<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 1996
REGISTRATION NO. 333-09429
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 3
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)
<TABLE>
<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. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED OFFERING PRICE (1) FEE (2)
<S> <C> <C>
Common Stock, par value $0.0001 per share................................... $187,500,000 $4,546
</TABLE>
(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933.
(2) $59,483 in registration fees has been previously paid.
--------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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.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 October 22, 1996
5,500,000 SHARES
[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 $29.00 and $30.00 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 Common Stock has been approved for listing on the New York Stock Exchange
("NYSE") under the symbol "UAG," subject to official notice of issuance.
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.
- --------------------------------------------------------------------------------
<TABLE>
<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 $2,625,000.
(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 750,000
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
, 1996 Smith Barney Inc.
<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.
<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
<TABLE>
<CAPTION>
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
Statements.................................. 19
Selected Consolidated Financial Data............ 26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 27
<CAPTION>
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 1996, 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 1,113,841 SHARES OF COMMON STOCK PLUS CERTAIN
OTHER CONSIDERATION (THE "MINORITY EXCHANGE") 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 operates six 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.
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.
4
<PAGE>
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 has received
commitments from Morgan Guaranty Trust Company of New York ("Morgan Guaranty")
and The Bank of Nova Scotia for a loan facility in the amount of $50 million for
the purpose of financing acquisitions (the "Acquisition Facility").
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 $62.7 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 $85.8 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
approximately $30.5 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
<TABLE>
<S> <C>
Common Stock Offered........................ 5,500,000 shares
Common Stock Outstanding after the Offering 15,528,684 shares
(1)........................................
Use of Proceeds............................. The net proceeds from the Offering are
estimated to be $148.3 million, of which
approximately $62.1 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."
NYSE Symbol................................. "UAG"
</TABLE>
- ------------------------------
(1) Does not include 873,000 and, assuming an initial public offering price of
$29.50 per share, 250,847 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 $1,352,770 $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) 19,425 (5,727) 9,404 17,289
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) 16,152 (5,819) 8,629 16,121
Net income (loss) 96 (1,691) (3,466) 9,112 (4,902) 3,898 9,185
Net income (loss) per common share $ .05 $ (.44) $ (.63) $ .53 $ (1.05) $ .46 $ .54
</TABLE>
<TABLE>
<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 $ 274,250
Current liabilities 117,494 125,825 139,447 128,027 181,317 226,111
Property and equipment, net 8,845 12,072 12,146 11,814 14,609 28,375
Intangible assets, net 22,832 23,018 48,774 22,700 66,131 153,814
Long-term debt 4,122 6,735 24,073 6,556 38,694 12,422
Auto Finance
Net assets -- 291 3,501 3,714 12,549 27,549
Total Company
Total assets 154,218 170,342 236,027 176,945 311,104 497,841
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 66,709 250,606
</TABLE>
<TABLE>
<CAPTION>
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Years Ended December 31, Six Months Ended 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% 2.2%
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, production and distribution 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. Similarly, the delivery of vehicles from Manufacturers
later than scheduled, which may occur particularly during periods of new product
introductions, can lead to reduced sales during such periods. This has been
experienced at certain of the Company' dealerships from time to time, including
in the third quarter of 1996. 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 restrictions, imposed by American Honda Motor
Co., Inc. ("Honda"), provide that, under certain circumstances, the Company may
be forced to sell or lose its Honda and Acura franchises if a person or entity
acquires a 5% ownership interest in the Company if Honda objects to such
acquisition within 180 days except that, so long as control of the Company is
held by its current non-public stockholders, any bank, mutual fund, insurance
company or pension fund may acquire up to a 10% ownership interest (15%
ownership interest in the case of any entity in its capacity as investment
advisor, trustee or custodian for the benefit of third parties) in the Company
without such consent but only if such bank, mutual fund, insurance company or
pension fund is not owned or
8
<PAGE>
controlled by or owns 15% or more of, or controls, any entity (other than an
automobile dealership) that competes with Honda or its affiliates in
manufacturing, marketing or selling automotive products or services. Similarly,
several Manufacturers have the right to approve the acquisition of 20% ownership
interests in the Company.
In addition, under the Company's agreement with Honda, no more than 40% of the
Company's capital stock (on a fully diluted basis) may be freely tradable and
unrestricted at any time. Upon consummation of the Offering, 33.9% of the Common
Stock (on a fully diluted basis and assuming full exercise of the Underwriters'
over-allotment option) will be freely tradable and unrestricted. The Company has
contractual obligations with its existing equity holders to register their
shares of Common Stock under the Securities Act under certain circumstances and
a number of such shares are, and more will become with time, eligible for sale
pursuant to the terms of Rule 144 under the Securities Act. See "Shares Eligible
for Future Sale." Only the Company's three largest stockholders may not sell any
of their shares without Honda's consent. See "Principal Stockholders."
Similarly, a number of Manufacturers, including Chrysler, continue to prohibit
transactions that 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
(on a fully diluted basis) 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. Violations by its stockholders or
prospective stockholders of any of the above restrictions are generally outside
the control of the Company, and if the Company is unable to renegotiate such
restrictions when necessary, it may be forced to terminate or sell 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. Finally, Honda has the right to approve any future public
offerings of capital stock, and the consent of other Manufacturers may be
needed, as well. 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 restrict the
number of franchises held within certain geographic areas. Similarly, it is
currently the policy of Honda to restrict any company from holding more than
seven Honda or more than three Acura franchises and restrict 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, five Nissan franchises and two
Honda franchises (of which one is Acura). 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
9
<PAGE>
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. In addition, Nissan Motor
Corporation U.S. A. ("Nissan") has conditioned the Company's acquisitions of the
Nissan franchises held by the Evans Group and Standefer Motor upon the Company's
agreeing to grant to Nissan an option to acquire the Evans Group's Nissan
franchise. 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. Other
than the Acquisition Facility, the Company does not have any commitments with
respect to 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 "-- 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."
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
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<PAGE>
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 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.
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
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<PAGE>
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 consummation 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 22.7%, 18.3% and 11.9% 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. Moreover, if
the Company elects to use its Class C Common Stock for future public offerings,
which carries one-tenth of the voting power of the Common Stock, such persons
will be able, to a great extent, to retain such control of the Company. 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, such concentration of ownership and such provisions 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."
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<PAGE>
Shares Eligible for Future Sale
Upon consummation of the Offering, the Company will have outstanding 15,528,684
shares of Common Stock. All of the 5,500,000 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
10,028,684 outstanding shares of Common Stock, including the 1,113,841 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 5,774,476
shares, including the 1,113,841 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 250,847 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 64.6% 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 $23.65 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 operates six 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 $62.7 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 $85.8
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 approximately $30.5 million in cash. The acquisition agreement provides for
additional contingent purchase price payments to the sellers based on the future
profitability of the acquired dealerships and also provides for contingent
payments to indemnify the sellers against certain tax liabilities. 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). In connection with such acquisition, the Company will also acquire
ownership of three parcels of real property with third-party financing in the
amount of $10.4 million. The Company expects to designate an unaffiliated third
party to purchase such property and simultaneously enter into long-term leases
with the Company.
Contemporaneously with the consummation of 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 consummation of 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. In connection with such acquisition, the sellers
will receive $6.2 million out of the proceeds of third-party financing pursuant
to provisions of the acquisition agreement permitting the withdrawal of certain
retained earnings. Standefer Motor holds one Nissan franchise and, in 1995, had
$65.8 million in sales.
15
<PAGE>
Use of Proceeds
The net proceeds to the Company from the sale of the Common Stock offered hereby
are estimated to be approximately $148.3 million ($168.8 million if the
Underwriters' over-allotment option is exercised in full) after deducting
underwriting discounts and estimated offering expenses and assuming an initial
public offering price of $29.50 per share. Of such net proceeds, (i)
approximately $62.1 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 $27.6 million will be used for working capital and other general
corporate purposes, including other potential acquisitions. At present, the
Company has not identified any probable 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, 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 November 1, 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 $ 18,985
Current portion of long-term debt 2,463 2,825
--------- -----------
Total short-term debt $ 20,048 $ 21,810
--------- -----------
--------- -----------
Long-term debt (excluding current portion):
Senior Notes (2) $ 27,988 $ --
Other 10,706 12,422
--------- -----------
Total long-term debt 38,694 12,422
--------- -----------
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, 15,529 shares issued and outstanding, as adjusted (3) 1 2
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 -- --
Class C Common Stock, $0.0001 par value; no shares authorized, actual;
20,000 shares authorized, no shares issued and outstanding, as
adjusted -- --
Additional paid-in capital 68,319 259,541
Accumulated deficit (1,612) (8,937)
--------- -----------
Total stockholders' equity 250,621 250,606
--------- -----------
Total capitalization $ 122,299 $ 263,028
--------- -----------
--------- -----------
</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 August 31, 1996, there were Senior Notes outstanding in the aggregate
principal amount of $33.3 million, net of unamortized discount of $1.7 million.
(3) Does not include 873,000 and 250,847 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 (deficit) of the
Common Stock, after giving effect to the Preferred Stock Conversion, the
Minority Exchange, the acquisition of Peachtree Nissan, the assumed exercise of
the Warrants (as defined herein) and the issuance and exercise of the Additional
Warrants (as defined herein), was approximately $(1.9) million, or approximately
$(.17) per share. Net tangible book value (deficit) 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 $29.50 per share and after
deducting estimated offering expenses), the Contemporaneous Acquisitions, the
senior debt repayment and dealerships transferred where Manufacturer approval
was not received, the pro forma net tangible book value of the Company at June
30, 1996 would have been approximately $96.8 million, or approximately $5.85 per
share. This represents an immediate dilution of approximately $23.65 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 $ 29.50
---------
Pro forma net tangible book value (deficit) per share at June 30, 1996
after giving effect to the Preferred Stock Conversion, the Minority
Exchange, the acquisition of Peachtree Nissan, the assumed exercise of
the Warrants and the issuance and exercise of the Additional Warrants $ (.17)
---------
Increase in pro forma net tangible book value per share attributable to
new investors in the Offering 6.02
---------
Pro forma net tangible book value per share as further adjusted for the
Offering, the Contemporaneous Acquisitions, the senior debt repayment
and dealerships transferred where Manufacturer approval was not received 5.85
---------
Dilution per share to new investors in the Offering $ 23.65
---------
---------
</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 the Warrants and the issuance and exercise of the Additional
Warrants) 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
$29.50 per share), the total consideration paid and the average price per share
paid:
<TABLE>
<CAPTION>
------------------------------------------------------------------
Shares Total
Purchased (1) Consideration (2) Average
------------------------ --------------------------- Price
Number Percent Amount Percent Per Share
----------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders 11,044,783 66.8% $ 116,658,379 41.8% $ 10.56
New investors in the Offering 5,500,000 33.2 162,250,000 58.2 29.50
----------- --- -------------- ---
Total 16,544,783 100% $ 278,908,379 100%
----------- --- -------------- ---
----------- --- -------------- ---
</TABLE>
- ------------------------------
(1) Does not include 873,000 and, assuming an initial offering price of $29.50
per share, 250,847 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.
(2) 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 $62,672 $85,822 $154,502 $81,669 $65,793
Cost of sales 720,344 147,566 98,969 52,570 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 17,319 7,842 5,192
--------- ---------- --------- --------- --------- ---------- ---------- ---------
Operating income (loss) (5,309) 6,670 2,011 1,113 947 3,203 1,368 2,317
Related party interest
income 3,039
Other income (expense), net (1,438) 242 17 1 21 (1,181) (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 $(.63)
---------
---------
Shares used in computing net
income (loss) per common
share 5,482
---------
---------
<CAPTION>
Pro Forma
Adjustments Pro Forma
-------------- ---------
<S> <C> <C>
Auto Dealerships
Total revenues $(100,086) (2) $1,352,770
(79,753) (3)
Cost of sales (95,893) (2) 1,197,200
(68,335) (3)
---------
Gross profit 155,570
Selling, general and
administrative expenses (11,286) (2) 136,145
(9,877) (3)
867 (4)
(127) (5)
(1,763) (6)
2,016 (7)
(3,121) (8)
575 (9)
---------
Operating income (loss) 19,425
Related party interest
income (3,039) (4) --
Other income (expense), net (1,050) (10) (1,891)
1,248 (11)
100 (12)
Equity in (loss) of
uncombined investees 831 (4) --
---------
Income (loss) before income
taxes -- Auto Dealerships 17,534
Auto Finance
Loss before income taxes --
Auto Finance (1,382)
---------
Total Company
Income (loss) before minority
interests and provision for
income taxes 16,152
Minority interests (366) (4) --
Benefit (provision) for income
taxes (8,076)(13) (7,040)
---------
Net income (loss) $ 9,112
---------
---------
Net income (loss) per common
share $ .53
---------
---------
Shares used in computing net
income (loss) per common
share 11,640(14) 17,122
---------
---------
</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
Rayman Hickman Sun Evans
Nissan Nissan Automotive Automotive Standefer Pro Forma
UAG (1) (1) Group (1) Group (1) Motor (1) Adjustments
--------- --------- --------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Auto Dealerships
Total revenues $597,939 $ 19,892 $ 41,320 $ 93,823 $ 46,369 $ 34,994 $ (33,707)
Cost of sales 531,560 16,503 36,581 80,389 40,497 31,018 (28,268)
--------- --------- --------- ---------- ---------- ---------
Gross profit 66,379 3,389 4,739 13,434 5,872 3,976
Selling, general and administrative (450)
expenses 56,975 2,481 4,072 9,661 4,664 2,187
(4,837)
433
18
(1,195)
764
288
--------- --------- --------- ---------- ---------- ---------
Operating income 9,404 908 667 3,773 1,208 1,789
Related party interest income 1,548 -- -- -- -- -- (1,548)
Other income (expense), net (2,049) -- 19 (717) 13 30 (340)
2,025
200
Equity in income of uncombined investees 75 -- -- -- -- -- (75)
--------- --------- --------- ---------- ---------- ---------
Income 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 before minority interests and
provision for income taxes 8,629 908 686 3,056 1,221 1,819
Minority interests (1,734) -- -- -- -- -- 1,734
Provision for income taxes (2,997) -- -- -- (365) (133) (3,441)
--------- --------- --------- ---------- ---------- ---------
Net income $3,898 $908 $686 $3,056 $856 $1,686
--------- --------- --------- ---------- ---------- ---------
--------- --------- --------- ---------- ---------- ---------
Net income per common share $.46
---------
---------
Shares used in computing net income
(loss) per common share 8,500 8,622
---------
---------
<CAPTION>
Total
---------
<S> <C> <C>
Auto Dealerships
Total revenues (3) $800,630
Cost of sales (3) 708,280
---------
Gross profit 92,350
Selling, general and administrative (2) 75,061
expenses
(3)
(4)
(5)
(6)
(7)
(9)
---------
Operating income 17,289
Related party interest income (4) --
Other income (expense), net (10) (819)
(11)
(12)
Equity in income of uncombined investees (4) --
---------
Income before income taxes -- Auto 16,470
Dealerships
Auto Finance
Loss before income taxes -- Auto Finance (349)
---------
Total Company
Income before minority interests and
provision for income taxes 16,121
Minority interests (4) --
Provision for income taxes (13) (6,936)
Net income $9,185
---------
---------
Net income per common share $.54
---------
---------
Shares used in computing net income
(loss) per common share (14) 17,122
---------
---------
</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 Automotive 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 Automotive 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 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 $1,611 for the year ended December 31, 1995 and $136 for the six
months ended June 30, 1996.
(5) Represents change in facility expenses at acquired dealerships due to
revised or terminated lease agreements upon acquisition.
(6) Represents reduction in compensation expense at acquired dealerships related
to former owners and employees to contractual amounts.
(7) Represents amortization of excess of cost over net assets acquired for the
acquired dealerships.
(8) Represents reduction for management fees paid to owners of acquired
dealerships.
(9) Represents adjustment for increase in rental expense under amended leases
relating to facilities in the DiFeo Group.
(10)Represents additional interest expense from the issuance of notes payable to
sellers as part of the acquisitions.
(11)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.
(12)Represents net increase in interest expense at acquired dealerships due to
the increase in short-term debt offset in part by repayment of long-term debt in
connection with the acquisition of Sun Automotive Group.
(13)Represents tax impact of pro forma adjustments at the statutory rate
adjusted for non-deductible items of $3,123 for the year ended December 31, 1995
and $2,085 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 $5,698 for the year ended December 31, 1995 and $1,356 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.
(14)Represents shares issued in connection with the Offering, the Minority
Exchange, the acquisition of Hickman Nissan and the Preferred Stock Conversion.
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 $148,268 (1)
11,531 (2)
(11,350) (2)
(31,150) (3)
(13,350) (4)
(18,550) (5)
(38,600) (6)
(5,000) (7)
(15,000) (8)
4,000 (9)
(4,000) (9)
(1,312) (10)
(908) (11)
Accounts receivable 48,209 4,442 6,907 5,812 1,431 (1,740) (11)
Inventories 121,289 6,272 15,968 8,927 8,430 2,351 (2)
948 (3)
1,926 (4)
3,322 (5)
(7,292) (11)
Deferred income taxes 5,333 -- -- -- -- 3,216 (6)
125 (10)
110 (12)
Other current assets 2,848 264 53 81 -- (227) (11)
100 (12)
--------- --------- ---------- ---------- ---------
Total current assets 186,980 11,189 23,049 15,521 10,093
Property and equipment, net 14,609 543 11,128 335 226 2,186 (3)
(652) (11)
Intangible assets, net 66,131 -- 1,137 -- -- 9,832 (2)
19,399 (3)
7,482 (4)
14,625 (5)
600 (10)
(67) (11)
34,675 (13)
Due from related parties 15,727 -- -- 699 -- (15,727) (13)
Other assets 11,090 64 843 32 150 3,017 (3)
(2,608) (6)
(198) (9)
(137) (11)
200 (12)
(3,317) (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 $35,145
Accounts receivable 65,061
Inventories 162,141
Deferred income taxes 8,784
Other current assets 3,119
----------
Total current assets 274,250
Property and equipment, net 28,375
Intangible assets, net 153,814
Due from related parties 699
Other assets 9,136
----------
Total Auto Dealership assets 466,274
----------
Auto Finance
Cash and cash equivalents 16,530
Finance assets, net 775
Other assets 14,262
----------
Total Auto Finance assets 31,567
----------
Total assets $497,841
----------
----------
</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 $6,001 (5)
(6,421) (11)
Short-term debt 15,069 -- -- -- -- 10,400 (3)
(5,000) (7)
(4,000) (9)
Accounts payable 20,626 916 1,357 1,977 741 (1,094) (11)
Accrued expenses 14,150 646 2,946 766 798 (400) (10)
(576) (11)
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 (2)
5,480 (2)
(12,905) (3)
(33,167) (6)
(785) (11)
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) (13)
--------- --------- ---------- ---------- ---------
Stock purchase warrants 1,597 -- -- -- -- (1,597) (14)
--------- --------- ---------- ---------- ---------
Commitments and contingent liabilities
Stockholders' equity
Convertible Preferred Stock 1 -- -- -- -- (1) (15)
Common Stock 1 50 7,228 2 1 1 (1)
(50) (2)
(7,228) (3)
(2) (4)
(1) (5)
Non-voting Common Stock -- -- -- -- 9 (9) (5)
Class C Common Stock -- -- -- -- --
Additional paid-in capital 68,319 1 -- 897 -- 148,267 (1)
(1) (2)
6,051 (2)
(897) (4)
3,802 (9)
575 (12)
30,929 (13)
1,597 (14)
1 (15)
Retained earnings (accumulated (1,116) (2)
deficit) (1,612) 1,116 (3,926) 3,042 6,594
3,926 (3)
(3,042) (4)
(6,594) (5)
(4,825) (6)
(187) (10)
(2,148) (11)
(165) (12)
--------- --------- ---------- ---------- ---------
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 16,469
Accounts payable 24,523
Accrued expenses 18,330
Current portion of long-term debt 2,825
----------
Total current liabilities 226,111
Long-term debt 12,422
Due to related party 1,191
Deferred income taxes 3,493
----------
Total Auto Dealership liabilities 243,217
----------
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 2
Non-voting Common Stock --
Class C Common Stock --
Additional paid-in capital 259,541
Retained earnings (accumulated (8,937)
deficit)
----------
Total stockholders' equity 250,606
----------
Total liabilities, minority interests
subject to repurchase, stock
purchase warrants and stockholders'
equity $497,841
----------
----------
</TABLE>
24
<PAGE>
Footnotes to Pro Forma Condensed Consolidated Balance Sheet
(1) Represents the net proceeds from the Offering.
(2) 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.
(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, repayments of long-term debt, incurrence of
short-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 of 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 issuance of additional equity, the reclassification of
deferred issuance costs and the repayment of short-term debt in July 1996.
(10) Represents adjustment for retroactive increase in rental expense under
amended leases relating to facilities in the DiFeo Group.
(11) Represents adjustment to eliminate the impact of dealerships transferred or
not acquired because Manufacturer approval was not received.
(12) Represents the purchase of a 5% equity interest in Atlanta Toyota by its
current general manager in exchange for a note.
(13) 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.
(14) 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.
(15) Represents the Preferred Stock Conversion.
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 56,975
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 -- -- -- $ .05 $ (.44) $ (.63) $ (1.05) $ .46
</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 operates six 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.
During the six months ended June 30, 1996, the Company sold 17,509 new vehicles
(67.2% of total vehicle sales) and 8,542 used vehicles (32.8% of total vehicle
sales). During the six months ended June 30, 1995, the Company sold 11,088 new
vehicles (75.1% of total vehicle sales) and 3,674 used vehicles (24.9% of total
vehicle sales). The increase in the relative proportion of used vehicle sales to
new vehicle sales was due principally to the expansion of existing used car
facilities and the establishment of two additional stand-alone used car retail
centers in response to the increased popularity of used cars. 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. Included in the above gross profit
figures is gross profit from finance and insurance activities, which increased
by $5.4 million, or 50.5%, from $10.7 million to $16.1 million due principally
to the acquisitions of Landers Auto, Atlanta Toyota and United Nissan. Gross
profit from finance and insurance activities at the continuing franchises of the
DiFeo Group increased by $1.2 million, or 12.5%, from $9.6 million to $10.8
million. Gross profit from finance and insurance activities consists principally
of fees for placing financing contracts with consumer finance companies and also
includes fees for placing extended service contracts and amounts earned on the
sale of accessories such as radios, cellular phones and alarms.
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.
29
<PAGE>
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.
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. During 1995, the
Company sold 25,138 new vehicles (73.7% of total vehicle sales) and 8,953 used
vehicles (26.3% of total vehicle sales). During 1994, the Company sold 22,464
new vehicles (72.9% of total vehicle sales) and 8,340 used vehicles (27.1% of
total vehicle sales). The decrease in the relative proportion of used vehicle
sales to new vehicle sales was due principally to stronger demand for new
vehicles
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as opposed to used vehicles at the DiFeo Group operations offset by the
acquisition of Landers Auto, which sells a higher proportion of used vehicles to
new vehicles than the DiFeo Group. 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.
Included in the above gross profit figures is gross profit from finance and
insurance activities, which decreased by $1.1 million, or 4.5%, from $24.5
million to $23.4 million due principally to the DiFeo Restructuring offset by
the acquisition of Landers Auto. Gross profit from finance and insurance
activities at the continuing franchises of the DiFeo Group decreased by $0.9
million, or 4.2%, from $21.4 million to $20.5 million.
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.
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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. During 1994,
the Company sold 22,464 new vehicles (72.9% of total vehicle sales) and 8,340
used vehicles (27.1% of total vehicle sales). During 1993, the Company sold
18,608 new vehicles (70.2% of total vehicle sales) and 7,891 used vehicles
(29.8% of total vehicle sales). The decline in the relative proportion of used
vehicle sales to new vehicle sales was due to stronger new vehicle demand. 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.
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. Included in the above gross profit figures is gross
profit from finance and insurance activities, which increased by $7.1 million,
or 40.8%, from $17.4 million to $24.5 million due to the full-year contributions
of dealerships acquired during 1993 and a significant increase in the
profitability of the finance and insurance products sold.
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.
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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.
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. During
such period, the Company sought and obtained waivers of non-compliance with, and
amendments to, certain covenants under its Securities Purchase Agreements and
Credit Agreement, including covenants regarding fixed charge coverage ratios and
delivery of certain collateral to secure the indebtedness thereunder.
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 June 30, 1996, $16.3
million and $29.5 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
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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. The
Company has received commitments from Morgan Guaranty and The Bank of Nova
Scotia for an Acquisition Facility in the amount of $50 million. There can be no
assurance that the Acquisition Facility will be successfully consummated or that
required additional capital will be available on reasonable terms, if at all, at
such times as required by the Company.
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 operates six 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 has received commitments from Morgan
Guaranty and The Bank of Nova Scotia for an Acquisition Facility in the amount
of $50 million.
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
retail purchases (exclusive of private sales) 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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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 a majority of its dealerships' CSI scores were at or above the average CSI
scores for the applicable 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. 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.
38
<PAGE>
NEW VEHICLES
On a pro forma basis, in 1995, UAG sold at retail 37,358 new vehicles and new
vehicle operations (including fleet sales) generated $841.7 million in revenues,
or 62.2% 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.
39
<PAGE>
USED VEHICLES
On a pro forma basis, in 1995, UAG sold at retail approximately 22,060 used
vehicles and used vehicle operations (including sales at wholesale) generated
$368.8 million in revenues, or 27.3% 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 six
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 six stand-alone
used car centers. Two operate in the DiFeo Group, three operate as part of the
Landers Auto division and one operates at Peachtree Nissan. 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.
40
<PAGE>
AFTERMARKET PRODUCTS
On a pro forma basis, in 1995, UAG's sales of aftermarket products generated
$40.0 million in revenues, or 2.9% 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
$102.3 million in revenues, or 7.6% 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.
43
<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, and the Company expects to renew any expiring agreements in
the ordinary course of business. The typical franchise agreement
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<PAGE>
provides for early termination or non-renewal by the Manufacturer under certain
circumstances 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
Except for three facilities that the Company owns in Arizona, 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 September 30, 2010
Danbury, CT sales; general
office; service
Fair 100 Federal Road New and used car Month-to-month
Hyundai/Isuzu/Suzuki Danbury, CT sales; service
DiFeo Lexus 1550 Route 22 East New and used car September 30, 2010
Bound Brook, NJ sales; service
DiFeo Chevrolet-Geo 599 Route 440W New and used car September 30, 2010
and Jersey City, NJ sales; service
J&F Oldsmobile
DiFeo Hudson Mall on Route New and used car September 30, 2010
Chrysler-Plymouth/ 440 sales; service
Jeep-Eagle/Hyundai Jersey City, NJ
Hudson Toyota 585 Route 440W New and used car September 30, 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 September 30, 2010
Nyack, NY sales; service
Rockland Toyota 115 Route 59 New and used car September 30, 2002,
Nyack, NY sales; service renewable to 2012
DiFeo Nissan (a) 977 Communipaw New and used car sales September 30, 2010
Avenue
Jersey City, NJ
(b) 909-921 Service September 30, 2010
Communipaw Ave.
Jersey City, NJ
Fair Honda 102 Federal Road New and used car September 30, 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 September 30, 2010
St.
Toms River, NJ
Gateway Toyota Route 37 & Batchelor New and used car September 30, 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 United 20570 I-30 Used car sales April 30, 2002,
AutoMart Benton, AR renewable to 2012
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 Lexus 6905 E. McDowell New and used car December 31, 2005,
Scottsdale, AZ sales; service renewable to 2010(1)
Land Rover 6925 E. McDowell New and used car August 10, 2005,
Scottsdale Scottsdale, AZ sales; service renewable to 2025
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 June 30, 2005,
Phoenix, AZ sales; service renewable to 2010
Evans Group
Evans BMW 3624 Commerce Ave. New and used car April 28, 1998(2)
Duluth, GA sales; service
Evans Nissan 1420 Iris Drive New and used car April 28, 1998(3)
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) The owner of the property has the right to require the tenant to purchase
the property at any time after December 31, 1997 at a purchase price equal to
one hundred times the monthly rental payment at the time of such purchase.
(2) The Company has entered into a purchase agreement to acquire the property
at any time 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.
(3) The Company has entered into a purchase agreement to acquire the property
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.
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.
48
<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. 54 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. Spielvogel, Cogan and Sallay are members of Class I, Messrs. Kroll,
Nelson and Sinkfield are members of Class II and Messrs. Eisenson and Hannan 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 and Hannan and
is responsible for administering the Company's Stock Option Plan and granting
options thereunder.
Compensation Committee Interlocks and Insider Participation
Mr. Cogan, Chairman of the Company's Compensation Committee, also serves as
Chairman of the Board and Chief Executive Officer of Foamex International Inc.,
on whose compensation committee Mr. Spielvogel serves.
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, $1,000 for each Board of
Directors meeting attended in person, $750 for each Board of Directors committee
meeting attended in person, and $500 for each such meeting participated in by
telephone. Such fees are payable at the option of the director in cash or in
Common Stock at the current market price. 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 $325 million in annual loan
purchases.
</TABLE>
51
<PAGE>
<TABLE>
<S> <C>
STEVEN KNAPPENBERGER Mr. Knappenberger serves as President and Chief Operating
Officer of the Sun Group, which he joined in 1980. He will
become a member of the Operating Committee upon consummation of
the Contemporaneous Acquisitions.
STEVE LANDERS Steve Landers serves as Chief Executive Officer and President of
Landers Auto. He began his career in the automotive retailing
industry in 1969. In 1972, Mr. Landers, with his father, Bob
Landers, opened a used car operation, which was the predecessor
to Landers Auto.
JOHN SMITH Mr. Smith serves as President of Atlanta Toyota, which he joined
in 1988. He began his career in the automotive retailing
industry in 1983.
</TABLE>
Summary Compensation Table
The following Summary Compensation Table sets forth information concerning the
compensation for services paid to the officers named below (the "Named Executive
Officers") during fiscal years 1995, 1994 and 1993.
<TABLE>
<CAPTION>
-----------------------------------------------
Long Term
Compensation
-------------
Annual Compensation Securities
Name and --------------------- Underlying
Principal Position Year Salary($) 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.
52
<PAGE>
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.
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
53
<PAGE>
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 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
54
<PAGE>
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 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 2,067,595 5,027,210
100,000(3) 8.8 (3) (3) 1,855,239 4,701,540
Ezra P. Mager -- -- -- -- -- --
Arthur J. Rawl 34,000(4) 3.0 10.00 4/23/06 213,824 541,872
George G. Lowrance 34,000(5) 3.0 10.00 4/23/06 213,824 541,872
Robert W. Thompson 3,500(6) 0.3 10.00 4/23/06 22,011 55,781
</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. The values in these columns assume that the fair market value on the
date of grant of each option was equal to the exercise price thereof.
(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, 1994. (6) Options were
granted on April 23, 1996 and vest and become exercisable in five equal annual
installments beginning on August 1, 1995.
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 50,847 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 New Jersey. Upon consummation of the Minority Exchange, all of
the Company's subsidiaries subject thereto 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
to be Issued in
Minority Minority
Division Interest Exchange
- --------------------------- ----------- ---------------
<S> <C> <C>
DiFeo Group 30% 216,079
Landers Auto 20% 750,808
Atlanta Toyota 5% 146,954
</TABLE>
The Company has agreed 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 $500 per share, or $400,000 in the aggregate. 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. In addition, the Company has agreed to grant such officers options
to purchase common stock of Atlantic Finance in such amounts as to enable them
to retain their percentage ownership of Atlantic Finance after the Company's
contribution out of the proceeds of
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<PAGE>
the Offering. Such options will vest and become exercisable in five equal annual
installments beginning on the first anniversary of the consummation of the
Offering at an exercise price increasing at a rate equal to $500 plus an amount
equal to 10% per year, compounded annually from the date of grant, on $500. 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.
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, the exercise of the Additional Warrants 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 22.7
375 Park Avenue
New York, New York 10152
Aeneas Venture Corporation........................ 2,843,656 18.3
(an affiliate of Harvard Private Capital)
600 Atlantic Avenue
Boston, Massachusetts 02210
AIF II, L.P....................................... 1,843,656 11.9
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
Carl Spielvogel (2)............................... 226,118 1.4
Ezra P. Mager..................................... 163,240 1.1
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 22.7
Michael R. Eisenson (5)........................... 2,843,656 18.3
John J. Hannan (6)................................ 1,843,656 11.9
Jules Kroll....................................... 104,474 *
Robert H. Nelson (7).............................. 3,544,756 22.8
John M. Sallay (8)................................ 2,843,656 18.3
Richard Sinkfield................................. 10,000 *
All directors and Named Executive Officers, 8,764,500 55.6
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.
57
<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, 20,000,000 shares of Class C 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" refer 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.
Class C Common Stock
No shares of Class C Common Stock have been issued. Holders of Class C Common
Stock would be entitled to one-tenth of one vote per share on all matters
submitted to a vote of stockholders, and they would be 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 Class C 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.
58
<PAGE>
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 upon consummation of the
Offering at a nominal exercise price and expire on September 22, 2003. 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 upon consummation of the Offering 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
restrictions, imposed by Honda, provide that, under certain circumstances, the
Company may be forced to sell or lose its Honda and Acura franchises if a person
or entity acquires a 5% ownership interest in the Company if Honda objects to
such acquisition within 180 days, except that, so long as control of the Company
is held by its current non-public stockholders, any bank, mutual fund, insurance
company or pension fund may acquire up to a 10% ownership interest (15%
ownership interest in the case of any entity in its capacity as investment
advisor, trustee or custodian for the benefit of third parties) in the Company
without such consent but only if such bank, mutual fund, insurance company or
pension fund is not owned or controlled by or owns 15% or more of, or controls,
any entity (other than an automobile dealership) that competes with Honda or its
affiliates in manufacturing, marketing or selling automotive products or
services. Similarly, several Manufacturers have the right to approve the
acquisition of 20% ownership interests in the Company. In addition, under the
Company's agreement with Honda, no more than 40% of the Company's capital stock
(on a fully diluted basis) may be freely tradable and unrestricted at any time.
Similarly, a number of Manufacturers, including Chrysler, prohibit transactions
that 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 eight directors upon
consummation of the Offering and thereafter as may be fixed from time to time by
resolution of the Board of Directors. 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 consummation of the Offering, there will be approximately 21.5 million
shares of Common Stock, 20.0 million shares of Class C 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 capital 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
59
<PAGE>
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 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.
60
<PAGE>
Shares Eligible for Future Sale
Of the 15,528,684 shares of Common Stock outstanding immediately after the
consummation of the Offering, the 5,500,000 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
10,028,684 shares of Common Stock outstanding, including the 1,113,841 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 5,774,476 Restricted Shares,
including the 1,113,841 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 155,287 shares upon
consummation 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. 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 all or a portion of the shares of Common Stock
issuable upon exercise of such options. Options to purchase up to 50,847 shares
of Common Stock have been granted as part of the consideration for the DiFeo
Group Minority Interest, which shares are subject to registration rights.
Further, upon consummation of the Offering, 1,016,099 shares of Common Stock
will be issuable upon the exercise of the Warrants at a nominal exercise price.
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
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<PAGE>
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.
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 1,113,841 shares of Common Stock.
The Warrants to purchase 1,016,099 shares of Common Stock and Additional
Warrants to purchase 93,747 shares of Common Stock 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.
62
<PAGE>
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............................................... 5,500,000
---------------
---------------
</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
750,000 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 Common Stock has been approved for listing on the NYSE under the symbol
"UAG," subject to official notice of issuance. 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 250,000 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, directors and
persons having business relationships with 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.
63
<PAGE>
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 and has committed to
lend up to $25,000,000 to the Company under the Acquisition Facility. 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.
The excess of the initial public offering price per share over the price paid
for the Additional Warrants by J.P. Morgan Capital Corporation (and its
affiliates) and The Equitable Life Assurance Society of the United States is
deemed by the NASD to be underwriting compensation pursuant to Rule 2710 of the
Conduct Rules.
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
64
<PAGE>
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.
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 (see note
2) $ .05 $ (.44) $ (.63) $ (1.05) $ .46
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Shares used in computing net income (loss)
per common share 1,894 3,873 5,482 4,682 8,500
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</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 -- $ -- 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:
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin Topic
4-D, all stock options and warrants granted by the Company during the twelve
months preceding the Company's initial public offering have been included in the
calculation of net income (loss) per common shares outstanding as if they were
outstanding for all periods presented, using the treasury stock method at an
assumed public offering price of $29.50 per share.
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)
2. Summary of Significant Accounting Policies: (Continued)
Net income (loss) per common share data calculated in accordance with APB No. 15
is as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Years Six Months Ended
Ended December 31, June 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
Net loss per common share........................................... $ .07 $ (.51) $ (.71) $ (1.19) $ .49
Weighted average shares outstanding (In thousands).................. 1,317 3,296 4,905 4,105 7,923
</TABLE>
The computations of net income (loss) per share in accordance with APB No. 15
are based on the weighted average number of common shares, the weighted average
number of preferred shares and warrants outstanding to the extent dilutive.
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>
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)
4. Inventories: (Continued)
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.
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.
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:
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.
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 47 -- 285
--- --- ---------
Deferred tax liability (asset):
Federal -- -- (2,374)
State and local -- -- --
--- --- ---------
Total deferred -- -- (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 franchises, 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. No goodwill had been allocated to the terminated franchises.
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 $(.72) $(.34) $.17
<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 service contracts thereon. The Company also earns a commission
on the sale of finance and insurance contracts.
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>
-------------------------------
Years ended December 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
Sales $ 104,080 $ 114,394 $ 112,162
<S> <C> <C> <C>
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
and service contracts thereon. The Company also earns a commission on the sale
of finance and insurance contracts.
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 March ended
December 31, December 31, 31, April 30,
------------ -------------------- ------------ -----------
1993 1994 1995 1995 1996
------------ --------- --------- ------------ -----------
Sales $ 27,750 $ 46,637 $ 62,672 $ 13,072 $ 19,892
Cost of sales, including floor plan interest of
$164, $262 and $434 for 1993, 1994 and 1995,
respectively 23,415 40,036 52,570 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 and service contracts
thereon. The Company also earns a commission on the sale of finance and
insurance contracts.
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.
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)
2. Summary of Significant Accounting Policies: (Continued)
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.
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 and vehicle service and parts. The
Company also earns a commission on the sale of finance and insurance contracts.
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 13,194 14,301 17,319 8,030 9,661
--------- --------- --------- --------- ---------
Income from operations 1,178 1,826 3,203 2,064 3,773
Other income (expense), net (748) (536) (1,181) (500) (717)
--------- --------- --------- --------- ---------
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 and
service contracts thereon. The Company also earns a commission on the sale of
finance and insurance contracts.
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.
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)
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
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.
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)
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 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>
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)
4. Inventories: (Continued)
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.
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 $1,150, 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 1,309 2,186
---------- --------- ---------
Retained earnings, end of period $ 2,186 $ 1,800 $ 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 and service
contracts thereon. The Company also earns a commission on the sale of finance
and insurance contracts.
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 (unaudited) (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 and
service contracts thereon. The Company also earns a commission on the sale of
finance and insurance contracts.
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.................................................... $ 64,029
NASD Fees............................................................... 19,250
NYSE Listing Fee........................................................ 140,000
Transfer Agent and Registrar Fees and Expenses.......................... 12,000
Printing and Engraving Expenses......................................... 485,000
Legal Fees and Expenses................................................. 1,000,000
Accounting Fees and Expenses............................................ 850,000
Blue Sky Fees and Expenses.............................................. 40,000
Miscellaneous Expenses.................................................. 14,721
----------
Total........................................................... $2,625,000
----------
----------
</TABLE>
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 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.
II-1
<PAGE>
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>
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.
II-2
<PAGE>
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.
10.1.14 Form of Agreement among the Company, certain of its affiliates and American Honda Motor
Co., Inc.
10.1.15 Form of Option Certificate of the Company in favor of Samuel X. DiFeo and Joseph C. DiFeo.
10.1.16 Form of Registration Rights Agreement among the Company and the parties listed on Schedule
I thereto.
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.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
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 October 21, 1996 (standard provisions
are in Exhibit 10.2.4.2 hereto).
<C> <S> <C>
*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, as amended September 6, 1996 (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, dated August 16, 1995, between Fair
Chrysler Plymouth Partnership and Chrysler Corporation, (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 September 18, 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).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
*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).
<C> <S> <C>
*10.2.21 Isuzu Dealer Sales and Service Agreement, dated as of September 16, 1996 between American
Isuzu Motors Inc. and Fair Cadillac--Oldsmobile--Isuzu Partnership (standard provisions
are in Exhibit 10.2.22 hereto).
*10.2.22 Isuzu Dealer Sales and Service Agreement Additional Provisions.
**10.2.23 Loan and Security Agreement, dated as of October 1, 1992, between General Motors
Acceptance Corporation and Hudson Motors Partnership, as amended April 7, 1993 (a
substantially similar agreement exists with each other operating partnership in the DiFeo
Group).
10.2.24 Unconditional, Continuing Guaranty of Payment of the Company and its affiliates named
therein, dated as of October 1, 1992, in favor of General Motors Acceptance Corporation,
as amended April 7, 1993.
10.2.25 Term Loan and Borrowing Base Credit Line Loan Agreement, dated as of April 7, 1993,
between General Motors Acceptance Corporation and DiFeo-EMCO Management Partnership.
10.2.26 Settlement Agreement, dated as of October 3, 1996, among the Company and certain of its
affiliates, on the one hand, and Samuel X. DiFeo, Joseph C. DiFeo and certain of their
affiliates, on the other hand.
10.2.27 Form of Agreement and Plan of Merger used in the Minority Exchange of the DiFeo Group.
10.2.28 Form of Lease of certain facilities in the DiFeo Group.
10.2.29 Lease Agreement, dated September 27, 1990, between J & F Associates and TJGHCC Associates.
10.2.30 Lease Agreement, dated October 1, 1992, between Manly Chevrolet, Inc. and County Toyota,
Inc.
10.2.31 Sublease, dated October 1, 1992, between DiFeo BMW, Inc. and DiFeo BMW 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 18, 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.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
*10.4.2 Promissory Note of the Company, dated August 1, 1995, in favor of Steve Landers and John
Landers.
<C> <S> <C>
*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.
*10.4.21 Agreement, dated July 31, 1995, between the Company and General Motors Corporation,
Oldsmobile Division.
*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.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
*10.5.6 Lease Agreement, dated as of January 3, 1996, between Carl Westcott and Atlanta Toyota,
Inc.
<C> <S> <C>
*10.5.7 Lease Guaranty of the Company, dated as of January 16, 1996, in favor of Carl Westcott.
*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
10.2.9.1).
*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.
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
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, as
amended on October 21, 1996 by Amendment No. 1, Amendment No. 2 and Amendment No. 3.
<C> <S> <C>
*10.8.2 Purchase and Sale Agreement, 6905 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.
10.8.5.1 Form of Audi Dealer Agreement (standard provisions are in Exhibit 10.8.5.2 hereto).
10.8.5.2 Audi Standard Provisions.
10.8.6.1 Form of Acura Automobile Dealer Sales and Service Agreement (standard provisions are in
Exhibit 10.8.6.2 hereto).
10.8.6.2 Acura Standard Provisions.
10.8.7.1 Form of BMW of North America Dealer Agreement (substantially similar to Exhibit 10.2.4.1).
10.8.8.1 Form of Porsche Sales and Service Agreement.
**10.8.8.2 Form of Addendum to Porsche Sales and Service Agreement.
**10.8.9.1 Form of Land Rover North America, Inc. Dealer Agreement.
**10.8.9.2 Land Rover Standard Provisions.
10.8.10 Sublease, dated June 7, 1988, between Max of Switzerland and Scottsdale Porsche & Audi,
Ltd.
10.8.11 Lease, dated October 1990, between Lisa B. Zelinsky and R. J. Morgan Corporation of
America and Scottsdale Hyundai, Ltd.
10.8.12 Sublease, dated July 1, 1995, between Camelback Automotive, Inc. and LRP Ltd.
10.8.13 Lease, dated February 27, 1995, between Lee S. Maas and Sun BMW Ltd.
10.8.14 Form of Shareholders' Agreement among UAG West, Inc., SK Motors, Ltd., and the
Knappenberger Revocable Trust.
10.8.15 Form of Management Agreement among the Company, UAG West, Inc. and Scottsdale Jaguar, Ltd.
10.8.16 Form of Lease Agreement between 6725 Agent and Scottsdale Jaguar, Ltd.
**10.8.17 Form of Indemnification Agreement among the Company, UAG West, Inc., Scottsdale Jaguar,
Ltd., Steven Knappenberger, and certain other individuals and trusts.
10.8.18 Form of Real Estate Loan and Security Agreement, made by SA Automotive, Ltd. for the
benefit of Chrysler Financial Corporation.
10.8.19 Form of Security Agreement and Master Credit Agreement of Chrysler Credit Corporation
(substantially similar to Exhibit 10.4.16).
10.8.20 Form of Continuing Guaranty of each of the Company and UAG West, Inc. in favor of Chrysler
Credit Corporation (substantially similar to Exhibit 10.4.18).
*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.
10.9.3 Form of Dealer Agreement between BMW North America, Inc. and Charles Evans BMW Inc.
(substantially similar to Exhibit 10.2.4.1).
10.9.4 Form of Nissan Dealer Term Sales and Service Agreement between Nissan Motor Corporation in
U.S.A. and Charles Evans Nissan, Inc. (substantially similar to Exhibit 10.2.9.1).
10.9.5 Form of Lease Agreement between Charles F. Evans and Charles Evans
BMW, Inc.
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
10.9.6 Form of Lease Guaranty of the Company in favor of Charles F. Evans.
<C> <S> <C>
10.9.7 Form of Lease Agreement between Charles F. Evans and Charles Evans Nissan, Inc.
**10.9.8 Form of Lease Guaranty of the Company in favor of Charles F. Evans.
10.9.9 Form of Purchase and Sale Agreement for Charles Evans BMW Property between Charles F.
Evans and the Company.
10.9.10 Form of Purchase and Sale Agreement for Charles Evans Nissan Property between Charles F.
Evans and the Company.
10.9.11 Form of Inventory Financing and Security Agreement between BMW Financial Services NA, Inc.
and UAG Atlanta IV Motors, Inc.
10.9.12 Form of Guaranty of the Company in favor of BMW Financial Services NA, Inc.
10.9.13 Form of Inventory Financing and Security Agreement between BMW Financial Services NA, Inc.
and Conyers Nissan, Inc. (substantially similar to Exhibit 10.9.11).
10.9.14 Form of Guaranty of the Company in favor of BMW Financial Services NA, Inc. (substantially
similar to Exhibit 10.9.12).
*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. Standefer for the
primary benefit of children, dated December 21, 1992.
**10.10.2 Form of Nissan Dealer Term Sales and Service Agreement between Nissan Motor Corporation in
U.S.A. and Conyers Nissan, Inc. (standard provisions are in Exhibit 10.2.9.2).
10.10.3 Form of Lease Agreement between Standefer Investment Company and Standefer Motor Sales,
Inc.
**10.10.4 Form of Lease Guaranty of the Company in favor of Standefer Investment Company.
10.10.5 Form of Security Agreement and Master Credit Agreement between Chrysler Credit Corporation
and Standefer Motor Sales, Inc. (substantially similar to Exhibit 10.4.16).
10.10.6 Form of Continuing Guaranty of each of the Company and UAG Tennessee, Inc. in favor of
Chrysler Credit Corporation (substantially similar to Exhibit 10.4.18).
11.1 Statement re computation of per share earnings.
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
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,
II-9
<PAGE>
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-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Amendment No. 3 to be signed on its behalf by the undersigned,
thereunto duly authorized, in New York, New York on October 22, 1996.
UNITED AUTO GROUP, INC.
By: /s/ PHILIP N. SMITH, JR.
-----------------------------------
Philip N. Smith, Jr.
VICE PRESIDENT, SECRETARY
AND GENERAL COUNSEL
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 3
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------ ------------------------------------------------- ------------------
<C> <S> <C>
*
--------------------------------- Chairman of the Board and Chief Executive Officer October 22, 1996
Carl Spielvogel (Principal Executive Officer)
*
--------------------------------- Executive Vice President and Chief Financial October 22, 1996
Arthur J. Rawl Officer (Principal Financial Officer)
/s/ ROBERT W. THOMPSON
--------------------------------- Vice President-Finance (Principal Accounting October 22, 1996
Robert W. Thompson Officer)
*
--------------------------------- Director October 22, 1996
Marshall S. Cogan
*
--------------------------------- Director October 22, 1996
Michael R. Eisenson
*
--------------------------------- Director October 22, 1996
John J. Hannan
*
--------------------------------- Director October 22, 1996
Jules B. Kroll
*
--------------------------------- Director October 22, 1996
Robert H. Nelson
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------ ------------------------------------------------- ------------------
<C> <S> <C>
*
--------------------------------- Director October 22, 1996
John M. Sallay
*
--------------------------------- Director October 22, 1996
Richard Sinkfield
*By: /s/ PHILIP N. SMITH, JR.
----------------------------
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.
10.1.14 Form of Agreement among the Company, certain of its affiliates and American Honda Motor
Co., Inc.
10.1.15 Form of Option Certificate of the Company in favor of Samuel X. DiFeo and Joseph C. DiFeo.
10.1.16 Form of Registration Rights Agreement among the Company and the parties listed on Schedule
I thereto.
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 October 21, 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, as amended September 6, 1996 (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).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
*10.2.6.2 Toyota Dealer Agreement Standard Provisions.
<C> <S> <C>
*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, dated August 16, 1995, between Fair
Chrysler Plymouth Partnership and Chrysler Corporation, (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 September 18, 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 Isuzu Dealer Sales and Service Agreement, dated as of September 16, 1996 between American
Isuzu Motors Inc. and Fair Cadillac--Oldsmobile--Isuzu Partnership (standard provisions
are in Exhibit 10.2.22 hereto).
*10.2.22 Isuzu Dealer Sales and Service Agreement Additional Provisions.
**10.2.23 Loan and Security Agreement, dated as of October 1, 1992, between General Motors
Acceptance Corporation and Hudson Motors Partnership, as amended April 7, 1993 (a
substantially similar agreement exists with each other operating partnership in the DiFeo
Group).
10.2.24 Unconditional, Continuing Guaranty of Payment of the Company and its affiliates named
therein, dated as of October 1, 1992, in favor of General Motors Acceptance Corporation,
as amended April 7, 1993.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
10.2.25 Term Loan and Borrowing Base Credit Line Loan Agreement, dated as of April 7, 1993,
between General Motors Acceptance Corporation and DiFeo-EMCO Management Partnership.
<C> <S> <C>
10.2.26 Settlement Agreement, dated as of October 3, 1996, among the Company and certain of its
affiliates, on the one hand, and Samuel X. DiFeo, Joseph C. DiFeo and certain of their
affiliates, on the other hand.
10.2.27 Form of Agreement and Plan of Merger used in the Minority Exchange of the DiFeo Group.
10.2.28 Form of Lease of certain facilities in the DiFeo Group.
10.2.29 Lease Agreement, dated September 27, 1990, between J & F Associates and TJGHCC Associates.
10.2.30 Lease Agreement, dated October 1, 1992, between Manly Chevrolet, Inc. and County Toyota,
Inc.
10.2.31 Sublease, dated October 1, 1992, between DiFeo BMW, Inc. and DiFeo BMW 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 18, 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.
*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).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
*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).
<C> <S> <C>
*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.
*10.4.21 Agreement, dated July 31, 1995, between the Company and General Motors Corporation,
Oldsmobile Division.
*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.
*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).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
*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).
<C> <S> <C>
*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
10.2.9.1).
*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, as
amended on October 21, 1996 by Amendment No. 1, Amendment No. 2 and Amendment No. 3.
*10.8.2 Purchase and Sale Agreement, 6905 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.
10.8.5.1 Form of Audi Dealer Agreement (standard provisions are in Exhibit 10.8.5.2 hereto).
10.8.5.2 Audi Standard Provisions.
10.8.6.1 Form of Acura Automobile Dealer Sales and Service Agreement (standard provisions are in
Exhibit 10.8.6.2 hereto).
10.8.6.2 Acura Standard Provisions.
10.8.7.1 Form of BMW of North America Dealer Agreement (substantially similar to Exhibit 10.2.4.1).
10.8.8.1 Form of Porsche Sales and Service Agreement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
**10.8.8.2 Form of Addendum to Porsche Sales and Service Agreement.
<C> <S> <C>
**10.8.9.1 Form of Land Rover North America, Inc. Dealer Agreement.
**10.8.9.2 Land Rover Standard Provisions.
10.8.10 Sublease, dated June 7, 1988, between Max of Switzerland and Scottsdale Porsche & Audi,
Ltd.
10.8.11 Lease, dated October 1990, between Lisa B. Zelinsky and R. J. Morgan Corporation of
America and Scottsdale Hyundai, Ltd.
10.8.12 Sublease, dated July 1, 1995, between Camelback Automotive, Inc. and LRP Ltd.
10.8.13 Lease, dated February 27, 1995, between Lee S. Maas and Sun BMW Ltd.
10.8.14 Form of Shareholders' Agreement among UAG West, Inc., SK Motors, Ltd., and the
Knappenberger Revocable Trust.
10.8.15 Form of Management Agreement among the Company, UAG West, Inc. and Scottsdale Jaguar, Ltd.
10.8.16 Form of Lease Agreement between 6725 Agent and Scottsdale Jaguar, Ltd.
**10.8.17 Form of Indemnification Agreement among the Company, UAG West, Inc., Scottsdale Jaguar,
Ltd., Steven Knappenberger, and certain other individuals and trusts.
10.8.18 Form of Real Estate Loan and Security Agreement, made by SA Automotive, Ltd. for the
benefit of Chrysler Financial Corporation.
10.8.19 Form of Security Agreement and Master Credit Agreement of Chrysler Credit Corporation
(substantially similar to Exhibit 10.4.16).
10.8.20 Form of Continuing Guaranty of each of the Company and UAG West, Inc. in favor of Chrysler
Credit Corporation (substantially similar to Exhibit 10.4.18).
*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.
10.9.3 Form of Dealer Agreement between BMW North America, Inc. and Charles Evans BMW Inc.
(substantially similar to Exhibit 10.2.4.1).
10.9.4 Form of Nissan Dealer Term Sales and Service Agreement between Nissan Motor Corporation in
U.S.A. and Charles Evans Nissan, Inc. (substantially similar to Exhibit 10.2.9.1).
10.9.5 Form of Lease Agreement between Charles F. Evans and Charles Evans
BMW, Inc.
10.9.6 Form of Lease Guaranty of the Company in favor of Charles F. Evans.
10.9.7 Form of Lease Agreement between Charles F. Evans and Charles Evans Nissan, Inc.
**10.9.8 Form of Lease Guaranty of the Company in favor of Charles F. Evans.
10.9.9 Form of Purchase and Sale Agreement for Charles Evans BMW Property between Charles F.
Evans and the Company.
10.9.10 Form of Purchase and Sale Agreement for Charles Evans Nissan Property between Charles F.
Evans and the Company.
10.9.11 Form of Inventory Financing and Security Agreement between BMW Financial Services NA, Inc.
and UAG Atlanta IV Motors, Inc.
10.9.12 Form of Guaranty of the Company in favor of BMW Financial Services NA, Inc.
10.9.13 Form of Inventory Financing and Security Agreement between BMW Financial Services NA, Inc.
and Conyers Nissan, Inc. (substantially similar to Exhibit 10.9.11).
10.9.14 Form of Guaranty of the Company in favor of BMW Financial Services NA, Inc. (substantially
similar to Exhibit 10.9.12).
*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. Standefer for the
primary benefit of children, dated December 21, 1992.
**10.10.2 Form of Nissan Dealer Term Sales and Service Agreement between Nissan Motor Corporation in
U.S.A. and Conyers Nissan, Inc. (standard provisions are in Exhibit 10.2.9.2).
10.10.3 Form of Lease Agreement between Standefer Investment Company and Standefer Motor Sales,
Inc.
**10.10.4 Form of Lease Guaranty of the Company in favor of Standefer Investment Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
10.10.5 Form of Security Agreement and Master Credit Agreement between Chrysler Credit Corporation
and Standefer Motor Sales, Inc. (substantially similar to Exhibit 10.4.16).
<C> <S> <C>
10.10.6 Form of Continuing Guaranty of each of the Company and UAG Tennessee, Inc. in favor of
Chrysler Credit Corporation (substantially similar to Exhibit 10.4.18).
11.1 Statement re computation of per share earnings.
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>
THIRD RESTATED CERTIFICATE OF INCORPORATION
OF
UNITED AUTO GROUP, INC.
* * * * * *
ARTICLE I
NAME
The name of the corporation is: United Auto Group, Inc. (the
"Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the Corporation's registered office in the State of
Delaware is 32 Loockerman Square, Suite L-100 in the City of Dover, County of
Kent. The name of the Corporation's registered agent at such address is The
Prentice Hall Corporation System, Inc.
ARTICLE III
PURPOSE
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware (the "DGCL").
<PAGE>
ARTICLE IV
CAPITAL
1. Designation.
The total number of shares of capital stock which the Corporation
shall have the authority to issue is 61,225,000, consisting of: (i) 40,000,000
shares of Voting Common Stock, par value $0.0001 per share (the "Voting Common
Stock"); (ii) 1,125,000 shares of Non-voting Common Stock, par value $0.0001 per
share (the "Non-voting Common Stock"); (iii) 20,000,000 shares of Class C Common
Stock, par value $0.0001 per share (the "Class C Common Stock" and, collectively
with the Voting Common Stock, and the Non-voting Common Stock, the "Common
Stock"); and (iv) 100,000 shares of Preferred Stock, par value $0.0001 per
share.
All shares of Common Stock issued and outstanding shall be identical
and shall entitle the holders thereof to the same rights and privileges, except
as otherwise provided in this Article IV. Holders of shares of Common Stock
shall not have preemptive or other rights to subscribe for additional shares of
Common Stock or for any other securities of the Corporation.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors of the Corporation (the "Board") is expressly
authorized at any time, and from time to time, to provide for the issuance of
shares of Preferred Stock in one or more series, for such consideration (not
less than its par value) and with such designations, powers, preferences and
relative, participating, optional or other special rights, and such
qualifications, limitations or restrictions, as shall be determined by the Board
and fixed by resolution or resolutions adopted by the Board providing for the
number of shares in each such series.
2. Voting Power of Common Stock.
(a) Except as otherwise required by law, each holder of Voting Common Stock
shall be entitled to vote on all matters and shall be entitled to one vote for
each share of Voting Common Stock standing in such holder's name on the books of
the Corporation determined as of the record date for the
-2-
<PAGE>
determination of stockholders entitled to vote on such matters or, if no such
record date is established, at the date such vote is taken.
(b) Except as provided in this Section 2 or as otherwise required by law,
no holder of Non-voting Common Stock shall be entitled to vote such stock on any
matter on which the stockholders of the Corporation shall be entitled to vote,
and shares of Non-voting Common Stock shall not be included in determining the
number of shares voting or entitled to vote on any such matters.
(c) Except as provided in this Section 2 or as otherwise required by law,
each holder of Class C Common Stock shall be entitled to one-tenth of one vote
for each share of Class C Common Stock standing in such holder's name on the
books of the Corporation determined as of the record date for the determination
of stockholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken, and each share of Class C Common
Stock shall be counted as one-tenth of one share in determining the number of
shares voting or entitled to vote on any such matters.
(d) Except as otherwise provided in this Section 2 or as otherwise required
by law, the holders of shares of Voting Common Stock and Class C Common Stock
and, on any matter on which the holders of shares of Non-voting Common Stock are
entitled to vote, the holders of shares of Non-voting Common Stock, shall vote
together as a single class; provided, however, that the holders of shares of
Non-voting Common Stock or Class C Common Stock shall be entitled to vote as a
separate class on any amendment, repeal or modification of any provision of this
Certificate of Incorporation that adversely affects the powers, preferences or
special rights of the holders of the Non-voting Common Stock or Class C Common
Stock, respectively.
3. Certain Provisions relating to Common Stock.
(a) Subject to and upon compliance with the provisions of this Section 3,
any Regulated Stockholder (as hereinafter defined) shall be entitled to convert,
at any time and from time to time, any or all of the shares of Voting Common
Stock held by such stockholder into an equal number of shares of Non-voting
Common Stock.
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(b) Subject to and upon compliance with the provisions of this Section 3,
each holder of Non-voting Common Stock shall be entitled to convert, at any time
and from time to time, any or all of the shares of Non-voting Common Stock held
by such stockholder into an equal number of shares of Voting Common Stock;
provided, however, that no holder of shares of Non-Voting Common Stock shall be
entitled to convert any such shares to the extent that, as a result of such
conversion, such holder and its Affiliates (as hereinafter defined), directly or
indirectly, would own, control or have the power to vote (i) a greater number of
shares of Voting Common Stock or other securities of any kind issued by the
Corporation than such holder and its Affiliates shall be permitted to own,
control or have power to vote under any law, regulation, rule or other
requirement of any governmental authority at the time applicable to such holder
or its Affiliates or (ii) with respect to a holder or Affiliate that is subject
to regulation under the insurance laws of any jurisdiction, 5% or more of the
outstanding voting capital stock of the Corporation.
(c) To exercise its conversion privilege pursuant to this Section 3, a
holder of Common Stock shall surrender the certificate or certificates
representing the shares of Common Stock being converted (the "Converting
Shares") to the Corporation's transfer agent and shall give written notice to
the Corporation and its transfer agent that such holder elects to convert the
Converting Shares into an equal number of shares of the class into which such
shares may be converted (the "Converted Shares"). Such notice shall also state
the name or names (with address or addresses) and denominations in which the
certificate or certificates for Converted Shares are to be issued. The
Corporation shall promptly notify each Regulated Stockholder (that has
previously informed the Corporation in writing of its status as a Regulated
Stockholder) of its receipt of such notice. The certificate or certificates for
Converting Shares shall be accompanied by proper assignment thereof to the
Corporation or in blank. The date when such written notice is received by the
Corporation's transfer agent, together with the certificate or certificates
representing the Converting Shares, shall be the "Conversion Date." As promptly
as possible after the Conversion Date, the Corporation shall issue and deliver
to the holder of the Converting Shares, or on its written order, such
certificate or certificates as it may request for the Converted Shares issuable
upon such conversion, and the Corporation shall deliver to the converting holder
a certificate
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(which shall contain such legends as were set forth on the surrendered
certificate or certificates) representing any shares which were represented by
the certificate or certificates that were delivered to the Corporation in
connection with such conversion but which were not converted, provided, however,
that if such conversion is subject to part (d) of this Section 3, the
Corporation shall not issue such certificate or certificates until the
expiration of the Deferral Period (as hereinafter defined) referred to therein.
Such conversion, to the extent permitted by the close of business on the
Conversion Date, and at such time the rights of the holder of the Converting
Shares as such holder shall cease (except that, in the case of a conversion
subject to part (d) of this Section 3, the conversion shall be deemed effective
upon the expiration of the Deferral Period referred to therein), and the person
or persons in whose name or names the certificate or certificates for the
Converted Shares shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the Converted Shares. Upon the
issuance of shares in accordance with this Section 3, such Converted Shares
shall be deemed to be duly authorized, validly issued, fully paid and
non-assessable.
(d) The Corporation shall not convert or directly or indirectly redeem,
purchase or otherwise acquire any shares of Voting Common Stock or any other
class of capital stock of the Corporation or take any other action affecting the
voting rights of such shares if such action will increase the percentage of any
class of outstanding voting securities owned or controlled by any Regulated
Stockholder (other than any such stockholder which requested that the
Corporation take such action or which otherwise waives in writing its rights
under part (d) of this Section 3) unless the Corporation gives written notice
(the "Deferral Notice") of such action to each Regulated Stockholder (that has
previously informed the Corporation in writing of its status as a Regulated
Stockholder). The Corporation shall defer making any such conversion,
redemption, purchase or other acquisition, or taking any such other action, for
a period of 30 days (the "Deferral Period") after giving the Deferral Notice in
order to allow each Regulated Stockholder to determine whether it wishes to
convert or take any other action with respect to the Common Stock it owns,
controls or has the power to vote, and if any such Regulated Stockholder then
elects to convert any shares of Voting Common Stock it shall notify the
Corporation in writing within 20 days of the issuance of the Deferral Notice, in
which case the Corporation shall (i) defer taking the pending action until the
end of the Deferral Period, (ii) promptly notify from
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time to time each other Regulated Stockholder of each proposed conversion and
the proposed transactions and (iii) effect the conversions requested by all
Regulated Stockholders in response to the notices issued pursuant to part (d) of
this Section 3 at the end of the Deferral Period.
(e) If the Corporation shall in any manner subdivide (by stock split,
stock dividend or otherwise) or combine (by reverse stock split or otherwise)
the outstanding shares of the Voting Common Stock, the Non-voting Common
Stock or the Class C Common Stock, the outstanding shares of each other class
of Common Stock shall be subdivided or combined, as the case may be, to the
same extent, share and share alike, and effective provision shall be made for
the protection of the conversion rights hereunder.
If, at any time and from time to time, there shall be a capital
reorganization of the Voting Common Stock (other than a change in par value or
from par value to no par value or from no par value to par value as a result of
any stock dividend or subdivision, split-up or combination of shares) or a
merger or consolidation of the Corporation with or into another corporation, or
sale of all or substantially all of the Corporation's properties and assets,
then, as part of such reorganization, merger, consolidation or sale, provision
shall be made so that each holder of any shares of Non-voting Common Stock shall
thereafter be entitled to receive upon conversion of any such shares, so long as
the conversion right hereunder with respect to such shares would exist had such
event not occurred, the number of shares of stock or other securities or
property of the Corporation, or of the successor corporation resulting from such
merger, consolidation or sale, to which such holder would have been entitled if
such holder had converted such shares immediately prior to such capital
reorganization, merger, consolidation or sale. In the event of such a merger,
consolidation or sale, effective provision shall be made in the certificate of
incorporation of the successor corporation or otherwise for the protection of
the conversion rights of the shares of Non-voting Common Stock that shall be
applicable, as nearly as reasonably may be, to any such other shares of stock
and other securities and property deliverable upon conversion of shares of
Voting Common Stock into which such Non-voting Common Stock could have been
converted immediately prior to such event. The Corporation shall not be a party
to any reorganization, merger or consolidation pursuant to which any Regulated
Stockholder would be required to take (i) any voting securities
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which would cause such holder to violate any law, regulation or other
requirement of any governmental body applicable to such holder or (ii) any
securities convertible into voting securities which if such conversion took
place would cause such holder to violate any law, regulation or other
requirement of any governmental body applicable to such holder, other than
securities which are specifically provided to be convertible only in the event
that such conversion may occur without any such violation.
(f) The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Voting Common Stock, Non-voting Common
Stock or its treasury shares, solely for the purpose of effecting the
conversion of shares of Voting Common Stock and Non-voting Common Stock, such
number of shares of such class as shall from time to time be sufficient to
effect the conversion of all then outstanding shares of Voting Common Stock
that are entitled to so convert and all then outstanding shares of Non-voting
Common Stock.
(g) The issuance of certificates for shares of any class of Common Stock
upon conversion of shares of any other class of Common Stock pursuant to this
Section 3 shall be made without charge to the holders of such shares for any
issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such conversion and the related issuance of shares of Common
Stock; provided, however, that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Common Stock converted.
(h) "Affiliate" shall mean with respect to any person, any other person,
directly or indirectly controlling, controlled by or under common control with
such person. For the purpose of the above definition, the term "control"
(including, with correlative meanings, the terms "controlling," "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 or by contract or otherwise.
"Regulated Stockholder" shall mean (i) any stockholder that is subject to
the provisions of Regulation Y of the Board of
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Governors of the Federal Reserve System (12 C.F.R. Part 225) or any successor to
such regulation ("Regulation Y") and to which shares of Common Stock of the
Corporation were issued pursuant to the warrants issued to J.P. Morgan Capital
Corporation, so long as such stockholder shall hold such shares of Common Stock
or shares issued upon conversion(s) of such shares, (ii) any stockholder that is
subject to regulation under the New York Insurance Law and to which shares of
Common Stock of the Corporation were issued pursuant to the warrants issued to
The Equitable Life Assurance Society of the United States, so long as such
stockholder shall hold such shares of Common Stock or shares issued upon
conversion(s) of such shares, (iii) any Affiliate of any such Regulated
Stockholder that is a transferee of any such shares of Common Stock of the
Corporation, so long as such Affiliate shall hold, and only with respect to,
such shares of Common Stock or shares issued upon conversion of such shares and
(iv) any person to which such Regulated Stockholder or any of its Affiliates has
transferred such shares, so long as such transferee shall hold, and only with
respect to, any shares transferred by such stockholder or Affiliates or any
shares issued upon conversion of such shares but only if such person (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.
ARTICLE V
BOARD OF DIRECTORS
Except as otherwise provided by law, the number of directors which shall
constitute the Board shall be as set forth in the Bylaws of the Corporation.
Elections of directors need not be by written ballot. The directors of the
Corporation shall be divided into three classes: Class I, Class II and Class
III. The number of directors in each class shall be divided equally so far as
possible among the three Classes. The initial Class I, Class II and Class III
directors shall be designated and the terms of the Board shall be as follows:
(i) Class I directors shall be elected to serve until the 1997 Annual
Meeting of Stockholders,
(ii) Class II directors shall be elected to serve until the 1998
Annual Meeting of Stockholders, and
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(iii) Class III directors shall be elected to serve until the 1999
Annual Meeting of Stockholders,
and until their successors shall be duly elected and qualified. At each annual
election of directors, beginning with the 1997 annual election, the successors
to the directors of each class whose term shall expire at such meeting shall be
elected to hold office for a term of three years from the date of their election
and until their successors shall be duly elected and qualified. In case of any
increase or decrease in the number of directors, the increase or decrease shall
be apportioned by the directors among the several classes as nearly equally as
possible; provided, however, that any decrease in the number of directors which
shall cause a director to be removed prior to the expiration of his term shall
be subject to the provisions of the next succeeding paragraph of this Article V.
Anything herein to the contrary notwithstanding, the provisions of this
Article V shall apply only to directors elected by holders of Voting Common
Stock together with holders of all other classes of the Corporation's capital
stock voting as a single class therewith on the election of directors. If
holders of any class of the Corporation's capital stock have the right to elect
directors voting as a separate class and such right be then in effect, the
maximum number of directors of the Corporation shall be increased by the number
of directors which such holders may so elect and upon termination of such right
the number shall be reduced to the extent it was previously so increased.
Notwithstanding any other provisions of this Certificate of Incorporation
or the Bylaws (and notwithstanding the fact that some lesser percentage may be
specified by law), the affirmative vote of the holders of 2/3 or more of the
outstanding shares of capital stock of the Corporation entitled to vote on such
amendment, alteration, change or repeal (considered for this purpose as one
class) shall be required to amend, alter, change or repeal this Article V.
ARTICLE VI
BYLAWS
In furtherance and not in limitation of the powers conferred by
statute, the Board is expressly authorized to make,
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alter or repeal Bylaws of the Corporation (except insofar as Bylaws adopted by
the stockholders shall otherwise provide).
ARTICLE VII
AGREEMENT WITH CREDITORS
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the DGCL or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the DGCL, order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE VIII
NO STOCKHOLDER ACTION WITHOUT MEETING
Any action required or permitted to be taken at an annual or special
meeting of the Corporation's stockholders may be taken only at such duly called
annual or special meeting.
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ARTICLE IX
INDEMNIFICATION
The Corporation shall indemnify to the fullest extent permitted under and
in accordance with the laws of the State of Delaware 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 by reason of the fact that he is or was a director, officer,
trustee, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee, employee or agent of
or in any other capacity with another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall (in the case of any action, suit or proceeding against a
director of the Corporation) or may (in the case of any action, suit or
proceeding against an officer, trustee, employee or agent) be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board upon receipt of an undertaking by or on
behalf of the indemnified person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article IX.
The indemnification and other rights set forth in this Article IX shall not
be exclusive of any provisions with respect thereto in the Bylaws or any other
contract or agreement between the Corporation and any director, officer,
trustee, employee or agent of the Corporation.
Neither the amendment nor repeal of this Article IX, nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article IX, shall eliminate or reduce the effect of this Article IX in respect
of any matter occurring before such amendment, repeal or adoption of an
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inconsistent provision or in respect of any cause of action, suit or claim
relating to any such matter which would have given rise to a right of
indemnification or right to receive expenses pursuant to this Article IX, if
such provision had not been so amended or repealed or if a provision
inconsistent therewith had not been so adopted.
ARTICLE X
ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS
To the fullest extent permitted by the DGCL, as the same presently
exists or may hereafter be amended, no director shall be personally liable to
the Corporation or to any stockholder for monetary damages for breach of
fiduciary duty as a director, except for any matter in respect of which such
director (a) shall be liable under Section 174 of the DGCL or any amendment
thereto or successor provision thereto, or (b) shall be liable by reason that,
in addition to any and all other requirements for liability, he (A) shall have
breached his duty of loyalty to the Corporation or its stockholders, (B) shall
not have acted in good faith or, in failing to act, shall not have acted in good
faith, (C) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a manner
involving intentional misconduct or a knowing violation of law or (d) shall have
derived an improper personal benefit.
Any repeal or modification of this Article X shall no adversely affect
any right or protection of a director with respect to any act or omission
occurring prior to such repeal or modification. If the DGCL is amended after the
date of incorporation to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.
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ARTICLE XI
SEVERABILITY
If any provisions contained in this Certificate of Incorporation shall
for any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not invalidate this entire
Certificate of Incorporation or any other provisions hereof. Such provision
shall be deemed to be modified to the extent necessary to render it valid and
enforceable and if no such modification shall render it valid and enforceable,
then this Certificate of Incorporation shall be construed as if not containing
such provision.
* * * * *
<PAGE>
[LETTERHEAD OF WILLKIE FARR & GALLAGHER]
October 22, 1996
United Auto Group, Inc.
375 Park Avenue
New York, New York 10152
Ladies and Gentlemen:
You have requested our opinion, as counsel for United Auto Group,
Inc., a Delaware corporation (the "Corporation"), in connection with the
Registration Statement on Form S-1, as amended (the "Registration Statement"),
under the Securities Act of 1933, as amended, filed by the Corporation with the
Securities and Exchange Commission.
The Registration Statement relates to an offering of up to
6,250,000 shares ("Shares") of Voting Common Stock, par value $0.0001 per
share, of the Corporation, of which up to 750,000 Shares are subject to a
30-day over-allotment option granted by the Corporation to the underwriters.
In that connection, we have examined drafts of the Corporation's Third
Restated Certificate of Incorporation and Bylaws and of the underwriting
agreement providing for the issuance and sale of the Shares (the "Underwriting
Agreement"), the applicable resolutions of the Corporation's Board of Directors
and the Registration Statement. We have also examined such other documents,
corporate records, certificates and instruments relating to the Corporation as
we have deemed relevant and necessary to the formation of the opinion
hereinafter set forth. In such examination, we have assumed the genuineness and
authenticity of all documents examined by us and all signatures thereon, the
legal capacity of all persons executing such documents, the conformity to
originals of all copies of documents submitted to us, the conformity in all
material respects of final documents with drafts thereof and the effectiveness
of the Third Restated Certificate of Incorporation.
Based upon and subject to the foregoing, we are of the opinion that
the Shares have been duly authorized
<PAGE>
United Auto Group, Inc.
October 22, 1996
Page 2
and, when issued, sold and delivered pursuant to the terms of the Underwriting
Agreement, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Registration Statement.
Very truly yours,
/s/ Willkie Farr & Gallagher
163164
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 1, 1995, is
entered into by and among United Auto Group, Inc., a Delaware corporation (the
"Company"), and each of the parties listed on Schedule I hereto.
WHEREAS, pursuant to the terms of the Shareholders' Agreement, (the
"Shareholders Agreement"), dated as of August 1, 1995, among the Company, United
Landers, Inc., a Delaware corporation, Landers Auto Sales, Inc., an Arkansas
corporation ("Auto Sales"), Steve Landers and John Landers (collectively
referred herein as the "Landers"), and certain other parties named therein, in
the event of an underwritten public offering of the Company's common stock, par
value $0.0001 per share (the "Common Stock"), the Landers will be required to
exchange their shares of common stock, no par value, of Auto Sales for shares
(the "Landers Shares") of Common Stock;
WHEREAS, the Company has agreed to grant the Landers certain rights to
have shares of Common Stock registered under the Securities Act of 1933, as
amended (the "1933 Act");
WHEREAS, pursuant to the terms of the Master Agreement (the "DiFeo
Master Agreement"), dated as of March 17, 1992, as amended, among the Company,
Samuel X. DiFeo, Joseph DiFeo (Samuel X. DiFeo and Joseph DiFeo are collectively
referred to herein as the "DiFeos"), and certain other parties named therein, in
the event of an underwritten public offering of the Common Stock, certain
entities owned by the DiFeos (the "DiFeo Entities") will be required to exchange
their interests in certain partnerships for shares (the "DiFeo Shares") of
Common Stock (the "DiFeo Exchange");
WHEREAS, pursuant to the terms of the DiFeo Master Agreement, the
Company has previously agreed to grant to the DiFeo Entities upon consummation
of the DiFeo Exchange certain rights to have shares of Common Stock registered
under the 1933 Act and it is contemplated that the DiFeo will enter into this
Agreement;
WHEREAS, it is contemplated by the Company that as a result of
ventures with or acquisitions of certain persons or entities (the "Venture
Shareholders") after the date hereof, the Company will grant certain rights to
the Venture Shareholders to have shares of Common Stock registered under the
1933 Act; and
WHEREAS, the Company, the Landers, the DiFeos and the DiFeo Entities
desire to integrate the registration rights held
<PAGE>
or to be held by the Landers, the DiFeo Entities and the Venture Shareholders
and to supersede in their entirety any registration rights previously granted to
the DiFeo Entities;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants herein contained, the parties hereto hereby agree as
follows:
SECTION 1. REGISTRATION RIGHTS
1.1 DEFINITIONS
As used in this Section 1:
(a) the terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the 1933 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 (A) the Landers Shares,
(B) the DiFeo Shares, (C) any shares of Common Stock which the Landers (or an
Affiliate (as defined below) thereof) or the DiFeos (or an Affiliate thereof)
may hereafter acquire, (D) any shares of Common Stock hereafter issued to or
acquired by a person or entity deemed by the Company to be a Venture Shareholder
for purposes hereunder and included at such time on Schedule I hereto, and (E)
any capital stock of the Company issued as a dividend or other distribution with
respect to, or in exchange for or in replacement of, the shares of Common Stock
referred to in clauses (A)-(D) above;
(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
previously been or will be granted rights pursuant to either the Registration
Rights Agreement, dated as of October 15, 1993, among the Company and certain
parties named therein (the "Registration Rights Agreement"), or the warrants
(the "Investor Warrants") to purchase Common Stock issued pursuant to the
Securities Purchase Agreements, to be entered into on or prior to November 30,
1995, among the Company and certain investors, such Securities Purchase
Agreements to be substantially in the form thereof dated August 10, 1995 but
incorporating the terms of that certain Supplement to Summary of Selected Terms
and containing such other terms not inconsistent with such Supplement as may be
agreed to by the parties to such Securities Purchase Agreements (the
Registration Rights
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Agreement and the Investor Warrants are collectively referred to herein as the
"Prior Registration Rights Agreements") to have shares of Common Stock
registered under the 1933 Act, either in respect of issued shares of Common
Stock or shares of Common Stock to be issued upon conversion of outstanding
securities of the Company;
(e) the number of shares of "Registrable Securities then outstanding"
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;
(f) 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; and
(g) the term "UAG IPO" means a Qualified Public Offering (as such
term is defined in UAG's Restated Certificate of Incorporation as in effect on
the date hereof) or the completion of a sale of capital stock of UAG (or a
subsidiary of UAG) pursuant to a registration statement which has become
effective under the Securities Act and which has been deemed to be a Qualified
Public Offering by the holders of a majority of the outstanding shares of the
Class A Preferred Stock, par value $0.0001 per share, of UAG.
1.2 REQUESTED REGISTRATION
(a) REQUEST FOR REGISTRATION. If, after one year following the UAG
IPO, the Company shall receive a written request from the Holder or Holders of
in excess of 66 2/3% 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 1993 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
ninety (90) days of its receipt of such written request, file a registration
statement on a form deemed appropriate by the
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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 1.2(a)) to be included in such registration and
the Company shall use its best efforts to cause such registration statement to
become effective.
The Company shall not be obligated to effect such registration
pursuant to this Section 1.2(a) hereof (A) after the Company already has
effected one (1) such registration pursuant to this Section 1.2(a) and such
registration has been declared or ordered effective, (B) if a registration
statement filed by the Company has been declared or ordered effective within
fifteen (15) months prior to the receipt of a written request from a Holder or
Holders under this Section 1.2(a), (C) if the Company shall be required by the
SEC or any state securities authority to have an audit of any of its interim
financial statements prepared in order to have a registration statement declared
effective, unless the Holders shall agree in writing to bear the expense of such
audit in full, (D) 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 shall have the right to defer such filing for a period of not
more that 180 days after receipt of the request of the Initiating Holders), or
(E) in any particular jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such registration,
unless the Company is already subject to service in such jurisdiction and except
as may be required by the 1933 Act or applicable rules or regulations
thereunder. It is expressly agreed that nothing contained in this Section
1.2(a) shall give any Holder the right to have the disposition of its
Registrable Securities effected by means of an underwritten offering.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 1.2(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 (the "Other Shareholders").
(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
1.2(a). If the Company approves of such request, it shall select an investment
-4-
<PAGE>
banking firm as underwriter of such requested registration. The right of any
Holder to registration pursuant to this Section 1.2 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 1.2, 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 1.
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
by the Company 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. Subject to the rights of the Prior Holders contained in the Prior
Registration Rights Agreements, notwithstanding any other provision of this
Section 1.2, 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, subject to the
rights of the Prior Holders contained in the Prior Registration Rights
Agreements, 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
-5-
<PAGE>
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 1.2(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.
(c) ASSIGNMENT. The registration rights granted pursuant to this
Section 1.2 may be assigned, in whole but not in part, to any transferee of all
of the Registrable Securities held by the transferring Holder.
1.3 COMPANY REGISTRATION
(a) INCLUSION IN REGISTRATION. If, after one year following the UAG
IPO, the Company shall determine to register any of its shares of 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 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 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
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<PAGE>
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 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.
The Company shall be under no obligation to complete any offering of the shares
of 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 1.3(a). In such event the right of the Holders to
registration pursuant to the Section 1.3 shall be conditioned upon the Holders'
participation in such underwriting and the inclusion of 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 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. Subject to the rights of the Prior Holders contained
in the Prior Registration Rights Agreements, notwithstanding any other provision
of this Section 1.3, if the representative of the underwriters determines that
marketing factors require a limitation on the number of shares of 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 amount of Registrable Securities and shares entitled to be included
therein
-7-
<PAGE>
owned by each selling Holder and Prior Holder, respectively, or in such other
apportions as shall be mutually agreed to by such selling Holders and Prior
Holders). 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. If
the registration of which the Company gives notice pursuant to Section 1.3(a)
hereof is a best efforts underwritten public offering on behalf of the Company,
any public sales of Registrable Securities of the Holders included therein shall
not commence until the earlier of: (i) ninety (90) days after the effective
date thereof, (ii) the completion of the sale of all shares of Common Stock
being sold for the account of the Company, or (iii) the receipt by the Company
of a letter from the representative of the underwriters advising that all or a
portion of the Registrable Securities of the Holders could be sold prior to the
dates set forth in the foregoing clauses (i) and (ii) without adversely
affecting the marketability or price of the shares offered by the Company.
(c) NUMBER; NO ASSIGNMENT. The Holders shall be entitled to have
their shares included in an unlimited number of registrations pursuant to this
Section 1.3. The registration rights granted pursuant to this Section 1.3 shall
not be assignable, whether in whole or in part.
1.4 EXPENSES OF REGISTRATION
Except as otherwise provided herein, in connection with a registration
pursuant to this Section 1, 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) filing fees or other expenses directly and
solely resulting from the inclusion of the Holders' Registrable Securities in a
registration pursuant to Section 1.3 hereof, (iii) stock transfer taxes incurred
in respect of the Registrable Securities being sold, and (iv) 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.
1.5 REGISTRATION PROCEDURES
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<PAGE>
In the case of each registration effected by the Company pursuant to
this Section 1, the Company shall:
(i) 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;
(ii) 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;
(iii) 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 1933 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 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; and
(iv) 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.
1.6 DELAY OF REGISTRATION
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<PAGE>
No Holder shall have any right to take any action to restrain, enjoin
or otherwise delay any registration as a result of any controversy that may
arise with respect to the interpretation or implementation of this Agreement.
1.7 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 1 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 1933 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 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 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 based upon
information furnished to the Company by such Holder or the underwriter of any
such 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
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<PAGE>
Securities were registered under the 1933 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.
(c) Each party entitled to indemnification under this Section 1 (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. 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.
1.8 LOCKUP AGREEMENT
In consideration for the Company agreeing to its obligations under
this Section 1, each Holder agrees in connection with the initial registration
(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) of the Company's
securities, upon the
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<PAGE>
request of the Company's underwriters managing any underwritten 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 Registrable Securities
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time from the effective date of such
registration as the Company or the underwriters may specify.
1.9 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 1.
1.10 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, (i) if the Company shall have received
opinions of counsel reasonably satisfactory to such Holder and the Company to
the effect that the proposed disposition of such Registrable Securities by such
Holder may be effected without registration under the 1933 Act or (ii) to the
extent such Registrable Securities can then be sold during a single three month
period pursuant to Rule 144 under the 1933 Act.
1.11 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 (a) make and keep public
information available as those terms are understood and defined in Rule 144
under the 1933 Act at all times from and after ninety (90) days following the
closing date of the first registration under the 1933 Act filed by the Company
for an offering of its securities to the general public, and (b) use its best
efforts to file with the SEC in a timely manner all reports and other documents
required of the Company under the Exchange Act at any time after it has become
subject to such reporting requirements.
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<PAGE>
1.12 RIGHTS GRANTED TO VENTURE SHAREHOLDERS
Any person or entity deemed by the Company to be a Venture Shareholder
for purposes of this Agreement and to whom rights under this Agreement are
granted shall, as a condition to such grant, deliver to the Company a written
instrument by which such person or entity agrees to be bound by the obligations
imposed upon Holders under this Agreement to the same extent as if such person
or entity were a Holder under this Agreement.
SECTION 2. WAIVER OF PRIOR REGISTRATION RIGHTS AND AMENDMENT OF
PRIOR AGREEMENTS
The DiFeos and the DiFeo Entities hereby waive any and all
registration rights granted them under agreements entered into prior to the date
hereof, including without limitation the DiFeo Master Agreement, and further
agree that all such prior agreements are amended to delete in their entirety the
provisions concerning registration rights therein contained.
SECTION 3. ASSIGNABILITY
This Agreement shall be binding upon and inure to the benefit of the
respective heirs, personal representatives, successors and assigns of the
parties hereto.
SECTION 4. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
SECTION 5. AMENDMENT
Any modification, amendment or waiver of this Agreement or any
provision hereof shall be in writing and executed by Holders of not less than 66
2/3% of the Registrable Securities PROVIDED, HOWEVER, that no such modification,
amendment or waiver shall reduce the aforesaid percentage of Registrable
Securities without the consent of all of the Holders of the Registrable
Securities.
SECTION 6. 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 AUGUST 1,
1995 BY AND AMONG UNITED AUTO
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<PAGE>
GROUP, INC. (THE "COMPANY") AND CERTAIN STOCKHOLDERS OF THE COMPANY
NAMED THEREIN, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE
COMPANY.
SECTION 7. 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:
to the Company:
United Auto Group, Inc.
374 Park Avenue
New York, New York 10022
Fax number: (212) 223-5148
Attn: George G. Lowrance,
Executive Vice President and
General Counsel
and to each Holder at such address as shall be furnished in writing to the
Company. All such notices, requests, demands and other communication shall,
when mailed (registered or certified mail, return receipt requested, postage
prepared), 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.
SECTION 8. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
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<PAGE>
IN WITNESS WHEREOF, the Company and each of the undersigned parties
has executed this Agreement effective for all purposes as of the date first
above written.
UNITED AUTO GROUP, INC.
By: /s/Carl Spielvogel
-------------------------------
Its: Chairman & CEO
-------------------------------
/s/Steve Landers
-----------------------------------
Steve Landers
/s/John Landers
-----------------------------------
John Landers
-----------------------------------
Samuel X. DiFeo
-----------------------------------
Joseph DiFeo
THE DIFEO ENTITIES:
FAIR CADILLAC-OLDSMOBILE CORP.
By:
-------------------------------
Its:
-------------------------------
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<PAGE>
FAIR CHEVROLET CORP.
By:
-------------------------------
Its:
-------------------------------
FAIR INFINITI, INC.
By:
-------------------------------
Its:
-------------------------------
DIFEO AUTO CENTER INC. (D/B/A)
DIFEO MAZDA)
By:
-------------------------------
Its:
-------------------------------
DIFEO LEASING CORPORATION
By:
-------------------------------
Its:
-------------------------------
SOMERSET MOTORS INC. (D/B/A)
DIFEO LEXUS)
By:
-------------------------------
Its:
-------------------------------
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<PAGE>
GATEWAY OLDSMOBILE INC. (D/B/A
DIFEO VOLKSWAGEN OF BRIDGEWATER)
By:
-------------------------------
Its:
-------------------------------
DIFEO B.M.W., INC.
By:
-------------------------------
Its:
-------------------------------
COUNTY AUTO GROUP, INC. (D/B/A
COUNTY TOYOTA)
By:
-------------------------------
Its:
-------------------------------
ROCKLAND MOTORS CORP. (D/B/A
ROCKLAND MITSUBISHI)
By:
-------------------------------
Its:
-------------------------------
DIFEO HYUNDAI INC.
By:
-------------------------------
Its:
-------------------------------
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<PAGE>
J & F OLDSMOBILE CORP.
By:
-------------------------------
Its:
-------------------------------
DIFEO SUBARU INC.
By:
-------------------------------
Its:
-------------------------------
DIFEO JEEP-EAGLE INC.
By:
-------------------------------
Its:
-------------------------------
DIFEO IMPORTS INC. (D/B/A
JERSEY CITY MITSUBISHI)
By:
-------------------------------
Its:
-------------------------------
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<PAGE>
DIFEO BUICK INC.
By:
-------------------------------
Its:
-------------------------------
FAIR IMPORTS CORP. (D/B/A FAIR
ACURA)
By:
-------------------------------
Its:
-------------------------------
FAIR HYUNDAI CORP.
By:
-------------------------------
Its:
-------------------------------
FAIR MOTORS CORP.
By:
-------------------------------
Its:
-------------------------------
DANBURY-MT. KISCO SATURN CORP.
(D/B/A SATURN OF DANBURY)
By:
-------------------------------
Its:
-------------------------------
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<PAGE>
HUDSON TOYOTA INC.
By:
-------------------------------
Its:
-------------------------------
DIFEO VOLKSWAGEN INC.
By:
-------------------------------
Its:
-------------------------------
NORTH JERSEY MANHATTAN SATURN CORP.
By:
-------------------------------
Its:
-------------------------------
JS1, INC.
By:
-------------------------------
Its:
-------------------------------
JS2, INC.
By:
-------------------------------
Its:
-------------------------------
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<PAGE>
JS4, INC.
By:
-------------------------------
Its:
-------------------------------
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<PAGE>
SCHEDULE I
Schedule of Registrable
SECURITIES
Number of Shares of
Common Stock Held and
Holder Type of security
- ------ ----------------------
Steve Landers (to be determined)
John Landers (to be determined)
Samuel X. DiFeo (to be determined)
Joseph DiFeo (to be determined)
<PAGE>
Pursuant to Section 1.12 of the Registration Rights Agreement, dated as of
August 1, 1995, among United Auto Group, Inc. and each of the parties listed on
Schedule I thereto (the "Agreement"), the undersigned hereby agrees, as of
August 31, 1996, to become a party to the Agreement and to be subject to the
rights and obligations of Holders (as defined in the Agreement) under the
Agreement to the same extent as if the undersigned were a Holder under the
Agreement.
-----------------------
John R. Smith
Accepted and agreed to
as of August 31, 1996:
UNITED AUTO GROUP, INC.
By:
----------------------
Name:
Title:
<PAGE>
AGREEMENT BETWEEN
AMERICAN HONDA MOTOR COMPANY, INC.
AND
UNITED AUTO GROUP, INC.
This Agreement, dated October 4, 1996, entered between United Auto Group,
Inc., a Delaware corporation with its principal place of business at 375 Park
Avenue, 22nd Floor, New York, New York 10152, UAG West, Inc., a Delaware
corporation with its principal place of business at 375 Park Avenue, 22nd
Floor, New York, New York 10152, UAG Northeast, Inc., a Delaware corporation
with its principal place of business at 375 Park Avenue, 22nd Floor, New
York, New York 10152, DiFeo Partnership, Inc., a Delaware corporation with
its principal place of business at 375 Park Avenue, 22nd Floor, New York, New
York 10152, Danbury Auto Partnership, Inc., a New Jersey partnership
corporation with its principal place of business at 102D Federal Road,
Danbury, Connecticut 06810, certain stockholders of UAG that have executed
the signatory page hereto (all of the above are collectively referred to
herein as "UAG") and American Honda Motor Co., Inc. ("AHM"), a California
corporation with its principal place of business at 1919 Torrance Boulevard,
Torrance, California 90501.
WHEREAS, UAG is currently the owner, directly or through its Affiliates (as
defined in Paragraph 1 below), in whole or in part, of a Honda automobile
dealership; and
WHEREAS, UAG wants to issue stock in a public offering of securities anticipated
to be traded on the New York Stock Exchange; and
WHEREAS, AHM has formulated the American Honda Motor Co., Inc. Policy on the
Public Ownership of Honda and Acura Dealerships (the "Policy"); and
WHEREAS, AHM is willing to permit UAG (as an entity of which a minority portion
is publicly owned) to own Honda and Acura dealerships, provided that UAG adheres
to the Policy and the terms and conditions set forth in this Agreement; and
WHEREAS, UAG is willing to adhere to the Policy and the terms set forth herein;
NOW THEREFORE, in consideration of the mutual covenants set forth herein and
other good and valuable consideration the sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. STRUCTURE OF RELATIONSHIP
1.1 DEALERSHIPS ARE SEPARATE LEGAL ENTITIES. UAG shall create and/or
maintain separate legal entities for each Honda and Acura 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
<PAGE>
each such dealership. Consistent with AHM policy, the name "Honda" or "Acura,"
as applicable, shall appear in the d/b/a of each dealership. The Honda and/or
Acura dealerships currently owned by UAG and/or approved by AHM for acquisition
by UAG are listed in Schedule A, appended hereto. As used herein, "Affiliate"
of, or a person or entity "affiliated" with, a specified person or entity, means
a person or entity that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, 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.
1.2 AGREEMENT TO AUTOMOBILE DEALER SALES AND SERVICE AGREEMENT. UAG
hereby agrees to be bound by the terms of Honda and Acura Automobile Dealer
Sales and Service Agreements (the "Dealer Agreements"), copies of which are
appended hereto as Schedule B. UAG further agrees that each individual Honda
and Acura dealership that it owns, in whole or in part, shall execute and be
bound by the applicable Dealer Agreement.
1.3 ADHERENCE TO THE POLICY. UAG and its Honda and Acura dealerships
hereby agree to be bound by the terms of the Policy, a copy of which is appended
hereto as Schedule C.
1.4 TRANSFER OF OWNERSHIP OF HONDA AND ACURA DEALERSHIPS UPON
OCCURRENCE OF THE INITIAL PUBLIC OFFERING. UAG understands and agrees that the
public offering (the "Offering") of certain shares of the capital stock of UAG
(the entire capital stock of UAG being referred to herein as the "UAG Stock")
will constitute a change of ownership of the Honda and Acura dealerships that,
pursuant to the Dealer Agreement, requires AHM's prior written approval.
Provided that the representations and warranties in this Section are accurate
and that UAG, its Honda and Acura dealerships, and UAG's shareholders adhere to
the terms and conditions of this Agreement, the Policy, and the applicable
Dealer Agreements, AHM hereby agrees to the transfer of certain shares of UAG
Stock pursuant to the Offering as described herein. UAG hereby represents and
warrants that it has provided all documentation and information to AHM
pertaining to the public offering of UAG Stock, including but not limited to all
filings with the SEC and other federal and state regulatory agencies (including,
but not limited to, quarterly and annual financial statement filings,
prospectuses and other materials related to UAG), all agreements between or
among UAG and financial institutions and/or underwriters, and all agreements
between or among UAG and its shareholders. One copy of this documentation and
information has been filed with AHM and labeled Schedule X. UAG hereby further
represents, warrants and covenants as follows:
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1.4.1 No more than 40% of the UAG Stock, including warrants,
stock options and minority roll-up interests, will be offered in the Offering or
otherwise become freely tradable or unrestricted at any time.
Within three (3)business days, UAG shall notify AHM, in writing (the
"Report"), of the sale, or offer to sell, to the public of any UAG Stock owned
by any person or entity listed on Schedule D appended hereto (or as the same may
be modified from time to time), which is an accurate list of all individuals and
entities that own or who have options, warrants or minority roll-up interests to
acquire UAG Stock ("Stockholders") and the number of shares of UAG Stock held by
each and the percentage ownership of UAG Stock owned or controlled by each
Stockholder. The Report shall include (A) the name of the person or entity that
has made the sale or offer; (B) the date of the sale or offer; (C) the number of
shares of UAG Stock that have been sold or offered; (D) the total number of
shares of UAG Stock outstanding (including, but not limited to, restricted
shares of UAG Stock, freely traded shares of UAG, warrants, stock options, and
minority roll-up interests); and (E) the number of shares of UAG Stock that are
registered and freely tradable (not including the shares of UAG Stock enumerated
in (C) immediately above). "Public Stock" shall mean the sum of the shares of
UAG Stock enumerated in (C) and (E) hereof. "Public Stock Percentage" shall
mean the number of Public Stock (C+E) as a percentage of total UAG Stock (D).
(Public Stock Percentage = [C+E]/D expressed as a percentage.)
In the event that the Public Stock Percentage exceeds 40% (that is,
[C+E]/D>.4), then UAG shall: (1) within thirty(30) days, take such steps or
measures as may be required to prevent the proposed transfer, reacquire stock on
the public market or take such other steps so that the Public Stock Percentage
shall not exceed 40%; or (2) shall enter into an agreement to sell all of its
Honda and/or Acura dealerships to one or more third parties which shall be
acceptable to AHM (which agreement shall be subject to AHM's rights herein
including, without limitation, Section 8.2 hereof); or (3) shall voluntarily
relinquish its rights (including, without limitation, its ownership interests)
to any and all Honda and Acura dealerships then owned, in whole or in part, by
UAG or its Affiliates, and such rights shall revert to AHM.
1.4.2 In addition to those persons or entities referred to in
Section 1.4.1 of this Agreement, Schedule D also lists those individuals or
entities with ownership interests in the following Stockholder: Trace
International Holdings, Inc. ("Trace"). On a continuing basis, UAG agrees to
provide pertinent financial and business data on Trace as well as Aeneas Venture
Corporation ("Aeneas") and AIF II, L.P. ("Apollo"), to the extent such
documentation and information is reasonably available.
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1.5 RESTRICTIONS ON TRANSFER OF UAG STOCK BY RESTRICTED STOCKHOLDERS.
Without AHM's prior written approval, Trace, Aeneas and Apollo (collectively,
"Restricted Stockholders") shall not sell, transfer or in any manner encumber
any UAG Stock nor enter into any agreement providing for the voting of UAG Stock
as directed by any person or entity or in a specified manner or pursuant to a
specified procedure, or grant any voting proxy or otherwise enter into any
arrangement the purpose or effect of which is to vest in any other person or
entity the voting rights of any UAG Stock held by the Restricted Stockholders.
AHM will not approve any transfers of UAG Stock that it reasonably deems
detrimental to AHM's interests as provided in Section 1.7 below, and any
approved transfer may only be made on the condition that the transferee(s) and
subsequent transferee(s) agree in writing to be bound by the terms of the
Agreement to the same extent as if it had executed this Agreement as a
Restricted Stockholder. Each certificate representing UAG Stock held by a
Restricted Stockholder or any securities issued in respect of such UAG Stock
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
The shares represented by this certificate are subject to restrictions on
transfer set forth in an Agreement between American Honda Motor Company,
Inc. and the Corporation dated October 4, 1996, as amended, a copy of
which will be furnished by the Corporation without charge upon written
request.
1.6 IDENTIFICATION OF OWNERS OF UAG. Schedule E, appended hereto,
includes accurate documentation and information pertaining to each individual or
entity that owns or controls 5% or more of the UAG Stock, whether such stock is
freely tradable and/or restricted. In the event of any change of ownership that
results in an individual or entity not listed on Schedule E obtaining ownership
or control of 5% or more of UAG Stock, UAG shall provide AHM with the
documentation and information required by Schedule E with respect to such person
or entity to the extent the documentation and information is reasonably
available. UAG will provide AHM with copies of all filings made with the SEC
and comparable filings made with state agencies by persons or entities that own
more than 5% of UAG and or any of its Affiliates. Without limiting the
foregoing, UAG will use its best efforts to provide such information regarding
such shareholders as AHM may from time to time request.
1.7 RIGHT OF AHM TO DISAPPROVE ACQUISITIONS OF UAG STOCK. Without
limiting the restrictions set forth in Section 1.5, AHM shall have the
irrevocable right to disapprove of the acquisition of more than 5% of the shares
of UAG Stock by any individual or entity if such acquisition is reasonably
deemed detrimental to AHM's interests. Without limiting the foregoing, the
parties agree that such acquisition or attempted acquisition may reasonably be
deemed to be detrimental to AHM's interests if the acquiring individual or
entity (a) competes with AHM or its
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parent, subsidiaries or Affiliates in manufacturing, marketing, or selling
automotive products or services or is owned or controlled by or has a
substantial economic interest in an entity that competes with American Honda or
its parent, subsidiaries or Affiliates in manufacturing, marketing, or selling
automotive products or services (not including an interest in a dealership
selling products manufactured by a competing automobile manufacturer); (b) has
criminal affiliations or a criminal record; (c) has less than an excellent
credit rating or credit history; (d) has demonstrated unacceptable customer
satisfaction index performance in any industry in which it has participated; or
(e) has had a prior relationship with AHM which AHM deems to have been
unsatisfactory. Notwithstanding the immediately preceding sentence, as long as
control of UAG remains in the hands of persons or entities approved by AHM, it
is not AHM's intention to restrict reputable banks, mutual funds, insurance
companies, and/or pension funds (collectively referred to herein as
"Institutional Investors") from acquiring up to 15% of UAG Stock. Therefore,
the parties further agree that, unless such Institutional Investor (i) is owned
or controlled by or owns 10% or more [15% or more if such ownership is in the
capacity as an investment advisor, trustee or custodian for the benefit of third
parties] of, or controls, any person or entity that competes with AHM or its
parent, subsidiaries or Affiliates in manufacturing, marketing, or selling
automotive products or services (not including an interest in a dealership
selling products manufactured by a competing automobile manufacturer); (ii) has
criminal affiliations or a criminal record; or (iii) has acquired, or has
reasonable likelihood of acquiring, a controlling interest in UAG, acquisition
of up to 15% of UAG Stock by such Institutional Investor shall be presumed not
to be detrimental to AHM's interests. The parties further agree that
acquisition or control of more than 15% of UAG Stock by any party shall be
subject to AHM's approval pursuant to the standards set forth above with respect
to parties that acquire 5% or more of UAG Stock.
UAG agrees that it will provide AHM with notice of any acquisition or
proposed acquisition of UAG Stock of which UAG becomes aware with respect to
which AHM has a right of disapproval pursuant to this Section 1.7. UAG shall
make its best efforts to obtain and provide to AHM such documentation and
information pertaining to the party or parties that have acquired or are
proposing to acquire the UAG Stock that AHM would need to exercise its right of
disapproval. Unless AHM objects in writing to such acquisition within 180 days
of receiving completed documentation and information from UAG pertaining
thereto, AHM shall be deemed to have approved such acquisition. In the event
AHM disapproves of such acquisition, UAG and its then current shareholders shall
make their best efforts to prevent such acquisition or, if it has already taken
place, to reacquire the shares of UAG Stock so transferred. In the event that
UAG is unable to prevent such acquisition or reacquire the shares of UAG
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Stock, AHM may invoke the purchase provisions of Section 9.3 hereof.
1.8 DESIGNATION OF UAG'S EXECUTIVE MANGER. UAG shall designate Carl
Spielvogel as its Executive Manager. The Executive Manager shall have
operational control of UAG and shall have final authority to decide any
dealership matters not within the authority of the Dealer Manager. UAG may not
change its Executive Manager without the prior written approval of AHM, which
approval shall not be unreasonably withheld.
1.9 NO FURTHER PUBLIC OFFERINGS OF STOCK WITHOUT AHM'S PRIOR WRITTEN
APPROVAL. UAG shall not make any further public offerings of UAG Stock without
AHM's prior written approval. UAG shall submit any proposals to make other
public offerings of UAG Stock to AHM in the manner set forth in the Policy and
AHM shall evaluate such proposal in accordance therewith. The restriction in
this Section 1.9 on making further public offerings of UAG Stock shall not be
construed to prevent any registration of shares of UAG Stock issuable to
employees pursuant to employee stock options; however, shares of UAG Stock so
registered shall be considered to be Public Stock as defined in Section 1.4.1 of
this Agreement which total Public Stock shall not be in excess of 40% of total
UAG Stock.
1.10 NO PUBLIC OWNERSHIP OF INDIVIDUAL DEALERSHIPS. UAG will not use
a public ownership structure for any of its Honda and/or Acura dealerships.
1.11 CHANGE OF CONTROL OF UAG. UAG acknowledges and agrees that AHM
has the right to ensure that its dealerships remain under the control of persons
and/or entities with a full-time commitment to the sales and service of Honda
Products or Acura Products (as the case may be). UAG recognizes the legitimacy
of AHM's concern (as more fully set forth in the Policy) that public ownership
of dealerships, if unrestricted, could lead to the loss of AHM's control over
the selection of the individuals who sell and service Honda Products or Acura
Products. Therefore, in the event that a controlling interest in UAG or any of
its Affiliates that own Honda or Acura dealers is acquired or threatened to be
acquired by an individual or entity not specifically approved by AHM, UAG agrees
that AHM may terminate its Dealer Agreement(s) with the Honda and/or Acura
dealership(s) then owned by UAG and/or exercise the right to purchase set forth
in Section 9.3. As used herein, "controlling interest" means (a) ownership or
practical control of shares of UAG or its Affiliates sufficient to appoint or
control either the management or the board of directors thereof or (b) the
practical ability to make the day-to-day and/or policy decisions of a Honda or
Acura dealership.
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2. FUTURE ACQUISITIONS BY UAG OF HONDA AND ACURA DEALERSHIPS
2.1 RIGHT OF APPROVAL BY AHM. Neither UAG nor any UAG Affiliate (as
defined above) shall acquire any interest in any Honda or Acura dealership not
listed on Schedule A without AHM's prior written approval. Approval shall be at
AHM's sole discretion and will be evaluated in light of the then current Policy
and AHM's then current business interests. Without limiting the foregoing, in
no event will AHM approve any such acquisition unless all Honda and Acura
dealerships owned or controlled by UAG and/or its Affiliates are (a) in full
compliance with all of the terms of its Dealer Agreement and this Agreement; and
(b) meet all of the applicable Honda or Acura policies and performance
expectations.
2.2 OWNERSHIP OF CONTIGUOUS DEALERSHIPS. UAG and/or its Affiliates
shall not own contiguous Honda and/or Acura dealerships.
2.3 OWNERSHIP OF MULTIPLE DEALERSHIPS. UAG shall not own or control,
directly or through an Affiliate, Honda or Acura dealerships in excess of the
numbers set forth below:
2.3.1 HONDA. UAG shall not hold an ownership interest, directly
or through an Affiliate, in a multiple number of Honda dealerships as provided
below: (a) in a "Metro" market (a "Metro" market is a metropolitan market area
represented by two or more Honda Dealer points) with two (2) to ten (10) Honda
dealership points (inclusive), no Dealer Owner may own, operate or have an
interest in more than one (1) Honda dealership; (b) in a Metro market with
eleven (11) to twenty (20) Honda dealership points (inclusive), no Dealer Owner
may own, operate or have an interest in more than two (2) Honda dealerships; (c)
in a Metro market with twenty-one (21) or more Honda dealership points
(inclusive), no Dealer Owner may own, operate or have an interest in more than
three (3) Honda dealerships; (d) 4% of the Honda dealerships in any one of the
ten Honda Zones; and (e) seven (7) Honda dealerships nationally.
2.3.2 ACURA. UAG shall not hold an ownership interest, directly
or through an Affiliate, in more than: (a) one (1) Acura dealership in a Metro
market (as used herein, "Metro" market is a Metropolitan market area represented
by two or more Acura dealer points); (b) two (2) Acura dealerships in any one of
the six Acura Zones; and (c) three (3) Acura dealerships nationally.
2.4 PROPOSED ACQUISITION IN EXCESS OF LIMITS. If the purchase of any
Honda or Acura dealership would result in exceeding the limits set forth in this
Section 2, AHM will reject UAG's application for approval of the ownership
transfer until such time as UAG shall divest itself of the appropriate number of
dealerships to bring it into compliance with the requirements of this Agreement
at which time AHM will reconsider the proposal in
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light of the Policy. In case of such divestiture, AHM may invoke the purchase
option/right of first refusal provisions of Section 8.2 hereof.
3. SEPARATE, FREESTANDING, EXCLUSIVE DEALERSHIPS
3.1 MAINTENANCE OF EXCLUSIVE DEALERSHIP PREMISES. Each Honda or
Acura dealership owned by UAG or its Affiliates shall be maintained as separate,
freestanding Dealership Operations that meet complete and timely compliance with
facility design and image enhancements to AHM's brand image, functionality and
capacity standards and guidelines, which standards and guidelines AHM may
reasonably modify from time to time, and shall exclusively offer a full range of
Honda Products and services or Acura Products and services and do not offer
competing products or services from its Dealership Premises.
3.2 FULL LINE OF PRODUCTS AND SERVICES. UAG shall make available to
the customers at each of its Honda dealerships all Honda Products and services,
including, but not limited to, vehicles, Genuine Parts and Accessories, American
Honda Finance Corporation retail financing services (whether for purchases or
leases), Honda Vehicle Service Contracts, and Honda Certified Used Car Program.
UAG shall make available to the customers at each of its Acura dealerships all
Acura Products and services, including vehicles, Genuine Parts and Accessories,
American Honda Finance Corporation retail financing services (whether for
purchases or leases), Acura Vehicle Service Contracts, and Acura Preferred Pre-
Owned Program.
3.3 TREATMENT AS INDEPENDENT DEALERSHIPS. For allocation and other
purposes, transfer of Honda or Acura Automobiles from one dealership to another
dealership owned by the same entity will be treated the same as a transfer
between separately-owned dealers.
3.4 INDEPENDENT REPORTING REQUIREMENTS. Each Honda and Acura
dealership shall have the same reporting requirements as all other Honda and
Acura dealerships, including fully audited dealership-specific financial
information. Each individual dealership must meet the capitalization
requirements and other requirements set forth in its individual Dealer
Agreement. The corporate by-laws of the individual corporation that actually
owns the Honda or Acura dealership must restrict it from engaging in any
activity other than the ownership and maintenance of a Honda or Acura
dealership, as the case may be.
4. DEALER MANAGERS
4.1 APPROVAL BY AHM. Each Honda and Acura dealership owned or
controlled by UAG shall have a qualified Dealer Manager, approved by AHM
(subject to the exception noted in Section 4.2 below). Each Dealer Manager
shall work at the Honda or Acura Dealership Premises, shall devote all efforts
to
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the management of the dealership and shall have no other significant business
interests or management responsibilities.
4.2 TRIAL PERIOD. Whenever UAG nominates a new Dealer Manager
candidate for a Honda or Acura dealership, AHM shall have the right to withhold
a decision concerning approval or rejection of the candidate for a trial period
of up to one year, at its sole discretion; provided, however, that the candidate
may operate in the capacity of Dealer Manager until AHM has approved or rejected
the candidate.
4.3 AUTHORITY OF DEALER MANAGER. UAG shall advise AHM in writing of
the limitations, by category and, where applicable, by specific action, on the
authority of the Dealer Manager regarding the operation of the dealership.
Without limiting the foregoing, the Dealer Manager must have the authority to
run the day-to-day operations of the dealership and the capacity to enter into
substantial transactions (e.g., the placement of orders for Honda or Acura
Automobiles and Genuine Parts and Accessories) on behalf of the dealership.
5. REPRESENTATION ON HONDA AND ACURA DEALER ORGANIZATIONS
No more than one representative each from the Honda, and separately,
Acura dealerships owned, directly or through an Affiliate, by UAG, may serve on
the Honda National Dealer Advisory Board, the Acura National Dealer Council or
any future Honda or Acura national board(s) which may be established, and no
more than one representative each may serve on either a Honda or Acura Zone
Advisory Board/Council, or Honda Advertising Triad or Acura advertising counsel
(should one be established in the future). Such representative must be involved
on a full-time basis in the day-to-day operation of the dealership which it is
appointed to represent and must otherwise comply with the bylaws of the
applicable organization.
6. DEALERSHIP PERSONNEL TRAINING
UAG shall not substitute training courses of its own for those
provided or sponsored by AHM without the prior written approval of AHM, which
approval shall be in AHM's sole discretion. In no event will AHM approve UAG
training courses unless the trainers are certified pursuant to Honda's or
Acura's certification programs, as applicable.
7. PROSPECTUS DISCLAIMER AND INDEMNIFICATION AND HOLD HARMLESS AGREEMENT
UAG shall place in its registration statement and its prospectus, as
well as in any other document offering shares in UAG Stock to public or private
investors, the following disclaimer:
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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 AHM pursuant to the terms of the
Indemnification Agreement set forth in Schedule F to this Agreement.
8. TRANSFER OF DEALERSHIPS BY UAG.
8.1 SALE OF OWNERSHIP INTEREST IN DEALERSHIP. This is a personal
services Agreement based upon personal skills, service, qualifications and
commitment of UAG, its Executive Manager, and its Dealer Managers. For this
reason, and because AHM has entered into this Agreement in reliance upon UAG's,
its Executive Manager's, and its Dealer Managers' qualifications, without
limiting any of the other restrictions on transfer of ownership set forth in
this Agreement, UAG agrees to obtain AHM's prior written approval of any
proposed transfer of any ownership interest in a Honda or Acura dealership owned
by UAG.
Without limiting the foregoing, in the event of such proposed
transfer, AHM shall not be obligated to renew the applicable Dealer Agreement or
to execute a new Dealer Agreement with UAG or the proposed transferee unless (a)
UAG first makes arrangements acceptable to AHM to satisfy any outstanding
indebtedness to AHM; (b) the proposed transfer conforms to this Agreement and
the Policy; and (c) the transferee agrees to the terms and conditions of this
Agreement and the Policy.
8.2 RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE
8.2.1 RIGHTS GRANTED. If a proposal to sell a dealership's
assets or transfer its ownership is submitted by UAG to AHM, AHM has a right of
first refusal or option to purchase the dealership assets or stock, including
any leasehold interest or realty. AHM's exercise of its right or option under
this Section supersedes UAG's right to transfer its interest in, or ownership
of, the dealership. AHM's right or option may be assigned by it to any third
party and AHM hereby guarantees the full payment to UAG of the purchase price by
such assignee. AHM may disclose the terms of any pending ownership transfer
agreement and any other relevant dealership performance information to any
potential assignee. AHM's rights under this Section will be binding on and
enforceable against any assignee or successor in interest of UAG or purchaser of
UAG's assets.
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8.2.2 EXERCISE OF AHM'S RIGHTS. AHM shall have 180 days from
AHM's receipt of all completed documentation and information customarily
required by it to evaluate a proposed transfer of ownership in which to exercise
its option to purchase or right of first refusal. AHM'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.
8.2.3 RIGHT TO FIRST REFUSAL. If UAG has entered into a bona
fide written ownership transfer agreement for its dealership business or assets,
AHM's right under this Section is a right of first refusal, enabling AHM to
assume the buyer's rights and obligations under such ownership transfer
agreement, and to cancel this Agreement and all rights granted UAG. Upon AHM's
request, UAG agrees to provide other documents relating to the proposed transfer
and any other information which AHM deems appropriate, including, but not
limited to, those reflecting other agreements or understandings between the
parties to the ownership transfer agreement. Refusal to provide such
documentation or to state that no such documents exist shall create the
presumption that the ownership transfer agreement is not a bona fide agreement.
8.2.4 OPTION TO PURCHASE. If UAG submits a proposal which AHM
determines is not bona fide or in good faith, AHM has the option to purchase the
principal assets of UAG utilizing the dealership business, including real estate
and leasehold interest, and to cancel this Agreement and the rights granted UAG.
The purchase price of the dealership assets will be determined by good faith
negotiations between the parties. If an agreement cannot be reached, the
purchase price will be exclusively determined as set forth in Section 9.3 of
this Agreement.
8.2.5 UAG'S OBLIGATIONS. Upon AHM's exercise of its right or
option and tender of performance under the ownership transfer agreement or upon
whatever terms may be expressed in the ownership transfer agreement, UAG 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 UAG shall deliver complete possession of the property and deed at
the time of closing. UAG shall also furnish to AHM all copies of any easements,
licenses or other documents affecting the property or dealership operations and
shall assign any permits or licenses that are necessary or desirable for the use
of or appurtenant to the property or the conduct of such Dealer Operations. UAG
also agrees to execute and deliver to AHM instruments satisfactory to AHM
conveying title to all personal property, including leasehold interests,
involved in the transfer or sale to AHM. If any personal property is subject to
any lien or charge of any kind, UAG agrees to procure the discharge and
satisfaction thereof prior to the closing of sale of such property to AHM.
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9. REMEDIES OF AHM.
9.1 CUMULATIVE REMEDIES. All of AHM's remedies set forth herein are
cumulative. No explicit listing of any remedy shall foreclose AHM from seeking
any remedy at laws or in equity, including injunctive relief, that would
otherwise be available to it.
9.2 INJUNCTIVE RELIEF. UAG agrees that any breach by UAG or its
Affiliates of the covenants set forth in this Agreement that pertain to the
ownership, control, transfer, and/or operation of Honda or Acura dealerships
would result in irreparable harm to AHM and therefore agrees that AHM shall be
entitled to emergency, preliminary and permanent injunctive relief to prevent
such breaches.
9.3 RIGHT TO PURCHASE. UAG understands and acknowledges that AHM has
the right to maintain a personal relationship with its dealers and a healthy and
competitive dealer network and that the Policy and this Agreement are designed
to ensure the protection of that right and the integrity of the dealer network
while at the same time enabling UAG to raise capital through the public offering
of stock. Therefore, in the event that UAG materially breaches the Policy or
this Agreement, in addition to any other remedies that AHM might have, upon
notice from AHM, AHM may exercise its right to purchase, and UAG agrees that it
will sell, all assets of its Honda and Acura dealerships at their then current
fair market value and on the terms set forth in Section 8.2.5 and that the
applicable Dealer Agreements will terminate upon such sale. In the event that
UAG or any of its Honda or Acura dealerships materially breaches any applicable
Honda or Acura Dealer Agreement(s), in addition to any other remedies that AHM
might have, upon notice from AHM, AHM may exercise its right to purchase, and
UAG agrees that it will sell, the assets of the affected Honda and/or Acura
dealerships or all Honda and Acura dealerships, at their then current fair
market value and on the terms set forth in Section 8.2.5 and that the applicable
Dealer Agreements will terminate upon such sale. Any dispute as the fair market
value of such dealerships will be resolved by arbitration as described in
Section 10 hereof. In such arbitration, the Arbitrator shall be empowered only
to determine (1) whether a material breach took place; and, (2) if so, the fair
market value of the dealerships at issue. The arbitrator in such proceeding
shall not have the power to award any other damages or other relief. If the
arbitrator finds a material breach, UAG shall transfer the dealerships to AHM or
its designee at the fair market value determined by the arbitrator without the
necessity of further legal action by AHM. The arbitrator's decision shall be
unappealable and unreviewable. If, in violation of the terms hereof, UAG
requires AHM to obtain a court judgment to enforce the arbitrator's decision,
that decision shall be enforceable in any court of competent jurisdiction and
UAG agrees to pay the costs and attorneys' fees expended in connection
therewith. The foregoing arbitration
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shall not, without the consent of both parties, be consolidated with any other
arbitration initiated by a party pursuant to Section 10 hereof.
10. DISPUTE RESOLUTION
Except as modified in Section 9.3 immediately above, any controversy
or claim arising out of or relating to the Agreement, or the breach thereof, or
any failure to agree where agreement of the parties is necessary pursuant
hereto, including the determination of the scope of this agreement to arbitrate,
shall be resolved by the following procedures:
10.1 ATTEMPT TO RESOLVE DISPUTE. The parties shall use all
reasonable efforts to amicably resolve the dispute through direct discussions.
The senior management of each party commits itself to respond promptly to any
such dispute. Any party may send written notice to the other parties
identifying the matter in dispute and invoking the procedures of this article.
Within ten (10) days after such written notice is received, unless a delay is
agreed to by both parties to the dispute or the parties agree to confer by
telephone, one or more senior management of each party shall meet in Los
Angeles, California to attempt to amicably resolve the dispute by written
agreement. If said dispute cannot be settled through direct discussions, the
parties agree to first endeavor to settle the dispute in an amicable manner by
mediation in Los Angeles and administered by the American Arbitration
Association ("AAA"), pursuant to the Commercial Mediation Rules of the AAA at
the time of submission prior to resorting to binding arbitration.
10.2 APPLICATION TO BINDING ARBITRATION. If after forty-five (45)
days from the first written notice of dispute, the parties fail to resolve the
dispute by written agreement or mediation, either party may submit the dispute
to final and binding arbitration administered by the AAA, pursuant to the
Commercial Arbitration Rules of the AAA at the time of submission. The
arbitration shall be held in Los Angeles before a single neutral, independent,
and impartial arbitrator (the "Arbitrator").
10.3 BINDING ARBITRATION PROCEDURE. Unless the parties have agreed
upon the selection of the Arbitrator before then, the AAA shall appoint the
Arbitrator as soon as practicable, but in any event within thirty (30) days
after the submission to AAA for binding arbitration. The arbitration hearings
shall commence within forty-five (45) days after the selection of the
Arbitrator. Unless the Arbitrator otherwise directs, each party shall be
limited to three pre-hearing depositions lasting no longer than 6 hours each.
The parties shall exchange documents to be used at the hearing no later than ten
(10) days prior to the hearing date. Unless the Arbitrator otherwise directs,
each party shall have no longer than three days to present its position, the
entire proceedings before the
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Arbitrator shall be on no more than eight hearing days within a three week
period. The Arbitrator's award shall be made no more than thirty (30) days
following the close of the proceeding. The Arbitrator's award may not include
consequential, exemplary, or punitive damages. The Arbitrator's award shall be
a final and binding determination of the dispute and shall be fully enforceable
in any court of competent jurisdiction. the prevailing party shall be entitled
to recover its reasonable attorneys' fees and expenses, including arbitration
administration fees, incurred in connection with such proceeding. Except in a
proceeding to enforce the results of the arbitration, neither party nor the
Arbitrator may disclose the existence, content, or results of any arbitration
hereunder without the prior written consent of both parties.
10.4 EXCEPTIONS. Notwithstanding the foregoing, either party may,
without recourse to arbitration, assert against the other party a third-party
claim, cross-claim or like claim in any action brought by a Third Party to which
this Agreement or the obligations of the parties hereunder may pertain. Nothing
herein shall prevent a party from seeking injunctive relief, where appropriate,
from a court of competent jurisdiction pending the outcome of any arbitration
concerning the subject of such arbitration or when authorized by an arbitrator's
award or when emergency relief is required.
11. ENTIRE AGREEMENT OF THE PARTIES
There are no prior agreements or understandings, either oral or
written, between the parties affecting this Agreement, except as otherwise
specified or referred to in this Agreement. No change or addition to, or
deletion of any portion of this Agreement shall be valid or binding upon the
parties hereto unless approved in writing signed by an officer of each of the
parties hereto. The parties acknowledge that each of them have been represented
by counsel and are substantial entities with considerable resources. This
Agreement has been fully negotiated. No provision of this Agreement shall be
construed against a party on the ground that the party or its attorneys drafted
it.
12. SEVERABILITY
If any provision of this Agreement should be held invalid or
unenforceable for any reason whatsoever, or conflicts with any applicable law,
this Agreement will be considered divisible as to such provision(s), and such
provision(s) will be deemed amended to comply with such law, or if it (they)
cannot be so amended without materially affecting the tenor of the Agreement,
then it (they) will be deemed deleted from this Agreement in such jurisdiction,
and in either case, the remainder of the Agreement will be valid and binding.
Notwithstanding the foregoing, if, as a result of any provision of this
Agreement being held invalid or unenforceable, AHM's ability to control the
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selection of the Dealer Owner, Executive Manager, or the Dealer Manager or to
otherwise maintain its ability to exercise reasonable discretion over the
selection of the actual individual who is managing a Honda or Acura dealership
is materially restricted beyond the terms of this Agreement or the Dealer
Agreement, AHM shall be permitted to invoke the purchase provisions of Section
9.3 hereof.
13. NO IMPLIED WAIVERS
The failure of either party at any time to require performance by the
other party of any provision herein shall in no way affect the right of such
party to require such performance at any time thereafter, nor shall any waiver
by any party of a breach of any provision herein constitute a waiver of any
succeeding breach of the same or any other provision, nor constitute a waiver of
the provision itself.
14. AHM POLICIES
AHM has adopted certain policies which are attached hereto as Schedule
G. UAG hereby agrees to abide by these policies as attached hereto and as
reasonably amended by AHM from time to time, and other policies promulgated in
the future by AHM. In addition, AHM has expressed a commitment to diversity in
management and among employees. UAG hereby agrees to adhere to that commitment
by seeking to achieve diversity among the management personnel and employees it
appoints in connection with the Honda and Acura dealerships it owns or controls.
Without limiting the foregoing, UAG hereby agrees that its dealerships will meet
or exceed (with respect to both the applicable zone and the United States as a
whole) average Honda and/or Acura dealership performance (as such performance is
measured by AHM, now or in the future) with respect to customer satisfaction,
sales, and market share.
15. APPLICABLE LAW
This Agreement shall be governed by and construed according to the
laws of the State of California.
16. BENEFIT
This Agreement is entered into by and between AHM 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.
17. NOTICE TO THE PARTIES
Any notices permitted or required under the terms of this Agreement
shall be directed to the following respective addresses of the parties, or if
either of the parties shall have
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specified another address by notice in writing to the other party, then to the
address last specified:
AMERICAN HONDA MOTOR CO., INC.
Acura Division
1919 Torrance Boulevard
Torrance, California 90501
Attention: Acura Dealer Development Department
AMERICAN HONDA MOTOR CO., INC.
Honda Division
1919 Torrance Boulevard
Torrance, California 90501
Attention: Dealer Placement Department
with a copy to:
Associate General Counsel
HONDA NORTH AMERICA, INC.
Law Department
700 Van Ness Avenue
Torrance, California 90509-2206
UNITED AUTO GROUP
375 Park Avenue
22nd Floor
New York, New York 10152
Attention: Carl Spielvogel, Chairman and C.E.O.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
UNITED AUTO GROUP, INC.
By:________________________________
Carl Spielvogel, Chairman and
Chief Executive Officer
UAG NORTHEAST, INC.
By:________________________________
Title:_____________________________
UAG WEST, INC.
By:________________________________
Title:_____________________________
DIFEO PARTNERSHIP, INC.
By:________________________________
Title:_____________________________
DANBURY PARTNERSHIP, INC.
By:________________________________
Title:_____________________________
RESTRICTED STOCKHOLDERS
TRACE INTERNATIONAL HOLDINGS, INC.
By:________________________________
Title:_____________________________
AENEAS VENTURE CORPORATION
By:_______________________________
Title:____________________________
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AIF II, L.P.
By:_______________________________
Title:____________________________
AMERICAN HONDA MOTOR CO., INC.
Acura Division
By:_______________________________
Richard B. Thomas
Executive Vice President
Acura Division
AMERICAN HONDA MOTOR CO., INC.
Honda Division
By:_______________________________
Richard Colliver
Senior Vice President
Automobile Sales Division
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AMERICAN HONDA MOTOR CO., INC.
POLICY ON THE PUBLIC OWNERSHIP
OF HONDA AND ACURA DEALERSHIPS
I. OBJECTIVES
In this policy on the Public Ownership of Honda and Acura Dealerships (the
"Policy"), American Honda Motor Co., Inc. ("American Honda") addresses several
issues raised by the recent announcement by certain entities which own
automobile dealerships that they intend to offer stock for sale to the public.
Proposals for the public ownership of automobile dealerships have been widely
publicized in the press. American Honda has been asked by several dealers and
the National Automobile Dealers Association to state its position on the public
ownership of Honda and Acura dealerships. This Policy is an effort to address
these inquiries by providing guidelines for the ownership of Honda and Acura
dealerships that assist Dealer Owners and potential Dealer Owners in assessing
whether a particular form of ownership is consistent with American Honda's
standards for its dealerships.
II. BACKGROUND
A. THE PERSONAL NATURE OF THE DEALER OWNER RELATIONSHIP
There is no simple "yes" or "no" answer to the question, "Will
American Honda permit transfer of a dealership to a publicly-owned corporation?"
The answer depends on whether the proposed form of ownership preserves the
individualized relationship between the Dealer Owner and the local community, on
the one hand, and American Honda and the Dealer Owner, on the other hand.
Despite the recent increase of mass marketing (including the advent
over the last twenty years of so-called "category killers" such as the toy store
giants that have replaced neighborhood toy stores and the hardware giants that
have replaced local hardware stores), American Honda continues to believe that
automobile sales and service are most effectively done through dedicated, local
dealerships with strong ties to the community. For most automobile purchasers,
the decision to buy a new car is a major financial commitment and is only made
after extensive deliberation. Although competitive price is undoubtedly a major
factor in the buying decision, American Honda believes strongly that the
building of a relationship between the dealer and the buyer, particularly the
development of trust in the quality of the product and the service provided by
Honda dealers has, over the years, been a major selling point that has
distinguished Honda and Acura vehicles from the competition. When a first-time
new car buyer purchases a Honda vehicle,
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American Honda believes that we have a great opportunity to make that customer a
life-time Honda and Acura buyer -- because we provide the best products and the
best service through the most dedicated and committed dealers.
In order to ensure that Honda and Acura dealers provide the advice and
service required by new car buyers, American Honda attempts to select the best
people to be its dealers and requires that these people maintain personal
control over dealership operations. Because individual Dealer Owners have
considerable autonomy as to how they run their dealerships, American Honda's
influence over the quality of its dealerships depends in large part on how
wisely it selects its dealers. Although no process is perfect, American Honda
believes that over the years it has done an excellent job of selecting Dealer
Owners and is extremely proud of the quality of its dealerships.
B. THE DEALER AGREEMENT
The Honda or Acura Automobile Dealer Sales and Service Agreement (the
"Dealer Agreement") between American Honda and its dealers includes a number of
provisions that ensure that the relationship between American Honda and its
dealers will remain personal. Section C of the Dealer Agreement states:
"Dealer covenants and agrees that this Agreement is personal to Dealer, to the
Dealer Owner, and to the Dealer Manager, and American Honda has entered into
this Agreement based upon their particular qualifications and attributes and
their continued ownership or participation in Dealership Operations." Sections
C and D of the Dealer Agreement name the specific individuals who own the
dealership, their percentage of ownership, the individual who will function as
the Dealer operator and the individual who will function as the Dealer Manager.
Section J states: "Neither this Agreement, nor any part thereof or interest
therein, may be transferred or assigned by Dealer, directly or indirectly,
voluntarily or by operation of law, without the prior written consent of
American Honda." In Section 8.1 of the Dealer Agreement, "Dealer agrees that
American Honda has the right to select each successor and replacement dealer and
to approve its owners and principal management." Dealers must inform American
Honda in writing of any potential change in the ownership or management listed
in Sections C and D. Prior to taking effect, such changes must be approved in
writing by American Honda. American Honda's approval will not be unreasonably
withheld.
C. THE POTENTIAL BENEFITS OF PUBLIC INVESTMENT IN DEALERSHIPS
Public investment in dealerships offers potential benefits to both
American Honda and its dealers. American Honda needs exclusive Honda or Acura
dealerships with separate, free-standing state-of-the-art facilities at prime
locations to meet its long term business objectives. American Honda dealers
need to compete vigorously and such competition may include expanded
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and improved showrooms, upgraded computerization, the introduction of various
customer amenities, etc. The ability to raise capital through public offerings
of stock provides an additional means of financing improvement in dealership
facilities and operations.
D. THE TENSION BETWEEN PERSONAL RELATIONSHIP AND PUBLIC OWNERSHIP
American Honda believes that the quality of the individuals who serve
as Honda or Acura dealers and Dealer Managers is essential to the success of
American Honda and the dealerships. Therefore, American Honda is determined to
maintain its personal relationships with its Dealer Owners and Dealer Managers
and to continue to exercise the right of approval of changes in dealer ownership
and management as set forth in the Dealer Agreement. To the extent that public
ownership of a Honda or Acura dealership means that the Dealer Manager will be
appointed by a board of directors selected by owners of publicly-traded stock,
such an arrangement is inconsistent with American Honda's needs and the Dealer
Agreement. On the other hand, public ownership of a portion of the shares of a
dealership may be consistent with American Honda's objectives in cases in which
a controlling interest in the dealership is maintained by a specified Dealer
Owner and the dealership is managed by a specified Dealer Manager. The
following guidelines are an attempt to reconcile the tension between American
Honda's need for a personal relationship with each dealer and dealer proposals
for public ownership of an interest in dealerships.
III. PUBLIC OWNERSHIP GUIDELINES
A. CASE-BY-CASE DETERMINATION. As in the past, American Honda will
evaluate requests to transfer ownership of Honda and Acura dealerships on a
case-by-case basis. Proposals to transfer ownership to entities with publicly-
traded shares will be reviewed based on the standards set forth in this Policy.
AMERICAN HONDA RESERVES THE RIGHT, IN ITS SOLE BUSINESS JUDGMENT, TO APPROVE OR
REJECT SUCH TRANSFERS.
B. PROPOSALS TO BE SUBMITTED IN WRITING. All proposals to transfer
ownership of Honda and Acura dealerships must be submitted in writing to
American Honda and must include:
1. A list of the individuals and entities that will own
PRIVATELY-HELD SHARES of the dealership, including the amount of shares
owned by such individual or entity and information and documentation about
each such individual or entity; in the case of entities owning or
controlling such privately-held shares, a list of the individuals owning
such entities and information and documentation about such individuals;
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2. With respect to ownership interests not listed in accordance with
subsection 1, immediately above, a list of the individuals and entities
that will own or control 5% or more of the dealership (either through
ownership of publicly-held stock or any combination of privately-held stock
and publicly-held stock or any other arrangement), including information
and documentation about each such individual or entity;
3. The number and percentage (if any) of the shares of the entity
that owns the dealership that will be publicly traded;
4. A detailed description, including flow charts, of the proposed
structure of the entities that will own and/or control the dealership and
the relationship of the Dealer Owner to these entities, including, with
respect to entities with a significant interest in the Dealer Owner, a
description of the individuals holding such interest;
5. The name and a brief biography of the individual who will
function as Dealer Manager and a detailed description of the functions and
responsibilities of the Dealer Manager;
6. Complete financial documents (including but not limited to the
most recent and the prior year end audited financial statements of any
entity proposing to obtain any interest equal to or greater than 5% of a
dealership or 5% of an entity that owns a dealership), indicating, among
other things, the amount of capitalization of the dealership and the
verifiable sources of such capitalization;
7. A detailed description of the proposed use of the funds to be
raised from the public investment;
8. The articles and bylaws of the entity or entities that will own
and/or control the dealership;
9. Copies of the proposed transactional documents that will be used
to effectuate the transaction, including, without limitation, copies of any
government filings and contracts pertaining thereto; and
10. Copies of any additional documents that the transferees,
transferors and other parties having a substantial interest in the
transaction have that American Honda would reasonably need to evaluate the
proposal.
After receipt of complete documentation for the Proposal, as outlined
above, and due consideration thereof, American Honda will provide the party
submitting the proposal with a preliminary assessment of the proposed
transaction. NO FINAL DECISION ON THE PROPOSAL WILL BE MADE UNTIL SUBMISSION OF
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FINAL VERSIONS OF ITEMS 1 THROUGH 10 WITH ANY OTHER DOCUMENTATION REQUESTED BY
AMERICAN HONDA AND AMERICAN HONDA AND THE NEW OWNERSHIP ENTITY AGREE ON AND
ENTER INTO A DEALER AGREEMENT.
It is not advisable to make any expenditures or commitments, or to
enter into any contracts or incur any obligations on the assumption that
authorization of a proposal will be granted. Any such expenditures, commitments
or obligations, financial or otherwise, made or entered into by a dealer in
anticipation of authorization of a proposal, and prior to: (1) receipt of final
written approval by American Honda and (2) execution of the necessary documents
as described above (including a new Dealer Agreement) are made entirely at the
dealer's own risk and without any liability on the part of American Honda.
C. GUIDES TO PREPARATION OF AN ACCEPTABLE PROPOSAL
In preparing the documents listed immediately above, the dealer should
keep in mind the following list of standards (which is intended to provide
guidance, not to be a complete list) to which American Honda will require
adherence:
1. All dealerships must have a qualified Dealer Manager acceptable
to American Honda. American Honda's right of prior written approval of any
change of Dealer Manager must be incorporated into the transactional
documents. The Dealer Manager should be a well-respected, civicly-active
member of the community. As discussed above, personal involvement by
Dealer Managers in Dealership Operations is an important means of ensuring
that Honda and Acura dealerships are run with a high level of attention,
care and commitment. The Dealer Manager must maintain control over the
day-to-day operations of the dealership and the transactional documents
should set forth in detail the level of autonomy that the Dealer Manager
will exercise, including, for example, the amount of money that the Dealer
Manager will be empowered to transfer. Dealerships must abide by American
Honda's commitment to encourage diversity of persons in dealer management
positions.
2. The Dealer Owner's Executive Manager (that is, the person who has
operational control of the entity that owns and/or controls the dealership)
should be an experienced, well-respected executive with final authority to
decide any dealership matters not within the authority of the Dealer
Manager.
3. Dealerships are non-transferable without the prior written
consent of American Honda. Because the shares of publicly-owned
corporations are freely transferable, the percentage of public ownership
must be restricted so that a controlling interest of the dealership remains
in the hands of approved individuals. It follows that the controlling
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interest in the entity that controls the dealership cannot be transferred
without the prior written consent of American Honda. In no event may the
percentage of public ownership of a dealership exceed the percentage of
private ownership by American Honda-approved individuals and privately-held
entities. To the extent that an entity not approved by American Honda
attempts to acquire control and/or ownership of a dealership, the Dealer
Agreement with American Honda must provide for termination of the Dealer
Agreement and/or American Honda's right to acquire the dealership at its
fair market value.
4. The controlling interest in Honda or Acura dealerships must
remain in the hands of a person or entity engaged predominantly in the sale
and service of new automobiles. For example, American Honda will not
approve transfer of dealerships or entities that control dealerships to
general retailers or retailers that deal primarily in non-automotive
products.
5. American Honda will not approve the transfer of Honda or Acura
dealerships to entities that are known to have significant investments in
companies that compete with American Honda or its parent, subsidiaries or
Affiliates in manufacturing, marketing, or selling automotive products or
services.
6. Public corporations having an ownership interest in the
dealership and the individuals and entities that control such public
corporations (but not persons whose ownership interest is limited to
passive ownership of 5% or less of the shares of public corporations) must
agree to obtain American Honda's approval before acquiring an interest in
any other Honda or Acura dealership. American Honda reserves the right to
limit the number and/or location of Honda and Acura dealerships that can be
owned or controlled by any one individual or corporation. In the future,
except where a specific finding is made by American Honda that such
acquisition would further a business interest of American Honda,
individuals and/or entities will be limited to acquiring interests in
dealerships as follows:
a. HONDA
No one shall be allowed to acquire an ownership interest, directly or
through an Affiliate, in a multiple number of Honda dealerships as
provided below:
a) in a "Metro" market (a "Metro" market is a metropolitan
market area represented by two or more Honda dealer points) with
two (2) to ten (10) Honda dealership points (inclusive), no
Dealer Owner may own, operate or have an interest in more than on
(1) Honda dealership;
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b) in a Metro market with eleven (11) to twenty (20) Honda
dealership points (inclusive), no Dealer Owner may own, operate
or have an interest in more than two (2) Honda dealerships;
c) in a Metro market with twenty-one (21) or more Honda
dealership points, no Dealer Owner may own, operate or have an
interest in more than three (3) Honda dealerships;
d) 4% of the Honda dealerships in any one of the ten Honda
Zones; and
e) seven (7) Honda dealerships nationally.
No one shall acquire contiguous Honda dealerships.
b. ACURA
No one shall be allowed to acquire an ownership interest,
directly or through an Affiliate, in a multiple number of Acura
dealerships as provided below:
(a) one (1) Acura dealer in a "Metro" market (a "Metro" market
is a Metropolitan market area represented by two or more Acura
dealer points)
(b) two (2) Acura dealerships in any one of the Six Acura Zones;
and
(c) three (3) Acura dealerships nationally.
No one shall acquire contiguous Acura dealerships.
"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.
7. The dealership would continue to have the same reporting
requirements as all other Honda and Acura dealerships, including
dealership-specific financial information on the same basis that the
dealership has provided such information in the past. In the case of
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corporations that, with American Honda's approval, own multiple Honda and
Acura dealerships, each such dealership must be separately incorporated and
financial information must be broken down by individual dealership and must
meet capitalization requirements, etc., by individual dealership. The
corporate by-laws of the individual corporation that actually owns a Honda
or Acura dealership must restrict it from engaging in any activity other
than the ownership and maintenance of a Honda or Acura dealership.
8. The dealership must agree to provide American Honda with all
information and documents, including but not limited to SEC filings, that
evidence a substantial change of ownership or control of such dealership or
any entity with a controlling interest in such dealership. Individuals or
entities that acquire, own or control more than 5% of any entity that owns
or controls a Honda or Acura dealership must provide American Honda with
copies of all filings made to the SEC, all comparable filings made to state
agencies, and, at least once annually, the most recent calendar year's
fully audited financial statements. Nothing in this section 8 should be
construed to limit the requirement that any proposed change in the
ownership or control of privately-held shares of a dealership or an entity
that owns a dealership must be reported to American Honda and is subject to
American Honda's prior written approval.
9. For allocation and other purposes, transfer of Honda or Acura
Automobiles from one dealership to another dealership owned and/or
controlled by the same entity will be treated the same as a transfer
between separately-owned dealers.
10. The dealership should be committed to providing separate,
freestanding Dealership Operations that exclusively offer a full range of
Honda Products and services or Acura Products and services and do not offer
competing products or services from its Dealership Premises.
11. The controlling individual or entity must be liable for the
operation of the dealership and must agree to indemnify American Honda for
any claims made by shareholders of publicly-held shares against American
Honda to the full extent permitted by law. American Honda must have the
right (but not the obligation) to review all documentation and other
representations to the public about any offering of stock in the dealership
or the entity owning the dealership. Whether or not American Honda reviews
them, such documentation and representations must include an affirmative
statement that American Honda is completely independent of the entity
offering the stock and that, although American Honda's acts or omissions
may have an impact on the value of the stock, American Honda bears no
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responsibility for such impact and has no liability to any investor under
any legal or equitable theory.
12. The entity that owns or controls the dealership may not commingle
its trademarks with dealer trademarks other than those used exclusively in
connection with the dealership. For example, a dealer could use its own
"dealership" trademark in conjunction with the Honda or Acura trademarks as
in "John Smith HONDA" but it could not use a trademark in conjunction with
the Honda or Acura Trademarks that it also uses in conjunction with the
non-Honda or non-Acura goods or services. The entity must agree to
maintain the Honda or Acura brand image, as that image is developed by
American Honda.
13. The entity that owns the dealership must agree to have all
dealership sales and service personnel certified by American Honda pursuant
to its usual certification programs; to use and sell genuine Honda and
Acura parts and accessories; and to participate in good faith in applicable
Honda or Acura sales, marketing, service, parts, facility image and
upgrade, training, customer satisfaction, and diversity programs.
14. The Dealer Agreement will also provide that breaches of the
Dealer Agreement or failure to adhere to American Honda requirements by any
individual dealership owned by an entity shall be treated as breaches of
the Dealer Agreement between American Honda and such entity and shall
constitute reasonable grounds for rejection by American Honda of
acquisition by the entity of additional Honda or Acura dealerships.
15. American Honda will not approve any transfer of a dealership that
is not in full compliance with the Dealer Agreement between American Honda
and such dealership prior to such transfer.
16. The Dealer Agreement with the entity that owns the dealership
will include provisions that incorporates the provisions of this Policy
and, without limiting the foregoing, permit American Honda to terminate the
Dealer Agreement for breaches of the above-listed requirements and to
reacquire the dealership as set forth in subsection IIIC3 above.
INQUIRIES ABOUT THE POLICY SHOULD BE MADE TO HONDA DEALER PLACEMENT DEPARTMENT
AND/OR ACURA DEALER DEVELOPMENT, AS APPLICABLE.
INQUIRIES ABOUT THE TRANSFER OF A DEALERSHIP SHOULD BE MADE TO ZONE SALES
OFFICE.
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Exhibit 10.1.15
[FORM OF OPTION CERTIFICATE]
THE OPTION REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND SUCH OPTION MAY NOT BE SOLD OR TRANSFERRED UNLESS
SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AT THE TIME AMENDED, OR IN CONFORMITY WITH THE
LIMITATIONS OF RULE 144 OR SIMILAR RULE AS THEN IN EFFECT UNDER SUCH ACT, OR
UNLESS SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE WITH RESPECT THERETO.
NO. _____ Option to Purchase
Shares of Common Stock
UNITED AUTO GROUP, INC.
COMMON STOCK PURCHASE OPTION
Void after , 2001
United Auto Group, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, _________________, or their heirs,
representatives, successors and assigns, is entitled, subject to the terms set
forth below, to purchase from the Company at any time or from time to time after
the Initial Exercise Date (as defined below) and before 5:00 P.M. New York time,
on , 2001 (the "Expiration Date") ________ fully paid and nonassessable
shares of Common Stock of the Company. The purchase price per share of such
Common Stock ("the Exercise Price") shall be $__________ [equal to the initial
price to public of the Company's Common Stock specified in the final prospectus
with respect to the Company's initial public offering].
1. DEFINITIONS. As used herein the following terms, unless the context
otherwise requires, have the following respective meanings:
1.1. The term "Company" includes any corporation which shall succeed
to or assume the obligations of the Company hereunder.
1.2. The term "Common Stock" shall mean the Common Stock of the
Company, and any other securities or property of the Company or of any other
person
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(corporate or otherwise) which the holder of this Option at any time shall be
entitled to receive on the exercise hereof, in lieu of or in addition to Common
Stock, or which at any time shall be issuable in exchange for or in replacement
of Common Stock.
1.3. The term Current Fair Market Value of the Common Stock shall
mean with respect to each share of Common Stock:
(a) if the Common Stock is traded on a securities exchange, the
fair market value shall be deemed to be the average of the closing prices over a
twenty-one (21) day period ending three days before the day with respect to
which the current fair market value of the Common Stock is being determined (or
such shorter period as the Common Stock may have been trading on such securities
exchange);
(b) if the Common Stock is actively traded over-the-counter, the
fair market value shall be deemed to be the average of the closing bid and asked
prices quoted on the Nasdaq system (or similar system) over the twenty-one (21)
day period ending three days before the day with respect to the current fair
market value of the Common Stock is being determined (or such shorter period as
the Common Stock may have been quoted on such system); or
(c) if at any time the Common Stock is not listed on any
securities exchange or quoted in the Nasdaq System or the over-the-counter
market, the current fair market value of Common Stock shall be the highest price
per share which the Company could obtain from a willing buyer (not a current
employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by its Board of
Directors, unless the Company shall become subject to a merger, acquisition or
other consolidation pursuant to which the Company is not the surviving party, in
which case the fair market value of Common Stock shall be deemed to be the value
received by the holders of the Company's Common Stock on a common equivalent
basis pursuant to such merger or acquisition.
2. INITIAL EXERCISE DATE; EXPIRATION. This Option may be exercised at any
time or from time to time following , 1996. It shall expire at 5:00
P.M., New York time, on , 2001.
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3. EXERCISE OF OPTION; PARTIAL EXERCISE. This Option may be exercised in
full or in part by the holder hereof by surrender of this Option, with the form
of subscription attached hereto duly executed by such holder, to the Company at
its principal office, accompanied by payment of the Exercise Price of the shares
of Common Stock to be purchased hereunder. For any partial exercise hereof, the
holder shall designate in the subscription the number of shares of Common Stock
that it wishes to purchase. On any such partial exercise, the Company at its
expense shall forthwith issue and deliver to the holder hereof a new option of
like tenor, in the name of the holder hereof, which shall be exercisable for
such number of shares of Common Stock represented by this Option which have not
been purchased upon such exercise.
The Exercise Price may be paid at the holder's election either by cash or
check payable to the order of the Company or by wire transfer.
4. WHEN EXERCISE EFFECTIVE. The exercise of this Option shall be deemed
to have been effected immediately prior to the close of business on the business
day on which this Option is surrendered to the Company as provided in Section 2,
and at such time the person in whose name any certificate for shares of Common
Stock shall be issuable upon such exercise, as provided in Section 4, shall be
deemed to be the record holder of such Common Stock for all purposes.
5. DELIVERY ON EXERCISE. As soon as practicable after the exercise of
this Option in full or in part, and in any event within five (5) business days
thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the holder hereof, or as such holder may direct, a certificate or certificates
for the number of fully paid and nonassessable full shares of Common Stock to
which such holder shall be entitled on such exercise.
6. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The character of
the shares of Common Stock issuable upon exercise of this Option (or any shares
of stock or other securities at the time issuable upon exercise of this Option)
and the purchase price therefor, are subject to adjustment upon the occurrence
of the following events:
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6.1. ADJUSTMENT FOR STOCK SPLITS, STOCK DIVIDENDS, RECAPITALIZATIONS,
ETC. The exercise price of this Option and the number of shares of Common
Stock issuable upon exercise of this Option (or any shares of stock or
other securities at the time issuable upon exercise of this Option) shall
be appropriately adjusted to reflect any stock dividend, stock split,
combination of shares, reclassification, recapitalization or other similar
event affecting the number of outstanding shares of Common Stock (or such
other stock or securities). For example if there should be a two-for-one
(2-for-1) stock split, the exercise price would be divided by two (2) and
such number of shares would be doubled or if there should be a one-for-two
(1-for-2) reverse stock split, the exercise price would be doubled and the
number of shares would be divided by two (2).
6.2. ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In case the
Company shall make or issue, or shall fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the Common Stock (or any shares of stock or
other securities at the time issuable upon exercise of the Option) payable
in (i) securities of the Company (other than shares of Common Stock) or
(ii) assets (excluding cash dividends paid or payable solely out of
retained earnings), then in each case, the holder of this Option on
exercise hereof at any time after the consummation, effective date or
record date of such event, shall receive, in addition to the Common Stock
(or such other stock or securities) issuable on such exercise prior to such
date, the securities or such other assets of the Company to which such
holder would have been entitled upon such date if such holder had exercised
this Option immediately prior thereto (all subject to further adjustment as
provided in this Option).
6.3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC. In
case of any consolidation or merger of the Company with or into any other
corporation, entity or person, or any other corporate reorganization, in
which the Company shall not be the continuing or surviving
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<PAGE>
entity of such consolidation, merger or reorganization, or any transactions
in which in excess of fifty percent (50%) of the Company's voting power is
transferred, or any sale of all or substantially all of the assets of the
Company (any such transaction being hereinafter referred to as a
"Reorganization"), then, in each case, the holder of this Option, on
exercise hereof at any time after the consummation or effective date of
such Reorganization (the "Effective Date"), shall receive, in lieu of the
Common Stock issuable on such exercise prior to the Effective Date, the
stock and other securities and property (including cash) to which such
holder would have been entitled upon the Effective Date if such holder had
exercised this Option immediately prior thereto (all subject to further
adjustment as provided in this Option).
6.4. ADJUSTMENT FOR ISSUANCE OF RIGHTS OR OPTIONS. In case the
Company shall issue rights or options to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price (or having a
conversion price per share) less than the Current Fair Market Value of the
Common Stock on the record date mentioned below, the Exercise Price shall
be adjusted so that the same shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the date of
such issuance by a fraction, the numerator of which shall be the sum of the
number of shares of Common Stock outstanding on the record date mentioned
below and the number of additional shares of Common Stock that the
aggregate offering price of the total number of shares of Common Stock so
offered (or the aggregate conversion price of the convertible securities so
offered) would purchase at the then current fair market value per share of
the Common Stock, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding on such record date and the
number of additional shares of Common Stock offered for subscription or
purchases (or into which the convertible securities so offered are
convertible). Such adjustment shall be made successively whenever such
rights or options are issued and shall
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become effective immediately after the record date for the determination of
shareholders entitled to receive such rights or options; and, to the extent
that shares of Common Stock are not delivered (or securities convertible
into Common Stock are not delivered) after the expiration of such rights or
options, the Exercise Price shall be readjusted to the Exercise Price that
would then be in effect had the adjustment made upon the issuance of such
rights or options been made upon the basis of delivery of only the number
of shares of Common Stock (or securities convertible into Common Stock)
actually delivered.
6.5. CERTIFICATE AS TO ADJUSTMENTS. In case of any adjustment or
readjustment in the price or kind of securities issuable on the exercise of
this Option, the Company will promptly give written notice thereof to the
holder of this Option in the form of a certificate, certified and confirmed
by the Board of Directors of the Company, setting forth such adjustment or
readjustment and showing in reasonable detail the facts upon which such
adjustment or readjustment is based.
7. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Option, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Option against dilution or other impairment. Without limiting the generality of
the foregoing, the Company (a) will not increase the par value of any shares of
stock receivable on the exercise of this Option above the amount payable
therefor on such exercise, (b) will at all times reserve and keep available a
number of its authorized shares of Common Stock, free from all preemptive rights
therein, which will be sufficient to permit the exercise of this Option, and (c)
shall take all such action as may be necessary or appropriate in order that all
shares of Common Stock as may be issued pursuant to the exercise of this Option
will, upon issuance, be duly and validly issued, fully paid and nonassessable
and free from all
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taxes, liens and charges with respect to the issue thereof.
8. NOTICE OF RECORD DATE, ETC. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, or any
transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to subscribed
for, purchase or otherwise acquire any shares of stock of any class or any other
securities, then and in each such event the Company will mail to the holder
hereof a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as to which the holders of record of Common
Stock (or any shares of stock or other securities at the time issuable upon the
exercise of this Option) shall be entitled to exchange their shares for
securities or other property deliverable on which reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant
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<PAGE>
and the persons or class of persons to whom such proposed issue or grant is to
be offered or made. Such notice shall be mailed at least twenty (20) days prior
to the date therein specified.
9. EXCHANGE OF OPTIONS. On surrender for exchange of this Option,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Option of like tenor, in
the name of such holder or as such holder may direct, calling in the aggregate
on the face thereof for the number of shares of Common Stock called for on the
face of the Option so surrendered.
10. REPLACEMENT OF OPTIONS. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Option and, in the case of any such loss, theft or
destruction of this Option, on delivery of an indemnity agreement reasonably
satisfactory in form and amount of the Company or, in the case of any such
mutilation, on surrender and cancellation of such Option, the Company at its
expense will execute and deliver, in lieu thereof, a new Option of like tenor.
11. REGISTRATION RIGHTS. The holder of this Option is entitled to all of
the benefits of the Registration Rights Agreement dated __________, 1996, by and
among UAG, Samuel X. DiFeo and Joseph DiFeo, as if such holder was a party to
such agreement.
12. INVESTMENT INTENT. Unless a current registration statement under the
Securities Act of 1933, as amended, shall be in effect with respect to the
securities to be issued upon exercise of this Option, the holder thereof, by
accepting this Option, covenants and agrees that, at the time of exercise
hereof, and at the time of any proposed transfer of securities acquired upon
exercise hereof, such holder will deliver to the Company a written statement
that the securities acquired by the holder upon exercise hereof are for the own
account of the holder for investment and are not acquired with a view to, or for
sale in connection with, any distribution thereof (or any portion hereof) and
with no present intention (at any such time) of offering and distributing such
securities (or any portion thereof).
13. TRANSFER. Subject to the transfer conditions referred to in the
legend endorsed hereon, this Option and all rights hereunder are transferrable,
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in whole or in part, without charge to the holder thereof upon surrender of this
Option with a properly executed assignment (in the form annexed hereto) at the
principal office of the Company. Upon any partial transfer, the Company will at
its expense issue and deliver to the holder hereof a new Option of like tenor,
in the name of the holder hereof, which shall be exercisable for such number of
shares of Common Stock which were not so transferred.
14. NO RIGHTS OR LIABILITY AS A STOCKHOLDER. This Option does not entitle
the holder hereof to any voting rights or other rights as a stockholder of the
Company. No provisions hereof, in the absence of affirmative action by the
holder hereof to purchase Common Stock, and no enumeration herein of the rights
or privileges of the holder hereof shall give rise to any liability of such
holder as a stockholder of the Company.
15. DAMAGES. The Company recognizes and agrees that the holder hereof
will not have an adequate remedy if the Company fails to comply with the terms
of this Option and that damages will not be readily ascertainable, and the
Company expressly agrees that, in the event of such failure, it shall not oppose
an application by the holder of this Option or any other person entitled to the
benefits of this Option requiring specific performance of any and all provisions
hereof or enjoining the Company from continuing to commit any such breach of the
terms hereof.
16. NOTICES. All notices referred to in this Option shall be in writing
and shall be delivered personally or by certified or registered mail, return
receipt requested, postage prepaid and will be deemed to have been given when so
delivered or mailed (i) to the Company, at its principal executive offices and
(ii) to the holder of this Option, at such holder's address as it appears in the
records of the Company (unless otherwise indicated by such holder).
17. PAYMENT OF TAXES. All shares of Common Stock issued upon the exercise
of this Option shall be validly issued, fully paid and nonassessable, and the
Company shall pay all taxes and other governmental charges that may be imposed
in respect to the issue or delivery thereof.
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<PAGE>
18. MISCELLANEOUS. This Option and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Option is being delivered in the State of New York and shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York (without reference to any principles of the conflicts of
laws). The headings in this Option are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof.
Dated: , 1996
United Auto Group, Inc.
By
---------------------------
Name:
Title:
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ATTACHMENT A TO OPTION
FORM OF SUBSCRIPTION
(To be signed only on exercise of Option)
To UNITED AUTO GROUP, INC.
The undersigned, the holder of the within Option, hereby irrevocably elects
to exercise the purchase rights represented by such Option for, and to purchase
thereunder, __________* shares of Common Stock of United Auto Group, Inc., and
makes payment of $_______ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to _______________, whose address
is _____________________________________.
--------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Option)
--------------------------------
--------------------------------
Address
Dated:
_______________________
<PAGE>
ATTACHMENT B TO OPTION
FORM OF ASSIGNMENT
(To be signed only on transfer of Option)
For value received, the undersigned hereby sells, assigns, and transfer
unto ___________________ the right represented by the within Option to purchase
shares of Common Stock of United Auto Group, Inc. to which the within Option
relates, and appoints ______________ Attorney to transfer such right on the
books of _________________ with full power of substitution in the premises.
--------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Option)
--------------------------------
--------------------------------
Address
Dated:
<PAGE>
Exhibit 10.1.16
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of __________, 1996, is
entered into by and among United Auto Group, Inc., a Delaware corporation (the
"Company"), and each of the parties listed on Schedule I hereto.
WHEREAS, pursuant to the terms of the Settlement Agreement (the "Settlement
Agreement"), dated as of October 1, 1996, among the Company, Samuel X. DiFeo,
Joseph DiFeo (Samuel X. DiFeo and Joseph DiFeo are collectively referred to
herein as the "DiFeos"), and certain other parties named therein, certain
entities owned or controlled by the DiFeos (the "DiFeo Entities") will be merged
with and into certain affiliates of the Company, and the shareholders of the
DiFeo Entities will receive, in consideration thereof, shares (the "DiFeo
Shares") of the Company's common stock (the "Common Stock"), and options (the
"DiFeo Options") to acquire additional shares of Common Stock;
WHEREAS, pursuant to the terms of the Settlement Agreement, the Company has
agreed to grant to the holders of the DiFeo Shares and the DiFeo Options certain
rights to have shares of Common Stock registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, in connection with the Shareholders' Agreement (the "Shareholders
Agreement"), dated as of August 1, 1995, among the Company, United Landers,
Inc., a Delaware corporation, Landers Auto Sales, Inc., an Arkansas corporation,
Steve Landers and John Landers (collectively referred herein as the "Landers"),
and certain other parties named therein, the Company has issued to the Landers
shares (the "Landers Shares") of Common Stock, and has granted the Landers
certain rights to have such shares registered under the 1933 Act;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein contained, the parties hereto hereby agree as follows:
<PAGE>
SECTION 1.1 REGISTRATION RIGHTS
1. DEFINITIONS
As used in this Section 1:
(a) the terms "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the 1933 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 (A) the DiFeo
Shares, (B) shares of Common Stock issued or issuable upon exercise of the DiFeo
Options, (C) any shares of Common Stock which the DiFeos or the other persons
named on Schedule I hereto (or an Affiliate thereof) may hereafter acquire, and
(D) any capital stock of the Company issued as a dividend or other distribution
with respect to, or in exchange for or in replacement of, the shares of Common
Stock referred to in clauses (A)-(C) above;
(c) the term "Holder" means any person owning or having the
right to acquire Registrable Securities;
(d) the number of shares of "Registrable Securities then
outstanding" 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;
(e) 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; and
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(f) the term "UAG IPO" means a Qualified Public Offering (as
such term is defined in UAG's Restated Certificate of Incorporation as in effect
on the date hereof) or the completion of a sale of capital stock of UAG (or a
subsidiary of UAG) pursuant to a registration statement which has become
effective under the 1933 Act and which has been deemed to be a Qualified Public
Offering by the holders of a majority of the outstanding shares of the Class A
Preferred Stock, par value $0.0001 per share, of UAG.
1.2. REQUESTED REGISTRATION
(a) REQUEST FOR REGISTRATION. If, after one year following the
UAG IPO, the Company shall receive a written request from the Holder or Holders
of 50% or more 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 1993 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
ninety (90) 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
1.2(a)) to be included in such registration and the Company shall use its best
efforts to cause such registration statement to become effective.
The Company shall not be obligated to effect such registration pursuant to
this Section 1.2(a) hereof (A) after the Company already has effected one (1)
such registration pursuant to this Section 1.2(a) and such registration has been
declared or ordered effective, (B) if the Company shall be required by the SEC
or any state securities authority to have an audit of any of its interim
financial statements prepared in order to have a registration statement declared
effective, unless the Holders shall agree in writing to bear the expense of such
audit in full, (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
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Company shall have the right to defer such filing for a period of not more than
180 days after receipt of the request of the Initiating Holders), or (D) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration, unless the
Company is already subject to service in such jurisdiction and except as may be
required by the 1933 Act or applicable rules or regulations thereunder. It is
expressly agreed that nothing contained in this Section 1.2(a) shall give any
Holder the right to have the disposition of its Registrable Securities effected
by means of an underwritten offering.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Section 1.2(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 (the "Other Shareholders").
(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 1.2(a). If the Company approves of such request, it shall
select an investment banking firm reasonably satisfactory to the Initiating
Holders as underwriter of such requested registration. The right of any Holder
to registration pursuant to this Section 1.2 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
1.2, 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 1.
The Holders shall (together with the Company, officers, directors and Other
Shareholders proposing to distribute their securities through such underwriting)
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enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected for such underwriting by the Company
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 1.2, 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 1.2 (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
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<PAGE>
have been included in such registration and underwriting will not thereby be
limited.
(c) ASSIGNMENT. The registration rights granted pursuant to
this Section 1.2 may be assigned, in whole but not in part, to any transferee of
all of the Registrable Securities held by the transferring Holder.
1.3. COMPANY REGISTRATION
(a) INCLUSION IN REGISTRATION. If, at any time or from time to
time following the UAG IPO, the Company shall determine to register any of its
shares of 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 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 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 Common Stock to be sold
by the Company and the Holders are advised in writing by the
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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; and PROVIDED, FURTHER, that if the
registration of which the Company gives notice relates only to
securities held by Trace International Holdings, Inc. and/or its
officers and directors (collectively, "Trace Securities"), and if the
purpose of such registration is to permit a margin transaction or
other pledge with respect to such securities (and not an offering or
sale of such securities, other than to or by the pledge thereof), then
the Registrable Securities may be included in such registration only
for the same purpose and subject to the same limitations.
The Company shall be under no obligation to complete any offering of the shares
of 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 1.3(a). In such event the right of the Holders to
registration pursuant to Section 1.3 shall be conditioned upon the Holders'
participation in such underwriting and the inclusion of 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 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
1.3, if the representative of the underwriters determines that marketing factors
require a limitation on the number of shares of Common Stock to be underwritten,
then the number of shares included in
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<PAGE>
such registration and underwriting shall be allocated as follows: first, if the
registration was initiated by holders of Common Stock (other than the Holders)
exercising demand registration rights, then the number of Trace Securities, if
any, included in such registration and underwriting shall be reduced (and
finally eliminated, if necessary); and second, the number of Registrable
Securities and Landers Shares included in such registration and underwriting
shall be reduced, PRO RATA among the Holders and holders of Landers Shares
according to the total number of shares entitled to be included therein and
owned by each selling Holder and holder of Landers Shares, respectively, or in
such other proportions as may be mutually agreed by such selling Holders and
holders of Landers Shares. 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. If the registration of which the Company gives notice
pursuant to Section 1.3(a) hereof is a best efforts underwritten public offering
on behalf of the Company, any public sales of Registrable Securities of the
Holders included therein shall not commence until the earlier of: (i) ninety
(90) days after the effective date thereof, (ii) the completion of the sale of
all shares of Common Stock being sold for the account of the Company, or (iii)
the receipt by the Company of a letter from the representative of the
underwriters advising that all or a portion of the Registrable Securities of the
Holders could be sold prior to the dates set forth in the foregoing clauses (i)
and (ii) without adversely affecting the marketability or price of the shares
offered by the Company.
(c) NUMBER; NO ASSIGNMENT. The Holders shall be entitled to
have their shares included in an unlimited number of registrations pursuant to
this Section 1.3. The registration rights granted pursuant to this Section 1.3
shall not be assignable, whether in whole or in part, except to the respective
heirs or personal representatives of the DiFeos and the other persons named on
Schedule I hereto, to receive Registrable Securities pursuant to the laws of
descent or distribution.
-8-
<PAGE>
1.4. EXPENSES OF REGISTRATION
Except as otherwise provided herein, in connection with a registration
pursuant to this Section 1, 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) filing fees or other expenses directly and
solely resulting from the inclusion of the Holders' Registrable Securities in a
registration pursuant to Section 1.3 hereof, (iii) stock transfer taxes incurred
in respect of the Registrable Securities being sold, and (iv) 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.
1.5. REGISTRATION PROCEDURES
In the case of each registration effected by the Company pursuant to
this Section 1, the Company shall:
(i) 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;
(ii) 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;
(iii) 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
1933 Act, any event with respect to the
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<PAGE>
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
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; and
(iv) 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.
1.6. DELAY OF REGISTRATION
No Holder shall have any right to take any action to restrain, enjoin or
otherwise delay any registration as a result of any controversy that may arise
with respect to the interpretation or implementation of this Agreement.
1.7. INDEMNIFICATION
(a) The Company shall indemnify each Holder offering Registrable
Securities for sale pursuant to each registration that has been effected
pursuant to
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<PAGE>
this Section 1 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 1933 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 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 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 based upon
information furnished to the Company by such Holder or the underwriter of any
such 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 person who controls the Company
within the meaning of the 1933 Act, 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 person controlling such other holder 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 1933 Act, or
based on any omission to state therein a material fact required to be stated
therein or
-11-
<PAGE>
necessary to make the statements therein not misleading, and will reimburse the
Company, such directors, officers, employees, control persons, 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.
(c) Each party entitled to indemnification under this Section 1
(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. 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.
1.8. LOCKUP AGREEMENT
In consideration for the Company agreeing to its obligations under this
Section 1, each Holder agrees in connection with the initial registration of the
Company's securities in connection with the UAG IPO, upon the request of the
Company's managing
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<PAGE>
underwriters, not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Registrable Securities without the
prior written consent of such underwriters, for such period of time, not to
exceed 180 days, from the effective date of such registration as the Company or
the underwriters may specify.
1.9. 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 1.
1.10. 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, (i) if the Company shall have received
opinions of counsel reasonably satisfactory to such Holder and the Company to
the effect that the proposed disposition of such Registrable Securities by such
Holder may be effected without registration under the 1933 Act or (ii) to the
extent such Registrable Securities can then be sold during a single three month
period pursuant to Rule 144 under the 1933 Act.
1.11. 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 (a) make and keep public
information available as those terms are understood and defined in Rule 144
under the 1933 Act at all times from and after ninety (90) days following the
closing date of the first registration under the 1933 Act filed by the Company
for an offering
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<PAGE>
of its securities to the general public, and (b) use its best efforts to file
with the SEC in a timely manner all reports and other documents required of the
Company under the Exchange Act at any time after it has become subject to such
reporting requirements.
SECTION 2. WAIVER OF PRIOR REGISTRATION RIGHTS
The DiFeos and the other persons named on Schedule I hereto hereby waive
any and all registration rights granted them under agreements entered into prior
to the date hereof, including without limitation the Master Agreement, dated as
of March 17, 1992, as amended.
SECTION 3. ASSIGNABILITY
This Agreement shall be binding upon and inure to the benefit of the
respective heirs, personal representatives, successors and assigns of the
parties hereto.
SECTION 4. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware.
SECTION 5. AMENDMENT
Any modification, amendment or waiver of this Agreement or any provision
hereof shall be in writing and executed by Holders of not less than 66% of the
Registrable Securities; PROVIDED, HOWEVER, that no such modification, amendment
or waiver shall reduce the aforesaid percentage of Registrable Securities
without the consent of all of the Holders of the Registrable
Securities.
SECTION 6. 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 __________, 1996, BY AND AMONG
UNITED AUTO GROUP, INC. (THE "COMPANY") AND CERTAIN STOCKHOLDERS OF THE
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<PAGE>
COMPANY NAMED THEREIN, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE
COMPANY.
SECTION 7. 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:
to the Company:
United Auto Group, Inc.
375 Park Avenue, 11th Floor
New York, New York 10152
Fax number: (212) 593-1363
Attn: Philip N. Smith, Jr., Esq.
and to each Holder at such address as shall be furnished in writing to the
Company. All such notices, requests, demands and other communication shall,
when mailed (registered or certified mail, return receipt requested, postage
prepared), 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.
SECTION 8. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.
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<PAGE>
IN WITNESS WHEREOF, the Company and each of the undersigned parties has
executed this Agreement effective for all purposes as of the date first above
written.
UNITED AUTO GROUP, INC.
By:
------------------------
-----------------------------
Samuel X. DiFeo
-----------------------------
Joseph C. DiFeo
-----------------------------
[Minority Stockholders]
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<PAGE>
SCHEDULE I
SCHEDULE OF REGISTRABLE
SECURITIES
Number of Initial Number of Shares
Shares of Common Covered by Initial
Holder Stock Options
- ------ ----------------- ------------------
Samuel X. DiFeo
Joseph C. DiFeo
[Minority
Stockholders]
<PAGE>
EXHIBIT
10.2.1.1
<PAGE>
HONDA
AUTOMOBILE DEALER
SALES AND SERVICE
AGREEMENT
Danbury Auto Partnership
T/A FAIR HONDA #207994
102 D Federal Road
Danbury, Connecticut 06810
AMERICAN HONDA MOTOR CO., INC.
<PAGE>
A
This is an agreement between the Honda Automobile Division, American Honda
Motor Co., Inc. (American Honda) and Danbury Auto Partnership (Dealer), a(n)
Partnership doing business as T/A FAIR HONDA. By this agreement, which is made
and entered into at Torrance, California, effective the 5th day of October,
1995, American Honda gives to Dealer the nonexclusive right to sell and service
Honda Products at the Dealership Location. It is the purpose of this Agreement,
including the Honda Automobile Dealer Sales and Service Agreement Standard
Provisions (Standard Provisions), which are incorporated herein by reference, to
set forth the rights and obligations which Dealer will have as a retail seller
of Honda Products. Achievement of the purposes of this Agreement is premised
upon the mutual understanding and cooperation between American Honda and Dealer.
American Honda and Dealer have each entered into this Agreement in reliance on
the integrity and ability and expressed intention of each to deal fairly with
the consuming public and with each other.
For consistency and clarity, terms which are used frequently in this
Agreement have been defined in Article 12 of the Standard Provisions.
B
American Honda grants to Dealer the nonexclusive right to buy Honda
Products and to identify itself as a Honda dealer at the Dealership Location.
Dealer assumes the obligations specified in this Agreement and agrees to sell
and service effectively Honda Products within Dealer's Primary Market Area and
to maintain premises satisfactory to American Honda.
C
Dealer covenants and agrees that this Agreement is personal to Dealer, to
the Dealer Owner, and to the Dealer Manager, and American Honda has entered into
this Agreement based upon their particular qualifications and attributes and
their continued ownership or participation in Dealership Operations. The
parties therefore recognize that the ability of Dealer to perform this Agreement
satisfactorily and the Agreement itself are both conditioned upon the continued
active involvement in or ownership of Dealer by either:
(1.) the following person(s) in the percentage(s) shown:
NAME ADDRESS TITLE PERCENT OF
OWNERSHIP
DiFeo Partnership, 875 Park Ave. Partner 70%
Inc. Suite 2201
New York, NY
<PAGE>
JS Two, Inc. 585 Route 440 Partner 30%
Jersey City, NJ
(2.) _________________________________________________________________, an
individual personally owning an interest in Dealer of at least 25% and
who has presented to American Honda a firm and binding contract giving
to him the right and obligation of acquiring an ownership interest in
Dealer in excess of 50% within five years of the commencement of
Dealership Operations and being designated in that contract as Dealer
operator.
D
Dealer represents, and American Honda enters into this Agreement in
reliance upon the representation, that Steven A. Gall exercises the functions of
Dealer Manager and is in complete charge of Dealership Operations with authority
to make all decisions on behalf of Dealer with respect to Dealership Operations.
Dealer agrees that there will be no change in Dealer Manager without the prior
written approval of American Honda.
E
American Honda has approved the following premises as the location(s) for
the display of Honda Trademarks and for Dealership Operations.
HONDA NEW VEHICLE PARTS AND SERVICE FACILITY
SALES SHOWROOM
102 D Federal Road 102 D Federal Road
Danbury, Connecticut Danbury, Connecticut
SALES AND GENERAL OFFICES USED VEHICLE DISPLAY
AND SALES FACILITIES
102 D Federal Road 102 D Federal Road
Danbury, Connecticut Danbury, Connecticut
F
There shall be no voluntary or involuntary change, direct or indirect, in
the legal or beneficial ownership or executive power or responsibility of Dealer
for the Dealership Operations, specified in Paragraphs C and D hereof, without
the prior written approval of American Honda.
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<PAGE>
G
Dealer agrees to maintain, solely with respect to the Dealership
Operations, minimum net working capital of $1,236,200.00, minimum owner's equity
of $_____*_____, and flooring and a line or lines of credit in the aggregate
amount of $1,855,000.00 with banks or financial institutions approved by
American Honda for use in connection with Dealer's purchases of and carrying of
inventory of Honda Products, all of which American Honda and Dealer agree are
required to enable Dealer to perform its obligations pursuant to this Agreement.
If Dealer also carries on another business or sells other products, Dealer's
total net working capital, owner's equity and lines of credit shall be increased
by an appropriate amount.
* Long Term Debt, less Real Estate Mortgages, shall not exceed a ratio of 1:1
when compared to Effective Net Worth which is defined as Total Net Worth
less Total Other Assets.
H
This Agreement is made for the period beginning October 5, 1995 and ending
October 31, 1996, unless sooner terminated. Continued dealings between American
Honda and Dealer after the expiration of this Agreement shall not constitute a
renewal of this Agreement for a term, but rather shall be on a day-to-day basis,
unless a new agreement or a renewal of this Agreement is fully executed by both
parties.
I
This Agreement may not be varied, modified or amended except by an
instrument in writing, signed by duly authorized officers of the parties,
referring specifically to this Agreement and the provision being modified,
varied or amended.
J
Neither this Agreement, nor any part thereof or interest therein, may be
transferred or assigned by Dealer, directly or indirectly, voluntarily or by
operation of law, without the prior written consent of American Honda.
Danbury Auto Partnership
Danbury Auto Partnership By:/s/Illegible
T/A FAIR HONDA #207994 ---------------------
- ------------------------------- (Dealer)
(Corporate or Firm Name)
(Corporate Seal)
AMERICAN HONDA MOTOR CO., INC.
HONDA AUTOMOBILE DIVISION
By: /s/Richard Colliver
---------------------------
Richard Colliver
Senior Vice President
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<PAGE>
Exhibit 10.2.1.2
<PAGE>
HONDA
AUTOMOBILE DEALER
SALES AND SERVICE
AGREEMENT
STANDARD PROVISIONS
<PAGE>
HONDA AUTOMOBILE DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
TABLE OF CONTENTS
PAGE
1. THE OBLIGATIONS OF AMERICAN HONDA . . . . . . . . . . 1
2. SALE OF HONDA PRODUCTS TO DEALER. . . . . . . . . . . 4
3. THE OBLIGATIONS OF DEALER . . . . . . . . . . . . . . 6
4. WARRANTY. . . . . . . . . . . . . . . . . . . . . . . 9
5. ADVERTISING AND PROMOTIONAL PROGRAMS. . . . . . . . . 9
6. TRADEMARKS AND SERVICE MARKS. . . . . . . . . . . . . 10
7. GENERAL BUSINESS REQUIREMENTS . . . . . . . . . . . . 11
8. APPOINTMENT OF SUCCESSOR AND REPLACEMENT DEALERS. . . 13
9. TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . 14
10. RIGHTS, OBLIGATIONS AND DEALINGS UPON TERMINATION . . 19
11. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . 23
12. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 25
<PAGE>
HONDA AUTOMOBILE DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
The following Standard Provisions are, by reference, incorporated in and made a
part of the Honda Automobile Dealer's Sales and Service Agreement. These
Standard Provisions accompany the Honda Dealer's Sales and Service Agreement
which has been executed on behalf of both American Honda and Dealer.
1. THE OBLIGATIONS OF AMERICAN HONDA
1.1. It is the obligation of American Honda to supply to Dealer, and
to all authorized dealers, Honda Products in a fair and
reasonable manner in order that Dealer may conduct Dealership
Operations in a businesslike manner. In fulfilling this
obligation, Honda Products may be supplied either on the basis of
dealer order or on the basis of allocation, depending on market
conditions and availability. There are numerous factors which
affect the availability of Honda Products. Among those factors
are component availability and production capacity, consumer
demand, strikes and other labor troubles, weather and
transportation conditions, and government regulations. Because
such factors affect individual dealer supply, American Honda
necessarily reserves discretion in accepting orders and
allocating and distributing Honda Products, and its judgment and
decision in such matters will be final.
1.2. To assist Dealer in the fulfillment of its obligations under the
Agreement, which it has as a retail seller of Honda Products,
American Honda agrees to provide Dealer sales, service and parts
support.
1.2.A. To assist Dealer in fulfilling its sales
responsibility, American Honda agrees to offer general
and specialized product information and to provide
field sales personnel to advise and counsel Dealer's
sales organization on sales-related subjects such as
merchandising, training and sales management.
1.2.B. To assist Dealer in fulfilling its service and parts
responsibilities, American Honda agrees to offer, or
cause to be offered, general and specialized service
and parts training courses. Based on the service
training needs of Dealer's service personnel, to be
determined by American Honda with the
<PAGE>
assistance of Dealer, Dealer agrees to have members of
Dealer's service organization attend such courses.
Further, American Honda agrees to make available to
Dealer field service personnel capable of advising and
counseling Dealer's service personnel on service-
related subjects, including product quality, technical
adjustments, repairs and replacement of product
components, recall, product improvement or product
update campaigns which American Honda may conduct,
owner complaints, warranty administration, service and
parts merchandising, and training and service
management.
1.3. To assist Dealer in planning, establishing and maintaining the
Dealership Premises, American Honda will, at its sole option,
make available to Dealer, upon request, sample copies of building
layout plans or facility planning recommendations, including
sales, service and parts space and the placement, installation
and maintenance of recommended signs. In addition,
representatives of American Honda will be available to Dealer
from time to time to counsel and advise Dealer and its personnel
in connection with Dealer's planning and equipping the Dealership
Premises.
1.4. American Honda agrees to make available to Dealer, at reasonable
cost, such sales, service and parts manuals, brochures, special
service tools and equipment and other data for Honda Products as
American Honda deems necessary for Dealership Operations.
1.5. American Honda agrees to maintain a nationwide system of
authorized dealers of Honda Products. In order that those
authorized dealers may be assured of the benefits of
comprehensive advertising of Honda Products, American Honda
agrees to establish and maintain general advertising programs in
such manner and amount as it may deem appropriate and will make
sales promotion and campaign materials available to Dealer.
1.6. American Honda agrees to compensate Dealer for the labor and
parts used by Dealer in performing its obligations under any
American Honda warranty and in connection with any recall,
product improvement or product update campaign which American
Honda may undertake and require Dealer to perform. Such
2
<PAGE>
compensation will be in such reasonable amounts, and pursuant to
such requirements and instructions, as American Honda shall
establish from time to time, and such compensation shall
constitute full and complete payment by American Honda to Dealer
for such work.
1.7. American Honda agrees to assume the defense of Dealer and to
indemnify Dealer against any money judgment, less any offset
recovered by Dealer, in any lawsuit naming Dealer as a defendant,
where such lawsuit relates to: (a) an alleged breach of any Honda
warranty relating to Honda Products; (b) bodily injury or
property damage claimed to have been caused by a defect in the
design, manufacture or assembly of a Honda Product prior to
delivery thereof to Dealer (other than a defect which could have
been detected by Dealer in a reasonable inspection); or (c) a
misrepresentation or misleading statement of American Honda;
provided, however, that if any information discloses the
possibility of Dealer error or omission in servicing or otherwise
(including but not limited to Dealer not having performed all
recalls of which Dealer has notice on the Honda Product involved
in the lawsuit if the defect subject to the recall is alleged or
contended to be a contributing cause of the breach of warranty,
injury or damage which is the subject matter of the lawsuit), or
should it appear that the Honda Product involved in such lawsuit
had been altered by or for Dealer, or if Dealer has violated any
of the provisions of this Paragraph 1.7, then Dealer will
immediately obtain its own counsel and defend itself, and
American Honda will not be obligated to defend or indemnify
Dealer further. Dealer will promptly notify American Honda of
any claim which Dealer will assert American Honda might be
obligated to defend under this Paragraph 1.7. American Honda will
have not less than thirty (30) days to conduct a reasonable
investigation to initially determine whether or not American
Honda is obligated to defend under this Paragraph 1.7. Dealer
will take the steps necessary to protect its own interests
involved in the lawsuit until American Honda assumes the active
defense of Dealer. American Honda will, upon assuming the
defense of Dealer, reimburse Dealer for all attorneys' fees or
court costs incurred by Dealer from the date of the tender.
American Honda, upon assuming Dealer's defense, will have the
right to retain and direct counsel of its own choosing, and
Dealer will cooperate in all matters during the course of
defending the lawsuit. If, upon final
3
<PAGE>
judgment in a lawsuit, it is determined that American Honda
wrongfully failed or refused to defend Dealer, American Honda
will reimburse Dealer for all costs and attorneys' fees incurred
by Dealer from the date of the tender of defense.
2. SALE OF HONDA PRODUCTS TO DEALER.
2.1. To the extent that Honda Products are the subject of dealer
order, such orders will be submitted and processed in accordance
with procedures established by American Honda. No order will be
binding on American Honda, as evidenced by either the issuance of
an invoice or shipment of the ordered Honda Products, and any
such order may be accepted in whole or in part. All orders by
Dealer will be deemed firm orders and binding upon the Dealer,
except that at any time prior to acceptance, an order may be
canceled by Dealer by giving actual notice to American Honda in
writing of the desire by Dealer to cancel such order.
2.2. While it is the intent of American Honda to provide Honda
Automobiles to Dealer in such quantities and types as are ordered
by Dealer, American Honda and Dealer recognize that Honda
Automobiles may not always be available in desired quantities.
It is therefore understood and agreed that American Honda, at its
sole election, will have the right to allocate Honda Automobiles
among authorized dealers of Honda Products in a fair and
reasonable manner. American Honda will provide to Dealer an
explanation, in writing, of any allocation system it may adopt.
2.3. American Honda will have the right at any time and from time to
time to establish and revise prices and other terms, including
payment by Dealer, for its sales of Honda Products to Dealer.
Revised prices, terms or provisions will apply to the sale of any
Honda Products as of the effective date of the revised prices,
terms or provisions, even though a different price or different
terms may have been in effect at the time such Honda Products
were allocated to or ordered by Dealer.
2.4. American Honda will have the right to select the distribution
points and the mode of transportation and may pay carriers for
all charges in effecting delivery of Honda Products to Dealer.
Dealer agrees to pay to American Honda such charges for delivery
as American Honda may assess. Subject to the terms of sale which
may be established from time to time by American Honda, risk of
loss to
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Honda Products will pass to Dealer upon tender of the Honda
Products to Dealer or its authorized agent, and title will pass
to Dealer upon receipt by American Honda of payment.
2.5. If Dealer should fail or refuse or for any reason be unable to
accept delivery of any Honda Products ordered by Dealer, or if
Dealer should request diversion of a shipment from American
Honda, Dealer will be responsible for and pay to American Honda,
promptly on demand, all costs and expenses incurred by American
Honda in filling and shipping Dealer's order and by reason of
such diversion, including costs of demurrage and storage, plus
restocking charges as determined by American Honda. American
Honda may direct that such returned Honda Products be delivered
to another destination, but the amount charged Dealer for return
to such other destination will not be greater than the costs and
expenses of returning such Honda Products to their original place
of shipment plus any demurrage, storage and restocking charges.
2.6. As between American Honda and Dealer, American Honda assumes
responsibility for damage to Honda Products caused prior to
delivery to Dealer or its authorized agent.
2.7. American Honda will not be liable in any manner for delay or
failure in supplying any Honda Products where such delay or
failure is the result of any event beyond the control of American
Honda. Such event may include, but is not limited to, any law or
regulation or any acts of God, foreign or civil wars, riots,
interruptions of navigation, shipwrecks, fires, strikes,
lockouts, or other labor troubles, embargoes, blockades, demand
for, or delay or failure of any supplier to deliver or in making
delivery, of Honda Products.
2.8. American Honda reserves the right at any time to change or
modify, without notice, any specification, design or model of
Honda Products. In the event of any change or modification with
respect to any Honda Products, Dealer will not be entitled to
have such or similar change or modification made with respect to
any other Honda Products, except as may be required by applicable
law. American Honda may, however, in its sole discretion, make
such changes or modifications to all Honda Products in its
inventory or control, whether or not invoiced to Dealer. No such
change
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will be considered a model year change unless specified by
American Honda.
2.9. American Honda may at any time discontinue, without obligation to
Dealer or Dealer's customers, the sale of any Honda Products, or
models or lines thereof or any other items, goods or services.
Further, American Honda will have no obligation, under any
circumstances, to accept orders for any Honda Products which are
not in current inventory.
3. THE OBLIGATIONS OF DEALER.
3.1. It is the obligation of Dealer to promote and sell, at retail,
Honda Products, and to promote and render service, whether or not
under warranty, for those products within the Dealer's Primary
Market Area.
3.2. Dealer's performance of its sales obligations for Honda Products
will be evaluated by American Honda on the basis of such
reasonable criteria as American Honda may develop from time to
time, including, but not limited to, such reasonable sales
objectives as American Honda may establish and a comparison of
Dealer's sales performance with other authorized dealers of Honda
Products.
3.3. To enable Dealer to fulfill its obligations satisfactorily,
Dealer agrees to establish and maintain an adequate and trained
sales and customer relations organization. Dealer further agrees
to establish and maintain a complete service and parts
organization, including a qualified service manager and a
qualified parts manager and a number of competent service and
parts personnel adequate to care for the service obligations to
be performed by Dealer under the Agreement.
3.4. Dealer agrees to acknowledge, investigate and resolve
satisfactorily all complaints received from owners of Honda
Products in a businesslike manner in order to secure and maintain
the goodwill of the public. Any complaint received by Dealer
which, in the opinion of Dealer, cannot be readily remedied,
shall be promptly reported to American Honda by Dealer.
3.5. Dealer agrees that it will not make any misrepresentations or
misleading statements regarding the items making up the total
selling price of Honda Products or as to the prices or
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charges relating to such items. With the understanding that
Dealer is the sole judge of the price at which it sells Honda
Products, dealer recognizes that a retail customer has the right
to purchase Honda Automobiles without being required to purchase
any optional equipment or accessories which the purchaser does
not want or order unless such equipment or accessories are
required under applicable laws or regulations.
3.6. Dealer agrees to make certain that all Honda Products sold by it
have received predelivery services and inspection in accordance
with applicable procedures and directives issued by American
Honda. Dealer further agrees that all Honda Products sold by it
will be in proper operating condition prior to delivery to any
customer. To enable Dealer to fulfill its obligations in this
regard, Dealer agrees that an appropriate number of its service
personnel will be fully qualified to perform all necessary
predelivery service and inspection.
3.7. Dealer agrees to comply with, and operate consistent with, all
applicable provisions of the National Traffic and Motor Vehicle
Safety Act of 1966 and the Federal Clean Air Act, as amended,
including such applicable rules and regulations as may be issued
thereunder, and all other applicable federal, state and local
motor vehicle safety and emission control requirements. In the
interests of motor vehicle safety and emission control, American
Honda agrees to provide to Dealer, and Dealer to American Honda,
such information and assistance as may reasonably be requested by
the other in connection with the performance of obligations
imposed on either party by the National Traffic and Motor Vehicle
Safety Act of 1966 and the Federal Clean Air Act, as amended, and
the rules and regulations issued thereunder, and all other
applicable federal, state and local motor vehicle safety and
emission control requirements.
3.8. Dealer agrees to conduct a used vehicle operation at or in
connection with the Dealership Premises, to the extent reasonably
required to enhance the opportunity for sales of Honda
Automobiles.
3.9. American Honda and Dealer recognize that it may be necessary for
American Honda to formulate new or different policies or
directives to meet new or changing technology, laws or
circumstances. In the operation of Dealer's business and in the
sale
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and promotion of Honda Products, in rendering service and in all
other activities of the Dealership Operations, Dealer will follow
all reasonable directives, suggestions and policies of American
Honda. All written directives, suggestions and policies of
American Honda contained in any of its bulletins or manuals,
which are in effect as of the date of the Agreement or are issued
thereafter, will be deemed a part of the Agreement.
3.10. Dealer agrees that it will, at all times, maintain in effect all
licenses required for Dealership Operations and for the
Dealership Premises.
3.11. Dealer agrees that it will comply with all laws, rules,
regulations and guides relating to the conduct of its business.
3.12. Dealer agrees that it will perform any and all warranty, recall,
product improvement or product update service in compliance with
instructions and directives issued by American Honda, regardless
of where the Honda Product involved was purchased. To protect
and maintain the goodwill and reputation of Honda Products and
the Honda Trademarks, Dealer agrees that it will not charge any
customer for warranty service or any work done in connection with
such warranty, recall, product improvement or update or any other
service as to which Dealer is reimbursed by American Honda.
3.13. Dealer fully understands that the success of its Dealership
Operations depends to a great extend upon the amount of net
working capital, owner's equity, flooring and lines of credit
which Dealer maintains. Accordingly, for the benefit of both
American Honda and Dealer, Dealer agrees that it will, at all
times, pay for Honda Products promptly and, to do so, maintain
its minimum net working capital, owner's equity, flooring and
lines of credit in the amounts specified in Paragraph G of the
Agreement. American Honda will have the right, reasonably, to
specify an increased amount of minimum net working capital,
owner's equity, flooring, or lines of credit to be used in
Dealership Operations and Dealer agrees promptly to establish and
maintain the increased amount. Dealer and American Honda agree
to execute such new documents as American Honda may reasonably
require to evidence revised capital requirements.
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3.14. Dealer agrees to assume the defense of American Honda and to
indemnify American Honda against any money judgment, less any
offset recovered by American Honda, in any lawsuit naming
American Honda as a defendant where such lawsuit relates to: (a)
an alleged failure by Dealer to comply, in whole or in part, with
any obligation assumed by Dealer pursuant to the Agreement, (b)
Dealer's alleged negligent or improper repairing or servicing of
Honda Products, or such other motor vehicles or equipment as may
be sold or serviced by Dealer, (c) Dealer's alleged breach of any
contract between Dealer and Dealer's customer, or (d) Dealer's
alleged misrepresentation or misleading statement, either direct
or indirect, to any customer of Dealer. American Honda may, at
its sole option and at its expense, participate in defending any
such lawsuit.
4. WARRANTY.
4.1. Dealer understands and agrees that the only warranties that will
be applicable to Honda Products will be such written warranty or
warranties as may be furnished by American Honda. Except for its
express liability under such written warranties, American Honda
neither assumes nor authorizes any other person or party to
assume for it any other obligation or liability in connection
with any Honda Product or component thereof.
4.2. Dealer agrees that it will expressly incorporate any warranty
furnished by American Honda with a Honda Automobile as a part of
each order form or other contract for the sale of such Honda
Automobile by Dealer to any buyer. Dealer further agrees that it
will deliver to the buyer of all Honda Products, at the time of
delivery of such Honda Products, copies of such applicable
warranties as may be furnished by American Honda. Dealer agrees
to abide by and implement in all other respects American Honda's
warranty procedures in effect at the time of Dealer's sale.
5. ADVERTISING AND PROMOTIONAL PROGRAMS.
5.1. Dealer agrees to develop and actively utilize programs for the
advertisement and promotion of Honda Products and its servicing
of such products. Such programs will include the prominent
display and use or demonstration of Honda Automobiles. Dealer
further agrees to cooperate with all
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reasonable promotional programs developed by American Honda.
5.2. Dealer agrees that it will not advertise, promote or trade in
Honda Products or the servicing thereof in such a manner as to
injure or be detrimental to the goodwill and reputation of
American Honda and the Honda Trademarks. Dealer further agrees
that it will not publish or otherwise disseminate any
advertisement or announcement or use any form or media of
advertising which is objectionable to American Honda. Dealer
agrees to discontinue immediately any advertisement or form of
advertising deemed objectionable upon request of American Honda.
5.3. Subject to applicable federal, state or local ordinances,
regulations and statutes, Dealer agrees to erect and maintain, at
the Dealership Location, at Dealer's expense, authorized product
and service signs of types required by American Honda, as well as
such other authorized signs as are necessary to advertise the
Dealership Operations effectively and as are required by American
Honda.
6. TRADEMARKS AND SERVICE MARKS.
6.1. Dealer agrees that American Honda has the exclusive right to use
and to control the use of the Honda Trademarks and but for the
right and license granted by Paragraph 6.2 hereof to use and
display the Honda Trademarks, Dealer would have no right to use
the same.
6.2. Dealer is hereby granted the nonexclusive right and license to
use and display the Honda Trademarks at the Dealership Premises.
Such use or display is limited to that which is necessary in
connection with the sale, offering for sale and servicing of
Honda Products at retail at the Dealership Location. Dealer
agrees that it will promptly discontinue the use of any of the
Honda Trademarks or change the manner in which any of the Honda
Trademarks is used when requested to do so by American Honda.
6.3. American Honda and Dealer recognize that Dealer is free to sell
Honda Products to customers wherever they may be located.
However, in order that American Honda may establish and maintain
an effective network of authorized dealers for the sale and
service of Honda Products, Dealer specifically agrees that it
will not display Honda
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Trademarks, or, either directly or indirectly, establish any
place or places of business for the conduct of any of its
Dealership Operations except at the locations and for the purpose
described in Paragraph E of the Agreement without the prior
written approval of American Honda. Dealer further agrees that
the rights and license granted by Paragraph 6.2 hereof will be
automatically canceled upon a change in the location of the
Dealership Location unless such change in location was previously
approved in writing by American Honda. Dealer further agrees
that such right and license terminates with the termination of
the Agreement.
6.4. If Dealer refuses or neglects to keep and perform its obligations
assumed under this Article 6 or under paragraph 10.3 hereof,
Dealer will reimburse American Honda for all costs, attorneys'
fees and other expenses incurred by American Honda in connection
with any action to require Dealer to comply therewith.
7. GENERAL BUSINESS REQUIREMENTS.
7.1. It is to the mutual benefit of Dealer and American Honda that
uniform accounting systems and practices be maintained by
authorized dealers. Accordingly, Dealer agrees to maintain such
systems and practices as are required by American Honda. In the
event Dealer engages in the sale of any other product, Dealer
agrees to maintain and keep separate records and books relating
to the sale and servicing of Honda Products.
7.2. Dealer agrees to furnish monthly to American Honda, on or before
the times designated by American Honda, on forms prescribed by
American Honda, a complete and accurate financial and operating
statement covering the preceding month and calendar-year-to-date
operations and showing the true and accurate condition of
Dealership Operations. Financial statements and other business
information furnished to American Honda will not be submitted to
any third party unless authorized by Dealer or required by law,
or the information is pertinent to a proceeding in which American
Honda and Dealer are parties.
7.3. Dealer agrees to keep complete and current records regarding the
sale and servicing of Honda Products and to prepare for American
Honda such reports, based on those records, as American Honda may
reasonably request. In order that policies and
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procedures relating to the applications for reimbursement for
warranty and other applicable work and for other credits or
reimbursements may be applied uniformly to all authorized
dealers, Dealer agrees to prepare, keep current and retain
records in support of requests for reimbursement or credit in
accordance with policies and procedures designated by American
Honda.
7.4. Dealer agrees to permit, during reasonable business hours,
American Honda, or its designee, to examine, audit, reproduce and
take copies of all reports, accounts and records pertaining to
the sale, servicing and inventorying of Honda Products,
including, but not limited to, records in support of claims for
reimbursement or credit from American Honda, and with the prior
approval of Dealer, which approval will not be unreasonably
withheld, to interview Dealer employees with respect thereto.
7.5. Dealer agrees that Dealership Operations will be conducted in the
normal course of business during and for not less than the days
of the week and hours of the day customary for automobile
dealerships in the Primary Market Area.
7.6. Dealer agrees and understands that any retail price which may be
suggested by American Honda is merely a suggested price, and
Dealer has no obligation to sell any Honda Products at such
price. Dealer further understands and agrees that it is the sole
judge of the price at which it sells Honda Products and the price
it charges others for service, subject only to applicable local,
state and federal laws, rules and regulations.
7.7. Dealer understands and agrees that it will be responsible for and
will pay any and all taxes, whether sales, use or excise, and all
other governmental or municipal charges imposed upon the sale of
Honda Products by American Honda to Dealer and will maintain
accurate records of the same, which records will be available to
American Honda, or its designee, during regular business hours
for inspection.
7.8. Dealer understands and agrees that, while it has responsibility
for the promotion and retail sale and servicing of Honda Products
within the Primary Market Area, it has no territorial
exclusivity. Further, American Honda reserves the right, based
upon reasonable criteria, to appoint other
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authorized dealers of Honda Products in the Primary Market Area.
8. APPOINTMENT OF SUCCESSOR AND REPLACEMENT DEALERS.
8.1. The parties recognize that Honda Products are marketed through a
system of authorized dealers developed by American Honda and that
customers and American Honda have a vital interest in the
preservation and efficient operation of the system. American
Honda has the responsibility of continuing to administer the
system and of selecting the most suitable dealer candidate in
each circumstance. Accordingly, Dealer agrees that American
Honda has the right to select each successor and replacement
dealer and to approve its owners and principal management and the
location of dealership facilities. Further, Dealer agrees to
provide written notice to American Honda of any potential change
in the involvement, ownership or management specified in
Paragraphs C and D of the Agreement. No change affecting such
involvement, ownership or management will be made without the
prior written approval of American Honda, which approval will not
be unreasonably withheld.
8.2. Upon Dealer's request, American Honda will execute with Dealer a
Successor Addendum designating proposed Dealer operators or
owners of a successor dealer to be established if the Agreement
expires or is terminated because of death or incapacity. The
request must be executed by all persons identified in Paragraph C
of the Agreement and all proposed dealer operators or owners and
be submitted to American Honda prior to such death or incapacity;
provided that such proposed dealer operators or owners must be
acceptable to American Honda.
8.3. Dealer, but not American Honda, may cancel any executed Successor
Addendum. If American Honda notifies Dealer that it does not
plan to permit Dealership Operations to continue at the
Dealership Location, American Honda shall have no obligation to
execute a new Successor Addendum.
8.4. If the Agreement expires or is terminated because of death or
incapacity and Dealer and American Honda have not executed a
Successor Addendum, the remaining owners, successors or heirs may
propose a successor dealer entity to continue Dealership
Operations at the Dealership Location. Such proposal must be
made within thirty days of the
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event causing expiration or termination by submitting a written
proposal to American Honda. Such proposal will be accepted by
American Honda if it does not introduce new owners or if the
proposed new owners are acceptable to American Honda.
8.5. Any successor dealer entity approved by American Honda pursuant
to this Article 8 must establish that it can conduct Dealership
Operations in an efficient and businesslike manner. Such
successor dealer entity will have one year to meet reasonable
performance criteria established from time to time by American
Honda. In the event such successor dealer entity fails to meet
those criteria, such failure will be separate grounds for
termination of the Agreement.
9. TERMINATION OF AGREEMENT.
9.1. The Agreement may be terminated, at any time, by mutual agreement
of American Honda and Dealer.
9.2. Dealer may terminate the Agreement, at any time, by giving
American Honda notice of such termination. Such termination
shall be effective upon the date specified by Dealer, or if no
date is specified, then upon receipt by American Honda of such
notice.
9.3. American Honda may terminate the Agreement, at any time, by
serving on Dealer a written notice of such termination by
certified or registered mail to Dealer at the Dealership
Premises. Subject to other provisions of the Agreement,
termination will be effective ninety (90) days after mailing of
such notice to dealer or such longer period as American Honda may
specify; provided, however, that termination will be effective
ten (10) days after mailing if for an occurrence of any
circumstance referred to in Paragraphs 9.4.A, 9.4.B, 9.4.J or
9.4.M hereof.
9.4. It is recognized that each of the following grounds is within
control of Dealer or originates from action taken by Dealer or
its employee(s) and is contrary to the spirit and objectives of
the Agreement. Therefore, American Honda may terminate the
Agreement upon the occurrence of any of the following:
9.4.A. Failure by Dealer to secure and continuously maintain
any license necessary for the conduct by Dealer of
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its business pursuant to the Agreement or the
termination or expiration without renewal, or
suspension or revocation of any such license for any
reason whatsoever, whether or not license is
reinstated.
9.4.B. Any change, transfer or attempted transfer by Dealer or
any Dealer Owner, voluntarily or by operation of law,
of the whole or any part of the Agreement or any
interest or legal or beneficial ownership therein or
any right or obligation thereunder, directly or
indirectly, such as, for example only, by way of a sale
of an underlying ownership interest in Dealer or the
Dealership Premises or a change in the persons having
control or managerial authority, without prior written
consent of American Honda. Any purported change,
transfer or assignment shall be null and void and not
binding on American Honda.
9.4.C. Any dispute, disagreement, controversy or personal
difficulty between or among Dealer Owners or in the
management of Dealer which, in American Honda's
opinion, may adversely affect the conduct of Dealer's
business, or the presence in the management of Dealer
of any person who, in American Honda's opinion, does
not have or no longer has requisite qualifications for
his position.
9.4.D. Impairment of the reputation or the financial standing
of Dealer or of any Dealer Owner subsequent to the
execution of the Agreement; or the ascertainment by
American Honda of any facts existing at or prior to
execution of the Agreement which tend to impair such
reputation or financial standings; or the failure of
Dealer continuously to meet American Honda's minimum
requirements of net working capital, owner's equity or
line(s) of credit.
9.4.E. Failure by Dealer to pay, within ten (10) days after
written demand from American Honda, any delinquent
accounts
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or other monies due to American Honda from Dealer.
9.4.F. Submission or participation in the submission to
American Honda of any false or fraudulent statement,
application, report, request for issuance of
reimbursement, compensation, refund or credit,
including but not limited to any false or fraudulent
claim for warranty work, labor rate, setup
reimbursement or warranty coverage.
9.4.G. Use by Dealer of any deceptive or fraudulent practice,
whether willful, negligent or otherwise, in the sale of
any Honda Product.
9.4.H. Any conviction in any court of original jurisdiction of
Dealer or any Dealer Owner or any employee of the
Dealership Operations for any crime or violation of any
law if, in the opinion of American Honda, such
conviction or violation may adversely affect the
conduct of the Dealership Operations or tend to be
harmful to the goodwill of American Honda or to the
reputation of Honda Products or the Honda Trademarks,
or the violation or refusal or neglect of Dealer to
comply with the provisions of the National Traffic and
Motor Vehicle Safety Act of 1966, as amended, or the
Clean Air Act, or any rules, regulations or standards
under either of said Acts, including but not limited to
performance of any product update or recall operation
as directed by American Honda.
9.4.I. Dealer's entering into any agreement, combination,
understanding or contract, oral or written, with any
other corporation, person, firm or other legal entity
for the purpose of fixing prices of Honda Products or
otherwise violating any law.
9.4.J. Dealer's abandonment of Dealership Premises or failure
to maintain Dealership Operations as a going business,
open during customary business hours for the days and
hours as are customary for automobile dealerships in
the Primary Market Area, provided such
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failure is not due to causes beyond Dealer's control.
Failure of the Dealership Premises to remain open for
seven (7) consecutive days will constitute, without
more, such abandonment.
9.4.K. Death or incapacity of any Dealer Owner or Dealer
Manager, subject to the provisions of Article 8.
9.4.L. Failure of Dealer to make improvements, alterations or
modifications of its Dealership Premises which are
required to meet reasonable facility requirements of
American Honda or which Dealer has agreed or
represented to American Honda that Dealer will make or
do.
9.4.M. The movement of Dealership Premises to a new location
or the establishment of an additional location for the
sale or service of any Honda Products without the prior
written approval of American Honda.
9.4.N. The failure of Dealer to provide adequate
representation, promotion, sales or service, including
warranty work, of any Honda Products.
9.4.O. Dealer's breach of any provision of the Agreement or
Dealer's failure to comply with any contained in the
Agreement.
9.5. The Agreement will also be terminated upon written notice by
American Honda in the event:
9.5.A. Of termination of American Honda's distribution
agreement as a Honda Automobile distributor.
9.5.B. Of withdrawal by American Honda from the market in
which Dealer is located.
9.5.C. American Honda will, for any reason, discontinue the
distribution of Honda Automobiles.
9.6. Upon the occurrence of any of the following facts or
circumstances, the Agreement will terminate automatically,
without notice or other action by American Honda or Dealer; and
upon such termination, any dealings between American Honda
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and dealer will be on a day-to-day basis at the sole option of
American Honda and may be discontinued at any time by American
Honda:
9.6.A. Insolvency by any definition of Dealer, or
9.6.B. The existence of facts or circumstances which would
allow the voluntary commencement by Dealer, or the
involuntary commencement against Dealer, of any
proceedings under any bankruptcy act or law or under
any state insolvency law; or
9.6.C. The appointment of a receiver or other officer having
similar powers for Dealer or the Dealership Premises;
or
9.6.D. Any levy against Dealer under attachment, garnishment
or execution or similar process which is not within ten
(10) days vacated or removed by payment or bonding.
9.7. American Honda may select any applicable provision under which it
elects to terminate the Agreement and give notice thereunder,
notwithstanding the existence of any other grounds for
termination or the failure to refer to such other grounds in the
notice of termination. The failure by American Honda to specify
additional ground(s) for cancellation in its notice will not
preclude American Honda from later establishing that termination
is also supported by such additional ground(s).
9.8. The acceptance by American Honda of orders from Dealer or the
continued sale of Honda Products to Dealer or any other act or
course of dealing of American Honda after termination of the
Agreement will not be construed as or deemed to be a renewal of
the Agreement for any further term or a waiver of such
termination. Any dealings after termination will be on a day-to-
day basis.
9.9. In all cases, Dealer agrees to conduct itself and Dealership
Operations until the effective date of termination and after
termination or expiration of the Agreement, so as not to injure
the reputation or goodwill of the Honda Trademarks or American
Honda.
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10. RIGHTS, OBLIGATIONS AND DEALINGS UPON TERMINATION.
10.1. Upon the mailing of a written notice of termination or after date
of the expiration of the Agreement without renewal, American
Honda will have the right to cancel all pending orders of Dealer
for Honda Products, special tools and equipment, whether
previously accepted by American Honda or not, except as
specifically otherwise provided in this Section 10.
Notwithstanding the foregoing, if American Honda chooses to fill
any orders, it will not be obligated to fill any other orders and
will not be precluded from changing the terms of any sale.
10.2. Not later than the effective date of the termination or
expiration of the Agreement, Dealer will cease to hold itself out
as being authorized to sell Honda Products and will discontinue
selling Honda Products or performing service as an authorized
dealer.
10.3. In addition to the requirements of Section 10.2, not later than
the effective date of the termination or expiration of the
Agreement, Dealer will, at its sole expense, discontinue any and
all uses of any Honda Trademarks and any words, symbols and marks
which are confusingly similar thereto; will remove all signs
bearing any Honda Trademark and will destroy all stationery,
repair orders, advertising and solicitation materials, and all
other printed matter bearing any Honda Trademark or referring
directly or indirectly to American Honda or Honda Products in any
way which might make it appear to members of the public that
Dealer is still an authorized dealer. The foregoing will
include, but not be limited to, discontinuing the use of a Honda
Trademark as part of Dealer's business and corporate name.
Dealer will also deliver to American Honda, at American Honda's
place of business, or to a person designated by American Honda,
or will destroy the same upon request by American Honda, any and
all technical or service literature, advertising and other
printed material then in Dealer's possession which relates to
Honda Products and which was acquired or obtained by Dealer from
American Honda. Dealer will destroy any sign bearing a Honda
Trademark which has not been repurchased by American Honda.
10.4. In the event the Agreement is terminated pursuant to the
provisions of paragraph 9.3 hereof, upon request of American
Honda for copying Dealer's
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records of predelivery service, warranty service, recall or
update service or other service of Honda Products. In the event
the Agreement is terminated pursuant to the provisions of
paragraphs 9.1 or 9.2 hereof, upon the request of American Honda,
Dealer will deliver to American Honda copies of such Dealer
records.
10.5. Dealer may, at any time within five (5) days after the effective
date of termination or expiration of the Agreement, notify
American Honda in writing of Dealer's desire to have American
Honda repurchase from Dealer Honda Products in Dealer's inventory
which were purchased from American Honda and which, when American
Honda accepts sole possession:
10.5.A. In the case of Honda Automobiles, are new and of the
then current model year, as designated by American
Honda, unused, undamaged and in first-class resalable
condition, regardless of whether or not American Honda
has exercised its right of inspection; and
10.5.B. In the case of Honda Parts are new, listed as current
in the Parts Price Book unused, undamaged, in their
original package and in first-class resalable
condition.
10.6. Upon termination or expiration without renewal, upon request of
Dealer given no later than five (5) days after the effective date
of termination or expiration, American Honda will repurchase all
signs which use a Honda Trademark as were authorized in advance
by American Honda and all service information and materials,
special tools and equipment designed specifically for service of
Honda Automobiles and which were purchased from American Honda
and are usable on current Honda Products, provided that such
signs, information, materials, tools and equipment are less than
five (5) years old and are in good working order.
10.7. American Honda will repurchase from Dealer Honda Products and
signs, information, materials, tools and equipment as aforesaid
on the condition that Dealer furnishes an inventory to American
Honda within thirty (30) day after the termination or expiration
without renewal of the Agreement and complies strictly with all
procedures and conditions of repurchase issued by American Honda
at the time of repurchase. American Honda will
20
<PAGE>
have the right and option to assign to another person or entity
the right to purchase such Honda Products.
10.7.A. The price for Honda Products, other than tools,
equipment, information, materials and signs, will be
the price at which they were originally purchased by
Dealer from American Honda or the price last
established by American Honda for the sale of identical
Honda Products, whichever may be lower, and in either
case will be less all prior refunds and allowances made
by American Honda with respect thereto, if any. The
price for tools, equipment, information, materials and
signs will be the price paid by Dealer reduced by
straight-line depreciation on the basis of a useful
life of five (5) years. In all cases, the price will
be reduced by any applicable restocking charge which
may be in effect at the time American Honda's receipt
of goods to be repurchased.
10.7.B. Dealer agrees to store Honda Products and other items
which American Honda desires or is obligated to
repurchase until receipt from American Honda of
rejection of repurchase or instructions for shipping
and return to American Honda. Dealer agrees to
strictly follow and abide by all instructions for
return as may be issued from time to time by American
Honda. All Honda Products will be properly and
suitably packaged and containered for safe
transportation to American Honda. All damage,
regardless of nature or cause, will be the
responsibility of Dealer until the Honda Products are
inspected and accepted by American Honda for
repurchase. Storage of such Honda Products and other
items will be at Dealer's expense for a period of
ninety (90) days after Dealer requests repurchase and
provides an inventory as provided by paragraphs 10.6
and 10.7 hereof. Thereafter, Dealer will be entitled
to charge American Honda a reasonable storage charge.
10.7.C. American Honda, or its designee, at such reasonable
time and for such a
21
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reasonable period of time as American Honda may
determine, will have the right to enter the premises
where items for repurchase are being held for the
purpose of checking the inventory submitted by Dealer
or examining, inspecting and inventorying any and all
Honda Products. If American Honda agrees to repurchase
and Dealer fails to furnish an inventory, Dealer will
reimburse American Honda for all costs of American
Honda taking an inventory.
10.7.D. Only those Honda Products meeting the requirements of
Paragraphs 10.5 and 10.6 hereof are or will be eligible
for return to American Honda. American Honda will not
be obligated to give Dealer credit for any Honda
Products which do not meet those requirements.
10.7.E. Dealer warrants and represents that all Honda Products
tendered to American Honda for repurchase will be free
of all liens, encumbrances, security interests or
attachments at the time repurchase is requested by
Dealer. Clear title will be vested in American Honda
upon receipt of goods. Dealer will execute and deliver
any documents necessary to vest clear title in American
Honda, and Dealer will be responsible for complying
with all applicable procedures, including but not
limited to those relating to bulk transfers.
10.7.F. Dealer will pay all freight and insurance charges from
Dealer to the place of delivery designated by American
Honda, provided that Dealer will not be liable for any
amount greater than the freight and insurance charges
from Dealer to American Honda's closest automobile
warehouse or parts center as American Honda may
designate. Claims for damage or allegedly caused by
any carrier will be the sole responsibility of Dealer,
and in no event will American Honda be obligated to
make a claim against a carrier or be liable to Dealer
for damage.
10.7.G. As a condition of repurchase and notwithstanding any
other agreement or
22
<PAGE>
offer to repurchase, payment for repurchase will first
be applied against any obligations or money owed by
Dealer to American Honda. All payment due from
American Honda to Dealer pursuant to any provisions of
the Agreement or in connection with the termination of
the Agreement or in connection with the termination of
the Agreement will be made by American Honda after
receipt of the goods to be repurchased and after all
debits and credits have been ascertained and applied to
Dealer's accounts, and Dealer has delivered to American
Honda the manufacturer's certificate of origin or other
document of title for Honda Automobiles tendered to
American Honda for repurchase. In the event it be
found that a balance is due from Dealer to American
Honda, Dealer will pay such sum to American Honda
within ten (10) days of written notice of such balance.
11. GENERAL PROVISIONS.
11.1. Dealer acknowledges that only the President or a designated Vice
President, Secretary or Assistant Secretary of American Honda is
authorized to execute the Agreement, agree to any variation,
modification or amendment of any of the provisions thereof,
including authorized location, or to make commitments for or on
behalf of American Honda. No other employee of American Honda
may make any promise or commitment on behalf of American Honda or
in any way bind American Honda. Dealer agrees that it will not
rely on any statements or purported statements except from
personnel as authorized hereinabove.
11.2. The Agreement contains the entire agreement between Dealer and
American Honda. Dealer acknowledges that no representations or
statements other than those expressly set forth therein were made
by American Honda or any officer, employee, agent or
representative thereof, or were relied upon by Dealer in entering
into the Agreement. The Agreement terminates and supersedes, as
of the execution thereof, all prior agreements relating to Honda
Products, if any.
11.3. Dealer hereby waives, abandons and relinquishes any and all
claims of any kind and nature whatsoever arising from or out of
or in connection
23
<PAGE>
with any prior agreement entered into between Dealer and American
Honda; provided, however, that nothing herein contained shall be
deemed a release or waiver of any claim arising out of prior
sales of Honda Products by American Honda to Dealer.
11.4. The Agreement is personal to the individuals identified as
principals, owner(s), partners or shareholder(s) in Paragraph C.
Neither the Agreement, nor any part hereof or any interest
therein, may be transferred or assigned by Dealer, in whole or in
part, directly or indirectly, voluntarily or by operation of law,
without the prior written approval of American Honda. Any
attempted transfer or assignment will be void and not binding
upon American Honda.
11.5. All notices, notifications or requests under or pursuant to the
provisions of the Agreement will be directed to the address of
the principal places of business of the respective parties to the
Agreement. If either party cannot effect notice at the place of
business of the other because a party has abandoned its place of
business or refuses to accept notice, then, and only in such
case, notice may be served on American Honda through its
designated agent for service of process and upon Dealer through
the Department of Motor Vehicles (or its equivalent) in the state
where the Dealership Location is authorized by American Honda.
11.6. The waiver by either party of any breach or violation of or
default under any provision of the Agreement will not be a waiver
by such party of any other provision or of any subsequent breach
or violation thereof or default thereunder. The failure or delay
of either party to take prompt action upon any breach or
violation of the Agreement will not be deemed a waiver of the
right to take action for such breach, default or violation at any
time in the future.
11.7. Dealer agrees to keep confidential and not disclose, directly or
indirectly, any information which American Honda designates as
confidential.
11.8. The Agreement is and shall be deemed to have been entered into in
California and shall be governed by and construed in accordance
with the laws of the State of California.
11.9. If any provision of this Agreement should be held invalid or
unenforceable for any reason whatsoever
24
<PAGE>
or to conflict with any applicable law, the Agreement will be
considered divisible as to such provisions, and such provisions
will be deemed amended to comply with such law, or if it cannot
be so amended without materially altering the tenor of the
Agreement, then it will be deemed deleted from the Agreement in
such jurisdiction, and in either case, the remainder of the
Agreement will be valid and binding.
11.10. The terms of the Agreement may not be modified except in writing
signed by an authorized officer of the parties. Without limiting
the generality of the foregoing, no course of dealing will serve
to modify or alter the terms of the Agreement.
11.11. Dealer is an independent business. The Agreement does not
constitute Dealer the agent or legal representative of American
Honda for any purpose whatsoever. Dealer is not granted any
expressed or implied right or authority to assume or create any
obligation on behalf of or in the name of American Honda or to
bind American Honda in any manner or thing whatsoever. Dealer
has paid no consideration for the Agreement. Neither the
Agreement nor any right granted under it is a property right.
11.12. The expiration or termination of the Agreement will not
extinguish any claims American Honda may have for the collection
of money or the enforcement of any obligations which may be in
the nature of continuing obligations.
12. DEFINITIONS.
12.1. American Honda means American Honda Motor Co., Inc. a California
corporation, and the Honda Automobile Division that markets Honda
Automobiles.
12.2. Dealer means the person, firm, corporation, partnership or other
legal entity that signs the Agreement and each of the persons
identified in Paragraph C.
12.3. Dealer Manager means the principal manager of Dealer identified
in Paragraph D upon whose personal service American Honda relies
in entering into the Agreement.
12.4. Dealer Owner means the owner(s) of Dealer identified in Paragraph
C upon whose personal
25
<PAGE>
service American Honda relies in entering into the Agreement.
12.5. Dealership Location means the location approved by American Honda
for the purpose of conducting Dealership Operations.
12.6. Dealership Operations means all operations contemplated by the
Agreement. These operations include the sale and service of
Honda Products, and any other activities undertaken by Dealer
related to Honda Products, including rental and leasing
operations, used car sales and body shop operations, and finance
and insurance operations, whether conducted directly or
indirectly by Dealer.
12.7. Dealership Premises means the facilities provided by Dealer at
its Dealership Location for the conduct of Dealership Operations
as approved by American Honda.
12.8. Honda Automobiles means such new passenger cars as are from time
to time offered for sale by American Honda to Dealer for resale
as part of the Honda automobile line as defined by American
Honda.
12.9. Honda Parts means parts, accessories and optional equipment
marketed by American Honda for use with Honda Automobiles.
12.10. Honda Products means Honda Automobiles and Honda Parts.
12.11. Honda Trademarks means the various trademarks, service marks,
names and designs which American Honda uses or is authorized to
use in connection with Honda Products or services relating
thereto.
12.12. Primary Market Area means the geographical area designated for
Dealer by American Honda from time to time.
12.13. The Agreement means the Honda Automobile Dealer's Sales and
Service Agreement and these Standard Provisions which are
incorporated therein by reference.
26
<PAGE>
EXHIBIT
10.2.4.1
<PAGE>
BMW OF NORTH AMERICA, INC.
DEALER AGREEMENT
This DEALER AGREEMENT is effective as of the 1st day of January, 1994,
by and between BMW of North America, Inc., a Delaware Corporation having its
principal place of business at Woodcliff Lake, New Jersey 07675 ("BMW NA") and
DEALER NAME: DiFeo BMW Partnership
------------------------------------
DEALER LOCATION: 301 County Road, Tenafly, New Jersey , a
-------------------------------------
BUSINESS TYPE: Partnership ,
----------------------------------
(if a corporation or partnership) organized or incorporated under the laws of
the
STATE OF: New Jersey and
---------------------------------------
DOING BUSINESS AS: DiFeo BMW
------------------------------
having its principal place of business at
ADDRESS: 301 County Road , in
----------------------------------------
CITY/TOWN: Tenafly , in the
--------------------------------------
COUNTY OF: Bergen , in the
--------------------------------------
STATE OF: New Jersey (as "Dealer").
---------------------------------------
All terms defined in the DEALER STANDARD PROVISIONS (Form 93/B) are incorporated
herein by reference.
-1-
<PAGE>
PURPOSE OF AGREEMENT
The purpose of this Agreement is to authorize Dealer to operate a BMW automobile
dealership and to set forth the responsibilities of both BMW NA and Dealer in
providing BMW Products and services to the consuming public.
The United States automotive market requires a fluid relationship between BMW NA
and authorized BMW dealers who represent BMW Products. Mutual compliance with
the terms of this Agreement will promote the interests of both BMW NA and Dealer
by providing each party an opportunity to earn a reasonable return on its
investment through developing and retaining satisfied customers and by building
a spirit of cooperation between BMW NA and authorized BMW dealers (collectively
the "BMW Dealers") which will increase the value and customer perception of BMW
trademarks.
BMW NA and Dealer have entered into this Agreement with confidence in each
other's integrity, ability and expressed intention to deal fairly with the other
party and the consuming public. Dealer is relying upon BMW NA's commitment to
distribute quality BMW Products which meet the needs and expectations of the BMW
customers in Dealer's primary market and to provide Dealer with a broad range of
support activities to assist Dealer in its retail operations. BMW NA is relying
upon Dealer's commitment to perform and carry out the responsibilities of an
authorized BMW dealer, as set forth in this Agreement. Each party recognizes
that it must rely upon the efforts of the other party in performing successfully
under this Agreement.
IN CONSIDERATION OF the foregoing and the mutual covenants herein contained, the
parties hereto agree as follows:
-2-
<PAGE>
A. APPOINTMENT OF DEALER
BMW NA appoints Dealer as a dealer of BMW Products. Subject to the terms of
this Agreement, Dealer is granted the non-exclusive right to buy BMW Products.
Dealer accepts such appointment and agrees to be bound by this Agreement.
While dealer recognizes that its performance will be primarily measured based
upon its activities in its Primary Market Area, Dealer agrees that this
appointment does not confer upon it the exclusive right to deal in BMW Products
in any specific geographic area within the 50 United States, nor does it limit
the persons within the 50 United States to whom Dealer may sell BMW Products for
use therein.
Dealer agrees that it will not sell BMW Products for resale or use outside the
50 United States. Dealer further agrees to abide by any Export Policy
established by BMW NA.
Dealer acknowledges that BMW NA reserves the right to appoint additional
dealers, whether located near Dealer's location or elsewhere, as BMW NA in its
sole discretion deems necessary or appropriate. BMW NA agrees that it will not
explore additional representation without first conferring individually with the
BMW Dealer(s) surrounding the proposed location to determine whether other
alternatives to additional representation are satisfactory to BMW NA. If a
decision is made to proceed with establishment of additional representation,
BMW NA will provide such BMW Dealer(s) no less than thirty (30) days written
notice of such decision.
-3-
<PAGE>
B. DEALER STANDARD PROVISIONS AND DEALER OPERATING REQUIREMENTS
The accompanying DEALER STANDARD PROVISIONS (Form 93/B), DEALER OPERATING
REQUIREMENTS, DEALER FACILITY GUIDELINES, and all currently effective Addenda
issued to Dealer by BMW NA, all of which may be amended, cancelled or superseded
from time to time, are hereby incorporated into this Dealer Agreement
("Incorporated Documents"). Unless the context otherwise indicates, the term
"Agreement" shall mean this document, the Incorporated Documents, and the
documents referred to therein. Dealer hereby acknowledges receipt of this
Agreement and agrees to become familiar with its terms.
While Dealer is not contractually required to comply with the BMW DEALER
OPERATING SYSTEM, Dealer agrees to consider conforming its operations to the
guidelines and recommendations of the BMW Dealer Operating System.
-4-
<PAGE>
C. DEALER OWNERSHIP AND MANAGEMENT
This is a PERSONAL SERVICES AGREEMENT. BMW NA is entering into this Agreement
in reliance upon the qualifications, abilities and integrity of the Dealer
Operator and upon the representation of the Dealer's Owner(s) that the Dealer
Operator will have full managerial authority for operations and activities of
Dealer. In order to induce BMW NA to enter into this Agreement, Dealer states
that:
(i) DEALER'S OWNERS. The beneficial owners, record owners and partners, if any
of Dealer are (include Record Owners if different from Beneficial):
NAME % RECORD OR BENEFICIAL
DiFeo Partnership Inc. 70%
DiFeo BMW, Inc. 30%
ADDITIONAL NAMES ATTACHED / /
-5-
<PAGE>
(ii) DEALER'S OFFICERS. The following persons are Dealer's Officers:
NAME TITLE
Ezra P. Mager CEO
Joseph C. Herman COO
Joseph C. DiFeo Executive Vice President
Samual X. DiFeo Executive Vice President
Robert J. Cohen Executive Vice President
(iii) DEALER'S CORPORATE DIRECTORS. If Dealer is a corporation, the following
are its Corporate Directors:
NAME TITLE
Marshall S. Cogan Chairman of the Board
Ezra P. Mager
Joseph C. DiFeo
Samuel X. DiFeo
Joseph C. Herman
(iv) DEALER OPERATOR. The following person shall be in complete charge of
Dealer's BMW Operations with authority to make all operating decisions on behalf
of Dealer with respect to Dealer's BMW Operations and is the person upon whom
BMW NA can rely to act on Dealer's behalf:
Name: Robert J. Cohen
(v) GENERAL MANAGER. The following is Dealer's General Manager (if none, enter
"NONE"):
Name: Robert J Cohen
-6-
<PAGE>
(vi) SUCCESSOR. The Dealer's Owners have nominated the following individual(s)
as proposed Dealer Owner(s) of a Successor Dealer to be established if this
Agreement is terminated because of the death or permanent disability of any of
the Dealers Owners (if none, enter "NONE"):
Name: _________________________________________________________________________
Name: _________________________________________________________________________
Because of the importance that BMW NA places on the statements and
representations of the Dealer's Owners and the qualifications of the Dealer
Operator, Dealer agrees that there will be no change in the (a) identity of the
Dealer's Owners (i above); (b) the Dealer Operator (iv above); or (c) Dealer's
name, identity, business organization or structure without the prior written
consent of BMW NA.
To enable BMW NA to maintain effectively the BMW NA dealer network, Dealer
further agrees to provide BMW NA with forty-five (45) days prior written notice
of any proposed change in the ownership of Dealer, which would change the
majority interest or control of Dealer, or of any proposed disposition of
Dealer's BMW assets. Any such change in ownership or disposition of Dealer's
BMW assets shall not be effective without the prior written consent of BMW NA
which consent shall not be unreasonably withheld. BMW NA shall respond to
Dealer's notification within forty-five (45) days after Dealer has furnished to
BMW NA all applications and information reasonably requested to evaluate the
proposal.
Without limiting other considerations in determining whether BMW NA will provide
consent, this Agreement may not be transferred, assigned or assumed until all
indebtedness of Dealer to BMW NA, its subsidiaries or affiliates has been fully
satisfied and unless the transferee, assignee or party assuming this Agreement
agrees and commits to fulfill and complete all of the obligations under this
Agreement and the Improvement Addendum (if applicable).
-7-
<PAGE>
Dealer recognizes that BMW NA has a vital interest in ensuring that qualified
personnel are employed by BMW Dealers. Therefore, Dealer agrees to employ
personnel who meet the qualifications for each position. BMW NA agrees that
Dealer has the right to decide reasonably all matters concerning management and
personnel.
Dealer has designated herein certain individuals as officers, directors,
managers and/or individuals with responsibility for Dealer's BMW Operations.
Dealer agrees to notify BMW NA in writing of any change in the designated
individuals (ii, iii and v above) and recognizes that such designation shall not
relieve Dealer of its responsibility for performance under this Agreement.
Dealer agrees that BMW NA may rely upon the Dealer Operator and General Manager
(if applicable) to act on Dealer's behalf and that such reliance will not alter
Dealer's responsibilities under this Agreement.
-8-
<PAGE>
D. DEALER'S FACILITIES
Dealer agrees that Dealer's Facilities shall satisfy all applicable provisions
of this Agreement, including reasonable space, facility and BMW Corporate
Identification requirements in the Dealer Operating Requirements Addendum and/or
Dealer Facilities Guidelines. BMW NA recognizes the investment Dealer has in
its facilities and hereby approves the location of the following Dealer's
Facilities for the exclusive purpose of:
1) A showroom and sales facility for BMW Vehicles at:
Address: 301 County Road, Tenafly, New Jersey
----------------------------------------------------------------------
2) Service and Parts facilities for BMW Vehicles at:
Address: 301 County Road, Tenafly, New Jersey
----------------------------------------------------------------------
3) Facilities for the display and sale of used BMW Vehicles at:
Address: 301 County Road, Tenafly, New Jersey
----------------------------------------------------------------------
4) Other facilities (indicate the nature of the facility; e.g., storage
facility):
Address: None
----------------------------------------------------------------------
Unless otherwise provided herein, Dealer shall conduct Dealer's BMW Operations
and keep BMW Products exclusively at Dealer's Facilities designated above.
In the event that Dealer desires to (i) change its principal place of business
from that first set forth in this Agreement; (ii) change any location of
Dealer's Facilities; (iii) establish any additional locations for either
operating its business or storage of BMW products; (iv) make any major
structural or design change in Dealer's Facilities; or (v) change the usage or
function of any locations or facility approved herein or otherwise utilize such
locations or facilities for any functions other than the approved functions,
Dealer must obtain the prior written approval of BMW NA for any such change or
establishment.
-9-
<PAGE>
In the event Dealer desires to establish or add any additional automobile
franchise, line, make or dealership at Dealer's Facilities simultaneously with
Dealer's BMW Operations, Dealer agrees to provide BMW NA thirty (30) days prior
written notice of such establishment or addition. At the time notice is
provided, Dealer shall demonstrate in writing to BMW NA that Dealer will
continue to comply with the Dealer Operating Requirements Addendum and will not
adversely impact the representation or sale of BMW Products. If Dealer is
unable to comply, Dealer shall not pursue such establishment or addition, but
may submit a detailed plan of compliance with the Dealer Operating Requirements
and Dealer Operating Requirements Addendum to BMW NA. If BMW NA approves the
detailed plan of compliance, Dealer may proceed with the establishment or
addition. Dealer understands that BMW NA may, at its sole option, reject the
plan or require issuance or modification of an Improvement Addendum in the event
the plan is approved. Such approval shall not be unreasonably withheld.
E. EXCLUSION OF WARRANTIES
EXCEPT AS SPECIFICALLY PROVIDED FOR IN THE NEW CAR LIMITED WARRANTY, THE LIMITED
WARRANTY ON EMISSION CONTROLS, THE LIMITED WARRANTY AGAINST RUST PERFORATION,
THE LIMITED WARRANTY ON ORIGINAL BMW PARTS AND THE LIMITED WARRANTY ON ORIGINAL
PARTS SOLD OVER THE COUNTER; ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE
EXCLUDED. THE EXCLUSION ALSO APPLIES TO INCIDENTAL, CONSEQUENTIAL, SPECIAL OR
INDIRECT DAMAGES FOR ANY BREACH OF EXPRESS OR IMPLIED WARRANTY, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS, IF ANY, APPLICABLE TO BMW
PRODUCTS.
-10-
<PAGE>
F. BMW DEALER FORUM
BMW NA and Dealer agree that it is in their mutual interest to have an
independent group of BMW dealer representatives serve on the BMW Dealer Forum
("DEALER FORUM"). The DEALER FORUM shall represent BMW Dealers and will
communicate the position of BMW Dealers to BMW NA on various common issues.
BMW NA and DEALER FORUM shall establish a mechanism to foster open and frequent
communication on substantive issues affecting BMW NA and BMW Dealers.
Each BMW dealer is entitled and encouraged to serve on the DEALER FORUM or on a
committee of the DEALER FORUM pursuant to its by-laws and each BMW dealer is
expected to support and participate in the DEALER FORUM.
The DEALER FORUM shall adopt by-laws as BMW Dealers deem reasonable and
necessary. The DEALER FORUM may establish committees to study various aspects
of the retail environment and the BMW NA - BMW Dealers' relationship.
Before any material change may be made to this Agreement, BMW NA agrees to
notify the DEALER FORUM and consider BMW Dealers' position regarding the
proposed change.
-11-
<PAGE>
G. TERM
This Agreement shall continue in full force and effect and shall govern all
relations and transactions between the parties commencing on the effective date
hereof and continuing as follows:
- If Dealer has fulfilled all of its obligations hereunder and no
Improvement Addendum is currently in force, this Agreement shall expire
five years from the effective date hereof, unless terminated earlier in
accordance with the applicable provisions of this Agreement. In such event
BMW NA will renew this Agreement or offer Dealer an opportunity to enter
into a superseding Agreement.
- If Dealer has outstanding obligations as of the effective date of this
Agreement and/or an Improvement Addendum is in force, this Agreement shall
expire on the earlier of three years from the effective date hereof or
sixty (60) days following the earliest "Compliance Date" specified in said
Addendum, unless otherwise terminated in accordance with the applicable
provisions of this Agreement.
-12-
<PAGE>
H. ALTERNATE DISPUTE RESOLUTION
BMW NA and Dealer agree to minimize disputes between them. However, in the
event that disputes arise, BMW NA and Dealer agree that they will attempt to
resolve all matters between them before any formal action is taken to seek any
administrative or judicial adjudication or governmental review.
A BMW BOARD ("BOARD") will act as the Administrator of all disputes between
BMW NA and Dealer arising out of this Agreement. The BOARD will consist of
three representatives who will be selected by BMW NA and three representatives
of BMW Dealers who will be selected by the DEALER FORUM. The BOARD will
determine eligibility requirements, develop procedures to ensure a fair and
equitable decision ("ADR PROCEDURES") and select individuals to participate in a
DISPUTE RESOLUTION PANEL ("PANEL") to hear an eligible dispute. The PANEL shall
consist of at least one BMW NA employee, one BMW dealer and one independent
person selected by the BOARD.
The BOARD shall also monitor the dispute resolution process, report to BMW NA
and the DEALER FORUM annually on the effectiveness of this process and, when
required, make recommendations for changes in this process.
BMW NA and Dealer agree that the process outlined in this Article H and
developed by the BOARD in the ADR PROCEDURES will be mandatory. The PANEL's
recommendation will be non-binding, unless the parties agree to be bound by the
decision of the PANEL. The purpose of the PANEL will be to recommend a
resolution and work with the parties to reach a fair and equitable solution to
their dispute in a cost-effective, efficient manner and to avoid formal
adjudication or government intervention.
If either party to this Agreement initiates any action in court or an
administrative agency prior to issuance of a PANEL recommendation on a dispute,
that party shall pay all costs, fees and expenses, including attorneys fees, of
the other party which arise out of the enforcement of this Article H.
-13-
<PAGE>
I. RIGHT OF FIRST REFUSAL
BMW NA recognizes the investment which Dealer has committed to remain a BMW
dealer. Dealer recognizes the importance to BMW NA of continuing dealership
operations from approved locations to provide for effective sale and service of
BMW Products. Accordingly, whenever Dealer intends to dispose of Dealer's BMW
assets or to change majority ownership from that listed in Article C(i), BMW NA
shall have the first right to purchase Dealer's BMW assets or ownership
interests pursuant to this Article. Dealer agrees to disclose to the
prospective buyer that any sale or disposition shall be subject to the terms of
this Dealer Agreement.
BMW NA will advise Dealer if it will exercise the right of first refusal
within forty-five (45) days after Dealer has furnished all applications and
information in accordance with Article C. If BMW NA exercises the right, BMW
NA will assume the proposed buyer's rights and obligations under the written
agreement the proposed buyer negotiated with Dealer (the "Buy/Sell
Agreement"). The purchase price shall be that set forth in the Buy/Sell
Agreement.
In the event BMW NA exercises its right of first refusal, BMW NA may assign the
Buy/Sell Agreement to any party. BMW NA shall remain responsible to guarantee
the purchase price to be paid by the assignee.
Dealer shall transfer the assets and any applicable real estate free and clear
of all liens and encumbrances. Any property shall be transferred by Warranty
Deed, where possible, conveying marketable title. Deeds will be in the proper
form for recording. Possession will be deemed transferred when the deed is
delivered. Dealer will furnish copies of, and will assign where required, all
agreements, licenses, easements, permits or other documents necessary for the
conduct of Dealer's BMW Operations.
If it exercises its right under this Article, BMW NA will reimburse Dealer for
all acceptable expenses, excluding brokerage commissions, incurred by Dealer in
connection with the development of the Buy/Sell Agreement. Dealer will supply
BMW NA with reasonable documentation to support all those expenses and all
copies of materials generated during the negotiation and development of the
Buy/Sell Agreement in anticipation of the sale (including environmental reports,
accounting reviews, among others.) Any dispute regarding reimbursement shall be
presented for review under Article H.
This Article shall not apply in the event that Dealer proposes to change
majority ownership, dispose of its assets or otherwise enter into a proposed
Buy/Sell Agreement with a member of Dealer's immediate family (spouse, child,
brother, sister, parent, grandchild, or spouse of child); to an individual who
is listed on the Successor Addendum; to an individual who is currently employed
by Dealer and has been actively employed by Dealer for at least three
consecutive years in the BMW Operations and is otherwise qualified as a Dealer
Operator; or to an individual who is currently listed as a Dealer's Owner in
Article C and has been so listed for the past three consecutive years and is
otherwise qualified as a Dealer Operator.
-14-
<PAGE>
J. CUSTOMER SATISFACTION
BMW NA and Dealer agree to conduct their respective businesses to promote and
support the image and reputation of BMW NA, BMW Products and BMW Dealers. BMW
Products must be perceived as the finest available. BMW NA and BMW Dealers must
be recognized as providing the best service in the industry.
Dealer, as the direct link to the BMW customer, is responsible for satisfying
customers in all matters, except those directly related to product design and
manufacturing. Dealer will take reasonable steps to ensure that each customer
is satisfied with BMW Products, and with the services and the practices of
Dealer. Dealer will recommend to BMW NA methods of reasonably satisfying
customers. BMW NA will support Dealer's customer satisfaction efforts through
counseling, training opportunities and providing survey results.
When requested by BMW NA, Dealer shall submit a plan detailing its customer
satisfaction programs. That plan shall include continuous reinforcement to all
dealership personnel of the importance of customer satisfaction, necessary
training for dealership personnel and methods of conveying to customers that
Dealer is committed to their satisfaction.
Following consultation with and notice from BMW NA or its authorized
representative, Dealer shall remedy to the satisfaction of BMW NA any practice
or method of operation which would have a detrimental effect upon customer
satisfaction or would impair the reputation or image of BMW NA, BMW Products or
Dealer.
-15-
<PAGE>
K. EXECUTION OF AGREEMENT
This Agreement shall not become effective until signed by a duly authorized
officer of Dealer, if a corporation; or by one of the general partners of
Dealer, if a partnership; or by the named individual if a sole proprietorship;
and countersigned by authorized representatives of BMW NA.
-16-
<PAGE>
L. MODIFICATION OF AGREEMENT
No representative of BMW NA shall have the authority to waive any of the
provisions of this Agreement or to make any amendment or modification of or any
other change in, addition to, or deletion of any portion of this Agreement or to
make any other agreement which imposes any obligation on either BMW NA or Dealer
which is not specifically imposed by this Agreement or which renews or extends
this Agreement; unless such waiver, amendment, modification, change, addition,
deletion or agreement is reduced to writing and signed by two authorized
representatives of BMW NA and by the authorized representative of Dealer as set
forth in Article K of this Agreement.
BMW OF NORTH AMERICA, INC. DIFEO BMW PARTNERSHIP
BY: /s/ James J. Ryan BY: /s/ Robert J. Cohen
------------------------ -------------------------------
TITLE: General Manager TITLE: V.P.
--------------------- -----------------------------
BY: /s/ Illegible
------------------------ FEDERAL TAX ID# 223186285
--------------------
TITLE: Area Manager ATTEST: (If Dealer is a Corporation)
---------------------
------------------------------------
Secretary
WITNESS: (If Partnership or Proprietorship)
/s/Illegible
------------------------------------
Name
301 County Rd., Tenafly NJ 07670
------------------------------------
Address
-17-
<PAGE>
EXHIBIT A
% of Ownership Title
-------------- -----
Owners of DiFeo Partnership, Inc.
United Auto Group, Inc. 100% N/A
12/2/94
Name
Owners of EMCO Motor Holdings, Inc.
Ezra P. Mager 3% President
40 E. 88th Street EMCO Motor Holdings, Inc.
New York, NY 10128
'21 International Holdings 97% N/A
153 E. 53rd Street
Suite 5900
New York, New York 10022
Marshall S. Cogan Voting Control Chairman
625 Park Avenue '21 International Holdings
New York, NY 10021
Owners of DiFeo BMW, Inc.
Joseph C. DiFeo 37.5% President/
17 Blackpoint Horseshoe Treasurer
Rumson, NJ 07760
Robert J. Cohen 25% Vice President
812 Napoleon Street
Woodmere, NY 11598
Samuel X. DiFeo 37.5% Secretary
121 Larraine Avenue
Spring Lake, NJ 07762
<PAGE>
AMENDMENT TO BMW OF NORTH AMERICA, INC.
DEALER AGREEMENT
This Amendment to the BMW Dealer Agreement is entered into among BMW of North
America, Inc. ("BMW NA"), DiFeo BMW ("Dealer"), DiFeo BMW Partnership
("Partnership"), DiFeo Partnership, Inc. ("DPI") and United Auto Group, Inc.
("UAG").
WHEREAS, BMW NA has entered into a BMW Dealer Agreement with Dealer dated
January 1, 1994, (the "Dealer Agreement"), pursuant to which Dealer is
authorized to operate a BMW automobile dealership; and
WHEREAS, the ownership and organization of Dealer are such that the terms of the
Dealer Agreement may not be wholly adequate to address the needs and concerns of
Dealer, Partnership, DPI and BMW NA; and
WHEREAS, Dealer and BMW NA entered into the Dealer Agreement in consideration of
and in reliance on certain understandings, assurances and representations which
the parties here to wish to document;
WHEREAS, BMW NA is relying on the representations of Dealer, Partnership, DPI
and UAG contained herein and would not have entered into this Amendment, but for
those representations.
NOW, THEREFORE, the parties agree as follows:
1. For purposes of the Dealer Agreement, including Article C(iv), Robert Cohen
shall be designated Dealer Operator. BMW NA has relied and is relying on the
personal qualifications, abilities and integrity of Dealer Operator and the
appointment and continued employment of Mr. Cohen as Dealer Operator was and is
a material inducement for BMW NA to enter into the Dealer Agreement with Dealer.
Dealer, Partnership, DPI and UAG hereby represent and warrant that Dealer
Operator is and will be in complete charge of Dealer's BMW Operations with
authority to make all operating decisions on behalf of Dealer with respect to
those operations and is the person upon whom BMW NA can rely to act on Dealer's
behalf. Neither Dealer nor Partnership nor DPI nor UAG will revoke, modify or
amend such authority without the prior written approval of BMW NA.
2. The removal or withdrawal of Dealer Operator without the prior written
consent of BMW NA shall constitute grounds for termination of the Dealer
Agreement, subject to applicable law. However, BMW NA recognizes that Dealer
Operator's employment relationship with Dealer may change. In that case, Dealer
shall have the opportunity to propose a replacement Dealer Operator in
accordance with Article C of the Dealer Agreement.
3. Dealer is a wholly owned subsidiary of Partnership, which, in turn, is a
wholly owned subsidiary of DPI, which, in turn, is a wholly owned subsidiary of
UAG. Dealer, Partnership, DPI and UAG hereby warrant that the representations
and assurances of each
<PAGE>
herein are within their respective authority to make and do not contravene any
directive, policy or procedure of any of them. The parties hereto acknowledge
that the provisions of this Amendment shall not be applicable until such time as
UAG completes a public offering of its stock.
4. Any material changes, including the change in 20% of the outstanding shares
as described in Paragraph 5, in the ownership of Dealer, Partnership, DPI and
UAG shall be considered a change of ownership of Dealer under the terms of the
Dealer Agreement, and all applicable terms of the Dealer Agreement shall apply
to any such change. BMW NA has executed the Dealer Agreement in reliance upon
the ownership and management structure of Dealer, Partnership, DPI and UAG and
any material change in the interest or control of any of those entities, or any
disposition of Dealer's BMW assets, without prior written consent of BMW NA
shall constitute grounds for the termination of the Dealer Agreement, subject to
applicable law. Such consent shall not be unreasonably withheld by BMW NA.
With respect to a Public Company (as defined in Paragraph 5) a material change
in ownership can only occur as described therein.
5. Given the ultimate control Partnership, DPI, and UAG have over Dealer,
the control of Dealer through a Company whose securities are publicly traded
which may eventually control Dealer ("Public Company") and BMW NA's strong
interest in assuring that those who own and control its Dealers have
interests consistent with those of BMW NA; Dealer, Partnership, DPI and UAG
agree that if an ownership interest is acquired in a Public Company by a
person or entity which notifies Public Company via Schedule 13D filed with
the Securities and Exchange Commission. Dealer shall advise BMW NA 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 (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 a 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 BMW NA reasonably concludes that such
person or entity does not have interests compatible with those of BMW NA, or
is otherwise not qualified to have an ownership interest in a BMW NA
dealership, Dealer, DPI, Partnership and UAG agree that within 90 days of
receipt of written notice from BMW NA of this fact, it will: (i) transfer
the assets associated with Dealer to a third party acceptable to BMW NA, (ii)
voluntarily terminate the Dealer Agreements in effect with Dealer, or (iii)
provide evidence to BMW NA that such person or entity no longer has such an
ownership interest in a Public Company. Should Dealer enter into an agreement
to transfer its assets to a third party, the right of first refusal described
in Article I of the Dealer Agreement shall apply to any such transfer.
Failure of Dealer, Partner, DPI, UAG or Public Company to comply with this
provision shall constitute grounds of termination of the Dealer Agreement.
6. Dealer, Partnership, DPI and UAG stipulate and agree that the alternate
dispute resolution process set forth at Article H of the Dealer Agreement shall
be the initial and exclusive source
-2-
<PAGE>
of resolution of any dispute regarding the Dealer Agreement and this Amendment,
including, but not limited to, involuntary termination of the Dealer Agreement.
7. Dealer, Partnership, DPI and UAG future stipulate and agree that if Dealer,
Partnership, DPI, BMW NA and the public are to realize the potential benefits
that Dealer, Partnership, DPI and UAG represent to be the result of BMW NA
approving the ownership structure proposed by Dealer, then Dealer shall comply
fully with the terms and conditions of The BMW Advantage program, the details of
which have previously been communicated to Dealer.
8. Dealer, Partnership, DPI and UAG agree that Dealer's Facilities shall be
used exclusively for the representation of BMW Products and related services and
in no event shall they be used for the display, sale or promotion of any new
vehicle other than BMW motor vehicles.
9. The parties agree that this Amendment shall supplement the terms of the
Dealer Agreement in accordance with Article L of the Dealer Agreement.
10. In the event that the policies of BMW NA with regard to the issues
addressed herein should be modified, the parties agree to review such
modifications to determine whether modifications to this Amendment are
appropriate.
11. Nothing in this Amendment 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
Amendment or the Dealer Agreement. Dealer, Partnership, DPI, and UAG thereby
agree to indemnify and hold BMW NA, its parent, directors, officers,
employees, subsidiaries, agents and representatives harmless 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 in Dealer, Partnership, DPI or other related entity.
12. This Amendment 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 provisions of this Amendment are in conflict
with other provisions of the Dealer Agreement, the provisions contained in this
Agreement shall govern.
13. Dealer, Partnership, DPI and UAG agree to indemnify BMW NA for any and all
costs that BMW NA may incur in defending or enforcing this Amendment, including
a challenge brought by any party hereto or any third party arising out of the
termination or transfer of the Dealer Agreement under the terms of this
Amendment.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment this ___ day of
October 1996.
DiFEO BMW DiFEO BMW PARTNERSHIP
By: DiFeo Partnership, Inc., as
General Partner
/s/ Joseph C. DiFeo /s/ Carl Spielvogel
- -------------------------------- --------------------------------------
By: Joseph C. DiFeo By: Carl Spielvogel
Title: Vice President Title: Chairman & Chief Executive
Date: October 21, 1996 Officer
Date: October 21, 1996
DiFEO PARTNERSHIP, INC. UNITED AUTO GROUP, INC.
/s/ Carl Spielvogel /s/ Carl Spielvogel
- -------------------------------- --------------------------------------
By: Carl Spielvogel By: Carl Spielvogel
Title: Chairman & Chief Title: Chairman & Chief Executive
Executive Officer Officer
Date: October 21, 1996 Date: October 21, 1996
BMW OF NORTH AMERICA, INC.
/s/ James J. Ryan /s/ Dennis Helfman
- -------------------------------- --------------------------------------
By: James J. Ryan By: Dennis Helfman
Title: Senior Vice President Title: General Counsel and Secretary
General Manager
Eastern Region
Date: October 21, 1996 Date: October 21, 1996
-4-
<PAGE>
AMENDMENT TO BMW OF NORTH AMERICA, INC.
DEALER AGREEMENT
This Amendment to the BMW Dealer Agreement is entered into among BMW of North
America, Inc. ("BMW NA"), DiFeo BMW ("Dealer"), DiFeo BMW Partnership
("Partnership"), DiFeo Partnership, Inc. ("DPI") and United Auto Group, Inc.
("UAG").
WHEREAS, BMW NA has entered into a BMW Dealer Agreement with Dealer dated
January 1, 1994, (the "Dealer Agreement"), pursuant to which Dealer is
authorized to operate a BMW automobile dealership; and
WHEREAS, the ownership and organization of Dealer are such that the terms of the
Dealer Agreement may not be wholly adequate to address the needs and concerns of
Dealer, Partnership, DPI and BMW NA; and
WHEREAS, Dealer and BMW NA entered into the Dealer Agreement in consideration of
and in reliance on certain understandings, assurances and representations which
the parties here to wish to document;
WHEREAS, BMW NA is relying on the representations of Dealer, Partnership, DPI
and UAG contained herein and would not have entered into this Amendment, but for
those representations.
NOW, THEREFORE, the parties agree as follows:
1. For purposes of the Dealer Agreement, including Article C(iv), Robert Cohen
shall be designated Dealer Operator. BMW NA has relied and is relying on the
personal qualifications, abilities and integrity of Dealer Operator and the
appointment and continued employment of Mr. Cohen as Dealer Operator was and is
a material inducement for BMW NA to enter into the Dealer Agreement with Dealer.
Dealer, Partnership, DPI and UAG hereby represent and warrant that Dealer
Operator is and will be in complete charge of Dealer's BMW Operations with
authority to make all operating decisions on behalf of Dealer with respect to
those operations and is the person upon whom BMW NA can rely to act on Dealer's
behalf. Neither Dealer nor Partnership nor DPI nor UAG will revoke, modify or
amend such authority without the prior written approval of BMW NA.
2. The removal or withdrawal of Dealer Operator without the prior written
consent of BMW NA shall constitute grounds for termination of the Dealer
Agreement, subject to applicable law. However, BMW NA recognizes that Dealer
Operator's employment relationship with Dealer may change. In that case, Dealer
shall have the opportunity to propose a replacement Dealer Operator in
accordance with Article C of the Dealer Agreement.
3. Dealer is a wholly owned subsidiary of Partnership, which, in turn, is a
wholly owned subsidiary of DPI, which, in turn, is a wholly owned subsidiary of
UAG. Dealer, Partnership, DPI and UAG hereby warrant that the representations
and assurances of each
<PAGE>
herein are within their respective authority to make and do not contravene any
directive, policy or procedure of any of them. The parties hereto acknowledge
that the provisions of this Amendment shall not be applicable until such time as
UAG completes a public offering of its stock.
4. Any material changes, including the change in 20% of the outstanding shares
as described in Paragraph 5, in the ownership of Dealer, Partnership, DPI and
UAG shall be considered a change of ownership of Dealer under the terms of the
Dealer Agreement, and all applicable terms of the Dealer Agreement shall apply
to any such change. BMW NA has executed the Dealer Agreement in reliance upon
the ownership and management structure of Dealer, Partnership, DPI and UAG and
any change in the majority interest or control of any of those entities, or any
disposition of Dealer's BMW assets, without prior written consent of BMW NA
shall constitute grounds for the termination of the Dealer Agreement, subject to
applicable law. Such consent shall not be unreasonably withheld by BMW NA.
With respect to a Public Company (as defined in Paragraph 5) a material change
in ownership can only occur as described therein.
5. Given the ultimate control Partnership, DPI, and UAG have over Dealer, the
control of Dealer through a Company whose securities are publicly traded which
may eventually control Dealer ("public company") and BMW NA's strong interest in
assuring that those who own and control their Dealers have interests consistent
with those of BMW NA; Dealer, Partnership, DPI and UAG agree that if an
ownership interest is acquired in a public company by a person or entity which
notifies public company via Schedule 13D filed with the Securities and Exchange
Commission, Dealer shall advise BMW NA 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 (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 a 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 BMW NA reasonably concludes that such person or
entity does not have interests compatible with those of BMW NA, or is otherwise
not qualified to have an ownership interest in a BMW NA dealership, Dealer, DPI,
Partnership and UAG agree that within 90 days of receipt of written notice from
BMW NA of this fact, it will: (i) transfer the assets associated with Dealer to
a third party acceptable to BMW NA, (ii) voluntarily terminate the Dealer
Agreements in effect with Dealer, or (iii) provide evidence to BMW NA that such
person or entity no longer has such an ownership interest in a public company.
Should Dealer enter into an agreement to transfer its assets to a third party,
the right of first refusal described in Article I shall apply to any such
transfer. Failure of Dealer or public company to comply with this provision
shall constitute grounds of termination of the Dealer Agreement.
6. Dealer, Partnership, DPI and UAG stipulate and agree that the alternate
dispute resolution process set forth at Article H of the Dealer Agreement shall
be the initial and exclusive source
-2-
<PAGE>
of resolution of any dispute regarding the Dealer Agreement and this Amendment,
including, but not limited to, involuntary termination of the Dealer Agreement.
7. Dealer, Partnership, DPI and UAG future stipulate and agree that if Dealer,
Partnership, DPI, BMW NA and the public are to realize the potential benefits
that Dealer, Partnership, DPI and UAG represent to be the result of BMW NA
approving the ownership structure proposed by Dealer, then Dealer shall comply
fully with the terms and conditions of The BMW Advantage program, the details of
which have previously been communicated to Dealer.
8. Dealer, Partnership, DPI and UAG agree that Dealer's Facilities shall be
used exclusively for the representation of BMW Products and related services and
in no event shall they be used for the display, sale or promotion of any new
vehicle other than BMW automobiles.
9. The parties agree that this Amendment shall supplement the terms of the
Dealer Agreement in accordance with Article L of the Dealer Agreement.
10. In the event that the policies of BMW NA with regard to the issues
addressed herein should be modified, the parties agree to review such
modifications to determine whether modifications to this Amendment are
appropriate.
11. Nothing in this Amendment 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 Amendment
or the Dealer Agreement. Dealer, Partnership and DPI hereby agree to indemnify
and hold BMW NA, its parent, directors, officers, employees, subsidiaries,
agents and representatives harmless 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 in UAG other than
through a derivative stockholder suit authorized by the board of directors of
UAG.
12. This Amendment 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 provisions of this Amendment are in conflict
with other provisions of the Dealer Agreement, the provisions contained in this
Agreement shall govern.
13. Dealer, Partnership, DPI and UAG agree to indemnify BMW NA for any and all
costs that BMW NA may incur in defending or enforcing this Amendment, including
a challenge brought by any party hereto or any third party arising out of the
termination or transfer of the Dealer Agreement under the terms of this
Amendment.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment this ___ day of
July 1996.
DiFEO BMW DiFEO BMW PARTNERSHIP
By: DiFeo Partnership, Inc., as
General Partner
/s/ Joseph C. DiFeo /s/ Carl Spielvogel
- -------------------------------- --------------------------------------
By: Joseph C. DiFeo By: Carl Spielvogel
Title: Vice President Title: Chairman and Chief Executive
Date: July 30, 1996 Officer
Date: July 30, 1996
DiFEO PARTNERSHIP, INC. UNITED AUTO GROUP, INC.
/s/ Carl Spielvogel /s/ Carl Spielvogel
- -------------------------------- --------------------------------------
By: Carl Spielvogel By: Carl Spielvogel
Title: Chairman and Chief Title: Chairman and Chief Executive
Executive Officer Officer
Date: July 30, 1996 Date: July 30, 1996
BMW OF NORTH AMERICA, INC.
/s/ James J. Ryan
- -------------------------------- --------------------------------------
By: James J. Ryan By:
Title: Senior Vice President Title:
General Manager
Eastern Region
Date: July 25, 1996 Date:
-4-
<PAGE>
NISSAN
DEALER TERM SALES AND SERVICE AGREEMENT
THIS AGREEMENT is entered into effective the day last set forth below by and
between the Nissan Division of NISSAN MOTOR CORPORATION IN U.S.A., a California
corporation, hereinafter called "Seller," and the natural persons and entities
identified in the Final Article of this Agreement.
INTRODUCTION
The purpose of this Agreement is to establish Dealer as an authorized dealer of
Nissan Products and to provide for the sale and servicing of Nissan Products in
a manner that will best serve owners, potential owners and purchasers of Nissan
Products as well as the interests of Seller, Dealer and other Authorized Nissan
Dealers. This Agreement sets forth: the rights which Dealer will enjoy as an
Authorized Nissan Dealer; the responsibilities which Dealer assumes in
consideration of its receipt of these rights; and the respective conditions,
rights and obligations of Seller and Dealer that apply to Seller's grant to
Dealer of such rights and Dealer's assumption of such responsibilities. It is
understood that Dealer wishes an opportunity to qualify for a regular Nissan
Dealer Sales and Service Agreement for Nissan Products and understands that for
that purpose Dealer first must fulfill all of Dealer's undertakings hereinafter
described.
This is a personal services Agreement. In entering into this Agreement and
appointing Dealer as provided below, Seller is relying, among other things, upon
the personal qualifications, expertise, reputation, integrity, experience,
ability and representations of the individual named in the Final Article of this
Agreement as Dealer Principal (the "Dealer Principal") and the individual named
in the Final Article of this Agreement as Executive Manager and the
representations of UAG Northeast, Inc., DiFeo Partnership, Inc., UAG and the
Dealer. In addition to Dealer, Seller intends to look to UAG Northeast, Inc.,
DiFeo Partnership, Inc., UAG, the Dealer Principal and the Executive Manager for
the performance of Dealer's obligations hereunder.
Nissan Products are intended for discriminate owners with the expectation that
such owners will be loyal and proud, but also demanding toward Seller and Dealer
with respect to Nissan Products and the manner in which they are sold and
serviced. Owners, potential owners and purchasers of Nissan Products are
expected to want, and are entitled to do business with, dealers who enjoy the
highest reputation in their communities and have well located, attractive and
efficient places of business, courteous personnel and outstanding service and
parts facilities. Nissan Products must be sold by enthusiastic dealers who are
not
<PAGE>
interested in short term results only but are willing to look toward long
term goals and whoa re devoted to creating and maintaining a positive total
ownership experience for owners of Nissan Products. Seller's standard of
excellence for Nissan Products must be matched by the dealers who sell them to
the public and who service them during their operative lives.
Achievement of the purposes of this Agreement is premised upon mutual
understanding and cooperation between Seller and Dealer. Dealer has entered into
this Agreement in reliance upon Seller's integrity and expressed intention to
deal fairly with Dealer and the consuming public. Seller has entered into this
Agreement in reliance upon the integrity and ability of the Dealer Principal and
Executive Manager and their expressed intention to deal fairly with the
consuming public and Seller.
It is the responsibility of Seller to market Nissan Products throughout the
Territory. It is the responsibility of Dealer to actively promote the retail
sale of Nissan Products and to provide courteous and efficient service of Nissan
Products. The success of both Seller and Dealer will depend on how well they
each fulfill their respective responsibilities under this Agreement. It is
recognized that: Seller will endeavor to provide motor vehicles of excellent
quality and workmanship and to establish a network of Authorized Nissan Dealers
that can provide an outstanding sales and service effort at the retail level;
and Dealer will endeavor to fulfill its responsibilities through aggressive,
sound, ethical selling practices and through conscientious regard for customer
service in all aspects of its Nissan Dealership Operations.
Seller and Dealer shall refrain from engaging in conduct or activities which
might be detrimental to or reflect adversely upon the reputation of Seller,
Dealer or Nissan Products and shall engage in no discourteous, deceptive,
misleading or unethical practices or activities.
For consistency and clarity, terms which are used frequently in this Agreement
have been defined in Section 1 of the Standard Provisions. All terms used herein
which are defined in the Standard Provisions shall have the meaning stated in
said Standard Provisions. These definitions should be read carefully for a
proper understanding of the provisions in which they appear.
To achieve the purposes referred to above, Seller, UAG Northeast, Inc., DiFeo
Partnership, Inc., Dealer, the Dealer Principal and the Executive Manager agree
as follows:
ARTICLE FIRST: Appointment of Dealer
Subject to the conditions and provisions of this Agreement, Seller:
-2-
<PAGE>
(a) appoints Dealer as an Authorized Nissan Dealer and grants Dealer the
non-exclusive right to buy from Seller those Nissan Products specified in
Dealer's current Product Addendum hereto, for resale, rental or lease at or from
the Dealership Locations established and described in accordance with Section 2
of the Standard Provisions; and
(b) grants Dealer a non-exclusive right, subject to and in accordance with
Section 6.K of the Standard Provisions, to identify itself as an Authorized
Nissan Dealer, to display the Nissan Marks in the conduct of its Dealership
Operations and to use the Nissan Marks in the advertising, promotion and sale of
Nissan Products in the manner provided in this Agreement.
ARTICLE SECOND: Assumption of Responsibilities by Dealer
Dealer hereby accepts from Seller its appointment as an Authorized Nissan
Dealer and, in consideration of its appointment and subject to the other
conditions and provisions of this Agreement, hereby assumes the responsibility
for:
(a) establishing and maintaining at the Dealership Location the Dealership
Facilities in accordance with Section 2 of the Standard Provisions;
(b) actively and effectively promoting the sale at retail (and, if Dealer
elects, the leasing and rental) of Nissan Vehicles within Dealer's Primary
Market Area in accordance with Section 3 of the Standard Provisions;
(c) servicing Nissan Vehicles and for selling and servicing Nissan Parts
and Accessories in accordance with Section 5 of the Standard Provisions;
(d) building and maintaining consumer confidence in Dealer and in Nissan
Products in accordance with Section 5 of the Standard Provisions; and
(e) performance of the additional responsibilities set forth in this
Agreement, including those specified in Section 6 of the Standard Provisions.
ARTICLE THIRD: Ownership
(a) Owners. This Agreement has been entered into by Seller in reliance
upon, and in consideration of, among other things, the personal qualifications,
expertise, reputation, integrity, experience, ability and representations with
respect thereto of the Dealer Principal and Executive Manager named in the Final
Article of this Agreement and in reliance upon the representations and
agreements of UAG Northeast, Inc., DiFeo Partnership, Inc., UAG and the Dealer
as follows:
-3-
<PAGE>
(i) UAG Northeast, Inc. and DiFeo Partnership, Inc. will at all times
own 100% of the capital stock of Dealer and Dealer will at all times be
maintained as a separate entity.
(ii) The Executive Committee of Dealer is set forth in attached
Schedule "A".
(iii) The officers of Dealer are as set forth in attached Schedule
"A".
(iv) United Auto Group, Inc. ("UAG") owns 100% of the outstanding
stock of UAG Northeast, Inc. and DiFeo Partnership, Inc., (se Attachment "A"
attached).
(b) Changes in Ownership. In view of the fact that this is a personal
services agreement with the Dealer Principal and Executive Manager and in view
of its objective and purposes, this Agreement and the rights and privileges
conferred on Dealer hereunder are not assignable, transferable or salable by UAG
Northeast, Inc. and DiFeo Partnership, Inc., and no property right or interest
is or shall be deemed to be sold, conveyed or transferred to Dealer, UAG
Northeast, Inc. and DiFeo Partnership, Inc. under this Agreement. Dealer, UAG
Northeast, Inc., DiFeo Partnership, Inc., the Dealer Principal and the executive
Manager agree that any change in the ownership of Dealer, UAG Northeast, Inc. or
DiFeo Partnership, Inc. specified herein requires the prior written consent of
Seller [IF DEALER DESIRES TO REMAIN AN AUTHORIZED NISSAN DEALER] and that
without the prior written consent of Seller:
(i) no sale, pledge, hypothecation or other transfer of any of the
currently outstanding capital stock or partnership interest of Dealer will be
made and no additional shares of capital stock, partnership interest or
securities convertible into shares of capital stock, of Dealer will be issued or
sold.
(ii) no sale, pledge, hypothecation or other transfer of any of the
currently outstanding capital stock of UAG Northeast, Inc. and DiFeo
Partnership, Inc. will be made and no additional shares of capital stock,
partnership interest or securities convertible into shares of capital stock, of
UAG Northeast, Inc. and DiFeo Partnership, Inc. will be issued or sold.
(iii) neither Dealer, UAG Northeast, Inc. nor DiFeo Partnership, Inc.
will be merged with or into, or consolidate with, any other entity and none of
the principal assets necessary for the performance of Dealer's obligations under
this Agreement will be sold, transferred or assigned.
(iv) UAG Northeast, Inc. and DiFeo Partnership, Inc. will not enter
into any transaction, including, without limitation, any sale, pledge,
hypothecation or other transfer of any of the currently outstanding capital
stock of UAG Northeast,
-4-
<PAGE>
Inc. and DiFeo Partnership, Inc., the issuance or sale of additional shares of
capital stock, partnership interest or securities convertible into shares of
capital stock, of UAG Northeast, Inc. and DiFeo Partnership, Inc., or the merger
of UAG Northeast, Inc. and DiFeo Partnership, Inc. with or into, or the
consideration of UAG Northeast, Inc. and DiFeo Partnership, Inc. with any other
entity, if as a result of such transaction, the UAG Northeast, Inc. and DiFeo
Partnership, Inc. will cease to own at least 100% of the capital stock or
interest of Dealer.
Any transaction involving the capital stock of UAG Northeast, Inc. and
DiFeo Partnership, Inc. which does not violate subparagraph (iv) above may be
effected without obtaining the prior written consent of Seller and without
triggering a termination event under Section 12.A.(2) of the Standard
Provisions.
Dealer shall give Seller prior notice of any proposed change in said
ownership requiring consent of Seller and immediate notice of the death or
incapacity of any Dealer Principal or Executive Manager. No such change, and no
assignment of this Agreement or of any right or interest herein, shall be
effective against Seller unless and until embodied in an appropriate amendment
to or assignment of this Agreement, as the case may be, duly executed and
delivered by Seller and by Dealer. Seller shall not, however, unreasonably
withhold its consent to any such change, subject to Seller's rights of first
refusal set forth in Article Tenth of this Agreement. Seller shall have no
obligation to transact business with any person who is not named either as a
Dealer Principal or Executive Manager of Dealer hereunder or otherwise to give
effect to any proposed sale or transfer of the ownership, partnership interest
management of Dealer, UAG Northeast, Inc. and DiFeo Partnership, Inc. (other
than changes in the ownership of UAG Northeast, Inc. and DiFeo Partnership, Inc.
which are expressly permitted by the Article Third) prior to having concluded
the evaluation of such a proposal as provided in Section 15 of the Standard
Provisions. Dealer acknowledges Seller's right to require consent to any change
in the ownership of Dealer, UAG Northeast, Inc., and DiFeo Partnership, Inc.
agree that any change or transfer without such consent from Seller is void, and
of no force and effect, and grounds for termination. Dealer, UAG Northeast,
Inc., and DiFeo Partnership, Inc. further agree that either will not challenge,
contest, dispute, or litigate:
(i) any action taken by Seller (including, without limitation,
termination of this Agreement) response to an attempt to transfer ownership of
Dealer (except as provided by this Agreement) without Seller's consent; or
(ii) any decisions by Seller to withhold consent to a proposed change
in ownership of Dealer.
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The stock certificates representing the stock or analogous instrument
demonstrating ownership of Dealer, UAG Northeast, Inc., and DiFeo Partnership,
Inc. will have legends which notify a potential purchaser of such stock of the
limitations on transfer set forth in this Article third. Dealer, UAG Northeast,
Inc., and DiFeo Partnership, Inc. represent and agree that none of UAG
Northeast, Inc. and DiFeo Partnership, Inc. or Dealer will register their
capital stock, or securities convertible into their capital stock for sale or
resale to the public under any state or federal securities laws. UAG Northeast,
inc. and DiFeo Partnership, Inc. agree that no capital stock, or securities
convertible into capital stock, of Dealer will be issued, sold or otherwise
transferred by Dealer, UAG Northeast, Inc. and DiFeo Partnership, Inc., directly
or indirectly, to any automobile manufacturer, automobile distributor, any motor
vehicle dealer, any other person who could reasonably be considered a competitor
or potential competitor of Seller, or any affiliate of any of the foregoing.
However, with the exception of the immediately preceding sentence and the stock
restriction set forth in Exhibit A attached, Nissan does not intend to restrict
the transfer of equity or interests in UAG.
ARTICLE FOURTH: Management
(a) This Agreement has been entered into by Seller in reliance upon, and in
consideration of, among other things, the personal qualifications, expertise,
reputation, integrity, experience, ability and representations with respect
thereto of the person named as Dealer Principal in the Final Article of this
Agreement and in reliance on the following representations and agreements of UAG
Northeast, Inc. and DiFeo Partnership, Inc. that:
(i) each of Samuel and Spielvogel will, subject to any other
obligations set forth in this Agreement, devote 100% of their time to the
business and day-to-day operations of the entity for which they are responsible.
(ii) Samuel will devote 100% of his time to the affairs of Dealer.
(b) Dealer. Seller and Dealer agree that the retention by Dealer of
qualified management is of critical importance to the successful operation of
Dealer and to the achievement of the purposes and objectives of this Agreement.
this agreement has been entered into by Seller in reliance upon, and in
consideration of, among other things, the personal qualifications, expertise,
reputation, integrity, experience, ability and representations with respect
thereto of the persons named as Dealer Principal and Executive Manager in the
Final Article of this Agreement and in reliance on the following representations
and agreements of Dealer, and UAG Northeast, Inc. and DiFeo Partnership, Inc.
that:
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(i) Samuel is currently employed as the Executive Manager of Dealer.
As long as Spielvogel is employed by UAG Northeast, Inc. and DiFeo Partnership,
Inc., and Samuel is employed by Dealer, they will have full and complete control
over the Dealership Operations, subject only to the powers of the Board of
Directors of Dealer to manage the business and affairs of Dealer, and they will
at all times be members of the Board of Directors of Dealer. In addition, any
replacements for Spielvogel and Samuel will, so long as such replacements are
employed by any UAG Northeast, Inc. and DiFeo Partnership, Inc. and Dealer, have
full and complete control over the Dealership Operations, subject only to the
powers of the Board of Directors of Dealer to manage the business and affairs of
Dealer, and such replacements will at all times be members of the Board of
Directors of dealer.
(ii) the Board of Directors of Dealer shall delegate the management of
the Dealership Operations to Samuel and Dealer will not amend its Certificate of
Incorporation or By-laws to provide that its Board of Directors provide that its
Board of directors is entitled to exercise any extraordinary powers or interfere
unduly in the Dealership Operations.
(iii) Samuel will, subject to any other obligations set forth in this
Agreement, continually provide his personal services in operating the dealership
and will be physically present at the Dealership Facilities on a full-time
basis.
(c) Changes in Management. In view of the fact that this is a personal
services Agreement with the Dealer principal and Executive Manager and in view
of its objectives and purposes, Dealer, UAG Northeast, Inc. and DiFeo
Partnership, Inc. agree that any change in the Dealer Principal or Executive
Manager from that specified in the Final Article of this Agreement requires the
prior written consent of Seller. In addition, UAG Northeast, Inc. and DiFeo
Partnership, Inc. agree that no chief executive officer, or person performing
services and having responsibilities similar to a chief executive officer, of
UAG Northeast, Inc. or DiFeo Partnership, Inc. will be appointed, directly or
indirectly, without the prior written consent of Seller. Dealer shall give
Seller prior notice of any proposed change in Dealer Principal or Executive
Manager or the appointment of any chief executive or similar officer of UAG
Northeast, Inc. and DiFeo partnership, Inc. and immediate notice of the death or
incapacity of any Dealer Principal or Executive Manager. No change in Dealer
Principal or Executive Manager and no appointment of a chief executive or
similar officer of UAG Northeast, Inc. or DiFeo Partnership, Inc. shall be
effective unless and until embodied in an appropriate amendment to this
Agreement duly executed and delivered by all of the parties hereto. Subject to
the foregoing, Dealer, UAG Northeast, Inc. and DiFeo Partnership, Inc. shall
make their own, independent decisions concerning the hiring and firing of its
employees, including, without limitation, the Dealer Principal and Executive
Manager.
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Dealer shall give Seller prior written notice of any proposed change in
Dealer Principal or Executive Manager and immediate notice of the death or
incapacity of Dealer Principal or Executive Manager. No change in Dealer
Principal or Executive Manager shall be effective unless and until embodies in
an appropriate amendment to this Agreement duly executed and delivered by all of
the parties hereto. Dealer acknowledges Seller's right as set forth herein and
in the Standard Provisions) to require consent to any change in the management
of Dealer, UAG Northeast, Inc. and DiFeo Partnership, Inc. agree that a change
without such consent from Seller is void, of no force and effect, and grounds
for termination. Dealer, UAG Northeast, Inc. and DiFeo Partnership, Inc. further
agree that either will not challenge, contest, dispute, or litigate:
(i) any action taken by Seller (including, without limitation,
termination of this Agreement) in response to an attempt to change the
management of Dealer without Seller's consent; or
(ii) any decision by Seller to withhold consent to a proposed change
in management of Dealer, or
(iii) any decision by Seller to withhold approval of a proposed
management candidate.
To enable Seller to evaluate and respond to Dealer concerning any proposed
change in Dealer Principal or Executive Manager or the appointment of any chief
executive or similar officer of UAG Northeast, Inc. and DiFeo Partnership, Inc.,
Dealer, UAG Northeast, Inc. and DiFeo Partnership, Inc. agree to provide, in the
form requested by Seller and in a timely manner, all applications and
information customarily requested by Seller to evaluate the proposed change.
While Seller shall not unreasonably withhold its consent to any such change, it
is agreed that any successor Dealer Principal, Executive Manager or chief
executive or similar officer of UAG Northeast, Inc. and DiFeo Partnership, Inc.
must possess personal qualifications, expertise, reputation, integrity,
experience and ability which are, in the opinion of Seller, satisfactory. Seller
will determine whether, in its opinion, the proposed change or appointment is
likely to result in a successful dealership cooperation with capable management
that will satisfactorily perform Dealer's obligations under this Agreement.
Seller shall have no obligation to transact business with any person who is not
named as a Dealer principal or Executive Manager of Dealer hereunder prior to
having concluded its evaluation of such person.
Any successor Dealer Principal or Executive Manager and any chief executive
or similar officer of UAG Northeast, Inc. and DiFeo Partnership, Inc. must meet
the following minimum requirements in order to be submitted to Seller for
approval:
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(i) At least three years of experience as a general manager of an
automobile dealer in a major metropolitan area or similar position involving all
aspects of the day-to-day operations of such an automobile dealership
(including, without limitation, new and used vehicles sales, service, parts and
administration); and
(ii) A demonstrated track record of success in his/her prior
automobile dealership activities as measured by the dealerships' performance
under his/her management. The dealership(s) shall have consistently demonstrated
at least the following:
1. An above average level of sales performance when measured
against regional or zone averages and as measured against sales performance
objectives established by the manufacturer; and
2. An above average level of customer satisfaction when measured
against regional or zone averages for the make; and
3. A history of cooperation and good relations with
manufacturer(s) and/or distributor(s).
(d) Evaluation of Management. Dealer and Seller understand and acknowledge
that the personal qualifications, expertise, reputation, integrity, experience
and ability of the Dealer Principal and Executive Manager and their ability to
effectively manage Dealer's day-to-day Dealership Operations is critical to the
success of Dealer in performing its obligation under this Agreement. Seller may
from time to time develop standards and/or procedures for evaluating the
performance of the Dealer Principal and Executive Manager and of Dealer's
personnel generally. Seller may, from time to time, evaluate the performance of
the Dealer Principal and Executive Manager and will advise Dealer, the Dealer
Principal and the Executive Manager of the results of such evaluations and the
way in which any deficiencies affect Dealer's performance of its obligations
under this Agreement.
(e) Compensation of Executive Manager. Samuel will have a substantial
portion of his compensation tied to Dealer's overall performance with respect to
objectives for sales, market penetration and customer service which will be
established at quarterly intervals.
ARTICLE FIFTH: Additional Provisions
The additional provisions set forth in the attached "Nissan Dealer Sales and
Service Agreement Standard Provisions," bearing from number NDA-4S/9-88, as
amended in Article Thirteenth of this Agreement, and excepting only the
provisions contained in Sections 4, 14 and 16, are hereby incorporated in and
made a part of this Agreement. The Notice of Primary Market area, Dealership
Facilities Addendum, Product Addendum, Dealership Identification addendum,
Holding Company Addendum, if applicable, and all guides
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and Standards referred to in this Agreement (including references contained in
the Standard Provisions referred to above) are hereby incorporated in and made a
part of this Agreement. Dealer further agrees to be bound by and comply with:
the Warranty Manual; Seller's Manuals or Instructions heretofore or hereafter
issued by Seller to Dealer; any amendment, revision or supplement to any of the
foregoing; and any other manuals heretofore or hereafter issued by Seller to
Dealer.
ARTICLE SIXTH: Termination of Prior Agreements
This Agreement cancels, supersedes and annuls all prior contracts,
agreements and understandings except as stated herein, all negotiations,
representations and understandings being merged herein. No waiver, modification
or change of any of the terms of this Agreement or change or erasure of any
printed part of this Agreement or addition to it(except filling of blank spaces
and lines) will be valid or binding on Seller unless approved in writing by the
President or an authorized Vice President of Seller.
ARTICLE SEVENTH: Term
This Agreement shall have a term commencing on the effective date hereof
and, subject to its earlier termination in accordance with the provisions of
this Agreement, expiring on the expiration date indicate in the Final Article of
this Agreement. Subject to other applicable provisions hereof, this Agreement
shall automatically terminate at the end of such stipulated term without any
action by Dealer, Seller or any of the other parties hereto.
ARTICLE EIGHTH: License of Dealer
If Dealer is required to secure or maintain a license for the conduct of
its business as contemplated by this Agreement in any state or jurisdiction
where any of its Dealership Operations are to be conducted or any of its
Dealership Facilities are located, this Agreement shall not be valid until and
unless Dealer shall have furnished Seller with written notice specifying the
date and number, if any, of such license or licenses issued to Dealer, Dealer
shall notify Seller immediately in writing if Dealer shall fail to secure or
maintain any and all such licenses or renewal thereof or, if such license or
licenses are suspended or revoked, specifying the effective date of any such
suspension or revocation.
ARTICLE NINTH: Additional Representations and Warranties
(a) All of the representations and covenants made to Seller by the other
parties to this Agreement have been made jointly and severally by each of the
parties hereto which has made any such representation or covenant.
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(b) In addition to the representations set forth elsewhere in this
Agreement, Dealer, UAG Northeast, Inc. and DiFeo Partnership, Inc., jointly and
severally, represent to Seller that:
(i) all of the documents and correspondence provided to seller by
Dealer, UAG Northeast, Inc., DiFeo Partnership, Inc., UAG or any of their agents
in connection with the solicitation of Seller's consent to this Agreement are
true and correct copies of such documents.
(c) In addition to the covenants set forth elsewhere in this Agreement,
Dealer, UAG Northeast, Inc. and DiFeo Partnership, Inc., jointly and severally,
agree with Seller that:
(i) Dealer will at times be involved in the operation of the Nissan
dealership currently operated by it and Dealer will not conduct any other type
of business.
(ii) no distributions will be made to the stockholders of partners of
Dealer, UAG Northeast, Inc. and DiFeo Partnership, Inc., if such distributions
would cause Dealer to fail to meet any of the Guides and Standards relating to
the capitalization of Dealer. In particular, UAG Northeast, Inc. and DiFeo
Partnership, Inc. will not be permitted to voluntarily redeem any of its
preferred stock, if prior to and after giving effect to such redemption Dealer
fails to meet any of the Guides and Standards relating to capitalization of
Dealer.
(iii) The UAG Northeast, Inc., DiFeo Partnership, Inc. and Dealer
hereby, jointly and severally, indemnify and hold harmless, Seller, its
officers, directors, affiliates and agents, and each person who controls Seller
within the meaning of the Securities Act of 1933, as amended (the "Act"), from
and against any and all losses, claims, damages or liabilities, to which they or
any of them may become subject under the Act, the Securities Exchange Act of
1934, as amended, or any other federal or state securities law, rule or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities arise out of the sale by the UAG Northeast, Inc., DiFeo
Partnership, Inc. or Dealer of any securities. The indemnification provided for
in this paragraph shall be exclusive of, and in addition to, any indemnification
pursuant to Section 10 of the Standard Provisions.
(iv) One of the conditions to the effectiveness of this Agreement by
Seller is the delivery of an opinion of counsel to all of the parties hereto
(other than Seller) to the effect that this Agreement has been duly executed and
delivered by each of the parties thereto (other than Seller) and is the legal,
valid and binding obligations of each of such parties enforceable in accordance
with its terms.
ARTICLE TENTH:
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A. Seller's right of First Refusal
In addition to its rights under this Agreement, in the event that UAG
Northeast, Inc., DiFeo Partnership, Inc. or Dealer should desire to enter into a
transaction, which if not approved by Seller, would result in a breach of the
covenants set forth in Article Third, Sections (a)(i), (a)(ii), (a)(iii),
(a)(iv) or (b) of this Agreement or in the event that any of the covenants set
forth i the fourth full paragraph of Article Third, Section (b), Article Forth,
Section (a)(vii) or Article Ninth, Section (c)(ii) of this Agreement are
breached, Seller shall have the additional right and option to purchase the
dealership assets or ownership interests pursuant to this Article Tenth.
(a) If Seller chooses to exercise its right of first refusal, it must do so
in its written refusal to consent to the proposed sale or transfer pursuant to
Section 15 of the Standard provisions or, if Section 15 of the Standard
Provisions does not apply, within sixty (60) days of receipt of notification
that an event triggering Seller's right of first refusal hereunder has occurred.
Dealer agrees not to complete any proposed change or sale prior to the
expiration of the period of exercise of Seller's right of first refusal and
without Seller's prior written consent. Such exercise shall be null and void if
Dealer withdraws its proposal within thirty (30) days following Dealer's receipt
of Seller's notice exercising its rights of first refusal.
(b) After being exercised, Seller's right to purchase may be assigned to
any party, and Seller hereby agrees to guarantee the full payment of the
purchase price by such assignee. Seller's rights under this Article Tenth shall
be binding on and enforceable against any assignee or successor in interest of
Dealer or purchaser of Dealer's assets. Seller shall have no obligation to
exercise its rights hereunder.
(c) If Dealer has entered into a bona fide written buy/sell agreement
respecting its Nissan dealership, Seller's right under this Article Tenth shall
be a right of first refusal, enabling Seller to assume the prospective
purchaser's purchase rights and obligations under such buy/sell agreement. The
purchase price and other terms of sale shall be those set forth in such
agreement and any related documents. Seller may request and Dealer agrees to
provide all other documents relating to Dealer and the proposed transfer,
including, but not limited to, those reflecting any other agreements or
understandings between the parties to the buy/sell agreement. If Dealer refuses
either to provide such documentation or to state in writing that no such
document exists, it shall be presumed that the agreement is not bona fide.
(d) If Seller determines pursuant to paragraph (c) above that the buy/sell
agreement is not bona fide, Seller will so notify Dealer. Dealer shall have ten
(10) days from its receipt
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of such notice within which to withdraw its proposal. Seller's exercise of its
rights hereunder shall be null and void if Dealer withdraws its proposal within
such time period. If the proposal is not withdrawn, Seller shall have the
option, but no obligation, under this Article Tenth to purchase the principal
assets, or the ownership interests, of Dealer, shall include the right to lease
the Dealership Facilities. the purchase price shall be at the then fair market
value as determined by an independent appraiser selected by Seller and
reasonably acceptable to UAG Northeast, Inc. and DiFeo Partnership, Inc. and the
other terms of sale shall be those agreed by Seller, Dealer, UAG Northeast, Inc.
and DiFeo Partnerships, Inc.
(e) Dealer shall transfer the affected property free and clear of liens,
claims, mortgages, and encumbrances.
(f) In addition to any other rights Seller may have at law, in equity or
hereunder, any conveyance of the dealership in violation of this right of first
refusal shall be viable by Seller.
(g) In the event that Seller elects not to exercise its right to purchase
the dealership assets or the ownership interests of the Dealer, UAG Northeast,
Inc. and DiFeo Partnership, Inc.
agree that it will offer to sell such assets or interests to the Dealer's then
current management team or to some other entity or persons acceptable to Seller.
If such individuals are not interested in such a transaction and no other entity
or individuals acceptable to Seller can be found then this Agreement will be
terminable at Seller's option, by deliver of written notice to Dealer.
B. Right of First Refusal on Sale or Lease of Property to a Third Party.
a) In addition to its rights under Articles Third and Fourth and Section 15
of the Standard Provisions, Dealer agrees that should Dealer seek to sell or
lease all or substantially all of the Approved Site to a third party for use as
a Nissan New Motor Vehicle Dealership, Seller shall have the additional right
and option, but not the obligation, to purchase or lease the Approved Site
pursuant to Article Thirteenth. A sale or lease for use other than a Nissan New
Motor Vehicle Dealership is void.
b) If Seller chooses to exercise its right of first refusal, it must do so
by written not delivered to Dealer within 60 days of Seller's receipt of notice
of the proposed sale or lease by Dealer. Dealer agrees not to complete any
proposed sale or lease prior to the expiration of the period for exercise of
Seller's right of first refusal and without Seller's prior written consent, and
agrees to allow Seller to perform an environmental study of the property. Such
exercise shall be null
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and void if Dealer withdraw its sale or lease proposal within thirty (30) days
following Dealer's receipt of Seller's notice exercising right of first refusal.
c) After being exercised, Seller's right to purchase or lease may be
assigned to any party, and Seller hereby agrees to guarantee the full payment of
the purchase price or the rental payment by such assignee. Seller's rights under
this Article Thirteenth shall be binding on an and enforceable against any
assignee or successor in interest of Dealer or purchase of Dealer's assets.
Seller shall have no obligation to exercise its rights hereunder, and Seller may
rescind its offer if the property is determined be contaminated pursuant to an
environmental study. Such contamination shall be deemed a breach of this
agreement by dealer.
d) Should Seller actually purchase or lease the facility, Dealer shall also
furnish to Seller copies of any easements, licenses, environmental studies or
other documents affecting the property.
e) Dealer shall transfer the affected property by deed conveying marketable
title free and clear of liens, claims, mortgages, encumbrances, tenancies and
occupancies, or, if applicable, by an assignment of any existing lease. The
Warranty Deed shall be in proper form for recording. Dealer shall deliver
complete possession of the property at the time of delivery of the Deed or lease
assignment. Dealer shall also furnish to Seller copies of any easements,
licenses, or other documents affecting the property and shall assign any permits
or licenses which are necessary for the conduct of the Dealership Operations.
f) In addition to any other rights Seller may have at law, in equity or
hereunder, any sale or lease of the Approved Site in violation of this right of
first refusal shall be voidable by Seller.
C. Exclusivity Provisions.
In order for Dealer to maintain competitive Dealership Facilities to
effectively market Nissan Products, Dealer hereby agrees to abide by and never
challenge the following provisions (hereinafter "Exclusively Provisions"). These
Exclusivity Provisions shall be effective on or before the execution of the
Agreement, and continue in effect thereafter so long as Dealer (or its
principals) are authorized N___ dealers and these provisions shall be binding on
any successors-in-interest, assigns or purchasers of Dealer:
a) The only line-make of new, unused motor vehicles which Dealer shall
display sell at the Approved Site shall be the Nissan line and make of motor
vehicles. Dealer shall not conduct any dealership operations for any other make
or line of vehicles from the Approved Site.
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b) Dealer shall sell and maintain a full line of Genuine Nissan Parts and
Accessories at the Approved Site and shall provide a full range of automotive
servicing for Nissan vehicles at the Approved Site pursuant to Section 5 of the
Standard Provisions to the Agreement. Nothing contained herein, however, shall
preclude Dealer from offering parts, accessories or servicing for vehicles of
other line or makes so long as such products or services are incidental to
Dealer's Nissan Dealership Operations;
c) Dealer shall not advertise or promote any make or line of new, unused
vehicles from the Approved Site other than the Nissan line; and
d) Dealer shall not install or maintain any sign at or near the Approved
Site which would tend to lead the public into believing that any line or make of
vehicles other than the Nissan line sold at the Approved Site.
ARTICLE ELEVENTH: Breach By Dealer
In the event (i) that any of the representations and warranties of Dealer,
UAG Northeast, Inc. DiFeo Partnership, Inc., UAG, Spielvogel or Samuel contained
in this Agreement shall prove not to have been true and correct when made or
(ii) of any breach or violation of any of the covenants made by Dealer, UAG
Northeast, Inc. and DiFeo Partnership, Inc., UAG, Spielvogel or Samuel in
Articles Third, Fourth and Ninth of this Agreement or upon the occurrence of any
of the events warranting termination of this Agreement as set forth in Section
12.A of the Standard Provisions, Seller may terminate this Agreement, prior to
the expiration date hereof, by giving Dealer written notice thereof, such
termination to be effective upon the date specified in such notice, or such
latter date as may be required by any applicable statute with the effect set
forth in Section 13 of the Standard Provisions.
ARTICLE TWELFTH: Execution of Agreement
This Agreement, and any Addendum or amendment or notice with respect
thereto, shall be valid and binding on Seller when it bears the signature of
either the President or an authorized Vice President of Seller and, when such
signature is a facsimile, the manual countersignature of an authorized employee
of Seller at the Director level and a duplicate original thereof is delivered
personally or by mail to the Dealership location. This Agreement shall bind
Dealer and the other parties hereto only when it is signed by: a duly authorized
officer or executive of Dealer or such party if a corporation; one of the
general partners of Dealer or such party if a partnership; or Dealer or such
party if an individual.
ARTICLE THIRTEENTH: Amendments to Standard Provisions
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(a) Section 1.0 of the Standard Provisions is hereby amended to read as
follows:
"O. 'Principal Owners(s)' shall mean the persons named as Dealer Principal
in the Final Article of this Agreement upon whose personal qualifications,
expertise, integrity, experience, ability and representations Seller has relied
in entering into this Agreement."
(b) Section 6.I of the Standard Provisions is hereby amended to read as
follows:
"Seller shall have the right, at all reasonable times during regular
business hours, to inspect the Dealership Facilities and to examine, audit and
make and take copies of all records, accounts and supporting data relating to
the sale, sales reporting, service and repair of Nissan Products by Dealer.
Whenever possible, Seller shall attempt to provide Dealer with advance notice of
an audit or examination of Dealer's operations. Seller shall also have the
right, at all reasonable times during regular business hours and upon advance
notice, to examine, audit and make and take copies of all records, accounts and
supporting data of UAG Northeast, Inc. and DiFeo Partnership, Inc. relating to
the business, ownership or operations of Dealer."
(c) Section 12.A(1) of the Standard Provisions is hereby amended to read as
follows:
"(1) Any actual or attempted sale, transfer, assignment or delegation,
whether by operation of law or otherwise, by Dealer, UAG Northeast, Inc. and
DiFeo Partnership, Inc. of any interest in or right, privilege or obligation
under this Agreement, or of the principal assets necessary for the performance
of Dealer's responsibilities under this Agreement, without, in either case, the
prior written consent of Seller having been obtained, which consent shall not be
unreasonably withheld;"
(d) Section 12.A(3) of the Standard Provisions is hereby amended to read as
follows:
"(3) Removal, resignation, withdrawal or elimination from Dealer for any
reason of the Executive Manager, or removal, resignation, withdrawal, or
elimination from Dealer of Spielvogel as President, or removal, resignation,
withdrawal or elimination from Dealer of Samuel as Executive Vice President or
Executive Manager; provided, however, in each case, Seller shall give Dealer a
reasonable period of time within which to replace such person with an individual
satisfactory to Dealer as the case may be, and Seller in accordance with Article
Fourth of this Agreement; or the failure of Dealer to retain an Executive
Manager who, in accordance with Article Fourth of this Agreement, in Seller's
reasonable opinion, is competent, possesses the requisite qualifications for the
position, and who will act in a
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manner consistent with the continued interests of both Seller and Dealer."
(e) Section 12.B(2)(i) of the Standard Provisions is hereby amended to read
as follows:
"(i) any dispute, disagreement or controversy between or among Dealer, UAG
Northeast, Inc., DiFeo Partnership, Inc. or UAG and any third party or between
the owners and management personnel of Dealer relating to the management or
ownership of Dealer, UAG Northeast, Inc., and DiFeo Partnership, Inc. develops
or exists which, in the reasonable judgment of Seller, tends to adversely affect
the conduct of the Dealership Operations or the interests of Dealer or Seller;
or"
(f) Section 12.B(2)(ii) of the Standard Provisions is hereby amended to
read as follows:
"(ii) any other act or activity of Dealer, UAG Northeast, Inc. and
DiFeo Partnership, Inc. or any of their owners or management occurs, which
substantially impairs the reputation or financial standing of Dealer or any
of its management subsequent to the execution of this Agreement:"
(g) Exhibits A and B are hereby incorporated by reference.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
_____ effective as of the 18th day of October, 1996 at Carson, California.
SELLER:
NISSAN DIVISION
NISSAN MOTOR DIVISION CORPORATION IN USA
By: /s/ Illegible By: /s/ Illegible
--------------------------------- ------------------------------
Its: Vice President Nissan Division Its: Regional Vice President
DIFEO NISSAN PARTNERSHIP
By: /s/ Carl Spielvogel
---------------------------------
Its: Chairman & CEO
UAG NORTHEAST, INC.
By: /s/ Carl Spielvogel
---------------------------------
Its: Chairman & CEO
DIFEO PARTNERSHIP, INC.
By: /s/ Carl Spielvogel
---------------------------------
Its: Chairman & CEO
CARL SPIELVOGEL
/s/ Carl Spielvogel
---------------------------------
SAMUEL X. DIFEO
/s/ Samuel X. DiFeo
---------------------------------
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<PAGE>
FINAL ARTICLE
The Dealer is DiFeo Nissan Partnership, a partnership formed under the laws of
the State of New Jersey. Dealer is located in Jersey City, New Jersey.
The other parties to this Agreement are UAG Northeast, Inc., a corporation
incorporated under the laws of the state of Delaware, DiFeo Partnership, Inc., a
corporation incorporated under the laws of the state of Delaware, Carl
Spielvogel ("Spielvogel") and Samuel X. DiFeo ("Samuel").
The Dealer Principal and Executive Manager is Samuel X. DiFeo.
Expiration Date: July 1, 2001
Working Capital Guide Requirement: $ 607,308
Net Worth Guide Requirement: $ 818,791
Flooring Line: $1,798,438
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<PAGE>
Attachment "A"
DIFEO NISSAN PARTNERSHIP
Executive Committee See Schedule
Officers "A"
30% Partner 70% Partner
UAG NORTHEAST, INC. DIFEO PARTNERSHIP, INC.
Directors See Schedule Directors See Schedule
Officers "B" Officers "C"
100% Stockholder 100% Stockholder
UNITED AUTO GROUP, INC.
Directors See Schedule
Officers "D"
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<PAGE>
Schedule "A"
DiFeo Nissan Partnership - Executive Committee and Officers
Executive Committee
Marshall S. Cogan
Carl Spielvogel
Arthur J. Rawl
Joseph C. DiFeo
Samuel X. DiFeo
Officers
Carl Spielvogel - Chairman and Chief Executive
Officer
Marshall S. Cogan - President
Arthur J. Rawl - Executive Vice President,
Chief Financial Officer and
Treasurer
George G. Lowrance - Secretary
Tambra S. King - Assistant Secretary
Judith Hershon - Assistant Secretary
Principal Owner/Executive Manager
Samuel X. DiFeo
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<PAGE>
Schedule "B"
UAG Northeast, Inc. - Directors and Officers
Directors
Marshall S. Cogan
Carl Spielvogel
Robert H. Nelson
Officers
Carl Spielvogel - Chairman and Chief Executive
Officer
Marshall S. Cogan - President
Arthur J. Rawl - Executive Vice President,
Chief Financial Officer and
Treasurer
George G. Lowrance - Secretary
Tambra S. King - Assistant Secretary
Judith Hershon - Assistant Secretary
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<PAGE>
Schedule "C"
DiFeo Partnership, Inc. - Directors and Officers
Directors
Marshall S. Cogan
Carl Spielvogel
Robert H. Nelson
Officers
Carl Spielvogel - Chairman and Chief Executive
Officer
Marshall S. Cogan - President
Arthur J. Rawl - Executive Vice President,
Chief Financial Officer and
Treasurer
George G. Lowrance - Secretary
Tambra S. King - Assistant Secretary
Judith Hershon - Assistant Secretary
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<PAGE>
Schedule "D"
United Auto Group, Inc. - Directors and Officers
Directors
Marshall S. Cogan
Carl Spielvogel
Robert H. Nelson
Michael R. Eisenson
John J. Hannan
Jules Kroll
John M. Sallay
Richard Sinkfield
Officers
Carl Spielvogel - Chairman and Chief Executive
Officer
Marshall S. Cogan - Vice Chairman
Arthur J. Rawl - Executive Vice President,
and Chief Financial Officer
George G. Lowrance - Executive Vice President,
Secretary and General
Counsel
The Company will provide prior notice of changes to this Schedule; franchisor
consent thereto is not required.
