the Company or to which the Company is required to make
contributions ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in Section
3(i) of ERISA, maintained by the Company or to
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which the Company is required to make contributions ("Welfare Benefit
Plan").
True and complete copies of all Pension Benefit Plans and Welfare
Benefit Plans (collectively, "ERISA Plans") have been delivered to or made
available to UAG together with, as applicable with respect to each such ERISA
Plan, trust agreements, summary plan descriptions, all IRS determination letters
or applications therefor with respect to any Pension Benefit Plan intended to be
qualified pursuant to Section 401 (a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and valuation or actuarial reports, accountant's opinions,
financial statements, IRS Form 5500s (or 5500-C or 5500-R) and summary annual
reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on SCHEDULE
2.17(b):
(i) there is no ERISA Plan which is a " multiemployer" plan
as that term is defined in Section 3(37) of ERISA ("Multiemployer Plan");
(ii) no event has occurred or (to the knowledge of the Company
or the Stockholders) is threatened or about to occur which would constitute
a prohibited transaction under Section 406 of ERISA or under Section 4975
of the Code;
(iii) each ERISA Plan has operated since its inception in accordance
with the reporting and disclosure requirements imposed under ERISA and the
Code and has timely filed Form 5500e (or 5500-C or 5500-R) and predecessors
thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under Section
401(a) of the Code:
(i) has been qualified, from its inception, under Section
401(a) of the Code, and the trust established thereunder has been exempt
from taxation under Section 501(a) of the Code and is currently in
compliance with applicable federal laws;
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(ii) has been operated, since its inception, in accordance with
its terms and there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review by the
IRS or (to the knowledge of the Company or the Stockholders) no such action
is contemplated or under consideration and the IRS has not asserted that
any Pension Benefit Plan is not qualified under Section 401(a) of the Code
or that any trust established under a Pension Benefit Plan is not exempt
under Section 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and, for the purpose solely of SECTION
2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the
Code:
(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been incurred by the Company
since the effective date of ERISA and all premiums due and owing to the
PBGC have been timely paid;
(ii) the PBGC has not notified the Company or any Pension
Benefit Plan of the commencement of proceedings under Section 4042 of ERISA
to terminate any such plan;
(iii) no event has occurred since the inception of any Pension
Benefit Plan or (to the knowledge of the Company or the Stockholders) is
threatened or about to occur which would constitute a reportable event
within the meaning of Section 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of
the Code); and
(v) if any of such Pension Benefit Plans were to be terminated
on the Closing Date (A) no liability under Title IV of ERISA would be
incurred by the Company and (B) all benefits accrued to the day prior to
the Closing Date (whether or not vested) would be fully funded in
accordance with the actuarial assumptions and method utilized by such plan
for valuation purposes.
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(e) With respect to each Pension Benefit Plan, SCHEDULE 2.17(e)
contains a list of all Pension Benefit Plans to which ERISA has applied which
have been or are being terminated, or for which a termination is contemplated,
and a description of the actions taken by the PBGC and the IRS with respect
thereto.
(f) The approximate aggregate of the amounts of contributions by the
Company to be paid or accrued under ERISA Plans for the current fiscal year is
set forth on SCHEDULE 2.17(f) (the "Aggregate ERISA Contributions"), and the
Aggregate ERISA Contributions are not expected to exceed the total amount set
forth on SCHEDULE 2.17(f). To the extent required in accordance with GAAP, the
Company Balance Sheet reflects in the aggregate an accrual of all amounts of
employer contributions accrued but unpaid by the Company under the ERISA Plans
as of the date of the Company Balance Sheet.
(g) With respect to any Multiemployer Plan (1) the Company has not,
since its formation, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of
ERISA; (2) there is no withdrawal liability of the Company under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Company had
occurred under each such Plan as of December 31, 1995; and (3) the Company has
not received notice to the effect that any Multiemployer Plan is either in
reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined in
Section 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Company under Welfare
Benefit Plans with respect to any condition which relates to a claim filed
on or before the Closing Date.
(ii) No claims for benefits are in dispute or litigation.
2.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on SCHEDULE 2.18(a) hereto is a true and complete list
of:
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(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance, severance, retirement,
excess benefit or other plan, trust or arrangement which is not an ERISA
Plan whether written or oral, which the Company maintains or is required to
make contributions to;
(ii) each other agreement, arrangement, commitment and understanding
of any kind, whether written or oral, with any current or former officer,
director or consultant of the Company pursuant to which payments may be
required to be made at any time following the date hereof (including,
without limitation, any employment, deferred compensation, severance,
supplemental pension, termination or consulting agreement or arrangement);
and
(iii) each employee of the Company whose aggregate compensation
for the fiscal year ended December 31, 1995 exceeded, and whose aggregate
compensation for the fiscal year ended December 31, 1996 is likely to
exceed, $50,000. True and complete copies of all of the written plans,
arrangements and agreements referred to on SCHEDULE 2.18(a) ("Compensation
Commitments") have been provided to UAG together with, where prepared by or
for the Company, any valuation, actuarial or accountant's opinion or other
financial reports with respect to each Compensation Commitment for the last
three years. An accurate and complete written summary has been provided to
UAG with respect to any Compensation Commitment which is unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material
respects in accordance with its terms;
(ii) is not currently under investigation, audit or review by
the IRS or any other federal or state agency and (to the knowledge of the
Company or the Stockholders) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or foreign
Taxes;
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(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code;
and
(vi) has operated since its inception in material compliance
with the reporting and disclosure requirements imposed under ERISA and the
Code.
2.19 TRANSACTIONS WITH INSIDERS.
Set forth on SCHEDULE 2.19 hereto is a complete and accurate
description of all material transactions between the Company or any ERISA Plan,
on the one hand, and any Insider, on the other hand, that have occurred since
January 1, 1995. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholders, any
director or officer of the Company, and any Affiliate, Associate or
Relative of any of the foregoing persons;
(ii) the term "Associate" used to indicate a relationship with
any person means (A) any corporation, partnership, joint venture or other
entity of which such person is an officer or partner or is, directly or
indirectly, through one or more intermediaries, the beneficial owner of 30%
or more of (1) any class or type of equity securities or other profits
interest or (2) the combined voting power of interests ordinarily entitled
to vote for management or otherwise, and (B) any trust or other estate in
which such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's spouse,
such person's parents, sisters, brothers, children and the spouses of the
foregoing, and any member of the immediate household of such person.
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2.20 PROPRIETY OF PAST PAYMENTS.
No funds or assets of the Company have been used for illegal purposes;
no unrecorded funds or assets of the Company have been established for any
purpose; no accumulation or use of the Company's corporate funds or assets has
been made without being properly accounted for in the respective books and
records of the Company; all payments by or on behalf of the Company have been
duly and properly recorded and accounted for in their respective books and
records; no false or artificial entry has been made in the books and records of
the Company for any reason; no payment has been made by or on behalf of the
Company with the understanding that any part of such payment is to be used for
any purpose other than that described in the documents supporting such payment;
and the Company has not made, directly or indirectly, any illegal contributions
to any political party or candidate, either domestic or foreign. Neither the
IRS nor any other federal, state, local or foreign government agency or entity
has initiated or threatened any investigation of any payment made by the Company
of, or alleged to be of, the type described in this SECTION 2.20.
2.21 INTEREST IN COMPETITORS.
Except as set forth on SCHEDULE 2.21, neither the Company nor the
Stockholders, nor any of their Affiliates, have any interest, either by way of
contract or by way of investment (other than as holder of not more than 2% of
the outstanding capital stock of a publicly traded Person, so long as such
holder has no other connection or relationship with such Person) or otherwise,
directly or indirectly, in any Person other than the Company that is engaged in
the retail sale of automobiles in Georgia.
2.22 BROKERS.
Neither the Company, nor any director, officer or employee thereof,
nor the Stockholders or any representative of the Stockholders, has employed any
broker or finder or has incurred or will incur any broker's, finder's or similar
fees, commissions or expenses, in each case in connection with the transactions
contemplated by this Agreement or the Lease.
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2.23 ACCOUNTS.
SCHEDULE 2.23 hereof correctly identifies each bank account maintained
by or on behalf or for the benefit of the Company and the name of each person
with any power or authority to act with respect thereto.
2.24 DISCLOSURE.
Neither the Company nor any Stockholder has made any material
misrepresentation to UAG relating to the Company or the Shares and neither the
Company nor any Stockholders has omitted to state to UAG any material fact
relating to the Company or the Shares which is necessary in order to make the
information given by or on behalf of the Company or the Stockholders to UAG not
misleading or which if disclosed would reasonably affect the decision of a
person considering an acquisition of the Shares. No fact, event, condition or
contingency exists or has occurred which has, or in the future can reasonably be
expected to have, a Material Adverse Effect, which has not been disclosed in the
Company's Financial Statements or the schedules to this Agreement.
2.25 NET WORTH AND WORKING CAPITAL.
The Net Worth of the Company, as determined in accordance with the
Accounting Principles, will be equal to or greater than One Million Eight
Hundred Thousand Dollars ($1,800,000.00) on the Closing Date. The working
capital of the Company, as reflected on the Estimated Closing Date Balance Sheet
(as defined in Section 6.6 hereof) will be not less than the amount required by
Nissan Motor Corporation USA.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder hereby jointly and severally represents and warrants
to UAG and Sub as follows:
3.1 OWNERSHIP OF SHARES; TITLE.
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Each Stockholder is the owner of record and beneficially of the Shares
set forth on SCHEDULE 3.1 hereof and has, and shall transfer to Sub at the
Closing, good and marketable title to the Shares owned by him, free and clear of
any and all Liens, claims and encumbrances and free and clear of any
restrictions on transfer (other than restrictions on transfer imposed by
applicable federal and state securities laws), proxies and voting or other
agreements.
3.2 AUTHORITY.
Each Stockholder has all requisite power and authority and has full
legal capacity and is competent to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby (including the
disposition of the Shares to Sub as contemplated by this Agreement). This
Agreement has been duly executed and delivered by each Stockholder and
constitutes a valid and binding obligation of each Stockholder, enforceable
against each Stockholder in accordance with its terms. Except as set forth on
SCHEDULE 3.2, the execution, delivery and performance of this Agreement by each
Stockholder and the consummation of the transactions contemplated hereby do not
and will not:
(i) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any material contract,
agreement, commitment, understanding, arrangement or restriction to which
any Stockholder is a party or to which any Stockholder or any of such
Stockholders's property is subject;
(ii) violate or conflict with any Legal Requirements applicable
to any Stockholder or any of such Stockholder's businesses or properties;
or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act, and
except to the extent such is required by the Georgia administrative agency
governing the sale of motor vehicles.
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3.3 REAL PROPERTY AND IMPROVEMENTS.
The Stockholders are the only two partners in Landlord. Landlord owns
the Real Property and Improvements in fee simple, free and clear of all Liens,
claims and encumbrances, except those disclosed in SCHEDULE 3.3(a), none of
which currently or, to each Stockholder's knowledge, in the future will affect
the use of the Real Property or the Improvements for the conduct of the
respective businesses of the Company as presently conducted. No assessments
have been made against any portion of the Real Property which are unpaid (except
ad valorem taxes for the current year that are not yet due and payable), whether
or not they have become Liens. There are no disputes concerning the location of
the lines and corners of the Real Property. No one has been granted any right
to purchase or lease the Real Property or Improvements other than the existing
lease in favor of the Company, which is to be terminated at Closing. Attached
as SCHEDULE 3.3 are all surveys, title binders, title policies and copies of any
exceptions to title.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UAG AND SUB
UAG and Sub hereby represent and warrant to the Company and the
Stockholders as follows:
4.1 ORGANIZATION AND GOOD STANDING.
Each of UAG and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has the corporate power and authority to own, lease and
operate the properties used in its business and to carry on its business as now
being conducted. Each of UAG and each of its subsidiaries is duly qualified to
do business and is in good standing as a foreign corporation in each state and
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when taken
together with all other such failures of UAG and its subsidiaries would not, or
could not reasonably be expected to, in the aggregate have a material adverse
effect on UAG and its subsidiaries, taken as a whole.
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4.2 AUTHORITY; APPROVALS AND CONSENTS.
UAG and Sub have the corporate power and authority to enter into this
Agreement and to perform their respective obligations hereunder. This Agreement
has been duly executed and delivered by, and constitutes valid and binding
obligation of, UAG and Sub, enforceable against UAG and Sub in accordance with
its terms. Except as set forth on SCHEDULE 4.3 hereto, the execution, delivery
and performance by UAG and Sub of this Agreement and the consummation of the
transactions contemplated hereby do not and will not:
(i) contravene any provisions of the certificate of
incorporation or bylaws of UAG or Sub;
(ii) (after notice or lapse of time or both) conflict with, result in
a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination
or acceleration in respect of, any UAG Agreement (as defined below) or,
require any consent or waiver of any party to any UAG Agreement other than
agreements the breach or violation of which could not reasonably be
expected to have a material adverse effect on UAG and its subsidiaries,
taken as a whole;
(iii) violate or conflict with any Legal Requirements applicable
to UAG or any of its subsidiaries or any of their respective businesses or
properties; or
(iv) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
4.3 BROKERS.
Neither UAG, Sub nor any of their directors, officers or employees has
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement or the Lease.
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4.4 DISCLOSURE.
Neither UAG nor Sub has made any material misrepresentation to the
Stockholders and neither UAG nor Sub has omitted to state to the Stockholders
any material fact relating to UAG or Sub which is necessary in order to make the
information given by UAG or Sub not misleading or which if disclosed would
reasonably affect the decision of a person considering the sale of the Shares.
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY.
Between the date hereof and the completion of due diligence as set
forth in SECTION 6.7 hereof, the Stockholders and the Company will (i) provide
to the officers and other authorized representatives of UAG and Sub, who will
proceed knowing and realizing that only a limited number of Company employees
have or will have any knowledge of a possible change of ownership of Company and
that such information if generally made known to other employees of Company
could cause substantial economic loss to Company, reasonable access, during
normal business hours, to any and all premises, properties, files, books,
records, documents, and other information of the Company and will cause the
Company's officers to furnish to UAG and its authorized representatives any and
all financial, technical and operating data and other information pertaining to
the businesses and properties of the Company (including the Real Property and
the Improvements), and (ii) make available for inspection and copying by UAG and
Sub true and complete copies of any documents relating to the foregoing. UAG
and Sub will hold, and will cause their representatives to hold, in confidence
(unless and to the extent compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law) all
Confidential Information (as defined below) and will not disclose the same to
any third party except in connection with obtaining financing and otherwise as
may reasonably be necessary to carry out this Agreement and the transactions
contemplated hereby, including any due diligence review by or on behalf of UAG
and Sub. If this Agreement is terminated, UAG and Sub will, and will cause
their representatives to, promptly return to the Company,
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all Confidential Information furnished by the Company, including all copies and
summaries thereof. As used herein, "Confidential Information" shall mean all
information concerning the Company obtained by UAG, Sub and their
representatives from the Company in connection with the transactions
contemplated by this Agreement, except information (x) ascertainable or obtained
from public information, (y) received from a third party not employed by or
otherwise affiliated with the Company or (z) which is or becomes known to the
public, other than through a breach by UAG or Sub or any of their
representatives of this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholders and the Company, on the one hand, and UAG and Sub, on
the other hand, will, as soon as practicable after reasonable request therefor,
furnish to the other all the information concerning the Stockholders and the
Company or UAG and Sub, respectively, required for inclusion in any statement or
application made by UAG or Sub or the Company or the Stockholders to any
governmental or regulatory body or to any manufacturer or distributor or in
connection with obtaining any third party consent in connection with the
transactions contemplated by this Agreement. Neither the Stockholders or the
Company, on the one hand, nor UAG or Sub, on the other hand, nor any
representative thereof, shall issue any press releases or otherwise make any
public statement with respect to the transactions contemplated hereby without
the prior consent of the other, except as may be required by law. In performing
its due diligence UAG and Sub will, without the prior consent of Rayman, refrain
from informing any employee of Company about any aspects of a potential change
in ownership of Company.
5.3 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, the Company shall, and the Stockholders shall cause the Company to,
conduct its businesses solely in the ordinary course consistent with past
practices and, without the prior written consent of UAG, neither the
Stockholders nor the Company will, except as required or permitted pursuant to
the terms hereof, permit the Company to:
(i) make any material change in the conduct of its businesses
and operations or enter into any transaction other
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than in the ordinary course of business consistent with past practices;
(ii) make any change in its Articles of Incorporation or
Bylaws, issue any additional shares of capital stock or equity securities
or grant any option, warrant or right to acquire any capital stock or
equity securities or issue any security convertible into or exchangeable
for its capital stock or alter any material term of any of its outstanding
securities or make any change in its outstanding shares of capital stock or
other ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any thereof,
except pursuant to transactions in the ordinary course of business
consistent with past practices, (B) issue any securities convertible or
exchangeable for debt securities of the Company, or (C) issue any options
or other rights to acquire from the Company, directly or indirectly, debt
securities of the Company or any security convertible into or exchangeable
for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of its assets or any part thereof, except transactions
pursuant to existing contracts (which will be set forth in SCHEDULE 2.15
hereto) and dispositions in the ordinary course of business consistent with
past practices;
(v) subject any of its assets, or any part thereof, to any
lien or suffer such to be imposed other than such liens as may arise in the
ordinary course of business consistent with past practices;
(vi) declare, set aside or pay any dividends or other
distribution (whether in cash, stock, property or any combination thereof)
in respect of any shares of its capital stock which would decrease the Net
Worth of the Company below One Million Eight Hundred Thousand Dollars
($1,800,000.00) or
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redeem, retire, purchase or otherwise acquire, directly or indirectly, any
shares of its capital stock;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of business
consistent with past practices;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase
in the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment)
or grant any increase in the compensation payable or to become payable to
any employee, except in accordance with pre-existing contractual provisions
or consistent with past practices;
(ix) make or commit to make any individual material capital
expenditure in excess of $50,000, or aggregate capital expenditures in
excess of $150,000, except in the ordinary course of business;
(x) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of its Affiliates, except in the ordinary course of
business;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other Person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by it (or on behalf of it) on
the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any Person, except in the ordinary course of business;
(xiv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change required
by reason of a concurrent change in
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GAAP or write-down the value of any inventory or write-off as uncollectible
any accounts receivable except in the ordinary course of business
consistent with past practices;
(xv) settle, release or forgive any material claim or
litigation or waive any material right;
(xvi) make, enter into, modify, amend in any material respect
or terminate any material commitment, bid or expenditure, other than in the
ordinary course of business consistent with past practice; or
(xvii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Stockholders and the Company will use their reasonable best efforts to cause the
Company to:
(i) continue to maintain, in all material respects, the
Company's properties, the Real Property and the Improvements in accordance
with present practices in a condition suitable for their current use;
(ii) comply with all applicable Environmental Laws, and, in the
event it shall receive notice that there exists a violation of any
Environmental Law with respect to its operations, the Improvements or any
Real Property, promptly (and in any event within the time period permitted
by the applicable governmental authority) remove or remedy such violation
in accordance with all applicable Environmental Laws;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when due
all taxes, assessments, fees and other charges lawfully levied or assessed
against it unless the validity thereof is contested in good faith and by
appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the
ordinary course and in accordance with existing practices;
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(v) preserve its business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships that
are, at the same time, not economically beneficial to it; and
(vi) continue to conduct its business in the ordinary course
consistent with past practices.
5.4 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
At the Closing there will be no intercompany payables or intercompany
receivables due and/or owing between the Stockholders and any of their
Affiliates, on the one hand, and the Company, on the other hand.
5.5 NEGOTIATIONS.
Until the earlier of 180 days from the date hereof or the termination
of this Agreement pursuant to SECTION 8.1 hereof, no Stockholder, nor the
Company, nor the Company's officers, directors, employees, advisors, agents,
representatives, Affiliates or anyone acting on behalf of the Stockholders, the
Company or such persons, shall, directly or indirectly, encourage, solicit,
initiate or engage in discussions or negotiations with, or provide any
information to, any person (other than UAG or its representatives) concerning
any merger, sale of assets (other than in the ordinary course of business),
purchase or sale of shares of capital stock or similar transaction involving the
Company. The Stockholders shall promptly communicate to UAG any inquiries or
communications concerning any such transaction (including the identity of any
person making such inquiry or communication) which the Stockholders may receive
or of which the Stockholders may become aware.
5.6 CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholders and the
Company and UAG and Sub will use their respective best efforts at their own
expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses, approvals,
authorizations, qualifications,
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orders and consents of all third parties and governmental authorities, and
make all filings and registrations with governmental authorities which are
required on their respective parts for (A) the consummation of the
transactions contemplated by this Agreement, (B) the ownership or leasing
and operating after the Closing by the Company of all its material
properties and (C) the conduct after the Closing by the Company of its
businesses as conducted by it on the date hereof.
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby; and
(iii) to furnish each other such information and assistance as
may reasonably be requested in connection with the foregoing.
5.7 ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts at its own expense to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers of
the Company shall take all such necessary action.
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5.8 INTERIM FINANCIAL STATEMENTS.
Within five (5) days of the execution of this Agreement or thirty (30)
days after the end of each calendar month after December 31, 1995, whichever
occurs later, the Company will deliver to UAG unaudited balance sheets of the
Company at the end of such calendar month and at the end of the corresponding
calendar month of the preceding fiscal year, together with the related unaudited
statements of income for the fiscal months then ended. The Company will also
deliver to UAG copies of the Company Factory Statements provided to Nissan after
the date hereof within five days of their delivery to Nissan. All such
financial statements shall fairly present the financial position and results of
operations of the Company as of the date or for the periods indicated. All
unaudited financial statements delivered pursuant to this SECTION 5.9 shall be
prepared on a basis consistent with the Company Financial Statements.
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5.9 NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this Agreement
will to the extent known to such party after diligent inquiry, give prompt
notice in writing to the other party hereto of: (i) any information that
indicates that any representation and warranty of such party contained herein
was not true and correct as of the date made or will not be true and correct as
of the Closing, (ii) the occurrence of any event which could result in the
failure to satisfy a condition specified in ARTICLE 6 or ARTICLE 7 hereof, as
applicable, (iii) any notice or other communication from any third person
alleging that the consent of such third person is or may be required in
connection with the transactions contemplated by this Agreement, and (iv) in the
case of the Stockholders and the Company, any notice of, or other communication
relating to, any default or event which, with notice or lapse of time or both,
would become a default under any Company Agreement set forth on SCHEDULE 2.15.
The Company and the Stockholders will (x) to the extent known to either of them
after diligent inquiry, promptly advise UAG of any event that has, or could
reasonably be expected in the future to have, a Material Adverse Effect on the
Company, (y) confer on a regular and frequent basis with one or more designated
representatives of UAG to report operational matters and to report the general
status of ongoing operations, and (z) to the extent known to either of them
after diligent inquiry, notify UAG of any emergency or other change in the
normal course of business or relating to the Real Property or Improvements of
the Company and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or adjudicatory
proceedings involving the Company, the Real Property or the Improvements and
will keep UAG fully informed of such events and permit UAG's representatives
access to all materials prepared in connection therewith. Each Stockholder
shall give prompt notice to UAG of any notice or other communication from any
third person asserting any right, title or interest in any of the Shares held by
such Stockholder (including, without limitation, any threat to commence, or
notice of the commencement of any action or other proceeding with respect to the
Shares) or the occurrence of any other event of which such Stockholder has
knowledge which could result in any failure to consummate the sale of the Shares
as contemplated hereby.
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5.10 ASSURANCE BY THE STOCKHOLDERS.
Each Stockholder shall use its best efforts to cause the Company to
comply with its respective covenants set forth in this Agreement.
5.11 ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG, the Stockholders and the Company, as applicable, shall each file
or cause to be filed with the Federal Trade Commission and the United States
Department of Justice any notifications required to be filed by the respective
"ultimate parent" entities under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "H-S-R Act"), and the rules and regulations
promulgated thereunder, with respect to the transactions contemplated herein.
The parties shall use their best efforts to make such filings promptly, to
respond to any requests for additional information made by either of such
agencies, to cause the waiting periods under the H-S-R Act to terminate or
expire at the earliest possible date and to resist vigorously, at their
respective cost and expense (including, without limitation, the institution or
defense of legal proceedings), any assertion that the transactions contemplated
herein constitute a violation of the antitrust laws, all to the end of
expediting consummation of the transactions contemplated herein; PROVIDED,
HOWEVER, that if UAG or the Stockholders shall determine after issuance of any
preliminary injunction that continuing such resistance is not in its or their
best interests, UAG or the Stockholders, as the case may be, may, by written
notice to the other party, terminate this Agreement with the effect set forth in
SECTION 8.2 hereof.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG AND SUB TO EFFECT THE CLOSING
The obligations of UAG and Sub required to be performed by them at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by UAG and Sub as
provided herein except as otherwise required by applicable law:
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6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.
Each of the representations and warranties of the Company and the
Stockholders contained in this Agreement shall be true and correct on the date
made and shall be true and correct in all material respects as of the Closing.
Each of the obligations of the Company and the Stockholders required by this
Agreement to be performed by them at or prior to the Closing shall have been
duly performed and complied with in all material respects as of the Closing. At
the Closing, Sub shall have received a certificate, dated the Closing Date and
duly executed by the Stockholders and the chief financial officer of the
Company, to the effect that the conditions set forth in the two preceding
sentences have been satisfied.
6.2 AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Lease, and the consummation
of the transactions contemplated hereby shall have been duly and validly taken
by the Company. All filings required to be made under the H-S-R Act in
connection with the transactions contemplated hereby shall have been made and
all applicable waiting periods with respect to each such filing, including
extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has a franchise agreement (or
comparable instrument)) required to consummate the transactions contemplated
hereby and all consents or waivers shall have been made or obtained.
6.3 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDERS' COUNSEL.
UAG and Sub shall have been furnished with the opinion of the
Company's and the Stockholders' counsel, dated the Closing Date, in form and
substance reasonably satisfactory to UAG and Sub and their counsel, which
opinion shall have been rendered with respect to those matters contained in
SECTIONS 2.1, 2.2,
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2.3, 2.4, 2.9, 3.1 AND 3.2 hereof. In rendering the foregoing opinion, such
counsel may rely as to factual matters upon certificates or other documents
furnished by officers and directors of the Company and by government officials
and upon such other documents and data as such counsel deem appropriate as a
basis for their opinions. Such opinions may be limited to Georgia and federal
laws.
6.4 ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or delays
the consummation of any of the transactions contemplated hereby or (ii) would
impose any limitation on the ability of UAG or Sub effectively to exercise full
rights of ownership of the Shares. No action, suit or proceeding before any
court or any governmental or regulatory entity shall be pending (or threatened
by any governmental or regulatory entity), and no investigation by any
governmental or regulatory entity shall have been commenced (and be pending),
seeking to restrain or prohibit (or questioning the validity or legality of) the
consummation of the transactions contemplated by this Agreement or seeking
damages in connection therewith which UAG or Sub, in good faith and with the
advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby.
6.5 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1995 to the Closing Date, there
shall not have been any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Company, except for the distribution of those dividends which are permissible
under Section 5.3(vi).
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6.6 WORKING CAPITAL REQUIREMENTS.
On the Closing Date, the Stockholders shall deliver to Sub a balance
sheet of the Company dated as of the most recent practicable date preceding the
Closing Date, prepared in accordance with the Accounting Principles (the
"Estimated Closing Date Balance Sheet"). The Estimated Closing Date Balance
Sheet shall show as of the date thereof, after taking into account the payment
of any of the fees, costs and expenses by the Company incurred in connection
with this Agreement, net working capital of not less than the amount required by
Nissan Motor Corporation USA.
6.7 COMPLETION OF DUE DILIGENCE.
UAG and Sub shall have completed their due diligence examination of
the Company, the Real Property and the Improvements and the results of such
examination, including any Phase I or Phase II environmental audits of the
Company, shall be satisfactory to UAG and Sub; PROVIDED, HOWEVER, that, with the
exception of due diligence relating to any environmental issues, such due
diligence shall be completed, and shall be deemed completed, no later than
forty-five (45) days after the execution of this Agreement. Sub will pay the
costs for a Phase I environmental audit. If, after obtaining the results of the
Phase I environmental audit, Sub determines that a Phase II environmental audit
is required, then Sub and Stockholders shall agree as to a suitable company for
the performance thereof, and the expenses of performing the Phase II
environmental audit shall be paid one-half by Sub and one-half by the
Stockholders.
6.8 LEASE.
The Landlord and the Company shall have entered into the Lease.
6.9 BOARD APPROVAL.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement.
6.10 CERTIFICATES.
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The Stockholders and the Company shall have furnished UAG and Sub with
a certificate, dated as of the Closing Date, executed by the Stockholders
certifying to the fulfillment of the conditions set forth in Section 6.5, 6.6
and 6.14 hereof and shall have furnished UAG and Sub with such any other
certificates of its officers and others as UAG and Sub may reasonably request to
evidence compliance with the conditions set forth in this ARTICLE 6.
6.11 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of the Stockholders and the Company
under the provisions of this Agreement, and all other actions and proceedings
required to be taken by or on behalf of the Stockholders and the Company in
furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel for UAG and Sub.
6.12 APPROVAL OF MANUFACTURER AND DISTRIBUTOR.
The Stockholders and the Company shall have obtained the consent,
authorization and approval of Nissan Motor Corporation USA on terms no less
favorable to those granted to the Company immediately prior to the execution of
this Agreement.
6.13 EMPLOYMENT AGREEMENT.
The Company and Bruce Dunker shall have entered into an employment
agreement for the employment of Bruce Dunker as Executive Manager of the
Company.
6.14 ENVIRONMENTAL LAWS.
The Company shall be in compliance with all applicable Environmental
Laws.
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6.15 NONDISTURBANCE AGREEMENT.
The Landlord shall have obtained a nondisturbance agreement in form
and substance satisfactory to the Company and UAG.
6.16 TITLE INSURANCE.
UAG shall have obtained title insurance on behalf of Company with
respect to its leasehold estate in form and substance satisfactory to UAG.
6.17 LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE.
The appropriate parties shall have executed a Lease Termination
Agreement and a Memorandum of Lease in form and substance satisfactory to UAG
and the Company.
6.18 RESIGNATION OF THE COMPANY'S DIRECTORS.
Each of the persons who is a director of the Company on the Closing
Date shall have tendered to Sub in writing his resignation as such in form and
substance satisfactory to UAG.
6.19 SCHEDULES.
The Company and the Stockholders shall have delivered to UAG and Sub
all Schedules referred to in ARTICLES 2 AND 3 and such Schedules shall be
acceptable in form and substance to UAG and Sub.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
The obligations of the Stockholders and the Company required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may be
waived by the Company and the Stockholders as provided herein except as
otherwise required by applicable law:
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7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
Each of the representations and warranties of UAG and Sub contained in
this Agreement shall be true and correct on the date made and shall be true and
correct in all material respects as of the Closing. Each of the obligations of
UAG and Sub required by this Agreement to be performed by them at or prior to
the Closing shall have been duly performed and complied with in all material
respects as of the Closing. At the Closing, the Stockholders shall have
received a certificate, dated the Closing Date and duly executed by the chief
financial officer of UAG and of Sub to the effect that the conditions set forth
in the preceding two sentences have been satisfied.
7.2 AUTHORIZATION OF THE AGREEMENT, CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, including but not limited to UAG's guarantee
of Sub's lease with Landlord, shall have been duly and validly taken by UAG and
Sub. All filings required to be made under the H-S-R Act in connection with the
transactions contemplated hereby shall have been made and all applicable waiting
periods with respect to each such filing, including extensions thereof, shall
have expired or been terminated.
(b) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has entered into a franchise
agreement (or comparable instrument)) required to consummate the transactions
contemplated hereby and all consents or waivers shall have been made or
obtained.
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7.3 OPINIONS OF UAG'S AND SUB'S COUNSEL.
The Stockholders shall have been furnished with the opinion of Rogers
& Hardin, counsel to UAG and Sub, dated the Closing Date, in form and substance
reasonably satisfactory to the Stockholders and their counsel, which opinions,
when taken together, shall have been rendered with respect to those matters
contained in SECTIONS 4.1 AND 4.2 hereof. In rendering the foregoing opinions,
such counsel may rely as to factual matters upon certificates or other documents
furnished by officers and directors of UAG and Sub and by government officials,
and upon such other documents and data as such counsel deems appropriate as a
basis for its opinion. Such opinions may be limited to Georgia and federal laws
and the General Corporation Law of the State of Delaware.
7.4 ABSENCE OF LITIGATION.
No order, stay, judgment or decree shall have been issued by any court
and be in effect restraining or prohibiting the consummation of the transactions
contemplated hereby.
7.5 LEASE.
The Company shall have entered into the Lease.
7.6 CERTIFICATES.
UAG and Sub shall have furnished the Stockholders with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this ARTICLE 7 as may be reasonably requested by the
Stockholders.
7.7 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG or Sub under the provisions
of this Agreement, and all other actions and proceedings required to be taken by
or on behalf of UAG or Sub in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Stockholders.
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ARTICLE 8
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG, Sub and the Stockholders;
(ii) by either UAG, Sub, or the Stockholders if the Closing
shall not have taken place on or prior to the date established in Section
1.1(b), or such later date as shall have been approved by UAG, Sub and the
Stockholders (provided that the terminating party is not otherwise in
material breach of its representations, warranties, covenants or agreements
under this Agreement);
(iii) by UAG, Sub, or the Stockholders if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG or Sub if any of the conditions specified in
ARTICLE 6 hereof have not been met or waived by UAG and Sub at such time as
such condition is no longer capable of satisfaction (provided that neither
UAG nor Sub is otherwise in material breach of its representations,
warranties, covenants or agreements under this Agreement);
(v) by the Stockholders if any of the conditions specified in
ARTICLE 7 hereof have not been met or waived by the Stockholders at such
time as such condition is no longer capable of satisfaction (provided that
neither the Stockholders nor the Company is otherwise in material breach of
his or its representations, warranties covenants or agreements under this
Agreement); or
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(vi) by either UAG, Sub or the Stockholders if there has been a
material breach on the part of the other of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach has not
been cured within ten (10) Business Days following receipt by the breaching
party of written notice of such breach.
If UAG, Sub or the Stockholders shall terminate this Agreement
pursuant to the provisions hereof, such termination shall be effected by notice
to the other parties specifying the provision hereof pursuant to which such
termination is made.
8.2 EFFECT OF TERMINATION.
Except (i) for any breach of this Agreement prior to its termination,
and (ii) for the obligations contained in SECTIONS 5.1 AND 10.2 hereof, and
(iii) as set forth in SECTION 9.1 and SECTION 9.2 hereof, upon the termination
of this Agreement pursuant to SECTION 8.1 hereof, this Agreement shall forthwith
become null and void and none of the parties hereto or any of their respective
officers, directors, employees, agents, Affili-ates, consultants, stockholders
or principals shall have any liability or obligation hereunder or with respect
hereto.
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ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE STOCKHOLDERS.
Notwithstanding the Closing or the delivery of the Shares, the
Stockholders indemnify and agree to fully defend, save and hold harmless on an
after-tax basis UAG, Sub, the Company (after the Closing), and any of their
respective officers, directors, employees, stockholders, advisors,
representatives, agents and Affiliates (other than the Stockholders) (each a
"UAG Indemnified Party"), if a UAG Indemnified Party (including the Company
after the Closing Date) shall at any time or from time to time suffer any Costs
(as defined in SECTION 9.7 below) arising, directly or indirectly, out of or
resulting from, or shall pay or become obligated to pay any sum on account of,
(i) any and all Stockholders Events of Breach (as defined below) or (ii) any
Claim before or by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity, which Claim involves, affects or relates to
any assets, properties or operations of the Company or the conduct of the
business of the Company prior to the Closing Date (a "Stockholders Third Party
Claim"). As used herein, "Stockholders Event of Breach" shall be and mean any
one or more of the following: (i) any untruth or inaccuracy in any
representation of any Stockholder or the Company or the breach of any warranty
of any Stockholder or the Company contained in this Agreement, including,
without limitation, any misrepresentation in, or omission from, any statement,
certificate, schedule, exhibit, annex or other document furnished pursuant to
this Agreement by any Stockholder or the Company (or any representative of any
Stockholder or the Company) to UAG or Sub (or any representative of UAG or Sub)
and any misrepresentation in or omission from any document furnished to UAG or
Sub in connection with the Closing, and (ii) any failure of any Stockholder or
the Company duly to perform or observe any term, provision, covenant, agreement
or condition on the part of such Stockholder or the Company to be performed or
observed under the terms of this Agreement.
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9.2 INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees to fully
defend, save and hold harmless on an after-tax basis the Stockholders, the
Company (prior to the Closing), and any of their respective officers, directors,
employees, stockholders, advisors, representatives, agents and Affiliates (each
a "Stockholder Indemnified Party"), if a Stockholder Indemnified Party
(including the Company prior to Closing) shall at any time or from time to time
suffer any Costs arising, directly or indirectly, out of or resulting from, or
shall pay or become obligated to pay any sum on account of, (i) any and all UAG
Events of Breach (as defined below) or (ii) any Claim before or by any court,
arbitrator, panel, agency or other governmental, administrative or judicial
entity, which Claim involves, affects or relates to any assets, properties or
operations of UAG or Sub or the conduct of the business of UAG prior to the
Closing Date (a "UAG Third Party Claim"). As used herein, "UAG Event of Breach"
shall be and mean any one or more of the following: (i) any untruth or
inaccuracy in any representation of UAG or Sub or the breach of any warranty of
UAG or Sub contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to this Agreement by UAG or
Sub (or any representative of UAG or Sub) to the Stockholders (or any
representative of the Stockholders) and any misrepresentation in or omission
from any document furnished to the Stockholders in connection with the Closing,
and (ii) any failure of UAG or Sub duly to perform or observe any term,
provision, covenant, agreement or condition on the part of UAG or Sub to be
performed or observed.
9.3 PROCEDURES.
If (i) any Stockholders Event of Breach occurs or is alleged and a UAG
Indemnified Party asserts that the Stockholders have become obligated to a UAG
Indemnified Party pursuant to SECTION 9.1, or if any Stockholder's Third Party
Claim is begun, made or instituted as a result of which the Stockholders may
become obligated to a UAG Indemnified Party hereunder, or (ii) a UAG Event of
Breach occurs or is alleged and a Stockholder Indemnified Party asserts that UAG
has become obligated to a Stockholder Indemnified Party pursuant to SECTION
9.2, or if any UAG Third Party Claim is begun, made or instituted as a result of
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which UAG may become obligated to a Stockholder Indemnified Party hereunder (for
purposes of this ARTICLE 9, any UAG Indemnified Party and any Stockholder
Indemnified Party is sometimes referred to as an "Indemnified Party" and UAG and
the Stockholders are sometimes referred to as an "Indemnifying Party," and any
UAG Third Party Claim and any Stockholders Third Party Claim is sometimes
referred to as a "Third Party Claim," in each case as the context so requires),
such Indemnified Party shall give prompt and timely written notice to the
Indemnifying Party of its or his obligation to provide indemnification
hereunder, provided that any failure to so notify the Indemnifying Party shall
not, in the absence of any Cost to the Indemnifying Party resulting from such
failure to notify, relieve them from any liability that it or he may have to the
Indemnified Party under this ARTICLE 9. If such notice relates to a Third Party
Claim, each Indemnifying Party, jointly and severally, agrees to defend, contest
or otherwise protect such Indemnified Party against any such Third Party Claim
at Indemnifying Party's sole cost and expense. Such Indemnified Party shall
have the right, but not the obligation, to participate at its own expense in the
defense thereof by counsel of such Indemnified Party's choice and shall in any
event cooperate with and assist the Indemnifying Party to the extent reasonably
possible. If the Indemnifying Party fails after written notice to timely
defend, contest or otherwise protect against such Third Party Claim, such
Indemnified Party shall have the right to do so, including, without limitation,
the right to make any compromise or settlement thereof, and such Indemnified
Party shall be entitled to recover the entire Cost thereof from the Indemnifying
Party, including, without limitation, reasonable attorneys' fees, disbursements
and amounts paid (or of which such Indemnified Party has become obligated to
pay) as the result of such Third Party Claim. Failure by the Indemnifying Party
to notify such Indemnified Party of its or their election to defend any such
Third Party Claim within fifteen (15) days after notice thereof shall have been
given to the Indemnifying Party shall be deemed a waiver by the Indemnifying
Party of its or their right to defend such Third Party Claim. If the
Indemnifying Party assumes the defense of the particular Third Party Claim, the
Indemnifying Party shall not, in the defense of such Third Party Claim, consent
to entry of any judgment or enter into any settlement, except with the written
consent of such Indemnified Party, which consent shall not be unreasonably
withheld based upon the merits and exposure to liability of that Third Party
Claim. In addition, the Indemnifying Party shall not enter into any
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settlement of any Third Party Claim (except with the written consent of such
Indemnified Party) which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to such Indemnified Party the same
release from liability in respect of such Third Party Claim as has been received
by the Indemnifying Party. Notwithstanding the foregoing, the Indemnifying
Party shall not be entitled to control (but shall be entitled to participate at
their own expense in the defense of), and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of any Third Party
Claim to the extent the Third Party Claim seeks an order, injunction or other
equitable relief against the Indemnified Party which, if successful, could
materially interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnified Party; PROVIDED, HOWEVER, that the
Indemnified Party shall not have sole control over, and the Indemnified Party
and the Indemnifying Party shall cooperate with each other with respect to, the
defense or settlement of any Third Party Claim that seeks both damages and such
equitable relief against the Indemnified Party.
9.4 OFFSET.
In addition to and not in limitation of all rights of offset that an
Indemnified Party may have under applicable law, the parties agree that, at any
Indemnified Party's option, any or all amounts owing to such Indemnified Party
under this ARTICLE 9 or any other provision of this Agreement or any other
liability of the other parties (or any Affiliate of the other parties) to such
Indemnified Party in connection with this Agreement or the transactions
contemplated hereby, may be recovered by the Indemnified Party by an offset
against any or all amounts due to such other parties pursuant to this Agreement
or the transactions contemplated hereby; provided, however that such shall not
include offsets in Company's future rent obligations to Landlord.
9.5 REMEDIES.
The rights of an Indemnified Party under this ARTICLE 9 are in
addition to such other rights and remedies which such Indemnified Party may have
under this Agreement, applicable law or otherwise.
9.6 LIMITATION ON INDEMNIFICATION.
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No Indemnified Party shall be entitled to indemnification for any
Costs hereunder unless the aggregate amount of Costs incurred by such party
exceeds $100,000, in which event such party shall be entitled to indemnification
for all such Costs, without regard to such threshold.
9.7 DEFINITIONS.
For purposes of this ARTICLE 9, "Costs" shall mean all liabilities,
losses, costs, damages (not including consequential damages), expenses, claims,
reasonable attorneys' fees, experts' fees, consultants' fees, and disbursements
of any kind or of any nature whatsoever. For purposes of application of the
indemnity provisions of this ARTICLE 9, the amount of any Cost arising from the
breach of any representation, warranty, covenant or agreement shall be the
entire amount of any Cost suffered, paid or required to be paid by the
respective Indemnified Party as a result of such breach.
ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
The respective representations, warranties, covenants and agreements
of each of the parties to this Agreement (except covenants and agreements which
are expressly required to be performed and are performed in full on or before
the Closing Date) shall survive the Closing Date and the consummation of the
transactions contemplated by this Agreement. In the event of a breach of any
such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have, subject to
ARTICLE 9 hereof, all rights and remedies for such breach available to it under
the provisions of this Agreement or otherwise, whether at law or in equity, but
in no instance for any period of time which extends more than three (3) years
from the Closing Date, regardless of any disclosure to, or investigation made by
or on behalf of, such party on or before the Closing Date.
10.2 FEES AND EXPENSES.
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Except as otherwise expressly provided in this Agreement, all legal
and other fees, costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby through the Closing Date shall be paid
by the party incurring such fees, costs or expenses; PROVIDED, HOWEVER, that if
the Closing does not occur and SECTION 5.5 hereof has been breached prior to the
termination of this Agreement, then the Stockholders or the Company shall pay to
UAG, within five (5) Business Days after receipt of a request therefor, an
amount equal to all of the reasonable legal and other fees, and other direct
costs and expenses incurred by UAG in connection with this Agreement and the
transactions contemplated hereby.