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<PAGE>
Exhibit "B"
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT ("Agreement"), made this __th day of
_________________ 19__ between United Auto Group, Inc., a Delaware corporation
the address of which is 375 Park Avenue, New York, New York 10152 ("UAG"), TRACE
INTERNATIONAL HOLDINGS, INC., a Delaware Corporation and principal shareholder
of UAG with an address at 375 Park Avenue, New York, New York 10152 ("Trace")
(UAG and Trace are hereinafter referred to as the "Indemnitors") and Nissan
Motor Corporation in U.S.A., a corporation the address of which is 18501 South
Figueroa Street, P.O. Box 191, Gardena, CA 90248-0191 ("Nissan").
WITNESSETH
WHEREAS, UAG has acquired all of the capital stock of various automobile
dealerships, including DiFeo Partnership Nissan of Jersey City, New Jersey
("DiFeo").
WHEREAS, UAG intends to offer and sell certain of its shares (the "Shares")
in a public offering pursuant to the Securities Act of 1933, as amended (the
"Act");
WHEREAS, UAG intends to use a portion of the proceeds from the public
offering to acquire, among other things, new automobile dealerships, repay debt
and provide cash for working capital and general corporate purposes;
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<PAGE>
WHEREAS, Nissan has consented to the transfer of DiFeo, and has agreed to
enter into a Nissan Dealer Sales and Service Agreement (the "Sales and Service
Agreement") with UAG, Carl J. Spielvogel ("Spielvogel") and DiFeo whereby
Spielvogel will serve as Dealer Principal for DiFeo;
WHEREAS, Nissan is not involved in the public offering of the Shares and
has no control over UAG's activities or representations in connection with that
offering or the sale of the Shares; and
WHEREAS, in recognition of Nissan's desire for complete protection against
liability and potential legal action and in order to obtain Nissan's consent to
the transfer of DiFeo and the execution of the Sales and Service Agreement, the
Indemnitors wish to provide in this Agreement for the indemnification of and the
advancing of expenses to Nissan 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 NISSAN
The Indemnitors hereby agree to indemnify and hold harmless Nissan from and
against any and all losses, liabilities, judgments, amounts paid in settlement,
claims, damages and expenses whatsoever incurred investigating, preparing or
defending against any litigation, commenced or threatened, to
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<PAGE>
which Nissan 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 offer and sale of the
Shares, including but not limited to any claim based upon the allegation that
Nissan is a "controlling person" within the meaning of 15 of the Act or 20(a) of
the Exchange Act. In addition, the Indemnitors hereby agree to indemnify and
hold harmless Nissan from any and all claims of the shareholders of UAG with
respect to any matter involving UAG, 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 Nissan that Nissan was liable for such Claim in whole or in
part, the indemnification set forth herein shall be of no force or effect, and
Nissan shall immediately reimburse the Indemnitors for any expenses advanced by
the Indemnitors pursuant to paragraph 3 of this Agreement.
2. NOTIFICATION AND DEFENSE OF CLAIM
(a) If any claim is made or any litigation is commenced against Nissan in
respect of which indemnity may be sought pursuant to this Agreement, Nissan
shall promptly notify the Indemnitors in writing of the claim or the
commencement of any such litigation, and the Indemnitors shall then assume the
defense of any such litigation, including the employment and fees
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<PAGE>
of counsel (reasonably satisfactory to Nissan) and the payment of all such
expenses. Notwithstanding the foregoing, Nissan agrees to first make demand upon
UAG for indemnification pursuant to this Agreement, unless such demand would be
futile.
(b) Nissan shall have the right, as its own expense, to employ its own
counsel in any such case to oversee the litigation on behalf of Nissan, to
consult with the attorneys engaged by the Indemnitors as to the proper handling
of the litigation and to take such actions in connection with the litigation as
are reasonably necessary to protect Nissan's interests. The Indemnitors,
however, shall pay the reasonable fees and expenses of not more than one
additional firm of attorneys for Nissan if the Indemnitors do not assume defense
of any claim or in the event that a conflict of interest arises between Nissan,
the Indemnitors and/or their counsel. In the event that a conflict arises
between Nissan's attorneys and the Indemnitors or Indemnitors' attorneys, the
Indemnitors agree that the conflict will be resolved in Nissan's favor and that
Nissan shall be permitted to continue to retain Nissan's attorneys.
(c) The Indemnitors agree promptly to notify Nissan of the commencement of
any litigation against UAG in connection with the issue and sale of the Shares.
UAG and Nissan agree to cooperate with each other in the defense of any
litigation.
(d) The Indemnitors shall not be obligated to indemnify or reimburse Nissan
under this Agreement for any amounts paid in settlement of any litigation
effected without prior written
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<PAGE>
consent. The Indemnitors shall not, in the defense of any such litigation,
except with Nissan's prior written consent, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to Nissan of a release from
all liability in respect to such litigation. Neither the Indemnitors nor Nissan
shall unreasonably withhold its consent to any proposed settlement.
3. ADVANCEMENT OF EXPENSES
The Indemnitors agree that they will pay any and all expenses incurred by
Nissan in defending any claim, civil or criminal action, suit or proceeding
against Nissan in advance of the time such expenses are due. With respect to
legal fees and disbursements of Nissan's attorneys, the Indemnitors 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.
4. ENFORCEMENT
(a) The Indemnitors expressly confirm and agree that they have entered into
this Agreement and assume the obligations imposed on them in order to induce
Nissan to consent to the transfer of DiFeo and to execute the Sales and Service
Agreement and acknowledge that Nissan is relying upon this Agreement, and other
promises, to grant such consent.
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<PAGE>
(b) In the event Nissan is required to bring any action to enforce rights
or to collect moneys due under this Agreement and is successful in such action,
the Indemnitors shall reimburse Nissan for all of Nissan's reasonable fees and
expenses in bringing and pursuing such action.
5. SUBROGATION
(a) In the event of payment under this Agreement, the Indemnitors shall be
subrogated to the extent of such payment to all of the rights of recovery of
Nissan, which shall execute all papers required and shall do everything that may
be necessary to secure such rights, including the execution of such documents
necessary to enable the Indemnitors effectively to bring suit to enforce such
rights.
(b) The Indemnitors shall not be liable under this Agreement to make any
payment in connection with any Claim or litigation made against Nissan to the
extent Nissan has otherwise actually received payment (under any insurance
policy or otherwise) of the amounts otherwise indemnifiable hereunder, provided,
that nothing contained in this Agreement shall be deemed to require Nissan to
notify its insurance carriers with respect to any Claim or litigation or to seek
payments from such carriers with respect to such Claim or litigation.
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<PAGE>
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,
Trace and Nissan and their respective legal representatives, successor and
assigns.
(c) No amendment, modification or termination of this Agreement shall be
effective unless in writing and signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
UNITED AUTO GROUP, INC.
By: /s/ Carl Spielvogel
-------------------------------
President
TRACE INTERNATIONAL HOLDINGS, INC.
By: /s/ Marshall S. Cogan
-------------------------------
Title:
NISSAN MOTOR CORPORATION IN U.S.A.
By: /s/ Michael J. Seergy
-------------------------------
Title: Regional Vice President
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<PAGE>
EXHIBIT A
This Exhibit is incorporated by reference in and is a part of the Nissan Dealer
Term Sales and Service Agreement between Dealer and Seller dated October 18,
1996.
Article THIRTEENTH (6)is hereby amended to read as follows:
If any person or entity, after the date of the initial public offering,
acquires more than 20% of UAG's common stock issued and outstanding at any
time and Nissan determines that such person or entity does not have
interests comparable with those of Nissan, or is otherwise not qualified to
have an ownership interest in a Nissan dealership (an "Adverse Person"),
UAG must terminate its dealer agreements with Nissan or transfer the Nissan
dealerships to a third party acceptable to Nissan unless, within 90 days
after Nissan's determination, the Adverse Person's ownership interest is
reduced to less than 20%.
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<PAGE>
DEALER:
DiFeo Nissan Partnership
- --------------------------------------------------------------------------------
(Name)
________________________________________________________________________________
(Doing Business As)
By /s/ Samuel X. DiFeo SELLER:
----------------------------- NISSAN DIVISION
(SIGNATURE) NISSAN MOTOR CORPORATION IN U.S.A.
Samuel DiFeo
-----------------------------
(TYPE NAME & TITLE) By /s/legible
---------------------------------
(SIGNATURE)
Jersey City NJ
---------------------------- Vice President Nissan Division
City State -----------------------------------
(TYPE NAME & TITLE)
____________________________
Dealer Code
By /s/ Michael J. Seergy
---------------------------------
(SIGNATURE)
Michael J. Seergy
Regional Vice President
---------------------------------
(TYPE NAME & TITLE)
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<PAGE>
Exhibit 10.2.9.2
NISSAN DEALER
SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
NISSAN DIVISION
NISSAN MOTOR CORPORATION IN U.S.A.
<PAGE>
NISSAN
DEALER SALES & SERVICE AGREEMENT
The following Standard Provisions have by reference been incorporated in and
made a part of the Nissan Dealer Sales & Service Agreement which they accompany
and which has been executed on behalf of Seller and Dealer.
Section 1. Definitions
Seller and Dealer agree that the following terms, as used in this Agreement,
shall be defined exclusively as set forth below.
A. "Authorized Nissan Dealers" shall mean dealers located in the
Territory that are authorized by Seller to conduct Dealership Operations in
connection with the sale of Nissan Products, pursuant to a duly executed Nissan
Dealer Sales and Service Agreement.
B. "Nissan Cars" shall mean the new passenger cars specified in the
current Product Addendum.
C. "Nissan Trucks" shall mean the new trucks, cab and chassis, utility
vehicles, buses or vans specified in the current Product Addendum.
D. "Nissan Vehicles" shall mean Nissan Cars and Nissan Trucks.
E. "Genuine Nissan Parts and Accessories" shall mean such parts,
accessories and other products for Nissan Vehicles as are from time to time
offered for sale by Seller to Authorized Nissan Dealers for resale under this
Agreement.
F. "Nissan Products" shall mean Nissan Vehicles and Genuine Nissan Parts
and Accessories.
G. "Competitive Vehicles" shall mean those new vehicles which are
considered by Seller to be directly competitive with Nissan Vehicles.
H. "Industry Cars" shall mean all new cars of all manufacturers which are
sold and distributed within the United States, to the extent data relating to
registration thereof are reasonably available.
I. "Competitive Truck Segment" shall include all compact pickup trucks,
compact utility vehicles, and compact buses of all manufacturers which are sold
and distributed within the United States, to the extent data relating to
registration therefor are reasonably available.
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<PAGE>
J. "Dealership Location" shall mean the place or places of business of
Dealer established and described in accordance with Section 2 of this Agreement.
K. "Dealership Facilities" shall mean the land areas at the Dealership
Location and the buildings and improvements erected thereon provided by Dealer
in accordance with Section 2 of this Agreement.
L. "Dealership Facilities Addendum" shall mean the addendum executed by
Seller and Dealer pursuant to Section 2 of this Agreement.
M. "Dealership Operations" shall mean all dealer functions contemplated
by this Agreement including, without limitation, sale and servicing of Nissan
Products, use and display of Nissan Marks and Nissan Products, rental and
leasing of Nissan Vehicles, sales of used vehicles, body shop work, financing or
insurance services and any other activities undertaken by Dealer in connection
with Nissan Products whether conducted directly or indirectly by Dealer.
N. "Primary Market Area" shall mean the geographic area which is
designated from time to time as the area of Dealer's sales and service
responsibility for Nissan Products in a Notice of Primary Market Area issued by
Seller to Dealer. Seller reserves the right, in its reasonable discretion, to
issue new, superseding "Notices of Primary Market Area" to Dealer from time to
time. Such geographic area may at any time be applicable to Dealer and to other
Authorized Nissan Dealers.
O. "Principal Owner(s)" shall mean the person(s) named as Principal
Owner(s) in the Final Article of this Agreement upon whose personal
qualifications, expertise, reputation, integrity, experience, ability and
representations concerning the management and operation of Dealer, Seller has
relied in entering this Agreement.
P. "Other Owner(s)" shall mean the person(s) named as Other Owner(s) in
the Final Article of this Agreement who will not be involved in the operation or
management of Dealer.
Q. "Executive Manager" shall mean the person named as Executive Manager
in the Final Article of this Agreement upon whose personal qualifications,
expertise, reputation, integrity, experience, ability and representations that
he or she shall devote his or her primary efforts to and have full managerial
authority and responsibility for the day-to-day management and performance of
Dealer, Seller has relied in entering into this Agreement.
R. "Successor Addendum" shall mean the Successor Addendum, if any,
executed by Seller and Dealer pursuant to Section 14 of this Agreement.
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<PAGE>
S. "Guides" shall mean such reasonable standards as may be established by
Seller for Authorized Nissan Dealers from time to time under its standard
procedures with respect to such matters as dealership facilities, tools,
equipment, financing, capitalization, inventories, operations and personnel.
The execution of this Agreement or of any addenda hereto (including, without
limitation, any Dealership Facilities Addendum) shall not, however, be construed
as evidence of Dealer's fulfillment of or compliance with said Guides or of
Dealer's fulfillment of its responsibilities under this Agreement.
T. "Warranty Manual" shall mean the publication or publications of
Seller, as the same may from time to time be amended, revised or supplemented,
which set forth Seller's policies and procedures concerning the administration
of Seller's warranties and related matters.
U. "Nissan Marks" shall mean those trademarks, service marks, names,
logos and designs that Seller may, from time to time, use or authorize for use
by Dealer in connection with Nissan Products or Dealership Operations including,
without limitation, the name "Nissan".
V. "Seller's Manuals and Instructions" shall mean those bulletins,
manuals or instructions issued by Seller to all Authorized Nissan Dealers
advising them of Seller's policies or procedures under this Agreement including,
without limitation, the Parts and Accessories Policy and Procedures Manual and
the Nissan Dealer Accounting System Manual.
W. "Territory" shall mean the geographic area in which Seller has been
authorized by Manufacturer to distribute Nissan Products.
X. "Product Addendum" shall mean the Product Addendum issued by Seller to
Dealer which specifies those Nissan Vehicles which shall be offered for sale by
Seller to Dealer for resale. Seller reserves the right, in its sole discretion,
to issue new, superseding Product Addenda to Dealer from time to time.
Y. "Dealer Identification Addendum" shall mean the Dealer Identification
Addendum executed by Seller and Dealer pursuant to Section 6.C of this
Agreement.
Section 2. Dealership Location
and Dealership Facilities
A. Location and Facilities.
Dealer shall provide, at the Dealership Location approved by Seller in
accordance with Section 2.B hereof, Dealership Facilities that will enable
Dealer to effectively perform its
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<PAGE>
responsibilities under this Agreement and which are reasonably equivalent to
those maintained by Dealer's principal competitors in the geographic area in
which Dealer's Primary Market Area is located. In addition, the Dealership
Facilities shall be satisfactory in space, appearance, layout, equipment,
signage and otherwise be substantially in accordance with the Guides therefor
established by Seller from time to time. Dealer shall conduct its Dealership
Operations only from Dealership Location specified in the Dealership Facilities
Addendum. If the Dealership Location is comprised of more than one place of
business, Dealer shall use each such place of business only for the purposes
specified therefor in the current Dealership Facilities Addendum.
B. Dealership Facilities Addendum.
Dealer and Seller will execute a Dealership Facilities Addendum which will
include a description of the Dealership Location and the Dealership Facilities,
the approved use for each such place of business and facility, and the current
Guides therefor.
C. Changes and Additions.
Dealer shall not move, relocate, or change the usage of the Dealership Location
or any of the Dealership Facilities, or substantially modify any of the
Dealership Facilities, nor shall Dealer or any person named in the Final Article
of this Agreement directly or indirectly establish or operate any other
locations or facilities for the sale or servicing of Nissan Products or for the
conduct of any other of the Dealership Operations contemplated by this
Agreement, without the prior written consent of Seller. Any changes in the
Dealership Location or the Dealership Facilities that may be agreed to by Seller
and Dealer shall be reflected in a new, superseding Dealership Facilities
Addendum executed by Seller and Dealer.
D. Assistance Provided by Seller.
To assist Dealer in planning, establishing and maintaining the Dealership
Facilities, Seller, at the request of Dealer, will from time to time make its
representatives available to Dealer to provide standard building layout plans,
facility planning recommendations, and counsel and advice concerning location
and facility planning.
E. Evaluation of Dealership Facilities and Location.
Seller will periodically evaluate Dealer's performance of its responsibilities
under this Section 2. In making such evaluations, Seller will give
consideration to: the actual land and building space provided by Dealer for the
performance of its responsibilities under this Agreement; the current Guides
established by Seller for the Dealership Facilities; the appearance, condition
and layout of the Dealership Facilities; the location of the Dealership
Facilities relative to the sales
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<PAGE>
opportunities and service requirements of the Primary Market Area; equivalence
with facilities maintained by Dealer's principal competitors; and such other
factors, if any, as may directly relate to Dealer's performance of its
responsibilities under this Section 2. Evaluations prepared pursuant to this
Section 2.E will be discussed with and provided to Dealer, and Dealer shall have
an opportunity to comment, in writing, on such evaluations, and Seller will
consider Dealer's comments. Dealer shall promptly take such action as may be
required to correct any deficiencies in Dealer's performance of its
responsibilities under this Section 2.
Section 3. Vehicle Sales
Responsibilities of Dealer
A. General Obligations of Dealer.
Dealer shall actively and effectively promote through its own advertising and
sales promotion activities the sale at retail (and if Dealer elects, the leasing
and rental) of Nissan Vehicles to customers located within Dealer's Primary
Market Area. Dealer's Primary Market Area is a geographic area which Seller
uses as a tool to evaluate Dealer's performance of its sales obligations
hereunder. Dealer agrees: that it has no right or property interest in any
such geographic area which Seller may designate; that, subject to Section 4 of
this Agreement, Seller may add, relocate or replace dealers in Dealer's Primary
Market Area; and that Seller may, in its reasonable discretion, change Dealer's
Primary Market Area from time to time.
B. Sales of Nissan Cars and Nissan Trucks.
Dealer's performance of its sales responsibility for Nissan Cars and Nissan
Trucks will be evaluated by Seller on the basis of such reasonable criteria as
Seller may develop from time to time, including for example:
1. Achievement of reasonable sales objectives which may be established
from time to time by Seller for Dealer as standards for performance;
2. Dealer's sales of Nissan Cars and Nissan Trucks in Dealer's Primary
Market Area and/or the metropolitan area in which Dealer is located, as
applicable, or Dealer's sales as a percentage of:
(i) registration of Nissan Cars and Nissan Trucks;
(ii) registration of Competitive Vehicles;
(iii) registration of Industry Cars;
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<PAGE>
(iv) registration of vehicles in the Competitive Truck Segment;
3. A comparison of Dealer's sales and/or registrations to sales and/or
registrations of all other Authorized Nissan Dealers combined for Seller's Sales
Region and District in which Dealer is located and, where Section 3.C applies,
for all other Authorized Nissan Dealers combined in the metropolitan area in
which Dealer is located; and
4. A comparison of sales and/or registrations achieved by Dealer to the
sales or registrations of Dealer's competitors.
The sales and registration data referred to in this Section 3 shall be
those utilized in Seller's records or in reports furnished to Seller by
independent sources selected by it and generally available for such purpose in
the automotive industry. If such reports of registration and/or sales are not
generally available, Seller may rely on such other registration and/or sales
data as can be reasonably obtained by Seller.
C. Metropolitan Markets.
If Dealer is located in a metropolitan or other marketing area where there are
located one or more Authorized Nissan Dealers other than Dealer, the combined
sales performance of all Nissan Dealers in such metropolitan or other marketing
area may be evaluated as indicated in Sections 3.B.2 and 3.B.3 above, and
Dealer's sales performance may also be evaluated on the basis of the proportion
of sales and potential sales of Nissan Vehicles in the metropolitan or other
marketing area in which Dealer is located for which Dealer fairly may be held
responsible.
D. Additional Factors for Consideration.
Where appropriate in evaluating Dealer's sales performance, Seller will take
into account such reasonable criteria as Seller may determine from time to time,
including, for example, the following: the Dealership Location; the general
shopping habits of the public in such market area; the availability of Nissan
Vehicles to Dealer and to other Authorized Nissan Dealers; any special local
marketing conditions that would affect Dealer's sales performance differently
from the sales performance of other Authorized Nissan Dealers; the recent and
long term trends in Dealer's sales performance; the manner in which Dealer has
conducted its sales operations (including advertising, sales promotion, and
treatment of customers); and the other factors, if any, directly affecting
Dealer's sales opportunities and performance.
E. Used Motor Vehicle Sales.
Dealer shall engage in used motor vehicle operations as and to the extent
reasonably required for Dealer to effectively perform
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<PAGE>
its responsibilities for the sale of Nissan Vehicles. Subject to requirements
and guidelines established by Seller, Dealer shall be entitled to identify such
used motor vehicle operations as a part of its Dealership Operations and to
apply the Nissan Marks relating to used motor vehicle operations.
F. Dealer Sales Personnel.
Dealer shall organize and maintain a sales organization that includes a
sufficient number of qualified and trained sales managers and sales people to
enable Dealer to effectively fulfill its responsibilities under this Section 3.
Seller may, from time to time, comment on or advise Dealer concerning the
qualifications, performance and ability of Dealer's sales personnel as the same
affect Dealer's performance of its obligations under this Section 3.
G. Assistance Provided by Seller.
1. Sales Training Courses.
Seller will offer from time to time sales training courses for Dealer sales
personnel. Based on its need therefor, Dealer shall, without expense to Seller,
have members of Dealer's sales organization attend such training courses and
Dealer shall cooperate in such courses as may from time to time be offered by
Seller.
2. Sales Personnel.
To further assist Dealer, Seller will provide to Dealer advice and counsel on
matters relating to new vehicle sales, sales personnel training and management,
merchandising, and facilities used for Dealer's vehicle sales operations.
H. Evaluation of Dealer's Sales Performance.
Seller will periodically evaluate Dealer's performance of its responsibilities
under this Section 3. Evaluations prepared pursuant to this Section 3.H will be
discussed with and provided to Dealer, and Dealer shall have an opportunity to
comment, in writing, on such evaluations. Dealer shall promptly take such
action as may be required to correct any deficiencies in Dealer's performance of
its responsibilities under this Section 3.
Section 4. Determination of
Dealer Representation
A. Development of Market Studies.
Seller may, from time to time and in its sole discretion, conduct studies of
various geographic areas to evaluate market
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<PAGE>
conditions. Such market studies may, where appropriate, take into account such
factors as geographical characteristics, consumer shopping patterns, existence
of other automobile retail outlets, sales opportunities and service requirements
of the geographic area in which Dealer's Primary Market Area is located, trends
in marketing conditions, current and prospective trends in population, income,
occupation, and such other demographic characteristics as may be determined by
Seller to be relevant to its study. Such studies will make recommendations
concerning the market, the Dealership Facilities, and the Dealership Location.
Prior to conducting a study which includes the geographic area in which Dealer's
Primary Market Area is located, Seller will notify Dealer of its intention to
conduct such a study. Dealer will be given the opportunity to present to Seller
such information pertaining to such study as Dealer believes may be relevant.
Seller will consider all relevant information timely provided by Dealer before
concluding its study.
B. Appointment of New Authorized Nissan Dealers to Fill Open Points.
1. If any study conducted pursuant to Section 4.A recommends that an open
point be established at a location that is within ten (10) miles driving
distance, by the shortest publicly traveled route, of Dealer's main Dealership
Location, Seller will so notify Dealer. Dealer will have thirty (30) days from
Dealer's receipt of notice of the recommendations of the study in which to
object to them. Upon Dealer's request, Seller will review the results of the
study with Dealer (excluding information considered by Seller to be
confidential). Seller will consider all objections to the recommended open
point timely made by Dealer. Prior to entering into a Nissan Dealer Sales and
Service Agreement with a New Authorized Nissan Dealer filling such an open
point, Seller will give Dealer written notice of its intent to fill the open
point (hereinafter the "Notice of Appointment"). If Dealer timely files a
Notice of Appeal (as defined in Section 16.B hereof) with the Policy Review
Board (as defined in Section 16.A hereof) in accordance with the procedures
established in Section 16.B therefor, Seller will not enter into a Nissan Dealer
Sales and Service Agreement appointing such New Authorized Nissan Dealer until
the Policy Review Board has rendered its decision on the matter.
2. Nissan reserves the right to sell Nissan Products to others and to
appoint Authorized Nissan Dealers within and outside the ten (10) miles driving
distance described above. However, Seller agrees that it will not enter into a
Nissan Dealer Sales and Service Agreement appointing a New Authorized Nissan
Dealer filling an open point which is located within the ten (10) miles driving
distance described above unless the study made pursuant to Section 4.A
demonstrates in Seller's good faith opinion that the declaration of an open
point is warranted by market or economic conditions.
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3. Nothing in this Agreement shall be construed to require Dealer's
consent to the appointment of a New Authorized Nissan Dealer at a location that
is within the ten (10) miles driving distance described above. Nothing in this
Agreement shall be construed to grant Dealer any rights in connection with the
appointment of an Authorized Nissan Dealer at a location that is not within the
ten (10) miles driving distance described above. In addition, this Section 4.B
does not apply to, nor shall it be construed to grant Dealer any rights in
connection with any of the events or transactions excluded from the definition
of "New Authorized Nissan Dealer" in Section 4.B.4(a), (b) or (c) below.
4. "New Authorized Nissan Dealer" shall mean an Authorized Nissan Dealer
that has not previously executed a Nissan Dealer Sales and Service Agreement or
done business as an Authorized Nissan Dealer; provided, however, that "New
Authorized Nissan Dealer" shall not include an Authorized Nissan Dealer who:
(a) is a Successor Dealer appointed pursuant to Section 14, (b) is a purchaser
or transferee of the assets of or ownership interests in an Authorized Nissan
Dealer that is appointed as an Authorized Nissan Dealer pursuant to Section 15,
or (c) who is approved as a Nissan Dealer following or resulting from:
(i) a change in name or form of an Authorized Nissan Dealer;
(ii) any other sale, exchange or other transfer of any ownership interests
in or any assets of any other Authorized Nissan Dealer, by operation of law or
otherwise and whether voluntary and involuntary;
(iii) an assignment, sale or other transfer of any interest in a Nissan
Dealer Sales and Service Agreement, by operation of law or otherwise and whether
voluntary or involuntary:
(iv) the relocation of an existing Authorized Nissan Dealer; or
(v) the replacement of a former Authorized Nissan Dealer where the
appointment of such replacement Dealer takes place within (2) years of the date
on which the former Dealer ceased doing business and where such replacement
Dealer's main Dealership Location is located within a five (5) mile driving
distance by the shortest publicly traveled route of the former Dealer's main
Dealership Location;
regardless of whether any of the foregoing actions, individually or
collectively, result in the appointment of an Authorized Nissan Dealer at a
location that is within or without the ten (10) miles driving distance described
above.
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Section 5. Responsibility of Dealer
with Respect to Service and Parts
A. General Service Obligations of Dealer.
Dealer understands and acknowledges that future sales of Nissan Products depend,
in part, upon the satisfaction of Dealer's customers with its servicing of such
Products. Dealer further recognizes that Seller has entered into this Agreement
in reliance upon Dealer's representations concerning its ability and commitment
to fair dealing and professional servicing. Accordingly, Dealer shall develop
and maintain a quality service organization and shall render at the Dealership
Facilities prompt, efficient and courteous service to owners and users of Nissan
Products, regardless of the origin of purchase, including, without limitation,
the specific obligations described in Section 5.B. In this regard, Dealer shall
take all reasonable steps to insure that: the service needs of its customer's
Nissan Vehicles are accurately diagnosed; Dealer's customers are advised of such
needs and that each customer's consent is obtained prior to initiation of any
repairs; necessary repairs and maintenance are professionally performed; and
Dealer's customers are treated courteously and fairly.
B. Specific Service Obligations of Dealer.
1. Pre-Delivery Inspections and Service.
Dealer shall perform or be responsible for the performance of pre-delivery
inspections and service on each Nissan Vehicle prior to sale and delivery
thereof by Dealer, in accordance with the standards and procedures relating
thereto set forth in the applicable pre-delivery inspection schedules furnished
by Seller to Dealer from time to time. The completion of such inspection and
service shall be verified by Dealer on forms supplied or approved by Seller for
this purpose. Dealer shall retain the original or a legible copy of each such
form in its records and shall furnish a copy to the purchaser.
2. Warranty Repairs and Goodwill Adjustments.
Dealer shall promptly, courteously and efficiently perform: (i) warranty
repairs on each Nissan Product which qualifies for such repairs under the
provisions of any warranty furnished therewith by Seller, Manufacturer or the
manufacturer of the Product; and (ii) such other inspections, repairs or
corrections on Nissan Products as may be approved or authorized by Seller to be
made at Seller's expense (hereinafter referred to as "goodwill adjustments").
Dealer shall perform such repairs and service on each such Nissan Product as and
when required and requested by the owner or user (or in the case of goodwill
adjustments when requested by Seller), without regard to its origin of purchase
and in accordance with the provisions relating thereto set forth
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in the Warranty Manual or in Seller's Manuals or Instructions issued to Dealer
from time to time. In performing such repairs and service on Nissan Products
for which Seller has agreed to reimburse Dealer, Dealer shall use Genuine Nissan
Parts and Accessories unless Dealer receives prior authorization from Seller to
use non-genuine parts or accessories. Dealer will provide to each owner or user
of a Nissan Product upon which any such repairs or service are performed a copy
of the repair order reflecting all services performed.
3. Campaign Inspections and Corrections.
Dealer shall promptly, courteously and efficiently perform such campaign
inspections and/or corrections for owners and users of Nissan Products,
regardless of their origin of purchase, as are: (i) described in owner
notifications and recall campaigns conducted by Seller in furtherance of any
federal or state law, regulation, rule or order; or (ii) requested by Seller on
Nissan Products that qualify for such inspections and/or corrections. Once
Dealer has been notified that a recall or service campaign affects a particular
class or type of Nissan Product, Dealer shall perform such campaign inspections
and/or corrections on all affected Nissan Products then in or which thereafter
come into Dealer's inventory or which are delivered to Dealer for repair or
service. Dealer shall inquire, through the Nissan Datanet system or otherwise,
with respect to each such Nissan Product to determine whether all applicable
campaign inspections and/or corrections have been performed on such Nissan
Product and, if they have not been performed, Dealer shall perform them.
Dealer shall advise Seller as and when such campaign inspections and/or
corrections are performed, in accordance with Seller's Manuals or Instructions
relating thereto and in accordance with the provisions relating thereto set
forth in the Warranty Manual. To enable Dealer to perform required corrections
as promptly as practicable, parts and/or other materials required for each such
campaign may be shipped in quantity and billed to Dealer. Dealer shall accept
and retain such parts and/or other materials for use in such campaign. Upon
completion of the campaign program, Dealer shall have the right to return excess
parts shipped by Seller to Dealer for such campaign, but only to the extent that
Dealer has not ordered and received additional parts from Seller. Such a return
of parts shall be apart from any other parts return policies or programs which
may be instituted by Seller. In performing such campaign corrections for which
Seller has agreed to reimburse Dealer for parts and materials used in making
such corrections, Dealer shall use Genuine Nissan Parts and Accessories unless
Dealer receives prior authorization from Seller to use non-genuine parts and
accessories.
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4. Maintenance and Repair Service.
Dealer shall promptly, courteously and efficiently maintain and repair Nissan
Products as and when required and requested by the owner or user thereof,
without regard to their origin of purchase. Dealer shall provide all owners and
users for whom Dealer provides maintenance and repair service itemized invoices
reflecting all the services performed. In connection with its sale or offering
for sale of any maintenance services recommended by Seller for the maintenance
of a Nissan Product, Dealer shall advise each customer requesting such
recommended maintenance service of: (i) a description of the items included in
maintenance recommended by Seller and Dealer's price therefor; and (ii) the
price and description of such additional maintenance or repair being sold or
recommended by Dealer which are in addition to that recommended by Seller in
published owner's manuals.
5. Payments by Seller to Dealer.
For pre-delivery inspections and service, warranty repairs, goodwill
adjustments, and campaign inspections and corrections performed by Dealer in
accordance with this Section 5.B, Seller shall fairly and adequately reimburse
Dealer for the parts and/or other materials (or shall provide Dealer with the
parts and/or other materials) and their labor required and used in connection
therewith in accordance with the provisions relating thereto set forth in the
Warranty Manual. Dealer understands and acknowledges that such repairs are
provided for the benefit of owners and users of Nissan Products, and Dealer
shall not impose any charge on such owners or users for parts, materials, or
labor for which Dealer has received or will receive compensation from Seller
hereunder.
Dealer shall comply with the disposition instructions contained in the
Warranty Manual with respect to any Genuine Nissan Parts or Accessories acquired
by Dealer as a result of its performance of warranty repairs, goodwill
adjustments and campaign adjustments and/or corrections.
C. Service Operations of Dealer.
1. Dealer Personnel.
Dealer shall organize and maintain, substantially in accordance with Seller's
Guides, a complete service organization that includes a competent, trained
service manager and a sufficient number of trained service and customer
relations personnel to enable Dealer to fulfill its responsibilities for service
and customer relations under this Section 5. Dealer shall designate at least
one member of its staff who shall be responsible for resolving consumer
complaints on behalf of Dealer. Dealer shall, without expense to Seller, have
members of Dealer's service organization attend training courses offered by
Seller and Dealer
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shall cooperate with and participate in such training courses as may from time
to time be offered by Seller. Dealer agrees that its personnel will meet such
educational, management and technical training standards as Seller may establish
or approve. Seller may, from time to time, comment on or advise Dealer
concerning the qualifications, performance and ability of Dealer's service
personnel as the same affect Dealer's performance of its obligations under this
Section 5.
2. Compliance with Laws.
In performing the maintenance and service obligations specified in Section 5.B,
Dealer shall comply with all applicable provisions of federal, state and local
laws, ordinances, rules, regulations and orders affecting Nissan Products
including, but not limited to, laws relating to safety, emissions control, noise
control and customer service. Seller shall provide to Dealer, and Dealer shall
provide to Seller, such information and assistance as may be reasonably
requested by the other in connection with the performance of obligations of the
parties under such laws, ordinances, rules, regulations and orders. if
applicable law requires the installation or supply of equipment not installed or
supplied as standard equipment by Seller or the manufacturer of a Nissan
Vehicle, Dealer shall, prior to its sale of the Nissan Vehicles on or for which
such equipment is required, install or supply such equipment at its own expense
and in conformance with such standards as may be adopted by Seller. Dealer
shall comply with all applicable laws pertaining to the installation or supply
of such equipment including, without limitation, the reporting thereof.
3. Tools and Equipment.
Dealer shall provide for use in its service operations such service equipment
and special tools, comparable to the type and quality recommended by Seller from
time to time, as are necessary to meet Dealer's service responsibilities
hereunder and as are substantially in accordance with Seller's Guides. In
addition, Dealer shall obtain and maintain for use in its service operations all
tools which are essential to the proper service, repair and maintenance of
Nissan Vehicles and are identified by Seller as essential tools. Seller shall
ship such essential tools to Dealer as required due to new model and component
introductions and Dealer shall pay Seller therefor as invoiced. If Dealer is in
possession of a tool equivalent to any essential tool shipped by Seller, Dealer
may so notify Seller and Seller will exempt Dealer from purchasing such
essential tool from Seller upon Seller's determination that Dealer's tool will
satisfy the need for the specific repair procedure or procedures for which the
essential tool is intended. Dealer shall maintain all such equipment and tools
in good repair and proper calibration so as to enable Dealer to meet its service
responsibilities under this Section 5.
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4. Owner Relations.
In providing service on Nissan Products, Dealer shall make every effort to build
and maintain good relations between Dealer and owners and users of Nissan
Products. Dealer shall promptly investigate and handle all matters brought to
its attention by Seller, owners or users of Nissan Products, or any public or
private agency, relating to the sale or servicing of Nissan Products, so as to
develop and maintain owner and user confidence in Dealer, Seller and Nissan
Products.
Dealer shall promptly report to Seller the details of each inquiry or
complaint received by Dealer relating to any Nissan Product which Dealer cannot
handle promptly and satisfactorily. Dealer will take such other steps with
respect to such customer complaints as Seller may reasonably require. Dealer
will do nothing to affect adversely Seller's rights or obligations under
applicable laws, rules and/or regulations. Furthermore, Dealer shall
participate in and cooperate with such dispute resolution procedures as Seller
may designate from time to time and such other procedures as may be required by
law.
Seller will promptly investigate all matters brought to its attention by
Dealer, owners or users of Nissan Products, or any public or private agency,
relating to the design, manufacture or sale by Seller of Nissan Products, and
Seller will take such action as it may deem necessary or appropriate so as to
develop and maintain owner confidence in Seller, Dealer and Nissan Products.
D. Parts Operations of Dealer.
1. Parts Sales Responsibility of Dealer.
Dealers shall actively and effectively promote through its own advertising and
sales promotion activities the sale of Genuine Nissan Parts and Accessories to
service, wholesale, retail and other customers within Dealer's Primary Market
Area.
2. Dealer Personnel.
Dealer shall organize and maintain, substantially in accordance with Seller's
recommendations with respect thereto, a complete parts organization that
includes a competent, trained parts manager and a sufficient number of trained
parts personnel to enable Dealer to fulfill its responsibilities under this
Section 5. Based on its need therefor, Dealer shall, without expense to Seller,
have members of Dealer's parts organization attend training courses offered by
Seller and Dealer shall cooperate in such training courses as may from time to
time be offered by Seller. Seller may, from time to time, comment on or advise
Dealer concerning the qualifications, performance and ability of Dealer's parts
personnel as the same affect Dealer's performance of its obligations under this
Section 5.
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3. Inventories of Parts and Accessories.
Dealer shall maintain at all times a stock of parts and accessories which is
adequate to meet its service and wholesale and retail parts sales
responsibilities under this Section 5. Dealer shall also maintain, subject to
the ability of Seller to supply the products ordered by Dealer, a stock of
Genuine Nissan Parts and Accessories of an assortment and in quantities adequate
to meet customer demand and for warranty repairs, goodwill adjustments and
campaign corrections made pursuant to this Section 5.
E. Assistance Provided by Seller.
1. Service and Parts Manuals.
Seller will make available to Dealer, for use by Dealer's service and parts
personnel, Seller's Manuals or Instructions concerning Dealer's services and
parts operations and other sources of information and technical data as Seller
deems necessary to permit Dealer to perform its service and parts
responsibilities under this Section 5. Dealer shall keep such information and
data current and available for consultation by Dealer's service and parts
employees.
2. Service and Parts Field Personnel.
To further assist Dealer, Seller will provide to Dealer the advice and counsel
of its service and parts field personnel on matters relating to service, parts
and accessories, including technical diagnosis, service and parts management,
merchandising, personnel training, owner relations, and facilities used for
Dealer's service and parts operations.
F. Evaluation of Dealer's Service and Parts Performance.
Dealer's performance of its service and parts responsibilities will be evaluated
by Seller on the basis of such reasonable criteria as Seller may develop from
time to time, including for example:
1. Dealer's performance in building and maintaining consumer confidence
in Dealer and in Nissan Products as measured by surveys or indices of consumer
satisfaction as compared with performance levels achieved by other Authorized
Nissan Dealers in Seller's Region or District in which Dealer is located or such
other means as may be deemed appropriate by Seller;
2. Reasonable parts purchase or sales performance objectives which may be
established from time to time by Seller for Dealer;
3. Dealer's advertising and promotion of its parts and service
operations;
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4. Dealer's performance of its service responsibilities and Dealer's
conduct of its service operations including, without limitation, the financial
results of its service operations, labor sales, warranty claims practices
training of service personnel, qualification, performance and ability of service
personnel, and inventory of special and essential tools and service equipment,
as compared with Seller's Guide therefor where such have been established and/or
as compared with performance levels achieved by other Authorized Nissan Dealers
in Seller's Region or District in which Dealer is located;
5. Dealer's performance of its parts sales responsibilities and Dealer's
conduct of its parts operations including, without limitation, the financial
results of its parts operations, training of parts personnel, and inventory of
parts, as compared with Seller's Guides therefor where such have been
established and/or as compared with performance levels achieved by other
Authorized Nissan Dealers in Seller's Region or District in which Dealer is
located; and
6. Evaluation reports resulting from any audit or review of Dealer's
service or parts operations by Seller's representatives.
Seller will periodically evaluate Dealer's performance of its
responsibilities under this Section 5. Evaluations prepared pursuant to this
Section 5 will be discussed with and provided to Dealer, and Dealer shall have
an opportunity to comment, in writing, on such evaluations. Dealer shall
promptly take such action as may be required to correct any deficiencies in
Dealer's performance of its responsibilities under this Section 5.
Section 6. Other Seller and
Dealer Responsibilities
A. Advertising and Promotion.
1. Advertising Standards.
Both Seller and Dealer recognize the need for maintaining the highest standards
of ethical advertising which is of a quality and dignity consonant with the
reputation and standing of Nissan Products. Accordingly, neither Seller nor
Dealer shall publish or cause to be published any advertising relating to Nissan
Products that is not in compliance with all applicable federal, state and local
laws, ordinances, rules, regulations and orders or that is likely to mislead,
confuse or deceive the public or impair the goodwill of Manufacturer, Seller or
Dealer or the reputation of Nissan Products or the Nissan Marks.
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2. Display by Dealer.
Dealer shall prominently state upon its stationery and other printed matter that
it is an Authorized Nissan Dealer.
3. Sales Promotion.
Seller will establish and maintain comprehensive advertising programs to promote
the sale of Nissan Vehicles and will from time to time offer advertising, sales
promotion and sales campaign materials to Dealer. In addition, to effectively
promote the sale of Nissan Products and the availability of service for Nissan
Vehicles, Dealer shall establish and maintain its own advertising and sales
promotion programs including, but not limited to, effective showroom displays,
and Dealer will have available in showroom ready condition at least one vehicle
in each model line of Nissan Vehicles for purposes of demonstration to potential
customers.
B. Dealer Disclosures and Representations Concerning Nissan Products and
Other Products or Services.
Dealer understands and acknowledges that it is of vital importance to Seller
that Nissan Products are sold and serviced in a manner which promotes consumer
satisfaction and which meet the high quality standards associated with Seller,
Manufacturer, the Nissan Marks and Nissan Products in general. Accordingly,
Dealer shall fully and accurately disclose to its customers all material
information concerning the products and services sold by Dealer and the terms of
purchase and sale including, without limitation: the items making up the
purchase price; the source of products sold; and all warranties affecting
products sold. Dealer shall not make any misleading statements or
misrepresentations concerning the products sold by Dealer, the terms of sale,
the warranties applicable to such products, the source of the products, or the
recommendations or approvals of Seller or Manufacturer.
Nothing in this Agreement shall limit or be construed to limit the products
or services which Dealer may sell to its customers. Seller acknowledges that
Dealer is free to sell whatever products or services Dealer may choose in
connection with its sale and servicing of Nissan Products, subject to Dealer
obligations under Sections 5 and 6 of this Agreement.
C. Signs.
Dealer shall, at its expense, display at its Dealership Location, in such number
and at such locations as Seller may reasonably require, signs which are
compatible with the design standards established by Seller and published in
Seller's Manuals or Instructions from time to time. Dealer's use and operation
of signs displayed by Dealer at the Dealership Location and Dealer's display of
any Nissan Mark shall be subject to Seller's approval
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and shall be in accordance with the terms and conditions of Section 6.K and the
Dealership Identification Addendum.
D. Hours of Operations.
Dealer recognizes that the service and maintenance needs of the owners of Nissan
Products and Dealer's own responsibilities to actively and effectively promote
the sale of Nissan Products can be met properly only if Dealer keeps its
Dealership Facilities open and conducts all of its Dealership Operations
required by this Agreement during hours which are reasonable and convenient for
Dealer's customers. Accordingly, Dealer shall maintain its Dealership
Facilities open for business and shall conduct all Dealership Operations
required under this Agreement during such days and hours as automobile dealers'
sales and service facilities are customarily and lawfully open in Dealer's
Primary Market Area or in the metropolitan area in which Dealer is located.
E. Capital and Financing.
Dealer recognizes that its ability to conduct its Dealership Operations
successfully on a day-to-day basis and to effectively perform its other
obligations under this Agreement including, without limitation, its obligations
with respect to Dealership Facilities, new vehicle sales, and service and parts
sales, depends to a great extent upon the adequate capitalization of Dealer,
including its maintaining sufficient net working capital and net worth and
employing the same in its Dealership Operations. Dealer shall at all times
maintain and employ such amount and allocation of net working capital and net
worth as are substantially in accordance with Seller's Guides therefor and which
will enable Dealer to fulfill all of its responsibilities under this Agreement.
Dealer shall at all times during the term of this Agreement have flooring
arrangements (wholesale financing) satisfactory to Seller, in an amount
substantially in accordance with Seller's Guides therefor, with a financial
institution acceptable to Seller, and which will enable Dealer to fulfill its
obligations under this Agreement.
F. Accounting System.
It is in the mutual interest of Seller and Dealer that all Authorized Nissan
Dealers install and maintain uniform accounting systems and practices, so that
Seller can develop standards of operating performance which will assist Dealer
in obtaining satisfactory results from its Dealership Operations and which will
assist Seller in formulating policies in the interests of Seller and all
Authorized Nissan Dealers. Accordingly, Dealer shall install and maintain an
accounting system, not exclusive of any other system, in accordance with
Seller's Nissan Dealer Accounting System Manual, as the same may from time to
time be amended, revised or supplemented.
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G. Records and Reports.
1. Financial Statements.
Dealer shall furnish to Seller, on or before the tenth (10th) day of each month,
in a manner acceptable to Seller, complete and accurate financial and operating
statements which fairly present, in accordance with generally accepted
accounting principles, Dealer's financial condition as of the end of the
preceding month and the results of Dealer's Dealership Operations for the
preceding month and for that portion of Dealer's fiscal year then ended. Dealer
shall also furnish for such periods reports of Dealer's sales and inventory of
Nissan Products. Dealer shall also promptly furnish to Seller a copy of any
adjusted annual financial or operating statement prepared by or for Dealer.
2. Sales Records and Reports.
Dealer shall prepare and retain for a minimum of two (2) years, complete and
up-to-date records covering its sales of Nissan Products. To assist Seller in
evaluating, among other things, current market trends, to provide information
for use in the adjustment of production and distribution schedules, to provide
information used by Seller in providing Nissan Vehicles to Dealer, and to
provide Seller with accurate records of the ownership of Nissan Vehicles for
various purposes including warranty records and ownership notification, Dealer
shall accurately submit to Seller such information with respect to Dealer's
sales of Nissan Products as Seller may reasonably require as and in the form or
manner specified by Seller, at or as soon as possible after the close of each
business day on which such Nissan Products are sold by Dealer. If Dealer
becomes aware that any information submitted by Dealer to Seller hereunder is or
has become inaccurate, Dealer will immediately take all steps necessary to
advise Seller of and to correct such inaccuracy. Should Seller determine or
discover that any report submitted hereunder by Dealer is or has become
inaccurate, Seller may take any steps it deems necessary or appropriate to
correct such inaccuracy and to adjust its records, calculations or procedures
with respect to Dealer's reported sales to correct the effect of such inaccuracy
or to prevent additional inaccurate reports from being made.
3. Service Records.
Dealer shall prepare and retain for a minimum of two (2) years, in accordance
with the procedures specified in the Warranty Manual: records in support of
applications for payment for pre-delivery inspection and service, warranty
repairs and goodwill adjustments, and campaign inspections and corrections
performed by Dealer; claims for parts compensation; and applications for
discounts, allowances, refunds or credits.
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4. Other Reports.
Dealer shall furnish to Seller such other records or reports concerning its
Dealership Operations as Seller may reasonably require from time to time.
H. Nissan Datanet System.
Seller has developed the Nissan Datanet system, which is an electronic data
communication and processing system designed to facilitate accurate and prompt
reporting of dealership operational and financial data, submission of parts
orders and warranty claims and processing of information with respect to the
Dealership Operations. Such data is used by Seller, among other things, to
develop composite operating statistics which are useful to Dealer and Seller in
assessing Dealer's progress in meeting its obligations under this Agreement, to
provide a basis for recommendations which Seller may make to Dealer from time to
time to assist Dealer in improving Dealership Operations, to assist Seller in
developing standards of operating performance which will assist Dealer in
obtaining satisfactory results from its Dealership Operations, to assist Seller
in formulating policies in the interest of Seller and all Authorized Nissan
Dealers, and to provide sales reporting information relied upon by Seller in
providing Nissan Vehicles to Dealer. Accordingly, Dealer shall install and
maintain electronic data processing facilities which are compatible with the
Nissan Datanet system.
I. Right of Inspection.
Seller shall have the right, at all reasonable times during regular business
hours, to inspect the Dealership Facilities and to examine, audit and make and
take copies of all records, accounts and supporting data relating to the sale,
sales reporting, service and repair of Nissan Products by Dealer. When
practicable, Seller shall attempt to provide Dealer with advance notice of an
in-dealership audit of Dealer's records or accounts.
J. Confidentiality.
Seller will not furnish to any third party financial statements or other
confidential data, excluding sales records or reports, submitted by Dealer to
Seller, except as an unidentified part of a composite or coded report, unless
disclosure is authorized by Dealer or is required by law, or unless such
information is pertinent to judicial or governmental administrative proceedings
or to proceedings conducted pursuant to Section 16 of this Agreement.
K. Use of Nissan Marks.
Seller grants Dealer the non-exclusive right to identify itself as an Authorized
Nissan Dealer and to display at the Dealership Location and use, in connection
with the sale and service of
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Nissan Products, the Nissan Marks. The Nissan Marks may not be used as part of
Dealer's name or trade name without Seller's written consent. No entity owned
by or affiliated with Dealer or any of its owners may use any Nissan Mark
without Seller's prior written consent. Dealer shall not make any use of any
Nissan Mark, and Dealer shall neither have nor claim any rights in respect of
any Nissan Mark. Dealer shall comply with any of Seller's Manuals or
Instructions regarding the use of Nissan Marks as may be issued by Dealer from
time to time. Dealer shall promptly change or discontinue its use of any Nissan
Marks upon Seller's request. Any authorization granted may be withdrawn by
Seller at any time and, in any event, shall cease immediately upon the effective
date of termination of this Agreement.
If Seller institutes litigation to effect or enforce compliance with this
Section 6.K, the prevailing party in such litigation shall be entitled to
reimbursement for its costs and expenses in such litigation, including
reasonable attorney's fees.
Section 7. Purchase and Delivery
A. Dealer Purchases.
1. Nissan Vehicles.
From time to time Seller will advise Dealer of the number and model lines of
Nissan Vehicles which Seller has available for sale to Dealer and, subject to
this Section 7, Dealer shall have the right to purchase such Nissan Vehicles.
Seller will distribute Nissan Vehicles to Authorized Nissan Dealers in
accordance with Seller's written distribution policies and procedures as the
same may be in effect from time to time. Seller will provide to Dealer an
explanation of the method used by Seller to distribute Nissan Vehicles to
Authorized Nissan Dealers. Dealer recognizes that there are numerous factors
which affect the availability of Nissan Vehicles to Seller and to Dealer
including, without limitation, production capacity, sales potential in Dealer's
and other Primary Market Areas, varying consumer demand, weather and
transportation conditions, and state and federal government requirements. Since
such factors may affect individual dealers differently, Seller reserves to
itself sole discretion to distribute Nissan Vehicles in a fair and consistent
manner, and its decisions in such matters shall be final.
2. Genuine Nissan Parts and Accessories.
Dealer shall submit to Seller firm orders for Genuine Nissan Parts and
Accessories in such quantity and variety as are reasonably necessary to fulfill
Dealer's obligations under this
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Agreement. All orders shall be submitted by Dealer in the manner specified by
Seller and in accordance with Seller's Parts and Accessories Policy and
Procedures Manual, may be accepted in whole or in part by Seller, and shall be
effective only upon acceptance thereof by Seller at its home office in
California (but without necessity of any notice of acceptance by Seller to
Dealer). Such orders shall not be cancellable by Dealer after acceptance and
shipment by Seller, except in accordance with Section 8 of this Agreement.
B. Delays in Delivery.
Seller shall not be liable for failure or delay in delivery to Dealer of Nissan
Products which Seller has previously agreed to deliver to Dealer where such
failure or delay is due to cause or causes beyond the control or without the
fault or negligence of Seller.
C. Shipment of Nissan Products.
1. Nissan Vehicles.
Seller will ship Nissan Vehicles to Dealer by whatever mode of transportation,
by whatever route, and from whatever point Seller may select. Dealer shall pay
to Seller in connection with Nissan Vehicles delivered to Dealer the applicable
destination charges that are established for Dealer by Seller and that are in
effect at the time of shipment. Dealer shall bear the risk of loss and damage
to Nissan Vehicles during transportation from the point of shipment; however,
Seller will, if requested by Dealer in such manner and within such time as
Seller shall from time to time specify, prosecute claims for loss of or damage
to Nissan Vehicles during said transportation against the responsible carrier
for and on behalf of Dealer.
2. Genuine Nissan Parts and Accessories. Seller will ship Genuine Nissan
Parts and Accessories to Dealer by whatever mode of transportation, by whatever
route, and from whatever point Seller may select. Dealer shall bear the risk of
loss and damage to Genuine Nissan Parts and Accessories during transportation
from the point of shipment.
D. Passage of Title.
Title to each Nissan Product shall pass from Seller to Dealer, or to the
financial institution designated by Dealer, upon delivery of said Product to
Dealer or to a carrier for transportation to Dealer, whichever occurs first.
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E. Security Interest.
1. Grant of Security Interest.
As security for the full payment of all sums from time to time owed by Dealer to
Seller under this Agreement, whether such sums are now, or hereafter become, due
and owing, Dealer hereby grants to Seller a security interest in the following
(collectively referred to as "Collateral"):
(i) All non-vehicle inventory of Dealer including, without limitation, all
Genuine Nissan Parts and Accessories delivered by Seller to Dealer hereunder on
account (all such inventory hereinafter referred to collectively as "Inventory"
and individually as "Item of Inventory"); and
(ii) All proceeds from any of the foregoing including, without limitation,
insurance payable by reason of the loss, damage or destruction of any Item of
Inventory; and all accounts and chattel paper of Dealer arising from sale,
lease, or other disposition of Inventory now existing or hereafter arising, and
all liens, securities, guarantees, remedies and privileges pertaining thereto,
together with all rights and liens of Dealer relating thereto.
2. Default in Payment.
Dealer shall be in default of this Section 7 if: (i) Dealer shall fail to pay
any amounts secured hereby when due or fail to perform any obligations under
this Section 7 in a timely manner; (ii) there shall occur any material adverse
change in the financial condition of Dealer; (iii) Dealer shall dissolve or
become insolvent or bankrupt; or (iv) Seller shall have determined in good faith
that the prospect of such payment or performance is impaired; and in any such
case Seller may declare all sums secured by this Section 7.E immediately due and
payable and Seller shall have all rights and remedies afforded to a secured
party after default under the Uniform Commercial Code or other applicable law in
effect on the date of this Agreement.
3. Assembly of Collateral, Payment of Costs, Notices.
Dealer shall, if requested by Seller upon the occurrence of any default under
the foregoing Section 7.E.2 assemble the Collateral and make it available to
Seller at a place or places designated by Seller. Dealer also shall pay all
costs of Seller including, without limitation, attorneys' fees incurred with
respect to the enforcement of any of Seller's rights under this Section 7.
4. Recording, Further Assurances.
Dealer shall execute and deliver such financing statements and such other
instruments or documents and take any other action as Seller may request in
order to create or maintain the security
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interest intended to be created by this Section 7.E or to enable Seller to
exercise and enforce its rights hereunder. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement and
may be filed in lieu of a financing statement in any and all jurisdictions which
accept such reproductions.
5. Records and Schedules of Inventory.
Dealer shall keep accurate records itemizing and describing the kind, type and
quantity of Inventory and shall furnish to Seller within five (5) days of
receipt of Seller's request therefor, with a current schedule of inventory in
form and substance satisfactory to Seller ("Schedule of Inventory"), which shall
be true and accurate in all respects. A physical inventory shall be conducted
no less than annually in connection with preparation of year-end financial
statements of Dealer and, at Seller's request, a report of such inventory shall
be promptly provided to Seller.
F. Charges for Storage and Diversions.
Dealer shall be responsible for and shall pay all charges for demurrage, storage
and other expense accruing after shipment to Dealer or to a carrier for
transportation to Dealer. If diversions of shipments are made upon Dealer's
request or are made by Seller as a result of Dealer's failure or refusal to
accept shipments made pursuant to Dealer's orders, Dealer agrees to pay all
additional charges and expenses incident to such diversions.
G. Changes in Nissan Products.
Seller shall have the right in its sole discretion to discontinue the supply, or
make changes in the design or component materials, of any Nissan Product at any
time. Seller shall be under no liability to Dealer on account of any such
changes and shall not be required as a result of any such changes to make any
changes to Nissan Products previously purchased by Dealer. No change shall be
considered a model year change unless so specified by Seller.
Section 8. Pricing
A. Nissan Vehicles.
At any time prior to shipment (or delivery to a carrier for transportation to
Dealer) of any Nissan Vehicle, Seller may, without prior notice and without
incurring any liability to Dealer or anyone else, including any customer of
Dealer, change at any time and from time to time the price, discount, allowance
or other terms of sale of any Nissan Vehicle offered for sale by
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Seller. Except with respect to the establishment of initial prices for a new
model year vehicle or for any new model or body type, Seller will notify Dealer
by mailgram or other acceptable means of any such change in price as soon as
reasonably practicable, and Dealer may, by notice to Seller within ten (10) days
after such notification, cancel any offer to purchase Nissan Vehicles affected
by such change, provided that Seller has not notified Dealer of its acceptance
of Dealer's offer on or prior to the date such notification by Dealer is
received by Seller.
B. Genuine Nissan Parts and Accessories.
Seller may, without prior notice and without incurring any liability to Dealer
or anyone else, including any customer of Dealer, change at any time and from
time to time the price, discount, allowance or other terms of sale of any
Genuine Nissan Part or Accessory offered for sale by Seller, and any such change
in price, discount, allowance or other terms of sale shall apply to all such
Genuine Nissan Parts and Accessories whether or not an order has been submitted
by Dealer, but not to Genuine Nissan Parts and Accessories for which Seller has
accepted and processed Dealer's order prior to the effective date of such
change. Seller will notify Dealer of any such change in price as soon as is
reasonably practicable. Dealer may, by notice to Seller, cancel any order for
Genuine Nissan Parts and Accessories affected by such change which was placed
before such notification was given, provided that such Genuine Nissan Parts and
Accessories have not been shipped to Dealer or delivered to a carrier for
transportation to Dealer on or prior to the date such notification by Dealer is
received by Seller.
Section 9. Payment
A. Payment for Vehicles.
Payment by Dealer for Nissan Vehicles must be made in accordance with the
applicable prices, charges, discounts, allowances and other terms of sale
established by Seller either: (i) in accordance with wholesale financing
arrangements that at the time of delivery to Dealer or to a carrier for
transportation to Dealer of such Nissan Vehicles, whichever shall first occur,
are in effect between Seller, Dealer and a financing institution; or (ii) prior
to delivery to Dealer or to a carrier for transportation to Dealer, whichever
shall first occur, by cash or such other medium of payment as Seller may agree
to accept.
B. Payment for Parts and Accessories.
Parts, equipment, accessories and other products and services will normally be
billed by Seller to Dealer on Seller's invoices, which shall be due the tenth
(10th) of the month following the
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month of shipment of such products and services; provided, however, Seller
reserves the right to place any and all sales of such items on a C.O.D. or cash
in advance basis, without notice; provided further, however, that Seller will
endeavor to provide Dealer with prior notice if in Seller's sole judgment such
notice would be practicable.
C. Accounts Payable.
1. Right of Set Off. In addition to any right of set off provided
by law, all sums due Dealer shall be considered net of indebtedness of Dealer to
Seller, and Seller may deduct any amounts due or to become due from Dealer to
Seller or any amounts held by Seller from any sums or accounts due from Seller
to Dealer.
2. Liquidated Damages.
(i) Liquidated Damages for Delinquent Payments.
In the event that Dealer fails to pay Seller in full any amounts owed by Dealer
to Seller when due, Dealer shall pay Seller a delinquency charge of one percent
(1%) per month of such amount or amounts to compensate Seller for its costs of
carrying and collection; provided, however, that Seller agrees that it will not
assess any delinquency charge on an overdue account which has a total
outstanding balance of less than $1,000.00, unless such account is more than
ninety (90) days overdue. Dealer and Seller agree that such charge is to be
assessed not as a penalty, but as liquidated damages under California Civil Code
Section 1671(b) based on Seller's reasonable estimate of the losses which will
be suffered by Seller as a result of such delinquent payment or payments. The
imposition of such delinquency charges shall not imply or constitute any
agreement to forbear collection of a delinquent account.
(ii) Liquidated Damages for Improper Payments to Dealer.
Seller may, from time to time, conduct audits or reviews of Dealer's books and
records pursuant to Section 6.I of this Agreement. If any such audit or review
results in a determination by Seller that Dealer was or is not entitled to
received payment from Seller, Seller may debit Dealer's account in such amounts
as Seller shall determine were improperly paid to Dealer. Such a determination
may be based on Dealer's failure to comply with applicable rules or procedures
or on Dealer's submission of false or inaccurate information to Seller. In
addition, Seller may assess and, if it does, Dealer will pay a delinquency
charge of one percent (1%) per month of such amount or amounts improperly paid
by Seller to Dealer to compensate Seller for its costs of auditing, loss of
funds and collection. Dealer and Seller agree that such charge is to be
assessed not as a penalty, but as liquidated damages under California Civil Code
Section 1671(b) based on Seller's reasonable estimate of the losses
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which will be suffered by Seller as a result of such improper payment or
payments. The imposition of such delinquency charges shall not imply or
constitute any agreement to forbear collection of a delinquent account.
D. Collection of Taxes by Dealer.
Dealer hereby represents and warrants that all Nissan Products purchased from
Seller are purchased for resale in the ordinary course of Dealer's business.
Dealer further represents and warrants that Dealer has obtained all licenses and
complied with all other requirements to collect sales, use and or other taxes
incurred in any such resale transaction, and that Dealer will furnish evidence
thereof to Seller, at Seller's request. If Dealer purchases any Nissan Products
other than for resale, or puts any Nissan Products to a taxable use, Dealer
shall pay directly to the appropriate taxing authority any sales, use or similar
taxes incurred as a result of such use or purchase, to file any tax returns
required in connection therewith and to hold Seller harmless from any claims or
demands with respect thereto.
Section 10. Warranties
The only warranties that shall be applicable to Nissan Products (or any
components thereof) shall be such written warranty or warranties as may be
furnished by Seller and as stated in the Warranty Manual or Seller's Parts and
Accessories Policy and Procedures Manual, as the same may be revised from time
to time. Except for its express limited liability under such written
warranties, neither Manufacturer nor Seller assumes, or authorizes any other
person or party including, without limitation, Dealer, to assume on their behalf
any other obligation or liability in connection with any Nissan Product (or
component thereof). Any obligations or liabilities assumed by Dealer which are
in addition to Seller's written warranties shall be solely the responsibility of
Dealer. Dealer shall expressly incorporate in full and without modification any
warranty furnished by Seller with a Nissan Vehicle as a conspicuous part of each
order form or other contract for the sale of such Nissan Vehicle by Dealer to
any buyer. Dealer shall make available to the buyer of each Nissan Product
prior to the purchase of such Nissan Product, copies of such applicable
warranties as may be furnished by Seller. Dealer shall also provide to the
buyer of each Nissan Product, in full and without modification, any owner's
manual, warranty booklet or other owner information which Seller may provide to
Dealer for delivery with such Nissan Product. Dealer agrees to abide by and
implement in all other respects Seller's warranty procedures then in effect.
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Section 11. Indemnification
A. Indemnification of Dealer.
Subject to Section 11.C, and upon Dealer's written request, Seller shall:
1. Defend Dealer against any and all claims that during the term of this
Agreement may arise, commence or be asserted against Dealer in any action
concerning or alleging:
(a) Bodily injury or property damage arising out of an occurrence caused
solely by a manufacturing defect or alleged manufacturing defect in a Nissan
Product supplied by Seller, except for any manufacturing defect in tires,
provided that the defect could not have reasonably been discovered by Dealer
during the pre-delivery inspection of the product required by Section 5.B.1 of
this Agreement;
(b) Bodily injury or property damage arising out of an occurrence caused
solely by a defect or alleged defect in the design of a Nissan Product applied
by Seller, except for a defect or alleged defect in the design of tires; and
(c) Any substantial damage occurring to a new Nissan Product and repaired
by Seller from the time the product left the manufacturer's assembly plant to
the time it was delivered to Dealer's designated location or to a carrier for
transportation to Dealer, whichever occurred first, provided Seller failed to
notify Dealer of such damage and repair prior to delivery of the product to the
first retail customer; and
(d) Breach of Seller's warranty of a Nissan Product which is not, in whole
or part, the result of Dealer's sales, service or repair practices or conduct;
and
2. Indemnify and hold Dealer harmless from any and all settlements made
which are approved by Seller and final judgments rendered with respect to any
claims described in Section 11.A.1; provided, however, that Seller shall have no
obligation to indemnify or hold Dealer harmless unless Dealer: (i) promptly
notifies Seller of the assertion of such claim and the commencement of such
action against Dealer; (ii) cooperates fully in the defense of such action in
such manner and to such extent as Seller may reasonably require; (iii) consents
to the employment of attorneys selected by Seller and agrees to waive any
conflict of interest then existent or which may later arise, thereby enabling
Seller's selected attorneys to represent Seller and/or the manufacturer of a
Nissan Product throughout the defense of the claim; and (iv) withdraws any
actions (including cross-claims) filed against Seller or the manufacturer of a
Nissan Product arising out of the circumstances for which Dealer
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seeks indemnity. Dealer shall pay all costs of its own defense incurred prior
to Seller's assumption of Dealer's defense and thereafter to the extent that
Dealer employs attorneys in addition to those selected by Seller.
3. Seller may offset any recovery on Dealer's behalf against any
indemnification that may be required under this Section 11 including, without
limitation, attorneys' fees paid by Seller pursuant to this Section 11.A and the
amount of any settlement or judgment paid by Seller.
B. Indemnification of Seller.
Subject to Section 11.C and upon Seller's written request, Dealer shall:
1. Defend Seller against any and all claims that during the term of this
Agreement may arise, commence or be asserted against Seller in any action
concerning or alleging:
(a) Dealer's failure to comply, in whole or in part, with any obligation
of Dealer under this Agreement;
(b) Any negligence, error, omission or act of Dealer in connection with
the preparation, repair or service (including warranty service, goodwill
adjustments, and campaign inspections and corrections) by Dealer of Nissan
Products;
(c) Any modification or alteration made by or on behalf of Dealer to a
Nissan Product, except those made pursuant to the express written instruction or
with the express written approval of Seller;
(d) Dealer's breach of any agreement between Dealer and Dealer's customer
or other third party;
(e) Misleading, libelous or tortuous statements, misrepresentations or
deceptive or unfair practices by Dealer, directly or indirectly, to Seller, a
customer or other third party including, without limitation, Dealer's failure to
comply with Section 6.B of this Agreement;
(f) Dealer's breach of any contract or warranty other than a contract with
or warranty of Seller or the manufacturer of a Nissan Product; or
(g) Any change in the employment status or in the terms of employment of
any officer, employee or agent of Dealer or of any Principal including but not
limited to, claims for breach of employment contract, wrongful termination or
discharge, tortious interference with contract or economic advantage, and
similar claims; and
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2. Indemnify and hold Seller harmless from any and all settlements made
and final judgments rendered with respect to any claims described in Section
11.B.1; provided, however, that Dealer shall have no obligation to indemnify or
hold Seller harmless unless Seller: (i) promptly notifies Dealer of the
assertion of such claim and the commencement of such action against Seller; (ii)
cooperates fully in the defense of such action in such manner and to such extent
as Dealer may reasonably require; (iii) consents to the employment of attorneys
selected by Dealer and agrees to waive any conflict of interest then existent or
which may later arise, thereby enabling Dealer's selected attorneys to represent
Dealer throughout the defense of the claim; and (iv) withdraws any actions
(including cross-claims) filed against Dealer arising out of the circumstances
for which Seller seeks indemnity. Seller shall pay all costs of its own defense
incurred prior to Dealer's assumption of Seller's defense and thereafter to the
extent that Seller employs attorneys in addition to those selected by Dealer.
C. Conditions and Exceptions to Indemnification.
1. If the allegations asserted in any action or if any facts established
during or with respect to any action would require Seller to defend and
indemnify Dealer under Section 11.A and Dealer to defend and indemnify Seller
under Section 11.B, Seller and Dealer shall each be responsible for its own
defense in such an action and there shall be no obligation or responsibility in
connection with any defense, judgment, settlement or expenses of such action as
between Seller and Dealer.
2. In undertaking its obligations to defend and/or indemnify each other,
Dealer and Seller conditional on the continued existence of the state of facts
as then known to such party and may provide for the withdrawal of such defense
and/or indemnification at such time as facts arise which, if known at the time
of the original request for a defense and/or indemnification, would have caused
either Dealer or Seller to refuse such request. In the event that subsequent
developments in a case make clear that the allegations which initially justified
acceptance of a request for a defense and/or indemnification are no longer at
issue therein or that the claims no longer meet the description of those for
which indemnification is required hereunder, any party providing a defense
and/or indemnification hereunder may terminate such defense and/or
indemnification of the other party. The party withdrawing from its defense
and/or indemnification to defend and/or indemnify shall give notice of its
withdrawal to the indemnifying party. Moreover, the withdrawing party shall be
responsible for all costs and expenses of defense up to the date of the other
party's receipt of the notice of withdrawal.
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Section 12. Termination
A. Termination Due to Certain Acts or Events.
The following represent events which are within the control of or originate from
actions taken by Dealer or its management or owners and which are so contrary to
the intent and purpose of this Agreement that they warrant its termination:
1. Any actual or attempted sale, transfer assignment or delegation,
whether by operation of law or otherwise, by Dealer of an interest in or right,
privilege or obligation under this Agreement, or of the principal assets
necessary for the performance of Dealer's responsibilities under this Agreement,
without, in either case, the prior written consent of Seller having been
obtained, which consent shall not be unreasonably withheld;
2. Subject to the provisions of Section 14 thereof, a change, by
operation of law or otherwise, in the direct or indirect ownership of Dealer,
whether voluntary or involuntary, from that set forth in the Final Article of
this Agreement, except as expressly permitted herein, without the prior written
consent of Seller having been obtained which consent shall not be unreasonably
withheld;
3. Removal, resignation, withdrawal or elimination from Dealer for any
reason of the Executive Manager of Dealer; provided, however, Seller shall give
Dealer a reasonable period of time within which to replace such person with an
Executive Manager satisfactory to Dealer and Seller in accordance with Article
Fourth of this Agreement; or the failure of Dealer to retain an Executive
Manager who, in accordance with Article Fourth of this Agreement, in Seller's
reasonable opinion, is competent, possesses the requisite qualifications for the
position, and who will act in a manner consistent with the continued best
interests of both Seller and Dealer;
4. The failure of Dealer to maintain the Dealership Facilities open for
business or to conduct all the Dealership Operations required by this Agreement
during and for not less than the hours customary and lawful in Dealer's Primary
Market Area or in the metropolitan area in which Dealer is located for seven (7)
consecutive days, unless such failure is caused by fire, flood, earthquake or
other act of God;
5. Any undertaking by Dealer to conduct, directly or indirectly, any of
the Dealership Operations at a location or facility other than that which is
specified in the current Dealership Facilities Addendum for that Dealership
Operation;
6. The failure of Dealer to establish or maintain wholesale financing
arrangements which are in accordance with
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Seller's Guides and which are reasonably acceptable to Seller with banks or
other financial institutions approved by Seller for use in connection with
Dealer's purchase of Nissan Vehicles, unless Seller shall have agreed to accept
another medium of payment;
7. Insolvency of Dealer; voluntary institution by Dealer of any
proceeding under the federal bankruptcy laws or under any state insolvency law;
institution against Dealer of any proceeding under the federal bankruptcy laws
or under any state insolvency law which is not vacated within thirty (30) days
from the institution thereof; appointment of a receiver, trustee or other
officer having similar powers for Dealer or Dealer's business, provided such
appointment is not vacated within thirty (30) days of the date of such
appointment; execution by Dealer of an assignment for the benefit of creditors;
or any levy under attachment, foreclosure, execution or similar process whereby
a third party acquires rights to a significant portion of the assets of Dealer
necessary for the performance of Dealer's responsibilities under this Agreement
or to the operation or ownership of Dealer, which is not within thirty (30) days
from the date of such levy vacated or removed by payment or bonding;
8. Any material misrepresentation by Dealer or any person named in the
Final Article of this Agreement as to any fact relied on by Seller in entering
into, amending or continuing with this Agreement including, without limitation,
any representation concerning the ownership, management or capitalization of
Dealer;
9. The conviction in a court of original jurisdiction of Dealer or of any
Principal Owner or Executive Manager of a crime affecting the Dealership
Operations or of any felony; provided, however, that a convicted Executive
Manager's ownership interest in Dealer shall not be an event warranting
termination of this Agreement if the individual is no longer employed by Dealer
or involved in any way in the management or operation of Dealer and Dealer has
made reasonable efforts to obtain the individual's divestiture of his ownership
interest in Dealer; or any willful failure of Dealer to comply with the
provisions of any laws, ordinances, rules, regulations, or orders relating to
the conduct of its Dealership Operations including, without limitation, the sale
and servicing of Nissan Products.
10. Knowing submission by Dealer to Seller of: (i) a false or fraudulent
report or statement; (ii) a false or fraudulent claim (or statement in support
thereof), for payment, reimbursement or for any discount, allowance, refund,
rebate, credit or other incentive under any plan that may be offered by Seller,
whether or not Dealer offers or makes restitution; (iii) false financial
information; (iv) false sales reporting data; or (v) any false report or
statement relating to pre-delivery inspection, testing, warranties, service,
repair or maintenance required to be performed by Dealer.
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Upon the occurrence of any of the foregoing events, Seller may terminate
this Agreement by giving Dealer notice thereof, such termination to be effective
upon the date specified in such notice, or such later date as may be required by
any applicable statute.
B. Termination by Seller for Non-Performance by Dealer.
1. If, based upon the evaluations thereof made by Seller, Dealer shall
fail to substantially fulfill its responsibilities with respect to:
a. Sales of new Nissan Vehicles and the other responsibilities of Dealer
set forth in Section 3 of this Agreement;
b. Maintenance of the Dealership Facilities and the Dealership Location
set forth in Section 2 of this Agreement;
c. Service of Nissan Vehicles and sale and service of Genuine Nissan
Parts and Accessories and the other responsibilities of Dealer set forth in
Section 5 of this Agreement;
d. The other responsibilities assumed by Dealer in this Agreement
including, without limitation, Dealer's failure to:
(i) Timely submit accurate sales, service and financial information
concerning its Dealership Operations, ownership or management and related
supporting data, as required under this Agreement or as may be reasonably
requested by Seller;
(ii) Permit Seller to make an examination or audit of Dealer's accounts and
records concerning its Dealership Operations after receipt of notice from Seller
requesting such permission or information;
(iii) Pay Seller for any Nissan Products or any other products or services
purchased by Dealer from Seller, in accordance with the terms and conditions of
sale; or
(iv) Maintain net worth and working capital substantially in accordance
with Seller's Guides therefor; or
2. In the event that any of the following occur:
(i) any dispute, disagreement or controversy between or among Dealer and
any third party or between or among the owners or management personnel of Dealer
relating to the management or ownership of Dealer develops or exists which, in
the reasonable opinion of Seller, tends to adversely affect the conduct of the
Dealership Operations or the interests of Dealer or Seller; or
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(ii) any other act or activity of Dealer, or any of its owners or
management occurs, which substantially impairs the reputation or financial
standing of Dealer or of any of its management subsequent to the execution of
this Agreement:
Seller will notify Dealer of such failure and will review with Dealer the
nature and extent of such failure and the reasons which, in Seller's or Dealer's
opinion, account for such failure.
Thereafter, Seller will provide Dealer with a reasonable opportunity to
correct the failure. If Dealer fails to make substantial progress towards
remedying such failure before the expiration of such period, Seller may
terminate this Agreement by giving Dealer notice of termination, such
termination to be effective at least ninety (90) days after such notice is
given.
During such period Dealer will commence such actions as may be necessary so
that the termination obligations of Seller and Dealer set forth in this
Agreement may be fulfilled as promptly as practicable.
C. Termination Because of Death or Physical or Mental Incapacity of
Principal Owner.
This Agreement is a personal services agreement and has been entered into by
Seller in reliance on Dealer's being owned by the Principal Owner(s). Seller
(subject to Section 14 hereof) may terminate this Agreement by giving notice to
Dealer upon the death of any of the Principal Owner(s) or if Seller in good
faith determines that any Principal Owner is so physically or mentally
incapacitated as to be unable to discharge his or her responsibility to the
operating management of Dealer. Unless deferred as hereinafter provided, the
effective date of such termination shall be not less than ninety (90) days from
the date such notice is given to Dealer.
To facilitate the orderly termination of the business relationship between
Seller and Dealer and of the Dealership Operations, Seller may, in its sole
discretion, defer the effective date of such termination and continue to operate
with Dealer under the terms of this Agreement for a period of time, to be
determined by Seller, of up to one (1) year from the date such notice of
termination is given if within sixty (60) days from the date of said notice, the
executor or representative of the deceased or incapacitated Principal Owner or a
surviving Principal Owner shall give to Seller written request for such
deferment. This Agreement shall automatically terminate without further notice
or action by Seller upon the expiration of any such deferment.
D. Termination for Failure of Seller or Dealer to be Licensed.
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If Seller or Dealer shall fail to secure or maintain any license, permit or
authorization required by either of them for their performance of any obligation
under or in connection with this Agreement, or if such license, permit or
authorization is suspended or revoked, irrespective of the cause, and such
suspension or revocation continues for a period of seven (7) days, either party
may immediately terminate this Agreement by giving notice to the other party.
E. Termination by Dealer.
Dealer has the right to terminate this Agreement at any time by giving notice to
Seller, such termination to be effective thirty (30) days after the giving of
such notice (unless the thirty (30) day notice period is waived in writing by
Seller) or on such other date as may be mutually agreed to in writing by Seller
and Dealer.
F. Termination by Seller Because of a Change of Seller's Method of
Distribution or Decision by Seller to Cease Distribution of Nissan Vehicles.
If Seller should elect or be required to discontinue its present method of
distributing Nissan Vehicles, or if Seller should elect or be required to cease
selling or distributing Nissan Vehicles, Seller may terminate this Agreement by
giving Dealer notice and such termination will be effective not less than one
(1) year after such notice is given.
G. Termination Upon Entering into a New Sales and Service Agreement.
Seller may terminate this Agreement at any time by giving Dealer at least
ninety (90) days prior notice thereof and offering to enter into a new or
amended form of Agreement with Dealer in a form being offered generally to
Authorized Nissan Dealers.
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 Seller and Dealer enter into a new
or superseding Dealer Sales and Service Agreement, and the rights and
obligations of the parties hereunder shall continue under the terms and
provisions of the new agreement.
Dealer's performance under any prior agreement may be considered by Seller
in evaluating Dealer's performance under this, or any succeeding, agreement.
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Section 13. Rights and Liabilities Upon Termination
A. Termination Procedures.
1. Upon termination of this Agreement by either Seller or Dealer for any
reason, Dealer shall: (i) immediately discontinue the distribution and sale of
Nissan Products as an Authorized Nissan Dealer; and (ii) at its own expense (a)
erase or obliterate all Nissan Marks and any word or words indicating that
Dealer is an Authorized Nissan Dealer from the stationery, forms and other
papers used by Dealer or any business associated or affiliated with Dealer; (b)
discontinue all advertising of Dealer as an Authorized Nissan Dealer; (c) take
all steps necessary to remove any listing in any telephone directory yellow
pages advertisement indicating that Dealer is an Authorized Nissan Dealer; (d)
discontinue any use of any Nissan Mark in Dealer's firm or trade name and take
all steps necessary or appropriate in the opinion of Seller to change such firm
or trade name to eliminate any Nissan Mark therefrom; (e) discontinue or cause
to be discontinued all other use of the Nissan Marks; (f) refrain from doing
anything, whether or not specified above, that would indicate that Dealer is or
was an Authorized Nissan Dealer; and (g) refrain from using, either directly or
indirectly, any Nissan Marks or any other confusingly similar marks, names,
logos or designs in a manner likely to cause confusion or mistake or to deceive
the public. If Dealer fails to comply with any requirements of this Section
13.A.1, Dealer shall reimburse Seller for all costs and expenses, including
reasonable attorney's fees, incurred by Seller in effecting or enforcing
compliance.
2. Termination of this Agreement will not release Dealer or Seller from
the obligation to pay any amounts owing the other.
3. Subject to Section 13.E, Seller shall process all claims and make all
payments due for all labor provided and all parts and/or other materials used by
Dealer pursuant to Sections 5.B.2 and 5.B.3 prior to the effective date of
termination as provided in the Warranty Manual. Dealer shall cease, as of the
effective date of termination, to be eligible to receive reimbursement for any
work thereafter performed or parts thereafter supplied under any warranty,
campaign inspections or corrections and any other adjustment previously
authorized by Seller.
4. Dealer shall, upon Seller's request, deliver to Seller or its designee
copies of Dealer's records with respect to pre-delivery, warranty, goodwill
campaign and other service work of Dealer.
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B. Repurchases by Seller Upon Termination.
Upon termination other than pursuant to a sale or transfer, Seller shall buy
from Dealer and Dealer shall sell to Seller, within ninety (90) days after the
effective date of termination:
1. All new, unused, undamaged, unlicensed, then current and immediate
previous model year Nissan Vehicles which were purchased by Dealer from Seller
and are then the unencumbered property of and in the possession of Dealer or
Dealer's flooring and/or financing institution. The price for such vehicles
shall be the invoice price previously paid by Dealer therefor, less Seller's
destination charges, all allowances paid or applicable allowances offered
thereon by Seller, any amount paid by Seller to Dealer for pre-delivery
inspection and service with respect to such vehicles pursuant to Section 5.B,
any dealer association collection, and any other charge for taxes or special
items or service. Seller shall also repurchase Genuine Nissan Accessories which
have been installed in such Nissan Vehicles which accessories are listed in the
current parts and accessories price list (except those items marked "not
eligible") at the prices set forth on Seller's then current parts and
accessories price list.
2. Subject to Section 13.C, all new, unused, undamaged and resalable
Genuine Nissan Parts and Accessories which are still in the original and
undamaged packages, were purchased from Seller, are listed in the current parts
and accessories price list (except those items marked "not eligible"), and are
then the unencumbered property of and in the possession of Dealer. The prices
for such Genuine Nissan Parts and Accessories shall be the prices set forth on
Seller's then current parts and accessories price list.
3. Subject to Section 13.C, all special tools and equipment owned by
Dealer and which are unencumbered and in the possession of Dealer on the
effective date of termination which were designed especially for servicing
Nissan Vehicles, are of the type recommended in writing by Seller and designated
as "essential" tools in accordance with Seller's Guides or other notices
pertaining thereto from Seller, are in usable and good condition, except for
reasonable wear and tear, and were purchased by Dealer from Seller within the
three (3) year period preceding the date of termination. Seller's purchase
price for such essential tools shall be calculated at Dealer's purchase price
reduced by straight-line depreciation on the basis of a useful life of thirty-
six (36) months.
Dealer's and Seller's obligations with respect to the signs located at the
Dealership Facilities shall be determined in accordance with the Dealership
Identification Addendum between Seller and Dealer.
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C. Dealer's Responsibilities with Respect to Repurchase.
Seller's obligation to repurchase Genuine Nissan Vehicles, Genuine Nissan Parts
and Accessories, and essential tools from Dealer is conditioned on Dealer's
fulfilling its responsibilities under this Section 13.C as follows:
1. Immediately following the effective date of termination of this
Agreement, Dealer shall furnish to Seller a list of vehicle identification
numbers and such other information and documents as Seller may require
pertaining to the Nissan Vehicles subject to the repurchase obligations of
Section 13.B.1. Dealer shall deliver all such vehicles in accordance with
Seller's instructions.
2. Within thirty (30) days after the effective date of termination of
this Agreement, Dealer shall deliver or mail to Seller a detailed inventory of
all of the items referred to in Sections 13.B.2 and 13.B.3. Within thirty (30)
days of its receipt of such inventory, Seller shall provide Dealer with
instructions as to the procedures to be followed in returning such items to
Seller. Dealer shall, at its expense, tag, pack and deliver all such items to
Seller at Seller's designated parts distribution center in accordance with such
instructions.
Should Dealer fail to comply with the responsibilities listed above, Seller
shall have no obligation to repurchase any such items from Dealer; provided,
however, that Seller shall have the right, but no obligation, to enter into the
Dealership Facilities for the purpose of compiling an inventory, tagging,
packing and shipping such items to Seller's designated parts distribution
center. If Seller undertakes any such responsibilities of Dealer, the
repurchase prices of such items shall be fifteen percent (15%) less than the
repurchase prices otherwise applicable under Section 13.B.
D. Title to Repurchased Property.
With respect to any items of property repurchased by Seller pursuant to this
Section 13, Dealer shall take such action and shall execute and deliver such
instruments as may be necessary: (i) to convey good and marketable title to all
such items of property; (ii) to comply with the requirements of any applicable
law relating to bulk sales and transfers; and (iii) to satisfy and discharge any
liens or encumbrances on such items of property prior to delivery thereof to
Seller.
E. Payment.
Seller shall make all payments to Dealer pursuant to this Section 13 within
ninety (90) days after Seller's receipt of all items to be repurchased by it and
provided Dealer has fulfilled all of its obligations under this Section 13;
provided, however, that Seller shall be entitled to offset against such payments
any and all
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<PAGE>
indebtedness or other obligations of Dealer to Seller. Seller may make any
payment for any property repurchased pursuant to this Section 13 directly to
anyone having a security or ownership interest therein.
F. Cancellation of Deliveries.
Upon termination of this Agreement Seller shall have the right to cancel all
shipments of Nissan Products scheduled for delivery to Dealer. After the
effective date of termination, if Seller shall voluntarily ship any Nissan
Products to Dealer, or otherwise transact business with Dealer, all such
transactions will be governed by the same terms provided in this Agreement,
insofar as those terms would have been applicable had the Agreement not been
terminated. Nevertheless, neither the shipping of such Nissan Products nor any
other acts by Seller shall be construed as a waiver of the termination or a
renewal or extension of this Agreement.
Section 14. Establishment of Successor Dealer
A. Because of Death of Principal Owner.
If Seller shall terminate this Agreement pursuant to Section 12.C because of the
death of a Principal Owner, the following provisions shall apply:
1. Subject to the other provisions of this Section 14, Seller shall offer
a two (2) year Term Sales and Service Agreement to a successor dealership
("Successor Dealership") comprised of the person nominated by such deceased
Principal Owner as his or her successor, together with the other Principal
Owner(s) and Other Owner(s), provided that:
(a) The nomination was submitted to Seller on a Successor Addendum, was
consented to by the remaining Principal Owner(s) and Other Owner(s), and was
approved by Seller prior to the death of such Principal Owner;
(b) Either (i) there has been no change in the Executive Manager of
Seller; or (ii) Seller has approved a candidate for Executive Manager having the
required qualifications, expertise, integrity, experience and ability to
successfully operate the dealership and perform Dealer's obligations under this
Agreement; and
(c) The Successor Dealership has capital and facilities substantially in
accordance with Seller's Guides therefor at the time the Terms Sales and Service
Agreement is offered.
2. If the deceased Principal Owner has not nominated a successor in
accordance with Section 14.A.1(a) above, but all of
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the beneficial interest of the deceased Principal Owner has passed by will or
the laws of intestate succession directly to the deceased Principal Owner's
spouse and/or children or to one (1) or more other Principal Owners who each
held not less than twenty-five percent (25%) beneficial ownership interest in
the dealership prior to the death of the deceased Principal Owner (collectively
"proposed New Owners"), subject to the other provisions of this Section 14,
Seller shall offer a two (2) year Term Sales and Service Agreement to a
Successor Dealership composed of the Proposed New Owner(s), together with the
other Principal Owner(s) and Other Owner(s), provided that:
(a) Either (i) there has been no change in the Executive Manager of
Dealer; or (ii) Seller has approved a candidate for Executive Manager having the
required qualifications, expertise, integrity, experience and ability to
successfully operate the dealership and perform Dealer's obligations under this
Agreement; and
(b) The Successor Dealership has capital and facilities substantially in
accordance with Seller's Guides therefor at the time the Term Sales and Service
Agreement is offered.
(B) Consideration of Successor Addendum.
To be named in the Successor Addendum, a proposed Principal Owner or Executive
Manager must (i) be employed by Dealer or a comparable automotive dealership as
his principal place of employment; (ii) be already qualified as a Principal
Owner or Executive Manager, as the case may be; and (iii) otherwise be
acceptable to Seller as provided below.
Upon receipt of a request from Dealer that one or more individuals be named
in a Successor Addendum, Seller shall request those named to submit an
application and to provide all personal and financial information that Seller
may reasonably and customarily require in connection with the review of such
applications. Seller, upon the submission of all requested information, will
determine whether to consent to a Successor Addendum naming such individuals by
applying its criteria for considering the qualifications of Principal Owners or
Executive Managers, as the case may be.
C. Termination of Successor Addendum.
Dealer may, at any time, withdraw a nomination of a Successor even if Seller
previously has qualified the candidate, or cancel an executed Successor Addendum
by giving notice to Seller of such withdrawal at any time prior to the death or
incapacity of any Principal Owner named in this Agreement. Seller may cancel an
executed Successor Addendum only if the proposed Principal Owner or Executive
Manager no longer complies with the requirements of this Section 14.
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D. Evaluation of Successor Dealership.
During the term of the Term Sales and Service Agreement, Seller will evaluate
the performance of the Successor Dealership and periodically review with the new
Dealer this evaluation. If the Successor Dealership's performance is deemed to
be satisfactory to Seller during the Term Sales and Service Agreement, Seller
will give first consideration to such Successor Dealership with respect to a new
Sales and Service Agreement.
E. Termination of Market Representation.
Notwithstanding anything stated or implied to the contrary in this Section 14,
Seller shall not be obligated to offer a Term Sales and Service Agreement to any
Successor Dealership if Seller notified Dealer prior to the event causing the
termination of this Agreement that Seller's market representation plans do not
provide for continuation of representation in Dealer's Primary Market Area.
F. Termination of Offer.
If the person or persons comprising a proposed Successor Dealership to which any
offer of a Term Sales and Service Agreement for Nissan Products shall have been
made pursuant to this Section 14 do not accept same within thirty (30) days
after notification to them of such offer, such offer shall automatically expire.
Section 15. Sale of Assets or
Ownership Interests in Dealer.
A. Sale or Transfer.
Article Third of this Agreement provides that neither this Agreement nor any
right or interest herein may be assigned without the prior written consent of
Seller. However, during the term of this Agreement, Dealer may negotiate for
the sale of the assets of Dealer, or the owners of Dealer may negotiate the sale
of their ownership interests in Dealer, upon such terms as may be agreed upon by
them and the prospective purchaser. With respect to any sale or transfer which
requires Seller's prior written consent under Article Third of this Agreement,
Dealer shall notify Seller prior to any closing of the transaction called for by
the purchase and sale agreement, and the prospective purchaser shall apply to
Seller for a Sales and Service Agreement.
B. Seller's Evaluation.
Seller is responsible for establishing and maintaining an effective body of
Authorized Nissan Dealers to promote the sale and servicing of Nissan Products.
Accordingly, Seller has the
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right and obligation to evaluate each prospective dealer, its owner(s) and
executive manager, the dealership location and the dealership facilities to
ensure that each of the foregoing is adequate to enable Dealer to meet its
responsibilities hereunder. Seller will evaluate each prospective purchaser's
qualifications and proposal for the conduct of the Dealership Operations by
applying the standards set forth or referred to in this Agreement. In
determining whether it shall consent to such a sale or transfer, Seller will
take into account factors such as the personal, business and financial
qualifications, expertise, reputation, integrity, experience and ability of the
proposed Principal Owner(s) and Executive Manager as referred to in Articles
Third and Fourth of this Agreement, the capitalization and financial structure
of the prospective dealer, the prospective purchaser's proposal for conducting
the Dealership Operations, and Seller's interest in promoting and preserving
competition.
In evaluating the prospective purchaser's application for a Sales and
Service Agreement, Seller may, without liability to Dealer, Dealer's Owners or
the prospective purchaser, consult with the prospective purchaser regarding any
matter relating to the proposed dealership.
Seller shall notify Dealer of Seller's consent or refusal to consent to
Dealer's proposed sale or transfer within sixty (60) days after Seller has
received from Dealer (i) Dealer's written request for Seller's approval; and
(ii) all applications and information customarily or reasonably requested by
Seller to evaluate such a proposal including, without limitation, information
concerning each proposed owner's and/or the replacement dealer's identity,
character, business affiliations, business experience, financial qualifications
and proposals for conducting the Dealership Operations. Any material change in
such a proposal including, without limitation, any change in the financial terms
or in the proposed ownership or management of any proposed replacement dealer,
shall be treated as a new proposal for purposes of this Section 15.B. If Seller
does not consent to Dealer's proposed sale or transfer, Seller will specify in
its notice to Dealer the reasons for its refusal to consent.
If Seller determines that the proposed dealership would not, at the
commencement of its operations, have capital or facilities in accordance with
Seller's Guides therefor and otherwise satisfactory to Seller, or if Seller
reasonably determines that the proposed dealership might not meet Seller's
performance standards in sales or service, Seller may, in its sole discretion
and in lieu of refusing to consent to the proposed sale or transfer, agree to
enter into a Term Sales and Service Agreement with the prospective purchaser.
If Seller has recommended, pursuant to a market study conducted in accordance
with Section 4.A, that Dealer relocate its Dealership Facilities, Seller may
offer to the proposed dealer a Term Sales and Service Agreement subject to the
condition that its Dealership Facilities shall be
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relocated within a reasonable time to a location and in facilities acceptable to
Seller and in accordance with the market study recommendations.
Notwithstanding anything stated or implied to the contrary in this Section
15, Seller shall not be obligated to enter into a Sales and Service Agreement
with any purchaser of the assets or ownership interests of Dealer if Seller has
notified Dealer prior to its having received notice of the proposed sale or
transfer that Seller's market representation plans do not provide for
continuation of representation in Dealer's Primary Market Area.
C. Effect of Termination.
This Agreement shall end on the effective date of termination and, except as
otherwise set forth in Section 13, all rights, obligations, duties and
responsibilities of Dealer and Seller under this Agreement shall cease as of the
effective date of termination. No assignment, transfer or sale of Dealer's
right or interest in this Agreement shall have the effect of granting the
assignee, transferee or buyer any right or interest in this Agreement that is
greater than or in addition to that then held by Dealer. Any such assignment,
transfer or sale shall be subject to the terms of any written notice of
deficiency under Section 12.B or any written notice of termination under
Sections 12.A, 12.B, 12.C, 12.D, 12.E or 12.F that was previously received by
Dealer, including but not limited to Dealer's obligation to correct any failure
before the expiration date of any period established in any such notice of
deficiency. No such assignment, transfer or sale shall correct any such
deficiency or extend the effective date of termination specified in any written
notice of termination.
Section 16. Policy Review Board
A. Establishment of Policy Review Board.
In the interest of maintaining harmonious relations between Seller and Dealer
and to provide for the resolution of certain protests, controversies and claims
with respect to or arising out of Section 4, Section 12 or Section 13 of this
Agreement, Seller has established the Nissan Motor Corporation in U.S.A. Policy
Review Board ("Policy Review Board"). The procedures of the Policy Review
Board, as they may be revised by Seller from time to time, are incorporated
herein by reference. At the time of execution of this Agreement, Seller will
have furnished to Dealer a copy of such procedures, and Seller will furnish to
Dealer a copy of each revision or modification that Seller may thereafter make
to such procedures. Any decision of the Policy Review Board shall represent the
independent decision of Seller and shall be binding on Seller but not on Dealer.
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B. Appeal of Dealer Appointment to Policy Review Board.
Any objections by Dealer to the proposed appointment of an additional Nissan
dealer within the ten (10) mile driving distance described in Section 4.B shall
be appealed to the Policy Review Board by filing a Notice of Appeal in
accordance with the procedures established therefor within thirty (30) days from
the date of Dealer's receipt of the Notice of Appointment.
C. Appeal of Termination to Policy Review Board.
Any protests, controversies or claims by Dealer (whether for damages, stay of
action, or otherwise) with respect to any termination of this Agreement or the
settlement of the accounts of Dealer with Seller after termination of this
Agreement has become effective shall be appealed to the Policy Review Board by
filing an appeal in accordance with the procedures established therefor within
thirty (30) days after Dealer's receipt of notice of termination or, as to
settlement of accounts after termination, within one (1) year after the
termination has become effective.
D. Effect of Other Proceedings.
Because the purpose of the Policy Review Board is to assist in resolving issues
between Seller and Dealer in a non-adversarial setting and to avoid litigation,
if Dealer institutes or seeks any relief or remedy through legal, administrative
or other proceedings as to any matter that is or could be the subject of an
appeal to the Policy Review Board, then the Policy Review Board may, in its sole
discretion, elect to refuse to consider any appeal to the Policy Review Board
then pending or thereafter filed by Dealer relating to such subject matter.
Dealer further agrees that Dealer's seeking such relief or remedy shall
constitute a waiver of any right to an appeal to the Policy Review Board with
respect to such subject matter and Seller and the Policy Review Board shall be
forever released from any obligation they might otherwise have had to conduct
any proceedings, render any decision or take any other action in connection with
such subject matter.
Section 17. General
A. Notices.
All notices or notifications required or permitted to be given by this Agreement
to either party shall be sufficient only if given in writing and delivered
personally or by mail to Dealer at the address set forth on the Dealership
Facilities Addendum to this Agreement and to Seller at its national
headquarters, or at such other address as the party to be addressed may have
previously
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designated by written notice to the other party. Unless otherwise specified in
the notice, such notices shall be effective upon receipt.
B. No Implied Waivers.
The waiver by either party, or the delay or failure by either party to claim a
breach, of any provision of this Agreement shall not affect the right to require
full performance thereafter, nor shall it constitute a waiver of any subsequent
breach, or affect in any way the effectiveness of such provision.
C. No Agency.
Dealer is an independently operated business entity in which Seller has no
ownership interest. This Agreement does not constitute Dealer the agent or
legal representative of Seller or Manufacturer 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 Seller or Manufacturer or
to bind Seller or Manufacturer in any manner or thing whatsoever.
D. Limitations of Seller's Liability.
This Agreement contemplates that all investments by or in Dealer shall be made,
and Dealer shall purchase and resell Nissan Products, in conformity with the
provisions hereof, but otherwise in the discretion of Dealer. Except as herein
specified, nothing herein contained shall impose any liability on Seller in
connection with the business of Dealer or otherwise or for any expenditures made
or incurred by Dealer in preparation for performance or in performance of
Dealer's responsibilities under this Agreement.
E. Entire Agreement.
This Agreement contains the entire understanding of the parties hereto with
respect to the subject matter contained herein and may be amended only by a
written instrument executed by each of the parties or their respective personal
representatives, successors and/or assigns. This Agreement supersedes any and
all prior agreements with respect to the subject matter hereof, and there are no
restrictions, promises, warranties, covenants or undertakings between the
parties other than those expressly set forth in this Agreement; provided,
however, Seller shall have the right to amend, modify or change this Agreement
in case of legislation, government regulations or changes in circumstances
beyond the control of Seller that might affect materially the relationship
between Seller and Dealer as further provided in Section 17.G.
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F. California Law.
This Agreement shall be deemed to have been entered into in the State of
California, and all questions concerning the validity, interpretation or
performance of any of its terms or provisions, or of any rights or obligations
of the parties hereof, shall be governed by and resolved in accordance with the
internal laws of the State of California including, without limitation, the
statute of limitations.
G. Changes Required by Law.
Should Seller determine that any federal or state legislation or regulation or
any condition referred to in Section 17.E required a change or changes in any of
the provisions of this Agreement, Seller may offer to Dealer an amendment or an
amended Agreement embodying such change or changes. If Dealer shall fail to
execute such amendment or amended Agreement and return it to Seller within
thirty (30) days after it is offered Dealer, Seller may terminate this Agreement
by giving notice to Dealer, such termination to be effective upon receipt by
Dealer of such notice.
H. Severability.
If any term or provision of this Agreement, or the application thereof to any
person or circumstance, shall to any extent be found to be invalid, void or
unenforceable, the remaining provisions and any application thereof shall
nevertheless continue in full force and effect without being impaired or
invalidated in any way.
I. Assignment.
Dealer shall not transfer or assign any right or transfer or delegate any
obligation of Dealer under this Agreement without prior written approval of
Seller. Any purported transfer, assignment or delegation made without the prior
written approval of Seller shall be null and void.
J. No Franchise Fee.
Dealer represents and warrants that it has paid no fee, nor has it provided any
goods or services in lieu of a fee, as consideration for Seller's entering into
this Agreement and that the sole consideration for Seller's entering into this
Agreement was Dealer's Principal Owners' and Executive Manager's abilities,
integrity, assurances of personal services and expressed intention to deal
fairly and equitably with Seller and the public and any other promises recited
in this Agreement.
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K. Captions.
The captions of the sections of this Agreement are for convenience and reference
only and shall in no way be construed to explain, modify, amplify, or aid in the
interpretation, construction or meaning of the provisions of this Agreement or
to be a part of this Agreement.
L. Benefit.
This Agreement is entered into by and between Seller and Dealer for their sole
and mutual benefit. Neither this Agreement nor any specific provision contained
in it is intended or shall be construed to be for the benefit of any third
party.
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Policy
Review Board
Procedures
Nissan Division
NISSAN MOTOR CORPORATION
in U.S.A.
<PAGE>
FOREWORD
Section 16 of the Nissan Dealer Sales and Service Agreement ("Agreement")
provides for the establishment by Nissan Motor Corporation in U.S.A. ("Nissan")
of a Policy Review Board. Under the Agreement, the Dealer may appeal to the
Policy Review Board any controversy with respect to termination of the
Agreement, the settlement of the accounts of a Dealer with Nissan after
termination of the Agreement, or the proposed appointment by Nissan of an
additional dealer which is subject to the requirements of Section 4 of the
Agreement.
The Policy Review Board and these procedures are intended to assist in
maintaining a harmonious relationship between Nissan and dealers. Accordingly,
the purpose of the Policy Review Board is to review and resolve issues which
have arisen between Nissan and dealers, falling within the limits of its
jurisdiction and which have not been or cannot be resolved through the usual
channels of communication between Nissan and its dealers The Board and its
procedures offer to the Dealer the opportunity to present its views to Nissan's
management in a non-adversarial business setting. The Dealer is not required to
pursue an appeal to the Board as a condition precedent to other actions it may
wish to take, but a decision of the Board, while not binding on the Dealer, is
binding on Nissan.
The following procedures shall govern the conduct of appeals to the Policy
Review Board.
Section 1. Policy Review Board Membership
The Policy Review Board (the "Board") shall consist of not less than
three(3) nor more than five (5) members of Nissan management who shall be
appointed by Nissan. One of the members shall be designated by Nissan as the
Chairman of the Board.
Section 2. Initiation of Appeal
A. Appeals to the Board must be initiated by the Dealer by serving a
written notice of appeal ("Notice of Appeal") on the Executive Secretary of
the Board. The Notice of Appeal shall be addressed "Executive Secretary,
Nissan Policy Review Board, P.O. Box 191, Gardena, California 90247." The
Notice of Appeal must be received by the Executive Secretary within the
following time periods:
(i) Termination of Agreement
Thirty (30) days from the Dealer's receipt of notice of
termination from Nissan.
<PAGE>
(ii) Settlement of Accounts
One (1) year after the effective date of termination.
(iii) Determination of Need for Additional Dealer
Thirty (30) days from the Dealer's receipt of the Notice of
Appointment from Nissan of its decision to appoint an additional
Nissan dealer as a result of its determination that one or more
of the conditions specified in Section 4.B of the Agreement
exists. Nissan will not enter into a Nissan Dealer Sales and
Service Agreement appointing such an additional Nissan dealer
until the Policy Review Board has rendered its decision on the
matter.
B. Within thirty (30) days of the Dealer's filing of its Notice of Appeal
or the Dealer's receipt of the information specified in Section 3.C. of
these procedures, whichever occurs later, the Dealer shall file with the
Board a complete and detailed statement of the reasons for the Dealer's
appeal. The Dealer shall attach to such statement any exhibits, documents,
or other supporting materials on which the Dealer intends to rely in its
appeal. The Dealer may also request that he be permitted to supplement the
detailed statement with an oral presentation to the Board at a meeting.
Section 3. Issues Before the Board
The Dealer's Notice of Appeal, and its detailed statement, including the
supporting exhibits, documents and other materials submitted or presented by the
Dealer, shall be limited to information relating to the issues which may be
appealed to the Board which are as follows:
A. If the appeal concerns the Dealer's termination pursuant to Section 12
of the Agreement, the issues before the Board are whether or not the
reasons stated in the notice of termination existed and whether or not such
reasons constitute appropriate grounds for termination pursuant to Section
12 of the Agreement.
B. If the appeal concerns settlement of the Dealer's account with Nissan
following the Dealer's termination, the issues shall be limited to matters
concerning Nissan's compliance with the Agreement in connection with such
settlement.
C. If the appeal concerns notice to the Dealer of the need for an
additional Nissan Dealer or Dealers within the ten (10) mile driving
distance specified in Section 4.B of the Agreement, the issue before the
Board is whether one or more
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of the conditions specified in Section 4.B of the Agreement exists. Upon
receipt of the Dealer's Notice of Appeal, Nissan shall provide the Dealer
with a copy of that portion of the market study which concludes that
additional representation is needed (excluding information concerning other
Nissan dealers). The Dealer has no right to obtain any particular
information from Nissan, except as otherwise required by the Agreement.
Section 4. Procedures for Appeal
A. Upon receipt of the Dealer's detailed statement, the Chairman of the
Policy Review Board shall determine the manner in which the Board will
decide the appeal. Subject to the Dealer's right to request the
opportunity to make an oral presentation under Section 2.B, the Board may
decide the appeal based solely upon the written submissions, it may request
oral presentations, or it may choose any other manner or procedures which
it may deem appropriate.
B. The Chairman of the Policy Review Board may limit the submissions
required by these procedures, require additional submissions, or otherwise
modify the appeal procedures set forth in this Section, in his sole
discretion.
Section 5. Meetings with the Board
A. The Chairman may delegate to one or more members of the Board the
authority and responsibility to conduct any meeting hereunder, and any such
member or members shall have all of the authority of the Board. The date,
time, and location of any such meeting shall be determined by the Chairman.
However, unless otherwise agreed to by the Chairman and the Dealer, any
such meeting shall take place not more than thirty (30) days after receipt
of the Dealer's detailed statement.
B. At any meeting with the Board or its members, the Dealer shall be
represented by a Principal Owner(s) or an Executive Manager so identified
in Article Third of the Agreement between Nissan and the Dealer. The
Chairman may, in his discretion, exclude anyone from the meeting or any
portion thereof.
C. The Chairman may also invite to the meeting a representative or
representatives from Nissan.
D. The Chairman shall determine how any meetings with the Dealer shall be
conducted, the issues to be discussed and considered, and what information
shall be received and considered by the Board in making its decision.
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<PAGE>
E. The Board is not an arbitration or quasijudicial panel and its
procedures are not necessarily intended to simulate litigation or
arbitration. The Dealer should have no expectation of obtaining discovery
against Nissan and the common law and/or federal rules of evidence will not
necessarily constrain the Chairman's conduct of any meeting.
Section 6. Decisions of the Board
A. The Chairman shall give written notice of the Board's decision to the
Executive Secretary, who shall promptly notify the Dealer. The decision
shall be binding upon Nissan.
B. If the Dealer shall fail to comply with the time requirements of these
rules, fail to appear at a hearing on its scheduled date, or otherwise
impede the appeal or the rendering of the Board's decision in any way, the
Board may either render a decision on the appeal based on the information
it has received, if any, or dismiss the appeal.
C. The Board shall render its decision as soon as practicable.
Section 7. Multiple Proceedings
In the case of appeals brought by more than one Dealer concerning a finding
by Nissan's Sales Department of the need for an additional Dealer, the Board may
determine such appeals jointly or separately, as the Chairman may determine.
Section 8. Effect of Other Proceedings
Because the purpose of the Policy Review Board and these procedures is to
assist in resolving issues between Nissan and dealers in a non-adversarial
setting and to avoid litigation, if Dealer institutes or seeks any relief or
remedy through legal, administrative or other proceedings as to any matter that
is or could be the subject of an appeal to the Policy Review Board, then the
Policy Review Board may, in its sole discretion, elect to refuse to consider any
appeal to the Policy Review Board then pending before or thereafter filed by
Dealer relating to such subject matter. Pursuant to Section 16.D of the
Agreement, Dealer's seeking such relief or remedy constitutes a waiver of any
right to an appeal to the Policy Review Board with respect to such subject
matter.
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Section 9. Expenses
Parties to an appeal shall bear their own expense, including travel.
Section 10. Notices
All notices required hereunder shall be in writing unless otherwise
specifically waived by the Chairman. Notices shall be effective upon receipt
and, unless there is evidence to the contrary, shall be deemed to have been
received three (3) days after the date of mailing.
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10.2.23 [Reserved for future use.]
[This Exhibit has been reserved by the Company for future use.]
<PAGE>
Exhibit 10.2.24
UNCONDITIONAL, CONTINUING GUARANTY OF PAYMENT
I. THE PARTIES
This Unconditional, Continuing Guaranty of Payment (the "Guaranty"), dated
effective as of the 1st day of October, 1992, is given to and in favor of
General Motors Acceptance Corporation, a New York corporation, with branch
operations offices located at (i) 325 Columbia Turnpike, Florham Park, New
Jersey 07932; (ii) 2700 Westchester Avenue, Purchase, New York 10577-2535; (iii)
90 Woodbridge Center Drive, Woodbridge, New Jersey 07095; and (iv) 555 Long
Wharf Drive, New Haven, Connecticut 06511 ("GMAC"), by each and every one of the
following parties whose name, legal status, and address is listed (the
"Guarantor(s)").
Guarantor Name Status Address
-------------- ------ -------
County Auto Group Partnership NJ General 115 Route 59
t/a County Toyota Partnership Nyack, NY 10960
Rockland Motors Partnership NJ General 73 North Highland Avenue
t/a Rockland Mitsubishi Partnership P.O. Box 724
Nyack, NY 10960
Somerset Motors Partnership NJ General Route 22 East
t/a DiFeo Lexus Partnership P.O. Box 310
Bound Brook, NJ 08805
DiFeo Oldsmobile Partnership NJ General Route 22 East
t/a DiFeo Volkswagen Partnership P.O. Box 310
Bridgewater Bound Brook, NJ 08805
Fair Motors Partnership NJ General 100 Federal Road
t/a Fair Mitsubishi Partnership Danbury, CT 06813
Fair Chevrolet-Geo Partnership NJ General 100 Federal Road
Partnership Danbury, CT 06813
Fair Hyundai Partnership NJ General 102D Federal Road
t/a Fair Suzuki Partnership Danbury, CT 06813
Fair Infiniti Partnership NJ General 100B Federal Road
Partnership Danbury, CT 06813
Fair Imports Partnership NJ General 100A Federal Road
t/a Fair Acura Partnership Danbury, CT 06813
Danbury-Mt. Kisco Saturn NJ General 102C Federal Road
Partnership t/a Saturn Partnership Danbury, CT 06813
of Danbury
Fair Cadillac-Oldsmobile-Isuzu NJ General 102 Federal Road
Partnership Partnership Danbury, CT 06813
<PAGE>
Guarantor Name Status Address
-------------- ------ -------
Danbury Auto Partnership NJ General 102D Federal Road
t/a Fair Honda Partnership Danbury, CT 06813
[TO BE FORMED]
DiFeo Nissan Partnership NJ General 977 Communipaw Avenue
[TO BE FORMED] Partnership Jersey City, NJ 07304
DiFeo Jeep-Eagle Partnership NJ General 315 Clendenny Ave.
Partnership Route 440
Jersey City, NJ 07304
DiFeo Autocenter Partnership NJ General Hudson Mall & Route 440
t/a DiFeo Mazda Partnership Jersey City, NJ 07304
DiFeo Subaru Partnership NJ General 315 Clendenny Avenue
Partnership Jersey City, NJ 07304
DiFeo Chevrolet-Geo Partnership NJ General 315 Clendenny Ave.
[TO BE FORMED] Partnership Route 440
Jersey City, NJ 07304
DiFeo Hyundai Partnership NJ General Hudson Mall & Route 440
Partnership Jersey City, NJ 07304
DiFeo Buick-Pontiac-GMC NJ General 919 Communipaw Avenue
Truck Partnership Partnership Jersey City, NJ 07304
DiFeo BMW Partnership NJ General 301 County Road
Partnership Tenafly, NJ 07670
DiFeo Imports Partnership NJ General 947 Communipaw Avenue
t/a Jersey City Mitsubishi Partnership Jersey City, NJ 07304
J & F Oldsmobile-Isuzu NJ General 315 Clendenny Avenue
Partnership Partnership Route 440
Jersey City, NJ 07304
DiFeo Leasing Partnership NJ General 977 Communipaw Avenue
Partnership Jersey City, NJ 07304
Hudson Motors Partnership NJ General 585 Route 440
t/a Hudson Toyota Partnership Jersey City, NJ 07304
J & S Ford Partnership NJ General 599 Route 440
[TO BE FORMED] Partnership Jersey City, NJ 07304
DiFeo Volkswagen Partnership NJ General 599 Route 440
Partnership Jersey City, NJ 07304
North Jersey Manhattan Saturn NJ General 943 Communipaw Avenue
Partnership Partnership Jersey City, NJ 07304
[TO BE FORMED]
DiFeo-EMCO Management NJ General 977 Communipaw Avenue
Partnership Partnership Jersey City, NJ 07304
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<PAGE>
Guarantor Name Status Address
-------------- ------ -------
County Auto Group, Inc. New York 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership RCT, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
DiFeo Partnership, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
EMCO Motor Holdings, Inc. Delaware 153 East 53 Street
Corporation Suite 5900
New York, NY 10022
Rockland Motors Corp. New York 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership RCM, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
Somerset Motors, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership SCT, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
Gateway Oldsmobile, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Motors Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership DM, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
Fair Chevrolet Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Hyundai Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Infiniti, Inc. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Imports Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Danbury-Mt. Kisco Saturn Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Cadillac-Oldsmobile Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
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JS2, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
JS1, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Jeep-Eagle, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Autocenter, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Subaru, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Hyundai, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Buick, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo BMW, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Imports, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership HCM, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
J & F Oldsmobile Corp. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Leasing Corporation New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Hudson Toyota, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership HCT, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
DiFeo Volkswagen, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
J & S Ford, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
North Jersey Manhattan Saturn New Jersey 943 Communipaw Avenue
Corporation Corporation Jersey City, NJ 07304
Samuel X. DiFeo Individual 121 Lorraine Avenue
Spring Lake, NJ 07762
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<PAGE>
Joseph C. DiFeo Individual 17 Blackpoint Horseshoe
Rumson, NJ 07760
James G. Hetherington Individual 44 Minors Bridge Road
Roxbury, CT. 06783
Neale A. Kuperman Individual 9 Sterling Forest Lane
Suffern, NY 10901
Robert J. Cohen Individual 812 Napoleon Street
Woodmere, NY 11598
Joseph J. Mitolo Individual 5 Michelle Lane
Warren, NJ 07060
Richard Mutterperl Individual 3 Cherbourg Road
Parsippany, NJ 07054
Sam C. DiFeo Individual 2219 First Avenue
Spring Lake, NJ 07762
James Salerno Individual Kennady Road
Mendham, NJ 07926
Michael Salerno Individual 228 E. Blackwell Street
Dover, NJ 07801
Raymond Duane Individual 267 Broad Street
Summit, NJ 07901
II. THE RECITALS
A. WHEREAS, the following named entities, presently in existence or proposed
to-be-formed, in their capacity as motor vehicle dealers (the "Dealer(s)"),
have requested GMAC to extend or continue to extend credit accommodations
to them as separate and distinct entities. The type of credit, in the
aggregate, will likely exceed $100 million and involves one or more of (1)
wholesale floorplan financing of motor vehicles, including related
demonstrator, short-term rental, and delayed payment programs; (2) retail
sales and lease financing; (3) all other obligations, indebtedness, and
liabilities of Dealers to GMAC for loans, leases, financing, and other
credit extensions which GMAC may, in its sole discretion, provide to one or
more Dealers from time to time; and (4) all costs, expenses or fees
relating to the extension, administration, and collection of the credit
accommodations (the "Obligations"); and
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<PAGE>
Dealer Name Status Address
----------- ------ -------
County Auto Group Partnership NJ General 115 Route 59
t/a County Toyota Partnership Nyack, NY 10960
Rockland Motors Partnership NJ General 73 North Highland Avenue
t/a Rockland Mitsubishi Partnership P.O. Box 724
Nyack, NY 10960
Somerset Motors Partnership NJ General Route 22 East
t/a DiFeo Lexus Partnership P.O. Box 310
Bound Brook, NJ 08805
DiFeo Oldsmobile Partnership NJ General Route 22 East
t/a DiFeo Volkswagen Partnership P.O. Box 310
Bridgewater Bound Brook, NJ 08805
Fair Motors Partnership NJ General 100 Federal Road
t/a Fair Mitsubishi Partnership Danbury, CT 06813
Fair Chevrolet-Geo Partnership NJ General 100 Federal Road
Partnership Danbury, CT 06813
Fair Hyundai Partnership NJ General 102D Federal Road
t/a Fair Suzuki Partnership Danbury, CT 06813
Fair Infiniti Partnership NJ General 100B Federal Road
Partnership Danbury, CT 06813
Fair Imports Partnership NJ General 100A Federal Road
t/a Fair Acura Partnership Danbury, CT 06813
Danbury-Mt. Kisco Saturn NJ General 102C Federal Road
Partnership t/a Saturn of Danbury Partnership Danbury, CT 06813
Fair Cadillac-Oldsmobile- NJ General 102 Federal Road
Isuzu Partnership Partnership Danbury, CT 06813
DiFeo Jeep-Eagle Partnership NJ General 315 Clendenny Ave.
Partnership Route 440
Jersey City, NJ 07304
DiFeo Autocenter Partnership NJ General Hudson Mall & Route 440
t/a DiFeo Mazda Partnership Jersey City, NJ 07304
DiFeo Subaru Partnership NJ General 315 Clendenny Avenue
Partnership Jersey City, NJ 07304
DiFeo Hyundai Partnership NJ General Hudson Mall & Route 440
Partnership Jersey City, NJ 07304
DiFeo Buick-Pontiac-GMC NJ General 919 Communipaw Avenue
Truck Partnership Partnership Jersey City, NJ 07304
DiFeo BMW Partnership NJ General 301 County Road
Partnership Tenafly, NJ 07670
DiFeo Imports Partnership NJ General 947 Communipaw Avenue
t/a Jersey City Mitsubishi Partnership Jersey City, NJ 07304
J & F Oldsmobile-Isuzu Partnership NJ General 315 Clendenny Avenue
Partnership Route 440
Jersey City, NJ 07304
Hudson Motors Partnership NJ General 585 Route 440
t/a Hudson Toyota Partnership Jersey City, NJ 07304
DiFeo Volkswagen Partnership NJ General 599 Route 440
Partnership Jersey City, NJ 07304
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<PAGE>
Dealer Name Status Address
----------- ------ -------
J & S Ford Partnership NJ General 599 Route 440
[TO BE FORMED] Partnership Jersey City, NJ 07304
North Jersey Manhattan Partnership NJ General 943 Communipaw Avenue
[TO BE FORMED] Partnership Jersey City, NJ 07304
Danbury Auto Partnership NJ General 102D Federal Road
t/a Fair Honda Partnership Danbury, CT 06813
[TO BE FORMED]
DiFeo Nissan Partnership NJ General 977 Communipaw Avenue
(TO BE FORMED) Partnership Jersey City, NJ 07304
DiFeo Chevrolet-Geo Partnership NJ General 315 Clendenny Ave.
[TO BE FORMED] Partnership Route 440
Jersey City, NJ 07304
B. WHEREAS, each Dealer is an affiliate of the other, having substantially
similar financial, ownership, and management interests with one another;
and
C. WHEREAS, each Guarantor is allied to at least one of the other Guarantors
by at least one of the following factors: financial, ownership, or
management; and
D. WHEREAS, GMAC has agreed to extend credit accommodations to Dealers
pursuant to the terms and conditions of a Loan and Security Agreement
executed on or about the date of this Guaranty, and such other documents,
agreements, and instruments referred to therein, all of which may be
amended, altered, suspended, or terminated from time to time in accordance
with the terms thereof (the "GMAC Financing"); and
E. WHEREAS, each Guarantor has determined that the execution, delivery, and
performance of this Guaranty directly benefits, and is within the purposes
and best interest of the Guarantor; and
F. WHEREAS, GMAC has been induced to provide GMAC Financing by the execution,
delivery, and performance of this Guaranty by all of the Guarantors;
III. THE GUARANTY AGREEMENT
NOW, THEREFORE, in consideration of the premises, the sufficiency of which is
hereby acknowledged, Guarantors hereby agree as follows:
1. Guaranty of Payment. Guarantor hereby unconditionally, continuously, and
absolutely guaranties to GMAC punctual payment of any and all Dealer
Obligations now or hereafter arising, whether matured, contingent, or
liquidated inclusive of all principal, interest, charges, costs, fees, and
expenses. This Guaranty is unlimited as to the amount and extent of
Obligations, except that as to individual Guarantors, James G.
Hetherington, Neale A. Kuperman, Robert J. Cohen, Joseph J. Mitolo, Richard
Mutterperl, Sam C. DiFeo, James Salerno, Michael Salerno and Raymond Duane,
his or their liability hereunder shall be limited
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<PAGE>
(i) to Obligations incurred by Dealers in which he or they have an
ownership interest as a shareholder of a general partner thereof; and (ii)
shall terminate for such Dealer Obligations which are incurred up to two
business days after his or their legal and equitable ownership interest
therein shall cease. The Guaranty shall not apply to any Obligation for
which the Guarantor is also the direct signatory/obligor of the
aforementioned Loan and Security Agreement to the extent of and in the
capacity as the Dealer thereunder.
2. Time for Payment. If any of the following events occur, GMAC may declare
all or any part of the Obligations, regardless of their terms or
conditions, and for the purposes of this Guaranty or otherwise, to be
immediately due and payable:
(a) any default with respect to payment or performance of any of the
Obligations by any Dealer; or
(b) any default in the observance or performance of any covenant or
agreement of any Guarantor under this Guaranty or otherwise; or
(c) insolvency, bankruptcy, or receivership proceeding initiated by or
against any Dealer or Guarantor; or
(d) the death, dissolution, or termination, as the case may be, of any
Guarantor;
(e) any material adverse change in the financial status of any Guarantor,
including the sale, mortgage, pledge, or encumbrance of any real or
personal property of the Guarantor without first obtaining the prior
written consent of GMAC (except as may occur for permitted purchase
money security interests and mortgages).
3. Right of Set-off. GMAC is hereby irrevocably authorized at any time and
from time to time without notice to Guarantor (any such notice being
expressly waived by Guarantor) to set-off, appropriate, recoup, and apply
any and all payments, credits, indebtedness or claims or any part thereof,
at any time held or owing by GMAC to or for the account of, or otherwise
payable to, Guarantor against and on account of the obligations and
liabilities of Guarantor to GMAC hereunder.
4. Waiver of Subrogation. Guarantor hereby waives and releases any rights that
it may now possess or hereafter acquire, whether by operation of law,
equity, or through contract, to obtain indemnity, reimbursement or
repayment from Dealers of any amount paid by Guarantor to GMAC pursuant to
this Guaranty, whether by way of subrogation, indemnity, defense,
reimbursement or otherwise. In the event that any Dealer shall be the
subject of a bankruptcy, insolvency or similar proceeding, Guarantor agrees
to make no claim against any Dealer or the estate of any Dealer arising out
of or in relation to the performance of this Guaranty
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<PAGE>
by Guarantor and to execute and deliver to the debtor-in-possession,
trustee, receiver or other appropriate person such releases and waivers of
any claims available to Guarantor as shall be required to evidence this
waiver and release.
5. Certain Rights of GMAC. GMAC may at any time to the extent provided by the
GMAC Financing, without the consent of, or notice (except as shall be
required by applicable statute and which cannot be waived) to Guarantor,
and without incurring responsibility to Guarantor or impairing, mitigating,
or releasing the obligations of Guarantor hereunder:
(a) change the manner, place or terms of payment, or change or extend the
time of payment of, renew or alter any Obligations, any security
therefor, or any liability incurred directly or indirectly in respect
thereof, and the Guaranty herein made shall apply to the Obligations
as so changed, extended, renewed or altered;
(b) sell, exchange, release, subordinate, surrender, realize upon or
otherwise deal with in any manner and in any order any property at any
time pledged or mortgaged to secure the Obligations; fail to obtain,
maintain, or perfect any lien, pledge, mortgage, or security interest
in any property of the Dealer, delay in the perfection of any such
interest, fail to fully and adequately conduct audits and verification
reviews of such property or the books and records of the Dealer; or
(c) exercise or refrain from exercising any rights or remedies against
Dealer or others (including Guarantor or any other person directly or
contingently liable for any or all the Obligations);
(d) settle or compromise any Obligations, any security therefor or any
liability (including any of those hereunder) incurred directly or
indirectly in respect thereof, and may subordinate the payment of all
or any part thereof to the payment of any liability (whether due or
not) of Dealers to creditors of Dealers; and
(e) apply any sums however realized from Guarantor in the order of payment
as set forth in the GMAC Financing agreements or, to the extent not
set forth, in GMAC's reasonable discretion, provided GMAC has no duty
to marshal assets for the benefit of any Dealer or Guarantor.
6. Other Agreements of Guarantor. Guarantor also agrees as follows:
(a) the liability of Guarantor under this Guaranty is absolute and
unconditional and may be enforced without requiring GMAC to first
resort to any other right, remedy or security;
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<PAGE>
(b) no setoffs or counterclaims that any Dealer or Guarantor, or any other
person, may have against GMAC shall impair or otherwise affect the
rights of GMAC against Guarantor and Guarantor waives the assertion of
any such setoffs or counterclaims in any proceeding to enforce
Guarantor's Obligations under this Guaranty;
(c) if any Dealer or Guarantor shall at any time become insolvent, make a
general assignment for the benefit of creditors, or if a petition in
bankruptcy or any insolvency or reorganization proceeding shall be
commenced by, against or in respect of any of them, such action shall
not release this Guaranty;
(d) this Guaranty is a continuing Guaranty which may not be terminated so
long as any Obligations remain outstanding;
(e) nothing shall discharge or satisfy the liability of Guarantor except
the full payment and performance of the Obligations;
(f) no invalidity, irregularity or unenforceability of all or any part of
the Obligations or of any security therefor shall affect, impair or be
a defense to this Guaranty; and
(g) this Guaranty is secured under separate security agreement, pledge,
assignment, and/or mortgage in favor of GMAC.
(h) 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
under this Guaranty, including, without limitation, Guarantor
expressly waives and dispenses with notice of acceptance of this
Guaranty, notices of non-payment or non-performance, notice of amount
of indebtedness outstanding at any time, protests, demands, and
prosecution of collection, foreclosure, and possessory remedies.
Guarantor further waives any right to require GMAC to (i) proceed
against other persons or any Dealer, (ii) advise the Guarantor of the
results of any collateral checks or examinations, (iii) require any
Dealer to comply with its agreement with GMAC, or (iv) proceed against
Dealer or proceed against or exhaust any security.
(i) Guarantor shall provide upon the execution of this Guaranty and upon
request by GMAC a detailed financial statement for such Guarantor,
upon the forms attached hereto as Exhibits "A" (GMAC Form 559) and "B"
(GMAC Form 505 G).
Continuing Guaranty. This is a continuing guaranty and shall remain in full
force and effect until five business days after receipt by GMAC of written
notice by the Guarantor terminating or modifying same; provided, however, that
such notice shall not operate to release the Guarantor from liability hereunder
with respect to any Obligations
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<PAGE>
incurred prior to the effective date of such notice; and provided further that
such notice shall be effective only as to the Guarantor specifically giving such
notice.
Integration. Except as noted herein or in the GMAC Financing agreements, GMAC
has made no promises to any Dealer or Guarantor to induce execution of this
Guaranty and there are no other agreements or understandings, either oral or in
writing, between GMAC and the Guarantor affecting this Guaranty.
Joint and Several Liability. The Obligation of all parties signing this Guaranty
shall be joint and several, and the failure of or subsequent release of any
Guarantor named in this Guaranty to be bound hereby shall not mitigate, release,
or impair the responsibility of every other Guarantor hereunder.
Reinstatement.
(a) Guarantor further agrees that if GMAC receives any payment or payments
on account of the Obligations, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent,
avoidable, or preferential, set aside or required to be repaid to a
trustee, receiver, or any other party under any bankruptcy, state or
federal law, common law or equitable doctrine, then to the extent of
any sum not finally retained by GMAC, Guarantor's obligations under
this Guaranty shall be reinstated and this Guaranty shall remain in
full force and effect (or be reinstated) until payment of all the
Obligations shall have been irrevocably and indefeasibly made to GMAC.
If any action or proceeding seeking such repayment is pending or, in
GMAC's reasonable judgment, threatened, this Guaranty shall remain in
full force and effect notwithstanding that any Dealer may not then be
obligated to GMAC.
(b) If claim is ever made upon GMAC for repayment or recovery of any
amount or amounts received by it in payment or on account of any of
the Obligations and all or part of such amount is repaid by reason of
(i) any judgment, decree or order of any court or administrative body
having jurisdiction over GMAC or any of its property, or (ii) any
settlement or compromise of any such claim affected by GMAC with any
such claimant (including Dealer), then and in such event Guarantor
agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon Guarantor, notwithstanding any revocation hereof
or the cancellation of any note or other instrument evidencing any
Obligations, and Guarantor shall be and remains liable to GMAC hereunder for the
amount so repaid or recovered to the same extent as if such amount had never
originally been received by GMAC.
11. Severability. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction or against any person
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<PAGE>
organized under the laws of such 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
or with respect to any other person.
12. Paragraph Headings. The paragraph headings used in this Guaranty are for
convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
13. Rights and Remedies Not Waived. No course of dealing between GMAC and any
Dealer and/or Guarantor or any failure or delay on the part of GMAC in
exercising any rights or remedies hereunder shall operate as a waiver of
any rights or remedies of GMAC and no single or partial exercise of any
rights or remedies hereunder shall operate as a wiaver or preclude the
exercise of any other rights or remedies hereunder.
14. Waivers and Amendments; Successors and Assigns; Governing Law. None of the
terms or provisions of this Guaranty may be waived, altered, modified or
amended except by a written instrument, duly executed by Guarantor and
GMAC. This Guaranty and all obligations of Guarantor hereunder shall be
binding upon the successors and assigns of Guarantor, and shall, together
with the rights and remedies of GMAC hereunder, inure to the benefit of
GMAC and its successors and assigns, provided that Guarantor may not assign
or transfer any of its rights or obligations hereunder without the prior
written consent of GMAC. This Guaranty shall be governed by, and be
construed and interpreted in accordance with, the internal laws (and not
the laws of conflict) of the State of New Jersey.
15. Notices. Any demand, notice or communication to be made or given hereunder
shall be in writing, except as otherwise expressly permitted or required
under this Guaranty, and may be made or given by personal delivery,
overnight courier, registered or certified mail or by transmittal by telex
or facsimile machine, whether by public or private means, addressed to the
respective parties at the addresses set forth in Section I above. If the
party making or giving such demand, notice or communication knows or ought
reasonably to know of difficulties with the postal system which might
affect the delivery of mail, any such demand, notice or communication shall
not be mailed but shall be made or given by personal delivery or by telex
or by facsimile transmission.
16. Counterparts. This Guaranty may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which taken
together shall be deemed to constitute one and the same instrument, and it
shall not be necessary in making
-12-
<PAGE>
proof of this Guaranty to produce or account for more than one such
counterpart.
17. Waiver of Jury Trial. THE PARTIES HERETO ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT THIS RIGHT MAY BE WAIVED.
GMAC AND EACH GUARANTOR EACH HEREBY KNOWINGLY, VOLUNTARILY AND WITHOUT
COERCION, WAIVE ALL RIGHTS TO A TRIAL BY JURY OF ALL DISPUTES ARISING OUT
OF OR IN RELATION TO THIS GUARANTY OR ANY OTHER AGREEMENTS BETWEEN THE
PARTIES. NO PARTY SHALL BE DEEMED TO HAVE RELINQUISHED THE BENEFIT OF THIS
WAIVER OF JURY TRIAL UNLESS SUCH RELINQUISHMENT IS IN A WRITTEN INSTRUMENT
SIGNED BY THE PARTY TO WHICH SUCH RELINQUISHMENT WILL BE CHARGED.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first above written.
County Auto Group Partnership
t/a County Toyota
By /s/Ezra P. Mager
-----------------------------
Title Ezra P. Mager, CEO
-----------------------------
Attest/Certify /s/Donald Betson
-----------------
Title Donald Betson, CFO
--------------------------
Rockland Motors Partnership
t/a Rockland Mitsubishi
By /s/Ezra P. Mager
-----------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
Somerset Motors Partnership
t/a DiFeo Lexus
By /s/Ezra P. Mager
-----------------------------
Title Ezra P. Mager, CEO
-----------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
------------------------
-13-
<PAGE>
DiFeo Oldsmobile Partnership
t/a DiFeo Volkswagen of Bridgewater
By /s/Ezra P. Mager
-----------------------------
Title Ezra P. Mager, CEO
-----------------------------
Attest/Certify /s/Donald Betson
-----------------
Title Donald Betson, CFO
------------------------
Fair Motors Partnership
t/a Fair Mitsubishi
By /s/Ezra P. Mager
-----------------------------
Title Ezra P. Mager, CEO
-----------------------------
Attest/Certify /s/Donald Betson
--------------
Title Donald Betson, CFO
------------------------
Fair Chevrolet-Geo Partnership
By /s/Ezra P. Mager
--------------------------
Title Ezra P. Mager, CEO
-----------------------------
Attest/Certify /s/Donald Betson
--------------
Title Donald Betson, CFO
------------------------
Fair Hyundai Partnership
t/a Fair Suzuki
By /s/Ezra P. Mager
-----------------------------
Title Ezra P. Mager, CEO
-----------------------------
Attest/Certify /s/Donald Betson
--------------
Title Donald Betson, CFO
------------------------
Fair Infiniti Partnership
By /s/Ezra P. Mager
-----------------------------
Title Ezra P. Mager, CEO
-----------------------------
Attest/Certify /s/Donald Betson
--------------
Title Donald Betson, CFO
------------------------
-14-
<PAGE>
Fair Imports Partnership
t/a Fair Acura
By /s/Ezra P. Mager
-----------------------------
Title Ezra P. Mager, CEO
-----------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
------------------------
Danbury-Mt. Kisco Saturn
Partnership t/a Saturn
of Danbury
By /s/Ezra P. Mager
----------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
Fair Cadillac-Oldsmobile-
Isuzu Partnership
By /s/Ezra P. Mager
----------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
-----------------
Title Donald Betson, CFO
--------------------------
Danbury Auto Partnership
t/a Fair Honda
By /s/Ezra P. Mager
----------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
-----------------
Title Donald Betson, CFO
--------------------------
DiFeo Nissan Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
-----------------
Title Donald Betson, CFO
--------------------------
-15-
<PAGE>
DiFeo Jeep-Eagle Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
DiFeo Autocenter Partnership
t/a DiFeo Mazda
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
DiFeo Subaru Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
-----------------
Title Donald Betson, CFO
--------------------------
DiFeo Chevrolet-Geo
Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
-----------------
Title Donald Betson, CFO
--------------------------
DiFeo Hyundai Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
-16-
<PAGE>
DiFeo Buick-Pontiac-GMC
Truck Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
DiFeo BMW Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
DiFeo Imports Partnership
t/a Jersey City Mitsubishi
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
-------------------------------
J & F Oldsmobile - Isuzu
Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
DiFeo Leasing Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
-17-
<PAGE>
Hudson Motors Partnership
t/a Hudson Toyota
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
J & S Ford Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
DiFeo Volkswagen Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
DiFeo-EMCO Management
Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
County Auto Group, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Treasurer
--------------------------------
-18-
<PAGE>
DiFeo Partnership PCT, Inc.
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
DiFeo Partnership, Inc.
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
EMCO Motor Holdings, Inc.
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
Rockland Motors Corp.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Asst. Sec.
---------------------------------
DiFeo Partnership RCM, Inc.
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
-19-
<PAGE>
Somerset Motors, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, VP
---------------------------
DiFeo Partnership SCT, Inc.
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
Gateway Oldsmobile, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, VP
--------------------------
Fair Motors Corp.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, Treasurer
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
----------------
Title Joseph C. DiFeo, Pres.
----------------------------
DiFeo Partnership DM, Inc.
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
-20-
<PAGE>
Fair Chevrolet Corp.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Sec.
---------------------------
Fair Hyundai Corp.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Treasurer
--------------------------------
Fair Infinite, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Sec.
---------------------------
Fair Imports Corp.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Pres.
----------------------------
Danbury-Mt. Kisco Saturn Corp.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Sec.
---------------------------
-21-
<PAGE>
Fair Cadillac-Oldsmobile Corp.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Sec.
---------------------------
JS2, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, VP
--------------------------
JS1, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, VP
--------------------------
DiFeo Jeep Eagle, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Pres.
----------------------------
DiFeo Autocenter, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Tres.
----------------------------
-22-
<PAGE>
DiFeo Subaru, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Sec.
---------------------------
DiFeo Hyundai, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Tres.
----------------------------
DiFeo Buick, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Sec.
---------------------------
DiFeo BMW, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, Sec.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Tres.
----------------------------
DiFeo Imports, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Pres.
----------------------------
-23-
<PAGE>
DiFeo Partnership HCM, Inc.
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
J & F Oldsmobile Corp.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Asst. Sec.
---------------------------------
DiFeo Leasing Corporation
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Sec.
---------------------------
Hudson Toyota, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, VP
-------------------------
DiFeo Partnership HCT, Inc.
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
------------------------
-24-
<PAGE>
DiFeo Volkswagen, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, VP
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, Tres.
----------------------------
/s/ Samuel X. DiFeo
-------------------------------
Samuel X. DiFeo, Individual
North Jersey-Manhattan Saturn Corporation
By /s/Samuel X. DiFeo
-------------------------------
Title
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title
----------------------------
North Jersey Manhattan Saturn Partnership
By /s/Ezra P. Mager
-------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/Donald Betson
----------------
Title Donald Betson, CFO
--------------------------
J & S Ford, Inc.
By /s/Samuel X. DiFeo
-------------------------------
Title Samuel X. DiFeo, Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
------------------
Title Joseph C. DiFeo, VP
--------------------------
/s/Joseph C. DiFeo
- ------------------------------- -------------------------------
James Salerno, Individual Joseph C. DiFeo, Individual
- ------------------------------- -------------------------------
Michael Salerno, Individual James G. Hetherington, Individual
- ------------------------------- -------------------------------
Raymond Duane, Individual Neale A. Kuperman, Individual
-25-
<PAGE>
- ------------------------------- -------------------------------
Richard Mutterperl, Robert J. Cohen, Individual
Individual
/s/Sam C. DiFeo
- ------------------------------- -------------------------------
Sam C. DiFeo, Individual Joseph J. Mitolo, Individual
GENERAL MOTORS ACCEPTANCE CORPORATION
By: /s/Illegible
- -------------------------------
Its: Asst. Tres.
------------
-26-
<PAGE>
FIRST AMENDMENT TO UNCONDITIONAL
CONTINUING GUARANTY OF PAYMENT
I. THE PARTIES
This First Amendment to Unconditional, Continuing Guaranty of Payment (the
"Amendment") is dated effective the 8th day of February, 1993, and executed by
and between General Motors Acceptance Corporation, a New York corporation, with
branch operations offices located at (i) 325 Columbia Turnpike, Florham Park,
New Jersey 07932; (ii) 2700 Westchester Avenue, Purchase, New York 10577-2535;
(iii) 90 Woodbridge Center Drive, Woodbridge, New Jersey 07095; and (iv) 555
Long Wharf Drive, New Haven, Connecticut 06511 ("GMAC"); Fair Chrysler Plymouth
Partnership, a New Jersey general partnership, trading as Fair Chrysler Plymouth
and located at 100C Federal Road, Danbury, Connecticut 06813 ("Fair Chrysler");
and by each and everyone of the following persons whose name, legal status, and
address is listed (the "Guarantors"):
Guarantor Name Status Address
- -------------- ------ -------
County Auto Group Partnership NJ General 115 Route 59
t/a County Toyota Partnership Nyack, NY 10960
Rockland Motors Partnership NJ General 73 North Highland Avenue
t/a Rockland Mitsubishi Partnership P.O. Box 724
Nyack, NY 10960
Somerset Motors Partnership NJ General Route 22 East
t/a DiFeo Lexus Partnership P.O. Box 310
Bound Brook, NJ 08805
DiFeo Oldsmobile Partnership NJ General Route 22 East
t/a Difeo Volkswagen Bridgewater Partnership P.O. Box 310
Bound Brook, NJ 08805
Fair Motors Partnership NJ General 100 Federal Road
t/a Fair Mitsubishi Partnership Danbury, CT 06813
Fair Chevrolet-Geo Partnership NJ General 100 Federal Road
Partnership Danbury, CT 06813
Fair Hyundai Partnership NJ General 102D Federal Road
t/a Fair Suzuki Partnership Danbury, CT 06813
Fair Infiniti Partnership NJ General 100B Federal Road
-27-
<PAGE>
Partnership Danbury, CT 06813
Fair Imports Partnership NJ General 100A Federal Road
t/a Fair Acura Partnership Danbury, CT 06813
Danbury-Mt. Kisco Saturn NJ General 102C Federal Road
Partnership t/a Saturn of Danbury Partnership Danbury, CT 06813
Fair Cadillac-Oldsmobile-Isuzu NJ General 102 Federal Road
Partnership Partnership Danbury, CT 06813
Danbury Auto Partnership NJ General 102D Federal Road
t/a Fair Honda Partnership Danbury, CT 06813
DiFeo Nissan Partnership NJ General 977 Communipaw Avenue
Partnership Jersey City, NJ 07304
DiFeo Jeep-Eagle Partnership NJ General 315 Clendenny Avenue
Partnership Route 440
Jersey City, NJ 07304
DiFeo Autocenter Partnership NJ General Hudson Mall & Route 440
t/a DiFeo Mazda Partnership Jersey City, NJ 07304
DiFeo Subaru Partnership NJ General 315 Clendenny Avenue
Partnership Jersey City, NJ 07304
DiFeo Chevrolet-Geo NJ General 315 Clendenny Avenue
Partnership Partnership Route 440
Jersey, City, NJ 07304
DiFeo Hyundai Partnership NJ General Hudson Mall & Route 440
Partnership Jersey City, NJ 07304
DiFeo Buick-Pontiac-GMC NJ General 919 Communipaw Avenue
Truck Partnership Partnership Jersey City, NJ 07304
DiFeo BMW Partnership NJ General 301 County Road
Partnership Tenafly, NJ 07670
DiFeo Imports Partnership NJ General 947 Communipaw Avenue
t/a Jersey City Mitsubishi Partnership Jersey City, NJ 07304
J & F Oldsmobile-Isuzu NJ General 315 Clendenny Avenue
Partnership Partnership Route 440
Jersey City, NJ 07304
-28-
<PAGE>
DiFeo Leasing Partnership NJ General 977 Communipaw Avenue
Partnership Jersey City, NJ 07304
Hudson Motors Partnership NJ General 585 Route 440
t/a Hudson Toyota Partnership Jersey City, NJ 07304
J & S Ford Partnership NJ General 599 Route 440
Partnership Jersey City, NJ 07304
DiFeo Volkswagen Partnership NJ General 599 Route 440
Partnership Jersey City, NJ 07304
North Jersey Manhattan Saturn NJ General 943 Communipaw Avenue
Partnership Partnership Jersey City, NJ 07304
DiFeo-EMCO Management NJ General 977 Communipaw Avenue
Partnership Partnership Jersey City, NJ 07304
County Auto Group, Inc. NY Corporation 585 Route 440
c/o Joseph C. DiFeo Jersey City, NJ 07304
DiFeo Partnership RCT, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
DiFeo Partnership, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
EMCO Motor Holdings, Inc. Delaware 153 East 53 Street
Corporation Suite 5900
New York, NY 10022
Rockland Motors Corp. New York 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership RCM, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
Somerset Motors, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership SCT, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
Gateway Oldsmobile, Inc. New Jersey 585 Route 440
-29-
<PAGE>
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Motors Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership DM, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
Fair Chevrolet Corp. Connecticut 585 Route 440
c/o Joseph C. DeFeo Corporation Jersey City, NJ 07304
Fair Hyundai Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Infiniti, Inc. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Imports Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Danbury-Mt. Kisco Saturn Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Cadillac-Oldsmobile Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
JS2, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
JS1, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Jeep-Eagle, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Autocenter, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Subaru, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Hyundai, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Buick, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
-30-
<PAGE>
DiFeo BMW, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Imports, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership HCM, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
J & F Oldsmobile Corp. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Leasing Corporation New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Hudson Toyota, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership HCT, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
DiFeo Volkswagon, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
J & S Ford, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
North Jersey Manhattan Saturn New Jersey 943 Communipaw Avenue
Corporation Corporation Jersey City, NJ 07304
Samuel X. DiFeo Individual 121 Lorraine Avenue
Spring Lake, NJ 07762
Joseph C. DiFeo Individual 17 Blackpoint Horseshoe
Rumson, NJ 07760
James G. Hetherington Individual 44 Minors Bridge Road
Roxbury, CT 06783
Sam C. DiFeo Individual 2219 First Avenue
Spring Lake, NJ 07762
II. THE RECITALS
-31-
<PAGE>
A. WHEREAS, each of the Guarantors executed and delivered to and in favor of
GMAC an Unconditional, Continuing Guaranty of Payment, dated effective
October 1, 1992, (the "Guaranty"); and
B. WHEREAS, the Guaranty is an unconditional, continuing guaranty of payment
of any and all obligations which the Dealers whose names were described
therein then or thereafter owed to GMAC, except that certain limitations
applied as to the Individual Guarantors, as more fully set forth in
paragraph 1 of the Guaranty; and
C. WHEREAS, each of the Dealers described in the Guaranty ("Dealers") has
previously executed, inter alia, a Loan and Security Agreement with GMAC
(the "Loan Agreement") which, among other things, required the
cross-guaranty of each Dealer, all Affiliates thereto, and certain other
parties named in paragraph 4 of the Loan Agreement; and
D. WHEREAS, Fair Chrysler has, contemporaneous with the execution of this
First Amendment, executed a Loan Agreement and other related documents,
instruments, and agreements with GMAC, and in connection therewith, will
become an "Affiliate" of the Dealers as that term is described in paragraph
6(I) of each and every Loan Agreement; and
E. WHEREAS, GMAC requires, in connection with all such Loan Agreements, that
each Guarantor unconditionally and continuously guaranty the payment of the
obligations of Fair Chrysler to GMAC and vice versa (the "Cross Guaranty");
and
F. WHEREAS, except for certain Individual Guarantors whose obligations are not
increased or altered by this First Amendment, each of the Parties hereto
intend that the Guaranty be amended to include the Cross-Guaranty of Fair
Chrysler.
III.
THE AMENDMENT AGREEMENT
NOW, THEREFORE, in consideration of the premises, the sufficiency of which is
hereby acknowledged, GMAC, Fair Chrysler, and each of the undersigned Guarantors
hereby agree, in conformity with paragraph 14 of the Guaranty, as follows:
1. The Guaranty is hereby amended to make and designate Fair Chrysler a
"Guarantor" and a "Dealer" as ascribed in the Guaranty and for all intents
and purposes thereunder, with all duties, obligations, and liabilities as a
Guarantor and Dealer as though originally executed by Fair Chrysler.
2. Except as noted above, the Guaranty remains in full force and effect and is
not otherwise waived, altered, modified, or amended hereby.
-32-
<PAGE>
Fair Chrysler Plymouth Partnership GENERAL MOTORS ACCEPTANCE
t/a Fair Chrysler Plymouth CORPORATION
By /s/ E.P. Mager By /s/ Paul A. Given
- ---------------------------------- -------------------------------
Title President Paul A. Given,
---------------------------- Control Branch Manager
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
--------------------
County Auto Group Partnership
t/a County Toyota
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Rockland Motors Partnership
t/a Rockland Mitsubishi
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Somerset Motors Partnership
t/a DiFeo Lexus
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Oldsmobile Partnership
t/a Difeo Volkswagen of Bridgewater
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
-33-
<PAGE>
Fair Motors Partnership
t/a Fair Mitsubishi
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Fair Chevrolet-Geo Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Fair Hyundai Partnership
t/a Fair Suzuki
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Fair Infiniti Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Fair Imports Partnership
t/a Fair Acura
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
-34-
<PAGE>
Danbury-Mt. Kisco Saturn
Partnership t/a Saturn of Danbury
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Fair Cadillac-Oldsmobile-Isuzu
Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Danbury Auto Partnership
t/a Fair Honda
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Nissan Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Jeep-Eagle Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
-35-
<PAGE>
DiFeo Autocenter Partnership
t/a DiFeo Mazda
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Subaru Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Chevrolet-Geo
Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Hyundai Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Buick-Pontiac-GMC
Truck Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
-36-
<PAGE>
DiFeo BMW Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Imports Partnership
t/a Jersey City Mitsubishi
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
J & F Oldsmobile-Isuzu
Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Leasing Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Hudson Motors Partnership
t/a Hudson Toyota
By /s/ E.P. Mager
-------------------------------
Title President
-------------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
-37-
<PAGE>
J & S Ford Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Volkswagen Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo-EMCO Management
Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
County Auto Group, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Partnership RCT, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
--------------------------
DiFeo Partnership, Inc.