10.3 HEADINGS.
The section headings herein are for convenience of reference only, do
not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
10.4 NOTICES.
All notices or other communications required or permitted hereunder
shall be given in writing and shall be deemed sufficient if delivered by hand,
recognized overnight delivery service or facsimile transmission or mailed by
registered or certified mail, postage prepaid (return receipt requested), as
follows:
If to the Company before the Closing date:
Steve Rayman Nissan, Inc.
6889 Jonesboro Road
Morrow, Georgia 30260
Attn: Steven L. Rayman
with a copy to:
Underwood, Kinsey, Warren & Tucker, P.A.
2020 Charlotte Plaza
201 South College Street
Charlotte, North Carolina 28244
Attn: Joseph Warren, III, Esq.
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If to the Company after the Closing Date:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and General Counsel
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Facsimile No.: (404) 525-2224
Attn: Michael Rosenzweig
If to the Stockholders:
Steven L. Rayman
3014 Lake Park Drive
Jonesboro, Georgia 30236_
and
Richard W. Keffer, Jr.
8200 E. Independence Blvd.
Charlotte, North Carolina 28227
with a copy to:
Underwood, Kinsey, Warren & Tucker, P.A.
2020 Charlotte Plaza
201 South College Street
Charlotte, North Carolina 28244
Attn: Joseph Warren, III, Esq.
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If to UAG or Sub:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and General Counsel
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Facsimile No.: (404) 525-2224
Attn: Michael Rosenzweig
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or three (3) days after the date so mailed;
PROVIDED, HOWEVER, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
10.5 ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto (and with respect to the
Stockholders, the personal representatives and heirs of the Stockholders) and
their respective successors and permitted assigns, and the provisions of ARTICLE
9 hereof shall inure to the benefit of the Indemnified Parties referred to
therein; PROVIDED, HOWEVER, that neither this Agreement nor any of the rights,
interests, or obligations hereunder may be assigned by any of the parties hereto
without the prior written consent of the other parties. Notwithstanding the
foregoing, UAG and Sub shall have the unrestricted right to assign this
Agreement and to delegate all or any part of their obligations hereunder to any
Affiliate of UAG, but in such event UAG and Assignee shall remain fully liable
for the performance of all of such obligations in the manner prescribed in this
Agreement.
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10.6 ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Lease embody
the entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated hereby other than those expressly set forth herein or
in the Lease. Prior drafts of this Agreement shall not be used as a basis for
interpreting this Agreement.
10.7 WAIVER AND AMENDMENTS.
Each of the Stockholders and the Company as one Party, and UAG and Sub
as the other Party may by written notice to the other parties (i) extend the
time for the performance of any of the obligations or other actions of the other
parties, (ii) waive any inaccuracies in the representations or warranties of the
other parties contained in this Agreement, (iii) waive compliance with any of
the covenants of the other parties contained in this Agreement, (iv) waive
performance of any of the obligations of the other parties created under this
Agreement, or (v) waive fulfillment of any of the conditions to its own
obligations under this Agreement. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach, whether or not similar. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the parties
hereto.
10.8 COUNTERPARTS.
This Agreement may be executed by facsimile signature(s) and in any
number of counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original.
10.9 GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Georgia.
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10.10 ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined or
modified in this Agreement shall have the respective meanings given to them in
accordance with GAAP.
10.11 CERTAIN DEFINITIONS.
For purposes of this Agreement:
(a) "Affiliate" of a specified Person shall mean a Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified, and in the
case of a specified Person who is a natural person, his spouse, his issue, his
parents, his estate and any trust entirely for the benefit of his spouse and/or
issue.
(b) "best efforts" shall be deemed to not include any obligation on
the part of any Person to undertake any liabilities, expend any funds or perform
acts (except liabilities, expenditures or performance, other than any best
efforts obligations, expressly required to be undertaken by the terms of this
Agreement) which are materially burdensome to such Person; PROVIDED, HOWEVER,
that notwithstanding the foregoing, the term "best efforts" shall include an
obligation to take such actions which are normally incident to or reasonably
foreseeable in connection with such obligation or the transactions contemplated
hereby.
(c) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(d) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States on the Closing Date.
(e) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditional and installment sale
agreements, encumbrances or charges of any kind.
(f) "Material Adverse Effect" shall mean any change in, or effect on,
the Company (including the business thereof) which
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is, or could reasonably be expected to be, materially adverse to the business,
operations, assets, condition (financial or otherwise) or prospects of the
Company.
(g) "Person" shall mean and include an individual, corporation,
limited liability company, partnership, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereto.
10.12 SCHEDULES.
Disclosure of any matter in any Schedule hereto or in the Financial
Statements shall not be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule to
this Agreement.
10.13 SEVERABILITY.
If any one or more of the provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
10.14 REMEDIES.
None of the remedies provided for in this Agreement, including
termination of this Agreement as set forth in ARTICLE 8, indemnification as set
forth in ARTICLE 9, the payment of certain fees, costs and expenses as set forth
in SECTION 10.2 or specific performance as set forth in this SECTION 10.14,
shall be the exclusive remedy of either party for a breach of this Agreement,
the parties hereto having the right to seek any other remedy in law or equity in
lieu of or in addition to any remedies provided in this Agreement, including an
action for damages for breach of contract.
10.15 TAXES AND COOPERATION.
The parties hereby agree that the accounting records and books of the
Company will be closed on the Closing Date and agree
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that the pro rata allocation method provided in Section 1362(e)(2) of the Code
does not apply. The Company will make an election under Section 1362(e)(3) of
the Code for purposes of determining the Company's taxable income or loss to be
reported on the Stockholders' Form K-1, and each party hereto will take all
necessary or proper steps and make any filings or notifications required to
effect such Section 1362(e)(3) election. The parties hereto agree that the
accounting firm that prepared the Company's 1994 tax return will prepare the
Company's final S corporation tax return. The Company agrees that it will make
its books and records available to the Stockholders and their representatives,
upon reasonable notice and at reasonable times, without cost or expense to them,
it being understood that the Stockholders shall be entitled to make copies of
any such books and records as shall be reasonably necessary. In the event the
Internal Revenue Service or any other taxing authority initiates an examination
of the Company with respect to a taxable period that could impact the
Stockholders' tax liability for any year, UAG shall promptly notify the
Stockholders of such examination, and the Stockholders shall have the right to
control the defense of the Company and shall have reasonable access to all
Company records in order to respond to any proposed adjustments that would
impact the Stockholders.
10.16 TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ Carl Spielvogel
------------------------------------
Name: Carl Spielvogel
Title: Chairman, Chief Executive Officer
UAG ATLANTA II, INC.
By: /s/ George Lowrance
------------------------------------
Secretary
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Name:
Title:
STEVE RAYMAN NISSAN, INC.
By: /s/Steve L. Rayman
______________________________
Name:
Title:
/s/Steve L. Rayman
__________________________________
Steve L. Rayman
/s/Richard W. Keffer, Jr.
_________________________________
Richard W. Keffer, Jr.
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EMPLOYMENT AGREEMENT
This Employment Agreement is dated as of May 1, 1996, and is entered
into between United Auto Group, Inc., a Delaware corporation ("UAG"), UAG
Atlanta II, Inc., a Delaware corporation ("UAG Atlanta II"), Steve Rayman
Nissan, Inc., a Georgia corporation (the "Company") and Bruce G. Dunker, an
individual resident of the State of Georgia ("Executive").
WHEREAS, Executive and the Company desire to embody in this Agreement
the terms and conditions of Executive's employment by the Company.
NOW, THEREFORE, the parties hereby agree:
ARTICLE 1
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
SECTION 1.1 EMPLOYMENT.
Executive shall be employed as President and General Manager of the
Company and Executive Vice-President of UAG Atlanta II. Executive hereby
accepts such employment. Executive agrees to devote his full business time and
efforts to promote the interests of the Company and its subsidiaries.
SECTION 1.2 DUTIES AND RESPONSIBILITIES.
Executive shall be required to perform such duties and
responsibilities as are consistent with his positions and as the Board of
Directors of the Company (the "Board") and/or the Chief Executive Officer of
United Auto Group, Inc. ("UAG") may from time to time prescribe. Executive
shall perform those duties primarily at the Company's facilities in Morrow,
Georgia.
SECTION 1.3 REPORTING.
Executive shall report, in the performance of his duties, directly to
the Chief Executive Officer of UAG.
ARTICLE 2
TERM
SECTION 2.1 TERM.
The term of Executive's employment under this Agreement (the "Term")
shall commence on May 1, 1996 and shall continue until April 30, 2001; provided
that this Agreement may be terminated earlier as provided in Article V hereof.
<PAGE>
SECTION 2.2 NO VIOLATION.
Executive represents and warrants to the Company and UAG Atlanta II
that neither the execution and delivery of this Agreement nor the performance of
his duties hereunder violates or will violate the provisions of any other
agreement to which he is a party or by which he is bound.
ARTICLE 3
COMPENSATION AND EXPENSES
SECTION 3.1 SALARY AND BENEFITS.
As compensation and consideration for the performance by Executive of
his obligations under this Agreement, Executive shall be entitled to the
following (subject, in each case, to the provisions of Article 5 hereof):
(a) SALARY. The Company shall pay Executive a salary payable in
accordance with the normal payment procedures of the Company and subject to such
withholdings and other normal employee deductions as may be required by law, at
the rate of Two Hundred Fifty Thousand Dollars ($250,000) per annum (or such PRO
RATA amount thereof for any period of less than one year). In addition, the
Company shall pay executive a bonus to be determined in accordance Section 3.2
hereof.
(b) BENEFIT PLANS. The Company shall, at its expense, provide the
Executive with health, major medical insurance and other plans for the benefit
of the employees of the Company as may be maintained from time to time during
the Term, if at all, in each case to the extent and in the manner available to
other officers of the Company and subject to the terms and provisions of such
plans or programs. The Company shall not be responsible for the payment of
Executive's tax liabilities (if any) relating to the benefits the Company
provides to the Executive.
(c) VACATION. Executive shall be entitled to a paid vacation in
accordance with Company policy during the Term.
(d) VEHICLE. Executive shall be entitled to the use of one vehicle
selected by Executive subject to the same terms and conditions applicable to
other employees of the Company who are provided with a demonstrator vehicle. In
the event that Executive's spouse ceases to be employed by a company whose
business includes the retail sale of new vehicles, then Executive shall be
entitled to the use of one additional vehicle subject to the same terms and
conditions applicable to other employees of the Company who are provided with a
demonstrator vehicle.
(e) STOCK OPTIONS. Executive shall be entitled to receive, from time
to time, stock options on terms and conditions
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comparable to stock options, if any, that UAG grants to employees of UAG or any
of its subsidiaries with responsibilities and duties similar to the
responsibilities and duties of Executive under this Agreement; provided,
however, that the decision to grant stock options shall be made by UAG in its
sole discretion.
(f) OTHER COMPENSATION. Executive shall be entitled to receive such
other compensation and bonuses as may be granted to Executive by UAG in its sole
discretion.
SECTION 3.2 BONUSES.
(a) NET INCOME BONUS. The Company shall pay Executive a monthly
bonus (the "Net Income Bonus") equal to three percent (3%) of the Company's
monthly net income before (i) taxes, (ii) any interest charges other than
interest charges relating to floor plan financing, (iii) any LIFO adjustments,
(iv) any management charges paid to UAG, and (v) the Net Income Bonus ("Monthly
Net Income") for the month ending May 31, 1996 and for each month thereafter
until the expiration of the Term or the earlier termination of the Agreement
pursuant to Article 5 hereof. For purposes of this Section 3.2, Monthly Net
Income shall be determined by applying generally accepted accounting principles
on a consistent basis and shall not include overhead expenses of UAG or UAG
Atlanta II attributed to the Company.
(b) CUSTOMER SATISFACTION BONUS. The Company shall pay Executive an
additional bonus equal to two percent (2%) of the Company's Monthly Net Income
(the "Customer Service Bonus") for each month that the Company meets or exceeds
the Nissan Customer Service Retro Bonus (or any successor index as may be
announced by Nissan) commencing with the month ending May 31, 1996 and for each
month thereafter until the expiration of the Term or the earlier termination of
the Agreement pursuant to Article 5 hereof.
(c) PAYMENT OF BONUSES. The Company shall pay the Net Income Bonus
and the Customer Service Bonus, if any, within 30 days after the last day of the
month for which such bonus is being paid.
ARTICLE 4
EXCLUSIVITY, ETC.
SECTION 4.1 EXCLUSIVITY.
Executive agrees to perform his duties, responsibilities and
obligations hereunder to the best of his ability. Executive agrees that he will
devote his entire working time, care and attention and best efforts to such
duties, responsibilities and obligations throughout the Term. Executive also
agrees that he will not engage in any other business activities, pursued for
gain, profit or other pecuniary advantage, that are competitive with the
activities of the Company or any of its subsidiaries, except as
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permitted in Section 4.2 below. Executive agrees that all of his activities as
an employee of the Company shall be in conformity with all policies, rules and
regulations and directions of the Company not inconsistent with this Agreement.
SECTION 4.2 OTHER BUSINESS VENTURES.
Executive agrees that, so long as he is employed by the Company, he
will not have any financial or other beneficial interest in any business
enterprise which is engaged in, or competitive with, any business engaged in by
the Company or any of its subsidiaries or affiliates. Notwithstanding the
foregoing, Executive may own, directly or indirectly, up to one percent (1%) of
the outstanding capital stock of any such business having a class of capital
stock which is traded on any national stock exchange or in the over-the-counter
market.
SECTION 4.3 CONFIDENTIALITY; NON-COMPETITION.
(a) Executive agrees that he will not, other than for proper purposes
of the Company, at any time during or after the Term, wrongfully make use of or
divulge to any other person, firm or corporation any trade or business secret,
process, method or means, or any other confidential information concerning the
business or policies of the Company, any of its subsidiaries or their
affiliates, except as may be necessary for Executive to carry out his duties
hereunder. For purposes of this Agreement, a "trade or business secret,
process, method or means, or any other confidential information" shall mean and
include information treated as confidential or as a trade secret by the Company,
any of its subsidiaries or their affiliates, including but not limited to any
confidential information regarding contemplated products, models, compilations,
business and financial methods or practices, marketing, merchandising and
selling techniques, customers, vendors, suppliers, trade secrets, training
programs, manuals or materials, technical information, contracts, systems,
procedures, mailing lists, trade names, improvements, pricing, price lists,
financial or other data (including the revenues, costs or profits associated
with any of the Company's or its subsidiaries' products or services), business
plans, strategy, code books, invoices and other financial statements, computer
programs, software systems, databases, discs and printouts, other plans
(technical or otherwise), customer lists, supplier lists, confidential
correspondence, internal reports, personnel files, confidential sales and
advertising material, unlisted telephone numbers, names, addresses or any other
compilation of confidential information, written or unwritten, which is or was
used in the business of the Company, any of its subsidiaries or their
affiliates, and which was not generally known or available in the industry.
Executive's obligation under this Section 4.3(a) shall not apply to any
information which is in the public domain or hereafter enters the public domain
without the fault of Executive, or information generally known to Executive
based on his experience and work in the industry.
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Executive agrees not to remove from the premises of the Company or any of its
subsidiaries, except as an employee of the Company in pursuit of the business of
the Company or except as specifically permitted in writing by the Company, any
document or other object containing or reflecting any such information.
Executive agrees and acknowledges that all of such information, in any form, and
copies and extracts thereof, are and shall remain the sole and exclusive
property of the Company, and upon termination of his employment with the
Company, Executive shall return to the Company the originals and all copies of
any such information provided to or acquired by Executive in connection with the
performance of his duties for the Company, and shall return to the Company all
files, correspondence and/or other communications received, maintained and/or
originated by Executive during the course of his employment, and no copy of any
such information shall be retained by him.
(b) During the Term and thereafter until May 1, 2003, Executive shall
not wrongfully interfere with or disrupt, or attempt to wrongfully interfere
with or disrupt, the relationship, contractual or otherwise, between the Company
or any of its subsidiaries or their affiliates and any customer, client,
supplier, manufacturer, distributor, consultant, independent contractor or
employee of the Company or any of its subsidiaries or their affiliates. The
provisions of this Section 4.3(b) shall not apply if the Executive is terminated
by the Company without Cause. For purposes of this Agreement, "Cause" shall
mean: (i) Executive's material failure, neglect or refusal to reasonably perform
his duties hereunder, which failure, neglect or refusal shall not have been
remedied by Executive within five (5) days of receipt by Executive of written
notice from the Company of such failure, neglect or refusal, (ii) Executive's
material refusal to follow the lawful and proper instructions, orders or
directives of the Board or the Chief Executive Officer of UAG with respect to
his duties and responsibilities hereunder, which refusal shall not have been
remedied by Executive within five (5) days of receipt by Executive of written
notice from the Company of such refusal; (iii) any willful or intentional act of
Executive that is intended to and has the effect of materially injuring the
reputation or business of the Company or its affiliates, (iv) any continued or
repeated absence from the Company, unless such absence is (A) approved or
excused by the Board or (B) is the result of Executive's illness, disability or
incapacity or a personal or family emergency, (v) use of illegal drugs by
Executive, (vi) conviction of Executive for, or the entry of a plea (including
nolo contenders or its equivalent) by Executive with respect to, a felony (or
equivalent offense not categorized as a "felony") under federal or state law
which has the effect of materially injuring the reputation or business of the
Company or its affiliates, (vii) the commission by Executive and conviction of a
material and intentional act of fraud or embezzlement against the Company, or
(viii) Executive's other material breach of this Agreement which breach shall
not have been remedied by Executive within five (5) days of receipt by Executive
of written notice from the Company of such breach.
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(c) It is the desire and intent of the parties that the provisions of
this Section 4.3 shall be enforced to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular portion of this Section 4.3 shall be
adjudicated to be invalid or unenforceable, this Section 4.3 shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of this
Section 4.3 in the particular jurisdiction in which such adjudication is made.
(d) Executive agrees that, at any time and from time to time during
and after the Term, he will execute any and all documents which the Company may
deem reasonably necessary or appropriate to effectuate the provisions of this
Section 4.3.
ARTICLE 5
TERMINATION
SECTION 5.1 TERMINATION BY THE COMPANY.
Subject to Section 5.5, the Company shall have the right to terminate
Executive's employment at any time.
SECTION 5.2 TERMINATION BY THE EXECUTIVE.
The Executive shall have the right to terminate his employment at any
time upon sixty (60) days' prior written notice.
SECTION 5.3 DEATH.
In the event Executive dies during the Term, this Agreement shall
automatically terminate (subject to Section 5.5 hereof), such termination to be
effective on the date of Executive's death.
SECTION 5.4 DISABILITY.
In the event that Executive shall suffer a disability which shall have
prevented him from performing satisfactorily his obligations hereunder for a
period of at least 90 consecutive days, or 180 non-consecutive days within any
365 day period, the Company shall have the right to terminate this Agreement
(subject to Section 5.5 hereof), such termination to be effective upon the
giving of notice thereof to Executive in accordance with Section 6.2 hereof.
SECTION 5.5 EFFECT OF TERMINATION.
(a) In the event of termination of Executive's employment for any
reason, the Company shall pay to Executive (or his beneficiary in the event of
his death) any salary or bonuses earned but
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not paid to Executive prior to the effective date of such termination.
(b) In the event that the Company terminates Executive's employment
without Cause prior to the end of the term, the Company shall, for a period of
12 months following such termination, continue to (i) pay to Executive his Base
Salary, (ii) provide Executive with one or more vehicles on the terms set forth
in Section 3.1(d) and (iii) provide Executive with medical benefits on the terms
set forth in Section 3.1(b).
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 UAG GUARANTY.
UAG hereby guarantees the performance of the obligations of the
Company and UAG Atlanta II hereunder.
SECTION 6.2 BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY.
This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, including, without limitation, any
corporation or person which may acquire all or substantially all of the
Company's assets or business, or with or into which the Company may be
consolidated or merged. This Agreement shall also inure to the benefit of, and
be enforceable by, Executive and his personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amount would still be payable to
Executive hereunder if he had continued to live, all such amounts shall be paid
in accordance with the terms of this Agreement to Executive's beneficiary,
devisee, legatee or other designee, or if there is no such designee, to
Executive's estate.
SECTION 6.3 NOTICES.
Any notice required or permitted hereunder shall be in writing and
shall be sufficiently given if personally delivered or if sent by telegram or
telex or by registered or certified mail, postage prepaid, with return receipt
requested, addressed: (a) in the case of the Company to c/o United Auto Group,
Inc. 375 Park Avenue, New York, New York 10022, facsimile no. (212) 223-5148,
Attention: General Counsel, or to such other address and/or to the attention of
such other person as the Company shall designate by written notice to Executive;
and (b) in the case of Executive, to Bruce G. Dunker at 1690 Spinnaker Drive,
Alpharetta, Georgia 30202, or to such other address as Executive shall designate
by written notice to the Company. Any notice given hereunder shall be effective
and deemed to have been given as of the date so delivered or three (3) days
after the date so mailed.
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SECTION 6.4 AMENDMENT.
This Agreement may not be changed or modified except by an instrument
in writing signed by both of the parties hereto.
SECTION 6.5 WAIVER.
The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof. Any waiver must be in
writing and signed by Executive or the Company, as the case may be.
SECTION 6.6 HEADINGS.
The Article and Section headings herein are for convenience of
reference only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
SECTION 6.7 AGREEMENT TO TAKE ACTIONS.
Each party hereto shall execute and deliver such documents,
certificates, agreements and other instruments, and shall take such other
actions, as may be reasonably necessary or desirable in order to perform his or
its obligations under this Agreement or to effectuate the purposes hereof.
SECTION 6.8 SURVIVORSHIP.
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
SECTION 6.9 VALIDITY.
The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other
provision or provisions of this Agreement, which shall remain in full force and
effect.
SECTION 6.10 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement effective as of the date first above written.
STEVE RAYMAN NISSAN, INC.
By: /s/ Steve L. Rayman
--------------------------------
Its: President
--------------------------------
UNITED AUTO GROUP, INC.
By: /s/ George Lowrance
--------------------------------
Its: Secretary
--------------------------------
UAG ATLANTA II, INC.
By: /s/ George Lowrance
--------------------------------
Its: Secretary
--------------------------------
/s/ Bruce G. Dunker
-------------------------------------
Bruce G. Dunker, Individually
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AFTER RECORDING RETURN TO:
STEPHEN R. LEEDS, ESQ.
ROGERS & HARDIN
2700 CAIN TOWER, PEACHTREE CENTER
229 PEACHTREE STREET N.E.
ATLANTA, GEORGIA 30303
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") made this 1st day of May, 1996, by and
between STEVEN L. RAYMAN and RICHARD W. KEFFER, JR. (jointly and severally
referred to herein as "Landlord"), whose addresses are 3014 Lake Park Drive,
Jonesboro, GA 30236 and 8200 E. Independence Blvd., Charlotte, NC 28227,
respectively and STEVE RAYMAN NISSAN, INC., a Georgia corporation ("Tenant"),
whose address is 6889 Jonesboro Road, Morrow, Georgia 30260.
W I T N E S S E T H:
FOR AND IN CONSIDERATION of the sum of $10.00 Dollars in hand paid and
of the mutual covenants and conditions contained herein, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. PREMISES. Landlord leases to Tenant and Tenant leases from
Landlord the following property:
All that tract or parcel of land containing approximately
5.5 acres, lying and being in Land Lots 81 and 112 of the
12th District of Clayton County, City of Morrow, Georgia,
being more particularly described on EXHIBIT A, attached
hereto and incorporated by reference herein.
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together with all improvements thereon and all rights, privileges, easements and
appurtenances pertaining thereto (collectively, the "Premises") upon the terms
contained herein.
2. TERM. The term hereof shall begin on the date hereof and shall
end on midnight April 30, 2016, unless extended or sooner terminated as provided
herein ("Term").
3. RENT.
(a) During the first (1st) through the sixtieth (60th) month of the
Term, Tenant agrees to pay to Landlord, as rent for the Premises, the sum of
Twenty-Six Thousand and Fifty ($26,050.00) Dollars per month ("Base Rate").
(b) During the sixty-first (61st) through the one hundred twentieth
(120th) month of the Term, Tenant agrees to pay to Landlord, as rent for the
Premises, the Base Rate per month plus a percentage of the Base Rate per month,
which percentage shall be three-fourths (3/4) of the percentage increase in the
Consumer Price Index between the first month of the Term and the sixtieth (60th)
month of the Term (the "First CPI Adjusted Rent Rate").
(c) During the one hundred twenty-first (121st) through the one
hundred eightieth (180th) month of the Term, Tenant agrees to pay to Landlord,
as rent for the Premises, the First CPI Adjusted Rent Rate per month plus a
percentage of the First CPI Adjusted Rent Rate per month, which percentage shall
be three-fourths (3/4) of the percentage increase in the Consumer Price Index
between the Sixtieth (60th) month of Term and the one hundred twentieth (120th)
month of the Term (the "Second CPI Adjusted Rent Rate").
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(d) During the one hundred eighty-first (181st) month of the Term
through the two hundred fortieth (240th) month of the Term, Tenant agrees to pay
to Landlord, as rent for the Premises, the Second CPI Adjusted Rent Rate per
month plus a percentage of the Second CPI Adjusted Rent Rate per month, which
percentage shall be three-fourths (3/4) of the percentage increase in the
Consumer Price Index between the one hundred twentieth (120th) month of the Term
and the one hundred eightieth (180th) month of the Term (the "Third CPI Adjusted
Rent Rate").
(e) (i) For purposes of this Lease, the following definitions shall
apply:
(A) The term "CONSUMER PRICE INDEX" shall mean the
Consumer Price Index for All Urban Consumers of Atlanta, Georgia (all
items, 1982-84=100) published by the Bureau of Labor Statistics,
United States Department of Labor.
(B) In computing increases in the Consumer Price Index
the parties will utilize the Consumer Price Index most recently
published prior to the dates called for in this Lease.
(ii) In the event that (A) the Consumer Price Index ceases
to use 1982-84=100 as the basis of calculation, or (B) the Consumer
Price Index shall be discontinued for any reason, the Bureau of Labor
Statistics shall be requested to furnish a new index comparable to the
Consumer Price Index together with information which will make
possible the conversion to the new index in computing
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the adjusted rent under this paragraph 3 and paragraph 40 of this
Lease. If for any reason the Bureau of Labor Statistics does not
furnish such an index and such information, the parties hereto shall
hereafter accept and use such other index or comparable statistics on
the cost of living for the City of Atlanta, Georgia as shall be
computed and published by an agency of the United States or by a
responsible financial periodical of recognized authority then to be
selected by Landlord and Tenant.
(f) Rent during the Term hereof shall be due and payable at
Landlord's office at the above address on or before the first day of each
calendar month thereof. Any rent payment not received by the fifth (5th)
day after notice of non-payment to Tenant by Landlord shall be subject to
an interest charge at the prime commercial rate (as quoted on a daily basis
by NationsBank, or, if not available, another large banking institution
with offices situated in Atlanta, Georgia) plus two (2%) percent per annum
("Interest Rate"), which charge the parties agree is a fair estimation of
the damages which may reasonably be expected to be incurred by Landlord in
connection with receiving such late payment.
(g) If the Term shall commence or end on a day other than the
first day of a calendar month, then the monthly rent for any fractional
months of the Term shall be appropriately prorated.
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(h) In no event shall the Adjusted Rent Rate for any current
period be less than the Adjusted Rent Rate for the preceding period.
4. UTILITIES. Tenant shall have all utilities listed in its name
and shall pay all utility bills, including, but not limited to water, sewer,
gas, electricity, fuel, light, and heat bills, for the Premises, and Tenant
shall pay all charges for garbage collection services or other sanitary services
rendered to the Premises or used by Tenant in connection therewith. If Tenant
fails to pay for such services, Landlord may, at its option and after providing
Tenant with at least twenty (20) days prior written notice, pay the same, and
the amount of the payment shall be payable to Landlord as additional rent.
Landlord shall not be or become liable for damages to Tenant alleged to be
caused or occasioned by or in any way connected with or the result of any
interruption, defect or breakdown of any utility.
5. USE OF THE PREMISES; ENVIRONMENTAL INDEMNITY. The Premises shall
be used only for the operation of a new and used automobile dealership, service
facility, body shop facility and uses incidental thereto, and for any other
purposes which may be agreed to by the parties. The Premises shall not be used
for any illegal purpose, nor in any manner which may create nuisance or
trespass. Furthermore, Tenant shall not violate any federal or state
environmental law, and Tenant agrees to indemnify and hold harmless Landlord
from any and all damages, costs, fines and expenses that might arise as a result
of any such violation and from its placement upon the Premises of hazardous
wastes and toxic
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substances that are placed on the Premises after the date hereof.
Notwithstanding anything to the contrary contained in this Paragraph 5, there
shall not be deemed to be a nuisance or trespass and Tenant's obligation to
indemnify and hold Landlord harmless shall not extend to any damages, claims, or
liabilities arising as a result of contaminants existing on the Premises on the
date hereof or migrating onto or beneath the Premises after the date hereof,
where such contamination is not caused by or attributable to Tenant, all of
which shall be Landlord's responsibility.
6. REPRESENTATION. All representations and warranties made by
Landlord in Sections 2.10, 2.11 and 3.3 of that certain Stock Purchase Agreement
(the "SPA") dated as of March 1, 1996 by and among Landlord, United Auto Group,
Inc., Steven L. Rayman, Richard W. Keffer and UAG Atlanta II, Inc. are hereby
incorporated by reference to the same effect as if fully set forth herein.
7. NO REPAIRS BY LAND. Landlord shall not be obligated to repair or
maintain the Premises after the date of this Lease, and all repairs,
replacements, and maintenance of any kind shall be the sole responsibility of
Tenant except to the extent the necessity therefor arose on or prior to the date
hereof, in which event such shall be the responsibility of Landlord.
8. REPAIRS BY TENANT. Subject to Landlord's representations and
warranties in the SPA, Tenant accepts the condition of the Premises as of the
date hereof and agrees that the Premises are suited for the uses specified
herein. Tenant shall, throughout the Term, at its expense, maintain the
Premises in good order and repair, including but not limited to repair and
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maintenance and, if necessary, replacement of the electrical, heating,
ventilation and air conditioning and plumbing systems, as well as the roof and
all structural components of buildings located on the Premises. Tenant further
agrees to care for all landscaping on the Premises, including the mowing of
grass, paving, policing, care of shrubs and general landscaping. If Tenant
fails to properly maintain and repair any portion of the Premises, Landlord may,
following at least twenty (20) days prior written notice to Tenant, maintain the
same including replacing of components and Tenant shall pay to Landlord within
thirty (30) days after demand the commercially reasonable costs thereof together
with interest on said amount from the date of payment by Landlord at a rate
equal to the Interest Rate. Tenant agrees to return the Premises to Landlord in
as good condition and repair as when first received by Tenant, natural wear and
tear, damage by storm, fire, lightening, earthquake or other casualties and
condemnation excepted.
9. TAX AND INSURANCE. Tenant shall promptly and on a timely basis
pay as additional rent during the Term all charges for taxes (including, but not
limited to, ad valorem taxes, special assessments and any other governmental
charges) on the Premises, which amounts shall be prorated between Tenant and
Landlord for all periods partially but not entirely within the Term. Tenant
shall also maintain, at all times during the Term of this Lease, fire and
extended insurance coverage on the Premises in amounts equal to the full
replacement value of the Premises, and written on policies issued by
underwriters reasonably acceptable to Landlord. Landlord agrees that such
coverages may be provided by blanket policies of
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insurance covering other locations in addition to the Premises. All policies
shall insure Landlord and Tenant as their respective interests shall appear and
shall contain a replacement cost endorsement. Should Tenant fail to pay such
tax expenses or fail to provide certificates evidencing the required insurance
coverage, Landlord may, following at least twenty (20) days prior written notice
to Tenant, pay any such charges or secure such coverage, and Tenant shall pay to
Landlord within thirty (30) days after demand as additional rent all amounts so
expended by Landlord together with interest on said amount from the date of
payment by Landlord at a rate equal to the Interest Rate.
10. DESTRUCTION OF OR DAMAGE TO THE PREMISES. If the Premises should
be damaged or destroyed by any insured peril whatsoever, all insurance proceeds
shall be delivered to Tenant and Tenant shall proceed with reasonable diligence
to rebuild and repair the Premises to substantially the condition in which it
existed prior to such damage or destruction. If, however, the damage or
destruction (a) shall be complete or (b) shall occur within the last two (2)
years of the Term, then Tenant may terminate this Lease as of the date that such
damage or destruction occurs by giving written notice to Landlord of such
election to terminate within sixty (60) days after the date of such damage or
destruction. If this Lease is terminated by Tenant, insurance proceeds with
respect to the building shall be paid to Landlord. The rent payable under this
Lease shall be abated beginning on the date of damage or destruction within the
scope of this Paragraph 10 (to the extent that the Premises are rendered
unusable by Tenant)
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and shall resume upon recompletion to substantially the condition in which the
Premises existed prior to such damage or destruction.
11. INDEMNITY; WAIVER OF SUBROGATION. Tenant agrees to indemnify and
hold harmless Landlord against all claims and expenses resulting therefrom,
including reasonable attorneys' fees and court costs, for damage to persons or
property by reason of the use or occupancy of the Premises by Tenant. Tenant
shall periodically provide Landlord with certificates of general liability
insurance naming Landlord as an additional insured, in an amount of not less
than $3,000,000 and with an insurance carrier reasonably satisfactory to
Landlord. The dollar amount of such insurance coverage shall be reviewed
annually, and adjusted if necessary, in order to provide for adequate protection
to both Landlord and Tenant; provided, however, in no event shall any aggregate
percentage increases in Tenant's liability coverage obligations hereunder ever
exceed the cumulative percentage increases in the Consumer Price Index occurring
during the corresponding portion of the Term of this Lease.
Landlord and Tenant each hereby release and waive any right of
recovery against the other for any loss, claim, liability, or damage occurring
on or to the Premises, whether wholly or contributorily caused by the negligence
of the other party, to the extent that the same is compensated by actual receipt
of proceeds from insurance policies covering such loss, claim, liability, or
damage.
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12. ALTERATIONS. Tenant shall make no structural alterations,
additions or improvements to the Premises without the express prior written
consent of Landlord which consent shall not be unreasonably withheld, except
that Tenant may alter any wall that is not of a load-bearing nature without the
consent of Landlord. Tenant may make non-structural changes and modifications
to the Premises without Landlord's approval. In the event Landlord has not
responded to Tenant's written request for alterations within fifteen (15) days
of when received, such alteration shall be deemed to have been approved by
Landlord. Tenant agrees to save Landlord harmless on account of any claim or
lien of mechanics, materialmen or other party, in connection with any
alterations, additions or improvements of or to the Premises performed by
Tenant. Tenant shall furnish such waivers of liens and appropriate affidavits
from the general contractor or subcontractors as Landlord may reasonably
require. Notwithstanding the foregoing, Tenant shall also be entitled to make
the following changes without necessity of Landlord's consent: (i) any
alterations required to be made by it pursuant to governmental orders, rules,
laws, regulations, ordinances or requirements, and (ii) any changes in its
signage or recommended or required by the automobile manufacturer whose
automobiles are sold on the Premises. Tenant shall have the right to finance
any alterations or improvements permitted hereunder and may pledge its interest
in this Lease as security therefor; provided, however, that any liens granted in
connection with such financings shall be subordinate to the rights of Landlord
under this Lease.
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13. GOVERNMENTAL ORDERS. Tenant agrees, at its own expense, to promptly
comply with all requirements of any public authority made necessary by reason of
Tenant's occupancy of the Premises from and after the date hereof or which may
be necessary for Tenant's occupancy to continue if the requirement to comply
arises after the date of this Lease. Landlord shall have no obligation of any
kind for such compliance except to the extent it arose prior to the date of this
Lease.
14. CONDEMNATION. If all or a substantial part of the Premises is
condemned for any public use or purpose, then the Term shall cease from the date
when possession thereof is taken, and rent shall be prorated as of that date;
provided, however, that Tenant may elect to continue this Lease in full force
and effect notwithstanding any such taking. Any termination shall be without
prejudice to the rights of either Landlord or Tenant to recover compensation and
damage caused by such condemnation from the condemner. Except as provided
herein, neither Tenant nor Landlord shall have any rights in any award made
solely to the other by any condemnation authority notwithstanding the
termination of the Lease as herein provided. If the Lease is not terminated as
provided above, then (i) this Lease shall continue in effect with respect to the
remaining portion of the Premises, in which event the rent payable hereunder
during the unexpired portion of the Term of this Lease shall be adjusted
proportional to the ratio of the value of the remaining portion of the Premises
to the total value of the Premises prior to the taking, (ii) the condemnation
award shall be paid to Tenant to hold for payment of repair and restoration to
the
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Premises, and (iii) Tenant shall proceed with reasonable diligence to rebuild
and repair the untaken portions of the Premises to as nearly as reasonably
possible their value, condition, and character as such existed immediately prior
to such taking. Any sums remaining after payment for such reconstruction shall
be paid by Tenant to Landlord to the extent they represent payment for a taking
of Landlord's fee interest. The phrase "substantial part," for purposes of this
section shall mean so much of the Premises, the improvements located thereon,
access to the Premises, or any combination of the foregoing, such that the
taking thereof would prevent or substantially impair, in Tenant's reasonable
judgment, the ability of Tenant to operate its business in a manner consistent
with the operation of its business prior to such taking.
15. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord (which consent shall not be unreasonably withheld or
delayed), assign this Lease or any interest hereunder, or sublet the Premises or
any part thereof, or permit the use of the Premises by any party other than
Tenant. All requests for assignment or subletting shall be made in writing and
delivered to Landlord. Failure by Landlord to disapprove of any proposed
assignment or subletting within ten (10) days after receipt of Tenant's written
request with reasons therefor shall result in such request being deemed
approved. Consent to any assignment or sublease shall not invalidate this
provision, and all later assignments or subleases shall be made only on the
prior written consent of Landlord. Any assignee of Tenant, at the option of
Landlord, shall become directly liable to Landlord for all
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obligations of Tenant hereunder, but no sublease or assignment by Tenant shall
relieve Tenant of any liability hereunder. Notwithstanding the foregoing,
Tenant shall be entitled to freely assign or sublet its interest in this Lease
to any parent, subsidiary or other entity under common control with Tenant or
Tenant's parent, without the prior written consent of Landlord. Moreover, the
sale or transfer of all or any part of the capital stock of Tenant shall not be
deemed to be an assignment hereunder.
16. REMOVAL OF FIXTURES. Tenant may (so long as no Event of Default
has occurred and is continuing hereunder), prior to the end of the Term, remove
all trade fixtures and equipment which Tenant has purchased as leasehold
improvements or placed in the Premises subsequent to the date hereof, provided
that Tenant repairs all damage to the Premises caused by the removal. However,
any buildings, fixtures, or other attached property installed by Tenant as
replacements of existing items, or anything that cannot be removed without
substantially changing the character of the Premises, shall become the property
of Landlord.
17. CANCELLATION OF LEASE BY LANDLORD. It shall be an "Event of
Default" hereunder if,
(a) Tenant fails to pay rent, including additional rent herein
reserved, when due, and fails to cure the failure to pay within ten (10)
days after written notice thereof from Landlord;
(b) Tenant fails to perform any of the terms or provisions of
this Lease other than the provision requiring the payment of rent, and
fails to cure the default within thirty
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(30) days after the date of receipt of written notice of default from
Landlord; provided, however, that if the nature of the default is such that
the same cannot reasonably be cured within said thirty (30) day period,
Tenant shall not be deemed to be in default if Tenant shall, within such
period, commence such cure and thereafter diligently prosecute the same to
completion;
(c) Tenant is adjudicated bankrupt;
(d) a permanent receiver is appointed for Tenant's property and
the receiver is not removed within sixty (60) days after written notice
from Landlord to Tenant to obtain the removal;
(e) Tenant or any guarantor of Tenant's obligations under this
Lease files a petition seeking an order for relief under Title 11 of the
United States Code, as amended, or under any similar law or statute of the
United States or any state thereof, or a petition seeking an order for
relief under Title 11 of the United States Code, or any similar law or
statute of the United States or any state thereof, is filed against Tenant
or any guarantor of Tenant's obligations under this Lease and such petition
is not dismissed with prejudice within sixty (60) days from the date of
filing;
(f) Tenant makes an assignment for benefit of creditors; or
(g) Tenant's effects should be levied upon or attached under
process against Tenant and not satisfied or
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dissolved within thirty (30) days after written notice from Landlord to
Tenant to obtain satisfaction thereof.
Upon the occurrence of an Event of Default, Landlord may pursue any right or
remedy against Tenant available at law or in equity. Without limitation to the
foregoing, Landlord, at its option, may at once or within six (6) months
thereafter (so long as such Event of Default is continuing), elect to terminate
this Lease by written notice to Tenant; whereupon this Lease shall terminate.
Any notice provided in this section may be given by Landlord, or its attorney,
or agent herein named. Upon termination of the Lease by Landlord, Tenant shall
at once surrender possession of the Premises to Landlord and remove all of
Tenant's effects therefrom, or Landlord shall be entitled to remove all persons
and effects therefrom, using such force as may be necessary without being guilty
of trespass, forcible entry or detainer or other tort.
18. RELETTING BY LANDLORD. If, after an Event of Default, Landlord
has not elected to terminate this Lease, Landlord shall, as Tenant's agent,
without terminating this Lease, enter upon and exercise good faith efforts to
rent the Premises at the best price obtainable by reasonable effort, for any
term Landlord deems proper. Tenant shall be liable to Landlord for the present
value of any deficiency between rent due hereunder and the rent received by
Landlord upon reletting. For purposes of computing the "present value of any
deficiency" in accordance with the provisions of this paragraph, the parties
agree to utilize a discount rate equal to the then prevailing prime rate of
interest charged by leading money center banks as published in "THE WALL STREET
JOURNAL."
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19. FINANCIAL STATEMENTS. Within fifteen (15) days after such are
prepared Tenant shall deliver to Landlord audited consolidated financial
statements of United Auto Group, Inc. ("UAG") prepared in accordance with
generally accepted accounting principles consistently applied by an independent
certified public accountant.
20. FOR RENT SIGNS. Landlord may place "FOR RENT" or "FOR SALE
"signs in the Premises one hundred eighty (180) days before the end of the Term.
Landlord may enter the Premises at reasonable hours, and after reasonable
notice, to show the Premises to prospective purchasers or tenants.
21. EFFECT OF TERMINATION OF LEASE. No termination of this Lease
prior to the normal ending thereof, by lapse of time or otherwise, shall affect
Landlord's right to collect rent for the period prior to termination thereof.
22. WARRANTIES OF TITLE AND QUIET POSSESSION. Landlord warrants and
represents that it has good and marketable title to the Premises and has full
right to make this Lease and that Tenant shall have quiet and peaceable
possession of the Premises during the Term so long as no Event of Default is in
existence and continuing hereunder.
23. SUBORDINATION ATTORNMENT. Landlord represents that the only Deed
to Secure Debt with respect to the Premises is in favor of NationsBank, N.A.
(South), F/K/A NationsBank of Georgia, N.A., dated April 5, 1993, recorded in
Deed Book 1887, Page 90, Clayton County, Georgia Records. Landlord shall
provide Tenant a Subordination, Non-Disturbance and Attornment Agreement from
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NationsBank, N.A. (South) in the form attached hereto and incorporated herein by
reference as EXHIBIT "B" ("SNDA"). This Lease is subject and subordinate to any
deed of trust, mortgage, or other security instrument, which presently or may in
the future cover the Premises, and to any increases, renewals, modifications,
consolidations, replacements, and extensions of any of such deed of trust,
mortgage, or security instrument, provided, however, that Tenant's subordination
to any encumbrance arising after the date of this Lease shall be conditioned
upon Landlord's delivery to Tenant of a non-disturbance agreement in form
reasonably satisfactory to Tenant containing the substantive provisions of the
SNDA.
Notwithstanding the generality of the foregoing, any mortgagee shall
have the right at any time to subordinate any deed of trust, mortgage, or other
security instrument to this Lease. At any time, before or after the institution
of any proceedings for the foreclosure of any deed of trust, mortgage, or other
security instrument or sale of the Premises under any such deed of trust,
mortgage, or other security instrument, Tenant shall attorn to such purchaser
upon any such sale or the grantee under any deed in lieu of such foreclosure and
shall recognize such purchaser or grantee as Landlord under this Lease. The
agreement of Tenant to attorn contained in the immediately preceding sentence
shall survive any such foreclosure sale, trustee's sale, or conveyance in lieu
thereof. Tenant shall, upon demand at any time, before or after any foreclosure
sale, trustee's sale, or conveyance in lieu thereof, execute, acknowledge, and
deliver to Landlord's mortgagee any written instruments and certificates
evidencing such attornment
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as Landlord's mortgagee may reasonably require. Upon Tenant's written request
and notice to Landlord, Landlord shall obtain from any such mortgagee a written
agreement that the rights of Tenant shall remain in full force and effect during
the Term of this Lease so long as Tenant shall continue to recognize and perform
all of the covenants and conditions of this Lease.
24. ESTATE CREATED; FUTURE GRANTS. Landlord and Tenant intend for
and agree that this Lease shall create a leasehold estate in the Premises for
the Term. Landlord agrees that, during the Term of this Lease, it will not
execute or join in any conveyances of easements or restrictive covenants or
other agreements restricting or affecting Tenant's use of the Premises without
the prior written consent of Tenant, which may be withheld in Tenant's sole
discretion.
25. HOLDING OVER. If Tenant remains in possession of the Premises
after expiration of the Term, with Landlord's acquiescence and without any
express agreement of parties, Tenant shall be a tenant from month-to-month at a
monthly rent rate equal to 125% of the monthly rental rate in effect at the end
of the Term, and there shall be no renewal of this Lease by operation of law.
26. ATTORNEY'S FEES AND HOMESTEAD. In the event either party should
seek to enforce its rights under this Lease through judicial process, the
prevailing party in any such action shall be entitled to collect from the other
party, in addition to all other sums owing hereunder, its reasonable attorney's
fees. Tenant waives all homestead rights and exemptions which it may have under
any law as against any obligation owing under this Lease.
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<PAGE>
27. RIGHTS CUMULATIVE. All rights hereunder shall be cumulative but
not restrictive to those given by law.
28. SERVICE OF NOTICE. Any notice required or permitted to be
delivered hereunder may be delivered in person or by United States certified
mail, postage prepaid, return receipt requested, or by recognized overnight
courier (e.g. Federal Express or DHL), next business day delivery, charges
prepaid, addressed to the parties at the addresses indicated above or at such
other addresses as may be specified by written notice delivered in accordance
herewith. Such notices shall be deemed effective three (3) business days after
deposited in the U.S. mail, or on the next business day if delivered by
overnight courier, or immediately upon delivery in person.
29. WAIVER OF RIGHTS. Neither party's failure to exercise any power
given to them hereunder, or to insist upon strict compliance by the other party
with its obligations hereunder, nor any custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of such party's right
to demand exact compliance with the terms hereof.
30. TIME OF ESSENCE. Time is of the essence under this Lease.
31. SUCCESSORS AND ASSIGNS. This Lease shall apply to, inure to the
benefit of, and be binding upon the parties hereof and their respective
successors, permitted assigns, and legal representatives except as otherwise
expressly provided herein.
32. TRIPLE NET LEASE. This Lease shall be considered a "triple net
lease" so that, except as expressly set forth herein,
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<PAGE>
Tenant shall bear all responsibility as additional rent for all payments of any
kind or nature relating to the Premises, including but not limited to payment of
all taxes (except for income, estate, inheritance or gift taxes of Landlord),
insurance, repairs and maintenance arising after the date of this Lease, but
subject to Landlord's representations and warranties in the SPA.
33. ENTIRE AGREEMENT; CONFLICT. This Lease and the SPA, including
any attachments made a part hereof or thereof, contains the entire agreement
between the parties and no representations, inducements, promises or agreements,
oral or otherwise, between the parties, not embodied herein or in the SPA, shall
be of any force or effect. In the event of any conflict between the terms
contained herein and the terms contained in the SPA, the terms of the SPA shall
control.
34. SEVERABILITY. If any term, provision or clause of this Lease, or
if the application thereof to any person or circumstances, shall to any extent
be invalid or unenforceable, then the remainder of this Lease or the application
of such term, provision or clause to persons or circumstances other than those
to which it is invalid or unenforceable shall not be affected thereby, and each
and every remaining term, provision, clause and application of this Lease shall
be valid and enforceable to the fullest extent permitted by law.
35. EXECUTION IN COUNTERPARTS. This Lease may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
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<PAGE>
36. AMENDMENT. This Lease may not be altered, waived, amended or
extended except by an instrument in writing signed by Landlord and Tenant.
37. HEADINGS. The headings used in this Lease are for the purposes
of convenience only. They shall not be construed to limit or to extend the
meaning of any part of this Lease.
38. GOVERNING LAW. This Lease shall be construed in accordance with
the laws of the State of Georgia, and all obligations of the parties created
hereunder are performable in Clayton County, Georgia.
39. FORCE MAJEURE. Wherever a period of time is herein prescribed
for action to be taken by either Landlord or Tenant, such party shall not be
liable or responsible for, and there shall be excluded from the computation of
any such period of time, any delays due to strikes, riots, acts of God,
shortages of labor or materials, wars, governmental laws, regulations or
restrictions or other causes which are beyond the control of Landlord or Tenant,
as the case may be.
40. EXTENSION OPTIONS. Tenant shall have two (2) separate five (5)
year options to extend the Term of this Lease upon the following terms and
provisions:
(a)Notice of the exercise of an option to extend shall be given
no less than one hundred eighty (180) days prior to the then expiration of the
Term of this Lease;
(b) The Term shall be extended under all terms and provisions of
this Lease except that the Rent to be paid hereunder with respect to the first
option to extend shall be equal to the
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Third CPI Adjusted Rent Rate per month plus a percentage of the Third CPI
Adjusted Rent Rate per month, which percentage shall be three-fourths (3/4) of
the percentage increase in the Consumer Price Index between the one hundred
eightieth (180th) month of the Term and the two hundred fortieth (240th) month
of the Term (such increased rent being referred to herein as the "Fourth CPI
Adjusted Rent Rate") and the Rent to be paid hereunder with respect to the
second option to extend shall be equal to the Fourth CPI Adjusted Rent Rate per
month plus a percentage of the Fourth CPI Adjusted Rent Rate per month, which
percentage shall be three-fourths (3/4) of the percentage increase in the
Consumer Price Index between the two hundred fortieth (240th) month of the Term
and the three hundredth (300th) month of the Term.
(c) Upon the request of either party, Landlord and Tenant shall
execute an acknowledgment setting forth the dates of the extended Term of the
Lease and the amount of the Rent for the applicable extension term, but the
failure to execute such acknowledgment shall not affect Tenant's exercise of its
option to extend the Term as provided herein.
41. RECORDATION. This Lease will not be recorded unless Landlord fails to
execute upon request, in recordable form, a Memorandum of Lease in form required
by Tenant's title insurance company.
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<PAGE>
IN WITNESS WHEREOF, the parties herein have hereunto caused their duly
authorized representatives to set their hands and seals the day and year first
above written.
LANDLORD:
Signed Sealed and Delivered /s/ Steve L. Rayman
in the presence of: --------------------------- (SEAL)
STEVEN L. RAYMAN
- ------------------------------- /s/ Richard W. Keffer, Jr.
Unofficial Witness --------------------------- (SEAL)
RICHARD W. KEFFER, JR.
- -------------------------------
Notary Public
[Notarial Seal]
My Commission Expires:
- -------------------------------
TENANT:
Signed Sealed and Delivered STEVE RAYMAN NISSAN, INC.a
in the presence of: Georgia Corporation
- --------------------------------
Unofficial Witness
By: /s/ Steve L. Rayman
------------------------
Name: Steve L. Rayman
------------------------
- -------------------------------- Title:
Notary Public ------------------------
Attest:
[Notarial Seal] By:
------------------------
Name:
------------------------
My Commission Expires: Title:
------------------------
- ------------------------------
[Corporate Seal]
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<PAGE>
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 7, 1996
AMONG
UNITED AUTO GROUP, INC.,
UAG ATLANTA III, INC.,
HICKMAN NISSAN, INC.,
LYNDA JANE HICKMAN
AND
LYNDA JANE HICKMAN
AS EXECUTRIX UNDER THE WILL OF
JAMES FRANKLIN HICKMAN, JR., DECEASED
<PAGE>
This STOCK PURCHASE AGREEMENT, dated as of June 7, 1996 is by and
among United Auto Group, Inc., a Delaware corporation ("UAG"), UAG Atlanta III,
Inc., a Delaware corporation ("Sub"), Hickman Nissan, Inc., a Georgia
corporation (the "Company"), Lynda Jane Hickman, an individual resident of the
State of Georgia ("Ms. Hickman") and Lynda Jane Hickman, as Executrix under the
Will of James Franklin Hickman, Jr. Deceased ("Stockholder").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company operates a Nissan automobile dealership and
related businesses in Chamblee, Georgia;
WHEREAS, the Stockholder owns all of the issued and outstanding shares
of common stock, par value $100, of the Company (the "Common Stock");
WHEREAS, Sub is a wholly-owned subsidiary of UAG; and
WHEREAS, Sub desires to purchase 500 shares of Common Stock from the
Stockholder (the "Shares"), and the Stockholder desires to sell the Shares to
Sub (upon the terms and subject to the conditions set forth in this Agreement),
such that immediately after giving effect to such purchase and sale, Sub will
own one hundred (100%) percent of the issued and outstanding shares of Common
Stock, on a fully diluted basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF THE SHARES.
(a) PURCHASE AND SALE. Upon the terms and subject to the conditions
set forth in this Agreement, the Stockholder shall sell to Sub, and Sub shall
purchase from the Stockholder, the Shares for an aggregate purchase price equal
to (i) Eleven
<PAGE>
Million Dollars ($11,000,000) (the "Base Price"), which Base Price is subject to
adjustment after Closing as provided in SECTION 1.2 hereof and (ii) a promissory
note (the "Note") issued by Sub and guaranteed by UAG and the Company in the
principal amount of Two Million Dollars ($2,000,000) with interest only payable
monthly at the rate of nine percent (9%) per annum and maturing on the second
anniversary of the Closing Date (the "Maturity Date"), such promissory note
being in the form attached hereto as EXHIBIT A. At the Closing referred to in
SECTION 1.1(b) hereof:
(i) the Stockholder shall sell, assign, transfer and deliver to
Sub the Shares representing 100% of the outstanding Common Stock, free and
clear of all Liens (as defined in SECTION 10.11), and shall deliver the
certificates representing such Shares accompanied by stock powers duly
executed in blank; and
(ii) Sub shall accept and purchase the Shares from the
Stockholder and in payment therefor shall deliver to Stockholder (A)
immediately available funds in an aggregate amount equal to the Base Price
by wire transfer to an account designated in writing by the Stockholder or
by certified funds; (B) the Note duly executed by Sub; (C) a guaranty of
the Estate Lease (as defined in SECTION 1.1(c)(iii) hereof executed by UAG,
in the form attached hereto as EXHIBIT B (the "UAG Guaranty of Estate
Lease); (D) a guaranty of the Argonne Lease (as defined in SECTION
1.1(c)(iv) hereof) executed by UAG, in the form attached hereto as EXHIBIT
C (the "UAG Guaranty of Argonne Lease); (E) a guaranty of the Note executed
by the Company, in the form attached hereto as EXHIBIT D (the "Company
Guaranty of Note"); and (F) a guaranty of the Note executed by UAG in the
form attached hereto as EXHIBIT E (the "UAG Guaranty of Note").
(b) CLOSING. Subject to the conditions set forth in this Agreement,
the purchase and sale of the Shares pursuant to this Agreement (the "Closing")
shall take place at the offices of Rogers & Hardin, 2700 Cain Tower, Peachtree
Center, 229 Peachtree Street, N.E., Atlanta, Georgia 30303, or such other
location as the parties shall agree upon, at 10:00 a.m. as soon as practicable
following the date on which all conditions to the obligations of the parties
hereunder (other than those requiring an
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exchange of certificates, opinions or other documents, or the taking of other
action, at the Closing) have been satisfied or waived but no later than the
later of: (i) June 28, 1996, (ii) the date that is two (2) business days after
the date on which the H-S-R Act (as defined in SECTION 5.11) waiting period
expires or is terminated, (iii) the date that is two (2) business days after the
date on which the condition set forth in SECTION 6.10 hereof is satisfied; or
(iv) the date that is two (2) business days after the date on which the
condition set forth in SECTION 6.17 hereof is satisfied; PROVIDED, HOWEVER, that
the Closing Date shall be no later than July 10, 1996. The date on which the
Closing occurs is herein referred to as the "Closing Date".
(c) DELIVERIES AT THE CLOSING. Subject to the conditions set forth
in this Agreement, at the Closing:
(i) the Stockholder shall deliver to Sub (A) certificates
representing the Shares bearing the restrictive legend customarily placed
on securities that have not been registered under applicable federal and
state securities laws and accompanied by stock powers as required by
SECTION 1.1(a)(i) hereof, and any other documents that are necessary to
transfer to Sub good title to all the Shares, and (B) all opinions,
certificates and other instruments and documents required to be delivered
by the Stockholder at or prior to the Closing or otherwise required in
connection herewith;
(ii) Sub shall pay and deliver to the Stockholder (A) funds as
required by SECTION 1.1(a)(ii) hereof, (B) the Note duly executed by Sub;
(C) the UAG Guaranty of Estate Lease duly executed by UAG; (D) the UAG
Guaranty of Argonne Lease duly executed by UAG; (E) the Company Guaranty of
Note duly executed by the Company; (F) the UAG Guaranty of Note executed by
UAG; and (G) all opinions, certificates and other instruments and documents
required to be delivered by Sub at or prior to the Closing or otherwise
required in connection herewith;
(iii) The Stockholder and the Company shall enter into a lease
for the real property used in the business of the Company and located at
5211 and 5214 Peachtree Industrial
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<PAGE>
Boulevard, Chamblee, Georgia, in the form attached hereto as EXHIBIT F (the
"Estate Lease").
(iv) The Stockholder shall deliver to Sub a lease for the real
property used in the business of the Company and located at 3393 Malone
Drive, Chamblee, Georgia, in the form attached hereto as EXHIBIT G (the
"Argonne Lease") duly executed by Argonne Enterprises, Inc. ("Argonne") and
the Company (the "Argonne Lease and the Estate Lease being referred to
herein collectively as the "Lease").
(v) Sub shall deliver to the Stockholder the Release of Guaranty
(as defined in SECTION 7.11 hereof).
(d) UAG hereby guarantees to the Stockholder the full and prompt
payment of the Base Price and all other amounts owned by Sub to the Stockholder
under this Agreement and the full and timely performance of all the terms,
conditions, covenants and agreements to be performed by Sub pursuant to this
Agreement.
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<PAGE>
1.2 NET WORTH ADJUSTMENT.
(a) As soon as practicable after the Closing Date, the Stockholder
shall deliver to Sub a balance sheet of the Company dated as of the Closing Date
(such balance sheet so delivered is referred to herein as the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet shall be prepared in good faith
on the same basis and in accordance with the accounting principles, methods and
practices used in preparing the 1995 Company Balance Sheet (as defined in
SECTION 2.5 hereof), subject to the modifications, adjustments and exceptions to
such accounting principles, methods and practices set forth on SCHEDULE 1.2(a)
hereto (such accounting principles, methods, and practices as so modified and
adjusted, and such procedures are referred to herein as the "Accounting
Principles"). In connection with the preparation of the Closing Date Balance
Sheet, the Stockholder and the Company shall permit the Reviewer (as defined
below) and other representatives of Sub to conduct a physical inventory at each
location where inventory is held by the Company. From the results of such
inventory and prior to the Closing Date, Sub and the Stockholder (or the
respective representatives thereof) will prepare a schedule, which shall be
signed by Sub and the Stockholder, setting forth the nature and quality of such
inventory and such other items as shall be agreed upon by Sub and the
Stockholder.
(b) Within forty-five (45) days after delivery of the Closing Date
Balance Sheet, (i) Coopers & Lybrand or such other national accounting firm (the
"Reviewer") selected by Sub, shall audit or otherwise review the Closing Date
Balance Sheet in such manner as Sub and the Reviewer deem appropriate, and (ii)
Sub shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet"),
together with the Reviewer's report thereon, to the Stockholder. The Reviewed
Balance Sheet (i) shall be prepared on the same basis and in accordance with the
Accounting Principles and (ii) shall include a schedule showing the computation
of the Final Net Worth (as defined in SECTION 1.2(g)(i) hereof), computed in
accordance with the definition of Net Worth set forth in SECTION 1.2(g)(iii)
hereof. Sub and the Reviewer shall have the opportunity to consult with the
Stockholder, the Company and each of the accountants and other representatives
of the Stockholder and the Company and examine the work papers, schedules and
other documents prepared by the Stockholder, the Company and each of
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<PAGE>
such accountants and other representatives during the preparation of the Closing
Date Balance Sheet. The Stockholder and the Stockholder's independent public
accountants shall have the opportunity to consult with the Reviewer and examine
the work papers, schedules and other documents prepared by Sub and the Reviewer
during the preparation of the Reviewed Balance Sheet.
(c) The Stockholder shall have a period of forty-five (45) days
after delivery to the Stockholder of the Reviewed Balance Sheet to present in
writing to Sub all objections the Stockholder may have to any of the matters set
forth or reflected therein, which objections shall be set forth in reasonable
detail. If no objections are raised within such 45-day period, the Reviewed
Balance Sheet shall be deemed accepted and approved by the Stockholder and a
supplemental closing (the "Supplemental Closing") shall take place within five
(5) Business Days following the expiration of such 45-day period, or on such
other date as may be mutually agreed upon in writing by Sub and the Stockholder.
(d) If the Stockholder shall raise any objection within the 45-day
period, Sub and the Stockholder shall attempt to resolve the matter or matters
in dispute and, if resolved, the Supplemental Closing shall take place within
five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by Sub and the Stockholder
within sixty (60) days after the delivery of the Reviewed Balance Sheet, then
the specific matters in dispute shall be submitted to a national firm of
independent public accountants mutually acceptable to Sub and the Stockholder,
which firm shall make a final and binding determination as to such matter or
matters. Such accounting firm shall send its written determination to Sub and
the Stockholder and the Supplemental Closing, if any, shall take place five (5)
Business Days following the receipt of such determination by Sub and the
Stockholder. The fees and expenses of the accounting firm referred to in this
SECTION 1.2(e) shall be paid one half by Sub and one half by the Stockholder.
(f) Sub and the Stockholder agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected by
Sub and the Stockholder pursuant to
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<PAGE>
SECTION 1.2 (e) hereof in order that any and all matters in dispute shall be
resolved as soon as practicable.
(g) (i) If the Net Worth as shown on the Reviewed Balance Sheet as
finally determined through the operation of SECTIONS 1. 2 (a) THROUGH (e) hereof
(such amount being referred to herein as the "Final Net Worth") shall be less
than Two Million Four Hundred Sixty-three Thousand Dollars ($2,463,000) (the
amount of any such deficiency being referred to herein as the "Net Worth
Deficiency"), the Stockholder shall pay to Sub at the Supplemental Closing, by
wire transfer of immediately available funds to an account designated in writing
by Sub within two (2) Business Days of the date of the Supplemental Closing, an
amount equal to the Net Worth Deficiency, together with interest on such amount
from the Closing Date to the date of the Supplemental Closing at the prime rate
or its equivalent (as announced from time to time by Citibank, N.A.); PROVIDED,
HOWEVER, that the Stockholder shall not be required to make any payment pursuant
to this SECTION 1.2(g)(i) unless the Net Worth Deficiency exceeds Fifty Thousand
Dollars ($50,000), in which event the Stockholder shall be fully liable for all
such Net Worth Deficiency without regard to such threshold.
(i) If the Final Net Worth shall be more than Two Million Four
Hundred Sixty-three Thousand Dollars ($2,463,000) (the amount of any such excess
being referred to herein as the "Net Worth Excess"), Sub shall pay to the
Stockholder at the Supplemental Closing, by wire transfer of immediately
available funds to an account designated in writing by the Stockholder, an
amount equal to the Net Worth Excess, together with interest on such amount from
the Closing Date to the date of the Supplemental Closing at the prime rate or
its equivalent (as announced from time to time by Citibank, N.A.); PROVIDED,
HOWEVER, that Sub shall not be required to make any payment pursuant to this
SECTION 1.2(g)(ii) unless the Net Worth Excess exceeds Fifty Thousand Dollars
($50,000), in which event Sub shall be fully liable for all such Net Worth
Excess without regard to such threshold.
(ii) "Net Worth" computed in connection with the Closing Date
Balance Sheet and the Reviewed Balance Sheet shall mean the amount by which the
total assets (calculated using the
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FIFO method of inventory which means that the LIFO reserves will be added back
to inventory) exceed the total liabilities.
ARTICLE 2
REPRESENTATIONS OF
THE COMPANY AND THE STOCKHOLDER
Subject to the parties' agreement and acknowledgement that certain of
the Schedules referred to in this ARTICLE 2 are to be delivered by the Company
and the Stockholder no later than June 12, 1996, the Company and the Stockholder
hereby jointly and severally represent to UAG and Sub as follows:
2.1 ORGANIZATION AND GOOD STANDING.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia and has the corporate power
and authority to own, lease and operate the properties used in its business and
to carry on its business as now being conducted. The Company is duly qualified
to do business and is in good standing as a foreign corporation in each state
and jurisdiction where qualification as a foreign corporation is required,
except for such failures to be qualified and in good standing, if any, which
when taken together with all other such failures of the Company would not, or
could not reasonably be expected to, in the aggregate have a Material Adverse
Effect (as defined in SECTION 10.11 hereof). SCHEDULE 2.1(a) hereto lists (i)
the states and other jurisdictions where the Company is so qualified and (ii)
the assumed names under which the Company conducts business and has conducted
business during the past five years. Attached as SCHEDULE 2.1(b) are complete
and correct copies of the Company's Articles of Incorporation and Bylaws as
amended and presently in effect.
2.2 SUBSIDIARIES.
Except as set forth in SCHEDULE 2.2 hereto or the Disclosure Documents
(as defined in SECTION 10.11 hereof), the Company does not have any interest or
investment in any Person (as defined in SECTION 10.11 hereof).
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<PAGE>
2.3 CAPITALIZATION.
The authorized stock of the Company and the number of shares of
capital stock that are issued and outstanding are set forth on SCHEDULE 2.3
hereto. The shares listed on SCHEDULE 2.3 hereto constitute all the issued and
outstanding shares of capital stock of the Company and have been validly
authorized and issued, are fully paid and nonassessable, have not been issued in
violation of any preemptive rights or of any federal or state securities law and
no personal liability (except under this Agreement) attaches to the ownership
thereof. There is no security, option, warrant, right, call, subscription,
agreement, commitment or understanding of any nature whatsoever, fixed or
contingent, that directly or indirectly (i) calls for the issuance, sale, pledge
or other disposition of any shares of capital stock of the Company or any
securities convertible into, or other rights to acquire, any shares of capital
stock of the Company, or (ii) obligates the Company to grant, offer or enter
into any of the foregoing, or (iii) relates to the voting or control of such
capital stock, securities or rights, except as provided in this Agreement. The
Company has not agreed to register any securities under the Securities Act.
2.4 AUTHORITY; APPROVALS AND CONSENTS.
The Company has the corporate power and authority to enter into this
Agreement and the Lease and to perform its obligations hereunder and thereunder.
The execution, delivery and performance of this Agreement and the Lease and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized and approved by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize and
approve this Agreement or the Lease and the transactions contemplated hereby and
thereby. This Agreement has been, and on the Closing Date the Lease will be,
duly executed and delivered by, and constitute a valid and binding obligation
of, the Company, enforceable against the Company in accordance with its terms.
Except as set forth in SCHEDULE 2.4 hereto or the Disclosure Documents, the
execution, delivery and performance by the Company and the Stockholder of this
Agreement and the Lease and the consummation of the transactions contemplated
hereby and thereby do not and will not:
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<PAGE>
(i) contravene any provisions of the Articles of Incorporation
or Bylaws of the Company;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result
in the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any Company Agreement (as
defined in SECTION 2.15 hereof) or, require any consent or waiver of any
party to any Company Agreement, except Company Agreements the breach or
violation of which could not reasonably be expected to have a Material
Adverse Effect;
(iii) result in the creation of any Lien upon, or any Person
obtaining any right to acquire, any properties, assets or rights of the
Company (other than the rights of Sub to acquire the Shares pursuant to
this Agreement);
(iv) violate or conflict with any Legal Requirements (as defined
in SECTION 2.9 hereof) applicable to the Company or any of its businesses
or properties, except for such violations or conflicts which could not
reasonably be expected to have a Material Adverse Effect; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act (as
defined in SECTION 5.11 hereof).
Except as referred to above, no permit or approval of, or notice to
any governmental, administrative or judicial authority is necessary to be
obtained or made by the Company to enable the Company to continue to conduct its
business and operations and use its properties after the Closing in a manner
which is in all material respects consistent with that in which they are
presently conducted, except for such failures which could not reasonably be
expected to have a Material Adverse Effect.
2.5 FINANCIAL STATEMENTS.
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Attached as SCHEDULE 2.5 are true and complete copies of:
(i) the audited balance sheet of the Company as of December 31,
1995 (the "1995 Company Balance Sheet"), and the related statements of
income, stockholders' equity and cash flow for the fiscal year ended
December 31, 1995, together with the notes thereto, in each case examined
by and accompanied by the report of independent certified public
accountants, and (B) the audited balance sheet of the Company as of
December 31, 1994, and the related statements of income, stockholders'
equity and cash flow for the fiscal year ended December 31, 1994, together
with the notes thereto, in each case examined by and accompanied by the
report of independent certified public accountants;
(ii) the unaudited balance sheet of the Company as of April 30,
1996 (the "April Company Balance Sheet") and the unaudited statement of
income, stockholders' equity and cash flow for the month period ended on
such date, together with the notes thereto (the April Unaudited Company
Balance Sheet and related statements of income, stockholder's equity and
cash flow being referred to collectively herein as "April Unaudited Company
Financial Statements"); and
(iii) the April 30, 1996 financial statement provided to Nissan
(the "Company Factory Statements");
(all of the foregoing financial statements [except for the financial statements
referred to in clause (iii) above] including the notes thereto, being referred
to herein collectively as the "Company Financial Statements"). The Company
Financial Statements are in accordance with the books and records of the
Company, fairly present the consolidated financial position, results of
operations, stockholders' equity and changes in the financial position of the
Company as of the dates and for the periods indicated, in the case of the
financial statements referred to in clauses (i) and (ii) above in conformity
with GAAP consistently applied (except as otherwise indicated in such statements
or Disclosure Documents) during such periods, and can be legitimately reconciled
with the financial statements and the financial records maintained and the
accounting methods applied by the Company for federal income tax purposes, and
the unaudited financial statements included in the Company Financial Statements
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include all adjustments, which consist of only normal recurring accruals,
necessary for such fair presentations. The statements of income included in the
Company Financial Statements do not contain any items of special or nonrecurring
income except as expressly specified therein or in the Disclosure Documents, and
the balance sheets included in the Company Financial Statements do not reflect
any write-up or revaluation increasing the book value of any assets except as
expressly stated therein or in the Disclosure Documents. The books and accounts
of the Company are complete and correct in all material respects and fairly
reflect all of the transactions, items of income and expense and all assets and
liabilities of the businesses of the Company consistent with prior practices of
the Company.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES.
To the Stockholder's knowledge (as defined in SECTION 10.11 hereof),
the Company does not have any liability of any nature whatsoever (whether known
or unknown, due or to become due, accrued, absolute, contingent or otherwise),
including, without limitation, any unfunded obligation under employee benefit
plans or arrangements as described in SECTIONS 2.17 AND 2.18 hereof or
liabilities for Taxes (as defined in SECTION 2.8 hereof), except for (i)
liabilities reflected or reserved against in the April Unaudited Company
Financial Statement, (ii) current liabilities incurred in the ordinary course of
business and consistent with past practice after the date of the April Unaudited
Company Balance Sheet which, individually and in the aggregate, do not have, and
cannot reasonably be expected to have, a Material Adverse Effect, and (iii)
liabilities disclosed on SCHEDULE 2.6 hereto or the Disclosure Documents. The
Company is not a party to any Company Agreement, or subject to any articles of
incorporation or bylaw provision, any other corporate limitation or any Legal
Requirement which has, or can reasonably be expected to have, a Material Adverse
Effect, provided that the Company is in compliance with all of the terms and
provisions thereof.
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2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1995, except as set forth on SCHEDULE 2.7(a)
hereto or the Disclosure Documents, the Company has operated in the ordinary
course of business consistent with past practice and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Company which could reasonably be expected to have a Material Adverse
Effect;
(ii) any material loss, damage, destruction or other casualty to
the property or other assets of the Company, whether or not covered by
insurance;
(iii) any change in any method of accounting or accounting
practice of the Company; or
(iv) any loss of the employment, services or benefits of any key
employee of the Company.
(b) Since December 31, 1995, except as set forth in SCHEDULE 2.7(b)
hereto or the Disclosure Documents, the Company has not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary course
of business consistent with past practice;
(ii) failed to disclose or satisfy any material lien or pay or
satisfy any material obligation or liability (whether absolute, accrued,
contingent or otherwise), other than liabilities being contested in good
faith and for which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets except for mechanics' Liens and Liens for taxes
not yet due and payable;
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(iv) sold or transferred any assets or cancelled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past practice;
(vii) written down the value of a material portion of the
inventory or written off as uncollectible a material portion of the
accounts receivable or any portion thereof not reflected in the April
Unaudited Company Financial Statements;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them;
(ix) made any individual capital expenditure in excess of
$75,000, or aggregate capital expenditures in excess of $200,000, or
additions to property, plant and equipment other than ordinary repairs and
maintenance, except for improvements to the used-car facility;
(x) discontinued any franchise or the sale of any products or
product line;
(xi) incurred any obligation or liability to any employee for the
payment of severance benefits; or
(x) entered into any agreement or made any commitment to do any
of the foregoing.
2.8 TAXES.
(a) The Company and, for any period during all or part of which the
tax liability of any other corporation was determined on a combined or
consolidated basis with the Company any such other corporation, have filed
timely all federal, state, local and foreign tax returns, reports and
declarations required
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to be filed (or have obtained or timely applied for an extension with respect to
such filing) correctly reflecting the Taxes (as defined below) and all other
information required to be reported thereon and have paid, or made adequate
provision for the payment of, all Taxes which are due pursuant to such returns
or pursuant to any assessment received by the Company or any such other
corporation. As used herein, "Taxes" shall mean all taxes, fees, levies or
other assessments for which the Company is liable, including but not limited to
income, excise, property (including property taxes paid by the Company pursuant
to any lease), sales, franchise, withholding, social security and unemployment
taxes imposed by the United States, any state, county, local or foreign
government, or any subdivision or agency thereof or taxing authority therein,
and any interest, penalties or additions to tax relating to such taxes, charges,
fees, levies or other assessments. Copies of all federal income tax returns for
tax years ended December 31, 1990, 1991, 1992, 1993, 1994 and 1995 have been
furnished or made available to UAG or its representatives and such copies are
accurate and complete as of the date hereof. The Company has also furnished or
made available to UAG or its representatives correct and complete copies of all
material notices and correspondence sent or received since January 1, 1990 by
the Company to or from any federal, state or local tax authorities. The Company
has adequately reserved for the payment of all Taxes with respect to periods
ended on, prior to or through the date of the April Unaudited Company Balance
Sheet for which tax returns have not yet been filed. In the ordinary course,
the Company makes adequate provision on its books for the payment of all Taxes
(including for the current fiscal period) owed by the Company. Except to the
extent reserves therefor are reflected on the April Unaudited Company Balance
Sheet, the Company is not liable, or will not become liable, for any Taxes for
any period ending on, prior to or through the date of the April Unaudited
Company Balance Sheet. On the Closing Date Balance Sheet, the Company will have
adequately reserved for the payment of any Taxes for any period ending on, prior
to or through the date of the Closing Date Balance Sheet. Except as set forth
in SCHEDULE 2.8 hereto or the Disclosure Documents, the Company has not been
subject to a federal or state tax audit of any kind since January 1, 1990, and
no adjustment has been proposed by the Internal Revenue Service ("IRS") since
January 1, 1990 with respect to any return for any subsequent year. With
respect to the audits referred to on
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SCHEDULE 2.8 hereto, no such audit has resulted in an adjustment in excess of
$50,000. To the Stockholder's knowledge, there is no basis for an assertion of
a deficiency for Taxes against the Company which has a substantial possibility
of being sustained on its merits on the basis of a reasonable and well-informed
analysis by a person knowledgeable in the law of such Taxes.
(b) The Stockholder will cooperate with the Company in the filing of
any returns and in any audit or refund claim proceedings involving Taxes for
which the Company may be liable or with respect to which the Company may be
entitled to a refund.
2.9 LEGAL MATTERS.
(a) Except as set forth in SCHEDULE 2.9(a) hereto or the Disclosure
Documents, (i) there is no claim, action, suit, litigation, investigation,
inquiry, review or proceeding (collectively, "Claims") pending against, or, to
the Stockholder's knowledge, threatened against or affecting, the Company, the
Real Property, the Improvements or any ERISA Plan (as defined in SECTION 2.18(a)
hereof) or any of the Company's or any ERISA Plan's respective assets,
properties or rights before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, domestic or foreign, and (ii)
the Company is not subject to any judgment, decree, writ, injunction, ruling or
order (collectively, "Judgments") of any governmental, administrative or
judicial authority, domestic or foreign. SCHEDULE 2.9(a) hereto identifies each
Claim and Judgment disclosed thereon which is fully covered by an insurance
policy.
(b) The businesses of the Company are being conducted in compliance
with all laws, ordinances, codes, rules, regulations, standards, judgments and
other requirements of all governmental, administrative or judicial entities
(collectively, "Legal Requirements") applicable to the Company or any of its
respective businesses or properties, except where the failure to be in such
compliance could not reasonably be expected to have a Material Adverse Effect.
The Company holds, and is in compliance with, all franchises, licenses, permits,
registrations, certificates, consents, approvals or authorizations
(collectively, "Permits") required by all applicable Legal Requirements except
where the failure to hold or be in compliance with such Permits could not
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reasonably be expected to have a Material Adverse Effect. A list of all such
permits is set forth on SCHEDULE 2.9(b) hereof.
(c) The Company owns or holds all Permits material to the conduct of
its business. To the Stockholder's knowledge, no event has occurred and is
continuing which permits, or after notice or lapse of time or both would permit,
any modification or termination of any Permit material to the conduct of its
business.
2.10 PROPERTY.
(a) The properties and assets owned by or leased to the Company are
adequate for the conduct of the respective businesses of the Company as
presently conducted. Set forth on SCHEDULE 2.10 hereto is a list of all
interests in real property owned by or leased to the Company (including all real
property owned or leased by the Stockholder (directly or indirectly) and used in
the businesses of the Company) and of all options or other contracts to acquire
any such interest (collectively, the "Real Property "). All improvements to the
Real Property ("Improvements") and all machinery, equipment and other tangible
property owned or used by or leased to the Company ("the "Tangible Property")
are in good operating condition and in good repair and are fit for the
particular purposes for which they are used by the Company, subject only to
ordinary wear and tear. The Real Property, the Tangible Property and all
Improvements owned or leased by the Company conform in all material respects
with all applicable laws, ordinances, rules and regulations and other Legal
Requirements and such Improvements do not encroach in any respect on property of
others except for nonconformity which could not reasonably be expected to have a
Material Adverse Effect. There are no latent defects with respect to the
Improvements. The Real Property is currently zoned to permit the conduct of the
respective businesses of the Company as presently conducted and there is no
pending, or to the Stockholder's knowledge, threatened applications for changes
in the zoning applicable to the Real Property. To the extent required, a
Certificate of Occupancy has been issued with respect to the Improvements
without special conditions or restrictions. To the Stockholder's knowledge, all
utilities servicing the Real Property and the Improvements are provided by
publicly-dedicated utility lines and are located within public rights-of-way and
do
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not cross or encumber any private land, except those utilities that are subject
to easements and other rights-of-way. No notice of any pending, threatened or
contemplated action by any governmental authority or agency having the power of
eminent domain has been given to the Company or the Stockholder with respect to
the Real Property. There is no default by any party to any lease of Real
Property and true and complete copies of such leases will be provided to UAG on
or before June 10, 1996.
2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth in SCHEDULE 2.11(a) hereto or the Disclosure
Documents, (i) the Company, the Real Property, the Improvements and any property
formerly owned, occupied or leased by the Company are in full compliance with
all Environmental Laws (as defined below), (ii) the Company has obtained all
Environmental Permits (as defined below), (iii) such Environmental Permits are
in full force and effect, and (iv) the Company is in full compliance with all
terms and conditions of such Environmental Permits, except for noncompliance
which could not reasonably be expected to have a Material Adverse Effect. As
used herein, "Environmental Laws" shall mean all applicable requirements of
environmental, public or employee health and safety, public or community right-
to-know, ecological or natural resource laws or regulations or controls,
including all applicable requirements imposed by any law (including without
limitation common law), rule, order, or regulations of any federal, state, or
local executive, legislative, judicial, regulatory, or administrative agency,
board, or authority, or any applicable private agreement (such as covenants,
conditions and restrictions), which relate to, (i) noise, (ii) pollution or
protection of the air, surface water, groundwater, or soil, (iii) solid,
gaseous, or liquid waste generation, treatment, storage, disposal or
transportation, (iv) exposure to Hazardous Materials (as defined below), or (v)
regulation of the manufacture, processing, distribution and commerce, use, or
storage of Hazardous Materials. As used herein, "Environmental Permits" shall
mean all permits, licenses, approvals, authorizations, consents or registrations
required under applicable Environmental Law in connection with the ownership,
use and/or operation of the Company's business or the Real Property or
Improvements.
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As used in this SECTION 2.11, "Hazardous Materials" shall mean,
collectively, (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste," "hazardous substances,"
"hazardous materials," "toxic substances" or similar terms in or pursuant to,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (42 U.S.C. 9601 ET SEQ.) ("CERCLA"), as amended by
Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100
State, 1613), the Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 ET SEQ.) ("RCRA"), the Occupational Safety and Health Act of 1970
(29 U.S.C. Section 651 ET SEQ.) ("OSHA"), and the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 ET SEQ. ("HMTA"), and in the
regulations promulgated pursuant to such laws, all as amended, (ii) those
substances listed in the United States Department of Transportation Table (49
CFR 172.101 and amendments thereto) or by the Environmental Protection Agency
(or any successor agency) as hazardous substances (40 CFR part 302 and
amendments thereto), (iii) any material, waste or substance which is or contains
(A) petroleum, including crude oil or any fraction thereof, natural gas, or
synthetic gas usable for fuel or any mixture thereof, (B) asbestos, (C)
polychlorinated biphenyls, (D) designated as a "hazardous substance" pursuant to
Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 ET SEQ. (33 U.S.C.
Section 1321) or listed pursuant to Section 307 of the Clean Water Act (33
U.S.C. Section 1317), (E) flammable explosives, (F) radioactive materials, and
(iv) such other substances, materials and wastes which are or become regulated
or classified as hazardous, toxic or as "special wastes" under any Environmental
Laws.
(b) Except as set forth in the Disclosure Documents, to the
Stockholder's knowledge, the Company and the Stockholder have not violated, done
or suffered any act which could give rise to liability under, and are not
otherwise exposed to liability under, any Environmental Law, except for
violations, acts or omissions which could not reasonably be expected to have a
Material Adverse Effect. Except as set forth in the Disclosure Documents, to
the Stockholder's knowledge, no event has occurred with respect to the Real
Property, the Improvements or any property formerly owned, occupied or leased by
the Company, which, with the passage of time or the giving of notice, or both,
would constitute a violation of or non-compliance with any applicable
Environmental Law, except for violations, acts or omissions which
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could not reasonably be expected to have a Material Adverse Effect. Except as
set forth in the Disclosure Documents, to the Stockholder's knowledge, the
Company has no contingent liability under any Environmental Law, and there are
no liens under any Environmental Law on the Real Property except for contingent
liabilities and liens which could not reasonably be expected to have a Material
Adverse Effect.
(c) Except as set forth in SCHEDULE 2.11(c) hereto or the Disclosure
Documents, (i) neither the Company, the Real Property or any portion thereof,
the Improvements or any property formerly owned, occupied or leased by the
Company, nor, to the knowledge of the Stockholder, any property adjacent to the
Real Property is being used or has been used for the treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Materials or as a landfill or other waste disposal site (provided, however, that
certain petroleum products are stored and handled on the Real Property in the
ordinary course of the Company's business and are, to the extent currently
required, in material compliance with all applicable Environmental Laws
including the existing regulations of the United States Environmental Protection
Agency and the State of Georgia regarding spill protection, overfill protection
and corrosion protection, (ii) neither the Company nor the Stockholder has been
notified that any of the Real Property or any portion thereof, the Improvements
or any property formerly owned, occupied or leased by the Company has been
subject to investigation by any governmental authority evaluating the need to
investigate or undertake Remedial Action (as defined below) at such property,
and (iii) none of the Real Property, the Improvements or any property formerly
owned, occupied or leased by the Company, or, to the knowledge of the
Stockholder, any site or location where the Company sent waste of any kind, is
identified on the current or proposed (A) National Priorities List under 40
C.F.R. 300 Appendix B, (B) Comprehensive Environmental Response Compensation and
Liability Inventory System list, or (C) any list arising from any statute
analogous to CERCLA. As used herein, "Remedial Action" shall mean any action
required to (i) clean up, remove or treat Hazardous Materials, (ii) prevent a
release or threat of release of any Hazardous Material, (iii) perform pre-
remedial studies, investigations or post-remedial monitoring and care, (iv) cure
a violation of Environmental Law or (v) take
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corrective action under sections 3004(u), 3004(v) or 3008(h) of RCRA or
analogous state law.
(d) Except as set forth in SCHEDULE 2.11(d) hereto or the Disclosure
Documents, there have been and are no (i) aboveground or underground storage
tanks, subsurface disposal systems, or wastes, drums or containers disposed of
or buried on, in or under the ground or any surface waters (provided, however,
that certain petroleum products are stored and handled on the Real Property in
the ordinary course of the Company's business and are, to the extent currently
required, in material compliance with all applicable Environmental Laws
including the existing regulations of the United States Environmental Protection
Agency and the State of Georgia regarding spill protection, overfill protection
and corrosion protection), (ii) asbestos or asbestos containing materials or
radon gas, (iii) polychlorinated biphenyls ("PCB") or PCB-containing equipment,
including transformers, or (iv) wetlands (as defined under any Environmental
Law) located within any portion of the Real Property, nor have any Liens been
placed upon any portion of the Real Property, the Improvements or any property
formerly owned, occupied or leased by the Company in connection with any actual
or alleged liability under any Environmental Law, except for conditions which
could not reasonably be expected to have a Material Adverse Effect.
(e) Except as set forth in SCHEDULE 2.11(e) hereto or the Disclosure
Documents, (i) there is no pending or, to the Stockholder's knowledge,
threatened claim, litigation, or administrative proceeding, or known prior
claim, litigation or administrative proceeding, arising under any Environmental
Law involving any of the Company, the Real Property, the Improvements or, to the
Stockholder's knowledge, any property formerly owned, leased or occupied by the
Company, any offsite contamination affecting the business of the Company or any
operations conducted at the Real Property, (ii) there are no ongoing
negotiations with or agreements with any governmental authority relating to any
Remedial Action or other environmentally related claim, (iii) the Company has
not submitted notice pursuant to Section 103 of CERCLA or analogous statute or
notice under any other applicable Environmental Law reporting a release of a
Hazardous Material into the environment, and (iv) the Company has not received
any notice, claim, demand, suit or request for information from any governmental
or private entity with respect to any liability or
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alleged liability under any Environmental Law, nor to Stockholder's knowledge,
has any other entity whose liability therefor, in whole or in part, may be
attributed to the Company, received such notice, claim, demand, suit or request
for information.