-38-
<PAGE>
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
EMCO Motor Holdings, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Rockland Motors Corp.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Partnership RCM, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Somerset Motors, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Partnership SCT, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
--------------------
Title General Counsel
--------------------------
-39-
<PAGE>
Gateway Oldsmobile, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Fair Motors Corp.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Partnership DM, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
------------------------
Fair Chevrolet Corp.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Fair Hyundai Corp.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
-40-
<PAGE>
Fair Infiniti, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Fair Imports Corp.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Danbury-Mt. Kisco Saturn Corp.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Fair Cadillac-Oldsmobile Corp.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
JS2, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
-41-
<PAGE>
JS1, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Jeep-Eagle, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Autocenter, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Subaru, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Hyundai, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
-42-
<PAGE>
DiFeo Buick, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo BMW, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Imports, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Partnership HCM, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
J & F Oldsmobile Corp.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
-43-
<PAGE>
DiFeo Leasing Corporation
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
Hudson Toyota, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Partnership HCT, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Volkswagon, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
North Jersey Manhattan Saturn
Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
-44-
<PAGE>
DiFeo-EMCO Mangement Avenue
Partnership
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
DiFeo Partnership RCT, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
J & S Ford, Inc.
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
North Jersey Manhattan Saturn
Corporation
By /s/ E.P. Mager
-------------------------------
Title President
----------------------------
Attest/Certify /s/ George Lowrance
-------------------
Title General Counsel
-------------------------
/s/ Samuel X. DiFeo
----------------------------------
Samuel X. DiFeo, Individual
/s/ Joseph C. DiFeo
----------------------------------
Joseph C. DiFeo, Individual
/s/ James G. Hetherington
----------------------------------
James G. Hetherington, Individual
-45-
<PAGE>
/s/ Sam C. DiFeo
----------------------------------
Sam C. DiFeo, Individual
-46-
<PAGE>
SECOND AMENDMENT TO UNCONDITIONAL
CONTINUING GUARANTY OF PAYMENT
I. THE PARTIES
This Second Amendment to Unconditional, Continuing Guaranty of Payment (the
"Second Amendment") is dated effective the 7th day of April, 1993, and executed
by and between General Motors Acceptance Corporation, a New York corporation,
with a branch operations office located at 325 Columbia Turnpike, Florham Park,
New Jersey 07932, and by each and everyone of the following persons whose name,
legal status, and address is listed below (the "Guarantors"):
Guarantor Name Status Address
-------------- ------ -------
County Auto Group Partnership NJ General 115 Route 59
t/a County Toyota Partnership Nyack, NY 10960
Rockland Motors Partnership NJ General 73 North Highland Avenue
t/a Rockland Mitsubishi Partnership P.O. Box 724
Nyack, NY 10960
Somerset Motors Partnership NJ General Route 22 East
t/a DiFeo Lexus Partnership P.O. Box 310
Bound Brook, NJ 08805
DiFeo Oldsmobile Partnership NJ General Route 22 East
t/a Difeo Volkswagen Partnership P.O. Box 310
Bridgewater Bound Brook, NJ 08805
Fair Motors Partnership NJ General 100 Federal Road
t/a Fair Mitsubishi Partnership Danbury, CT 06813
Fair Chevrolet-Geo Partnership NJ General 100 Federal Road
Partnership Danbury, CT 06813
Fair Hyundai Partnership NJ General 102D Federal Road
t/a Fair Suzuki Partnership Danbury, CT 06813
Fair Infiniti Partnership NJ General 100B Federal Road
Partnership Danbury, CT 06813
Fair Imports Partnership NJ General 100A Federal Road
t/a Fair Acura Partnership Danbury, CT 06813
Danbury-Mt. Kisco Saturn NJ General 102C Federal Road
Partnership t/a Saturn of Partnership Danbury, CT 06813
Danbury and t/a Saturn of
Watertown
Fair Cadillac-Oldsmobile-Isuzu NJ General 102 Federal Road
Partnership Partnership Danbury, CT 06813
Danbury Auto Partnership NJ General 102D Federal Road
t/a Fair Honda Partnership Danbury, CT 06813
DiFeo Nissan Partnership NJ General 977 Communipaw Avenue
Partnership Jersey City, NJ 07304
-47-
<PAGE>
Guarantor Name Status Address
-------------- ------ -------
DiFeo Chrysler-Plymouth NJ General 315 Clendenny Ave.
Jeep-Eagle Partnership Partnership Route 440
Jersey City, NJ 07304
DiFeo Autocenter Partnership NJ General Hudson Mall & Route 440
t/a DiFeo Mazda Partnership Jersey City, NJ 07304
DiFeo Subaru Partnership NJ General 315 Clendenny Avenue
Partnership Jersey City, NJ 07304
DiFeo Chevrolet-Geo Partnership NJ General 315 Clendenny Ave.
Partnership Route 440
Jersey City, NJ 07304
DiFeo Hyundai Partnership NJ General Hudson Mall & Route 440
Partnership Jersey City, NJ 07304
DiFeo Buick-Pontiac-GMC Truck NJ General 919 Communipaw Avenue
Partnership Partnership Jersey City, NJ 07304
DiFeo BMW Partnership NJ General 301 County Road
Partnership Tenafly, NJ 07670
DiFeo Imports Partnership NJ General 947 Communipaw Avenue
t/a Jersey City Mitsubishi Partnership Jersey City, NJ 07304
J & F Oldsmobile-Isuzu NJ General 315 Clendenny Avenue
Partnership Partnership Route 440
Jersey City, NJ 07304
DiFeo Leasing Partnership NJ General 977 Communipaw Avenue
Partnership Jersey City, NJ 07304
Hudson Motors Partnership NJ General 585 Route 440
t/a Hudson Toyota Partnership Jersey City, NJ 07304
J & S Ford Partnership NJ General 599 Route 440
TO BE FORMED Partnership Jersey City, NJ 07304
DiFeo Volkswagen Partnership NJ General 599 Route 440
Partnership Jersey City, NJ 07304
North Jersey Manhattan Saturn NJ General 943 Communipaw Avenue
Partnership Partnership Jersey City, NJ 07304
DiFeo-EMCO Management NJ General 585 Route 440
Partnership Partnership Jersey City, NJ 07304
County Auto Group, Inc. New York 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership RCT, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
DiFeo Partnership, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
EMCO Motor Holdings, Inc. Delaware 153 East 53 Street
Corporation Suite 5900
New York, NY 10022
-48-
<PAGE>
Guarantor Name Status Address
-------------- ------ -------
Rockland Motors Corp. New York 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership RCM, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
Somerset Motors, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership SCT, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
Gateway Oldsmobile, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Motors Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership DM, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
Fair Chevrolet Corp. Connecticut 585 Route 440
c/o Joseph C. Difeo Corporation Jersey City, NJ 07304
Fair Hyundai Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Infiniti, Inc. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Imports Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Danbury-Mt. Kisco Saturn Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Cadillac-Oldsmobile Corp. Connecticut 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
JS2, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
JS1, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Jeep-Eagle, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Autocenter, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Subaru, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Hyundai, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Buick, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
-49-
<PAGE>
Guarantor Name Status Address
-------------- ------ -------
DiFeo BMW, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Imports, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership HCM, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
J & F Oldsmobile Corp. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Leasing Corporation New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Hudson Toyota, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
DiFeo Partnership HCT, Inc. Delaware 153 East 53 Street
c/o EMCO Motor Holdings, Inc. Corporation Suite 5900
New York, NY 10022
DiFeo Volkswagen, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
J & S Ford, Inc. New Jersey 585 Route 440
c/o Joseph C. DiFeo Corporation Jersey City, NJ 07304
Fair Chrysler Plymouth NJ General 100 C Federal Road
Partnership Partnership Danbury, CT 06813
t/a Fair Chrysler Plymouth
Samuel X. DiFeo Individual 121 Lorraine Avenue
Spring Lake, NJ 07762
Joseph C. DiFeo Individual 17 Blackpoint Horseshoe
Rumson, NJ 07760
II. THE RECITALS
A. WHEREAS, each of the Guarantors executed and delivered to and in favor of
GMAC an Unconditional, Continuing Guaranty of Payment, dated effective
October 1, 1992, (the "Guaranty"); and
B. WHEREAS, the Guaranty is an unconditional, continuing guaranty of payment
of any and all obligations while the Dealers whose names were described
therein then or thereafter owed to GMAC, except that certain limitations
applied as to certain of the Individual Guarantors, as more fully set forth
in paragraph 1 of the Guaranty or as subsequently modified in writing by
GMAC; and
C. WHEREAS, the Guaranty was first amended effective February 8, 1993, for the
purpose of adding an additional party thereto both as a named "Guarantor"
and a named "Dealer" thereunder; and
-50-
<PAGE>
D. WHEREAS, each of the Dealers named in the Guaranty (as amended) have hired
and retained DiFeo-EMCO Management Partnership, a New Jersey general
partnership (with its principal administrative office located at 585 Route
440, Jersey City, New Jersey 07304) for the purpose of coordinating,
managing, and supervising various business, financial, organizational,
management, and operational matters for each such Dealer, and in connection
therewith, have deemed it in their best interests that DiFeo-EMCO
Management Partnership borrow money and procure extensions of credit for
and on behalf of itself and each such Dealer (the "Group Loans"); and
E. WHEREAS, DiFeo-EMCO Management Partnership has requested and GMAC is
willing to provide the Group Loans but only in accordance with the terms
and conditions of a certain Term Loan and Borrowing Base Credit Line Loan
Agreement, dated of even date herewith, substantially in the form of
Exhibit "A" hereto (the "Loan Agreement"; and
F. WHEREAS, the Loan Agreement requires, among other things, the
unconditional, continuing guaranty of payment by the Guarantors of all
Group Loans, made in accordance with the Loan Agreement; and
G. WHEREAS, each of the Guarantors agree and acknowledge that the Group Loans
are in their best interest, irrespective of whether they are a direct
recipient or beneficiary thereof, and intend hereby that the Guaranty, as
amended, by further amending to include as a Dealer Obligation guarantied
thereby, the Global Loans pursuant to the Loan Agreement.
III.
THE AMENDMENT AGREEMENT
NOW, THEREFORE, in consideration of the premises, the sufficiency of which is
hereby acknowledged, GMAC, and each of the undersigned Guarantors hereby agree,
in conformity with paragraph 14 of the Guaranty, as follows:
1. The Guaranty is hereby amended to make and designate DiFeo-EMCO Management
Partnership as a "Dealer" under the Guaranty and all Group Loans under the
Loan Agreement as an "Obligation" guarantied thereby, for all intents and
purposes thereunder, as though originally executed by the Guarantors in
this manner.
2. The Guaranty is hereby further amended to make and designate as a "Dealer"
for all intents and purposes under the Guaranty, and without further
amendment or notice thereof, any corporate or partnership entity which is
later formed and which has substantially similar and common financial,
ownership, and management interests as each of the Dealers presently
designated hereunder, as of the date hereof.
-51-
<PAGE>
3. Except as noted above, the Guaranty remains in full force and effect and is
not otherwise waived, altered, modified, or amended hereby.
GENERAL MOTORS ACCEPTANCE CORPORATION
By /s/Paul A. Given
----------------------------------
Paul A. Given,
Control Branch Manager
County Auto Group Partnership
t/a County Toyota
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
Rockland Motors Partnership
t/a Rockland Mitsubishi
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
Somerset Motors Partnership
t/a DiFeo Lexus
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Oldsmobile Partnership
t/a Difeo Volkswagen of Bridgewater
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
-52-
<PAGE>
Fair Chrysler Plymouth Partnership
t/a Fair Chrysler Plymouth
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
Fair Motors Partnership
t/a Fair Mitsubishi
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
Fair Chevrolet-Geo Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
Fair Hyundai Partnership
t/a Fair Suzuki
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
Fair Infiniti Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
-53-
<PAGE>
Fair Imports Partnership
t/a Fair Acura
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
Danbury-Mt. Kisco Saturn Partnership
t/a Saturn of Danbury and
t/a Saturn of Watertown
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
Fair Cadillac-Oldsmobile-
Isuzu Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
Danbury Auto Partnership
t/a Fair Honda
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Nissan Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
-54-
<PAGE>
DiFeo Chrysler-Plymouth Jeep-Eagle
Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Autocenter Partnership
t/a DiFeo Mazda
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Subaru Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Chevrolet-Geo Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Hyundai Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
-55-
<PAGE>
DiFeo Buick-Pontiac-GMC Truck Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo BMW Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Imports Partnership
t/a Jersey City Mitsubishi
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
J & F Oldsmobile-Isuzu Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Leasing Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
-------------------------------
Title V. Pres.
--------------------
-56-
<PAGE>
Hudson Motors Partnership
t/a Hudson Toyota
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
J & S Ford Partnership
TO BE FORMED
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Volkswagen Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo-EMCO Management Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, CEO
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
County Auto Group, Inc.
By /s/ Joseph DiFeo
----------------------------------
Title Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
-57-
<PAGE>
DiFeo Partnership RCT, Inc.
By /s/E.P. Mager
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Partnership, Inc.
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
EMCO Motor Holdings, Inc.
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
Rockland Motors Corp.
By /s/ Joseph C. DiFeo
----------------------------------
Title Tres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title Pres.
--------------------
DiFeo Partnership RCM, Inc.
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
Somerset Motors, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title V. Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title Pres.
--------------------
-58-
<PAGE>
DiFeo Partnership SCT, Inc.
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
Gateway Oldsmobile, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title V. Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title Pres.
--------------------
Fair Motors Corp.
By /s/Joseph C. DiFeo
----------------------------------
Title Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Partnership DM, Inc.
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/ Joseph C. DiFeo
----------------------
Title Treasurer
--------------------
Fair Chevrolet Corp.
By /s/Joseph C. DiFeo
----------------------------------
Title V. Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
Fair Hyundai Corp.
By /s/Joseph C. DiFeo
----------------------------------
Title Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
-59-
<PAGE>
Fair Infiniti, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title Treasurer
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title Pres.
--------------------
Fair Imports Corp.
By /s/Joseph C. DiFeo
----------------------------------
Title Pres
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
Danbury-Mt. Kisco Saturn Corp.
By /s/Joseph C. DiFeo
----------------------------------
Title Sec.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
Fair Cadillac-Oldsmobile Corp.
By /s/Joseph C. DiFeo
----------------------------------
Title
--------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title
---------------------
JS2, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title V. Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title Pres.
--------------------
JS1, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title V. Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title Pres.
--------------------
-60-
<PAGE>
DiFeo Jeep-Eagle, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Autocenter, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Subaru, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title V. Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title Pres.
--------------------
DiFeo Hyundai, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Buick, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title V. Pres
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title Pres.
--------------------
DiFeo BMW, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
-61-
<PAGE>
DiFeo Imports, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres
--------------------
DiFeo Partnership HCM, Inc.
By /s/E.P. Mager
----------------------------------
Title Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
J & F Oldsmobile Corp.
By /s/Joseph C. DiFeo
----------------------------------
Title Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
---------------------
DiFeo Leasing Corporation
By /s/Joseph C. DiFeo
----------------------------------
Title Sec.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
Hudson Toyota, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title V. Pres
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Partnership HCT, Inc.
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
-62-
<PAGE>
DiFeo Volkswagen, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title Pres.
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
North Jersey Manhattan Saturn Partnership
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
----------------------
Title V. Pres.
--------------------
DiFeo Partnership RCT, Inc.
By /s/E.P. Mager
----------------------------------
Title Ezra P. Mager, Pres.
-------------------------------
Attest/Certify /s/Joseph C. DiFeo
----------------------
Title
---------------------
J & S Ford, Inc.
By /s/Joseph C. DiFeo
----------------------------------
Title Pres
-------------------------------
Attest/Certify /s/Samuel X. DiFeo
----------------------
Title V. Pres.
--------------------
/s/Samuel X. DiFeo
-------------------------------------
Samuel X. DiFeo, Individual
/s/Joseph C. DiFeo
-------------------------------------
Joseph C. DiFeo, Individual
-63-
<PAGE>
Exhibit 10.2.25
TERM LOAN AND BORROWING
BASE CREDIT LINE LOAN AGREEMENT
I. THE PARTIES
This Term Loan and Borrowing Base Credit Line Loan Agreement (the "Loan
Agreement") is made effective the 7th day of April, 1993, by and between General
Motors Acceptance Corporation, a New York corporation with a branch operations
office located at 325 Columbia Turnpike, Florham Park, New Jersey 07932 ("GMAC")
and DiFeo-EMCO Management Partnership, a New Jersey general partnership with its
principal administrative office located at 585 Route 440, Jersey City, New
Jersey 07304 ("Borrower").
II. THE RECITALS
A. WHEREAS, GMAC is in the business of providing, among other things, various
credit accommodations to motor vehicle dealers for use in the purchase,
sale, lease, rental, and servicing of motor vehicles ("Dealership
Financing"); and
B. WHEREAS, beginning on or after October 1, 1992, GMAC provided Dealership
Financing to the 27 separate entities listed on the attached Schedule A,
and GMAC may, in the future, provide Dealership Financing to other
entities, and GMAC is also willing to include and consider DiFeo Leasing
Partnership, a New Jersey general partnership, as similarly situated for
purposes of this Loan Agreement (the "Dealers"). In every instance, the
Borrower and each and every Dealer are affiliates of one another, having
substantially similar and common financial, ownership, and management
interests with one another including, without limitation, the direct or
indirect ownership interest of EMCO Motor Holdings, Inc., a Delaware
corporation, and Samuel X. DiFeo and his brother Joseph C. DiFeo, both of
whom are residents of New Jersey (the "Dealer Group"); and
C. WHEREAS, the Dealers have hired and retained the Borrower for the purpose
of coordinating, managing, and supervising various business, financial,
organizational, management, and operational matters for each and every
Dealer.
D. WHEREAS, the best interests of the Dealer Group warrants that the Dealers
replace certain of their Dealership Financing with loans and revolving
lines of credit and in furtherance of this objective, have requested
Borrower to borrow money and procure extensions of credit for and on behalf
of itself and each and every Dealer (the "Group Loans"); and
E. WHEREAS, Borrower has requested and GMAC is willing to provide certain
credit and finance accommodations as Group
<PAGE>
Loans but only in accordance with the terms and conditions of this Loan
Agreement.
III. THE AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual promises herein
contained, the sufficiency of which is hereby acknowledged, GMAC and Borrower
hereby agree as follows:
1. Two Types of Group Loans. Subject to all of the terms and conditions of
this Loan Agreement, GMAC shall make two separate and distinct types of
credit and finance accommodations to Borrower as follows:
(a) TERM LOAN. GMAC shall loan to Borrower the amount of Two Million
Dollars ($2,000,000.00) (the "Term Loan").
(b) LINE OF CREDIT. GMAC hereby establishes a revolving line of credit,
not to exceed Ten Million Dollars ($10,000,000.00) (the "Line of
Credit").
(The Term Loan and Line of Credit are hereinafter referred to as "Group
Loans.")
(c) THE PURPOSE. The Group Loans shall be used by the Borrower as working
capital in connection with the lawful business, investment, and
financial operations of Borrower and the Dealers.
(d) PURCHASE MONEY LOAN. Borrower acknowledges that the fundamental
nature and character of the Group Loans is a purchase money loan in
that the existence and use of the credit accommodations will enable
and facilitate the acquisition of Used Motor Vehicles and service
parts and accessories merchandise as inventory for Borrower and all of
the Dealers.
2. THE TERM LOAN.
(a) THE ADVANCE. GMAC shall advance to the Borrower the full amount of
the Term Loan as of the date of this Loan Agreement.
(b) ISSUANCE OF NOTE. To further evidence the Term Loan, Borrower shall
execute and deliver a promissory note payable to the order of GMAC,
substantially in the form of Exhibit 2(b) hereto with the appropriate
insertions (the "Term Loan Note"). The Term Note shall be subject to
the terms and conditions of this Loan Agreement.
(c) INTEREST. The Term Loan shall earn interest from time to time on the
unpaid principal balance beginning the date of this Loan Agreement
through the date of payment in full of all amounts owing hereunder.
The interest
-2-
<PAGE>
shall accrue and be payable in accordance with the Term Loan Note.
(d) PERMISSIVE PREPAYMENT OF THE TERM LOAN. The Term Loan may be prepaid
in whole or in part at the option of Borrower and without premium or
penalty; provided, however, that any partial prepayment shall be in
multiple amounts of one thousand dollars and shall be applied to
instalments of principal due under the Term Loan Note in inverse order
of maturity thereunder.
(e) MANDATORY PAYMENT OF THE TERM LOAN. Unless voluntarily prepaid in
full or accelerated due to an Event of Default, the Term Loan shall be
repaid in sixty (60) consecutive monthly instalments as set forth in
the Term Loan Note, beginning one month from the date of this Loan
Agreement.
3. THE LINE OF CREDIT.
(a) ADVANCES. Upon request made to GMAC by Borrower from time to time,
GMAC will loan and advance money directly to Borrower or its designee
under the Line of Credit ("Advance"). Such request shall be in
writing and presented to GMAC substantially in the form of Exhibit
3(a) hereto with the appropriate insertions (the "Request for Credit
Line Advance"). The first Advance made on or after the date of this
Loan Agreement shall be in an amount and shall be so used to fully pay
the total principal amount outstanding under the used vehicle
floorplan financing accommodations between the Dealers and GMAC. The
aggregate principal amount of all Advances remaining unpaid from time
to time are deemed "Credit Line Advances."
(b) LIMITATION. Credit Line Advances shall at no time and in no event
exceed the lesser of Ten Million Dollars ($10,000,000.00) or the
Collateral Formula Amount, as that term is defined in subparagraph
3(g)(i); provided, however, that if it does, the excess amount shall
be deemed to be part of the Line of Credit for all intents and
purposes under this Loan Agreement.
(c) ACCOUNT STATED. Each Advance shall be charged to the Borrower's
account on GMAC's books and records. GMAC will render to Borrower a
statement at least once each month of the Borrower's account which, in
the absence of manifest error, shall constitute an account stated and
shall be deemed to be correct and accepted by and binding upon
Borrower and constitute conclusive evidence as to the existence and
amounts of the Credit Line Advances, unless GMAC receives a written
statement of the Borrower's exceptions thereto within thirty (30) days
after such statement is rendered to the Borrower.
-3-
<PAGE>
(d) ISSUANCE OF A NOTE. Borrower shall repay the Credit Line Advances to
GMAC together with all accrued and unpaid interest, and applicable
costs and expenses as hereinafter set forth, and in any event, on or
before two (2) years from the date of this Loan Agreement. To further
evidence the Line of Credit, Borrower shall execute and deliver a
promissory note payable to the order of GMAC, substantially in the
form of Exhibit 3(d) hereto with the appropriate insertions (the "Line
of Credit Note"). The Line of Credit Note shall be subject to the
terms and conditions of this Loan Agreement.
(e) PRINCIPAL REPAYMENT. In addition to the other amounts Borrower is
obligated to pay GMAC as herein set forth, Borrower shall promptly and
forthwith repay to GMAC the Credit Line Advances, as follows:
(i) PERMISSIVE PREPAYMENT. The Credit Line Advances may be prepaid
in whole or in part at the option of Borrower and without premium
or penalty; provided, however, that any partial prepayment shall
be in multiple amounts of ten thousand dollars.
(ii) MANDATORY REPAYMENT OF CREDIT LINE ADVANCES.
[A] The full amount of the Credit Line Advances must be paid:
[X] immediately upon the occurrence of an Event of Default
as hereinafter set forth;
[Y] immediately upon the effective date of termination
under paragraph 12 of this Loan Agreement.
[B] So much of the Credit Line Advances must be paid from time
to time to ensure the Line of Credit limitation of paragraph
3(b) is not exceeded.
(f) INTEREST. The Credit Line Advances shall bear interest on the
principal amount of and from the date of each Advance to the date of
repayment in full of the Credit Line Advances. Only one interest rate
will apply to the Credit Line Advances at any given time. The
interest rate on each Credit Advance will be determined from time to
time at the Prime Rate plus one percent per annum. The "Prime Rate"
shall mean the rate of interest publicly announced as being in effect
from time to time by a majority of the twelve largest commercial banks
operating in the United States (the
-4-
<PAGE>
"Banks") as the "prime" or "base" rate for computing interest on loans
for borrowers of the highest credit standing. In determining the
Prime Rate hereunder, GMAC's determination of the Banks and their
publicly announced prime or base rates shall be conclusive. No change
will be made in the Prime Rate unless there is a single rate of
interest which is publicly announced by at least seven of the Banks as
their prime or base rate. The Prime Rate as of the date of this
Agreement is Six Percent (6.00%). Interest shall be calculated on the
basis of a 360-day year for the number of actual days outstanding.
Interest shall be billed by GMAC monthly and shall be due and payable
immediately upon receipt. The parties hereto intend to comply with
applicable usury laws and the aforesaid interest rate is to be
construed in accordance with this intent. The parties acknowledge
that these laws may change from time to time. If acceleration or
other events cause the interest contracted for, charged or received to
be in excess of the lawful maximum, Borrower will receive credits so
that the interest will comply with the law and in no event will the
interest contracted for, charged or received exceed the legal maximum.
(g) SPECIAL DEFINITIONS.
(i) COLLATERAL FORMULA AMOUNT. The Collateral Formula Amount shall
be the aggregate of the following amounts, as hereinafter
described, as of the date of this Loan Agreement, as adjusted
from time to time, and as certified in the Certification Report
required to be submitted to GMAC by Borrower pursuant to
paragraph 7(f) hereof; provided that the actual Collateral
Formula Amount shall at no time be less than (i) the amount
represented in the Monthly Certification Report or (ii) the
Credit Line Advances, whichever is less:
[A] Eighty-Five Percent (85%) of the lesser of (I) the actual
and reasonable acquisition cost (plus actual and reasonable
reconditioning expenditures) or (II) the current listed
wholesale value as provided in the current, local edition of
a used car guide of national repute of all Used Motor
Vehicles owned by Borrower or any Dealer.
[B] Fifty Percent (50%) of the original acquisition cost of all
new and unused or rebuilt service parts and accessories held
in inventory and owned by Borrower or any Dealer, which are
free from security interests, liens, and encumbrances not
otherwise arising in favor of GMAC.
-5-
<PAGE>
(ii) "Used Motor Vehicles" shall mean any and all motor vehicles,
cars, vans, passenger vehicles, and light trucks which
[A] are then owned and held in inventory for sale, lease, or
rental by Borrower or any Dealer; and
[B] have been owned and held in inventory for not more than 120
days from original acquisition from outside the Group or,
for motor vehicles owned as of the date of this Loan
Agreement, 120 days from that date; and
[C] have been previously used and titled under any state title
certificate law (except if such use and titling was for the
exclusive purpose of utilizing it as a demonstrator in
promoting the sale, lease, or rental of Dealer merchandise);
and
[D] were originally acquired by Dealer or Borrower, exclusive of
reconditioning expenditures, for not less than Three
Thousand Dollars per motor vehicle; and
[E] are of any make, type, model, or age; and
[F] are not otherwise customarily regarded by GMAC in the
ordinary course of its business as a new motor vehicle; and
[G] are free from any other lien, security interest, or
encumbrance, except in favor of GMAC in connection with this
Loan Agreement; and
[H] includes all parts, accessories, instruments, or equipment
installed thereon.
4. SECURITY INTEREST AND COLLATERAL ASSIGNMENT. To secure (i) the prompt and
complete payment of the Group Loans, (ii) the performance of any and all
obligations and duties of Borrower or any Dealer pursuant to this Loan
Agreement, and (iii) the payment and performance of any and all other
debts, obligations or duties of Borrower or any Dealer to GMAC now existing
or hereafter arising by this Loan Agreement, any guaranty in favor of GMAC
or otherwise, Borrower hereby pledges, assigns and grants to GMAC a
security interest in the following described property of Borrower, now
existing or hereafter acquired and wherever located, and any and all
proceeds thereof, in whatever form (the "Collateral"):
-6-
<PAGE>
(a) inventory of all types and kinds including new and used motor
vehicles, chassis, trailers, cars and trucks, service parts and
accessories.
(b) equipment of all types and kinds including fixtures, tools, signs,
furniture, electronic and computer devices, software programs, hoists,
analyzers, and goods.
(c) all types and kinds of general intangibles, contract rights, accounts
receivable, rebates, refunds, open accounts, bank and depository
accounts, certificates of deposit, reserve accounts, chattel paper,
franchise rights, cash, instruments, goodwill, accounts, documents,
and contracts.
Borrower shall execute and deliver to GMAC one or more agreements,
documents, and financing statements, in form and substance satisfactory to
GMAC, as may be required by GMAC to grant and maintain a valid, perfected
first lien or security interest in the Collateral; provided, however, that
the interest of GMAC shall be secondary to the extent of the interest of
other persons having a purchase money security interest in non-inventory
personal property perfected in conformity with Section 9-312 of the Uniform
Commercial Code.
5. With respect to the Collateral, Borrower shall ensure that Borrower and the
Dealers:
(a) maintain, secure and protect it from diminution in value; and
(b) except for purchase money security interests granted in connection
with Indebtedness permitted under subparagraph 8(e) of this Loan
Agreement, keep it free and clear of the claims, liens, mortgage,
pledge, encumbrance, security interests and rights of all others; and
(c) hold, control and dispose of the Used Motor Vehicles only for the
purpose of storing and exhibiting it for retail sale or lease in the
ordinary course of business; and
(d) permit GMAC full and complete access to it in order to inventory,
inspect and audit it, including review of Borrower and all Dealer
books and records; and
(e) insure it against all risks in such amounts and with a carrier and
deductibles acceptable to GMAC. Such insurance policy shall name GMAC
as loss payee, to the extent of its interests therein and shall
contain a
-7-
<PAGE>
cancellation provision only upon thirty (30) days prior written notice
to GMAC.
6. REPRESENTATIONS AND WARRANTIES. In recognition that they will be relied
upon by GMAC and in order to induce GMAC to enter into this Loan Agreement
and make Advances as herein provided, Borrower represents and warrants to
GMAC as follows:
(a) FINANCIAL STATEMENTS. The balance sheet and the statement of profit
and loss and surplus of the Borrower and any Dealer heretofore
furnished to GMAC are correct and complete and fairly represent the
financial condition of the subject thereof as of the relevant dates
thereof and the results of its operations for the fiscal periods ended
on such dates. Since the latest of such dates, there has been no
material adverse change in the properties or financial condition of
Borrower or any Dealer.
(b) ABSENCE OF CONFLICTING OBLIGATIONS. The execution of this Loan
Agreement and compliance with its terms or the issuance of the
promissory notes as herein contemplated will not result in a breach of
any of the terms and conditions of, or result in the imposition of any
lien, charge or encumbrance upon any property of Borrower or any
Dealer pursuant to, or constitute a default under, any indenture or
other agreement or instrument under or to which Borrower or any Dealer
is a party or its property is bound.
(c) TAXES. All tax returns and reports of Borrower and any Dealer
required to be filed by it have been timely filed or proper extensions
have been obtained, and all taxes, assessments, fees, amounts required
to be withheld and paid to a governmental agency or regulatory
authority, and other governmental charges upon them or their
properties, assets, income and franchises which are due and payable
have been paid when due and payable. Borrower does not know of any
proposed, asserted, or assessed tax deficiency against it that would
be material to the condition (financial or otherwise) of Borrower or
any Dealer, is not a party to, bound by, or obligated under any tax
sharing or similar agreement.
(d) ABSENCE OF MATERIAL LITIGATION. Neither Borrower nor any Dealer is a
party to any litigation or administrative proceeding, nor is any
litigation or administrative proceeding threatened against any of
them, which in either case would, if adversely determined, cause any
material adverse change in the properties or financial condition of
any of them. Borrower shall furnish to GMAC promptly upon the
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<PAGE>
commencement thereof, written notice of any litigation, including
arbitration, where the amount claimed exceeds $50,000 and of any
proceedings before any governmental agency which would, if successful,
materially, adversely affect Borrower or any Dealer, except that where
the claimed amount is subject to a fully enforceable contract of
insurance or indemnification and the insurer or indemnitor has
acknowledged its obligation under such contract, the said notice shall
not be required.
(e) RECORDS. The records concerning all of the Collateral are kept at the
local office of Borrower or Dealer, as the case may be. Such records
shall not be moved from such location without prior written notice to
GMAC.
(f) ORGANIZATION/AUTHORIZATION. Borrower and Dealers are general
partnerships duly organized, validly existing and in good standing
under the laws of the state where originally formed, and have all
requisite power and authority to own and operate their properties, to
carry on their business as now conducted and proposed to be conducted.
Borrower has all requisite power and authority to enter into this Loan
Agreement, to issue any promissory notes and to carry out the
transactions contemplated under this Loan Agreement. Borrower and
Dealers possess all franchises, certificates, licenses, permits and
other authorizations from governmental or regulatory authorities, free
from burdensome restrictions, that are necessary in any material
respects for the ownership, maintenance and operation of their
properties and assets and conduct of their business as now conducted
and proposed to be conducted, and are not in violation of them in any
material respect.
(g) GOOD TITLE. Borrower and Dealer has and will have good and marketable
title to all Collateral free from all liens, encumbrances, security
interests and claims except as granted to GMAC hereby.
7. AFFIRMATIVE COVENANTS. While this Loan Agreement remains in effect or any
of the Group Loans remain unpaid, unless waived in writing by GMAC:
a. FINANCIAL STATUS. Borrower, in aggregation with all Dealers (the
"Group") shall at all times maintain (i) a Tangible Net Worth in the
amount of at least Ten Million Five Hundred Thousand Dollars
($10,500,000) and (ii) a ratio of Total Liabilities of Group to
Tangible Net Worth of Group of no greater than nine (9) to one (1).
-9-
<PAGE>
As used herein, the term "Tangible Net Worth" shall mean the Group's
paid-in capital, contributions, or investment, plus paid-in surplus,
plus retained earnings and LIFO reserve, minus any intangible assets
(including, but not limited to goodwill, patents, copyrights, leases,
licenses, franchise rights, trade names, organization cost, debt
expense, and customer lists), as defined and computed in accordance
with generally accepted accounting principles applicable to the Group.
As used herein, the term "Total Liabilities" shall mean with respect
to the Group all obligations for borrowed money (including, without
limitation, all notes payable and drafts accepted representing
extensions of credit, commercial paper, all obligations evidenced by
bonds, debentures, notes or other similar instruments and all
obligations upon which interest charges are customarily paid), all
obligations under conditional sale or other title retention
agreements, all obligations issued or assumed as full or partial
payment for property (whether or not any such obligations represent
obligations for borrowed money), all capitalized lease obligations,
and all indebtedness secured by any lien existing on property owned or
acquired by the Group subject to any such lien whether or not the
obligations secured thereby shall have been assumed.
(b) INSURANCE. Borrower shall maintain and furnish GMAC with proof of
insurance required pursuant to paragraph 5(e) herein. The receipt by
GMAC of any insurance proceeds shall not release Borrower from payment
of its obligations hereunder, except to the extent of such proceeds.
(c) EXISTENCE AND BUSINESS OBLIGATIONS. Except as provided in
subparagraph 10(d), Borrower and all Dealers shall maintain and
continue its present business and maintain their existence in good
standing, shall preserve and keep in full force and effect any
franchise rights and trade names, and shall pay, before the same
become delinquent and before penalties accrue thereon, all taxes,
assessments, and other governmental charges against them or its
property, and any and all other liabilities, except to the extent, and
so long as the same are being contested in good faith by appropriate
proceedings, with adequate reserves provided for such payments.
(d) ACCOUNTING RECORDS; REPORTS. The Group shall maintain a standard and
modern system for accounting in accordance with generally accepted
accounting principles consistently applied throughout all accounting
periods and furnish to GMAC such information respecting its business,
assets and financial condition
-10-
<PAGE>
as GMAC may reasonably request and, Borrower without request, shall
furnish to GMAC:
(i) as soon as available and in any event within one hundred twenty
days after the close of each fiscal year of the Group, a copy of
unqualified audited financial statements of the Group, in form
and prepared by a Certified Public Accountant selected by
Borrower and satisfactory to GMAC, to the effect that the same
fairly presents the financial condition of the Group, and the
results of its operations as of the relevant dates thereof;
(ii) as soon as available, and in any event within thirty days after
the end of each month, a consolidated financial statement for the
Group to include a balance sheet and a statement of operations
(income and expenses) with an accompanying spreadsheet showing
the same information by Dealer. Individual Dealer operating
reports in the format supplied to the vehicle manufacturer will
be provided to GMAC upon request;
(iii) within one hundred twenty (120) days after the end of each fiscal
year of the Group a schedule showing all insurance policies which
the Group had in force with respect to the Collateral as of the
end of such fiscal year, signed by the Group;
(iv) within thirty (30) days of each period beginning April 15, 1993,
and every six (6) months thereafter, and more frequently upon
request by GMAC, a detailed and comprehensive schedule of the
disbursement, loan, transfer, deposit, investment, payment, or
other direct or indirect distribution by Borrower to and amongst
the Dealers of any and all proceeds from Group Loans. This
provision shall not be deemed to restrict Borrower from making
such disbursements, loans, etc. in its sound and absolute
discretion;
(v) as soon as available and in any event by August 14 of each year,
a report by the Borrower's certified public accountant on the
results of applying procedures satisfactory to GMAC for the parts
and accessories inventory which would include, but not be limited
to, the following: observation of physical inventories or test
counts of physical inventories and a review of the reconciliation
to the general ledger for reasonableness at selected dealerships
representing at least 50% of the Dealer's total average value of
parts and accessories inventory; and an analytic review for
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<PAGE>
all Dealer locations of the outstanding balance of the parts and
accessories inventory, parts inventory aging by aged category and
obsolescence or other reserves for the parts and accessories
inventory at June 30 as compared to the prior June 30 review and
December 31 audited balance. The results of a physical count of
the parts and accessories inventory taken at each Dealer location
by a reputable inventory service at each year-end will be audited
by the certified public accountant and serve as the basis for the
parts and accessories inventory amount stated in the annual
certified audit report.
(vi) from time to time, such other information as GMAC may reasonably
request concerning Borrower and any Dealer.
(e) INSPECTIONS. Borrower irrevocably authorizes representatives of GMAC
to inspect and audit the Collateral and to visit and enter the
premises of Borrower and any Dealer to audit, inspect, review,
examine, copy (by electronic or other means) and abstract any of the
books and accounting and records of them, and to discuss the affairs,
business, finances and accounts of them with its officers and
employees, at any reasonable time and as often as may be reasonably
desired.
(f) MONTHLY CERTIFICATION REPORTS. Borrower shall furnish GMAC within
fifteen days of the fifteenth and last day of each month a report
certified by the chief executive officer or the chief financial
officer of Borrower, in the form attached as Exhibit 7(f), detailing
the Group's Collateral Formula Amount as of the reporting date
("Monthly Certification Report"). The Monthly Certification Report
submitted as of a month-end date shall have attached to it a complete
and detailed listing of all Used Motor Vehicles, in the form attached
to Exhibit 7(f). GMAC may, in its sole discretion, increase the
frequency of such reports and demand such a report at any time.
(g) PROPERTIES IN GOOD CONDITION. Borrower shall keep its respective
properties in good repair, working order and condition and, from time
to time, make all needful and proper repairs, renewals, replacements,
additions and improvements thereto, so that the business carried on
may be properly and advantageously conducted at all times in
accordance with prudent business management.
(h) APPLICATION TO FUTURE AFFILIATED DEALERS. Any motor vehicle
dealership entity which comes into existence, is not listed on the
attached Schedule A, and has
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<PAGE>
substantially similar and common financial, ownership, and management
interests as the Group shall, upon execution of the Guaranty referred
to in paragraph 9 of this Loan Agreement and documents evidencing a
new vehicle floorplan financing agreement with GMAC, be deemed to be a
"Dealer" within the meaning of this Loan Agreement for all intents and
purposes.
8. NEGATIVE COVENANTS. While this Loan Agreement remains in effect, or any of
the Group Loans remain unpaid, no member of the Group shall, without the
prior written consent of GMAC:
(a) MERGERS, CONSOLIDATIONS, DISPOSITION OF ASSETS. Merge or consolidate
with or into any other corporation or entity, except if Borrower or
Dealer remains the surviving entity, or sell, lease, transfer or
otherwise dispose of all or any substantial part of the property,
assets or business of the Borrower or Dealer.
(b) INVESTMENTS. Make any loans or advances to, or investments in, other
persons, corporations or other entities, except
(i) investments in (A) bank certificates of deposit and savings
accounts; (B) obligations of the United States; and (C) prime
commercial paper maturing within ninety (90) days of the date of
acquisition by Borrower or Dealer; (D) those existing loans to
other Dealers which are disclosed on the financial statements
referenced in paragraph 6(a) of this Loan Agreement; and (E) any
Dealer or subsidiaries of Borrower or Dealer; and
(ii) loans or advances to (A) affiliates of Borrower or Dealer other
than affiliates whose principal business is the sale and service
of new and used motor vehicles; (B) employees of Dealer; (C)
customers of Dealer in the ordinary course of Dealer's business;
and (D) any Dealer or subsidiaries of Borrower or Dealer.
(c) CONTINGENT LIABILITIES. Guarantee or become a surety or otherwise
contingently liable for any obligations of others, except (i) pursuant
to the deposit and collection of checks and similar items in the
ordinary course of business; and (ii) for transactions in the ordinary
course of business; and (iii) contingent obligations owing by Dealer
to GMAC pursuant to the bulk sale of chattel paper.
(d) EXPENDITURES. Make any substantial or unusual disbursement of funds
or expend sums for the
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<PAGE>
acquisition of capital assets exceeding One Million Two Hundred
Thousand Dollars ($1,200,000) in any one calendar year, excluding
present construction commenced or planned to commence in 1993, as set
forth on the attached Exhibit 8(d).
(e) RESTRICTION ON INDEBTEDNESS. Create, incur, assume or have
outstanding any indebtedness for borrowed money except:
(i) the amount due GMAC hereunder;
(ii) indebtedness for current borrowings (maturing in twelve (12)
months or less, including renewals available at the option
of the Dealer), all of which indebtedness must be completely
paid up for a period of not less than sixty (60) consecutive
days in each calendar year;
(iii) indebtedness incurred in the ordinary course of Borrower's
or Dealer's business for necessary warranty, extended
service contracts, materials, supplies, etc. (e.g., trade
creditors), all of which shall be due not more than ninety
(90) days from the date of obligation or invoice and none of
which shall be past due;
(iv) other indebtedness (not including current indebtedness as
described in (e)(ii) of this paragraph) which was
outstanding on the date of this Loan Agreement and is shown
on the financial statements of Borrower or Dealer referenced
in paragraph 6(a) of this Loan Agreement including, but not
limited to, fully subordinated loans aggregating up to six
million dollars made to any member of the Group by EMCO
Motor Holdings, Inc., a Delaware corporation and/or DiFeo
Partnership, Inc., a Delaware corporation, and including any
refinancing, extension, or renewal thereof on substantially
similar terms and conditions; and
(v) for any other circumstance not otherwise set forth in
subparagraphs 8(e)(i)-(iv) above, the aggregate amount of
$500,000.
(f) Borrower will not create, incur, or suffer any lien, mortgage, pledge,
assignment, or other encumbrance on or security interest in the
Collateral.
9. CONDITIONS PRECEDENT TO MAKING THE GROUP LOANS. The Group Loans shall be
made or available to Borrower only upon the fulfillment of each of the
following conditions:
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<PAGE>
(a) Execution and delivery to GMAC of an amendment to Unconditional,
Continuing Guaranty of Payment dated October 1, 1992, as amended
February 8, 1993, by a First Amendment thereto (the "Guaranty"), to
and in favor of GMAC by each of the parties thereto, substantially in
the form of Exhibit 9(a) hereto.
(b) GMAC shall have received a certified copy of all partnership action
taken by Borrower authorizing the execution, delivery, and performance
of this Loan Agreement, and all other notes, documents, agreements,
instruments, and obligations attendant thereto.
(c) GMAC shall have received an opinion of counsel to Borrower, in form
and substance satisfactory to counsel to GMAC as to the matters
referred to in subparagraph 6(f) and further to the effect that this
Loan Agreement and all attendant notes, documents, etc. have legal,
valid, binding, and enforceable agreements of Borrower and other
signatories thereto (excepting GMAC).
(d) Execution and delivery to GMAC of all agreements, notes, documents,
and instruments referred to and contemplated by this Loan Agreement.
10. EVENT OF DEFAULT. An Event of Default shall include one or more of the
following: (a) a default by Borrower or any Dealer in the payment,
performance or observance of any obligation or covenant under this Loan
Agreement or under any other agreement now or hereafter entered into with
GMAC; (b) the institution of a proceeding in bankruptcy, receivership or
insolvency by or against Borrower or any Dealer or its property [provided
that Dealer shall have sixty days to obtain an order of dismissal of any
involuntary petition in bankruptcy filed against it unless such petition
was initiated by GMAC]; (c) an assignment by Dealer for the benefit of
creditors; (d) the failure of Dealer to maintain, in good standing, its
present franchise, dealer, or sales and service agreement, provided that
this subsection (d) shall not apply to the voluntary sale, transfer or
surrender of any such agreement where the one disposed of represents not
more than ten percent (10%) of total gross sales volume in dollars over the
prior immediate twelve-month period; (e) the imposition of a tax or any
other nonconsensual lien against any of the Borrower's or any Dealer's
property other than (A) for taxes not overdue or challenged in good faith
or (B) liens not discharged or bonded within 60 days of any protest or
notice of filing; (f) a misrepresentation by Dealer for the purpose of
obtaining credit or an extension of credit; (g) if GMAC shall deem itself
insecure based on its knowledge of any event, occurrence, circumstance or
fact not directly caused by GMAC, which in the reasonable judgment of GMAC
will have a material adverse effect on the Collateral, or on the
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<PAGE>
collection by GMAC under any guaranty of the obligations of Borrower or any
Dealer hereunder; (h) if any material representation, warranty or other
statement of fact given herein or in any writing, certificate, report or
statement at any time furnished to GMAC by Borrower or any Dealer or its
agents pursuant to or in connection with this Loan Agreement, or otherwise,
shall be false or misleading in any material respect when given; (i)
exceeding the Line of Credit Limitations set forth in paragraph 3(b); (j)
the failure of any Dealer in the Group to offer and make available to GMAC
all of its floorplan financing needs, provided the Dealer is creditworthy
and GMAC is customarily providing such finance accommodations; and (k) the
termination of any guaranty of payment of the Group Loans provided to GMAC
by any member of the Dealer Group, or any of its owners, shareholders,
officers, affiliates, parents, or subsidiaries.
11. RIGHTS AND REMEDIES OF GMAC. Upon the occurrence of an Event of Default as
set forth in Paragraph 10 herein or if any substantial portion of
Collateral is in danger of misuse, loss, seizure or confiscation, GMAC may
take immediate possession of Collateral without demand or further notice
and without legal process. In furtherance thereof, Borrower shall, if GMAC
so requests, assemble Collateral and make it available to GMAC at a
reasonable, convenient place designated by GMAC. GMAC shall have the
right, and Borrower hereby authorizes and empowers GMAC, to enter upon the
premises wherever Collateral may be and remove same. In addition, GMAC
shall have the right to exercise one or more of the following remedies:
(a) institute proceedings to collect all or a portion of the Group Loans
and to recover a judgment for the same and to collect upon such
judgment out of any property of the Borrower wherever situated;
(b) to offset and apply any monies, credits or other proceeds of property
of Borrower that has or may come into possession or under the control
of GMAC against any amount owing by Borrower to GMAC;
(c) with respect to accounts, contract rights, chattel paper, tax refunds
and general intangibles constituting Collateral herein, GMAC
(i) may settle, adjust and compromise all present and future
claims arising thereunder or in connection therewith,
(ii) may sell, assign, pledge or make any other agreement with
respect thereto or the proceeds thereof;
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<PAGE>
(iii) may notify all such account, contract right, etc., debtors
of GMAC's interest therein and require direct payment to
GMAC of such obligations;
(iv) may receive, sign, endorse, and deliver in its name or the
name of the Borrower any and all notes, instruments,
documents, titles, negotiable instruments and the like
necessary and appropriate to effect the collection of such
intangibles, and Borrower hereby waives notice of
presentment, protest and nonpayment of any instrument so
endorsed.
(v) is hereby constituted and appointed by Borrower as
Borrower's attorney-in-fact with power to accept and to
receipt and endorse Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences
of payment or Collateral that may come into GMAC's
possession; to notify the Post Office authorities to change
the address for delivery of mail addressed to Borrower to
such address as GMAC may designate; to do all other acts and
things necessary to carry out this Agreement. All acts of
said attorney or designee are hereby ratified and approved,
and said attorney or designee shall not be liable for any
acts of omission or commission, nor for any error of
judgment or mistake of fact or law; this power being coupled
with an interest is irrevocable while any of the Group Loans
remain unpaid.
(d) sell or lease the Collateral, or any portion thereof, after five days'
written notice at public or private sale for the account of the
Borrower.
Borrower agrees that the sale by GMAC of any new or unused property
repossessed by GMAC to the Seller thereof, or to any person designated by
such Seller at the invoice cost thereof to Borrower less any credits
granted to Borrower with respect thereto and reasonable costs of
transportation and reconditioning, shall be deemed to be a commercially
reasonable means of disposing of the same. Borrower further agrees that if
GMAC shall solicit bids from three or more other dealers in the type of
property repossessed by GMAC hereunder, any sale by GMAC of such property
in bulk or in parcels to the bidder submitting the highest cash bid
therefor also shall 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
GMAC shall have the right to dispose of any property repossessed hereunder
by any commercially reasonable means. GMAC's remedies hereunder are
cumulative and may be enforced successively or concurrently. Borrower
shall pay all expenses and reimburse
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<PAGE>
GMAC for any expenditures, including reasonable attorney fees and legal
expenses, in connection with GMAC's exercise of any of its rights and
remedies under this Loan Agreement. Upon the occurrence of an Event of
Default, in addition to the rights specified herein, all the rights and
remedies afforded GMAC by applicable law shall apply.
12. TERMINATION. This Loan Agreement shall terminate upon the earliest of the
following: (a) two years from the date of this Loan Agreement; (b) the
declaration by GMAC of any Event of Default; or (c) ninety (90) days after
written notice to terminate provided by Borrower to GMAC. The Line of
Credit Loan shall be immediately due and payable upon termination of this
Loan Agreement. The Term Loan shall continue in full force and effect in
accordance with the terms and conditions of the Promissory Note upon
termination of this Loan Agreement except following an Event of Default, in
which case the Term Loan shall also become immediately due and payable.
All rights and remedies of GMAC or duties and obligations of Borrower
extant upon termination of this Loan Agreement shall continue in full force
and effect until all Group Loans are paid in full.
13. SUSPENSION. GMAC may, in its sole and absolute discretion and judgment,
suspend its obligation to make Advances under the Line of Credit Loan due
to material, adverse changes in Dealer's financial condition, material
adverse change in Dealer's business or the discovery of any information
which appears to constitute an Event of Default. GMAC shall provide Dealer
with written notice of its decision to suspend its lending obligation as
soon as is practicable, but in no event more than three (3) business days
after effecting such a decision.
14. CONSENT AND WAIVER. Borrower recognizes that GMAC has ongoing business
relationships with others including certain shareholders and related
entities of Borrower or Dealers. GMAC's dealings with these others may
require it to act in providing and administering credit different than its
dealings with Borrower or Dealer. Borrower hereby acknowledges, consents
to, and waives any claim or defense it may have with respect to such
differences.
15. NOTICES. All notices, requests, and demands shall be in writing and be
given to or made upon the respective parties at the addresses set forth in
Section I of this Agreement, or to such other address as either party shall
designate for itself in writing to the other party. Notice shall be deemed
given when received by the addressee and may include hand delivery,
overnight courier, certified mail, or electronic written transmission by
public or private means.
16. ADOPTION AND RATIFICATION. Any and all acts, disclosures, notices,
executions, and deliveries which may have been made
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<PAGE>
by Borrower to or in favor of GMAC prior to the execution of this Loan
Agreement is hereby ratified and adopted as the legal, valid, and binding
act of the Borrower as though authorized and empowered as of such act, etc.
17. RIGHTS AND REMEDIES NOT WAIVED. No course of dealing between the Borrower
and GMAC or any failure or delay on the part of GMAC in exercising any
rights or remedies hereunder shall operate as a waiver of any rights or
remedies of GMAC and no single or partial exercise of any rights or
remedies hereunder shall operate as a waiver or preclude the exercise of
any other rights or remedies hereunder.
18. COMPLETE AGREEMENT. Except as otherwise provided or referred to herein,
there are no other agreements or understandings, either oral or in writing,
between the parties affecting this Loan Agreement or relating to any of the
subject matters covered by this Loan Agreement. No agreement between GMAC
and Borrower 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 Loan Agreement will be binding unless it is
approved in a written agreement executed by a duly authorized
representative of each party.
19. BINDING EFFECT. This Agreement shall be binding upon the parties'
successors and assigns provided, however, that Borrower shall have
absolutely no right of assignment absent prior written consent of GMAC.
20. SEVERABILITY. Any provision hereof prohibited by law shall be ineffective
to the extent of such prohibitions without invalidating the remaining
provisions hereof.
21. GOVERNING LAW. This Loan Agreement shall be construed in accordance with
and governed by the laws of New Jersey.
21. CAPTIONS. The captions of the various sections and paragraphs of this Loan
Agreement have been inserted only for the purposes of convenience; such
captions are not a part of this Loan Agreement and shall not be deemed in
any manner to modify, explain, enlarge or restrict any of the provisions of
this Loan Agreement.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Loan Agreement to be
executed by its duly authorized representative this 7th day of April, 1993.
DIFEO-EMCO MANAGEMENT PARTNERSHIP GENERAL MOTORS ACCEPTANCE
a New Jersey General Partnership CORPORATION
By_____________________________ By______________________
Ezra Mager for DiFeo Partnership, William F. Muir,
Inc., a Delaware Corporation, Vice President
as General Partner National Accounts
and
By:____________________________
Joseph C. DiFeo for various DiFeo
Corporate Entities, as General
Partners
and
By:_____________________________
Samuel X. DiFeo for various DiFeo
Corporate Entities, as General
Partners
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<PAGE>
SCHEDULE A to Term Loan and Borrowing
Base Credit Line Loan Agreement Between
GMAC and DiFeo-EMCO Management
Partnership, dated April 7, 1993 (the
"Loan Agreement")
Dealer Name Status Address
- ----------- ------ -------
County Auto Group Partnership NJ General 115 Route 59
t/a County Toyota Partnership Nyack, NY 10960
Rockland Motors Partnership NJ General 73 North Highland Avenue
t/a Rockland Mitsubishi Partnership P.O. Box 724
Nyack, NY 10960
Somerset Motors Partnership NJ General Route 22 East
t/a DiFeo Lexus Partnership P.O. Box 310
Bound Brook, NJ 08805
DiFeo Oldsmobile Partnership NJ General Route 22 East
t/a DiFeo Volkswagen of Partnership P.O. Box 310
Bridgewater Bound Brook, NJ 08805
Fair Motors Partnership NJ General 100 Federal Road
t/a Fair Mitsubishi Partnership Danbury, CT 06813
Fair Chevrolet-Geo Partnership NJ General 100 Federal Road
Partnership Danbury, CT 06813
Fair Hyundai Partnership NJ General 102D Federal Road
t/a Fair Suzuki Partnership Danbury, CT 06813
Fair Infiniti Partnership NJ General 100B Federal Road
Partnership Danbury, CT 06813
Fair Imports Partnership NJ General 100A Federal Road
t/a Fair Acura Partnership Danbury, CT 06813
Danbury-Mt. Kisco Saturn NJ General 102C Federal Road
Partnership t/a Saturn Partnership Danbury, CT 06813
of Danbury and t/a
Saturn of Watertown
Fair Cadillac-Oldsmobile- NJ General 102 Federal Road
Isuzu Partnership Partnership Danbury, CT 06813
Danbury Auto Partnership NJ General 102D Federal Road
t/a Fair Honda Partnership Danbury, CT 06813
DiFeo Nissan Partnership NJ General 977 Communipaw Avenue
Partnership Jersey City, NJ 07304
<PAGE>
Schedule A/Page of 2
Dealer Name Status Address
- ----------- ------ -------
DiFeo Chrysler-Plymouth NJ General 315 Clendenny Ave.
Jeep-Eagle Partnership Partnership Jersey City, NJ 07304
DiFeo Autocenter Partnership NJ General Hudson Mall & Route 440
t/a DiFeo Mazda Partnership Jersey City, NJ 07304
DiFeo Subaru Partnership NJ General 315 Clendenny Avenue
Partnership Jersey City, NJ 07304
DiFeo Chevrolet-Geo NJ General 315 Clendenny Ave.
Partnership Partnership Jersey City, NJ 07304
DiFeo Hyundai Partnership NJ General Hudson Mall & Route 440
Partnership Jersey City, NJ 07304
DiFeo Buick-Pontiac-GMC NJ General 919 Communipaw Avenue
Truck Partnership Partnership Jersey City, NJ 07304
DiFeo BMW Partnership NJ General 301 County Road
Partnership Tenafly, NJ 07670
DiFeo Imports Partnership NJ General 947 Communipaw Avenue
t/a Jersey City Mitsubishi Partnership Jersey City, NJ 07304
J & F Oldsmobile-Isuzu NJ General 315 Clendenny Avenue
Partnership Partnership Route 440
Jersey City, NJ 07304
Hudson Motors Partnership NJ General 585 Route 440
t/a Hudson Toyota Partnership Jersey City, NJ 07304
J & S Ford Partnership NJ General 599 Route 440
TO BE FORMED Partnership Jersey City, NJ 07304
DiFeo Volkswagen Partnership NJ General 599 Route 440
Partnership Jersey City, NJ 07304
Fair Chrysler Plymouth NJ General 100 C Federal Road
Partnership Partnership Danbury, CT 06813
t/a Fair Chrysler Plymouth
North Jersey Manhattan Saturn NJ General 943 Communipaw
Partnership Partnership Jersey City, NJ 07304
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<PAGE>
Exhibit 10.2.26
SETTLEMENT AGREEMENT
Dated as of October 3, 1996
among
TRACE INTERNATIONAL HOLDINGS, INC.
(FORMERLY "21" INTERNATIONAL HOLDINGS, INC.)
UAG NORTHEAST, INC.
DIFEO PARTNERSHIP, INC.
DIFEO PARTNERSHIP RCT, INC.
DIFEO PARTNERSHIP HCM, INC.
DIFEO PARTNERSHIP HCT, INC.
DIFEO PARTNERSHIP DM, INC.
DIFEO PARTNERSHIP SCT, INC.
DIFEO PARTNERSHIP RCM, INC.
UNITED AUTO GROUP, INC. (FORMERLY,
EMCO MOTOR HOLDINGS, INC.)
FAIR CADILLAC-OLDSMOBILE CORP.
FAIR CHEVROLET CORP.
FAIR INFINITI, INC.
FAIR IMPORTS CORP.
FAIR HYUNDAI CORP.
FAIR MOTORS CORP.
DANBURY-MT. KISCO SATURN CORP.
HUDSON TOYOTA, INC.
J & S FORD INC.
DIFEO VOLKSWAGEN INC.
DIFEO HYUNDAI, INC.
J & F OLDSMOBILE CORP.
DIFEO SUBARU, INC.
DIFEO JEEP-EAGLE, INC.
DIFEO IMPORTS, INC.
DIFEO BUICK, INC.
DIFEO AUTOCENTER, INC.
DIFEO LEASING CORPORATION
SOMERSET MOTORS INC.
GATEWAY OLDSMOBILE INC.
DIFEO B.M.W., INC.
COUNTY AUTO GROUP INC.
ROCKLAND MOTORS CORP.
JS1, INC.
JS2, INC.
JS4, INC.
SAMUEL X. DIFEO
and
JOSEPH C. DIFEO
<PAGE>
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") is made as of October 3, 1996
by and among Trace International Holdings, Inc. (formerly "21" International
Holdings, Inc.), a Delaware corporation, UAG Northeast, Inc. ("UAG Northeast"),
a Delaware corporation, DiFeo Partnership, Inc. ("DPI"), a Delaware corporation,
United Auto Group, Inc. ("UAG") (formerly EMCO Motor Holdings, Inc.), a Delaware
corporation, and DiFeo Partnership RCT, Inc., DiFeo Partnership HCM, Inc., DiFeo
Partnership HCT, Inc., DiFeo Partnership DM, Inc., DiFeo Partnership SCT, Inc.,
DiFeo Partnership RCM, Inc., each a Delaware corporation (individually, a "DPI
Subsidiary" and, collectively, the "DPI Subsidiaries"), and Fair Cadillac-
Oldsmobile Corp., Fair Chevrolet Corp., Fair Infiniti, Inc., Fair Imports Corp.,
Fair Hyundai Corp., Fair Motors Corp., Danbury-Mt. Kisco Saturn Corp., Hudson
Toyota Inc., J & S Ford Inc., DiFeo Volkswagen Inc., DiFeo Hyundai Inc., J & F
Oldsmobile Corp., DiFeo Subaru Inc., DiFeo Jeep-Eagle Inc., DiFeo Imports Inc.,
DiFeo Buick Inc., DiFeo Autocenter Inc., DiFeo Leasing Corporation, Somerset
Motors Inc., Gateway Oldsmobile Inc., DiFeo B.M.W., Inc., County Auto Group,
Inc., Rockland Motors Corp., JS1, Inc., JS2, Inc. and JS4, Inc. (individually a
"Corporation" and, collectively, the "Corporations") and Samuel X. DiFeo and
Joseph C. DiFeo (individually, a "Principal" and, collectively, the
"Principals"). UAG Northeast, DPI, UAG, DPI Subsidiaries, the Corporations and
the Principals are referred to collectively herein as "Parties".
PRELIMINARY STATEMENTS. The Parties hereto make the following preliminary
statements:
A. Pursuant to the terms of a certain Master Agreement made as of March
11, 1992 as amended by Amendment No. 1 to the Master Agreement dated October 1,
1992 and by Amendment No. 2 to the Master Agreement dated July 21, 1993 (as so
amended, the "Master Agreement") by and among the Parties, DPI and certain
wholly-owned subsidiaries of DPI entered into certain partnerships (the
"Partnerships") with the Corporations to operate automobile dealerships, as the
franchisees under franchise agreements with various automobile manufacturers and
to lease real property in connection therewith.
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B. This Agreement settles certain disputes, claims and issues among the
Parties relative to the Corporations, the Partnerships and certain third parties
and upon the Closing, as hereinafter defined, is intended to supersede the
Master Agreement and all related agreements thereto (including, but not limited
to, all leases, employment and consulting agreements, pledge agreements and such
other ancillary documents executed in connection with the Master Agreement, but
not including the partnership agreements and subleases executed in connection
with the Master Agreement) (collectively with the Master Agreement, the "1992
Transaction Documents") in their entirety.
C. The Parties desire that the transactions contemplated by this
Agreement be implemented through the execution and simultaneous closing of the
transactions contemplated by the 1996 Transaction Documents (as defined in
Section 1.2(b) hereof).
D. The Parties agree that this Agreement and the transactions contemplated
hereunder are subject to UAG consummating its initial public offering (the
"Initial Public Offering") by December 31, 1996.
NOW, THEREFORE, in consideration of the mutual agreements and on the terms
and conditions contained herein, and intending to be legally bound, the Parties
hereby agree as follows:
ARTICLE 1
EFFECT OF SETTLEMENT AGREEMENT AND CLOSING
Section 1.1 EFFECT OF AGREEMENT. Upon the Closing (as hereinafter
defined) and execution of the 1996 Transaction Documents contemplated hereunder
and subject to the fulfillment (or waiver) of the conditions specified in
Article 5 herein, the 1992 Transaction Documents and the non-binding Memorandum
of Understanding executed by UAG and the Principals on August 7, 1996 shall be
superseded by this Agreement and the 1996 Transaction Documents in their
entirety.
From and after the Closing, the 1992 Transaction Documents and the
Memorandum of Understanding executed by UAG and the Principals on August 7, 1996
shall be
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considered terminated and shall no longer be in force and effect.
Section 1.2 CLOSING. (a) The closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Arnold & Porter, 399
Park Avenue, New York, New York 10022 (or at such different location as the
Parties shall mutually agree), at such time and date as the Parties shall
mutually agree, so long as such date is not later than December 31, 1996,
provided that all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the Parties will take at the Closing itself) have been satisfied or waived (the
"Closing Date"). All of the actions contemplated to be taken pursuant to this
Agreement on the Closing Date and taken or occurring on such date shall be
deemed to occur simultaneously.
(b) At the Closing, the following transaction documents (the "1996
Transaction Documents") associated with this Agreement shall be delivered by
each of the parties thereto:
(i) A Merger Agreement as to each of the Mergers referred to in
Section 6.2 in the form attached hereto as EXHIBIT 6.2;
(ii) B Reorganization Agreements referred to in Section 6.2;
(iii) UAG Options referred to in Section 6.1 in the form attached
hereto as EXHIBIT 6.1;
(iv) Registration Rights Agreement referred to in Section 6.1 in the
form attached hereto as EXHIBIT 6.1(A);
(v) Consulting Agreements with respect to Samuel DiFeo, Sr. and
Joseph C. DiFeo referred to in Section 7.2;
(vi) Employment Agreement of Samuel X. DiFeo referred to in Section
7.3;
(vii) Partnership Exchange Agreement and related documents and
instruments referred to in Article 8;
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(viii) Leases referred to in Article 11;
(ix) Assignment of Claims Agreement and related documents referred to
in Article 9; and
(x) Assignment and Assumption Agreement and related documents
referred to in Article 13.
(c) ADDITIONAL DELIVERIES OF UAG, UAG NORTHEAST, DPI AND DPI SUBSIDIARIES.
At the Closing, UAG, UAG Northeast, DPI and DPI Subsidiaries shall deliver the
following additional documents to the Principals and Corporations:
(i) A certificate of good standing regarding each of UAG, UAG
Northeast, DPI and DPI Subsidiaries dated as of a recent date and issued by
the Secretary of State of the State of Delaware;
(ii) A closing certificate by UAG, UAG Northeast, DPI and DPI
Subsidiaries dated as of the Closing Date to the effect that each of the
conditions specified in Article 5 are satisfied in all material respects;
(iii) A certificate of authority and incumbency with respect to the
authority of the officers of UAG, UAG Northeast, DPI and DPI Subsidiaries
executing any Closing documents, in a form reasonably acceptable to the
Principals and Corporations;
(iv) A legal opinion of counsel to UAG, UAG Northeast, DPI and DPI
Subsidiaries in a form reasonably acceptable to the Principals and
Corporations; and
(v) Such other documents, certificates and instruments as may
reasonably be requested by the Principals and Corporations.
(d) ADDITIONAL DELIVERIES OF THE PRINCIPALS AND CORPORATIONS. At the
Closing, the Principals and Corporations shall deliver the following additional
documents to UAG, UAG Northeast, DPI and DPI Subsidiaries:
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(i) A certificate of good standing regarding each of the Corporations
dated as of a recent date and issued by the Secretary of State of the State
of its incorporation;
(ii) A closing certificate by the Principals and Corporations dated
as of the Closing Date to the effect that each of the conditions specified
in Article 5 are satisfied in all material respects;
(iii) A certificate of authority and incumbency with respect to the
officers of the Corporations, in a form reasonably acceptable to UAG, UAG
Northeast, DPI and DPI Subsidiaries;
(iv) A legal opinion of counsel to the Principals and Corporations,
in a form reasonably acceptable to UAG, UAG Northeast, DPI and DPI
Subsidiaries; and
(v) Such other documents, certificates and instruments as may
reasonably be requested by UAG, UAG Northeast, DPI and DPI Subsidiaries.
Section 1.3 METHOD OF PAYMENT. Any and all payments to be made under this
Agreement and the agreements related thereto shall, unless otherwise specified
herein or therein, be made in lawful money of the United States and in funds
immediately available by wire transfer to the account specified by the party to
receive such payment.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
UAG, UAG NORTHEAST, DPI AND DPI SUBSIDIARIES
UAG, UAG Northeast, DPI and DPI Subsidiaries jointly and severally
represent and warrant to the Corporations and the Principals, as of the date of
this Agreement and as of the Closing Date, as follows:
Section 2.1 CORPORATE STATUS. Each of UAG, UAG Northeast, DPI and DPI
Subsidiaries is or upon the Closing shall be a corporation which is duly
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incorporated, validly existing and in good standing under the laws of the State
of Delaware.
Section 2.2 POWER AND AUTHORITY. Each of UAG, UAG Northeast, DPI and DPI
Subsidiaries has or upon the Closing shall have the corporate power and
authority to execute, deliver and perform this Agreement and this Agreement and
all transactions contemplated hereby have or will have been duly and validly
authorized by all necessary corporate action on the part of UAG, UAG Northeast,
DPI and DPI Subsidiaries and by all necessary partnership action on the part of
the Partnerships.
Section 2.3 BINDING AGREEMENT. When executed and delivered by UAG, UAG
Northeast, DPI and DPI Subsidiaries, this Agreement shall be the valid and
binding obligation of each of UAG, UAG Northeast, DPI and DPI Subsidiaries,
enforceable in accordance with its terms.
Section 2.4 CONSENTS. There are no (i) consents, approvals,
authorizations or other actions of, or filings with, any court, governmental
authority or regulatory body and (ii) approvals, authorizations or orders of any
person under any material permits, licenses, contracts, decrees or other
restrictions to which UAG, UAG Northeast, DPI, DPI Subsidiaries or any of the
Partnerships is party, which UAG, UAG Northeast, DPI or DPI Subsidiaries or the
Partnerships shall have not obtained, taken or filed prior to the Closing Date
that are required to be obtained, taken or filed in order for this Agreement to
be executed and delivered and the transactions contemplated hereby to be
consummated.
Section 2.5 ABSENCE OF CONFLICT OR BREACH. The execution, delivery and
performance of this Agreement does not and shall not conflict with or result in
a breach of any of the terms, conditions or provisions of any judgment, order,
injunction, decree or ruling of any court or arbitration tribunal or
governmental authority to which UAG, UAG Northeast, DPI or DPI Subsidiaries is
subject, or of any provision of any agreement or understanding or arrangement to
which UAG, UAG Northeast, DPI or DPI Subsidiaries is a party or by which UAG,
UAG Northeast, DPI or DPI Subsidiaries is bound, which would interfere with
UAG's, UAG
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Northeast's, DPI's or DPI Subsidiaries' ability to execute, deliver and
perform under this Agreement and the 1996 Transaction Documents.
Section 2.6 BROKERS' FEES. Neither UAG, UAG Northeast, DPI nor DPI
Subsidiaries has any liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated by
this Agreement for which the Corporations or Principals could become liable or
obligated.
Section 2.7 LITIGATION. There is no outstanding order, writ, judgment,
stipulation, injunction, decree or determination before or by any court or
arbitration tribunal or governmental authority against UAG, UAG Northeast, DPI
and DPI Subsidiaries and there are no claims, actions, suits, investigations or
proceedings of any kind pending, or to the knowledge of the UAG, UAG Northeast,
DPI and DPI Subsidiaries, threatened before any court or arbitration tribunal or
governmental authority that seek to restrain, enjoin, or otherwise prevent the
consummation of the transactions contemplated by this Agreement.
Section 2.8 CAPITALIZATION. The outstanding capital stock of UAG consists
of (a) 3,593,750 shares of Voting Common Stock, par value $0.0001 per share (the
"UAG Common Stock"); (b) 5,227,346 shares of Class A Convertible Preferred
Stock, par value $0.0001 per share (the "Class A Convertible Preferred Stock").
UAG has granted Warrants for 1,016,099 shares of UAG Common Stock and Warrants
for 93,747 shares of Class A Convertible Preferred Stock. UAG has granted
options to purchase 873,000 shares of UAG Common Stock. Except as described in
this Agreement, there are no other options, warrants, conversion privileges or
other contractual rights presently outstanding to purchase any of the authorized
but unissued capital stock of UAG. All outstanding shares of UAG Common Stock
and Class A Convertible Preferred Stock were issued in compliance with all
federal and state securities laws.
In the event that the capitalization of UAG described herein changes on or
prior to the Closing, UAG shall immediately notify the Principals of such
changes, and the consideration to be received by the Principals at the Closing
will be adjusted so that the
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Principals, in fact, receive 2% of the UAG Common Stock as contemplated in
Article 6.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE CORPORATIONS
Each of the Corporations and the Principals jointly and severally represent
and warrant to UAG, UAG Northeast, DPI and DPI Subsidiaries that:
Section 3.1 CORPORATE STATUS. Each of the Corporations is or upon the
Closing shall be a corporation which is duly incorporated, validly existing and
in good standing under the laws of the State of its incorporation.
Section 3.2 POWER AND AUTHORITY. Subject to Section 4.4 of Article 4,
each of the Corporations has or upon the Closing shall have the corporate power
and authority to execute, deliver and perform this Agreement, and this Agreement
and all transactions contemplated hereby have or will have been duly and validly
authorized by all necessary action on the part of each of the Corporations.
Section 3.3 BINDING AGREEMENT. When executed and delivered by the
Corporations and Principals, this Agreement shall be the valid and binding
obligation of the Principals, and, subject to Section 4.4 of Article 4, each of
the Corporations, enforceable in accordance with its terms.
Section 3.4 CONSENTS. There are no (a) consents, approvals,
authorizations, or other actions of, or filings with, any court, governmental
authority or regulatory body and (b) approvals, authorizations or orders of any
person under any material permits, licenses, contracts, decrees or other
restrictions to which any of the Corporations is a party, which the Corporations
or the Principals shall have not obtained, taken or filed prior to the Closing
Date that are required to be obtained, taken or filed in order for this
Agreement to be executed and delivered and the transactions contemplated hereby
to be consummated,
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<PAGE>
except for any manufacturer consents which UAG and its affiliates shall have
obtained prior to the Closing.
Section 3.5 ABSENCE OF CONFLICT OR BREACH. The execution, delivery and
performance of this Agreement do not and shall not conflict with or result in a
breach of any of the terms, conditions or provisions of any judgment, order,
injunction, decree or ruling of any court or arbitration tribunal or
governmental authority to which each of the Corporations or the Principals is
subject, or, subject to Section 4.4 of Article 4, of any provision of any
agreement or understanding or arrangement to which each of the Corporations or
the Principals is a party or by which each of the Corporations or the Principals
is bound, which would interfere with the Corporations' and Principals' ability
to execute, deliver and perform under this Agreement and the 1996 Transaction
Documents.
Section 3.6 BROKERS' FEES. Neither any Corporation nor any Principal has
paid or will become obligated to pay any fee or commission to any broker,
finder, consultant or other intermediary for or on account of the transactions
provided for in this Agreement.
Section 3.7 LITIGATION. There is no outstanding order, writ, judgment,
stipulation, injunction, decree or determination before or by any court or
arbitration tribunal or governmental authority against any of the Corporations
or the Principals, and there are no claims, actions, suits, investigations or
proceedings of any kind pending, or to the knowledge of any of the Corporations
or the Principals, threatened, before any court or arbitration tribunal or
governmental authority that would seek to restrain, enjoin or otherwise prevent
the consummation of the transactions contemplated by this Agreement.
Section 3.8 INVESTMENT REPRESENTATIONS.
(a) The UAG Common Stock will be acquired for the Principals' own
accounts not as a nominee or agent, and not with a view to, or for resale in
connection with, any "distribution" thereof for purposes of the Securities Act
of 1933, as amended (the
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"Securities Act"), except in compliance with the Securities Act.
(b) The Principals understand that the UAG Common Stock will not be
registered under the Securities Act for purposes of the sale contemplated
herein.
(c) Each of the Principals is an "accredited investor" as that term
is defined in Regulation D promulgated under the Securities Act.
ARTICLE 4
COVENANTS
The Parties agree as follows with respect to the period from and after
execution of this Agreement:
Section 4.1 FURTHER ASSURANCES. Each of the Parties shall, without
further consideration, take all reasonable actions and do all things reasonably
necessary in order to consummate and make effective the transactions
contemplated by the Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Article 5 below), and to that end, shall share
such information and documents as reasonably required to adequately address any
tax, accounting, financial and legal issues incident to the agreements provided
herein and the transactions contemplated thereby.
Section 4.2 NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the other of any material adverse development causing a breach of any
of its own representations and warranties in Articles 2 and 3 above.
Section 4.3 THIRD PARTY CONSENTS. The Parties shall cooperate with one
another in obtaining and shall use reasonable efforts to obtain consents and
approvals from third parties with respect to the transactions contemplated by
this Agreement.
Section 4.4 MINORITY SHAREHOLDERS. The Parties acknowledge that UAG and
its affiliates are currently in discussions with certain minority shareholders
of
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the Corporations (the "Minority Shareholders") in connection with securing their
consent to, or as required, their approval of, the transactions contemplated
hereunder. Certain of the representations and warranties and covenants of the
Principals and Corporations hereunder may be subject to UAG and its affiliates
obtaining such consents or approvals. UAG shall use, and shall cause its
affiliates to use, reasonable efforts to obtain such consents and approvals and
the Principals shall reasonably cooperate and assist UAG in such efforts.
ARTICLE 5
CONDITIONS TO CLOSING
Section 5.1 CONDITIONS TO OBLIGATIONS OF UAG, UAG NORTHEAST, DPI AND DPI
SUBSIDIARIES. The obligations of the UAG, UAG Northeast, DPI and DPI
Subsidiaries to consummate the transactions contemplated hereunder shall be
subject to the fulfillment (or waiver by UAG, UAG Northeast, DPI and DPI
Subsidiaries), on or prior to the Closing Date, of the following additional
conditions, which the Corporations and Principals agree to use their respective
reasonable efforts to cause to be fulfilled:
Section 5.1.1 REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in Article 3 hereof shall be true and correct in all
material respects on and as of the date hereof and shall be true and correct in
all material respects on and as of the Closing Date with the same effect as
though made on and as of the Closing Date.
Section 5.1.2 COVENANTS. The Corporations and Principals shall have
performed and complied with all of their covenants contained in Article 4 hereof
in all material respects through the Closing.
Section 5.1.3 CONSENTS. Each of the Corporations and Principals
shall have obtained and delivered to UAG, UAG Northeast, DPI and DPI
Subsidiaries any governmental or third party consents, authorizations or
approvals to the transactions contemplated by this Agreement required to be
obtained by each of the Corporations and Principals.
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Section 5.1.4 INITIAL PUBLIC OFFERING. All conditions to the closing
of the Initial Public Offering shall have been satisfied or waived.
Section 5.1.5 DELIVERY OF ALL DOCUMENTS. At the Closing, the
Corporations and Principals shall have delivered all the documents, certificates
and other deliveries set forth in Article 1 hereof.
Section 5.2 CONDITIONS TO OBLIGATIONS OF THE CORPORATIONS AND PRINCIPALS.
The obligations of the Corporations and Principals to consummate the
transactions contemplated hereunder shall be subject to the fulfillment (or
waiver by the Corporations and Principals), on or prior to the Closing Date, of
the following additional conditions, which UAG, UAG Northeast, DPI and DPI
Subsidiaries agree to use their respective reasonable efforts to cause to be
fulfilled:
Section 5.2.1 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of UAG, UAG Northeast, DPI and DPI Subsidiaries contained in
Article 2 hereof shall be true and correct in all material respects on and as of
the date hereof and shall be true and correct in all material respects on and as
of the Closing Date with the same effect as though made on and as of the Closing
Date.
Section 5.2.2 COVENANTS. UAG, UAG Northeast, DPI and DPI
Subsidiaries shall have performed and complied with all of their respective
covenants contained in Article 4 hereof in all material respects through the
Closing.
Section 5.2.3 CONSENTS. UAG, UAG Northeast, DPI and DPI Subsidiaries
shall have obtained and delivered to the Corporations and Principals any
governmental or third party consents, authorizations or approvals, including any
manufacturer consents, to the transactions contemplated by this Agreement
required to be obtained by UAG, UAG Northeast, DPI, DPI Subsidiaries or the
Partnerships.
Section 5.2.4 INITIAL PUBLIC OFFERING. All conditions to the closing
of the Initial Public Offering shall have been satisfied or waived.
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Section 5.2.5 DELIVERY OF ALL DOCUMENTS. At the Closing, UAG, UAG
Northeast, DPI and DPI Subsidiaries shall have delivered all the documents,
certificates and other deliveries set forth in Article 1 hereof.
Section 5.2.6 CONSENTS OF MINORITY SHAREHOLDERS. Any consents of the
Minority Shareholders necessary to consummate the transactions contemplated
hereby shall have been obtained.
ARTICLE 6
REORGANIZATIONS
Section 6.1 REORGANIZATIONS. At the Closing, (i) each of the Corporations
identified on SCHEDULE 6.1 hereto will merge with and into a wholly-owned
subsidiary of UAG (collectively, the "Buyers") in reorganizations pursuant to
Section 368(a)(2)(D) of the Internal Revenue Code (the "Code") (collectively,
the "Mergers") and (ii) DiFeo Partnership, Inc. will acquire 100% of the capital
stock of Hudson Toyota, Inc. and DiFeo Partnership, Inc. will acquire 100% of
the capital stock of Somerset Motors Inc. in reorganizations pursuant to Section
368(a)(1)(B) of the Code (the "B Reorganizations"). At the Closing, the
Principals will receive (a) pursuant to the Mergers and the B Reorganizations,
an aggregate number of shares of UAG Common Stock equal to the number of shares
that will represent 2% of the shares of UAG Common Stock outstanding immediately
prior to the Initial Public Offering, on a fully diluted basis (but without
regard to other Minority Roll-ups, as defined in the prospectus for the Initial
Public Offering, options to acquire up to 200,000 shares of UAG Common Stock to
be granted at the public offering price, and the shares issuable hereunder) and
(b) pursuant to the Mergers, options ("UAG Options"), in the form attached
hereto as EXHIBIT 6.1, to acquire an amount of shares of UAG Common Stock equal
to $1,500,000 divided by the initial price to the public of the UAG Common Stock
specified in the final prospectus with respect to the Initial Public Offering.
The UAG Common Stock and the shares of UAG Common Stock issuable on the exercise
of the UAG Options will be entitled to the benefits of the Registration Rights
Agreement by and between UAG and
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the Principals, in the form attached hereto as EXHIBIT 6.1(A), provided however,
that in the event that UAG is unable to provide the registration rights provided
for in Section 1.3 of such Registration Rights Agreement with respect to
registrations demanded by any UAG stockholders having demand registration
rights, then UAG shall provide the Principals with such alternative
consideration as may be agreed upon between UAG and the Principals as
representing the fair value of such rights.
Section 6.2 MERGER AGREEMENTS. Each of the Mergers referred to in Section
6.1 will be evidenced by an Agreement and Plan of Merger substantially in the
form attached hereto as EXHIBIT 6.2 (the "Merger Agreement"). The B
Reorganizations will be evidenced by an agreement, which shall contain
representations and warranties and covenants and other material terms
substantially similar to the terms and conditions in the Merger Agreements (the
"B Reorganization Agreements").
ARTICLE 7
EMPLOYMENT AND CONSULTING ARRANGEMENTS
Section 7.1 CURRENT SALARY ARRANGEMENTS. The current salary arrangements
of each of Joseph C. DiFeo (at a rate of $200,000 per year) and Samuel DiFeo,
Sr. (at a rate of $50,000 per year) shall continue through December 31, 1996.
James Hetherington's current salary arrangement shall continue through the
Closing and, thereafter, UAG shall pay or reimburse J&S Ford, Inc. on account of
salary for James Hetherington through December 31, 1996 at an annual rate of
$50,000. Samuel X. DiFeo shall receive a base salary at the rate of $225,000
per annum for the period October 1, 1995 through December 31, 1996.
Section 7.2 CONSULTING AGREEMENTS. Samuel DiFeo, Sr. and Joseph C. DiFeo
shall enter into 5 year and 3 year consulting agreements ("Consulting
Agreements"), respectively, with UAG at the rate of $50,000 per year. The
Consulting Agreements shall commence on January 1, 1997 and shall be on terms
and conditions mutually satisfactory to the parties and consistent with this
Agreement. James Hetherington may
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enter into a consulting agreement for the periods after December 31, 1996 with
UAG, if at all, on terms and conditions mutually agreeable to UAG and James
Hetherington.
Section 7.3 EMPLOYMENT AGREEMENT OF SAMUEL X. DIFEO. From and after
January 1, 1997, Samuel X. DiFeo shall continue to be employed by UAG on terms
and conditions mutually satisfactory to the parties and consistent with this
Agreement ("Employment Agreement").
ARTICLE 8
PARTNERSHIP EXCHANGES
Section 8.1 TRANSFER OF PARTNERSHIP INTERESTS. The Principals and UAG
shall take such steps as shall be necessary to cause the transfer by: J & F
Oldsmobile Corp., Fair Hyundai Corp. and JS1, Inc. of their respective interests
in J&F Oldsmobile-Isuzu Partnership; and Fair Hyundai Partnership and Fair
Chevrolet-Geo Partnership; and DiFeo Nissan Partnership and DiFeo Chevrolet-Geo
Partnership to UAG or its affiliates in exchange for the interests of UAG in
each of DiFeo Imports Partnership ("Mitsubishi"), DiFeo Buick-Pontiac-GMC
Partnership ("Buick"), and North Jersey-Manhattan Saturn Partnership and
Engelwood Saturn Partnership (collectively, "Saturn"), as well as those certain
notes of Salerno Duane Managment Group, Inc. payable to DPI and DiFeo
Partnership HCM, Inc. in the original principal amounts of $60,957.40 and
$53,842.60 respectively (collectively, the "Salerno Notes") issued pursuant to
the Amended and Restated Master Agreement dated as of September 15, 1994
(referenced hereinafter). In addition, UAG shall confirm that all prior
advances made by UAG to Buick and Mitsubishi were made as capital contributions
to said Partnerships. Further, in the event UAG shall fail to transfer or cause
the transfer of Saturn by reason of its inability to obtain manufacturer
approval, or otherwise, on or before the Closing Date or such other date as
mutually agreed upon between UAG and the Principals, but in all events not later
than December 31, 1996, UAG and the Principals shall mutually agree on
alternative consideration payable to the Principals commensurate with the value
of UAG's
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interest in Saturn. UAG shall insure that with respect to each of Buick,
Mitsubishi and Saturn the minimum net working capital standard of each
manufacturer shall be met on the date of transfer of each of Buick, Mitsubishi
and Saturn, PROVIDED, HOWEVER, that the Parties acknowledge UAG's objective of
aggregating capital among said Partnerships for purposes of calculating any
amount required to be funded by UAG to satisfy the aggregate minimum net working
capital requirements of said Partnerships, and PROVIDED FURTHER, HOWEVER, that
in the event the holders of the Salerno interests in said Partnerships shall
fail to exercise their right to additional ownership interests in said
Partnerships, any aggregating of capital shall only occur with respect to Buick
and Mitsubishi, and UAG shall otherwise satisfy the minimum net working capital
requirements of Saturn, PROVIDED FURTHER, HOWEVER, that in the event UAG shall
fail to transfer or cause the transfer of Saturn, UAG shall aggregate capital
only with respect to Buick and Mitsubishi.
Nothing contained in this Section 8.1 or elsewhere in this Agreement shall
affect or otherwise be deemed to amend, modify or supersede in any respect the
rights and obligations of the parties to that certain Amended and Restated
Master Agreement dated as of September 15, 1994 among Salerno-Duane Management
Group, Inc. and affiliates of UAG and the Principals.
Section 8.2 PARTNERSHIP EXCHANGE AGREEMENT. In order to effectuate the
partnership exchanges contemplated in Section 8.1, the parties referred to
therein shall enter into a partnership exchange agreement (the "Partnership
Exchange Agreement") in a form acceptable to such parties, which shall contain
representations and warranties and covenants and other material terms
substantially similar to the terms and conditions in the Merger Agreements.
ARTICLE 9
ASSIGNMENT OF CLAIMS
Section 9.1 ASSIGNMENT OF CLAIMS. In full settlement and release of
certain disputes between the Principals and certain affiliates of the
Principals, on the one hand, and UAG and affiliates of UAG, on the
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other hand, regarding partnership allocations, capital requirements, accounting
adjustments and other similar matters, UAG and their affiliates shall assign all
claims held by UAG and affiliates of any kind or nature against the Principals
and/or their affiliates to the Principals, and the Principals shall assign all
claims held by the Principals of any kind or nature against UAG and its
affiliates to UAG, in each case to the extent arising prior to the Closing,
pursuant to an assignment of claims agreement (the "Assignment of Claims
Agreement") in a form reasonably satisfactory to said parties.
ARTICLE 10
J & S FORD, INC.
Section 10.1 J & S FORD, INC. The Principals shall not be required to
consummate the legal transfer of J&S Ford, Inc. to UAG as originally
contemplated by the parties to the Master Agreement, and the Principals shall
retain all right, title and interest in J&S Ford, Inc. and UAG shall have no
interest, legal or otherwise, therein. To that end, UAG shall take any and all
of the requisite steps to (i) relinquish control over any cash accounts and
other assets of J&S Ford, Inc. and (ii) insure that J&S Ford, Inc. has net
working capital, as of October 1, 1996 of $1,400,000 determined in accordance
with the manufacturer's accounting method, with an adjustment to said $1,400,000
for delinquent receivables and obsolete parts (obsolete parts shall be parts
regarding which no activity has occurred since December 31, 1995, and delinquent
receivables shall be receivables on the books of J&S Ford, Inc. on December 31,
1995 and remaining outstanding on October 1, 1996), and all calculations shall
be made exclusive of all intercompany accounts.
ARTICLE 11
LEASES
Section 11.1 LEASES. The Principals and UAG shall cause the cancellation
of certain leases identified on SCHEDULE 11.1 hereto among the Principals
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and/or certain affiliates of the Principals, on the one hand, and certain of the
Partnerships, on the other hand, and shall cause the Principals and/or certain
affiliates of the Principals, as landlords, and UAG, or certain affiliates of
UAG, as tenants, to enter into new leases as identified on SCHEDULE 11.1(A), to
be evidenced by leases in the form attached hereto as EXHIBIT 11.1 (the
"Lease"), which leases shall contain INTER ALIA, the following terms:
(a) The term of such leases shall be for a period of 15 years,
commencing as of October 1, 1995;
(b) Effective as of October 1, 1995, an increase in the aggregate
rental rates of such leases of $250,000 over all other minimum rent increases
provided for in the leases among the Principals and/or certain affiliates of the
Principals, on the one hand, and certain of the Partnerships, on the other hand,
which were in full force and effect on September 1, 1995; thus, the rental rate
increase applicable as of October 1, 1995 shall be in the aggregate amount of
$495,000;
(c) Annual rent under such leases shall be increased on October 1 of
each year commencing on October 1, 1996 by the greater of 2% of the rent as of
the September 1 immediately prior thereto, or 75% of (i) the percentage
increase, if any in the Consumer Price Index for Urban Consumers-New
York-Northeastern New Jersey ("CPI-U") for the month of September of the year of
calculation over (ii) the CPI-U for September of the year prior to the year of
calculation;
(d) All obligations of "tenant" under such leases shall be guaranteed
by UAG to the extent UAG is not the actual tenant of any such lease;
(e) UAG shall pay or cause to be paid all rent then due and payable
pursuant to such new leases on or prior to the Closing Date; and
(f) If agreed to by UAG and the Principals, UAG shall provide
security on account of security deposit obligations under the new leases in form
and amount mutually acceptable to UAG and the Principals.
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ARTICLE 12
AUTOMOBILE STORAGE SPACE
Section 12.1 AUTOMOBILE STORAGE SPACE. The lease for the property located
at 559 Route 440 West, Jersey City, New Jersey shall exclude an area sufficient
for the Principals to park up to 250 vehicles and shall include such reservation
of ingress and egress as may be necessary to access the storage area.
Section 12.2 MCCARTHY BUILDING AND LEASE. At no cost to J&S Ford, Inc.,
UAG shall take such steps as reasonably necessary to (i) allow J&S Ford, Inc. to
use certain real property in Jersey City, New Jersey referred to as the McCarthy
Building, together with its contents, and (ii) undertake and perform all
obligations under the current lease of the McCarthy Building for the benefit of
J&S Ford, Inc., in each instance until the earlier of the expiration of said
lease of the McCarthy Building, the termination of the Principals' majority
ownership of J&S Ford, Inc. or the subletting by UAG of said property to a third
party on six (6) months prior notice to J&S Ford, Inc. on terms and conditions
comparable to the terms and conditions in said lease.
ARTICLE 13
TRANSFER OF GATEWAY PARTNERSHIPS
Section 13.1 TRANSFER OF GATEWAY PARTNERSHIPS. The Principals shall cause
JS4, Inc. to transfer all of its respective partnership interests in the OCT
Partnership (i.e., Gateway Toyota) and the OCM Partnership (i.e., Gateway
Mitsubishi) to UAG or a designated affiliate of UAG on or prior to Closing Date
pursuant to an assignment and assumption agreement (the "Assignment and
Assumption Agreement") in a form reasonably satisfactory to said parties which
shall have representations, warranties and covenants and other material terms
substantially similar to the terms and conditions in the Merger Agreement in
full and final satisfaction of any and all outstanding obligations of the
Principals and/or affiliates of the Principals to UAG and affiliates of UAG,
including the
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respective Partnerships, relative to the acquisition of the automobile
dealerships owned by such Partnerships.
ARTICLE 14
PARTNERSHIP TAX DISTRIBUTIONS
Section 14.1 PARTNERSHIP TAX DISTRIBUTIONS. UAG has paid or has caused
the Partnerships to distribute $600,000 to the Principals on behalf of the
Corporations on account of tax distributions pursuant to Section 5.2 of the
partnership agreements relative to the Partnerships for years 1992, 1993 and
1994 (receipt of which is acknowledged by the Corporations and Principals) and
UAG shall pay or shall cause the Partnerships to make tax distributions to the
Principals on behalf of the Corporations consistent with Section 5.2 of such
partnership agreements on account of tax distributions for 1995 in the aggregate
amount of $206,557, and UAG shall pay or cause the Partnerships to make tax
distributions to the Principals on behalf of the Corporations with respect to
any additional income allocated to the Corporations for the years 1992-1995
pursuant to tax audits, or on account of any income allocated to the
Corporations for 1996 for the period prior to the Closing, including, without
limitation, on account of any LIFO recapture.
ARTICLE 15
DEALERSHIP LIQUIDITY CONTRIBUTIONS
Section 15.1 RETURN OF DEALERSHIP LIQUIDITY CONTRIBUTIONS. UAG has
caused, and the Principals acknowledge that UAG has caused, the Partnerships to
return to the Principals their respective Dealership Liquidity Contributions
referenced in the Master Agreement in the aggregate amount of $400,000, together
with interest thereon at the rate of 6% from October 1, 1992 through the date of
payment hereunder.
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ARTICLE 16
LEGAL FEES
UAG shall directly pay Arnold & Porter all of its reasonable legal fees and
disbursements charged and incurred by it on behalf of its representation of the
Corporations, the Principals and the affiliates of the Principals in connection
with this Agreement and the transactions contemplated thereby.
ARTICLE 17
INDEMNIFICATION AND RELEASES
Section 17.1 INDEMNIFICATION OF THE CORPORATIONS AND PRINCIPALS. Except
for the Special Tax Indemnity provided for in Section 7.3 of the Merger
Agreements (and the corresponding sections of the B Reorganization Agreements,
Partnership Exchange Agreement and Assignment and Assumption Agreement), UAG,
UAG Northeast, DPI and DPI Subsidiaries, jointly and severally, shall defend,
indemnify and hold the Corporations and the Principals harmless from and against
any and all claims, liabilities, obligations, whether absolute, accrued,
contingent or otherwise and whether a contractual or any other type of
liability, obligation or claim (other than income tax liabilities of the
Principals arising from the transactions contemplated by this Agreement)
including, without limitation, all damages, losses and expenses, reasonable fees
of experts and attorneys and all costs of suit, suffered or incurred or to be
suffered or incurred by the Corporations and Principals (i) arising out of the
breach of any or all representations and warranties and covenants made by or on
behalf of UAG, UAG Northeast, DPI and DPI Subsidiaries in this Agreement or in
any document delivered hereunder; (ii) arising from any and all liabilities,
claims, guarantees or demands with respect to any indebtedness or obligations of
the Partnerships and Corporations; (iii) arising from any and all personal
guarantees of liabilities relative to floor plans and other loans from GMAC or
any other lender with respect to any indebtedness or obligations of the
Partnerships and Corporations; (iv) arising out of or in connection with any
outstanding issues with respect to any of the
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Minority Shareholders relative to their respective ownership interests in
certain of the Corporations, (v) arising out of any claims or demands asserted
by the holders of the Salerno interests relative to their interests in Buick,
Mitsubishi and Saturn and (vi) arising out of or in connection with any claims
under the Securities Act or any other law administered by the Securities and
Exchange Commission or any State securities commission, whether asserted by a
private party or any such governmental authority relating to any private or
public offering of securities by UAG.
Section 17.2 INDEMNIFICATION OF UAG, UAG NORTHEAST, DPI AND DPI
SUBSIDIARIES. Except for the Special Tax Indemnity provided for in Section 7.3
of the Merger Agreements (and the corresponding sections of the B Reorganization
Agreements, Partnership Exchange Agreement and Assignment and Assumption
Agreement), the Principals jointly and severally, shall defend, indemnify and
hold UAG, UAG Northeast, DPI and DPI Subsidiaries harmless from and against any
and all claims, liabilities, obligations, whether absolute, accrued, contingent
or otherwise and whether a contractual or any other type of liability,
obligation or claim including, without limitation, all damages, losses and
expenses, reasonable fees of experts and attorneys and all costs of suit,
suffered or incurred or to be suffered or incurred by UAG, UAG Northeast, DPI
and DPI Subsidiaries arising out of the breach of any or all representations and
warranties and covenants made by the Principals and the Corporations in this
Agreement and all documents delivered pursuant to this Agreement, including, but
not limited to, the Merger Agreements, the B Reorganization Agreements and the
Partnership Exchange Agreement.
Section 17.3 INDEMNIFICATION PROCEDURE. A party seeking indemnification
pursuant to this Article 17 (an "indemnified party") shall give prompt notice to
the party from whom such indemnification is sought (the "indemnifying party") of
the assertion of any claim, or the commencement of any action or proceeding, in
respect of which indemnity may be sought hereunder. The indemnifying party
shall have the right to assume the defense (in consultation and cooperation with
the indemnified party, in good faith and to the extent appropriate under the
circumstances) of any such suit, action or proceeding at its own expense. If an
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indemnifying party shall elect not to assume the defense of any such suit,
action or proceeding, the indemnified party may assume such defense at the
expense of the indemnifying party. An indemnifying party shall not be liable
under this Article 17 for any settlement effected without its consent of any
claim, litigation or proceeding in respect of which indemnity may be sought
hereunder. No investigation by an indemnified party at or prior to the Closing
shall relieve an indemnifying party of any liability hereunder.
Section 17.4 RELEASE BY LENDERS. UAG shall use its best efforts to cause
the release of each of Samuel DiFeo, Sr., Joseph C. DiFeo, Samuel X. DiFeo,
James Hetherington, Neale Kuperman, Robert Cohen and Richard Mutterperl from any
and all personal guarantees or liabilities relative to floor plans and other
loans from GMAC or any other lender with respect to any indebtedness or
obligations of the Partnerships and Corporations, such release to be evidenced
by releases or other documents and instruments in a form reasonably satisfactory
to each party. Such release shall be effective within ninety (90) days of the
Closing, and provided that if such release is not effective within said period,
UAG shall pay the Principals a fee of $50,000 on the ninety-first (91st) day
following the Closing and quarterly thereafter with each successive payment
being $25,000 greater than the immediately proceeding quarterly payment until
such release has been delivered as required hereunder.
Section 17.5 RELEASE BY UAG. UAG and all of its affiliates shall release
each of Samuel DiFeo, Sr., Joseph C. DiFeo and Samuel X. DiFeo from any and all
liabilities, claims or demands with respect to any indebtedness or obligations
of the Partnerships and Corporations, such release to be evidenced by releases
or other documents and instruments in a form reasonably satisfactory to each
Party except for obligations arising under this Agreement.
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ARTICLE 18
MISCELLANEOUS
Section 18.1 DIFEO LEASING CORPORATION. UAG and the Principals agree that
the disposition of the interests of DPI and DiFeo Leasing Corporation in DiFeo
Leasing Partnership shall be determined by the partners therein without regard
to this Agreement as soon as may be practicable.
Section 18.2 SURVIVAL. The Parties agree that this Agreement, including
without limitation, the representations and warranties of each Party in Articles
2 and 3 and the indemnification and release provisions in Article 17, shall
survive the Closing
Section 18.3 NO WAIVER. No waiver of any term,condition, default, or
breach of this Agreement, or of any document executed pursuant hereto, shall
be effective unless in writing and executed by the party making such waiver;
no such waiver shall operate as a waiver of either (i) such term, condition,
default, or breach on any other occasion, or (ii) any other term, condition,
default, or breach of this Agreement. No delay or failure to enforce any
provision of this Agreement or of any document executed pursuant hereto shall
operate as a waiver of such provision or any other provision herein or
therein. The enforcement by any party of any right it may have under this
Agreement or under applicable laws shall not be deemed an election of
remedies or otherwise prevent such party from enforcement of one or more
other remedies at any time.
Section 18.4 PARTIES BOUND. All of the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of, and be
enforceable by and against, the Parties hereto and their respective heirs,
representatives, successors and permitted assigns.
Section 18.5 NOTICES. Any and all notices, requests, communications, or
demands required or permitted to be given hereunder shall be in writing, and
shall be delivered either (i) in person or by electronic facsimile, (ii) by an
established overnight
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delivery service, or (iii) by certified mail, return receipt requested,
addressed as follows:
If to Principals
or Corporations: Joseph C. DiFeo
and
Samuel X. DiFeo
121 Lorraine Avenue
Spring Lake, New Jersey 07762
copy to: Arnold & Porter
399 Park Avenue
New York, New York 10022
Fax: (212) 715-1399
Phone: (212) 715-1000
Attention: Michael J. Canning, Esq.
If to UAG or
its Affiliates: United Auto Group, Inc.
375 Park Avenue - 11th Floor
New York, New York 10152
Fax: (212) 593-1363
Phone: (212) 230-0493
Attention: Philip N. Smith, Jr., Esq.
copy to:
If by Hand: Bressler, Amery & Ross, P.C.
325 Columbia Turnpike
Florham Park, New Jersey 07932
Fax: (201) 514-1660
Phone: (201) 514-1200
Attention: Edward P. McKenzie, Esq.
If by Mail: P.O. Box 1980
Morristown, New Jersey 07962
or to such other address or addresses as any party may designate to the others
by notice given as provided above. Notices delivered in person or by electronic
facsimile shall be deemed to have been given on the date of delivery; notices
delivered by overnight delivery service shall be deemed to have been given on
the business day following the date of deposit with
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such overnight delivery service; and notices given by mail shall be deemed to
have been given three (3) days after the date of mailing.
Section 18.6 GOVERNING LAW. The rights and duties of the parties and the
validity, construction, enforcement, and interpretation of this Agreement shall
be determined according to the laws of the State of New York.
Section 18.7 SUBMISSION TO JURISDICTION. To the extent permitted by law
the Parties hereby consent to the jurisdiction of the Federal courts of the
United States sitting in the Southern District of New York and the courts of the
State of New York sitting in the City of New York in respect of any legal action
or proceeding arising out of or relating to this Agreement or to the
transactions contemplated hereunder.
Section 18.8 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
Section 18.9 THIRD PARTY BENEFICIARIES. The terms and provisions of this
Agreement are for the sole benefit of the Parties hereto and their respective
heirs, personal representatives, successors and permitted assigns and no third
party may benefit from such terms and provisions.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
TRACE INTERNATIONAL HOLDINGS, INC.
By: /s/Philip N. Smith, Jr.
-------------------------
Its:
-------------------------
UAG NORTHEAST, INC.
By: /s/Philip N. Smith, Jr.
-------------------------
Its:
-------------------------
DIFEO PARTNERSHIP, INC.
By: /s/Philip N. Smith, Jr.
-------------------------
Its:
-------------------------
UNITED AUTO GROUP, INC.
By: /s/Philip N. Smith, Jr.
-------------------------
Its:
-------------------------
DIFEO PARTNERSHIP RCT, INC.
By: /s/Philip N. Smith, Jr.
-------------------------
Its:
-------------------------
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DIFEO PARTNERSHIP HCM, INC.
By: /s/Philip N. Smith, Jr.
-------------------------
Its:
-------------------------
DIFEO PARTNERSHIP HCT, INC.
By: /s/Philip N. Smith, Jr.
-------------------------
Its:
-------------------------
DIFEO PARTNERSHIP DM, INC.
By: /s/Philip N. Smith, Jr.
-------------------------
Its:
-------------------------
DIFEO PARTNERSHIP SCT, INC.
By: /s/Philip N. Smith, Jr.
-------------------------
Its:
-------------------------
DIFEO PARTNERSHIP RCM, INC.
By: /s/Philip N. Smith, Jr.
-------------------------
Its:
-------------------------
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THE CORPORATIONS:
FAIR CADILLAC-OLDSMOBILE CORP.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
FAIR CHEVROLET CORP.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
FAIR INFINITI, INC.
By: /s/Joseph C. DiFeo
Its:_________________________
FAIR IMPORTS CORP.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
FAIR HYUNDAI CORP.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
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FAIR MOTORS CORP.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
DANBURY-MT. KISCO SATURN CORP.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
HUDSON TOYOTA, INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
J & S FORD INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
DIFEO VOLKSWAGEN INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
DIFEO HYUNDAI, INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
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J & F OLDSMOBILE CORP.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
DIFEO SUBARU, INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
DIFEO JEEP-EAGLE, INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
DIFEO IMPORTS, INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
DIFEO BUICK, INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
DIFEO AUTOCENTER, INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
-------------------------
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DIFEO LEASING CORPORATION
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
SOMERSET MOTORS INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
GATEWAY OLDSMOBILE INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
DIFEO B.M.W., INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
COUNTY AUTO GROUP INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
ROCKLAND MOTORS CORP.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
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JS1, INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
JS2, INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
JS4, INC.
By: /s/Joseph C. DiFeo
-------------------------
Its:
-------------------------
THE PRINCIPALS:
/s/Samuel X. DiFeo
-----------------------------
Samuel X. DiFeo
/s/Joseph C. DiFeo
-----------------------------
Joseph C. DiFeo
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SCHEDULE 6.1
Merging Entities
CORPORATION
(State of
Incorporation) PARTNERSHIP
-------------- -----------
COUNTY AUTO GROUP, COUNTY AUTO GROUP
INC. (NY) PARTNERSHIP
ROCKLAND MOTORS ROCKLAND MOTORS
CORP. (NY) PARTNERSHIP
DIFEO HYUNDAI, DIFEO HYUNDAI
INC. (NJ) PARTNERSHIP
DIFEO JEEP-EAGLE, DIFEO JEEP-EAGLE
INC. (NJ) PARTNERSHIP
DANBURY-MT. KISCO DANBURY-MT. KISCO
SATURN CORP. (CT) SATURN PARTNERSHIP
DIFEO BMW, INC. (NJ) DIFEO BMW
PARTNERSHIP
JS2, INC. (CT) DANBURY AUTO
PARTNERSHIP
JS2, INC. (CT) DANBURY CHRYSLER
PLYMOUTH
PARTNERSHIP
<PAGE>
SCHEDULE 11.1
Cancelled Leases
1. Lease between Fair Realty Company, as Landlord, and Fair Hyundai
Partnership, as Tenant, dated October 1, 1992.
2. Lease between Fair Realty Company, as Landlord, and Danbury-Mt. Kisco
Saturn Partnership, as Tenant, dated October 1, 1992.
3. Lease between Fair Realty Company, as Landlord, and Fair
Cadillac-Oldsmobile-Isuzu Partnership, as Tenant, dated October 1, 1992.
4. Lease between Rockland Realty Associates, as Landlord, and Rockland Motors
Partnership, as Tenant, dated October 1, 1992.
5. Lease between Boundbrook Realty Associates, as Landlord, and DiFeo
Oldsmobile Partnership, as Tenant, dated October 1, 1992.
6. Lease between Boundbrook Realty Associates, as Landlord, and Somerset
Motors Partnership, as Tenant, dated October 1, 1992.
7. Lease between J & S Equity Urban Renewal Corp., as Landlord, and Hudson
Motors Partnership, as Tenant, dated October 1, 1992.
8. Lease between J & S Equity Associates, as Landlord, and DiFeo Jeep-Eagle
Partnership, as Tenant, dated October 1, 1992.
9. Lease between J & S Equity Associates, as Landlord, and J & F
Oldsmobile-Isuzu Partnership, as Tenant, dated October 1, 1992.
10. Lease between J & S Equity Associates, as Landlord, and DiFeo Subaru
Partnership, as Tenant, dated October 1, 1992.
11. Lease between J & S Equity Associates, as Landlord, and DiFeo
Buick-Pontiac-GMC Truck Partnership, as Tenant, dated October 1, 1992,
respecting Block 1761.A, Lots S-2 & S-3; Block 1751, Lots 11-C and 11-D;
Block 1753, Lots 11-23, Jersey City, New Jersey.
<PAGE>
12. Lease between J & S Equity Associates, as Landlord, and DiFeo
Buick-Pontiac-GMC Truck Partnership, as Tenant, dated October 1, 1992,
respecting Block 1745, Lots 11, 12, 13, 14, 15, 16, 17 & 18, 919 Communipaw
Avenue, Jersey City, New Jersey.
13. Lease between J & S Equity Associates, as Landlord, and DiFeo
Buick-Pontiac-GMC Truck Partnership, as Tenant, dated October 1, 1992,
respecting Block 1745, Lots 34-40; Block 1746, Lots 19A, 21A, & 22A; Block
1747, Lots 81, 82, 83 and 84, Jersey City, New Jersey.
14. Lease between J & S Equity Associates, as Landlord, and DiFeo Imports
Partnership, as Tenant, dated October 1, 1992.
15. Lease between J & S Equity Associates, as Landlord, and DiFeo Autocenter
Partnership, as Tenant, dated October 1, 1992.
2
<PAGE>
SCHEDULE 11.1(A)
Leases
1. Lease between Boundbrook Realty Associates, as Landlord, and Somerset
Motors Partnership, as Tenant
Rent -- $71,799 per month as of October 1, 1995
Property Description -- The automobile dealership buildings of
approximately 25,600 square feet and 18,200 square feet, respectively,
along with parking, display and storage areas located on Lot 2, Block 7201
in the Township of Bridgewater, Somerset County, New Jersey.
2. Lease between Rockland Realty Associates, as Landlord, and Rockland Motors
Partnership, as Tenant
Rent -- $12,901 per month as of October 1, 1995
Property Description -- 73, 75 and 77 North Highland Avenue, Nyack, New
York 10960.
3. Lease between SDJD 37 Realty, Inc., as Landlord, and OCM Partnership, t/a
Gateway Mitsubishi, and OCT Partnership, t/a Gateway Toyota, as Tenants
Rent -- $34,030 per month as of October 1, 1995
Property Description -- Lot 6.01 in Block 691; Lot 28 in Block 691, and Lot
1 in Block 690.01, Dover Township, Ocean County, New Jersey
4. Lease between Gateway Associates, as Landlord, and OCT Partnership t/a
Gateway Toyota
Rent -- $18,697 per month
Property Description -- Lot 12.01, Block 691, Dover Township, Ocean County,
New Jersey
<PAGE>
5. Lease between J & S Equity Associates, as Landlord, and DiFeo Nissan
Partnership, as Tenant
Rent -- $27,817 per month as of October 1, 1995
Property Description -- 126, 181-187 Roosevelt Avenue; 29 Marcy Avenue;
909, 911-913, 915-921 and 967-983 Communipaw Avenue
6. Lease between J & S Equity Urban Renewal Corp., as Landlord, and Hudson
Motors Partnership, as Tenant
Rent -- $30,000 per month as of October 1, 1995
Property Description -- Block 1290.1, Lot A.1 on the Tax Map of Jersey
City, Hudson County, New Jersey
7. Lease between J & S Equity Associates, as Landlord, and Hudson Motors
Partnership, as Tenant
Rent -- $40,000 per month as of October 1, 1995
Property Description -- Block 1290.1, Lot A.2 on the Tax Map of Jersey
City, Hudson County, New Jersey
8. Lease between J & S Equity Associates, as Landlord, and DiFeo Chevrolet-Geo
Partnership, DiFeo Jeep-Eagle Partnership and DiFeo Hyundai Partnership,
as Tenants
Rent -- $57,000 per month as of October 1, 1995
Property Description -- 599 U.S. Route 440, known as Lots 10K1 & 10K2,
Block 1751, Tax Map of City of Jersey City, Hudson County, New Jersey
2
<PAGE>
9. Lease between Fair Realty Company, as Landlord, and Danbury-Mt. Kisco
Saturn Partnership, Danbury Auto Partnership, and Fair Chevrolet-Geo
Partnership, as Tenants
Rent -- $80,000 per month as of October 1, 1995
Property Description -- 102 Federal Road, Danbury, Connecticut, more
particularly described as a portion of the following described land
currently used as the Fair Cadillac-Oldsmobile-Isuzu car dealership (i.e.,
List 6759, Lot 0009).
10. Lease between Fair Realty Company, as Landlord, and Danbury-Mt. Kisco
Saturn Partnership, Danbury Auto Partnership, and Fair Chevrolet-Geo
Partnership, as Tenants
Rent -- $7,505 per month as of October 1, 1995
Property Description -- Federal Road, Danbury, Connecticut (i.e., List
6758, Lot 0007).
3
<PAGE>
Exhibit 10.2.27
FORM OF
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT made as of this ____ day of ________, 1996, by and among
United Auto Group, Inc., a Delaware corporation ("UAG") and __________________
[Buyer] a Delaware corporation and a wholly-owned subsidiary of UAG ("Buyer"),
and _________________ [Target] ("Target"), a __________________ corporation and
________________ [Target Shareholders], each a shareholder of the Target
(collectively, the "Target's Shareholders"). UAG, the Buyer, the Target and the
Target Shareholders are referred to collectively herein as "Parties".
W I T N E S S E T H:
RECITALS:
A. This Agreement contemplates a tax-free merger of the Target with and
into the Buyer in a reorganization pursuant to Section 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended. The current shareholders of the
Target (collectively, the "Target Shareholders") will receive common stock in
UAG ("UAG Common Stock") and options for UAG Common Stock ("UAG Options") in
exchange for their rights, title and interests in and to their ownership
interests in the Target.
B. Pursuant to the terms of a certain Master Agreement made as of March
11, 1992 as amended by Amendment No. 1 to the Master Agreement dated October 1,
1992 and by Amendment No. 2 to the Master Agreement dated July 21, 1993 (as so
amended, the "Master Agreement") the Buyer and the Target became general
partners in _______________, a __________ general partnership (the
"Partnership").
C. This Agreement is entered into pursuant to a Settlement Agreement by
and among the Parties and/or certain affiliates of the Parties dated October 3,
1996 which by its terms supersedes the Master Agreement in its entirety.
D. At present Target is the owner of a 30% interest in the Partnership
("Partnership Interest").
<PAGE>
E. The Partnership is in the business of operating an automobile
dealership in the State of _____________________, as the franchisee under a
franchise agreement with one or more automobile manufacturers.
F. Prior to the Effective Time (as hereinafter defined), the boards of
directors and stockholders of each of the Buyer and the Target shall have
approved and adopted resolutions declaring advisable the merger of Target with
and into the Buyer on the terms and conditions hereinafter set forth and shall
have also approved and adopted this Agreement and Plan of Merger.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations and warranties and
covenants herein contained, the Parties agree as follows:
1. THE MERGER
1.1 THE MERGER. On and subject to the terms and conditions of this
Agreement, the Target will merge with and into the Buyer (such transaction being
hereinafter referred to as the "Merger") at the Effective Time (as hereinafter
defined). The Buyer shall be the corporation surviving the Merger (the
"Surviving Corporation"). The Merger shall become effective at the time (the
"Effective Time") the Buyer and Target file the Certificate of Merger with the
Secretary of State of their respective States of incorporation. The Surviving
Corporation may, at any time after the Effective Time, take any action
(including executing and delivering any document) in the name and on behalf of
either of its constituent corporations in order to carry out and effectuate the
transactions contemplated by this Agreement.
1.2 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation and the Bylaws of the Buyer in effect at and as of the Effective
Time will remain the Certificate of Incorporation and the Bylaws of the
Surviving Corporation in the Merger, without any modification or amendment.
1.3 DIRECTORS AND OFFICERS. The directors and officers of the Buyer
in office at and as of the
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Effective Time will remain the directors and officers of the Surviving
Corporation. Each of such directors and officers shall retain his or her
respective position and term of office.
1.4 DELIVERY OF CONSIDERATION. At the Closing (as hereinafter
defined), in satisfaction of its obligations hereunder, the Buyer shall deliver
to the Target Shareholders, PRO RATA in accordance with their shareholdings of
the Target, ___________ shares of UAG Common Stock and UAG Options to acquire
___________ shares of UAG Common Stock. The UAG Options shall be in the form
attached to the Settlement Agreement as Exhibit 6.1(A)
2. CLOSING
2.1 CLOSING DATE. The closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Arnold & Porter,
399 Park Avenue, New York, New York 10022, at 10:00 a.m. on _____________,
1996 provided that all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (other than conditions with
respect to actions the Parties will take at the Closing itself) have been
satisfied or waived or such other time and date as the Parties may agree to
in writing (the "Closing Date").
2.2 ACTIONS AT THE CLOSING. At the Closing, in addition to the
delivery of the consideration provided for in Section 1.4 above, (i) the Target
will deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 2.3 below, (ii) the Buyer will deliver to the Target the
various certificates, instruments, and documents referred to in Section 2.4
below, (iii) each of the Buyer and Target will file with the Secretary of State
of its incorporation a Certificate of Merger, and (iv) the Buyer will deliver to
the Target* a qualification form to do business in the State of the Target's
incorporation, duly executed by an officer of the Buyer, unless already so
qualified in such State, in order that the Target can file such qualification
form
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* Such action is applicable only if the Target is incorporated in New
Jersey.
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<PAGE>
with the Secretary of State of its incorporation along with the Certificate of
Merger.
2.3 DELIVERIES OF THE TARGET. At the Closing, the Target and
Target's Shareholders shall deliver the following documents to the Buyer and
UAG:
2.3.1 A certificate of good standing regarding the Target dated
as of a recent date and issued by the Secretary of State of the State of the
Target's incorporation.
2.3.2 A closing certificate in the form attached hereto as
EXHIBIT 2.3.2, duly executed by an officer of the Target and dated as of the
Closing Date, to the effect that each of the conditions specified in Section 6.1
are satisfied in all material respects.
2.3.3 A legal opinion of counsel to the Target, in a form
reasonably acceptable to the Target and the Target's Shareholders.
2.3.4 A copy of the Target's Certificate of Incorporation
certified by the Secretary of State of the State of its incorporation, and a
copy of its Bylaws certified by the President or Secretary of the Target.
2.3.5 A duly executed Registration Rights Agreement,
substantially in the form attached to the Settlement Agreement as Exhibit
6.1(A).
2.3.6 Share certificates of the capital stock of the Target held
by the Target's Stockholders, duly endorsed to the Buyer, together with all
minute books and records of the Target.
2.3.7 Such other documents, certificates and instruments as may
reasonably be requested.
2.4 DELIVERIES OF THE BUYER AND UAG. At the Closing, the Buyer and
UAG shall deliver the following documents to the Target:
2.4.1 A closing certificate in the form attached hereto as
EXHIBIT 2.4.1 by the Buyer and UAG dated as of the Closing Date to the effect
that
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each of the conditions specified in Section 6.2 are satisfied in all material
respects.
2.4.2 A legal opinion of counsel to UAG and the Buyer, in a form
reasonably acceptable to the Buyer and UAG.
2.4.3 A certificate of good standing regarding the Buyer and UAG
dated as of a recent date and issued by the Secretary of State of the State of
[Delaware].
2.4.4 A duly executed Registration Rights Agreement,
substantially in the form attached to the Settlement Agreement hereto as Exhibit
6.1(A).
2.4.5 Such other documents, certificates and instruments as may
reasonably be requested.
3. TARGET'S AND TARGET'S SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES
The Target and Target's Shareholders, jointly and severally, represent and
warrant to the Buyer, as of the date of this Agreement and as of the Closing
Date, as follows:
3.1 TITLE TO TARGET'S PARTNERSHIP INTEREST. Except for certain
pledge agreements executed in connection with the Master Agreement which pledge
agreements are being terminated simultaneously herewith pursuant to the
Settlement Agreement, there are no liens or rights of others in the Partnership
Interest, except for any such liens or rights that may have been created or
suffered to be created by the Partnership or UAG.
3.2 CORPORATE STATUS. The Target is a corporation which is duly
incorporated, validly existing and in good standing under the laws of the State
in which it is incorporated.
3.3 POWER AND AUTHORITY. The Target has the corporate power and
authority to execute, deliver and perform this Agreement. This Agreement and
all transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of the Target and Target's
Shareholders.
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<PAGE>
3.4 BINDING AGREEMENT. When executed and delivered by the Target,
this Agreement shall be the valid and binding obligation of the Target
enforceable in accordance with its terms.
3.5 ABSENCE OF CONFLICT OR BREACH. The execution, delivery and
performance of this Agreement do not and shall not conflict with or result in a
breach of any of the terms, conditions or provisions of any judgment, order,
injunction, decree or ruling of any court or arbitration tribunal or
governmental authority to which the Target is subject, or of any provision of
any agreement or understanding or arrangement to which the Target is a party or
by which the Target is bound, which would interfere with the Target's ability to
execute, deliver and perform under this Agreement.
3.6 BROKERS' FEES. The Target does not have any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
3.7 LITIGATION. There is no outstanding order, writ, judgment,
stipulation, injunction, decree or determination before or by any court or
arbitration tribunal or governmental authority against the Target, and there are
no claims, actions, suits, investigations or proceedings of any kind pending,
or, to the knowledge of the Target, threatened, before any court or arbitration
tribunal or governmental authority that seek to restrain, enjoin or otherwise
prevent the consummation of the transactions contemplated by this Agreement.
3.8 TAX MATTERS. The target has timely filed all material federal,
state and local tax returns and all material information returns and reports
required to be filed by or with respect to it under the laws of the United
States or any State or other jurisdiction, for all periods ending prior to the
date hereof and will timely file all such returns and reports required to be
filed from the date hereof to the Effective Time. The Target has paid all taxes
shown on such returns and will pay prior to the Effective Time all taxes which
shall be shown on returns to be filed from the date hereof to the Effective
Time.
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<PAGE>
3.9 CONDUCT OF BUSINESS AND UNDISCLOSED LIABILITIES. The Target is
not and has not been engaged in any business other than holding, and owns no
other material asset than, the Partnership Interest and the Target has no debts,
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise) that have not been disclosed to the
Buyer and UAG in writing, except to such extent that such undisclosed
liabilities, individually or in the aggregate, would not have a material adverse
effect on the Target. The Target has not entered into any material agreement
other than the partnership agreement and any other agreements it may have with
the Partnership. The Target has no employees and no employee benefit plans
within the meaning of the Employee Retirement Income Security Act of 1974, as
amended and is not a party to any collective bargaining agreement.
3.10 IDENTITY OF TARGET SHAREHOLDERS. All of the Target's
Shareholders and their ownership percentages are set forth on Schedule 3.10.
3.11 INSURANCE. Set forth on Schedule 3.11 is a list of all
insurance policies (including policy number, insurance company issuing the
policy and amount of coverage) under which the Target is currently covered and
under which it has been covered since the date it became a party to the Master
Agreement.
3.12 CONSENTS. Except as disclosed on Schedule 4.4, there are no (i)
consents, approvals, authorizations or other actions of, or filings with, any
court, governmental authority or regulatory body and (ii) approvals,
authorizations or orders of any person under any material permits, licenses,
contracts, decrees or other restrictions to which the Partnership is a party,
known to the Target or the Target's Shareholders that are required to be
obtained, taken or filed in order for this Agreement to be executed and
delivered and the transactions contemplated hereby to be consummated.
3.13 DISCLOSURE. No representation or warranty of the Target or
Target's Shareholders omits to state a material fact necessary to make the
statements herein, in light of the circumstances in which they were made and
with respect to the subject matter thereof, not misleading.
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<PAGE>
3.14 INVESTMENT REPRESENTATIONS.
(a) The UAG Common Stock will be acquired for the Target
Shareholders' own accounts not as a nominee or agent, and not with a view to, or
for resale in connection with, any "distribution" thereof for purposes of the
Securities Act of 1933, as amended (the "Securities Act"), except in compliance
with the Securities Act.
(b) The Target Shareholders understand that the UAG Common Stock will
not be registered under the Securities Act for purposes of the sale contemplated
herein.
(c) Each of the Target Shareholders is an "accredited investor" as
that term is defined in Regulation D promulgated under the Securities Act.
4. BUYER'S AND UAG'S REPRESENTATIONS AND WARRANTIES
The Buyer and UAG, jointly and severally, represent and warrant to the
Target and the Target's Shareholders, as of the date of this Agreement and as of
the Closing Date, as follows:
4.1 CORPORATE STATUS. Each of the Buyer and UAG is a corporation
which is duly incorporated, validly existing and in good standing under the laws
of the State of [Delaware].
4.2 POWER AND AUTHORITY. Each of the Buyer and UAG has the corporate
power and authority to execute, deliver and perform this Agreement. This
Agreement and all transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Buyer and UAG
and by all necessary partnership action on the part of the Partnership.
4.3 BINDING AGREEMENT. When executed and delivered by the Buyer and
UAG, this Agreement shall be the valid and binding obligation of each of the
Buyer and UAG, enforceable in accordance with its terms.
4.4 CONSENTS. Except as disclosed on Schedule 4.4, there are no (i)
consents, approvals, authorizations or other actions of, or filings with,
8-
<PAGE>
any court, governmental authority or regulatory body and (ii) approvals,
authorizations or orders of any person under any material permits, licenses,
contracts, decrees or other restrictions benefitting or affecting UAG, the Buyer
or the Partnership that are required to be obtained, taken or filed in order for
this Agreement to be executed and delivered and the transactions contemplated
hereby to be consummated. All of the consents, approvals, authorizations,
orders or other actions identified on Schedule 4.4 have been, or prior to the
Effective Time shall be, obtained, taken or filed.
4.5 ABSENCE OF CONFLICT OR BREACH. The execution, delivery and
performance of this Agreement do not and shall not conflict with or result in a
breach of any of the terms, conditions or provisions of any judgment, order,
injunction, decree or ruling of any court or arbitration tribunal or
governmental authority to which the Buyer or UAG is subject, or of any provision
of any agreement or understanding or arrangement to which the Buyer or UAG is a
party or by which the Buyer or UAG is bound, which would interfere with the
Target's ability to execute, deliver and perform under this Agreement.
4.6 UAG COMMON STOCK AND OPTIONS. All of the shares of UAG Common
Stock to be issued in the Merger have been duly authorized and, upon
consummation of the Merger, will be validly issued, fully paid, and
nonassessable. All of the UAG Options to be issued in the Merger have been duly
authorized and, upon consummation of the Merger, will grant valid rights to the
holder to acquire UAG Common Stock, in accordance with the terms of the UAG
Options. The shares issuable upon exercise of the UAG Options have been duly
reserved for issuance by UAG and, when issued in accordance with the terms of
the UAG Options, such shares will be validly issued, fully paid and
nonassessable.
4.7 BROKERS' FEES. Neither UAG nor the Buyer has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which the Target
or Target Shareholders could become liable or obligated.
4.8 LITIGATION. There is no outstanding order, writ, judgment,
stipulation, injunction, decree
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<PAGE>
or determination before or by any court or arbitration tribunal or governmental
authority against the Buyer or UAG, and there are no claims, actions, suits,
investigations or proceedings of any kind pending, or, to the knowledge of the
Buyer or UAG, threatened, before any court or arbitration tribunal or
governmental authority that seek to restrain, enjoin or otherwise prevent the
consummation of the transactions contemplated by this Agreement.
4.9 DISCLOSURE. The final prospectus used by UAG in connection with
its initial public offering and any supplement or amendment thereto when filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, in light of the circumstances in which
they were made.
5. COVENANTS OF THE PARTIES
The Parties agree as follows with respect to the period from and after the
execution of this Agreement:
5.1 GENERAL. Each of the Parties will use its best efforts to take
all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by the Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 6
below).
5.2 FILINGS. Each of the Parties shall cooperate with one another in
filing, supplying, or causing to be filed or supplied, as promptly as
practicable, all applications, notifications and information required to be
filed or supplied by it or by the Partnerships pursuant to (i) applicable law
and (ii) all then applicable agreements to which the other Parties are a party,
in connection with the Merger pursuant to this Agreement.
5.3 THIRD PARTY CONSENTS. The Parties shall cooperate with one
another in obtaining consents and approvals from third parties with respect to
the transactions contemplated by this Agreement.
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<PAGE>
5.4 NOTICE OF DEVELOPMENTS. Each Party will give prompt written
notice to the other of any material adverse development causing a breach of any
of its own representations and warranties in Section 3 and Section 4 above.
6. CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the
Buyer to consummate the transactions contemplated hereunder shall be subject to
the fulfillment (or waiver by the Buyer) on or prior to the Closing Date of the
following additional conditions, which the Target agrees to use its best efforts
to cause to be fulfilled:
6.1.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Target and the Target's Shareholders contained in Section 3
hereof shall be true and correct in all material respects on and as of the date
hereof and shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of the Closing Date.
6.1.2 COVENANTS. The Target shall have performed and complied
with all of its covenants contained in Section 5 hereof in all material respects
through the Closing.
6.1.3 INSTRUMENT EVIDENCING ASSUMPTION OF LIABILITY. The Buyer
will deliver to the Target an instrument in the form attached hereto as EXHIBIT
6.1.3, duly executed by an officer of the Buyer, to the effect that the Buyer
assumes the tax liabilities of the Target, in order that the Target can expedite
the tax clearance procedure which is required to be satisfied prior to the
filing of a Certificate of
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Merger.** If any such instrument is delivered it shall have no impact upon, and
shall not modify the rights of, the Parties as more fully set forth in Section
7.
6.1.4 DELIVERY OF ALL DOCUMENTS. At the Closing, the Target
shall have delivered all the documents, certificates and other deliveries set
forth in Section 2.3 hereof.
6.2 CONDITIONS TO OBLIGATIONS OF THE TARGET. The obligations of the
Target to consummate the transactions contemplated hereunder shall be subject to
the fulfillment (or waiver by the Target), on or prior to the Closing Date, of
the following additional conditions, which the Buyer and UAG agree to use their
best efforts to cause to be fulfilled:
6.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Buyer and UAG contained in Section 4 hereof shall be true and
correct in all material respects on and as of the date hereof and shall be true
and correct in all material respects on and as of the Closing Date with the same
effect as though made on and as of the Closing Date.
6.2.2 COVENANTS. The Buyer and UAG shall have performed and
complied with all of its covenants contained in Section 5 hereof in all material
respects through the Closing.
6.2.3 CONSENTS. The Buyer and UAG shall have obtained and
delivered to the Target any governmental or third party consents, authorizations
or approvals, including any manufacturer consent, to the transactions
contemplated by this Agreement required to be obtained by the Buyer, UAG or the
Partnership.
6.2.4 DELIVERY OF ALL DOCUMENTS. At the Closing, the Buyer and
UAG shall have delivered all the documents, certificates and other deliveries
set forth in Section 2.4 hereof.
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** Such instrument is required only if the Target is incorporated in the
State of New York and the Buyer is not incorporated in the State of New York.
Alternatively, the Buyer may reincorporate in the State of New York, which will
eliminate the Target's need to obtain tax clearance altogether.
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<PAGE>
7. INDEMNIFICATION
7.1 GENERAL INDEMNIFICATION OF THE TARGET SHAREHOLDERS. Except as
provided in Section 7.3, the Surviving Corporation and UAG, jointly and
severally, shall defend, indemnify and hold the Target Shareholders harmless
from and against any and all claims, liabilities, obligations, whether absolute,
accrued, contingent or otherwise and whether a contractual or any other type of
liability, obligation or claim (other than income tax liabilities of the Target
Shareholders arising from the transactions contemplated by this Agreement)
including, without limitation, all damages, losses and expenses, reasonable fees
of experts and attorneys and all costs of suit, suffered or incurred or to be
suffered or incurred by the Target and the Target Shareholders (i) arising out
of the breach of any or all representations and warranties made by or on behalf
of the Buyer or UAG in this Agreement or in any document delivered hereunder,
and (ii) arising from or out of the operations of the Target or the Surviving
Corporation. The Surviving Corporation and UAG shall indemnify and hold
harmless the present and former officers and directors and employee benefit plan
fiduciaries of the Target in respect of acts or omissions occurring at or prior
to the Effective Time to the same extent now provided under the Target's
Articles of Incorporation and By-Laws in effect on the date hereof.
7.2 INDEMNIFICATION OF UAG AND THE SURVIVING CORPORATION. Except as
provided in Section 7.3, the Target Shareholders jointly and severally shall
defend, indemnify and hold UAG, and the Surviving Corporation harmless from and
against any and all claims, liabilities, obligations, whether absolute, accrued,
contingent or otherwise and whether a contractual or any other type of
liability, obligation or claim including, without limitation, all damages,
losses and expenses, reasonable fees of experts and attorneys and all costs of
suit, suffered or incurred or to be suffered or incurred by UAG and the
Surviving Corporation arising out of the breach of any or all representations
and warranties and covenants made by the Target and the Target's Shareholders in
this Agreement or in any document delivered hereunder.
7.3 SPECIAL TAX INDEMNITY. Notwithstanding any other provision of this
Section 7, except for the Tax Liabilities referred to in the following sentence,
the
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Target Shareholders shall be liable for, and shall indemnify and hold UAG and
the Surviving Corporation harmless from and against, any and all claims,
liabilities and obligations in respect of income or franchise taxes, whether
absolute, accrued, contingent or otherwise (herein, "Tax Liabilities"), asserted
against the Target for any period prior to the Effective Time. Each of the
Buyer, Surviving Corporation and UAG shall be liable for, and shall indemnify
and hold the Target Shareholders harmless from and against, any Tax Liabilities
(in excess of those shown on returns filed by the Target for periods prior to
the Effective Time) asserted against the Target as a result of adjustments by
any tax authority or the Partnership to any items of income, gain, deduction,
loss or credit allocable to the Target in respect of Target's interest in the
Partnership for any period after the formation of the Partnership and prior to
the Effective Time.
7.4 INDEMNIFICATION PROCEDURE. A party seeking indemnification
pursuant to this Section 7 (an "indemnified party") shall give prompt notice to
the party from whom such indemnification is sought (the "indemnifying party") of
the assertion of any claim, or the commencement of any action or proceeding, in
respect of which indemnity may be sought hereunder. The indemnifying party
shall have the right to assume the defense (in consultation and cooperation with
the indemnified party, in good faith and to the extent appropriate under the
circumstances) of any such suit, action or proceeding at its own expense. If an
indemnifying party shall elect not to assume the defense of any such suit,
action or proceeding, the indemnified party may assume such defense at the
expense of the indemnifying party. An indemnifying party shall not be liable
under this Section 7 for any settlement effected without its consent of any
claim, litigation or proceeding in respect of which indemnity may be sought
hereunder. No investigation by an indemnified party at or prior to the Closing
shall relieve an indemnifying party of any liability hereunder.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The Buyer, UAG, the Target and the Target's Shareholders agree that the
representations and warranties of each party in Section 3 and Section 4, the
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indemnification provisions in Section 7 and the registration rights granted to
the Target Shareholders in Section 9 shall survive the Closing.
9. REGISTRATION RIGHTS
UAG shall grant the Target Shareholders registration rights upon the terms
and conditions set forth in the form of a Registration Rights Agreement attached
to the Settlement Agreement as Exhibit 6.1(A) (the "Registration Rights
Agreement").
10. CERTAIN TAX MATTERS
After the Closing, the Target Shareholders shall cooperate with respect to
any audit or other administrative or court proceedings with respect to taxes and
tax returns of the Target for periods ending on or before the Closing Date, in
each case including maintaining and making available to the Surviving
Corporation and UAG all records necessary in connection with taxes payable with
respect to such tax returns and in resolving all disputes and audits and refunds
with respect to such tax returns and taxes and any earlier tax returns and taxes
of the Target. Any refunds of or credits for taxes of the Target with respect
to any taxable period ending on or before the Closing Date shall be for the
account of the Target Shareholders and if received or utilized by the Surviving
Corporation or UAG shall be paid to Target Shareholders within five business
days after the Surviving Corporation or UAG receives such refund or utilizes
such credit. The Surviving Corporation and UAG shall cooperate, and shall cause
their respective officers, employees, agents, auditors and representatives to
cooperate, with respect to any audit or other administrative or court
proceedings with respect to taxes and returns of the Target for periods ending
on or before the Closing Date, in each case including maintaining and making
available to the Target Shareholders all available records necessary in
connection with taxes payable with respect to such tax returns and in resolving
all disputes, audits and refunds with respect to such returns and taxes and any
earlier returns and taxes of Target.
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<PAGE>
11. MISCELLANEOUS
11.1 NO WAIVER. No waiver of any term, condition, default, or breach
of this Agreement, or of any document executed pursuant hereto, shall be
effective unless in writing and executed by the party making such waiver; no
such waiver shall operate as a waiver of either (i) such term, condition,
default, or breach on any other occasion, or (ii) any other term, condition,
default, or breach of this Agreement. No delay or failure to enforce any
provision of this Agreement or of any document executed pursuant hereto shall
operate as a waiver of such provision or any other provision herein or therein.
The enforcement by any party of any right it may have under this Agreement or
under applicable laws shall not be deemed an election of remedies or otherwise
prevent such party from enforcement of one or more other remedies at any time.
11.2 CONSTRUCTION; PRONOUNS. The rule of construction construing
ambiguities in documents against their drafters shall not be applicable to the
construction of this Agreement. All words used herein shall be construed
according to their proper gender and number, as the context shall require.
11.3 PARTIES BOUND. All of the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of, and be enforceable by and
against, the Parties hereto and their respective heirs, representatives,
successors and permitted assigns.
11.4 NOTICES. Any and all notices, requests, communications, or
demands required or permitted to be given hereunder shall be in writing, and
shall be delivered either (i) in person or by electronic facsimile, (ii) by an
established overnight delivery service, or (iii) by certified mail, return
receipt requested, addressed as follows:
If to Target: Joseph C. DiFeo
and
Samuel X. DiFeo
121 Lorraine Avenue
Spring Lake, New Jersey 07762
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<PAGE>
copy to: Arnold & Porter
399 Park Avenue
New York, New York 10022
Fax: (212) 715-1399
Phone: (212) 715-1000
Attention: Michael J. Canning, Esq.
If to UAG or
Buyer: United Auto Group, Inc.
375 Park Avenue - 11th Floor
New York, New York 10152
Fax: (212) 593-1363
Phone: (212) 230-0493
Attention: Philip N. Smith, Jr., Esq.
copy to:
If by Hand: Bressler, Amery & Ross, P.C.
325 Columbia Turnpike
Florham Park, New Jersey 07932
Fax: (201) 514-1660
Phone: (201) 514-1200
Attention: Edward P. McKenzie, Esq.
If by Mail: P.O. Box 1980
Morristown, New Jersey 07962
or to such other address or addresses as any party may designate to the others
by notice given as provided above. Notices delivered in person or by electronic
facsimile shall be deemed to have been given on the date of delivery; notices
delivered by overnight delivery service shall be deemed to have been given on
the business day following the date of deposit with such overnight delivery
service; and notices given by mail shall be deemed to have been given three (3)
days after the date of mailing.
11.5 GOVERNING LAW. The rights and duties of the parties and the
validity, construction, enforcement, and interpretation of this Agreement shall
be determined according to the laws of the State of New York.
11.6 SUBMISSION TO JURISDICTION. The Parties hereby agree that the
Federal courts of the United States sitting in the Southern District of New York
and the courts of the State of New York sitting in the City of New York shall
have the exclusive
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<PAGE>
jurisdiction in respect of any legal action or proceeding arising out of or
relating to this Agreement or to the transactions contemplated hereunder.
11.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
UNITED AUTO GROUP, INC.
By:
-------------------------
Name:
Title:
[BUYER]
By:
-------------------------
Name:
Title:
[TARGET]
By:
-------------------------
Name:
Title:
[TARGET'S SHAREHOLDERS]
By:
-------------------------
Name:
Title:
By:
-------------------------
Name:
Title:
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<PAGE>
EXHIBIT 2.3.2
CERTIFICATE OF THE TARGET
Pursuant to Section 2.3.2 of the Agreement and Plan of Merger dated as of
, 1996 (the "Agreement") among the undersigned and ________________ (the
"Buyer") and United Auto Group Inc., the undersigned, by executing this
Certificate and delivering it to the Buyer and UAG certifies to the Buyer and
UAG knowing and intending that the Buyer and UAG are relying hereon that:
1. The representations and warranties of the Target contained in Section 3
of the Agreement are true and correct in all material respects on and as of the
date hereof.
2. The undersigned has performed and complied in all material respects
with all covenants contained in Section 5 required by the Agreement to be
performed or complied with by it on or prior to the date hereof.
3. All conditions to the undersigned's obligations under the Agreement
have been satisfied in all material respects.
[TARGET]
By:
-------------------------
Name:
[TARGET'S SHAREHOLDERS]
By:
-------------------------
Name:
By:
-------------------------
Name
<PAGE>
EXHIBIT 2.4.1
CERTIFICATE OF THE BUYER AND UAG
Pursuant to Section 2.4.1 of the Agreement and Plan of Merger (the
"Agreement") dated as of , 1996 among the undersigned and United Auto
Group, Inc., and _____________________________________ (the "Target") and
__________________________________ (the "Target's Shareholders"), the
undersigned, by executing this Certificate and delivering it to the Target,
certifies to the Target, knowing and intending that the Target is relying hereon
that:
1. The representations and warranties of the undersigned contained in
Section 4 of the Agreement are true and correct in all material respects on as
of the date hereof.
2. Each of the undersigned has performed and complied in all material
respects with all covenants contained in Section 5 required by the Agreement to
be performed or complied with by it on or prior to the date hereof.
3. All conditions to the undersigneds' obligations under the Agreement
have been satisfied in all material respects.
<PAGE>
[BUYER]
By:
-------------------------
Name:
Title:
UNITED AUTO GROUP, INC.
By:
-------------------------
Name:
Title:
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<PAGE>
EXHIBIT 6.1.3
ASSUMPTION OF LIABILITY
_____________________, a corporation organized under the laws of the State
of __________, does hereby guarantee that it will file, or cause to be filed,
all returns required of _____________________________, a corporation organized
under the laws of the State of __________, and does assume the liability for and
guarantee the payment of all taxes accrued and owing by said
__________________________, the ________________ corporation.
-----------------------
By
---------------------
(Vice) President
ATTEST:
- --------------------------------
(Assistant) Secretary
STATE OF ___________)
) SS.:
COUNTY OF __________)
I, _______________, a Notary Public, do hereby certify that on the ______
day of ________, 1996, personally appeared before me ____________________, and,
being first duly sworn by me, acknowledged that he signed the foregoing document
in the capacity therein set forth and declared that the statements therein
contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
before written.
-------------------------
Notary Public
<PAGE>
Exhibit 10.2.28
FORM OF LEASE
This lease ("Lease") is dated as of October 1, 1995, by and between
[Fair Realty Company, a New Jersey partnership, having an office at c/o
Dealership Management, 585 Route 440, Jersey City, New Jersey ("Landlord"), or
such other Landlord as applicable] and [United Auto Group, Inc., a Delaware
corporation, having an address at 375 Park Avenue, New York, New York 10022 or
Individual Partnership (to be determined)] ("Tenant").
W I T N E S S E T H:
That Landlord in consideration of the rents reserved in this Lease to
be paid by Tenant and in consideration of the covenants, agreements and
conditions herein contained to be observed and fulfilled by Tenant, hereby
demises and leases to Tenant, and Tenant hereby hires and takes from Landlord,
the real property (the "Land") situate, lying and being, and, as more
particularly bounded and described, in SCHEDULE A.
TOGETHER with the Buildings and the Appurtenances (as hereinafter
respectively defined; the Land, the Buildings and the Appurtenances,
collectively, the "Premises").
SUBJECT to the mortgages specified in EXHIBIT A and any easements,
restrictions and other matters of record against the Premises as of the date
hereof.
TO HAVE AND TO HOLD the Premises unto Tenant, its successors and
assigns, for a term commencing on October 1, 1995 (the "Term Commencement Date")
and expiring on the last day of the calendar month in which occurs the end of a
fifteen (15) year period from the Term Commencement Date, (September 30, 2010)
unless this Lease shall sooner terminate as hereinafter provided, upon and
subject to the terms and conditions hereinafter set forth.
AND Landlord and Tenant covenant and agree as follows:
<PAGE>
ARTICLE I
BASE, ESCALATION AND ADDITIONAL RENT
Section 1.1. BASE RENT. Tenant shall pay to Landlord during the term
hereof in lawful money of the United States of America, by check subject to
collection, at the address of the Landlord specified above or at such place as
Landlord may from time to time designate, without notice or demand, net annual
base rental (the "Base Rent"), in equal monthly installments in advance on the
twenty-fifth (25th) day of the calendar month preceding the month to which such
installment of Base Rent relates, at a rate per annum of ____, subject to
adjustment as provided in this Article 1. Notwithstanding the foregoing (and
without limitation of any other rights or remedies provided to Landlord
hereunder), if during any twelve (12) month period Tenant shall be more than
five (5) days late in the payment of two (2) monthly installments of Base Rent
hereunder, then, for the twelve (12) months following such second (2nd)
instance, Base Rent hereunder shall be payable on the fifteenth (15th) day of
the calendar month preceding the month to which such installment of Base Rent
relates.
Section 1.2. BASE RENT ADJUSTMENTS. The Base Rent shall be adjusted
as follows:
(a) the Base Rent shall be increased as of May 1, 2000 by an
additional ______ per annum; and
(b) on October 1 of each year subsequent to the year of the Term
Commencement Date, the Base Rent shall be increased by the greater of (i) 2% of
the Base Rent as of the September 1 immediately prior thereto, or (ii)
seventy-five (75%) percent of (1) the percentage increase, if any, in the
Consumer Price Index for Urban Consumers - New York - Northeastern New Jersey
("CPI-U") for the month of September of the year of calculation over (2) the
CPI-U for September of the year prior to the year of calculation.
Section 1.3. NET LEASE. This Lease shall be deemed and construed to
be an absolutely "net lease", except as herein expressly provided to the
contrary. It is the intent of Landlord and Tenant that the Base Rent shall be
absolutely net to Landlord so that this Lease shall yield to Landlord the Base
Rent, and that all costs, expenses, charges, assessments, impositions and
obligations of every
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<PAGE>
kind and nature relating to the Premises which may arise or become due during
the Term, whether foreseen or unforeseen, ordinary or extraordinary, shall be
the responsibility of Tenant, except (i) as expressly provided to the contrary
in this Lease, or (ii) for obligations relating to Fee Mortgages and liens
created by Landlord, or other agreements entered into by Landlord relating to
the Premises, to the extent that the same are not expressly assumed in writing
by Tenant or that Tenant expressly agrees to comply with the same hereunder.
Tenant shall pay to Landlord the Base Rent and other payments hereunder free of
any charges, assessments, impositions or deductions of any kind and without
abatement, deduction, demand, notice, or set-off, except as otherwise expressly
provided in this Lease.
Section 1.4. PRORATIONS; ADDITIONAL RENT; ADJUSTMENTS. (a) If the
Term Commencement Date or the expiration date of the Term, or the date on which
any rent adjustment shall become effective, shall be other than the first and
last day, respectively, of a calendar month, the monthly installment of Base
Rent for such month shall be prorated on a PER DIEM basis. If any period to
which a payment of additional rent hereunder relates shall not be wholly within
the Term of this Lease, such payment of additional rent shall be prorated on a
PER DIEM basis.
(b) All additional rent, sums, charges and other payments provided
for under this Lease, other than Base Rent, shall be deemed additional rent and
shall constitute rent payable hereunder with the same affect as if the same were
Base Rent reserved and provided for herein and, in the event of the nonpayment
by Tenant of such additional rent when due hereunder, Landlord shall have the
same rights and remedies in respect thereof as Landlord shall or may have in
respect of non-payment of Base Rent reserved and provided for herein.