(f) To the Stockholder's knowledge, the Stockholder and the Company
have provided to UAG all environmental studies and reports obtained by them or
known to them pertaining to the Real Property, the Improvements, the Company and
any property formerly owned, occupied or leased by the Company, and have
permitted (or will have permitted as of the Closing Date), the testing of the
soil, groundwater, building components, tanks, containers and equipment on the
Real Property, the Improvements, and any property formerly owned, occupied or
leased by the Company (to the extent permitted by the owner thereof), by UAG or
UAG's agents or experts as they have or shall have deemed necessary or
appropriate to confirm the condition of such properties.
2.12 INVENTORIES.
The values at which inventories are carried on the April Unaudited
Company Balance Sheet reflect the normal inventory valuation policies of the
Company, and such values are in conformity with GAAP consistently applied,
except as otherwise provided in the April Unaudited Balance Sheet. All
inventories reflected on the April Unaudited Company Balance Sheet and Company
Factory Statement or arising since the date thereof are currently marketable and
can reasonably be anticipated to be sold in the ordinary course of business
(subject to the reserve for obsolete, off-grade or slow-moving items that is
reflected in the April Unaudited Company Balance Sheet or will be reflected in
the Closing Date Balance Sheet), except for spare parts inventory which
inventory is good and usable.
2.13 ACCOUNTS RECEIVABLE.
Except to the extent reserved, all accounts receivable reflected on
the April Unaudited Company Balance Sheet are, and all accounts receivable on
the Closing Date Balance Sheet, except to the extent reserved, will be good and
or will have been collected or are collectible, without resort to litigation.
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2.14 INSURANCE.
All material properties and assets of the Company which are of an
insurable character are insured against loss or damage by fire and other risks
to the extent and in the manner reasonable in light of the risks attendant to
the businesses and activities in which the Company is engaged and customary for
companies engaged in similar businesses or owning similar assets. Set forth on
SCHEDULE 2.14 hereto is a list and brief description (including the name of the
insurer, the type of coverage provided, the amount of the annual premium for the
current policy period, the amount of remaining coverage and deductibles and the
coverage period) of all policies for such insurance and the Company has made or
will make available to UAG true and complete copies of all such policies. All
such policies are in full force and effect sufficient for all applicable
requirements of law and will not in any way be effected by or terminated or
lapsed by reason of the consummation of the transactions contemplated by this
Agreement and the Lease. True and complete copies of all insurance policies
referred to in SCHEDULE 2.14 hereof have been delivered to or made available to
UAG or its representatives. No notice of cancellation or non-renewal with
respect to, or disallowance of any claim under, any such policy has been
received by the Company.
2.15 CONTRACTS; ETC.
As used in this Agreement, the term "Company Agreements" shall mean
all mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding,
(including all leases and other agreements referred to on SCHEDULE 2.10 hereto)
to which the Company is a party or by which the Company or any of its assets or
properties (including the Real Property and the Improvements) may be bound or
affected, including all amendments, modifications, extensions or renewals of any
of the foregoing and which involve receipts or payments by the Company which
exceed or can reasonably be expected to exceed in $10,000 per year. Set forth
on SCHEDULE 2.15 hereto is a complete and accurate list of each Company
Agreement which is material to the businesses, operations, assets, condition
(financial or otherwise) or prospects of the Company. True and complete copies
of all written
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Company Agreements referred to on SCHEDULE 2.15 and SCHEDULE 2.10 hereto have
been delivered or made available to UAG or its representatives, and the Company
has provided UAG with accurate and complete written summaries of all unwritten
Company Agreements which are material. Except as set forth in SCHEDULE 2.15 or
the Disclosure Documents, to the Stockholder's knowledge, the Company is not,
nor, to the knowledge of the Stockholder, is any other party thereto, in breach
of or default under any Company Agreement, and no event has occurred which
(after notice or lapse of time or both) would become a breach or default under,
or would permit modification, cancellation, acceleration or termination of, any
Company Agreement or result in the creation of any Lien upon, or any Person
obtaining any right to acquire, any properties, assets or rights of the Company
in any such case except for breaches, defaults or other events which could not
reasonably be expected to have a Material Adverse Effect. To the Stockholder's
knowledge, there are no material unresolved disputes involving any Company
Agreement.
2.16 LABOR RELATIONS.
(a) Except as set forth in the Disclosure Documents, the Company has
paid or made provision for the payment of all salaries and accrued wages and has
complied in all material respects with all applicable laws, rules and
regulations relating to the employment of labor, including those relating to
wages, hours, collective bargaining and the payment and withholding of taxes,
and has withheld and paid to the appropriate governmental authority, or is
holding for payment not yet due to such authority, all amounts required by law
or agreement to be withheld from the wages or salaries of its employees.
(b) Except as set forth in SCHEDULE 2.16(b) hereto or the Disclosure
Documents, to the Stockholder's knowledge, the Company is not a party to any (i)
outstanding employment agreements or contracts with officers or employees that
are not terminable at will, or that provide for payment of any bonus or
commission, (ii) agreement, policy or practice that requires it to pay
termination or severance pay to salaried, non-exempt or hourly employees (other
than as required by law), (iii) collective bargaining agreement or other labor
union contract applicable to persons employed by the Company, nor does the
Stockholder know of any activities or proceedings of any labor union to
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organize any such employees. The Company has furnished to UAG or its
representatives complete and correct copies of all such agreements ("Employment
and Labor Agreements"). To the Stockholder's knowledge, the Company has not
breached or otherwise failed to comply with any provisions of any Employment or
Labor Agreement, except for breaches or failures which could not reasonably be
expected to have a Material Adverse Effect.
(c) Except as set forth in SCHEDULE 2.16(c) hereto or the Disclosure
Documents, (i) there is no unfair labor practice charge or complaint pending
before the National Labor Relations Board ("NLRB"), (ii) there is no labor
strike, material slowdown or material work stoppage or lockout actually pending
or, to the Stockholder's or the Company's knowledge, threatened, against or
affecting the Company, and the Company has not experienced any strike, material
slow down or material work stoppage, lockout or other collective labor action by
or with respect to employees of the Company, (iii) there is no representation
claim or petition pending before the NLRB or any similar foreign agency and no
question concerning representation exists relating to the employees of the
Company, (iv) there are no charges with respect to or relating to the Company
pending before the Equal Employment Opportunity Commission or any state, local
or foreign agency responsible for the prevention of unlawful employment-
practices, (v) the Company has not received formal notice from any federal,
state, local or foreign agency responsible for the enforcement of labor or
employment laws of an intention to conduct an investigation of the Company and,
to the Stockholder's knowledge, no such investigation is in progress and (vi)
the consents of the unions that are parties to any Employment and Labor
Agreements are not required to complete the transactions contemplated by this
Agreement and the Documents.
(d) The Company has never caused any "plant closing" or "mass
layoff" as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. Sections 2101-2109, and the
regulations promulgated therein.
2.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth in SCHEDULE 2.17(a) hereto or the Disclosure Documents
is a true and complete list of:
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(i) each employee pension benefit plan, as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the Company or to which the Company is required to make
contributions ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in Section
3(i) of ERISA, maintained by the Company or to which the Company is
required to make contributions ("Welfare Benefit Plan").
True and complete copies of all current Pension Benefit Plans and
Welfare Benefit Plans (collectively, "ERISA Plans") have been delivered to or
made available to UAG or its representatives together with, as applicable with
respect to each such ERISA Plan, trust agreements, summary plan descriptions,
all IRS determination letters or applications therefor with respect to any
Pension Benefit Plan intended to be qualified pursuant to Section 401 (a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and valuation or
actuarial reports, accountant's opinions, financial statements, IRS Form 5500s
(or 5500-C or 5500-R) and summary annual reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on SCHEDULE
2.17(b) or the Disclosure Documents:
(i) there is no ERISA Plan which is a "multi-employer" plan as
that term is defined in Section 3(37) of ERISA ("Multiemployer Plan");
(ii) no event has occurred or (to the Stockholder's knowledge),
is threatened or about to occur which would constitute a prohibited
transaction under Section 406 of ERISA or under Section 4975 of the Code;
(iii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed under
ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R)
and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
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(c) Except as set forth in SCHEDULE 2.17(c) hereto or in the
Disclosure Documents, each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section 401(a)
of the Code, and the trust established thereunder has been exempt from
taxation under Section 501(a) of the Code and is currently in compliance
with applicable federal laws;
(ii) has been operated, since its inception, in accordance with
its terms and there exists no fact which could reasonably be expected would
adversely affect its qualified status; and
(iii) is not currently under investigation, audit or review by the
IRS or (to the Stockholder's knowledge), no such action is contemplated or
under consideration and the IRS has not asserted that any Pension Benefit
Plan is not qualified under Section 401(a) of the Code or that any trust
established under a Pension Benefit Plan is not exempt under Section 501(a)
of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and, for the purpose solely of SECTION
2.17(d)(iv) hereof, to the Stockholder's knowledge, each defined contribution
plan under Section 414(i) of the Code:
(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been incurred by the Company
since the effective date of ERISA and all premiums due and owing to the
PBGC have been timely paid;
(ii) the PBGC has not notified the Company or any Pension Benefit
Plan of the commencement of proceedings under Section 4042 of ERISA to
terminate any such plan;
(iii) no event has occurred since the inception of any Pension
Benefit Plan or (to the knowledge of the Company or the Stockholder) is
threatened or about to occur which would
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constitute a reportable event within the meaning of Section 4043(b) of
ERISA;
(iv) no Pension Benefit Plan ever has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of
the Code); and
(v) if any of such Pension Benefit Plans were to be terminated
on the Closing Date (A) no liability under Title IV of ERISA would be
incurred by the Company and (B) all benefits accrued to the day prior to
the Closing Date (whether or not vested) would be fully funded in
accordance with the actuarial assumptions and method utilized by such plan
for valuation purposes.
(e) With respect to each Pension Benefit Plan, SCHEDULE 2.17(e)
contains a list of all Pension Benefit Plans to which ERISA has applied which
have been or are being terminated since January 1, 1990, or for which a
termination is contemplated, and a description of the actions taken by the PBGC
and the IRS with respect thereto.
(f) The aggregate of the amounts of contributions by the Company to
be paid or accrued under ERISA Plans is not expected to exceed the total amount
set forth on SCHEDULE 2.17(f) for the current fiscal year. To the extent
required in accordance with GAAP, and except as set forth on the Disclosure
Documents, to the Stockholder's knowledge, the April Unaudited Company Balance
Sheet reflects in the aggregate an accrual of all amounts of employer
contributions accrued but unpaid by the Company under the ERISA Plans as of the
date of the April Unaudited Company Balance Sheet.
(g) With respect to any Multiemployer Plan (1) the Company has not,
since its formation, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of
ERISA; (2) there is no withdrawal liability of the Company under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Company had
occurred under each such Plan as of December 31, 1995; and (3) the Company has
not received notice to the effect that any Multiemployer Plan is either in
reorganization (as defined in
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Section 4241 of ERISA) or insolvent (as defined in Section 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans, except as set forth
in the Disclosure Documents:
(i) There are no liabilities of the Company under Welfare
Benefit Plans with respect to any condition which relates to a claim filed
on or before the date of the April Unaudited Company Balance Sheet.
(ii) No claims for benefits are in dispute or litigation.
2.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on SCHEDULE 2.18(a) hereto or the Disclosure Documents
is a true and complete list of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance, severance, retirement,
excess benefit or other plan, trust or arrangement which is not an ERISA
Plan whether written or oral, which the Company maintains or is required to
make contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current or
former officer, director or consultant of the Company pursuant to which
payments may be required to be made at any time following the date hereof
(including, without limitation, any employment, deferred compensation,
severance, supplemental pension, termination or consulting agreement or
arrangement); and
(iii) each employee of the Company whose aggregate compensation
for the fiscal year ended December 31, 1995 exceeded, and whose aggregate
compensation for the fiscal year ended December 31, 1996 is likely to
exceed, $50,000. True and complete copies of all of the written plans,
arrangements and agreements referred to on SCHEDULE 2.18(a) ("Compensation
Commitments") have been provided to UAG
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together with, where prepared by or for the Company, any valuation,
actuarial or accountant's opinion or other financial reports with respect
to each Compensation Commitment for the last three years. An accurate and
complete written summary has been provided to UAG with respect to any
Compensation Commitment which is unwritten.
(b) Except as set forth in the Disclosure Documents, to the
Stockholder's knowledge, each material Compensation Commitment:
(i) since its inception, has been operated in all material
respects in accordance with its terms;
(ii) is not currently under investigation, audit or review by the
IRS or any other federal or state agency and (to the knowledge of the
Stockholder) no such action is contemplated or under consideration;
(iii) has no liability for any federal, state, local or foreign
Taxes, except to the extent not due and payable;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code;
and
(vi) has operated since its inception in material compliance with
the reporting and disclosure requirements imposed under ERISA and the Code,
except to the extent ERISA and the Code are not applicable.
2.19 TRANSACTIONS WITH INSIDERS.
Set forth on SCHEDULE 2.19 hereto or the Disclosure Documents is a
complete and accurate description of all material transactions between the
Company or any ERISA Plan, on the one hand, and any Insider, on the other hand,
that have occurred since January 1, 1991. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholder, any director
or officer of the Company, and any Affiliate, Associate or Relative of any
of the foregoing persons;
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(ii) the term "Associate" used to indicate a relationship with
any person means (A) any corporation, partnership, joint venture or other
entity of which such person is an officer or partner or is, directly or
indirectly, through one or more intermediaries, the beneficial owner of 30%
or more of (1) any class or type of equity securities or other profits
interest or (2) the combined voting power of interests ordinarily entitled
to vote for management or otherwise, and (B) any trust or other estate in
which such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's spouse,
such person's parents, sisters, brothers, children and the spouses of the
foregoing, and any member of the immediate household of such person.
2.20 PROPRIETY OF PAST PAYMENTS.
To the Stockholder's knowledge, no funds or assets of the Company have
been used for illegal purposes; no unrecorded funds or assets of the Company
have been established for any purpose; no accumulation or use of the Company's
corporate funds or assets has been made without being properly accounted for in
the respective books and records of the Company; all payments by or on behalf of
the Company have been duly and properly recorded and accounted for in their
respective books and records; no false or artificial entry has been made in the
books and records of the Company for any reason; no payment has been made by or
on behalf of the Company with the understanding that any part of such payment is
to be used for any purpose other than that described in the documents supporting
such payment; and the Company has not made, directly or indirectly, any illegal
contributions to any political party or candidate, either domestic or foreign.
Neither the IRS nor any other federal, state, local or foreign government agency
or entity has initiated or, to the Stockholder's knowledge, threatened any
investigation of any payment made by the Company of, or alleged to be of, the
type described in this SECTION 2.20.
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2.21 INTEREST IN COMPETITORS.
Except as set forth in SCHEDULE 2.21 or the Disclosure Documents,
neither the Company nor the Stockholder, nor any of their Affiliates, have any
interest, either by way of contract or by way of investment (other than as
holder of not more than 2% of the outstanding capital stock of a publicly traded
Person, so long as such holder has no other connection or relationship with such
Person) or otherwise, directly or indirectly, in any Person other than the
Company that is engaged in the retail sale or servicing of automobiles or light
duty trucks.
2.22 BROKERS.
Neither the Company, nor any director, officer or employee thereof,
nor the Stockholder or any representative of the Stockholder, has employed any
broker or finder or has incurred or will incur any broker's, finder's or similar
fees, commissions or expenses, in each case in connection with the transactions
contemplated by this Agreement or the Lease.
2.23 ACCOUNTS.
SCHEDULE 2.23 hereof correctly identifies each bank account maintained
by or on behalf or for the benefit of the Company and the name of each person
with any power or authority to act with respect thereto.
2.24 DISCLOSURE.
Neither the Company nor the Stockholder has made any material
misrepresentation to UAG relating to the Company or the Shares and neither the
Company nor the Stockholder has omitted to state to UAG any material fact
relating to the Company or the Shares which is necessary in order to make the
information given by or on behalf of the Company or the Stockholder to UAG not
misleading.
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ARTICLE 3
REPRESENTATIONS OF THE STOCKHOLDER
Subject to the parties' agreement and acknowledgement that certain of
the Schedules referred to in this ARTICLE 3 are to be delivered by the
Stockholder to UAG and Sub no later than June 12, 1996, the Stockholder hereby
represents to UAG and Sub as follows:
3.1 OWNERSHIP OF SHARES; TITLE.
The Stockholder is the record and legal owner of the Shares set forth
on SCHEDULE 3.1 hereof and has, and shall transfer to Sub at the Closing, good
and marketable title to the Shares owned by her, free and clear of any and all
Liens, claims and encumbrances and free and clear of any restrictions on
transfer (other than restrictions on transfer imposed by applicable federal and
state securities laws), proxies and voting or other agreements.
3.2 AUTHORITY.
(a) The Stockholder has all requisite power and authority and has
full legal capacity and is competent to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby (including the
disposition of the Shares to Sub as contemplated by this Agreement). This
Agreement has been duly executed and delivered by the Stockholder and
constitutes a valid and binding obligation of the Stockholder, enforceable
against the Stockholder in accordance with its terms.
(b) Except as set forth in SCHEDULE 3.2 or the Disclosure Documents,
the execution, delivery and performance of this Agreement by the Stockholder and
the consummation of the transactions contemplated hereby do not and will not:
(i) (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination
or acceleration in respect of, any material contract, agreement,
commitment, understanding, arrangement or restriction to which the Stock-
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holder is a party or to which the Stockholder or any of her property is
subject;
(ii) violate or conflict with any Legal Requirements applicable
to the Stockholder or any of its businesses or properties; or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
3.3 REAL PROPERTY AND IMPROVEMENTS.
Except as set forth in SCHEDULE 3.3 hereto or the Disclosure
Documents, the Stockholder or Argonne owns the Real Property and Improvements in
fee simple, free and clear of all Liens, claims and encumbrances (all such Real
Property and Improvements owned by Stockholder or Argonne being referred to
herein collectively as the "Stockholder Realty"). No assessments have been made
against any portion of the Stockholder Realty which are unpaid (except ad
valorem taxes for the current year that are not yet due and payable), whether or
not they have become Liens. There are no disputes concerning the location of
the lines and corners of the Real Property. No one has been granted any right
to purchase or lease the Stockholder Realty other than the existing leases in
favor of the Company, which is to be terminated at Closing. All contractors,
subcontractors and other persons or entities furnishing work, labor, materials
or supplies with respect to any of the Real Property, Improvements or Tangible
Property have been paid and there are no Liens against such property in
connection therewith (except for improvements to the used car facility which are
being paid in the ordinary course of business). Attached as SCHEDULE 3.3 are
all surveys, title binders, title policies and copies of any exceptions to title
relating to the Stockholder Realty.
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ARTICLE 4
REPRESENTATIONS OF UAG AND SUB
Subject to the parties' agreement and acknowledgement that certain of
the Schedules referred to in this ARTICLE 4 are to be delivered by UAG and Sub
no later than June 12, 1996, UAG and Sub hereby jointly and severally represent
to the Company and the Stockholder as follows:
4.1 ORGANIZATION AND GOOD STANDING.
Each of UAG and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has the corporate power and authority to own, lease and
operate the properties used in its business and to carry on its business as now
being conducted. Each of UAG and each of its subsidiaries is duly qualified to
do business and is in good standing as a foreign corporation in each state and
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when taken
together with all other such failures of UAG and its subsidiaries would not, or
could not reasonably be expected to, in the aggregate have a material adverse
effect on UAG and its subsidiaries, taken as a whole.
4.2 AUTHORITY; APPROVALS AND CONSENTS.
UAG and Sub, respectively, have the corporate power and authority to
enter into this Agreement, the Note, the UAG Guaranty of Note, the UAG Guaranty
of Estate Lease, the UAG Guaranty of Argonne Lease and the Company Guaranty of
Note (the "Stipulated Documents"), and to perform their respective obligations
hereunder. This Agreement has been, and on the Closing Date the Stipulated
Documents will be, duly executed and delivered by, and constitutes valid and
binding obligation of, UAG and Sub, enforceable against UAG and Sub in
accordance with its terms. The execution, delivery and performance by UAG and
Sub of this Agreement and the consummation of the transactions contemplated
hereby do not and will not:
(i) contravene any provisions of the certificate of
incorporation or bylaws of UAG or Sub;
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(ii) (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination
or acceleration in respect of, any UAG Agreement (as defined in SECTION 4.5
hereof) or, require any consent or waiver of any party to any UAG Agreement
other than agreements the breach or violation of which could not reasonably
be expected to have a material adverse effect on UAG and its subsidiaries,
taken as a whole;
(iii) violate or conflict with any Legal Requirements applicable
to UAG or any of its subsidiaries or any of their respective businesses or
properties, except for such violations or conflicts which could not
reasonably be expected to have a Material Adverse Effect; or
(iv) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
4.3 FINANCIAL STATEMENTS.
Attached as SCHEDULE 4.3 are true and correct copies of:
(i) (A) the unaudited balance sheet of UAG as of December 31,
1995 (the "1995 UAG Balance Sheet") and the related statements of income,
stockholders' equity and cash flow for the fiscal year ended December 31,
1995, together with the notes thereto, and (B) the audited balance sheet of
UAG as of December 31, 1994 and the related statements of income,
stockholders' equity and cash flow for the fiscal year ended December 31,
1994, together with the notes thereto, in each case examined by and
accompanied by the report of independent certified public accountants; and
(ii) the unaudited balance sheet of UAG as of April 30, 1996 (the
"April Unaudited UAG Balance Sheet") and the unaudited statement of income,
stockholders' equity and cash flow for the month period ended on such date,
together with the notes thereto (the April Unaudited UAG Balance Sheet and
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related statements of income, Stockholder's equity cash flow, being
referred to collectively herein as "April Unaudited UAG Financial
Statements");
(all of the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "UAG Financial Statements"). The UAG
Financial Statements are in accordance with the books and records of UAG, fairly
present the consolidated financial position, results of operations,
stockholders' equity and changes in the financial position of UAG as of the
dates and for the periods indicated, in the case of the financial statements
referred to in clause (i) above in conformity with GAAP consistently applied
(except as otherwise indicated in such statements) during such periods, and can
be legitimately reconciled with the financial statements and the financial
records maintained and the accounting methods applied by UAG for federal income
tax purposes, and the unaudited financial statements included in the UAG
Financial Statements include all adjustments, which consist of only normal
recurring accruals, necessary for such fair presentations. The statements of
income included in the UAG Financial Statements do not contain any items of
special of nonrecurring income except as expressly specified therein, and the
balance sheets included in the UAG Financial Statements to not reflect any
write-up or evaluation increasing the book value of any assets except as
expressly stated therein. The books and accounts of UAG are complete and
correct in all material respects and fairly reflect all of the transactions,
items of income and expense and all assets and liabilities of the businesses of
UAG consistent with prior practices of UAG.
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4.4 LEGAL MATTERS.
(a) Except as set forth in SCHEDULE 4.4(a) hereto, (i) there is no
claim, action, suit, litigation, investigations, inquiry, review or proceeding
(collectively, "UAG Claims") pending against, or, to UAG's knowledge, threatened
against or affecting, UAG or its subsidiaries or any of their ERISA plans,
assets, properties or rights before or by any court, arbitrator, panel, agency
or other governmental, administrative or judicial entity, domestic or foreign,
and (ii) neither UAG nor any of its subsidiaries, is subject to any judgment,
decree, writ, injunction, ruling or order (collectively, "UAG Judgments") of any
governmental, administrative or judicial authority, domestic or foreign.
(b) To UAG's knowledge, the businesses of UAG and its subsidiaries
are being conducted in compliance with all laws, ordinances, codes, rules,
regulations, standards, judgments and other requirements of all governmental,
administrative or judicial entities (collectively, "UAG Legal Requirements")
applicable to UAG, its subsidiaries, or any of its respective businesses or
properties. To the knowledge of UAG, UAG or its subsidiaries hold, and are in
compliance with, all franchises, licenses, permits, registrations, certificates,
consents, approvals or authorizations (collectively, "UAG Permits") required by
all applicable UAG Legal Requirements.
4.5 CONTRACTS, ETC.
As used in this Agreement, the term "UAG Agreements" shall mean all
mortgages, indenture notes, agreements, contracts, leases, licenses, franchises,
obligations, instruments or other commitments, arrangements or understandings of
any kind, whether written or oral, binding or non-binding, to which UAG or its
subsidiaries is a party or by which UAG or its subsidiaries or any of its assets
or properties may be bound or affected, including all amendments, modifications,
extensions or renewals of any of the foregoing, and which involve receipts or
payments by UAG or its subsidiaries which exceed $100,000 per year. To UAG's
knowledge, UAG and its subsidiaries are not, nor, to the knowledge of UAG, is
any other party thereto, in breach of or default under any UAG Agreement, and no
event has occurred which (after notice or lapse of time or both) would become a
breach or
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default under, or would permit modification, cancellation, acceleration or
termination of, any UAG Agreement or result in the creation of any Lien upon, or
any Person obtaining any right to acquire, any properties, assets or rights of
UAG or its subsidiaries in any such case where such breach, default or other
event would have, or could not reasonably be expected to have, a material
adverse effect. To UAG's knowledge, there are no material unresolved disputes
involving any UAG Agreement, except for disputes which could not reasonably be
expected to have a material adverse effect.
4.6 BROKERS.
Neither UAG, Sub nor any of their directors, officers or employees has
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement or the Lease.
4.7 DISCLOSURE.
Neither UAG nor Sub has made any material misrepresentation to the
Stockholder and neither UAG nor Sub has omitted to state to the Stockholder any
material fact relating to UAG or Sub which is necessary in order to make the
information given by UAG or Sub not misleading.
4.8 INVESTMENT.
Sub is acquiring the Shares for investment purposes only, for Sub's
own account, and not with a view to, or resale in connection with, the
distribution or transfer thereof. The Shares have not been offered to Sub or
UAG by means of any publicly disseminated advertisements or sales literature.
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY.
(a) Between the date hereof and the Closing Date, the Stockholder and
the Company will (i) provide to the officers and
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other authorized representatives of UAG and Sub full access, during normal
business hours, to any and all premises, properties, files, books, records,
documents, and other information of the Company and will cause their officers to
furnish to UAG and Sub and their authorized representatives any and all
financial, technical and operating data and other information pertaining to the
businesses and properties of the Company, and (ii) make available for inspection
and copying by UAG and Sub true and complete copies of any documents relating to
the foregoing. UAG and Sub will hold in confidence (unless and to the extent
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law), and will cause their employees,
agents and representatives to hold in confidence, all Confidential Information
(as defined below), and will not disclose the same to any third party except in
connection with obtaining financing and otherwise as may reasonably be necessary
to carry out this Agreement and the transactions contemplated hereby, including
any due diligence review by or on behalf of UAG and Sub. If this Agreement is
terminated, UAG and Sub will promptly return to the Company, upon the request of
either the Stockholder or the Company, all Confidential Information furnished by
the Stockholder and/or the Company to UAG, Sub or any of their employees, agents
and/or the Company to UAG, Sub or any of their employees, agents or
representatives and held by UAG, Sub or any of their employees, agents and
representatives, including all originals, copies, excerpts, disks, tapes and
summaries thereof. UAG and Sub and their employees, agents and representatives
shall use the Confidential Information only for the purpose of consummating the
transactions contemplated by this Agreement and shall not use any Confidential
Information for any other purpose. If this Agreement is terminated for any
reason, UAG, Sub and their employees, agents and representatives shall not use
or have any communication with respect to any Confidential Information, or make
any Confidential Information available to any other Person (other than the
Company or the Stockholder) nor shall they or any of them for a period of two
(2) years following the termination of this Agreement, either on their own
behalf or on behalf of others, solicit, divert or hire, or attempt to solicit,
divert or hire any person employed by the Company at the time of execution of
this Agreement, whether or not the employment of any such person is pursuant to
a written contract, for a determined period or at will. As used herein,
"Confidential Information" shall mean all information,
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documents and data concerning the Company obtained by UAG, Sub or any of their
employees, agents or representatives from the Stockholder and/or the Company in
connection with the transactions contemplated by this Agreement, except
information (x) ascertainable or obtained from public information, (y) received
from a third party not employed by or otherwise affiliated with the Company or
(z) which is or becomes known to the public, other than through a breach by UAG,
Sub or any of their employees, agents or representatives of this SECTION 5.1 or
this Agreement.
(b) The Stockholder will hold in confidence (unless and to the
extent compelled to disclose by judicial or administrative process, or, in the
opinion of her counsel, by other requirements of law) all UAG Confidential
Information (as defined below) and will not disclose the same to any third party
except as may reasonably be necessary to carry out this Agreement and the
transactions contemplated hereby, including any due diligence review by or on
behalf of the Stockholder. If this Agreement is terminated, the Stockholder
will promptly return to UAG, upon the reasonable request of UAG, all UAG
Confidential Information furnished by UAG and held by the Stockholder, including
all copies and summaries thereof. As used herein, "UAG Confidential
Information" shall mean all information concerning UAG or any of its
subsidiaries obtained by the Stockholder in connection with the transactions
contemplated by this Agreement, except information (x) ascertainable or obtained
from public information, (y) received from a third party not employed or
otherwise affiliated with UAG or any of its subsidiaries or (z) which is or
becomes known to the public, other than a breach by the Stockholder of this
Agreement.
(c) The terms and provisions of this SECTION 5.1 shall survive the
termination of this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholder and the Company, on the one hand, and UAG and Sub, on
the other hand, will, as soon as practicable after reasonable request therefor,
furnish to the other all the information concerning the Stockholder and the
Company or UAG and Sub, respectively, required for inclusion in any statement or
application made by UAG or Sub or the Company or the Stockholder
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to any governmental or regulatory body or to any manufacturer or distributor or
in connection with obtaining any third party consent in connection with the
transactions contemplated by this Agreement. Neither the Stockholder or the
Company, on the one hand, nor UAG or Sub, on the other hand, nor any
representative thereof, shall issue any press releases or otherwise make any
public statement with respect to the transactions contemplated hereby without
the prior consent of the other, except as may be required by law.
5.3 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, the Company shall, and the Stockholder shall cause the Company to, conduct
its businesses solely in the ordinary course consistent with past practices and,
without the prior written consent of UAG, neither the Stockholder nor the
Company will, except as required or permitted pursuant to the terms hereof,
permit the Company to:
(i) make any material change in the conduct of its businesses and
operations or enter into any transaction other than in the ordinary course
of business consistent with past practices;
(ii) make any change in its Articles of Incorporation or Bylaws,
issue any additional shares of capital stock or equity securities or grant
any option, warrant or right to acquire any capital stock or equity
securities or issue any security convertible into or exchangeable for its
capital stock or alter any material term of any of its outstanding
securities or make any change in its outstanding shares of capital stock or
other ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any thereof,
except pursuant to transactions in the ordinary course of business
consistent with past practices, (B) issue any securities convertible or
exchange-
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able for debt securities of the Company, or (C) issue any options or other
rights to acquire from the Company, directly or indirectly, debt securities
of the Company or any security convertible into or exchangeable for such
debt securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of its assets or any part thereof, except transactions
pursuant to existing contracts (which will be set forth in SCHEDULE 2.15
hereto) and dispositions in the ordinary course of business consistent with
past practices;
(v) subject any of its assets, or any part thereof, to any lien
or suffer such to be imposed other than such Liens as may arise in the
ordinary course of business consistent with past practices;
(vi) declare, set aside or pay any dividends or other
distribution (whether in cash, stock, property or any combination thereof)
in respect of any shares of its capital stock which could reasonably be
expected to decrease the Net Worth of the Company below the April 30, 1996
Net Worth or redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of business
consistent with past practices;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase
in the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment)
or grant any increase in the compensation payable or to become payable to
any employee, except in accordance with pre-existing contractual provisions
or consistent with past practices;
(ix) make or commit to make any individual material capital
expenditure in excess of $50,000, or aggregate capital expenditures in
excess of $150,000, except in the
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ordinary course of business and except improvements to complete the used-
car facility which is currently under construction;
(x) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of its Affiliates, except in the ordinary course of
business;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other Person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by it (or on behalf of it) on
the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any Person, except in the ordinary course of business;
(xiv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change required
by reason of a concurrent change in GAAP or write-down the value of any
inventory or write-off as uncollectible any accounts receivable except in
the ordinary course of business consistent with past practices;
(xv) settle, release or forgive any material claim or litigation
or waive any material right;
(xvi) make, enter into, modify, amend in any material respect or
terminate any material commitment, bid or expenditure, other than in the
ordinary course of business consistent with past practice; or
(xvii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Stockholder and the Company will use their reasonable best efforts to cause the
Company to:
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(i) continue to maintain, in all material respects, the Company's
properties, the Real Property and the Improvements in accordance with
present practices in a condition suitable for their current use;
(ii) comply with all applicable Environmental Laws, and, in the
event it shall receive notice that there exists a violation of any
Environmental Law with respect to its operations, the Improvements or any
Real Property, take such action as the Company may deem appropriate
consistent with the terms of this Agreement;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when due
all taxes, assessments, fees and other charges lawfully levied or assessed
against it unless the validity thereof is contested in good faith and by
appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the ordinary
course and in accordance with existing practices;
(v) preserve its business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships that
are, at the same time, not economically beneficial to it; and
(vi) continue to conduct its business in the ordinary course
consistent with past practices.
5.4 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
At the Closing there will be no intercompany payables or intercompany
receivables due and/or owing between the Stockholder and any of her Affiliates,
on the one hand, and the Company, on the other hand, except under the Estate
Lease and the Argonne Lease.
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5.5 NEGOTIATIONS.
Until the earlier of (i) 180 days from the date hereof and (ii) the
termination of this Agreement pursuant to SECTION 8.1 hereof, neither the
Stockholder, the Company, nor the Company's officers, directors, employees,
advisors, agents, representatives, Affiliates or anyone acting on behalf of the
Stockholder, the Company or such persons, shall, directly or indirectly,
encourage, solicit, initiate or engage in discussions or negotiations with, or
provide any information to, any person (other than UAG, Sub and their respective
employees and representatives) concerning any merger, sale of assets (other than
in the ordinary course of business), purchase or sale of shares of capital stock
or similar transaction involving the Company. The Stockholder shall promptly
communicate to UAG any inquiries or communications concerning any such
transaction (including the identity of any person making such inquiry or
communication) which the Stockholder may receive or of which the Stockholder may
become aware.
5.6 CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholder and the
Company and UAG and Sub will use their respective best efforts at their own
expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses, approvals,
authorizations, qualifications, orders and consents of all third parties
and governmental authorities, and make all filings and registrations with
governmental authorities which are required on their respective parts for
(A) the consummation of the transactions contemplated by this Agreement,
(B) the ownership or leasing and operating after the Closing by the Company
of all its material properties and (C) the conduct after the Closing by the
Company of its businesses as conducted by it on the date hereof.
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including
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governmental authorities) challenging this Agreement or the transactions
contemplated hereby; and
(iii) to furnish each other such information and assistance as
may reasonably be requested in connection with the foregoing.
5.7 ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts at its own expense to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
provided that in no event shall total expense of any party under this sentence
exceed Twenty-Five Thousand Dollars ($25,000). In case at any time after the
Closing any further action is necessary or desirable to carry out the purposes
of this Agreement, the proper officers of the Company shall take all such
necessary action.
5.8 INTERIM FINANCIAL STATEMENTS.
Within thirty (30) days after the end of each calendar month after
April 30, 1996, the Company will deliver to UAG unaudited consolidated balance
sheets of the Company at the end of such calendar month and at the end of the
corresponding calendar month of the preceding fiscal year, together with the
related unaudited consolidated statements of income and cash flow for the fiscal
months then ended. The Company will also deliver to UAG copies of the Company
Factory Statements provided to Nissan after the date hereof within five days of
their delivery to Nissan. All such financial statements shall fairly present
the financial position and results of operations of the Company as of the date
or for the periods indicated. All unaudited financial statements delivered
pursuant to this SECTION 5.9 shall be prepared on a basis consistent with the
April Unaudited Company Financial Statements.
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5.9 NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this Agreement
will give prompt notice in writing to the other party hereto of: (i) any
information that indicates that any representation of such party contained
herein was not true and correct as of the date made or will not be true and
correct as of the Closing, (ii) the occurrence of any event which could result
in the failure to satisfy a condition specified in ARTICLE 6 or ARTICLE 7
hereof, as applicable, (iii) any notice or other communication from any third
person alleging that the consent of such third person is or may be required in
connection with the transactions contemplated by this Agreement, and (iv) in the
case of the Stockholder and the Company, any notice of, or other communication
relating to, any default or event which, with notice or lapse of time or both,
would become a default under any Company Agreement set forth on SCHEDULE 2.15.
The Company and the Stockholder will (x) promptly advise UAG of any event that
has, or could reasonably be expected in the future to have, a Material Adverse
Effect on the Company, (y) confer on a regular and frequent basis with one or
more designated representatives of UAG to report operational matters and to
report the general status of ongoing operations, and (z) notify UAG of any
emergency or other change in the normal course of business or relating to the
Real Property or Improvements of the Company and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) or adjudicatory proceedings involving the Company, the Real
Property or the Improvements and will keep UAG fully informed of such events and
permit UAG's representatives access to all materials prepared in connection
therewith. Each Stockholder shall give prompt notice to UAG of any notice or
other communication from any third person asserting any right, title or interest
in any of the Shares held by such Stockholder (including, without limitation,
any threat to commence, or notice of the commencement of any action or other
proceeding with respect to the Shares) or the occurrence of any other event of
which such Stockholder has knowledge which could result in any failure to
consummate the sale of the Shares as contemplated hereby.
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5.10 ASSURANCE BY THE STOCKHOLDER.
The Stockholder, the Company, UAG and Sub shall use their respective
best efforts to comply with their respective covenants set forth in this
Agreement.
5.11 ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG, Sub, the Stockholder and the Company, as applicable, shall each
file or cause to be filed with the Federal Trade Commission and the United
States Department of Justice any notifications required to be filed by the
respective "ultimate parent" entities under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "H-S-R Act"), and the rules and
regulations promulgated thereunder, with respect to the transactions
contemplated herein. The parties shall use their best efforts to make such
filings promptly, to respond to any requests for additional information made by
either of such agencies, to cause the waiting periods under the H-S-R Act to
terminate or expire at the earliest possible date and to resist vigorously, at
UAG's sole cost and expense (including, without limitation, the institution or
defense of legal proceedings), any assertion that the transactions contemplated
herein constitute a violation of the antitrust laws, all to the end of
expediting consummation of the transactions contemplated herein; PROVIDED,
HOWEVER, that if UAG or the Stockholder shall determine after issuance of any
preliminary injunction that continuing such resistance is not in its or their
best interests, UAG or the Stockholder, as the case may be, may, by written
notice to the other party, terminate this Agreement with the effect set forth in
SECTION 8.2 hereof. Notwithstanding the foregoing, UAG shall pay, at its sole
cost and expense, all filing fees and other expenses relating to complying with
the H-S-R Act.
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ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG AND SUB TO EFFECT THE CLOSING
The obligations of UAG and Sub required to be performed by them at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by UAG and Sub as
provided herein except as otherwise required by applicable law:
6.1 REPRESENTATIONS; AGREEMENTS; COVENANTS.
Each of the representations of the Company and the Stockholder
contained in this Agreement shall be true and correct on the date made and shall
be true and correct in all material respects as of the Closing. Each of the
obligations of the Company and the Stockholder required by this Agreement to be
performed by them at or prior to the Closing shall have been duly performed and
complied with in all material respects as of the Closing. At the Closing, Sub
shall have received a certificate, dated the Closing Date and duly executed by
the Stockholder, to the effect that the conditions set forth in the two
preceding sentences have been satisfied.
6.2 AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Lease, and the consummation
of the transactions contemplated hereby shall have been duly and validly taken
by the Company. All filings required to be made under the H-S-R Act in
connection with the transactions contemplated hereby shall have been made and
all applicable waiting periods with respect to each such filing, including
extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has a franchise agreement (or
comparable instrument)) required to consummate the transactions
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contemplated hereby and all consents or waivers shall have been made or
obtained.
6.3 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDER'S COUNSEL.
UAG and Sub shall have been furnished with the opinion of the
Company's and the Stockholder's counsel, dated the Closing Date, in form and
substance that is substantialy similar to the terms agreed to between UAG and
Stockholder's counsel on June 5, 1996.
6.4 ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or delays
the consummation of any of the transactions contemplated hereby or (ii) would
impose any limitation on the ability of UAG or Sub effectively to exercise full
rights of ownership of the Shares. No action, suit or proceeding before any
court or any governmental or regulatory entity shall be pending (or threatened
by any governmental or regulatory entity), and no investigation by any
governmental or regulatory entity shall have been commenced (and be pending),
seeking to restrain or prohibit (or questioning the validity or legality of) the
consummation of the transactions contemplated by this Agreement or seeking
damages in connection therewith which UAG or Sub, in good faith and with the
advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby.
6.5 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1995 to the Closing Date, there
shall not have been any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Company.
6.6 COMPLETION OF DUE DILIGENCE.
UAG and Sub shall have completed their due diligence examination of
the Company, the Real Property and the Improvements and the results of such
examination, including any Phase I or Phase II environmental audits of the
Company, shall be
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satisfactory to UAG and Sub; PROVIDED, HOWEVER, that, with the exception of due
diligence relating to any environmental issues, such due diligence shall be
completed, and shall be deemed completed, no later than twenty-one (21) days
after the execution of this Agreement. UAG will pay the costs for a Phase I
environmental audit. If, after obtaining the results of the Phase I
environmental audit, UAG determines that a Phase II environmental audit is
required, the expenses of the Phase II environmental audit shall be paid by UAG;
PROVIDED, HOWEVER, that if the results of the Phase II environmental audit
conclude that remedial action is required, the Stockholder shall reimburse UAG
for one-half of the Phase II expenses and shall be responsible for the costs of
the remedial action, except that if it can reasonably be expected that the cost
of such remedial action will exceed Five Hundred Thousand Dollars ($500,000),
the Stockholder shall have the right to terminate this Agreement if UAG does not
agree to pay all such costs in excess of Five Hundred Thousand Dollars
($500,000). Notwithstanding the foregoing, UAG, Sub and their respective
representatives, in the performance of any due diligence, shall not communicate,
without the Stockholder's prior approval, with any employee, lender, creditor,
customer, franchisor, licensor, vendor, distributor or supplier of the Company
or any other person who deals or is otherwise associated with the Company.
6.7 LEASES.
The Stockholder and the Company shall have entered into the Estate
Lease, and the Company and Argonne shall have entered into the Argonne Lease.
6.8 CERTIFICATES.
The Stockholder and the Company shall have furnished UAG and Sub with
a certificate, dated as of the Closing Date, executed by the Stockholder
certifying to the fulfillment of the conditions set forth in SECTIONS 6.4 AND
6.11 hereof and shall have furnished UAG and Sub with such any other
certificates of its officers and others as UAG and Sub may reasonably request to
evidence compliance with the conditions set forth in this ARTICLE 6.
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6.9 LEGAL MATTERS.
All certificates, instruments and other documents required to be
executed or delivered by or on behalf of the Stockholder and the Company under
the provisions of this Agreement, and all other actions and proceedings required
to be taken by or on behalf of the Stockholder and the Company in furtherance of
the transactions contemplated hereby, shall be reasonably satisfactory in form
and substance to counsel for UAG and Sub.
6.10 APPROVAL OF MANUFACTURER AND DISTRIBUTOR.
The Stockholder and the Company shall have obtained the consent,
authorization and approval of Nissan Motor Corporation USA on terms no less
favorable to those granted to the Company immediately prior to the execution of
this Agreement.
6.11 ENVIRONMENTAL LAWS.
The Company shall be in compliance with all applicable Environmental
Laws.
6.12 NONDISTURBANCE AGREEMENT.
The Stockholder shall have obtained nondisturbance agreements with
respect to any indebtedness secured by the Real Property in form and substance
satisfactory to the Company and UAG.
6.13 TITLE INSURANCE.
UAG and Sub shall have obtained title insurance, at their expense, on
behalf of the Company with respect to the leasehold estate for the Estate Lease
and the Argonne Lease, in form and substance satisfactory to UAG and Sub and
shall have obtained certificates of title from Obenschain and Chandler, L.L.C.
with respect to title of the landlord under the Guynn Leases.
6.14 LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE.
With respect to the existing leases between the Company and the
Stockholder and the Company and Argonne, the Company, the Stockholder and
Argonne, as the case may be, shall have executed
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lease termination agreements in form and substance satisfactory to UAG and the
Company. With respect to the Estate Lease and the Argonne Lease, the Company,
the Stockholder and Argonne shall have executed memoranda of lease in form and
substance satisfactory to UAG and the Company.
6.15 RESIGNATION OF THE COMPANY'S DIRECTORS.
Each of the persons who is a director of the Company on the Closing
Date shall have tendered to Sub in writing his resignation as such in form and
substance satisfactory to UAG.
6.16 SCHEDULES.
The Company and the Stockholder shall have delivered to UAG and Sub
all Schedules referred to in ARTICLES 2 AND 3 and such Schedules and the
Disclosure Documents shall be acceptable in form and substance to UAG and Sub.
6.17 COURT ORDER.
The Stockholder shall have obtained an order from the Probate Court of
Gwinnett County, Georgia relating to the power and authority of the Stockholder
to consummate the transactions contemplated by this Agreement.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF THE
STOCKHOLDER AND THE COMPANY TO EFFECT THE CLOSING
The obligations of the Stockholder and the Company required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may be
waived by the Company and the Stockholder as provided herein except as otherwise
required by applicable law:
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7.1 REPRESENTATIONS AND AGREEMENTS.
Each of the representations of UAG and Sub contained in this Agreement
shall be true and correct on the date made and shall be true and correct in all
material respects as of the Closing. Each of the obligations of UAG and Sub
required by this Agreement to be performed by them at or prior to the Closing
shall have been duly performed and complied with in all material respects as of
the Closing. At the Closing, the Stockholder shall have received a certificate,
dated the Closing Date and duly executed by the chief financial officer of UAG
and of Sub to the effect that the conditions set forth in the preceding two
sentences have been satisfied.
7.2 AUTHORIZATION OF THE AGREEMENT, CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement, the Stipulated Documents and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken by UAG and Sub. All filings required to be made under the H-S-R
Act in connection with the transactions contemplated hereby shall have been made
and all applicable waiting periods with respect to each such filing, including
extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has entered into a franchise
agreement (or comparable instrument)) required to consummate the transactions
contemplated hereby and all consents or waivers shall have been made or
obtained.
7.3 OPINIONS OF UAG'S AND SUB'S COUNSEL.
The Stockholder shall have been furnished with the opinion of Rogers &
Hardin, counsel to UAG and Sub, dated the Closing Date, in form and substance
satisfactory to the Stockholder and its counsel. In rendering the foregoing
opinions, such counsel may rely as to factual matters upon certificates or other
documents furnished by officers and directors of UAG and
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Sub and by government officials, and upon such other documents and data as such
counsel deems appropriate as a basis for its opinion. Such opinions may be
limited to Georgia and federal laws and the General Corporation Law of the State
of Delaware.
7.4 ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the United States shall be in effect (i) that prevents or delays
the consummation of any of the transactions contemplated hereby or (ii) would
impose any limitation on the ability of the Stockholder effectively to exercise
full right to sell and transfer ownership of the Shares. No action, suit or
proceeding before any court or any governmental or regulatory entity shall be
pending (or threatened by any governmental or regulatory entity), and no
investigation by any governmental or regulatory entity shall have been commenced
(and be pending), seeking to restrain or prohibit (or questioning the validity
or legality of) the consummation of the transactions contemplated by this
Agreement or seeking damages in connection therewith which the Stockholder, in
good faith and with the advice of counsel, believes makes it undesirable to
proceed with the consummation of the transactions contemplated hereby.
7.5 BASE PRICE AND NOTE.
Sub shall have paid the Base Price and shall have executed the Note.
7.6 UAG GUARANTY.
UAG shall have executed the UAG Guaranty of Note, the UAG Guaranty of
Estate Lease, the UAG Guaranty of Argonne Lease and the UAG Guaranty of Note.
7.7 COMPANY GUARANTY OF NOTE.
The Company shall have executed the Company Guaranty of Note.
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7.8 CERTIFICATES.
UAG and Sub shall have furnished the Stockholder with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this ARTICLE 7 as may be reasonably requested by the
Stockholder.
7.9 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG or Sub under the provisions
of this Agreement, and all other actions and proceedings required to be taken by
or on behalf of UAG or Sub in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Stockholder.
7.10 APPROVAL OF MANUFACTURER AND DISTRIBUTOR.
The Stockholder, UAG and the Company hall have obtained the consent,
authorization and approval of Nissan Motor Corporation USA.
7.11 RELEASE OF GUARANTY.
UAG and Sub shall have obtained the full and complete release of Lynda
Hickman, individually ("LH"), and the Stockholder from any and all obligations
and liabilities of the Company, including without limitation the guaranty of LH
and the Stockholder of all Liabilities under the Promissory Note dated May 4,
1994, in the original principal amount of $7,500,000 between Bank South, N.A.
and Hickman Nissan, Inc. (the "Release of Guaranty").
7.12 SCHEDULES.
UAG shall have delivered to the Stockholder all Schedules referred to
in ARTICLE 4 and such Schedules shall be acceptable in form and substance to the
Stockholder.
7.13 BOARD APPROVAL.
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The Board of Directors of UAG and Sub shall have approved this
Agreement and the transactions contemplated hereby.
ARTICLE 8
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG, Sub and the Stockholder;
(ii) by either UAG, Sub, or the Stockholder if the Closing shall
not have taken place on or prior to the later of: (A) June 28, 1996, (B)
the date that is two (2) business days after the date on which the H-S-R
Act (as defined in SECTION 5.11) waiting period expires or is terminated,
(C) the date that is two (2) business days after the date on which the
condition set forth in Section 6.10 HEREOF IS SATISFIED, or (D) the date
that is two (2) business days after the date on which any condition set
forth in SECTION 6.17 hereof is satisfied; PROVIDED, HOWEVER, that the
Closing Date shall be no later than July 10, 1996 unless a later date shall
have been approved by UAG, Sub and the Stockholder.
(iii) by UAG, Sub, or the Stockholder if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG or Sub if any of the conditions specified in ARTICLE
6 hereof have not been met or waived by UAG and Sub at such time as such
condition is no longer capable of satisfaction (provided that neither UAG
nor Sub is otherwise in material breach of its representations, covenants
or agreements under this Agreement);
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(v) by the Stockholder if any of the conditions specified in
ARTICLE 7 hereof have not been met or waived by the Stockholder at such
time as such condition is no longer capable of satisfaction (provided that
neither the Stockholder nor the Company is otherwise in material breach of
his or its representations, covenants or agreements under this Agreement);
or
(vi) by either UAG, Sub or the Stockholder if there has been a
material breach on the part of the other of any representation, covenant or
agreement set forth in this Agreement, which breach has not been cured
within ten (10) Business Days following receipt by the breaching party of
written notice of such breach.
If UAG, Sub or the Stockholder shall terminate this Agreement pursuant
to the provisions hereof, such termination shall be effected by notice to the
other parties specifying the provision hereof pursuant to which such termination
is made.
8.2 EFFECT OF TERMINATION.
(a) Except (i) for any breach of this Agreement prior to its
termination, and (ii) for the obligations contained in SECTIONS 5.1 AND 10.2
hereof and (iii) as set forth in SECTION 8.2(b) hereof, upon the termination of
this Agreement pursuant to SECTION 8.1 hereof, this Agreement shall forthwith
become null and void and none of the parties hereto or any of their respective
officers, directors, employees, agents, Affiliates, consultants, stockholders or
principals shall have any liability or obligation hereunder or with respect
hereto.
(b) Notwithstanding anything contained in this Agreement to the
contrary except SECTION 5.1 hereof, if the transactions contemplated by this
Agreement fail to close for any reason whatsoever (including without limitation
any party's breach of one or more representations, covenants and agreements set
forth in this Agreement or any party's arbitrary or capricious refusal to
close), then the total liability of the Stockholder and the Company (even if
such parties breach this Agreement or refuse to close) under ARTICLE 9 and this
Agreement shall not (except for matters described in SECTION 5.1(b) hereof)
exceed Twenty-Five Thousand Dollars ($25,000), and the total liability of UAG
and
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Sub (even if such parties breach this Agreement or refuse to close) under
ARTICLE 9 and this Agreement shall not (except for matters described in SECTION
5.1(a) hereof) exceed Twenty-Five Thousand Dollars ($25,000), and the parties
hereto acknowledge, covenant and agree that none of the parties hereto or any
other Person shall be entitled to specific performance or have any right to any
other equitable remedy or injunctive relief.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE STOCKHOLDER.
Notwithstanding the Closing or the delivery of the Shares, the
Stockholder indemnifies and agrees, except to the extent covered by insurance,
to fully defend, save and hold harmless UAG, Sub and the Company (after the
Closing) (each a "UAG Indemnified Party"), if a UAG Indemnified Party (including
the Company after the Closing Date) shall at any time or from time to time pay
any Costs (as defined in SECTION 9.7 below) arising out of or resulting from, or
shall pay or become legally obligated to pay any sum on account of, (i) any and
all Stockholder Events of Breach (as defined below) or (ii) any claim before or
by any court, arbitrator, panel, agency or other governmental, administrative or
judicial entity, which claim involves, affects or relates to any assets,
properties or operations of the Company or the conduct of the business of the
Company prior to the Closing Date (a "Stockholder Third Party Claim"). As used
herein, "Stockholder Event of Breach" shall be and mean any one or more of the
following: (i) any untruth or inaccuracy in any representation of the
Stockholder or the Company contained in this Agreement, including, without
limitation, any misrepresentation in, or omission from, any statement,
certificate, schedule, exhibit, annex or other document furnished pursuant to
this Agreement by the Stockholder or the Company (or any representative of the
Stockholder or the Company) to UAG or Sub (or any representative of UAG or Sub)
and any misrepresentation in or omission from any document furnished to UAG or
Sub in connection with the Closing, and (ii) any failure of the Stockholder or
the Company duly to perform or observe any term, provision, covenant, agreement
or condition on the part of the Stockholder or the Company to be performed or
observed.
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9.2 INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees, except to the
extent covered by insurance, to fully defend, save and hold harmless the
Stockholder and the Company (prior to the Closing) (each a "Stockholder
Indemnified Party"), if a Stockholder Indemnified Party (including the Company
prior to Closing) shall at any time or from time to time pay any Costs arising
out of or resulting from, or shall pay or become legally obligated to pay any
sum on account of, (i) any and all UAG Events of Breach (as defined below), (ii)
any claim before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, which claim involves, affects
or relates to any assets, properties or operations of UAG or Sub or the conduct
of the business of UAG or Sub prior to or after the Closing Date or (iii) any
claim before or by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity, which claim involves, affects or relates to
the conduct of the business of the Company after the Closing Date (any and all
claims described in clauses (ii) and (iii) being referred to herein collectively
as a "UAG Third Party Claim"). As used herein, "UAG Event of Breach" shall be
and mean any one or more of the following: (i) any untruth or inaccuracy in any
representation of UAG or Sub contained in this Agreement, including, without
limitation, any misrepresentation in, or omission from, any statement,
certificate, schedule, exhibit, annex or other document furnished pursuant to
this Agreement by UAG or Sub (or any representative of UAG or Sub) to the
Stockholder (or any representative of the Stockholder) and any misrepresentation
in or omission from any document furnished to the Stockholder in connection with
the Closing, and (ii) any failure of UAG or Sub duly to perform or observe any
term, provision, covenant, agreement or condition on the part of UAG or Sub to
be performed or observed.
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9.3 PROCEDURES.
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If (i) any Stockholder Event of Breach occurs or is alleged and a UAG
Indemnified Party asserts that the Stockholder has become obligated to a UAG
Indemnified Party pursuant to SECTION 9.1, or if any Stockholder's Third Party
Claim is begun, made or instituted as a result of which the Stockholder may
become obligated to a UAG Indemnified Party hereunder, or (ii) a UAG Event of
Breach occurs or is alleged and a Stockholder Indemnified Party asserts that UAG
has become obligated to a Stockholder Indemnified Party pursuant to SECTION
9.2, or if any UAG Third Party Claim is begun, made or instituted as a result of
which UAG may become obligated to a Stockholder Indemnified Party hereunder (for
purposes of this ARTICLE 9, any UAG Indemnified Party and any Stockholder
Indemnified Party is sometimes referred to as an "Indemnified Party" and UAG and
the Stockholder are sometimes referred to as an "Indemnifying Party," and any
UAG Third Party Claim and any Stockholder Third Party Claim is sometimes
referred to as a "Third Party Claim," in each case as the context so requires),
such Indemnified Party shall give written notice to the Indemnifying Party of
its or her obligation to provide indemnification hereunder, provided that any
failure to so notify the Indemnifying Party shall not relieve them from any
liability that it or he may have to the Indemnified Party under this ARTICLE 9.
If such notice relates to a Third Party Claim, each Indemnifying Party, jointly
and severally, agrees to defend, contest or otherwise protect such Indemnified
Party against any such Third Party Claim at its or her sole cost and expense.
Such Indemnified Party shall have the right, but not the obligation, to
participate at its own expense in the defense thereof by counsel of such
Indemnified Party's choice and shall in any event cooperate with and assist the
Indemnifying Party to the extent reasonably possible. If the Indemnifying Party
fails timely to defend, contest or otherwise protect against such Third Party
Claim, such Indemnified Party shall have the right to do so, including, without
limitation, the right to make any compromise or settlement thereof, and such
Indemnified Party shall be entitled to recover the entire Cost thereof from the
Indemnifying Party, including, without limitation, attorneys' fees,
disbursements and amounts paid (or of which such Indemnified Party has become
obligated to pay) as the result of such Third Party Claim. Failure by the
Indemnifying Party to notify such Indemnified Party of its or their election to
defend any such Third Party Claim within fifteen (15) days after notice thereof
shall have been given to the Indemnifying Party shall be deemed a waiver by
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the Indemnifying Party of its or their right to defend such Third Party Claim.
If the Indemnifying Party assumes the defense of the particular Third Party
Claim, the Indemnifying Party shall not, in the defense of such Third Party
Claim, consent to entry of any judgment or enter into any settlement, except
with the written consent of such Indemnified Party. In addition, the
Indemnifying Party shall not enter into any settlement of any Third Party Claim
(except with the written consent of such Indemnified Party) which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to such Indemnified Party a full release from all liability in respect
of such Third Party Claim. Notwithstanding the foregoing, the Indemnifying
Party shall not be entitled to control (but shall be entitled to participate at
their own expense in the defense of), and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of any Third Party
Claim to the extent the Third Party Claim seeks an order, injunction or other
equitable relief against the Indemnified Party which, if successful, could
materially interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnified Party.
9.4 LIMITATION ON INDEMNIFICATION.
(a) INDEMNIFICATION BY THE STOCKHOLDERS. A UAG Indemnified Party
shall be entitled to indemnification in connection with a Stockholder Event of
Breach or a Stockholder Third Party Claim only if the aggregate Costs incurred
or sustained by all UAG Indemnified Parties exceed Two Hundred Fifty Thousand
Dollars ($250,000). In the event that the aggregate Costs incurred or sustained
by all UAG Indemnified Parties exceeds Two Hundred Fifty Thousand Dollars
($250,000), then the Stockholder shall be fully liable for all such Costs
without regard to such threshold. The provisions of this SECTION 9.4(a) shall
not apply to SECTIONS 1.2, 5.1 OR 10.2.
(b) INDEMNIFICATION BY UAG. A Stockholder Indemnified Party shall be
entitled to indemnification in connection with a UAG Event of Breach or a UAG
Third Party claim only if the aggregate Costs incurred or sustained by all
Stockholder Indemnified Parties exceed Two Hundred Fifty Thousand Dollars
($250,000). In the event the aggregate Costs incurred or sustained by all
Stockholder Indemnified Parties exceeds Two
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Hundred Fifty Thousand Dollars ($250,000), then UAG shall be fully liable for
all such Costs without regard to such threshold. The provisions of this SECTION
9.4(b) shall not apply to SECTIONS 1.2, 5.1 OR 10.2.
(c) BENEFITS. If any liability for taxes, with respect to which an
Indemnified Party is entitled to indemnification from the Indemnifying Party,
results from the disallowance of any claimed deduction or credit, or from the
shifting of any item of income from one taxable period to another taxable
period, then the amount of indemnification to which the Indemnified Party is
entitled shall be computed after taking into consideration any resulting tax
benefit accruing to the Indemnified Party. The adjustments for tax benefits and
insurance coverage under this ARTICLE 9 shall take into account the time value
of money using the then applicable federal rate for federal income tax purposes
in determining the amount of reimbursement to which the Indemnified Party is
entitled under this Article.
(d) CAP. (i) Notwithstanding anything contained in this Agreement to
the contrary and except as set forth in SECTION 9.10 hereof, in no event shall
the aggregate liability of the Stockholder under this ARTICLE 9 and this
Agreement exceed Two Million Dollars ($2,000,000), except that if the
transactions contemplated by this Agreement fail to close for any reason, in no
event shall the aggregate liability of the Stockholder under this ARTICLE 9 and
this Agreement exceed Twenty-Five Thousand Dollars ($25,000).
(ii) Notwithstanding anything contained in this Agreement to the
contrary, and except for UAG's liability under ARTICLE 1 hereof, including
without limitation UAG's liability under the UAG Guaranty of Estate Lease, UAG
Guaranty of Argonne Lease and UAG Guaranty of Note, in no event shall the
aggregate liability of UAG under this ARTICLE 9 and this Agreement exceed Two
Million Dollars ($2,000,00), except that if the transactions contemplated by
this Agreement fail to close for any reason, in no event shall the aggregate
liability of UAG under this ARTICLE 9 and this Agreement exceed Twenty-Five
Thousand Dollars ($25,000).
9.5 OFFSET.
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(a) Notwithstanding anything in this Agreement to the contrary, the
right of UAG, Sub and/or the Company to recover from the Stockholder for any
amounts due to UAG, Sub or the Company under this ARTICLE 9 shall be limited to
(i) the right to offset such amount against UAG's, Sub's or the Company's
obligations under the Note or (ii) to recover any principal amount paid on the
Note.
(b) If UAG, Sub or the Company (the "Exercising Party") determines in
good faith that it has a right to be indemnified and held harmless by the
Stockholder under this ARTICLE 9 (the "Offset Claim"), it may, after giving
twenty (20) days prior written notice to the Stockholder of its intention to
exercise its right of offset or right of recovery under this SECTION 9.5 with
respect to any Offset Claim (the "Right of Offset"), exercise such Right of
Offset with respect to such Offset Claim. Notwithstanding the foregoing, the
exercise of any Right of Offset by any Exercising Party shall not constitute or
be construed as a waiver or release of the Stockholder's right to object to any
Offset Claim or the exercise of any Right of Offset by any Exercising Party, and
the Stockholder shall have all of the rights and remedies available to the
Stockholder (whether at law or in equity) with respect thereto.
9.6 REMEDIES.
Except as otherwise provided in SECTIONS 5.1 AND 10.2 of this
Agreement, the rights of an Indemnified Party under this ARTICLE 9 shall be the
exclusive rights and remedies to which such Indemnified Party shall be entitled
under this Agreement, applicable law or otherwise.
9.7 DEFINITIONS.
For purposes of this ARTICLE 9, "Costs" shall mean, except to the
extent covered by insurance, all liabilities, losses, costs, damages (not
including consequential damages), expenses, claims, attorney's fees, experts'
fees, consultants' fees, and disbursements of any kind or of any nature
whatsoever; PROVIDED, HOWEVER, that attorney's fees shall be reasonable and
based on time actually spent which shall be charged at not more than the
attorney's standard hourly rate and provided further that only one law firm
shall be paid on any claim regardless of
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the number of indemnified parties involved in such claim. For purposes of
application of the indemnity provisions of this ARTICLE 9, the amount of any
Cost arising from the breach of any representation, covenant or agreement shall
be the out-of-pocket amount of any Cost actually paid or legally required to be
paid by the Indemnified Party as a result of such breach.
9.8 ADJUSTMENTS.
Notwithstanding anything contained in this Agreement to the contrary,
the Stockholder shall not have any liability under this Article for any breach
of covenant or misrepresentation or otherwise have any liability under this
Agreement to the extent that the existence of such liability or the breach of
covenant or the falsity of the representation upon which such liability would be
based is disclosed in any Schedule or Disclosure Document or in any other
contracts, documents, records or instruments delivered to or made available to
UAG, Sub or its representatives hereunder or which is disclosed in a written
notice furnished to any of them prior to the Closing Date; PROVIDED, HOWEVER,
that any such disclosure made between the date of execution of this Agreement
and the Closing Date shall not affect the right of Sub to elect not to close the
transactions contemplated by this Agreement as provided in SECTION 8.1 hereof;
it being understood and agreed that if Sub elects to close after such disclosure
(thereby waiving such breach or misrepresentation), UAG and Sub shall thereafter
have no claim against the Company or the Stockholder by reason of, in connection
with or arising from any such disclosed liability, breach or misrepresentation.
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9.9 SUBROGATION.
If the Indemnifying Party makes any payment under this Article with
respect to any loss, the Indemnifying Party shall be subrogated, to the extent
of such payment, to the rights of the Indemnified Party against any insurer or
other party with respect to such losses. If the Indemnified Party makes any
payments under this Article with respect to any losses, the Indemnified Party
shall assign to the Indemnifying Party any and all rights with respect to which
and to the extent to which indemnification shall have been sought or made under
this Agreement, and the Indemnified Party shall not take any action which
directly or indirectly would affect such claims that the Indemnifying Party may
have with respect thereto and shall cooperate fully with the Indemnified Party
in pursuing such claims.
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9.10 CERTAIN ADDITIONAL INDEMNIFICATION.
Notwithstanding anything herein to the contrary, the Stockholder and
Lynda Jane Hickman, in her individual capacity, jointly and severally, indemnify
and agree to fully defend, save and hold harmless each UAG Indemnified Party if
a UAG Indemnified Party shall at any time or from time to time be required to
pay any Costs or is subject to any other damages or liability arising out of or
resulting from, or shall pay or become legally obligated to pay any sum on
account of, any untruth or inaccuracy in any representation of the Stockholder
or the Company contained in SECTIONS 2.3, 3.1 AND 3.2(a) hereof; PROVIDED,
HOWEVER, that in no event shall the aggregate amount of the liability of the
Stockholder and Ms. Hickman under this SECTION 9.10 exceed Eleven Million
Dollars ($11,000,000) (the "Limitation Amount"), except that after the
expiration of the period that commences on the Closing Date and ends on the date
that is two (2) years after the Closing Date (the "2-Year Period") such
Limitation Amount shall be increased by the amount by which $2,000,000 exceeds
the aggregate amount of all claims asserted against the Stockholder during the
2-Year Period under SECTIONS 9.1 AND 9.5 hereof; and, PROVIDED, FURTHER, that
(a) the obligations of the Stockholder hereunder shall expire on the later of
the date that is (i) five (5) years after the Closing Date or (ii) with respect
to any claim asserted with respect to any breach of such representation pursuant
to SECTION 9.3 hereof within five (5) years of the Closing Date on the date such
claim is finally liquidated or otherwise resolved; and (b) the obligations of
Ms. Hickman hereunder shall expire on the later of the date that is (x) seven
(7) years after the Closing Date or (y) with respect to any claim asserted with
respect to any breach of such representation pursuant to SECTION 9.3 hereof
within seven (7) years of the Closing Date on the date such claim is finally
liquidated or otherwise resolved.
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ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
(a) The respective representations, covenants and agreements of each
of the parties to this Agreement (except covenants and agreements which are
expressly required to be performed and are performed in full on or before the
Closing Date) shall survive the Closing Date and the consummation of the
transactions contemplated by this Agreement, subject to SECTION 10.1(b) below.
In the event of a breach of any such representations, or covenants, the party to
whom such representations, or covenants have been made shall have all rights and
remedies for such breach available to it under the provisions of this Agreement,
regardless of any disclosures to, or investigation made by or on behalf of, such
party on or before the Closing Date.
(b) Each of the representations set forth in ARTICLE 2, ARTICLE 3 and
ARTICLE 4 hereof and in any certificate delivered pursuant to ARTICLE 6 or
ARTICLE 7 hereof shall survive, and not be affected in any respect by the
Closing, for a period terminating on the later of (i) the date that is two (2)
years after the Closing Date, and (ii) with respect to any claim asserted with
respect to any breach of such representations pursuant to SECTION 9.3 hereof
before the expiration of such representation, on the date such claim is finally
liquidated or otherwise resolved; PROVIDED, HOWEVER, that with respect to the
Stockholder, the representations set forth in SECTIONS 2.3, 3.1 AND 3.2(a)
hereof shall survive and not be affected in any respect by the Closing, for a
period terminating on the later of (x) the date that is five (5) years after the
Closing Date and (y) with respect to any claim asserted with respect to any
breach of such representations pursuant to SECTION 9.3 hereof before the
expiration of such representations on the date such claim is finally liquidated
or otherwise resolved; and PROVIDED, FURTHER, that with respect to Ms. Hickman,
the representations set forth in SECTIONS 2.3, 3.1 AND 3.2(a) hereof shall
survive and not be affected in any respect by the Closing, for a period
terminating on the later of (x) the date that is seven (7) years after the
Closing Date and (y) with respect to any claim asserted with respect to any
breach of such representations pursuant to SECTION 9.3 hereof before the
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expiration of such representations on the date such claim is finally liquidated
or otherwise resolved.
10.2 FEES AND EXPENSES.
Except as otherwise expressly provided in this Agreement, all legal
and other fees, costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby through the Closing Date shall be paid
by the party incurring such fees, costs or expenses; PROVIDED, HOWEVER, that if
the Closing does not occur and SECTION 5.5 hereof is breached, then the
Stockholder or the Company shall pay to UAG, within five (5) Business Days after
receipt of a request therefor, an amount equal to the lesser of (a) Twenty
Thousand Dollars ($20,000), or (b) all of the legal and other fees, costs and
expenses incurred by UAG in connection with this Agreement and the transactions
contemplated hereby.
10.3 HEADINGS.
The section headings herein are for convenience of reference only, do
not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
10.4 NOTICES.
All notices or other communications required or permitted hereunder
shall be given in writing and shall be deemed sufficient if delivered by hand,
recognized overnight delivery service or mailed by registered or certified mail,
postage prepaid (return receipt requested), as follows:
If to the Company before the Closing date:
339 Argonne Drive
Atlanta, Georgia 30304
and
Neill B. Faucett
Faucett, Taylor & Associates, P.C.
2550 Heritage Court, N.W.
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Atlanta, Georgia 30339
with a copy to:
Davis, Matthews & Quigley, P.C.
14th Floor, Lenox Towers II
3400 Peachtree Road
Atlanta, Georgia 30326
Attn: William M. Matthews, Esq.
If to the Company after the Closing Date:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Facsimile No.: (404) 525-2224
Attn: Michael Rosenzweig
If to the Stockholder:
339 Argonne Drive
Atlanta, Georgia 30305
and
Neill B. Faucett
Faucett, Taylor & Associates, P.C.
2550 Heritage Court, N.W.
Atlanta, Georgia 30339
with a copy to:
Davis, Matthews & Quigley, P.C.
14th Floor, Lenox Towers II
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3400 Peachtree Road
Atlanta, Georgia 30326
Attn: William M. Matthews, Esq.
If to UAG or Sub:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Facsimile No.: (404) 525-2224
Attn: Michael Rosenzweig
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or three (3) days after the date so mailed;
PROVIDED, HOWEVER, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
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10.5 ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns, and the provisions of ARTICLE 9 hereof
shall inure to the benefit of the Indemnified Parties referred to therein;
PROVIDED, HOWEVER, that neither this Agreement nor any of the rights, interests,
or obligations hereunder may be assigned by any of the parties hereto without
the prior written consent of the other parties except with respect to the
distribution of the Estate of James Franklin Hickman pursuant to the terms of
his Will. Notwithstanding the foregoing, UAG and Sub shall have the
unrestricted right to assign this Agreement and to delegate all or any part of
their obligations hereunder to any Affiliate of UAG, but in such event UAG shall
remain fully liable for the performance of all of such obligations in the manner
prescribed in this Agreement.
10.6 ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Lease embody
the entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, covenants or undertakings with respect to the transactions
contemplated hereby other than those expressly set forth herein or in the Lease.
Prior drafts of this Agreement shall not be used as a basis for interpreting
this Agreement.
10.7 WAIVER AND AMENDMENTS.
The Stockholder, the Company, UAG and Sub may by written notice to the
other parties (i) extend the time for the performance of any of the obligations
or other actions of the other parties, (ii) waive any inaccuracies in the
representations of the other parties contained in this Agreement, (iii) waive
compliance with any of the covenants of the other parties contained in this
Agreement, (iv) waive performance of any of the obligations of the other parties
created under this Agreement, or (v) waive fulfillment of any of the conditions
to its own obligations
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under this Agreement. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach, whether or not similar. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the parties
hereto.
10.8 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, all of
which shall be considered one and the same agreement and each of which shall be
deemed an original.
10.9 GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Georgia.
10.10 ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined in
this Agreement shall have the respective meanings given to them in accordance
with GAAP.
10.11 CERTAIN DEFINITIONS.
For purposes of this Agreement:
(a) "Affiliate" of a specified Person shall mean a Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified, and in the
case of a specified Person who is a natural person, his spouse, his issue, his
parents, his estate and any trust entirely for the benefit of his spouse and/or
issue.
(b) "best efforts" shall be deemed to not include any obligation on
the part of any Person to undertake any liabilities, expend any funds or perform
acts (except liabilities, expenditures or performance, other than any best
efforts obligations, expressly required to be undertaken by the terms of this
Agreement) which are materially burdensome to such Person; PROVIDED, HOWEVER,
that notwithstanding the foregoing, the term "best efforts" shall include an
obligation to take such actions
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which are normally incident to or reasonably foreseeable in connection with such
obligation or the transactions contemplated hereby.
(c) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(d) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States on the Closing Date.
(e) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditional and installment sale
agreements, encumbrances or charges of any kind.
(f) "Material Adverse Effect" shall mean any change in, or effect
on, the Company (including the business thereof) which would, or could
reasonably be expected to have a substantial material adverse effect on the
financial condition of the Company taken as a whole.
(g) "Person" shall mean and include an individual, corporation,
limited liability company, partnership, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereto.
(h) "Knowledge" means, with respect to the Stockholder, that Lynda
Hickman, President of the Company, knows, or in the exercise of reasonable
diligence, would or should have known of the particular matter referred to, and,
with respect to UAG, that the President of UAG knows or, in the exercise of
reasonable diligence, would or should have known of the particular matter
referred to.
(i) "Disclosure Documents" means this Agreement, the Schedules and
Exhibits attached hereto and all other contracts, documents, records and other
instruments delivered to UAG or Sub on or before the Closing Date.
10.12 SCHEDULES.
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Disclosure of any matter in any Schedule hereto or in the Financial
Statements shall be considered as disclosure pursuant to any other provision,
subprovision, section or subsection of this Agreement or Schedule to this
Agreement.
10.13 SEVERABILITY.
If any one or more of the provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
10.14 TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
10.14A MS. HICKMAN.
The parties hereby acknowledge and agree that the liability of Ms.
Hickman in her individual capacity under this Agreement is limited to her
obligations under SECTION 9.10 hereof.
10.15 S SHORT YEAR.
(a) The parties hereto acknowledge that upon the closing of the
transactions contemplated by this Agreement, the Company's status as an S
corporation for federal income tax purposes shall cease, that the taxable year
of the Company in which such closing occurs shall be divided into two (2) short
taxable years (a S short year and a C short year). Each of the parties hereto
covenants and agrees to make all elections, consents, statements and filings
that may be required by the Internal Revenue Code of 1986 to close the Company's
books on the last applicable day of the S short year (the "S Short Year").
(b) The federal and state income tax return for the S Short Year (the
"S Tax Returns") shall be prepared, at the Company's expense, by the accounting
firm of Faucett, Taylor &
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Associates, P.C. ("FTA"). The Company, UAG and Sub covenant and agree to
cooperate fully with the Stockholder and FTA in the preparation of the S Tax
Returns and to make available to FTA
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during normal business hours all books, records and information that FTA may
reasonably request to complete the preparation of the S Tax Returns in a prompt,
timely and complete manner. The S Tax Returns shall be prepared on the same
basis, and in a manner consistent with, the principles, methods and practices
used in preparing the Company's previous federal income tax returns. Upon FTA's
delivery of the completed S Tax Returns to the Company, which delivery shall be
no less than 30 days prior to the date thereof, in form and substance reasonably
satisfactory to the Company, the Company covenants and agrees to execute and
file, and UAG and Sub covenant and agree to cause the Company to execute and
file, such S Tax Returns with the appropriate taxing authorities on a timely
basis.
(c) UAG, Sub and the Company covenant and agree that they shall not,
without the Stockholder's prior written approval, make any elections or take any
action with respect to the S Short Year or any other tax period that precedes
the Closing Date which could affect the determination of the Company's or the
Stockholder's federal or state income liability for any of such tax periods.
10.16 ESTATE.
The parties hereby acknowledge and agree that the Stockholder has
executed this Agreement in her capacity as Executrix under the Will of James
Franklin Hickman, Jr., Deceased, and that the Stockholder has not made, and does
not make, any warranties under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ Carl Spielvogel
_________________________________
Name: Carl Spielvogel
Title: Chief Executive Officer
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<PAGE>
UAG ATLANTA III, INC.
By: /s/ Carl Spielvogel
_________________________________
Name: Carl Spielvogel
Title: Chief Executive Officer
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<PAGE>
HICKMAN NISSAN, INC.
By: /s/ Lynda Jane Hickman
________________________________
Name: Lynda Jane Hickman
Title: President
/s/Lynda Jane Hickman
____________________________________
Lynda Jane Hickman, Individually
/s/Lynda Jane Hickman
_____________________________________
Lynda Jane Hickman, as Executrix under the
Will of James Franklin Hickman, Jr., Deceased
<PAGE>
EXHIBIT 10.7.3
NISSAN
(LOGO)
NISSAN MOTOR ACCEPTANCE CORPORATION
AUTOMOTIVE WHOLESALE
FINANCING AND SECURITY AGREEMENT
<PAGE>
NISSAN (LOGO) NISSAN MOTOR ACCEPTANCE CORPORATION
AUTOMOTIVE WHOLESALE FINANCING
AND SECURITY AGREEMENT
This Agreement between Nissan Motor Acceptance Corporation, 990 W. 190th
Street, Torrance, California 90502-1001 ("NMAC"), and PEACHTREE NISSAN, INC.,
located at 5211 PEACHTREE INDUSTRIAL BOULEVARD, CHAMBLEE O_ 30341 ("Dealer"),
sets out the basic terms under which NMAC may establish and maintain for Dealer
a wholesale line of credit, and make advances to or on behalf of Dealer
thereunder, to finance new and used automobiles, trucks, truck-tractors,
trailers, semi-trailers, buses, mobile homes, motor homes, other vehicles and
other merchandise for Dealer whether held by Dealer for sale, lease or otherwise
as inventory, equipment or otherwise (the "Property"). It is therefore agreed
as follows:
1. Advances Made by NMAC
NMAC at all times shall have the right, in its sole discretion, to determine the
extent to which, the terms and conditions on which, and the period for which it
will make advances to or on behalf of Dealer, or extend credit to Dealer. NMAC
may at any time and from time to time in its sole discretion, establish, rescind
or change limits or the extent to which financing accommodations under this
Agreement will be made available to Dealer. This Agreement contemplates that
NMAC may extend credit and make advances to Dealer by paying the invoice amount
of Property ordered by or shipped to Dealer by a manufacturer, distributor or
other seller of such Property to Dealer and NMAC may pay to any such person the
invoice amount thereof, and NMAC shall be fully protected in relying in good
faith upon any invoice or advice from any manufacturer, distributor or seller
that the property described therein has been ordered by or shipped to Dealer and
the invoice amount therefor is correctly stated. Any such payment made by NMAC
to any such manufacturer, distributor or seller shall be an advance made by NMAC
to or on behalf of Dealer pursuant hereto and shall be repayable by Dealer in
accordance with the terms hereof. In addition, NMAC may make loans or other
advances directly to Dealer with respect to property of any type held by Dealer
for sale or lease and any such loan or other advance shall be an advance made by
NMAC to or on behalf of Dealer pursuant hereto and shall be repayable by Dealer
in accordance with the terms hereof. NMAC from time to time shall furnish
statements to Dealer of advances made by NMAC to or on behalf of Dealer pursuant
hereto. Promptly upon receipt by Dealer of any such statement, Dealer shall
review the same and advise NMAC in writing of any discrepancy therein. In the
event Dealer shall fail to advise NMAC of any discrepancy in any such
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<PAGE>
statement within ten calendar days from the receipt thereof by Dealer, such
statement shall be deemed to be conclusive evidence of advances by NMAC to or on
behalf of Dealer pursuant hereto unless Dealer or NMAC establishes by a
preponderance of evidence that such advances were not made or were made in
different amounts than as set forth in such statement.
2. Interest Rate and Flat Charges
All advances made by NMAC to or on behalf of Dealer pursuant hereto shall bear
interest from the date of advance by NMAC to the date of repayment in good funds
by Dealer at the rate established by NMAC from time to time for Dealer (the
"Rate"); provided, however, that any amount not paid when due hereunder shall
bear interest at 2% per annum in excess of the Rate, or the maximum contract
rate permitted by law of the state where Dealer maintains its business as
indicated above, whichever is the lesser. In addition to such interest, the
financing of property hereunder shall be subject to service and insurance flat
charges ("Flat Charges") established by NMAC from time to time for Dealer. The
standard insurance program maintained by NMAC and optional coverages which may
be obtained by Dealer, are attached to this Agreement (for information purposes
only, and may be changed from time to time and at any time at the sole
discretion of NMAC) as Exhibit 1. NMAC shall advise Dealer in writing from time
to time of changes in the Rate and Flat Charges. Such changes in the Rate and
Flat Charges shall be effective from the date stated in such notice; provided,
however, that in the event any such notice advises Dealer of an increase in the
Rate or Flat Charges, Dealer shall have the option of terminating this Agreement
by paying to NMAC the full unpaid balance outstanding under Dealer's wholesale
line of credit and all other amounts due or to become due hereunder in good
funds within ten calendar days after receipt of such notice by Dealer, in which
event such increased Rate or Flat Charges shall not become effective. Interest
shall be calculated daily on the unpaid principal balance outstanding at the
close of business each day. In no event shall Dealer be obligated to pay
interest for any period which exceeds the maximum interest permitted by the
applicable law for that period.
3. Payments by Dealer
The aggregate amount outstanding from time to time of all advances made by NMAC
to or on behalf of Dealer pursuant hereto shall constitute a single obligation
of Dealer, notwithstanding such advances are made from time to time, and such
amount, or so much thereof as may be demanded, together with NMAC's interest and
Flat Charges with respect thereto, shall be payable by Dealer to NMAC upon
demand. Notwithstanding that NMAC shall not have demanded payment therefor,
upon any sale, lease, transfer or other disposition of property financed
pursuant to this Agreement, Dealer shall, on or before the close of the next
business day following such sale, pay over to NMAC an amount
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<PAGE>
equal to the unpaid balance of the amount advanced with respect to the item sold
together with interest thereon; provided, however, that if Dealer is in default,
Dealer shall, on or before the close of the next business day following such
sale, pay over to NMAC the entire proceeds of such sale, but nothing herein
contained shall be deemed to authorize any sale of any Collateral (as
hereinafter defined) while Dealer is in default. Dealer shall also pay to NMAC,
upon demand, the full amount of any rebate, refund or other credit received by
Dealer with respect to any property financed by NMAC hereunder. Dealer shall
pay NMAC the earned and accrued interest on the unpaid balance of all advances
made from time to time upon the earlier of demand by NMAC or the fifteenth day
of each calendar month.
4. NMAC's Security Interest
As security for (i) all advances now or hereafter made by NMAC to or on behalf
of Dealer pursuant hereto, (ii) any other indebtedness of Dealer to NMAC now in
existence or hereafter arising and (iii) the observance of performance of all
other obligations of Dealer to NMAC in connection with the financing of property
for Dealer; Dealer hereby grants to NMAC, its successors and assigns, a security
interest in the following: the "Collateral".
A. All automobiles, trucks, truck-tractors, trailers, semi-trailers,
buses, mobile homes, motor homes, other vehicles and other merchandise, and all
parts, accessories and furnishings used in connection therewith, now held or
hereafter acquired by Dealer, including all goods hereafter added to or acquired
in replacement of the foregoing, and the proceeds of all of the foregoing,
whether or not inventory or other and whether or not new, used, repossessed,
surrendered or other;
B. All goods, including without limitation all machinery, equipment,
tools, appliances, trucks, motor vehicles and office furniture and fixtures now
held or hereafter acquired by Dealer, and the proceeds of all of the foregoing;
C. All accounts receivable, chattel paper, security agreements,
instruments, contract rights, policies and certificates of insurance,
manufacturers certificates or statements of origin, bills of sale, receipts,
journals, records, files, book and ledger sheets, documents and general
intangibles now held or hereafter acquired by Dealer, including all monies and
credits now due or to become due to Dealer from, and all claims against
manufacturers or distributors of inventory or other lending institutions, and
the proceeds of all of the foregoing; and
D. All other assets now held or hereafter acquired by Dealer, with the
exception of real property exclusive of fixtures.
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<PAGE>
5. Dealer's Possession and Sale of Merchandise
Dealer's possession of the Property financed pursuant hereto shall be for the
sole purpose of storing and exhibiting the same for sale or lease in the
ordinary course of Dealer's business. Dealer shall keep all new Property brand
new and all used Property in at least as good condition as when it was acquired
by Dealer, all of which shall be subject to inspection by NMAC. Dealer shall
keep all such Property free from all taxes, liens and encumbrances. Any sum of
money that may be paid by NMAC in release or discharge of any taxes, liens or
encumbrances on any Collateral, or on any documents executed in connection
therewith, shall become an obligation of Dealer to NMAC upon demand. Dealer
shall keep the Collateral at the premises described above or at such other place
as NMAC may approve in writing. Dealer shall not, except as expressly permitted
under this paragraph 5, sell, transfer, lease, mortgage or otherwise dispose of
the Collateral or any part thereof or interest therein, remove the Collateral
from such premises or attempt any such sale, transfer, lease, mortgage, removal
or other disposition of the Collateral without the prior written consent of
NMAC. Unless and until an event of default shall have occurred, Dealer may sell
the Property financed pursuant to this Agreement in the ordinary course of the
Dealer's business, but nothing herein shall be deemed to waive or release any
interest NMAC may have hereunder or under any other agreement and in any
proceeds of such Property, including any accounts receivable, chattel paper,
security agreements, instruments, contract rights, documents and general
intangibles. Except as may be necessary to remove or transport the same from a
freight depot to Dealer's place of business, Dealer shall not use or operate, or
permit the use or operation of, any Property financed hereunder for
demonstration or otherwise without the express prior written consent of NMAC in
each case, and Dealer shall not in ???? use such Property illegally, improperly
or for hire. Dealer shall not mortgage, pledge or loan any of such Property and
shall not transfer or otherwise dispose of the same except by sale or lease in
the ordinary course of Dealer's business. Dealer represents and warrants that
it has good title to the Collateral, that the Collateral is free and clear of
all liens and encumbrances other than those created by this Agreement, that
Dealer has authority to convey a security interest in the Collateral, that NMAC
need not look behind the Dealer signatories hereto to verify such authority that
Dealer will comply with all laws and regulations affecting the Collateral, and
that Dealer shall maintain adequate records for the purpose of identifying the
disposition of any of the Property. As used in this paragraph 5, "sale in the
ordinary course of Dealer's business" shall include only a bona fide retail sale
to a purchaser for his own use at the fair market value of the Property sold,
and ????? an occasional sale of such Property to another dealer at a price not
less than Dealer's cost of the Property sold, provided such sale is not a part
of a plan or ???????????? to liquidate all or any portion of Dealer's business;
and "lease in the ordinary course of Dealer's business"
-5-
<PAGE>
shall include only a bona fide lease to a lessee for his own use at a fair
rental value of the Property leased.