ARTICLE II
CERTAIN DEFINITIONS
As used herein:
(a) "ADR" shall have the meaning ascribed thereto in Article 18;
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(b) "AFFILIATE" means when used with reference to a specified Person,
(i) any Person that directly or indirectly through one or more intermediaries
controls or is controlled by or is under common control with the specified
Person or (ii) any Person that is an executive officer or director of, partner
in, or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, partner or
trustee, or with respect to which the specified Person serves in a similar
capacity; and, (iii) when used with reference to a natural Person, any Person
that is related to the specified Person by blood or marriage in the first degree
of consanguinity; PROVIDED, HOWEVER, that no natural Person shall be deemed to
be controlled by any other Person;
(c) "AFFILIATE LEASES" shall mean this Lease and all other leases to
be entered into contemporaneously herewith by Landlord (or Affiliates of
Landlord) and Tenant (or Affiliates of Tenant), a list of all such Affiliate
Leases being attached hereto as Exhibit B;
(d) "AFFILIATE SUBLEASES" shall mean the subleases previously entered
into or to be entered into contemporaneously herewith by Landlord (or Affiliates
of Landlord) and Tenant (or Affiliates of Tenant), a list of such Affiliate
Subleases being attached hereto as Exhibit C;
(e) "ALTERATIONS" shall have the meaning set forth in Section 10.1;
(f) "APPURTENANCES" shall mean all easements, licenses, privileges,
rights and appurtenances related to the Land or the Buildings;
(g) "BUILDINGS" shall mean any buildings, structures or improvements
now or hereafter erected or situated on the Land, the foundations and footings
thereof, any and all fixtures, equipment, machinery and other tangible personal
property of every kind and nature whatsoever now or hereafter affixed or
attached hereto;
(h) "CONDEMNATION PROCEEDS" shall have the meaning set forth in
Section 9.2;
(i) "CONSTRUCTIVE TOTAL TAKING" shall have the meaning set forth in
Section 9.1;
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<PAGE>
(j) "DEALERSHIPS" shall mean Fair Cadillac-Oldsmobile Corp., Fair
Chevrolet Corp., Fair Infiniti, Inc., Fair Imports Corp., Fair Hyundai Corp.,
Fair Motors Corp. (d/b/a Fair Mitsubishi), Danbury-Mt. Kisco Saturn Corp. (d/b/a
Saturn of Danbury), Hudson Toyota Inc., J & S Ford Inc., DiFeo Volkswagen Inc.,
DiFeo Hyundai Inc., J & F Oldsmobile Corp., DiFeo Subaru Inc., DiFeo Jeep-Eagle
Inc., DiFeo Imports Inc. (d/b/a Jersey City Mitsubishi), Park Pontiac-GMC Truck,
Inc., DiFeo Buick Inc., DiFeo Autocenter Inc. (d/b/a DiFeo DiFeo Mazda), DiFeo
Leasing Corporation, Somerset Motors Inc. (d/b/a DiFeo Lexus), Gateway
Oldsmobile Inc. (d/b/a DiFeo Volkswagen of Bridgewater), DiFeo B.M.W., Inc.,
County Auto Group Inc. (d/b/a County Toyota) and Rockland Motors Corp. (d/b/a
Rockland Mitsubishi);
(k) "DEPOSITARY" shall have the meaning set forth in Section 11.1;
(l) "DEPOSITED SUMS" shall have the meaning set forth in Section
11.1;
(m) "ENVIRONMENTAL AGENCY" shall mean the EPA, NJDEPE, NYDEC, CDEP,
Occupational Safety and Health Administration, or other federal, state or local
agency or authority with jurisdiction over Hazardous Substances or Environmental
Laws;
(n) "ENVIRONMENTAL DOCUMENTS" shall mean those documents known to
Landlord as follows: (a) results of any analysis including, but not limited to,
analysis of water, soil, air or asbestos samples, whether or not submitted to
any Environmental Agency; (b) any inspection report of the Premises by any
Environmental Agency; (c) any document or communication from any Environmental
Agency concerning a Notice;
(o) "ENVIRONMENTAL INVESTIGATIONS" shall mean all environmental
investigations, audits, assessments or occupational and health studies of the
Premises known to Landlord;
(p) "ENVIRONMENTAL, HEALTH AND SAFETY MATTERS" shall mean any: (a)
person, place, object, substance or matter (including discharges to air, water
and soil) regulated by any Environmental Law; (b) matter which falls within the
jurisdiction of any Environmental Agency; (c) matter which is the subject of any
Notice, Environmental
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<PAGE>
Investigation, Environmental Documents, or Environmental Permits; (d) Release,
Notice, Environmental Law, Environmental Agency, Environmental Investigation,
Environmental Documents and Environmental Permits; (e) matter which is regulated
by the Occupational Health and Safety Administration pursuant to 29 CFR
1910.120, dealing with Hazardous Waste Operations and Emergency Responses and 29
CFR 1910.1200 dealing with Hazard Communication or similar matters regulated by
similar state or local agencies; (f) all events, proceedings, actions, filings,
reports, investigations, remediations, conditions, violations, compliance
obligations, operations, claims, lawsuits, losses, liabilities, fines,
penalties, judgments, damages and expenses involving any issue of the
environment under any Environmental Law and arising at, about or by reason of
any of the Premises, the operation of any automobile dealerships, automobile
rental and financing businesses and any automobile repair business as conducted
by any of the Dealerships or their Affiliates, or their successors, whenever
occurring or arising; and (g) health and/or safety issues or matters which are
related to any of the foregoing;
(q) "ENVIRONMENTAL LAW" shall mean: (a) CERCLA; (b) RCRA; (c) OSHA;
(d) ISRA; (e) the Spill Act; (f) the New Jersey Underground Storage of Hazardous
Substances Act, as amended, N.J.S.A. 58:10a-21 ET SEQ.; (g) the New Jersey Water
Pollution Control Act, as amended, N.J.S.A. 58:10a-1 ET SEQ. ("WPCA"); (h) the
New Jersey Air Pollution Control Act, as amended, N.J.S.A. 26:2c-1 ET SEQ.
("APCA"); (i) the New York Air Pollution Control Act, E.C.L. Section 27-0101 ET
SEQ. - Collection, Treatment and Disposal of Refuse and Other Solid Waste; Conn.
Gen. Stat Section 22a-134 ET SEQ., the Connecticut Transfer Act; Conn. Gen.
State. Section 22a-170 ET SEQ. -- Air Pollution Control; Con. Gen. State
Section 22a-114 ET SEQ. -- Hazardous Waste; Conn. Gen. Stat. Section 22a-207 ET
SEQ. -- Solid Waste Management; Conn. Gen. Stat. Section 22a-416 ET SEQ. --
Water Pollution Control; Conn. Gen. Stat. Section 22a-452a -- Super lien;
Conn. Gen. Stat. Section 22a-449a ET SEQ -- Underground Storage Tanks; Conn.
Gen. Stat. Section 22a-36 -- Inland Wetlands and Watercourses; Conn. Gen. Stat.
Section 22a-342 ET SEQ. -- Stream Channel Encroachment; Conn. Gen. Stat. Section
22a-365 ET SEQ. -- The Connecticut Water Diversion Policy Act; Conn. Gen. Stat.
Section 22a-401 ET SEQ. -- Dams and Reservoirs; Conn. Gen. Stat. Section
22a-600 -- Community Right-to-Know; Conn. Gen. Stat. Section 25-39e ET SEQ. --
Community Right-to-Know; and Conn. Gen. Stat. Section 29-307a ET SEQ. --
Community Right-to-Know and (n) any and all past,
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present and future laws, including common laws, statutes, ordinances,
regulations, permits, executive orders or directives, federal, state and local
in any way related to the protection of human health or the environment
applicable to the particular Real Property or Dealership in question;
(r) "ENVIRONMENTAL PERMITS" shall mean any official documents or
certificates issued by an Environmental Agency pursuant to any Environmental Law
which authorizes or regulates the conduct of business or activities and which
documents or certificates are required under that Environmental Law;
(s) "EVENT OF DEFAULT" shall have the meaning set forth in Article
15;
(t) "FEE MORTGAGE" shall mean any mortgage or deed of trust placed
upon fee title to all or any portion of the Premises, and all renewals,
refinancings, modifications, replacements and extensions thereof; and "FEE
MORTGAGEE" shall mean the holder of any Fee Mortgage;
(u) "FULL INSURABLE VALUE" shall mean the actual replacement cost of
the Buildings (excluding foundation and excavation costs) and shall be
determined at the request of Landlord by an architect, appraiser, appraisal
company or one of the insurers, selected by Landlord and reasonably acceptable
to and paid for by Tenant, but such determination shall not be required to be
made more frequently than once every 36 months, unless such determination is
required by an Institutional Fee Mortgagee;
(v) "GUARANTOR" shall have the meaning set forth in Section 15.1.
(w) "HAZARDOUS SUBSTANCE" shall be defined, for the Premises and with
regard to obligations as to each particular law as hereafter referenced, as any
"hazardous chemical", "hazardous substances", "hazardous waste", "hazardous
material" or similar term as defined in any Environmental Law applicable to the
Premises at the Closing Date, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. 9601
ET SEQ. ("CERCLA"), the Industrial Site Recovery Act, as amended N.J.S.A.
13:1k-6 ET SEQ. ("ISRA"), the New Jersey Spill Compensation and Control Act, as
amended, N.J.S.A. 58:10-23.11, ET SEQ. ("Spill Act"), the Solid Waste
Management Act, N.J.S.A. 13:1K-1 ET SEQ.
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("SWMA"), the New Jersey Spill Compensation and Control Act, as amended,
N.J.S.A. 58: 10-23.11, ET SEQ. ("Spill Act"), the Solid Waste Management Act,
N.J.S.A. 13:1K-1 ET SEQ., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. 6901 ET SEQ. ("RCRA"), the Occupational Safety and Health Act
of 1970, as amended 27 U.S.C. Section 651 ET SEQ. ("OSHA"), the New Jersey
Underground Storage of Hazardous Substances Act, as amended, 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, and any other
present or future federal, state or local environmental law, ordinance, rule,
regulation, order, directive or policy dealing with environmental protection.
For real property in Connecticut, if any, the term "Hazardous Substances" with
regard to obligations as to each particular law hereafter referenced shall
include substances defined as "hazardous waste," "chemical liquids," "oil or
petroleum," "solid liquid or gaseous products," or "Wasteoil," under Conn. Gen.
Stat. Section 22a-448; "hazardous waste" under Conn. Gen. Stat. Section 22a-115;
"hazardous waste" under Conn. Gen. Stat. Section 22a-134(4) (Connecticut
Transfer Act); "pesticide" under Conn. Gen. Stat. Section 22a-47(w); "PCB" under
Conn. Gen. Stat. Section 22a-463(b); "hazardous substance" under Conn. Gen.
Stat. Section 25-39d; "hazardous material" under Conn. Gen. Stat. Section
29-307a(2); "hazardous substance" under Conn. Gen. Stat. Section 22a-134p;
"carcinogenic substance" under Conn. Gen. Stat. Section 19a-329; "Connecticut
Regulated Wastes" under the Connecticut Department of Environmental Protection
Policy document entitled "Interim Status Standards for Commercial Connecticut
Regulated Waste Facilities"; "hazardous air pollutant" under Section 22a-174-1
of the Regulations of Connecticut State Agencies; "toxic substance or hazardous
substance" under Section 22a-430-3(a) (3) of the Regulations of Connecticut
State Agencies (Wastewater Discharge Regulations) and "toxic substance" under
Conn. Gen. Stat. Section 31-40(i);
(x) "IMPOSITIONS" shall have the meaning set forth in Section 3.1;
(y) "INSTITUTION" shall mean a savings and loan association, a
savings bank, a commercial bank or trust company (whether acting individually or
in any fiduciary capacity), an insurance company, an educational institution or
a state, municipal or similar public employees' welfare, pension or retirement
fund or system, a real estate investment trust, a real estate fund, or
investment banking company or any other corporation or organization subject to
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supervision and regulation by the insurance or banking departments of the State
of New York, the State of New Jersey, the State of Connecticut, or the United
States Treasury, or any successor department or departments hereafter exercising
the same functions as said departments;
(z) "INSTITUTIONAL FEE MORTGAGE" and "INSTITUTIONAL FEE MORTGAGEE"
shall mean, respectively, a Fee Mortgage held by an Institution and the
Institution which is the holder of an Institutional Fee Mortgage;
(aa) "INSTITUTIONAL MORTGAGE" and "INSTITUTIONAL MORTGAGEE" shall
mean, respectively, a Mortgage held by an Institution and the holder of an
Institutional Mortgage;
(bb) "LANDLORD GUARANTY" shall have the meaning ascribed thereto in
Section 15.12;
(cc) "LAWS" shall have the meaning set forth in Section 7.1;
(dd) "MANUFACTURER" shall mean an entity with which Tenant is a party
to an automobile service or franchise agreement.
(ee) "MORTGAGE" shall mean any mortgage or deed of trust constituting
a lien on Tenant's interest in this Lease and all renewals, refinancings,
modifications, replacements and extensions thereof;
(ff) "NOTICE" means any summons, citation, directive, order, claim,
litigation, investigation, proceeding, judgment, letter or other written
communication actually received by or known to Landlord or Tenant which is the
subject of the Notice, from the New York Department of Environmental
Conservation ("NYDEC"), Connecticut Department of Environmental Protection
("CDEP"), New Jersey Department of Environmental Protection and Energy
("NJDEPE"), the United States Environmental Protection Agency ("EPA") the
Occupations Safety and Health Administration or any other federal, state or
local agency or authority, concerning any act or omission which resulted, is
resulting or which may result in a Release or any other violation of any
Environmental Law. "Notice" includes the imposition of any liens on real
property, assets, personal property, or revenues pursuant to any Environmental
Law (as hereafter defined);
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(gg) "PERSON" means any individual, firm, partnership, corporation,
trust or other entity.
(hh) "PRIME RATE" shall mean the prime commercial lending rate from
time to time announced by The Chase Manhattan Bank, N.A. ("Chase") to be in
effect at its principal office in New York, New York or, if Chase no longer
announces such a rate, then a comparable rate selected by Landlord and
reasonably acceptable to Tenant;
(ii) "RELEASE" shall mean releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, ejecting, escaping, leaching,
disposing or dumping of Hazardous Substances onto lands or into waters in
violation of Environmental Laws;
(jj) "SPACE TENANT" shall have the meaning set forth in Section 14.7;
(kk) "TENANT GUARANTY" shall have the meaning, ascribed thereto in
Article 29.1;
(ll) "TERM" shall be as defined in the granting clause of this Lease;
(mm) "TRACE" shall mean Trace International Holdings, Inc. a Delaware
corporation having an office at 375 Park Avenue, New York, New York, 10022;
(nn) "TRACE GUARANTY" shall have the meaning of ascribed thereto in
Article 29.3;
(oo) "UAG" shall mean United Auto Group, Inc., a Delaware corporation
having an office at 375 Park Avenue, New York, New York, 10022;
(pp) "UAG GUARANTY" shall have the meaning ascribed thereto in Article
29.2;
(qq) "WORK" shall have the meaning set forth in Section 11.2.
ARTICLE III
IMPOSITIONS
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<PAGE>
Section 3.1. PAYMENT OF IMPOSITIONS. As additional rent, Tenant
shall pay, before any fine, penalty, interest or cost may be added thereto for
the non-payment thereof (or at such earlier and commercially reasonable time as
is required by an Institutional Fee Mortgagee or a Fee Mortgagee which is not an
Institution), all real estate taxes, assessments, special assessments, water and
sewer rates and charges, vault charges, occupancy taxes measured by income,
license and permit fees and other governmental levies and charges, general and
special, ordinary and extraordinary, unforeseen as well as foreseen, of any kind
and nature (collectively, "Impositions") which are assessed, levied, confirmed,
imposed or become a lien upon or are due and payable with respect to the
Premises or the sidewalks or streets in front of or adjoining the same, or are
assessed, levied, confirmed or imposed upon Landlord as owner of the Premises
and/or as the Landlord under this Lease or as the recipient of rents or other
charges produced by this Lease, and which become or are payable, during the Term
(including any interest imposed thereon by reason of an election to pay the same
in installments), and any and all other taxes, assessments and charges levied,
assessed or imposed upon the Premises or any portion thereof or upon Landlord as
an owner of the Premises and/or as the Landlord under this Lease or in respect
of the rents or other charges produced by this Lease in lieu of or in addition
to the foregoing, including in substitution of or in addition to any other
Impositions (for such purpose, the Imposition in question shall be calculated as
if the Premises were the sole asset of Landlord); provided, that if, by law, any
Imposition is payable or at the option of the taxpayer may be paid in
installments (whether or not interest shall accrue on the unpaid balance
thereof), Tenant may pay the same (and any accrued interest on the unpaid
balance) in installments (and Landlord shall cooperate with Tenant in any
application by Tenant to pay the same in installments) and shall pay only such
installments as may become due during the Term as the same respectively become
due and before any fine, penalty, interest or cost may be added thereto for
non-payment thereof (or at such earlier and commercially reasonable time as is
required by an Institutional Fee Mortgagee or a Fee Mortgagee which is not an
Institution); and provided, further, that any Imposition relating to a fiscal
period of a taxing authority, a part of which period is included within the Term
of this Lease and a part of which is included in a period of time after the
expiration or earlier termination of this Lease, shall (whether or not such
Imposition shall be assessed, levied, confirmed, imposed or
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become a lien upon the Premises, or shall become payable, during the Term) be
appropriately pro-rated between Landlord and Tenant.
Section 3.2. TAXES NOT INCLUDED IN IMPOSITIONS. Nothing in this
Lease contained shall require Tenant to pay any franchise, income, corporate,
estate, inheritance, succession, capital levy, stamp or transfer tax of Landlord
or other taxes imposed on taxpayers generally as opposed to the owners of real
property or on rents in particular. In the event of a dispute between Landlord
and Tenant as to whether or to what extent a tax is an Imposition, such dispute
shall be determined by ADR in the manner provided in Article 18.
Section 3.3. RECEIPTS FOR IMPOSITIONS. Tenant shall, upon request of
Landlord, furnish to Landlord within fifteen (15) days after the date when any
Imposition is payable, official receipts of the appropriate taxing authority, or
other evidence satisfactory to Landlord, evidencing the payment thereof.
Section 3.4. RIGHT TO CONTEST IMPOSITIONS. Tenant, after prior
notice to Landlord, shall have the right to contest the amount or validity, in
whole or in part, of any Imposition by appropriate proceedings, and to pay any
Imposition under protest or with reservation of rights. Notwithstanding Section
3.1, and only if payment of the Imposition in question would bar such contests,
Tenant may postpone such payment pending resolution of such contest if (i)
Tenant deposits with Landlord in cash, cash equivalents or a clean, irrevocable
letter of credit in form and with an issuer reasonably acceptable to Landlord,
as a reserve for payment thereof, the amount of such Impositions being
contested, plus all fines, interest, penalties and costs which may become due
pending the determination of such contest, in such amounts as Landlord may
reasonably request from time to time, and (ii) no part of the Premises shall be
in any danger of sale or forfeiture within the next 120 days by reason of such
nonpayment; provided, however, that Tenant may not postpone such payment if (i)
postponement of such payment would violate the terms and provisions of any
Institutional Fee Mortgage (and the Institutional Fee Mortgagee refuses to waive
the same), or (ii) Tenant does not comply with the terms and conditions of such
Institutional Fee Mortgage, relating to such postponement (but Tenant will not
be obligated to deposit sums for the same obligations with both Landlord and an
Institutional Fee
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Mortgagee). Upon the termination of such proceedings, or if the Premises at any
time become in danger of sale or forfeiture by reason thereof within the next
120 days, Tenant shall pay the amount of such Imposition or part thereof, the
payment of which may have been deferred during the prosecution of such
proceedings, together with any costs, fees, interest, penalties or other
liabilities in connection therewith. Without limiting the foregoing, Tenant
shall have the right to apply for a reduction in the assessed valuation of the
Premises or for an abatement of or exemption from any Imposition, for any fiscal
or tax year during any part of which the Term of this Lease is in effect.
Landlord shall, at Tenant's request, join in any such proceedings or permit the
same to be brought in its name if required by law. Landlord shall not be
subjected to any liability for the payment of any costs or expenses in
connection with any such proceedings unless Landlord intervenes and takes an
affirmative part therein (but Tenant shall be entitled to control such
proceedings, and Tenant shall indemnify and save harmless Landlord from any such
costs or expenses, except in the case of such intervention.) If Tenant has not
commenced such a proceeding for a particular period or Imposition within a
reasonable time prior to the last date on which such a proceeding may be
commenced, and fails to commence the same within thirty (30) days after notice
from Landlord referring to this Section, Landlord shall have the right to
commence, maintain and control, at Landlord's sole cost and expense, such a
proceeding (a "Landlord Proceeding") for such period or Imposition. Any refund
or rebate of any Impositions and interest or penalties thereon shall belong to
Landlord except to the extent it is based on a payment made by Tenant or to a
payment made by Landlord to the extent Landlord has been reimbursed therefor by
Tenant, in which case it shall belong to Tenant, notwithstanding the expiration
or sooner termination of this Lease. Any refund or rebate so belonging to
either party and received by the other party shall be deemed trust funds and as
such are to be received by the recipient party in trust and forthwith paid to
the other party, in accordance with this Article. Each party agrees, promptly
upon request by the other party, to execute and deliver any receipt which may be
necessary to effectuate the provisions of this Section. If any such refund or
rebate is subject to apportionment between Landlord and Tenant as hereinabove
provided, all costs and expenses (including experts and attorney's fees and
disbursements) incurred by Tenant, or by Landlord in the case of a Landlord
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Proceeding, in connection with obtaining such refund or rebate shall first be
deducted from the amount thereof.
Section 3.5. EVIDENCE OF IMPOSITIONS. The certificate, advice, bill
or receipt by an appropriate official legally authorized to make or give the
same shall be PRIMA FACIE evidence that an Imposition was due and payable on the
date thereof, or has been paid, and either party shall be entitled to rely
thereon.
Section 3.6. TENANT TAXES. Tenant shall at all times be responsible
for and shall pay directly to the applicable taxing authority, before
delinquency, all taxes and assessments which shall or may during the Term be
charged, levied, assessed or imposed on Tenant with respect to Tenant's right to
occupy the Premises and any personal property of any kind owned, used or
installed by Tenant at the Premises or in connection with (a) the operation of
the Premises or (b) Tenant's business conducted on or at the Premises.
Section 3.7. PAYMENTS TO INSTITUTIONAL FEE MORTGAGEE. If the
provisions of a Fee Mortgage permit an Institutional Fee Mortgagee, or a Fee
Mortgagee which is not an Institution, to require payment of some or all of the
Impositions by Landlord to be held in escrow by such Fee Mortgagee to enable
such Fee Mortgagee to pay the same, and such Fee Mortgagee so requires, then
Tenant, at the direction of Landlord, shall make such payments to such Fee
Mortgagee (or to Landlord, as directed by Landlord, in which event Landlord
agrees to pay the same to such Fee Mortgagee) in the amounts and at the times
required by such Fee Mortgagee. Payment of such amounts by Tenant shall be
deemed, to the extent thereof, to relieve Tenant of its obligations hereunder
with respect to such Impositions. If such Fee Mortgagee fails or refuses to
apply the sums so paid by Tenant in payment when due of the Impositions to which
such sums relate (unless applied by such Fee Mortgagee to cure a default under
its Fee Mortgage, which default resulted from the failure by Tenant to perform
or observe an obligation imposed against it under this Lease, within applicable
grace periods hereunder), and if Landlord shall not pay or cause to be paid such
Impositions within thirty (30) days after demand by Tenant, Tenant may, at its
option, pay the same and offset the sums so paid against the next Base Rent due
hereunder and Landlord shall, if insufficient Base Rent shall thereafter be
payable, pay the same to Tenant; provided, however, that if within such thirty
(30)
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day period Landlord disputes Tenant's right to such offset by notice to Tenant,
then the matter shall be resolved by ADR as provided in Article 18, pending
resolution of which dispute by ADR, Tenant shall have no right to an offset.
Section 3.8. ALLOCATION. If the Premises are a part of a single tax
lot with the premises demised under one or more other Affiliate Leases, then
Tenant and the tenants under such Affiliate Leases shall apportion the
Impositions thereon between themselves on a going-forward basis, subject to the
consent of the Landlords under this Lease and such Affiliate Leases, such
consent not to be unreasonably withheld, or if such Landlords and Tenants shall
fail to reach agreement, by ADR pursuant to Article 18 hereunder and under such
Affiliate Leases, but Tenant shall in all events be jointly and severally liable
with the tenants under such other Affiliate Leases for the payment of all
Impositions assessed on the basis of such single tax lot.
Section 3.9. SURVIVAL. The provisions of this Article 3 shall
survive the expiration or sooner termination of this Lease.
ARTICLE IV
INSURANCE
Section 4.1. REQUIRED INSURANCE. At all times during the Term of
this Lease, Tenant shall, at Tenant's sole cost and expense, keep, provide and
maintain in force the following insurance:
(i) Property insurance covering the Buildings against loss or damage
from such causes or loss as are embraced by insurance policies of the type now
known as "All Risks" or "Open Perils" property insurance on a replacement cost
basis with the Agreed Value Endorsement waiving co-insurance, all in an amount
not less than one hundred percent (100%) of the then Full Insurable Value,
without deduction for physical depreciation thereof. Such property insurance
shall include a Demolition and Increased Cost of Construction Endorsement as
well as such other insurance as the Landlord may from time to time reasonably
require to cover other risks and hazards affecting the Premises;
(ii) Flood insurance if the Premises is located in a designated flood
zone area;
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(iii) Boiler and machinery insurance insuring against loss or damage
to the Premises and to the major components of any heating, air-conditioning or
other ventilation systems and/or such other machinery or apparatus as may be now
or hereafter installed in the Premises, in such amounts as Landlord may from
time to time reasonably require;
(iv) General liability insurance insuring against claims for personal
injury (including, without limitation, bodily injury or death), property damage
liability and such other loss or damage from such causes of loss as are embraced
by insurance policies of the type now known as "Commercial General Liability
Insurance," all in such amounts as Landlord may from time to time reasonably
require. Landlord currently requires such insurance to be in the amount of
$10,000,000 combined single limit per occurrence. Such insurance coverage shall
be issued and maintained on an "occurrence" basis;
(v) Workmen's compensation insurance covering employees of Tenant, in
statutory limits;
(vi) Business interruption or rental insurance for the benefit of
Landlord covering the full monthly rental (including all Base Rent and
additional rent) due from time to time hereunder.
(vii) In addition to, and not in limitation of the above requirements,
such insurance as may be reasonably required by any Institutional Fee Mortgagee
or Fee Mortgagee not an Institution; and
Subject to clause (vii) above, if applicable, if either Landlord or Tenant
believes that the insurance described above is less or different than, or is
greater or more extensive than, that which is then customarily maintained by
prudent owners of comparable properties for comparable uses, the insurance
required above shall be so adjusted if either (A) the parties agree on the
adjustment, or (B) by ADR instituted by either party under Article 18, if it is
determined that the party requesting the change in insurance is correct in its
belief as aforesaid.
Section 4.2. INSURERS; FORM OF POLICY. All insurance provided for
under this Lease shall be effected under valid enforceable policies by insurers
of recognized responsibility who may legally issue such insurance in the
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State in which the Premises is located, and reasonably acceptable in form,
amount and content, to Landlord and reasonably acceptable to any Institutional
Fee Mortgagee. Upon the execution of this Lease, certificates in respect of the
policies procured by Tenant pursuant to Section 4.1 shall be delivered to
Landlord. Within fifteen (15) days after the execution hereof, Landlord shall
be furnished with the original or certified copies of each policy required
hereunder. At least twenty (20) days prior to the expiration of any policy
required hereunder Tenant shall furnish Landlord with appropriate proofs of the
issuance of a policy continuing in force the insurance covered by the policy so
expiring. To the extent reasonably obtainable, all policies referred to in
Section 4.1 shall contain agreements by the insurers that (a) any loss shall be
payable to Landlord and to the holder of any Fee Mortgage to whom loss may be
payable as hereinafter provided, notwithstanding any act or negligence of Tenant
which might otherwise result in forfeiture of said insurance, or affect the
validity or enforceability thereof, (b) such policies shall not be cancelled or
materially modified except upon at least twenty (20) days prior written notice
to each named insured and loss payee and (c) the coverage afforded thereby shall
not be affected by the performance of any work in or about the Premises.
Section 4.3. PAYMENT OF PROCEEDS. (a) The insurance policy
described in Section 4.1(iv) shall name Landlord, any Fee Mortgagee and any
Mortgagee as additional insureds.
(b) The insurance policies described in Section 4.1(i), (ii) and
(iii) shall name Landlord, Tenant, any Fee Mortgagee and any Mortgagee as named
insureds, as their interests may appear, and shall provide that proceeds shall
be paid to Landlord or any Fee Mortgagee, as their interests may appear, and not
to Tenant or any Mortgagee, which proceeds shall be held by Landlord or by any
Fee Mortgagee pursuant to the terms of this Lease, and shall, to the extent
required by an Institutional Fee Mortgagee or a Fee Mortgagee which is not an
Institution, contain a standard, non-contributory mortgagee clause or Lender
Loss Payable Endorsement.
(c) So long as there shall be an Institutional Fee Mortgagee, any
business interruption or rental value policy or similar policy for the Premises
shall name such Institutional Fee Mortgagee as the loss payee thereunder, or
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if there shall be no Institutional Fee Mortgagee then Tenant shall be named as
the loss payee thereunder. Upon receipt of such proceeds by an Institutional
Fee Mortgagee, such proceeds shall be deemed payments of Base Rent and
additional rent hereunder and shall be deemed to have been so applied by the
Institutional Fee Mortgagee; to the extent that such proceeds relate to
Impositions or insurance premiums, and the Institutional Fee Mortgagee fails or
refuses to apply the same to such Impositions or insurance premiums, then Tenant
shall have rights comparable to the rights specified in Section 3.7 as to
payments on account of Impositions which an Institutional Fee Mortgagee so fails
to apply; the balance of any proceeds after restoration of the Buildings shall
be promptly paid to Tenant (or, if not so paid, Tenant shall be entitled to
offset the same against the next Base Rent or additional rent due hereunder).
(d) All such policies shall expressly provide that loss thereunder
shall be adjusted and paid as provided in Section 4.4 and this Section. Any
loss paid to Landlord or Tenant which, pursuant to the requirements contained in
this Lease, should have been paid to the other party, or to any Fee Mortgagee,
shall be held by the receiving party in trust and shall be promptly turned over
to the person entitled thereto under this Lease.
Section 4.4. ADJUSTMENT OF LOSS. Landlord and Tenant shall cooperate
reasonably and in good faith and shall use their reasonable efforts to cause any
Fee Mortgagee or Mortgagee to cooperate reasonably and in good faith to adjust
any loss under a policy of insurance required to be maintained by Tenant under
this Lease expeditiously and favorably, recognizing Landlord's ownership of the
Buildings and Tenant's obligation to effect restoration at its expense, without
an abatement of Base Rent and additional Rent hereunder. Subject to the rights
of an Institutional Fee Mortgagee or a Fee Mortgagee which is not an
Institution, adjustment of any such loss shall be subject to the consent of
Landlord and Tenant, which consent shall not be unreasonably withheld.
Section 4.5. BLANKET POLICIES. Nothing in this Article shall prevent
Tenant from taking out insurance of the kind and in the amounts and with
companies provided for under Section 4.1, under a blanket insurance policy or
policies which can cover other properties owned, leased or operated by Tenant
(or any Affiliate of Tenant) as well as the Premises; provided, that any such
policy of insurance
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provided for under Section 4.1(i) shall specify therein, or Tenant shall furnish
Landlord and the holder of any Fee Mortgage with a written statement from the
insurers under such policies specifying, the amount of the total insurance
allocated to the Buildings, which amount shall comply with the requirements of
Section 4.1. Tenant shall furnish to Landlord and to the holder of any Fee
Mortgage, within thirty (30) days after the filing thereof with any insurance
rate-making body, copies of the schedule or make-up of all property covered by
every such policy of blanket insurance. Notwithstanding the foregoing, if the
taking out by Tenant of any such blanket insurance policy would require the
consent or waiver of an Institutional Fee Mortgagee, so as not to constitute a
default under the terms of an Institutional Fee Mortgage, then Tenant must
obtain such consent or waiver in order to benefit from the provisions of this
Section as to the insurance question.
Section 4.6. DEDUCTIBLES. All insurance provided for under Section
4.1 may contain loss deductible clauses in such reasonable and customary maximum
amounts as Landlord shall approve, which approval shall not be unreasonably
withheld. In the event of a dispute between Landlord and Tenant as to the
amount which may be deductible under a policy, or otherwise as to the insurance
required under this Article, such dispute shall be determined by ADR in the
manner provided in Article 18.
Section 4.7. WAIVER OF SUBROGATION. Landlord hereby waives its
rights of recovery against Tenant, its subtenants and their respective
successors and assigns for any losses to the Premises covered by fire and
extended coverage insurance (or otherwise covered by insurance maintained by
either party), but only to the extent of the actual recovery. In consideration
therefore Tenant hereby waives its rights of recovery against Landlord, its
successors and assigns, for any losses to the Premises covered by fire and
extended coverage insurance (or otherwise covered by insurance maintained by
either party) but only to the extent of the actual recovery. The above referred
to waivers shall only be applicable with respect to loss or damage occurring
during such time as the waiving party's policy shall contain a clause or
endorsement to the effect that any such waiver shall not adversely affect or
impair the right of the party so waiving from recovering thereunder. Each party
shall obtain from its insurance carriers, at its expense, and will deliver to
the other party waivers of the subrogation rights and the statement
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described in the preceding sentence under its respective policies as herein
provided.
Section 4.8. OTHER INSURANCE. (a) Tenant may insure its own
property at the Premises in such manner as Tenant deems advisable and shall be
entitled to all proceeds therefrom.
(b) Neither Landlord nor Tenant shall carry any insurance concurrent
in coverage or contributory in the event of loss with any insurance which is
required to be carried by Tenant hereunder if the effect of such separate
insurance would be to reduce the protection or the payment to be made under the
insurance policy required to be maintained by Tenant hereunder. Landlord shall
immediately notify Tenant of the taking out of any such insurance and the terms
thereof.
Section 4.9. RENEWAL. Notwithstanding anything hereinabove to the
contrary, Tenant shall annually provide Landlord with a renewal policy and paid
receipt at least 30 days prior to expiration of the then current policies, for
one year's premium for all insurance required under this Lease.
ARTICLE V
RIGHT TO PERFORM OTHER PARTY'S COVENANTS
Section 5.1. RIGHT TO PERFORM OTHER PARTY'S COVENANTS. (a) If
Tenant shall default in the performance of any of Tenant's obligations under
this Lease, Landlord may perform the same at the expense of Tenant (i)
immediately and without notice in the case of (x) emergency, or (y) the taking
of any action required to prevent an imminent lapse or termination of any
insurance policy required to be obtained by Tenant hereunder, or (z) the taking
of any action required to prevent an imminent default under any Fee Mortgage
(but will provide Tenant with prompt notice thereafter); and (ii) in any other
case if Tenant shall fail to remedy such default after Landlord shall have
notified Tenant of such default and the applicable grace period for curing such
default shall have expired, and such failure continues after three (3) business
days from the date of the giving by Landlord to Tenant of a further notice of
Landlord's intention to so perform; provided, however, that, in the case of a
failure which for
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causes beyond Tenant's reasonable control (the failure to pay money shall not be
deemed beyond a party's reasonable control) cannot with due diligence be cured
within such grace period, such grace period shall be deemed extended if Tenant
(x) shall promptly upon the receipt of such first notice, advise Landlord of
Tenant's intention to institute all steps necessary to cure such failure and (y)
shall institute and thereafter with reasonable dispatch prosecute to completion
all steps necessary to cure the same.
(b) If Landlord shall default in the performance of any of its
obligations under this Lease, Tenant may perform the same at the expense of
Landlord (i) immediately and without notice in the case of (x) emergency, (y)
the taking of any action required to prevent an imminent lapse or termination of
any insurance policy required to be obtained by Tenant hereunder due to such
default, or (z) the taking of any action required to prevent an imminent default
under any Mortgage (but will provide Landlord with prompt notice thereafter) and
(ii) in any other case if such failure continues after thirty (30) days from the
date of the giving by Tenant to Landlord of notice of intention so to perform
the same or, in the case of a failure which for causes beyond Landlord's
reasonable control (the failure to pay money shall not be deemed beyond a
party's reasonable control) cannot with due diligence be cured within such
thirty (30) day period, such thirty (30) day period shall be deemed extended if
Landlord (x) shall promptly upon the receipt of such notice, advise Tenant of
Landlord's intention to institute all steps necessary to cure such failure and
(y) shall institute and thereafter with reasonable dispatch prosecute to
completion all steps necessary to cure the same; provided that, at the
expiration of the period described in this clause (ii), such default continues
after three (3) business days from the date of the giving by Tenant to Landlord
of a further notice of Tenant's intention to perform the same.
Section 5.2. REIMBURSEMENT OF CURING PARTY. All sums paid by either
party affecting a cure pursuant to Section 5.1 and all necessary incidental
costs and expenses paid or incurred by such party in connection with the
performance of any act by such party pursuant to said Section, together with
interest thereon from the date of making of such expenditure by such party at a
rate two (2%) percent above the Prime Rate, shall be payable by the other party
to such curing party within thirty (30) days after demand therefor accompanied
by evidence reasonably
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establishing that the expenditure has reasonably been made. Nothing contained
herein shall be deemed or construed to permit Tenant to make any set-off against
Tenant's obligations to pay Base Rent or additional rent, except as may
otherwise be expressly provided in this Lease.
ARTICLE VI
USE; CONDITION OF PREMISES; COVENANTS AGAINST WASTE
AND TO REPAIR AND MAINTAIN THE PREMISES
Section 6.1. USE. (a) Tenant shall have the right to use the
Premises for (i) a motor vehicle dealership, vehicle showroom, vehicle storage,
used vehicle sales, vehicle body shop (but only if a vehicle body shop use was a
use of the Premises during December, 1991), service and maintenance facilities,
general executive and administrative offices in connection with such uses, any
uses ancillary or customarily exercised in connection therewith, and (ii) any
other uses for which the Premises during December, 1991 were in fact used
(collectively, "Vehicle-Related Uses").
(b) Intentionally omitted.
(c) Tenant shall be entitled to use all or any portion of the
Premises for any lawful use other than as described in subsection (a) of this
Section, provided that Tenant shall have received Landlord's consent to such
use, which consent Landlord shall not unreasonably withhold (without limitation,
it shall not be unreasonable for Landlord to withhold its consent to such use if
such use is disreputable, would cause the Premises to become subject to
compliance with the remedial provisions of ISRA (or a similar state statute
requiring environmental testing and/or remediation) prior to the sale or other
transfer of the Premises, upon the occurrence of any assignment of this Lease or
sublease of all or part of the Premises, or upon the expiration or sooner
termination of this Lease or cessation of operations at the Premises, or would
increase in any material respect the risk of environmental contamination of the
Premises, and it shall not be unreasonable for Landlord to take into account any
material adverse effect of such change in use on contiguous properties owned by
Landlord or Affiliates of Landlord, including those which are subject to
Affiliate Leases or
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Affiliate Subleases). The parties acknowledge that there is no agreement under
this Lease that Tenant shall use all or any portion of the Premises for any
particular use or uses during the term of this Lease. Any dispute between the
parties under this subsection (c) or subsection (d) hereafter shall be
determined by ADR as provided in Article 18.
(d) Tenant shall not use or occupy or permit the Premises to be used
or occupied, nor do or permit anything to be done in or on the Premises, in
whole or in part, in a manner which in any way (i) violates any certificate of
occupancy affecting the Premises; (ii) violates or breaches the provisions of
any recorded easement, restriction or the like affecting the Premises on the
date hereof or entered into after the date hereof with the prior consent of
Tenant; (iii) violates any present or future law, rule or requirement of any
governmental, public or quasi public authority having jurisdiction over the
Premises; (iv) makes void or voidable any insurance in force with respect to the
Premises; or (v) constitutes a public or private nuisance.
Section 6.2. CONDITION OF PREMISES. (a) The parties hereto hereby
acknowledge and agree that Landlord is delivering, and Tenant is accepting, the
Premises in their "as is" condition on the date hereof. Tenant acknowledges
that it has inspected, examined and investigated to its full satisfaction the
Premises and the uses thereof and any other matter of concern to Tenant with
respect to the Premises, that Tenant accepts the Premises in their present
condition (after having occupied same) without any representation or warranty
whatsoever by Landlord as to the condition of the Premises or the value thereof
or the utility thereof or usefulness for any particular purpose or any other
matter or thing relating in any way to the Premises, and that Tenant
acknowledges that Landlord has not made and does not make, and Tenant is not
relying upon, any representation or warranty, except as herein expressly
provided, as to the physical condition, quality, value or character or any other
matter relating to or affecting the Premises.
(b) Landlord represents and warrants to Tenant, which
representations and warranties are a material inducement to Tenant entering into
this Lease, as follows:
(i) The mortgages specified in Exhibit A are the only Fee
Mortgages encumbering or affecting all or any part of the Premises as of the
date hereof, and true and
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complete copies of the Fee Mortgage documents or documents evidencing or
affecting such lien, as in effect on the date hereof, have been previously
delivered to Tenant.
(ii) The easements, restrictions and other matters of
record as of December, 1991, and any unrecorded agreements of a similar nature
to which Tenant would be subject hereunder, do not materially adversely affect,
individually or in the aggregate, the use of the Premises, as the Premises were
used in December, 1991.
(iii) The actual uses being made of the Premises during
December 1991 were permitted by all applicable zoning laws, or (if not permitted
by zoning laws) were lawful nonconforming uses, and all certificates of
occupancy required for such use in December 1991 were obtained and were in full
force and effect.
(iv) To the actual knowledge of Landlord, Joseph C. DiFeo
and Samuel X. DiFeo, as of December, 1991 there were no material structural
defects in the Premises on the date hereof, except as set forth on EXHIBIT D.
(v) Landlord is a fee owner of the Premises and all prior
tenancies and rights of occupancy at the Premises or any part thereof, other
than those of Tenant, have been terminated.
Section 6.3. NO WASTE. Tenant shall not cause or permit any waste to
the Premises.
Section 6.4. MAINTENANCE AND REPAIR. Tenant shall keep the Premises,
all systems, and the adjoining sidewalks, curbs and any vaults clean and in good
condition and repair, free of accumulations of dirt, rubbish, snow and ice, and
shall make all necessary repairs and replacements, whether structural or
non-structural, interior or exterior, ordinary as well as extraordinary,
foreseen as well as unforeseen.
Section 6.5. REMOVAL OF PROPERTY. Tenant shall not remove or permit
the removal of any of the permanent furnishings or of any of the fixtures or
other property or equipment constituting a part of the Premises (other than
property of Tenant or other tenants or occupants of the Buildings or obsolescent
fixtures, property or equipment) unless other fixtures, property or equipment at
least equal
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in value and utility shall be promptly substituted therefor, provided this
Section shall not apply if Tenant demolishes existing Buildings and erects new
Buildings on the Land, or a portion thereof, in accordance with Article 10.
Section 6.6. UTILITIES AND SERVICES; SIGNAGE. (a) Landlord shall not
be responsible to furnish any utilities or services to the Premises, and shall
not be liable for any interruption or failure in the supply of any such utility
or service. The interruption or failure in the supply of any such utility or
service or the inability to obtain such utility or service shall not affect,
alter, negate or diminish Tenant's obligations hereunder.
(b) Tenant shall make its own arrangements with the appropriate
utility companies supplying electricity, water, gas, steam, telephone and other
utilities to the Premises, and for garbage disposal from the Premises, and shall
arrange to have all bills for such utilities or services forwarded directly to
Tenant. Tenant shall pay when due all charges for such utilities or services
accruing during the term of this Lease.
(c) Subject to Landlord's consent, which Landlord shall not
unreasonably withhold, Tenant shall have the right to enter into agreements with
public utility companies and municipal and other governmental authorities,
agencies and departments creating such easements or other similar rights in
favor thereof, or to apply for permits, licenses, certificates or other
governmental or quasi-governmental authorizations relating to Alterations or the
use and operation of the Premises ("Permits"), as may be necessary or convenient
to the use or servicing of the Premises or the making of any Alterations
required or permitted hereunder; provided, however, that Landlord shall have the
right, in its sole and absolute discretion, to withhold granting its consent to
any zoning variance which would have the effect of prohibiting any use being
made of the Premises in December, 1991. If pursuant to this Lease Landlord
shall consent (or shall be deemed hereunder to have consented or shall be
required by ADR to consent) thereto, Landlord shall, at Tenant's expense, (i)
cooperate with Tenant in obtaining any necessary consent of any mortgagee or
ground or underlying lessee to such agreements, (ii) join in any request for
such consent or Permit or permit the same to be brought in Landlord's name (if
necessary to obtain such consent or Permit or to effectuate such agreement), or
(iii) join in any such agreement. Landlord shall incur no
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liability for the payment of any costs or expenses in connection with Landlord's
review, execution and delivery of the same, or involvement with respect to the
same, and Tenant shall indemnify and hold harmless Landlord and within thirty
(30) days after demand, reimburse Landlord, from any such costs or expenses.
(d) Tenant, at its expense and subject to compliance with applicable
Laws pursuant to Article 7, and subject to the applicable provisions of Article
10, shall be entitled to construct and maintain such signage at the Premises as
Tenant shall elect to construct and maintain.
ARTICLE VII
COMPLIANCE WITH LAWS
Section 7.1. COMPLIANCE WITH LAWS. (a) Tenant shall, at its sole
cost and expense, promptly comply with all present and future laws and
ordinances and the orders, rules, regulations and requirements of all federal,
state and municipal governments and appropriate departments, commissions, boards
and officers thereof, which may be applicable to the Premises and sidewalks,
curbs and vaults adjoining the same or to the use or manner of use of the
Premises, whether or not such requirement shall be foreseen or unforeseen,
ordinary or extraordinary (collectively, "Laws").
(b) Intentionally Omitted.
(c) Intentionally Omitted.
(d) Intentionally Omitted.
Section 7.2. RIGHT TO CONTEST LAWS. Tenant shall have the right,
after prior notice to Landlord, to contest by appropriate legal proceedings, in
the name of Tenant or Landlord (but only if legally required to so contest) or
both, without cost or expense to Landlord, the validity or application of any
Laws, and if, by the terms of any such Law, compliance therewith pending the
prosecution of any such proceeding may legally be held in abeyance without the
incurrence of a lien, charge or liability of any kind against the Premises or
Tenant's leasehold interest therein and without subjecting Tenant or Landlord to
any criminal liability or (unless Tenant shall indemnify Landlord
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therefor) civil liability for failure so to comply therewith, and without
adversely affecting any insurance policy required to be obtained by Tenant
hereunder, Tenant may postpone compliance therewith until the final
determination of any proceedings, provided that all such proceedings shall be
prosecuted with due diligence and dispatch, and if any lien, charge or civil
liability is incurred by reason of non-compliance, Tenant may nevertheless make
the contest and delay compliance as aforesaid, provided that Tenant furnishes to
Landlord security, reasonably satisfactory to Landlord, against any loss or
injury by reason of such non-compliance or delay and prosecutes the contest with
due diligence. Landlord shall, at the cost and expense of Tenant, execute and
deliver any papers which may be necessary or proper to permit Tenant to contest
the validity or application of any such Law. In the event that a contest is not
concluded prior to the expiration of the Term of this Lease, if at the
termination of the contest a determination is to the effect that some or all of
the work in question should have been or must be performed, Tenant shall pay to
Landlord a sum sufficient to pay for the cost of the work required to be
performed. This provision shall survive the termination or sooner expiration of
this Lease. Notwithstanding anything to the contrary contained hereon, Tenant's
right to contest the validity or applicability of any Law is subject to the
applicable provisions contained in any Institutional Fee Mortgage, and shall be
limited thereby and shall be subject to compliance with the requirements
thereof.
Section 7.3. TENANT'S TERMINATION RIGHT. If Tenant is, or would be,
required to do any work or incur any expenses to comply with the requirements of
Section 7.1 during the last year of the Term which, in Tenant's reasonable
judgment will, in the aggregate cost more than one-half of the Base Rent payable
for the then remainder of such Term, Tenant may, by notice to Landlord, decline
to comply with such requirements, and upon giving of such notice, Tenant shall
not be obligated to comply with the same (but Landlord, at the cost and expense
of Landlord, may comply with same), but this Lease shall not be otherwise
affected. Notwithstanding the foregoing, the provisions of this Section 7.3
shall not be applicable if the Law which must be complied with became effective
and required compliance to be effected prior to the last year of the Term.
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Section 7.4. ARBITRATION AS TO LAWS. In the event of any dispute
between the parties as to an issue covered by this Article, the matter shall be
resolved by ADR as provided in Article 18.
ARTICLE VIII
DAMAGE TO OR DESTRUCTION OF THE BUILDINGS
Section 8.1. RESTORATION AND REPAIR. (a) In case of damage to or
destruction of the Buildings, in whole or in part, by fire or any other cause,
similar or dissimilar (a "Casualty"), Tenant shall, regardless of the
availability of insurance proceeds (but subject to Section 8.5), restore,
repair, replace or rebuild the Buildings as nearly as may be reasonably possible
to the condition, quality and class the same were in immediately prior to such
damage or destruction, or with such changes or alterations as Tenant shall elect
to make in conformity with Article 10. Such restoration, repairs, replacement
or rebuilding shall be commenced with reasonable promptness and prosecuted with
reasonable diligence.
(b) Provided that there does not then exist an Event of Default
hereunder, all insurance money collected by Landlord or Tenant from any policy
of insurance maintained by Tenant pursuant to Article 4 on account of such
Casualty, less the cost, if any, incurred in connection with the adjustment of
the loss and the collection thereof (herein sometimes referred to as the
"insurance proceeds"); shall be held in an interest bearing account by an
Institutional Fee Mortgagee (as provided in Section 11.1) or, if there is no
such Institutional Fee Mortgagee, by an Institution, as insurance trustee,
selected by Landlord and reasonably approved by Tenant, shall be applied to the
payment of the cost of rebuilding, and shall be paid out to or for the account
of Tenant from time to time, upon requisition by Tenant, as such work
progresses, subject to Article 10 and Article 11. However, if the insurance
proceeds for any Casualty are less than $50,000, such insurance proceeds shall
be paid to Tenant, and shall be held by Tenant in trust for the purpose of
paying the cost of such reconstruction.
(c) Upon Landlord's receipt of evidence reasonably acceptable to it
that the reconstruction has been completed and paid for in full, that there are
no liens on
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the Premises as a result thereof, that reconstruction has been completed in a
good and workmanlike manner, in accordance in all material respects with
applicable Laws and in substantial accordance with plans and specifications
theretofore submitted to (and if required hereunder approved by) Landlord, and
that a certificate of occupancy, if required by Law, has been issued or is
otherwise in effect with respect to such reconstruction, Landlord shall pay or
cause to be paid to Tenant any remaining balance of said insurance proceeds.
Section 8.2. NO ABATEMENT. No provision of this Article shall be
construed to entitle Tenant to any abatement, allowance, reduction or suspension
of Base Rent or additional rent, unless this Lease is terminated as herein
provided.
Section 8.3. TERMINATION. If in the final year of the Term the
Premises are damaged to such an extent that the cost to repair and restore will
exceed one-half of the Base Rent payable for the then remainder of the Term, or
repair and restoration will take longer than ninety (90) days to complete and in
either case the damage occurs in the last year of the Term, Tenant may by notice
to Landlord given within thirty (30) days after the occurrence of such damage
terminate this Lease effective as of a date specified in such notice and upon
such effective date this Lease shall terminate as if such date were the
scheduled date for expiration of the Term, but Tenant shall remain liable to pay
the Base Rent and additional rent relating to Impositions and insurance premiums
due hereunder until the originally scheduled date for such expiration. In such
case all proceeds of insurance shall be payable outright and belong solely to
Landlord, anything herein to the contrary notwithstanding.
Section 8.4. NOTICE OF CASUALTY. Tenant shall immediately notify
Landlord of the occurrence of a Casualty.
Section 8.5. ISSUES RELATING TO INSURANCE PROCEEDS. (a) Tenant
acknowledges that Tenant bears the risk that the insurance coverage maintained
by Tenant shall be sufficient to provide the funds required to effect
restoration of the Buildings after a Casualty (including due to the financial
inability of the insurance carrier to pay the same).
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(b) If a Casualty occurs, Landlord will use its reasonable efforts
(but Landlord shall not be obligated to give up any right or to make any payment
to the Fee Mortgagee, unless Tenant shall agree to be responsible for such
payment) to cause any Fee Mortgagee to agree to apply, and thereafter to apply,
the applicable insurance proceeds to restoration on terms consistent with those
which a sophisticated Institutional Fee Mortgagee would customarily impose
("Customary Conditions"), so long as Tenant is not in default beyond applicable
grace periods in its obligations hereunder.
(c) If any of the following events shall occur:
(i) Within sixty (60) days after a Casualty shall have
occurred and the insurance proceeds are made available by the insurer
for restoration, the Fee Mortgagee shall not agree to make such
proceeds available for restoration on Customary Conditions or if
thereafter for a period in excess of sixty (60) days such Fee
Mortgagee shall refuse to so apply all or any portion of the insurance
proceeds (unless such refusal to agree is due to (x) an Event of
Default by Tenant hereunder unless Tenant is disputing the existence
of such Event of Default as hereinafter provided or (y) a failure by
Tenant to comply with the Customary Conditions); or
(ii) The Fee Mortgagee shall apply any such insurance
proceeds to the payment, in whole or in part, of the indebtedness
secured by the Fee Mortgage in question (unless caused by a default by
Tenant hereunder beyond applicable grace periods); or
(iii) Due to the negligence or willful misconduct of
Landlord or such Fee Mortgagee, or a default by Landlord hereunder
beyond applicable grace periods, a reasonable amount of insurance
proceeds under the circumstances cannot be obtained under the policies
of insurance maintained by Tenant within a reasonable period of time
under the circumstances; or
(iv) If the insurance proceeds are within Landlord's
control and Landlord refuses to apply the same toward restoration in
accordance
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with Customary Conditions, unless such refusal is due to an Event of
Default then existing under this Lease;
and, in addition, if within sixty (60) days thereafter (thirty (30) days
thereafter in respect to clause (iv) above) Landlord does not make available the
proceeds in question, then Tenant, by notice to Landlord, may terminate this
Lease on a date specified in such notice, and upon such date this Lease shall
terminate, as if such date were the scheduled expiration date of this Lease, and
in such event neither party shall have any further obligations to the other
party hereunder.
ARTICLE IX
CONDEMNATION
Section 9.1. CONDEMNATION. (a) If there shall be a total taking or
a Constructive Total Taking of the fee title to the Premises in condemnation
proceedings, by deed in lieu of condemnation proceedings or by any right of
eminent domain, this Lease shall terminate on the date of such taking and the
Base Rent and other charges payable by Tenant hereunder shall be apportioned and
paid to the date of such taking. "Constructive Total Taking" means a taking of
less than all of the Premises, but of such scope that the untaken portion of the
Premises is insufficient or has insufficient access to public streets to permit
the restoration of the existing Buildings so as to constitute an economically
viable property for the conduct of Tenant's business.
(b) If a Constructive Total Taking shall occur and this Lease is
terminated, then from and after the date of such termination for the remainder
of the Term of this Lease absent such termination, Tenant shall pay to the
Landlord, in equal monthly installments on the same dates as Base Rent would
have been payable hereunder, a sum per annum equal to the "Annual CTT Payment".
For such purposes, the Base Rent hereunder shall first be recomputed pursuant to
Section 9.5, as if the Constructive Total Taking were a partial taking subject
to Section 9.3, and the Annual CTT Payment shall be equal to fifty (50%) percent
of the annual Base Rent and Impositions for the Premises, as so recomputed. Any
dispute between the parties pursuant to this Section shall be resolved by ADR
pursuant to Article
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18. Tenant's failure to pay these sums, subject to grace periods comparable to
those set forth in Article 15 for a failure by Tenant to pay Base Rent
hereunder, shall be deemed an Event of Default for purposes of Section 15.1(c)
notwithstanding that this Lease may be deemed to have been terminated.
Section 9.2. CONDEMNATION AWARD. In the event of any such total
taking or Constructive Total Taking, the award or awards for said taking, less
the cost of the determination of the amount thereof (the "Condemnation
Proceeds"), shall be paid to Landlord, who shall be entitled to receive the
entire award with respect to any taking, without deduction therefrom for any
estate vested in Tenant other than with respect to Tenant's property as
described in Section 10.3 and for Tenant's moving expenses ("Tenant's Share")
and Tenant shall receive no part of such award other than Tenant's Share.
Tenant hereby assigns to Landlord all of its right, title and interest in and to
such award (other than to Tenant's Share). Tenant may, at its sole cost and
expense, make a claim with the condemning authority for Tenant's Share and,
provided that Landlord's award is not thereby reduced or otherwise adversely
affected, for other sums to which Tenant may be entitled under applicable law.
Section 9.3. PARTIAL CONDEMNATION. In the event of a taking which is
less than a Constructive Total Taking, this Lease shall not terminate or be
affected in any way, except as provided in Section 9.5, and the Condemnation
Proceeds shall be paid as follows:
(a) The portion of the Condemnation Proceeds with interest thereon as
shall be awarded for or shall be required for restoration of the Buildings shall
be payable (i) so long as there shall be an Institutional Fee Mortgagee, to such
Institutional Fee Mortgagee, or (ii) if there shall be no Institutional Fee
Mortgagee, in trust to Landlord for application by Tenant to the cost of
restoring, repairing, replacing or rebuilding the Buildings. Such portion of
the Condemnation Proceeds shall be held and disbursed as Deposited Sums, in the
same manner as insurance proceeds are treated in accordance with Article 10 and
Article 11.
(b) The remainder of the Condemnation Proceeds shall be treated as
provided in section 9.2.
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Section 9.4. RESTORATION AND REPAIR. In the event of a taking of
less than a Constructive Total Taking, Tenant shall, to the extent Condemnation
Proceeds are available, proceed, with due diligence to restore, repair, replace
or rebuild the remaining part of the Buildings to substantially their former
condition or with such changes or alterations as Tenant may elect to make in
conformity with Article 10 so as to constitute a complete, usable building and
property. For that purpose, the provisions of Section 8.5(b) and (c) shall be
applicable, except that references to casualty and to insurance proceeds shall
be deemed references to Condemnation and to Condemnation Proceeds, and the
following clause (v) shall be deemed added to Section 8.5(c): "(v) If sufficient
Condemnation Proceeds for restoration are not obtained from the condemning
authority within a reasonable period of time under the circumstances and the
cost of restoration is more than 110% of the Condemnation Proceeds obtained and
available for restoration;".
Section 9.5. ABATEMENT OF RENT. In the event of a taking of the
character referred to in Section 9.3, this Lease shall terminate as to the
portion of the Premises so taken and from and after the date of such taking a
just proportion of the Base Rent, according to the extent and nature of such
taking, shall abate for the remainder of the Term. If Landlord and Tenant
cannot agree on the amount of such abatement of rent, such dispute shall be
determined by ADR as provided in Article 18. Until the amount of the reduction
of the Base Rent shall have been determined, Tenant shall continue to pay to
Landlord the Base Rent provided for herein; when the amount of the abatement
shall have been agreed upon or determined, Landlord shall permit Tenant to
credit against the next installments of Base Rent due hereunder (to the extent
thereof), or shall refund to Tenant, the amount of the Base Rent paid from the
date of the taking which is in excess of the amount to which the Base Rent has
been reduced by such abatement, together with interest thereon at the Prime Rate
for the period from the date the Base Rent was paid until the date of
reimbursement to Tenant.
Section 9.6. TEMPORARY TAKING. If the whole or any part of the
Premises, or of Tenant's leasehold estate under this Lease, shall be taken in
condemnation proceedings or by any right of eminent domain for temporary use or
occupancy (for these purposes, for a period of twelve (12) months or less), the
foregoing provisions of this Article
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shall not apply and Tenant shall continue to pay, in the manner and at the times
herein specified, the full amounts of the Base Rent and all additional rent and
other charges payable by Tenant hereunder, and, except only to the extent that
Tenant may be prevented from so doing pursuant to the terms of the order of the
condemning authority, Tenant shall perform and observe all of the other terms,
covenants, conditions and obligations hereof upon the part of Tenant to be
performed and observed, as though such taking had not occurred. Tenant shall be
entitled to receive the entire amount of the Condemnation Proceeds made for such
taking, whether paid by way of damages, rent or otherwise, unless such period of
temporary use or occupancy shall extend beyond the expiration or termination of
this Lease, in which case the Condemnation Proceeds shall be apportioned between
Landlord and Tenant upon receipt thereof as of the date of the expiration or
termination of this Lease; provided, however, that the portion of such award
which represents reimbursement for the cost of restoration (and is not required
to pay Base Rent or additional rent accruing hereunder during the period of
temporary taking) shall be used by Tenant to pay or to reimburse Tenant for
payment of the costs of restoration and shall be treated hereunder as provided
in Section 9.4. Tenant shall, upon the expiration of any such period of
temporary use or occupancy during the Term and to the extent Condemnation
Proceeds are available for the purpose, restore the Buildings, as nearly as may
be reasonably practicable, to the condition in which the same were immediately
prior to such taking, subject to Section 9.4. The provisions of Section 4.3(c)
shall apply, with appropriate modifications to reflect the difference between
rent insurance proceeds and Condemnation Proceeds for a temporary taking.
Section 9.7. ALLOCATION OF AWARD. If the order or decree in any
condemnation or similar proceeding shall fail separately to state the amount to
be awarded to Landlord and the amount to be awarded to Tenant under this
Article, or the amount of the compensation for the restoration of the Buildings
under this Article, and if Landlord and Tenant cannot agree thereon within
thirty (30) days after the final award or awards shall have been fixed and
determined, any such dispute shall be determined by ADR in the manner provided
in Article 18.
Section 9.8. ASSIGNMENTS OF CONDEMNATION PROCEEDS. Tenant shall be
entitled to assign to the holder of any Mortgage any Condemnation Proceeds to
which it shall
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be entitled under this Article and Landlord shall recognize such assignment and
shall consent to the payment of said Condemnation Proceeds to said assignee as
its interest may appear. Nothing in this Section 9.8 shall grant a Mortgagee
any greater rights than Tenant possesses under this Article.
Section 9.9. PARTICIPATION IN CONDEMNATION PROCEEDINGS. Tenant and
the holder of any Mortgage or Fee Mortgage shall have the right to participate
in any condemnation proceeding for the purpose of protecting their rights
hereunder (consistent with the above); provided, however, that Landlord shall
have the sole right to settle such condemnation proceeding, but Tenant shall not
be bound by any determination in such proceeding as to, and shall have the right
to dispute, by ADR as provided in Article 18, the portion of any Condemnation
Proceeds to which Tenant is entitled under this Article.
ARTICLE X
CHANGES AND ALTERATIONS
Section 10.1. ALTERATIONS. Tenant shall have the right, at any time
and from time to time, to make such changes and alterations, structural or
otherwise, to the Buildings as Tenant shall deem necessary or desirable,
including the right to increase or reduce the height of the Buildings, or to
demolish the Buildings, or any part thereof, provided that in the case of any
demolition Tenant shall erect in substitution thereof a new building or (in the
event of the demolition of part of a Building) a new part thereof. Such
changes, alterations, demolition or new construction (collectively,
"Alterations") shall be made in all cases subject to the following conditions:
(a) no Alterations shall be undertaken until Tenant shall have
procured and paid for, so far as the same may be required from time to time, all
municipal and other governmental permits and authorizations of the various
municipal departments and governmental subdivisions having jurisdiction, and
Landlord shall join, at Tenant's expense, in the application for such permits or
authorizations whenever such action is necessary;
(b) any structural Alterations, or any Alterations undertaken as a
single project and involving an estimated cost aggregating more than $75,000
shall be
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conducted under the supervision of an architect or engineer selected by Tenant,
and in accordance with plans and specifications approved in writing in advance
by Landlord;
(c) all Alterations shall be of such a character that, when
completed, the value of the Building shall be not less than the value of the
Buildings immediately before any such Alterations;
(d) all work done in connection with any Alterations shall be done in
a good and workmanlike manner, in accordance with applicable Laws, and in
substantial accordance with the plans and specifications approved by Landlord;
(e) workmen's compensation insurance covering all persons employed in
connection therewith and with respect to whom death or bodily injury claims
could be asserted against Landlord, Tenant or the Premises and general liability
and property damage insurance, and insurance covering all risks generally
related to construction and which would reasonably be required by a prudent
Institutional Fee Mortgagee for similar construction (which may be effected by
endorsement, if obtainable, on the insurance required to be carried pursuant to
Section 4.1) for the mutual benefit of Landlord, any Fee Mortgagee, and Tenant
with limits of not less than those required to be carried pursuant to Section
4.1 shall be maintained by Tenant at all times when any work is in process in
connection with any Alterations, and evidence of the procuring of such policies
shall be submitted to Landlord before construction of any such Alteration is
commenced;
(f) any structural Alterations, including Alterations which involve
the demolition and reconstruction of any material structure on the Premises,
shall be subject to Landlord's prior written consent, which consent shall not be
unreasonably withheld by Landlord (in the case of the demolition and
reconstruction of any material structure on the Premises, it shall not be
unreasonable for Landlord to withhold its consent if Tenant cannot reasonably
demonstrate that Tenant has obtained or can obtain the funds required to pay the
cost of such demolition or reconstruction and it shall not be unreasonable for
Landlord to take into account any material adverse effect of such Alterations on
contiguous properties owned by Landlord or Affiliates of Landlord, including
those properties which are subject to Affiliate Leases or Affiliate Subleases,
but it shall be
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unreasonable for Landlord to withhold its consent to any such Alterations
required by a Manufacturer if Tenant has otherwise satisfied the conditions
hereunder);
(g) subject to Section 10.3, all Alterations shall immediately upon
installation become Landlord's property and shall remain on and be surrendered
with the Premises as part thereof at the termination of this Lease;
(h) the cost of any Alteration shall be paid by Tenant so that,
subject to Article 12, the Premises shall at all times be free of liens for
labor and materials supplied or claimed to have been supplied to the Premises in
connection with such Alteration;
(i) within a reasonable time after completion of any Alteration,
Tenant shall provide Landlord with complete as-built mylar drawings thereof, if
such drawings were prepared for Tenant, and otherwise with such final plans and
specification for such Alteration as are in Tenant's possession;
(j) any Alterations commenced by Tenant shall be processed diligently
to completion by Tenant; and
(k) any Alterations (a) shall be subject to the consent of any
Institutional Fee Mortgagee if and to the extent required under the
Institutional Fee Mortgage in question, and (b) shall be performed in compliance
with the applicable requirements of the Institutional Fee Mortgage in question.
(l) notwithstanding subsections (b) and (d) above, with respect to
any Alterations requested by a Manufacturer, Landlord's prior consent shall not
be required as to plans and specification with respect thereto, but Tenant shall
nevertheless deliver copies of such plans and specifications to Landlord.
Any dispute under this Section shall be determined by arbitration in the manner
provided in Article 18.
Section 10.2. APPLICABILITY OF CONDITIONS. In performing any work or
repairs to, or restoration, replacement or rebuilding of, the Buildings required
to be performed by Tenant under Article 6, 7, 8 or 9, Tenant shall observe and
perform, insofar as the nature of such repairs, restoration, replacement or
rebuilding make such observance
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and performance appropriate, the conditions of Section 10.1 relating to changes
or alterations.
Section 10.3. TENANT'S PROPERTY. All items of personal property, all
business and trade fixtures and equipment and any other property of Tenant at
the Premises, which is not a part of any structure or building system, or
required for the operation of any building as a building, shall remain the
property of Tenant and shall be removed by Tenant at any time prior to the
expiration or sooner termination of this Lease. Tenant, at its expense, shall
repair any damage to the Building caused by any such removal. Tenant's property
shall include (a) equipment (for example, hoists) installed by Tenant and not
required for the use and operation of the Buildings as buildings and (b) any
property previously transferred by Landlord or Affiliates of Landlord outright
to Tenant. Any of the foregoing enumerated property of Tenant which shall
remain in the Premises within thirty (30) days after the expiration or sooner
termination of this Lease (but the foregoing provision shall not relieve Tenant
of any obligations or liabilities hereunder on account of such holdover) may, at
the option of Landlord, subject to Section 10.4, be deemed abandoned and may
either be retained by Landlord as its property or be promptly disposed of
without accountability as Landlord sees fit and Tenant shall reimburse Landlord,
within thirty (30) days after demand, for the reasonable costs and expenses
incurred by Landlord in such disposal.
Section 10.4. LIENS ON TENANT'S PROPERTY. (a) Except as otherwise
provided in Section 14.2(c) with respect to a Mortgage, and as provided in
subsection (b) of this Section, all property installed by Tenant in the Premises
shall be installed and maintained free and clear of any liens, encumbrances and
security interests.
(b) Notwithstanding subsection (a) of this Section, Tenant may
install and maintain items of Tenant's property in the Premises subject to
conditional sales agreements, equipment leases and similar financing, provided
that (i) the removal of such property, if not movable personal property, would
not adversely affect the value of the Buildings as real estate (as opposed to
their value for a particular use) and would not adversely affect the operation,
function, or use of the Buildings as buildings, (ii) Tenant agrees to restore
any damage to the Premises caused by the removal thereof, and (iii) the term of
such financing does not extend beyond the expiration date of the
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Term. The other party to such conditional sales agreement, equipment lease or
similar financing shall have the right to remove the property in question from
the Premises within thirty (30) days after the expiration or ninety (90) days
after the sooner termination of the Term, but this sentence shall not relieve
Tenant of any obligations or liabilities hereunder on account of such holdover.
ARTICLE XI
DISBURSEMENT OF DEPOSITED MONEYS
Section 11.1. DEPOSITED SUMS. All sums (collectively, the "Deposited
Sums") paid to or deposited with an Institutional Fee Mortgagee or to an
Institution described in Section 8.1 (the "Depositary"), shall be disbursed in
the manner hereinafter provided.
Section 11.2. DISBURSEMENT. From time to time as the restoration,
repair, replacement or rebuilding of any Buildings or any portion thereof
damaged or destroyed by fire or any other cause, or not taken in a proceeding of
the character described in Section 9.3, progresses (collectively, the "Work"),
disbursement of the Deposited Sums shall be made in accordance with good and
sophisticated construction lending practices which a prudent Institutional Fee
Mortgagee would adopt in order to insure that the Work shall be completed in a
good and workmanlike manner, shall be paid for in full, shall be completed free
of any lien against the Premises, and shall be completed in accordance with
applicable law and in substantial accordance with the plans and specifications
submitted to (and if required hereunder, approved by) Landlord. In the event
that a reputable independent architect or engineer selected by Landlord and
reasonably approved by Tenant shall determine, or if the Institutional Fee
Mortgagee or a Fee Mortgagee which is not an Institution, shall determine, as
provided in the applicable Fee Mortgage, that the Deposited Sums are
insufficient to pay for the cost to complete the Work, (i) Tenant shall be
responsible for paying for any such shortfall (which obligation shall survive
the expiration or sooner termination of this Lease), and (ii) no further
disbursement of the Deposited Sum shall be made until Tenant shall have
deposited with the Institution cash, cash equivalents or other security for the
shortfall, which deposit shall be made promptly after demand therefor by
Landlord, and shall be treated in the same manner as the
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Deposited Sums are treated (but any unused portion thereof, shall in all events
be returned to Tenant upon completion of the Restoration in question). At any
time after the completion of the Work the balance of the Deposited Sums shall be
disbursed to Tenant (and Tenant may retain any insurance proceeds held by
Tenant).
Section 11.3. DISBURSEMENT AFTER DEFAULT. If this Lease shall be
terminated pursuant to Section 15.1 prior to the disbursement of the Deposited
Sums or any part thereof, Landlord may notify the Depositary thereof and
thereupon the Depositary shall have no further right or obligation to disburse
any of the Deposited Sums to Tenant, but shall disburse the same to or for the
account of Landlord upon Landlord's direction so to do, provided that if Tenant
disputes the termination of this Lease, the Depositary shall take no action
until the issue is resolved between Landlord and Tenant by ADR as provided in
Article 18.
Section 11.4. EXPENSES OF DEPOSITORY. The Depository shall have the
right to deduct from the Deposited Sums its reasonable charges for acting as
Depository hereunder.
ARTICLE XII
MECHANICS' LIENS
Section 12.1. MECHANICS' LIENS. Tenant shall not suffer or permit
any mechanics' liens to be filed against the Premises, nor against Tenant's
leasehold estate hereunder, by reason of work, labor, services or materials
supplied or claimed to have been supplied to Tenant or anyone holding any
interest in the Premises or any part thereof through or under Tenant. If any
such mechanic's lien shall at any time be filed against the Premises, Tenant
shall, within thirty (30) days after notice of the filing thereof, or sooner,
and within ten (10) days after demand from Landlord if required in order to
close a sale or financing involving the Premises (and which notice shall refer
to such ten (10) day period and this sentence), cause the same to be discharged
of record by payment, deposit, bond, order of a court of competent jurisdiction
or otherwise. If Tenant shall fail to cause such lien to be discharged within
the period aforesaid, then Landlord may (without complying with any other
provision contained in
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this Lease) discharge the same either by paying the amount claimed to be due or
by procuring the discharge of such lien by deposit or by bonding proceedings,
and in any such event Landlord shall be entitled, if Landlord so elects, to
compel the prosecution of an action for the foreclosure of such lien by the
lienor and to pay the amount of the judgment in favor of the lienor with
interest, costs and allowance. Nothing in this Lease contained shall be deemed
or construed in any way as constituting the consent or request of Landlord,
express or implied, by inference or otherwise, to any contractor, subcontractor,
laborer or materialman for the performance of any labor or the furnishing of any
materials for any specific improvement, alteration to or repair of the Premises
or any part thereof, nor as giving Tenant a right, power or authority to
contract for or permit the rendering of any services or the furnishing of any
materials that would give rise to the filing of any mechanic's lien against the
Premises.
ARTICLE XIII
SURRENDER OF THE PREMISES; INSPECTION OF THE PREMISES
Section 13.1. SURRENDER. Upon the expiration or sooner termination
of this Lease, Tenant shall surrender to Landlord the Premises, free of
subtenants (except as provided in Section 14.7), occupants or the like, in good
order and repair (except in the event of termination upon a Casualty, a total
taking or Constructive Total Taking in condemnation proceedings), reasonable
wear and tear and damage by casualty or condemnation (except to the extent
Tenant was theretofore obligated under this Lease to restore such casualty or
condemnation prior to the date of such expiration or sooner termination)
excepted and also except as Tenant may have been prevented from maintaining the
Premises in good order and repair by occupation thereof by any entity having the
power of eminent domain which shall have taken the temporary use thereof and
shall then be in possession thereof. If the Premises are not surrendered at the
end of the Term, Tenant shall compensate Landlord for all damages which Landlord
shall suffer by reason thereof, and Tenant shall indemnify, defend and hold
Landlord harmless from and against all claims made by any succeeding tenant
against Landlord founded upon delay by Landlord in delivering possession of the
Premises to such succeeding tenant to the extent that all or any portion of such
delay is occasioned by the failure of Tenant to surrender the
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Premises as and when required by this Lease. Without limiting the provisions of
Section 13.1 hereof, if Tenant shall, without the written consent of Landlord,
hold over after the expiration of the Term, Tenant's use shall be deemed a
month-to-month tenancy, which tenancy may be terminated upon demand of Landlord.
During such tenancy, Tenant agrees to pay to Landlord, each month, (i) the
following percentage of the Base Rent in effect upon the expiration of the Term:
(A) 125% of such Base Rent for the first ninety (90) days
after the expiration or sooner termination of this Lease;
(B) 150% of such Base Rent for the next ninety (90) days
(that is, until the 180th day thereafter);
(C) 175% of such Base Rent for the next ninety (90) days
(that is, until the 270th day thereafter); and
(D) 200% of such Base Rent for the period from and after
such 270th day after the expiration or sooner termination of this
Lease,
plus (ii) all additional rent payable by Tenant hereunder for such month.
Section 13.2. INSPECTION. Tenant shall permit Landlord and
Landlord's authorized representatives to enter the Premises at reasonable times
during usual business hours upon reasonable prior notice (except in the case of
an emergency or to prevent an imminent default under a Fee Mortgage, which entry
may be made without notice at any time) for the purpose of inspecting the same
and of exhibiting the same to prospective purchasers or mortgagees thereof, or
others to whom Landlord shall desire to so exhibit the Premises.
ARTICLE XIV
ASSIGNMENT AND SUBLETTING
Section 14.1. ASSIGNMENT AND SUBLETTING. Except as otherwise
provided in this Article 14, or as expressly provided elsewhere in this Lease,
Tenant shall not, without
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the prior written consent of Landlord, assign, mortgage, pledge or encumber this
Lease, or sublease the Premises, or any part thereof. The consent of Landlord
to any assignment, mortgage, pledge, encumbrance or subletting shall not relieve
Tenant from obtaining Landlord's consent to any further such transaction which
requires Landlord's consent hereunder.
Section 14.2. PERMITTED TRANSACTIONS. Without Landlord's consent,
but upon at least fifteen (15) days, prior notice to Landlord, and subject to
Section 14.3(c), Tenant may:
(a) Assign this Lease or sublease all or any part of the Premises to
an Affiliate of Tenant;
(b) Assign this Lease or sublet all or substantially all of the
Premises for all or any portion of the Term in connection with a sale or other
transfer to the assignee or sublessee of all or substantially all of the
business conducted by Tenant at the Premises;
(c) Mortgage, pledge or encumber this Lease, except as provided in
Section 14.3(a); or
(d) Sublease the Premises, in whole or in part, other than a sublease
of all or substantially all of the Premises for all or substantially all of the
term (except as provided in subsection (b) above).
Section 14.3. TRANSACTIONS REQUIRING LANDLORD'S CONSENT. (a) So
long as Landlord is an Affiliate of Joseph C. DiFeo or Samuel X. DiFeo,
Landlord's consent shall be required to any mortgage, pledge or encumbrance of
this Lease (but not to a transaction described in Section 10.4(b)), which
consent may be withheld in Landlord's sole discretion, notwithstanding any
provision of this Lease which contemplates the potential existence of any
Mortgage, or otherwise gives to Tenant the right to mortgage this Lease and the
leasehold estate created hereby.
(b) Tenant may assign this Lease, and may sublease all or any part of
the Premises, other than as provided in Section 14.2, subject to Landlord's
prior consent, which consent Landlord shall not unreasonably withhold, upon the
following terms and conditions:
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(i) Tenant shall furnish Landlord with the name and business
address of the proposed assignee or subtenant and with information
with respect to the nature and character of the proposed assignee's or
subtenant's business or activities as are reasonably satisfactory to
Landlord;
(ii) Landlord shall not be entitled to take into account the
financial net worth, credit or financial responsibility of the
proposed assignee or subtenant;
(iii) Tenant shall deliver an executed assignment or sublease to
Landlord at the time Landlord's consent is requested;
(iv) The nature and character of the proposed assignee or
subtenant, and its business or activities are, in Landlord's
reasonable judgment, in keeping with the standards of the Premises
(and its intended use of the Premises is not in violation of the
provisions of this Lease);
(v) Each assignment or sublease, whether or not Landlord's
consent is required thereto, shall specifically state that (i) it is
subject to all of the terms, covenants, agreements, provisions and
conditions of this Lease (except, as otherwise provided herein as to
Sections 3.8, and 15.1(c), and provided, further, that no assignee or
subtenant shall be obligated to enter into, assume or otherwise be
liable for obligations under any Tenant Guaranty); and (ii) the
assignee or subtenant will not have the right to further assign or
sublet all or part of the Premises except in accordance with the
provisions of this Lease.
(vi) With respect to any assignment or sublease, whether or not
Landlord's consent is required thereto: (A) the receipt by Landlord
of any amounts from an assignee or subtenant, or other occupant of any
part of the Premises, shall not be deemed or construed as releasing
Tenant from Tenant's obligations hereunder or of the acceptance of
that party as a direct Tenant; (B) Tenant shall reimburse Landlord
within thirty (30) days after demand for any reasonable costs
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incurred by Landlord to review the proposed assignment or sublease in
connection with the requested consent, including the cost of making
investigations as to the acceptability of the proposed assignee or
subtenant and any reasonable attorney's fees incurred by Landlord; (C)
consent by Landlord thereto shall not be deemed or construed to
modify, amend or affect the terms and provisions of this Lease, or
Tenant's obligations hereunder, which shall continue to apply to the
Premises as if the assignment or sublease had not been made; and (D)
if Tenant defaults in the payment of any rent, Landlord is authorized
to collect any rents due or accruing from any assignee, subtenant or
other occupant of the Premises and to apply the net amounts collected
to the rent due hereunder.
(c) No assignment or sublease permitted under Section 14.2, Section
14.3, or otherwise permitted hereunder shall be permitted if the assignee or
sublessee, in Landlord's reasonable judgment, is not reputable, or if the
assignment or sublease, in Landlord's reasonable judgment, would cause the
Premises to become subject to compliance with the remedial provisions of ISRA
(or a similar state statute requiring environmental testing and/or remediation)
prior to the sale or other transfer of the Premises, upon such assignment of
this Lease or sublease of all or any portion of the Premises, or upon the
expiration or sooner termination of this Lease or cessation of operations at the
Premises. Landlord will advise Tenant, by notice to Tenant within thirty (30)
days of Tenant's request therefor, if Landlord judges a proposed assignee or
subtenant named in such request not to be reputable, or a proposed assignment or
sublease to cause the Premises to become subject to ISRA or such similar statute
as aforesaid, which notice from Landlord shall specify, in reasonable detail,
the grounds for Landlord's determination. Failure or refusal of Landlord to
respond within such thirty (30) day period shall be deemed a determination by
Landlord that the proposed assignee or subleasee is reputable and the proposed
assignment or sublease does not cause the Premises to become subject to ISRA or
such other similar statute. In making such determination, the financial
condition of the proposed assignee or sublessee shall not be taken into account
by Landlord. If Tenant disputes Landlord's determination, such dispute shall be
resolved by ADR pursuant to Article 18.
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(d) Notwithstanding anything to the contrary in this Lease, Tenant
shall not assign this Lease or sublease the Premises to a government or any
subdivision or agency thereof, without Landlord's consent, which consent
Landlord may withhold in its sole discretion.
Section 14.4. TAKEBACK RIGHT. If at any time Tenant shall request
Landlord's consent (if such consent is required hereunder) (a) to assign this
Lease, other than to an Affiliate or in connection with a sale of all or
substantially all of Tenant's business at the Premises to the assignee, or (b)
to sublease all or substantially all of the Premises for all or substantially
all of the Term, other than to an Affiliate or in connection with sale or all or
substantially all of Tenant's business at the Premises to the sublessee, or (c)
to change the use of all or substantially all of the Premises to a use other
than a Vehicle-Related Use, and shall have notified Landlord of such proposal,
then Landlord shall have a period of thirty (30) days following such
notification to terminate this Lease as to the entire Premises, by notice to
Tenant, in which event such termination shall occur on the forty-fifth (45th)
day after the date of such notice, as if such forty-fifth (45th) day were the
date herein specified for the expiration of the Term, and, from and after such
termination, neither party shall have any further obligation hereunder to the
other party, except for obligations which accrued prior to the date of
termination or which by their terms survive the termination of this Lease
Nothing herein in this Section shall be deemed or construed to limit Landlord's
right to withhold consent to an assignment or sublease, in accordance with the
provisions of this Lease, if such consent is required hereunder, and the
existence of this takeback right shall not be taken into account in determining
whether Landlord is entitled to withhold consent to an assignment or sublease,
if such consent is required hereunder.
Section 14.5. REQUIREMENTS AS TO ASSIGNMENTS OR SUBLEASES. (a)
Anything in this Article 14 to the contrary notwithstanding, any assignment of
this Lease, whether made with Landlord's consent or without Landlord's consent,
as the case may be, shall not be effective unless and until (i) the assignee
shall execute, acknowledge and deliver to Landlord an agreement in form and
substance reasonably satisfactory to Landlord, and with respect to which
Landlord shall be a direct beneficiary, whereby the assignee shall (x) assume
the obligations and performance of this Lease and
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agree to be personally bound by all of the covenants, agreements, terms,
provisions and conditions hereof on the part of Tenant to be performed and
observed from and after the effective date of any such assignment and (y) agree
that the provisions of this Article 14 shall, notwithstanding such assignment or
sublease, continue to be binding upon it in the future. Tenant covenants that,
notwithstanding any assignment or sublease, whether or not in violation of the
provisions of this Lease, and notwithstanding the acceptance of rent by Landlord
from any assignee or subtenant or any other party, Tenant and Guarantors shall
remain fully and primarily and jointly and severally liable for the payment of
rent due and to become due under this Lease and for the performance and
observance of all the covenants, agreements, terms, provisions and conditions of
this Lease on the part of Tenant to be performed or observed.
(b) The liability of Tenant, and the due performance by Tenant of the
obligations on its part to be performed under this Lease, shall not be
discharged, released or impaired in any respect by an agreement or stipulation
made by Landlord or any grantee or assignee of Landlord or any other agreement
with a third party extending the term of or modifying any of the obligations
contained in this Lease, or by any waiver or failure of Landlord to enforce any
of the obligations on Tenant's part to be performed under this Lease, and Tenant
shall continue liable hereunder. If any such agreement or modification operates
to increase the obligations of Tenant under this Lease the liability of the
Tenant under this Lease or any of its successors in interest (all such parties
shall be deemed to have expressly consented in writing to such agreement or
modification) shall continue to be no greater than if such agreement or
modification had not been made.
Section 14.6. LEASEHOLD MORTGAGES. (a) Without the prior consent of
Landlord, Tenant shall have the right to mortgage this Lease and the leasehold
estate hereby created. The execution and delivery of a Mortgage shall not be
deemed to constitute an assignment or transfer of this Lease nor shall the
holder of any Mortgage, as such, be deemed an assignee or transferee of this
Lease so as to require such holder to assume the performance of any of the
covenants or agreements on the part of Tenant to be performed hereunder. No
action or agreement hereafter taken or entered into by Tenant to cancel,
surrender, modify or amend this Lease shall be binding upon or enforceable
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against a Mortgagee, without the prior written consent of such Mortgagee.
(b) A Mortgagee shall only have the rights provided for herein if
there has been delivered to Landlord a true, correct and complete copy of the
Mortgage in question, together with written notice executed by Tenant setting
forth the name and address of the Mortgagee. Landlord shall not be bound to
recognize any assignment of a Mortgage unless and until Landlord shall be given
written notice of such assignment and the name and address of the assignee. A
Mortgagee shall cease to be entitled to any of the rights provided for herein if
its Mortgage is satisfied or discharged of record or if Mortgagee has given
written notice to Landlord that its Mortgage has been satisfied. Tenant shall
not grant any Mortgage unless such Mortgage shall expressly state that the
proceeds of any insurance policies and condemnation awards shall be held, used
and applied for the purposes and in the manner provided in this Lease, and a
Mortgagee whose Mortgage does not so provide shall have no rights hereunder.
Section 14.7. SUBLEASE RECOGNITION. Landlord confirms, for the
benefit of any tenant under any Major Sublease (such tenant being called a
"Space Tenant"), that, upon the termination of this Lease pursuant to Section
15.1, Landlord will recognize the Space Tenant under such sublease as the direct
tenant of Landlord (provided that such Space Tenant attorns to Landlord) and
will, upon the request of Tenant with respect to a Major Sublease consented to
by Landlord, enter into a reasonable and customary form of recognition and
attornment agreement with such Space Tenant which will provide for the
recognition by Landlord of such Space Tenant as the direct tenant of Landlord
and the attornment by such Space Tenant to Landlord, provided that, among other
things, at the time of the termination of this Lease no default exists under the
Space Tenant's sublease which at such time would then permit the landlord
thereunder to terminate the same or to exercise any dispossess remedy provided
for therein. The term "Major Sublease" shall mean a sublease of all of the
Premises for all of the Term (less one day), provided that the sublease requires
the sublessee to perform all of Tenant's obligations hereunder, subject to
Section 3.8, grants to the sublandlord all of Landlord's rights hereunder other
than pursuant to Section 15.1(c) (which shall not apply to the Major Sublease)
and that the sublessee shall not be obligated to enter into, assume or
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otherwise be liable for obligations under any Tenant Guaranty as otherwise
provided in Article 29.
ARTICLE XV
DEFAULT PROVISIONS; CONDITIONAL LIMITATION
Section 15.1. EVENTS OF DEFAULT. In the event that any one or more
of the following events occur, an event of default (an "Event of Default") shall
be deemed to exist under this Lease:
(a) default shall be made in the payment of the Base Rent when due
and such default shall continue for a period of ten (10) days after notice
thereof, specifying such default, shall have been given to Tenant, or default
shall be made in the payment of any item of additional rent and such latter
default shall continue for a period of thirty (30) days after notice thereof,
specifying such default, shall have been given to Tenant; or
(b) default shall be made in the performance of any other covenant or
agreement on the part of Tenant to be performed hereunder, and such default
shall continue for a period of thirty (30) days after notice thereof, specifying
such default, shall have been given to Tenant; provided, however, in the case of
a default which cannot with due diligence be remedied by Tenant within a period
of thirty (30) days, if Tenant during such thirty (30) day period advises
Landlord of Tenant's intentions to cure such default, and proceeds as promptly
as may be reasonably possible after the service of such notice and with all due
diligence, and continuity of purpose to remedy the default and thereafter to
prosecute the remedying of such default with all due diligence (including by
appropriate actions against a subtenant of all or part of the Premises to compel
performance by such subtenant or to recover possession of the Premises so as to
permit Tenant to cure such default to the extent that Tenant is unable to cure
the same without recovering possession), the period of time after the giving of
such notice within which to remedy the default shall be extended for such period
as may be necessary to remedy the same with all due diligence; or
(c) an Event of Default, subject to Section 15.3, shall have occurred
under any Affiliate Lease or under any Affiliate Sublease; provided, however,
that if any Affiliate
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Lease or Affiliate Sublease, other than this Lease, is assigned, in a
transaction permitted thereunder, to a person or entity which is not an
Affiliate of the Tenant thereunder, and does not thereafter become an Affiliate
of the Tenant thereunder, then this subsection shall thereafter apply only with
respect to such Affiliate Lease or Affiliate Sublease to a monetary Event of
Default under such Affiliate Lease or Affiliate Sublease and shall not
thereafter apply to a non-monetary Event of Default under such Affiliate Lease
or Affiliate Sublease; or
(d) whenever Tenant shall default in complying with the provisions of
Article 12 with respect to the discharging of mechanics' liens within the time
period provided therein and such default shall exist for thirty (30) days after
notice from Landlord specifying such default, or, if applicable, for ten (10)
days after notice from Landlord specifying such default if such discharge is
required in order to close a sale or refinancing involving the Premises (which
notice shall refer to such ten (10) day period and Article 12); or
(e) if any execution or attachment shall be issued against Tenant or
any of Tenant's property pursuant to which execution or attachment the Premises
or any part thereof shall be taken or occupied by someone other than Tenant,
except as permitted under this Lease; or
(f) (i) the making by Tenant, Trace, UAG or a Tenant under any
Affiliate Lease or Affiliate Sublease (each of Trace, UAG and any Tenant under
any Affiliate Lease or Affiliate Sublease, being herein called a "Guarantor" and
collectively the "Guarantors") of any general assignment for the benefit of
creditors; (ii) the filing by or against Tenant or any Guarantor of any petition
to have Tenant or any Guarantor adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless, in
the case of a petition filed against Tenant or any Guarantor, the same is
dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Tenant's or any Guarantor's
assets, or substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease; or
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(g) if Tenant's right, title and interest in this Lease or the estate
of Tenant hereunder shall be transferred to or shall pass to or devolve upon any
person or entity whether by action of Tenant, by operation of law or otherwise,
in violation of the terms of this Lease, and such default shall not be cured
within thirty (30) days after notice from Landlord of such default; or
(h) if any Mortgagee commences an action to foreclose or otherwise
realize upon its Mortgage or Tenant's interest in this Lease, unless such action
has been dismissed or discontinued.
Section 15.2. Intentionally Omitted.
Section 15.3. MULTIPLE NOTICES. If a monetary Event of Default
occurs hereunder, then Landlord shall have the right to send to Tenant a second
(2nd) notice, referring to this Section and specifying such default and stating
that it is a "Second Notice" of such default, and, if such monetary Event of
Default shall not be cured within five (5) business days after such notice is
given, then Landlord shall have the right to send Tenant a third (3rd) notice,
referring to this Section and specifying that it is a "Third Notice" of such
default, and, if such monetary Event of Default shall not be cured within ten
(10) business days after such notice is given, Landlord may thereafter proceed
to exercise all rights and remedies which Landlord may exercise upon such Event
of Default (but prior to Landlord's commencing to exercise its rights and
remedies, Landlord shall be obligated to accept such a cure). The provisions of
this Section shall only apply to the first two (2) monetary Events of Default of
the same type in any period of twelve (12) consecutive calendar months. Tenant
specifically acknowledges that it will not argue before any court, ADR tribunal
or anyone that Landlord is obligated or required to accept any cure of an Event
of Default described in this Section after the expiration of the applicable time
frame provided for after the Third Notice, Tenant having negotiated for the
giving of the Second and Third Notices in lieu of any other benefit or right
provided to Tenant at law, in equity or otherwise with respect to the right to
cure such Events of Default.
Section 15.4. NOTICES OF DEFAULT TO MORTGAGEES.
(a) If Landlord shall give a notice to Tenant regarding the Tenant's
failure to observe or perform any
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obligation imposed upon Tenant under this Lease, Landlord shall at the same time
give a copy of each such notice to each Mortgagee, and no such notice shall be
deemed to have been effected unless and until notice is so given to each
Mortgagee. If a Mortgage is held by more than one person, corporation or other
entity, no provision of this Lease requiring Landlord to give a notice to a
Mortgagee shall be binding upon Landlord unless and until all of said holders
shall designate in writing one of their number to receive all such notices and
shall have given to Landlord an original executed counterpart of such
designation in form reasonably satisfactory to Landlord.
(b) Landlord shall permit a Mortgagee the right (without obligation
on the part of the Mortgagee to do so) to perform any term, covenant, condition
or agreement and to remedy any default by Tenant hereunder, within the time
periods provided to the Tenant hereunder or otherwise provided to the Mortgagee
hereunder and together with any and all rights of Tenant hereunder with respect
to remedying or contesting any such default, and Landlord shall accept such
performance by Mortgagee with the same force and effect as if furnished by
Tenant; provided, however, that Mortgagee shall not thereby or hereby be
subrogated to the rights of Landlord.
(c) If an Event of Default shall occur hereunder, then, before
Landlord shall be entitled to terminate this Lease on account of such Event of
Default, Landlord shall give to the holder of any such Mortgage a further notice
that such specified Event of Default remains unremedied, and the holder of such
Mortgage shall have the right to remedy any Event of Default arising from a
failure to pay Base Rent or additional rent within a period of twenty (20) days
after the service of such notice and to commence to remedy any other Event of
Default within a period of thirty (30) days after the service of such notice.
Section 15.5. RIGHTS OF MORTGAGEES. In case of the occurrence of an
Event of Default (other than an Event of Default of the character of a failure
to pay Base Rent or additional rent) if, within thirty (30) days after the
further notice referred to in Section 15.4 is given by Landlord to the holder of
a Mortgage, such holder shall:
(a) notify Landlord of its election to proceed with due diligence
promptly to acquire possession of the
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Premises or to foreclose the Mortgage or otherwise to extinguish Tenant's
interest in this Lease;
(b) deliver to Landlord an instrument in writing duly executed and
acknowledged wherein the holder of the Mortgage agrees that:
(i) during the period that such holder or a receiver of rents
and profits appointed upon application of such holder shall benefit
from the provisions of this Section (until, by notice to Landlord,
such holder waives any further benefits under this Section with
respect to such Event of Default), it will pay or cause to be paid to
Landlord all sums from time to time becoming due under this Lease for
the Base Rent and additional rent; and
(ii) if delivery of possession of the Premises shall be made to
such holder or such receiver or, in the event such holder is an
Institution, to its nominee, whether voluntarily or pursuant to any
foreclosure or other proceedings or otherwise, such holder shall,
promptly following such delivery of possession, perform or cause such
nominee to perform, as the case may be, such of the covenants and
agreements herein contained on Tenant's part to be performed as Tenant
shall have failed to perform to the extent the same are of a type
which can reasonably be performed by a party other than the Tenant and
the defaults which cannot so reasonably be performed shall no longer
be deemed to be defaults hereunder as respects Mortgagee or any
nominee, or their successors and assigns; and
(c) If such holder is not an Institution deliver to Landlord security
sufficient in Landlord's reasonable opinion to secure the obligations undertaken
pursuant to clauses (a) and (b) above;
and provided that such default is in a nature that the same cannot practically
be cured by such Mortgagee without taking possession of the Premises, then
Landlord shall not be entitled to terminate this Lease on account of such Event
of Default and shall accept such performance, for such period or periods of time
as may be necessary for such holder, with the exercise of due diligence, to
extinguish Tenant's
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interest in this Lease and to perform or cause to be performed all of the
covenants and agreements to be performed by Tenant to the extent the same are of
a type which can reasonably be performed by a party other than Tenant. Nothing
herein contained shall be deemed to require the holder of a Mortgage to continue
with any foreclosure or other proceedings or, in the event such holder or
receiver shall acquire possession of the Premises, to continue such possession,
if the Event of Default in respect of which Landlord shall have given a notice
shall be remedied. If prior to any sale pursuant to any proceeding brought to
foreclose any Mortgage, or if prior to the date on which Tenant's interest in
this Lease shall otherwise be extinguished, the Event of Default in respect of
which Landlord shall have given a notice shall have been remedied and possession
of the Premises shall have been restored to Tenant, then the obligation of the
holder of the Mortgage pursuant to the instrument referred to in clause (b) of
this Section shall be null and void and of no further effect. Nothing herein
contained shall affect the right of Landlord, upon the subsequent occurrence of
any Event of Default, to exercise any right or remedy herein reserved to
Landlord.
Section 15.6. REMEDIES. (a) Upon the occurrence of an Event of
Default, subject, however, to Section 15.3, in addition to any other remedies
available to Landlord at law or in equity or provided for herein, Landlord shall
have the option, upon five (5) business days' prior notice to Tenant, to
terminate this Lease and all rights of Tenant hereunder. In the event that
Landlord elects to so terminate this Lease, then Landlord may recover from
Tenant all Base Rent and additional rent through the end of the term hereof and
under all Affiliates Leases and Affiliate Subleases.
(b) From and after the occurrence of an Event of Default, subject,
however, to Section 15.3, Landlord shall also have the right, with, or without
terminating this Lease, upon notice to Tenant, to re-enter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant. No re-entry or taking possession of the Premises by Landlord
pursuant to this Section 15.6(b) shall be construed as an election to terminate
this Lease unless a written notice of such intention is given to Tenant. No
entry or re-entry by Landlord, whether had or taken under summary proceeding or
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otherwise, shall absolve or discharge Tenant from any liability hereunder.
(c) In the event that Landlord shall elect to re-enter as provided in
subsection (b) above or shall take possession of the Premises pursuant to legal
proceedings or pursuant to any notice provided by law, then if Landlord does not
elect to terminate this Lease as provided above, Landlord may, from time to
time, without terminating this Lease, either recover all rent (which shall be
deemed to include all Base Rent, additional rent, and other payments and charges
required to be made by Tenant hereunder), as it becomes due or relet the
Premises or any part thereof on terms and conditions as Landlord in its sole
discretion may deem advisable for the whole or any part of the remainder of the
term or for a longer period, in Landlord's name, or as agent of Tenant, and in
connection therewith, Landlord may make repairs or alterations to the Premises
in such manner as Landlord may deem necessary or advisable.
(d) In the event Landlord shall, pursuant to subsection (c) above,
elect to so relet, the rents received by Landlord from such reletting shall be
applied: first to the cost and expenses of re-taking, repossessing, repairing
and/or altering the Premises and the expense of removing all persons and
property therefrom; second, to the costs and expenses incurred in securing any
new tenant or tenants; and third, to the payment of rent due and unpaid
hereunder and the residue, if any, shall be held by Landlord and applied to
payment of future Base Rent and additional rent as the same may become due and
payable. Should that portion of such rents received from such reletting during
any month, which is applied to the payment of Base Rent and additional rent
hereunder, be less than the Base Rent and additional rent payable during the
month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord
immediately upon demand therefor by Landlord. Such deficiency shall be
calculated and paid monthly. Tenant shall also pay to the Landlord, as soon as
ascertained, any reasonable costs and expenses incurred by Landlord in reletting
or in making such alterations and repairs not covered by the rents received from
such reletting. Suit or suits for the recovery of such deficiency or damage, or
for a sum equal to any installment or installments of rent, may be brought by
Landlord from time to time at Landlord's election and nothing herein contained
shall be deemed to require Landlord to await the date on which this Lease or the
term hereof would have expired by limitation had there been no such default by
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Tenant; provided, however, that this subsection (d) shall cease to be applicable
on a going forward basis if Landlord makes the election described in subsection
(a) of this Section.
(e) Landlord shall have no obligation to mitigate damages upon the
exercise of any of Landlord's rights or remedies under this Article 15.
Section 15.7. NO WAIVERS. All rights, options and remedies of
Landlord contained in this Lease shall be construed and held to be cumulative,
and no one of them shall be exclusive of the other, and Landlord shall have the
right to pursue any one or all of such remedies or any other remedy or relief
which may be provided by law, whether or not stated in this Lease. Tenant
hereby expressly waives any and all rights to recover or regain possession of
the Premises or to reinstate or redeem its tenancy or this Lease as is permitted
or provided by or under any statue, law or a decision now or hereafter in force
and effect. Tenant also waives the provisions of any law now or hereafter in
effect relating to notice and delay in levy of execution in case of an eviction
or dispossess of Tenant for non-payment of rent. Tenant waives and shall waive
any and all rights to a trial by jury in the event that summary proceedings
shall be instituted by Landlord. The term "enter", "re-enter" "entry", or
"re-entry" as used in this Lease is not restricted to their technical legal
meanings.
Section 15.8. NEW LEASES. In case of the termination of this Lease
by reason of the happening of any Event of Default, Landlord shall give prompt
notice thereof to the holder of any Mortgage. So long as the Mortgagee has
complied with Sections 15.4 and 15.5, Landlord shall, on written request of such
holder, made at any time within 60 days after the giving of such notice by
Landlord, enter into a new Lease of the Premises with such holder, or its
designee, within thirty (30) days after receipt of such request, which new Lease
shall be effective as of the date of such termination of this Lease for the
remainder of the term of this Lease, at the same Base Rent and additional rent
and upon the same terms, covenants, conditions and agreements as are herein
contained; provided that the holder of the Mortgage shall (a) contemporaneously
with the delivery of such request pay to Landlord the Base Rent and items of
additional rent which Landlord has specified as due in any notice to such
holder, (b) pay to Landlord at the time of the execution and delivery of said
new Lease any and
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all sums for the Base Rent and additional rent which would have been due
hereunder from the date of termination of this Lease (had this Lease not been
terminated) to and including the date of the execution and delivery of said new
Lease, together with all expenses, reasonably incurred by Landlord, in
connection with the termination of this Lease and with the execution and
delivery of such new Lease, less the net amount of all sums received by Landlord
from any occupants of any part or parts of the Premises up to the date of
commencement of such new Lease, and (c) on or prior to the execution and
delivery of said new Lease, agree in writing that promptly following the
delivery of such new Lease, such holder or its designee will perform or cause to
be performed all of the other covenants and agreements herein contained on
Tenant's part to be performed to the extent that Tenant shall have failed to
perform the same to the date of delivery of such new Lease. Nothing herein
contained shall be deemed to impose any obligation on the part of Landlord to
deliver physical possession of the Premises to such holder of a Mortgage or its
designee unless Landlord at the time of the execution and delivery of such new
Lease shall have obtained physical possession thereof. Upon execution and
delivery of such new Lease, any subleases which may have theretofore been
assigned and transferred to Landlord shall thereupon be assigned and
transferred, without recourse, by Landlord to the new tenant. If a new Lease of
the Premises be entered into pursuant to the above, then the holder of the
Mortgage, or any assignee or designee thereof, or a purchaser at a foreclosure
sale shall, for the remainder of the term of this Lease, succeed to the interest
of the Tenant hereunder, subject to the terms, provisions, covenants and
agreements on the part of Tenant to be performed as provided above. If more
than one Mortgagee shall request such new Lease, such new Lease shall be made
with and delivered to the Mortgagee whose Mortgage is prior in lien to those of
any others, without regard to the time of request. Landlord shall have no
obligation to determine the lien priority as among Mortgagees, but shall base
its actions in dealing with a Mortgagee on information contained in a title
report issued by a title company acceptable to Landlord. Any such new lease
shall be expressly made subject to the rights, if any, of Tenant under the
terminated lease and of the rights of parties in possession.
Section 15.9. Intentionally Omitted.
Section 15.10. MULTIPLE MORTGAGES. If at any time there shall be
more than one Mortgage, the holder of
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the Mortgage prior in lien shall be vested with the rights under Sections 15.3
and 15.8 to the exclusion of the holder of any junior Mortgage; provided,
however, that if the holder of a Mortgage prior in lien to any other Mortgage
shall fail or refuse to exercise the rights set forth in said Section, each
holder of a Mortgage in the order of the priority of their respective liens
shall have the right to exercise such rights; and provided further, however,
that with respect to the right of the holder of a Mortgage under Section 15.8 to
request a new Lease, such right may, notwithstanding the limitation of time set
forth in said Section, be exercised by the holder of any junior Mortgage, in the
event the holder of a prior Mortgage shall not have exercised such right, more
than 120 days but not more than 140 days after the giving of notice by Landlord
of the termination of this Lease as in said Section provided.
Section 15.11. ELIMINATION OF CROSS-DEFAULT AND
CROSS-COLLATERALIZATION. (a) The provisions of Section 15.1(c) shall no longer
apply to this Lease, and Landlord shall cease to be entitled to consider an
Event of Default to exist or to terminate this Lease on account of an Event of
Default under Section 15.1(c), in any of the following circumstances:
(i) If this Lease shall be assigned (but only
if Landlord's consent, if required hereunder, has been obtained), in a
transaction permitted hereunder, to an assignee which is not an
Affiliate of Tenant and provided that (i) such assignee or transferee
does not thereafter become an Affiliate of Tenant, or (ii) Tenant, or
an Affiliate of Tenant, does not thereafter become the Tenant under
this Lease; or
(ii) If the holder of an Institutional Mortgage permitted
hereunder or its successors and assigns shall succeed Tenant as the
Tenant under this Lease.
Section 15.12. LANDLORD DEFAULTS; LANDLORD GUARANTY. Landlord has
guaranteed the performance by the landlords under the Affiliate Leases and the
sublandlords under the Affiliate Subleases pursuant to the Landlord Guaranty, in
form attached hereto as Exhibit __. Any successor to Landlord's interest
hereunder shall be deemed to have agreed to be bound by the terms of any such
Landlord Guaranty (but shall have no liability under such Landlord
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Guaranty at such time if it is not an Affiliate of Joseph C. DiFeo or Samuel X.
DiFeo, other than the obligation in the next sentence). Landlord agrees that it
will not assign or otherwise transfer the Premises or this Lease unless the
assignee or other transferee enters into a Landlord Guaranty substantially in
the same form of the Landlord Guaranty entered into by Landlord (subject to the
limitations on liability contained in the foregoing sentence).
Section 15.13. TENANT GUARANTY. Pursuant to the Tenant Guaranty,
Tenant has guaranteed the performance of the tenants under the Affiliate Leases
and subtenants under the Affiliate Subleases.
Section 15.14. INTEREST ON DEFAULTED SUMS. If either party shall
fail to pay any sums due hereunder within ten (10) days after the due date
thereof, such unpaid sums shall bear interest, payable on demand, from and after
the due date thereof until paid at a rate per annum equal to the Prime Rate plus
two (2%) percent.
Section 15.15. LATE CHARGE. If Tenant shall fail to pay all or part
of any installment of Base Rent on the date on which the same shall be due and
payable hereunder more than once in any twelve (12) month period, Tenant shall
pay to Landlord, within twenty (20) days after demand therefor by Landlord, a
late charge equal to the greater of (a) two (2%) percent of all or the portion
of such installment not paid when due, or (b) any late charge, interest charge
or other charge imposed upon Landlord by a Fee Mortgagee because Landlord was
unable to pay when due sums required to be paid under the Fee Mortgage because
of Tenant's failure as aforesaid. In applying this provision, it shall be
assumed that Landlord has no funds from which to pay sums required to be paid
under the Fee Mortgage in question other than the sums required to be paid by
Tenant to Landlord under this Lease.
ARTICLE XVI
INDEMNIFICATION
Section 16.1. INDEMNIFICATION. (a) Except to the extent due to
negligence or willful misconduct of Landlord, its agents, employees or
contractors, from and after the date hereof, Tenant shall indemnify and save
harmless Landlord against and from any and all claims arising during
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the Term (even if asserted after the end of the Term) (i) by or on behalf of any
person for injury to persons or damage to property occurring in, on or about the
Premises, or (ii) arising from the conduct or management of or from any work or
thing whatsoever done in or on the Premises, or the use and occupancy of the
Premises, or (iii) arising from any condition of the Premises or any sidewalk
adjoining the Premises, or of any vaults, passageways or space therein or
appurtenant thereto, or arising from any act of negligence of Tenant, or any
occupant of the Premises or any part thereof, or of its or their agents,
contractors, servants, employees, invitees or licensees and from and against all
judgments, costs, expenses and liabilities incurred in or about any such claim
or action or proceeding brought therein; and in case any action or proceeding be
brought against Landlord by reason of any such claim, Tenant upon notice from
Landlord shall defend such action or proceeding by counsel reasonably
satisfactory to Landlord. The provisions contained in this subsection shall not
be applicable to any environmental or other matters which are the subject matter
of Article 22 of this Lease, and the rights and obligations of the parties with
respect to such matters shall be governed by such Section(s) of this Lease and
not by this subsection.
(b) Landlord shall indemnify and save harmless Tenant against and
from any and all claims arising during the Term (even if asserted after the end
of the Term) to the extent due to negligence or willful misconduct of Landlord,
its agents, employees or contractors, from and after the date hereof, solely
with respect to and arising from any entry of any thereof into or upon the
Premises, (i) by or on behalf of any person for injury to persons or damage to
property occurring in, on or about the Premises, or (ii) any act of negligence
or willful misconduct of Landlord, or of its agents, contractors, servants,
employees, invitees or licensees (other than Tenant), from and after the date
hereof, and from and against all judgments, costs, expenses and liabilities
incurred in or about any such claim or action or proceeding brought therein,
solely with respect to an entry of any thereof into or upon the Premises; and in
case any action or proceeding be brought against Tenant by reason of any such
claim, Landlord, upon notice from Tenant, shall defend such action or proceeding
by counsel reasonably satisfactory to Landlord. The provisions contained in
this subsection shall not be applicable to any environmental or other matters
which are the subject matter of Article 22 of this Lease, and the rights and
obligations of the parties
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with respect to such matters shall be governed by such Section(s) of this Lease
and not by this subsection.
ARTICLE XVII
Intentionally omitted.
ARTICLE XVIII
ARBITRATION AND APPRAISAL
Section 18.1. RULES. All matters under this Lease shall be settled
and finally determined by means of alternative dispute resolution as provided in
the New Jersey Alternative Procedure for Dispute Resolution Act, N.J.S.A.
2A:23A-1, ET SEQ., as in effect on the date of this Lease, [or CT or NY
equivalent, as appropriate] (the "Act"), other than as provided in Section 18.2,
upon written notice given by any party to the other (the "Dispute Notice"), and
to the umpire hereafter established. Except to the extent required by law, the
proceedings under the Act shall be confidential and shall not be disclosed or
discussed with persons not parties to this Lease without the consent of all
parties to the dispute. In the event a party to a dispute may suffer
irreparable harm or injury, such party shall have the ability to seek
provisional remedies, including but not limited to injunctive relief and other
equitable remedies, to the fullest extent permitted by law pending completion of
the process provided under this Article 18.
Section 18.2. UMPIRES. (a) Within thirty (30) days after the
Dispute Notice is given the parties shall select three (3) umpires from among
the persons listed in Subparagraphs (1) through (4) below in the order of
priority listed below, i.e., if a person meeting the requirements of
Subparagraph (1) is not able or willing to serve, a person meeting the
requirements of Subparagraph (2) shall be selected, and so forth. In addition
to meeting the requirements of Subparagraph (1), (2), (3) or (4) below, the
umpires must also satisfy the requirements described in Subparagraphs (b) and
(d) below. A potential umpire is:
(1) Any retired judge of a United States District Court or a
United States Circuit Court of Appeals;
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(2) Any retired judge of any State Superior, Appellate or
Supreme Court;
(3) Any attorney licensed to practice law for more than fifteen
(15) years or certified public accountant who has been certified for
more than fifteen (15) years; and, in either case, who has either
directly or indirectly, no conflict of interest; or
(4) Such other person upon whom the members of the selecting
group agree.
(b) In addition to the requirements described in Section 18.2 (a)
above, the umpires selected hereunder must:
(i) Be free of any potential for bias or conflict of interest
with respect to either of the parties hereto, directly or indirectly
or by virtue of any direct or indirect financial interest, family
relationship or close friendship; and
(ii) Be in a position to immediately hear the dispute and
thereafter render a resolution within the time specified in Section
18.7 below.
(c) If the umpires are not selected within the period of time
specified in Section 18.2(a) above, Landlord, on the one hand, and Tenant, on
the other hand, each shall promptly select an umpire which umpires shall select
a third umpire who shall be the solo umpire. If the parties fail to so select
umpires pursuant to the foregoing provisions within twenty (20) days after the
expiration of the period described in Section 18.2(a), the solo umpire shall be
selected by the Chief Judge of the United States District Court for the District
of New Jersey or, if the Chief Judge is unable or unwilling to act, by the Chief
Judge of the Southern District of New York or the President of the Bar
Association of the City of New York. Such selection shall be in accordance with
the requirements of Sections 18.2(a) and 18.2(b) above. The umpire to be
selected pursuant to this Section 18.2(c) must be designated within thirty (30)
days after the expiration of the period described in Section 18.2(a) above.
(d) Anything to the contrary herein notwithstanding, the following
persons are not eligible to
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be an umpire under this Article: a party to this Lease or any affiliate thereof;
an employee or co-employee or any party to the dispute; or any person having
material or undisclosed, financial or personal interests dependent on the
success or failure of any of the parties.
(e) An umpire shall disqualify himself or herself if he or she is
unable to handle the process promptly so as to render a resolution within a
reasonable time, in no event to exceed forty-five (45) days after final
testimony and/or briefs and in all events not to extend beyond six months form
the date the umpire is chosen, or such longer period to which the parties to the
dispute and the umpire may agree.
Section 18.3. TIME AND PLACE OF ALTERNATIVE RESOLUTION. The
alternative resolution shall be held at such place as the umpire may determine
within Essex County, New Jersey or such other location to which the parties may
agree, to commence not later than ten (10) days after the umpire has been
determined in accordance with Section 18.2.
Section 18.4. FEES. All fees and expense (including transcripts,
room rental and fees of the umpire) of alternative dispute resolution, shall be
paid as follows: 25% by the party or parties served with the Dispute Notice and
25% by the person(s) serving the Dispute Notice, with the remaining 50%
allocated 10% to the prevailing party (or parties) and 40% to the non-prevailing
party (or parties), as determined by the umpire (if the umpire does not
determine a prevailing party then pro-rata to each of the material parties to
the dispute as determined by the umpire) provided that the umpire shall have the
right to order that such fees be paid in a different percentage if any of the
parties has acted in bad faith (in which case he may shift other's shares to the
bad faith party(ies)). The fees payable to the umpire shall be his usual hourly
rates for consulting or dispute resolution services, as the same may be in
effect from time to time. Each party shall pay his own legal fees, costs and
disbursements.
Section 18.5. DISCOVERY. Each party shall be entitled to discovery
by way of oral deposition, inspection and copying of all relevant documents
within the care, custody or control of a party or a witness, and when authorized
by the umpire, by way of interrogatories. All discovery shall be complete
within forty-five (45) days of the appointment of the umpire. All documents to
be relied
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upon by any party to the proceeding shall be provided to the others no later
than two weeks before the hearing date for the proceedings. The time periods
for discovery may be extended by the umpire for good cause, provided that he is
able to meet the time requirement of Section 18.7.
Section 18.6. PROVISIONAL REMEDIES. When appropriate under
applicable New Jersey substantive and procedural law, the umpire shall have full
and complete authority to award provisional relief, on an ex parte basis or
otherwise.
Section 18.7. TIME AND METHOD FOR RESOLUTION. The umpire shall make
the award and serve notice thereof upon all parties within six (6) months of the
date the umpire is designated, or such longer period to which the parties to the
dispute and the umpire may agree. If the umpire fails to make his decision in
accordance with substantive law, or to properly apply the facts to the law, the
umpire's award will be deemed to have been procured by "undue means" and "beyond
his power." Any party may apply to court in accordance with the Act to have the
umpire's decision confirmed, reviewed, modified, affirmed or remanded to the
umpire with directions.
Section 18.8. ACT AND AGREEMENT GOVERN. Except as otherwise provided
herein, the Act shall govern the procedures and methods for any Alternative
Dispute Resolution undertaken pursuant to this Lease. Except as expressly
provided above, the umpire may not modify the provisions of this Article.
Section 18.9. INTENTIONALLY OMITTED.
ARTICLE XIX
REMEDIES
Section 19.1. REMEDIES NOT EXCLUSIVE. The specified remedies to
which either party may resort under the terms of this Lease are cumulative and
are not intended to be exclusive of any other remedies or means of redress to
which such party may be lawfully entitled in case of any breach or threatened
breach by the other party hereto of any provision of this Lease. The failure of
either party to insist in any one or more cases upon the strict performance of
any of the covenants of this Lease or to exercise any
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option herein contained shall not be construed as a waiver or a relinquishment
for the future of such covenant or option (except as otherwise expressly
provided herein). A receipt by Landlord of the Base Rent or additional rent
with knowledge of the breach of any covenant hereof shall not be deemed a waiver
of such breach, and no waiver by either party of any provision of this Lease
shall be deemed to have been made unless expressed in writing and signed by such
party. In addition to the other remedies in this Lease provided, both parties
shall be entitled to the restraint by injunction of the violation, or attempted
or threatened violation, of any of the covenants, conditions or provisions of
this Lease by the other party hereto. In the event of any litigation between
the parties, the party which does not prevail shall reimburse the other party,
within ten (10) days after demand therefor, for the reasonable legal fees and
disbursements incurred by the prevailing party in such litigation.
ARTICLE XX
CERTIFICATES OF LANDLORD AND TENANT
Section 20.1. CERTIFICATES. Either party hereto shall, at any time
and from time to time, upon not less than fifteen (15) days' prior notice from
the other party, execute, acknowledge and deliver to the other party (or to such
person or entity designated by the other party) a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, that this Lease is in full force and effect as
modified and stating the modifications), and the dates to which the Base Rent
and other charges have been paid, stating whether or not to the best knowledge
of the signer of such statement the other party is in default in keeping,
observing or performing any covenant or agreement contained in this Lease and,
if there be a default, specifying each such default, and containing such other
customary certifications as the other party may reasonably request, it being
intended that any such statement delivered pursuant to this Article may be
relied upon by the other party (or by the person or entity designated by the
other party), but reliance on such statement may not extend to any default as to
which the signer shall have had no actual knowledge, after due inquiry.
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ARTICLE XXI
SUBORDINATION
Section 21.1. SUBORDINATION. This Lease shall be subject and
subordinate to each Fee Mortgage which may now or subsequently affect Landlord's
interest in the Premises; provided, that this Lease shall not be so subject or
subordinate unless and until the holder of each Fee Mortgage shall execute and
deliver to Tenant a non-disturbance agreement, in form reasonably acceptable to
Tenant, providing in substance that, so long as this Lease shall be in full
force and effect, and Tenant shall not be in default hereunder, this Lease shall
not be terminated, nor shall Tenant's use, possession or enjoyment of the
Premises or exercise of its rights under this Lease be terminated, nor shall
Tenant's use, possession or enjoyment of the Premises or exercise of its rights
under this Lease be interfered with, nor shall the leasehold estate granted by
this Lease be affected in any other manner, by any foreclosure of or other
action to enforce any Fee Mortgage.
Section 21.2. ATTORNMENT. In the event of the enforcement by the
holder of any Fee Mortgage to which this Lease is subject and subordinate, as
provided in Section 21.1, of the remedies provided for by law or by such Fee
Mortgage, then Tenant shall automatically become the tenant of such holder, or
any person succeeding to the interest of such holder, without change in the
terms or provisions of this Lease; provided, that neither such holder nor
successor in interest (unless such holder or successor is an Affiliate of
Landlord) shall be bound by (a) any payment of Base Rent for more than one month
in advance except prepayments in the nature of security for the performance by
Tenant of its obligations under this Lease or (b) any surrender, termination
(other than in accordance with the terms of this Lease), cancellation, amendment
or modification of this Lease made subsequent to the making of the Fee Mortgage
in question and the notification of Tenant as to the name and address of such
holder, without the consent of such holder or successor in interest, and (c)
neither such holder nor successor in interest shall be liable for any act or
omission of Landlord (but shall be obligated to perform all continuing
obligations of Landlord hereunder after such holder or successor in interest
shall succeed to Landlord's rights in the Premises). Upon request by such
holder or successor in interest, Tenant shall execute and deliver an instrument
or instruments, reasonably requested by such
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holder or successor in interest, confirming the subordination and attornment
provided for herein.
Section 21.3. CURRENT FEE MORTGAGE. It shall be a condition
precedent to any of Tenant's obligations hereunder that Landlord has obtained,
for the benefit of Tenant, from the holder of any current Fee Mortgage, a
reasonable non-disturbance agreement customarily given by commercial mortgage
lenders in the state where the Premises is located and satisfying the
requirements of Section 21.1 above.
Section 21.4. PERFORMANCE OF OBLIGATIONS. Landlord agrees to perform
all of Landlord's obligations under any Fee Mortgage encumbering all or any part
of the Premises, except to the extent that, under this Lease, such obligations
are the responsibility of Tenant to perform.
Section 21.5. Intentionally omitted.
ARTICLE XXII
HAZARDOUS MATERIALS
Section 22.1. (a) DISCHARGES. If Tenant receives any actual notice
of the happening of any event involving an emission, spill, release or discharge
(including any "Release" as defined herein) into or upon (i) the air, (ii) soils
or (iii) surface water or ground water, of any toxic or hazardous substances or
wastes (intended hereby and hereafter to include any and all such material
listed in any federal, state or local law, code and ordinance and all rules and
regulations promulgated thereunder (including all "Environmental Law" as defined
herein), as hazardous (including all "Hazardous Substances" as defined herein)
(any of which is hereafter referred to as a "Hazardous Discharge"), or any
complaint, order, directive, claim, citation or notice by any governmental
authority (including any "Notice" as defined herein) or any other person or
entity (including any "Environmental Agency" as defined herein) with respect to
the following events or matters occurring prior to the Landlord and Tenant
entering into this Lease and/or during the term of this Lease: (a) air
emissions, (b) spills, releases or discharges to soils or any improvements
located thereon, surface water, ground water or the sewer, septic system or
waste treatment, storage or disposal systems servicing the Premises, (c)
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noise emissions, (d) solid or liquid waste disposal, (e) the use, generation,
storage, transportation or disposal of toxic or hazardous substances or wastes
(f) other Environmental, Health and Safety Matters (as defined herein) affecting
Tenant, the Premises, any improvements located thereon, or the business therein
conducted or, (g) violations of any Environmental Law or Environmental Permit
(any of which is hereafter referred to as an "Environmental Complaint"), then
Tenant at its sole expense shall give immediate notice to Landlord. Subject to
Landlord's rights and obligations hereinafter provided, Tenant shall initiate
and complete all steps and actions necessary or advisable to cleanup, remove,
restore, resolve and minimize the impacts of any Hazardous Discharge or
Environmental Complaint and to otherwise comply and cause the Premises to comply
with any Environmental Law or Environmental Permit pertaining to the Premises.
(b) Without limitation of the foregoing, Landlord shall have the
option, but shall not be obligated, to exercise any of its rights as provided in
this Lease, and may enter onto the Premises and/or take any actions as it deems
necessary or advisable upon notice to Tenant (except no notice shall be required
in emergent situations) to cleanup, remove, resolve or minimize the impact of,
or otherwise deal with, any Hazardous Discharge or Environmental Complaint or
otherwise to comply and cause the Premises to comply with any Environmental Law
or Environmental Permit, upon and after Landlord's receipt of any notice from
any person or entity asserting the happening of a Hazardous Discharge or an
Environmental Complaint or a violation of an Environmental Law or Environmental
Permit on or pertaining to the Premises. All costs and expenses incurred by
Landlord in the exercise of any such rights shall be deemed to be additional
rent hereunder.
Section 22.2. LIEN. If any federal, state or local agency imposes a
lien in a liquidated amount upon the Premises or any portion thereof by reason
of the occurrence of a Hazardous Discharge or Environmental Complaint at the
Premises or Tenant's failure to perform as required under this Lease then Tenant
shall within thirty (30) days thereafter either (i) eliminate or satisfy such
lien or (ii) post security or financial assurances in form and amount reasonably
satisfactory to Landlord to secure against enforcement of the lien. As to liens
in unliquidated amounts, Tenant shall act promptly and in good faith to obtain
the removal or satisfaction of such lien.
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Section 22.3. REPORTS. (a) Tenant shall promptly provide to
Landlord true, accurate and complete copies of any and all documents, including
reports, submissions, notices, orders, directives, findings and correspondence
made by Tenant to New Jersey's Department of Environmental Protection ("NJDEP")
[or CT or NY counterparts], the United States Environmental Protection Agency
("EPA"), the United States Occupation Safety and Health Administration ("OSHA")
or any other federal, state or local authority pursuant to any federal, state or
local law, code or ordinance and all rules and regulations thereunder which
require or involve information and submissions concerning Environmental Health
and Safety Matters (including any "Environmental Law" as defined herein).
(b) Without limitation of the foregoing, Landlord and Tenant shall
promptly furnish to the other:
(i) true and complete copies of all documents, submissions, and
correspondence provided to or received from any environmental
agencies;
(ii) true and complete copies of any Notice;
(iii) true and complete copies of all sampling and test results
obtained from samples and tests taken in and around the Premises; and
(iv) notice of the date and time of all meetings with any
Environmental Agency.
Section 22.4. RIGHTS. Upon reasonable notice to Tenant, Tenant shall
give any representatives of Landlord access during normal business hours to, and
permit any of them to examine, audit, copy or make extracts from, any and all
books, records and documents in possession of Tenant, its agents or any
independent contractor relating to Tenant's or the Premises environmental,
health or safety affairs and to inspect the Premises.
Section 22.5. COMPLIANCE. (a) Upon any and every appropriate
occurrence, Tenant shall, at Tenant's expense, promptly comply with all laws and
regulations governing sales, transfer or cessation of operations at a place of
business including the Industrial Site Recovery Act N.J.S.A. 13: 1K-6 ET SEQ.,
The Connecticut Transfer Act, and
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the Connecticut General Statute Section 22a-134 ET SEQ. if applicable, and any
other law, rule or regulation or legal requirement applicable to the Premises by
reason of which law there is a requirement for sampling, investigation,
remediation and/or filings concerning the environmental condition of the
Premises, as to all events happening after the date of this Lease (collectively
"ISRA").
(b) At no expenses to Landlord, Tenant shall promptly provide all
information requested by Landlord to determine ISRA applicability to the Tenant
(or any subtenant or assignee of Tenant) and shall promptly sign affidavits
evidencing any and all facts relevant to that determination when requested by
Landlord.
(c) Tenant and Landlord shall immediately furnish to the other party
true and complete copies of all documents, reports, submissions, notices,
orders, directives, findings and correspondence and other materials pertinent to
compliance with ISRA as such are issued or received by such party. Tenant and
Landlord shall also promptly furnish to the other party true and complete copies
of all sampling and test results obtained from all environmental and/or health
samples and tests taken at and around the Premises.
Section 22.6. Intentionally Omitted.
Section 22.7. INDEMNIFICATION. Landlord and Tenant acknowledge that
Tenant, or Affiliates of Tenant, have been in use and occupancy of the Premises
for several years prior to entering into this Lease. Accordingly, Tenant agrees
that Landlord shall have no liability for any Hazardous Discharge or
Environmental Complaint, or for compliance with any Environmental Law or
Environmental Permit relative to the Premises, on account of any action or
omission by Landlord or others either prior to this Lease or arising during the
term of this Lease (other than on account of Landlord's negligence or willful
misconduct). Tenant hereby further agrees, at its sole cost and expense, to
defend, indemnify and hold Landlord harmless from and against any and all
claims, lawsuits, liabilities, losses, damage and expenses (including, without
limitation, cleanup costs and reasonable attorney's fees arising by reason of
any of the aforesaid or an action against the Tenant under this indemnity) of
any kind or nature whatsoever by whomsoever asserted which may at any time be
imposed upon, incurred by or asserted or awarded against Landlord, Joseph
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C. DiFeo or Samuel X. DiFeo arising directly or indirectly from, out of or by
reason of any breach of this Article 22 occurring during the term of this Lease,
or arising out of:
(a) Use of the Premises (or any part thereof) for the storage,
treatment, generation, transportation, processing, handling, production or
disposal of any Hazardous Substance or as a landfill or other waste disposal
site or for manufacturing or industrial purposes (or any part thereof);
(b) Presence of any Hazardous Substances or a Release or the threat
of a Release on, at or from the Premises (or any part thereof);
(c) Appropriate and necessary investigative, containment, removal,
clean up and other remedial actions with respect to a Release or the threat of
any Release on, at or from the Premises (or any part thereof);
(d) Human exposure to any Hazardous Substance to the extent the same
arise from the condition of the Premises (or any part thereof) or the use or
operation thereof;
(e) Violation of any applicable Environmental Law;
(f) Non-compliance with any Environmental Permit; and
(g) Failure to perform any covenant made by a Tenant pursuant to the
terms of this Article 22.
The liability of Tenant hereunder shall in no way be limited,
abridged, impaired or otherwise affected by:
1. Any amendment or modification of this Lease;
2. Any extensions of time for payment or performance required by
Tenant under the Lease;
3. The release of any Guarantor or any other person from the
performance or observance of any of the agreements, covenant, terms or
conditions contained in the Lease;
4. Any investigation or inquiry conducted by or on the behalf of
Landlord or any agent of Landlord during
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the Term or any information which Landlord or any agent of Landlord may obtain
with respect to the environmental or ecological condition of the Premises (or
any part thereof);
5. The granting of a Fee Mortgage on the Premises;
6. The sale, transfer, conveyance or lease of the Premises (or any
part thereof), or the assignment of the Lease by Landlord, or the assignment or
sublease of the Lease, as provided for herein, by Tenant;
7. The dissolution or liquidation of any entity; and/or
8. Any other circumstances which constitutes a legal or equitable
release or discharge, in whole or in part, of Tenant under this Article 22 of
this Lease and as to which Tenant may not lawfully waive the effect of such
circumstance.
Section 22.8. (a) ENVIRONMENTAL MANAGER. In the event Landlord
shall exercise its rights under Section 22.1(b) above, Tenant hereby appoints
Landlord, which appointment shall be effective, if at all, only during the last
three (3) years of the Term, (which position may be delegated by Landlord) as
the manager of all environmental issues and Environmental Claims. The
Landlord's rights under these provisions are notwithstanding the provisions of
any other agreement to the contrary, and are intended to give the Landlord the
unfettered discretion to act practically and in a cost efficient manner to deal
with such issues effectively, over such period as Landlord deems appropriate,
choosing from the available alternatives as Landlord deems appropriate, without
interference or hindrance from any other party as long as the Landlord's actions
satisfy the requirements of any Environmental Agency. Without limitation of the
foregoing, but by way of explication, the Landlord shall have the following
rights:
(i) LICENSE. To the extent necessary or advisable in the
Landlord's opinion to permit the Landlord to exercise rights under
this Article, the Tenant shall permit the Landlord full and
non-exclusive use, occupancy, possession and enjoyment of the
Premises, for purposes including the installation and operation of
permanent improvements, and the sampling, removal and
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remediation of soils, groundwater and improvements, at reasonable
times and in a reasonable manner, using reasonable efforts to minimize
the intrusion upon and inconvenience to the Tenant and its ongoing
operations, without charge or liability of any kind (whether by reason
of a breach of the obligation to be reasonable or otherwise) for the
interference with the business of the Tenant resulting from the
exercise of such rights.
(ii) CONTROL. The Landlord shall have the right to: (a)
control the investigation and remediation of any Environmental Claim,
decide among available alternatives for remediation or correction
(including the right to choose inaction, or alternatives which result
in higher operational expenses as opposed to capital expenses); (b)
initiate, assume and control the prosecution or defense of any action,
proceeding, litigation or suit involving an Environmental Claim; (c)
settle or compromise any Environmental Claim; (d) exercise its rights
under this Article, to bind the Tenant after consultation with Tenant;
and (e) hire lawyers, consultants, advisors and contractors acceptable
to the Landlord. The Landlord may cause Tenant to incur expenses by
acting in its name, or it may incur expenses itself, all of which are
subject to reimbursement in accordance with Subparagraph 22.7.
(iii) COOPERATION. Tenant shall cooperate in all respects with
the exercise by Landlord of its rights hereunder and shall not
interfere with the implementation of decisions made by Landlord
hereunder. Tenant and its Affiliates shall not initiate contact
directly or indirectly with any Environmental Agency in a manner
intended or likely to result in the initiation of an enforcement
action or in interference with decisions of Landlord unless such
contact is required by law and failure to initiate contact will
subject the Tenant or its Affiliates to civil or criminal penalties.
Tenant may retain and consult with its own experts and lawyers
concerning the performance by the Landlord of its rights and
obligations.
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(iv) BOUND BROOK. Without limitation of the foregoing, the
Landlord may arrange to cause the move of any automobile franchise
operated by any Tenant from the present Bound Brook Premises to
another location mutually acceptable to the parties hereto in order to
permit more efficient investigation and or remediation of the Bound
Brook site.
(v) Intentionally Omitted.
(vi) Intentionally Omitted.
(b) Notwithstanding any other provision of this Article, Tenant
agrees to cooperate with Landlord with respect to any environmental matters,
shall keep Landlord fully apprised in this regard and shall provide Landlord
with copies of any reports, investigations or Notices received or undertaken
relative to the Premises.
(c) DISCLAIMER. The transactions covered by this Agreement and all
other agreements between or among any or all parties hereto involve properties
and operations that are conveyed "AS IS, WHERE IS.", and are subject only to any
specific representations, warranties or covenants made herein. Tenant is aware
that the Premises have had instances of environmental contamination or
noncompliance and Tenant has been given authority acceptable to Tenant to
conduct investigations and due diligence independent of this Lease to determine
the nature and extent of such conditions and has determined to proceed with the
transactions contemplated hereunder subject to the provisions of this Lease. As
noted above, Tenant, or Affiliates of Tenant, have been in use and occupancy of
the Premises for several years prior to entering into this Lease. In no event
shall there by any liability of Landlord, Joseph C. DiFeo or Samuel X. DiFeo for
lost profits, consequential damages or otherwise by reason of any Environmental
Claim or by reason of the Landlord's or Dealership's actions or omissions under
or by reason of any Environmental Claim or this Lease.
Section 22.9. SURVIVAL. Tenant's obligations under this Lease shall
survive the expiration or sooner termination of this Lease.
ARTICLE XXIII
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NOTICES; CONSENTS
Section 23.1. NOTICES. Any notice, demand, request, approval or
other communication (a "NOTICE") which, under the terms of this Lease or under
any statute, must or may be given by the parties hereto, must be in writing, and
must be given by mailing the same by registered or certified mail, return
receipt requested, postage prepaid, addressed to the respective parties as
follows:
If to Landlord:
Samuel X. DiFeo
121 Lorraine Avenue
Spring Lake, New Jersey 08755
with a Copy to:
Arnold & Porter
399 Park Avenue
New York, New York 10022
Attn: Michael J. Canning
If to Tenant:
United Auto Group, Inc.
375 Park Avenue
Suite 2201
New York, New York 10022
Attn: Philip Smith
with a Copy to:
Edward McKenzie
Bressler Amery & Ross
325 Columbia Turnpike
Florham Park, N.J. 07932
Either party, and the holder of any Mortgage or Fee Mortgage who shall have made
the request referred to in the last sentence of this Section 23.1, may designate
by notice in writing given in the manner herein specified a new or other address
to which a notice shall thereafter be so given. All notices shall be deemed
given when received. If requested in writing by the holder of any Mortgage or
Fee Mortgage (which request shall be made in the manner provided in this Section
23.1 and shall specify an address to which notices
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shall be given) any such notice shall also be given contemporaneously to such
holder in the manner herein specified.
Section 23.2. LANDLORD'S CONSENT. (a) No consent, approval or other
exercise of discretion (a "Consent") by Landlord shall, unless this Lease
specifies that such Consent is within Landlord's sole discretion, be
unreasonably withheld or refused. If Landlord shall fail to respond to any
request by Tenant for any Consent, within twenty (20) days after the date of
such request, and within ten (10) days after a further notice from Tenant,
stating that it is a "Second Notice" and referring to this Section, such request
shall be conclusively deemed to have been approved by Landlord. In any refusal
to grant Consent, Landlord shall specify in reasonable detail the reasons for
its refusal. Any dispute between the parties as to whether Landlord should have
granted a Consent shall be resolved by ADR in the manner described in Article
18.
(b) With respect to any provision of this Lease which provides, in
effect, that Landlord shall not unreasonably withhold, delay or refuse its
consent, Tenant, in no event shall be entitled to make, nor shall Tenant make,
any offset against rent otherwise due nor shall Tenant withhold any rent
otherwise due pursuant to the terms of this Lease based upon any claim or
assertion by Tenant that Landlord has unreasonably withheld, refused or delayed
any consent or approval; but, unless Landlord's unreasonable withholding,
refusal or delay is arbitrary, capricious or in bad faith (in which event
Tenant's rights and remedies against Landlord shall not be so limited), Tenant's
sole remedy shall be an action or proceeding to enforce any such provision, or
for specific performance, injunction or declaratory judgment.
ARTICLE XXIV
QUIET ENJOYMENT
Section 24.1. QUIET ENJOYMENT. Subject to the terms of this Lease,
Tenant, upon paying the Base Rent, additional rent and all other charges herein
provided for and upon observing and keeping all of the covenants, agreements and
provisions of this Lease on its part to be observed and kept, shall lawfully and
quietly hold, occupy
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and enjoy the Premises during the Term without hindrance or molestation.
ARTICLE XXV
INVALIDITY OF PARTICULAR PROVISIONS
Section 25.1. INVALIDITY. If any provision of this Lease or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Lease, or the application of such
provision to persons or circumstances other than those as to which it is invalid
or unenforceable, shall not be affected thereby, and each provision of this
Lease shall be valid and be enforced to the fullest extent permitted by law.
ARTICLE XXVI
BROKERAGE
Section 26.1. BROKERAGE. Each party represents and warrants to the
other that it has dealt with no broker or finder in connection with this Lease.
Each party agrees to indemnify and hold harmless the other party from and
against any claims, liabilities, suits, actions, loss, damage or expense
(including attorneys, fees and disbursements) resulting from any breach of the
foregoing representation and warranty.
ARTICLE XXVII
MEMORANDUM OF LEASE
Section 27.1. MEMORANDUM OF LEASE. Each party shall execute and
deliver, and Tenant may at any time record in the appropriate land records, a
notice or memorandum of this Lease in recordable form reasonably acceptable to
both parties. From time to time, promptly at the request of either party, each
party shall execute and deliver, and the requesting party may thereafter record
in the appropriate land records, an amendment or modification to such notice or
memorandum of lease in recordable form reasonably acceptable to both parties.
This Lease shall not be recorded. Upon any termination of this Lease, Tenant
shall, within ten (10)
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days after demand, execute and deliver to Landlord a document sufficient to
discharge of record any such notice or memorandum.
ARTICLE XXVIII
MISCELLANEOUS
Section 28.1. NO ORAL MODIFICATIONS. This Lease may not be modified
or amended except by a writing executed by both parties.
Section 28.2. GOVERNING LAW. This Lease shall be governed by and
shall be construed in accordance with the laws of the State in which the
Premises is located.
Section 28.3. UNAVOIDABLE DELAYS. If, during the term of this Lease,
either party shall be prevented or delayed from punctually performing any
obligations or satisfying any conditions of this Lease by any strike, lockout,
labor dispute, inability to obtain labor or materials, Act of God, legal
requirements, governmental restriction, regulation or control, enemy or hostile
action, civil commotion or other condition beyond the reasonable control of such
party, then the time to perform such obligation or satisfy such condition shall
be extended by the delay caused by such event. If either party shall, as a
result of any such event, be unable to exercise any right or option contained in
this Lease within any time period provided for in this Lease, such time period
shall be deemed extended for a period equal to the duration of the delay caused
by such event. Nothing herein contained shall apply to either party's
obligations to pay monies to the other party (including, as to Tenant, a failure
by Tenant to pay any Base Rent or Additional Rent due under this Lease).
Section 28.4. SUCCESSORS AND ASSIGNS. The covenants and agreements
herein contained shall bind and inure to the benefit of Landlord and Tenant and
their respective successors and assigns (but, in the case of Tenant, only
permitted assigns).
Section 28.5. CONSTRUCTION. The terms "include", "including" and
similar terms as used herein, shall be construed as if followed by the phrase
"without limitation". All reference in this Lease to Articles, Sections,
subsections or Exhibits shall be deemed references to
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Articles, Sections or subsections of or Exhibits to and incorporated into this
Lease, unless expressly provided to the contrary.
Section 28.6. NO JOINT VENTURE. Landlord and Tenant agree that they
are not partners or joint venturers by reason of this Lease.
Section 28.7. AUTHORIZATION. The person and entity signing this
Lease for Landlord and Tenant, respectively, each represents and warrants that
this Lease has been duly authorized, executed and delivered by Landlord and
Tenant, as the case may be.
Section 28.8. RELATIONSHIP OF LANDLORD TO TENANT. Landlord, an
Affiliate of Landlord, or persons comprising Landlord, may be a stockholder,
partner or the like in Tenant or an Affiliate of Tenant, which fact shall not
impose any duty or obligation (fiduciary or otherwise) on the Landlord in acting
as landlord under this Lease, it being specifically understood and agreed that
Landlord shall have the right to do or not do anything with respect to this
Lease to the same extent as if Landlord, an Affiliate of Landlord or persons
comprising Landlord were not a stockholder, partner or the like with or in
Tenant or any Affiliate of Tenant.
Section 28.9. NO SERVICE. Landlord will furnish no services of any
kind in or to the Premises. All required services shall be procured by Tenant
at its cost and expense.
Section 28.10. NO ABATEMENT UNLESS SPECIFIED. Except as may be
otherwise expressly provided in this Lease there shall be no abatement or
reduction of rents or other charges payable by Tenant under this Lease because
of inconvenience, interruption, cessation or loss of business or otherwise,
caused directly or indirectly by any present or future laws, rules,
requirements, orders, directions or regulations or any governmental authority
whatever or by priorities, rationing or curtailment of labor or materials or by
war or any manner or thing resulting therefrom, or by any other cause or causes,
nor shall this Lease be affected by any such causes.
Section 28.11. CAPTIONS. The captions herein are for convenience of
reference only and shall not be deemed to
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define, limit or describe the scope or intendment of any provision of this
Lease.
Section 28.12. SURRENDER. Neither acceptance of the keys nor any
other act or thing done by Landlord or any agent or employee of Landlord during
the term of this Lease shall be deemed to be an acceptance of a surrender of the
Premises. Surrender of the Premises can only be affected by agreement in
writing signed by Landlord accepting or agreeing to accept such a surrender.
Section 28.13. LANDLORD FOR TIME BEING. The term "Landlord" means
the owner, at the applicable time, of the Premises. If the named Landlord or
any successor landlord shall convey the Premises or transfer its interest
therein and the assignee shall assume Landlord's obligations hereunder, the
assigning Landlord shall thereupon cease to be liable for any subsequently
accruing obligations under this Lease.
Section 28.14. NON-RECOURSE. There shall be absolutely no personal
liability on the part of the Landlord, its partners, shareholders, officers,
directors, agents and employees or their successors or assigns with respect to
any of the terms, covenants and conditions of this Lease or with respect to any
act, omission or negligence of the Landlord. Tenant shall look solely to
Landlord's estate and property in the Premises and net proceeds therefrom for
the satisfaction of Tenant's remedies for the collection of any judgment or any
other judicial process requiring the payment of money by Landlord, and no other
property or assets of Landlord shall be subject to levy, execution or other
enforcement procedure for the satisfaction of Tenant's remedies under or with
respect to this Lease, the relationship of Landlord and Tenant or Tenant's use
of occupancy of the Premises.
Section 28.15. CROSS-DEFAULT; CROSS- COLLATERALIZATION. (a) Any one
or more events constituting a default by Tenant hereunder or by Tenants under
any Affiliate Leases or Affiliate Subleases shall, at Landlord election,
constitute a default under this Lease and all Affiliate Leases and Affiliate
Subleases.
(b) Any item of security under this Lease or any Affiliate Lease or
Affiliate Sublease shall constitute security under all such Leases and
Subleases.
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Section 28.16. LEASE MODIFICATIONS. Tenant agrees that in the event
any Institutional Fee Mortgagee shall require modifications to this Lease in
connection with the granting of a Fee Mortgage to Landlord, Tenant shall
reasonably cooperate with such Institutional Fee Mortgage and Landlord to
effectuate such modifications, and shall execute any reasonable Lease amendment
or Lease modification relative thereto; provided, however, that any such
amendment or modification shall not increase any financial obligations or
materially increase any obligations or decrease any rights of Tenant under this
Lease.
Section 28.17. LANDLORD ASSIGNMENT. Anything herein to the contrary
notwithstanding Landlord shall have the right to assign this Lease, without the
prior consent of Tenant, provided any such assignee shall execute, acknowledge
and deliver to Tenant an agreement assuming all obligations and performance of
this Lease to be rendered by Landlord from and after the effective date of such
assignment, other than the Landlord Guaranty if such assignee is not an
Affiliate of Landlord.
ARTICLE XXIX
LEASE GUARANTIES
Section 29.1. TENANT GUARANTY. (a) In order to induce Landlord to
enter into the Lease, and Affiliates of Landlord to enter into Affiliate Leases
and Affiliate Subleases, Tenant agrees to unconditionally guarantee to each
Landlord of an Affiliate Lease and an Affiliate Sublease (a) the full prompt and
unconditional payment of all sums owed by each Tenant (and each successor and
assign of such Tenant with respect to its interest therein) pursuant to such
Affiliate Lease and Affiliate Sublease (which includes, but is not limited to,
the Annual CTT Payments) which may become due under such Affiliate Lease and
Affiliate Sublease; and (b) the full, prompt and unconditional performance of
every obligation of each Tenant (and each successor and assign of such Tenant
with respect to its interest therein) to be performed under such Affiliate Lease
and Affiliate Sublease. The Tenant hereby agrees that if any amount as
aforesaid is not paid under any Affiliate Lease or Affiliate Sublease when and
as the same shall be due and payable, or if any obligation under any Affiliate
Lease or Affiliate Sublease is not fully performed on a timely manner, the
Tenant shall, from an after the Performance Date (as hereinafter defined) cause
such amount
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to be paid or cause such performance to be rendered, as if the same were to be
paid or performed by the Tenant hereunder. The term "Performance Date" shall
mean, with respect to each Affiliate Lease or Affiliate Sublease, the date upon
which an Event of Default (as defined therein) shall have occurred under such
Affiliate Lease or Affiliate Sublease with respect to which Event of Default the
Landlord thereunder shall be entitled to proceed to exercise the rights and
remedies provided for therein upon the occurrence of such Event of Default
without the requirement under such Affiliate Lease or Affiliate Sublease to give
any further notice of default to the Tenant thereunder, and any applicable grace
period provided to such Tenant shall have expired.
(b) The obligations of the Tenant pursuant to this Guaranty shall be
absolute and unconditional, irrespective of any (a) legal or equitable defense;
(b) discharge of one or more Tenants from its obligations under their respective
Affiliate Lease or Affiliate Sublease; (c) the validity or enforceability of the
any Affiliate Lease or Affiliate Sublease or any provision thereof; (d) the
absence or delay of any action to enforce the provisions of any Affiliate Lease
or Affiliate Sublease; and (e) any assignment of any Affiliate Lease or
Affiliate Sublease of the premises subject thereto.
(c) The Tenant hereby waives (a) all demands for payment or
performance hereunder, notice of acceptance of this Guaranty and all other
notices in connection herewith or in connection with the liabilities,
obligations and duties guaranteed hereby, including notices of default by a
Tenant or Tenants under any Affiliate Lease or Affiliate Sublease or any of them
and waives diligence, presentment and suit on the part of any Landlord in the
enforcement of any liability, obligation or duty guaranteed hereby; and (b) any
right to have the Landlords proceed against the defaulting Tenant(s) (or their
successors or assigns with respect to their interests under any Affiliate Lease
or Affiliate Sublease) under any Affiliate Lease or Affiliate Sublease or any
other guarantor of the Tenant's obligations under any Affiliate Lease or
Affiliate Sublease before proceeding against the Tenant, or any right to have
the Landlords enforce their rights against any Tenant, any other guarantor of
the Tenant's obligations under any Affiliate Lease or Affiliate Sublease and/or
exhaust any collateral security securing the Tenant's performance thereunder.
Suit may be brought and maintained against the Tenant by any
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Landlord under any Affiliate Lease or Affiliate Sublease to enforce any
liability, obligation or duty guaranteed hereby without joinder of any other
Tenant or other person. This Guaranty shall not be discharged except by the
full performance of all obligations and liabilities of all Tenants under the
Affiliate Lease or Affiliate Sublease.
(d) The Landlords under any Affiliate Lease or Affiliate Sublease may
deal with their respective Tenants in the same manner and as freely as if this
Guaranty did not exist, and shall be entitled to grant to their respective
Tenants such extension of time to perform any of their obligations pursuant to
their respective Affiliate Lease or Affiliate Sublease from time to time and at
any time, without in any way affecting, impairing, releasing or modifying,
limiting or discharging, in whole or in part, the Tenant's liability and
obligations hereunder. Such Landlords shall have the full right in their sole
discretion and without any notice to their respective Tenants, from time to time
and at any time, without affecting the liability and obligations of the Tenants
hereunder, to make any change, amendment or modification whatsoever in any term
or condition of the respective Affiliate Lease or Affiliate Sublease.
Furthermore, no impairment, change, release or limitation of the liability of
any or some of the Tenants in bankruptcy or any remedy for the enforcement
thereof, resulting from the operation of any present or future provision of the
Bankruptcy Code (11 U.S.C. Section 101 et seq.), or any similar law or statute
of the United States or any state thereof shall impair, modify, change, release
or limit in any manner the liabilities and obligations of the Tenant hereunder.
(e) This Guaranty shall be binding upon the Tenant an its respective
successors and assigns. Nothing contained in the preceding sentence shall be
deemed to impose upon any assignee or subtenant of Tenant's interest in the
Lease the obligation to guarantee contained herein.
29.2. UAG GUARANTY. This Lease and all Tenant's obligations
hereunder are guaranteed in all respects and in all events pursuant to the UAG
Guaranty, a copy of which is attached hereto as Exhibit __.
29.3. TRACE GUARANTY. This Lease and all Tenant's obligations
hereunder are further guaranteed to the extent provided in the Trace Guaranty, a
copy of which is attached hereto as Exhibit ____.
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IN WITNESS WHEREOF, Landlord and Tenant have duly executed and
delivered this Lease as of the day and year first above written.