6. Risk of Loss and Insurance Requirements
Except to the extent of any insurance proceeds actually received by NMAC with
respect thereto under insurance obtained by NMAC pursuant to this Agreement or
any other agreement, all Property financed hereunder shall be at Dealer's sole
risk or any loss or damage to the same. Dealer hereby indemnifies NMAC against
and holds NMAC harmless from all claims for injury or damage to persons or
property caused by the use, operation or other holding of the Collateral and if
requested to do so by NMAC, Dealer shall maintain, at its own expense, liability
insurance in connection therewith in such form and amounts and with such
insurers as NMAC may reasonably require from time to time. In addition, Dealer
shall insure all Collateral financed hereunder that is or may be used for
demonstration or operated for any other purpose against loss due to collision,
subject in each case to the deductible amounts and limitations required by NMAC.
If Dealer fails to furnish acceptable evidence of any insurance required by
NMAC, NMAC may, but shall not be required to, obtain such insurance at Dealer's
expense.
7. Credits and Setoffs
All funds or other property belonging to NMAC and received by Dealer shall be
received by Dealer in trust for NMAC and shall be remitted to NMAC forthwith.
NMAC shall at all times have a right to offset and apply any and all credits,
monies or properties of Dealer in NMAC's possession or control against any
obligation of Dealer to NMAC.
8. Information Concerning Dealer
To induce NMAC to extend financing accommodations hereunder, Dealer has
submitted information concerning its business organization and financial
condition, and Dealer hereby certifies that the information is complete, true
and correct in all respects and that the financial information contained
therein, and any other financial information that may be furnished to NMAC from
time to time hereafter, does and shall fairly present the financial condition of
Dealer in accordance with generally accepted accounting principles applied on a
consistent basis. Dealer shall submit to NMAC (i) within 120 days after the end
of Dealer's fiscal year, a complete statement of Dealer's financial condition
for that year in a form which is reasonably satisfactory to NMAC, (ii) within 15
days after the last day of each calendar month, a balance sheet and profit and
loss statement for that preceding month, and for any other financial records or
reports which NMAC may reasonably request. In addition, Dealer agrees to
notify NMAC immediately of any material change in its ownership, control,
business organization or financial condition or of any information relating
thereto
-6-
<PAGE>
previously furnished to NMAC. Dealer acknowledges and intends that NMAC shall
rely, and shall have the right to rely, on such information in extending and
continuing to extend financing accommodations to Dealer. Dealer hereby
authorizes NMAC from time to time and at all reasonable times to examine,
appraise and verify, through contracts with retail purchasers and otherwise, the
existence and condition of all inventory, goods, documents, commercial or other
paper and other property in which NMAC has or has had any title, title
retention, lien, security or other interest, and all of Dealer's books and
records in any way relating to its business.
9. Default
The happening of any of the following events or conditions shall constitute a
default as such term is used herein:
A. Dealer defaults in the payment of any indebtedness for advances made
hereunder or otherwise due NMAC or in the performance of any of the terms,
conditions or obligations of Dealer under this Agreement or any other agreement
between NMAC and Dealer;
B. Any warranty, representation or statement made or caused to be made by
Dealer in connection with this Agreement or any other agreement between NMAC and
Dealer is or becomes false or breached in any material respect;
C. Loss, theft, damage, destruction, sale (except as permitted in
paragraph 5) or encumbrance of the Collateral or the making of any levy, seizure
or attachment thereon;
D. Inability of Dealer to pay debts as they mature, insolvency,
appointment of a receiver, trustee or custodian for Dealer or Dealer's property,
assignment for the benefit of creditors by Dealer, commencement of any
proceedings under any bankruptcy or insolvency law of the United States, any
state or any political subdivision thereof by or against Dealer, or an order of
attachment, execution, sequestration or other order in the nature of a writ is
levied on the Collateral;
E. Death of the Dealer if the Dealer is a natural person, or death of any
partner of the Dealer if it is a partnership;
F. Dissolution, merger or consolidation of any Dealer which is a
corporation or a partnership or a transfer of all or any substantial part of the
property of any Dealer; or
G. Revocation, surrender, suspension or termination of any license,
certificate, franchise, permit or any agreement necessary to allow Dealer to
engage in the business which it presently conducts or which materially affects
the ability of Dealer to carry on its business as it is presently conducted.
-7-
<PAGE>
Whenever a default shall occur, or at any time thereafter, NMAC at its option
and without demand or notice of any kind, may terminate this Agreement and
declare the indebtedness to be immediately due and payable. Upon default, NMAC
shall have all the remedies of a secured creditor under the Uniform Commercial
Code with respect to the Collateral and all other security pursuant to any other
agreements between NMAC and Dealer. Dealer grants to NMAC, in any such event,
the right to take possession of the Collateral and such other security by any
means not involving a breach of the peace and to sell the same. For such
purpose, NMAC may enter upon the premises on which the Collateral or other
security may be situated and remove the same to such other place as NMAC may
determine, and Dealer waives any notice or hearing with respect to such taking
of possession. Dealer shall, upon NMAC's demand, assemble and make the
Collateral or other security available to NMAC at a place to be designated by
NMAC which is reasonably convenient to both parties. Further, NMAC may collect
all monies and credits then due or to become due to Dealer from, and all claims
against, manufacturers or distributors of inventory or other lending
institutions. If any notice is required by law, such notice shall be deemed
reasonably and properly given if mailed first class mail, postage prepaid, to
the address of Dealer indicated above at least five days before the event with
respect to which notice is required.
In the event of any default, Dealer shall pay all costs incurred by NMAC in
enforcing the terms of this Agreement and collecting any amounts due hereunder,
including those incurred in bankruptcy proceedings, expenses of locating the
goods, expense of any repairs to any realty or other property to which any of
the goods may be affixed or be a part, and reasonable attorney's fees and legal
expenses. The security interest granted hereunder shall be deemed to secure, in
addition to all other sums of money due hereunder, the repayment of all such
costs of collection and enforcement and all amounts expended by NMAC on behalf
of the Dealer. Dealer agrees that the sale by NMAC of any new or unused
property repossessed by NMAC to the manufacturer, distributor or seller thereof,
or to any person designated by such manufacturer, distributor or seller, at the
invoice cost to Dealer less any credit granted to Dealer with respect thereto
and reasonable costs of transportation and reconditioning, shall be deemed to be
a commercially reasonable means of disposing of the same. Dealer further agrees
that if NMAC shall solicit bids from three or more other dealers in the type of
property repossessed by NMAC hereunder, any sale by NMAC of such property in
bulk or in parcels to the bidder submitting the highest cash bid therefor shall
also be deemed to be a commercially reasonable means of disposing of the same.
Notwithstanding the foregoing, it is expressly understood that such means of
disposal shall not be exclusive, and that NMAC shall have the right to dispose
of any property repossessed hereunder by any commercially reasonable means. In
addition to all other rights and remedies of NMAC, Dealer shall be liable for
the amounts by which the indebtedness of Dealer to NMAC hereunder shall exceed
the amount realized by
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<PAGE>
NMAC from any of the Collateral and other security, but nothing herein shall
require NMAC to look to any or all of the Collateral in satisfaction of Dealer's
indebtedness to NMAC.
10. General
Time shall be of the essence herein. Any delay on the part of NMAC in the
exercise of any right or remedy shall not operate as a waiver thereof, and no
single or partial exercise by NMAC of any right or remedy shall preclude any
other or further exercise of any other right or remedy.
The word "indebtedness" is used herein in its most comprehensive sense and
includes any and all advances, debts, obligations and liabilities of Dealer,
heretofore, now, or hereafter made, incurred or created, whether voluntary or
involuntary, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether Dealer may be liable
individually or jointly with others.
Any reference herein to NMAC shall include the successors and assigns of NMAC.
If more than one party shall execute this Agreement, the term "Dealer" shall
mean all parties signing this Agreement (other than NMAC) and each of them, and
all such parties shall be jointly and severally obligated and liable hereunder.
The covenants and conditions of this Agreement shall apply to and be binding
upon the heirs, executors, administrators, successors and assigns of Dealer and
shall inure to the benefit of NMAC, its successors and assigns. This Agreement
shall not be assignable by Dealer except with the express written consent of
NMAC.
The neuter pronoun when used herein shall include the masculine and the feminine
and also the plural.
Whenever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
Dealer further agrees that the Collateral is now and shall continue to be
personal property, notwithstanding the manner and degree of affixation of the
Collateral to any real property.
Except as herein provided, no modification hereof may be made except by written
instrument duly executed by, or pursuant to the express written authority of, an
executive officer of NMAC.
Dealer shall execute and deliver to NMAC promissory notes or other evidences of
Dealer's indebtedness hereunder, security agreements, trust receipts, chattel
mortgages or other security
-9-
<PAGE>
instruments and any other documents which NMAC may reasonably request to confirm
Dealer's obligation to NMAC and to confirm NMAC's security interest in any
collateral by NMAC, and if NMAC so requests, the terms and conditions hereof
shall be deemed to be incorporated therein. NMAC's security or other interest
in any Collateral shall not be impaired by the delivery to Dealer of such
Collateral or of bills of lading, certificates of origin, invoices or other
documents pertaining thereto or by the payment by Dealer of any curtailment,
security or other deposit or portion of the amount financed. The execution by
Dealer or on Dealer's behalf of any document for the amount of any credit
extended shall be deemed evidence of Dealer's obligation and not payment
thereof.
NMAC may, for and in the name of Dealer, endorse and assign any obligation
transferred to NMAC by Dealer and any check or other medium of payment intended
to apply upon such obligation. NMAC may complete any blank space and fill in
omitted information on any document or paper furnished to it by Dealer.
Unless the context clearly requires, the terms used herein shall be given the
same meaning as ascribed to them under the provisions of the Uniform Commercial
Code.
Section headings are inserted for convenience only and shall not affect any
construction or interpretation of this Agreement. This Agreement shall be
interpreted in accordance with the laws of the state of the Dealer's place of
business indicated above.
11. Effective Date and Termination
This Agreement shall become effective on the date NMAC first extends credit to
Dealer hereunder and shall be binding on Dealer and NMAC and their respective
successors and assigns from such date until terminated by receipt of written
notice by either party from the other; provided, however, that any such
termination shall not relieve either party from any obligation incurred prior to
the effective date thereof, nor shall it affect the security interest granted
hereunder which shall continue until all outstanding obligations and
indebtedness of Dealer to NMAC are satisfied in full. Such termination shall
not affect the obligations of any guarantor of the obligations and indebtedness
of the Dealer hereunder.
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<PAGE>
Dated: July 12, 1996
PEACHTREE NISSAN, INC.
5211 Peachtree Industrial Boulevard
Chamblee, GA 30341
By: /s/ Carl Spielvogel
--------------------------
Carl Spielvogel, President
NISSAN MOTOR ACCEPTANCE CORPORATION
By: /s/ Mark Doi
--------------------------
Mark Doi, Senior Manager
Commercial Credit
-11-
<PAGE>
ADDENDUM TO
AUTOMOTIVE WHOLESALE FINANCING
AND SECURITY AGREEMENT
This Addendum to Automotive Wholesale Financing and Security Agreement
("Addendum") is made between NISSAN MOTOR ACCEPTANCE CORPORATION ("NMAC") and
PEACHTREE NISSAN, INC. ("Dealer") effective as of July 12, 1996.
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, NMAC and Dealer hereby agree to supplement the
Automotive Wholesale Financing and Security Agreement between NMAC and Dealer,
dated as of July 12, 1996 (the "Agreement"), as follows:
Section 8 of the Agreement is amended to add, at the end of the section,
the following paragraph:
"As a condition of extensions of credit by NMAC, Dealer
acknowledges and agrees to maintain tangible net worth,
working capital and net cash requirements established by
Nissan Motor Corporation in U.S.A. ("NMC") and/or NMAC
("Capitalization Guidelines"). The Capitalization
Guidelines are established and modified from time to time,
based upon Dealer's total new vehicle unit sales, the
Dealer's annual planning unit volume established by NMC,
and/or the amount of the Dealer's wholesale inventory
floorplan lines of credit approved by NMAC, as the foregoing
may be modified from time to time. Dealer shall receive
prior written notice from NMC or NMAC regarding any changes
to the Capitalization Guidelines."
Except as expressly modified in this Addendum, the Agreement shall remain
unchanged and in full force and effect.
PEACHTREE NISSAN, INC.,
a Georgia corporation
/s/ Carl Spielvogel
------------------------
By: Carl Spielvogel
President
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<PAGE>
EXHIBIT 10.7.4
GUARANTY AGREEMENT
TO: NISSAN MOTOR ACCEPTANCE CORPORATION DATE: July 12 96
--------------
COUNTY OF DeKalb
----------------
STATE OF Georgia
-----------------
To induce NISSAN MOTOR ACCEPTANCE CORPORATION (hereinafter referred to as
"NMAC"), to extend or continue to extend credit to PEACHTREE NISSAN, INC., 5211
Peachtree Industrial Blvd., Chamblee, Georgia 30341 (hereinafter referred to as
the "DEALER"), and for and in consideration of good and valuable consideration,
the receipt of which is hereby acknowledged, the Undersigned (which term refers
both to each of the Undersigned individually and to all or any two or more
jointly) hereby jointly and severally unconditionally and irrevocably deliver
this Guaranty to NMAC and hereby jointly and severally, unconditionally and
irrevocably guarantee to NMAC, and any transferee of this Guaranty or of any
liability guaranteed hereby, the full and prompt payment of all present and
future liabilities of the DEALER to NMAC irrespective of its nature or the time
it arises. If any liability guaranteed hereby is not paid when due, the
Undersigned hereby agree to and will immediately pay same, without resort by the
holder thereof to any other person or party.
The liabilities covered by this Guaranty and hereby guaranteed by the
Undersigned (herein referred to collectively and individually as the
"liabilities") include all obligations and liabilities of the DEALER to NMAC
(whether individually or jointly with others, and whether direct, indirect,
absolute or contingent as maker, endorser, guarantor, surety or otherwise) now
existing or hereafter coming into existence and renewals or extensions in whole
or in part of any of said liabilities and include any and all damages, losses,
costs, interest, charges, attorney's fees and expenses of every kind, nature and
description suffered or incurred by NMAC, arising in any manner out of or in any
way connected with, or growing out of, said liabilities. As used herein, the
term person includes natural persons, partnerships, and incorporated and
unincorporated entities and associations of every kind.
Any payment of the Undersigned hereunder may be applied to any of the
liabilities which NMAC may choose. The obligation of the Undersigned hereunder
is an addition to and shall not prejudice or be prejudiced by any other
agreement, instrument, surety
<PAGE>
GUARANTY AGREEMENT
Page 2
or guaranty (including any agreement, instrument, surety or guaranty signed by
the Undersigned) which NMAC may now or hereafter hold relative to any of the
liabilities. The obligation of the Undersigned to NMAC hereunder is primary,
absolute and unconditional.
The Undersigned acknowledges that there may be future advances by NMAC to
the DEALER (although NMAC is under no obligation to make such advances) and that
the number and amount of the liabilities are unlimited and may fluctuate from
time to time hereafter. The Undersigned expressly agree that the Undersigned's
obligation hereunder shall remain absolute, primary and conditional
notwithstanding such future advances and fluctuations, if any, and agree that,
in any event, this agreement is a continuing Guaranty and shall remain in force
at all times hereafter, whether there are any liabilities outstanding or not;
until a written notice of termination from the Undersigned is received and
acknowledged by NMAC stating an effective date of no less than two (2) business
days following receipt of such notice by NMAC, but such termination shall not be
effective as to any Undersigned who has failed to give such notice, and shall
not release the Undersigned from liability for payment of (i) any and all
liabilities (as hereinbefore defined) then in existence, (ii) any renewals or
extensions thereof, in whole or in part of, whether such renewals or extensions
are made before or after such termination, and (iii) any damages, losses, costs,
interest, charges, attorney's fees or expenses then or thereafter incurred in
connection with said liabilities or any renewals or extensions thereof.
The Undersigned hereby consent and agree that, at any time or times,
without notice to or further approval of the Undersigned or the DEALER, and
without in any way affecting the obligation of the Undersigned hereunder, NMAC
may, with or without consideration, (i) release, compromise, or agree not to
sue, in whole or in part, the DEALER, any of the Undersigned or any other
obligor, guarantor, endorser or surety upon any of the liabilities; (ii) waive,
rescind, renew, extend, modify, increase, decrease, delete, terminate, amend, or
accelerate in accordance with its terms, either in whole or in part, any of the
liabilities, any of the terms thereof, or any agreement, covenant, condition, or
obligation of or with the DEALER, any of the Undersigned or any other obligor,
guarantor, endorser or surety upon any of the liabilities to any of liabilities
which NMAC may choose.
The Undersigned hereby consent and agree that NMAC may at any time, either
with or without consideration, surrender, release or receive any property or
other security of any kind or nature whatsoever held by it or any person on its
behalf or for
<PAGE>
GUARANTY AGREEMENT
Page 3
its account securing any indebtedness of the DEALER or any liability, or
substitute any collateral so held by NMAC for other collateral of like kind, or
any kind, without notice to or further consent from the Undersigned, and such
surrender, receipt, release or substitution shall not in any way affect the
obligation of the Undersigned hereunder. NMAC shall have full authority to
adjust, compromise and receive less than the amount due upon any such
collateral, and may enter into any accord and satisfaction agreement with
respect to the same as may seem advisable to NMAC without affecting the
obligation of the Undersigned hereunder, which shall remain absolute, primary
and unconditional. NMAC shall be under no duty to undertake to collect upon
such collateral or any part thereof, and shall not be liable for any negligence
or mistake in judgment in handling, disposing of, obtaining, or failing to
collect upon, or perfecting a security interest in, any such collateral. NMAC
may collect or otherwise liquidate any collateral in any manner and bid and
purchase at any sale without affecting or impairing the obligation of the
Undersigned.
This Guaranty covers all liabilities to NMAC purporting to be made on
behalf of the DEALER by any officer, agent or partner of said DEALER, without
regard to the actual authority of such officer, agent or partner to bind the
DEALER, and without regard to the capacity of the DEALER or whether the
organization or charter of the DEALER is in any way defective.
The Undersigned hereby waive notice of acceptance of this agreement and of
the creation, extension or renewal of any liability of the DEALER to which it
related and of any default by the DEALER. The Undersigned hereby waive
presentment, demand, protest and notice of dishonor of any of the liabilities,
and hereby waive any failure to promptly commence suit against any party thereto
or liable thereon and give any notice to or make any claim or demand upon the
Undersigned or the DEALER. No act, failure to act or omission of any kind on
the part of the Undersigned, the DEALER, NMAC or any other person shall be a
legal or equitable discharge or release of the Undersigned from their obligation
hereunder. This Guaranty shall not be affected by any change which may arise by
reason of the death of the Undersigned, or of any partner(s) of the Undersigned,
or of the DEALER, or of the accession to any such partnership of any one of more
new partners.
This agreement shall bind and inure to the benefit of NMAC, its successors
and assigns, and likewise shall bind and inure to the benefit of the
Undersigned, their heirs, executors, administrators, estates, successors and
assigns.
<PAGE>
GUARANTY AGREEMENT
Page 4
If any legal action or actions are instituted by NMAC to enforce any of its
rights against the Undersigned hereunder, then the Undersigned, jointly and
severally, agree to pay NMAC all expenses incurred by NMAC relative to such
legal action or actions, including, but not limited to, court costs plus 15% of
the total amount of principal and accrued interest then due NMAC hereunder as
attorney's fees.
The obligation of the Undersigned hereby created is joint and several, and
NMAC is authorized and empowered to proceed against the Undersigned or any of
them, without joining the DEALER of any of the others of the Undersigned. All
of said parties may be sued together, or any of them may be sued separately
without first or contemporaneously suing the others. There shall be no duty or
obligations upon NMAC, whether by notice under any applicable stature or
otherwise, (i) to proceed against the DEALER or any of the Undersigned, (ii) to
initiate any proceeding or exhaust any remedy against the DEALER or any of the
Undersigned, or (iii) to give any notice to the Undersigned or the DEALER,
whatsoever, before bringing suit, exercising any right to any collateral to
security, or instituting proceedings of any kind against the DEALER, the
Undersigned or any of them.
The Undersigned hereby ratify, confirm, and adopt all the terms,
conditions, agreements and stipulations of all notes and other evidences of the
liabilities heretofore executed. Without in any way limiting the generality of
the foregoing, the Undersigned, and each of them, waive and renounce, each for
himself and family, any and all homestead or exemption rights any of them may
have under or by virtue of the constitution or laws of any state, or the United
States, as against the obligation hereby created, and the Undersigned do hereby
each transfer, convey and assign, and direct any Trustee in Bankruptcy or
receiver to deliver to NMAC or holder hereof, a sufficient amount of property or
money in any homestead or exemption that may be allowed to the Undersigned, or
any of them to pay any liability guaranteed hereby in full and all costs of
collection. The undersigned also waive and renounce for themselves any defenses
to any of the liabilities which may be available to or could be asserted by the
DEALER, except for payment, and further waive any setoffs and counterclaims.
The undersigned further agree that if at any time all or any part of any
payment theretofore applied by NMAC to any of the liabilities is or must be
rescinded or returned by NMAC for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of the DEALER), such
liabilities shall, for the purposes of the Guaranty, to the extent that such
payment is or must be rescinded or returned, be deemed to have
<PAGE>
GUARANTY AGREEMENT
Page 5
continued in existence, notwithstanding such application by NMAC, and this
Guaranty shall continue to be effective or be reinstated, as the case may be, as
to such liabilities, all as though such application by NMAC had not been
continue to be effective or be reinstated, as the case may be, as to such
liabilities, all as though such application by NMAC has not been made.
All NMAC's rights and remedies are cumulative and those granted hereunder
are in addition to any rights and remedies available to NMAC under law. If any
provision of this agreement or the application thereof to any person or
circumstances shall to any extent be invalid or unenforceable, the remainder of
this agreement or the application of such provision to persons or circumstances
other than those as to which it is held invalid or unenforceable shall not be
affected thereby, and each provision of this agreement shall be valid and
enforceable to the full extent permitted by law. The failure or forbearance of
NMAC to exercise any right hereunder, or otherwise granted to it by law or
another agreement, shall not affect the obligation of the Undersigned hereunder
and shall not constitute a waiver of said right. This Guaranty contains the
entire agreement between the parties, and no provision hereof may be waived,
modified, or altered except by a writing executed by the Undersigned and NMAC.
There is no understanding that any person other than or in addition to the
Undersigned shall execute this Guaranty.
It is contemplated that this is and is intended to be the personal guaranty
of payment and performance of each individual who signs this instrument, and any
language in connection with any signature indicating a capacity other than
personal shall be deemed stricken from and shall not be part of the signature,
but this provision shall not apply to the signature of a person who signs as an
officer of a corporation which is not the DEALER, and which executes this
instrument as its corporate guaranty.
THE UNDERSIGNED'S EXECUTION OF THIS GUARANTY WAS NOT BASED UPON ANY FACTS
OR MATERIALS PROVIDED BY NMAC NOR WAS THE UNDERSIGNED INDUCED TO EXECUTE THIS
GUARANTY BY ANY REPRESENTATION, STATEMENT OR ANALYSIS MADE BY NMAC. THE
UNDERSIGNED ACKNOWLEDGE AND AGREE THAT THE UNDERSIGNED ASSUME SOLE
RESPONSIBILITY FOR INDEPENDENTLY OBTAINING ANY INFORMATION OR REPORTS DEEMED
ADVISABLE BY THE UNDERSIGNED WITH REGARD TO THE DEALER OR ANY OF THE
UNDERSIGNED, AND THE UNDERSIGNED AGREE TO RELY SOLELY ON THE INFORMATION OR
REPORTS SO OBTAINED IN REACHING ANY DECISION TO EXECUTE OR NOT TO TERMINATE THIS
GUARANTY. THE UNDERSIGNED ACKNOWLEDGE AND AGREE THAT NMAC IS AND SHALL BE UNDER
NO OBLIGATION NOW OR IN THE FUTURE TO FURNISH ANY INFORMATION TO THE UNDERSIGNED
CONCERNING THE DEALER, THE LIABILITIES OR ANY OF
<PAGE>
GUARANTY AGREEMENT
Page 6
THE OTHER UNDERSIGNED, AND THAT NMAC DOES NOT AND SHALL NOT BE DEEMED IN THE
FUTURE TO WARRANT THE ACCURACY OF ANY INFORMATION OR REPRESENTATION CONCERNING
THE DEALER, THE UNDERSIGNED OR ANY OTHER PERSON WHICH MAY INDUCE THE UNDERSIGNED
TO EXECUTE OR NOT TO TERMINATE THIS GUARANTY.
EACH PARTY HEREBY WAIVES TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING.
<PAGE>
GUARANTY AGREEMENT
Page 7
This agreement and its performance, interpretation and enforcement shall in
all respects be governed by the laws of the State where the DEALER is located.
IN WITNESS HEREOF, and in agreement hereto the undersigned individual(s)
have affixed their signatures and seals and the undersigned corporation(s) have
caused their seals to be affixed by their duty authorized officers this 12 day
of July, 1996.
FOR CORPORATE GUARANTORS:
UAG Atlanta III, Inc.
375 Park Ave. Ste. 2201,
BY: /s/ Carl Spielvogel New York, NY 10152
-------------------------- ------------------------------
Carl Spielvogel, President Address
Attest: /s/ George Lowrance
----------------------
Secretary
(CORPORATE SEAL)
United Auto Group, Inc.
375 Park Ave, Ste. 2201,
BY: /s/ Carl Spielvogel New York, NY 10152
-------------------------- ------------------------------
Carl Spielvogel, President Address
Attest: /s/ George Lowrance
----------------------
Secretary
(CORPORATE SEAL)
<PAGE>
THE SECURITIES REPRESENTED BY THIS NOTE (THE "SECURITIES") HAVE BEEN ISSUED AND
SOLD WITHOUT REGISTRATION IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") AND SECTION 10-5-9(13)
OF THE OFFICIAL CODE OF GEORGIA (THE "GEORGIA CODE"). SUCH SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN (i) PURSUANT TO AN EFFECTIVE
REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE 1933 ACT AND THE GEORGIA CODE
AND (ii) UPON RECEIPT BY THE ISSUER OF EVIDENCE SATISFACTORY TO IT OF COMPLIANCE
WITH THE 1933 ACT, THE GEORGIA CODE AND THE APPLICABLE SECURITIES LAWS OF ANY
OTHER JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF
COUNSEL SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS.
NOTWITHSTANDING THE FOREGOING, NOTHING CONTAINED HEREIN SHALL RESTRICT THE
PAYEE'S RIGHT TO DISTRIBUTE THIS NOTE TO ITS BENEFICIARIES.
$2,000,000 July 12, 1996
PROMISSORY NOTE
UAG Atlanta III, Inc., a Delaware corporation (hereinafter called
"Maker"), for value received, promises and agrees to pay to the order of Lynda
Jane Hickman, as Executrix under the Will of James Franklin Hickman, Jr.,
Deceased (hereinafter called "Payee" and, along with each subsequent holder of
this Note, referred to as the "Holder"), in lawful money of the United States of
America, the principal sum of TWO MILLION DOLLARS ($2,000,000) (the "Principal
Amount") on July 12, 1998 (the "Maturity Date"), together with interest thereon
(calculated on the basis of a 360 day year) from and after the date hereof until
maturity at a rate per annum equal to nine percent (9%), but in no event in
excess of the maximum rate of nonusurious interest allowed from time to time by
law (hereinafter called the "Highest Lawful Rate"). All sums due under this
Note are payable to Holder at such address as may be designated in writing by
Holder to the Maker.
ACCRUED INTEREST is due and payable monthly commencing on the first
day of the month immediately following the date hereof and on the first day of
each and every calendar month thereafter and at maturity; PROVIDED, HOWEVER,
that if the principal of this Note is prepaid in whole or in part, all accrued
and unpaid interest is due and payable on the date of such prepayment. Maker
has the right to prepay this Note in whole or in part at any time and from time
to time without premium or penalty upon not less than five days' notice to
Holder.
INSTALLMENTS not paid when due shall bear interest at the rate of
twelve percent (12%) per annum from maturity. Should this Note, or any part of
the indebtedness evidenced hereby, be collected by law or through an
attorney-at-law, the Holder shall
<PAGE>
be entitled to collect actual and reasonable attorneys' fees and expenses
incurred by Holder in connection with such collection.
ALL PAYMENTS hereunder shall be made in lawful money of the United
States.
FOR PURPOSES of this Note, an "Event of Default" shall occur whenever:
(a) default is made in the payment when due of the principal of this Note, (b)
default is made in the payment when due of any installment of interest on this
Note and such default has not been cured within five days after the date on
which Maker receives written notice of the default from Holder, (c) Maker shall
fail to perform or observe any other term, covenant or agreement contained in
this Note and any such failure shall remain unremedied for 10 days after written
notice thereof shall have been given to Maker by Holder, (d) Maker, Hickman
Nissan, Inc., a Georgia corporation ("Hickman") or United Auto Group, Inc., a
Delaware Corporation ("UAG") institutes proceedings to be adjudicated as
bankrupt or insolvent, or consents to institution of bankruptcy or insolvency
proceedings against it or the filing by it of a petition or answer or consent
seeking reorganization or release under the federal Bankruptcy Act or any other
applicable federal or state law, or consents to the filing of any such petition
or the appointment of a receiver, liquidator, assignee, trustee or other similar
official of Maker, Hickman or UAG, or of any substantial part of its property,
or makes an assignment for the benefit of creditors, or takes corporate action
in furtherance of any such action, or (e) within 60 days after the commencement
of an action against Maker, Hickman or UAG seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such action shall not have been resolved in
favor of Maker, Hickman or UAG, as applicable, or if, within 60 days after the
appointment without the consent or acquiescence of Maker, Hickman or UAG of any
trustee, receiver or liquidator of Maker, Hickman or UAG or all or any
substantial part of its properties, such appointment shall not have been
vacated.
Upon the occurrence of any Event of Default described in clause (a),
(b), (c) or (d) of the foregoing paragraph, Holder may declare the entire
principal amount then outstanding under this Note, together with interest then
accrued thereon, and attorney's fees as specified herein, to be immediately due
and payable. Upon the occurrence of any Event of Default described in clause
(e) of the foregoing paragraph, the entire principal amount of all indebtedness
then outstanding under this Note, together with interest then accrued thereon,
shall automatically become immediately due and payable together with attorneys'
fees as specified herein.
It is the intention of Maker and Holder to conform strictly to
applicable usury laws. Accordingly, if the transac-
-2-
<PAGE>
tions contemplated hereby would be usurious under applicable law (including the
laws of the State of Georgia and the laws of the United States of America),
then, in that event, notwithstanding anything to the contrary herein or in any
agreement entered into in connection with or as security for this Note, it is
agreed that the aggregate of all consideration which constitutes interest under
applicable law that is taken, reserved, contracted for, charged or received
under this Note or under any of the other aforesaid agreements or otherwise in
connection with this Note shall under no circumstances exceed the maximum amount
of interest allowed by applicable law, and any excess shall be cancelled
automatically and, if theretofore paid, shall be credited on the Note by the
holder hereof (or, to the extent that this Note shall have been or would thereby
be paid in full, refunded to the Maker).
Maker hereby waives presentment, demand for payment, protest and
notice of any kind.
Maker hereby, to the extent permitted by applicable law, further
conveys and assigns to the holder hereof and waives and renounces any and all
exemption rights which it may have under or by virtue of the Constitution or
laws of Georgia, or any other state, or the United States, as may be allowed,
against this debt or any renewal thereof.
This Note is subject to UAG's and Maker's right of offset pursuant to
the provisions of Section 9.5 (the "Right of Offset") of that certain Stock
Purchase Agreement dated effective as of June 7, 1996, by and among Maker,
Payee, Hickman and UAG ("Stock Purchase Agreement"). Notwithstanding anything
in this Note to the contrary, the exercise by UAG or Maker of the Right of
Offset (including the withholding of any payments otherwise due hereunder) shall
not constitute an Event of Default under the terms hereof and shall not
constitute or be construed as a waiver or release of Holder's right to object to
the exercise of any right of indemnification under Article 9 of the Stock
Purchase Agreement or the exercise of any Right of Offset.
This Note shall be binding upon Maker and its successors and assigns
and shall inure to the benefit of Holder, their legal representatives,
successors and assigns.
Time is of the essence of this Note.
This Note has been executed and delivered in and shall be construed in
accordance with and governed by the laws of the State of Georgia (without regard
to choice-of-law principles) and of the United States of America.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed, sealed and delivered
this instrument as of the day and year first above written.
UAG ATLANTA III, INC.
a Delaware Corporation
By: George Lowrance
---------------------------
Its: Vice President
---------------------
[Corporate Seal]
<PAGE>
UAG GUARANTY OF NOTE
In order to induce Lynda Jane Hickman, as Executrix under the Will of
James Franklin Hickman, Jr., Deceased ("Hickman"), to sell one hundred percent
(100%) of the issued and outstanding shares of common stock of Hickman Nissan,
Inc., a Georgia corporation ("Hickman Nissan"), to UAG Atlanta III, Inc., a
Delaware corporation and a wholly-owned subsidiary of the undersigned ("UAG
Atlanta III"), the undersigned hereby irrevocably, unconditionally and
absolutely guarantees the due performance and punctual payment when due, whether
at stated maturity, by acceleration or otherwise, of all obligations of UAG
Atlanta III now or hereafter existing under that certain Promissory Note (the
"Note") dated July 12, 1996 payable to the order of Estate in the original
principal amount of Two Million Dollars ($2,000,000), together with any
renewals, modifications, consolidations and extensions thereof (all such
obligations being sometimes hereinafter referred to as the "Obligations").
The undersigned further agrees to pay Estate all expenses (including,
without limitation, court costs and reasonable attorneys' fees) paid or incurred
by Estate in endeavoring to collect the indebtedness evidence by the Note, and
in enforcing the obligations of UAG Atlanta III guaranteed hereby, or any
portion thereof, and in enforcing this Guaranty.
The undersigned hereby waives presentment, protest, demand for
payment, notice of acceptance of this guaranty, notice of dishonor, notice of
non-payment when due of the Obligations guaranteed hereby and notices of every
other kind and hereby consents to any and all forebearances and extensions of
time of payment of the Obligations and to any and all of the changes in the
terms, covenants and conditions thereof hereafter made or guaranteed.
Whenever possible each provision of this Guaranty shall be interpreted
in such a manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or be invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
This Guaranty shall inure to the benefit of Estate and its successors,
successors-in-title and assigns, and shall be binding upon the undersigned and
its successors, successors-in-title and assigns. This instrument constitutes
the entire agreement as to the subject matter contemplated hereby.
The undersigned agrees that, if at anytime all or any part of any
payment theretofore applied by Estate for any of the Obligations is rescinded or
returned by estate for any reason (whatsoever, including, without limitation,
the insolvency,
<PAGE>
bankruptcy, liquidation or reorganization of any party), such Obligation shall,
for the purposes of this Guaranty, be deemed to have continued in existence to
the extent of such payment, notwithstanding such application by Estate, and this
Guaranty shall continue to be effective or be reinstated, as the case may be, as
to such Obligation, all as though such application by Estate had not been made.
The undersigned acknowledges and agrees that no change in the nature of terms of
the Note (including any novations), whether by operation of law or otherwise,
shall discharge all or any part of the liabilities of the undersigned pursuant
to this Guaranty.
(a) any defense based upon the failure of Estate to give notice of the
existence, creation or incurring of any new or additional indebtedness or
obligation or the failure of Estate to give notice of any action of non-action
on the part of any other person whomsoever, in connection with any obligation
hereby guaranteed;(b) any defense based upon election of remedies by Estate
which destroys or otherwise impairs any subrogation rights of the undersigned to
proceed against UAG Atlanta III for reimbursement, or both;(c) any defense based
upon failure of Estate to commence any action against UAG Atlanta III; (d)any
duty on the part of Estate to disclose to the undersigned any facts that it may
now or hereafter know regarding UAG Atlanta III;(e) acceptance or notice of
acceptance of this Guaranty by Estate;(f) notice of presentment and demand for
payment of any indebtedness or performance of any of the obligations hereby
guaranteed;(g) protest and notice of dishonor or of default to the undersigned
or any other party with respect to the indebtedness or performance of
obligations hereby guaranteed;(h) any and all other notices whatsoever to which
the undersigned might otherwise be entitled;(i) any defense based upon lack of
due diligence by Estate in collection, protection or realization upon any
collateral securing the obligations; and (j) the provisions of Section 10-7-24
of the Official Code of Georgia Annotated.
This is a guaranty of payment and not of collection. The liability of
the undersigned under this Guaranty shall be direct and immediate and not
conditional or contingent upon the pursuit of any remedies against UAG Atlanta
III or any other person (any rights, under Georgia law or any other applicable
law to require Estate to bring an action against UAG Atlanta III, being
expressly waived hereby), nor against collateral, securities or liens available
to Estate, its successors, successors-in-title, endorsees or assigns. The
undersigned hereby waives any right to require that an action be brought against
UAG Atlanta III or any other person or to require that resort be had to any
security. In the event of the occurrence of a default or an event of default
under the Note, Estate shall have the right to enforce its rights, powers and
remedies thereunder or hereunder or under any other instrument now or hereafter
evidencing, securing or otherwise relating to the obligations, in any order, and
all
- 2 -
<PAGE>
rights, powers and remedies available to Estate in such event shall be non-
exclusive and cumulative of all other rights, powers and remedies provided
thereunder or hereunder or by law or in equity.
This Guaranty is assignable by Estate, and any assignment hereof or
any transfer or assignment of the Note shall operate to vest in any such
assignee all rights and powers herein conferred upon and granted to Estate.
This Guaranty shall in no event be impaired by any change which may arise by
reason of the dissolution or liquidation of UAG Atlanta III.
No amendment or waiver of any provision of this Guaranty nor consent
to any departure by Estate therefrom shall in any event be effective unless the
same shall be in writing and signed by Estate and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. This Guaranty shall be irrevocable by the undersigned until
all indebtedness guaranteed hereby has been completely paid.
This Guaranty is subject to United Auto Group, Inc.'s ("UAG") and UAG
Atlanta III's right of offset against the Note pursuant to the provisions of
SECTION 9.5 of that certain Stock Purchase Agreement dated as of June 7, 1996,
by and among the undersigned, UAG Atlanta III, Hickman Nissan, Inc. and the
Estate.
This instrument has been made and delivered in the State of Georgia
and shall be governed by the laws of the State of Georgia.
IN WITNESS WHEREOF the undersigned has executed, sealed and delivered
this instrument as of the 12th day of July, 1996.
UNITED AUTO GROUP, INC.,
a Delaware corporation
By: George Lowrance
----------------------------
Its: Executive Vice President
------------------------
[Corporate Seal]
- 3 -
<PAGE>
COMPANY GUARANTY OF NOTE
In order to induce Lynda Jane Hickman, as Executrix under the Will of
James Franklin Hickman, Jr., Deceased ("Estate"), to sell one hundred percent
(100%) of the issued and outstanding shares of common stock of Hickman Nissan,
Inc., a Georgia corporation ("Hickman Nissan"), to UAG Atlanta III, Inc., a
Delaware corporation and the parent (after the aforementioned sale) of the
undersigned ("UAG Atlanta III"), the undersigned hereby irrevocably,
unconditionally and absolutely guarantees the due performance and punctual
payment when due, whether at stated maturity, by acceleration or otherwise, of
all obligations of UAG Atlanta III now or hereafter existing under that certain
Promissory Note (the "Note") dated July 12, 1996, payable to the order of Estate
in the original principal amount of Two Million Dollars ($2,000,000), together
with any renewals, modifications, consolidations and extensions thereof (all
such obligations being sometimes hereinafter referred to as the "Obligations").
The undersigned further agrees to pay Estate all expenses (including,
without limitation, court costs and reasonable attorneys' fees) paid or incurred
by Estate in endeavoring to collect the indebtedness evidence by the Note, and
in enforcing the obligations of UAG Atlanta III guaranteed hereby, or any
portion thereof, and in enforcing this Guaranty.
The undersigned hereby waives presentment, protest, demand for
payment, notice of acceptance of this guaranty, notice of dishonor, notice of
non-payment when due of the Obligations guaranteed hereby and notices of every
other kind and hereby consents to any and all forebearances and extensions of
time of payment of the Obligations and to any and all of the changes in the
terms, covenants and conditions thereof hereafter made or guaranteed.
Whenever possible each provision of this Guaranty shall be interpreted
in such a manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or be invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
This Guaranty shall inure to the benefit of Estate and its successors,
successors-in-title and assigns, and shall be binding upon the undersigned and
its successors, successors-in-title and assigns. This instrument constitutes
the entire agreement as to the subject matter contemplated hereby.
The undersigned agrees that, if at anytime all or any part of any
payment theretofore applied by Estate for any of the Obligations is rescinded or
returned by Estate for any reason (whatsoever, including, without limitation,
the insolvency,
<PAGE>
bankruptcy, liquidation or reorganization of any party), such Obligation shall,
for the purposes of this Guaranty, be deemed to have continued in existence to
the extent of such payment, notwithstanding such application by Estate, and this
Guaranty shall continue to be effective or be reinstated, as the case may be, as
to such Obligation, all as though such application by Estate had not been made.
The undersigned acknowledges and agrees that no change in the nature of terms of
the Note (including any notations), whether by operation of law or otherwise,
shall discharge all or any part of the liabilities of the undersigned pursuant
to this Guaranty.
The undersigned hereby waives and agrees not to assert or take
advantage of any defense based upon the failure of Estate to give notice of the
existence, creation or incurring of any new or additional indebtedness or
obligation or the failure of Estate to give notice of any action of non-action
on the part of any other person whomsoever, in connection with any obligation
hereby guaranteed; (a)any defense based upon election of remedies by Estate
which destroys or otherwise impairs any subrogation rights of the undersigned to
proceed against UAG Atlanta III for reimbursement, or both;(b) any defense based
upon failure of Estate to commence any action against UAG Atlanta III;(c) any
duty on the part of Estate to disclose to the undersigned any facts that it may
now or hereafter know regarding UAG Atlanta III;(d) acceptance or notice of
acceptance of this Guaranty by Estate;(e) notice of presentment and demand for
payment of any indebtedness or performance of any of the obligations hereby
guaranteed;(f) protest and notice of dishonor or of default to the undersigned
or any other party with respect to the indebtedness or performance of
obligations hereby guaranteed;(g) any and all other notices whatsoever to which
the undersigned might otherwise be entitled;(h) any defense based upon lack of
due diligence by Estate in collection, protection or realization upon any
collateral securing the obligations; and (i) the provisions of Section 10-7-24
of the Official Code of Georgia Annotated.
This is a guaranty of payment and not of collection. The liability
of the undersigned under this Guaranty shall be direct and immediate and not
conditional or contingent upon the pursuit of any remedies against UAG Atlanta
III or any other person (any rights, under Georgia law or any other applicable
law to require Estate to bring an action against UAG Atlanta III, being
expressly waived hereby), nor against collateral, securities or liens
available to Estate, its successors, successors-in-title, endorsees or
assigns. The undersigned hereby waives any right to require that an action be
brought against UAG Atlanta III or any other person or to require that resort
be had to any security. In the event of the occurrence of a default or an
event of default under the Note, Estate shall have the right to enforce its
rights, powers and remedies thereunder or hereunder or under any other
instrument now or hereafter evidencing, securing or otherwise relating to the
obligations, in any order, and all rights, powers and remedies available to
Estate in such event shall be non-exclusive and cumulative of all other
rights, powers and remedies provided thereunder or hereunder or by law or in
equity.