LANDLORD:
FAIR REALTY COMPANY
By:_________________________
Name:_______________________
Title:______________________
TENANT:
[UNITED AUTO GROUP, INC. OR
INDIVIDUAL PARTNERSHIP
(to be determined)]
By:_________________________
Name:_______________________
Title:______________________
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<PAGE>
SCHEDULE OF LEASES
1. Lease between Boundbrook Realty Associates, as Landlord, and Somerset
Motors Partnership, as Tenant
Rent -- $71,799 per month as of October 1, 1995
Property Description -- The automobile dealership buildings of
approximately 25,600 square feet and 18,200 square feet, respectively,
along with parking, display and storage areas located on Lot 2, Block 7201
in the Township of Bridgewater, Somerset County, New Jersey
2. Lease between Rockland Realty Associates, as Landlord, and Rockland Motors
Partnership, as Tenant
Rent -- $12,901 per month as of October 1, 1995
Property Description -- 73, 75 and 77 North Highland Avenue, Nyack, New
York 10960.
3. Lease between SDJD 37 Realty, Inc., as Landlord, and OCM Partnership, t/a
Gateway Mitsubishi, and OCT Partnership, t/a Gateway Toyota, as Tenants
Rent -- $34,030 per month as of October 1, 1995
Property Description -- Lot 6.01 in Block 691; Lot 28 in Block 691, and
Lot 1 in Block 690.01, Dover Township, Ocean County, New Jersey.
4. Lease between Gateway Associates, as Landlord, and OCT Partnership t/a
Gateway Toyota
Rent -- $18,697 per month
Property Description -- Lot 12.01, Block 691, Dover Township, Ocean County,
New Jersey
5. Lease between J & S Equity Associates, as Landlord, and DiFeo Nissan
Partnership, as Tenant
Rent -- $27,817 per month as of October 1, 1995
Property Description -- 126, 181-187 Roosevelt Avenue; 29 Marcy Avenue;
909, 911-913, 915-921 and 967-983 Communipaw Avenue
<PAGE>
6. Lease between J & S Equity urban Renewal Corp., as Landlord, and Hudson
Motors Partnership, as Tenant
Rent -- $30,000 per month as of October 1, 1995
Property Description -- Block 1290.1, Lot A.1 on the Tax Map of Jersey
City, Hudson County, New Jersey
7. Lease between J & S Associates, as Landlord, and Hudson Motors Partnership,
as Tenant
Rent -- $40,000 per month as of October 1, 1995
Property Description -- Block 1290.1, Lot A.2 on the Tax Map of Jersey
City, Hudson County, New Jersey
8. Lease between J & S Equity Associates, as Landlord, and DiFeo Chevrolet-Geo
Partnership, DiFeo Jeep-Eagle Partnership and DiFeo Hyundai Partnership, as
Tenants
Rent -- $57,000 per month as of October 1, 1995
Property Description -- 599 U.S. Route 440, known as Lots 10K1 & 10K2,
Block 1751, Tax Map of City of Jersey City, Hudson County, New Jersey
9. Lease between Fair Realty Company, as Landlord, and Danbury-Mt. Kisco
Saturn Partnership, Danbury Auto Partnership, and Fair Chevrolet-Geo
Partnership, as Tenants
Rent -- $80,000 per month as of October 1, 1995
Property Description -- 102 Federal Road, Danbury, Connecticut, more
particularly described as a portion of the following described land
currently used as the Fair Cadillac-Oldsmobile-Isuzu car dealership (i.e.,
List 6759, Lot 0009).
10. Lease between Fair Realty Company, as Landlord, and Danbury-Mt Kisco Saturn
Partnership, Danbury Auto Partnership, and Fair Chevrolet-Geo Partnership,
as Tenants
Rent -- $7,505 per month as of October 1, 1995
Property Description -- Federal Road, Danbury, Connecticut (i.e., List
6758, Lot 0007).
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<PAGE>
THIS LEASE entered into this 27th day of September, 1990, by and between
J & F ASSOCIATES and TJGHCC ASSOCIATES, Connecticut Partnerships having offices
in the Town of Danbury, County of Fairfield and State of Connecticut
(hereinafter cumulatively called "Lessor"), both acting herein by JOHN D.
D'ELIA, General Partner and FAIR IMPORTS CORP. d/b/a FAIR ACURA, a Connecticut
Corporation having its principal office in the City of Danbury, County of
Fairfield and State of Connecticut (hereinafter called "Lessee").
ARTICLE I
Premises
1.1 Lessor, in consideration of the rent hereinafter reserved and of the
agreements and covenants herein contained on the part of the Lessee to be kept,
performed and fulfilled, has demised and leased, and by these presents does
demise and lease, unto Lessee and Lessee does hereby accept such leasehold
interest in reliance upon the agreements and covenants herein contained on the
parts of Lessor to be kept and performed on the terms and subject to the
limitations and conditions herein expressed, all that certain tract of land with
the buildings and improvements thereon more particularly described in Exhibit A
attached hereto and made part hereof, together with Lessors' right, title and
interest in and to all occupancy agreements and Leases listed on Exhibit B
attached hereto and made part hereof.
The Building occupied by Lessee, together with the land upon which it is
located as described in Exhibit A, are hereinafter collectively called the
demised premises. Said premises are subject (insofar as the same may be in
effect or applicable) to:
<PAGE>
(a) Building restrictions and regulations now in force and present and
future zoning laws, ordinances, resolutions and regulations affecting the
demised property and all present and future ordinances, laws, regulations and
orders of all boards, bureaus, commissions and bodies of any municipal, county,
state or federal sovereigns, now or hereafterhaving acquired jurisdiction of the
demised premises and the use and improvement thereof.
(b) Violation of law, ordinances, orders or requirements that might be
disclosed by an examination and inspection or search of the demised premises by
any federal, state or municipal departments or authority having jurisdiction, as
the same may exist on the date of the commencement of the term of this Lease,
subject to the provisions of Paragraph 5.1(C), (D), (E) and (F) hereof.
(c) The condition and state of repair of the demised premises as the same
may be on the date of the commencement of the term of this Lease.
(d) Any state of facts which an accurate survey of the demised premises may
show, provided such does not render title unmarketable. Lessor represents that
the survey attached hereto as Exhibit A is a true and accurate representation of
the premises.
(e) All taxes, assessment, water charges and sewer rents, accrued or
unaccrued, fixed or not fixed, not yet due and payable.
(f) Covenants, easements, restrictions, utility and other agreements of
record, provided such do not prohibit the intended
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<PAGE>
use of the premises, contain forfeiture or divestment clauses or render title
unmarketable.
ARTICLE II
Term
2.1 The term of this Lease shall be for a period of ten (10) years,
commencing on the day of closing of the purchase contract between COLONIAL
SUZUKI, INC. and ACCURATE MOTORS, INC. and JAMES G. HETHERINGTON dated March 27,
1990 (hereinafter the "Purchase Agreement").
2.2 Lessee shall have the option to cancel this Lease effective on the 61st
through the 63rd months of the Lease if Lessee gives Lessor six (6) months prior
notice of the exercise of this option to cancel and pays to Lessor the sum of
Two Hundred Thousand ($200,000.00) Dollars in five (5) equal monthly payments of
$40,000.00 commencing on the effective date of the cancellation and on the
monthly anniversaries thereof. Time shall be of the essence with regard to the
exercise of this option. In the event that the option is not exercised within
the time periods provided herein, it shall be of no further force and effect.
Once the option to cancel is exercised, Lessor shall have the right to show the
premises to prospective tenants and/or prospective purchasers at reasonable
times.
2.3 The Lessor grants to Lessee an option to extend the within Lease for
two periods of five (5) years each at the end of the basic term hereof
conditioned upon Lessee's not being in default under any of the terms and
conditions of this Lease. The terms and conditions of the Lease during each of
such option periods shall be the same as those set forth in the within Lease,
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<PAGE>
except for the rent and except that there shall be no further rights of
extension. In order to exercise each of the options set forth herein, Lessee
must give written notice of its intention to exercise at least six (6) months
prior to the commencement of each of said option periods, which notice shall be
by registered or certified mail and time is of the essence with regard to such
notice. The monthly rent payable during the first option period shall be the
lesser of $49,500.00 or one (1%) percent of the fair market value of such
premises, but in no event shall such monthly rent during such first option
period be less than $47,000.00 per month. If the parties cannot agree upon such
new rent sixty (60) days prior to the effective date of each option period each
party shall then appoint an MAI Appraiser and such two appraisers shall
establish the Fair Market Value of the premises leased hereunder for such option
period. In the event that the two appraisers shall be unable to agree on said
fair market value, they shall choose a third appraiser whose decision on such
fair market value shall be binding, such appraisal to be no lower than the lower
of the two appraisals nor higher than the higher of the two appraisals. In the
event that the Lessee shall exercise its second option to extend, then the
monthly rent payable during the second option period shall be the lesser of
$51,500.00 or one (1%) per cent of the fair market value of the Premises at the
commencement of such second extended term, but in no event shall the rent be
less than the rent paid during the first extended term. If the parties cannot
agree upon such new rent sixty (60) days prior to the effective date thereof,
then the fair market valuation shall be determined by the appraisers
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<PAGE>
as set forth in this Paragraph. During the second five-year option period the
fair market value shall again be determined in the same manner as provided for
during the first option period but utilizing the Sixteenth Lease Year instead of
the Eleventh Lease Year.
ARTICLE III
Rental
3.1 Basic Annual Net Rent. In consideration of the leasing aforesaid,
Lessee agrees to pay to Lessor as net basic rent for the demised premises the
amounts set forth in this Article III. The monthly rental for the premises which
shall be on the 1st day of each and every month in advance, shall be payable as
follows:
First Lease Year..................................$36,000.00
Second Lease Year.................................$36,000.00
Third Lease Year..................................$40,000.00
Fourth Lease Year.................................$40,000.00
Fifth Lease Year..................................$42,500.00
Sixth through Tenth Lease Years...................$47,000.00.
3.2 Net Rent: The Basic Annual Net Rent provided for in this Article shall
be in addition to and over and above all other payments to made by Lessee as
herein provided, it being the intention of the parties hereto that the Basic
Annual Net Rent shall be absolutely Net to Lessor and that Lessee shall pay all
costs and expenses relating to the premises.
3.3 Lease Year: The term "Lease Year" as used herein shall mean a period of
twelve (12) consecutive calendar months, the first of which lease years shall
commence on the date of closing of the Purchase Agreement previously described.
Subsequent lease
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<PAGE>
years shall run consecutively, each commencing upon an anniversary of the
commencement of the first lease year. Any period prior to the commencement of
the first lease year shall be a partial lease year.
3.4 No Set Off: The Basic Annual Net Rent, and all other rental hereunder,
shall be paid to Lessor without Notice or demand and without abatement,
deduction or set-off unless otherwise provided. Lessee shall pay interest at the
rate of twelve (12%) per cent per annum by law on any overdue installment which
is not paid by Lessee for a period of ten (10) days, computed from the date such
installment first became due.
3.5 Placement of Payment: Said basic Annual Net Rent and additional rent
shall be paid in lawful money of the United States of America c/o John D'Elia,
289 Mason Street, Greenwich, Connecticut 06830, or at such other place as may
hereafter be designated by Lessor in writing.
3.6 Additional Rental. All sums due and payable under this Lease other than
Basic Annual Net Rent shall be additional rent.
3.7 Covenant to Pay. Lessee covenants to pay the above rent herein reserved
and all other sums which may become due hereunder, or be payable by Lessee
hereunder, at the times and in the manner in this Lease provided.
3.8 Allocation. One Thousand ($1,000.00) Dollars per Month shall be the
rent allocated to property owned by TJGHCC and the balance to property owned by
J & F.
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<PAGE>
ARTICLE IV
Taxes and Assessments
4.1 Taxes. Lessee covenants and agrees to pay, as additional rent, before
any fine, penalty, interest or cost may be added therefor for the payment
thereof, except as provided in Section 4.6 of this Article, all real estate
taxes, assessments, water rate and charges, and other governmental charges,
general and special, ordinary and extraordinary, unforeseen as well as foreseen,
of any kind and nature whatsoever, including but not limited to assessments for
public improvements or benefits, which shall during the term hereby demised be
laid, assessed, levied, confirmed or imposed upon or become due or payable or a
lien upon the premises of which the demised premises are part or any part
thereof (all of which taxes, assessments, water rates ???? charges, levies and
other governmental charges are hereinafter referred to as "Impositions");
provided, however, that any imposition relating to a fiscal period of the taxing
authority, a part of which period is included in a period of ?????? either prior
to commencement or after the termination of ?????? term of this Lease, shall
(whether or not, during the term of this Lease, such imposition shall be laid,
assessed, levied, confirmed or imposed upon or become due or payable or a lien
upon the demised premises or any part thereof) be adjusted as between Lessor and
Lessee as of the commencement or termination of the term of this Lease, so that
Lessor shall pay that proportion of such imposition which that part of such
fiscal period included in the period of time before commencement or after the
termination of the term of this Lease bears to such fiscal period, and Lessee
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<PAGE>
shall pay the remainder thereof. With respect to any imposition for public
improvements or benefits which by law is payable, or at the option of the
taxpayer may be paid in installments, Lessor shall pay the installments thereof
which become due and payable subsequent to the termination of the term of this
Lease, and Lessee shall pay those installments which become due and payable
during the term of this Lease. The Lessee shall pay such taxes directly to the
applicable taxing body and shall arrange with the cooperation of Lessor to have
all bills sent directly to Lessee.
4.2 Tax on Rents. If, at any time during the term of this Lease, under the
laws of the State of Connecticut or a political subdivision thereof, a tax or
excise on rents or other tax, however described, is assessed or levied by said
state or political subdivision against Lessor on the basic rent expressly
reserved hereunder, as a substitute, in whole or in part, for taxes assessed or
imposed by said state or political subdivision on land and buildings or on land
or buildings, Lessee covenants to pay and discharge such tax or excise on rents
or other tax but only to the extent of the amount thereof which, so far as is
ascertainable, is a substitute, in whole or in part for taxes assessed or
imposed by said state or political subdivision on land and buildings or on land
or buildings, and is lawfully assessed or imposed upon Lessor and which was so
assessed or imposed as a direct result of Lessor's ownership of the demised
premises, or of this Lease or of the rentals accruing under this Lease, it being
the intention of the parties hereto that the basic rent to be paid hereunder
shall be paid to Lessee in full and without deduction of any amount whatsoever,
except as in this
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<PAGE>
Lease otherwise expressly provided. The payment to be made by Lessee pursuant to
this section shall be made before any fine, penalty, interest or cost may be
added thereto for the non-payment thereof. Such tax or excise on rents or other
tax shall be deemed to be an "imposition", as defined in Section 4.1 of this
Article.
4.3 Personal Property Tax. Lessee shall pay all taxes assessed on fixtures
and personal property installed by or for the Lessee in the demised premises or
used by Lessee thereat and all taxes on improvements made by or for the Lessee
in and to the demised premises even though the same may be assessed against the
Lessor.
4.4 Proof of Payment. Lessee shall make all tax payments within thirty (30)
days after receipt of bills from the taxing authority. If the holder of Lessor's
existing mortgage so requires Lessee shall pay to such mortgage holder
one-twelfth (1/12) thereof monthly in advance, together with its monthly payment
of the net basic rent. After each lease year, Lessor shall furnish Lessee with a
statement in reasonable detail of the actual imposition of taxes incurred by
Lessor during such period. Thereupon, there shall be an adjustment between
Lessor and Lessee with payment to or repayment by Lessor, as the case may
require, to the end that Lessor shall receive the entire amount of Lessee's pro
rata share of such costs and expenses for such period and no more.
4.5 Evidence of Tax. The certificate, advice or bill of the appropriate
official designated by law to make or issue the same or to receive payment of
any such imposition, or the non-
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<PAGE>
payment of any such imposition, shall be prima facie evidence that such
imposition is due and unpaid at the time of the making or issuance of such
certificate, advise or bill.
4.6 Nothing herein contained shall require Lessee to pay municipal, state
or Federal income taxes assessed against Lessor, municipal, state or Federal
capital levy, estate, succession, inheritance or transfer taxes of Lessor, nor
corporation franchise taxes imposed upon any corporate owner of the fee of the
Premises.
ARTICLE V
BUILDING
5.1. Lessor represents, warrants and covenants to Lessee as of the
Commencement Date that:
(A) During the period between the date of this Agreement and the
Commencement Date, Lessor shall, at Lessor's sole cost and expense, keep the
Property in reasonably good repair and conditions as is commercially prudent in
Danbury for similar Property and that on the Commencement Date the property
shall be in substantially the same condition as the Property is at the date of
this Lease, reasonable wear and tear, damage by fire, or condemnation as
provided below, excepted.
(B) Lessor is sole owner of the good, record and marketable title to the
Premises, has full authority to enter into this Lease and to perform all of its
obligations hereunder. The execution and delivery of this Lease and the
performance by Lessor of its obligations hereunder have been duly authorized by
_________ requisite action and no further action or approval is
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<PAGE>
required in order to constitute this contract as a binding and enforceable
obligation of Lessor;
(C) To Lessor's knowledge (and Lessor warrants that it has received no
notice of violations) the Property is free of any ___________ble explosives,
radioactive materials, organic compound ___________as polychlorinated biphenyls,
chemicals known to cause cancer or reproductive toxicity, pollutants,
contaminants, hazardous wastes, toxic substances or related materials,
including, without limitation, any substances defined as or included in the
definition of "hazardous substances" (collectively, "Hazardous Materials") under
any federal, state or local laws, ordinances or regulations, now or hereafter in
effect, relating to environmental conditions, industrial hygiene or Hazardous
Materials on, under or about the Property, including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq, the Resource Conservation and Recovery
act, 42 U.S.C. Section 6901, et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. Section 6901, et seq., the Clean Water Act, 33 U.S.C. Section
1251, et seq., the Clean Air Act, 42 UY.S.C. Section 7401, et seq., the Toxic
Substance Control Act, 15 U.S.C. Section 2601 through 2629, the Safe Drinking
Water Act, 42 U.S.C. Sections 300f through 300j, and any similar state and local
laws and ordinances and the regulations now or hereafter adopted, published
and/or promulgated pursuant thereto (collectively, the "Hazardous Materials
Laws"). The property is not currently used in a manner, and no prior use (by
Lessor, prior owners, or any tenant) has occurred which violates
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<PAGE>
any Hazardous Materials Laws. Neither the Lessor nor any tenant has received any
notice from a governmental agency for violation of Hazardous Materials Laws.
(D) Lessor has not received (and has no actual knowledge of) any notice or
request from any insurance company or Board of Fire Underwriters (or
organization exercising functions similar thereto) or from the holder or
servicing agent of the holder of any Mortgage, or from any state or municipal
authority, requesting the performance of any work or alteration in respect to
the Property.
(E) Lessor now has no actual knowledge of pending or contemplated
condemnation proceedings affecting the Property or any part thereof.
(F) Lessor is not now a party to any litigation, and Lessor knows of no
litigation or claims affecting the physical condition or title to the Property
except a certain action against Lessor by R & D Contractors against which Lessor
will hold Lessee harmless and Lessor shall give to Lessee prompt notice of the
institution prior to the Commencement Date of any such litigation, except
summary process proceedings against defaulting tenants of the Property.
(G)) Lessor represents that as of the date hereof the premises are zoned so
as to allow the Lessee to carry on the use provided hereunder (paragraph 6.1)
and to the best of Lessor's knowledge the buildings comply with applicable
zoning regulations.
All of the representations, warranties and covenants of the Lessor
contained in this Lease or in any document delivered to
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<PAGE>
Lessee pursuant to the terms of this Lease shall be true and correct in all
material respects and not in material default at the time of the Commencement
Date of this Lease.
5.2 Repairs and Maintenance. Except as otherwise provided in this Paragraph
5.2, Lessee covenants throughout the initial term of this Lease or any renewal
term, at Lessee's sole cost and expense, to take good care of the demised
premises and all improvements now or at any time erected on the demised
premises, such as the meters, sewage disposal, heating, plumbing and electrical
systems serving same, if any, and to keep the same in good order and condition,
and in a first rate state of decoration, and shall promptly at Lessee's own cost
and expense make all necessary repairs, whether structural or nonstructural,
interior and exterior, ordinary as well as extraordinary, foreseen as well as
unforeseen, all subject to reasonable wear and tear. When used in this Article,
the term "repairs" shall include replacements or renewals when necessary, and
all such repairs made by Lessee shall be equal in quality and class of the
original work. Lessee shall keep and maintain all portions of the building and
the demised premises, and the sidewalks, ramps and steps adjoining same, in a
clean and orderly condition, free of accumulation of dirt, rubbish, snow and
ice. Lessee further covenants throughout the term of this Lease, at Lessee's
sole cost and expense, promptly to comply with all laws and ordinances and the
orders, rules, regulations and requirements of all federal, state and municipal
governments and appropriate departments, commissions, boards, bureaus, agencies
and officers thereof, and the orders, rules, regulations and requirements of
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the local board of fire underwriters (or any other body now or hereafter
constituted exercising similar functions) whether such laws, ordinances, orders,
rules, regulations and requirements are foreseen or unforeseen, ordinary or
extraordinary, which may be applicable to the Building, the furniture, fixtures,
decoration equipment thereof and the sidewalk, curbs and vaults, if any,
adjoining the demised premises or the use or manner of use of the Building.
Lessee will likewise observe and comply with the requirements of all policies of
public liability, fire and all other policies of insurance at any time in force
with respect to the demised premises or the Building. Notwithstanding the above
provisions, Lessor shall have the obligation to repair, maintain and replace the
foundation, exterior walls, roof and structural beams and columns, unless the
required repairs or replacements are necessitated by the negligence or other
acts of Lessee.
5.3 Changes or Alterations. Lessee, at its sole cost and expense, shall
have the right at any time and from time to time to make non-structural changes
and alterations, to the Building, or any portion thereof. All improvements shall
be done in a good and workmanlike manner and shall comply with laws, regulations
and requirements of municipal and other governmental departments having
jurisdiction, and in accordance with the orders, rules, and regulations of the
Board of Fire Underwriters or any other body now or hereafter constituted
exercising similar functions; and Lessee shall procure certificates of occupancy
and other certificates if required by law. The consent by Lessor to any such
improvements shall not be so construed as to subject Lessor or the Demised
Premises to any liability whatsoever for the
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payment of any labor performed materials furnished in connection therewith and
in the event that any claim therefor is asserted against Lessor or the Demised
Premises, Lessee agrees to forthwith pay the same, or cause such security to be
deposited for the payment thereof as may be reasonably satisfactory to Lessor.
5.4 Contest of Validity. Lessee shall have the right to contest by
appropriate legal proceedings, without cost or expense to Lessor, the validity
of any law, ordinance, order, rule, regulation or requirement of the nature
referred to in this Article V, and if by the terms of any such law, ordinance,
order, rule, regulation or requirement, compliance therewith may legally be held
in abeyance without subjecting Lessee or Lessor to any liability of whatsoever
nature for failure to so comply therewith, Lessee may postpone compliance
therewith until the final determination of any such proceedings, provided that
all such proceedings shall be prosecuted with all due diligence and dispatch.
5.5 Payment for Services. The Lessee agrees to pay or cause to be paid all
charges for gas, fuel, oil, water, sewer, electricity, light, heat, air
conditioning, power, telephone or other communication service or other utility
or service used, rendered or supplied to, upon or in connection with the
Building and the demised premises throughout the demised term, and to indemnify
the Lessor and save it harmless against any liability or damages on such
account. The Lessee shall also at its sole cost and expense procure or cause to
be procured any and all necessary permits, licenses or other authorizations
required for
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the lawful and proper use, occupation, operation and management of the demised
premises and for the lawful and proper installation and maintenance upon the
Building of wires, pipes, conduits, tubes and other equipment or appliances for
use in supplying any such service to or upon the Building. The Lessee expressly
agrees that the Lessor is not, nor shall it be, required to furnish to the
Lessee or any other occupant of the Building, during the demised term, any
water, sewer, gas, fuel, oil, heat air conditioning, electricity, light, power
or any other facilities, equipment, labor, materials or services of any kind
whatsoever.
5.6 Indemnity. Lessee agrees to and does hereby indemnify Lessor against
damages, losses, costs and expenses with respect to liens which shall attach to
the demised premises. The Lessee further agrees that in the use and occupation
of the Building, the Lessee will comply with all requirements of all laws,
ordinances, orders and regulations of the federal, state, county and municipal
authorities and with any direction or certificate of occupancy issued pursuant
to any law by any public office or officer. The Lessee covenants that it will
not use or permit to be used any part of the Building or the premises for any
dangerous, noxious or offensive trade or business and will not cause or maintain
any nuisance in, at or on the Building or the premises.
ARTICLE VI
Use
6.1 Use. Lessee may use the premises as a multiple automobile agency,
together with uses incidental thereto.
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ARTICLE VII
Indemnity and Insurance
7.1 Indemnity. (a) Lessee hereby agrees to defend, pay, indemnify and save
free and harmless Lessor, and/or any fee owner or ground or underlying lessors
of the demised premises, from and against any and all claims, demands, fines,
suits, actions, proceedings, orders, decrees and judgments of any kind or nature
by or in favor of anyone whomsoever and from and against any and all costs and
expenses, including attorneys' fees, resulting from or in connection with loss
of life, bodily or personal injury or property damage arising, directly or
indirectly, out of or from or on account of any occurrence, in, upon, about, at
or from the demised premises occasioned wholly or in part by any negligent or
willful act or omission of Lessee or any sub-tenant, concessionaire or licensee
of Lessee, or their respective employees, agents, contractors or invitees in,
upon, about, at or from the demised premises or its appurtenances or by reason
of the failure of all or any sub-tenant to perform any acts required of them
pursuant to the provisions of this Lease. (b) Lessee and all those claiming by,
through or under Lessee shall store their property in and shall occupy and use
the demised premises and any improvements therein and appurtenances thereto and
solely at their own risk and Lessee and all those claiming by, through or under
Lessee hereby release Lessor from any and all claims of every kind, including
loss of life, personal or bodily injury, damage to merchandise, equipment,
fixtures of other property, or damage to business or for business interruption,
arising directly or indirectly, out of or from or on account of such occupancy
and
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use or resulting from any present or future condition or state of repair
thereof. (c) Lessor and Lessor's agents or employees shall not be responsible or
liable at any time to Lessee, or to those claiming by, through or under Lessee,
for any loss of life, bodily or personal injury, or damage to property or
business, or for business interruption, that may be occasioned by or through the
acts, omissions or negligence of any other persons. (d) Lessor's and Lessor's
agents and employees shall not be responsible or liable at any time for any
defects, latent or otherwise, in the demised premises or any of the systems,
equipment including plumbing, heating or air conditioning, electrical wiring or
insulation thereof, stairs, porches, railings or walks, machinery utilities,
appliances or apparatus therein, nor shall Lessor be responsible or liable at
any time for loss of life, or injury or damage to any person or to any property
or business of Lessee, or those claiming by, through or under Lessee, caused by
or resulting from the bursting, breaking, leaking, running, seeping, overflowing
or backing up of sewer pipes, downspouts, tanks, tubs, water closets, waste
pipe, drain or other pipes, or caused by water, steam, gas sewage, snow or ice
in any part of the demised premises, or caused by or resulting from injury done
or occasioned by wind, rain, snow or leakage of water or from the interruption
in the supply of any utilities, acts of God or the elements, or resulting from
any defect or negligence in the occupancy, construction, operation or use of any
Building or improvement on or in the demised premises, including the demised
premises or any of the equipment, fixtures, machinery, appliances or apparatus
therein or from broken glass,
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water, snow or ice coming through the roof, doors, windows, walks or other place
or the falling of any fixtures, plaster, tile, stucco or other matter, or any
equipment, or appurtenance becoming out of order or repair or interruption of
any service. (e) Lessee shall give prompt notice to Lessor in case of fire or
other casualty or accidents in the demised premises or any defects therein or in
any of its fixtures, machinery or equipment. (f) Lessee expressly acknowledges
that all of the foregoing and following provisions of this Section shall apply
and become effective from and after the commencement date of this Lease and
shall be effective to the full extent permitted by law. In case Lessor shall be
made a party to any litigation, commenced by or against Lessee, its agents,
licensees, concessionaires, contractors, customers or employees, or arising out
of Lessee's use or occupancy of the demised premises or other action of the
Lessee or its agents, then Lessee shall protect and hold Lessor harmless and, in
addition, shall pay all costs, expenses and reasonable attorney's fees incurred
or paid by Lessor in connection with such litigation. The Lessee shall maintain
at its own expense insurance in such amounts and for such purposes and on such
terms as follows:
7.2 Fire Insurance. Lessee,shall, at Lessee's sole cost and expense, keep
the Building and improvements constituting the Premises, insured against: (a)
loss or damage by flood, fire, icing, wind damage, and against loss or damage by
other risks now or hereafter embraced on an "all risk basis", so-called,
including difference in conditions coverage and against such other risks as
Lessor may designate, in amounts equal to the then
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"full replacement Cost", as increased annually to reflect the then current
replacement cost, such replacement cost to be established by appraisal by
Lessors. It is agreed that the total replacement cost for the buildings
presently located on the premises as of the Commencement Date of this lease is
at least $2,800,000.00; (b) loss or damage from leakage of systems now or
hereafter installed in the Premises, in such amount as Lessor may reasonably
require; (c) loss or liability resulting from property damage, personal injury
or death by explosion of hot-water boiler, air conditioning equipment, pressure
vessels or similar apparatus, if any, now or hereafter installed in the
premises, in such limits with respect to any one accident shall be not less than
$1,000,000.00 or as reasonably be requested by Lessors from time to time; (d)
Rent abatement insurance covering risk of loss during a one-year period due to
the occurrence of any of the foregoing hazards. At Lessor's request, Lessee
shall furnish Lessor a certificate of insurance certifying that the insurance
coverage required hereby is in force. Lessor shall be named as an insured party
as owner. All policies of insurance required hereby shall provide, to the extent
available, that they will not be cancelled upon less than fifteen (15) days'
prior notice to Lessor. Any insurance required by the terms of this Lease to be
carried by Lessee may be under a blanket policy (or policies) covering other
properties of Lessee. If such insurance is maintained under a blanket policy,
Lessee shall procure and deliver to Lessor a statement from the insurer or
general agent of the insurer setting forth the coverage maintained and the
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amounts thereof allocated to the risks intended to be insured hereunder.
7.3 Workmen's Compensation Insurance. The Lessee in compliance with the
workmen's compensation law of the State of Connecticut shall carry a policy of
Workmen's Compensation and Employer's Liability Insurance. Unless the laws of
such state prohibit placing a dollar limit on the liability of an insurance
company for employer's liability, the policy shall be written with an employer's
liability limit of at least $100,000.00. Such insurance shall be maintained in
full force at all times during the terms of the Lease.
7.4 General Liability Insurance. The Lessee, at its own cost and expense,
shall purchase and maintain in force a policy of general liability insurance.
This policy shall provide at least the coverages and limits specified
immediately below:
(a) The policy shall be written on a so-called "comprehensive" general
liability form;
(b) The Lessor shall be a named insured under the policy;
(c) The policy shall be endorsed with a cross-liability endorsement stating
that in the event that a claim is brought by one insured against another insured
under the policy, or by an employee of one insured against another insured under
the policy, each insured shall be considered a separate insured for purposes of
the insurance;
(d) The policy shall be written on the "caused by any occurrence" rather
than written on the "caused by accident" basis for bodily injury and property
damage liability coverage;
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(e) The policy shall be written with a blanket contractual liability
endorsement providing automatic coverage for bodily injury or property damage
assumed under any type of written contract in addition to types of contracts
defined in the policy form;
(f) The policy shall be written using a "personal injury" endorsement
providing coverage for claims arising out of false arrest, false imprisonment,
defamation of character, libel and slander, wrongful eviction and invasion of
privacy and such endorsement shall not contain an exclusion of coverage for
claims for "personal injury" brought by employees of an insured;
(g) Unless by special agreement, the Lessee and Lessor have mutually agreed
in writing each to hold the other harmless for damage to its property caused by
the negligence of the other, and unless each shall have had its policies of
property damage or business interruption insurance endorsed to acknowledge
receipt and acceptance of advices that such hold harmless agreements have been
undertaken, the policy effected by the Lessee shall specifically include
coverage for legal liability for damage to the demised premises and/or any
portion of the demised premises by fire and inherent explosion, or by water
damage (the latter including, where pertinent, sprinkler leakage damage);
(h) The policy shall be written with bodily injury limits of $1,000,000 per
person, $5,000,000 per occurrence (which limits shall also apply per person and
aggregate for "personal injury" coverage) and with a property damage limit of at
least $1,000,000 per occurrence and $1,000,000 aggregate (which limits shall
also apply to fire and explosion legal liability coverage).
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7.5 Proceeds. All such policies of insurance hereinabove referred to shall
provide that the proceeds thereof shall be payable to Lessee and Lessor as their
respective interests may appear, in accordance with the provisions of Paragraph
7.10 below.
7.6 Insurance Companies. All such policies of insurance hereinablve
referred to shall be written in companies reasonably satisfactory to Lessor and
authorized to do business in the State of Connecticut and shall be written in
such form and distributed in such companies as shall be reasonably acceptable to
Lessor. Lessee shall deliver to Lessor on or before the commencement of the term
of this Lease all such policies of insurance or binders in the amounts and
covering the risks hereinabove provided, and all policies to be carried by
Lessee in which Lessor is named as an insured shall provide that the insurer
shall not cancel the same unless not less than 30 days prior written notice
thereof is given to Lessor.
7.7 Maintenance of Insurance. It is the intention of the parties that
Lessee, as to that insurance, it is to take out, maintain in force at all times,
pay for and deliver to Lessor all of the policies of insurance, binders or
certificates of insurance hereinabove referred to at such times and in such
manner so that Lessor shall at all times during the initial term and any renewal
term of the lease be in possession of policies or binders of insurance which are
in full force and effect.
7.8 Rent Insurance. The loss of rental insurance referred to in paragraph
7.2 above shall be purchased by Lessor at Lessee's expense in any amount equal
to at least the Basic Annual
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Net Rent for one year, plus, for one year, additional rent hereunder, as
estimated by Lessor.
7.9 Waiver of Subrogation Rights. The parties hereto hereby waive any and
all rights of recovery, claim, action or cause of action, against each other,
their respective agents, officers and employees for any loss or damage that may
occur to the Leased Premises or the Building and to all property, whether real,
personal or mixed, located in the Leased Premises, or the Building, by reason of
fire, the elements, or any other cause normally insured against under the terms
of standard fire and extended coverage insurance policies or the type prescribed
from time to time for use in respect of the Building, regardless of cause or
origin, including negligence of the parties hereto, their respective agents and
employees. Each party agrees to provide the other with reasonable evidence of
its insurance carrier's consent to such waiver of subrogation.
7.10 Insurance Proceeds Escrow. For the purpose of paying the cost of
repair, replacement, or rebuilding, the proceeds of insurance policies shall be
kept in an escrow account and disbursed by the Lessor during the course of the
work. If the amount of the insurance proceeds is insufficient to pay the cost of
the necessary repair, replacement, or rebuilding of such damaged building or
improvements the Lessee shall pay any additional sum required, and if the amount
of the insurance proceeds is in excess of the cost thereof the amount of the
excess shall be retained by the Lessor.
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ARTICLE VIII
Lessor's Right to Perform Covenants of Lessee
8.1 Lessor's Right to Make Payments. Lessee covenants and agrees that if it
shall at any time fail to pay any imposition pursuant to the provisions of this
Lease or to take out, pay for, maintain or deliver any of the insurance policies
provided for herein, or shall fail to make any other payment (all of which
payments under this Lease shall be deemed additional rent) or perform any other
act on its part to be make or performed as in this Lease provided, then Lessor
may, but shall not be obligated to do so, and without notice to or demand upon
Lessee and without waiving or releasing Lessee from any obligations of Lessee in
this Lease contained, pay any such imposition, effect any such insurance
coverage and pay premiums therefor, and may make any other payment or perform
any other act on the part of Lessee to be made and performed as in this Lease
provided, in such manner and to such extent as Lessor may deem desirable, and in
exercising any such rights pay necessary and incidental costs and expenses,
employ counsel and incur and pay reasonable attorneys' fees. All sums so paid by
Lessor and all necessary and incidental costs and expenses in connection with
the performance of any such act by Lessor, together with interest thereon at the
rate of twelve per cent (12%) per annum from the date of the making of such
expenditure by lessor, shall be payable to Lessor on demand, and Lessee
covenants to pay any such sum or sums with interest as aforesaid and Lessor
shall have (in addition to any other right or remedy of Lessor) the same rights
and remedies in
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the event of the non-payment thereof by Lessee as in the case of default by
Lessee in the payment of the Basic Annual Net Rent.
ARTICLE IX
Mechanics' Liens
9.1 Mechanic's Liens. Lessee shall not suffer or permit any mechanic's
liens to be filed against the Building, the demised premises, or any part
thereof, by reason of work, labor, services or materials supplied or claimed to
have been supplied to Lessee or anyone occupying the Building, the demised
premises or any part thereof through or under Lessee. If any such mechanic's
lien shall at any time be filed against the Building or the demised premises of
which Lessee shall have received written notice from Lessor or the lienor,
Lessee shall cause the same to be discharged of record within thirty (30) days
after the date of filing the same except as provided in Section 9.2 of this
Article. If Lessee shall fail to discharge such mechanic's lien within such
period, then in addition to any other right or remedy of Lessor, Lessor may, but
shall not be obligated to, discharge the same either by paying the amount
claimed to be due or by procuring the discharge of such lien by deposit in court
or by giving security or in such other manner as is, or may be prescribed by
law. Any amount paid by Lessor for any of the aforesaid purposes,and all
reasonable legal and other expenses of Lessor, including reasonable counsel
fees, in or about procuring the discharge of such lien, with necessary
disbursements in connection therewith, with interest thereon at the rate of
twelve per cent (12%) per annum from the date of payment shall be repaid by
Lessee to Lessor on demand as provided in Article VIII hereof.
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Nothing herein contained shall imply any consent or agreement on the part of
Lessor to subject Lessor's estate to liability under any mechanic's lien law.
9.2 Right to Challenge. Lessee shall have the right to contest the amount
or validity of any such lien by appropriate legal proceedings provided Lessee,
within twenty (20) days after notice of the attachment of such lien, shall give
written notice to Lessor of its intention to contest the same which shall
specify the amount of the lien to be contested, and provided that at the time of
giving such notice Lessee shall deposit with Lessor or as directed by a court of
law as security for the payment of such lien money or other security
satisfactory to Lessor in an amount sufficient, in the sole judgment of Lessor,
to pay or secure payment of such lien together with interest, court costs,
attorneys' fees and any other charges in connection therewith that may be
assessed against or become a charge on the Building, the demised premises or any
part thereof, in said proceedings. As long as Lessee shall continue diligently
to prosecute such proceedings and is not in default under any provision of this
Lease, and further provided neither Lessor nor Lessee, or any interest of either
of them is subject to loss, forfeiture, attachment or criminal process, Lessor
shall not have the right to pay, remove or discharge any such lien so contested.
If at any time while such proceedings are pending the money or other security
held by Lessor shall in the reasonable judgment of Lessor be insufficient to pay
or secure payment or such lien together with interest, court costs, attorney's
fees and any other charges in connection therewith that may be assessed
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against or become a charge on its Building, demised premises or any part thereof
in said proceedings, Lessee shall forthwith pay over to Lessor an amount of
money sufficient, together with the money or other security so deposited
pursuant to this Section, to pay the same. In the event of any default by Lessee
under this Lease, or in the event Lessor or Lessee or any interest of either is
subject to forfeiture, attachment or criminal process, Lessor is authorized to
use any money or other security deposited under this Section (together with any
interest on any securities deposited hereunder) to apply at its option, on
account of such default or to pay said lien. Lessee shall not be entitled to
interest on any money deposited pursuant to this Section, but shall be entitled
to receive from time to time any interest on any securities deposited hereunder
so long as the amount of such deposit is sufficient in the reasonable judgment
of Lessor to pay or secure payment of such lien together with all interest,
court costs, reasonable attorneys' fees and other charges in connection
therewith that may be assessed against or become a charge on the Building, the
demised premises, or any part thereof, in said proceedings and provided that
Lessee is not in default under any provision of this Lease of which Lessee shall
have written notice. Upon the termination of such proceedings, the money or
other security so deposited (together with any interest on any security
deposited hereunder) shall be applied to the payment, removal and discharge of
such lien, if any, then payable and the interest, court costs, attorneys' fees
and other charges in connection therewith accruing in such proceedings, and when
such lien has been discharged of record, the balance, if any, shall
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be paid or returned to Lessee, provided Lessee is not in default under this
Lease.
ARTICLE X
Covenant Against Waste
10.1 Covenant Against Waste. Lessee covenants not to do or suffer any waste
or damage, disfigurement or injury to the Building or the demised premises
except as may be caused by reasonable wear and tear or other loss specifically
provided for elsewhere in this Lease. Nothing in this Article shall be construed
to prevent Lessee from making changes and alterations permitted under this
Lease.
ARTICLE XI
Paramount Title of Lessor
11.1 Paramount Title of Lessor. Nothing in this Lease contained shall
authorize Lessee to do or refrain from doing any act which shall in any way
encumber the title of Lessor in and to the demised premises, nor shall the
title, interest or estate of Lessor therein be in any way subject to any claim
by way of lien or encumbrance, whether arising by operation of law or by virtue
of an express or implied contract by Lessee. Any claim to a lien or encumbrance
upon said demised premises, arising from any act or omission of Lessee, shall
accrue only against the leasehold estate of Lessee and shall in all respects be
subject or subordinate to this paramount title and right of Lessor in and to
said demised premises. The whole world and particularly every person furnishing,
manufacturing or preparing any material, fixtures, apparatus or machinery for,
or on account of, said
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demised premises, or the Building, or the appurtenances or furnishings therein,
or performing any labor or services in, upon or about said demised premises, or
the Building, or appurtenances, or dealing in any wise with Lessee or any other
claiming under it, shall take and be held charged with notice of this condition,
and shall have and acquire no lien upon Lessor's interest through the furnishing
of such material, fixtures, apparatus, machinery, labor or services.
ARTICLE XII
Mortgages, Assignments and Subleases
12.1 Assignment and Subletting. The Lessee shall not assign, mortgage, or
encumber this Lease (whether by operation of law or otherwise), without the
prior written consent to the Lessor in each instance. Lessee may assign this
Lease without consent of Lessor to one or more partnerships or corporations of
which it shall be a general partner or stockholder, or which are owned and
controlled to the extent of 50% or more by Lessee or SAMUEL X. DiFEO and JOSEPH
DiFEO, as the case may be. In the event that Lessee is a corporation, the sale
or transfer of more than thirty-five (35%) per cent of its stock shall be deemed
an assignment and shall require Lessor's consent. Lessee may sublet all or
portions of the Demised Premises for rental periods within the term of this
Lease without the prior written consent of the Lessor, provided, however, that
the Lessee shall remain primarily liable for the payment of all rent due Lessor
under this Lease and for the performance of all the other terms of this Lease
required to be performed by the Lessee. If this Lease is assigned, or if the
Demised Premises or any part thereof is
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sublet, or occupied by anybody other than Lessee, Lessor may, after default by
the Lessee, collect rents from the assignee, subtenant or occupant and apply the
net amount collected to the rent payable by Lessee under this Lease. No such
assignment, subletting, occupancy, or collection shall be deemed a waiver of
this covenant, or the acceptance of the assignee, subtenant, or occupant as
tenant, or a release of Lessee from the further performance by Lessee of the
covenants in this Lease. The consent by the Lessor to an assignment of mortgage
or encumbering of this Lease shall not be construed to relieve the Lessee from
obtaining the consent of Lessor to any further assignment. Notwithstanding the
foregoing, if Lessee assigns this Lease entirely to one or more corporations of
which he shall be a stockholder, then Lessee shall have no further obligation or
personal liability except as otherwise provided in this Lease.
ARTICLE XIII
Surrender of Leased Premises
13.1 Condition of Demised Premises Upon Surrender. All erections,
alterations, improvements or additions made upon the demised premises either by
Lessor or Lessee, except furniture, business equipment or movable partitions or
trade fixtures installed by Lessee or set forth in the Purchase Agreement, shall
be the property of Lessor and shall remain and be surrendered with the demised
premises as a part thereof at the termination of this Lease without compensation
to Lessee.
13.2 Expiration. Lessee for itself and its successors in, under and to this
Lease, in, under and to said Building, expressly covenants and agrees with the
Lessor that upon
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expiration of the term of this Lease by lapse of time or upon the earlier
termination of this Lease for any reason whatsoever (except as a consequence of
default hereunder by the Lessor), all right and interest of the Lessee in the
Building, together with all of the right, title and interest of the Lessee in
and to all personal property and materials and supplies in the Building used in
the maintenance or operation of the Building, shall be and become the property
solely of Lessor, and Lessee shall have no further right, title or interest
therein.
13.3 Surrender. Upon the expiration of the term of this Lease by lapse of
time or upon the earlier termination of this Lease for any reason whatsoever
(except as a consequence of default hereunder by the Lessor), and also in the
event that pursuant to any of the provisions of this Lease the right of the
Lessee to possession of the demised premises and of the Building ceased and the
Lessor under the terms of this Lease has such right of possession even though
the term of this Lease has not expired, Lessee shall and will surrender and
deliver up the Building and the demised premises into the possession and use of
the Lessor immediately, and Lessee hereby acknowledges and agrees that Lessor
shall have the right in any such event to enter into and upon said demised
premises and the Building, to take possession thereof, with or without process
of law, and the right to expel and remove Lessee, using such force as may
reasonably be necessary, and such entry or possession shall not constitute a
trespass or forcible entry or detainer.
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ARTICLE XIV
Default
14.1 Default. If the Lessee shall: (a) default in the payment of the Basic
Annual Net Rent reserved herein or any additional rental herein mentioned or any
part of either or in making any other payment herein provided for a period of
ten (10) days or more and after written notice from Lessor which shall allow
Lessee a three-day period within whIch to cure any default. Lessor shall not Be
required to give Lessee more than three written notices in any calendar year or
(b) default in the observance of any of the other terms, convenants and
conditions of this Lease and such default shall continue for more than thirty
(30) days after written notice of such default; or (c) make any assignment of
Lessee's leasehold interest for the benefit of creditors or any of its leasehold
interest shall be attached, or if Lessee shall file a voluntary petition in
bankruptcy or be by any court adjudicated a bankrupt or take the benefit of any
insolvency act or be dissolved, and such appointment, if made in proceedings
instituted by Lessee, shall not to be vacated within sixty (60) days after it
has been made, or if made in proceedings instituted by Lessee, shall not be
vacated within sixty (60) days after it has been made, then, upon the happening
of any one or more of the defaults or events above mentioned in this Article
XIV, this Lease and the term hereof shall, at Lessor's option, upon the date
specified in a notice, which date shall not be less than thirty (30) days after
the date of mailing of such notice by Lessor to Lessee, wholly cease and expire,
with the same force and effect as though the date so
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specified were the date hereinabove first set forth as the date of the
expiration of the lease term unless remedied by Lessee within such period or if
such default cannot reasonably be remedied by Lessee within such period and
Lessee has commenced and diligently proceeded to remedy such default (but Lessee
shall remain liable to Lessor as hereinafter provided); and thereupon, or at any
time thereafter, Lessor may re-enter the demised premises either by force or
otherwise, and have the possession thereof in the manner prescribed by the
statute relating to summary proceedings, or similar statutes (but Lessee shall
remain liable to Lessor as hereinafter provided), it being understood that no
demand for the rent and no re-entry for condition broken and no notice to quit
possession or other notices prescribed by statute shall be necessary to enable
Lessor to recover such possession, but that all right to any such demand and any
such re-entry and any notice to quit possession or other statutory notices or
pre-requisites are hereby expressly waived by Lessee.
14.2 Rental Upon Default. In case of any such default, re-entry, expiration
and/or dispossess by summary proceedings or otherwise: (a) All Basic Annual Net
Rent and additional rental shall become due thereupon and be paid up to the time
of such re-entry, dispossess and/or expiration, together with such reasonable
expenses as Lessor may incur for legal expenses, attorneys' fees, brokerage,
and/or puttng the demised premises in good order, or for preparing the same for
re-rental (whether or not judgment is sought or obtained; (b) Lessor may relet
the demised premises or any part or parts thereof, either in the name of Lessor
or otherwise, for a term or terms which may at Lessor's
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option be less than or exceed the period which would otherwise have constituted
the balance of the lease term and may grant concessions or free rent; and (3)
Lessee or the legal representative of Lessee shall also pay Lessor as liquidated
damages for failure of Lessee to observe and perform said Lessee's covenants
herein contained, any deficiency between all rental hereby reserved and/or
covenanted to be paid and the net amount, if any, of all rental collected on
account of the demised premises for each month of the period which would
otherwise have constituted the balance of the lease term. In computing such
liquidated damages there shall be added to the said deficiency such expenses as
Lessor may incur in connection with reletting, such as legal expenses,
attorneys' fees, brokerage and for keeping the demised premises in good order or
for preparing the same for reletting. Any such liquidated damages shall be paid
in monthly installments by Lessee on the rent day specified in this Lease and
any suit brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of the Lessor to collect the deficiency for any
subsequent month by a similar proceeding.
14.3 Damages upon Default. In case of any default, reentry, expiration
and/or dispossess, by summary proceedings, or otherwise, pursuant to this
Section 14 Lessor shall (notwithstanding any other provisions of this Lease), be
entitled, at its option, in addition to and without prejudice to any other
rights and remedies it may have hereunder or at law or in equity to recover from
Lessee as damages, in addition to any unpaid Basic Annual Net Rent or additional
rental accrued to the
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date of such re-entry, expiration and/or dispossess, an amount equal to the
difference between the Basic Annual Net Rent and additional rent reserved
hereunder for what would otherwise have been the expired portion of the lease
term (had such re-entry, expiration and/or dispossess not occurred) and the then
fair and reasonable rental value of the demised premises for such unexpired
portion of the lease term, both discounted at the rate of six (6%) per cent per
annum to present worth. Lessee shall be entitled to recover and receive the full
amount of such damages at whatever time after such re-entry, expiration and/or
dispossess it seeks to recover the same. However, nothing herein contained shall
limit or prejudice the right of Lessor to prove for and obtain as damages, by
reason of the default or other event or occurrence as a result of which such
re-entry, expiration and/or dispossess shall have occurred, an amount equal to
the maximum amount allowed by any statute or rule of law in effect at the time
when, and governing the proceedings in which, such damages are to be proved,
whether or not such an amount be greater, equal to or less than the amount of
the difference referred to above. If any reletting is for an amount greater than
Lessee is required to pay hereunder such coverage shall be retained by Lessor
and Lessee shall not be entitled to any portion of such overage. In determining
the then fair and reasonable rental value of the demised premises, the rental
realized upon any reletting, if such reletting shall be accomplished within a
reasonable time after such re-entry, expiration and/or dispossess, shall be
deemed prima facie to be such rental value. Lessee shall be entitled, in
addition to the
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amount of such difference, to also recover such expenses as Lessor may incur in
connection with such re-entry and/or dispossess and such reletting, such as
legal expenses, attorneys' fees, brokerage and the costs and expenses incurred
in connection therewith and in keeping the demises premises in good order and in
preparing the same for such reletting.
14.4 Repair and Alteration Upon Default. Lessor at Lessor's option may make
such reasonable alterations, repairs, replacements and/or decorations in the
demised premises as Lessor, in Lessor's sole judgment, considers advisable and
necessary for the purpose of reletting the demised premises; and the making of
such alterations and/or decorations shall not operate or be construed to release
Lessee from liability hereunder as aforesaid. Lessor shall in no event be liable
in any way whatever for failure to relet the demised premised, or in the event
that the demised premises are relet, for failure to collect the rent thereof
under such reletting.
14.5 Injunctive Relief. In the event of a breach or threatened breach by
Lessee of any of the covenants or provisions of this Lease, Lessor shall have
the right of injunction and the right to invoke any remedy allowed at law or in
equity as if re-entry, summary proceedings and other remedies were not herein
provided for. Mention in this Lease of any particular remedy shall not preclude
Lessor from any other remedy, in law or in equity.
14.6 Rental After Termination. No receipt of any Basic Annual Net Rent or
additional rental by Lessor from Lessee after the proper legal termination in
any way of this Lease or after
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giving any notice, shall reinstate, continue or extend the lease term, or affect
any notice. No receipt of any rental after the commencement of suit, or after
final judgment for possession of the demised premises, shall reinstate, continue
or extend the lease term or affect said suit or said judgment.
14.7. Waiver. The obligations set forth in this Article XIV shall be
binding on the Lessee whether or not Lessor has taken possession of the
premises, and whether or not Lessee has been evicted from the premises by
summary process, and Lessee hereby waives the right to interpose any defense to
any action hereunder based upon such possession or summary process.
ARTICLE XV
Condemnation
15.1 Eminent Domain. The parties hereto agree that should the demised
premises, or any substantial part thereof which renders the use of the premises
for the intended purpose impractical as reasonably determined by Lessee, be
taken or condemned by competent authority for public or quasi-public use, or
acquired by such authority by negotiation and sale in lieu thereof then, and in
that event, this Lease shall cease and come to an end as of the time of such
actual taking, and then, and thenceforth, all obligations of the parties
hereunder, the one to the other, shall cease and terminate. All damages awarded
as a result of any condemnation of the premises or any part thereof except as
otherwise herein set forth, shall become the sole and absolute property of
Lessor, including without limitation, any damages awarded as compensation for
diminution in value of the leasehold and/or loss of the fee title to the
premises. Lessee
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assigns any rights in and to any condemnation award to Lessor except as provided
in Paragraph 15.2 hereof.
15.2 Lessee Damage. In the event of any such taking as described above, the
Tenant shall have the right to apply for any relief provided by statute or
regulation for Lessee's benefit, provided that such benefit does not reduce the
damages or compensation due the Lessor above described or provided above.
ARTICLE XVI
Damage or Destruction
16.1 Damage. If the demised premises, or the building or buildings of which
the premises may form a part, are damaged by fire or other casualty to such an
extent that the damage cannot, in the opinion of Lessor, be repaired or restored
within two hundred seventy (270) days of the date of such occurrence, this lease
may be terminated at the option of the Landlord upon notice to Lessee within
such two hundred seventy (270) day period, even though the premises have not
become untenantable, and upon such termination shall shall be an adjustment of
rent to said date of termination, except that Lessee shall have the right to
negate such termination by agreeing to rebuild the premises as herein provided
in Paragraph 16.2. If Lessor does not exercise the foregoing option, or if the
premises are damaged by fire or other insured casualty, and such damage can be
repaired within two hundred seventy (270) days of the date of such occurrence,
or if the Lessee shall elect to repair or rebuild the premises this lease shall
remain in full force and effect and Lessee shall promptly repair such damage at
its expense and Lessor will make available to Lessee the proceeds of insurance
carried by Lessee
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for the parties' benefit for Lessee's use in paying for such repairs. If this
lease is not terminated as aforesaid, there shall be no abatement of rental
payable hereunder but Lessee shall receive a credit against rental in an amount
equal to the proceeds of rent insurance, if any, received by Lessor. The
provisions of this paragraph shall not prejudice any other rights and remedies
of Lessor in the event the Premises shall be damaged by fire or other casualty
due to the fault or neglect of Lessee, Lessee's servants, employees,
contractors, agents, visitors or licensees. Except to the extent provided for in
this lease Lessor's obligations under this Lease shall not be affected by any
damage to or destruction of the premises by any cause whatsoever, and Tenant
hereby expressly waives any and all additional right it might otherwise have
under any law or statute. Tenant agrees that its fire insurance policies for its
contents, furniture, furnishings, fixtures and other property removable by
Lessee under the provisions of this lease shall include appropriate clauses
pursuant to which the insurance carriers (a) waive all rights of subrogation
against Lessor with respect to losses payable under such policies and/or (b)
agree that such policies shall not be invalidated should the insured waive in
writing prior to a loss any or all right of recovery against any party for
losses covered by such policies. Lessee shall have Lessor named in such policies
as one of the assureds. If Lessor shall be named as one of the assured under the
policies covering Lessee's contents, furniture, furnishings and fixtures in
accordance with the foregoing provisions, Lessor shall promptly endorse to the
order of Lessee, without recourse, any
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check, draft, or order for the payment of money representing the proceeds of any
such policy or representing any other payment growing out of or connected with
said policies, and Lessor does hereby irrevocably waive any and all rights in
and to such proceeds and payments, provided, however, that Lessee's right of
full recovery under its aforesaid policies is not thereby prejudiced or
otherwise adversely affected. Lessee hereby waives any and all right or recovery
which it might otherwise have against Landlord, its agents and employees, for
loss or damage to Lessee's contents, furniture, furnishings, fixtures and other
property removable by Lessee under the provisions of this lease to the extent
that the same is covered by Lessee's insurance, notwithstanding that such loss
of damage may result from the negligence or fault of Landlord, its agents or
employees. Lessee agrees to advise Lessor promptly as to the coverage or
language of the clauses included in its insurance policies pursuant to this
paragraph. Lessee also agrees to notify Lessor promptly of any cancellation or
change of the terms of any such policy which would affect such clauses or
naming.
16.2 Lessee Repair. Notwithstanding paragraph 16.1, Lessee, in the event
that Lessor does not exercise the option to repair in accordance with said
paragraph, may by giving notice to Lessor, undertake the restoration of the
damage to the demised premises by notifying Lessor within five (5) days after it
received notification from Lessor that Lessor shall not be undertaking repairs
to the damaged premises. In case of damage to or destruction of any building on
the demised premises or of the machinery, fixtures and equipment (except movable
trade
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fixtures, furniture, and furnishings) used in the operation and maintenance
thereof, by fire or otherwise, the Lessee will, at such time and upon the
conditions hereinafter set forth, restore, repair, replace, rebuild, or alter
the same as nearly as possible to the conditions such property was in
immediately prior to such damage or destruction. Such restoration, repair,
replacement, rebuilding, or alteration shall be commenced as soon as practicable
after the receipt by the Lessor or the holder of any mortgage of the insurance
money to be paid on account of such damage or destruction, and, after such work
has been commenced, it shall be prosecuted with reasonable diligence. Before
commencement, any and all permissions required under any existing mortgage on
the premises must be obtained and appropriate plans for such work approved by
Lessor, which approval shall not be unreasonably withheld. In addition, Lessor
must be adequately assured that the insurance proceeds are sufficient to cover
the cost of repair. Upon such consents and proof of financial ability to
complete, the following provisions shall apply:
(a) All insurance money received by the Lessor or any such mortgagee on
account of such damage or destruction, less the cost, if any, of such recovery,
shall be applied by the Lessor or such mortgagee to the payment of the cost of
such restoration, repair, replacement, rebuilding, or alteration, hereinafter
referred to as the work, including expenditures made for temporary repairs or
for the protection of property pending the completion of permanent restoration,
repair, replacement, rebuilding, or alteration to the leased property, and shall
be paid out, as hereinafter provided, from time to time, as such
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work progresses, upon the written request of the Lessee which shall be
accompanied by the following:
(i) A certificate of the architect or engineer in charge of the work, dated
not more than thirty (30) days prior to such request, setting forth that the sum
then requested either has been paid by the Lessee or is justly due to
contractors, subcontractors, materialmen, engineers, architects, or other
persons (whose names and addresses shall be stated), who have rendered services
or furnished materials for certain work. Such certificate shall give a brief
description of such services and materials, shall list the several amounts so
paid or due to each of such persons, shall state the fair value of such work at
the date of the requisition, and shall state that no part of such expenditures
has been or is being made the basis for any other request for payment. Such
certificate shall state also that except for the amounts listed therein, there
is no outstanding indebtedness known to such architect or engineer, after due
inquiry, which is then due for labor, wages, materials, supplies, or services in
connection with such work which, if unpaid, might become the basis of a vendor's
mechanic's, laborers, materialmen's or similar lien upon such work or upon the
demised premises.
(ii) An affidavit sworn to by the Lessee that all materials and all
property constituting the work described in such certificate of the architect or
engineer are free and clear of all security interest, liens, charges, or
encumbrances, except encumbrances, if any, securing indebtedness due to persons
specified in such certificate which are to be discharged upon
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payment of such indebtedness, as well as appropriate waivers of mechanics liens
properly signed by all contractors and materialmen.
(b) Upon compliance with the foregoing provisions of subparagraph (a), the
Lessor or such mortgagee shall, out of such insurance money, on request of the
Lessee, pay to the persons named in such certificate the respective amounts
stated in such certificate to be due to them, or shall pay to the Tenant the
amount stated in such certificate to have been paid by the Tenant; provided,
however, that such payments shall not exceed in amount the fair value of the
relevant work as stated in such certificate. If the insurance money in the hands
of the Lessor or such mortgagee exceed the amount required to pay the cost of
such work the Lessor or such mortgagee, as the case may be, shall be entitled to
retain such excess.
(c) The Lessee's obligation to pay the basic rent and all other charges and
to perform all other terms of this lease shall not be affected by any such
damage to or destruction of any building on the leased property or of the
machinery, fixtures, and equipment used in the operation and maintenance
thereof, and the Lessee hereby waives the provisions of any statute or law now
or hereafter in effect contrary to such obligation of the Tenant as herein set
forth or which releases the Lessee therefrom.
(d) Notwithstanding the foregoing provisions of the paragraph, any
insurance moneys in the hands of the Lessor or such mortgagee shall not be
required to be paid out if, at the time of the request for payment, the Lessee
is in default in the performance of any term in this Lease as to which notice of
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default has been given and which has not been remedied within the time limit
specified in this lease, or if such mortgagee uses such insurance moneys to
reduce the mortgage debt. In the event that the mortgagee so elects to use such
moneys to reduce its debt and Lessor does not rebuild at Lessor's expense,
Lessee shall have the option to re-building at Lessee's cost or of cancelling
this Lease.
ARTICLE XVII
CONSUMER PRICE INDEX
17.1 Consumer Price Index. As used herein, the term "Consumer Price Index"
shall mean the Index for Urban Wage Earners and Clerical Workers, N.Y.
- --Northeastern N.J, All Items --Series A (1982-84=100) issued by the U.S.
Department of Labor, Bureau of Labor Statistics, Washington, D.C. (the "Index")
or the successor of such index. Should Lessor lack sufficient data to make the
determination specified in this Lease on the date of any required adjustment,
Lessee shall continue to pay the monthly Rent payable immediately prior to such
adjustment date. As soon as Lessor obtains the necessary data, it shall
determine the Rent payable from and after such adjustment date and if it shall
exceed the amount previously paid by Lessee for such period, Lessee shall
forthwith pay the difference to Landlord, and if it shall be less than the
amount previously paid, Lessor shall reimburse Lessee for any overpayment. In
the event that the aforementioned Index shall be discontinued, the parties
hereto shall accept comparable statistics established by the United States
Department of Labor or some other similar authority and if the parties cannot
agree on a comparable index then such matter
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shall be submitted to arbitration under the rules of the American Arbitration
Association in Stamford and the arbitrators' determination shall be binding upon
the parties.
ARTICLE XVIII
Definition of Certain Terms and Liabilities
of Successors and Assigns
18.1 Definitions. For the purposes of this Lease, unless the context
otherwise requires:
(a) The term "Lessor" shall mean only the owner from time to time of the
fee simple title to the land comprising the demised premises.
(b) The term "Lessee" shall mean the owner from time to time of the
Lessee's interest in this Lease and the leasehold estate created hereby.
18.2 Successor Lessor. In the event the Lessor named in this Lease, or any
successor Lessor as hereinabove defined, shall convey the fee simple title to
the land constituting the demised premises, then the Lessor so conveying or
transferring shall be automatically freed and relieved from and after the date
of such conveyance or transfer of and from all liabilities and obligations,
express or implied, on the part of the Lessor contained in or resulting from the
Lease, and each successor, transferee or grantee of the fee simple title to said
land shall become and be bounded by such covenants and obligations, express or
implied, but only during the period, respectively, of such grantee's or
transferee's respective ownership of such fee simple title; provided, always
that upon any such conveyances or transfer, any funds in the hands of the Lessor
so conveying or
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transferring awaiting distribution, payment or application in the manner and for
the purposes provided in this Lease, shall be paid over and transferred to such
a successor, grantee or transferee, to be held and used for the same uses and
purposes under and pursuant to this Lease as the funds so transferred.
ARTICLE XIX
Estoppel Certificates of Lessee
19.1 Estoppel Certificate. Lessor or Lessee shall, without charge, at any
time, and from time to time hereafter, within ten (10) days after written
request of the other, certify by a written instrument duly executed and
acknowledged to any mortgagee or purchaser, or proposed mortgagee or proposed
purchaser, or any other person specified in such request:
(a) As to whether this Lease has been supplemented or amended, and if so,
the substance and manner of said supplement or amendment;
(b) As to the validity and force and effect of this Lease, in accordance
with its provisions as then constituted;
(c) As to the existence of any default hereunder;
(d) As to the existence of any offset, counter-claims, or defenses hereto
on the part of the Lessee;
(e) As to the commencement and expiration dates of the term;
(f) As to any other matter as may reasonably be so requested.
Any such certificates may be relied upon by requesting same and any other
person to whom the same may be exhibited or
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delivered and the contents of such certificate shall be binding upon the
certifying party.
19.2 Attornment. Lessee shall, in the event any proceedings are brought for
the foreclosure of, or in the event of exercise of the power of sale under any
mortgage made by the Lessor covering the premises or if any party succeeds to
the interest of the Lessor, attorn to the purchaser upon any such foreclosure or
sale or to the ground Lessor and recognize such purchaser or ground Lessor as
the Lessor under this lease.
19.3 Subordination. This lease is hereby made subject and subordinate to
the lien of any first mortgage or mortgages, or the lien resulting from any
other method of financing or refinancing, now or hereafter in force against the
land and buildings of which the premises are a part or upon any buildings
hereafter placed upon the land of which the premises are a part, and to all
advances made or hereafter to be made upon the security thereof. This section
shall be self-operative and no further instrument of subordination shall be
required by any mortgagee. In the event of such subsequent refinancing, the
Lessor shall use reasonable efforts to obtain a non-disturbance agreement in
form satisfactory to mortgagor. Lessor, provided that Lessee is not in default
hereof, hereby agrees to make all payments under the existing mortgage or any
future mortgage.
19.4 Attorney-in-Fact. Lessee, upon request of any party in interest, shall
execute promptly such instruments or certificates to carry out the intent of
Sections 19.1, 19.2 and 19.3 above as shall be requested by the Lessor. The
Lessee hereby irrevocably appoints the Lessor as attorney-in-fact for
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the Lessee with full power and authority to execute and deliver in the name of
Lessor any such instruments or certificates. If fifteen (15) days after the date
of a written request by Lessor to execute such instruments, the Lessee shall not
have executed the same, the Lessor may, at its option, treat such failure as a
default under this Lease.
ARTICLE XX
Cumulative Remedies - No Waiver
No Oral Change
20.1 Cumulative Remedies. The specified remedies to which the Lessor may
resort under the terms of this Lease are cumulative and are not intended to be
exclusive with any other remedies or means of redress to which the Lessor may be
lawfully entitled in case of any breach or threatened breach by the Lessee of
any provision of this Lease. The failure of the Lessor to insist in any one or
more cases upon the strict performance of any of the covenants of this Lease or
to exercise any option herein contained shall not be construed as a waiver or a
relinquishment for the future of such covenant or option. A receipt by the
Lessor of any rent or other payment hereunder with or without knowledge of the
breach of any covenant hereof shall not be deemed a waiver of such breach, and
no waiver by the Lessor of any provision of this Lease shall be deemed to have
been made unless expressed in writing and signed by the Lessor. In addition to
the other remedies in this Lease provided, the Lessor shall be entitled to the
restraint by injunction of the violation or attempted or threatened violation,
of any of the covenants, conditions or provisions of this Lease or to a decree
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compelling performance of any of the covenants, conditions or provisions of this
Lease.
20.2 No Oral Change. This Lease may not be changed orally.
ARTICLE XXI
Captions and Headlines
21.1 Captions. The captions and headings throughout this Lease are for
convenience and reference only and the words contained therein shall in no way
be held or deemed to define, limit, describe, explain, modify, amplify or add to
the interpretation, construction or meaning of any provisions of or the scope or
intent of this Lease nor in any way affect this Lease.
21.2 Inferences. In the event that it shall be necessary to interpret any
portion of this Lease, no inferences shall be drawn against either party since
the parties agree that they each participated in the drawing and finalization of
this Lease.
ARTICLE XXII
Recordation of Lease
22.1 Memorandum. The parties prefer to record a short form of this Lease,
rather than the Lease itself, and contemporaneously with the execution hereof
they have executed a Memorandum of Lease which may be recorded by either party,
or upon the request of either party shall execute such Memorandum.
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ARTICLE XXIII
Covenants to Bind and Benefit Respective Parites
23.1 Binding Effect. The covenants and agreements herein contained shall
bind and inure to the benefit of Lessor and Lessee and their respective heirs,
legal representatives, successors and assigns, except as otherwise provided
herein.
ARTICLE XXIV
Quiet Enjoyment - Lessee's Liability
24.1 Quiet Enjoyment. Lessee, upon paying the basic rent and all additional
rent and other charges herein provided for and observing and keeping all
covenants, agreements and conditions of this Lease on its part to be performed,
shall quietly have and enjoy the demised premises during the term of this Lease
without hindrance or molestation by anyone claiming by, or through Lessor,
subject, however, to the exceptions, reservations and conditions of this Lease.
ARTICLE XXV
Miscellaneous
25.1 Inspection of Premises. Lessee has inspected the buildings on the
demised premises and acknowledges that it is fully familiar with the condition
thereof. No representations, promises or assurances, except such as are
specified or endorsed herein have been made on the part of the Lessor prior to
or at the execution of this Lease. Lessee will make no claim on account of any
representations, promises or assurances whatsoever, whether made by any renting
agent, broker, officer or other representative of Lessor or which may be
contained in any
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circular, prospectus or advertisement relating to the premises, or otherwise,
unless the same is specifically set forth in this Lease.
25.2 Waiver of Jury Trial. In the event of any dispute between the parties
under or arising out of this Lease the parties waiver any right to a trial by
jury.
25.3 No Partnership or Joint Venture. Nothing in this Lease nor any action
taken pursuant to it shall be construed to create a partnership or joint venture
between the Lessor and Lessee for any purpose.
25.4 Covenants and Conditions. Each provision of this Lease to be performed
by the Lessee or Lessor shall be construed as both a covenant and a condition.
25.5 Waiver. Failure of the Lessor or Lessee to enforce or insist upon
performance of any of the terms of this Lease shall not be construed as a waiver
of any other term or as a waiver of any future right to enforce or insist upon
the performance of the same term.
25.6 Applicable Law. This Lease shall be construed pursuant to the laws of
the State of Connecticut.
25.7 Brokerage. The Lessee represents that it has not had dealings with
brokers or agents in connection with the negotiations of this lease. Lessee
agrees to save and hold Lessor harmless and to indemnify the Lessor from and
with respect to any and all costs, expenses and/or liabilities (including costs
of suit and reasonable attorney's fees) for any compensation, commission or
charges claimed by any realtor, broker or agent with respect to this Lease.
Lessor represents
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that it knows of no claim that has been made or can be made for a commission
with regard to the within Lease.
25.8 Merger. No oral statement or prior written matters shall have any
force or effect after the signing of this Lease. All such matters shall be
merged herein and be superseded hereby. Lessee agrees that it is not relying on
any representations or agreements other than those contained in this Lease. This
Agreement shall not be modified except by a writing subscribed to by all parties
nor may this Lease be cancelled by Lessee except with the written consent of
Lessor. If any provision of this Lease shall become invalid or unenforceable, it
shall not affect any other provision. This Lease shall not be binding upon
Lessor until signed by both parties and delivered in executed form to each. This
Lease may be executed in any number of counterparts and each such counterpart
shall for all purposes be deemed to be an original; and all such counterparts
shall together constitute but one and the same Lease.
25.9 Holding Over. Any holding over after the expiration of the term
hereof, with the consent of the Lessor, shall be construed to be a tenancy at
will at double the rents herein specified (pro rated on a monthly basis) and
shall otherwise be on the terms and conditions herein specified, so far as
applicable.
25.10 "Lessor" Defined, Exculpation. The term "Lessor" as used in this
Lease means only the owner or the mortgagee in possession for the time being of
the building in which the premises are located or the holder of a lease of both
said building and the land thereunder so that in the event of any sale
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of said building and the land thereunder or any assignment of this lease or any
underlying lease or a demise of both said building and land, Lessor shall be and
hereby is entirely freed and relieved of all obligations of Lessor hereunder and
it shall be deemed without further agreement between the parties and such
purchaser(s), assignee(s) or lessee(s) that the purchaser, assignee or lessee
has assumed and agreed to observe and perform all obligations of Lessor
hereunder. Notwithstanding anything to the contrary provided in this Lease it is
specifically understood and agreed that there shall be absolutely no personal
liability on the part of Lessor, or any individual partner thereof, with respect
to any of the terms, covenants and conditions of this Lease, and that Lessee
shall look solely to the equity of Lessor or its successor in interest in the
premises or the leasehold estate of Lessor or such successor in the premises for
the satisfaction of each and every remedy of Lessee in the event of any breach
by Lessor or by such successor in interest of any of the terms, covenants and
conditions of this Lease to be performed by Lessor, such exculpation of personal
liability to be absolute and without any exception whatsoever.
25.11 Late Penalty. In the event that Lessee is more than fifteen (15) days
late in the monthly payment of the basic annual rent, Lessee shall pay an amount
equal to three (3%) per cent of any such monthly payment, which payment shall be
due within five (5) days of billing by Lessor.
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ARTICLE XXVI
Security Deposit
26.1 Security Deposit. Lessee has deposited with Lessor as security for the
performance by Lessee of the terms of this lease the sum of Fifty-four Thousand
($54,000.00) Dollars. Lessor may use, apply on Lessee's behalf or retain
(without liability or interest except as hereinafter set forth) during the term
the whole or any part of the security so deposited to the extent required for
the payment of any rent or other sum as to which Lessee may be in default
hereunder or for any sum which Lessor may expend by reason of Lessee's default
in respect of any of the terms of this Lease, including but not limited to any
deficiency or damage incurred in reletting the leased premises. The covenants of
this paragraph are personal covenants between Lessor and Lessee and not
covenants running with the land, and in no event will Lessor's mortgagee(s) or
any purchaser at a foreclosure sale or a sale in lieu of foreclosure be liable
to Lessee for the return of the security deposit. After each application from
Lessee's security deposit, Lessee shall upon demand replenish said deposit to
the amount set forth above.
ARTICLE XXVII
HAZARDOUS WASTE
(a) Subject to the provisions of paragraph 5.1C hereof, Lessee shall during
the term of this Lease comply with all applicable Governmental Requirements and
precautions now or hereafter mandated or advised by any federal, state, local or
other governmental agency with respect to the use, generation, storage, or
disposal of hazardous, toxic or radioactive materials
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(collectively, "Hazardous Materials") with respect to the Demised Premises. As
herein used, Hazardous Materials shall include, but not be limited to, those
substances defined as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances", or other similar designations in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq. and any other governmental statutes, laws,
ordinances, rules, regulations, advisories and guidelines. Lessee shall not
cause, or allow anyone claiming under Lessee to cause, any Hazardous Materials
to be used, generated, stored, or disposed of on or about the Premises, Building
or Land without the prior written consent of Lessor, which consent may be
withheld in the sole discretion of Lessor, and which consent may be revoked at
any time.
(b) Lessee's indemnification of Lessor shall extend to all liability,
including all foreseeable and unforeseeable consequential damages, directly or
indirectly arising out of the use, generation, storage or disposal of Hazardous
Materials by Lessee or any other person claiming under Lessee during the terms
of this Lease, including without limitation, the cost of any required or
necessary repair, removal, cleanup, or detoxification and the preparation of any
closure or other required plans, whether such action is required or necessary
prior to or following the termination of this Lease, to the full extent that
such action is attributable, directly or indirectly, to the use,
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general, storage or disposal of Hazardous Materials by Lessee or any person
claiming under Lessee, nor the strict compliance by Lessee with all Governmental
Requirements and precautions pertaining to Hazardous Materials, shall excuse
Lessee from Lessee's obligation of indemnification pursuant to this subsection
(b).
(c) If the presence of hazardous materials on the Premises caused or
permitted by Lessee or any sub-tenant of Lessee results in contamination or
deterioration of water or soil resulting in a level of contaminating greater
than the levels established by any governmental agency having jurisdiction over
such contamination, then Lessee shall promptly take any and all action necessary
to clean up such contamination if required by law or as a condition to the
issuance or continuing effectiveness of any governmental approval which related
to the use of the premises. Lessee shall further be solely responsible for, and
hereby indemnifies, and shall defend and hold Lessor and its agents harmless
from and against all claims, cost, damages and liabilities, including attorney's
fees and costs, arising out of or in connection with any removal, clean-up and
restoration work and materials required hereunder to return the premises and any
other property of whatever nature their condition existing prior to the
appearance of the Hazardous Materials caused or permitted by Lessee. The Lessee
shall have the right on or before May 1, 1990 to cause environmental tests and
structural examination to take place at the premises. In the event that such
tests or examination shall reveal any material faults in the structures or
hazardous waste on the premises, Lessee shall have the right to terminate this
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Lease and the Purchase Agreement referred to herein upon ten (10) days' written
notice by registered or certified mail to Lessor. Notwithstanding such right to
terminate, Lessor shall have the right to cure faults revealed by either such
examination within ten (10) days of receipt of the notice from Lessee and in the
event of such cure, the right to terminate shall become null and void and of no
further force and effect.
ARTICLE XXVIII
OPTION TO PURCHASE
Provided that Lessee is not In Default at the time of the exercise of this
option or at the time of the closing as herein described, Lessee shall have the
option to purchase from Lessor the premises described in Schedule "A" attached
Hereto and made part hereof; and subject to the matters set forth in said
schedule. The purchase price shall be in the following:
During the First through the Fifth
Lease Years ...............................................$6,800,000.00
During the Sixth Lease Year................................$7,600,000.00
During the Seventh through the Tenth Lease
Years......................................................$8,150,000.00
During the Eleventh through the Twentieth
Lease Years, at the fair market value of
said premises but in no event at a price
less than..................................................$7,600,000.00
In the event that the parties cannot agree on the fair market value of said
premises, then the determination of said fair market value shall be made in the
same manner as is set forth in Paragraph 2.3 hereof.
The purchase price shall be paid in cash, certified check, or cashier's
check at the time of closing, such checks to be
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<PAGE>
issued by a State or Federally chartered banking institution doing business in
Fairfield County, Connecticut, or at Lessor's or Lessee's option, by a wire
transfer. Notice of the exercise of this option shall be given at least ninety
(90) days prior to the date on which title is to close and such notice shall
designate the closing date. The closing shall be held at the offices of Wofsey
Rosen Kweskin & Kuriansky, 600 Summer Street, Stamford, Connecticut.
At the closing the following shall be apportioned in the manner normally
used by the Danbury Bar Association. Rent, utilities, taxes and sewer rents, if
any. Lessor shall deliver to Lessee a good and valid Connecticut Form of
Warranty Deed conveying Lessor's fee simple interest in the property to Lessee,
subject only to the matters set forth in Exhibit C attached hereto. Such
exception to title will not materially affect the marketability of the premises
nor the use allowed under this Lease. Lessor shall pay any conveyance taxes due.
ARTICLE XXIX
NOTICES
All notices, demands and requests under this Lease shall be in writing and
shall be sent by United States registered or certified mail, postage prepaid,
return receipt requested, and addressed as follows:
To Lessor: John D'Elia
c/o Saul Kwartin, Esquire
600 Summer Street
Stamford, Connecticut 06901
Copy to: John D'Elia
289 Mason Street
Greenwich, CT 06830
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<PAGE>
To Lessee: James G. Hetherington
102 Federal Road
P.O. Box 436
Danbury, CT 06810
Lawrence Iannaconne
c/o Dealership Management Associates
585 Route 440
Jersey City, NJ 07304
Robert W. Perrotti
3035 Whitney Avenue
Hamden, Connecticut
Either party may, by notice given to the other party, designate a new address to
which notices, demands and requests shall be sent and, thereafter, any of the
foregoing shall be sent to the address most recently designated by such party.
Notices, demands and request shall be sent and, thereafter, any of the foregoing
shall be sent to the address most recently designated by such party. Notices,
demands and requests which shall be served upon Lessor or Lessee in the manner
aforesaid shall be deemed to have been served or given for all purposes under
this Lease at the time such notice, demand or request shall be mailed by United
States registered are certified mail as aforesaid, in any post office or branch
post office regularly maintained by the United States Government.
ARTICLE XXXI
GUARANTY
SAMUEL X. DiFEO and JOSEPH DiFEO shall individually guarantee all of
Lessee's obligations hereunder in accordance with the Guaranty Agreement
attached hereto and made part hereof. Further, Fair Realty Company which Lessee
represents is a General Partnership whose General Partners include SAM DiFEO and
JOSEPH
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<PAGE>
DiFEO, will guarantee Lessee's obligation hereunder. The guarantee of
Fair Realty Company and its partners shall be limited to its ownership interest
in premises known as 102 Federal Road, Danbury, Connecticut presently owned by
Fair Realty Company. In the event that Fair Realty Company shall sell or in any
other way convey the said premises, then and in such event Fair Realty Company's
Guaranty will be assumed by Sam DiFeo and Joseph DiFeo without the three-year
limitation on the Guaranty which is attached hereto and made part hereof.
ARTICLE XXXII
CONDITION PRECEDENT
This Lease shall not become effective unless and until a certain Contract
dated March 27, 1990 between COLOMIAL SUZUKI, INC. and ACCURATE MOTORS, INC. as
SELLERS and JAMES G. HETHERINGTON, or his assigns as BUYERS have been signed and
the closing thereunder shall have been completed.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be
executed in duplicate, and their respective seals to be hereunto affixed, as of
the day and year first above written.
ATTEST: LESSOR
________________________ _________________________
________________________
LESSEE
_________________________ _________________________
_________________________ _________________________
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<PAGE>
GUARANTY
In consideration of the execution of the within Lease by Lessor, at the
request of the undersigned and in reliance of this guaranty, the undersigned
hereby guarantees unto Lessor, its successors and assigns, the prompt payment of
all rent and the performance of all of the terms, covenants and conditions
provided in said Lease, hereby waiving all notice of default, and consenting to
any extensions of time or changes in the manner of payment or performance of any
of the terms and conditions of the said Lease the Lessor may grant the Lessee,
and further consenting to the assignments of the said Lease, and any
modifications thereof, including the sub-letting and changing of the use of the
demised premises, all without notice to the undersigned. The undersigned agrees
to pay the Lessor all expenses incurred in enforcing the obligations of the
Lessee under the within Lease and in enforcing this guaranty.
This Guaranty shall be effective for a period of three (3) years and shall
expire and terminate at the end of such period; except that any obligations
which arose during such three-year period shall not expire or terminate until
they have been fully satisfied.
Witness:/s/_______________________ /s/ Sam X. DeFeo
--------------------------------
SAM DeFEO
/s/________________________ /s/ Joseph C. DeFeo
--------------------------------
JOSEPH DeFEO
<PAGE>
MODIFICATION OF LEASE
WHEREAS, the parties hereto are parties to or guarantors of a certain Lease
dated September 27, 1990, covering premises on Federal Road, Danbury,
Connecticut; and
WHEREAS, it is the desire of the parties to modify said Lease as
hereinafter set forth. NOW, THEREFORE, in consideration of the mutual
agreements set forth herein, and in further consideration of One ($1.00)
Dollar by each party paid to the other, the parties agree as follows:
1. Paragraph 2.2 is amended by adding the following language thereto:
"In the event that SAMUEL X. DiFEO, JOSEPH C. DiFEO and ________________
shall not close title to certain real estate on Federal Road, Danbury, which is
the subject of the Purchase Contract attached hereto and made part hereof as
Exhibit A on or before November 15, 1992, then and in such event the option to
cancel the Lease as set forth in Paragraph 2.2 shall become effective on
November 15, 1997, subject to the notice provisions set forth in Paragraph 2.2.
If the Lesssee shall exercise the option to cancel, Lessee shall pay to Lessor
the sum of $120,000.00 in five (5) equal monthly payments of $24,000.00 each,
commencing on the effective date of the cancellation".
2. Paragraph 2.3 is amended as follows. The first sentence of Paragraph 2.3
is eliminated and the following substituted therefor:
<PAGE>
"The Lessor grants to Lessee an option to extend the within Lease for two
periods at the end of the basic term hereof, the first being for a period of
five (5) years and the second being for a period of three (3) years. The right
to exercise such option to extend is conditioned upon Lessee not being in
default under any of the terms and conditions of this Lease.
The rental provisions set forth in Paragraph 2.3 are changed as follows:
"The monthly rent payable during the First Option Period shall be the
lesser of $54,500.00 or one (1%) per cent of the value of said premises, but in
no event said monthly rent during the First Option Period be less than
$52,000.00 per month. Monthly rent payable during the Second Option Period shall
be the lesser of $56,500.00 or one (1%) per cent of the fair market value of the
premises at the commencement of said Second Extended Term, but in no event shall
the rent be less than the rent paid during the First Extended Period.
Reference to 'the Second Five (5) Year Option Period' in the last sentence
of Paragraph 2.2 is changed to the phrase 'the Three-Year Option Period'.
3. Paragraph 3.1. In the event that the Purchaser does not close title to
the premises covered by the Contract attached hereto as Exhibit A on or before
September 15, 1993, then and in such event the rent payable pursuant to this
Paragraph shall increase by $5,000.00 per month.
4. Article XXXI is amended by adding the following language thereto:
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<PAGE>
"The guarantees provided for in this Article shall be effective with
respect not only to the basic Lease but also with respect to the modified
Lease."
5. Paragraph 12.1 is amended by adding the following language after the
words "Joseph DiFeo", to wit: "and/or _______ Holdings, Inc. of
____________________.
Except as otherwise modified herein, the parties hereby confirm and ratify
all of the other terms and conditions of the Lease above described.
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<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hand and seal this
_______ day of __________ 1992.
FAIR IMPORTS CORP. d/b/a
FAIR ACURA
By____________________________
TJGHCC ASSOCIATES
By____________________________
J & F ASSOCIATES
By____________________________
______________________________
SAMUEL X. DiFEO
______________________________
JOSEPH C. DiFEO
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<PAGE>
LEASE AGREEMENT
BY AND BETWEEN
MANLY CHEVROLET, INC.
Landlord,
- and -
COUNTY TOYOTA, INC.,
Tenant.
------------------------------
DATED: October 1, 1992
------------------------------
COLE, SCHOTZ, BERNSTEIN, MEISEL & FORMAN, P.A.
A PROFESSIONAL CORPORATION
COURT PLAZA NORTH
25 MAIN STREET
P.O. BOX 800
HACKENSACK, NEW JERSEY 07602-0800
(201) 489-3000
<PAGE>
AGREEMENT OF LEASE
Between MANLY CHEVROLET, INC. (hereinafter called "Landlord"), and
COUNTY TOYOTA, INC., a New York corporation (hereinafter called "Tenant").
PREAMBLE
BASIC LEASE PROVISIONS AND DEFINITIONS.
In addition to other terms elsewhere defined in this Lease, the
following terms whenever used in this lease should have only the meanings set
forth in this section, unless such meanings are expressly modified, limited or
expanded elsewhere herein.
(1) Date of Lease: October 1, 1992
(2) Exhibits: The following Exhibits attached to this lease are
incorporated herein and made a part hereof:
Exhibit "A": Legal Description of the Property
Exhibit "B": Site Plan
(3) Building: 115 Route 59, Central Nyack, New York
(4) Premises: The Land together with the Building, except as
leased to Autocraft Body and Collision, Inc. and shown on
Exhibit "B".
(5) Land: The parcel of land described on Exhibit "A"
(6) Term: ten (10) years
(7) Commencement Date: October 1, 1992
(8) Fixed Rent: Two million Five Hundred Eighty Thousand
($2,580,000.00) Dollars, payable as follows:
Lease Year Annual Rent Monthly Rent
---------- ----------- ------------
1 $204,000 $17,000.00
2 224,000 18,666.67
3 224,000 18,666.67
4 224,000 18,666.67
5 264,000 22,000.00
6 264,000 22,000.00
7 264,000 22,000.00
8 304,000 25,333.33
9 304,000 25,333.33
10 304,000 25,333.33
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<PAGE>
(9) Termination Date: Midnight on the last day of the month in
which the tenth (10th) anniversary of the Commencement Date
shall fall.
(10) Permitted Uses: Auto dealership and ancillary uses, provided
that in the exercise of said use, the Premises will not be in
violation of the provisions of any "Environmental Acts", as
hereinafter defined.
(11) Tenant's address: 115 Route 59, Central Nyack, New York
(12) Landlord's address: 215 Bush Avenue, Mahwah, New Jersey
(13) Broker: None
(14) Overlandlord: Estate of Mannie Rosen
(15) Security: A Letter of Credit in accordance with the provisions
of Paragraph 39 hereof to secure the lease obligations and
Promissory Note of Tenant to Landlord in the principal face
amount of Two Hundred Thousand ($200,000.00) Dollars, which
Letter of Credit shall be in the following sums:
Amount of
Lease Year Letter of Credit
---------- ----------------
1-4 $250,000
5-7 200,000
8-10 125,000
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<PAGE>
W I T N E S S E T H :
1. Premises. The Landlord hereby leases the Premises to Tenant and
Tenant hereby takes the Premises from Landlord, subject however, to all of the
terms, covenants, provisions and conditions herein set forth and to all present
and future encumbrances, conditions, rights, easements, restrictions,
rights-of-way, covenants, other matters of record and zoning and building laws,
ordinances, regulations and codes affecting or governing the Building and/or
Land or which hereafter may affect or govern the Building and/or Land, and such
matters as -may be disclosed by inspection or survey.
TO HAVE AND TO HOLD the Premises for the Term and at the rents herein
set forth.
2. Term.
(a) The Term shall commence on the Commencement Date and shall
terminate on the Termination Date, unless sooner terminated or extended as
herein expressly provided.
(b) For purposes of this lease, a "Lease Year" shall be deemed to
be each consecutive period of twelve (12) full calendar months during the Term,
except that the first Lease Year also shall include the fractional portion of
the month, if any, immediately following the Commencement Date, and the last
Lease Year shall run only from the day following the termination of the previous
Lease Year to the Termination Date of the lease.
3. Possession.
(a) Tenant, by entering into possession of the Premises, shall be
conclusively deemed to have agreed that Landlord up to the time of such
possession has performed all of its obligations hereunder, and that the Premises
are in satisfactory condition as of the date of such possession.
(b) Tenant, at its sole cost and expense, shall be required to
procure any and all approvals from any governmental authorities having
jurisdiction thereover, relating to or arising out of, the business of Tenant or
its use or occupancy of the Premises, which approvals shall include but shall
not be limited to, applicable use permits, Certificates of Continued Occupancy,
any other permits and environmental protection approvals. Tenant agrees to make
prompt application and to proceed diligently and in good faith to procure all
necessary approvals (collectively, "approvals"), including all work in
connection therewith, to furnish Landlord with true copies of all writing
submitted or received in connection therewith and forthwith to notify Landlord
in writing of all determinations regarding such approvals. If the applicable
governmental authority shall require work to be performed to the Premises in
order to issue a Certificate of Continued Occupancy, then Tenant forthwith shall
notify Landlord
<PAGE>
and set forth in reasonable detail, the estimated cost of such work. Tenant
shall bear the cost of such work up to a maximum amount of Five Thousand
($5,000.00) Dollars and Landlord shall bear the cost of such work over Five
Thousand ($5,000.00) up to a maximum amount of Ten Thousand ($10,000.00)
Dollars. If the cost of such work shall be reasonably estimated to exceed Ten
Thousand ($10,00.00) Dollars, then the parties, within ten (10) days following
Landlord's receipt of the said notice, shall agree on who shall bear the cost of
such work. If the parties fail to agree, either party thereafter may terminate
this Lease upon ten (10) days written notice to the other, provided that the
other party may cancel the termination by agreeing to pay all additional costs.
(c) Following the Commencement Date, Tenant shall not have the
right to cancel this lease, seek a diminution of Rental, sue for damages, or
assert any other contractual, legal or equitable remedy based either on a claim
that Landlord failed to deliver possession in accordance with the terms of this
lease or based on a claim that the size, location, layout, dimensions or
construction of the Premises or the Building or any part thereof, were not
completed or furnished in accordance with the terms hereof. Notwithstanding the
foregoing, if during the Term hereof, Landlord is in default of any of its
obligations hereunder, Tenant shall have such rights at law or equity to which
it may be entitled, except that Tenant hereby waives any right to cancel or
terminate this lease. As of the Commencement Date, Tenant shall be deemed to
have certified to Landlord and to the holder of any mortgage to which this
lease, is or at any time during the Term hereof shall be, subject and
subordinate, that except as otherwise herein specifically provided, the Premises
have been delivered to it in accordance with the terms of this lease and that
possession thereof has been fully and completely accepted by Tenant and that the
Term and the date for the payment of Rental hereunder shall have commenced, and
that there is not then any offset against any Rental to be paid hereunder nor
any violation of any of the terms of this lease on the part of Landlord. The
foregoing provisions shall be self-operative and no further instrument or other
writing shall be required unless Landlord and/or any mortgagee shall deem the
same appropriate, in which event Tenant promptly shall execute any instrument or
other writing containing the foregoing and such other similar provisions in
regard to the condition of the Premises, the Rental and the Term, as shall be
requested by the Landlord and/or said mortgagee(s), and Tenant hereby
irrevocably constitutes and appoints Landlord as its attorney-in-fact having a
power coupled with an interest to execute any such instrument or other writing
for and on behalf of Tenant following at least ten (10) days' prior notice to
Tenant or ten (10) days after Tenant's failure or refusal to execute the
documents referred to above.
4. Intentionally Omitted.
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<PAGE>
5. Rental.
(a) Tenant covenants and agrees to pay to Landlord the Fixed Rent
in equal monthly installments on or before the first day of each calendar month
during the Term. If the Commencement Date shall be other than the first day of a
month, Fixed Rent shall be paid on the Commencement Date on a pro-rata basis for
the fractional part of the month between the date same is due and the last day
of said month (based on a thirty (30) day month).
(i) All other charges payable pursuant to this lease
hereinafter are called "Additional Rental". All payments of Additional Rental,
unless otherwise provided herein, shall be due and payable to Landlord in the
same manner as is set forth in Paragraph 5(a) on the first day of the calendar
month or ten (10) days following demand therefor, whichever shall later occur.
(ii) If the Commencement Date shall be other than the first
day of a month, then Tenant shall pay on the Commencement Date, any Additional
Rental for the fractional portion of the month on a per them basis until the
first day of the next succeeding month.
Fixed Rent and Additional Rental herein are referred to collectively as
"Rental".
(b) If any payment of Rental due hereunder shall be overdue, a
"late charge" may be charged at the rate of five (5%) percent per month on any
Rental which is overdue, computed from the due date until payment thereof. This
charge shall be in addition to and not in lieu of any other remedy Landlord may
have under the circumstances and is in addition to any charge by Landlord to
Tenant for reasonable fees and charges of any agents or attorneys Landlord may
employ as a result of any default in the payment of Rental hereunder whether
authorized herein or by law. Any such "late charges", if not previously paid, at
the option of the Landlord, shall be added to and shall become cart of the
succeeding Rental payment to be made hereunder and shall be deemed to constitute
Additional Rental.
(c) It is the intention of the parties hereto that t-e Fixed Rent
payable hereunder shall be absolutely net to Landlord, so that this lease shall
yield to Landlord the net annual Fixed Rent specified herein during the Term,
and that all costs, expenses and obligations of every kind and nature whatsoever
relating to the Premises shall be paid by Tenant, except as otherwise
specifically provided for herein.
6. Use. The Premises are to be used by Tenant solely for the Permitted
Use, and with the consent of Landlord, for any other uses lawfully permitted
thereon without the obtaining of any variance in connection therewith. In all
events, the Premises shall be used in accordance with all rules, regulations,
laws, ordinances and requirements of all governmental
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<PAGE>
authorities, the Fire Insurance Rating or Service Organizations and any similar
bodies having jurisdiction thereof and for no other purposes. Landlord
represents that the Premises can be used for the Permitted Uses.
7. Insurance.
(a) Tenant shall provide, on or before the Commencement Date, and
shall keep in force at all times during the Term, at its sole cost and expense,
a comprehensive public liability insurance policy insuring against any claim or
liability for personal injury to or death of any person(s), and/or damage to
property occurring in, on or about the Premises, or any appurtenances thereto.
Such policy shall provide for combined single limits of liability thereunder of
not less than Five Million ($5,000,000.00) Dollars in respect to personal injury
or death to any one or to any number of persons or in respect to property
damage, on a per occurrence basis. Tenant shall increase said limit from time to
time upon the reasonable request of Landlord.
(b) Tenant shall to obtain and keep in full force and effect at
all times during the Term at its sole cost and expense: (i) fire, extended
coverage and all risk insurance, on a full replacement basis, without
co-insurance; (ii) policies of insurance insuring all improvements, alterations,
additions, fixtures and contents installed or owned by Tenant in, on or at the
Premises, against fire, vandalism, riot, malicious mischief, sprinkler leakage
or other casualty with extended coverage, in amounts equal to the full
replacement value, without co-insurance, of such improvements, alterations,
additions, fixtures and contents; (iii) policies of rental insurance insuring at
a minimum the Fixed Rent and Additional Rental due and payable hereunder for a
minimum of twelve (12) months; and (iv) such other insurance as Landlord
reasonably may request, from time to time.
(c) Tenant agrees that its insurance policies to be obtained
hereunder shall provide that the insurance carriers shall waive all rights of
subrogation against Landlord and Overlandlord and that such policies shall not
be invalidated should the insured waive in writing prior to a loss any or all
right of recovery against any party for losses covered by such policies.
Landlord agrees that any insurance policies relating to the Premises which it
may obtain shall provide for a waiver of subrogation against Tenant. Tenant
hereby waives and releases any and all right of recovery which it might
otherwise have against Landlord, Overlandlord, their agents and employees, and
all liability or responsibility of Landlord, Overlandlord, their agents and
employees, for all injury and for loss or damage to its business, contents,
furniture, furnishings, fixtures and other property of Tenant, to the extent
that the same are insurable under any insurance policy, notwithstanding that
such
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<PAGE>
injury, loss or damage may result from the negligence or fault of Landlord,
Overlandlord or any of their agents or employees.
(d) Tenant agrees to deliver to Landlord, at or prior to the
Commencement Date, and thereafter at least thirty (30) days prior to the
expiration of any such policy, either a duplicate original or a certificate of
insurance and true copies of all policies procured by Tenant in compliance with
its obligations hereunder, together with evidence of payment therefor. All of
said policies of insurance shall be for the mutual benefit of and shall name
Landlord, Overlandlord and their designees (without any obligation to pay
premium) as well as Tenant as insureds as their interests may appear, and shall
be in form, amounts and with insurance companies licensed to do business in the
State of New York and satisfactory to Landlord. All such policies shall contain
an endorsement stating that such insurance may not be canceled and/or amended
except upon not less than thirty (30) days' prior written notice to Landlord and
any designee of Landlord.
(e) Landlord shall have the right, but shall not be required, to
obtain any insurance policies relating to the Premises.
8. Increase of Insurance Rates. Tenant, at its sole cost and expense,
agrees to comply promptly with all of the rules and regulations of the Fire
Insurance Rating or Service Organizations and any similar bodies having
jurisdiction over the Premises. If, at any time, as a result of or in connection
with any failure by Tenant to comply with the foregoing provision, or as a
result of any act of omission or commission by Tenant, its employees, agents,
contractors, invitees, licensees or subtenants, or as a result of or in
connection with the use to which the Premises are put, notwithstanding that such
use may be for the Permitted Use or that such use may have been consented to by
Landlord, any insurance rate applicable to the Building and/or to the contents
thereof shall be increased or shall be higher than that which would be
applicable for the least hazardous types of occupancy legally permitted therein,
then and in any of such events, Tenant shall pay such additional premiums for
all insurance policies in force with respect to the Premises. Tenant, at its
sole cost and expense, promptly shall make whatever changes are necessary to
prevent or remedy such condition and to comply with all requirements of
Landlord, Landlord's insurers, the Board of Fire Insurance Underwriters or
Service Organization or any similar body and any governmental authority having
jurisdiction thereof. For the purposes of this Paragraph, any finding or
schedule of the Fire Insurance Rating or Service Organization or any similar
organization having jurisdiction shall be deemed to be conclusively binding on
the parties hereto.
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<PAGE>
9. Fire and Other Casualty.
(a) If at any time during the Term, the Premises shall be damaged
in whole or in part or wholly or partially destroyed from fire or other casualty
(including any casualty for which insurance coverage was not obtained) of any
kind or nature, regardless of whether said damage or destruction resulted from
an act of God, the fault of Tenant, Landlord, Overlandlord, or from any other
cause whatsoever, Tenant promptly shall replace, repair and rebuild the damaged
or destroyed improvements and buildings, at least to the extent of the value of
the improvements and buildings, and as nearly practicable to the character of
the buildings or improvements, existing immediately prior to such occurrence,
herein referred to as "Rebuilding". Such Rebuilding shall be in accordance with
all applicable governmental requirements and in accordance with plans and
specifications therefor which first shall be submitted to and approved by
Landlord, which approval shall not be unreasonably withheld.
(b) All insurance proceeds paid pursuant to any policy of
insurance on account of such destruction or damages, less the cost, if any,
incurred in connection with the adjustment of the loss and the collection
thereof (herein sometimes referred to as the "insurance proceeds"), shall be
applied to the payment of the cost of the Rebuilding, and shall be endorsed to
and held by Landlord, in trust, and shall be paid out to or for the account of
the Rebuilding from time to time as such work progresses, in accordance with
usual lending institution procedures for funding of construction loans, provided
Landlord reasonable determines that the insurance proceeds are sufficient to pay
all costs and expenses related to the Rebuilding. If said proceeds are
insufficient, then such proceeds shall not be paid out unless and until Tenant
shall satisfy Landlord that Tenant has sufficient funds to pay such deficit and
such portion of the cost of Rebuilding shall have been paid for by Tenant so
that the funds held by Landlord pursuant to this Paragraph 9(b) shall be
sufficient to pay for the remaining cost of the Rebuilding. if Tenant shall fail
to satisfy Landlord that it has sufficient funds to pay such deficit within
twenty (20) days following receipt of insurance proceeds, Landlord at any time
thereafter, until it shall be so satisfied, shall have the right to retain all
insurance proceeds and to terminate this lease on not more than one (1) year's
notice to Tenant.
(c) Upon Landlord's receipt of evidence reasonably satisfactory to
it that the Rebuilding has been completed in accordance herewith and paid for in
full and that there are no liens on the Premises as a result thereof, Landlord
shall pay to Tenant from said insurance proceeds, any remaining unreimbursed
costs resulting from the Rebuilding. All excess funds shall be retained by
Landlord.
(d) Under no circumstances shall Landlord be obligated to make any
payment, disbursement or contribution towards the
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<PAGE>
cost of the Rebuilding except to the extent of the insurance proceeds actually
received by the Landlord in accordance herewith.
(e) In the last year of the Term, Tenant shall have the option not
to Rebuild in the event of a major casualty requiring the expenditure of more
than One Hundred Thousand ($100,000.00) Dollars to complete the Rebuilding
thereof, in which event, Landlord shall be entitled to all insurance proceeds,
and Tenant shall remain liable for Rental payments for the balance of the Term.
10. Repairs and Maintenance. Tenant acknowledges that as of the
Commencement Date, it shall have inspected and examined the Premises and that it
has entered into this lease without any representations on the part of Landlord,
Overlandlord, their agents or representatives, as to the condition thereof,
including, but not limited to, its environmental condition, is leasing and
accepting the Premises "as-is" subject only to the provisions hereof, and is not
relying upon any representation or statement made by Landlord as to the
condition, character, quality or value of the same. Tenant, at its sole cost and
expense, shall take good care of the Premises and shall keep, repair, replace
and maintain the Premises in good order, condition and repair, and each and
every part thereof including, without limitation, the structure, roof, exterior
walls, floors, downspouts, gutters, glass, electrical, plumbing, heating,
ventilating and air-conditioning systems, elevators, painting and decorating and
repairs and replacements to the parking and outside areas and any improvements
located thereon including, without limitation, all landscaping). Tenant shall
not cause nor permit any dirt, debris or rubbish to be put, placed or maintained
an the sidewalks, driveways, parking lots, yards, entrances and curbs and shall
remove same at its sole cost and expense. Tenant further agrees to keep the
Premises in a clean and sightly condition and well lit during appropriate hours
and to keep same free of snow and ice.
11. Covenants Against Liens.
(a) Tenant shall not do any act, nor make any contract which may
create any lien or other encumbrance upon all or any part of the Premises, nor
permit nor suffer same, on account of work performed or materials supplied or
furnished for or to Tenant or the Premises. if, because of any act or omission
(or alleged act or omission) of Tenant, any mechanic's or other lien or
encumbrance shall be filed against all or any part of the Premises, whether or
not such lien or encumbrance is valid or enforceable as such, Tenant, at its
sole cost and expense, shall cause same to be discharged of record or bonded
within ten (10) days after notice to Tenant of the filing thereof; and Tenant
shall indemnify and save harmless Landlord and Overlandlord against and from all
damages, costs, liabilities, suits, penalties, claims and demands, including
reasonable counsel fees,
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resulting from the creation of such lien or encumbrance. if Tenant fails to so
comply, Landlord shall have the option, in addition to declaring a default
hereunder, of discharging or bonding any such lien or encumbrance, and Tenant
agrees to reimburse Landlord and/or Overlandlord for all costs, legal fees and
other expenses incurred in connection therewith, together with interest thereon
at the lesser of: (i) the annual rate equal to four (4t) percent above the
annual prime interest rate extended by Chase Manhattan Bank, N.A. at its New
York office as of the date of payment by Landlord; or (ii) the highest rate
permitted by law (said rate of interest hereinafter being called the "Lease
Interest Rate"), which interest shall commence to run as of the date of payment
and which sums, including the said interest, shall be deemed to constitute
Additional Rental. All materialmen, contractors, artisans, mechanics, laborers
and any other persons now or hereafter contracted by Tenant for the furnishing
of any labor, services, materials, supplies or equipment, at any time from the
date hereof until the end of the Term, are hereby charged with notice that they
must look exclusively to Tenant to obtain payment for same. Tenant, following
notice to Landlord, shall have the right to contest by appropriate legal
proceedings, at its sole cost and expense, the validity of any mechanic's lien
filed against the Premises; provided, however, that: (i) any noncompliance or
contest shall not constitute a crime on the part of Landlord and/or Overlandlord
or otherwise adversely affect, jeopardize or threaten the interests of Landlord
and/or Overlandlord; (ii) Tenant diligently shall prosecute any such contest to
a final determination by a court, department or governmental authority having
final jurisdiction and shall keep Landlord advised in writing as to all changes
in status and determinations in connection with any such proceedings; (iii)
Tenant shall indemnify and save harmless Landlord and Overlandlord against and
from any and all losses, costs, expenses, claims, penalties, actions, demands,
liabilities, judgments or other damages which Landlord and/or Overlandlord may
sustain by reason of such contest or as a result of Tenant's failure or delay in
compliance, including, without limitation, reasonable attorneys' fees; and (iv)
Tenant shall provide such reasonable security as shall be requested by Landlord.
In no event shall Tenant defer compliance if such deferment would constitute a
violation of any of the provisions of any mortgage. Landlord agrees to cooperate
reasonably with Tenant and to execute any documents or pleadings reasonably
required for the purpose of any such contest; provided that the same shall be
without cost, expense or obligation to Landlord and/or Overlandlord. Landlord
shall have the right, but not the obligation, to contest by appropriate legal
proceedings, at Landlord's expense, any such law, ordinance, rule, regulation or
requirement.
(b) Nothing in this lease shall be deemed to be, or construed in any
way as constituting, the consent or request of Landlord and/or Overlandlord,
expressed or implied, by inference or otherwise, to any person, firm or
corporation for the
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performance of any labor or the furnishing of any materials for any
construction, rebuilding, alteration, addition or repair of or to the Premises
or any part thereof, nor as giving Tenant any right, power or authority to
contract for or permit the rendering of any services or the furnishing of any
materials which might in any way give rise to the right to file any lien against
the Premises. Landlord shall have the right to post and keep posted on the
Premises any notices which Landlord shall deem necessary for the protection of
Landlord, Overlandlord and/or the Premises from any such lien.
12. Alterations.
(a) Tenant shall not make or cause or permit the making of any
repairs, alterations, additions, or improvements in or to the Premises without
obtaining Landlord's prior written consent thereto in each instance. Such work
shall not be commenced until Tenant shall submit to Landlord plans and
specifications relating to any such repairs, alterations, additions or
improvements, and all such work shall be performed in accordance with the
provisions of this lease. Landlord shall have the right to determine if such
work would reduce the value, size or general utility of the Premises or any
portion thereof, or whether such work maintains the architectural harmony of the
Building. Any approval by Landlord as aforesaid may be upon condition that
Tenant furnish to Landlord such evidence of Tenant's financial ability to assure
completion thereof and payment therefor, as Landlord reasonably may require,
including the furnishing of adequate security. All repairs, alterations,
additions or improvements, when installed or attached to the Premises, shall
belong to and become the property of Landlord and shall be surrendered with the
Premises and as part thereof, upon the expiration or sooner termination of this
lease without compensation to Tenant. However, if Landlord shall elect, Tenant,
at its sole cost and expense, shall remove any alterations, additions and
improvements prior to the expiration or other termination of this lease and
repair all damage caused by such removal and restore the Premises to the
condition they were in prior to the installation of any such alteration,
addition or improvement. Nothing herein contained shall be construed to restrict
Tenant's right to make any alterations, additions or improvements in Tenant's
own movable trade fixtures. The provisions of this Paragraph are subject to the
terms and conditions of any mortgage, including the necessity of obtaining the
consent of such mortgagee and .he approval of its architect, if required.
(b) Any work performed by Tenant shall be subject to Landlord's
inspection and approval after completion to determine whether it complies with
the requirements of this lease. The approval or consent of Landlord shall not
relieve Tenant of its obligation that all such repairs, alterations,
improvements and/or additions be constructed and performed in a good and
workmanlike manner and in accordance with all applicable
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governmental and fire underwriting requirements, nor constitute a waiver of any
rights of Landlord if Tenant fails to perform its obligations. Tenant, at its
sole cost and expense, shall procure all necessary governmental approvals,
permits or certificates in connection with all work performed by Tenant in, on
or at the Premises and shall deliver the original of all such approvals, permits
or certificates to Landlord to be retained by Landlord.
(c) During the course of any and all repairs, alterations,
additions or improvements which the Tenant either shall be required to perform
or which the Tenant shall elect to perform, Tenant, at its sole cost and
expense, at all times, shall obtain and maintain or cause to be obtained and
maintained, workmen's compensation insurance and any other insurance which shall
then be required by law, together with public liability insurance as set forth
in Paragraph 7 hereof, to insure against any additional hazards created in
connection with the performance of any of the aforesaid work. Prior to the
commencement of any such work, Tenant shall deliver to Landlord copies of all
policies of insurance required pursuant to this subparagraph 12(c).
13. Condemnation.
(a) If the whole or substantially all of the Premises shall be
taken for any public or quasi-public use under any statute or by right of
eminent domain, or by private purchase in lieu thereof, then this lease shall
automatically terminate as of the date that title shall be taken. If a part of
the Premises shall be so taken as to render the remainder thereof unusable for
the purpose for which the Premises are leased, then Landlord and Tenant each
shall have the right to terminate this lease on thirty (30) days' notice to the
other, given within ninety (90) days following the date of such taking. If this
lease shall terminate or be terminated, the Rental hereunder shall be equitably
adjusted as of the date of termination.
(b) If a part of the Premises shall be so taken and this lease
shall not be terminated pursuant to the provisions of subparagraph (a) above,
then the Rental shall be equitably apportioned according to the square footage
of the Building so taken and this lease, in all other respects, shall remain in
full force and effect, and Tenant, at its own cost and expense, shall restore
the remaining portion of the Premises to the extent necessary to render it
reasonably suitable for the purposes for which the Premises are leased, provided
that such work need not exceed the scope of the work necessary to restore the
remainder of the Premises to the condition in which they were delivered at the
Commencement Date, ordinary wear and tear excepted. Landlord shall hold in trust
the portion of net proceeds received on account of such condemnation award
directly related to the performance of such work and shall disburse same in
accordance with the provisions of Paragraph 9 hereof.
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(c) Subject only to the provisions of subparagraph (b), all
compensation awarded or paid upon such a total or partial taking of the Premises
shall belong to and shall be the property of Landlord and/or overlandlord, and
without any sharing by Tenant, whether such compensation results from diminution
in value of the leasehold or to the fee interest in the Premises. Tenant,
however, shall have the right to seek and prosecute any claim directly against
the condemning authority in such condemnation proceedings for moving expenses,
inventory and/or movable trade fixtures, furniture and other personal property
belonging to Tenant, so long as such claim shall not diminish or otherwise
adversely affect the award of Landlord, Overlandlord, any mortgagee.
(d) Tenant agrees to execute and deliver such instruments as may
be deemed necessary or required to expedite any condemnation proceedings or to
effectuate a proper transfer of title to such governmental or other public
authority, agency, body or public utility seeking to take or acquire the
Premises or any portion thereof. Tenant covenants and agrees to vacate the
Premises, remove all of its personal property therefrom and to deliver up
peaceable possession thereof to Landlord or to such other party designated by
Landlord. Failure by Tenant to comply with any provision hereof shall subject
Tenant to such costs, expenses, damages and losses as Landlord may incur,
including attorneys' fees, by reason of Tenant's breach hereof.
14. Access and Right to Exhibit.
(a) Landlord, Overlandlord and their designees shall have the
right to place and maintain all utility equipment of any kind in or on the
Premises as may be necessary or desirable to serve the Premises or any portion
thereof. Landlord, Overlandlord and their designees shall have the right to
enter upon the Premises at all reasonable hours (and in emergencies at all
times): (i) to inspect the same; (ii) to make repairs, additions or alterations
to the Premises and/or the utility lines serving same or to prevent waste or
depreciation thereof; (iii) to exhibit the Premises to any prospective purchaser
or mortgagee; (iv) to determine and/or comply with its obligations pursuant to
Paragraph 21(b) hereof; or (v) for any other lawful purpose. This Paragraph
shall not be deemed to be a covenant by Landlord and/or Overlandlord nor be
construed to create an obligation or duty on the part of Landlord and/or
Overlandlord to make such installation, maintenance, inspection, repairs,
additions or alterations except as otherwise specifically herein provided. Any
performance by Landlord and/or Overlandlord hereunder shall not be deemed a
constructive eviction or a waiver of Tenant's default in failing to perform
same, nor shall Landlord and/or Overlandlord be liable for any inconvenience,
disturbance, loss of business, loss of use of the Premises or any other damage
suffered by Tenant due to said performance by Landlord and/or Overlandlord, and
the obligations of Tenant pursuant to this lease shall not be affected in any
manner
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whatsoever. Landlord agrees to exercise due care to cause the least reasonably
possible interference with Tenant's business in the exercise of its rights
hereunder but Landlord and/or Overlandlord shall not be required to employ labor
on weekends or on an overtime basis to avoid or reduce any such interference.
(b) For a period commencing nine (9) months prior to the end of
the Term, Landlord and its designees shall have reasonable access to the
Premises for the purpose of exhibiting the same to prospective tenants and
during the last three (3) months of the Term, to post any "To Let" or "To Lease"
signs upon the Premises.
15. Assignment.
(a) Tenant shall not sublet the Premises or any part thereof, nor
assign, mortgage or otherwise encumber or dispose of this lease or any interest
therein, nor grant concessions or licenses for the occupancy of the Premises or
any part thereof without Landlord's prior consent. Landlord shall not be
obligated to consider any request for approval unless the following conditions
are satisfied:
(i) Tenant shall request Landlord's consent in writing, which
writing shall set forth the name and address of the assignee or sublessee, the
rental to be paid by said assignee or sublessee, the proposed effective date of
such assignment or subletting, together with all other terms and conditions of
said assignment or subletting;
(ii) At the time of such assignment and/or subletting, this
lease must be in full force and effect without any breach or default thereunder
on the part of Tenant or without any act or omission which, with the passage of
time, would constitute a breach or default hereunder;
(iii) The assignee or sublessee shall assume, by written
recordable instrument, in form and content reasonably satisfactory to Landlord,
the due performance of all of Tenant's covenants, conditions and obligations
hereunder, including any accrued obligations at the time of the assignment or
subletting;
(iv) A copy of the assignment or sublease and the original
assumption agreement, in form and content satisfactory to Landlord, fully
executed and acknowledged by the assignee and/or sublessee; a certified copy of
a properly executed corporate resolution, if applicable, authorizing and
accepting such assignment, subletting or assumption agreement; unaudited
financial statements of the proposed assignee or sublessee for its three (3)
most recently completed fiscal years prior to the request for consent hereunder
prepared in accordance with generally accepted accounting principles and
evidencing a financial condition that in Landlord's sole opinion is
satisfactory; and such other information as Landlord reasonably
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may request; shall be delivered to Landlord together with the notice required
pursuant to subparagraph 15(a)(i) above;
(v) Such assignment and/or subletting shall be upon and
subject to all of the provisions, terms, covenants and conditions of this lease,
and Tenant and any prior assignee or sublessee shall continue to be and remain
primarily, jointly and severally liable hereunder for the due performance of all
of the provisions, terms, covenants, conditions and obligations hereunder,
including, but not limited to, all payment of Rental; and
(vi) Tenant and said assignee or subtenant shall comply with
all applicable governmental laws, ordinances, rules and regulations in
connection with said assignment or subletting, and Tenant, its assignee or
subtenant shall bear the sole cost and expense of complying therewith.
(b) Notwithstanding anything herein contained to the contrary and
notwithstanding any prior consent by Landlord, no subtenant or assignee shall
assign or sublease further all or any portion of the Premises without Landlord's
prior consent in each such instance and without compliance with the provisions
of this Paragraph.
(c) Any and all payments agreed to be made to Tenant by any
assignee or sublessee shall accrue to and be paid over to Landlord, it being
understood and agreed that said assignee or sublessee shall pay the Rental and
all other monies and charges directly to Landlord, but in no event shall Tenant
be entitled to a credit for any part of such payment in excess of the Rental to
be paid to Landlord hereunder for a corresponding period.
(d) Intentionally Omitted.
(e) Notwithstanding the foregoing provisions of this Paragraph,
Tenant shall have the right, without the necessity of obtaining Landlord's
consent, but subject to all other provisions of this Paragraph 15, to:
(i) Sublet all or part of the Premises to any parent or
wholly owned subsidiary of Tenant;
(ii) Assign this lease to any parent or wholly owned
subsidiary of Tenant; or
(iii) Assign this lease to a corporation, partnership or
other entity which succeeds to all or substantially all of the assets and
business of Tenant or into which Tenant is merged, if the net worth of such to
ration, following such assignment, equals or exceeds the net worth of Tenant at
the date hereof or immediately prior to such assignment, whichever is greater;
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provided, however, that Tenant, at all times, shall be and remain primarily,
jointly and severally liable under this lease despite any such subletting or
assignment and provided further that the income tax consequences to Landlord
from the income derived hereunder shall not be adversely affected.
(f) In addition to the right of the Landlord to declare this lease
to be in default, the failure of the Tenant or its assignee or sublessee to
comply with any of the provisions and conditions of this Paragraph, at
Landlord's option, shall render any purported assignment or subletting null and
void and of no force and effect.
(g) It is acknowledged that the sale, transfer, conveyance or
other disposition of fifty (50%) percent or more of the outstanding capital
shares of Tenant, and/or any disposition or modification of the voting control
of the present shareholders of Tenant, shall constitute an assignment of lease
pursuant to the provisions of this Paragraph 15.
16. Rules and Regulations, Compliance With Laws.
(a) Tenant, at all times during the Term hereof, and at its sole
cost and expense, agrees:
(i) to pay promptly and when due, all taxes, licenses, fees,
assessments or other charges levied or imposed upon the business of Tenant or
upon any fixtures, furnishings or equipment in, on or at the Premises;
(ii) not to commit, permit nor allow any waste, defacement,
damage or nuisance to the Premises or any portion(s) thereof, nor use, permit
nor allow the plumbing facilities to be used for any purpose injurious to same
or dispose of any garbage or any other foreign substance therein, nor place a
load on any floor in the Premises exceeding the floor load per square foot which
such floor was designed to carry, nor install, attach, operate and/or maintain
in the Premises any heavy equipment or apparatus without the consent of
Landlord, nor install, operate and/or maintain in the Premises any electrical
equipment which will overload the electrical system therein, or any part
thereof, beyond its capacity for proper and safe operation as determined by
Landlord or which does not have Underwriter's approval;
(iii) to keep the Premises in a neat, clean, orderly and
sanitary condition, free of all insects, rodents, vermin, pests, animals or pets
of every type and kind;
(iv) not to use, permit or allow the Premises to be used for
any purpose or business which would: cause excessive depreciation or which is
illegal, noxious, offensive because of the emission of noise, smoke, dust,
vapors or odors or which could damage the Premises or any portion(s) thereof; or
be a nuisance or menace to or interfere with, the public; or require
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any plan and/or bond to be furnished or require any work to be performed to cure
and/or correct any condition created by Tenant, pursuant to any applicable
governmental law or requirement; or be for a purpose not permitted by this
lease;
(v) to comply with the requirements of all suppliers of
utility services to the Premises and not to suffer or permit any act or
omission, the consequence of which could be to cause the interruption,
curtailment, limitation or cessation of any utility service to the Premises.
(b) Tenant, at its sole cost and expense, agrees to comply
promptly with all ordinances, orders, rules, regulations and requirements of all
federal, state, county and municipal governments and appropriate departments,
commissions, boards and offices thereof, foreseen or unforeseen, ordinary as
well as extraordinary, and whether or not the same presently shall be within the
contemplation of the parties hereto or shall involve any change of governmental
policy or require extraordinary or structural repairs, alterations, equipment or
additions or any work of any kind, which may be applicable to the Premises, or
the purposes to which the Premises are put, or the manner of use of the Premises
at the commencement of or during the Term. The provisions of Paragraph 12 shall
apply to all work to be performed by Tenant pursuant to this Paragraph.
(c) No abatement, diminution or reduction of the Rental or other
charges required to be paid by Tenant pursuant to the terms of this lease shall
be claimed by or allowed to, the Tenant for any inconvenience, interruption,
cessation or loss of business or otherwise caused directly or indirectly by any
present or future laws, rules, requirements, orders, directions, ordinances or
regulations of any governmental or lawful authority whatsoever, or as a result
of any diminution of the amount of space used by Tenant caused by legally
required changes in the construction, equipment, operation or use of the
Premises.
(d) Tenant, following notice to Landlord, shall have the right to
contest by appropriate legal proceedings, at its sole cost and expense, the
validity of any law, ordinance, order, rule, regulation or requirement of the
nature referred to in subparagraph 16(b); provided, however, that: (i) any
noncompliance shall not constitute a crime on the part of Landlord and/or
Overlandlord or otherwise adversely affect, jeopardize or threaten the interest
of Landlord and/or Overlandlord; (ii) Tenant shall prosecute diligently any such
contest to a final determination by a court, department or governmental
authority having final jurisdiction and shall keep Landlord advised in writing
as to all changes in status and determinations in connection with any such
proceedings; and (iii) Tenant shall indemnify and save harmless Landlord and
Overlandlord against any and all losses, costs, expenses, claims, penalties,
actions, demands, liabilities, judgments or other damages which Landlord and/or
Overlandlord may sustain by reason
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of such contest or as a result of Tenant's failure or delay in compliance,
including, without limitation, reasonable attorneys, fees. It is agreed however,
that Landlord has the right to demand that the Tenant furnish adequate security
to ensure its ability to perform its indemnity obligations hereunder, which
security if so requested, shall be furnished to Landlord prior to the Tenant
commencing or continuing with such contest, as the case may be. In no event
shall Tenant defer compliance if such deferment would constitute a violation of
any of the provisions of any mortgage. Landlord agrees to cooperate reasonably
with Tenant, and to execute any documents or pleadings reasonably required for
the purpose of any such contest, provided that the same shall be without cost,
expense or obligation to Landlord. Landlord shall have the right, but not the
obligation, to contest by appropriate legal proceedings, at Landlord's expense,
any such law, ordinance, rule, regulation or requirement.
(e) Tenant, at its sole cost and expense, shall fulfill, observe
and comply with all of the terms and provisions of and shall cure all violations
arising during the Term hereof from all applicable governmental laws, rules,
regulations, ordinances and/or requirements relating to air, ground and/or water
pollution, the use, storage, discharge, creation or maintenance of Hazardous
Substances and Wastes (as defined in any applicable Environmental Act) in, on,
under, above or around the Premises, and protection and/or preservation of the
environment, as the same may be amended from time to time (all such laws, rules,
regulations, ordinances and requirements herein called the "Environmental
Acts"), including, without limitation, all rules, regulations, ordinances,
opinions, orders and directives issued or promulgated by any Department of
Environmental Protection, or any subdivision or bureau thereof or any other
governmental or quasi-governmental agency, authority or body having jurisdiction
over such matter(s) (herein referred to collectively and individually as
applicable, as the "DEP"). Without limiting the foregoing, Tenant agrees that it
shall properly and accurately label and segregate all materials stored at the
Premises; prepare, deliver and/or file with the applicable governmental
authorities, all forms, certificates, notices, documents, plans and other
writings, and furnish all such other information as may be required or requested
by Landlord, any mortgagee or any applicable governmental authority, in
connection with compliance or curing of any applicable requirement during the
Term hereof, related to the ownership, leasing or use of the Premises; the
termination of this lease; the sale, transfer or mortgaging of the Premises; or
the closing, terminating or transferring of operations, as the same are defined
in the Environmental Acts.
(f) Tenant agrees:
(i) At its sole cost and expense, to promptly discharge and
remove any lien or other encumbrance arising out of Tenant's failure to comply
with the provisions of this lease and/or any Environmental Acts, placed against
the Premises or any
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other property owned or controlled in whole or in part by Landlord, Overlandlord
or any related entity or party; and
(ii) It shall and hereby agrees to indemnify and hold
Landlord and/or overlandlord harmless from and against any and all liability,
penalties, losses, expenses, damages, costs, claims, causes of action, judgments
and/or the like, of whatever nature, including but not limited to, reasonable
attorneys' fees and other costs of litigation or preparation therefor, arising
out of or in connection with Tenant's failure or inability, for any reason
whatsoever, to observe or comply with any Environmental Acts pursuant hereto.
(iii) Upon delivery or receipt, as the case may be, to
deliver to Landlord, copies of all documents which it shall forward to or
receive from any governmental authority with respect to all Environmental Acts.
(iv) Whenever any Environmental Act requires the "owner or
operator" to do any act, related to any act or conduct occurring during the Term
hereof, Tenant shall do such act at its sole cost and expense, it being the
intention of the parties hereto that Landlord and Overlandlord shall be free of
all expenses and obligations arising from or in connection with compliance with
any Environmental Act arising from or relating to any act or conduct occurring
during the Term hereof and that Tenant shall fulfill all such obligations and
pay all such expenses.
(g) Tenant agrees that each and every provision of this Paragraph
16 shall survive the expiration or earlier termination of the Term of this
lease, regardless of the reason for such termination, it being agreed and
acknowledged that Landlord would not have entered into this lease but for the
provisions of this Paragraph 16 and the survival thereof.
17. Utilities. Tenant agrees to pay as and when the same become due and
payable, all water rents, rates and charges, all sewer rents and all similar
charges assessed or charged to the Premises during the Term, all charges for
electricity, gas, heat, steam, hot water and all other utilities supplied to the
Premises during the Term, together with the cost of repair, maintenance,
replacement and reading of all meters measuring Tenant's use or consumption
thereof, whether supplied by Landlord, Overlandlord or by a public or private
utility company. If Landlord and/or Overlandlord shall supply any or all of the
aforesaid services, the charges therefor shall be deemed Additional Rental and
shall be collectible as such on the first day of the month following the demand
for payment thereof. If any or all of the aforesaid services shall be supplied
by others and are not paid as the same become due and payable, Landlord shall
have the right, but not the obligation, to make such payments, in which event, a
sum equal to any such payments shall be paid on the first day of the month
following the demand for payment thereof, as Additional
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Rental, and shall be collectible as such, together with interest thereon at the
Lease Interest Rate, and which interest shall commence to run from the date of
payment. In no event shall Landlord and/or Overlandlord be responsible or liable
for the failure to supply Tenant or for the failure of the Tenant to receive or
for fluctuations in the supply of any utility service, nor shall Tenant be
entitled to any cessation, abatement, reduction or other offset of Rental in the
event of any failure to receive any utility service.
18. Signs. Tenant, at its sole cost and expense, may provide, install
and maintain such signs as Tenant may be requested by Toyota Motor Company,
provided: (i) such installation be made in such manner as will not affect any
roofing bond and/or other guarantee which then shall be in force and effect and
(ii) all such signs, at all times, shall conform to all applicable rules,
regulations, codes and ordinances of any governmental agencies having
jurisdiction thereover. All such signs shall be provided, installed, maintained
in good condition and repair and removed at the termination of the lease, at
Tenant's sole cost and expense. Tenant further agrees that it will not place any
advertisements or other type of structure or obstruction on the roof facade or
walls of the Premises and that it shall not operate any loudspeaker or other
device which can be heard outside of the Premises. If Landlord, Overlandlord
and/or their agents deem it necessary to remove any such signs in order to paint
or make any repairs, alterations or improvements in or upon the Building or any
part thereof, they may be so removed, but shall be replaced at Landlord's
expense when the said repairs, alterations or improvements shall have been
completed. Nothing contained in this Paragraph shall create any obligation on
the part of the Landlord and/or Overlandlord to make any repairs, alterations or
improvements.
19. Taxes.
(a) Tenant covenants and agrees that it shall pay all real estate
taxes, assessments, added assessments and other governmental charges or
substitutes therefor (hereinafter collectively called "Taxes") levied, imposed,
assessed or fixed on or against the Land and improvements thereon or arising
from the use, occupancy or possession thereof, during the Term hereof.
(b) Tenant shall have the right to contest in good faith any of
said Taxes, at its own cost and expense, provided, however, that notwithstanding
such contest, Tenant, at all times, shall: when due, pay all of the Taxes then
due; comply with all applicable laws, rules and regulations regarding the
payment of taxes; not take any action which would adversely affect, threaten or
jeopardize the interest of the Landlord and/or Overlandlord in the Land,
improvements, or any part thereof; and promptly pay, indemnify and save Landlord
and Overlandlord harmless from, all penalties and interest which may be charged
or imposed as a result of or during the pendency of, any such contest. In the
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event of any such contest, Landlord agrees to reasonably cooperate and to
execute any necessary documents, provided, however, that the same shall be
without any cost or expense to Landlord and/or Overlandlord. Tenant shall notify
Landlord of the filing of any tax appeal or contest not later than forty-five
(45) days prior to the deadline for the filing of any such tax appeal or contest
for each such tax year during the Term hereof.
(c) In the event that Tenant shall fail to contest all of such
Taxes or shall fail to notify Landlord or its filing of any such appeal or
contest, then and in either of such events, Landlord and/or Overlandlord shall
have the right, but not the obligation, to contest, at its own cost and expense,
any of such Taxes, and Landlord shall be entitled to all of the proceeds of any
refund received as a result of such contest, together with the receipt of
payments by Tenant of sums equal to all reductions or savings in future Taxes
resulting from or arising out of said appeal or contest, which sums shall be
paid on an annual basis, within thirty (30) days following demand therefor, or
pursuant to the provisions of Paragraph 19(e). Said payments shall be deemed to
constitute Additional Rental.
(d) Tenant shall pay Taxes directly to the applicable taxing
authority prior to the date same are due and payable (without penalty or
interest being imposed) and shall forward Landlord a copy of the check and
receipted tax bill within five (5) days after payment.
(e) Landlord, at any time and from time to time, may elect to have
Tenant pay one-twelfth (1/12) of the Taxes on the first day of each and every
month following such election, together with such escrow amounts as Landlord
reasonably may request. Tenant shall pay an amount reasonably estimated by
Landlord until a different amount is designated by Landlord, which payments are
designated as Additional Rental. There shall be appropriate adjustment at the
expiration of each Lease Year to the effect that any overpayment by Tenant shall
be applied to the next succeeding payment of Taxes and any amount due to
Landlord shall be paid to Landlord within ten (10) days after Landlord has
requested same.
(f) For the first and last Lease Years of the Term hereof, the
portion of all Taxes, other than such as result from added assessments, shall be
prorated, depending on the proportion which each such Lease Year shall bear to
the tax year in which it falls. The portion of Taxes resulting from added
assessments during the first and last Lease Years of the Term shall be pro rated
depending on the proportion which such Lease Year shall bear to the portion of
the tax year for which the added assessment is charged.
(g) If at any time during the Term hereof, a tax or excise on
rents or other tax, however described, is levied or assessed by said
Municipality, County, State or Country or any
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political subdivision thereof, against Landlord, Overlandlord or the Rental
reserved hereunder, or any part thereof, as a substitute or addition, in whole
or in part, for any revenues derived from any tax assessed or imposed by any
such political entity on land and buildings, Tenant covenants to pay to Landlord
such sum as shall be necessary to pay and discharge such tax or excise on rents
or other tax, which sum shall be paid to Landlord in the manner herein set forth
for Taxes.
(h) Except as otherwise provided herein, Tenant shall not be
obligated or required hereunder to pay any franchise, excise, corporate, estate,
inheritance, succession, capital levy or transfer tax of Landlord, or any
income, profit or revenue tax upon the income or receipts of Landlord.
(i) Tenant shall be responsible for and shall pay prior to the
time when such payment shall be deemed delinquent, all taxes assessed during the
Term against any leasehold interest, or any improvements, alterations,
additions, fixtures or personal property of any nature placed in, on or about
the Premises by Tenant, whether such tax shall have been levied or assessed
against Landlord, Overlandlord or Tenant.
20. Non-Liability of Landlord.
(a) Except for their negligent acts or conduct, neither Landlord,
Overlandlord, nor any of their agents, representatives, employees, constituent
members, successors or assigns shall be liable for any damage or injury which
may be sustained by Tenant or by any other person, nor shall Tenant have any
right to claim an eviction or constructive eviction as a consequence of: any
defect, latent or apparent; any change of conditions in the Premises; the
failure, breakage, leakage or obstruction of the street or sub-surface; the
water, plumbing, steam, sewer, waste or soil pipes; the roof, walls, drains,
leaders, gutters, valleys, downspouts or the like; the electrical, gas, power,
conveyor, refrigeration, sprinkler, air conditioning or heating systems; the
elevators or hoisting equipment; any other structural failure; the elements; any
theft or pilferage; any fire, explosion or other casualty; the carelessness,
negligence or improper conduct on the part of Tenant, or of Landlord,
overlandlord, their agents, employees, guests, licensees, invitees, subtenants,
assignees or successors; any interference with, interruption of or failure,
beyond the control of Landlord, of any services to be furnished or supplied by
Landlord; or any other cause whatsoever. All property kept, maintained or stored
in, on or at the Premises shall be so kept, maintained or stored at the sole
risk of the Tenant
(b) Neither Landlord, Overlandlord, nor any of their agents,
representatives, employees, constituent members, successors or assigns shall be
liable to Tenant or to any person or entity claiming through the Tenant, nor
shall Tenant be excused from the performance of any obligation hereunder, due to
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any breach or violation by Landlord or by any other person or entity of any
provision, covenant, term or condition of any other agreement affecting the
Premises or any portion thereof.
21. Indemnity.
(a) Tenant, at its sole cost and expense, agrees to indemnify and
save Landlord, Overlandlord and each of their agents, representatives,
employees, constituent members, successors and assigns harmless from and against
any and all claims, actions, demands and suits, for, in connection with, or
resulting from, any accident, injury or damage whatsoever (including, without
limitation, reasonable attorneys' fees) caused to any person or property
arising, directly or indirectly, in whole or in part, out of the business
conducted in or the use of the Premises, or occurring in, on or about the
Premises or any part thereof (including, without limitation, adjacent
sidewalks), or arising, directly or indirectly, in whole or in part, from any
act or omission of Tenant or any concessionaire or subtenant or their respective
licensees, servants, agents, employees or contractors, or arising out of the
breach or default by Tenant of any term, provision, covenant or condition herein
contained, and from and against any and all losses, costs, expenses, judgments
and liabilities incurred in connection with any claim, action, demand, suit or
other proceeding brought thereon. Said indemnity shall include defending or
resisting any proceeding by attorneys reasonably satisfactory to Landlord. It is
agreed that attorneys designated by Tenant's insurance carrier shall be deemed
to be satisfactory. The within indemnity shall be insured as a contractual
obligation under the policy of liability insurance Tenant is required to carry
hereunder. Notwithstanding the foregoing, if Tenant's obligations pursuant to
this Paragraph 21(a) shall result from the negligent acts or conduct of the
indemnitors, then such obligations shall be limited to the extent of the
coverage of the insurance policies which it is obligated to maintain pursuant to
this lease and if such insurance policies are maintained, Tenant shall not have
any additional liability on account of this Paragraph 21(a).
(b) Landlord, at its sole cost and expense, shall fulfill, observe
and comply with all of the terms and provisions of and shall cure all violations
relating to the Premises arising prior to the Commencement Date from all
applicable Environmental Acts, including, without limitation, all rules,
regulations, ordinances, opinions, orders and directives issued or promulgated
by any applicable DEP. Without limiting the foregoing, Landlord agrees that it
shall prepare, deliver and/or file with the applicable governmental authorities,
all forms, certificates, notices, documents, plans and other writings, and
furnish all such other information as may be required by any mortgagee or any
applicable governmental authority, in connection with compliance or curing of
any applicable requirement related to the ownership, leasing or use of the
Premises prior to the Commencement Date.
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(c) Landlord agrees:
(i) It shall and hereby agrees to indemnify and hold Tenant
harmless from and against any and all liability, penalties, losses, expenses,
damages, costs, claims, causes of action, judgments and/or the like, of whatever
nature, including but not limited to, reasonable attorneys' fees and other costs
of litigation or preparation therefor, arising out of or in connection with
Landlord's failure or inability, for any reason whatsoever, to observe or comply
with any Environmental Acts pursuant hereto.
(ii) Upon delivery or receipt, as the case may be, to deliver
to Tenant, copies of all documents which it shall forward to or receive from any
governmental authority with respect to all Environmental Acts.
(iii) Whenever any Environmental Act requires the "owner or
operator" to do any act relating to acts or conduct occurring prior to the
Commencement Date, Landlord shall do such act at its sole cost and expense, it
being the intention of the parties hereto that Tenant shall be free of all
expenses and obligations arising from or in connection with compliance with any
Environmental Act relating to any act or conduct occurring prior to the
Commencement Date and that Landlord shall fulfill all such obligations and pay
all such expenses.
(d) In order to secure the ability of Landlord to indemnify Tenant
pursuant to Paragraph 21(c), Landlord agrees that during the Term hereof, it
shall not encumber the Premises with any mortgage(s) which shall be prior to any
lien of Tenant to enforce its rights pursuant to the indemnity given by Landlord
in Paragraph 21(c) hereof which in the aggregate shall be in an amount in excess
of an amount equal to two-thirds (2/3) of the appraised value of the Land and
all improvements thereon at the time said mortgages) are placed against the
Premises. The appraised value shall be determined by an MAI appraiser selected
by Landlord or by such appraiser as may be selected by the holder of any such
mortgage. In the event this provision shall be breached, Tenant's remedies shall
be limited to obtaining a lien against the Property which shall be superior to
the liens of any mortgage(s) encumbering the Property to the extent the amount
of such mortgages exceed the amounts permitted hereunder. In no event shall such
breach permit Tenant to terminate this lease or to create any further liability
on Landlord. Tenant shall have the right to record a Memorandum of Lease to
reflect the provisions of this Paragraph 21(d) provided that on the Commencement
Date it shall deliver to Landlord's attorney, a Discharge of Memorandum of
Lease, to be released from escrow and filed of record upon any termination of
this lease.
(e) If Landlord shall fail to indemnify and hold harmless Tenant
pursuant to Paragraph 21(c) for a period of thirty (30) days following receipt
of demand therefor, then and
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until Landlord shall do so, and in addition to its other rights, Tenant shall be
entitled to a credit against payments of Fixed Rent due hereunder of a sum equal
to all monies expended by Tenant on account of reasonable costs and expenses,
for which Landlord is to indemnify and save Tenant harmless, provided that in
all instances, Tenant shall have furnished Landlord with a prior written
statement detailing the monies which it expended and which it alleges are within
the indemnification set forth in Paragraph 21(c).
22. Right to Cure Default. If Tenant shall fail to comply fully with
any of its obligations hereunder, then Landlord shall have the right, at its
option, to cure such breach, at Tenant's expense, upon fifteen (15) days' prior
notice to Tenant, except in cases of emergency (in which event no notice need be
given), and if Tenant shall fail to cure said default within such period
(provided, however, that if said default cannot be cured within said period, if
Tenant shall not have commenced in good faith to cure such default within said
fifteen (15) day period and shall not be continuing the curing thereof
diligently thereafter), Tenant agrees to reimburse Landlord promptly (as
Additional Rental) for all costs and expenses incurred as a result thereof or in
connection therewith, together with interest at the Lease Interest Rate, which
shall commence as of the date on which Landlord shall have made any such
payment. Any action so taken by Landlord pursuant to this lease shall not serve
to waive or release Tenant from its performance of any obligation hereunder.
23. Remedies Upon Default.
(a) If Tenant shall: (i) default in payment of the Rental reserved
herein or in making any payment herein provided; or (ii) default in the
observance of any of the other terms, covenants and conditions of this lease,
which default continues for fifteen (15) days following the delivery of notice
thereof, as hereinafter required; or (iii) abandon, desert or vacate the
Premises; or (iv) assign, sublet or permit the Premises to be occupied by
someone other than Tenant, except as herein provided; or (v) make any assignment
for the benefit of creditors, file a voluntary petition in bankruptcy, be by any
court adjudicated a bankrupt, take the benefit of any insolvency act or be
dissolved or liquidated, voluntarily or involuntarily, or if a receiver or
trustee of Tenant and/or its property shall be appointed in any proceedings; or
(vi) default in payment or performance of any other obligation pursuant to the
Promissory Note given by Tenant to Landlord concurrently herewith; or (vii)
record or attempt to record this lease or any memorandum thereof except as
otherwise permitted herein; or (viii) suffer or permit any execution, attachment
or other similar process to issue against Tenant or a substantial portion of its
property or assets, or suffer or permit the Premises to be taken and/or occupied
or attempted to be taken and/or occupied by one other than Tenant; or (ix)
remove or attempt to remove, or in the judgment of Landlord, manifest an
intention to remove, its goods or property from the Premises,
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other than in the ordinary course of its business; or (x) fail to make any
Rental payment within fifteen (15) days following its due date on more than two
(2) occasions during any twelve (12) month period; then, upon the happening of
any of the events set forth in this Paragraph, Landlord shall have the right to
terminate this lease and the Term hereof upon not less than five (5) days'
notice to Tenant, except as otherwise herein provided, or as otherwise required
by applicable law, with the same force and effect as though the date so
specified was the date hereinabove first set forth as the date of the expiration
of the Term (but Tenant shall remain liable to Landlord as herein provided), and
at the expiration of the period provided in said notice, the Term hereof and all
of the Tenant's right, title and interest hereunder shall cease and terminate,
and Landlord without further notice, may reenter the Premises, remove the Tenant
and its property therefrom, and have possession and enjoyment of the same,
and/or may recover possession thereof as prescribed by law relating to summary
proceedings or otherwise, without any liability for damages or prosecution
therefrom, it being understood that no demand for the Rental, no reentry for
condition broken and no notice to quit or other notice prescribed by law shall
be necessary nor shall any notice of non-payment of Rental be required to be
given to enable Landlord to recover such possession, to terminate this lease
and/or to exercise any other right(s) to which it may be entitled hereunder or
pursuant to law, but that all rights to any such demand, reentry, notice or
other prerequisites are hereby expressly waived by Tenant.
(b) In the event of any such default, reentry, expiration and/or
dispossess: (i) the Rental shall become due and shall be paid up to the time of
such reentry, dispossess and/or expiration, together with such costs and
expenses as Landlord may incur in reacquiring possession of the Premises, for
legal expenses, attorneys' and brokerage fees, putting or restoring the Premises
in or to good order and altering or preparing the same for re-rental, and/or in
enforcing its rights hereunder; (ii) the Fixed Rent for the balance of the Term
and the Additional Rental for the balance of the Term, as the same can be
determined from time to time, shall become due and payable immediately, together
with such costs and expenses, including but not limited to, legal expenses and
attorneys' fees, as Landlord may incur in enforcing its rights; (iii) Landlord
shall have the right, but shall not be obligated, to relet the Premises or any
part or parts thereof, either in the name of Landlord or otherwise, for a term
or terms which, at Landlord's option, may be less than or exceed the period
which otherwise would have constituted the balance of the Term, for such rental
and on such terms as Landlord shall deem reasonable; (iv) if Landlord shall not
have exercised or shall be unable to exercise its rights pursuant to
subparagraph (b)(ii) above, Tenant, or the legal representatives of Tenant,
shall pay Landlord any deficiency between the Rental hereby covenanted to be
paid and the net amount, if any, of the rents collected on account of any
reletting of the Premises for each month of the period which otherwise would
have constituted the balance of the
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Term. In computing such sum, there shall be added to the Rental hereby
covenanted to be paid, such expenses of Landlord as are referred to in
subparagraph (b)(i) of this Paragraph. Any such deficiency shall be paid in
monthly installments by Tenant on the first day of each month, in advance, and
any suit brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Landlord to collect the deficiency for any
subsequent month by a similar proceeding or by joining, consolidating or
otherwise including in one action, any and all claims for subsequent periods;
(v) notwithstanding any other provisions of this lease, Landlord shall be
entitled, at its option, in addition and without prejudice to any other rights
and remedies it may have hereunder or at law or in equity, to recover from
Tenant as damages, in addition to any Rental unpaid or accrued to the date of
such reentry, expiration and/or dispossess, together with all of the additional
costs and expenses incurred by Landlord, an amount equal to the difference
between the Rental covenanted to be paid hereunder for what otherwise would have
been the unexpired portion of the Term had such reentry, expiration and/or
dispossess not occurred, and the then fair and reasonable rental value of the
Premises for such unexpired portion of the Term, both discounted at the rate of
six (6%) percent per annum to present worth. Landlord shall be entitled to
recover and receive the full amount of such damages at whatever time after such
reentry, expiration and/or dispossess it seeks to recover the same, without
limiting or prejudicing the right of Landlord to seek as damages an amount equal
to the maximum amount allowed by applicable law at the time when such damages
are sought or an amount equal to the maximum amount of damages to which Landlord
may be entitled by virtue of the provisions of this lease. In determining the
then fair and reasonable rental value of the Premises, the rental realization
upon any reletting, if such reletting shall be accomplished within a reasonable
time after such reentry, expiration and/or dispossess, shall be deemed prima
facie to be such fair and reasonable rental value. Landlord shall be entitled,
in addition to the amount of such difference, to also recover such expenses as
are referred to in subparagraph (b)(i) of this Paragraph; (vi) Landlord hereby
is granted a lien, in addition to any statutory lien or right to distrain which
may exist, on all personal property of Tenant in or on the Premises, to secure
payment of the Rental and performance of the terms, provisions, covenants and
conditions of this lease. Landlord shall have the right, as agent of Tenant or
any affiliated or related person or entity, to take possession of any such
furniture, fixtures or other personal property found in or about the Premises
and sell the same at public or private sale and to apply the proceeds thereof to
the payment of any monies becoming due under this lease, Tenant hereby waiving
the benefit of all laws exempting property from execution, levy and sale on
distress or judgment. Tenant agrees to pay all legal expenses, attorneys' and
brokerage fees and all other costs and expenses incurred by Landlord in
exercising its rights hereunder or in enforcing any of the obligations of Tenant
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under this lease, which monies are deemed to constitute Additional Rental.
(c) Landlord may make such alterations, repairs, replacements
and/or decorations in or on the Premises as in its sole judgment, it considers
advisable or necessary for the purpose of reletting the Premises; and the making
of such alterations, repairs, replacements and/or decorations shall not operate
or be construed to relieve Tenant from its liability hereunder. Landlord, in no
event, shall be liable in any way whatsoever for any failure to relet and/or to
attempt to relet the Premises and/or any portion thereof, or in the event that
the Premises and/or any portion thereof, are relet, for the reasonableness of
the rental or for the failure to collect any rental under such reletting.
(d) In the event of a breach or violation by Tenant of any of the
covenants, conditions, terms or provisions of this lease, Landlord shall have
the right to obtain an injunction or to invoke any remedy allowed at law or in
equity, without limitation, in addition to any and all rights and remedies
provided for herein.
(e) No receipt of Rental by Landlord after the termination in any
manner of this lease, or the performance by Tenant of any obligation hereunder
after the period stated in any notice given pursuant to this lease, shall
reinstate, continue or extend the lease or the Term thereof, affect any such
notice or cure any default theretofore arising hereunder. No receipt of Rental
or the performance by Tenant of any obligation hereunder after the commencement
of suit, or after final judgment for possession of the Premises, shall
reinstate, cure, continue or extend the lease or the Term thereof or affect said
suit or said judgment.
(f) The rights and remedies of Landlord specified in this lease,
as well as the rights and remedies to which Landlord is entitled by law or in
equity, are cumulative and are not intended to be exclusive of or preclude the
exercise of any other rights or remedies which may be available to Landlord in
the event of a breach by Tenant of any provision of this lease and shall survive
the expiration or termination of this lease.
(g) In no event shall Tenant be entitled to receive all or any
portion of any net surplus monies obtained or received by Landlord either in
connection with any reletting or as a result of the exercise of any other right
or remedy to which Landlord may be entitled.
(h) Landlord shall have the right to institute proceedings for the
recovery of damages, including the payment of Rental, at any time and from time
to time, and shall not be required to postpone the institution of any proceeding
until the date when the Term would have expired if it had not been so
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terminated pursuant to the provisions hereof, or pursuant to any provision of
law, or had Landlord not re-entered the Premises. Nothing herein contained shall
be construed to limit or preclude any recovery by Landlord against Tenant of any
damages to which, in addition to the damages particularly set forth herein,
Landlord may be entitled by reason of any default hereunder on the part of
Tenant, nor limit or prejudice the right of Landlord to prove and obtain as
damages by reason of the default of Tenant hereunder, an amount equal to the
maximum allowed by any stature or law in effect at the time when such damages
are to be proved, whether or not such amount shall be greater than, equal to, or
less than any damages or monies to which Landlord is entitled hereunder.