-2-
<PAGE>
This Guaranty is assignable by Estate, and any assignment hereof or
any transfer or assignment of the Note shall operate to vest in any such
assignee all rights and powers herein conferred upon and granted to Estate.
This Guaranty shall in no event be impaired by any change which may arise by
reason of the dissolution or liquidation of UAG Atlanta III.
No amendment or waiver of any provision of this Guaranty nor consent
to any departure by Estate therefrom shall in any event be effective unless the
same shall be in writing and signed by Estate and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. This Guaranty shall be irrevocable by the undersigned until
all indebtedness guaranteed hereby has been completely paid.
This Guaranty is subject to United Auto Group, Inc.'s ("UAG") and UAG
Atlanta III's right of offset pursuant to the provisions of SECTION 9.5 of that
certain Stock Purchase Agreement dated as of June 7, 1996, by and among the
undersigned, UAG Atlanta III, UAG and the Estate.
This instrument has been made and delivered in the State of Georgia
and shall be governed by the laws of the State of Georgia.
IN WITNESS WHEREOF the undersigned has executed, sealed and delivered
this instrument as of the 12th day of July, 1996.
HICKMAN NISSAN, INC.,
a Georgia corporation
By: George Lowrance
---------------------------
Its: Vice President
---------------------
[Corporate Seal]
-3-
<PAGE>
LEASE AGREEMENT
(HICKMAN)
THIS LEASE AGREEMENT ("Lease") made this 12th day of July, 1996, by
and between LYNDA JANE HICKMAN, AS EXECUTRIX UNDER THE WILL OF JAMES FRANKLIN
HICKMAN, JR., DECEASED(referred to herein as "Landlord"), whose address is 339
Argonne Drive, Atlanta, Georgia 30305, and HICKMAN NISSAN, INC., a Georgia
corporation ("Tenant"), whose address is 5214 Peachtree Industrial Boulevard,
Chamblee, Georgia 30341.
W I T N E S S E T H:
FOR AND IN CONSIDERATION of the sum of $10.00 Dollars in hand paid and
of the mutual covenants and conditions contained herein, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. PREMISES. Landlord leases to Tenant and Tenant leases from
Landlord the following property:
(See Exhibit "A" attached hereto and incorporated
herein by reference.)
together with all improvements thereon and all rights, privileges, easements and
appurtenances pertaining thereto (collectively, the "Premises") upon the terms
contained herein.
2. TERM. The term hereof shall begin on the date hereof and shall
end on midnight June 30, 2016, unless extended or sooner terminated as provided
herein ("Term").
3. RENT.
(a) From the commencement date through December 31, 1997, Tenant
agrees to pay to Landlord, as rent for the Premises
<PAGE>
("Rent"), the sum of Thirty-two Thousand Eighty-three and Fifty-two/One
Hundredths ($32,083.52) Dollars per month.
(b) On January 1, 1998, Rent shall be increased by the percentage
increase in the Consumer Price Index between June 30, 1996 and December 31,
1997.
(c) Thereafter, during the remainder of the Term, commencing January
1, 1999, Rent shall be increased each January 1st by the percentage increase in
the Consumer Price Index between the first day of the previous year and the last
day of the previous year.
(d) (i) For purposes of this Lease, the following definitions shall
apply:
(A) The term "CONSUMER PRICE INDEX" shall mean the
Consumer Price Index for All Urban Consumers of Atlanta, Georgia (all
items, 1982-84=100) published by the Bureau of Labor Statistics,
United States Department of Labor.
(B) In computing increases in the Consumer Price Index
the parties will utilize the Consumer Price Index most recently
published prior to the dates called for in this Lease.
(C) The increase in Rent shall be calculated by
multiplying (i) the Rent then currently in effect by (ii) the percentage
increase determined as of such date; provided,
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<PAGE>
however, that the Rent shall never decrease by virtue of this subparagraph.
Landlord shall notify Tenant in writing of the new Rent monthly installment
amount after the date on which the increase in Rent becomes effective. Tenant
shall continue to pay the previous Rent in the interim and shall begin paying
based upon the new monthly installment amount commencing with the first monthly
installment of Rent which is due after the date of Landlord's notification to
Tenant of the increase, and Tenant shall also pay at such time, in a lump sum,
any additional amount due with respect to any monthly payments previously made
by Tenant after the date on which such increase became effective but for which
the increased amount has not been paid. The 'percentage increase' means, when
computed for any particular date, a figure stated as a percentage derived by
first subtracting from the Consumer Price Index most recently published prior to
December 31 of the previous year before which the increase is being calculated
the Consumer Price Index most recently published prior to January 1 of such
previous year (except under (b) above where the date shall be June 30, 1996),
and then dividing the resultant figure by the latter Consumer Price Index. (For
example, in determining the Rent to be paid for calendar year 1999, if the Rent
for 1998 was $33,000.00 per month and the Consumer Price Index most recently
published prior to December 31, 1998 was 110 and the Consumer Price Index most
recently published prior to January 1, 1998 was 100,
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then the percentage increase would be 110 - 100 = 10 DIVIDED BY 100 = 10% and
Rent for 1999 would be: $33,000 x 10% = $3,300 + $33,000 = $36,300.)
(ii) In the event that (A) the Consumer Price Index ceases
to use 1982-84=100 as the basis of calculation, or (B) the Consumer
Price Index shall be discontinued for any reason, the Bureau of Labor
Statistics shall be requested to furnish a new index comparable to the
Consumer Price Index together with information which will make
possible the conversion to the new index in computing the adjusted
Rent under this paragraph 3 and paragraph 40 of this Lease. If for
any reason the Bureau of Labor Statistics does not furnish such an
index and such information, the parties hereto shall hereafter accept
and use such other index or comparable statistics on the cost of
living for the City of Atlanta, Georgia as shall be computed and
published by an agency of the United States.
(a) Rent during the Term hereof shall be due and payable at
Landlord's office at the above address on or before the first day of each
calendar month thereof. Any Rent payment not received by the fifth (5th)
day after notice of non-payment to Tenant by Landlord shall be subject to a
one-time late charge equal to three (3%) percent of that rental installment
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<PAGE>
("Late Charge") and, beginning with the thirty-second (32nd) day after the
due date of such Rent installment, that Rent installment shall bear
interest at the prime commercial rate (as quoted on a daily basis by
NationsBank, or, if not available, another large banking institution with
offices situated in Atlanta, Georgia) plus five (5%) percent per annum
("Interest Rate") to the extent, but only to the extent, that such interest
exceeds the Late Charge, which charge the parties agree is a fair
estimation of the damages which may reasonably be expected to be incurred
by Landlord in connection with receiving such late payment.
Notwithstanding the foregoing, Landlord shall not be obligated to give
notice of nonpayment of Rent more than two (2) times in any calendar year
and upon the failure of Tenant to pay any Rent payment a third (3rd) time
in any calendar year, such Late Charge shall accrue after the fifth (5th)
of the month without additional notice. The imposition of interest is not
the full extent of damages Landlord may incur, time being of the essence of
this Lease in all respects.
(b) If the Term shall commence or end on a day other than the
first day of a calendar month, then the monthly Rent for any fractional
months of the Term shall be appropriately prorated.
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<PAGE>
(c) In no event shall the monthly Rent for any year be less than
the monthly Rent for the preceding period.
(d) Rent and additional rent under this Lease shall be payable
without any offset or deduction or demand therefor whatsoever.
2. UTILITIES. Tenant shall have all utilities listed in its name
and shall pay all utility bills, including, but not limited to water, sewer,
gas, electricity, fuel, light, and heat bills, for the Premises, and Tenant
shall pay all charges for garbage collection services or other sanitary services
rendered to the Premises or used by Tenant in connection therewith. If Tenant
fails to pay for such services, such amount shall be deemed additional rent and,
Landlord may, at its option and after providing Tenant with at least ten (10)
days prior written notice, pay the same, and the amount of the payment together
with interest at the Interest Rate from the date paid by Landlord shall be
payable to Landlord upon demand. Pursuant to the terms of this Lease, Landlord
shall not be or become liable for damages to Tenant alleged to be caused or
occasioned by or in any way connected with or the result of any interruption,
defect or breakdown of any utility.
3. USE OF THE PREMISES; ENVIRONMENTAL INDEMNITY. The Premises shall
be used only for the operation of a new and/or used automobile dealership,
service facility, body shop facility and
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<PAGE>
uses incidental thereto, and for any other purposes which may be agreed to by
the parties. The Premises shall not be used for any illegal purpose, nor in
violation of any regulation of any governmental body required to be remedied by
Tenant hereunder, nor in any manner which may create nuisance or trespass.
Furthermore, Tenant shall not, by its actions, violate any federal or state
environmental law, and Tenant agrees to indemnify and hold harmless Landlord
from any and all damages, costs, fines and expenses that might arise as a result
of any such violation and from its placement upon the Premises of hazardous
wastes and toxic substances that are placed on the Premises after the date
hereof. Notwithstanding anything to the contrary contained in this Paragraph 5,
there shall not be deemed to be a nuisance or trespass and Tenant's obligation
to indemnify and hold Landlord harmless shall not extend to any damages, claims,
or liabilities arising as a result of contaminants existing on the Premises on
the date hereof or migrating onto or beneath the Premises after the date hereof,
where such contamination is not caused by or attributable to Tenant.
4. NO REPAIRS BY LANDLORD. Landlord shall not be obligated to
repair or maintain the Premises after the date of this Lease, and all repairs,
replacements, and maintenance of any kind shall be the sole responsibility of
Tenant, but Tenant's obligation
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<PAGE>
shall not encompass such matters to the extent the necessity therefor arose on
or prior to the date hereof.
5. REPAIRS BY TENANT. Tenant accepts the condition of the Premises
as of the date hereof and agrees that the Premises are suited for the uses
specified herein. Tenant shall, throughout the Term, at its expense, maintain
the Premises in good order and repair, including but not limited to repair and
maintenance and, if necessary, replacement of the electrical, heating,
ventilation and air conditioning and plumbing systems, as well as the roof and
all structural components of buildings located on the Premises. Tenant further
agrees to care for all landscaping on the Premises, including the mowing of
grass, paving, policing, care of shrubs and general landscaping. If Tenant
fails to properly maintain and repair any portion of the Premises, Landlord may,
following at least twenty (20) days prior written notice to Tenant, maintain the
same including replacing of components and Tenant shall pay to Landlord within
thirty (30) days after demand the costs thereof together with interest on said
amount from the date of payment by Landlord at a rate equal to the Interest
Rate, which amount shall be deemed additional rent. Subject to the provisions
of Paragraphs 9 and 13 hereof, Tenant agrees to return the Premises to Landlord
in as good condition and repair as when first received by Tenant, natural wear
and tear excepted.
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<PAGE>
6. TAX AND INSURANCE. Tenant shall promptly and on a timely basis
pay during the Term all charges for taxes (including, but not limited to, ad
valorem taxes, special assessments and any other governmental charges) on the
Premises, which amounts shall be prorated between Tenant and Landlord for all
periods partially but not entirely within the Term. Tenant shall also maintain,
at all times during the Term of this Lease, fire and extended insurance coverage
on the Premises in amounts equal to the full replacement value of the Premises,
and written on policies issued by underwriters reasonably acceptable to
Landlord. Landlord agrees that such coverages may be provided by blanket
policies of insurance covering other locations in addition to the Premises. All
policies shall insure Landlord and Tenant as their respective interests shall
appear and shall contain a replacement cost endorsement. Should Tenant fail to
pay such tax expenses or fail to provide certificates evidencing the required
insurance coverage, such amounts shall be deemed to be additional rent hereunder
and Landlord may, following at least ten (10) days prior written notice to
Tenant, pay any such charges or secure such coverage, and Tenant shall pay to
Landlord within thirty (30) days after demand all amounts so expended by
Landlord together with interest on said amount from the date of payment by
Landlord at a rate equal to the Interest Rate.
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<PAGE>
7. DESTRUCTION OF OR DAMAGE TO THE PREMISES. If the Premises should
be damaged or destroyed by any insured peril whatsoever, all insurance proceeds
shall be delivered to Landlord and Tenant shall proceed with reasonable
diligence to rebuild and repair the Premises to substantially the condition in
which it existed prior to such damage or destruction; provided, however, that
Landlord agrees to disburse such proceeds to Tenant for such reconstruction
within five (5) days of submission of request for payment together with Tenant's
architect's certification that the work for which payment is requested has been
accomplished. If, however, the damage or destruction shall occur within the
last two (2) years of the Term, then Tenant may terminate this Lease as of the
date that such damage or destruction occurs by giving written notice to Landlord
of such election to terminate within sixty (60) days after the date of such
damage or destruction. If this Lease is terminated by Tenant, insurance
proceeds with respect to the building shall be paid to Landlord. If this Lease
is not terminated, the rent payable under this Lease shall not be abated as a
result of damage or destruction.
8. INDEMNITY; WAIVER OF SUBROGATION. Tenant agrees to indemnify and hold
harmless Landlord against all claims and expenses resulting therefrom, including
attorneys' fees actually reasonably incurred and court costs, for damage to
persons or property by reason of the use or occupancy of the Premises by
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<PAGE>
Tenant, except for any claims with respect to violations of laws for conditions
existing at the date of this Lease. Tenant shall periodically provide Landlord
with certificates of general liability insurance naming Landlord as an
additional insured, in an amount of not less than $5,000,000 and with an
insurance carrier reasonably satisfactory to Landlord. The dollar amount of
such insurance coverage shall be adjusted annually as of the first of each year
by the percentage increase in the Consumer Price Index calculated as provided in
Section 3(d)(i)(c) hereof.
Landlord and Tenant each hereby release and waive any right of
recovery against the other for any loss, claim, liability, or damage occurring
on or to the Premises, whether wholly or contributorily caused by the negligence
of the other party, to the extent that the same is compensated by actual receipt
of proceeds from insurance policies covering such loss, claim, liability, or
damage. Waiver of subrogation between Landlord and Tenant under this paragraph
shall be evidenced by waiver of subrogation endorsements on the respective
policies of the Landlord and the Tenant. Provided, however, Landlord shall not
be obligated to carry any such insurance but may do so at its sole discretion.
9. ALTERATIONS. Tenant shall make no structural alterations,
additions or improvements to the Premises without the express prior written
consent of Landlord which consent shall not be unreasonably withheld. Tenant
may make non-structural
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<PAGE>
alterations, additions and improvements to the Premises without Landlord's
approval. In the event Landlord has not responded to Tenant's written request
for alterations, additions or improvements, which request shall be accompanied
by preliminary drawings of such proposed changes, within twenty (20) days of
when received, such alterations, additions or improvements shall be deemed to
have been approved by Landlord. Tenant agrees to save Landlord harmless on
account of any claim or lien of mechanics, materialmen or other party, in
connection with any alterations, additions or improvements of or to the Premises
performed by Tenant. Tenant shall furnish such waivers of liens and appropriate
affidavits from the general contractor or subcontractors as Landlord may
reasonably require. Notwithstanding the foregoing, Tenant shall also be
entitled to make the following changes without necessity of Landlord's consent:
(i) any alterations required to be made by it pursuant to governmental orders,
rules, laws, regulations, ordinances or requirements, and (ii) any changes in
its signage or alterations, additions and improvements recommended or required
by the automobile manufacturer whose automobiles are sold on the Premises.
Tenant shall have the right to finance any alterations, additions or
improvements permitted hereunder and may pledge its interest in this Lease as
security therefor; provided, however, that any pledges or liens granted in
connection with such financings shall be subordinate to the rights of Landlord
under
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<PAGE>
this Lease and the instrument evidencing such pledge or lien shall not contain
insurance provisions contrary to those contained herein.
10. GOVERNMENTAL ORDERS. Tenant agrees, at its own expense, to
promptly comply with all requirements of any public authority made necessary by
reason of Tenant's occupancy of the Premises from and after the date hereof or
which may be necessary for Tenant's occupancy to continue if the requirement to
comply arises after the date of this Lease. Landlord shall have no obligation
of any kind for such compliance.
11. CONDEMNATION. If all or a substantial part of the Premises is
condemned for any public use or purpose, then the Term shall cease and this
Lease shall be terminated from the date when possession thereof is taken, and
rent shall be prorated as of that date; provided, however, that Tenant may elect
to continue this Lease in full force and effect notwithstanding any such taking.
Any termination shall be without prejudice to the rights of either Landlord or
Tenant to recover compensation and damage caused by such condemnation from the
condemnor. Except as provided herein, neither Tenant nor Landlord shall have
any rights in any award made solely to the other by any condemnation authority
notwithstanding the termination of the Lease as herein provided. If the Lease
is not terminated as provided above, then (i) this Lease shall continue in
effect with respect to the remaining portion of the
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Premises, in which event the Rent payable hereunder during the unexpired portion
of the Term of this Lease shall be adjusted proportional to the ratio of the
value of the remaining portion of the Premises (after reconstruction as provided
below) to the total value of the Premises prior to the taking, and (ii) Tenant
shall proceed with reasonable diligence to rebuild and repair the untaken
portions of the Premises to as nearly as reasonably possible their value,
condition, and character as such existed immediately prior to such taking and
Landlord shall pay to Tenant the amount necessary for reconstruction and repair
of the Premises to complete architectural units for Tenant's conduct of its
business within the time and under the conditions provided in Paragraph 9
hereof. The phrase "substantial part," for purposes of this section shall mean
so much of the Premises, the improvements located thereon, access to the
Premises, or any combination of the foregoing, such that the taking thereof
would prevent or substantially impair the ability of Tenant to operate its
business in a manner consistent with the operation of its business prior to such
taking. Notwithstanding anything contained in this Paragraph 13 to the
contrary, if the cost to reconstruct and repair the Premises to complete
architectural units is more than the LESSER of (i) the condemnation award
payable to Landlord; or (ii) one year's rent under this Lease at the time of
such condemnation, then Landlord shall only pay such lesser amount to Tenant for
such purpose and Tenant shall have the
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right, but not the obligation, to (x) pay the additional amount of such cost, in
which event this Lease shall continue with rent payable as provided above; or
(y) terminate this Lease by giving notice to Landlord, in which event this Lease
shall terminate and Tenant shall have no further obligations under this Lease.
12. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord (which consent shall not be unreasonably withheld or
delayed), assign this Lease or any interest hereunder, or sublet the Premises or
any part thereof, or permit the use of the Premises by any party other than
Tenant, or pledge or hypothecate this lease except as provided elsewhere in this
Agreement. All requests for assignment or subletting shall be made in writing
and delivered to Landlord and include the most recent balance sheet and cash
flow statement of the proposed assignee or subtenant. Failure by Landlord to
disapprove of any proposed assignment or subletting with reasons therefor within
THIRTY (30) days after receipt of Tenant's written request shall result in such
request being deemed approved. Consent to any assignment or sublease shall not
invalidate this provision, and all later assignments or subleases shall be made
only on the prior written consent of Landlord. Any assignee of Tenant, at the
option of Landlord, shall become directly liable to Landlord for all obligations
of Tenant hereunder, but no sublease or assignment by Tenant shall relieve
Tenant of any liability hereunder. Notwith-
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standing the foregoing, Tenant shall be entitled to freely assign or sublet its
interest in this Lease to any parent, subsidiary or other entity under common
control with Tenant or Tenant's parent, without the prior written consent of
Landlord. Moreover, the sale or transfer of all or any part of the capital
stock of Tenant shall not be deemed to be an assignment hereunder.
13. REMOVAL OF FIXTURES. Tenant may (so long as no Event of Default
has occurred and is continuing hereunder), prior to the end of the Term, remove
all trade fixtures and equipment which Tenant has purchased or placed in the
Premises subsequent to the date hereof, provided that Tenant repairs all damage
to the Premises caused by the removal. However, any buildings, fixtures, or
other attached property installed by Tenant as replacements of existing items,
or anything that cannot be removed without substantially changing the character
of the Premises, shall become the property of Landlord.
14. EVENTS OF DEFAULT. It shall be an "Event of Default" hereunder
if,
(a) Tenant fails to pay rent, including additional rent herein
reserved, when due, and fails to cure the failure to pay within five (5)
days after written notice thereof from Landlord; provided, however,
Landlord shall not be obligated to give Tenant more than two (2) such
notices in any calendar year and upon any third (3rd) failure to make a
payment hereunder in
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such calendar year, no such notice shall be required, prior to Landlord's
exercise of its remedies;
(b) Tenant fails to perform any of the terms or provisions of
this Lease other than the provision requiring the payment of rent, and
fails to cure the default within thirty (30) days after the date of receipt
of written notice of default from Landlord; provided, however, that if the
nature of the default is such that the same cannot reasonably be cured
within said thirty (30) day period, Tenant shall not be deemed to be in
default if Tenant shall, within such period, commence such cure and
thereafter diligently prosecute the same to completion;
(c) Tenant is adjudicated bankrupt;
(d) a permanent or temporary receiver is appointed for Tenant's
property and the receiver is not removed within sixty (60) days after
written notice from Landlord to Tenant to obtain the removal;
(e) Tenant or any guarantor of Tenant's obligations under this
Lease files a petition seeking an order for relief under Title 11 of the
United States Code, as amended, or under any similar law or statute of the
United States or any state thereof, or a petition seeking an order for
relief under Title 11 of the United States Code, or any similar law or
statute of the United States or any state thereof, is filed against Tenant
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or any guarantor of Tenant's obligations under this Lease and such petition
is not dismissed within sixty (60) days from the date of filing;
(f) Tenant makes an assignment for the benefit of creditors; or
(g) Tenant's effects should be levied upon or attached under
process against Tenant and not satisfied or dissolved within thirty (30)
days after such levy or attachment.
Upon the occurrence of an Event of Default, Landlord may pursue any right or
remedy against Tenant available at law or in equity. Without limitation to the
foregoing, Landlord, at its option, may elect to terminate this Lease by written
notice to Tenant; whereupon this Lease shall terminate. Any notice provided in
this section may be given by Landlord, or its attorney, or agent herein named.
Upon termination of the Lease by Landlord, Tenant shall at once surrender
possession of the Premises to Landlord and remove all of Tenant's effects
therefrom, or Landlord shall be entitled to remove all persons and effects
therefrom, using such force as may be necessary without being guilty of
trespass, forcible entry or detainer or other tort. Landlord may, at its option,
remove all or part of any Tenant property left on the Premises after Tenant
loses its right to possession, and Landlord may store the same without liability
to Tenant for loss thereof, and Tenant shall be liable to
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Landlord for all expenses incurred in such removal and also storage of said
effects.
15. REMEDIES. If, after an Event of Default, Landlord has not
elected to terminate this Lease, Landlord may (but shall not be obligated to),
without terminating this Lease, enter upon and rent the Premises at the best
price obtainable by reasonable effort, for any term Landlord deems proper.
Landlord shall have the right to terminate the Tenant's possession of the
Premises without terminating this Lease, and termination of possession shall not
release Tenant, in whole or in part. Landlord may collect the rents from any
such reletting and apply the same first to the payment of the expenses of
reentry, repair and the expenses of reletting (including without limitation
standard broker's commissions and attorney's fees actually reasonably incurred),
second, to the reasonable cost of refurbishing the Premises in order to
facilitate the reletting, including performing of deferred maintenance, and
third, to the payment of annual rent herein provided to be paid by Tenant.
Tenant shall be liable to Landlord for any deficiency between rent as due
hereunder and the rent received by Landlord upon reletting. The foregoing
remedies are not exclusive and Landlord shall have all remedies available to it
at law or equity if there is an Event of Default by Tenant.
16. FINANCIAL STATEMENTS. Within fifteen (15) days after such are
prepared, but no later than September 30 of each calendar
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year, commencing in 1997, Tenant shall deliver to Landlord audited consolidated
financial statements of United Auto Group, Inc. ("UAG") prepared in accordance
with generally accepted accounting principles consistently applied by an
independent certified public accountant.
17. FOR RENT SIGNS. Landlord may place "FOR RENT" or "FOR SALE"
signs in the Premises one hundred eighty (180) days before the end of the Term.
Landlord may enter the Premises at reasonable hours, and after reasonable
notice, to show the Premises to prospective purchasers or tenants and to inspect
the Premises to see that Tenant is complying with all its obligations hereunder.
Landlord shall have the right to enter the Premises without notice in the case
of an emergency.
18. EFFECT OF TERMINATION OF LEASE. No termination of this Lease
prior to the normal ending thereof, by lapse of time or otherwise, shall affect
Landlord's right to collect rent for the period prior to termination thereof.
19. REPRESENTATIONS OF TITLE AND QUIET POSSESSION. Landlord
represents that it has good and marketable title to the Premises and has full
right to make this Lease and that Tenant shall have quiet and peaceable
possession of the Premises during the Term so long as no Event of Default is in
existence and continuing hereunder.
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20. SUBORDINATION ATTORNMENT. Landlord represents that there is no
indebtedness secured by the Premises. This Lease is subject and subordinate to
any deed of trust, mortgage, or other security instrument, which may in the
future cover the Premises, and to any increases, renewals, modifications,
consolidations, replacements, and extensions of any of such deed of trust,
mortgage, or security instrument, provided, however, that Tenant's subordination
shall be conditioned upon Landlord's delivery to Tenant of a non-disturbance
agreement in form reasonably satisfactory to Tenant containing the substantive
provisions of the Subordination, Non-Disturbance and Attornment Agreement
("SNDA") in the form attached hereto and incorporated herein by reference
executed by the Lender and Landlord in recordable form.
Notwithstanding the generality of the foregoing, any mortgagee shall
have the right at any time to subordinate any deed of trust, mortgage, or other
security instrument to this Lease. At any time, before or after the institution
of any proceedings for the foreclosure of any deed of trust, mortgage, or other
security instrument or sale of the Premises under any such deed of trust,
mortgage, or other security instrument, Tenant shall attorn to such purchaser
upon any such sale or the grantee under any deed in lieu of such foreclosure and
shall recognize such purchaser or grantee as Landlord under this Lease. The
agreement of Tenant to attorn contained in the immediately preceding sentence
shall survive any
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such foreclosure sale, trustee's sale, or conveyance in lieu thereof. Tenant
shall, upon demand at any time, before or after any foreclosure sale, trustee's
sale, or conveyance in lieu thereof, execute, acknowledge, and deliver to
Landlord's mortgagee any written instruments and certificates evidencing such
attornment as Landlord's mortgagee may reasonably require. Upon Tenant's
written request and notice to Landlord, Landlord shall obtain from any such
mortgagee a written agreement that the rights of Tenant shall remain in full
force and effect during the Term of this Lease so long as there shall be no
Event of Default hereunder.
21. ESTATE CREATED; FUTURE GRANTS. Landlord and Tenant intend for
and agree that this Lease shall create a leasehold estate in the Premises for
the Term. Landlord agrees that, during the Term of this Lease, it will not
execute or join in any conveyances of easements or restrictive covenants or
other agreements restricting or affecting Tenant's use of the Premises without
the prior written consent of Tenant, which may be withheld in Tenant's sole
discretion.
22. HOLDING OVER. If Tenant remains in possession of the Premises
after expiration of the Term, with Landlord's acquiescence and without any
express agreement of parties, Tenant shall be a tenant at sufferance, subject to
ejectment for trespass. There shall be no month to month tenancy and there
shall be no renewal of this Lease by operation of law.
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23. ATTORNEY'S FEES AND HOMESTEAD. If the Rent or any additional
rent or other sums owed by Tenant to Landlord under this Lease is collected by
law or through an attorney at law, Landlord shall be entitled to collect
attorney's fees actually reasonably incurred.
24. RIGHTS CUMULATIVE. All rights hereunder shall be cumulative but
not restrictive to those given by law.
25. SERVICE OF NOTICE. Any notice required or permitted to be
delivered hereunder may be delivered in person or by United States certified
mail, postage prepaid, return receipt requested, or by recognized overnight
courier (e.g. Federal Express or DHL), next business day delivery, charges
prepaid, addressed to the parties at the addresses indicated above or at such
other addresses as may be specified by written notice delivered in accordance
herewith. Such notices shall be deemed effective three (3) business days after
deposited in the U.S. mail, or on the next business day if delivered by
overnight courier, or immediately upon delivery in person.
26. WAIVER OF RIGHTS. Neither party's failure to exercise any power
given to them hereunder, or to insist upon strict compliance by the other party
with its obligations hereunder, nor any custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of such party's right
to demand exact compliance with the terms hereof.
23
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27. TIME OF ESSENCE. Time is of the essence under this Lease.
28. SUCCESSORS AND ASSIGNS. This Lease shall apply to, inure to the
benefit of, and be binding upon the parties hereof and their respective
successors, permitted assigns, and legal representatives except as otherwise
expressly provided herein.
29. TRIPLE NET LEASE. This Lease shall be considered a "triple net
lease" so that, except as expressly set forth herein, Tenant shall bear all
responsibility as additional rent for all payments of any kind or nature
relating to the Premises, including but not limited to payment of all taxes
(except for income, estate, inheritance or gift taxes of Landlord), insurance,
repairs and maintenance arising after the date of this Lease to the extent
Tenant is obligated therefor under the terms of this Lease.
30. ENTIRE AGREEMENT; CONFLICT. This Lease and that certain Stock
Purchase Agreement dated as of June 7, 1996 by and among Landlord, UAG Atlanta
III, Inc., United Auto Group, Inc. and Tenant (the "SPA"), including any
attachments made a part hereof or thereof, contains the entire agreement between
the parties and no representations, inducements, promises or agreements, oral or
otherwise, between the parties, not embodied herein or in the SPA, shall be of
any force or effect. To the extent there is any conflict between the provisions
of this Lease and the SPA or the SPA provides remedies for the breach of any
representations or
24
<PAGE>
warranties contained therein relating to the Premises or otherwise, the
provisions of the SPA and Tenant's and other parties' rights thereunder shall
control and be in full force and effect for two (2) years after the date hereof;
provided, however, that Rent and additional rent hereunder shall be payable
without regard to any claims under the SPA.
31. SEVERABILITY. If any term, provision or clause of this Lease, or
if the application thereof to any person or circumstances, shall to any extent
be invalid or unenforceable, then the remainder of this Lease or the application
of such term, provision or clause to persons or circumstances other than those
to which it is invalid or unenforceable shall not be affected thereby, and each
and every remaining term, provision, clause and application of this Lease shall
be valid and enforceable to the fullest extent permitted by law.
32. EXECUTION IN COUNTERPARTS. This Lease may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
33. AMENDMENT. This Lease may not be altered, waived, amended or
extended except by an instrument in writing signed by Landlord and Tenant.
25
<PAGE>
34. HEADINGS. The headings used in this Lease are for the purposes
of convenience only. They shall not be construed to limit or to extend the
meaning of any part of this Lease.
35. GOVERNING LAW. This Lease shall be construed in accordance with
the laws of the State of Georgia, and all obligations of the parties created
hereunder are performable in DeKalb County, Georgia.
36. FORCE MAJEURE. Except for the payment of Rent and additional
rent, wherever a period of time is herein prescribed for action to be taken by
either Landlord or Tenant, such party shall not be liable or responsible for,
and there shall be excluded from the computation of any such period of time, any
delays due to strikes, riots, acts of God, shortages of labor or materials,
wars, governmental laws, regulations or restrictions or other causes which are
beyond the control of Landlord or Tenant, as the case may be.
37. EXTENSION OPTIONS. Tenant shall have two (2) separate five (5)
year options to extend the Term of this Lease upon the following terms and
provisions:
(a) Notice of the exercise of an option to extend shall be given
no less than one hundred eighty (180) days prior to the then expiration of the
Term of this Lease;
(b) The Term shall be extended under all terms and provisions of
this Lease except the Rent to be paid hereunder which
26
<PAGE>
shall be determined as follows: The Rent for the first year of both the first
and second five-year extensions shall be determined by the following, and the
Rent for the second and subsequent lease years of either the first or second
five-year extension shall be increased by the "percentage increase" in the
Consumer Price Index: At the commencement of any extension of this Lease, the
monthly Rent under this Lease shall be the then "fair market rental rate" as
hereinafter defined, as agreed upon by Landlord and Tenant not later than four
(4) months prior to the expiration of the initial term of this Lease or the
first Extended Term, as the case may be, or in the event Landlord and Tenant
cannot agree, an amount equal to the "fair market rental rate" as hereinafter
defined and established. The phrase "fair market rental rate" shall mean the
monthly rental rate (projected to the date of the commencement of the Extended
Term to which it applies) which Tenant would expect to pay and Landlord would
expect to receive under a lease for premises of comparable size and quality as
the Premises used as automobile dealerships in Northern DeKalb County, Georgia.
If Landlord and Tenant have not reached agreement on a fair market rental rate
and executed an amendment to this Lease setting forth such agreement on or
before the date four (4) months prior to the commencement of such extended Term,
then, within ten (10) days after that date each party shall appoint and employ,
at its cost, a real estate appraiser (who shall be a member of the American
Institute of Real
27
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Estate Appraisers (MAI) with at least ten (10) years of full-time commercial
real estate appraisal experience, with substantial experience relative to
comparable premises in metropolitan Atlanta, Georgia) to appraise and establish
the "fair market rental rate" and notify the other party of the name and
qualification of such appraiser. If either party fails to so appoint its
appraiser, the other party may apply to a judge of the Superior Court of DeKalb
County for such appointment. The two appraisers, thus appointed, shall meet
promptly and attempt to agree upon and establish said rate, or, upon failing to
do so, shall then jointly designate a third appraiser meeting the qualifications
set forth above, all within ten (10) days after the date of appointment of the
last two appraisers. If they are unable to agree on the third appraiser, either
of the parties, after giving five (5) days notice to the other, may apply to a
judge of the Superior Court of DeKalb County (to whose jurisdiction for this
limited purpose both Landlord and Tenant hereby consent) for the selection of a
third appraiser meeting the qualifications stated above. Each of the parties
shall bear one-half of the cost of the appointment of the third appraiser and of
the third appraiser's fee. Within thirty (30) days after the selection of a
third appraiser, a majority of the appraisers shall agree upon the "fair market
rental rate." If a majority of the appraisers are unable to agree within the
stipulated time, the third appraiser shall select one of the determinations of
the first
28
<PAGE>
two appraisers (either Landlord's or Tenant's) originally selected, without
modification or qualification. In any of said events, the determination shall
be final, conclusive and binding upon both Landlord and Tenant. PROVIDED,
HOWEVER, in no event shall Rent payable to Landlord under this Lease be less
than that payable in any previous lease year of the initial term or any extended
term and in determining fair market rental rate the appraisers shall take into
account that each year of each Extended Term the Rent is to be increased by the
percentage increase in the Consumer Price Index.
(c) Upon the request of either party, Landlord and Tenant shall
execute an acknowledgment setting forth the dates of the extended Term of the
Lease and the amount of the Rent for the applicable extension term, but the
failure to execute such acknowledgment shall not affect Tenant's exercise of its
option to extend the Term as provided herein.
38. RECORDATION. This Lease will not be recorded unless Landlord
fails to execute upon request, in recordable form, a Memorandum of Lease in form
required by Tenant's title insurance company.
39. RECOURSE. Recourse against the Landlord in connection with
Landlord's obligations and liability to Tenant with respect to this Lease shall
be limited solely to Landlord's fee simple interest in the Premises, and neither
Landlord nor any
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partner of landlord, nor any officer, director, or shareholder, executor,
executrix, personal representative or assigns shall have any personal liability
whatsoever with respect to this Lease. In the event of any sale, transfer or
distribution of the Premises by the Landlord, the Landlord shall be and hereby
is entirely freed and relieved of all covenants and obligations of Landlord
hereunder accruing thereafter.
40. ESTOPPEL CERTIFICATE. Tenant agrees, at any time and from time
to time, to deliver within ten (10) days from the date of receipt of a request
therefor, a statement in writing certifying (a) that this Lease is unmodified
and in full force and effect and contains the full agreement between the parties
(or, if there have been modifications or additional agreements, that the Lease
is in full force and effect as modified and identifying the modifications
thereof or additional agreements), (b) the date to which the Rent, additional
rent and other charges due under this Lease have been paid, and (c) that insofar
as Tenant knows, Landlord is not in default under any provision of this Lease
and has performed all of the obligations to be performed by a Landlord to date
(or, if Tenant has knowledge of any default or of any unperformed obligations, a
statement of the nature thereof).
41. CROSS DEFAULT. The Tenant is also the tenant under that certain
Lease Agreement, dated the date hereof, with ARGONNE
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ENTERPRISES, INC., demising premises used in conjunction with the business
conducted on the Premises. The Landlord under this Lease is affiliated with the
landlord under such other Lease Agreement, and, a default by the Tenant under
such other Lease Agreement shall be deemed to be a default by the Tenant under
this Lease.
IN WITNESS WHEREOF, the parties herein have hereunto caused their duly
authorized representatives to set their hands and seals the day and year first
above written.
LANDLORD:
Signed Sealed and Delivered /s/ Lynda Jane Hickman (SEAL)
-------------------------
in the presence of: Lynda Jane Hickman, as Executrix
Under the Will of James Franklin
Hickman, Jr., Deceased
Illegible
- ------------------------------
Unofficial Witness
Illegible
- ------------------------------
Notary Public
[Notarial Seal]
My Commission Expires:
Illegible
- -----------------------------
TENANT:
Signed Sealed and Delivered HICKMAN NISSAN, INC., a
in the presence of: Georgia Corporation
Illegible
- ------------------------------
Unofficial Witness
By: /s/ George Lowrance
----------------------------------------
Name: George Lowrance
-----------------------------------
Title: Vice President
-----------------------------------
Illegible
- -----------------------------
Notary Public
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<PAGE>
[Notarial Seal]
My Commission Expires:
- -----------------------------
32
<PAGE>
LEASE AGREEMENT
(ARGONNE)
THIS LEASE AGREEMENT ("Lease") made this 12th day of July, 1996, by
and between ARGONNE ENTERPRISES, INC., a Georgia corporation (referred to herein
as "Landlord"), whose address is 339 Argonne Drive, Atlanta, Georgia 30305,
respectively and HICKMAN NISSAN, INC., a Georgia corporation ("Tenant"), whose
address is 5214 Peachtree Industrial Boulevard, Chamblee, Georgia 30341.
W I T N E S S E T H:
FOR AND IN CONSIDERATION of the sum of $10.00 Dollars in hand paid and
of the mutual covenants and conditions contained herein, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. PREMISES. Landlord leases to Tenant and Tenant leases from
Landlord the following property:
(See Exhibit "A" attached hereto and incorporated
herein by reference.)
together with all improvements thereon and all rights, privileges, easements and
appurtenances pertaining thereto (collectively, the "Premises") upon the terms
contained herein.
<PAGE>
2. TERM. The term hereof shall begin on the date hereof and shall
end on midnight June 30, 2016, unless extended or sooner terminated as provided
herein ("Term").
3. RENT.
(a) From the commencement date through December 31, 1997, Tenant
agrees to pay to Landlord, as rent for the Premises ("Rent"), the sum of Two
Thousand Five Hundred ($2,500) Dollars per month.
(b) On January 1, 1998, Rent shall be increased by the percentage
increase in the Consumer Price Index between June 30, 1996 and December 31,
1997.
(c) Thereafter, during the remainder of the Term, commencing January
1, 1999, Rent shall be increased each January 1st by the percentage increase in
the Consumer Price Index between the first day of the previous year and the last
day of the previous year.
(d) (i) For purposes of this Lease, the following definitions shall
apply:
(A) The term "CONSUMER PRICE INDEX" shall mean the
Consumer Price Index for All Urban Consumers of Atlanta, Georgia (all
items, 1982-84=100) published by the Bureau of Labor Statistics,
United States Department of Labor.
2
<PAGE>
(B) In computing increases in the Consumer Price Index
the parties will utilize the Consumer Price Index most recently
published prior to the dates called for in this Lease.
(C) The increase in Rent shall be calculated by
multiplying (i) the Rent then currently in effect by (ii) the percentage
increase determined as of such date; provided, however, that the Rent shall
never decrease by virtue of this subparagraph. Landlord shall notify Tenant in
writing of the new Rent monthly installment amount after the date on which the
increase in Rent becomes effective. Tenant shall continue to pay the previous
Rent in the interim and shall begin paying based upon the new monthly
installment amount commencing with the first monthly installment of Rent which
is due after the date of Landlord's notification to Tenant of the increase, and
Tenant shall also pay at such time, in a lump sum, any additional amount due
with respect to any monthly payments previously made by Tenant after the date on
which such increase became effective but for which the increased amount has not
been paid. The 'percentage increase' means, when computed for any particular
date, a figure stated as a percentage derived by first subtracting from the
Consumer Price Index most recently published prior to December 31 of the
previous year before which the increase is being calculated the Consumer Price
Index most recently published prior to January 1
3
<PAGE>
of such previous year (except under (b) above where the date shall be June 30,
1996), and then dividing the resultant figure by the latter Consumer Price
Index. (For example, in determining the Rent to be paid for calendar year 1999,
if the Rent for 1998 was $2,600.00 per month and the Consumer Price Index most
recently published prior to December 31, 1998 was 110 and the Consumer Price
Index most recently published prior to January 1, 1998 was 100, then the
percentage increase would be 110 - 100 = 10 DIVIDED BY 100 = 10% and Rent for
1999 would be: $2,600 x 10% = $260 + $2,600 = $2,860.)
(ii) In the event that (A) the Consumer Price Index ceases
to use 1982-84=100 as the basis of calculation, or (B) the Consumer
Price Index shall be discontinued for any reason, the Bureau of Labor
Statistics shall be requested to furnish a new index comparable to the
Consumer Price Index together with information which will make
possible the conversion to the new index in computing the adjusted
Rent under this paragraph 3 and paragraph 40 of this Lease. If for
any reason the Bureau of Labor Statistics does not furnish such an
index and such information, the parties hereto shall hereafter accept
and use such other index or comparable statistics on the cost of
living for the City of Atlanta, Georgia as shall be computed and
published by an agency of the United States.
4
<PAGE>
(a) Rent during the Term hereof shall be due and payable at
Landlord's office at the above address on or before the first day of each
calendar month thereof. Any Rent payment not received by the fifth (5th)
day after notice of non-payment to Tenant by Landlord shall be subject to a
one-time late charge equal to three (3%) percent of that rental installment
("Late Charge") and, beginning with the thirty-second (32nd) day after the
due date of such Rent installment, that Rent installment shall bear
interest at the prime commercial rate (as quoted on a daily basis by
NationsBank, or, if not available, another large banking institution with
offices situated in Atlanta, Georgia) plus five (5%) percent per annum
("Interest Rate") to the extent, but only to the extent, that such interest
exceeds the Late Charge, which charge the parties agree is a fair
estimation of the damages which may reasonably be expected to be incurred
by Landlord in connection with receiving such late payment.
Notwithstanding the foregoing, Landlord shall not be obligated to give
notice of nonpayment of Rent more than two (2) times in any calendar year
and upon the failure of Tenant to pay any Rent payment a third (3rd) time
in any calendar year, such Late Charge shall accrue after the fifth (5th)
of the month without additional notice. The imposition of interest is not
the full extent of damages
5
<PAGE>
Landlord may incur, time being of the essence of this Lease in all
respects.
(b) If the Term shall commence or end on a day other than the
first day of a calendar month, then the monthly Rent for any fractional
months of the Term shall be appropriately prorated.
(c) In no event shall the monthly Rent for any year be less than
the monthly Rent for the preceding period.
(d) Rent and additional rent under this Lease shall be payable
without any offset or deduction or demand therefor whatsoever.
2. UTILITIES. Tenant shall have all utilities listed in its name
and shall pay all utility bills, including, but not limited to water, sewer,
gas, electricity, fuel, light, and heat bills, for the Premises, and Tenant
shall pay all charges for garbage collection services or other sanitary services
rendered to the Premises or used by Tenant in connection therewith. If Tenant
fails to pay for such services, such amount shall be deemed additional rent and,
Landlord may, at its option and after providing Tenant with at least ten (10)
days prior written notice, pay the same, and the amount of the payment together
with interest at the Interest Rate from the date paid by Landlord shall be
payable to Landlord upon demand. Pursuant to the terms of this Lease, Landlord
shall not be or become liable for damages to Tenant
6
<PAGE>
alleged to be caused or occasioned by or in any way connected with or the result
of any interruption, defect or breakdown of any utility.