(i) Notwithstanding the foregoing, if the applicable law of the
State of New York provides that the parties to a commercial lease cannot waive
the duty of Landlord to mitigate its damages or if Landlord elects to attempt to
mitigate its damages, then Landlord only shall be obligated to use commercially
reasonable efforts to mitigate damages. Landlord shall be deemed to have used
reasonable efforts to mitigate if:
(i) It uses leasing practices and seeks such rent, period and
other terms and conditions as then are being utilized by Landlord or an
affiliate for similar properties in the same geographic area; or
(ii) It uses leasing practices and seeks such rent, period
and other terms and conditions as then are reasonable or usual for similar
properties in the same geographic area.
Landlord, in no event, shall be required to relinquish or jeopardize
any economic benefit or opportunity, including, without limitation, the leasing
of other property owned or controlled by Landlord or an affiliate in order to
mitigate damages. The rental of any other property owned or controlled by
Landlord or an affiliate shall not reduce any damages which Landlord would be
entitled to receive from Tenant and any such damages shall include any late fees
chargeable pursuant to the terms of this lease.
If Landlord shall be under a duty to or shall elect to mitigate
damages, then only the "net proceeds" of any such reletting received by Landlord
shall be credited against Tenant's existing or future outstanding obligations
under this lease, in such manner and in such order as Landlord, in its sole
discretion, may determine. As used herein, "net proceeds" shall mean the full
amount of rent and other similar charges paid to Landlord, reduced by all
Landlord's expenses incurred in connection with reletting, operating or
maintaining the Premises (including, but not limited to, expenses for work done
to the Premises in connection with such reletting, brokerage fees, attorneys'
fees and disbursements and any costs or expenses of
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Landlord paid or reimbursed by a tenant, whether as Additional Rental or
otherwise).
24. Waiver of Redemption. Upon the expiration or sooner termination of
this lease or in the event of entry of judgment for the recovery of the
possession of the Premises in any action or proceeding, or if Landlord shall
enter the Premises by process of law or otherwise, Tenant, for itself and all
persons claiming through or under Tenant, including, but not limited to, its
creditors, hereby waives and surrenders any right or privileges of redemption
provided or permitted by any statute, law or decision now or hereafter in force,
to the extent legally authorized, and does hereby waive and surrender up all
rights or privileges which it may or might have under and by reason of any
present or future law or decision, to redeem the Premises or for a continuation
of this lease after having been dispossessed or ejected therefrom by process of
law, or otherwise.
25. Mortgage Priority.
(a) This lease shall be and hereby is made subject and subordinate
at all times to all ground and underlying leases and to any amendments thereof
made from time to time, and to he rights of any ground lessor thereunder, to any
and all reciprocal easement agreements and to all mortgages and all advances
made thereon which, now or hereafter, may affect the Premises, and to all
increases, renewals, modifications, consolidations participations, replacements
and extensions thereof, irrespective of the time of recording thereof, without
the necessity of any further instrument of subordination. If Landlord or any
lease holder, mortgagee or ground lessor desires confirmation of such
subordination, Tenant shall promptly execute and deliver any certificate or
instrument that may be requested. Tenant hereby constitutes and irrevocably
appoints Landlord as its attorney-in-fact having a power coupled with an
interest to execute any such certificates for and on its behalf.
(b) Tenant agrees that in the event the interest of the Landlord
becomes vested in the holder of any mortgage or in any ground lessor, or in
anyone claiming by, through or under any of them, then such holder or ground
lessor shall not be:
(i) liable for any act or omission on any prior landlord
(including Landlord herein); or
(ii) subject to any offsets or defenses which Tenant may have
against any prior landlord (including Landlord herein); or
(iii) bound by any Rental which Tenant may have paid for more
than the current month to any landlord (including Landlord herein); or
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(iv) bound by any alteration or modification of any provision
hereof, nor any cancellation or surrender of this lease unless the same shall
have been approved in writing by such holder, or unless specific provision
therefor is set forth in this lease.
(c) Tenant agrees that, upon the request of Landlord, Tenant will
execute, acknowledge and deliver such document or instrument as may be requested
by the holder of any mortgage and/or ground lessor confirming or agreeing that
this lease is assigned to such mortgagee and/or ground lessor as collateral
security for such mortgage and/or ground lease and agreeing to abide by such
assignment, provided that a copy of such assignment has in fact been delivered
to Tenant.
(d) Tenant shall do nothing to cause a default under any ground
lease and/or mortgage now or hereafter affecting the Premises.
26. Surrender of Premises.
(a) On the expiration date or sooner termination of the Term,
Tenant shall deliver to Landlord all keys to the Premises which are in its
possession and/or control, shall quit and surrender the Premises to Landlord in
broom-clean, good condition and repair, reasonable wear and tear excepted, in
compliance with all applicable governmental laws, rules, regulations and other
requirements, including but not limited to, all Environmental Acts, together
with all alterations, additions and improvements which may have been made in, on
or to the Premises, except for movable furniture and equipment, or unattached
movable trade fixtures put in at the sole expense of Tenant; provided, however,
that Tenant shall ascertain from Landlord, at least thirty (30) days prior to
the end of the Term, whether Landlord desires to have the Premises or any part
thereof restored to the condition in which it was originally delivered to
Tenant, ordinary wear and tear excepted. If Landlord shall desire, then Tenant,
prior to the end of the Term, at its sole cost and expense, shall restore the
Premises, remove therefrom all of its property together with such alterations,
additions and improvements as may be requested by Landlord, and fix and repair
any and all damage or defacement to the Premises caused by the installation
and/or removal of alterations, additions, improvements, furniture, equipment,
trade fixtures or any other property. Any or all of such property, alterations,
additions or improvements not so removed, at Landlord's option, shall become the
exclusive property of Landlord and/or may be disposed of by Landlord, at
Tenant's cost and expense, without further notice or demand. If the Premises is
not surrendered as and when aforesaid, Tenant shall indemnify Landlord against
any damages, loss or liability resulting therefrom, including, without
limitation, any claims made by any succeeding occupant founded on such delay.
Tenant's obligation under this Paragraph shall survive the expiration or sooner
termination of the Term.
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(b) Notwithstanding anything herein contained to the contrary,
Tenant shall not have the right to remove any movable furniture or equipment,
unattached movable trade fixtures or any other property at any time as Tenant
shall be in breach or default hereunder, whether prior to, upon or subsequent to
the expiration or termination of this lease.
27. Unavoidable Delays.
(a) If, as a result of strikes, lockouts, labor disputes,
inability to obtain labor, materials or reasonable substitutes therefor, acts of
God, governmental restrictions, regulations or controls, enemy or hostile
governmental action, civil commotion, insurrection, revolution, sabotage, fire
or other casualty, acts or failure to act by either party or other conditions
beyond the control of Landlord and/or Overlandlord, whether prior to or during
the Term, Landlord shall fail punctually to perform any lease obligation, then
and in any of such events, such obligation shall be punctually performed as soon
as practicable after such condition shall abate. If Landlord, as a result of any
such condition, shall be unable to exercise any right or option within any time
limit provided in this lease, such time limit shall be deemed extended for a
period equal to the duration of such condition. The failure of Landlord to
perform any lease obligation for the reasons set forth herein shall not affect,
curtail, impair or excuse this lease or the obligations of Tenant hereunder,
including but not limited to, the obligation of Tenant to pay Rental.
(b) No diminution or abatement of Rental, or any other form of
compensation, shall be claimed or allowed for inconvenience or discomfort
arising from the making of repairs or improvements to the Premises, or arising
from the construction of or repairs or improvements to, other buildings,
structures, lands or appliances, whether or not the same shall be owned by
Landlord and/or Overlandlord. With respect to the various "services", if any, to
be furnished by Landlord to Tenant, is agreed that there shall be no diminution
or abatement of Rental, or any other form of compensation, for interruption or
curtailment of such "service", when such interruption or curtailment shall be
due to accident, alterations or repairs necessary to be made or to inability or
difficulty in securing supplies or labor for the maintenance of such "service"
or to any other cause. No such interruption or curtailment of any such "service"
nor any non-performance by Landlord pursuant to subparagraph (a) of this
Paragraph, shall be deemed a constructive eviction, nor shall there be any
abatement or diminution of Rental, or any other form of compensation, because of
making of repairs, improvements or decorations to the Premises after the
Commencement Date, it being understood that the Rental, in any event, shall
commence to run at such date so above fixed.
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28. Landlord Consent. Any consent required by Landlord hereunder shall
be in writing and, except as otherwise provided herein, shall not be
unreasonably withheld. Tenant, in no event, shall be entitled to make any claim,
and Tenant hereby waives any claim for money damages, whether by way of setoff,
counterclaim, defense or otherwise, based upon any claim or assertion by Tenant
that Landlord has unreasonably withheld or delayed any consent or approval,
notwithstanding Landlord has covenanted herein not to unreasonably withhold its
consent. Tenant's sole remedies shall be an action or proceeding to enforce any
such provision, or for an injunction or for a declaratory judgment. All expenses
reasonably incurred by Landlord in reviewing and acting upon any rest for
consent hereunder, including but not limited to, attorneys' and architects'
fees, shall be reimbursed by Tenant to Landlord, shall be deemed to constitute
Additional Rental and shall be paid over to Landlord on the first day of the
month following demand therefor.
29. Certification.
(a) Tenant, without charge and at any time, within ten (10) days
after written request of Landlord, agrees to certify by a written instrument
duly executed, acknowledged and delivered t Landlord or any other person, firm
or corporation specified in such request: (i) as to whether this lease has been
modified or amended, and if so, the date, substance and manner of such
modification or amendment; (ii) as to the validity and force and effect of this
lease; (iii) as to the existence of any default thereunder, and if so, the
nature, scope and extent thereof; (iv) as to the existence of any offsets,
counterclaims or defenses thereto on the part of Tenant, and if so, the nature,
scope and extent thereof; (v) as to the commencement and expiration dates of the
Term; (vi) as to the dates to which Rental payments have been made; (vii) as to
the existence of any Hazardous Wastes or Substances or as to similar
environmental matters; (viii) as to any other matters as reasonably may be so
requested. Any such certificate may be relied upon by Landlord and any other
person, firm or corporation to whom the same may be exhibited or delivered, and
Tenant shall be bound by the contents of such certificate. Tenant hereby
constitutes and irrevocably appoints Landlord as its attorney-in-fact having a
power coupled with an interest to execute any such instrument or other writing
for and on its behalf if Tenant shall fail or refuse to execute the instrument
within the aforesaid ten (10) day period.
(b) Tenant further agrees to furnish to Landlord at any time, but
not more frequently than once per calendar year, within ten (10) days after
request of Landlord, and solely in connection with the sale, lease or mortgaging
of the Premises, a copy of its annual unaudited financial statement for its last
full fiscal year, prepared by independent Certified Public Accountants,
including, but not limited to, a profit and loss statement.
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30. Waiver of Trial by Jury. The parties hereby waive trial by jury in
any action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this lease, the relationship of Landlord and Tenant, Tenant's use
or occupancy of the Premises, and/or any claim of injury or damage.
31. Quiet Enjoyment.
(a) Landlord covenants and agrees with Tenant that upon Tenant's
paying the Rental and observing and performing all of the terms, provisions,
covenants and conditions on its part to be observed and performed, Tenant,
peaceably and quietly, may enjoy the Premises during the Term hereof, subject
however, to all of the terms, conditions, covenants and provisions of this lease
and to any mortgage and/or ground lease to which this lease is subject. In the
event of any breach by Landlord of this covenant, provided the same would in law
or equity entitle Tenant to cancel, Tenant, by not less than thirty (30) days'
notice given to Landlord, may cancel this lease, unless within such thirty (30)
day period, Landlord shall have commenced appropriate action to cure such breach
and thereafter shall proceed diligently to cure such breach. Upon such
cancellation, all rights of either party against the other shall cease and the
Term shall expire with the same force and effect as if the date of such
cancellation were the date originally fixed herein for the expiration of the
Term. Such right of cancellation shall be Tenant's sole remedy hereunder for a
breach by Landlord of the covenants herein set forth.
(b) It is acknowledged that this lease is a sub-lease and that
Landlord herein is a tenant of Overlandlord pursuant to a certain Overlease. It
is agreed that so long as Tenant is not in default hereunder, it shall have the
right to remain in possession of the Premises, to exercise its rights and
perform its obligations hereunder, notwithstanding any breach or termination of
the Overlease. If the Overlease shall terminate, and if Landlord no longer shall
have the interest of Landlord hereunder, this lease shall remain in full force
and effect and Overlandlord, its successors and assigns, shall become the
Landlord hereunder.
32. Landlord.
(a) The term "Landlord" as used in this lease means only the
holder of this lease or the mortgagee in possession for the time being of the
Premises, so that in the event of any sale of or assignment of this lease,
Landlord herein shall be and hereby is entirely freed and relieved of all
obligations of Landlord hereunder without the necessity of further agreement
between the parties and such purchaser or assignee that the purchaser or
assignee has assumed and agreed to observe and perform all of the obligations of
Landlord hereunder.
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(b) Notwithstanding anything herein contained to the contrary, it
is specifically understood and agreed that there shall be no personal liability
on the part of Landlord, Overlandlord, their agents, representatives, employees,
successors, assigns or any of their constituent members, with respect to any of
the terms, provisions, covenants and conditions of this lease or otherwise, and
that Tenant shall look solely to the estate, property and equity of Landlord or
such successor in interest in the Premises and subject to the prior rights of
any mortgagee or lease holder, for the satisfaction of each and every remedy of
Tenant in the event of any breach of any of the terms, provisions, covenants and
conditions of this lease to be performed by Landlord, or in the event of any
other claim which Tenant may allege against Landlord, Overlandlord, their
agents, representatives, employees, constituent members, successors or assigns,
which exculpation of personal liability shall be absolute and without exception.
33. Notices. All notices, demands, requests, approvals or consents
required under the terms of this lease shall be given in writing by either party
or its attorney to the other and except as otherwise set forth herein, shall be
complete by personal delivery, by mailing such notices by certified or
registered mail, return receipt requested, or by delivery by a postal or private
expedited delivery service, to the party at the address set forth hereinabove,
or to such other address as either party may designate in writing, which notice
of change of address shall be given in the same manner. A copy of any notice
given to Landlord shall be forwarded to Cole, Schotz, Bernstein, Meisel &
Forman, P.A., Court Plaza North, 25 Main Street, P. O. Box 800, Hackensack, New
Jersey 07602-0800, Attention: Stanley Stern, Esq., and a copy of any notice
given to Tenant shall be forwarded to Mandelbaum, Salsburg, Gold, Lazris,
Discenza & Steinberg, P.A., 155 Prospect Avenue, West Orange, New Jersey 07052,
Attention: Joseph A. Vena, Esq.
34. Covenants, Effect of Waiver.
(a) Every term, condition, agreement or provision set forth in
this lease shall be deemed also to constitute a covenant.
(b) The waiver of any term, provision, covenant or condition by
Landlord shall not be construed as a waiver of a subsequent breach of the same
or any other term, provision, covenant or condition, and the consent or approval
by Landlord to or of any act by Tenant, whether or not requiring Landlord's
consent or approval, shall not be construed to waive or render unnecessary
Landlord's consent or approval to or of any subsequent similar act by Tenant.
The failure of Landlord to insist in any one or more instances upon the strict
performance of any term, condition, provision, covenant or agreement or to
exercise any option or any right hereunder, shall not be construed as a waiver
or relinquishment of the same for the
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future. The receipt by Landlord of any Rental payment or the acceptance by
Landlord of the performance of anything required to be performed by this lease,
with knowledge of a breach of any term, condition, provision or covenant of this
lease shall not be deemed a waiver of such breach. No payment by Tenant or
receipt and/or acceptance by Landlord of a lesser sum than the agreed upon
Rental shall operate or be deemed or construed to be other than on account of
the earliest Rental then unpaid, nor shall any endorsement or statement on any
check or any letter or writing accompanying any check nor the acceptance of any
check or payment be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to its right to recover the balance of
any Rental or to pursue any other remedy to which it may be entitled.
35. Holding Over. Any holding over or continued occupancy by Tenant
after the expiration of the Term of this lease shall not operate to extend or
renew this lease or to imply or create a new lease. in such event, Landlord
shall have the right to immediately terminate Tenant's occupancy or to treat
Tenant's occupancy as a month-to-month tenancy, in which event Tenant shall
continue to perform all obligations, including the payment of Fixed Rent at a
rate equal to the greater of: two hundred (200%) percent of the Fixed Rent as
shall be in effect immediately prior to the termination of the Term hereof; or
the maximum rental otherwise permitted by applicable law. In no event however,
shall Tenant be relieved of any liability to Landlord for damages resulting from
such holding over.
36. References. Wherever herein the singular or plural number is used,
the same shall include the other, and the use of masculine, feminine or neuter
genders shall include or shall be deemed to mean such other genders as the sense
and circumstances dictate. The paragraph headings, index and captions used
herein are for reference and convenience only. The words "reenter" and "reentry"
as used herein are not restricted to their technical legal meaning.
37. Entire Agreement. This lease contains the entire agreement between
the parties. No oral statement or prior written matter shall have any force or
effect nor shall the waiver of any provision of this lease be effective unless
in writing, signed by the waiving party. Tenant agrees that it is not relying on
any representations or agreements other than those contained in this lease. This
lease shall not be modified except by a writing executed by both parties, nor
may this lease be canceled by Tenant except with the written consent of
Landlord, unless otherwise specifically provided herein. The covenants,
provisions, terms, conditions and agreements contained in this lease shall bind
Landlord and Tenant and their respective successors and assigns and shall inure
to the benefit of Landlord and Tenant, the successors and assigns of Landlord,
and the successor and assigns of Tenant who shall
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have succeeded or shall have obtained an assignment of lease in accordance with
the provisions of this lease.
38. Attornment. At the option of Landlord, Overlandlord, a purchaser of
the Premises or the holder of any mortgage or ground lease affecting the
Premises, Tenant agrees that neither the cancellation nor the termination of the
Overlease or any ground or other underlying lease to which this lease is now or
hereafter may become subject or subordinate, nor the sale of the Premises, nor
the foreclosure of any mortgage affecting the Premises, nor the institution of
any suit, action, summary or other proceeding by Landlord or any mortgagee, by
operation of law or otherwise, shall result in the cancellation or termination
of this lease or the obligations of Tenant hereunder, and Tenant covenants and
agrees in such event and upon request of Landlord, Overlandlord, or any such
holder of a mortgage or ground lease (as the case may be) to attorn to Landlord
or to the holder of such mortgage or ground or underlying lease or to the
purchaser of the Premises whether by foreclosure or otherwise.
39. Security.
(a) Tenant, simultaneously herewith, has deposited with Landlord,
the Security. If Tenant defaults with respect to any of the terms, covenants,
provisions or conditions of this lease, including, but not limited to, the
payment of Rental, and/or the payment and performance of its obligations
pursuant to the Promissory Note, then in addition to any other remedies to which
Landlord may be entitled by virtue of the provisions of this lease, or pursuant
to law or equity, Landlord shall have the right to use, apply or retain the
whole or any part of the Security to the extent required for the payment of any
Rental, any payment pursuant to the Promissory Note or any other sum as to which
Tenant is in default or any sum which Landlord may expend or may be required to
expend by reason of Tenant's default, including, but not limited to, damages or
deficiencies resulting from the reletting of the Premises, whether such damages
or deficiencies accrued before or after summary proceedings or other reentry by
Landlord.
(b) If the entire Security or any portion thereof is appropriated
or applied by Landlord for the payment of Rental, on account of the Promissory
Note or any other sums due and payable to Landlord by Tenant hereunder, or for
the payment or reimbursement of any cost or expense incurred by Landlord as a
result of any default or failure of performance by Tenant hereunder, then
Tenant, upon the demand of Landlord, forthwith shall remit to Landlord a
sufficient Letter of Credit and/or good funds to restore the Security to the sum
required to be deposited hereunder, the delivery of such Letter of Credit and/or
good funds hereby deemed to be Additional Rental, and Tenant's failure to do so
within five (5) days after the forwarding of such demand shall constitute a
breach of this lease.
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(c) If Tenant shall fully and faithfully comply with all of the
terms, provisions, covenants and conditions of the Promissory Note and this
lease, including the delivery of the Premises to Landlord in accordance with the
provisions hereof and compliance with all Environmental Acts, then the Security
shall be returned to Tenant within thirty (30) days following the expiration of
the Term hereof.
(d) If Tenant shall exercise its Renewal Option hereunder, then
upon the commencement of the First Renewal Term and the receipt of the Security
required pursuant to the exercise thereof, Landlord shall return the Letter of
Credit to Tenant.
(e) Tenant shall not be entitled to any interest on the aforesaid
deposit of Security or the proceeds thereof. Tenant further covenants that it
will not assign or encumber or attempt to assign or encumber the Security except
as permitted pursuant to the provisions of Paragraph 15 hereof, and that neither
Landlord nor its successors or assigns shall be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance.
(f) It is expressly understood and agreed that the exercise of any
remedy by Landlord for any default on the part of Tenant shall not be deemed
such a termination of this lease as to entitle Tenant to the recovery of the
Security, and said Security shall be retained and remain in the possession of
Landlord as hereinbefore stated.
(g) In the event of a sale, leasing or assignment of Landlord's
interest in this lease by Landlord, Landlord shall have the right to transfer
the Security to the purchaser, lessee or assignee, shall furnish Tenant with
notice thereof and thereupon shall be released by Tenant from all liability for
the return of the Security, and Tenant agrees to look solely to the transferee
for the application of the Security. It is agreed that the provisions hereof
shall apply to every transfer or assignment made of the Security to a new
transferee.
(h) Each Letter of Credit to be deposited hereunder shall be a
clean, irrevocable Letter of Credit, shall be in the amount set forth herein,
shall be issued by a bank and shall be in form and substance, satisfactory to
Landlord, and shall provide, inter alia, the following:
(i) It shall be renewed in the agreed upon amount,
automatically from year to year unless the issuing bank, not less than
forty-five (45) days prior to its expiration, shall notify Landlord and Tenant
in writing that the Letter of Credit shall not be renewed;
(ii) Landlord shall have the right to draw upon all or any
part(s) of the Letter of Credit, immediately upon delivering a certification to
the issuing bank setting forth that
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it is entitled to draw upon the Letter of Credit pursuant to the provisions of
the Promissory Note, and/or this lease and setting forth the amount of the money
sought to be received, which Letter of Credit may be drawn upon, to the extent
necessary, to satisfy said request in full.
(iii) Landlord shall have the right to draw upon the entire
Letter of Credit, whether or not Tenant shall be 4n default hereunder, within
the last twenty (20) days of the thereof, upon delivering a certification to the
issuing bank setting forth that the bank has elected not to renew the Letter of
Credit and that Tenant has not provided Landlord with a substitute Letter of
Credit in accordance with the provisions of this Agreement.
(i) Landlord shall retain the proceeds of the Letter of
Credit received pursuant to the provisions of Paragraph 39(h)(iii) in accordance
with the provisions hereof and shall return such proceeds to Tenant upon receipt
of a new Letter of Credit in compliance herewith.
40. Renewal Option.
(a) Subject to the provisions set forth below, Tenant shall have
the option to renew this lease for two (2) additional terms of five (5) years
each (the "Renewal Term(s)"). The First Renewal Term shall commence upon the
expiration of the original Term of this lease (the "Initial Term") and the
Second Renewal Term shall commence on the expiration of the First Renewal Term.
All of the terms, covenants and conditions of this lease shall govern the
Renewal Terms, except as otherwise specifically set forth hereinafter or if
inapplicable thereto.
(b) The Fixed Rent during the initial Lease Year of the First
Renewal Term shall be equal to the sum of: (i) the Fixed Rent for the last year
of the Initial Term (hereinafter called the "Last Year Rent"); and (ii) the
product of (x) the Last Year Rent and (y) fifty (50%) percent of the percentage
increase in the Index (as hereinafter defined) between the Index for the month
one (1) year immediately prior to the commencement of the Initial Term and the
Index for the first month of the last Lease Year of the Initial Term.
(c) The Fixed Rent during each Lease Year of the First Renewal
Term and for each Lease Year of the Second Renewal Term shall be equal to the
sum of (i) the Fixed Rent for the prior Lease Year; and (ii) the product of (x)
the Fixed Rent for the prior Lease Year and (y) the percentage increase in the
Index between the Index for the first month of the prior Lease Year and the
Index for the first month of the then current Lease Year.
(d) The term Index shall mean the Consumer Price Index for Urban
Wage Earners and Clerical Workers, New York-Northeastern New Jersey, All Items
revised 1982-1984 equal 100,
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published by the Bureau of Labor Statistics, U.S. Department of Labor (herein
referred to as the "Index"). If the Index (or a successor or substitute index)
becomes unavailable, a reliable governmental or other non-partisan publication
evaluating the information theretofore used in determining the Index shall be
used in lieu of such Index. If the Index is not known as of the applicable month
of calculation, Tenant shall pay a monthly Fixed Rent equal to that which was
paid for the last month prior to the Lease Year in which a rent adjustment
occurs until the Index is known and the necessary computation can be made by
Landlord to determine the increase in the Fixed Rent, if any, at which time
Tenant shall pay all arrearages based upon such increased Fixed Rent within ten
(10) days of Landlord's rendition to Tenant of its invoice for same.
(e) Tenant's option to renew, as provided in subparagraph (a)
above, shall be conditioned upon and subject to each of the following:
(i) Tenant shall notify Landlord in writing of its exercise
of its option to renew at least nine (9) months prior to the expiration of the
Initial Term or the First Renewal Term, whichever shall be applicable;
(ii) At the time Landlord receives Tenant's notice as
provided in (i) above and at the date of commencement of the applicable Renewal
Term, Tenant shall not be in default under the terms or provisions of this lease
or have acted or failed to act in such manner as with the passage of time, would
constitute a default hereunder;
(iii) Tenant shall have no further renewal option beyond the
two (2) renewal options set forth herein;
(iv) This option to renew shall be deemed part of the lease
and may not be assigned or transferred, other than as part of an assignment of
this lease in accordance with the provisions of this lease;
(v) Landlord shall have no obligation to do any work or
perform any services for the Renewal Term(s) with respect to the Premises, and
Tenant agrees to accept same in its then "as is" condition; and
(vi) In no event shall the Fixed Rent during any Lease Year
of any Renewal Term be less than the Fixed Rent for the immediately preceding
Lease Year.
(f) The Tenant shall deposit with Landlord as Security on or
before the Commencement Date of the First Renewal Term, an amount equal to three
(3) months' Fixed Rent and on or before the commencement of each subsequent
Lease Year shall deposit with Landlord, such additional monies as may be
necessary so as to
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provide Landlord with Security equal to three (3) months',
Fixed Rent.
41. Easements, Rights to Lease Additional Space.
(a) The parties acknowledge that a portion of the lands described
on Exhibit "A" and a building located thereon presently are leased to Autocraft
Body and Collision, Inc. ("Autocraft") pursuant to a certain lease agreement
dated as of April 1, 1991 and terminating on March 31, 1996. ("Autocraft
Premises"). Tenant shall not have any liability for any breach of an
Environmental Act occurring on the Autocraft Premises and Landlord shall
indemnify and save Tenant therefrom, unless such breach shall be due to the acts
and/or conduct of Tenant, unless and until Tenant shall lease the Autocraft
Premises.
(b) It is agreed that Tenant and Autocraft, their employees,
agents, guests and invitees shall have the right to travel on the lands leased
to the other for purposes of ingress and egress. Landlord shall provide Tenant
with a writing from Autocraft consenting to and accepting such rights and
limitations.
(c) Provided that Tenant shall not be in default hereunder at the
time it exercises its option hereunder, or shall not have acted or failed to act
in such manner as with the passage of time, would constitute a default
hereunder, Tenant shall have the right to lease the Autocraft Premises upon
expiration of the Autocraft lease, provided that it shall submit notice thereof
to Landlord on or before July 1, 1995, after which time the right to lease the
Autocraft premises pursuant hereto shall cease and terminate.
(d) If Tenant exercises its right to lease the Autocraft Premises,
said leasing shall take effect on April 1, 1996, at which time this lease shall
be deemed amended to include as the Premises all of the Land and all of the
improvements thereon, including the Autocraft Premises; and to provide that the
Fixed Rent shall increase by Thirty-Six Thousand ($36,000.00) Dollars per Lease
Year, payable at the rate of Three Thousand ($3,000.00) Dollars per month. In
all other respects, this lease shall remain in full force and effect.
(e) The right to lease the Autocraft Premises shall be deemed a
part of this lease and may not be assigned or transferred, other than as part of
an assignment of this lease in accordance with the provisions of this lease.
42. Adjacent Excavation and Shoring. In the event that any excavation
shall be made upon land adjacent to the Building, or shall be authorized to be
made, whether or not same shall be on lands owned or controlled by Landlord
and/or Overlandlord, then and in any of such events, Tenant agrees to permit the
person(s) causing or authorized to cause such excavation, the right to
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enter upon the Premises for the purposes of doing such work as shall be
necessary to preserve and/or protect all or any portion of the Building and all
persons in and around the Building from injury or damage and/or to support the
Building, and Tenant hereby waives any and all rights to make any claim for
damages, indemnity, cost and/or other expense against Landlord and/or Overland,
or to make any claim for a diminution or abatement of Rental.
43. Validity of Lease. The terms, conditions, covenants and provisions
of this lease shall be deemed to be severable. if any clause or provision herein
contained shall be adjudged to be invalid or unenforceable by a court of
competent jurisdiction or by operation of any applicable law, the same shall be
deemed to be severable and shall not affect the validity of any other clause or
provision herein, but such other clauses or provisions shall remain in full
force and effect.
44. Representations. Tenant represents that it is a corporation in good
standing of the State of New York, that there are no judgments or suits pending
against it, that it does not owe any taxes, that and are its President and
Secretary respectively, and that they are empowered and authorized to enter into
this lease for and on behalf of Tenant. Tenant agrees to deliver to Landlord
simultaneously with the execution hereof, a certified copy of a resolution of
its Board of Directors authorizing the execution of this lease.
45. No Option. The submission of this lease for examination and/or
signature does not constitute a reservation of, or option for, the Premises, and
Tenant has hereunto affixed its signature with the understanding that this lease
shall not become effective or in any way bind Landlord until such time as the
same has been approved and executed by Landlord and a copy thereof delivered to
Tenant.
IN WITNESS WHEREOF, the parties hereto have hereunto caused these
presents to be signed and sealed by duly authorized persons, the day and year
first above written.
MANLY CHEVROLET, INC.
(Landlord)
By /s/ Paul Rosen
---------------------
Paul Rosen, President
COUNTY TOYOTA, INC. (Tenant)
By /s/ Joseph DiFeo
-----------------------
Joseph DiFeo, President
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The Overlandlord hereby agrees to be bound by the applicable
provisions, terms, covenants and conditions of the above lease and acknowledges
that the applicable provisions, terms, covenants and conditions of the above
lease are for his benefit.
ESTATE OF MANNIE ROSEN
By /s/ Paul Rosen
--------------------
Paul Rosen, Executor
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EXHIBIT "A"
Tax Map #392089120-G-30 and #392089120-G-31
SUBLEASE
This Sublease is made this 1st day of October, 1992 by and between
DIFEO BMW, INC., a New Jersey corporation, having an address at c/o Dealership
Management, 585 Route 440, Jersey City, New Jersey ("Sublandlord") and DIFEO BMW
PARTNERSHIP, a New Jersey partnership, having an address at c/o EMCO Motor
Holdings, Inc., 153 East 53rd Street, New York, New York 10022 ("Subtenant").
W I T N E S S E T H
WHEREAS, Sublandlord is the tenant under that certain lease, more
particularly described on Exhibit A attached hereto and made part hereof (said
lease being hereinafter referred to as the "Overlease"), demising certain
premises as more particularly described in the Overlease (said premises being
hereinafter referred to as the "Demised Premises");
WHEREAS, Subtenant desires to sublease from Sublandlord the Demised
Premises.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Subleasing
Sublandlord, in consideration of the rents reserved in this Sublease
to be paid by Subtenant and in consideration of the covenants, agreements and
conditions herein contained to be observed and fulfilled by Subtenant, hereby
subleases to Subtenant, and Subtenant hereby hires from Sublandlord, the Demised
Premises.
2. Term
The term of this Sublease shall commence on the date hereof and
shall terminate at 5 o'clock p.m. (local time) on the day preceding the last day
of the term of the Overlease in effect on the date of this Sublease, unless
extended or earlier terminated pursuant to the provisions of this Sublease.
3. Incorporation
This Sublease is expressly subject and subordinate to the Overlease,
and all that to which the Overlease is subject and subordinate. Except as
otherwise provided herein, the terms, covenants, provisions and conditions of
the Overlease are incorporated herein by this reference with the same force and
effect as if fully set forth herein and shall be binding upon both parties
hereto. This Section shall be self-operative and no
<PAGE>
further instrument of subordination shall be required. Whenever reference is
made in the terms, covenants, provisions and conditions of the Overlease to
"Landlord" or "Lessor" (or the like), "Tenant" or "Lessee" (or the like),
"Demised Premises" or "Premises" (or the like) and "Lease" (or the like), unless
otherwise provided for in this Sublease, the same shall be deemed to refer to
Sublandlord, Subtenant, the Demised Premises hereunder, and to this Sublease,
respectively. All of the duties, obligations and requirements owed by
Sublandlord to the Landlord under the Overlease ("Overlandlord") are during the
term hereof owed by subtenant to the Sublandlord under this Sublease and
Subtenant shall timely perform and observe the same as if expressly set forth
herein. Subtenant shall not take or suffer any action in connection with its use
and enjoyment of the Demised Premises which would constitute a default under or
be a violation of, the Overlease (nothing contained in this Sublease shall be
deemed to impose upon Subtenant any obligation which, under this Sublease, is
the responsibility of the Sublandlord). All of the rights and benefits conferred
by the Overlease upon the Overlandlord are hereby upon Sublandlord with respect
to the Demised Premises and the Subtenant and all of the obligations, duties and
requirements imposed by the Overlease upon the Sublandlord are hereby imposed
upon Subtenant with respect to the Demised Premises.
4. Services
4.1 Any provision in this Sublease to the contrary notwithstanding,
including, without limitation, the provisions of Section 3 hereof, Sublandlord
shall, except as otherwise expressly provided for in this Sublease or in the
Transaction Agreements (hereinafter defined), have no obligation during the term
of this Sublease, under this Sublease or otherwise, to render any services to
Subtenant of any nature or to expend any money for the preservation or repair of
the Demised Premises, or to perform any obligation imposed upon the Overlandlord
under the Overlease. Subtenant agrees to look solely to the Overlandlord for
furnishing of any services or the maintenance, rebuilding or repair of the
Demised Premises or equipment therein or access thereto to which Subtenant is
entitled under the provisions of the Overlease incorporated herein and for the
performance or fulfillment of any promise, obligation, covenant, warranty or
representation made by or imposed upon Overlandlord under the Overlease. If the
Overlandlord is not obligated for arranging, doing or providing for the same
then Subtenant shall arrange, provide and do the same at Subtenant's sole cost
and expense unless, under this Sublease or the Transaction Agreements,
Sublandlord (or an Affiliate of Sublandlord) is responsible for the same.
Sublandlord shall not be obligated to perform and shall not be liable for the
performance by the Overlandlord of any of the obligations imposed or assumed or
undertaken by the Overlandlord under the Overlease and Subtenant shall have no
claim against Sublandlord by reason of any default upon the part of the
Overlandlord, and Sublandlord shall not be liable to
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Subtenant nor shall Subtenant's obligations hereunder be impaired or the
performance thereof excused (including the payment of rent and additional rent)
because of any failure or delay on the Overlandlord's part in furnishing any
such service or making any such repairs or alterations or in providing equipment
or access or because of Subtenant's inability to obtain said service or for any
other reason whatsoever.
4.2 If Overlandlord shall default in any of its obligations with
respect to the Demised Premises, or there shall exist a bona fide dispute with
Overlandlord under the terms of the Overlease and Subtenant notifies Sublandlord
in writing that Subtenant shall have previously notified Overlandlord of such
dispute and that such notice shall have been disregarded or not reasonably
satisfactorily acted upon, then Sublandlord shall notify Overlandlord of such
default or dispute in its name on Subtenant's behalf. Subtenant shall be
entitled to participate with Sublandlord in the enforcement of Sublandlord's
rights against Overlandlord, but Sublandlord shall have no obligation to bring
any action or proceeding or to take any steps to enforce Sublandlord's rights
against Overlandlord. If, after written request from Subtenant, Sublandlord
shall fail or refuse to take appropriate action for the enforcement of
Sublandlord's rights against Overlandlord with respect to the Demised Premises,
Subtenant shall have the right to take such action in its own name, and for such
purpose and only to such extent, all of the rights of Sublandlord under the
Overlease are hereby conferred upon and assigned to Subtenant and Subtenant
hereby is subrogated to such rights to the extent that the same shall apply to
the Demised Premises or Subtenant may, at Subtenant's sole cost and expense,
upon not less than five (5) business days prior notice to Sublandlord (or in the
event of an emergency, without any notice) take such action in Sublandlord's
name; provided Subtenant shall, in connection with any of the foregoing,
indemnify and hold Sublandlord harmless from and against all liability, loss or
damage, including, without limiting the foregoing, reasonable attorney's fees
(as well as attorneys fees incurred to enforce this indemnity), which
Sublandlord shall suffer by reason of such action, which obligation to indemnify
shall survive the expiration or earlier termination of this Sublease. Without
limiting the foregoing, Subtenant shall reimburse Sublandlord for all reasonable
costs incurred by Sublandlord in connection with the provisions of this Section
4.2.
5. Utilities
Subtenant shall make its own arrangements with the appropriate
utility company supplying electricity, water, gas, steam, telephone and other
utilities to the Demised Premises and for garbage disposal from the Demised
Premises, and shall arrange to have all bills for such utilities or services to
be forwarded directly to Subtenant. Subtenant shall pay when due all charges for
such utilities or services accruing during the term of this
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Sublease.
6. Indemnification
6.1 Except to the extent due to negligence or willful misconduct of
Sublandlord, its agents, employees, or contractors from and after the date
hereof, Subtenant shall indemnify and save harmless Sublandlord against and from
any and all claims arising during the term hereof (even if asserted after the
end of the term hereof) (i) by or on behalf of any person for injury to persons
or damage to property occurring in, on or about the Demised Premises, or (ii)
arising from the conduct or management of or from any work or thing whatsoever
done in and on the Demised Premises, or the use and occupancy of the Demised
Premises, or (iii) arising from any condition of the Demised Premises or any
sidewalk adjoining the Demised Premises, or of any vaults, passageways or space
therein or appurtenant thereto or arising from any act of negligence of
Subtenant, or any occupant of the Demised Premises or any part thereof, or of
its or their agents, contractors, servants, employees, invitees or licensees and
from and against all judgments, costs, expenses or liabilities incurred in or
about any such claim or action or proceeding brought therein; and in case any
action or proceeding be brought against Sublandlord by reason of any such claim,
Subtenant upon notice from Sublandlord shall defend such action or proceeding by
counsel reasonably satisfactory to Sublandlord. Nothing contained herein shall
be deemed or construed to deal with environmental related matters.
6.2 Sublandlord shall indemnify and save harmless Subtenant against
and from any and all claims arising during the term hereof (even if asserted
after the end of the term hereof) to the extent due to negligence or willful
misconduct of Sublandlord, its agents, employees or contractors, from and after
the date hereof, solely with respect to and arising from any entry of any
thereof into or upon the Demised Premises, (i) by or on behalf of any person for
injury to persons or damage to property occurring in, on or about the Demised
Premises, or (ii) any act of negligence or willful misconduct of Sublandlord, or
of its agents, contractors, servants, employees, invitees or licensees, from and
after the date hereof, and from and against all judgments, costs, expenses and
liabilities incurred in or about any such claim or action or proceeding brought
therein solely with respect to an entry of any thereof into or upon the Demised
Premises; and in case any such action or proceeding be brought against Subtenant
by reason of any such claim, Sublandlord upon notice from Subtenant shall defend
such action or proceeding by counsel reasonably satisfactory to Sublandlord.
Nothing contained herein shall be deemed or construed to deal with environmental
related matters.
7. Payment of Rent
7.1 Subtenant shall make payment of all forms of rent
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(which shall be deemed to include base rent, additional rent and all other
charges required to be paid by the tenant under the Overlease, regardless of
whether to the Overlandlord) required to be paid by tenant under the Overlease
directly to the person, entity or party to whom the Overlease requires such
payment to be made. However, if the Overlandlord refuses to accept payments
directly from the Subtenant, then Subtenant shall make payment of the same to
Sublandlord who will, after receipt, promptly make payment of the same to the
Overlandlord. All such payments shall be made by Subtenant no later than the
date when the Overlease requires such payment to be made by the tenant
thereunder except that if the Overlandlord refuses to accept payments directly
from the Subtenant, then Subtenant shall make such payments to Sublandlord no
later than five (5) days prior to the date when the Overlease requires such
payment to be made by the tenant thereunder and Sublandlord shall, after
receipt, but subject to Subtenant's timely compliance with the foregoing, make
payment of the same to the Overlandlord within the time required by the
Overlease. Without limiting any of the foregoing, Subtenant shall, upon request
from Sublandlord, provide evidence to the Sublandlord that all such payments
have been made.
7.2 All sums, charges, costs, expenses and payments which this
Sublease requires the Subtenant to pay (regardless of to whom) shall be deemed
rent hereunder and Sublandlord shall have all of the rights and remedies
afforded to the Overlandlord pursuant to the Overlease in the case of the
non-payment of basic rent, all rights and remedies afforded to the Sublandlord
pursuant to this Sublease for failure to pay the same, as well as all rights and
remedies afforded to landlords under law or at equity.
7.3 With respect to sums and charges required to be paid by the
Subtenant hereunder, which sums and charges are not required by the Overlease to
be paid by the tenant thereunder, if this Sublease does not set forth a time
frame for the payment of such sums and charges, then the same shall be due and
payable within fifteen (15) days after demand.
8. Permitted Use
Subtenant shall not have the right to use the Demised Premises for
any use which (i) would cause the Demised Premises to become subject to
compliance with the remedial provisions of the New Jersey Environmental Clean Up
Responsibility Act (N.J.S.A. 13:1k-6 et seq., or the regulations promulgated
thereunder ("ECRA")), or a similar state statute requiring environmental testing
and/or remediation, in any case prior to the sale or other transfer of the
Demised Premises, upon the circumstance of an assignment of this Sublease or
sublease of the Demised Premises, upon the expiration or sooner termination of
this Sublease or any such sublease or upon the cessation of operations at the
Demised Premises or (ii) would increase in any material respect the risk of
environmental contamination of the
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Demised Premises (the increase in risk to be measured from the uses being made
of the Demised Premises during December, 1991 by Sublandlord (or an Affiliate of
Sublandlord)). If Subtenant desires to use the Demised Premises for a use not
being made thereof during December, 1991, it shall notify Sublandlord.
Sublandlord will advise Subtenant, by notice within thirty (30) days of
Subtenant's notice, if Sublandlord believes that the proposed use to which the
Subtenant desires to put the Demised Premises violates the prohibitions
contained above, which notice from Sublandlord shall specify in reasonable
detail grounds for Sublandlord's determination. Failure or refusal of
Sublandlord to respond within such thirty (30) day period shall be deemed a
determination by Sublandlord that the proposed use does not violate the above
prohibitions. If Subtenant disputes Sublandlord's determination, such dispute
shall be resolved by ADR pursuant to Section 36 hereof. Nothing contained in
this Section 8 shall be deemed or construed to prohibit Subtenant from using the
Demised Premises for the uses being made thereof by Sublandlord (or an Affiliate
of Sublandlord) during December, 1991.
9. Net Sublease
It is the purpose and intent of Sublandlord and Subtenant that
except for Sublandlord's obligations which are expressly provided for herein (or
in the Transaction Agreements), that this be an absolutely net sublease and that
Subtenant shall make all payments hereunder free of any charges, assessments,
impositions or deductions of any kind and without abatement, deduction, demand,
notice or setoff and that all costs, expenses, charges, assessments, impositions
and obligations of every kind and nature whatsoever relating to the Demised
Premises which are the tenant's obligations under the Overlease or which
otherwise relate to the Demised Premises and/or the use and occupancy thereof,
whether foreseen or unforeseen, ordinary or extraordinary, shall be the
responsibility of the Subtenant.
10. Notices from Overlandlord
Subtenant shall promptly furnish Sublandlord with copies of all
notices which Subtenant shall receive from the Overlandlord (or anyone claiming
by, through or under Overlandlord) with respect to the Overlease and/or the
Demised Premises. Sublandlord shall promptly furnish Subtenant with copies of
all notices which Sublandlord shall receive from the Overlandlord (or anyone
claiming by, through or under Overlandlord) with respect to the Overlease and/or
the Demised Premises.
11. Absence of Representations by Sublandlord
11.1 The parties hereto acknowledge and agree that, except as
otherwise provided in this Sublease, in the Master Agreement and in the other
transaction agreements, Sublandlord is
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delivering, and Subtenant is accepting, the Demised Premises in their "as is"
condition on the date hereof. Subtenant acknowledges that it has inspected,
examined and investigated to its full satisfaction the Demised Premises and the
uses thereof and any other matter of concern to Subtenant with respect to the
Demised Premises, that Subtenant accepts the Demised Premises in their present
condition without any representation or warranty whatsoever by Sublandlord,
except as herein expressly provided, as to the condition of the Demised Premises
or the value thereof or the utility thereof or usefulness for any particular
purpose or any other matter or thing relating in any way to the Demised
Premises, and that Subtenant acknowledges that Sublandlord has not made and does
not make, and Subtenant is not relying upon, any representation or warranty,
except as herein expressly provided, as to the physical condition, quality,
value or character or any other matter relating to or affecting the Demised
Premises. Nothing in this Sublease, including this Section, however, shall waive
or modify any of the obligations, rights or remedies of the parties to the
Master Agreement and the other Transaction Agreements pursuant to the Master
Agreement and the other Transaction Agreements.
11.2 Sublandlord represents and warrants to Subtenant as follows:
(a) The actual uses being made of the Demised
Premises by Sublandlord during December 1991 and the use of the Demised Premises
by Subtenant on the date hereof for the same uses were and are permitted by all
applicable zoning laws, or (if not permitted by zoning laws) are lawful
nonconforming uses, and all certificates of occupancy required for such use in
December 1991 were obtained and were in full force and effect immediately prior
to the commencement of the term hereof.
(b) To the actual knowledge of Sublandlord, Joseph
C. DiFeo and Samuel X. DiFeo, there are no material structural defects in the
Demised Premises on the date hereof, except as set forth on Exhibit B.
(c) The representations and warranties set forth in
Exhibit C are true, correct and complete as of the date hereof.
11.3 Notwithstanding anything in this Sublease to the contrary, in
the event that any representation or warranty of Sublandlord set forth in
Section 11.2 are false or incorrect when made (an "Inaccuracy") in any material
respect, then Sublandlord shall, in its sole expense (but subject to the cost
sharing provisions contained in the Master Agreement) after receipt of notice
from Subtenant of the specifics of the Inaccuracy institute steps necessary to
cure the same and proceed with reasonable dispatch to effectuate the same. If,
by reason of such Inaccuracy, Subtenant's ability to use the Demised Premises
for the December Uses is materially adversely interfered with
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then there shall be an equitable reduction of the rent until such time as the
material interference caused by the Inaccuracy has been eliminated, which
reduction shall not extend beyond six months from the date Subtenant notified
Sublandlord of such Inaccuracy. If by reason of the Inaccuracy the Subtenant's
use of the Demised Premises for the December Uses is materially adversely
interfered with for a period of six (6) consecutive months from the date of such
notice, then Subtenant shall have the right, prior to the cessation of such
material interference, as its sole remedy with respect to such Inaccuracy, to
terminate this Sublease in which event neither party hereto shall have any
further liability or obligation to the other under this Sublease except those
which are expressly stated to survive the expiration or sooner termination of
this Sublease. Any notice by Subtenant to Sublandlord advising of the Inaccuracy
must be given by six (6) months from the date of this Sublease and must
specifically identify the Inaccuracy, failing which Sublandlord shall have no
responsibility to Subtenant hereunder with respect to any Inaccuracy.
12. No Violations
12.1 Subject to the provisions of Section 29.7 hereof, Subtenant
shall not do or permit to be done anything which would constitute a violation or
breach of any of the terms, conditions or provisions of the Overlease or which
would cause the Overlease to be terminated or forfeited by virtue of any rights
of termination or forfeiture reserved or vested in Overlandlord. Nothing
contained in this Section 12.1 shall be deemed or construed to obligate
Subtenant to perform any obligation imposed upon Sublandlord hereunder. If
Subtenant shall default in the performance of any of Subtenant's obligation
under this Sublease, Sublandlord may perform same at the expense of Subtenant
(i) immediately without notice in the case of an emergency, which shall be
deemed to include, without limitation, the lapse or termination of any insurance
policy required to be obtained by Subtenant hereunder or the taking of any
action required to prevent an imminent default under the Overlease (but will
provide Subtenant with prompt notice thereafter) and (ii) in any other case if
Subtenant shall fail to remedy such default after Sublandlord shall have
notified Subtenant of such default (Sublandlord shall not be entitled to notify
Subtenant of a default which respects Subtenant's failure to perform or observe
any covenant or agreement on the part of Subtenant to be performed hereunder
which involves the observance and performance of a covenant or agreement imposed
upon the tenant under the Overlease (excepting from the foregoing, however, the
failure to make payment of rent, additional rent or any other payment required
to be made by Subtenant hereunder, and excepting from the foregoing any
obligation which is independently imposed upon the Subtenant under this
Sublease) unless Sublandlord receives notice from the Overlandlord with respect
to such failure to perform or observe) and the applicable grace period, if any,
for curing such default shall have expired, provided, however, in the
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case of a failure for which for causes beyond Subtenant's reasonable control
cannot with due diligence be cured within such applicable grace period, such
grace period shall be deemed extended if Subtenant (x) shall promptly upon the
receipt of such notice, advise Sublandlord of Subtenant's intention to institute
all steps necessary to cure such failure and (y) shall institute and thereafter
with reasonable dispatch prosecute to completion all steps necessary to cure the
same.
12.2 Sublandlord shall not do or permit to be done anything which
would constitute a violation or breach of any of the terms, conditions or
provisions of the Overlease or which would cause the Overlease to be terminated
or forfeited by virtue of any rights of termination or forfeiture reserved or
vested in Overlandlord. Nothing contained in this Section 12.2 shall be deemed
or construed to obligate Sublandlord to perform any obligation imposed upon
Subtenant hereunder. If Sublandlord shall default in the performance of any of
Sublandlord's obligations under this Sublease (if any), Subtenant may perform
same at the expense of Sublandlord (i) immediately and without notice in the
case of any emergency which shall be deemed to include the taking of any action
required to prevent an imminent default under the Overlease (but will provide
Sublandlord with prompt notice thereafter) and (ii) in any other case if such
failure continues after thirty (30) days from the date of the giving by
Subtenant to Sublandlord of notice of intention so to perform the same or, in
the case of a failure which for causes beyond Sublandlord's reasonable control
(the failure to pay money shall not be deemed beyond a party's reasonable
control) cannot with due diligence be cured within such thirty (30) day period,
such thirty (30) day period shall be deemed extended if Sublandlord (x) shall
promptly upon the receipt of such notice, advise Subtenant of Sublandlord's
intention to institute all steps necessary to cure such failure and (y) shall
institute and thereafter with reasonable dispatch prosecute to completion all
steps necessary to cure the same; provided that, at the expiration of the period
described in this clause (ii) such default continues after three (3) business
days from the date of the giving by Subtenant to Sublandlord of a further notice
of Subtenant's intention to perform the same.
12.3 All sums paid by either party affecting a cure pursuant to this
Section 12 and all necessary incidental costs and expenses paid or incurred by
such party in connection with the performance of any act by such party pursuant
to such section, together with interest thereon from the date of the making of
such expenditure by such party at the rate of two (2%) per cent above the prime
commercial lending rate from time to time announced by The Chase Manhattan Bank,
N.A. ("Prime Rate") to be in effect at its principal office in New York, New
York, or if Chase no longer announces such a rate, then a comparable rate
selected by Sublandlord and reasonably acceptable to Subtenant, shall be payable
by the other party to such curing party within thirty (30) days after demand
therefore accompanied by evidence
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reasonably establishing that the expenditure has reasonably been made. Nothing
contained herein shall be deemed or construed to permit Subtenant to make any
set-off against Subtenant's obligations hereunder.
13. Consents
Whenever the consent or approval of the Overlandlord shall be
required under the Overlease, the consent or approval of the Sublandlord shall
not be required under this Sublease. Subtenant agrees that Sublandlord shall not
have any duty or responsibility with respect to obtaining the consent or
approval of Overlandlord when the same is required other than (i) the
transmission by Sublandlord to Overlandlord of Subtenant's request for such
consent or approval; and (ii) Sublandlord's cooperation (at Subtenant's expense)
with Subtenant to obtain, and providing assistance to Subtenant in obtaining
such approval or consent. Subtenant shall be entitled to take the actions
specified in Section 4.2 of this Sublease as it respects the obtaining of the
Overlandlord's consent. Subtenant, in no event, shall be entitled to make, nor
shall Subtenant make, any setoff against rent otherwise due, nor shall Subtenant
withhold any rent otherwise due pursuant to the terms of this Sublease based
upon any claim or assertion by Subtenant that overlandlord has unreasonably
withheld, conditioned or delayed any consent or approval. Nothing contained
herein shall be deemed or construed to limit the obligation of Subtenant to
obtain Sublandlord's consent where expressly provided for in this Sublease.
14. Compliance with Laws
14.1 Notwithstanding anything in this Sublease to the contrary,
Subtenant shall not be in default hereunder if Subtenant shall fail to comply
with any Law to the extent that the Demised Premises, or their use, prior to the
date hereof, were not in compliance with such Law, except to the extent that
Subtenant is otherwise obligated to comply with such Law pursuant to the Master
Agreement or the other Transaction Agreements.
14.2 If the Demised Premises and the use thereof for the actual uses
being made of the Demised Premises by Sublandlord during December 1991 are not,
on the day preceding the date hereof, in compliance with all Laws (such
non-compliance being hereinafter referred to as "Non-Compliance"), and if
Non-Compliance is not Subtenant's responsibility to correct pursuant to the
Master Agreement and the other Transaction Agreements, or this Sublease, and if
such Non-Compliance would, under the Overlease, be the obligation of the tenant
thereunder to cure or correct, Sublandlord shall, at its sole cost and expense
(but subject to the cost sharing provisions provided for in Section 4.231 of the
Master Agreement), after receipt of notice from Subtenant of the specifics of
such Non-Compliance, institute steps necessary to cure such Non-Compliance and
proceed with reasonable dispatch to effectuate the same. Nothing contained
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herein shall be deemed or construed to obligate Sublandlord to make any changes,
alterations or repairs to the structural elements of the Demised Premises unless
the existence of the condition which caused the need to make the same
constitutes a violation of the warranty and representation contained in Section
11.2(b) hereof. The Demised Premises shall not be deemed to be in Non-Compliance
(that is, shall be deemed to be in compliance) if on the date hereof the time by
which such Law must be complied with had not expired, although such Law had been
enacted. If by reason of such Non-Compliance a governmental authority or agency
takes action or refuses to take action (any such action or refusal, including a
refusal to permit the transfer or continued effectiveness of any certificate of
occupancy or other license or permit, being herein called a "Governmental
Action"), which Governmental Action materially adversely interferes with
Subtenant's ability to use the Demised Premises for the uses for which the
Premises during December, 1991 were in fact used by Sublandlord ("December
Uses"), then there shall be an equitable reduction of the rent until such time
as the material interference caused by the Non-Compliance has been eliminated,
which reduction shall not, however, extend beyond six (6) months from the date
Subtenant notifies Sublandlord of such Non-Compliance or Governmental Action.
If, by reason of the Non-Compliance or Governmental Action, Subtenant's use of
the Demised Premises for the December Uses is materially adversely interfered
with for a period of six (6) consecutive months after the date of such notice,
then Subtenant shall have the right, prior to the cessation of such material
interference as its sole remedy with respect to such Non-Compliance, to
terminate this Sublease, in which event neither party hereto shall have any
further liability or obligation to the other under this Sublease except those
which are expressly stated to survive the expiration or sooner termination of
this Sublease. Any notice by Subtenant to Sublandlord advising of Non-Compliance
must be given by six (6) months after the date hereof and must specifically
identify the Non-Compliance, failing which Sublandlord shall have no
responsibility to Subtenant under this Section with respect to such
Non-Compliance. The provisions contained in this subsection shall not be
applicable to any environmental related matters.
15. Adjustments
Sublandlord and Subtenant shall cooperate with each other in
making usual and customary closing type adjustments and apportionment's for real
estate taxes, rents, security deposits, utility charges, water and sewer charges
and premiums on transferable insurance policies which are in fact transferred to
Subtenant except to the extent that such adjustments were taken into account
under the Transaction Agreements, it being the intention of the parties to avoid
duplication of such adjustments. Sublandlord shall pay to Subtenant or Subtenant
shall pay to Sublandlord, as the case may be, the net amount owing by one to the
other promptly after such adjustments have been agreed upon. Any dispute between
the parties hereto in
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connection with the making of such adjustment shall be resolved pursuant to the
alternative dispute resolution mechanism set forth in Section 36 hereof.
16. Brokers
Each party represents and warrants to the other that it has
dealt with no broker or finder in connection with this Sublease. Each party
agrees to indemnify and hold harmless the other from and against any claims,
liabilities, suits, actions, losses, damages or expenses (including attorney's
fees and disbursements, including those incurred to enforce this indemnity)
resulting from any breach of the foregoing representation and warranty.
17. Notices
Any notice, demand, request, approval or other communication
(a "Notice") which, under the terms of this Sublease or under any statute, must,
or may be given by the parties hereto must be in writing and shall be sent by
any of the following means: registered or certified mail, return receipt
requested; reputable overnight delivery service; or by "fax." Any Notice given
by registered or certified mail shall be deemed given when received (as
evidenced by the return receipt); any Notice given by overnight delivery notice
shall be deemed given one (1) business day after mailed; any Notice given by fax
shall be deemed given when received. Any Notice given by fax shall only be
effective if a copy thereof is sent by reputable overnight delivery service to
arrive on the day after it is dispatched by fax. All Notices shall be addressed
as follows:
If to Sublandlord:
c/o Joseph DiFeo and Samuel X. DiFeo
585 Route 440
Jersey City, New Jersey 07034
With a Copy to:
Hannoch Weisman
A Professional Corporation
4 Becker Farm Road
Roseland, New Jersey 07068-3788
Attn: Stephen P. Lichtstein
If to Subtenant:
c/o EMCO Motor Holdings, Inc.
153 East 53rd Street
Suite 5900
New York, New York 10022
Attn: Ezra P. Mager
With a Copy to:
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Akin, Gump, Haver & Feld
1700 Pacific Avenue
4100 First City Center
Dallas, Texas 75201-2800
Attn: Gary M. Lawrence, P.C.
Either party may designate by Notice in writing given in the manner
herein specified a new or other address to which a Notice shall thereafter be so
given.
18. Insurance
18.1 Subtenant agrees to name Sublandlord as an additional
insured in all insurance policies which the tenant under the Sublease is
required to carry and maintain. Subtenant shall, as it respects Sublandlord, be
entitled to solely control the adjustment of any loss under a casualty insurance
policy.
18.2 In addition to, and not in limitation of, any of the
Subtenant's obligations hereunder, Subtenant shall maintain general liability
insurance insuring against claims for personal injury (including, without
limitation, bodily injury or death), property damage liability and such other
loss or damage from such causes of loss as are embraced by insurance policies of
the type now known as "Commercial General Liability" insurance, all in such
amounts as Sublandlord may from time to time reasonably require. Sublandlord
currently requires such insurance to be in the amount of Five Million
($5,000,000) Dollars combined single limit per occurrence. Such insurance
coverage shall be issued and maintained on an "occurrence" basis. Subtenant's
obligations with respect to such insurance policy shall be governed by the
Overlease as if such insurance policy were expressly required to be maintained
by the tenant thereunder.
18.3 Subtenant shall consult with sublandlord before adjusting
or settling any loss under any insurance policy required to be maintained by the
tenant under the Overlease.
19. Subordination
This Sublease shall, to the extent provided for in the
Overlease, be subject and subordinate to any ground lease, underlying lease
and/or mortgages made or given by Overlandlord which now or hereafter affect the
Demised Premises and to all renewals, modifications, consolidations,
replacements and extensions of such ground or underlying leases and mortgages.
This Sublease is, to the extent provided for in the Overlease, made subject and
subordinate to all liens, claims, encumbrances and other title matters affecting
the Demised Premises. This paragraph shall be self-operative and no further
instrument of subordination shall be required. However, in confirmation of such
subordination, Subtenant shall promptly execute and deliver at its own cost and
expense any instrument, in recordable form if
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requested, that Overlandlord shall request be executed pursuant to the
provisions of the Overlease.
20. Entry
Subtenant shall, upon prior notice (except in the event of an
emergency which shall include, without limitation, prevention of imminent
default under the Overlease in which event no notice shall be required) permit
entry to the Demised Premises by Sublandlord and authorized representatives of
Sublandlord at reasonable times (or at any and all times in the event of an
emergency) for the purpose of inspecting the Demised Premises and making any
necessary repairs or performing any work at the Demised Premises that may be
necessary by reason of Subtenant's failure to make them or otherwise (subject to
the provisions of Section 12 hereof). Nothing contained herein shall imply any
duty on the part of Sublandlord to do any such work which under any provision of
this Sublease, Subtenant may be required to perform, and the performance by
Sublandlord shall not constitute a waiver of Subtenant's default in failing to
perform.
21. Estoppel Certificates
Either party hereto shall, at any time and from time to time,
upon not more than fifteen (15) days prior notice from the other party, execute,
acknowledge and deliver to the other party (or to such person or entity
designated by the other party) a statement in writing certifying that this
Sublease is unmodified and in full force and effect (or if there have been
modifications, that this Sublease is in full force and effect as modified and
stating the modifications), and the dates to which rent and other charges have
been paid, stating whether or not to the best knowledge of the signer of such
statement the other party is in default in keeping, observing or performing any
covenant or agreement contained in this Sublease and, if there be a default,
specifying each such default, and containing any such customary certifications
as the other party may reasonably request, it being intended that any such
statement delivered pursuant to this Section may be relied upon by the other
party (or by the person or entity designated by the other party), but reliance
on such statement may not extend to any default as to which the signor shall
have had no actual knowledge, after due inquiry.
22. Right of First Refusal
Sublandlord hereby grants to Subtenant the right of first
refusal to acquire the Sublandlord's interest in the Overlease ("Sublandlord's
Interest") on the terms and conditions contained herein. If Sublandlord, during
the term of this Sublease and provided that this Sublease is then in full force
and effect and there does not then exist an Event of Default hereunder, desires
to sell or transfer Sublandlord's Interest, then Sublandlord shall, prior
thereto, submit to the Subtenant a
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writing ("Writing") executed by the Sublandlord and the proposed acquiror of
Sublandlord's Interest (the "Acquiror"), which Writing shall set forth the
material terms and conditions of the sale by the Sublandlord to the Acquiror of
the Sublandlord's Interest. The Writing need not be a legally binding agreement.
If Subtenant desires to acquire the Sublandlord's Interest upon the terms and
conditions contained in the Writing it shall give notice ("Reply Notice") to
that effect to the Sublandlord within fifteen (15) days after it receives the
Writing, time being of the essence. Upon the giving of the Reply Notice, the
Sublandlord shall be obligated to sell and Subtenant shall be obligated to
purchase the Sublandlord's Interest upon the terms and conditions contained in
the Writing. The Sublandlord and Subtenant shall, in such circumstance, proceed
expeditiously, in good faith and with due diligence to consummate the transfer
of the Sublandlord's Interest to the Subtenant in accordance with the terms and
conditions contained in the Writing. If the Subtenant does not timely give a
Reply Notice then Sublandlord shall be permitted to sell the Sublandlord's
Interest to the Acquiror upon substantially the same terms and conditions
contained in the Writing and, upon the consummation of such sale, Subtenant's
right of first refusal shall cease to exist forever. If the Sublandlord and the
Acquiror do not consummate the transaction contemplated by the Writing or desire
to consummate the transaction contemplated by the Writing on terms and
conditions which are not substantially the same as those set forth in the
Writing, then Sublandlord shall, before selling the Sublandlord's Interest,
follow the procedure above set forth granting the Subtenant a right of first
refusal. Notwithstanding anything to the contrary contained herein the right of
first refusal provided for above shall not be applicable to (i) a transfer of
the Sublandlord's Interest to an Affiliate of Sublandlord, Joseph C. DiFeo
and/or Samuel X. DiFeo (but such Affiliate shall comply with the right of first
refusal herein granted to Subtenant in the event it desires to sell or transfer
Subtenant's Interest and shall confirm in writing its obligation to so comply at
the time of the transfer of the Sublandlord's Interest to such Affiliate); or
(ii) a transaction entered into between Sublandlord, or an Affiliate of
Sublandlord, Joseph C. Difeo and/or Samuel X. Difeo and another which is not an
Affiliate of Sublandlord, Joseph C. Difeo and/or Samuel X. Difeo which involves
other significant property or properties in addition to the transfer of the
Sublandlord's Interest ("Other Matters"). Upon the consummation of a transaction
involving Other Matters the right of first refusal granted to Subtenant
hereunder shall cease to exist forever. Any dispute between the parties hereto
regarding the application of the provisions contained herein shall be resolved
by ADR in accordance with the provisions of Section 36 hereof.
23. End of Term
Upon the expiration or other termination of the term hereof,
Subtenant shall quit and surrender the Demised
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Premises in the condition and state of repair required under the provisions of
the Overlease, free and clear of any and all lettings and rights to occupy or
use the Demised Premises or any part thereof created by Subtenant or by anyone
claiming by, through or under Subtenant and free and clear of liens or
encumbrances created by any act or omission on the part of Subtenant or anyone
claiming by, through or under Subtenant. No reference in this Section to
lettings, right to occupy or use and to liens and encumbrances shall in and of
itself be construed to authorize any of the same.
24. Termination of Lease
If for any reason whatsoever the Overlease shall terminate
prior to the expiration of the term hereof, then this Sublease shall likewise
terminate simultaneously with such termination and, except for the termination
of the Overlease because of a default of Sublandlord as tenant thereunder, or
any other act of Sublandlord causing the Overlease to terminate, Subtenant shall
acquire no right or cause of action against Sublandlord by reason of such
termination. Sublandlord hereby agrees that it will not voluntarily cancel or
terminate the Overlease or otherwise modify or amend the same. If the Overlease
grants to the tenant thereunder an express right to elect to terminate the
Overlease, then the Subtenant shall have the same right to elect to terminate
this Sublease, subject, however, to compliance with the provisions of Section 28
hereof.
25. Casualty; Condemnation
Anything in this Sublease or the provisions of the Overlease
incorporated herein by reference to the contrary notwithstanding: (a) in the
event the Demised Premises shall be damaged or destroyed as a result of any fire
or other casualty, or taken in condemnation proceedings, by deed in lieu of
condemnation and by any right of eminent domain, Subtenant shall have the same
right to terminate this Sublease as Sublandlord, as tenant under the Overlease,
has to terminate or otherwise cause the term of the Overlease to expire or be
forfeited (subject to the provisions of Section 28 hereof); and (b) Subtenant
shall have no right to an abatement of fixed rent or additional rent or any
other similar charge unless Sublandlord is entitled to a corresponding abatement
with respect to its corresponding obligation under the Overlease as it relates
to the Demised Premises (the dollar amount of such abatement shall be limited to
the amount of the abatement to which Sublandlord is entitled under the
Overlease). If, by reason of such fire or casualty or condemnation, the
Overlandlord elects to terminate the Overlease in accordance with the provisions
of the Overlease, then, upon such termination of the Overlease, this Sublease
automatically shall be terminated as if such date of termination were the
expiration date.
26. Options to Extend
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26.1 Subtenant shall have the right (but not the obligation),
at its election and as hereinafter provided, to extend the original term of this
Sublease in effect on the date of this Sublease for the same number of
additional periods as shall be permitted under the Overlease and Sublandlord
shall duly exercise the respective additional periods under the Overlease, upon
the following terms and conditions:
(a) Subtenant shall give Sublandlord written notice
of each such election not earlier than one hundred eighty (180) days, nor later
than thirty (30) days prior to the last day in the Overlease on which such
notice must be given to the Overlandlord;
(b) At the time of exercise of such election and at
the commencement of such additional period (which condition Sublandlord may
waive in its sole and absolute discretion), Subtenant shall not be in default
under this Sublease beyond any applicable grace period or notice periods and
this Sublease shall be in full force and effect;
(c) Each such additional periods shall be upon the
same terms and conditions as during the initial term hereof, except as otherwise
provided in the Overlease and except that Subtenant shall have no further right
to extend the term of this Sublease (i) beyond such additional periods, or (ii)
if Subtenant shall have failed to timely elect to extend the term for any prior
additional period; and
(d) the term of each such additional period shall be
one (1) day less than the respective additional period under the Overlease.
26.2 Sublandlord hereby agrees that, if the extension of the
initial term or any additional period under the Overlease is an automatic
extension, to occur unless notice to the contrary is given by the tenant
thereunder, Sublandlord shall timely notify the Overlandlord that Sublandlord
does not wish to extend such term or period, provided that Subtenant shall
notify Sublandlord to give notice electing against the automatic extension not
less than sixty (60) days prior to the latest date such notice must be given
under the terms of the Overlease.
26.3 If, under the Overlease, the rent to be paid during any
renewal term is not a sum certain, or is not capable of being determined by
reference to a state of facts (for example, by reference to a consumer price
index) but is to be determined by agreement of the parties to the Overlease or
another mechanism which requires input of the parties, agreement of the parties
or determination by others (for example, fair market rental, appraisal
procedures, arbitration procedures or the like) then Subtenant shall have the
right to be directly involved in and solely control such rental determination
process to the exclusion of the Sublandlord but shall, nevertheless keep
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the Sublandlord advised in connection therewith.
27. Assignment; Subletting
27.1 Subject to the provisions of Sections 27.2 and 27.3
below, and subject to the applicable provisions of the Overlease (including,
without limitation, all prohibitions contained therein and consents required
thereby), Subtenant may assign this Sublease or sublet the Demised Premises.
Nothing contained in this Section 27.1 shall be deemed or construed to permit
the Subtenant to assign, mortgage, pledge, encumber or otherwise transfer this
Sublease, or sublet the Demised Premises in contravention of the terms and
provisions of the Overlease.
27.2 Any assignment of the Sublease shall not be effective
unless and until (i) the assignee shall execute, acknowledge and deliver to
Sublandlord an agreement in form and substance reasonably satisfactory to
Sublandlord, and with respect to which Sublandlord shall be a direct
beneficiary, whereby the assignee shall (x) assume the obligations and
performance of this Sublease and agree to be personally bound by all the
covenants, agreements, terms, provisions and conditions hereof on the part of
Subtenant to be performed and observed from and after the effective date of any
such assignment and (y) agree that the provisions of this Section 27 shall,
notwithstanding such assignment or transfer, continue to be binding upon it in
the future. Subtenant covenants that, notwithstanding any assignment, sublease
or transfer, whether or not in violation of the provisions of this Sublease, and
notwithstanding the acceptance of rent by Sublandlord from any assignee,
subtenant or transferee or any other party, Subtenant shall remain fully and
primarily and jointly and severally liable for the payment of rent due and to
become due under this Sublease and for the performance and observance of all the
covenants, agreements, terms, provisions and conditions of this Sublease on the
part of Subtenant to be performed or observed. The liability of Subtenant, and
the due performance by Subtenant of the obligations on its part to be performed
under this Sublease shall not be discharged, released or impaired in any respect
by an agreement or stipulation made by Sublandlord or any assignee of
Sublandlord or any other agreement with a third party extending the term or
modifying any of the obligations contained in this Sublease, or by any waiver or
failure of Sublandlord to enforce any of the obligations on Subtenant's part to
be performed under this Sublease, and Subtenant shall continue liable hereunder.
If any such agreement or modification operates to increase the obligations of
Subtenant under this Sublease the liability of Subtenant under this Sublease or
any of its successors in interest (all such parties shall be deemed to have
expressly consented in writing to such agreement or modification) shall continue
to be no greater than if such agreement or modification had not been made. Each
sublease entered into by Subtenant shall provide that in the event of
cancellation or termination of this Sublease because of a default by Subtenant
hereunder or of the
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surrender of this Sublease whether voluntary, involuntary or by operation of
law, prior to the expiration date of the sub-sublease, including extensions and
renewals granted thereunder, at Sublandlord's option, the sub-subtenant shall
make full and complete attornment to the Sublandlord for the balance of the term
of the sub-sublease, which attornment shall be evidenced by an agreement in form
and substance reasonably satisfactory to Sublandlord, which the sub-subtenant
shall execute and deliver at any time within ten (10) days after request by
Sublandlord, its successors and assigns and that the sub-subtenant waives the
provisions of any law now or hereafter in effect which may give the
sub-subtenant any right of election to terminate the sub-sublease or surrender
possession of the demised premises in the event any proceeding is brought by the
Sublandlord to terminate this Sublease.
27.3 Subtenant shall not have the right to sublet the Demised
Premises or assign this Sublease if the same would cause the Demised Premises to
become subject to compliance with the remedial provisions of the New Jersey
Environmental Clean Up Responsibility Act (N.J.S.A. 13:lk-6 et seq., or the
regulations promulgated thereunder ("ECRA")), or a similar state statute
requiring environmental testing and/or remediation, in any case prior to the
sale or other transfer of the Demised Premises, upon the circumstance of such
assignment or sublease, upon the expiration or sooner termination of this
Sublease or any such sublease or upon the cessation of operations at the Demised
Premises. If Subtenant desires to so assign or sublet, it shall notify
Sublandlord. Sublandlord will advise Subtenant, by notice within thirty (30)
days of Subtenant's notice, if Sublandlord believes that the proposed assignment
or sublet violates the prohibitions contained above, which notice from
Sublandlord shall specify in reasonable detail grounds for Sublandlord's
determination. Failure or refusal of Sublandlord to respond within such thirty
(30) day period shall be deemed a determination by Sublandlord that the proposed
assignment or sublet does not violate the above prohibitions. If Subtenant
disputes Sublandlord's determination, such dispute shall be resolved by ADR
pursuant to Section 36 hereof.
27.4 Sublandlord confirms, for the benefit of any subtenant
under any Major Sublease (such subtenant being called a "Space Subtenant"), that
upon the termination of this Sublease pursuant to Section 29.1 hereof,
Sublandlord will recognize the Space Subtenant under such sublease as a direct
tenant of Sublandlord (provided that such Space Subtenant attorns to
Sublandlord) and will, upon the request of Subtenant with respect to a Major
Sublease consented to by Sublandlord, enter into a reasonable and customary form
of recognition and attornment agreement with such Space Subtenant which would
provide for the recognition by Sublandlord of such Space Subtenant as a direct
tenant of Sublandlord and the attornment by such Space Subtenant to Sublandlord,
provided that, among other things, at the time of the termination of this
Sublease no default exists under the
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Space Subtenant's sublease which at such time would then permit the landlord
thereunder to terminate the same or to exercise any dispossess remedy provided
for therein. The term "Major Sublease" shall mean a sublease of all of the
Demised Premises for all of the term hereof (less one day), provided that the
sublease requires the sublessee to perform all of the Subtenant's obligations
hereunder, grants to the sublandlord all of Sublandlord's rights hereunder other
than pursuant to Section 29.1(c) or (d) (which shall not apply to the Major
Sublease) and that the sublessee shall not be obligated to enter into, assume or
otherwise be liable for obligations under any Tenant Cross-Guaranty.
28. Time Periods
The time limits set forth in the various provisions of the
Overlease for the giving of notices are (unless a different time frame is set
forth herein) changed for the purposes of this Sublease by lengthening or
shortening the same in each instance, as appropriate, by two (2) business days
so that notices may be given Sublandlord or Subtenant, as the case may be,
within the time limit relating thereto contained in the Overlease.
29. Defaults and Remedies
29.1 The occurrence of any one or more of the following events
shall constitute an event of default ("Event of Default") hereunder by
Subtenant:
(a) The failure by Subtenant to make any payment of
base rent required to be made by Subtenant hereunder, as and when due, when such
failure shall continue for a period of three (3) business days after written
notice thereof from Sublandlord to Subtenant;
(b) The failure of Subtenant to observe or perform
any other covenant or agreement on the part of Subtenant to be performed
hereunder which does not include the payment of rent, additional rent or any
other payment required to be made by Subtenant hereunder (with respect to which
the provisions of Subsection (a) hereof shall govern) and which does not involve
the observance or performance of a covenant or agreement imposed upon the tenant
under the Overlease and such default shall continue for a period of twenty (20)
days after notice thereof, specifying such default shall have been given to
Subtenant. However, in the case of a default which cannot with due diligence be
remedied by Subtenant within a period of twenty (20) days, if Subtenant, during
such twenty day period advises Sublandlord of Subtenant's intention to duly
institute all steps necessary to remedy such situation and proceeds as promptly
as may be reasonably possible after the service of such notice and with all due
diligence and continuity of purpose to remedy the default and thereafter
prosecutes the remedy of such default with due
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diligence, the period of time after the giving of such notice within which to
remedy the default shall be extended for such period as may be necessary to
remedy the same with all due diligence;
(c) An Event of Default, subject to the provisions
of Section 15.3 of a Group Lease, shall have occurred under any Group Lease;
provided, however, that if any Group Lease is assigned in a transaction
permitted thereunder to a person or entity which is not an Affiliate of the
Tenant thereunder, and does not thereafter become an Affiliate of the Tenant
thereunder, then this Subsection shall thereafter apply only with respect to
such Group Lease to a monetary Event of Default under such Group Lease and shall
not thereafter apply to a non-monetary Event of Default under such Group Lease;
(d) An Event of Default, subject to the provisions
of Section 29.9 of a Group Sublease, shall have occurred under any Group
Sublease; provided, however, that if any Group Sublease is assigned in a
transaction permitted thereunder, to a person or entity which is not an
Affiliate of the Subtenant thereunder, and does not thereafter become an
Affiliate of the Subtenant thereunder, then this Subsection shall thereafter
apply only with respect to such Group Sublease to a monetary Event of Default
under such Group Sublease and shall not thereafter apply to a non-monetary Event
of Default under such Group Sublease;
(e) (i) The making by Subtenant or '21'
International Holdings, Inc., while the TIHI Guaranty is in effect or any EMCO
Sub, while its EMCO pledge is in effect (said entities, during such periods of
time only, being each called a "Guarantor") of any general assignment for the
benefit of creditors; (ii) the filing by or against Subtenant or a Guarantor of
any petition to have Subtenant or a Guarantor adjudged a bankrupt or a petition
for reorganization or arrangement under any law relating to bankruptcy (unless,
in the case of a petition filed against Subtenant or a Guarantor, the same is
dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Subtenant's or a Guarantor's
assets, or substantially all of Subtenant's or a Guarantor's assets, or
substantially all of Subtenant's assets located at the Demised Premises or of
Subtenant's interest in this Sublease; or (iv) the attachment, execution or the
judicial seizure of substantially all of Subtenant's or a Guarantor's assets, or
substantially all of Subtenants assets located at the Demised Premises or of
Subtenant's interest in this Sublease; or (v) the liquidation or dissolution of
Subtenant or a Guarantor; or
(f) Subject to the provisions of Section 29.7
hereof, the occurrence of any act or event or the existence of any other matter,
circumstance, state of fact or thing (as it respects Subtenant) which would
constitute a default under the Overlease, including, without limitation, the
failure of
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Subtenant to observe or perform any covenant or agreement on the part of
Subtenant to be performed hereunder which does involve the observance or
performance of a covenant or agreement imposed upon the tenant under the
Overlease (but which does not involve the payment of base rent required to be
made by Subtenant hereunder, with respect to which the provisions of Subsection
(a) hereof shall govern) if the same is not cured or remedied by the date when
the same would (taking into account applicable grace periods provided for in the
Overlease) constitute a default under the Overlease.
29.2 From and after the occurrence of an Event of Default,
Sublandlord shall also have the right, with or without terminating this Sublease
and without any further notice to Subtenant , to re-enter the Demised Premises
and remove all persons and property from the Demised Premises; such property may
be removed and stored in a public warehouse or elsewhere at the cost of an for
the account of Subtenant. No re-entry or taking possession of the Demised
Premises by Sublandlord pursuant to this Section 29.2 shall be construed as an
election to terminate this Sublease unless a written notice of such intention is
given to Subtenant. No entry or re-entry by Sublandlord, whether had or taken
under summary proceedings or otherwise, shall absolve or discharge Subtenant
from any liability hereunder. Sublandlord agrees that it will cease exercising
any right it may have under this Sublease by reason of the occurrence of an
Event of Default hereunder which relates to the Subtenant's failure to observe
or perform a covenant or agreement imposed upon the tenant under the Overlease
if subsequent to the occurrence of such Event of Default such failure to observe
or perform is remedied by the Subtenant and the Overlandlord accepts such cure
and waives any default occasioned thereby.
29.3 In the event that Sublandlord shall elect to re-enter as
provided above or shall take possession of the Demised Premises pursuant to
legal proceedings or pursuant to any notice provided by law, then if Sublandlord
does not elect to terminate this Sublease as provided above, Sublandlord may,
from time to time, without terminating this Sublease, either recover all rent
(which shall be deemed to include all base rent, additional rent and other
payments and charges required to be made by Subtenant hereunder) as it becomes
due or relet the Demised Premises or any part thereof on terms and conditions as
Sublandlord in its sole discretion may deem advisable for the whole or any part
of the remainder of the term or for a longer period, in Sublandlord's name, or
as agent of Subtenant, and in connection therewith Sublandlord may make repairs
or alterations to the Demised Premises in such a manner as Sublandlord may deem
necessary or advisable. Subtenant specifically acknowledges and agrees that
Sublandlord shall have no obligation or duty to mitigate damages hereunder.
29.4 In the event Sublandlord shall elect to so relet, the
rents received by Sublandlord from such reletting
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shall be applied: first, to the cost and expenses or retaking, repossessing,
repairing and/or altering the Demised Premises and the expense of removing all
persons and property therefrom; second, to the cost and expenses incurred in
securing any new tenant or tenants; and third, to the payment of rent due and
unpaid hereunder and the residue, if any, shall be held by Sublandlord and
applied to payment of future rent as the same may become due and payable. Should
that portion of such rents received from such reletting during any month, which
is applied to the payment of rents hereunder, be less than the rent payable
during the month by Subtenant hereunder, then Subtenant shall pay such
deficiency to Sublandlord immediately upon demand therefor by Sublandlord. Such
deficiency shall be calculated and paid monthly. Subtenant shall also pay to the
Sublandlord, as soon as ascertained, any costs and expenses incurred by
Sublandlord in reletting or in making such alternations and repairs not covered
by the rents received from such reletting. Suit or suits for the recovery of
such deficiency or damage, or for a sum equal to any installment or installments
of rent may be brought by Sublandlord from time to time at Sublandlord's
election and nothing herein contained shall be deemed to require Sublandlord to
await the date on which the Sublease or the term hereof would have expired by
limitation had there been no such default by Subtenant.
29.5 All rights, options and remedies of Sublandlord contained
in this Sublease shall be construed and held to be cumulative and no one of them
shall be exclusive of the other, and Sublandlord shall have the right to pursue
any one or all of such remedies or any other remedy or relief which may be
provided by law, whether or not stated in this Sublease. Subtenant expressly
waives service of any notice of intention to re-enter subsequent to the
occurrence of an Event of Default. Subtenant hereby expressly waives any and all
rights to recover or regain possession of the Demised Premises or to reinstate
or redeem its tenancy or this Sublease as is permitted or provided by or under
any statute, law or a decision now or thereafter in force and effect. Subtenant
also waives the provisions of any law now or hereafter in effect relating to
notice and delay in levy of execution in case of an eviction or dispossess of
Subtenant for non-payment of rent. Subtenant waives and shall waive any and all
right to a trial by jury in the event that summary proceedings shall be
instituted by Sublandlord. The term "enter", "re-enter", "entry", or "re-entry",
as used in this Sublease is not restricted to their technical legal meanings.
29.6 In addition to and not in limitation of any right or
remedy provided to Sublandlord in this Section 29, Sublandlord shall have all
rights and remedies which the Overlandlord is entitled to pursuant to the
provisions of the Overlease, at law, equity or otherwise upon the occurrence of
a default by the tenant thereunder.
29.7 Sublandlord agrees that it will not be entitled to give a
default notice to Subtenant with respect to
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Subtenant's failure to perform or observe any covenant or agreement on the part
of Subtenant to be performed hereunder which involves the observance or
performance of a covenant or agreement imposed upon the tenant under the
Overlease (excepting from the foregoing, however, the failure to make payment of
rent, additional rent or any other payment required to be made by Subtenant
hereunder, and excepting from the foregoing any obligation which is
independently imposed upon the Subtenant under this Sublease; the provisions of
the first sentence of Section 12.1 hereof shall not be deemed an obligation
which is independently imposed upon the Subtenant under this Lease) unless
Sublandlord receives notice from the Overlandlord with respect to such failure
to perform or observe. Nothing contained in this Section 29.7 shall be deemed or
construed to limit Sublandlord's right to take any action pursuant to Section
12.1 in the event of any emergency.
28.8 If Sublandlord shall give Subtenant a notice pursuant to
Section 29.1(b) of a default or an event which may, with the giving of such
notice, or the passage of time, or both, become an Event of Default, and if
Subtenant within fifteen (15) days after the giving of any such notice from
Sublandlord pursuant to Section 29.1(b) shall dispute by notice to Sublandlord
(a "Section 29.8" Notice) the existence of such default, the matter shall be
determined by ADR as provided in Article 36 and, pending such determination,
Sublandlord shall not be entitled to terminate this Sublease, nor shall a
default or Event of Default be deemed to exist hereunder on account thereof;
provided, however, that if it shall be determined by ADR that Subtenant is so in
default, the time within which Subtenant shall have to remedy the same under
Section 29.1(b) shall be computed from the date of such determination. Any such
Section 29.8 Notice to Sublandlord shall specify in reasonable detail the
grounds for such dispute.
29.9 If a monetary Event of Default occurs hereunder (other
than a monetary Event of Default which respects the payment of rent, additional
rent or any other payment required to be made by the tenant under the Overlease)
then Sublandlord shall have the right to send to Subtenant a second (2nd)
notice, referring to this Section and specifying such default and stating that
it is a "Second Notice" of such default, and, if such monetary Event of Default
shall not be cured within five (5) business days after such notice is given,
then Sublandlord shall have the right to send Subtenant a third (3rd) notice,
referring to this Section and specifying that it is a "Third Notice" of such
default, and if such monetary Event of Default shall not be cured within ten
(10) business days after such notice is given, Sublandlord may thereafter
proceed to exercise all rights and remedies which Sublandlord may exercise upon
such Event of Default and Sublandlord shall not thereafter be obligated to
accept a cure by Subtenant of such monetary Event of Default (but prior to
Sublandlord's commencing to exercise its rights and remedies, Sublandlord shall
be obligated to accept
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such a cure). The provisions of this Section shall only apply to the first two
(2) monetary Events of Default (as above noted, the provisions of this Section
shall not be applicable to a default relating to the payment of rent, additional
rent or any other payment required to be made by the tenant under the Overlease)
in any period of twelve (12) consecutive calendar months. Subtenant specifically
acknowledges that it will not argue before any court, ADR tribunal or anyone
that Sublandlord is obligated or required to accept any cure of any such Event
of Default described in this Section after the expiration of the applicable time
frame provided for after the Third Notice, Subtenant having negotiated for the
giving of the Second and Third Notices in lieu of any other benefit or right
provided to Subtenant at law, in equity or otherwise with respect to the right
to cure such Events of Default.
29.10 (a) The provisions of Section 29.1(d) shall no longer
apply to this Sublease, and Sublandlord shall cease to be entitled to consider
an Event of Default to exist or to terminate this Sublease on account of an
Event of Default under Section 29.1(d) in any of the following circumstances:
(i) If this Sublease shall be assigned (but only if Sublandlord's
consent, if required hereunder, has been obtained), in a transaction
permitted hereunder, to an assignee which is not an Affiliate of
Subtenant and provided that (i) such assignee or transferee does not
thereafter become an Affiliate or Subtenant, or (ii) Subtenant, or
an Affiliate of Subtenant, does not thereafter become the Subtenant
under this Sublease; or
(ii) if Sublandlord shall cease to be (and so long thereafter as
Sublandlord shall continue not to be) an Affiliate of Joseph C.
DiFeo or Samuel X. DiFeo.
(b) For purposes of Sections 29.1(c) and 29.1(d) a sublease
other than this Sublease, or a lease which is originally considered a Group
Sublease or a Group Lease shall cease to be a Group Sublease or Group Lease for
such purposes if the sublandlord or landlord under such sublease or lease shall
cease to be an Affiliate of Joseph C. DiFeo or Samuel X. DiFeo, but shall again
be considered a Group Sublease or Group Lease if and so long as the sublandlord
or landlord under such sublease or lease shall again be an Affiliate of Joseph
C. DiFeo or Samuel X. DiFeo.
29.11 Pursuant to the Tenant Cross-Guaranty, Subtenant has
guaranteed the performance of the tenants under the Group Leases and the
subtenants under the Group Subleases.
30. Purchase of Demised Premises
The Overlease may grant the Sublandlord an option to purchase the Demised
Premises, a right of first refusal to purchase the
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Demised Premises, the right of first offer to purchase the Demised Premises or
other rights (collectively "Rights") concerning the purchase of the Demised
Premises. Subtenant specifically acknowledges that Sublandlord has retained all
of its rights with respect to the foregoing and Subtenant does not have any
rights with respect to the foregoing. If Sublandlord, or an Affiliate of
Sublandlord, acquires title to the Demised Premises at any time during the term
of this Sublease, then this Sublease shall automatically be deemed to be a
direct lease between Sublandlord (or the Affiliate of Sublandlord), as landlord,
and Subtenant, as tenant, except that this Sublease shall automatically be
deemed modified to incorporate all of the terms and provisions of the lease in
the form of Exhibit D hereto, it being agreed, however, that the term of the
direct lease between Sublandlord (or an Affiliate of Sublandlord) and Subtenant
shall be for a term which is coterminous with the balance of the then effective
term of this Sublease and that the Subtenant shall have the options to renew
provided for in the Overlease and that the base rent, additional rent and other
charges to be paid by the Subtenant, as tenant, to Sublandlord (or an Affiliate
of Sublandlord), as landlord, shall be the same rent and additional rent which
the Subtenant was required to pay under this Sublease. If a successor
("Successor") in interest to the Sublandlord with respect to this Sublease
(other than an Affiliate of Sublandlord) or the Sublandlord's Rights acquires
title to the Demised Premises then this Sublease shall automatically be deemed
to be a direct lease between the Successor, as landlord, and Subtenant, as
tenant. Each Successor shall execute a writing so assuming the obligations
contained herein with respect to it.
31. Taxes
Subtenant shall be responsible for paying (or reimbursing Sublandlord, as
appropriate) any and all taxes, assessments and charges, levied, assessed or
imposed upon Sublandlord (other than income taxes, but including occupancy taxes
which are measured by income) measured by (x) Sublandlord's ownership of its
interest in this Sublease; (y) this Sublease; or (z) the rent or other charges
produced by this Sublease. Nothing contained in the foregoing sentence shall
require Subtenant to pay any franchise, income, corporate, estate succession,
capital levy, stamp or transfer tax of Sublandlord or other taxes imposed on
taxpayers generally as opposed to the owners or landlords of real property or on
rents in particular. Nothing contained herein shall be deemed or construed to
limit or diminish Subtenant's obligations contained elsewhere in this Sublease.
32. No Fiduciary Obligation
Sublandlord, an affiliate of Sublandlord, or persons comprising Sublandlord, may
be a stockholder, partner or the like in Subtenant or an affiliate of Subtenant,
which fact shall not impose any duty or obligation (fiduciary or otherwise) on
the
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Sublandlord in acting as sublandlord under this Sublease, it being specifically
understood and agreed that Sublandlord shall have the right to do or not to do
anything with respect to this Sublease to the same extent as if Sublandlord, an
affiliate of Sublandlord or persons comprising Sublandlord were not a
stockholder, partner or the like with or in Subtenant or an affiliate of
Subtenant.
33. Warranties and Representations
Sublandlord represents to the Subtenant that, as of the date of this Sublease:
(i) the Overlease is in full force and effect;
(ii) attached hereto as Exhibit E is a complete copy of the
Overlease, together with all amendments thereto and modifications thereof;
(iii) to the best of its knowledge, there exists no default on
its part under the Overlease
(iv) The Sublandlord is the holder of the tenants interest
under the Overlease and has not assigned the same; and
(v) There are no presently effective subleases or rights of
occupancy entered into or granted by Sublandlord with respect to the Demised
Premises.
34. Non-Recourse
There shall be absolutely no personal liability on the part of Sublandlord, its
partners, agents, employees, shareholders, officers and directors or their
successors or assigns with respect to any of the terms, covenants and conditions
of this Sublease or with respect to any act, omission or negligence of the
Sublandlord. Subtenant shall look solely to Sublandlord's estate and property in
the Demised Premises for the satisfaction of Subtenant's remedies for the
collection of any judgment or any other judicial process requiring the payment
of money by Sublandlord, and no other property or assets of Sublandlord shall be
subject to levy, execution or other enforcement procedure or for the
satisfaction of Subtenant's remedies under or with respect to this Sublease, the
relationship of Sublandlord and Subtenant or of Subtenant's use or occupancy of
the Demised Premises.
35. Certain Definitions
As used herein:
(a) "Affiliate" shall have the meaning ascribed thereto
in the Master Agreement.
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(b) "TIHI Guaranty" shall have the meaning ascribed
thereto in the Master Agreement.
(c) "EMCO Sub" shall mean the pledgor(s) under the EMCO
Pledge(s).
(d) "Transaction Agreements" means, collectively, the
Master Agreement and the Transaction Documents (as defined in the Master
Agreement).
(e) Master Agreement" shall mean the Master Agreement,
dated as of March 11, 1992, among Emco Motor Holdings, Inc., DiFeo Partnership,
Inc., '21' International Holdings, Inc., Fair Cadillac-Oldsmobile Corp., Fair
Chevrolet Corp., Fair Infiniti, Inc., Fair Imports Corp. (d/b/a Fair Acura),
Fair Hyundai Corp., Fair Motors Corp. (d/b/a Fair Mitsubishi), Danbury-Mt. Kisco
Saturn Corp. (d/b/a/ Saturn of Danbury), Hudson Toyota Inc., J & S Ford Inc.,
DiFeo Volkswagen Inc., DiFeo Hyundai Inc., J & F Oldsmobile Corp., DiFeo Subaru
Inc., DiFeo Jeep-Eagle Inc., DiFeo Imports, Inc. (d/b/a/ Jersey City
Mitsubishi), Park Pontiac-GMC Truck, Inc., DiFeo Buick Inc., DiFeo Autocenter
Inc. (d/b/a/DiFeo Mazda), DiFeo Leasing Corporation, Somerset Motors Inc.
(d/b/a/ DiFeo Lexus), Gateway Oldsmobile Inc. (d/b/a DiFeo Volkswagen of
Bridgewater), DiFeo B.M.W., Inc., County Auto Group, Inc. (d/b/a County Toyota),
Rockland Motors Corp. (d/b/a Rockland Mitsubishi), Samuel X. DiFeo and Joseph
DiFeo, as the same may have been amended.
(f) "Group Leases" means the leases to be entered into
contemporaneously herewith by Sublandlord (or Affiliates of Sublandlord) and
Subtenant (or Affiliates of Subtenant) pursuant to the Master Agreement, a list
of such Group Leases being attached hereto as Exhibit F.
(g) "Group Subleases" means this Sublease and all other
subleases to be entered into contemporaneously herewith by Sublandlord (or
Affiliates of Sublandlord) and Subtenant (or Affiliates of Subtenant) pursuant
to the Master Agreement, a list of all such Group Subleases being attached
hereto as Exhibit G.
(h) "ADR" shall have the meaning ascribed thereto in
Article 36.
(i) "EMCO pledge(s)" shall have the meaning ascribed to
"EMCO Sub-Pledge Agreements (Leases)" in the Mater Agreement.
(j) "laws" shall mean all present and future laws and
ordinances and the orders, rules, regulations and requirements of all federal,
state and municipal governments and appropriate departments, commissions, board
and officers thereof, which may be applicable to the Demised Premises and the
sidewalks, curbs and vaults adjoining the same or to the use or
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manner of use of the Demised Premises, whether or not such requirement shall be
foreseen or unforeseen, ordinary or extraordinary.
(k) "Tenant Cross-Guaranty" shall have the meaning
ascribed thereto in the Master Agreement.
36. ADR
36.1 In such cases where this Sublease provides for the
determination of any matter by arbitration or ADR, the same shall be settled and
finally determined by the means of alternative dispute resolution as provided in
the New Jersey Alternative Procedure for Dispute Resolution Act, N.J.S.A.
2A:23A-1, et seq., as in effect on the date of this Sublease, (the "Act") upon
written notice given by any party to the other (the "Dispute Notice"), and to
the umpire hereafter established. Except to the extent required by law, the
proceedings under the Act shall be confidential and shall not be disclosed or
discussed with persons not parties to this Sublease without the consent of all
parties to the dispute. In the event a party to a dispute may suffer irreparable
harm or injury, such party shall have the ability to seek provisional remedies,
including but not limited to injunctive relief and other equitable remedies, to
the fullest extent permitted by law pending completion of the process provided
under this Article 36.
36.2 (a) Within thirty (30) days after the Dispute Notice is
given the parties shall select three (3) umpires from among the persons listed
in Subparagraphs (1) through (4) below in the order of priority listed below,
i.e., if a person meeting the requirements of Subparagraph (1) is not able or
willing to serve, a person meeting the requirements of Subparagraph (2) shall be
selected, and so forth. In addition to meeting the requirements of Subparagraph
(1), (2), (3) or (4) below, the umpires must also satisfy the requirements
described in Subparagraphs (b) and (d) below. A potential umpire is:
(1) Any retired judge of a United States District
Court or a United States Circuit Court of Appeals;
(2) Any retired judge of any State Superior Appellate or
Supreme Court;
(3) Any attorney licensed to practice law for more than
fifteen (15) years or certified public accountant who has been certified for
more than fifteen (15) years; and, in either case, who has either directly or
indirectly, no conflict of interest; or
(4) Such other person upon whom the members of the
selecting group agree.
(b) In addition to the requirements described in
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Section 36.2(a) above, the umpires selected hereunder must:
(1) Be free of any potential for bias or conflict of
interest with respect to either of the parties hereto, directly or indirectly or
by virtue of any direct or indirect financial interest, family relationship or
close friendship; and
(2) Be in a position to immediately hear the dispute and
thereafter render a resolution within the time specified in Section 36.7 below.
(c) If the umpires are not selected within the period of time
specified in Section 36.2(a) above, Sublandlord, on the one hand, and Subtenant,
on the other hand, each shall promptly select an umpire which umpires shall
select a third umpire who shall be the sole umpire. If the parties fail to so
select umpires pursuant to the foregoing provisions within twenty (20) days
after the expiration of the period described in Section 36.2(a), the sole umpire
shall be selected by the Chief Judge of the United States District Court for the
District of New Jersey or, if the Chief Judge is unable or unwilling to act, by
the Chief Judge of the Southern District of New York or the President of the Bar
Association of the City of New York. Such selection shall be in accordance with
the requirements of Sections 36.2(a) and 36.2(b) above. The umpire to be
selected pursuant to this Section 36.2(c) must be designated within thirty (30)
days after the expiration of the period described in Section 36.2(a) above.
(d) Anything to the contrary herein notwithstanding, the
following persons are not eligible to be an umpire under this Article: a party
to this Sublease or any affiliate thereof; an employee or co-employee of any
party to the dispute; or any person having material or undisclosed, financial or
personal interests dependent on the success or failure of any of the parties.
(e) An umpire shall disqualify himself or herself if he or she
is unable to handle the process promptly so as to render a resolution within a
reasonable time, in no event to exceed forty-five (45) days after final
testimony and/or brief and in all __________ not to extend beyond six months
from the date the umpire is chosen, or such longer period to which the parties
to the dispute and the umpire may agree.
36.3. The alternative resolution shall be held at such place
as the umpire may determine within Essex County, New Jersey or such other
location to which the parties may agree, to commence not later than ten (10)
days after the umpire has been determined in accordance with Section 36.2.
36.4. All fees and expenses (including transcripts, room
rental and fees of the umpire) of alternative dispute resolution, shall be paid
as follows: 25% by the party
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or parties served with the Dispute Notice and 25% by the person(s) serving the
Dispute Notice, with the remaining 50% allocated 10% to the prevailing party (or
parties) and 40% to the non-prevailing party (or parties), as determined by the
umpire (if the umpire does not determine a prevailing party then pro-rata to
each of the material parties to the dispute as determined by the umpire)
provided that the umpire shall have the right to order that such fees be paid in
a different percentage if any of the parties have acted in bad faith (in which
case he may shift other's shares to the bad faith party(ies). The fees payable
to the umpire shall be his usual hourly rates for consulting or dispute
resolution services, as the same may be in effect from time to time. Each party
shall pay his own legal fees, costs and disbursements.
36.5. Each party shall be entitled to discovery by way of oral
deposition, inspection and copying of all relevant documents within the care,
custody or control of a party or a witness, and when authorized by the umpire,
by way of interrogatories. All discovery shall be complete within forty-five
(45) days of the appointment of the umpire. All documents to be relied upon by
any party to the proceeding shall be provided to the others no later than two
weeks before the hearing date for the proceedings. The time periods for
discovery may be extended by the umpire for good cause, provided that he is able
to meet the time requirement of Section 36.7.
36.6. When appropriate under applicable New Jersey substantive
and procedural law, the umpire shall have full and complete authority to award
provisional relief, on an ex parte basis or otherwise.
36.7. The umpire shall make the award and serve notice thereof
upon all parties within six (6) months of the date the umpire is designated, or
such longer period to which the parties to the dispute and the umpire may agree.
If the umpire fails to make his decision in accordance with substantive law, or
to properly apply the facts to the law, the umpire's award will be deemed to
have been procured by "undue means" and "beyond his power." Any party may apply
to court in accordance with the Act to have the umpire's decision confirmed,
reviewed, modified, affirmed or remanded to the umpire with directions.
36.8. Except as otherwise provided herein, the Act shall
govern the procedures and methods for any Alternative Dispute Resolution
undertaken pursuant to this Sublease. Except as expressly provided above, the
umpire may not modify the provisions of this Article. Except as expressly
provided to the contrary above, and to the extent otherwise not inconsistent
with this Sublease and the Act, proceedings under this Article, including
efforts to mediate the dispute, shall be governed by the "Rules for
Non-Administered Arbitration of Business Disputes" (Final Draft, June 14, 1989)
by the CPR (NY).
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37. Miscellaneous
37.1 This Sublease may not be modified or amended except by a
writing executed by both parties.
37.2 This Sublease shall be governed by and shall be construed
in accordance with the laws of the State in which the Demised Premises is
located.
37.3 The covenants and agreements herein contained shall bind
and inure to the benefit of Sublandlord and Subtenant and their respective
successors and assigns (but in the case of Subtenant only, permitted assigns).
37.4 Sublandlord and Subtenant agree that they are not
partners or joint venturers by reason of this Sublease.
37.5 The persons and entities signing this Sublease for
Sublandlord and Subtenant respectively each represents and warrants that this
Sublease has been duly authorized, executed and delivered by Sublandlord and
Subtenant, as the case may be.
37.6 Neither acceptance of the keys nor any other act or thing
done by Sublandlord or any agent or employee of Sublandlord during the term of
this Sublease shall be deemed to be an acceptance or a surrender of the Demised
Premises. Surrender of the Demised Premises can only be effected by agreement in
writing signed by Sublandlord accepting or agreeing to accept such a surrender.
37.7 Sublandlord and Subtenant hereby waive trial by jury in
any action or proceeding (including counterclaims) brought by either against the
other in any matters arising out of or relating to this Sublease which are not
required to be decided pursuant to the alternative dispute resolution mechanism
set forth herein.
37.8 This Sublease contains the entire agreement between the
parties concerning the subleasing of the Demised Premises by Sublandlord to
Subtenant. All prior descriptions and negotiations between the parties regarding
the subject matter of this Sublease are merged into and superseded by this
Sublease.
37.9 The captions herein are for convenience of reference only
and shall not be deemed to define, limit or describe the scope or intendment of
any provision of this Sublease.
IN WITNESS WHEREOF, Sublandlord and Subtenant have duly executed and
delivered this Sublease as of the day and year first above written.
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WITNESS DIFEO BMW, INC.
By:
Name:
Its:
DIFEO BMW PARTNERSHIP
By: /s/ Ezra P. Mager
Name: Ezra P. Mager
Its: CEO
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EXHIBIT A TO SUBLEASE BETWEEN DIFEO BMW, INC. AND
DIFEO BMW PARTNERSHIP
Lease dated January 6, 1992 between Michael Zullo, Sr. and
Bertha Zullo, as landlord, and DiFeo BMW, Inc., as tenant.
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EXHIBIT B TO SUBLEASE BETWEEN
DIFEO BMW, INC. AND DIFEO BMW PARTNERSHIP
Report Of Site Investigation For Various Automobile Dealerships In New
Jersey, New York and Connecticut - SE # 2519, Prepared For: EMCO Motor
Holdings, Inc. by Storch Engineers - Dated June 2, 1992, as amended.
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EXHIBIT C TO SUBLEASE BETWEEN
DIFEO BMW, INC. AND DIFEO BMW PARTNERSHIP
Additional Representations
And Warranties of Sublandlord
1. Existence. Sublandlord is a corporation duly organized, validly
existing and in good standing under the laws of its state of organization and
has all requisite power and authority to enter into this Sublease and the Rent
Adjustment and Takeback Agreement (collectively, the "Lease Documents") to which
it is a party and to perform its obligations hereunder and thereunder; and has
all requisite corporate power and authority to own its properties and assets and
conduct its business as it is now being conducted.
2. Authority; Consents. The execution, delivery performance by
Sublandlord of the Lease Documents to which it is a party and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate, partnership or other action, and no other corporate,
partnership or other action on the part of Sublandlord is necessary for the
execution, delivery and performance by Sublandlord of any Lease Document to
which it is a party and the consummation by it of the transactions contemplated
hereby and thereby. Subject to Section 4.23 of the Master Agreement (which
exclusively governs Environmental Health and Safety Matters) and except as
disclosed on Schedule C-1 hereto, or in the Master Agreement, neither the
execution nor the delivery by Sublandlord of any Lease Document to which it is a
party, nor the consummation of any of the transactions contemplated hereby or
thereby, nor compliance with nor fulfillment by Sublandlord of the terms and
provisions hereof or thereof, will, except as disclosed on Schedule C-1 hereto,
(i) conflict with or result in a breach of the terms, conditions or provisions
of or constitute a default under (A) the Certificate or Articles of
Incorporation, Bylaws, partnership agreement, or other organizational documents
of Sublandlord, or (B) any lease, contract, instrument, mortgage, deed of trust,
trust deed or deed to secure debt evidencing or securing indebtedness for
borrowed money, any financing lease, any law, rule, regulation, judgment, order,
award, decree or other restriction of any kind to which Sublandlord is a party
or by which it is bound and the Demised Premises is subject, (ii) require
Sublandlord to obtain the consent, approval, authorization or other order or
action of, or filing with, any court, governmental authority or regulatory body,
(iii) require the consent, approval, authorization or order of any person or
entity under, and will not conflict with, or result in the breach, lapse or
termination of, or constitute a default under, or result in the acceleration of
the performance by Sublandlord
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under, any material lease, permit, license, contract, mortgage, deed of trust,
trust deed, deed to secure debt, other lease, indenture or other instrument to
which Sublandlord is a party and by which the Demised Premises is subject, (iv)
give any party with rights under any instrument, contract (including any
sale/leaseback agreement), lease, mortgage, deed of trust, trust deed, deed to
secure debt, judgment, order, award, decree or other restriction the right to
terminate, modify or otherwise change the rights or obligations of any party
under such instrument, contract, lease, mortgage, deed of trust, trust deed,
deed to secure debt, judgment, order, award, decree or other restriction or (v)
require any declaration, filing or registration with any governmental or
regulatory authority by Sublandlord. Each Lease Document has been duly executed
and delivered by Sublandlord and (assuming the due authorization, execution and
delivery hereof and thereof by the other parties hereto and thereto),
constitutes a legal, valid and binding obligation of Sublandlord, enforceable
against Sublandlord in accordance with its respective terms (except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditor's rights generally and laws
restricting the availability of equitable remedies and may be subject to general
principles of equity whether or not such enforceability is considered in a
proceeding at law or in equity).
3. No Litigation. There is no action, lawsuit, claim, counterclaim,
proceeding or investigation (or group of related actions, lawsuits, claims,
proceedings or investigations) pending or, to the knowledge of Sublandlord,
Joseph DiFeo or Samuel DiFeo, threatened against or affecting Sublandlord that
seeks to restrain or enjoin the consummation of the transactions contemplated by
any Lease Document.
4. Title to Assets. Sublandlord has the legal right to use all
of the Demised Premises.
5. Compliance. Except as otherwise disclosed in the Master
Agreement, Sublandlord is not in default under or in violation of, any
applicable franchise, permit or license, its Articles or Certificate of
Incorporation (or other charter document), Bylaws, partnership agreement or
other organizational document, any promissory note, indenture or any evidence of
indebtedness or security therefor, mortgage, lease, Contract (as hereinafter
defined) or any other instrument to which it is a party and by which it or the
Premises is or may be bound.
6. Litigation. Except as disclosed in Schedule C-1 hereto or in the
Master Agreement and except for Environmental Health and Safety Matters which
are governed exclusively by Section 4.23 of the Master Agreement, there is no
action, lawsuit, claim, counterclaim, proceeding, or investigation (or group or
related actions, lawsuits, claims, proceedings or investigations) pending or, to
the knowledge of Sublandlord,
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threatened, against or affecting Sublandlord in any court, or before any
Federal, state, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind, and as of the date hereof Landlord knows of
no reasonable basis for any such action, lawsuit, claim, proceeding, or
investigation (or group of related actions, lawsuits, claims, proceedings or
investigations) which seeks to restrain or enjoin the consummation of the
transactions contemplated by the Lease Documents or would materially adversely
affect Subtenant or Subtenant's use and occupancy of the Demised Premises.
Except as disclosed in Schedule C-1 or in the Master Agreement, Sublandlord is
not in default, and no condition exists that with notice or the lapse of time or
both would constitute a default, with respect to any judgment, order writ,
injunction or decree of any court or before any Federal, state, provincial,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting or relating to the business of
Sublandlord. No condemnation proceeding has commenced or, to the knowledge of
Sublandlord, is threatened to be commenced against any of the Demised Premises.
7. Contracts. Except as otherwise disclosed in the Master Agreement,
Schedule C-1 hereto lists all of the following contracts of Sublandlord relating
to the Demised Premises ("Contracts"): (i) any lease, sublease or other right of
occupancy, (ii) any contract, commitment or option to sell or lease the Demised
Premises, (iii) any mortgage, hypothecation, deed of trust, equipment lease,
conditional sales agreement or similar instrument which place a lien or
encumbrance upon the Demised Premises, (iv) any other contract relating to
rights in the Demised Premises which will, or has the reasonable likelihood to,
materially adversely interfere with Subtenant, this Sublease or the use and
occupancy of the Demised Premises by Subtenant pursuant to this Sublease, or (v)
any other contract which would be binding on Subtenant hereunder. Sublandlord
has made available to Subtenant true and complete copies of all Contracts, all
as presently in effect. This representation shall not be deemed to affect, or to
be affected, by any environmental matter or Environmental Claims, each of which
is governed exclusively by the Master Agreement.
Any dispute with respect to the foregoing representations and
warranties shall be resolved by ADR pursuant to Article 36.
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SCHEDULE C-1
The consent of the overlandlord of the Demised Premises is required.
The Sublandlord is a party to the Overlease.
Incorporated herein by reference is all that which is disclosed in the
Master Agreement.
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LEASE
This LEASE is dated as of October 1, 1992, by and between J & S
Equity Associates, a New Jersey partnership, having an office at c/o Dealership
Management, 585 Route 440, Jersey City, New Jersey ("Landlord"), and DiFeo
Buick-Pontiac-GMC Truck Partnership, a New Jersey general partnership, having an
address c/o EMCO Motor Holdings, Inc., 153 East 53rd Street, New York, New York
10022 ("Tenant").
W I T N E S S E T H:
That Landlord in consideration of the rents reserved in this Lease
to be paid by Tenant and in consideration of the covenants, agreements and
conditions herein contained to be observed and fulfilled by Tenant, hereby
demises and leases to Tenant, and Tenant hereby hires and takes from Landlord,
the real property (the "Land") situate, lying and being in Jersey City, New
Jersey, as more particular bounded and described in Exhibit A.
TOGETHER with the Buildings and the Appurtenances (as hereinafter
respectively defined; the Land, the Buildings and the Appurtenances,
collectively, the "Premises").
SUBJECT to the mortgages specified in Exhibit A and any easements,
restrictions and other matters of record against the Premises as of the date
hereof.
TO HAVE AND TO HOLD the Premises unto Tenant, its successors and
assigns, for a term commencing on the date hereof (the "Term Commencement Date")
and expiring on the last day of the calendar month in which occurs the tenth
(10th) anniversary of the Term Commencement Date, subject to extension as
provided in Article 17, unless this Lease shall sooner terminate as hereinafter
provided, upon and subject to the terms and conditions hereinafter set forth.
AND Landlord and Tenant covenant and agree as follows:
ARTICLE 1.
BASE, ESCALATION AND ADDITIONAL RENT
Section 1.1. Base Rent. Tenant shall pay to Landlord during the term
hereof in lawful money of the United States of America, by check subject to
collection, at the address of the Landlord specified above or at such place as
Landlord may from time to time designate, without notice or demand, a net annual
base rental (the "Base Rent"), in equal monthly installments in advance on the
twenty-fifth (25th) day of the calendar month preceding the month to which such
installment of Base Rent
<PAGE>
relates, at a rate of $156,000 per annum, subject to adjustment as provided in
this Article 1 and Article 17. Notwithstanding the foregoing (and without
limitation of any other rights or remedies provided to Landlord hereunder), if
during any twelve (12) month period Tenant shall be more than five (5) days late
in the payment of two (2) monthly installments of Base Rent hereunder, then, for
the twelve (12) months following such second (2nd) instance, Base Rent hereunder
shall be payable on the fifteenth (15th) day of the calendar month preceding the
month to which such installment of Base Rent relates.
Section 1.2. Base Rent Adjustments. (a) The Base Rent shall be
adjusted as and to the extent required in Section 11 of the Rent Adjustment
and Takeback Agreement.
(b) The Base Rent shall be adjusted as of the third (3rd)
anniversary of the Term Commencement Date (the "First Adjustment"), and as of
the ninety-first (91st) calendar month anniversary of the Term Commencement Date
(the "Second Adjustment"), to an amount equal to the fair market rental value of
the Premises, determined as provided in this Section, as of said third (3rd)
anniversary (for the First Adjustment) and as of such ninety-first (91st) month
anniversary (for the Second Adjustment), which fair market rental value shall be
determined by agreement of the parties or, failing such agreement within 180
days prior to the respective date referred to above, by arbitration which shall
be conducted in the manner provided in Article 18 in which the arbitrator shall
determine the fair market rental value of the Premises (for automobile
dealership use only (or any other Vehicle-Related Use or other use for which the
Premises are in fact being used, but only to the extent that such other
Vehicle-Related Use or other use is a higher and better use of the Premises than
as an automobile dealership) and taking into consideration the obligations of
Tenant under this Lease (the arbitrator is to conclusively presume that the
Premises are in good condition and repair, are undamaged by any fire or other
casualty and are free of any environmental contamination), the character and
location of the Premises, the absence of a brokerage commission, work letter or
rent concessions, any further provisions for adjustment of Base Rent, and other
factors customarily taken into account in calculating fair market rental value
of real property, but excluding any valued added by Alterations in the nature of
new Buildings (other than where Tenant has demolished and replaced a Building
existing on the date hereof, in which event any value added by such Alternations
shall be included) or additions to Buildings existing on the date hereof and
undertaken by Tenant, but including renovations or restorations to (but not
expansions of) Buildings existing as of the date hereof, determined as of the
date the Base Rent is to be adjusted).
(c) With respect to the First Amendment, by a separate Rent
Adjustment and Takeback Agreement, the parties have agreed that the First
Adjustment under all of the Group Leases shall in
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the aggregate result in an increase in Base Rent under all Group Leases of at
least $288,000 per annum, but not more than $864,000 per annum (although under
certain circumstances these numbers may be adjusted, as provided in the Rent
Adjustment and Takeback Agreement). The First Adjustment determined pursuant to
subsection (b) of this Section shall therefore be subject to further adjustment
pursuant to the Rent Adjustment and Takeback Agreement.
(d) With respect to the Second Adjustment, by a separate Rent
Adjustment and Takeback Agreement, the parties have agreed that the Second
Adjustment under all of the Group Leases shall in the aggregate result in an
increase (together, cumulatively with the aggregate increase of the First
Adjustment) in Base Rent under all Group Leases of at least $576,000 per annum
(although under certain circumstances this number may be adjusted, as provided
in the Rent Adjustment and Takeback Agreement), but not more than a maximum
amount, in excess of the $576,000 per annum minimum (as such minimum may be so
adjusted), determined pursuant to the Rent Adjustment and Takeback Agreement.
The Second Adjustment determined pursuant to subsection (b) of this Section
shall therefor be subject to further adjustment pursuant to the Rent Adjustment
and Takeback Agreement.
(e) After the First Adjustment or the Second Adjustment, or any
other adjustment pursuant to Section 11 of the Rent Adjustment and Takeback
Agreement, has been determined, then, at either party's request, the parties
shall enter into an agreement confirming the amount of the First Adjustment or
the Second Adjustment, or such other adjustment, but failure to enter into the
same shall not affect the rights or obligations of the parties hereunder.
Section 1.3. Net Lease. This Lease shall be deemed and construed to
be an absolutely "net lease", except as herein expressly provided to the
contrary. It is the intent of Landlord and Tenant that the Base Rent shall be
absolutely net to Landlord so that this Lease shall yield to Landlord the Base
Rent, and that all costs, expenses, charges, assessments, impositions and
obligations of every kind and nature relating to the Premises which may arise or
become due during the Term, whether foreseen or unforeseen, ordinary or
extraordinary, shall be the responsibility of Tenant, except (i) as expressly
provided to the contrary in this Lease, or (ii) for obligations relating to Fee
Mortgages and liens created by Landlord, or other agreements entered into by
Landlord relating to the Premises, to the extent that the same are not expressly
assumed in writing by Tenant or that Tenant expressly agrees to comply with the
same hereunder. Tenant shall pay to Landlord the Base Rent and other payments
hereunder free of any charges, assessments, impositions or deductions of any
kind and without abatement, deduction, demand, notice, or set-off, except as
otherwise expressly provided in this Lease.
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Section 1.4. Prorations; Additional Rent; Adjustments. (a) If the
Term Commencement Date or the expiration date of the Term, or the date on which
the First Adjustment or the Second Adjustment shall become effective, shall be
other than the first and last day, respectively, of a calendar month, the
monthly installment of Base Rent for such month shall be prorated on a per diem
basis. If any period to which a payment of additional rent hereunder relates
shall not be wholly within the Term of this Lease, such payment of additional
rent shall be prorated on a per diem basis.
(b) All additional rent, sums, charges and other payments provided
for under this Lease, other than Base Rent, shall be deemed additional rent and
shall constitute rent payable hereunder with the same effect as if the same were
Base Rent reserved and provided for herein and, in the event of the non-payment
by Tenant of such additional rent when due hereunder, Landlord shall have the
same rights and remedies in respect thereof as Landlord shall or may have in
respect of non-payment of Base Rent reserved and provided for herein.
(c) Landlord and Tenant shall cooperate with each other in making
apportionments for Impositions, utility payments and premiums on transferable
insurance policies which are in fact transferred to Tenant, except to the extent
that such apportionments are taken into account under the Master Agreement, it
being the intention of the parties to avoid duplication of such adjustments.
Landlord shall pay to Tenant or Tenant shall pay to Landlord, as the case may
be, the net amount, if any, owing by one to the other promptly after such
apportionments have been agreed upon. Any dispute between the parties hereto in
connection with the making of such apportionments shall be resolved pursuant to
ADR as set forth in Article 18.
ARTICLE 2.
CERTAIN DEFINITIONS
As used herein:
(a) "ADR" shall have the meaning ascribed thereto in Article 18;
(b) "Affiliate" shall have the meaning ascribed thereto in the
Master Agreement;
(c) "Alterations" shall have the meaning set forth in Section 10.1;
(d) "Appurtenances" means all easements, licenses, privileges,
rights and appurtenances related to the Land or the Buildings;
(e) "Buildings" means any buildings, structures or improvements now
or hereafter erected or situated on the Land,
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the foundations and footings thereof, any and all fixtures, equipment, machinery
and other tangible personal property of every kind and nature whatsoever now or
hereafter affixed or attached thereto;
(f) "Condemnation Proceeds" shall have the meaning set forth in
Section 9.2;
(g) "Constructive Total Taking" shall have the meaning set forth in
Section 9.1;
(h) "Dealerships" shall have the meaning ascribed thereto in the
Master Agreement;
(i) "Depositary" shall have the meaning set forth in Section 10.1;
(j) "Deposited Sums" shall have the meaning set forth in Section
11.1;
(k) "EMCO" means EMCO Motor Holdings, Inc., a Delaware corporation;
(l) "EMCO SUB" shall mean the pledgor(s) under the EMCO Pledge(s);
(m) "EMCO Pledge(s)" shall have the meaning ascribed to "EMCO SUB
Pledge Agreements (Leases)" in the Master Agreement.
(n) "Event of Default" has the meaning set forth in Article 15;
(o) "Fee Mortgage" shall mean any mortgage or deed of trust placed
upon fee title to all or any portion of the Premises, and all renewals,
refinancings, modifications, replacements and extensions thereof, and "Fee
Mortgagee" shall mean the holder of any Fee Mortgage;
(p) "Full Insurable Value" means the actual replacement cost of the
Buildings (excluding foundation and excavation costs) and shall be determined at
the request of Landlord by an architect, appraiser, appraisal company or one of
the insurers, selected by Landlord and reasonably acceptable to and paid for by
Tenant, but such determination shall not be required to be made more frequently
than once every 36 months, unless such determination is required by an
Institutional Fee Mortgage (subject to Section 21.5);
(q) "Group Leases" means this Lease and all other leases to be
entered into contemporaneously herewith by Landlord (or Affiliates of Landlord)
and Tenant (or Affiliates of Tenant) pursuant to the Master Agreement, a list of
all such Group Leases being attached hereto as Exhibit B;
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(r) "Group Subleases" means the subleases to be entered into
contemporaneously herewith by Landlord or Affiliates of Landlord and Tenant or
Affiliates of Tenant pursuant to the Master Agreement, a list of such Group
Subleases being attached hereto as Exhibit C;
(s) "Impositions" shall have the meaning set forth in Section 3.1;
(t) "Institution" means a savings and loan association, a savings
bank, a commercial bank or trust company (whether acting individually or in any
fiduciary capacity), an insurance company, an educational institution or a
state, municipal or similar public employees' welfare, pension or retirement
fund or system, a real estate investment trust or any other corporation or
organization subject to supervision and regulation by the insurance or banking
departments of the State of New York, the State of New Jersey, the State of
Connecticut, or the United States Treasury, or any successor department or
departments hereafter exercising the same functions as said departments;
(u) "Institutional Fee Mortgage" and "Institutional Fee Mortgagee"
mean, respectively, a Fee Mortgage held by an Institution and the Institution
which is the holder of an Institutional Fee Mortgage;
(v) "Institutional Mortgage" and "Institutional Mortgagee" mean,
respectively, a Mortgage held by an Institution and the holder of an
Institutional Mortgage;
(w) "Landlord Guaranty" shall have the meaning ascribed to the
"Landlord Cross-Guaranty" in the Master Agreement.
(x) "Laws" shall have the meaning set forth in Section 7.1;
(y) "Master Agreement" shall mean the Master Agreement, dated as of
March 11, 1992, among Emco Motor Holdings, Inc., DiFeo Partnership, Inc., '21'
International Holdings, Inc., Fair Cadillac-Oldsmobile Corp., Fair Chevrolet
Corp., Fair Infiniti, Inc., Fair Imports Corp. (d/b/a Fair Acura), Fair Hyundai
Corp., Fair Motors Corp. (d/b/a Fair Mitsubishi), Danbury-Mt. Kisco Saturn Corp.
(d/b/a Saturn of Danbury), Hudson Toyota Inc., J & S Ford Inc., DiFeo Volkswagen
Inc., DiFeo Hyundai Inc., J & F Oldsmobile Corp., DiFeo Subaru Inc., DiFeo
Jeep-Eagle Inc., DiFeo Imports, Inc. (d/b/a Jersey City Mitsubishi), Park
Pontiac-GMC Truck, Inc., DiFeo Buick Inc., DiFeo Autocenter Inc. (d/b/a DiFeo
Mazda), DiFeo Leasing Corporation, Somerset Motors Inc. (d/b/a DiFeo Lexus),
Gateway Oldsmobile Inc. (d/b/a DiFeo Volkswagen of Bridgewater), DiFeo B.M.W.,
Inc., County Auto Group, Inc. (d/b/a County Toyota),
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Rockland Motors Corp. (d/b/a Rockland Mitsubishi), Samuel X. DiFeo and Joseph
DiFeo, as the same may have been amended.
(z) "Mortgage" means any mortgage or deed of trust constituting a
lien on Tenant's interest in this Lease and all renewals, refinancings,
modifications, replacements and extensions thereof;
(aa) "Prime Rate" means the prime commercial lending rate from time
to time announced by The Chase Manhattan Bank, N.A. ("Chase") to be in effect at
its principal office in New York, New York or, if Chase no longer announces such
a rate, then a comparable rate selected by Landlord and reasonably acceptable to
Tenant;
(bb) "Rent Adjustment and Takeback Agreement" shall mean the Rent
Adjustment and Takeback Agreement, dated as of the date hereof, among Fair
Imports Corp., J & S Equity Associates, Fair Motors Corp. and DiFeo BMW, Inc.
(collectively, the sublandlords), Fair Imports Partnership, DiFeo Volkswagen
Partnership, DiFeo Hyundai Partnership, Fair Motors Partnership, DiFeo BMW
Partnership, and DiFeo Autocenter Partnership (collectively, the subtenants),
Fair Realty Company, Rockland Realty Associates, Boundbrook Realty Associates, J
& S Equity Urban Renewal Corp. and J & S Equity Associates (collectively, the
landlords), Fair Hyundai Partnership, Danbury-Mt. Kisco Saturn Partnership, Fair
Cadillac-Oldsmobile-Isuzu Partnership, Rockland Motors Partnership, DiFeo
Oldsmobile Partnership, Somerset Motors Partnership, Hudson Motors Partnership,
DiFeo Jeep-Eagle Partnership, J & F Oldsmobile-Isuzu Partnership, DiFeo Subaru
Partnership, DiFeo Autocenter Partnership, DiFeo Buick-Pontiac-GMC Truck
Partnership, and DiFeo Imports Partnership (collectively, the tenants).
(cc) "Space Tenant" shall have the meaning set forth in Section
14.7;
(dd) "Tenant Guaranty" shall have the meaning ascribed to the
"Tenant Cross-Guaranty" in the Master Agreement.
(ee) "Term" means the initial term and each successive renewal term
effected pursuant to Article 17;
(ff) "TIHI Guaranty" shall have the meaning ascribed thereto in the
Master Agreement;
(gg) "Transaction Agreements" means, collectively, the Mater
Agreement and the Transaction Documents (as defined in the Master Agreement);
(hh) "Work" shall have the meaning set forth in Section 11.2.
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ARTICLE 3.
IMPOSITIONS
Section 3.1. Payment of Impositions. As additional rent, Tenant
shall pay, before any fine, penalty, interest or cost may be added thereto for
the non-payment thereof (or at such earlier and commercially reasonable time as
is required by a Institutional Fee Mortgagee or a Fee Mortgagee on the date
hereof which is not an Institution), all real estate taxes, assessments, special
assessments, water and sewer rates and charges, vault charges, occupancy taxes
measured by income, license and permit fees and other governmental levies and
charges, general and special, ordinary and extraordinary, unforeseen as well as
foreseen, of any kind and nature (collectively, "Impositions") which are
assessed, levied, confirmed, imposed or become a lien upon or are due and
payable with respect to the Premises or the sidewalks or streets in front of or
adjoining the same, or are assessed, levied, confirmed or imposed upon Landlord
as owner of the Premises and/or as the Landlord under this Lease or as the
recipient of rents or other charges produced by this Lease, and which become or
are payable, during the Term (including any interest imposed thereon by reason
of an election to pay the same in installments), and any and all other taxes,
assessments and charges levied, assessed or imposed upon the Premises or any
portion thereof or upon Landlord as an owner of the Premises and/or as the
Landlord under this Lease or in respect of the rents or other charges produced
by this Lease in lieu of or in addition to the foregoing, including in
substitution of or in addition to any other Impositions (for such purpose, the
Imposition in question shall be calculated as if the Premises were the sole
asset of Landlord); provided, that if, by law, any Imposition is payable or at
the option of the taxpayer may be paid in installments (whether or not interest
shall accrue on the unpaid balance thereof), Tenant may pay the same (and any
accrued interest on the unpaid balance) in installments (and Landlord shall
cooperate with Tenant in any application by Tenant to pay the same in
installments) and shall pay only such installments as may become due during the
Term as the same respectively become due and before any fine, penalty, interest
or cost may be added thereto for non-payment thereof (or at such earlier and
commercially reasonable time as is required by an Institutional Fee Mortgagee or
a Fee Mortgagee on the date hereof which is not an Institution); and provided,
further, that any Imposition relating to a fiscal period of a taxing authority,
a part of which period is included within the Term of this Lease and a part of
which is included in a period of time before the Term Commencement Date or after
the expiration or earlier termination of this Lease, shall (whether or not such
Imposition shall be assessed, levied, confirmed, imposed or become a lien upon
the Premises, or shall become payable, during the Term) be appropriately
pro-rated between Landlord and Tenant, subject to Section 1.4(c).
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Section 3.2. Taxes Not Included In Impositions. Nothing in this
Lease contained shall require Tenant to pay any franchise, income, corporate,
estate, inheritance, succession, capital levy, stamp or transfer tax of Landlord
or other taxes imposed on taxpayers generally as opposed to the owners of real
property or on rents in particular. In the event of a dispute between Landlord
and Tenant as to whether or to what extent a tax is an Imposition, such dispute
shall be determined by ADR in the manner provided in Article 18.
Section 3.3. Receipts for Impositions. Tenant shall, upon request of
Landlord, furnish to Landlord within fifteen (15) days after the date when any
Imposition is payable, official receipts of the appropriate taxing authority, or
other evidence satisfactory to Landlord, evidencing the payment thereof.
Section 3.4. Right to Contest Impositions. Tenant, after prior
notice to Landlord, shall have the right to contest the amount or validity, in
whole or in part, of any Imposition by appropriate proceedings, and to pay any
Imposition under protest or with reservation of rights. Notwithstanding Section
3.1, and only if payment of the Imposition in question would bar such contest,
Tenant may postpone such payment pending resolution of such contest if (i)
Tenant deposits with Landlord in cash, cash equivalents or a clean, irrevocable
letter of credit in form and with an issuer reasonably acceptable to Landlord,
as a reserve for payment thereof, the amount of such Impositions being
contested, plus all fines, interest, penalties and costs which may become due
pending the determination of such contest, in such amounts as Landlord may
reasonably request from time to time, and (ii) no part of the Premises shall be
in any danger of sale or forfeiture within the next 120 days by reason of such
nonpayment; provided, however, that Tenant may not postpone such payment if,
subject to Section 21.5, (i) postponement of such payment would violate the
terms and provisions of any Institutional Fee Mortgage (and the Institutional
Fee Mortgagee refuses to waive the same), or (ii) Tenant does not comply with
the terms and conditions of such Institutional Fee Mortgage, relating to such
postponement (but Tenant will not be obligated to deposit sums for the same
obligations with both Landlord and an Institutional Fee Mortgagee). Upon the
termination of such proceedings, or if the Premises at any time become in danger
of sale or forfeiture by reason thereof within the next 120 days, Tenant shall
pay the amount of such Imposition or part thereof, the payment of which may have
been deferred during the prosecution of such proceedings, together with any
costs, fees, interest, penalties or other liabilities in connection therewith.
Without limiting the foregoing, Tenant shall have the right to apply for a
reduction in the assessed valuation of the Premises or for an abatement of or
exemption from any Imposition, for any fiscal or tax year during any part of
which the Term of this Lease is in effect. Landlord shall, at Tenant's request,
join in any such proceedings or permitting the same to be brought in its name if
required by law. Landlord shall not be subjected to any
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liability for the payment of any costs or expenses in connection with any such
proceedings unless Landlord intervenes and takes an affirmative part therein
(but Tenant shall be entitled to control such proceedings), and Tenant shall
indemnify and save harmless Landlord from any such costs or expenses, except in
the case of such intervention. If Tenant has not commenced such a proceeding for
a particular period or Imposition within a reasonable time prior to the last
date on which such a proceeding may be commenced, and fails to commence the same
within thirty (30) days after notice from Landlord referring to this Section,
Landlord shall have the right to commence, maintain and control, at Landlord's
sole cost and expense, such a proceeding (a "Landlord Proceeding") for such
period or Imposition. Any refund or rebate of any Impositions and interest or
penalties thereon shall belong to Landlord except to the extent it is based on a
payment made by Tenant or to a payment made by Landlord to the extent Landlord
has been reimbursed therefor by Tenant, in which case it shall belong to Tenant,
notwithstanding the expiration or sooner termination of this Lease. Any refund
or rebate so belonging to either party and received by the other party shall be
deemed trust funds and as such are to be received by the recipient party in
trust and forthwith paid to the other party, in accordance with this Article.
Each party agrees, promptly upon request by the other party, to execute and
deliver any receipt which may be necessary to effectuate the provisions of this
Section. If any such refund or rebate is subject to apportionment between
Landlord and Tenant as hereinabove provided, all costs and expenses (including
experts and attorneys' fees and disbursements) incurred by Tenant, or by
Landlord in the case of a Landlord Proceeding, in connection with obtaining such
refund or rebate shall first be deducted from the amount thereof.
Section 3.5. Evidence of Impositions. The certificate, advice, bill
or receipt by an appropriate official legally authorized to make or give the
same shall be prima facie evidence that an Imposition was due and payable on the
date thereof, or has been paid, and either party shall be entitled to rely
thereon.
Section 3.6. Tenant Taxes. Tenant shall at all times be responsible
for and shall pay directly to the applicable taxing authority, before
delinquency, all taxes and assessments which shall or may during the Term be
charged, levied, assessed or imposed on Tenant with respect to Tenant's right to
occupy the Premises and any personal property of any kind owned, used or
installed by Tenant at the Premises or in connection with (a) the operation of
the Premises or (b) Tenant's business conducted on or at the Premises.
Section 3.7. Payments to Institutional Fee Mortgagee. If the
provisions of a Fee Mortgage permit an Institutional Fee Mortgagee, or a Fee
Mortgagee on the date hereof which is not an Institution, to require payment of
some or all of the Impositions by Landlord to be held in escrow by such Fee
Mortgagee to enable
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such Fee Mortgagee to pay the same, and such Fee Mortgagee so requires, then
Tenant, at the direction of Landlord, shall make such payments to such Fee
Mortgagee (or to Landlord, as directed by Landlord, in which event Landlord
agrees to pay the same to such Fee Mortgagee) in the amounts and at the times
required by such Fee Mortgagee. Payment of such amounts by Tenant shall be
deemed, to the extent thereof, to relieve Tenant of its obligations hereunder
with respect to such Impositions. If such Fee Mortgagee fails or refuses to
apply the sums so paid by Tenant in payment when due of the Impositions to which
such sums relate (unless applied by such Fee Mortgagee to cure a default under
its Fee Mortgagee, which default resulted from the failure by Tenant to perform
or observe an obligation imposed against it under this Lease, within applicable
grace periods hereunder), and if Landlord shall not pay or cause to be paid such
Impositions within thirty (30) days after demand by Tenant, Tenant may, at its
option, pay the same and offset the sums so paid against the next Base Rent due
hereunder and Landlord shall, if insufficient Base Rent shall thereafter be
payable, pay the same to Tenant; provided, however, that if within such thirty
(30) day period Landlord disputes Tenant's right to such offset by notice to
Tenant, then the matter shall be resolved by ADR as provided in Article 18,
pending resolution of which dispute by ADR, Tenant shall have no right to an
offset.
Section 3.8. Allocation. If the Premises are a part of a single tax
lot with the premises demised under one or more other Group Leases, then Tenant
shall pay its allocable share of the Impositions thereon as determined in the
Rent Adjustment and Takeback Agreement, but shall be jointly and severally
liable with the tenants under the other such Group Leases for the payment of all
Impositions assessed on the basis of such single tax lot; provided, however,
that if a transaction described in Section 15.11(a)(i) or (a)(ii) shall occur to
this Lease, then the assignee or subtenant in question shall only be liable for
its allocable share of such Impositions thereon, as so determined.
Section 3.9. Survival. The provisions of this Article 3 shall
survive the expiration or sooner termination of this Lease.
ARTICLE 4.
INSURANCE
Section 4.1. Required Insurance. At all times during the Term
of this Lease, Tenant shall, at Tenant's expense, keep, provide and maintain
in force the following insurance:
(i) Property insurance covering the Buildings against loss or
damage from such causes of loss as are embraced by insurance policies of
the type now known as "All Risks" or "Open Perils" property insurance on a
replacement cost basis with an Agreed Value Endorsement waiving
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insurance, all in an amount not less than one hundred per cent (100%) of
the then Full Insurable Value, without deduction for physical depreciation
thereof. Such property insurance shall include a Demolition and Increased
Cost of Construction Endorsement as well as such other insurance as the
Landlord may from time to time reasonably require to cover other risks and
hazards affecting the Premises;
(ii) Flood insurance if required by law, in amounts
required by law;
(iii) Boiler and machinery insurance insuring against loss or
damage to the Premises and to the major components of any heating,
air-conditioning or other ventilation systems and/or such other machinery
or apparatus as may be now or hereafter installed in the Premises, in such
amounts as Landlord may from time to time reasonably require;
(iv) General liability insurance insuring against claims for
personal injury (including, without limitation, bodily injury or death),
property damage liability and such other loss or damage from such causes
of loss as are embraced by insurance policies of the type now known as
"Commercial General Liability" insurance, all in such amounts as Landlord
may from time to time reasonably require. Landlord currently requires such
insurance to be in the amount of $5,000,000 combined single limit per
occurrence. Such insurance coverage shall be issued and maintained on an
"occurrence" basis;
(v) Workmen's compensation insurance covering employees of
Tenant, in statutory limits; and
(vi) In addition to and not in limitation of the above
requirements, subject to Section 21.5, such insurance as may be reasonably
required by any Institutional Fee Mortgagee.
Subject to clause (vi) above, if applicable, if either Landlord or Tenant
believes that the insurance described above is less or different than, or is
greater or more extensive than, that which is then customarily maintained by
prudent owners of comparable properties for comparable uses, the insurance
required above shall be so adjusted if either (A) the parties agree on the
adjustment, or (B) by ADR instituted by either party under Article 18, if it is
determined that the party requesting the change in insurance is correct in its
belief as aforesaid.
Section 4.2. Insurers; Form of Policy. All insurance provided for
under this Lease shall be effected under valid enforceable policies issued by
insurers of recognized responsibility who may legally issue such insurance in
the State in which the Premises is located, and reasonably acceptable in
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form, amount and content, to Landlord and, subject to Section 21.5, reasonably
acceptable to the Institutional Fee Mortgagee. Upon the execution of this Lease,
certificates in respect of the policies procured by Tenant pursuant to Section
4.1 shall be delivered to Landlord. Within fifteen (15) days after the execution
hereof Landlord shall be furnished with the original or certified copies of each
policy required hereunder. At least twenty (20) days prior to the expiration of
any policy required hereunder Tenant shall furnish Landlord with appropriate
proofs of the issuance of a policy continuing in force the insurance covered by
the policy so expiring. To the extent reasonably obtainable, all policies
referred to in Section 4.1 shall contain agreements by the insurers that (a) any
loss shall be payable to Landlord and to the holder of any Fee Mortgage to whom
loss may be payable as hereinafter provided, notwithstanding any act or
negligence of Tenant which might otherwise result in forfeiture of said
insurance, or affect the validity or enforceability thereof, (b) such policies
shall not be cancelled or materially modified except upon at least twenty (20)
days' prior written notice to each named insured and loss payee and (c) the
coverage afforded thereby shall not be affected by the performance of any work
in or about the Premises.
Section 4.3. Payment of Proceeds. (a) The insurance policy
described in Section 4.1(iv) shall name Landlord, any Fee Mortgagee and any
Mortgagee as additional insureds.
(b) The insurance policies described in Section 4.1(i), (ii) and
(iii) shall name Landlord, Tenant, any Fee Mortgage and any Mortgagee as named
insureds as their interests may appear and shall provide that proceeds shall be
paid to Landlord or any Fee Mortgagee, as their interests may appear, and not to
Tenant or any Mortgagee, which proceeds shall be held by Landlord or by any Fee
Mortgagee (but only if such Fee Mortgagee is neither a Fee Mortgagee on the date
hereof nor an Institutional Fee Mortgagee) pursuant to the terms of this Lease,
and shall, to the extent required by an Institutional Fee Mortgagee or a Fee
Mortgagee on the date hereof which is not an Institution, contain a standard,
non-contributory mortgagee clause or Lender Loss Payable Endorsement.
(c) So long as there shall be an Institutional Fee Mortgagee, any
rental value policy or similar policy for the Premises shall name such
Institutional Fee Mortgagee as the loss payee thereunder or if there shall be no
Institutional Fee Mortgagee then Tenant shall be named as the loss payee
thereunder. Upon receipt of such proceeds by an Institutional Fee Mortgagee,
such proceeds shall be deemed payments of Base Rent and Additional Rent
hereunder and shall be deemed to have been applied by the Institutional Fee
Mortgagee as provided in the next sentence; to the extent that such proceeds
relate to Impositions or insurance premiums, and the Institutional Fee Mortgagee
fails or refuses to apply the same to such Impositions or insurance premiums,
then Tenant shall have rights comparable
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to the rights specified in Section 3.7 as to payments on account of Impositions
which an Institutional Fee Mortgagee so fails to apply; the balance of any
proceeds after Restoration of the Buildings shall be promptly paid to Tenant
(or, if not so paid, Tenant shall be entitled offset the same against the next
Base Rent or Additional Rent due hereunder).
(d) All such policies shall expressly provide that loss thereunder
shall be adjusted and paid as provided in Section 4.4 and this Section. Any loss
paid to Landlord or Tenant which, pursuant to the requirements contained in this
Lease, should have been paid to the other party, or to any Fee Mortgagee, shall
be held by the receiving party in trust and shall be promptly turned over to the
person entitled thereto under this Lease.
Section 4.4. Adjustment of Loss. Landlord and Tenant shall cooperate
reasonably and in good faith and shall use their best efforts to cause any Fee
Mortgagee or Mortgagee to cooperate reasonably and in good faith to adjust any
loss under a policy of insurance required to be maintained by Tenant under this
Lease expeditiously and favorably, recognizing Landlord's ownership of the
Buildings and Tenant's obligation to effect restoration at its expense, without
an abatement of Base Rent and Additional Rent hereunder. Subject to the rights
of an Institutional Fee Mortgagee or a Fee Mortgagee on the date hereof which is
not an Institution (subject to Section 21.5), adjustment of any such loss shall
be subject to the consent of Landlord and Tenant, which consent shall not be
unreasonably withheld.
Section 4.5. Blanket Policies. Nothing in this Article shall prevent
Tenant from taking out insurance of the kind and in the amounts and with
companies provided for under Sections 4.1, under a blanket insurance policy or
policies which can cover other properties owned, leased or operated by Tenant
(or any Affiliate of Tenant) as well as the Premises; provided, that any such
policy of insurance provided for under Section 4.1(i) shall specify therein, or
Tenant shall furnish Landlord and the holder of any Fee Mortgage with a written
statement from the insurers under such policies specifying, the amount of the
total insurance allocated to the Buildings, which amount shall comply with the
requirements of Section 4.1. Tenant shall furnish to Landlord and to the holder
of any Fee Mortgagee, within thirty (30) days after the filing thereof with any
insurance rate-making body, copies of the schedule or make-up of all property
covered by every such policy of blanker insurance. Notwithstanding the
foregoing, subject to Section 21.5, if the taking out by Tenant of any such
blanket insurance policy would require the consent or waiver of an Institutional
Fee Mortgagee, so as not to constitute a default under the terms of an
Institutional Fee Mortgage, then Tenant must obtain such consent or waiver in
order to benefit from the provisions of this Section as to the insurance in
question.
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Section 4.6. Deductibles. All insurance provided for under Section
4.1(a) may contain loss deductible clauses in such reasonable and customary
maximum amounts as Landlord shall approve, which approval shall not be
unreasonably withheld. In the event of a dispute between Landlord and Tenant as
to the amount which may be deductible under a policy, or otherwise as to the
insurance required under this Article, such dispute shall be determined by ADR
in the manner provided in Article 18.
Section 4.7. Waiver of Subrogation. Landlord hereby waives its
rights of recovery against Tenant, its subtenants and their respective
successors and assigns for any losses to the Premises covered by fire and
extended coverage insurance (or otherwise covered by insurance maintained by
either party), but only to the extent of the actual recovery. In consideration
therefor, Tenant hereby waives its rights of recovery against Landlord, its
successors and assigns, for any losses to the Premises otherwise covered by
insurance maintained by either party), but only to the extent of the actual
recovery. The above referred to waivers shall only be applicable with respect to
loss or damage occurring during such time as the waiving party's policy shall
contain a clause or endorsement to the effect that any such waiver shall not
adversely affect or impair the right of the party so waiving from recovering
thereunder. Each party shall obtain from its insurance carriers, at its expense,
and will deliver to the other party waivers of the subrogation rights and the
statement described in the preceding sentence under its respective policies as
herein provided.
Section 4.8. Other Insurance. (a) Tenant may insure its own
property at the Premises in such manner as Tenant deems advisable and shall
be entitled to all proceeds therefrom.
(b) Neither Landlord nor Tenant shall carry any insurance concurrent
in coverage or contributory in the event of loss with any insurance which is
required to be carried by Tenant hereunder if the effect of such separate
insurance would be to reduce the protection or the payment to be made under the
insurance policy required to be maintained by Tenant hereunder. Landlord shall
immediately notify Tenant of the taking out of any such insurance and the terms
thereof.
ARTICLE 5.
RIGHT TO PERFORM OTHER PARTY'S COvenanTS -
ADDITIONAL RENT
Section 5.1. Right to Perform Other Party's Covenants. (a) If Tenant
shall default in the performance of any of Tenant's obligations under this
Lease, Landlord may perform the same at the expense of Tenant (i) immediately
and without notice in the case of (x) emergency, or (y) the taking of any action
required to prevent an
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imminent lapse or termination of any insurance policy required to be obtained by
Tenant hereunder, or (ii) if the taking of any action is required to prevent an
imminent default under any Fee Mortgage, and such default continues after three
(3) business days from the date of the giving by Landlord to Tenant of a notice
of Landlord's intention to so perform; and (iii) in any other case if Tenant
shall fail to remedy such default after Landlord shall have notified Tenant of
such default and the applicable grace period for curing such default shall have
expired, and such failure continues after three (3) business days from the date
of the giving by Landlord to Tenant of a further notice of Landlord's intention
to so perform; provided, however, that, in the case of a failure which for
causes beyond Tenant's reasonable control (the failure to pay money shall not be
deemed beyond a party's reasonable control) cannot with due diligence be cured
within such grace period, such grace period shall be deemed extended if Tenant
(x) shall promptly upon the receipt of such first notice, advise Landlord of
Tenant's intention to institute all steps necessary to cure such failure and (y)
shall institute and thereafter with reasonable dispatch prosecute to completion
all steps necessary to cure the same.
(b) If Landlord shall default in the performance of any of its
obligations under this Lease, Tenant may perform the same at the expense of
Landlord (i) immediately and without notice in the case of (x) emergency, (y)
the taking of any action required to prevent an imminent lapse or termination of
any insurance policy required to be obtained by Tenant hereunder due to such
default, or (z) the taking of any action required to prevent an imminent default
under any Mortgage (but will provide Landlord with prompt notice thereafter) and
(ii) in any other case if such failure continues after thirty (30) days from the
date of the giving by Tenant to Landlord of notice of intention so to perform
the same or, in the case of a failure which for causes beyond Landlord's
reasonable control (the failure to pay money shall not be deemed beyond a
party's reasonable control) cannot with due diligence be cured within such
thirty (30) day period, such thirty (30) day period shall be deemed extended if
Landlord (x) shall promptly upon the receipt of such notice, advise Tenant of
Landlord's intention to institute all steps necessary to cure such failure and
(y) shall institute and thereafter with reasonable dispatch prosecute to
completion all steps necessary to cure the same; provided that, at the
expiration of the period described in this clause (ii), such default continues
after three (3) business days from the date of the giving by Tenant to Landlord
of a further notice of Tenant's intention to perform the same.
Section 5.2. Reimbursement of Curing Party. All sums paid by either
party effecting a cure pursuant to Section 5.1 and all necessary incidental
costs and expenses paid or incurred by such party in connection with the
performance of any act by such party pursuant to said Section, together with
interest thereon from the date of making of such expenditure by such party at a
rate two (2%) percent above the Prime Rate, shall be payable by the other party
to such curing party within thirty (30) days
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after demand therefor accompanied by evidence reasonably establishing that the
expenditure has reasonably been made. Nothing contained herein shall be deemed
or construed to permit Tenant to make any set-off against Tenant's obligations
to pay Base Rent or Additional Rent, except as may otherwise be expressly
provided in this Lease.