3. USE OF THE PREMISES; ENVIRONMENTAL INDEMNITY. The Premises shall
be used only for the operation of a new and/or used automobile dealership,
service facility, body shop facility and/or uses incidental thereto, and for any
other purposes which may be agreed to by the parties. The Premises shall not be
used for any illegal purpose, nor in violation of any regulation of any
governmental body required to be remedied by Tenant hereunder, nor in any manner
which may create nuisance or trespass. Furthermore, Tenant shall not, by its
actions, violate any federal or state environmental law, and Tenant agrees to
indemnify and hold harmless Landlord from any and all damages, costs, fines and
expenses that might arise as a result of any such violation and from its
placement upon the Premises of hazardous wastes and toxic substances that are
placed on the Premises after the date hereof. Notwithstanding anything to the
contrary contained in this Paragraph 5, there shall not be deemed to be a
nuisance or trespass and Tenant's obligation to indemnify and hold Landlord
harmless shall not extend to any damages, claims, or liabilities arising as a
result of contaminants existing on the Premises on the date hereof or migrating
onto or beneath the Premises after the date hereof,
7
<PAGE>
where such contamination is not caused by or attributable to Tenant.
4. NO REPAIRS BY LANDLORD. Landlord shall not be obligated to
repair or maintain the Premises after the date of this Lease, and all repairs,
replacements, and maintenance of any kind shall be the sole responsibility of
Tenant, but Tenant's obligation shall not encompass such matters to the extent
the necessity therefor arose on or prior to the date hereof.
5. REPAIRS BY TENANT. Tenant accepts the condition of the Premises
as of the date hereof and agrees that the Premises are suited for the uses
specified herein. Tenant shall, throughout the Term, at its expense, maintain
the Premises in good order and repair, including but not limited to repair and
maintenance and, if necessary, replacement of the electrical, heating,
ventilation and air conditioning and plumbing systems, as well as the roof and
all structural components of buildings located on the Premises. Tenant further
agrees to care for all landscaping on the Premises, including the mowing of
grass, paving, policing, care of shrubs and general landscaping. If Tenant
fails to properly maintain and repair any portion of the Premises, Landlord may,
following at least twenty (20) days prior written notice to Tenant, maintain the
same including replacing of components and Tenant shall pay to Landlord within
thirty (30) days after demand the costs thereof together with interest on said
amount from the date of payment by
8
<PAGE>
Landlord at a rate equal to the Interest Rate, which amount shall be deemed
additional rent. Subject to the provisions of Paragraphs 9 and 13 hereof,
Tenant agrees to return the Premises to Landlord in as good condition and repair
as when first received by Tenant, natural wear and tear excepted.
6. TAX AND INSURANCE. Tenant shall promptly and on a timely basis
pay during the Term all charges for taxes (including, but not limited to, ad
valorem taxes, special assessments and any other governmental charges) on the
Premises, which amounts shall be prorated between Tenant and Landlord for all
periods partially but not entirely within the Term. Tenant shall also maintain,
at all times during the Term of this Lease, fire and extended insurance coverage
on the Premises in amounts equal to the full replacement value of the Premises,
and written on policies issued by underwriters reasonably acceptable to
Landlord. Landlord agrees that such coverages may be provided by blanket
policies of insurance covering other locations in addition to the Premises. All
policies shall insure Landlord and Tenant as their respective interests shall
appear and shall contain a replacement cost endorsement. Should Tenant fail to
pay such tax expenses or fail to provide certificates evidencing the required
insurance coverage, such amounts shall be deemed to be additional rent hereunder
and Landlord may, following at least ten (10) days prior written notice to
Tenant, pay any such charges or secure such coverage, and Tenant
9
<PAGE>
shall pay to Landlord within thirty (30) days after demand all amounts so
expended by Landlord together with interest on said amount from the date of
payment by Landlord at a rate equal to the Interest Rate.
7. DESTRUCTION OF OR DAMAGE TO THE PREMISES. If the Premises should
be damaged or destroyed by any insured peril whatsoever, all insurance proceeds
shall be delivered to Landlord and Tenant shall proceed with reasonable
diligence to rebuild and repair the Premises to substantially the condition in
which it existed prior to such damage or destruction; provided, however, that
Landlord agrees to disburse such proceeds to Tenant for such reconstruction
within five (5) days of submission of request for payment together with Tenant's
architect's certification that the work for which payment is requested has been
accomplished. If, however, the damage or destruction shall occur within the
last two (2) years of the Term, then Tenant may terminate this Lease as of the
date that such damage or destruction occurs by giving written notice to Landlord
of such election to terminate within sixty (60) days after the date of such
damage or destruction. If this Lease is terminated by Tenant, insurance
proceeds with respect to the building shall be paid to Landlord. If this Lease
is not terminated, the rent payable under this Lease shall not be abated as a
result of damage or destruction.
10
<PAGE>
8. INDEMNITY; WAIVER OF SUBROGATION. Tenant agrees to indemnify and hold
harmless Landlord against all claims and expenses resulting therefrom, including
attorneys' fees actually reasonably incurred and court costs, for damage to
persons or property by reason of the use or occupancy of the Premises by Tenant,
except for any claims with respect to violations of laws for conditions existing
at the date of this Lease. Tenant shall periodically provide Landlord with
certificates of general liability insurance naming Landlord as an additional
insured, in an amount of not less than $5,000,000 and with an insurance carrier
reasonably satisfactory to Landlord. The dollar amount of such insurance
coverage shall be adjusted annually as of the first of each year by the
percentage increase in the Consumer Price Index calculated as provided in
Section 3(d)(i)(c) hereof.
Landlord and Tenant each hereby release and waive any right of
recovery against the other for any loss, claim, liability, or damage occurring
on or to the Premises, whether wholly or contributorily caused by the negligence
of the other party, to the extent that the same is compensated by actual receipt
of proceeds from insurance policies covering such loss, claim, liability, or
damage. Waiver of subrogation between Landlord and Tenant under this paragraph
shall be evidenced by waiver of subrogation endorsements on the respective
policies of the Landlord and the
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<PAGE>
Tenant. Provided, however, Landlord shall not be obligated to carry any such
insurance but may do so at its sole discretion.
9. ALTERATIONS. Tenant shall make no structural alterations,
additions or improvements to the Premises without the express prior written
consent of Landlord which consent shall not be unreasonably withheld. Tenant
may make non-structural alterations, additions and improvements to the Premises
without Landlord's approval. In the event Landlord has not responded to
Tenant's written request for alterations, additions or improvements, which
request shall be accompanied by preliminary drawings of such proposed changes,
within twenty (20) days of when received, such alterations, additions or
improvements shall be deemed to have been approved by Landlord. Tenant agrees
to save Landlord harmless on account of any claim or lien of mechanics,
materialmen or other party, in connection with any alterations, additions or
improvements of or to the Premises performed by Tenant. Tenant shall furnish
such waivers of liens and appropriate affidavits from the general contractor or
subcontractors as Landlord may reasonably require. Notwithstanding the
foregoing, Tenant shall also be entitled to make the following changes without
necessity of Landlord's consent: (i) any alterations required to be made by it
pursuant to governmental orders, rules, laws, regulations, ordinances or
requirements, and (ii) any changes in its signage or alterations, additions and
improvements recommended or
12
<PAGE>
required by the automobile manufacturer whose automobiles are sold on the
Premises. Tenant shall have the right to finance any alterations, additions or
improvements permitted hereunder and may pledge its interest in this Lease as
security therefor; provided, however, that any pledges or liens granted in
connection with such financings shall be subordinate to the rights of Landlord
under this Lease and the instrument evidencing such pledge or lien shall not
contain insurance provisions contrary to those contained herein.
10. GOVERNMENTAL ORDERS. Tenant agrees, at its own expense, to
promptly comply with all requirements of any public authority made necessary by
reason of Tenant's occupancy of the Premises from and after the date hereof or
which may be necessary for Tenant's occupancy to continue if the requirement to
comply arises after the date of this Lease. Landlord shall have no obligation
of any kind for such compliance.
11. CONDEMNATION. If all or a substantial part of the Premises is
condemned for any public use or purpose, then the Term shall cease and this
Lease shall be terminated from the date when possession thereof is taken, and
rent shall be prorated as of that date; provided, however, that Tenant may elect
to continue this Lease in full force and effect notwithstanding any such taking.
Any termination shall be without prejudice to the rights of either Landlord or
Tenant to recover compensation and damage caused by
13
<PAGE>
such condemnation from the condemnor. In addition, if the Hickman Lease (as
hereinafter defined) is terminated under Paragraph 13 thereof, Tenant shall have
the right, within thirty (30) days after the date of such termination, to
terminate this Lease by notice to Landlord. Except as provided herein, neither
Tenant nor Landlord shall have any rights in any award made solely to the other
by any condemnation authority notwithstanding the termination of the Lease as
herein provided. If the Lease is not terminated as provided above, then (i)
this Lease shall continue in effect with respect to the remaining portion of the
Premises, in which event the Rent payable hereunder during the unexpired portion
of the Term of this Lease shall be adjusted proportional to the ratio of the
value of the remaining portion of the Premises (after reconstruction as provided
below) to the total value of the Premises prior to the taking, and (ii) Tenant
shall proceed with reasonable diligence to rebuild and repair the untaken
portions of the Premises to as nearly as reasonably possible their value,
condition, and character as such existed immediately prior to such taking and
Landlord shall pay to Tenant the amount necessary for reconstruction and repair
of the Premises to complete architectural units for Tenant's conduct of its
business within the time and under the conditions provided in Paragraph 9
hereof. The phrase "substantial part," for purposes of this section shall mean
so much of the Premises, the improvements located thereon, access to the
premises, or any
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<PAGE>
combination of the foregoing, such that the taking thereof would prevent or
substantially impair.
12. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord (which consent shall not be unreasonably withheld or
delayed), assign this Lease or any interest hereunder, or sublet the Premises or
any part thereof, or permit the use of the Premises by any party other than
Tenant, or pledge or hypothecate this lease except as provided elsewhere in this
Agreement. All requests for assignment or subletting shall be made in writing
and delivered to Landlord and include the most recent balance sheet and cash
flow statement of the proposed assignee or subtenant. Failure by Landlord to
disapprove of any proposed assignment or subletting with reasons therefor within
THIRTY (30) days after receipt of Tenant's written request shall result in such
request being deemed approved. Consent to any assignment or sublease shall not
invalidate this provision, and all later assignments or subleases shall be made
only on the prior written consent of Landlord. Any assignee of Tenant, at the
option of Landlord, shall become directly liable to Landlord for all obligations
of Tenant hereunder, but no sublease or assignment by Tenant shall relieve
Tenant of any liability hereunder. Notwithstanding the foregoing, Tenant shall
be entitled to freely assign or sublet its interest in this Lease to any parent,
subsidiary or other entity under common control with Tenant or Tenant's parent,
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without the prior written consent of Landlord. Moreover, the sale or transfer
of all or any part of the capital stock of Tenant shall not be deemed to be an
assignment hereunder.
13. REMOVAL OF FIXTURES. Tenant may (so long as no Event of Default
has occurred and is continuing hereunder), prior to the end of the Term, remove
all trade fixtures and equipment which Tenant has purchased or placed in the
Premises subsequent to the date hereof, provided that Tenant repairs all damage
to the Premises caused by the removal. However, any buildings, fixtures, or
other attached property installed by Tenant as replacements of existing items,
or anything that cannot be removed without substantially changing the character
of the Premises, shall become the property of Landlord.
14. EVENTS OF DEFAULT. It shall be an "Event of Default" hereunder
if,
(a) Tenant fails to pay rent, including additional rent herein
reserved, when due, and fails to cure the failure to pay within five (5)
days after written notice thereof from Landlord; provided, however,
Landlord shall not be obligated to give Tenant more than two (2) such
notices in any calendar year and upon any third (3rd) failure to make a
payment hereunder in such calendar year, no such notice shall be required,
prior to Landlord's exercise of its remedies;
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(b) Tenant fails to perform any of the terms or provisions of
this Lease other than the provision requiring the payment of rent, and
fails to cure the default within thirty (30) days after the date of receipt
of written notice of default from Landlord; provided, however, that if the
nature of the default is such that the same cannot reasonably be cured
within said thirty (30) day period, Tenant shall not be deemed to be in
default if Tenant shall, within such period, commence such cure and
thereafter diligently prosecute the same to completion;
(c) Tenant is adjudicated bankrupt;
(d) a permanent or temporary receiver is appointed for Tenant's
property and the receiver is not removed within sixty (60) days after
written notice from Landlord to Tenant to obtain the removal;
(e) Tenant or any guarantor of Tenant's obligations under this
Lease files a petition seeking an order for relief under Title 11 of the
United States Code, as amended, or under any similar law or statute of the
United States or any state thereof, or a petition seeking an order for
relief under Title 11 of the United States Code, or any similar law or
statute of the United States or any state thereof, is filed against Tenant
or any guarantor of Tenant's obligations under this Lease and
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such petition is not dismissed within sixty (60) days from the date of
filing;
(f) Tenant makes an assignment for the benefit of creditors; or
(g) Tenant's effects should be levied upon or attached under
process against Tenant and not satisfied or dissolved within thirty (30)
days after such levy or attachment.
Upon the occurrence of an Event of Default, Landlord may pursue any right or
remedy against Tenant available at law or in equity. Without limitation to the
foregoing, Landlord, at its option, may elect to terminate this Lease by written
notice to Tenant; whereupon this Lease shall terminate. Any notice provided in
this section may be given by Landlord, or its attorney, or agent herein named.
Upon termination of the Lease by Landlord, Tenant shall at once surrender
possession of the Premises to Landlord and remove all of Tenant's effects
therefrom, or Landlord shall be entitled to remove all persons and effects
therefrom, using such force as may be necessary without being guilty of
trespass, forcible entry or detainer or other tort. Landlord may, at its option,
remove all or part of any Tenant property left on the Premises after Tenant
loses its right to possession, and Landlord may store the same without liability
to Tenant for loss thereof, and Tenant shall be liable to
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Landlord for all expenses incurred in such removal and also storage of said
effects.
15. REMEDIES. If, after an Event of Default, Landlord has not
elected to terminate this Lease, Landlord may (but shall not be obligated to),
without terminating this Lease, enter upon and rent the Premises at the best
price obtainable by reasonable effort, for any term Landlord deems proper.
Landlord shall have the right to terminate the Tenant's possession of the
Premises without terminating this Lease, and termination of possession shall not
release Tenant, in whole or in part. Landlord may collect the rents from any
such reletting and apply the same first to the payment of the expenses of
reentry, repair and the expenses of reletting (including without limitation
standard broker's commissions and attorney's fees actually reasonably incurred),
second, to the reasonable cost of refurbishing the Premises in order to
facilitate the reletting, including performing of deferred maintenance, and
third, to the payment of annual rent herein provided to be paid by Tenant.
Tenant shall be liable to Landlord for any deficiency between rent as due
hereunder and the rent received by Landlord upon reletting. The foregoing
remedies are not exclusive and Landlord shall have all remedies available to it
at law or equity if there is an Event of Default by Tenant.
16. FINANCIAL STATEMENTS. Within fifteen (15) days after such are
prepared, but no later than September 30 of each calendar
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year, commencing in 1997, Tenant shall deliver to Landlord audited consolidated
financial statements of United Auto Group, Inc. ("UAG") prepared in accordance
with generally accepted accounting principles consistently applied by an
independent certified public accountant.
17. FOR RENT SIGNS. Landlord may place "FOR RENT" or "FOR SALE"
signs in the Premises one hundred eighty (180) days before the end of the Term.
Landlord may enter the Premises at reasonable hours, and after reasonable
notice, to show the Premises to prospective purchasers or tenants and to inspect
the Premises to see that Tenant is complying with all its obligations hereunder.
Landlord shall have the right to enter the Premises without notice in the case
of an emergency.
18. EFFECT OF TERMINATION OF LEASE. No termination of this Lease
prior to the normal ending thereof, by lapse of time or otherwise, shall affect
Landlord's right to collect rent for the period prior to termination thereof.
19. WARRANTIES OF TITLE AND QUIET POSSESSION. Landlord represents
and warrants that it has good and marketable title to the Premises and has full
right to make this Lease and that Tenant shall have quiet and peaceable
possession of the Premises during the Term so long as no Event of Default is in
existence and continuing hereunder.
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20. SUBORDINATION ATTORNMENT. Landlord represents and warrants that
there is no indebtedness secured by the Premises. This Lease is subject and
subordinate to any deed of trust, mortgage, or other security instrument, which
may in the future cover the Premises, and to any increases, renewals,
modifications, consolidations, replacements, and extensions of any of such deed
of trust, mortgage, or security instrument, provided, however, that Tenant's
subordination shall be conditioned upon Landlord's delivery to Tenant of a non-
disturbance agreement in form reasonably satisfactory to Tenant containing the
substantive provisions of the Subordination, Non-Disturbance and Attornment
Agreement ("SNDA") in the form attached hereto and incorporated herein by
reference executed by the Lender and Landlord in recordable form.
Notwithstanding the generality of the foregoing, any mortgagee shall
have the right at any time to subordinate any deed of trust, mortgage, or other
security instrument to this Lease. At any time, before or after the institution
of any proceedings for the foreclosure of any deed of trust, mortgage, or other
security instrument or sale of the Premises under any such deed of trust,
mortgage, or other security instrument, Tenant shall attorn to such purchaser
upon any such sale or the grantee under any deed in lieu of such foreclosure and
shall recognize such purchaser or grantee as Landlord under this Lease. The
agreement of Tenant to attorn
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contained in the immediately preceding sentence shall survive any such
foreclosure sale, trustee's sale, or conveyance in lieu thereof. Tenant shall,
upon demand at any time, before or after any foreclosure sale, trustee's sale,
or conveyance in lieu thereof, execute, acknowledge, and deliver to Landlord's
mortgagee any written instruments and certificates evidencing such attornment as
Landlord's mortgagee may reasonably require. Upon Tenant's written request and
notice to Landlord, Landlord shall obtain from any such mortgagee a written
agreement that the rights of Tenant shall remain in full force and effect during
the Term of this Lease so long as there shall be no Event of Default hereunder.
21. ESTATE CREATED; FUTURE GRANTS. Landlord and Tenant intend for
and agree that this Lease shall create a leasehold estate in the Premises for
the Term. Landlord agrees that, during the Term of this Lease, it will not
execute or join in any conveyances of easements or restrictive covenants or
other agreements restricting or affecting Tenant's use of the Premises without
the prior written consent of Tenant, which may be withheld in Tenant's sole
discretion.
22. HOLDING OVER. If Tenant remains in possession of the Premises
after expiration of the Term, with Landlord's acquiescence and without any
express agreement of parties, Tenant shall be a tenant at sufferance, subject to
ejectment for trespass. There
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shall be no month to month tenancy and there shall be no renewal of this Lease
by operation of law.
23. ATTORNEY'S FEES AND HOMESTEAD. If the Rent or any additional
rent or other sums owed by Tenant to Landlord under this Lease is collected by
law or through an attorney at law, Landlord shall be entitled to collect
attorney's fees actually reasonably incurred.
24. RIGHTS CUMULATIVE. All rights hereunder shall be cumulative but
not restrictive to those given by law.
25. SERVICE OF NOTICE. Any notice required or permitted to be
delivered hereunder may be delivered in person or by United States certified
mail, postage prepaid, return receipt requested, or by recognized overnight
courier (e.g. Federal Express or DHL), next business day delivery, charges
prepaid, addressed to the parties at the addresses indicated above or at such
other addresses as may be specified by written notice delivered in accordance
herewith. Such notices shall be deemed effective three (3) business days after
deposited in the U.S. mail, or on the next business day if delivered by
overnight courier, or immediately upon delivery in person.
26. WAIVER OF RIGHTS. Neither party's failure to exercise any power
given to them hereunder, or to insist upon strict compliance by the other party
with its obligations hereunder, nor any custom or practice of the parties at
variance
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with the terms hereof, shall constitute a waiver of such party's right to demand
exact compliance with the terms hereof.
27. TIME OF ESSENCE. Time is of the essence under this Lease.
28. SUCCESSORS AND ASSIGNS. This Lease shall apply to, inure to the
benefit of, and be binding upon the parties hereof and their respective
successors, permitted assigns, and legal representatives except as otherwise
expressly provided herein.
29. TRIPLE NET LEASE. This Lease shall be considered a "triple net
lease" so that, except as expressly set forth herein, Tenant shall bear all
responsibility as additional rent for all payments of any kind or nature
relating to the Premises, including but not limited to payment of all taxes
(except for income, estate, inheritance or gift taxes of Landlord), insurance,
repairs and maintenance arising after the date of this Lease to the extent
Tenant is obligated therefor under the terms of this Lease.
30. ENTIRE AGREEMENT; CONFLICT. This Lease and that certain Stock
Purchase Agreement dated as of June 7, 1996 by and among LYNDA JANE HICKMAN, AS
EXECUTRIX, UAG ATLANTA, III, INC., UNITED AUTO GROUP, INC., and TENANT (the
"SPA"), including any attachments made a part hereof or thereof, contains the
entire agreement between the parties and no representations, inducements,
promises or agreements, oral or otherwise, between the parties, not embodied
herein or in the SPA, shall be of any force or effect. To
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the extent there is any conflict between the provisions of this Lease and the
SPA or the SPA provides remedies for the breach of any representations or
warranties contained therein relating to the Premises or otherwise, the
provisions of the SPA and Tenant's and other parties' rights thereunder shall
control and be in full force and effect for two (2) years after the date hereof;
provided, however, that Rent and additional rent hereunder shall be payable
without regard to any claims under the SPA.
31. SEVERABILITY. If any term, provision or clause of this Lease, or
if the application thereof to any person or circumstances, shall to any extent
be invalid or unenforceable, then the remainder of this Lease or the application
of such term, provision or clause to persons or circumstances other than those
to which it is invalid or unenforceable shall not be affected thereby, and each
and every remaining term, provision, clause and application of this Lease shall
be valid and enforceable to the fullest extent permitted by law.
32. EXECUTION IN COUNTERPARTS. This Lease may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
33. AMENDMENT. This Lease may not be altered, waived, amended or
extended except by an instrument in writing signed by Landlord and Tenant.
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34. HEADINGS. The headings used in this Lease are for the purposes
of convenience only. They shall not be construed to limit or to extend the
meaning of any part of this Lease.
35. GOVERNING LAW. This Lease shall be construed in accordance with
the laws of the State of Georgia, and all obligations of the parties created
hereunder are performable in DeKalb County, Georgia.
36. FORCE MAJEURE. Except for the payment of Rent and additional
rent, wherever a period of time is herein prescribed for action to be taken by
either Landlord or Tenant, such party shall not be liable or responsible for,
and there shall be excluded from the computation of any such period of time, any
delays due to strikes, riots, acts of God, shortages of labor or materials,
wars, governmental laws, regulations or restrictions or other causes which are
beyond the control of Landlord or Tenant, as the case may be.
37. EXTENSION OPTIONS. Tenant shall have two (2) separate five (5)
year options to extend the Term of this Lease upon the following terms and
provisions:
(a) Notice of the exercise of an option to extend shall be given
no less than one hundred eighty (180) days prior to the then expiration of the
Term of this Lease;
(b) The Term shall be extended under all terms and provisions of
this Lease except the Rent to be paid hereunder which
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shall be determined as follows: The Rent for the first year of both the first
and second five-year extensions shall be determined by the following, and the
Rent for the second and subsequent lease years of either the first or second
five-year extension shall be increased by the "percentage increase" in the
Consumer Price Index: At the commencement of any extension of this Lease, the
monthly Rent under this Lease shall be the then "fair market rental rate" as
hereinafter defined, as agreed upon by Landlord and Tenant not later than four
(4) months prior to the expiration of the initial term of this Lease or the
first Extended Term, as the case may be, or in the event Landlord and Tenant
cannot agree, an amount equal to the "fair market rental rate" as hereinafter
defined and established. The phrase "fair market rental rate" shall mean the
monthly rental rate (projected to the date of the commencement of the Extended
Term to which it applies) which Tenant would expect to pay and Landlord would
expect to receive under a lease for premises of comparable size and quality as
the Premises used as automobile dealerships in Northern DeKalb County, Georgia.
If Landlord and Tenant have not reached agreement on a fair market rental rate
and executed an amendment to this Lease setting forth such agreement on or
before the date four (4) months prior to the commencement of such extended Term,
then, within ten (10) days after that date each party shall appoint and employ,
at its cost, a real estate appraiser (who shall be a member of the American
Institute of Real
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Estate Appraisers (MAI) with at least ten (10) years of full-time commercial
real estate appraisal experience, with substantial experience relative to
comparable premises in metropolitan Atlanta, Georgia) to appraise and establish
the "fair market rental rate" and notify the other party of the name and
qualification of such appraiser. If either party fails to so appoint its
appraiser, the other party may apply to a judge of the Superior Court of DeKalb
County for such appointment. The two appraisers, thus appointed, shall meet
promptly and attempt to agree upon and establish said rate, or, upon failing to
do so, shall then jointly designate a third appraiser meeting the qualifications
set forth above, all within ten (10) days after the date of appointment of the
last two appraisers. If they are unable to agree on the third appraiser, either
of the parties, after giving five (5) days notice to the other, may apply to a
judge of the Superior Court of DeKalb County (to whose jurisdiction for this
limited purpose both Landlord and Tenant hereby consent) for the selection of a
third appraiser meeting the qualifications stated above. Each of the parties
shall bear one-half of the cost of the appointment of the third appraiser and of
the third appraiser's fee. Within thirty (30) days after the selection of a
third appraiser, a majority of the appraisers shall agree upon the "fair market
rental rate." If a majority of the appraisers are unable to agree within the
stipulated time, the third appraiser shall select one of the determinations of
the first
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two appraisers (either Landlord's or Tenant's) originally selected, without
modification or qualification. In any of said events, the determination shall
be final, conclusive and binding upon both Landlord and Tenant. PROVIDED,
HOWEVER, in no event shall Rent payable to Landlord under this Lease be less
than that payable in any previous lease year of the initial term or any extended
term and in determining fair market rental rate the appraisers shall take into
account that each year of each Extended Term the Rent is to be increased by the
percentage increase in the Consumer Price Index.
(c) Upon the request of either party, Landlord and Tenant shall
execute an acknowledgment setting forth the dates of the extended Term of the
Lease and the amount of the Rent for the applicable extension term, but the
failure to execute such acknowledgment shall not affect Tenant's exercise of its
option to extend the Term as provided herein.
38. RECORDATION. This Lease will not be recorded unless Landlord
fails to execute upon request, in recordable form, a Memorandum of Lease in form
required by Tenant's title insurance company.
39. RECOURSE. Recourse against the Landlord in connection with
Landlord's obligations and liability to Tenant with respect to this Lease shall
be limited solely to Landlord's fee simple interest in the Premises, and neither
Landlord nor any
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partner of landlord, nor any officer, director, or shareholder, executor,
executrix, personal representative or assigns shall have any personal liability
whatsoever with respect to this Lease. In the event of any sale, transfer or
distribution of the Premises by the Landlord, the Landlord shall be and hereby
is entirely freed and relieved of all covenants and obligations of Landlord
hereunder accruing thereafter.
40. ESTOPPEL CERTIFICATE. Tenant agrees, at any time and from time to
time, to deliver within ten (10) days from the date of receipt of a request
therefor, a statement in writing certifying (a) that this Lease is unmodified
and in full force and effect and contains the full agreement between the parties
(or, if there have been modifications or additional agreements, that the Lease
is in full force and effect as modified and identifying the modifications
thereof or additional agreements), (b) the date to which the Rent, additional
rent and other charges due under this Lease have been paid, and (c) that insofar
as Tenant knows, Landlord is not in default under any provision of this Lease
and has performed all of the obligations to be performed by a Landlord to date
(or, if Tenant has knowledge of any default or of any unperformed obligations, a
statement of the nature thereof).
41. CROSS DEFAULT. The Tenant is also the tenant under that certain
Lease Agreement, dated the date hereof, with Lynda Jane Hickman, as Executrix,
demising premises used in conjunction
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with the business conducted on the Premises ("Hickman Lease"). The Landlord
under this Lease is affiliated with the landlord under such other Lease
Agreement, and, a default by the Tenant under such other Lease Agreement shall
be deemed to be a default by the Tenant under this Lease.
IN WITNESS WHEREOF, the parties herein have hereunto caused their duly
authorized representatives to set their hands and seals the day and year first
above written.
LANDLORD:
Signed Sealed and Delivered
in the presence of: ARGONNE ENTERPRISES, INC.
By:
/s/ Ashley L. Hickman
___________________________ __________________________
Unofficial Witness Name: Ashley L. Hickman
________________________
Title: President
___________________________ _______________________
Notary Public
[Notarial Seal] Attest:
By: /s/ Lynda M. Hickman
__________________________
My Commission Expires: Name: Lynda M. Hickman
________________________
Title: Secretary
_______________________
___________________________
[Corporate Seal]
TENANT:
Signed Sealed and Delivered HICKMAN NISSAN, INC. a
in the presence of: Georgia Corporation
___________________________
Unofficial Witness
By: /s/ George Lowrance
___________________________
Name: ________________________
Title: ________________________
___________________________
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Notary Public
Attest:
[Notarial Seal] By: __________________________
Name: __________________________
My Commission Expires: Title ________________________
____________________________ [CORPORATE SEAL]
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EXHIBIT 10.7.11
UAG GUARANTY OF ARGONNE LEASE
THIS GUARANTY OF LEASE ("Guaranty"), made as of the 12th day of July, 1996,
by UNITED AUTO GROUP, INC. ("Guarantor") to and for the benefit of ARGONNE
ENTERPRISES, INC., a Georgia corporation, its successors, successors-in-title
and assigns ("Argonne").
WITNESSETH:
WHEREAS, Argonne, as "Landlord," and Hickman Nissan, Inc., a Georgia
corporation and second-tier subsidiary of Guarantor (hereinafter referred to as
the "Corporation,") as Tenant, have entered into a Lease Agreement of even date
herewith (the "Lease"), demising the Premises commonly known as 3393 Malone
Drive, Chamblee, Georgia, 30341; and
WHEREAS, Argonne has required, as a condition precedent to the
effectiveness of the Lease, that Guarantor execute and deliver this Guaranty;
and
WHEREAS, the Guarantor, as the corporate parent of the Corporation, and,
having a financial interest in the Corporation, has agreed to execute and
deliver this Guaranty.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Guarantor agrees as follows:
1. GUARANTY. Guarantor absolutely, unconditionally and irrevocably
guarantees to Argonne:
(a) the full and prompt payment of any amounts required to be paid by
Corporation, or for which the Corporation shall be liable, under the
Lease, including without limitation Rent, Base Rent, additional rent,
real estate taxes, assessments, maintenance and repair, governmental
charges, interest, attorneys' fees and premiums for insurance policies
payable by the Corporation under the Lease, including all interest and
other charges with respect thereto;
(b) the payment of all Enforcement Costs (as hereinafter defined);
(c) the full, complete and punctual observance, performance and
satisfaction of the obligations, duties and agreements of the
Corporation under the Lease.
All amounts due, debts, liabilities and payment obligations described in
subparagraphs (a) and (b) of this Paragraph 1 are referred to herein as the
"Indebtedness." All obligations described in subparagraph (c) of this Paragraph
1 are referred to herein as the "Obligations." The Obligations of the Guarantor
<PAGE>
hereunder are primary and unconditional and shall be enforceable before,
concurrently or after any claim or demand made or suit filed against the
Corporation.
2. DEFAULT. All sums guaranteed hereby shall be deemed to become
immediately due and payable to Argonne if:
(a) there is an Event of Default (as defined in the Lease) by the
Corporation under the Lease; or
(b) the Guarantor becomes insolvent or unable to pay debts as they mature
or admits in writing to such effect, makes a conveyance fraudulent as
to creditors under any state or federal law, makes an assignment for
the benefit of creditors, or any proceeding is instituted by or
against the Guarantor alleging that the Guarantor is insolvent or
unable to pay debts as they mature, or a petition under any provision
of Title 11 of the United States Code, as amended, is brought by or
against the Guarantor, or a receiver is appointed for any part of the
property or assets of the Corporation or the Guarantor.
3. REMEDIES REGARDING INDEBTEDNESS. If there is an Event of Default by
Corporation under the Lease, the Guarantor's liability and obligation for
payment of the outstanding balance of the Indebtedness hereunder shall not be
limited in any respect. Guarantor agrees to pay the amount of such
Indebtedness, regardless of any defense, right of set-off or claims which the
Corporation or the Guarantor may have against Argonne. Argonne shall have the
option of joining the Guarantor as a party to any such enforcement proceeding.
This is an absolute, irrevocable, present and continuing guaranty of payment and
not of collection.
4. REMEDIES REGARDING OBLIGATIONS. If there is an Event of Default by
the Corporation under the Lease, then, in any such event, Guarantor agrees to
immediately (i) perform the Obligations; (ii) pay any and all costs and expenses
necessary for said timely performance; and (iii) indemnify and hold Argonne
harmless from and against any and all loss, damage, cost, expense, injury, or
liability Argonne may suffer or incur in connection with the exercise of its
rights under this Guaranty.
5. RETURN OF PAYMENTS. Guarantor agrees that, if at any time all or any
part of any payment theretofore applied by Argonne to any Indebtedness is
rescinded or returned by Argonne for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy, liquidation or reorganization of any
party), such Indebtedness shall, for the purposes of this Guaranty, be deemed to
have continued in existence to the extent of such payment, notwithstanding such
application by Argonne, and this Guaranty shall continue to be effective or be
reinstated, as
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the case may be, as to such Indebtedness, all as though such application by
Argonne had not been made.
6. NO DISCHARGE. Guarantor agrees that the obligations, covenants and
agreements of Guarantor under this Guaranty shall not be affected or impaired by
any act of Argonne, or any event or condition except full performance (as called
for herein) of the Obligations and repayment of the Indebtedness and any other
sums due hereunder. Guarantor agrees that, without full performance (as called
for herein) of the Obligations and payment in full of the Indebtedness (as
called for herein), the liability of Guarantor hereunder shall not be discharged
by: (i) the renewal or extension of time for the payment of the Indebtedness or
performance of the Obligations under the Lease or any other agreement relating
to the Indebtedness or the Obligations, whether made with or without the
knowledge or consent of Guarantor; or (ii) any transfer, waiver, compromise,
settlement, modification, surrender, or release of the Lease; or (iii) the
existence of any defenses to enforcement of the Lease; (iv) any failure,
omission, delay or inadequacy, whether entire or partial, of Argonne to exercise
any right, power or remedy regarding the Lease; (v) the existence of any set-
off, claim, reduction, or diminution of the Indebtedness, or any defense or any
kind or nature, which Guarantor may have against the Corporation or which any
party has against Argonne; (vi) the addition of any and all other endorsers,
guarantors, obligors, and other persons liable for the payment of the
Indebtedness and performance of the Obligations; all whether or not Guarantor
shall have had notice or knowledge or any act or omission referred to in the
foregoing clauses (i) through (vi) of this Paragraph. Guarantor intends that
Guarantor shall remain liable hereunder as a principal until all Indebtedness
shall have been paid in full and all Obligations have been performed,
notwithstanding any fact, act, event or occurrence which might otherwise operate
as a legal or equitable discharge of a surety or guarantor.
7. APPLICATION OF AMOUNTS RECEIVED. Any amounts received by Argonne from
whatsoever source on account of any Indebtedness may be applied by Argonne to
the payment of such Indebtedness, and in such order or application, as Argonne
may from time to time elect. Notwithstanding any payments made by or for the
account of Guarantor on account of the Indebtedness, such Guarantor shall not be
subrogated to any rights of Argonne until such time as Argonne shall have
received payment of the full amount of all Indebtedness and the Obligations
shall have been performed to Argonne's satisfaction.
8. WAIVER. Guarantor expressly waives: (i) notice of the acceptance by
Argonne of this Guaranty; (ii) notice of the existence, creation, payment or
nonpayment of the Indebtedness; (iii) presentment, demand, notice of dishonor,
protest, and all other notices whatsoever; (iv) any failure by Argonne to inform
Guarantor of any facts Argonne may now or hereafter know about
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<PAGE>
the Corporation or the Lease, it being understood and agreed that Argonne has no
duty to inform and that Guarantor is fully responsible for being and remaining
informed by the Corporation of all circumstances bearing on the existence or
creation, or the risk of nonpayment of the Indebtedness; and (v) the provisions
of O.C.G.A. Section 10-7-24 (or any similar statute of any other jurisdiction)
relating to the Guarantor's right to discharge upon giving notice to Argonne to
proceed against the Corporation for collection, and the failure or refusal by
Argonne to commence an action or foreclose any collateral within a period of
time or at any time. Credit may be granted or continued from time to time by
Argonne to Corporation without notice to or authorization from Guarantor,
regardless of the financial or other condition of the Corporation at the time of
any such grant or continuation. No modification or waiver of any of the
provisions of this Guaranty will be binding upon Argonne except as expressly set
forth in a writing duly signed and delivered on behalf of Argonne.
9. ENFORCEMENT COSTS. If: (i) this Guaranty or the Lease is placed in
the hands of an attorney for collection or enforcement through any legal
proceeding; (ii) an attorney is retained to represent Argonne in any bankruptcy,
reorganization, receivership, or other proceedings affecting creditors' rights
and involving a claim under this Guaranty or the Lease; (iii) an attorney is
retained to protect or enforce the Lease; or (iv) an attorney is retained to
represent Argonne in any other proceedings whatsoever in connection with this
Guaranty or the Lease or any property subject thereto, then Guarantor shall pay
to Argonne upon demand the costs of collection and the actual reasonable
attorneys' fees and expenses incurred by Argonne, including without limitation
court costs, filing fees, recording costs, and all other costs and expenses
incurred in connection therewith (all of which are referred to herein as
"Enforcement Costs"), in addition to all other amounts due hereunder.
10. TRANSFER OF INDEBTEDNESS OR OBLIGATIONS. Notwithstanding any
assignment or transfer of the Indebtedness or any Obligations or any interest
therein, all portions of the Indebtedness or the Obligations or any interest
therein, including those assigned, and each and every immediate and successive
assignee or transferee of such Indebtedness or Obligations or interest shall, to
the extent of the Indebtedness or Obligations or interests assigned or
transferred, be entitled to the benefits of this Guaranty to the same extent as
if such assignee or transferee were Argonne; provided, however, that unless the
assignor or transferor shall otherwise consent in writing, the assignor or
transferor shall have an unimpaired right, prior and superior to that of such
assignee or transferee, to enforce this Guaranty for its benefit as to such
portions of the Indebtedness or interest therein not assigned or transferred.
11. GOVERNING LAW; INTERPRETATION. This Guaranty and the Lease Agreement
has been negotiated and delivered in Atlanta, Georgia, and shall be governed by
the laws of the State of
-4-
<PAGE>
Georgia without reference to the conflicts of law principles of that State. The
headings of sections and paragraphs in this Guaranty are for convenience only
and shall not be construed in any way to limit or define the content, scope, or
intent of the provisions hereof. As used in this Guaranty, the singular shall
be fully interchangeable, where the context so requires. If any provision of
this Guaranty, or any paragraph, sentence, clause, phrase, or word, or the
application thereof, in any circumstances, is adjudicated by a court of
competent jurisdiction to be invalid, the validity of the remainder of this
Guaranty shall be construed as if such invalid part were never included herein.
Time is of the essence of the Guaranty. All payments to be made hereunder shall
be made in currency and coin of the United States of America which is legal
tender for public and private debts at the time of payment.
12. ENTIRE AGREEMENT. This Guaranty and the Lease Agreement constitute
the entire agreements among the parties with respect to the subject matter
hereof and supersede all prior such agreements and understandings, both written
and oral. This Guaranty may not be modified or amended except by a written
instrument signed by Argonne and Guarantor. If this Guaranty is executed in
several counterparts, each of those counterparts shall deemed an original, and
all them together shall constitute one and the same instrument.
13. SUCCESSORS AND ASSIGNS; JOINT AND SEVERAL LIABILITY. This is Guaranty
shall bind Guarantor and the heirs, assigns, successors, executors and legal and
personal representatives of Guarantor. If this Guaranty is executed by more
than one person, it shall be the joint and several undertaking of each of the
undersigned. Irrespective of whether this Guaranty is executed by more than one
person, it is agreed that the undersigned's liability hereunder is several and
independent of any other guaranties or other obligations at any time in effect
with respect to the Indebtedness, the Obligation or any part thereof and that
Guarantor's liability hereunder may be enforced regardless of the existence,
validity, enforcement or non-enforcement of any such other guaranties or other
obligations.
14. NOTICES. Any notice, demand or other communication which either party
may desire or may be required to give to the other shall be in writing, and
shall be deemed given if and when personally delivered, or on the second
business day after being deposited in United States registered or certified
mail, postage prepaid, addressed to the other party at its address set forth
below, or to such other address as either party may have designated to the other
party in writing:
If to Argonne:
Argonne Enterprises, Inc.
3393 Argonne Drive
Atlanta, Georgia 30305
-5-
<PAGE>
with a copy to:
Davis, Matthews & Quigley, P.C.
14th Floor, Lenox Towers II
3400 Peachtree Road
Atlanta, Georgia 30326
Attn: William M. Matthews, Esq.
If to Guarantor:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: Georgia G. Lowrance, Esq.
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, NE
Atlanta, Georgia 30303
Facsimile No.: (404) 525-2224
Attn: Michael Rosenzweig
Except as otherwise specifically required herein, notice of the exercise of
any right, option or power granted to Argonne by this Guaranty is not required
to be given.
IN WITNESS WHEREOF, the undersigned has executed, sealed and delivered this
instrument as of the day and year first above written.
GUARANTOR:
AUTO GROUP, INC.
By: /s/ George Lowrance
------------------------------
Its: Executive Vice President
------------------------------
[Corporate Seal]
-6-
<PAGE>
Exhibit 23.1.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of our
report dated June 17, 1996, on our audits of the financial statements and
financial statement schedule of United Auto Group, Inc. and Subsidiaries. We
also consent to the reference to our firm under the captions "Experts" and
Selected Consolidated Financial Data.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Princeton, New Jersey
September 12, 1996
<PAGE>
Exhibit 23.1.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of our
report dated May 31, 1996, on our audits of the financial statements of Landers
Auto Sales, Inc. We also consent to the reference to our firm under the caption
"Experts".
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Memphis, Tennessee
September 12, 1996
<PAGE>
Exhibit 23.1.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of our
report dated June 30, 1996, on our audits of the financial statements of Atlanta
Toyota, Inc. We also consent to the reference to our firm under the caption
"Experts".
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Atlanta, Georgia
September 12, 1996
<PAGE>
Exhibit 23.1.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of our
report dated June 14, 1996, on our audits of the financial statements of Steve
Rayman Nissan, Inc. We also consent to the reference to our firm under the
caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Atlanta, Georgia
September 12, 1996
<PAGE>
Exhibit 23.1.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of our
report dated August 16, 1996, on our audits of the financial statements of
Hickman Nissan, Inc. We also consent to the reference to our firm under the
caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Atlanta, Georgia
September 12, 1996
<PAGE>
Exhibit 23.1.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of our
report dated June 12, 1996, on our audits of the financial statements of Sun
Automotive Group. We also consent to the reference to our firm under the caption
"Experts".
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Phoenix, Arizona
September 12, 1996
<PAGE>
Exhibit 23.1.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of our
report dated September 1, 1996, on our audits of the financial statements of
Evans Automotive Group. We also consent to the reference to our firm under the
caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Atlanta, Georgia
September 12, 1996
<PAGE>
Exhibit 23.1.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of our
report dated August 29, 1996, on our audits of the financial statements of
Standefer Motor Sales, Inc. We also consent to the reference to our firm under
the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Memphis, Tennessee
September 12, 1996
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<PAGE>
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<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
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