ARTICLE 6.
USE; CONDITION OR PREMISES; COVENANTS AGAINST WASTE
AND TO REPAIR AND MAINTAIN THE PREMISES
Section 6.1. Use. (a) Tenant shall have the right to use the
Premises for (i) a motor vehicle dealership, vehicle showroom, vehicle storage,
used vehicle sales, vehicle body shop (but only if a vehicle body shop use was a
use of the Premises during December, 1991), service and maintenance facilities,
general, executive and administrative offices in connection with such uses, any
uses ancillary or customarily exercised in connection therewith, and (ii) any
other uses for which the Premises during December, 1991 were in fact used
(collectively, "Vehicle-Related Uses").
(b) During the period ending on the third (3rd) anniversary of the
Term Commencement Date, Tenant shall not use any material portion of the
Premises for a use other than as described in subsection (a) of this Section
without Landlord's consent, which consent Landlord may withhold in Landlord's
sole discretion.
(c) From and after the third (3rd) anniversary of the Term
Commencement Date, Tenant shall be entitled to use all or any portion of the
Premises for any lawful use other than as described, or in addition to those
described, in subsection (a) of this Section, provided that Tenant shall have
received Landlord's consent to such use, which consent Landlord shall not
unreasonably withhold (without limitation, it shall not be unreasonable for
Landlord to withhold its consent to such use if such use is disreputable, would
cause the Premises to become subject to compliance with the remedial provisions
of ECRA (or a similar state statute requiring environmental testing and/or
remediation) prior to the sale or other transfer of the Premises, upon the
occurrence of any assignment of this Lease or sublease of all or part of the
Premises, or upon the expiration or sooner termination of this Lease or
cessation of operations at the Premises, or would increase in any material
respect the risk of environmental contamination of the Premises, and it shall
not be unreasonable for Landlord to take into account any material adverse
effect of such change in use on contiguous properties owned by Landlord or
Affiliates of Landlord, including those which are subject to Group Leases). The
parties acknowledge that there is no agreement under this Lease that Tenant
shall use all or any portion of the Premises for any particular use or uses
during the term of this Lease. Any dispute between the parties
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under this subsection (c) or subsection (d) shall be determined by ADR as
provided in Article 18.
(d) Tenant shall not use or occupy or permit the Premises to be used
or occupied, nor do or permit anything to be done in or on the Premises, in
whole or in part, in a manner which in any way (i) violates any certificate of
occupancy affecting the Premises; (ii) violates or breaches the provisions of
any recorded easement, restriction or the like affecting the Premises on the
date hereof or entered into after the date hereof with the prior consent of
Tenant; (iii) violates any present or future law, rule or requirement of any
governmental, public or quasi public authority having jurisdiction over the
Premises; (iv) makes void or voidable any insurance in force with respect to the
Premises; or (v) constitutes a public or private nuisance.
Section 6.2. Condition of Premises. (a) The parties hereto hereby
acknowledge and agree that, except as otherwise provided in this Lease, in the
Master Agreement and in the other Transaction Agreements, Landlord is
delivering, and Tenant is accepting, the Premises in their "as is" condition on
the date hereof. Tenant acknowledges that it has inspected, examined and
investigated to its full satisfaction the Premises and the uses thereof and any
other matter of concern to Tenant with respect to the Premises, that Tenant
accepts the Premises in their present condition without any representation or
warranty whatsoever by Landlord, except as herein expressly provided, as to the
condition of the Premises or the value thereof or the utility thereof or
usefulness for any particular purpose or any other matter or thing relating in
any way to the Premises, and that Tenant acknowledges that Landlord has not made
and does not make, and Tenant is not relying upon, any representation or
warranty, except as herein expressly provided, as to the physical condition,
quality, value or character or any other matter relating to or affecting the
Premises. Nothing in this Lease, including in this Section, however, shall waive
or modify any of the obligations, rights or remedies of the parties to the
Master Agreement and the other Transaction Agreements pursuant to the Master
Agreement and the other Transaction Agreements.
(b) Landlord represents and warrants to Tenant as follows:
(i) The mortgages specified in Exhibit A are the only Fee
Mortgages encumbering or affecting all or any part of the Premises as of
the date hereof, and true and complete copies of the Fee Mortgage
documents or documents evidencing or affecting such lien, as in effect on
the date hereof, have been delivered to Tenant, nor, except as otherwise
provided in the Master Agreement, is any portion of the Premises subject
to a security interest, equipment lease, conditional sales agreement or
similar financing arrangement, or to a ground or underlying lease.
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(ii) The easements, restrictions and other matters of record
as of the date hereof, and any unrecorded agreements of a similar nature
to which Tenant would be subject hereunder, do not materially adversely
affect, individually or in the aggregate, the use of the Premises, as the
Premises were used in December, 1991.
(iii) The actual uses being made of the Premises during
December 1991 and the use of the Premises by Tenant on the date hereof for
the same uses were and are permitted by all applicable zoning Laws, or (if
not permitted by zoning laws) are lawful nonconforming uses, and all
certificates of occupancy required for such use in December 1991 were
obtained and were in full force and effect immediately prior to the
commencement of the Term.
(iv) To the actual knowledge of Landlord, Joseph C. DiFeo and
Samuel X. DiFeo, there are no material structural defects in the Premises
on the date hereof, except as set forth on Exhibit D.
(v) Landlord is a fee owner of the Premises and all prior
tenancies and rights of occupancy at the Premises or any part thereof have
been terminated.
(vi) The representations and warranties set forth on Exhibit E
are true, correct and complete as of the date hereof.
Section 6.3. No Waste. Tenant shall not cause or permit any
waste to the Premises.
Section 6.4. Maintenance and Repair. Tenant shall keep the Premises
and the adjoining sidewalks, curbs and any vaults clean and in good condition
and repair, free of accumulations of dirt, rubbish, snow and ice, and shall make
all necessary repairs and replacements, whether structural or non-structural,
interior or exterior, ordinary as well as extraordinary, foreseen as well as
unforeseen. Notwithstanding the foregoing, unless this Lease is assigned or the
Premises is sublet to a person or entity which is not an Affiliate of Tenant,
Tenant shall only be obligated hereunder to repair or maintain the Premises in
accordance with ordinary and prudent standards of repair and maintenance for
comparable uses. In the event of any dispute between the parties as to the
standard for the repair or maintenance of the Premises, the dispute shall be
resolved by ADR as provided in Article 18.
Section 6.5. Removal of Property. Tenant shall not remove or permit
the removal of any of the permanent furnishings or of any of the fixtures or
other property or equipment constituting a part of the Premises (other than
property of Tenant or other tenants or occupants of the Buildings or obsolescent
fixtures, property or equipment) unless other
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fixtures, property or equipment at least equal in value and utility shall be
promptly substituted therefor, provided this Section shall not apply if Tenant
demolishes existing Buildings and erects new Buildings on the Land, or a portion
thereof, in accordance with Article 10.
Section 6.6. Utilities and Services; Signage. (a) Landlord shall not
be responsible to furnish any utilities or services to the Premises, and shall
not be liable for any interruption or failure in the supply of any such utility
or service. The interruption or failure in the supply of any such utility or
service or the inability to obtain such utility or service shall not affect,
alter, negate or diminish Tenant's obligations hereunder.
(b) Tenant shall make its own arrangements with the appropriate
utility companies supplying electricity, water, gas, steam, telephone and other
utilities to the Premises, and for garbage disposal from the Premises, and shall
arrange to have all bills for such utilities or services to be forwarded
directly to Tenant. Tenant shall pay when due all charges for such utilities or
services accruing during the term of this Lease.
(c) Subject to Landlord's consent, which Landlord shall not
unreasonably withhold, Tenant shall have the right to enter into agreements with
public utility companies and municipal and other governmental authorities,
agencies and departments creating such easements or other similar rights in
favor thereof, or to apply for permits, licenses, certificates or other
governmental or quasi-governmental authorizations relating to Alterations or the
use and operation of the Premises ("Permits"), as may be necessary or convenient
to the use or servicing of the Premises or the making of any Alterations
required or permitted hereunder; provided, however, that Landlord shall have the
right, in its sole and absolute discretion, to withhold granting its consent to
any zoning variance which would have the effect of prohibiting any use being
made of the Premises in December, 1991. If pursuant to this Lease Landlord shall
consent (or shall be deemed hereunder to have consented or shall be required by
ADR to consent) thereto, Landlord shall, at Tenant's expense, (i) cooperate with
Tenant in obtaining any necessary consent of any mortgagee or ground or
underlying lessee to such agreements, (ii) join in any request for such consent
or Permit or permit the same to be brought in Landlord's name (if necessary to
obtain such consent or Permit or to effectuate such agreement), or (iii) join in
any such agreement. Landlord shall incur no liability for the payment of any
costs or expenses in connection with Landlord's review, execution and delivery
of the same, or involvement with respect to the same, and Tenant shall indemnify
and hold harmless Landlord and, within thirty (30) days after demand, reimburse
Landlord, from any such costs or expenses.
(d) Tenant, at its expense and subject to compliance with applicable
Laws pursuant to Article 7, and subject to the
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applicable provisions of Article 10, shall be entitled to construct and maintain
such signage at the Premises as Tenant shall elect to construct and maintain.
ARTICLE 7.
COMPLIANCE WITH LAWS
Section 7.1. Compliance with Laws. (a) Subject to the provisions of
subsections (b) and (c) hereof, Tenant shall, at its sole cost and expense,
promptly comply with all present and future laws and ordinances and the orders,
rules, regulations and requirements of all federal, state and municipal
governments and appropriate departments, commissions, boards and officers
thereof, which may be applicable to the Premises and the sidewalks, curbs and
vaults adjoining the same or to the use or manner of use of the Premises,
whether or not such requirement shall be foreseen or unforeseen, ordinary or
extraordinary (collectively, "Laws").
(b) Notwithstanding anything in this Lease to the contrary, Tenant
shall not be in default hereunder if Tenant shall fail to comply with any Law to
the extent that the Premises, or their use, prior to the Term Commencement Date,
were not in compliance with such Law, except to the extent that Tenant is
otherwise obligated to comply with such Law pursuant to the Master Agreement or
the other Transaction Agreements.
(c) If the Premises and the use thereof for the actual uses of the
Premises during December 1991 are not, on the day preceding the date hereof, in
compliance with all Laws (such non-compliance being hereinafter referred to as
"Non-Compliance"), and if Non-Compliance is not Tenant's responsibility to
correct pursuant to the Master Agreement and the other Transaction Agreements,
or this Lease, Landlord shall, at its sole cost and expense (but subject to the
cost sharing provisions provided for in Section 4.231 of the Master Agreement),
after receipt of notice from Tenant of the specifics of such Non-Compliance,
institute steps necessary to cure such Non-Compliance and proceed with
reasonable dispatch to effectuate the same. Nothing contained herein shall be
deemed or construed to obligate Landlord to make any changes, alterations or
repairs to the structural elements of the Premises unless the existence of the
condition which causes the need to make the same constitutes a violation of the
warranty and representation contained in Section 6.2(b)(iv) hereof. The Premises
shall not be deemed to be in Non-Compliance (that is, shall be deemed to be in
compliance) if on the date hereof the time by which such Law must be complied
with had not expired, although such Law had been enacted. If by reason of such
Non-Compliance a governmental authority or agency takes action or refuses to
take action (any such action or refusal, including a refusal to permit the
transfer or continued effectiveness of any certificate of occupancy or other
license or permit, being herein called a "Governmental Action"), which
Governmental Action materially adversely interferes with Tenant's
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ability to use the Premises for the uses for which the Premises during December,
1991 were in fact used ("December Uses"), then there shall be an equitable
reduction of the Base Rent and Additional Rent until such time as the material
interference caused by the Non-Compliance has been eliminated, which reduction
shall not, however, extend beyond six (6) months from the date Tenant notifies
Landlord of such Non-Compliance or Governmental Action. If, by reason of the
Non-Compliance or Governmental Action, Tenant's use of the Premises for the
December Uses is materially adversely interfered with for a period of six (6)
consecutive months after the date of such notice, then Tenant shall have the
right, prior to the cessation of such material interference as its sole remedy
with respect to such Non-Compliance, to terminate this Lease, in which event
neither party hereto shall have any further liability or obligation to the other
under this Lease except those which are expressly stated to survive the
expiration or sooner termination of this Lease. Any notice by Tenant to Landlord
advising of Non-Compliance must be given by six (6) months after the date hereof
and must specifically identify the Non-Compliance, failing which Landlord shall
have no responsibility to Tenant under this Section with respect to such
Non-Compliance. The provisions contained in this subsection shall not be
applicable to any environmental or other matters which are the subject matter of
Section 22 of this Lease and the rights and obligations of the parties with
respect to such matters shall be governed by that Section of this Lease and not
by this subsection.
(d) Notwithstanding anything in this Lease to the contrary, in the
event that any representation or warranty of Landlord set forth in Section
6.2(b)(ii), (iii) or (v) are false or incorrect when made (an "Inaccuracy") in
any material respect, then Landlord shall, in its sole expense (but subject to
the cost sharing provisions contained in the Master Agreement) after receipt of
the notice from Tenant of the specifics of the Inaccuracy institute steps
necessary to cure the same and proceed with reasonable dispatch to effectuate
the same. If, by reason of such Inaccuracy, Tenant's ability to use the Premises
for the December Uses is materially adversely interfered with then there shall
be an equitable reduction of the Base Rent and Additional Rent until such time
as the material interference caused by the Inaccuracy has been eliminated, which
reduction shall not extend beyond six months from the date Tenant notifies
Landlord of such Inaccuracy. If by reason of the Inaccuracy the Tenant's use of
the Premises for the December Uses is materially adversely interfered with for a
period of six (6) consecutive months from the date of such notice, then Tenant
shall have the right, prior to the cessation of such material interference, as
its sole remedy with respect to such Inaccuracy, to terminate this Lease in
which event neither party hereto shall have any further liability or obligation
to the other under this Lease except those which are expressly stated to survive
the expiration or sooner termination of this Lease. Any notice by Tenant to
Landlord advising of the Inaccuracy must be given by six (6)
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months from the date of this Lease and must specifically identify the
Inaccuracy, failing which Landlord shall have no responsibility to Tenant
hereunder with respect to any Inaccuracy.
Section 7.2. Right to Contest Laws. Tenant shall have the right,
after prior notice to Landlord, to contest by appropriate legal proceedings, in
the name of Tenant or Landlord (but only if legally required to so contest) or
both, without cost or expense to Landlord, the validity or application of any
Laws, and if, by the terms of any such Law, compliance therewith pending the
prosecution of any such proceeding may legally be held in abeyance without the
incurrence of a lien, charge or liability of any kind against the Premises or
Tenant's leasehold interest therein and without subjecting Tenant or Landlord to
any criminal liability or (unless Tenant shall indemnify Landlord therefor)
civil liability for failure so to comply therewith, and without adversely
affecting any insurance policy required to be obtained by Tenant hereunder,
Tenant may postpone compliance therewith until the final determination of any
proceedings, provided that all such proceedings shall be prosecuted with due
diligence and dispatch, and if any lien, charge or civil liability is incurred
by reason of non-compliance, Tenant may nevertheless make the contest and delay
compliance as aforesaid, provided that Tenant furnishes to Landlord security,
reasonably satisfactory to Landlord, against any loss or injury by reason of
such non-compliance or delay and prosecutes the contest with due diligence.
Landlord shall, at the cost and expense of Tenant, execute and deliver any
papers which may be necessary or proper to permit Tenant to contest the validity
or application of any such Law. In the event that a contest is not concluded
prior to the expiration of the Term of this Lease, if at the termination of the
contest a determination is to the effect that some or all of the work in
question should have been or must be performed, Tenant shall pay to Landlord a
sum sufficient to pay for the cost of the work required to be performed. This
provision shall survive the termination or sooner expiration of this Lease.
Notwithstanding anything to the contrary contained herein, Tenant's right to
contest the validity or applicability of any Law is subject to the applicable
provisions contained in any Institutional Fee Mortgage, subject to Section 21.5,
and shall be limited thereby and shall be subject to compliance with the
requirements thereof.
Section 7.3. Tenant's Termination Right. If Tenant is, or would be,
required to do any work or incur any expenses to comply with the requirements of
Section 7.1 during the last year of the Term which, in Tenant's reasonable
judgment will, in the aggregate cost more than one-half of the Base Rent payable
for the then remainder of such Term, Tenant may, by notice to Landlord, decline
to comply with such requirements, and upon giving of such notice, Tenant shall
not be obligated to comply with the same (but Landlord, at the cost and expense
of Landlord, may comply with same), but this Lease shall not be otherwise
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affected. Notwithstanding the foregoing, the provisions of this Section 7.3
shall not be applicable if the Law which must be complied with became effective
and required compliance to be effected prior to the last year of the Term.
Section 7.4. Arbitration as to Laws. In the event of any dispute
between the parties as to an issue covered by this Article, the matter shall be
resolved by ADR as provided in Article 18.
ARTICLE 8.
DAMAGE TO OR DESTRUCTION OF THE BUILDINGS
Section 8.1. Restoration and Repair. (a) In case of damage to or
destruction of the Buildings, in whole or in part, by fire or any other cause,
similar or dissimilar (a "Casualty"), Tenant shall, regardless of the
availability of insurance proceeds (but subject to Section 8.5), restore,
repair, replace or rebuild the Buildings as nearly as may be reasonably possible
to the condition, quality and class the same were in immediately prior to such
damage or destruction, or with such changes or alterations as Tenant shall elect
to make in conformity with Article 10. Such restoration, repairs, replacement or
rebuilding shall be commenced with reasonable promptness and prosecuted with
reasonable diligence.
(b) Provided that there does not then exist an Event of Default
hereunder, all insurance money collected by Landlord or Tenant from any policy
of insurance maintained by Tenant pursuant to Article 4 on account of such
Casualty, less the cost, if any, incurred in connection with the adjustment of
the loss and the collection thereof (herein sometimes referred to as the
"insurance proceeds"), shall be held in an interest bearing account by an
Institutional Fee Mortgagee (as provided in Section 11.1) or, if there is no
such Institutional Fee Mortgagee, by an Institution, as insurance trustee,
selected by Landlord and reasonably approved by Tenant, shall be applied to the
payment of the cost of rebuilding, and shall be paid out to or for the account
of Tenant from time to time, upon requisition by Tenant, as such work
progresses, subject to Article 10 and Article 11. However, if the insurance
proceeds for any Casualty are less than $50,000, such insurance proceeds shall
be paid to Tenant, and shall be held by Tenant in trust for the purpose of
paying the cost of such reconstruction.
(c) Upon Landlord's receipt of evidence reasonably acceptable to it
that the reconstruction has been completed and paid for in full, that there are
no liens on the Premises as a result thereof, that reconstruction has been
completed in a good and workmanlike manner, in accordance in all material
respects with applicable Laws and in substantial accordance with plans and
specifications theretofore submitted to (and if required hereunder approved by)
Landlord, and that a certificate of occupancy, if required by Law, has been
issued or is otherwise in
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effect with respect to such reconstruction, Landlord shall pay or cause to be
paid to Tenant any remaining balance of said insurance proceeds.
Section 8.2. No Abatement. No provision of this Article shall be
construed to entitle Tenant to any abatement, allowance, reduction or suspension
of Base Rent or Additional Rent, unless this Lease is terminated as herein
provided.
Section 8.3. Termination. If the Premises are damaged to such an
extent that the cost to repair and restore will exceed one-half of the Base Rent
payable for the then remainder of the Term or repair and restoration will take
longer than ninety (90) days to complete and in either case the damage occurs in
the last year of the Term, Tenant may by notice to Landlord given within thirty
(30) days after the occurrence of such damage terminate this Lease effective as
of a date specified in such notice, not earlier than thirty (30) days after the
date of such notice, and upon such effective date this Lease shall terminate as
if such date were the scheduled dated for expiration of the Term, but Tenant
shall remain liable to pay the Base Rent and Additional Rent relating to
Impositions and insurance premiums due hereunder until the originally scheduled
date for such expiration.
Section 8.4. Notice of Casualty. Tenant shall immediately
notify Landlord of the occurrence of a casualty.
Section 8.5. Issues Relating to Insurance Proceeds. (a) Tenant
acknowledges that Tenant bears the risk that the insurance coverage maintained
by Tenant shall be insufficient to provide the funds required to effect
restoration of the Buildings after a casualty (including due to the financial
inability of the insurance carrier to pay the same).
(b) If a casualty occurs, Landlord will use its best efforts (but
Landlord shall not be obligated to give up any right or to make any payment to
the Fee Mortgagee, unless Tenant shall agree to be responsible for such payment)
to cause any Fee Mortgagee to agree to apply, and thereafter to apply, the
applicable insurance proceeds to restoration on terms consistent with those
which a sophisticated Institutional Fee Mortgagee would customarily impose
("Customary Conditions"), so long as Tenant is not in default beyond applicable
grace periods in its obligations hereunder.
(c) If any of the following events shall occur:
(A) Within sixty (60) days after a casualty shall have
occurred and the insurance proceeds are made available by the insurer for
restoration, the Fee Mortgagee shall not agree to make such proceeds
available for restoration on Customary Conditions or if thereafter for a
period in excess of sixty (60) days such Fee Mortgagee shall refuse to so
apply all or any portion of the insurance proceeds (unless
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such refusal to agree is due to (x) an Event of Default by Tenant
hereunder unless Tenant is disputing the existence of such Event of
Default as hereinafter provided or (y) a failure by Tenant to comply with
the Customary Conditions); or
(B) The Fee Mortgagee shall apply any such insurance proceeds
to the payment, in whole or in part, of the indebtedness secured by the
Fee Mortgage in question (unless caused by a default by Tenant hereunder
beyond applicable grace periods); or
(C) Due to the negligence or willful misconduct of Landlord or
such Fee Mortgagee, or a default by Landlord hereunder beyond applicable
grace periods, a reasonable amount of insurance proceeds under the
circumstances cannot be obtained under the policies of insurance
maintained by Tenant within a reasonable period of time under the
circumstances; or
(D) If the insurance proceeds are within Landlord's control
and Landlord refuses to apply the same toward restoration in accordance
with Customary Conditions, unless such refusal is due to an Event of
Default then existing under this lease;
and, in addition, if within sixty (60) days thereafter (thirty (30) days
thereafter in respect of clause (D) above) Landlord does not make available the
proceeds in question to Tenant, then Tenant, by notice to Landlord, may
terminate this Lease on a date specified in such notice, and upon such date this
Lease shall terminate, as if such date were the scheduled expiration date of
this Lease, and in such event neither party shall have any further obligations
to the other party hereunder.
ARTICLE 9.
CONDEMNATION
Section 9.1. Condemnation. (a) If there shall be a total taking or a
Constructive Total Taking of the fee title to the Premises in condemnation
proceedings, by deed in lieu of condemnation or by any right of eminent domain,
this Lease shall terminate on the date of such taking and the Base Rent and
other charges payable by Tenant hereunder shall be apportioned and paid to the
date of such taking. "Constructive Total Taking" means a taking of less than all
of the Premises, but of such scope that the untaken portion of the Premises is
insufficient or has insufficient access to public streets to permit the
restoration of the existing Buildings so as to constitute an economically viable
property for the conduct of Tenant's business.
(b) If a Constructive Total Taking shall occur and this Lease is
terminated, then from and after the date of such termination for the remainder
what would have been of the then-
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current Term of this Lease absent such termination, Tenant shall pay to
Landlord, in equal monthly installments on the same dates as Base Rent would
have been payable hereunder, a sum per annum equal to the "Annual CTT Payment."
For such purposes, the Base Rent hereunder shall first be recomputed pursuant to
Section 9.5, as if the Constructive Total Taking were a partial taking subject
to Section 9.3, and the Annual CTT Payment shall be equal to fifty (50%) percent
of the annual Base Rent and Impositions for the Premises, as so recomputed.
Notwithstanding the foregoing, Tenant's obligation to pay the Annual CTT Payment
shall cease if a circumstance occurs to the remaining Premises analogous to a
circumstance described in Section 3(e)(iii)(A) or (B) of the Rent Adjustment and
Takeback Agreement. Any dispute between the parties pursuant to this Section
shall be reduced by ADR pursuant to Article 18. Tenant's failure to pay these
sums, subject to grace periods comparable to those set forth in Article 15 for a
failure by Tenant to pay Base Rent hereunder, shall be deemed an Event of
Default for purposes of Section 15.1(c) notwithstanding that this Lease may be
deemed to have been terminated.
Section 9.2. Condemnation Award. In the event of any such total
taking or Constructive Total Taking, the award or awards for said taking, less
the cost of the determination of the amount thereof (the "Condemnation
Proceeds"), shall be paid to Landlord, who shall be entitled to receive the
entire award with respect to any taking, without deduction therefrom for any
estate vested in Tenant other than with respect to Tenant's property as
described in Section 10.3 and for Tenant's moving expenses ("Tenant's Share")
and Tenant shall receive no part of such award other than Tenant's Share. Tenant
hereby assigns to Landlord all of its right, title and interest in and to such
award (other than to Tenant's Share). Tenant may, at its sole cost and expense,
make a claim with the condemning authority for Tenant's Share and, provided that
Landlord's award is not thereby reduced or otherwise adversely affected, for
other sums to which Tenant may be entitled under applicable law.
Section 9.3. Partial Condemnation. In the event of a taking which is
less than a Constructive Total Taking, this Lease shall not terminate or be
affected in any way, except as provided in Section 9.5, and the Condemnation
Proceeds shall be paid as follows:
(a) The portion of the Condemnation Proceeds with interest thereon
as shall be awarded for or shall be required for restoration of the
Buildings shall be payable (i) so long as there shall be an Institutional
Fee Mortgagee, to such Institutional Fee Mortgagee, or (ii) if there shall
be no Institutional Fee Mortgagee, in trust to Landlord for application by
Tenant to the cost of restoring, repairing, replacing or rebuilding the
Buildings. Such portion of the Condemnation Proceeds shall be held and
disbursed as Deposited Sums, in the same manner as insurance
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proceeds are treated in accordance with Article 10 and Article 11.
(b) The Remainder of the Condemnation Proceeds shall be treated
as provided in Section 9.2.
Section 9.4. Restoration and Repair. In the event of a taking less
than a Constructive Total Taking, Tenant shall, to the extent Condemnation
Proceeds are available, proceed with due diligence to restore, repair, replace
or rebuild the remaining part of the Buildings to substantially their former
condition or with such changes or alterations as Tenant may elect to make in
conformity with Article 10 so as to constitute a complete, usable building and
property. For that purpose, the provisions of Section 8.5(b) and (c) shall be
applicable, except that references to casualty and to insurance proceeds shall
be deemed references to condemnation and to Condemnation Proceeds, and the
following clause (E) shall be deemed added to Section 8.5(c): "(E) If sufficient
Condemnation Proceeds for restoration are not obtained from the condemning
authority within a reasonable period of time under the circumstances and the
cost of restoration is more than 110% of the Condemnation Proceeds obtained and
available for restoration;".
Section 9.5. Abatement of Rent. In the event of a taking of the
character referred to in Section 9.3, this Lease shall terminate as to the
portion of the Premises so taken and from and after the date of such taking a
just proportion of the Base Rent, according to the extent and nature of such
taking, shall abate for the remainder of the Term. If Landlord and Tenant cannot
agree on the amount of such abatement of rent, such dispute shall be determined
by ADR as provided in Article 18. Until the amount of the reduction of the Base
Rent shall have been determined, Tenant shall continue to pay to Landlord the
Base Rent provided for herein; when the amount of the abatement shall have been
agreed upon or determined, Landlord shall permit Tenant to credit against the
next installments of Base Rent due hereunder (to the extent thereof), or shall
refund to Tenant, the amount of the Base Rent paid from the date of the taking
which is in excess of the amount to which the Base Rent has been reduced by such
abatement, together with interest thereon at the Prime Rate for the period from
the date the Base Rent was paid until the date of reimbursement to Tenant.
Section 9.6. Temporary Taking. If the whole or any part of the
Premises, or of Tenant's leasehold estate under this Lease, shall be taken in
condemnation proceedings or by any right of eminent domain for temporary use or
occupancy (for these purposes, for a period of twelve (12) months or less), the
foregoing provisions of this Article shall not apply and Tenant shall continue
to pay, in the manner and at the times herein specified, the full amounts of the
Base Rent and all additional rent and other charges payable by Tenant hereunder,
and, except only to the extent that Tenant may be prevented from so doing
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pursuant to the terms of the order of the condemning authority, Tenant shall
perform and observe all of the other terms, covenants, conditions and
obligations hereof upon the part of Tenant to be performed and observed, as
though such taking had not occurred. Tenant shall be entitled to receive the
entire amount of the Condemnation Proceeds made for such taking, whether paid by
way of damages, rent or otherwise, unless such period of temporary use or
occupancy shall extend beyond the expiration or termination of this Lease, in
which case the Condemnation Proceeds shall be apportioned between Landlord and
Tenant upon receipt thereof as of the date of the expiration or termination of
this Lease; provided, however, that the portion of such award which represents
reimbursement for the cost of restoration (and is not required to pay Base Rent
or Additional Rent accruing hereunder during the period of temporary taking)
shall be used by Tenant to pay or to reimburse Tenant for payments of the costs
of restoration and shall be treated hereunder as provided in Section 9.4. Tenant
shall, upon the expiration of any such period of temporary use or occupancy
during the Term and to the extent Condemnation Proceeds are available for the
purpose, restore the Buildings, as nearly as may be reasonably practicable, to
the condition in which the same were immediately prior to such taking, subject
to Section 9.4. The provisions of Section 4.3(c) shall apply, with appropriate
modifications to reflect the difference between rent insurance proceeds and
Condemnation Proceeds for a temporary taking.
Section 9.7. Allocation of Award. If the order or decree in any
condemnation or similar proceeding shall fail separately to state the amount to
be awarded to Landlord and the amount to be awarded to Tenant under this
Article, or the amount of the compensation for the restoration of the Buildings
under this Article, and if Landlord and Tenant cannot agree thereon within
thirty (30) days after the final award or awards shall have been fixed and
determined, any such dispute shall be determined by ADR in the manner provided
in Article 18.
Section 9.8. Assignments of Condemnation Proceeds. Tenant shall be
entitled to assign to the holder of any Mortgage any Condemnation Proceeds to
which it shall be entitled under this Article and Landlord shall recognize such
assignment and shall consent to the payment of said Condemnation Proceeds to
said assignee as its interest may appear. Nothing in this Section 9.8 shall
grant a Mortgagee any greater rights than Tenant possesses under this Article.
Section 9.9. Participation in Condemnation Proceedings. Tenant and
the holder of any Mortgage or Fee Mortgage shall have the right to participate
in any condemnation proceeding for the purpose of protecting their rights
hereunder (consistent with the above); provided, however, that Landlord shall
have the sole right to settle such condemnation proceeding, but Tenant shall not
be bound by any determination in such proceeding as to, and shall have the right
to dispute, by ADR as
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provided in Article 18, the portion of any Condemnation Proceeds to which Tenant
is entitled under this Article.
ARTICLE 10.
CHANGES AND ALTERATIONS
Section 10.1. Alterations. Tenant shall have the right, at any time
and from time to time, to make such changes and alterations, structural or
otherwise, to the Buildings as Tenant shall deem necessary or desirable,
including the right to increase or reduce the height of the buildings, or to
demolish the Buildings, or any part thereof, provided that in the case of any
demolition Tenant shall erect in substitution thereof a new building or (in the
event of the demolition of part of a Building) a new part thereof. Such changes,
alterations, demolition or new construction (collectively, "Alterations") shall
be made in all cases subject to the following conditions:
(a) no Alterations shall be undertaken until Tenant shall have
procured and paid for, so far as the same may be required from time to
time, all municipal and other governmental permits and authorizations of
the various municipal departments and governmental subdivisions having
jurisdiction, and Landlord shall join, at Tenant's expense, in the
application for such permits or authorizations whenever such action is
necessary;
(b) any structural Alterations, or any Alterations undertaken as a
single project and involving an estimated cost aggregating more than
$75,000, shall be conducted under the supervision of an architect or
engineer (who may be an employee of Tenant) selected by Tenant, and no
such work shall be undertaken until ten (10) business days after plans and
specifications and budget estimates therefor, prepared and approved in
writing by such architect or engineer shall have been submitted to
Landlord;
(c) all Alterations shall be of such a character that, when
completed, the value of the Buildings shall be not less than the value of
the Buildings immediately before any such Alterations;
(d) all work done in connection with any Alterations shall be done
in a good and workmanlike manner, in compliance with applicable Laws, and
in substantial accordance with the plans and specifications submitted to
Landlord;
(e) workmen's compensation insurance covering all persons employed
in connection therewith and with respect to whom death or bodily injury
claims could be asserted against Landlord, Tenant or the Premises and
general liability and property damage insurance, and insurance covering
all risks generally related to construction and which would reasonably
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be required by a prudent Institutional Fee Mortgagee for similar
construction (which may be effected by endorsement, if obtainable, on the
insurance required to be carried pursuant to Section 4.1) for the mutual
benefit of Landlord, any Fee Mortgagee, and Tenant with limits of not less
than those required to be carried pursuant to Section 4.1 shall be
maintained by Tenant at all times when any work is in process in
connection with any Alterations, and evidence of the procuring of such
policies shall be submitted to Landlord before construction of any such
Alteration is commenced;
(f) any structural Alterations, including Alterations which involve
the demolition and reconstruction of any material structure on the
Premises, shall be subject to Landlord's consent, which consent shall not
be unreasonably withheld by Landlord (in the case of the demolition and
reconstruction of any material structure on the Premises, it shall not be
unreasonable for Landlord to withhold its consent if Tenant cannot
reasonably demonstrate that Tenant has obtained or can obtain the funds
required to pay the cost of such demolition or reconstruction and it shall
not be unreasonable for Landlord to take account any material adverse
effect of such Alterations on contiguous properties owned by Landlord or
Affiliates of Landlord, including those properties which are subject to
Group Leases);
(g) subject to Section 10.3, all Alterations shall immediately upon
installation become Landlord's property and shall remain on and be
surrendered with the Premises as part thereof at the termination of this
Lease;
(h) the cost of any Alteration shall be paid by Tenant so that,
subject to Article 12, the Premises shall at all times be free of liens
for labor and materials supplied or claimed to have been supplied to the
Premises in connection with such Alteration;
(i) within a reasonable time after completion of any Alteration,
Tenant shall provide Landlord with complete as-built mylar drawing
thereof, if such drawings were prepared for Tenant, and otherwise with
such final plans and specification for such Alteration as are in Tenant's
possession;
(j) any Alterations commenced by Tenant shall be prosecuted
diligently to completion by Tenant; and
(k) Subject to Section 21.5, any Alterations (i) shall be subject to
the consent of any Institutional Fee Mortgagee if and to the extent
required under the Institutional Fee Mortgage in question, and (ii) shall
be performed in compliance with the applicable requirements of the
Institutional Fee Mortgage in question.
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Any dispute under this Section shall be determined by arbitration in the manner
provided in Article 18.
Section 10.2. Applicability of Conditions. In performing any work or
repairs to, or restoration, replacement or rebuilding of, the Buildings required
to be performed by Tenant under Article 6, 7, 8 or 9, Tenant shall observe and
perform, in so far as the nature of such repairs, restoration, replacement or
rebuilding make such observance and performance appropriate, the conditions
relating to changes or alterations set forth in Section 10.1.
Section 10.3. Tenant's Property. All items of personal property, all
business and trade fixtures and equipment and any other property of Tenant at
the Premises which is not a part of any structure or building system, or
required for the operation of any building as a building, shall remain the
property of Tenant and shall be removed by Tenant at any time prior to the
expiration or sooner termination of this Lease. Tenant, at its expense, shall
repair any damage to the Building caused by any such removal. Tenant's property
shall include (a) equipment (for example, hoists) installed by Tenant and not
required for the use and operation of the Buildings as buildings and (b) any
property transferred to Tenant pursuant to the Master Agreement and the other
Transaction Agreements. Any of the foregoing enumerated property of Tenant which
shall remain in the Premises within thirty (30) days after the expiration or
sooner termination of this Lease (but the foregoing provision shall not relieve
Tenant of any obligations or liabilities hereunder on account of such holdover)
may, at the option of Landlord, subject to Section 10.4, be deemed abandoned and
may either be retained by Landlord as its property or be promptly disposed of
without accountability as Landlord sees fit and Tenant shall reimburse Landlord,
within thirty (30) days after demand, for the reasonable costs and expenses
incurred by Landlord in such disposal.
Section 10.4. Liens on Tenant's Property. (a) Except as otherwise
provided in Section 14.2(c) with respect to a Mortgage, and as provided in
subsection (b) of this Section, all property installed by Tenant in the Premises
shall be installed and maintained free and clear of any liens, encumbrances and
security interests.
(b) Notwithstanding subsection (a) of this Section, Tenant may
install and maintain items of Tenant's property in the Premises subject to
conditional sales agreements, equipment leases and similar financing, provided
that (i) the removal of such property, if not movable personal property, would
not adversely affect the value of the Buildings as real estate (as opposed to
their value for a particular use) and would not adversely affect the operation,
function, or use of the Buildings as buildings, (ii) Tenant agrees to restore
any damage to the Premises caused by the removal thereof, and (iii) the term of
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such financing does not extend beyond the then-scheduled expiration date of the
Term. The other party to such conditional sales agreement, equipment lease or
similar financing shall have the right to remove the property in question from
the Premises within thirty (30) days after the expiration or ninety (90) days
after the sooner termination of the Term, but this sentence shall not relieve
Tenant of any obligations or liabilities hereunder on account of such holdover.
ARTICLE 11.
DISBURSEMENT OF DEPOSITED MONEYS
Section 11.1. Deposited Sums. All sums (collectively, the "Deposited
Sums") paid to or deposited with an Institutional Fee Mortgagee or to an
Institution described in Section 8.1 (the "Depositary"), shall be disbursed in
the manner hereinafter provided.
Section 11.2. Disbursement. From time to time as the restoration,
repair, replacement or rebuilding of any Buildings or any portion thereof
damaged or destroyed by fire or any other cause, or not taken in a proceeding of
the character described in Section 9.3, progresses (collectively, the "Work"),
disbursement of the Deposited Sums shall be made in accordance with good and
sophisticated construction lending practices which a prudent Institutional Fee
Mortgagee would adopt in order to insure that the work shall be completed in a
good and workmanlike manner, shall be paid for in full, shall be completed free
of any lien against the Premises, and shall be completed in accordance with
applicable law and in substantial accordance with the plans and specifications
submitted to (and if required hereunder, approved by) Landlord. In the event
that a reputable independent architect or engineer selected by Landlord and
reasonably approved by Tenant shall determine or if (subject to Section 21.5)
the Institutional Fee Mortgagee or a Fee Mortgagee on the date hereof which is
not an Institution, shall determine, as provided in the applicable Fee Mortgage,
that the Deposited Sums are insufficient to pay for the cost to complete the
Work, (i) Tenant shall be responsible for paying for any such shortfall (which
obligation shall survive the expiration or sooner termination of this Lease),
and (ii) no further disbursement of the Deposited Sum shall be made until Tenant
shall have deposited with the Institution cash, cash equivalents or other
security for the shortfall, which deposit shall be made promptly after demand
therefor by Landlord, and shall be treated in the same manner as the Deposited
Sums are treated (but any unused portion thereof shall in all events be returned
to Tenant upon completion of the Restoration in question). At any time after the
completion of the work the balance of the Deposited Sums shall be disbursed to
Tenant (and Tenant may retain any insurance proceeds held by Tenant).
Section 11.3. Disbursement After Default. If this Lease shall be
terminated pursuant to Section 15.1 prior to the
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disbursement of the Deposited Sums or any part thereof, Landlord may notify the
Depositary thereof and thereupon the Depositary shall have no further right or
obligation to disburse any of the Deposited Sums to Tenant, but shall disburse
the same to or for the account of Landlord upon Landlord's direction so to do,
provided that if Tenant disputes the termination of this Lease, the Depositary
shall take no action until the issue is resolved between Landlord and Tenant by
ADR as provided in Article 18.
Section 11.4. Expenses of Depositary. The Depositary shall have
the right to deduct from the Deposited Sums its reasonable charges for acting
as Depositary hereunder.
ARTICLE 12.
MECHANICS' LIENS
Tenant shall not suffer or permit any mechanics' liens to be filed
against the Premises, nor against Tenant's leasehold estate hereunder, by reason
of work, labor, services or materials supplied or claimed to have been supplied
to Tenant or anyone holding any interest in the Premises or any part thereof
through or under Tenant. If any such mechanic's lien shall at any time be filed
against the Premises, Tenant shall, within thirty (30) days after notice of the
filing thereof, or sooner and within ten (10) days after demand from Landlord if
required in order to close a sale or financing involving the Premises (and which
notice shall refer to such ten (10) day period and this sentence), cause the
same to be discharged of record by payment, deposit, bond, order of a court of
competent jurisdiction or otherwise. If Tenant shall fail to cause such lien to
be discharged within the period aforesaid, then Landlord may (without complying
with any other provision contained in this Lease) discharge the same either by
paying the amount claimed to be due or by procuring the discharge of such lien
by deposit or by bonding proceedings, and in any such event Landlord shall be
entitled, if Landlord so elects, to compel the prosecution of an action for the
foreclosure of such lien by the lienor and to pay the amount of the judgment in
favor of the lienor with interest, costs and allowance. Nothing in this Lease
contained shall be deemed or construed in any way as constituting the consent or
request of Landlord, express or implied, by inference or otherwise, to any
contractor, subcontractor, laborer or materialman for the performance of any
labor or the furnishing of any materials for any specific improvement,
alteration to or repair of the Premises or any part thereof, nor as giving
Tenant a right, power or authority to contract for or permit the rendering of
any services or the furnishing of any materials that would give rise to the
filing or any mechanic's lien against the Premises.
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ARTICLE 13.
SURRENDER OF THE PREMISES;
INSPECTION OF THE PREMISES
Section 13.1. Surrender. Upon the expiration or sooner termination
of this Lease, Tenant shall surrender to Landlord the Premises, free of
subtenants (except as provided in Section 14.7), occupants or the like, in good
order and repair (except in the event of termination upon a Casualty, a total
taking or Constructive Total Taking in condemnation proceedings), reasonable
wear and tear and damage by casualty or condemnation (except to the extent
Tenant was theretofore obligated under this Lease to restore such casualty or
condemnation prior to the date of such expiration or sooner termination)
excepted and also except as Tenant may have been prevented from maintaining the
Premises in good order and repair by occupation thereof by any entity having the
power of eminent domain which shall have taken the temporary use thereof and
shall then be in possession thereof. If the Premises are not surrendered at the
end of the Term, Tenant shall compensate Landlord for all damages which Landlord
shall suffer by reason thereof, and Tenant shall indemnify, defend and hold
Landlord harmless from and against all claims made by any succeeding tenant
against Landlord founded upon delay by Landlord in delivering possession of the
Premises to such succeeding tenant to the extent that all or any portion of such
delay is occasioned by the failure of Tenant to surrender the Premises as and
when required by this Lease. Without limiting the provisions of Section 13.1
hereof, if Tenant shall, without the written consent of Landlord, hold over
after the expiration of the Term, Tenant's use shall be deemed a month-to-month
tenancy, which tenancy may be terminated upon demand of Landlord. During such
tenancy, Tenant agrees to pay Landlord, each month, (i) the following percentage
of the Base Rent in effect upon the expiration of the Term:
(A) 125% of such Base Rent for the first ninety (90) days after
the expiration or sooner termination of this Lease;
(B) 150% of such Base Rent for the next ninety (90) days (that is,
until the 180th day thereafter);
(C) 175% of such Base Rent for the next ninety (90) days (that is,
until the 270th day thereafter); and
(D) 200% of such Base Rent for the period from and after such
270th day after the expiration or sooner termination of this
Lease,
plus (ii) all Additional Rent payable by Tenant hereunder for such month.
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Section 13.2. Inspection. Tenant shall permit Landlord and
Landlord's authorized representatives to enter the Premises at reasonable times
during usual business hours upon reasonable prior notice (except in the case of
an emergency or to prevent an imminent default under a Fee Mortgage, which entry
may be made without notice at any time) for the purpose of inspecting the same
and of exhibiting the same to prospective purchasers or mortgagees thereof, or
others to whom Landlord shall desire to so exhibit the Premises.
ARTICLE 14.
ASSIGNMENT AND SUBLETTING
Section 14.1. Assignment and Subletting. Except as otherwise
provided in this Article 14, or as expressly provided elsewhere in this Lease,
Tenant shall not, without the prior written consent of Landlord, assign,
mortgage, pledge or encumber this Lease or sublease the Premises, or any part
thereof. The consent of Landlord to any assignment, mortgage, pledge,
encumbrance or subletting shall not relieve Tenant from obtaining Landlord's
consent to any further such transaction which requires Landlord's consent
hereunder.
Section 14.2. Permitted Transactions. Without Landlord's
consent, but upon at least fifteen (15) days' prior notice to Landlord, and
subject to Section 14.3(c), Tenant may:
(a) Assign this Lease or sublease all or any part of the
Premises to an Affiliate of Tenant;
(b) Assign this Lease or sublet all or substantially all of the
Premises for all or any portion of the Term in connection with a sale or other
transfer to the assignee or sublessee of all or substantially all of the
business conducted by Tenant at the Premises;
(c) Mortgage, pledge or encumber this Lease, except as provided
in Section 14.3(a); or
(d) Sublease the Premises, in whole or in part, other than a
sublease of all or substantially all of the Premises for all or substantially
all of the term (except as provided in subsection (b) above).
Section 14.3. Transactions Requiring Landlord's Consent.
(a) So long as Landlord is an Affiliate of Joseph C. DiFeo or Samuel
X. DiFeo, Landlord's consent shall be required to any mortgage, pledge or
encumbrance of this Lease (but not to a transaction described in Section
10.4(b)), which consent may be withheld in Landlord's sole discretion,
notwithstanding any provision of this Lease which contemplates the potential
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existence of any Mortgage, or otherwise give to Tenant the right to mortgage
this Lease and the leasehold estate created hereby.
(b) Tenant may assign this Lease, and may sublease all or any part
of the Premises, other than as provided in Section 14.2, subject to Landlord's
prior consent, which consent Landlord shall not unreasonably withhold, upon the
following terms and conditions:
(i) Tenant shall furnish Landlord with the name and business
address of the proposed assignee or subtenant and with information with
respect to the nature and character of the proposed assignee's or
subtenant's business or activities as are reasonably satisfactory to
Landlord.
(ii) Landlord shall not be entitled to take into account the
financial net worth, credit or financial responsibility of the proposed
assignee or subtenant;
(iii) Tenant shall deliver an executed assignment or
sublease to Landlord at the time Landlord's consent is requested;
(iv) The nature and character of the proposed assignee or
subtenant, and its business or activities are, in Landlord's reasonable
judgment, in keeping with the standards of the Premises (and its intended
use of the Premises is not in violation of the provisions of this Lease);
(v) Each assignment or sublease, whether or not Landlord's
consent is required thereto, shall specifically state that (i) it is
subject to all of the terms, covenants, agreements, provisions and
conditions of this Lease (except as otherwise provided herein as to
Sections 3.8, and 15.1(c), and provided, further, that no assignee or
subtenant shall be obligated to enter into, assume or otherwise be liable
for obligations under any Tenant Guaranty, and provided, further, that no
assignee or subtenant shall be obligated to enter into, assume or
otherwise be liable for obligations under any Tenant Guaranty; and (ii)
the assignee or subtenant will not have the right to further assign or
sublet all or part of the Premises except in accordance with the
provisions of this Lease.
(vi) With respect to any such assignment or sublease, whether
or not Landlord's consent is required thereto: (A) the receipt by Landlord
of any amounts from an assignee or subtenant, or other occupant of any
part of the Premises, shall not be deemed or construed as releasing Tenant
from Tenant's obligations hereunder or of the acceptance of that party as
a direct Tenant; (B) Tenant shall reimburse Landlord within thirty (30)
days after
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demand for any reasonable costs incurred by Landlord to review the
proposed assignment or sublease in connection with the requested consent,
including the cost of making investigations as to the acceptability of the
proposed assignee or subtenant and any reasonable attorney's fees incurred
by Landlord; (C) consent by Landlord thereto shall not be deemed or
construed to modify, amend or affect the terms and provisions of this
Lease, or Tenant's obligations hereunder, which shall continue to apply to
the Premises as if the assignment or sublease had not been made; and (D)
if Tenant defaults in the payment of any rent, Landlord is authorized to
collect any rents due or accruing from any assignee, subtenant or other
occupant of the Premises and to apply the net amounts collected to the
rent due hereunder.
(c) No assignment or sublease permitted under Section 14.2, Section
14.3, or otherwise permitted hereunder shall be permitted if the assignee or
sublessee, in Landlord's reasonable judgment, is not reputable, or if the
assignment or sublease, in Landlord's reasonable judgment, would cause the
Premises to become subject to compliance with the remedial provisions of ECRA
(or a similar state statute requiring environmental testing and/or remediation)
prior to the sale or other transfer of the Premises, upon such assignment of
this Lease or sublease of all or any portion of the Premises, or upon the
expiration or sooner termination of this Lease or cessation of operations at the
Premises. Landlord will advise Tenant, by notice to Tenant within thirty (30)
days of Tenant's request therefor, if Landlord judges a proposed assignee or
subtenant named in such request not to be reputable, or a proposed assignment or
sublease to cause the Premises to become subject to ECRA or such similar statute
as aforesaid, which notice from Landlord shall specify, in reasonable detail,
the grounds for Landlord's determination. Failure or refusal of Landlord to
respond within such thirty (30) days period shall be deemed a determination by
Landlord that the proposed assignee or sublessee is reputable and the proposed
assignment or sublease does not cause the Premises to so become subject to ECRA
or such other similar statute. In making such determination, the financial
condition of the proposed assignee or sublessee shall not be taken into account
by Landlord. If Tenant disputes Landlord's determination, such dispute shall be
resolved by ADR pursuant to Article 18.
(d) Notwithstanding anything to the contrary in this Lease, Tenant
shall not assign this Lease or sublease the Premises to a government or any
subdivision or agency thereof, without Landlord's consent, which consent
Landlord may withhold in its sole discretion.
Section 14.4 Takeback Right. If at any time Tenant shall request
Landlord's consent (if such consent is required hereunder) (a) to assign this
Lease, other than to an Affiliate or in connection with a sale of all or
substantially all of Tenant's business at the Premises to the assignee, or (b)
to
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sublease all or substantially all of the Premises for all or substantially all
of the Term, other than to an Affiliate or in connection with sale or all or
substantially all of Tenant's business at the Premises to the sublessee, or (c)
to change the use of all or substantially all of the Premises to a use other
than a Vehicle-Related Use, and shall have notified Landlord of such proposal,
then Landlord shall have a period of thirty (30) days following such
notification to terminate this Lease as to the entire Premises, by notice to
Tenant, in which event such termination shall occur on the forty-fifth (45th)
day after the date of such notice, as if such forty-fifth (45th) day were the
date herein specified for the expiration of the Term, and, from and after such
termination, neither party shall have any further obligation hereunder to the
other party, except for obligations which accrued prior to the date of
termination or which by their terms survive the termination of this Lease.
Nothing herein in this Section shall be deemed or construed to limit Landlord's
right to withhold consent to an assignment or sublease, in accordance with the
provisions of this Lease, if such consent is required hereunder, and the
existence of this takeback right shall not be taken into account in determining
whether Landlord is entitled to withhold consent to an assignment or sublease,
if such consent is required hereunder.
Section 14.5. Requirements as to Assignments or Subleases. (a) Any
assignment of this Lease, whether made with Landlord's consent or without
Landlord's consent, as the case may be, shall not be effective unless and until
(i) the assignee shall execute, acknowledge and deliver to Landlord an agreement
in form and substance reasonably satisfactory to Landlord, and with respect to
which Landlord shall be a direct beneficiary, whereby the assignee shall (x)
assume the obligations and performance of this Lease and agree to be personally
bound by all of the covenants, agreements, terms, provisions and conditions
hereof on the part of Tenant to be performed and observed from and after the
effective date of any such assignment; and (y) agree that the provisions of this
Article 14 shall, notwithstanding such assignment or sublease, continue to be
binding upon it in the future. Tenant covenants that, notwithstanding any
assignment or sublease, whether or not in violation of the provisions of this
Lease, and notwithstanding the acceptance of rent by Landlord from any assignee
or subtenant or any other party, Tenant shall remain fully and primarily and
jointly and severally liable for the payment of rent due and to become due under
this Lease and for the performance and observance of all the covenants,
agreements, terms, provisions and conditions of this Lease on the part of Tenant
to be performed or observed.
(b) The liability of Tenant, and the due performance by Tenant of
the obligations on its part to be performed under this Lease, shall not be
discharged, released or impaired in any respect by an agreement or stipulation
made by Landlord or any grantee or assignee of Landlord or any other agreement
with a
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third party extending the term of or modifying any of the obligations contained
in this Lease, or by any waiver or failure of Landlord to enforce any of the
obligations on Tenant's part to be performed under this Lease, and Tenant shall
continue liable hereunder. If any such agreement or modification operates to
increase the obligations of Tenant under this Lease the liability of the Tenant
under this Lease or any of its successors in interest (all such parties shall be
deemed to have expressly consented in writing to such agreement or modification)
shall continue to be no greater than if such agreement or modification had not
been made.
Section 14.6. Leasehold Mortgages.
(a) Without the prior consent of Landlord, Tenant shall have the
right to mortgage this Lease and the leasehold estate hereby created. The
execution and delivery of a Mortgage shall not be deemed to constitute an
assignment or transfer of this Lease nor shall the holder of any Mortgage, as
such, be deemed an assignee or transferee of this Lease so as to require such
holder to assume the performance of any of the covenants or agreements on the
part of Tenant to be performed hereunder. No action or agreement hereafter taken
or entered into by Tenant to cancel, surrender, modify or amend this Lease shall
be binding upon or enforceable against a Mortgage, without the prior written
consent of such Mortgagee.
(b) A Mortgagee shall only have the rights provided for herein if
there has been delivered to Landlord a true, correct and complete copy of the
Mortgage in question, together with written notice executed by Tenant setting
forth the name and address of the Mortgagee. Landlord shall not be bound to
recognize any assignment of a Mortgage unless and until Landlord shall be given
written notice of such assignment and the name and address of the assignee. A
Mortgagee shall cease to be entitled to any of the rights provided for herein if
its Mortgage is satisfied or discharged of record or if Mortgagee has given
written notice to Landlord that its Mortgage has been satisfied. Tenant shall
not grant any Mortgage unless such Mortgage shall expressly state that the
proceeds of any insurance policies and condemnation awards shall be held, used
and applied for purposes and in the manner provided in this Lease, and a
Mortgagee whose Mortgage does not so provide shall have no rights hereunder.
Section 14.7. Sublease Recognition. Landlord confirms, for the
benefit of any tenant under any Major Sublease (such tenant being called a
"Space Tenant"), that, upon the termination of this Lease pursuant to Section
15.1, Landlord will recognize the Space Tenant under such sublease as the direct
tenant of Landlord (provided that such Space Tenant attorns to Landlord) and
will, upon the request of Tenant with respect to a Major Sublease consented to
by Landlord, enter into a reasonable and customary form of recognition and
attornment agreement with such Space Tenant which will provide for the
recognition by
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Landlord of such Space Tenant as the direct tenant of Landlord and the
attornment by such Space Tenant to Landlord, provided that, among other things,
at the time of the termination of this Lease no default exists under the Space
Tenant's Sublease which at such time would then permit the landlord thereunder
to terminate the same or to exercise any dispossess remedy provided for therein
The term "Major Sublease" shall mean a sublease of all of the Premises for all
of the Term (less one day), provided that the sublease requires the sublessee to
perform all of Tenant's obligations hereunder, subject to Section 3.8, grants to
the sublandlord all of Landlord's rights hereunder other than pursuant to
Section 15.1(c) (which shall not apply to the Major Sublease) and that the
sublessee shall not be obligated to enter into, assume or otherwise be liable
for obligations under any Tenant Guaranty.
ARTICLE 15.
DEFAULT PROVISIONS; CONDITIONAL LIMITATION
Section 15.1. Events of Default. In the event that any one or
more of the following events occur, an event of default (an "Event of Default")
shall be deemed to exist under this Lease:
(a) default shall be made in the payment of the Base Rent when due
and such default shall continue for a period of ten (10) days after notice
thereof, specifying such default, shall have been given to Tenant, or default
shall be made in the payment of any item of additional rent and such latter
default shall continue for a period of thirty (30) days after notice thereof,
specifying such default, shall have been given to Tenant; or
(b) default shall be made in the performance of any other covenant
or agreement on the part of Tenant to be performed hereunder, and such default
shall continue for a period of thirty (30) days after notice thereof, specifying
such default, shall have been given to Tenant; provided, however, in the case of
a default which cannot with due diligence be remedied by Tenant within a period
of thirty (30) days, if Tenant during such thirty (30) day period advised
Landlord of Tenant's intentions to cure such default, and proceeds as promptly
as may be reasonably possible after the service of such notice and with all due
diligence, and continuity of purpose to remedy the default and thereafter to
prosecute the remedying of such default with all due diligence (including by
appropriate actions against a subtenant of all or part of the Premises to compel
performance by such subtenant or to recover possession of the Premises so as to
permit Tenant to cure such default to the extent that Tenant is unable to cure
the same without recovering possession), the period of time after the giving of
such notice within which to remedy the default shall be extended for such period
as may be necessary to remedy the same with all due diligence; or
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(c) an Event of Default, subject to Section 15.3, shall have
occurred under any Group Lease or under any Group Sublease; provided, however,
that if any Group Lease or Group Sublease, other than this Lease, is assigned,
in a transaction permitted thereunder, to a person or entity which is not an
Affiliate of the Tenant thereunder, and does not thereafter become an Affiliate
of the Tenant thereunder, then this subsection shall thereafter apply only with
respect to such Group Lease or Group Sublease to a monetary Event of Default
under such Group Lease or Group Sublease and shall not thereafter apply to a
non-monetary Event of Default under such Group Lease or Group Sublease; or
(d) whenever Tenant shall default in complying with the provisions
of Article 12 with respect to the discharging of mechanics' liens within the
time period provided therein and such default shall exist for thirty (30) days
after notice from Landlord specifying such default, or, if applicable, for ten
(10) days after notice from Landlord specifying such default if such discharge
is required in order to close a sale or refinancing involving the Premises
(which notice shall refer to such ten (10) day period and Article 12); or
(e) if any execution or attachment shall be issued against Tenant or
any of Tenant's property pursuant to which execution or attachment the Premises
or any part thereof shall be taken or occupied by someone other than Tenant,
except as permitted under this Lease; or
(f) (i) the making by Tenant or '21' International Holdings, Inc.
("TIHI"), while the TIHI Guaranty is in effect, or by any EMCO Sub, while its
EMCO Pledge is in effect (each of TIHI and Emco Sub, during such respective
period of time only, being herein called a "Guarantor") of any general
assignment for the benefit of creditors; (ii) the filing by or against Tenant or
any Guarantor of any petition to have Tenant or any Guarantor adjudged a
bankrupt or a petition for reorganization or arrangement under any law relating
to bankruptcy (unless, in the case of a petition filed against Tenant or any
Guarantor, the same is dismissed within sixty (60) days; (iii) the appointment
of a trustee or receiver to take possession of substantially all of Tenant's or
any Guarantor's assets, or substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease; or (iv) the attachment,
execution or the judicial seizure of substantially all of Tenant's or any
Guarantor's assets, or substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease; or
(g) if Tenant's right, title and interest in this Lease or the
estate of Tenant hereunder shall be transferred to or shall pass to or devolve
upon any person or entity whether by action of Tenant, by operation of law or
otherwise, in violation of the terms of this Lease, and such default shall not
be cured
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within thirty (30) days after notice from Landlord of such default; or
(h) if any Mortgagee commences an action to foreclose or otherwise
realize upon its Mortgage or Tenant's interest in this Lease, unless such action
has been dismissed or discontinued.
Section 15.2. Right to ADR. If Landlord shall give Tenant a notice,
pursuant to any of subsections (a) through (h) of Section 15.1, of a default or
an event which may, with the giving of such notice, or the passage of time, or
both, become an Event of Default, and if the default in question is other than a
failure by Tenant to pay an installment of Base Rent due hereunder, and if
Tenant within fifteen (15) days after the giving of any such notice from
Landlord pursuant to subsections (a) through (h) of this Section, shall dispute
by notice to Landlord (a "Section 15.2 Notice") the existence of such default,
the matter shall be determined by ADR as provided in Article 18 and, pending
such determination, Landlord shall not be entitled to terminate this Lease, nor
shall a default or Event of Default be deemed to exist hereunder on account
thereof; provided, however, that if it shall be determined by ADR that Tenant is
so in default, the time within which Tenant shall have to remedy the same under
subsection (a) through subsection (h) above shall be computed from the date of
such determination. Any such Section 15.2 Notice to Landlord shall specify in
reasonable detail the grounds for such dispute.
Section 15.3. Multiple Notices. If a monetary Event of Default
occurs hereunder, then Landlord shall have the right to send to Tenant a second
(2nd) notice, referring to this Section and specifying such default and stating
that it is a "Second Notice" of such default, and, if such monetary Event of
Default shall not be cured within five (5) business days after such notice is
given, then Landlord shall have the right to send Tenant a third (3rd) notice,
referring to this Section and specifying that it is a "Third Notice" of such
default, and, if such monetary Event of Default shall not be cured within ten
(10) business days after such notice is given, Landlord may thereafter proceed
to exercise all rights and remedies which Landlord may exercise upon such Event
of Default and Landlord shall not thereafter be obligated to accept a cure by
Tenant of such monetary Event of Default (but prior to Landlord's commencing to
exercise its rights and remedies, Landlord shall be obligated to accept such a
cure). The provisions of this Section shall only apply to the first two (2)
monetary Events of Default of the same type in any period of twelve (12)
consecutive calendar months. Tenant specifically acknowledges that it will not
argue before any court, ADR tribunal or anyone that Landlord is obligated or
required to accept any cure of an Event of Default described in this Section
after the expiration of the applicable time frame provided for after the Third
Notice, Tenant having negotiated for the giving of the Second and Third Notices
in lieu of any other
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benefit or right provided to Tenant at law, in equity or otherwise with respect
to the right to cure such Events of Default.
Section 15.4. Notices of Default to Mortgages.
(a) If Landlord shall give a notice to Tenant regarding the Tenant's
failure to observe or perform any obligation imposed upon Tenant under this
Lease, Landlord shall at the same time give a copy of each such notice to each
Mortgagee, and no such notice shall be deemed to have been effected unless and
until notice is so given to each Mortgagee. If a Mortgage is held by more than
one person, corporation or other entity, no provision of this Lease requiring
Landlord to give a notice to a Mortgagee shall be binding upon Landlord unless
and until all of said holders shall designate in writing one of their number to
receive all such notices and shall have given to Landlord an original executed
counterpart of such designation in form reasonably satisfactory to Landlord.
(b) Landlord shall permit a Mortgagee the right (without obligation
on the part of the Mortgagee to do so) to perform any term, covenant, condition
or agreement and to remedy any default by Tenant hereunder, within the time
periods provided to the Tenant hereunder or otherwise provided to the Mortgagee
hereunder and together with any and all rights of Tenant hereunder with respect
to remedying or contesting any such default, and Landlord shall accept such
performance by Mortgagee with the same force and effect as if furnished by
Tenant; provided, however, that Mortgagee shall not thereby or hereby be
subrogated to the rights of Landlord.
(c) If an Event of Default shall occur hereunder, then, before
Landlord shall be entitled to terminate this Lease on account of such Event of
Default, Landlord shall give to the holder of any such Mortgage a further notice
that such specified Event of Default remains unremedied, and the holder of such
Mortgage shall have the right to remedy any Event of Default arising from a
failure to pay Base Rent or Additional Rent within a period of twenty (20) days
after the service of such notice and to commence to remedy any other Event of
Default within a period of thirty (30) days after the service of such notice.
Section 15.5. Rights of Mortgagees. In case of the occurrence of an
Event of Default (other than an Event of Default of the character of a failure
to pay Base Rent or Additional Rent) if, within thirty (30) days after the
further notice referred to in Section 15.4 is given by Landlord to the holder of
a Mortgage, such holder shall:
(a) notify Landlord of its election to proceed with due diligence
promptly to acquire possession of the Premises or to foreclose the
Mortgage or otherwise to extinguish Tenant's interest in this Lease;
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(b) deliver to Landlord an instrument in writing duly executed and
acknowledged wherein the holder of the Mortgage agrees that:
(i) during the period that such holder or a receiver of rents
and profits appointed upon application of such holder shall benefit
from the provisions of this Section (until, by notice to Landlord,
such holder waives any further benefits under this Section with
respect to such Event of Default), it will pay or cause to be paid
to Landlord all sums from time to time becoming due under this Lease
for the Base Rent and Additional Rent; and
(ii) if delivery of possession of the Premises shall be made
to such holder or such receiver or, in the event such holder is an
Institution, to its nominee, whether voluntarily or pursuant to any
foreclosure or other proceedings or otherwise, such holder shall,
promptly following such delivery of possession, perform or cause
such nominee to perform, as the case may be, such of the covenants
and agreements herein contained on Tenant's part to be performed as
Tenant shall have failed to perform to the extent the same are of a
type which can reasonably be performed by a party other than the
Tenant and the defaults which cannot so reasonably be performed
shall no longer be deemed to be defaults hereunder as respects
Mortgagee or any nominee, or their successors and assigns; and
(c) If such holder is not an Institution deliver to Landlord
security sufficient in Landlord's reasonable opinion to secure the
obligations undertaken pursuant to clauses (a) and (b) above;
and provided that such default is in a nature that the same cannot practically
be cured by such Mortgagee without taking possession of the Premises, then
Landlord shall not be entitled to terminate this Lease on account of such Event
of Default and shall accept such performance, for such period or periods of time
as may be necessary for such holder, with the exercise of due diligence, to
extinguish Tenant's interest in this Lease and to perform or cause to be
performed all of the covenants and agreements to be performed by Tenant to the
extent the same are of a type which can reasonably be performed by a party other
than Tenant. Nothing herein contained shall be deemed to require the holder of a
Mortgage to continue with any foreclosure or other proceedings or, in the event
such holder or receiver shall acquire possession of the Premises, to continue
such possession, if the Event of Default in respect of which Landlord shall have
given a notice shall be remedied. If prior to any sale pursuant to any
proceeding brought to foreclose any Mortgage, or if prior to the date on which
Tenant's interest in this Lease shall
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otherwise be extinguished, the Event of Default in respect of which Landlord
shall have given a notice shall have been remedied and possession of the
Premises shall have been restored to Tenant, then the obligation of the holder
of the Mortgage pursuant to the instrument referred to in clause (b) of this
Section shall be null and void and of no further effect. Nothing herein
contained shall affect the right of Landlord, upon the subsequent occurrence of
any Event of Default, to exercise any right or remedy herein reserved to
Landlord.
Section 15.6. Remedies. (a) Upon the occurrence of an Event of
Default, subject, however to Section 15.3, in addition to any other remedies
available to Landlord at law or in equity or provided for herein, Landlord shall
have the option, upon five (5) business days' prior notice to Tenant, to
terminate this Lease and all rights of Tenant hereunder. In the event that
Landlord elects to so terminate this Lease, then Landlord may recover from
Tenant:
(i) the worth at the time of award of any unpaid rent
which had been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time
of award exceeds the amount of rent loss that Tenant proves could have
been avoided; plus
(iii) the worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the time of aware
exceeds the fair market rental value for the Premises for such period.
As used in clauses (i) and (ii) above, the "worth at the time of award" is
computed by allowing interest at the Prime Rate plus two (2%) percent. As used
in clause (iii) above, the "worth at the time of award" is computed by
discounting such award at an appropriate interest rate determined at the time.
(b) From and after the occurrence of an Event of Default, subject,
however, to Section 15.3, Landlord shall also have the right, with or without
terminating this Lease, upon notice to Tenant, to re-enter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant. No re-entry or taking possession of the Premises by Landlord pursuant
to this Section 15.6(b) shall be construed as an election to terminate this
Lease unless a written notice of such intention is given to Tenant. No entry or
re-entry by Landlord, whether had or taken under summary proceeding or
otherwise, shall absolve or discharge Tenant from any liability hereunder.
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(c) In the event that Landlord shall elect to re-enter as provided
in subsection (b) above or shall take possession of the Premises pursuant to
legal proceedings or pursuant to any notice provided by law, then if Landlord
does not elect to terminate this Lease as provided above, Landlord may, from
time to time, without terminating this Lease, either recover all rent (which
shall be deemed to included all Base Rent, Additional Rent, and other payments
and charges required to be made by Tenant hereunder), as it becomes due or relet
the Premises or any part thereof on terms and conditions as Landlord in its sole
discretion may deemed advisable for the whole or any part of the remainder of
the term or for a longer period, in Landlord's name, or as agent of Tenant, and
in connection therewith, Landlord may make repairs or alterations to the
Premises in such manner as Landlord may deem necessary or advisable. If the
Premises, or any part thereof, are leased to or occupied by Landlord, Joseph C.
DiFeo, Samuel X. DiFeo or any Affiliate of any thereof, the tenant or occupant
shall be deemed to be leasing or occupying the same on arms-length terms at the
then applicable fair market rental value of the premises in question, regardless
of the actual terms of or rental with respect to such leasing or occupancy.
(d) In the event Landlord shall, pursuant to subsection (c) above,
elect to so relet, the rents received by Landlord from such reletting shall be
applied: first to the cost and expenses of re-taking, repossessing, repairing
and/or altering the Premises and the expense of removing all persons and
property therefrom; second, to the costs and expenses incurred in securing any
new tenant or tenants; and third, to the payment of rent due and unpaid
hereunder and the residue, if any, shall be held by Landlord and applied to
payment of future Base Rent and Additional Rent as the same may become due and
payable. Should that portion of such rents received from such reletting during
any month, which is applied to the payment of Base Rent and Additional Rent
hereunder, be less than the Base Rent and Additional Rent payable during the
month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord
immediately upon demand therefor by Landlord. Such deficiency shall be
calculated and paid monthly. Tenant shall also pay to the Landlord, as soon as
ascertained, any reasonable costs and expenses incurred by Landlord in reletting
or in making such alterations and repairs not covered by the rents received from
such reletting. Suit or suits for the recovery of such deficiency or damage, or
for a sum equal to any installment or installments of rent, may be brought by
Landlord from time to time at Landlord's election and nothing herein contained
shall be deemed to require Landlord to await the date on which this Lease or the
term hereof would have expired by limitation had there been no such default by
Tenant; provided, however, that this subsection (d) shall cease to be applicable
on a going forward basis if Landlord makes the election described in subsection
(a) of this Section.
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(e) Landlord shall have no obligation to mitigate damages upon the
exercise of any of Landlord's rights or remedies under this Article 15.
Section 15.7. No Waivers. All rights, options and remedies of
Landlord contained in this Lease shall be construed and held to be cumulative,
and no one of them shall be exclusive of the other, and Landlord shall have the
right to pursue any one or all of such remedies or any other remedy or relief
which may be provided by law, whether or not stated in this Lease. Tenant hereby
expressly waives any and all rights to recover or regain possession of the
Premises or to reinstate or redeem its tenancy or this Lease as is permitted or
provided by or under any statue, law or a decision now of hereafter in force and
effect. Tenant also waives the provisions of any law now or hereafter in effect
relating to notice and delay in levy of execution in case of an eviction or
dispossess of Tenant for non-payment of rent. Tenant waives and shall waive any
and all rights to a trial by jury in the event that summary proceedings shall be
instituted by Landlord. The term "enter", "re-enter" "entry", or "re-entry" as
used in this Lease is not restricted to their technical legal meanings.
Section 15.8. New Leases. In case of the termination of this Lease
by reason of the happening of any Event of Default, Landlord shall give prompt
notice thereof to the holder of any Mortgage. So long as the Mortgagee has
complied with Sections 15.4 and 15.5, Landlord shall, on written request of such
holder, made at any time within 60 days after the giving of such notice by
Landlord, enter into a new Lease of the Premises with such holder, or its
designee, within thirty (30) days after receipt of such request, which new Lease
shall be effective as of the date of such termination of this Lease for the
remainder of the term of this Lease, at the same Base Rent and upon the same
terms, covenants, conditions and agreements as are herein contained; provided
that the holder of the Mortgage shall (a) contemporaneously with the delivery of
such request pay to Landlord the Base Rent and items of Additional Rent which
Landlord has specified as due in any notice to such holder, (b) pay to Landlord
at the time of the execution and delivery of said new Lease any and all sums for
the Base Rent and Additional Rent which would have been due hereunder from the
date of termination of this Lease (had this Lease not been terminated) to and
including the date of the execution and delivery of said new Lease, together
with all expenses, reasonably incurred by Landlord, in connection with the
termination of this Lease and with the execution and delivery of such new Lease,
less the net amount of all sums received by Landlord from any occupants of any
part or parts of the Premises up to the date of commencement of such new Lease,
and (c) on or prior to the execution and delivery of said new Lease, agree in
writing that promptly following the delivery of such new Lease, such holder or
its designee will perform or cause to be performed all of the other covenants
and agreements herein contained on Tenant's part to be performed to
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the extent that Tenant shall have failed to perform the same to the date of
delivery of such new Lease. Nothing herein contained shall be deemed to impose
any obligation on the part of Landlord to deliver physical possession of the
Premises to such holder of a Mortgage or its designee unless Landlord at the
time of the execution and delivery of such new Lease shall have obtained
physical possession thereof. Upon execution and delivery of such new Lease, any
subleases which may have theretofore been assigned and transferred to Landlord
shall thereupon be assigned and transferred, without recourse, by Landlord to
the new tenant. If a new lease of the premises be entered into pursuant to the
above, then the holder of the Mortgage, or any assignee or designee thereof, or
a purchaser at a foreclosure sale shall, for the remainder of the term of this
Lease, succeed to the interest of the Tenant hereunder, subject to the terms,
provisions, covenants and agreements on the part of Tenant to be performed as
provided above. If more than one Mortgagee shall request such new lease, such
new Lease shall be made with and delivered to the Mortgagee whose Mortgage is
prior in lien to those of any others, without regard to the time of request.
Landlord shall have no obligation to determine the lien priority as among
Mortgagees, but shall base its actions in dealing with a Mortgagee on
information contained in a title report issued by a title company acceptable to
Landlord. Any such new lease shall be expressly made subject to the rights, if
any, of Tenant under the terminated lease and of the rights of parties in
possession.
Section 15.9. [Intentionally deleted.]
Section 15.10. Multiple Mortgages. If at any time there shall be
more than one Mortgage, the holder of the Mortgage prior in lien shall be vested
with the rights under Sections 15.3 and 15.8 to the exclusion of the holder of
any junior Mortgage; provided, however, that if the holder of a Mortgage prior
in lien to any other Mortgage shall fail or refuse to exercise the rights set
forth in said Sections, each holder of a Mortgage in the order of the priority
of their respective liens shall have the right to exercise such rights; and
provided further, however, that with respect to the right of the holder of a
Mortgage under Section 15.8 to request a new Lease, such right may,
notwithstanding the limitation of time set forth in said Section, be exercised
by the holder of any junior Mortgage, in the event the holder of a prior
Mortgage shall not have exercised such right, more than 120 days but not more
than 140 days after the giving of notice by Landlord of the termination of this
Lease as in said Section provided.
Section 15.11. Elimination of Cross-Default and
Cross-Collateralization.
(a) The provisions of Section 15.1(c) shall no longer apply to this
Lease, and Landlord shall cease to be entitled to consider an Event of Default
to exist or to terminate this Lease
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on account of an Event of Default under Section 15.1(c), in any of the following
circumstances:
(i) If this Lease shall be assigned (but only if Landlord's
consent, if required hereunder, has been obtained), in a transaction
permitted hereunder, to an assignee which is not an Affiliate of Tenant
and provided that (i) such assignee or transferee does not thereafter
become an Affiliate of Tenant, or (ii) Tenant, or an Affiliate of Tenant,
does not thereafter become the Tenant under this Lease; or
(ii) If the holder of an Institutional Mortgage permitted
hereunder or its successors and assigns shall succeed Tenant as the Tenant
under this Lease; or
(iii) If Landlord shall cease to be (and so long thereafter as
Landlord shall continue not to be) an Affiliate of Joseph C. DiFeo or
Samuel X. DiFeo.
(b) For purposes of Section 15.1(c) a lease other than this Lease or
a Sublease which is originally considered a Group Lease or Group Sublease shall
cease to be a Group Lease or Group Sublease for such purposes if the landlord or
sublandlord under such lease or sublease shall cease to be an Affiliate of
Joseph D. DiFeo or Samuel X. DiFeo, but shall again be considered a Group Lease
or Group Sublease if and so long as the landlord or sublandlord under such lease
or sublease shall again be an Affiliate of Joseph C. DiFeo or Samuel X. DiFeo.
Section 15.12. Landlord Defaults; Landlord Guaranty. Pursuant to the
Landlord Guaranty, Landlord has guaranteed the performance by the landlords
under the Group Leases and the sublandlords under the Group Subleases. Any
successor to Landlord's interest hereunder shall be deemed to have agreed to be
bound by the terms of any such Landlord Guaranty (but shall have no liability
under such Landlord Guaranty at such time as it is not an Affiliate of Joseph C.
DiFeo or Samuel X. DiFeo, other than the obligation in the next sentence).
Landlord agrees that it will not assign or otherwise transfer the Premises or
this Lease unless the assignee or other transferee enters into a Landlord
Guaranty substantially in the same form of the Landlord Guaranty entered into by
Landlord (subject to the limitations on liability contained in the foregoing
sentence).
Section 15.13. Tenant Guaranty. Pursuant to the Tenant
Guaranty, Tenant has guaranteed the performance of the tenants under the
Group Leases and subtenants under the Group Subleases.
Section 15.14. Interest on Defaulted Sums. If either party shall
fail to pay any sums due hereunder within ten (10) days after the due date
thereof, such unpaid sums shall bear interest, payable on demand, from and after
the due date thereof
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until paid at a rate per annum equal to the Prime Rate plus two (2%) percent.
Section 15.15. Late Charge. If Tenant shall fail to pay all or part
of any installment of Base Rent on the date on which the same shall be due and
payable hereunder more than once in any twelve (12) month period, Tenant shall
pay to Landlord, within twenty (20) days after demand therefor by Landlord, a
late charge equal to the greater of (a) two (2%) percent of all or the portion
of such installment not paid when due, or (b) any late charge, interest charge
or other charge imposed upon Landlord by a Fee Mortgagee because Landlord was
unable to pay when due sums required to be paid under the Fee Mortgage because
of Tenant's failure as aforesaid. In applying this provision, it shall be
assumed that Landlord has no funds from which to pay sums required to be paid
under the Fee Mortgage in question other than the sums required to be paid by
Tenant to Landlord under this Lease.
ARTICLE 16.
INDEMNIFICATION
(a) Except to the extent due to negligence or willful misconduct of
Landlord, its agents, employees or contractors, from and after the date hereof,
Tenant shall indemnify and save harmless Landlord against and from any and all
claims arising during the Term (even if asserted after the end of the Term) (i)
by or on behalf of any person for injury to persons or damage to property
occurring in, on or about the Premises, or (ii) arising from the conduct or
management of or from any work or thing whatsoever done in or on the Premises,
or the use and occupancy of the Premises, or (iii) arising from any condition of
the Premises or any sidewalk adjoining the Premises, or of any vaults,
passageways or space therein or appurtenant thereto, or arising from any act of
negligence of Tenant, or any occupant of the Premises or any part thereof, or of
its or their agents, contractors, servants, employees, invitees or licensees and
from and against all judgments, costs, expenses and liabilities incurred in or
about any such claim or action or proceeding brought therein; and in case any
action or proceeding be brought against Landlord by reason of any such claim,
Tenant upon notice from Landlord shall defend such action or proceeding by
counsel reasonably satisfactory to Landlord. The provisions contained in this
subsection shall not be applicable to any environmental or other matters which
are the subject matter of Article 22 of this Lease, and the rights and
obligations of the parties with respect to such maters shall be governed by such
Section(s) of this Lease and not by this subsection.
(b) Landlord shall indemnify and save harmless Tenant against and
from any and all claims arising during the Term (even if asserted after the end
of the Term) to the extent due to negligence or willful misconduct of Landlord,
its agents, employees or contractors, from and after the date hereof, solely
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with respect to and arising from any entry of any thereof into or upon the
Premises, (i) by or on behalf of any person for injury to persons or damage to
property occurring in, on or about the Premises, or (ii) any act of negligence
or willful misconduct of Landlord, or of its agents, contractors, servants,
employees, invitees or licensees, from and after the date hereof, and from and
against all judgments, costs, expenses and liabilities incurred in or about any
such claim or action or proceeding brought therein, solely with respect to an
entry of any thereof into or upon the Premises; and in case any action or
proceeding be brought against Tenant by reason of any such claim, Landlord upon
notice from Tenant shall defend such action or proceeding by counsel reasonably
satisfactory to Landlord. The provisions contained in this subsection shall not
be applicable to any environmental or other matters which are the subject matter
of Article 22 of this Lease, and the rights and obligations of the parties with
respect to such matters shall be governed by such Section(s) of this Lease and
not by this subsection.
ARTICLE 17.
RENEWAL PRIVILEGES
Section 17.1. First Renewal Term. Provided that this Lease is in
full force and effect and provided that no Event of Default exists at the time
of Tenant's exercise of the renewal option, Tenant shall have the option to
renew this Lease and extend the Term, by giving notice as provided in Section
17.4, for a further period of five (5) years, to commence on the expiration of
the initial Term hereof and to expire on the fifth (5th) anniversary of such
commencement date upon all of the terms, covenants and conditions set forth in
this Lease except as otherwise provided in Section 17.3, and except that Tenant
shall only have the right to further renew this Lease in accordance with Section
17.2.
Section 17.2. Second Renewal Term. Provided that this Lease is in
full force and effect and provided that no Event of Default exists at the time
of Tenant's exercise of the renewal option, and provided that Tenant has
exercised the renewal option contained in Section 17.1, Tenant shall have the
further option to renew this Lease and extend the Term, by giving notice as
provided in Section 17.4, for a further period of five (5) years, to commence on
the expiration of the first renewal term pursuant to Section 17.1 and to expire
on the fifth (5th) anniversary of such commencement date, upon all of the terms,
covenants and conditions set forth in this Lease except as otherwise provided in
Section 17.3, and except that Tenant shall have no further right to renew this
Lease.
Section 17.3. Renewal Rent. The Base Rent shall be adjusted as of
the commencement date of each renewal term pursuant to Sections 17.1 and 17.2,
to an amount equal to the fair market rental value of the Premises, determined
as provided below, as of the first (1st) day of the renewal term in question,
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which fair market rental value shall be determined by agreement of the parties
or, failing such agreement within one (1) year prior to the first day of the
renewal term in question, by an arbitration which shall be conducted in the
manner provided in Article 18 in which the arbitrator shall determine the fair
rental value of the Premises (for automobile dealership use only (or any other
Vehicle-Related Use or other use for which the Premises is in fact being used,
but only to the extent that such other Vehicle-Related Use or other use is a
higher and better use of the Premises than as an automobile dealership), and
taking into consideration the obligations of Tenant under this Lease (the
arbitrator is to conclusively presume that the Premises are in good condition
and repair, are undamaged by any fire or other casualty and are free of any
environmental contamination), the character and location of the Premises, the
absence of a brokerage commission, work letter or rent concessions, any further
provisions for adjustment of Base Rent, and other factors customarily taken into
account in calculating fair market rental value of real property, but excluding
any value added by Alterations in the nature of new Buildings (other than where
Tenant has demolished and replaced a Building existing on the date hereof, in
which event any value added by such Alterations shall be included) or additions
to Buildings existing on the date hereof and undertaken by Tenant, but including
renovations or restorations to (but not expansions of) Buildings existing on the
date hereof, determined as of the date the Base Rent is to be adjusted). In no
event shall Base Rent for any renewal term (a) be reduced below an amount
determined pursuant to the Rent Adjustment and Takeback Agreement, or(b) be
increased to an amount greater than the amount determined pursuant to the Rent
Adjustment and Takeback Agreement.
Section 17.4. Renewal Notices. (a) Tenant shall exercise its right
to renewal terms pursuant to Sections 17.1 and 17.2 by giving Landlord notice of
its election to do not less than six (6) months prior to the commencement date
of the renewal term in question (or, if later, ten (10) business days after the
applicable Meeting (as defined in Article 18) with respect thereto) and upon the
giving of such notice, this Lease, subject to the provisions of this Article,
shall be deemed to be renewed and the Term shall be deemed extended for the
period of the relevant renewal term without the execution of any further lease
or instrument.
Section 17.5. Confirmation. After Base Rent for either renewal term
has been determined, then, at either party's request, the parties shall enter
into an agreement confirming the amount of such Base Rent, but failure to enter
into the same shall not affect the rights or obligations of the parities
hereunder.
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ARTICLE 18.
ARBITRATION AND APPRAISAL
Section 18.1. Rules. In such cases where this Lease provides for the
determination of any matter by arbitration or ADR, other than as provided in
Section 18.2, the same shall be settled and finally determined by means of
alternative dispute resolution as provided in the New Jersey Alternative
Procedure for Dispute Resolution Act, N.J.S.A. 2A:23A-1, et seq., as in effect
on the date of this Lease, (the "Act") upon written notice given by any party to
the other (the "Dispute Notice"), and to the umpire hereafter established.
Except to the extent required by law, the proceedings under the Act shall be
confidential and shall not be disclosed or discussed with persons not parties to
this Lease without the consent of all parties to the dispute. In the event a
party to a dispute may suffer irreparable harm or injury, such party shall have
the ability to seek provisional remedies, including but not limited to
injunctive relief and other equitable remedies, to the fullest extent permitted
by law pending completion of the process provided under this Article 18.
Section 18.2. Umpires. (a) Within thirty (30) days after the Dispute
Notice is given the parties shall select three (3) umpires from among the
persons listed in Subparagraphs (1) through (4) below in the order of priority
listed below, i.e., if a person meeting the requirements of Subparagraph (1) is
not able or willing to serve, a person meeting the requirements of Subparagraph
(2) shall be selected, and so forth. In addition to meeting the requirements of
Subparagraph (1), (2), (3) or (4) below, the umpires must also satisfy the
requirements described in Subparagraphs (b) and (d) below. A potential umpire
is:
(1) Any retired judge of a United States District Court or a United
States Circuit Court of Appeals;
(2) Any retired judge of any State Superior, Appellate or Supreme
Court;
(3) Any attorney licensed to practice law for more than fifteen (15)
years or certified public accountant who has been certified for more than
fifteen (15) years; and, in either case, who has either directly or indirectly,
no conflict of interest; or
(4) Such other person upon whom the members of the selection group
agree.
(b) In addition to the requirements described in Section 18.2 (a)
above, the umpires selected hereunder must:
(1) Be free of any potential for bias or conflict of interest with
respect to either of the parities hereto, directly or indirectly or by virtue of
any direct or indirect financial interest, family relationship or close
friendship; and
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(2) Be in a position to immediately hear the dispute and thereafter
render a resolution within the time specified in Section 18.7 below.
(c) If the umpires are not selected within the period of time
specified in Section 18.2(a) above, Landlord, on the one hand, and Tenant, on
the other hand, each shall promptly select an umpire which umpires shall select
a third umpire who shall be the sole umpire. If the parties fail to so select
umpires pursuant to the foregoing provisions within twenty (20) days after the
expiration of the period described in Section 18.2(a), the sole umpire shall be
selected by the Chief Judge of the United States District Court for the District
of New Jersey or, if the Chief Judge is unable or unwilling to act, by the Chief
Judge of the Southern District of New York or the President of the Bar
Association of the City of New York. Such selection shall be in accordance with
the requirements of Sections 18.2(a) and 18.2(b) above. The umpire to be
selected pursuant to this Section 18.2(c) must be designated within thirty (30)
days after the expiration of the period described in Section 18.2(a) above.
(d) Anything to the contrary herein notwithstanding, the following
persons are not eligible to be an umpire under this Article: a party to this
Lease or any affiliate thereof; an employee or co-employee or any party to the
dispute; or any person having material or undisclosed, financial or personal
interests dependent on the success or failure of any of the parties.
(e) An umpire shall disqualify himself or herself if he or she is
unable to handle the process promptly so as to render a resolution within a
reasonable time, in no event to exceed forty-five (45) days after final
testimony and/or briefs and in all events not to extend beyond six months from
the date the umpire is chosen, or such longer period to which the parties to the
dispute and the umpire may agree.
Section 18.3. Time and Place of Alternative Resolution. The
alternative resolution shall be held at such place as the umpire may determine
within Essex County, New Jersey or such other location to which the parties may
agree, to commence not later than ten (10) days after the umpire had been
determined in accordance with Section 18.2.
Section 18.4. Fees. All fees and expense (including transcripts,
room rental and fees of the umpire) of alternative dispute resolution, shall be
paid as follows: 25% by the party or parties served with the Dispute Notice and
25% by the person(s) serving the Dispute Notice, with the remaining 50%
allocated 10% to the prevailing party (or parties) and 40% to the non-prevailing
party (or parties), as determined by the umpire (if the umpire does not
determine a prevailing party then pro-rata to each of the material parties to
the dispute as determined by the umpire) provided that the umpire shall have the
right to order
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that such fees be paid in a different percentage if any of the parties has acted
in bad faith (in which case he may shift other's shares to the bad faith
party(ies)). The fees payable to the umpire shall be his usual hourly rates for
consulting or dispute resolution services, as the same may be in effect from
time to time. Each party shall pay his own legal fees, costs and disbursements.
Section 18.5. Discovery. Each party shall be entitled to discovery
by way of oral deposition, inspection and copying of all relevant documents
within the care, custody or control of a party or a witness, and when authorized
by the umpire, by way of interrogatories. All discovery shall be complete within
forty-five (45) days of the appointment of the umpire. All documents to be
relied upon by any party to the proceeding shall be provided to the others no
later than two weeks before the hearing date for the proceedings. The time
periods for discovery may be extended by the umpire for good cause, provided
that he is able to meet the time requirement of Section 18.7.
Section 18.6. Provisional Remedies. When appropriate under
applicable New Jersey Substantive and procedural law, the umpire shall have full
and complete authority to award provisional relief, on an ex parte basis or
otherwise.
Section 18.7. Time and Method for Resolution. The umpire shall make
the award and serve notice thereof upon all parties within six (6) months of the
date the umpire is designated, or such longer period to which the parties to the
dispute and the umpire may agree. If the umpire fails to make his decision in
accordance with substantive law, or to properly apply the facts to the law, the
umpire's award will be deemed to have been procured by "undue means" and "beyond
his power". Any party may apply to court in accordance with the Act to have the
umpire's decision confirmed, reviewed, modified, affirmed or remanded to the
umpire with directions.
Section 18.8. Act and Agreement Govern. Except as otherwise provided
herein, the Act shall govern the procedures and methods for any Alternative
Dispute Resolution undertaken pursuant to this Lease. Except as expressly
provided above, the umpire may not modify the provisions of this Article. Except
as expressly provided to the contrary above, and to the extent otherwise not
inconsistent with this Lease and the Act, proceedings under this Article,
including efforts to mediate the dispute shall be governed by the "Rules for
Non-Administered Arbitration of Business Disputes" (Final Draft, June 14, 1989)
by the CPR (NY).
Section 18.9. Procedure for Determining Fair Market Rental Value.
(a) In each instance under this Lease where it shall become necessary to
determine the fair market rental value of the Premises, the fair market rental
value shall be determined in accordance with the provisions of this Section. If
by the
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date which is two hundred seventy (270) days before the date on which the First
Adjustment, or the Second Adjustment, is to become effective, or by the date
which is one year before the commencement date of any renewal term hereunder,
the parties have been unable to agree on the fair market rental value, then
Landlord shall send Tenant a notice (the "Meeting Notice") specifying in
Landlord's order of preference those alternative dates (on business days) and
times (between 9:00 a.m. and 5:00 p.m. local time) for Landlord and Tenant to
meet at the office of the Landlord or such other locations in the northern New
Jersey, New York Metropolitan area to exchange notices ("Valuation Notice")
specifying Landlord's and Tenant's respective determinations of the fair market
rental value for the Premises. Within thirty (30) days after the giving of the
Meeting Notice, Tenant shall give Landlord a notice (the "Meeting Designation
Notice") designating which of the alternative days and times specified in the
Meeting Notice shall be acceptable to Tenant (such date and time for the meeting
between Landlord and Tenant at the location specified by Landlord being herein
call the "Meeting"). At the Meeting Landlord and Tenant shall exchange their
Valuation Notices and both Landlord and Tenant shall initial a copy thereof for
both Landlord's and Tenant's records. If Landlord's determination of the fair
market rental value for the Premises as set forth in Landlord's Valuation Notice
is less than Tenant's determination as set forth in Tenant's Valuation Notice,
the fair market rental value for the Premises shall be the average of the
Landlord's and Tenant's determinations. If Landlord's determination is greater
than Tenant's determination and within ten (10) business days after the Meeting
the parties shall fail to agree upon the fair market rental value for the
Premises, the same shall then be determined as herein provided. If either party
shall fail to appear at the Meeting, for other than force majeure reasons (in
the event of a force majeure reason the parties shall endeavor in good faith to
have the Meeting within one week thereafter in which event all references herein
to the Meeting shall be to such delayed Meeting or, failing that, the Meeting
shall take place on the tenth (10th) business day following the original
specified Meeting Date at 10:00 o'clock a.m. at the place designated in the
Meeting Notice), then the first sentence of subsection (b) of this Section shall
apply. If the Landlord shall fail to give the Meeting Notice by the date which
is two hundred forty (240) days (in the case of the First Adjustment or Second
Adjustment) or eleven (11) months before the commencement of the renewal term in
question (in the case of an adjustment to be made in connection with a renewal
term) Tenant shall have the right to so notify Landlord in writing and Landlord
shall be obligated to deliver the Meeting Notice, within ten (10) business days
after its receipt of Tenant's notification of such failure on its part. If
Landlord again fails to deliver the Meeting Notice, Tenant shall have the right
to deliver the Meeting Notice, prior to delivery by Landlord of such Meeting
Notice. If Tenant so elects to deliver any Meeting Notice, the above provisions
shall apply thereto as if Landlord were Tenant and Tenant were Landlord as
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appropriate give the sense and circumstance. In each Valuation Notice the
parties shall also designate the name of an appraiser. The parties shall cause
the appraiser designated by them in each Valuation Notice to meet towards the
end of agreeing on a single appraiser (the "Deciding Appraiser") to determine
the fair market rental value of the Premises. If, within thirty (30) days after
the Meeting, the appraisers selected by the parties are unable to agree on a
Deciding Appraiser then either Landlord or Tenant, on behalf of both, may
request such appointment by the presiding justice of the highest court in the
county in which the premises are located for the appointment of a Deciding
Appraiser and neither party shall raise any questions as to the court's full
power and jurisdiction to entertain the application and make the appointment.
The appraiser designated by the parties in their Valuation Notices, the
appraiser selected by such two appraisers (to the extent that they can agree)
and the appraiser designated by the presiding justice (if the need therefor
arises) shall all be members of the American Institute of Real Estate Appraisers
(or a successor organization), shall be impartial, shall have M.A.I.
credentials, and shall be doing business as such in the county in which the
Premises are located for a period of at least ten (10) years before the date of
his appointment. In determining fair market rental value for the Premises the
Deciding Appraiser shall choose which of Landlord's or Tenant's determination of
fair market rental value as set forth in their Valuation Notices is closest to
the Deciding Arbitrator's determination of fair market rental value and such
determination for all purposes shall be deemed to be the fair market rental
value. It is the intention of the parties that Valuation Notices be exchanged
with respect to all Premises subject to Group Leases at the Meeting. It is also
the intention of the parties that the Deciding Appraiser be the same person for
all Premises with respect to Group Leases which are in the same county; that is,
the same person shall determine fair market rental value for all Premises in the
same county in which the application of these provisions contemplate that such
determination will be made by the Deciding Appraiser. The decision of the
Deciding Appraiser shall be final and conclusive on the parties. The Deciding
Appraiser shall offer the parties a reasonable opportunity to present their
cases as to fair market rental value, including the testimony of other
appraisers and the introduction of appraisal reports. Each party shall bear the
costs of its appraiser, and the fees and expenses of the Deciding Appraiser
shall be shared equally by both parties.
(b) If, on the date on which Base Rent hereunder is to be adjusted,
the new Base Rent has not been finally determined pursuant to this Section,
Tenant shall pay, until the new Base Rent is finally determined, as new Base
Rent an amount equal to one-half of the difference between Landlord's proposal
and Tenant's proposal (notwithstanding the foregoing, if either party shall fail
to appear at the Meeting, if such party is Tenant, Tenant shall pay, until the
new Base Rent is finally determined, as new Base Rent an amount equal to
Landlord's proposal, and if
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such party is Landlord, Tenant shall pay, until the new Base Rent is finally
determined, as new Base Rent an amount equal to Tenant's proposal.) When the new
Base Rent is finally determined, appropriate adjustments shall be made as
follows: (i) any underpayment by Tenant shall be paid by Tenant within thirty
(30) days after the new Base Rent is finally determined, and (ii) any
overpayment by Tenant shall be credited against the next installments of Base
Rent due hereunder.
ARTICLE 19.
REMEDIES
Section 19.1. Remedies Not Exclusive. The specified remedies to
which either party may resort under the terms of this Lease are cumulative and
are not intended to be exclusive of any other remedies or means of redress to
which such party may be lawfully entitled in case of any breach or threatened
breach by the other party hereto of any provision of this Lease. The failure of
either party to insist in any one or more cases upon the strict performance of
any of the covenants of this Lease or to exercise any option herein contained
shall not be construed as a waiver or a relinquishment for the future of such
covenant or option (except as otherwise expressly provided herein). A receipt by
Landlord of the Base Rent or Additional Rent with knowledge of the breach of any
covenant hereof shall not be deemed a waiver of such breach, and no waiver by
either party of any provision of this Lease shall be deemed to have been made
unless expressed in writing and signed by such party. In addition to the other
remedies in this Lease provided, both parties shall be entitled to the restraint
by injunction of the violation, or attempted or threatened violation, of any of
the covenants, conditions or provisions of this Lease by the other party hereto.
In the event of any litigation between the parties, the party which does not
prevail shall reimburse the other party, within ten (10) days after demand
therefor, for the reasonable legal fees and disbursements incurred by the
prevailing party in such litigation.
ARTICLE 20.
CERTIFICATES OF LANDLORD AND TENANT
Either party hereto shall, at any time and from time to time, upon
not less than fifteen (15) days' prior notice from the other party, execute,
acknowledge and deliver to the other party (or to such person or entity
designated by the other party) a statement in writing certifying that this Lease
is unmodified and in full force and effect (or if there have been modifications,
that this Lease is in full force and effect as modified and stating the
modifications), and the dates to which the Base Rent and other charges have been
paid, stating whether or not to the best knowledge of the signer of such
statement the other party is in default in keeping, observing or performing any
covenant or agreement contained in this Lease and, if there be a default,
specifying each such default, and containing such other customary
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certifications as the other party may reasonably request, it being intended that
any such statement delivered pursuant to this Article may be relied upon by the
other party (or by the person or entity designated by the other party), but
reliance on such statement may not extend to any default as to which the signer
shall have had no actual knowledge, after due inquiry.
ARTICLE 21.
SUBORDINATION
Section 21.1. Subordination. This Lease shall be subject and
subordinate to each Fee Mortgage which may now or subsequently affect Landlord's
interest in the Premises; provided, that this Lease shall not be so subject or
subordinate unless and until the holder of each Fee Mortgage shall execute and
deliver to Tenant a non-disturbance agreement, in form reasonably acceptable to
Tenant, providing in substance that, so long as this Lease shall be in full
force and effect, this Lease shall not be terminated, nor shall Tenant's use,
possession or enjoyment of the Premises or exercise of its rights under this
Lease be terminated, nor shall Tenant's use, possession or enjoyment of the
Premises or exercise of its rights under this Lease be interfered with, nor
shall the leasehold estate granted by this Lease be affected in any other
manner, by any foreclosure of or other action to enforce any Fee Mortgage.
Section 21.2. Attornment. In the event of the enforcement by the
holder of any Fee Mortgage to which this Lease is subject and subordinate, as
provided in Section 21.1, of the remedies provided for by law or by such Fee
Mortgage, then Tenant shall automatically become the tenant of such holder, or
any person succeeding to the interest of such holder, without change in the
terms or provisions of this Lease; provided, that neither such holder nor
successor in interest (unless such holder or successor is an Affiliate of
Landlord) shall be bound by (a) any payment of Base Rent for more than one month
in advance except prepayments in the nature of security for the performance by
Tenant of its obligations under this Lease or (b) any surrender, termination
(other than in accordance with the terms of this Lease), cancellation, amendment
or modification of this Lease made subsequent to the making of the Fee Mortgage
in question and the notification of Tenant as to the name and address of such
holder, without the consent of such holder or successor in interest, and (c)
neither such holder nor successor in interest shall be liable for any act or
omission of Landlord (but shall be obligated to perform all continuing
obligations of Landlord hereunder after such holder or successor in interest
shall succeed to Landlord's rights in the Premises). Upon request by such holder
or successor in interest, Tenant shall execute and deliver an instrument or
instruments, reasonably requested by such holder or successor in interest,
confirming the subordination and attornment provided for herein.
Section 21.3. Current Fee Mortgage.
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(a) It shall be a condition precedent to any of Tenant's obligations
hereunder that Landlord has obtained, for the benefit of Tenant, from the holder
of any Fee Mortgage described in Section 6.2(b)(i), a non-disturbance agreement
satisfying the requirements of Section 21.1 and, in addition, pursuant to which
such Fee Mortgagee:
(i) agrees (A) not to require Tenant to pay Impositions earlier than
the date, or in some manner other than as, required under Section 3.1, not
to require Tenant to pay some or all of the Impositions in escrow to such
Fee Mortgagee as contemplated under Section 3.7, not to require insurance
in addition to that required in Section 4.1(a)(i) through (v), not to
prohibit or limit Tenant's rights under Section 4.5, and not to prohibit
or limit Tenant's rights under Article 10 or Article 14, and (B) to waive
any right of such Fee Mortgagee in the Fee Mortgage to approve or consent
to, or to declare a default under the Fee Mortgage on account of, Tenant's
exercise of any of the foregoing rights; and
(ii) agrees to apply or permit application of insurance proceeds and
Condemnation Proceeds in accordance with the provisions of Articles 8, 9,
10 and 11.
Section 21.4. Performance of Obligations. Landlord agrees to perform
all of Landlord's obligations under any Fee Mortgage encumbering all or any part
of the Premises, except to the extent that, under this Lease, such obligations
are the responsibility of Tenant to perform.
Section 21.5. Special Fee Mortgage Provisions. (a) Whenever in this
Lease a right of Tenant to do or not to do something is conditioned upon the
consent or approval of a Fee Mortgagee (including an Institutional Fee
Mortgagee) or upon such doing or not doing of the thing in question being
consistent with the provisions of the Fee Mortgage in question, or wherever a
Fee Mortgagee is granted a right hereunder, the following provisions shall apply
as respects the rights of Tenant being limited thereby:
(a) Neither Landlord nor any Affiliate of Landlord, or of
Joseph C. DiFeo or Samuel X. DiFeo shall be deemed to be a Fee
Mortgagee for such purposes, or shall any mortgage held thereby be
deemed a Fee Mortgage (including a purchase money mortgage held by
any thereof upon a sale of the Premises) for such purposes.
(b) If a consent, approval or waiver is obtained or is not
required from the holder of a first Fee Mortgage, no consent,
approval or waiver for the matter in question is required from any
subordinate Fee Mortgagee.
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(c) If Landlord is obligated to or does grant a consent or
approval, or is not required to grant a consent or approval
hereunder, to any action or failure to act by Tenant, or any other
matter relating to this Lease, but this Lease requires a consent,
approval or waiver from a Fee Mortgagee, then Landlord agrees, at
its sole cost and expense, to use its best efforts to obtain such
consent, approval or waiver (but Landlord shall not be obligated to
give up any right or to make any payment to the Fee Mortgagee,
unless Tenant shall agree to be responsible for such payment, in
order to grant such consent, approval or waiver), and agrees that if
Landlord shall fail or refuse to use its best efforts to obtain such
consent or approval, then Tenant shall have the right to request the
same separately (but upon prior notice to Landlord) in the name of
Tenant or, if required, in the name of Landlord, from the Fee
Mortgagee.
(d) If and so long as the reason for the Fee Mortgagee's
failure or refusal to grant such consent, approval or waiver is due
to a default by Landlord under the Fee Mortgage in question (other
than a default caused by a default by Tenant under this Lease), then
any requirement of this Lease that Tenant needs to obtain such
consent, approval or waiver shall not apply to Tenant.
(e) Notwithstanding any provisions of this Lease to the
contrary, this Lease is not intended to, and shall not, grant rights
to any Fee Mortgagee greater than the rights, if any, possessed by a
Fee Mortgagee under any Fee Mortgage on the date hereof (as such
rights may have been modified by an agreement described in Section
21.3 or any other agreement in favor of Tenant entered into by such
Fee Mortgagee on or before the date hereof), but, subject to
subsection (f) of this Section, if, after the date hereof, a Fee
Mortgage is entered into by Landlord securing an amount equal to or
less than the Refinanced Amounts (as hereinafter defined), then the
Fee Mortgagee holding such Fee Mortgage shall be entitled to the
benefit of the rights granted hereunder to a Fee Mortgagee to the
extent possessed by any Fee Mortgagee on the date hereof (as such
rights may have been modified by an agreement described in the
parenthetical in the first sentence of this subsection).
Notwithstanding any provision of this Lease granting any rights to a
Fee Mortgagee, qualifying any of Tenant's rights if the same would
constitute a default under a Fee Mortgage, requiring Tenant to
obtain a consent, approval or waiver of a Fee Mortgagee in order to
exercise any of its rights hereunder, or requiring Tenant to pay any
sums to a Fee Mortgagee, such provisions shall only apply to the
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extent that, as of the date hereof, under the existing terms of a
Fee Mortgage, such rights are required to be granted to the Fee
Mortgagee, such rights of Tenant would constitute such a default,
such consent, approval or waiver is required, or such payments are
required to be made. In no event shall Tenant be restricted by any
rights of any Fee Mortgagee which such a Fee Mortgagee on the
Premises does not so possess on the date hereof.
(f) If, after the date hereof, a Fee Mortgage is entered into
by Landlord securing an amount greater than the amounts (the
"Refinanced Amounts") required to refinance the sums secured by the
prior Fee Mortgage, plus customary costs incurred in the refinancing
transaction (for example, without limitation, commitment fees,
attorneys' fees, mortgage title insurance premiums, and recording
charges or taxes), or if and so long as the Fee Mortgagee is an
Affiliate of Landlord, Joseph C. DiFeo, Samuel X. DiFeo or the then
Landlord, then, for purposes of subsection (e) of this Section,
there shall be deemed to have been no Fee Mortgage in effect on the
date hereof (that is, no provision of this Lease which limits
Tenant's rights subject to the provisions of Section 21.5 shall
apply which requires the consent, approval or waiver of a Fee
Mortgagee for Tenant to exercise its rights hereunder, or requires
Tenant to conform to the provisions of a Fee Mortgage). If, to
circumvent the foregoing sentence, a refinancing shall be split into
more than one (1) Fee Mortgage with the same Fee Mortgagee or with
more than one (1) Fee Mortgagee which are Affiliates of each other,
and the Fee Mortgages in the aggregate would secure an amount
greater than the Refinanced Amounts, then to all such Fee Mortgages
there shall be deemed to have been no Fee Mortgage as the date
hereof.
ARTICLE 22.
HAZARDOUS MATERIALS
Section 22.1. (a) Discharges. If Tenant receives any actual notice
of the happening of any event on or after the date of this Lease involving an
emission, spill, release or discharge (including any "Release" as defined in the
Master Agreement) into or upon (i) the air, (ii) soils or (iii) surface water or
ground water, of any toxic or hazardous substances or wastes (intended hereby
and hereafter to include any and all such material listed in any federal, state
or local law, code or ordinance and all rules and regulations promulgated
thereunder (including all "Environmental Law" as defined in the Master
Agreement), as hazardous (including all "Hazardous Substances" as defined in the
Master Agreement) (any of which is hereafter referred to as a "Hazardous
Discharge"), or any complaint, order, directive, claim, citation or notice by
any governmental authority
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(including any "Notice" as defined in the Master Agreement) or any other person
or entity (including any "Environmental Agency" as defined in the Master
Agreement) with respect to the following events or matters occurring on or after
the date of this Lease (a) air emissions, (b) spills, releases or discharges to
soils or any improvements located thereon, surface water, ground water or the
sewer, septic system or waste treatment, storage or disposal systems servicing
the Premises, (c) noise emissions, (d) solid or liquid waste disposal, (e) the
use, generation, storage, transportation or disposal of toxic or hazardous
substances or wastes or (f) other Environmental, Health and Safety Matters (as
defined in the Master Agreement) affecting Tenant, the Premises, any
improvements located thereon, or the business therein conducted (any of which is
hereafter referred to as an "Environmental Complaint"), then Tenant at its sole
expense shall give immediate notice to Landlord. Subject to Landlord's rights
and obligations hereinafter provided and the Dealership's rights and obligations
under Section 4.231 of the Master Agreement and subject to cost allocation
pursuant to Subparagraph 22.7 below and Section 4.231 of the Master Agreement,
Tenant shall initiate and complete all steps and actions necessary or advisable
to cleanup, remove, restore, resolve and minimize the impacts of the Hazardous
Discharge or Environmental Complaint. Tenant shall not be in breach of its
duties under this Section 22.1 by reason of Dealership's exercise of its right
to act as manager of environmental issues under Section 4.231 of the Master
Agreement.
(b) Without limitation of the foregoing, Landlord shall have the
option, but shall not be obligated, to exercise any of its rights as provided in
this Lease, and may enter onto the Premises and/or take any actions as it deems
necessary or advisable upon notice to Tenant (except no notice shall be required
in emergent situations) to cleanup, remove, resolve or minimize the impact of,
or otherwise deal with, any Hazardous Discharge or Environmental Complaint upon
and after Landlord's receipt of any notice from any person or entity asserting
the happening of a Hazardous Discharge or an Environmental Complaint on or
pertaining to the Premises. All costs and expenses incurred by Landlord in the
exercise of any such rights shall be deemed to be additional rent hereunder,
subject however to allocation of costs pursuant to Subparagraph 22.7 below.
Section 22.2. Lien. If any federal, state or local agency imposes a
lien in a liquidated amount upon the Premises or any portion thereof by reason
of the occurrence of a Hazardous Discharge or Environmental Complaint as a
result of Tenant's operations at the Premises or Tenant's failure to perform as
required under this Lease then Tenant shall within thirty (30) days thereafter
either (i) eliminate or satisfy such lien or (ii) post security or financial
assurances in form and amount reasonably satisfactory to Landlord to secure
against enforcement of the lien. As to liens in unliquidated amounts, Tenant
shall act promptly and in good faith to obtain the removal or satisfaction of
such lien.
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Section 22.3. Reports. (a) Tenant shall promptly provide to Landlord
true, accurate and complete copies of any and all documents, including reports,
submissions, notices, orders, directives, findings and correspondence made by
Tenant to New Jersey's Department of Environmental Protection and Energy
("NJDEPE"), the United States Environmental Protection Agency ("EPA"), the
United States Occupation Safety and Health Administration ("OSHA") or any other
federal, state or local authority pursuant to any federal, state or local law,
code or ordinance and all rules and regulations promulgated thereunder which
require or involve information and submissions concerning Environmental Health
and Safety Matters (as defined in the Master Agreement) (including any
"Environmental Law" as defined in the Master Agreement).
(b) Without limitation of the foregoing, unless otherwise furnished
by the Dealerships, Landlord and Tenant shall promptly furnish to the other:
(i) true and complete copies of all documents, submissions, and
correspondence provided to or received from any environmental agencies;
(ii) true and complete copies of any Notice;
(iii) true and complete copies of all sampling and test results
obtained from samples and tests taken in and around the Premises; and
(iv) notice of the date and time of all meetings with any
Environmental Agency.
Section 22.4. Rights. Upon reasonable notice to Tenant, Tenant shall
give any representatives of Landlord access during normal business hours to, and
permit any of them to examine, audit, copy or make extracts from, any and all
books, records and documents in possession of Tenant, its agents or any
independent contractor relating to Tenant's or the Premise's environmental,
health or safety affairs and to inspect the Premises.
Section 22.5. Compliance. (a) Tenant shall, at Tenant's initial
expense, but subject to the cost allocations in Subparagraph 22.7 below,
promptly comply with all laws and regulations governing sales, transfer or
cessation of operations at a place of business including he Environmental
Cleanup Responsibility Act N.J.S.A. 13: 1K-6 et seq. and the Connecticut
Transfer Act, Connecticut General Statute Section 22a-134 et seq. and any
other law, rule or regulation or legal requirement applicable to the Premises
by reason of which law there is a requirement for sampling, investigation,
remediation and/or filings concerning the environmental condition of the
Premises, as to all events happening after the date of this Lease
(collectively "ECRA").
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(b) At no expenses to Landlord, Tenant shall promptly provide all
information requested by Landlord to determine ECRA applicability to the Tenant
(or any subtenant or assignee of Tenant) and shall promptly sign affidavits
evidencing any and all facts relevant to that determination when requested by
Landlord.
(c) Tenant and Landlord shall immediately furnish to the other party
true and complete copies of all documents, reports, submissions, notices,
orders, directives, findings and correspondence and other materials pertinent to
compliance with ECRA as such are issued or received by such party. Tenant and
Landlord shall also promptly furnish to the other party true and complete copies
of all sampling and test results obtained from all environmental and/or health
samples and tests taken at and around the Premises.
Section 22.6. Partnerships. (a) Notwithstanding any provision of
this Article 22 to the contrary, it is agreed that the Partnership (as defined
in the Master Agreement) as Tenant shall not bear responsibility for
Environmental Claims (as defined in Sections 4.23 and 4.231 of the Master
Agreement) (i) which preexist the date of this Lease and (ii) which are
unrelated to Vehicle Related Uses and are unrelated to the use, ownership or
operation of the Premises by the applicable Dealerships (the "Landlord
Environmental Claims") provided, however, that, in consideration of the Landlord
entering into this Lease, the parties hereto until the termination of this Lease
(or until the later expiration of the then current term of this Lease) if
terminated by reason of a Tenant default, shall deem all Landlord Environmental
Claims to be Class I Environmental Claims governed by Section 4.231(a)(1) (to
the extent relating to the Bound Brook, New Jersey Premises problem which is the
subject of that Section) and otherwise Class II Environmental Claims governed by
Section 4.231(a)(2) of the Master Agreement in all respects (except that the
amounts set forth in such paragraph shall be allocated with the aggregate of all
amounts paid by Landlords and Dealerships on the one hand and Partnerships
(under the Master Agreement and/or as Tenant) on the other in counting to
satisfy the limits of the levels of cost sharing set forth in Section 4.231).
The parties hereto acknowledge and agree that there shall be a presumption that
an Environmental Claim is not a Landlord Environmental Claim. Tenant's liability
for Landlord Environmental Claims will terminate with this Lease.
(b) Subject to the foregoing, Landlord agrees to indemnify, defend
and hold Tenant harmless from and against all claims, lawsuits, liabilities,
losses, damages and expenses (including without limitation cleanup costs and
reasonable attorneys fees arising by reason of any of the aforesaid or an action
against the Landlord under this indemnity) arising by reason of a Landlord
Environmental Claim.
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(c) In further consideration of the Landlord entering into this
Lease, the parties hereto agree that, to the extent that the Landlord is
obligated to indemnify the Tenant pursuant to Subparagraph 22.6(b) above in
respect of a claim other than a Landlord Environmental Claim, then the
Landlord's liability shall be subject to the same aggregate limitations on
indemnification contained in Section 8.5 of the Master Agreement as if Landlord
was a Dealership.
Section 22.7. Indemnification. Tenant hereby agrees to defend,
indemnify and hold Landlord harmless from and against any and all claims, law
suits, liabilities, losses, damages and expenses (including without limitation
cleanup costs and reasonable attorney's fees arising by reason of any of the
aforesaid or an action against the Tenant under this indemnity) arising directly
or indirectly from, out of or by reason of any breach of this Article 22
occurring during the term of this Lease. The sole exclusion to Tenant's
obligation under this Subparagraph 22.7 shall be for Landlord Environmental
Claims, provided further however, that Tenant shall be obligated to indemnify
Landlord for Tenant's share of such claims under Subparagraph 22.6(a) above and
Section 4.231 of the Master Agreement, integrated with the relative obligations
of the parties therein, as if it was a signatory partnership to the Master
Agreement and Landlord was an indemnified Dealership.
Section 22.8. (a) Environmental Manager. Tenant hereby appoints the
Landlord, which may be delegated by Landlord to a manager acting under the
Master Agreement, as the manager of all environmental issues and Landlord
Environmental Claims which are the subject of any obligation of the Landlord to
indemnify Tenant under this Article. The Landlord's rights under these
provisions are notwithstanding the provisions of any other agreement to the
contrary, and are intended to give the Landlord the unfettered discretion to act
practically and in a cost-efficient manner to deal with such issues effectively,
over such period as they deem appropriate, choosing from the available
alternatives as they deem appropriate, without interference or hindrance from
any of the other parties as long as the Landlord's actions satisfy the
requirements of any Environmental Agency. Without limitation of the foregoing,
but by way of explication, the Landlord shall have the following rights:
(i) License. To the extent necessary or advisable
in the Landlord's opinion to permit the Landlord to exercise rights under this
Article, the Tenant shall permit the Landlord full and non-exclusive use,
occupancy, possession and enjoyment of the Premises, for purposes including the
installation and operation of permanent improvements, and the sampling, removal
and remediation of soils, groundwater and improvements, at reasonable times and
in a reasonable manner, using reasonable efforts to minimize the intrusion upon
and inconvenience to the Tenant and its ongoing operations, without charge or
liability of any kind (whether by reason of a breach of
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the obligation to be reasonable or otherwise) for the interference with the
business of the Tenant resulting from the exercise of such rights.
(ii) Control. The Landlord shall have the right
to: (a) control the investigation and remediation of any Landlord Environmental
Claim, decide among available alternatives for remediation or correction
(including the right to choose inaction, or alternatives which result in higher
operational expenses as opposed to capital expenses); (b) initiate, assume and
control the prosecution or defense of any action, proceeding, litigation or suit
involving a Landlord Environmental Claim; (c) settle or compromise any Landlord
Environmental Claim; (d) exercise its rights under this Article, to bind the
Tenant and any indemnified party after consultation with Tenant; and (e) hire
lawyers, consultants, advisors and contractors acceptable to the Landlord. The
Landlord may cause Tenant to incur expenses by acting in its name, or it may
incur expenses itself, all of which are subject to reimbursement in accordance
with Subparagraph 22.7 (and accordingly with the escrow and indemnity provisions
of Section 4.231 of the Master Agreement).
(iii) Cooperation. Tenant shall cooperate in all
respects with the exercise by Landlord of its rights hereunder and shall not
interfere with the implementation of decisions made by Landlord hereunder or
under Section 4.231 of the Master Agreement. Tenant and its Affiliates shall not
initiate contact directly or indirectly with any Environmental Agency in a
manner intended or likely to result in the initiation of an enforcement action
or in interference with decisions of Landlord unless such contact is required by
law and failure to initiate contact will subject the Tenant or its Affiliates to
civil or criminal penalties. EMCO and any EMCO Sub may retain and consult with
their own experts and lawyers concerning the performance by the Landlord of
their rights and obligations, provided that the costs of such experts and
lawyers shall be borne solely by EMCO and such EMCO Sub.
(iv) Bound Brook. Without limitation of the
foregoing, the Landlord may arrange to cause the move of any automobile
franchise operated by any Tenant from the present Bound Brook Premises to
another location mutually acceptable to the parties hereto in order to permit
more efficient investigation and or remediation of the Bound Brook site.
(v) Assumption of Control. Tenant or its Affiliates
may cause the termination of the Landlord rights hereunder by notifying the
Landlord that it assumes the obligation to indemnify for all amounts otherwise
to be borne by the Landlord, without limitation or exclusion.
(vi) Certain Environmental Claims. The Tenant shall
have sole control of all dealings with regulators for, and shall have the sole
obligations to accomplish at the
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Premises: (a) ongoing compliance with Environmental Laws unrelated to an
Environmental Claim which is the subject of an indemnity obligation of the
Dealerships under Section 4.231 of the Master Agreement or of the Landlord under
this Section of the Lease (e.g. obtaining permits and complying with
Environmental Laws for new underground tanks or tanks presently in compliance
with laws); and (b) resolution of events or conditions which are not
Environmental Claims or as to which the Dealerships under Section 4.231 of the
Master Agreement or Landlord under this Section of the Lease have no obligation
to indemnify (because, for example, they occur or arise after the date of this
Lease [e.g. a new Release]).
(b) Exclusive Remedy. Notwithstanding any other provision of
this Lease or any of the other agreements among the parties hereto, and
notwithstanding any other provision of Environmental Law or other law to the
contrary, and excluding only the intentional actual fraud of the Landlord: (i)
it is intended that the sole remedy among the parties hereto for the correction
of any Environmental Claim or condition now existing at the Premises or by
reason of the operations of the Dealerships, Partnerships (as defined in the
Master Agreement) or their successors in interest shall be as provided in this
Section and the Master Agreement, and that all contrary provisions of any other
agreement are superseded and amended to be consistent with this Lease and the
Master Agreement; (ii) without limitation of the foregoing, the environmental
indemnity provision in this Lease and in Section 4.231 of the Master Agreement
is in lieu of any rights otherwise available to the Partnerships, Tenant, the
Dealerships, EMCO and any EMCO Sub under this and all other agreements; and
(iii) the Landlord's obligations, as well as those of any other seller or owner
or operator affiliated with the Landlord, and its and their respective equity
owners, officers, agents, servants, employees, with regard to Environmental
Claims, now known or unknown, presently existing or hereafter arising, shall be
solely as provided in this Section of the Lease and Section 4.231 of the Master
Agreement and any and all other claims, rights and remedies under Environmental
Law (as for example, without limitation, may arise under CERCLA, the Spill Act,
RCRA, ECRA, Clean Water Act), or under those other agreements among the parties
hereto, are hereby waived and released.
(c) Disclaimer. The transactions covered by this Agreement and
all other agreements between or among any or all parties hereto involve
properties and operations that are conveyed "AS IS, WHERE IS" except only as
expressly provided in this Lease to the contrary. No representations, warranties
or covenants are or have been made outside of this Lease and the Master
Agreement with regard to the environmental condition, liabilities or compliance
of the Premises, or the Dealerships or the accuracy, completeness of any
environmental information (except that the Landlord has not intentionally
altered any of the test results assembled as part of any environmental studies).
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Tenant is aware that the Premises and the Dealerships have had instances of
environmental contamination or noncompliance and Tenant, EMCO and the EMCO
Sub(s) have been given authority acceptable to them to conduct investigations
and due diligence independent of this Lease to determine the nature and extent
of such conditions and have determined to proceed with the transactions
contemplated hereunder subject to the provisions of this Lease. In no event
shall there be any liability of the Dealerships or the Landlord for lost profits
or other consequential damages by reason of any Environmental Claim or by reason
of the Landlord's or Dealership's actions or omissions under or by reason of an
Environmental Claim or this Lease.
Section 22.9. Survival. Tenant's obligations under this Article
shall survive the expiration or sooner termination of this Lease.
ARTICLE 23.
NOTICES; CONSENTS
Section 23.1. Notices. Any notice, demand, request, approval or
other communication (a "notice") which, under the terms of this Lease or under
any statute, must or may be given by the parties hereto, must be in writing, and
must be given by mailing the same by registered or certified mail, return
receipt requested, postage prepaid, addressed to the respective parties as
follows:
If to Landlord:
c/o Joseph DiFeo and Samuel X. DiFeo
585 Route 440
Jersey City, New Jersey 07034
with a Copy to:
Hannoch Weisman
A Professional Corporation
4 Becker Farm Road
Roseland, New Jersey 07068-3788
Attn: Stephen P. Lichtstein
If to Tenant:
c/o EMCO Motor Holdings, Inc.
153 East 53rd Street
Suite 5900
New York, New York 10022
Attn: Ezra P. Mager
with a Copy to:
Akin, Gump, Hauer & Feld
1700 Pacific Avenue
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4100 First City Center
Dallas, Texas 75201-2800
Attn: Gary M. Lawrence, P.C.
Either party, and the holder of any Mortgage or Fee Mortgage who shall have made
the request referred to in the last sentence of this Section 23.1, may designate
by notice in writing given in the manner herein specified a new or other address
to which a notice shall thereafter be so given. All notices shall be deemed
given when received. If requested in writing by the holder of any Mortgage or
Fee Mortgage (which request shall be made in the manner provided in this Section
23.1 and shall specify an address to which notices shall be given) any such
notice shall also be given contemporaneously to such holder in the manner herein
specified.
Section 23.2. Landlord's Consent. (a) No consent, approval or other
exercise of discretion (a "Consent") by Landlord shall, unless this Lease
specifies that such Consent is within Landlord's sole discretion, be
unreasonably withheld or refused. If Landlord shall fail to respond to any
request by Tenant for any Consent, within twenty (20) days after the date of
such request, and within ten (10) days after a further notice from Tenant,
stating that it is a "Second Notice" and referring to this Section, such request
shall be conclusively deemed to have been approved by Landlord. In any refusal
to grant Consent, Landlord shall specify in reasonable detail the reasons for
its refusal. Any dispute between the parties as to whether Landlord should have
granted a Consent shall be resolved by ADR in the manner described in Article
18.
(b) With respect to any provision of this Lease which provides, in
effect, that Landlord shall not unreasonably withhold, delay or refuse its
consent, Tenant, in no event shall be entitled to make, nor shall Tenant make,
any offset against rent otherwise due nor shall Tenant withhold any rent
otherwise due pursuant to the terms of this Lease based upon any claim or
assertion by Tenant that Landlord has unreasonably withheld, refused or delayed
any consent or approval; but, unless Landlord's unreasonable withholding,
refusal or delay is arbitrary, capricious or in bad faith (in which event
Tenant's rights and remedies against Landlord shall not be so limited), Tenant's
sole remedy shall be an action or proceeding to enforce any such provision, or
for specific performance, injunction or declaratory judgment.
ARTICLE 24.
QUIET ENJOYMENT
Subject to the terms of this Lease, Tenant, upon paying the Base
Rent, additional rent and all other charges herein provided for and upon
observing and keeping all of the covenants, agreements and provisions of this
Lease on its part to be observed and kept, shall lawfully and quietly hold,
occupy and
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enjoy the Premises during the Term without hindrance or molestation.
ARTICLE 25.
INVALIDITY OF PARTICULAR PROVISIONS
If any provision of this Lease or the application thereof to any
person or circumstance shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby, and each provision of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
ARTICLE 26.
BROKERAGE
Section 26.1. Brokerage. Each party represents and warrants to the
other that it has dealt with no broker or finder in connection with this Lease.
Each party agrees to indemnify and hold harmless the other party from and
against any claims, liabilities, suits, actions, loss, damage or expense
(including attorneys' fees and disbursements) resulting from any breach of the
foregoing representation and warranty.
ARTICLE 27.
MEMORANDUM OF LEASE
Section 27.1. Memorandum of Lease. Each party shall execute and
deliver, and Tenant may at any time record in the appropriate land records, a
notice or memorandum of this Lease in recordable form reasonably acceptable to
both parties. From time to time, promptly at the request of either party, each
party shall execute and deliver, and the requesting party may thereafter record
in the appropriate land records, an amendment or modification to such notice or
memorandum of lease in recordable form reasonably acceptable to both parties.
This Lease shall not be recorded. Upon any termination of this Lease, Tenant
shall, within ten (10) days after demand, execute and deliver to Landlord a
document sufficient to discharge of record any such notice or memorandum.
ARTICLE 28.
MISCELLANEOUS
Section 28.1. No Oral Modifications. This Lease may not be
modified or amended except by a writing executed by both parties.
Section 28.2. Governing Law. This Lease shall be governed by
and shall be construed in accordance with the laws of the State in which the
Premises is located.
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Section 28.3. Unavoidable Delays. If, during the term of this Lease,
either party shall be prevented or delayed from punctually performing any
obligations or satisfying any conditions of this Lease by any strike, lockout,
labor dispute, inability to obtain labor or materials, Act of God, legal
requirements, governmental restriction, regulation or control, enemy or hostile
action, civil commotion or other condition beyond the reasonable control of such
party, then the time to perform such obligation or satisfy such condition shall
be extended by the delay caused by such event. If either party shall, as a
result of any such event, be unable to exercise any right or option contained in
this Lease within any time period provided for in this Lease, such time period
shall be deemed extended for a period equal to the duration of the delay caused
by such event. Nothing herein contained shall apply to either party's
obligations to pay monies to the other party (including, as to Tenant, a failure
by Tenant to pay any Base Rent or Additional Rent due under this Lease).
Section 28.4. Successors and Assigns. The covenants and agreements
herein contained shall bind and inure to the benefit of Landlord and Tenant and
their respective successors and assigns (but, in the case of Tenant, only
permitted assigns).
Section 28.5. Construction. The terms "include", "including" and
similar terms, as used herein, shall be construed as if followed by the phrase
"without limitation". All references in this Lease to Articles, Sections,
subsections or Exhibits shall be deemed references to Articles, Sections or
subsections of or Exhibits to and incorporated into this Lease, unless expressly
provided to the contrary.
Section 28.6. No Joint Venture. Landlord and Tenant agree that
they are not partners or joint venturers by reason of this Lease.
Section 28.7. Authorization. The person and entity signing this
Lease for Landlord and Tenant, respectively, each represents and warrants that
this Lease has been duly authorized, executed and delivered by Landlord and
Tenant, as the case may be.
Section 28.8. Relationship of Landlord to Tenant. Landlord, an
Affiliate of Landlord, or persons comprising Landlord, may be a stockholder,
partner or the like in Tenant or an Affiliate of Tenant, which fact shall not
impose any duty or obligation (fiduciary or otherwise) on the Landlord in acting
as landlord under this Lease, it being specifically understood and agreed that
Landlord shall have the right to do or not to do anything with respect to this
Lease to the same extent as if Landlord, an Affiliate of Landlord or persons
comprising Landlord were not a stockholder, partner or the like with or in
Tenant or any Affiliate of Tenant.
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Section 28.9. No Services. Landlord will furnish no services of
any kind in or to the Premises. All required services shall be procured by
Tenant at its cost and expense.
Section 28.10. No Abatement Unless Specified. Except as may be
otherwise expressly provided in this Lease there shall be no abatement or
reduction of rents or other charges payable by Tenant under this Lease because
of inconvenience, interruption, cessation or loss of business or otherwise,
caused directly or indirectly by any present or future laws, rules,
requirements, orders, directions or regulations or any governmental authority
whatever or by priorities, rationing or curtailment of labor or materials or by
war or any manner or thing resulting therefrom, or by any other cause or causes,
nor shall this Lease be affected by any such causes.
Section 28.11. Captions. The captions herein are for
convenience of reference only and shall not be deemed to define, limit or
describe the scope or intendment of any provision of this Lease.
Section 28.12. Surrender. Neither acceptance of the keys nor any
other act or thing done by Landlord or any agent or employee of Landlord during
the term of this Lease shall be deemed to be an acceptance of a surrender of the
Premises. Surrender of the Premises can only be affected by agreement in writing
signed by Landlord accepting or agreeing to accept such a surrender.
Section 28.13. Landlord for Time Being. The term "Landlord" means
the owner, at the applicable time, of the Premises. If the named Landlord or any
successor landlord shall convey the Premises or transfer its interest therein
and the assignee shall assume Landlord's obligations hereunder, the assigning
Landlord shall thereupon cease to be liable for any subsequently accruing
obligations under this Lease.
Section 28.14. Non-Recourse. There shall be absolutely no personal
liability on the part of the Landlord, its partners, agents and employees or
their successors or assigns with respect to any of the terms, covenants and
conditions of this Lease or with respect to any act, omission or negligence of
the Landlord. Tenant shall look solely to Landlord's estate and property in the
Premises and net proceeds therefrom for the satisfaction of Tenant's remedies
for the collection of any judgment or any other judicial process requiring the
payment of money by Landlord, and no other property or assets of Landlord shall
be subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies under or with respect to this Lease, the
relationship of Landlord and Tenant or Tenant's use of occupancy of the
Premises.
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IN WITNESS WHEREOF, Landlord and Tenant have duly executed and
delivered this Lease as of the day and year first above written.
LANDLORD:
J & S EQUITY ASSOCIATES
By:________________________________
Name:______________________________
Title:_____________________________
TENANT:
DIFEO BUICK-PONTIAC-GMC TRUCK
PARTNERSHIP
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT A
LEGAL DESCRIPTION AND MORTGAGES
Block 1745, Lots 11, 12, 13, 14, 15, 16, 17 & 18 919 Communipaw
Avenue, Jersey City, New Jersey.
1. Mortgage made by J & S Equity Associates to The Trust Company of New
Jersey, dated May 4, 1990 and recorded May 8, 1990 in the Hudson County
Register's Office in Mortgage Book 4562, Page 122.
2. Mortgage made by J & S Equity Associates to The Trust Company of New
Jersey, dated May 4, 1990 and recorded May 8, 1990 in the Hudson County
Register's Office in Mortgage Book 4562, Page 222.
3. Mortgage made by J & S Equity Associates to The Trust Company of New
Jersey, dated December 1, 1978 and recorded December 13, 1978 in the
Hudson County Register's Office in Mortgage Book 3041, Page 965.
4. Mortgage made by Samuel C. DiFeo and Julia DiFeo, his wife, to The Trust
Company of New Jersey, dated October 29, 1976 and recorded November 3,
1976 in the Hudson County Register's Office in Mortgage Book 2982, Page
876.
5. Mortgage made by Sam-Jul Realty Corp., et al. to The Trust Company of New
Jersey, dated October 29, 1976 and recorded November 3, 1976 in the Hudson
County Register's Office in Mortgage Book 2982, Page 872.
6. Mortgage made by Samuel C. DiFeo and Julia DiFeo to The Trust Company of
New Jersey, dated July 28, 1969 and recorded July 29, 1969 in the Hudson
County Register's Office in Mortgage Book 2822, Page 707.
7. Mortgage made by Joseph DiFeo and Samuel X. DiFeo to The Trust Company of
New Jersey, dated June 30, 1983 and recorded July 20, 1983 in the Hudson
County Register's Office in Mortgage Book 3168, Page 715.
8. Mortgage made by Joseph C. DiFeo and Samuel X. DiFeo t/a J & S Equity
Associates to The Trust Company of New Jersey, dated December 13, 1978 and
recorded December 13, 1978 in the Hudson County Register's Office in
Mortgage Book 3041, Page 1002.
9. Mortgage made by Joseph C. DiFeo and Samuel X. DiFeo t/a J & S Equity
Associates to The Trust Company of New Jersey, dated August 27, 1986 and
recorded September 26, 1986 in the Hudson County Register's Office in
Mortgage Book 3515, Page 20.
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10. Mortgage made by J & S Equity Associates to The Trust Company of New
Jersey, dated October 25, 1985 and recorded November 8, 1985 in the Hudson
County Register's Office in Mortgage Book 3302, Page 1.
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EXHIBIT B
GROUND LEASES
All leases set forth below are dated as of October 1, 1992 unless
otherwise stated.
1. Lease between Fair Realty Company, as landlord and Fair Hyundai
Partnership T/A Fair Suzuki, as tenant.
2. Lease between Fair Realty Company, as landlord and Danbury-Mt. Kisco
Saturn Partnership T/A Saturn of Danbury, as tenant.
3. Lease between Fair Realty Company, as landlord and Fair
Cadillac-Oldsmobile-Isuzu Partnership, as tenant.
4. Lease between Rockland Realty Associates, as landlord and Rockland Motors
Partnership T/A Rockland Mitsubishi, as tenant.
5. Lease between Boundbrook Realty Associates, as landlord and DiFeo
Oldsmobile Partnership, as tenant.
6. Lease between Boundbrook Realty Associates, as landlord and Somerset
Motors Partnership T/A DiFeo Lexus, as tenant.
7. Lease between J & S Equity Urban Renewal Corp., as landlord and Hudson
Motors Partnership T/A Hudson Toyota, as tenant.
8. Lease between J & S Equity Associates, as landlord and DiFeo Jeep-Eagle
Partnership, as tenant.
9. Lease between J & S Equity Associates, as landlord and J & F
Oldsmobile-Isuzu Partnership, as tenant.
10. Lease between J & S Equity Associates, as landlord and DiFeo Subaru
Partnership, as tenant.
11. Lease between J & S Equity Associates, as landlords and DiFeo
Buick-Pontiac-GMC Truck Partnership, as tenant (Premises: Block 1745, Lots
34-40; Block 1746, Lots 19A, 21A and 22A; Block 1747, Lots 81-84, Jersey
City, New Jersey).
12. Lease between J & S Equity Associates, as landlord and DiFeo Autocenter
Partnership, as tenant.
13. Lease between J & S Equity Associates, as landlord and DiFeo
Buick-Pontiac-GMC Truck Partnership, as tenant (Premises: 919 Communipaw
Avenue, Jersey City, New Jersey.
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14. Lease between J & S Equity Associates, as landlord and DiFeo Imports
Partnership T/A Jersey City Mitsubishi, as tenant.
15. Lease between J & S Equity Associates, as landlord and DiFeo
Buick-Pontiac-GMC Truck Partnership, as tenant (Premises: 315 Clendenny
Avenue, Jersey City, New Jersey).
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EXHIBIT C
GROUP SUBLEASES
All leases set forth below are dated as of October 1, 1992 unless
otherwise stated.
1. Sublease between Fair Imports Corp., as sublandlord and Fair
Imports Partnership t/a Fair Acura, as subtenant.
2. Sublease between J & S Equity Associates, as sublandlord and
DiFeo Volkswagen Partnership, as subtenant.
3. Sublease between J & S Equity Associates, as sublandlord and
DiFeo Hyundai Partnership, as subtenant.
4. Sublease between Fair Motors Corp., as sublandlord and Fair
Motors Partnership t/a Fair Mitsubishi, as subtenant.
5. Sublease between DiFeo BMW, Inc., as sublandlord and DiFeo BMW
Partnership, as subtenant.
6. Sublease between J & S Equity Associates, as sublandlord and
DiFeo Autocenter, as subtenant.
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EXHIBIT D
STRUCTURAL DEFECTS
All such structural defects as set forth in that certain Report of
Site Investigation for Various Automobile Dealerships in New Jersey, New York
and Connecticut, SE #2519, dated June 2, 1992, as amended, prepared by Storch
Engineers.
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EXHIBIT E
Additional Representations
And Warranties of Landlord
1. Existence. Landlord is a partnership organized validly
existing and in good standing under the laws of its state of organization and
has all requisite power and authority to enter into this Lease, the Lease
Takeback and Rent Adjustment Agreement and the Landlord Guaranty (collectively,
the "Lease Documents") to which it is a party and to perform its obligations
hereunder and thereunder; and has all requisite corporate power and authority to
own its properties and assets and conduct its business as it is now being
conducted.
2. Authority; Consents. The execution, delivery performance by
Landlord of the Lease Documents to which it is a party and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate, partnership or other action, and no other corporate,
partnership or other action on the part of Landlord is necessary for the
execution, delivery and performance by Landlord of any Lease Document to which
it is a party and the consummation by it of the transactions contemplated hereby
and thereby. Subject to Article 22, which Article exclusively governs
Environmental Health and Safety Matters and except as disclosed on Schedule E-1
hereto, neither the execution nor the delivery by Landlord of any Lease Document
to which it is a party, nor the consummation by any of the transactions
contemplated hereby or thereby, nor compliance with nor fulfillment by Landlord
of the terms and provisions hereof or thereof, will, except as disclosed on
Schedule E-2 hereto, (i) conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under (A) the Certificate or
Articles of Incorporation, Bylaws, partnership agreement, or other
organizational documents of Landlord, or (B) any lease contract, instrument,
mortgage, deed of trust, trust deed or deed to secure debt evidencing or
securing indebtedness for borrowed money, any financing lease, any law, rule,
regulation, judgment, order, award, decree or other restriction of any kind to
which Landlord is a party or by which it is bound, or the Premises is subject,
(ii) require Landlord to obtain the consent, approval, authorization or other
order or action of, or filing with, any court, governmental authority or
regulatory body, (iii) require the consent, approval, authorization or order of
any person or entity under, and will not conflict with, or result in the breach,
lapse or termination of, or constitute a default under, or result in the
acceleration of the performance by Landlord under, any material lease, permit,
license, contract, mortgage, deed of trust, trust deed, deed to secure debt,
other lease, indenture or other instrument to which Landlord is a party or by
which the Premises is subject, (iv) give any party with rights under any
instrument, contract (including any sale/leaseback agreement), lease,
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mortgage, deed or trust, trust deed, deed to secure debt, judgment, order,
award, decree or other restriction the right to terminate, modify or otherwise
change the rights or obligations of any party under such instrument, contract,
lease, mortgage, deed of trust, trust deed, deed to secure debt, judgment,
order, award, decree or other restriction or (v) require any declaration, filing
or registration with any governmental or regulatory authority by Landlord. Each
Lease Document has been duly executed and delivered by Landlord and (assuming
the due authorization, execution and delivery hereof and thereof by the other
parties hereto and thereto), constitutes a legal, valid and binding obligation
of Landlord, enforceable against Landlord in accordance with its respective
terms (except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditor's
rights generally and laws restricting the availability of equitable remedies and
may be subject to general principles of equity whether or not such
enforceability is considered in a proceeding at law or in equity).
3. No Litigation. There is no action, lawsuit, claim
counterclaim, proceeding or investigation (or group of related actions,
lawsuits, claims, proceedings or investigations) pending or, to the knowledge of
Landlord, Joseph DiFeo or Samuel DiFeo, threatened against or affecting Landlord
that seeks to restrain or enjoin the consummation of the transactions
contemplated by any Lease Document.
4. Title to Assets. Landlord owns, and has the legal
right to use, all of the Premises. None of the personal property or fixtures
on the Premises by the prior tenant have reverted to Landlord as a result of
the termination of the prior lease of the Premises.
5. Compliance. Landlord is not in default under or in
violation of, any applicable franchise, permit or license, its Articles or
Certificate of Incorporation (or other charter document), Bylaws, partnership
agreement or other organizational document, any promissory note, indenture or
any evidence of indebtedness or security therefor, mortgage, lease, Contract (as
hereinafter defined) or any other instrument to which it is a party or by which
it or the Premises is or may be bound.
6. Litigation. Except as disclosed in Schedule E-4 hereto and
except for Environmental Health and Safety Matters which are governed
exclusively by Article 22, there is no action, lawsuit, claim, counterclaim,
proceeding or investigation (or group or related actions, lawsuits, claims,
proceedings or investigations) pending or, to the knowledge of Landlord
threatened, against or affecting Landlord in any court, or before and Federal,
state, provincial, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind, and as of the date hereof Landlord knows of no
reasonable basis for any
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such action, lawsuit, claim, proceeding, or investigation (or group of related
actions, lawsuits, claims, proceedings or investigations) which seeks to
restrain or enjoin the consummation of the transactions contemplated by the
Lease Documents or would materially adversely affect Tenant or Tenant's use and
occupancy of the Premises. Landlord is not in default, and no condition exists
that with notice or the lapse of time or both would constitute a default, with
respect to any judgment, order writ, injunction or decree of any court or before
any Federal, state, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting or relating to the business of Landlord. No condemnation proceeding
has commenced or, to the knowledge of Landlord, is threatened to be commenced
against any of the Premises.
7. Contracts. Schedule E-5 hereto lists all of the following
contracts of Landlord relating to the Premises ("Contracts"): (i) any lease,
sublease or other right of occupancy, (ii) any contract, commitment or option to
sell or lease the Premises, (iii) any mortgage, hypothecation, deed of trust,
equipment lease, conditional sales agreement or similar instrument which place a
lien or encumbrance upon the Premises, (iv) any other contract relating to
rights in the Premises which will, or has the reasonable likelihood to,
materially adversely interfere with Tenant, this Lease or the use and occupancy
of the Premises by Tenant pursuant to this Lease, or (v) any other contract
which would be binding on Tenant hereunder. Landlord had made available to
Tenant true and complete complies of all Contracts, all as presently in effect.
This representation shall not be deemed to affect, or to be affected, by any
environmental matter or Environmental Claims, each of which is governed
exclusively by Article 22.
8. Insurance. Except as disclosed in writing to Tenant
on or before April 29, 1992, the insurance maintained by the occupant of the
Premises as of March 11, 1992 is sufficient to comply with the provisions of
the Lease.
Any dispute with respect to the foregoing representations and
warranties shall be resolved by ADR pursuant to Article 18.
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EXHIBIT E
TO SUBLEASE BETWEEN
DIFEO BMW, INC. AND DIFEO BMW PARTNERSHIP
<PAGE>
LEASE
Lease dated January 6, 1992, between Michael Zullo, Sr. and Bertha
Zullo, with an address at 40 Knoll Road, Tenafly, New Jersey 07670 ("Landlord")
and DIFEO BMW, INC., with an address of 820 River Road, Edgewater, New Jersey
("Tenant").
Landlord hereby leases to Tenant and Tenant hereby rents from
Landlord the Demised Premises described hereinbelow for the Term and at the rent
provided for hereinbelow subject to the conditions set forth in the General
Conditions of Lease attached hereto and made a part hereof. Intending to be
legally bound hereunder and in consideration of $1.00 and other good and
valuable consideration, Landlord and Tenant hereby agree with each other as
follows: DEFINITIONS AND SPECIFIC TERMS OF LEASE
(a) Demised Premises: Demised Premises means the property described
in Exhibit A which Exhibit has been initialed by the parties and attached hereto
and made a part hereof, together with the building and other improvements
located thereon. The Demised Premises includes any alterations, additions or
repairs made thereto and all lifts and fixtures attached hereto or used in
connection with the business operated on the Demised Premises.
(b) Building: Means the Building located on the Demised Premises,
commonly known as 301 County Road, Tenafly, New Jersey.
(c) Commencement Date: Means January 6, 1992.
(e) Renewals: Tenant shall have the option to renew this Lease for
two additional five (5) year period, each five year period being referred to
respectively as the First Renewal Period and Second Renewal Period.
(d) Term: Means the term of ten (10) years unless sooner terminated
in accordance herewith.
(f) Rent: The "triple net" rent herein reserved to Landlord during
the Term of this lease shall be as set forth below and shall be payable by
Tenant in equal monthly installments, on or before the first day of each month
in advance to Landlord at the office of Landlord as designated below, or to such
other recipient or place as shall be designated by Landlord, without any prior
demand therefor and without any deduction or set-off whatsoever. Notwithstanding
the foregoing, the "triple net" rent from the Commencement Date until January
31, 1992 shall be $9,000.00.
<PAGE>
TERM ANNUAL RENT
---- -----------
Lease Year 1 264,000.00
Lease Year 2 264,000.00
Lease Year 3 288,000.00
Lease Year 4 288,000.00
Lease Year 5 288,000.00
Lease Year 6 372,000.00
Lease Year 7 372,000.00
Lease Year 8 372,000.00
Lease Year 9 372,000.00
Lease Year 10 372,000.00
First Renewal Period 480,000.00
Second Renewal Period 600,000.00
(g) Security Deposit: $22,000 payable $5,500 per month for the first
four (4) months of the Term.
(h) Use: The Demised Premises are to be used for a car dealership or
any other lawful purpose. Tenant at its own cost and expense shall obtain any
and all licenses and permits necessary for such use.
(i) Notice Addresses:
(1) Landlord's Notice Address:
Michael Zullo, Sr.
301 County Road
Tenafly, New Jersey
(2) Landlord's Notice Copy Address:
Hannoch Weisman, A Professional Corporation
4 Becker Farm Road
Roseland, New Jersey 07068
Attn: Ira B. Marcus, Esq.
(3) Tenant's Notice Address:
DiFeo BMW, Inc.
820 River Road
Edgewater, New Jersey 07020
Attn: Robert Cohen
(4) Tenant's Notice Copy Address:
Lawrence Iannacone, Esq.
Dealer Management Associates
DiFeo Automotive Group
585 Route 440
Jersey City, New Jersey 07304
Joseph A. Vena, Esq.
Mandelbaum Salsburg Gold Lazris
Discensza & Steinberg
155 Prospect Avenue
West Orange, New Jersey 07052
(j) Liability Insurance Limits:
<PAGE>
(1) Combined Single Limit
Death or Injury Limit: $500,000
(2) Combined Single Limit
Property Damage Limit: $500,000
(3) Umbrella Liability Coverage: $5,000,000
(k) Interest: Any payment required to be made by Tenant under
the provisions of this Lease or as set forth in the General Conditions of Lease
not made by Tenant when and as due shall thereupon be deemed to be due and
payable on demand with interest thereon at the lesser of twelve percent (12%)
per year or at the highest legal rate computed from the date when the particular
amount became due to the date of payment thereof to Landlord.
(l) Late Charge: In order to cover the extra expense involved in
handling delinquent payments, Tenant, at Landlord's option, shall pay a "late
charge" of four percent (4%) of any payment of Rent when such payment of Rent is
paid more than ten (10) days after the due date thereof. It is understood and
agreed that this charge is for additional expense incurred by Landlord and shall
not be considered interest.
(m) Option to Purchase:
(1) Provided the Tenant is not in Default (as defined in the
General Conditions of Lease), the Tenant shall be given the right and privilege
to purchase the Demised Premises upon the terms set forth in the Purchase
Agreement attached hereto as Exhibit C.
(2) The right, option, and privilege of the Tenant to purchase
the Demised Premises as hereinabove set forth is expressly conditioned upon the
Tenant delivering to the Landlord, in writing by certified mail, return receipt
requested, at any time upon three (3) months' prior notice of its intention to
purchase, which notice shall be given to the Landlord by the Tenant no later
than six (6) months prior to the date fixed for termination of the Term
hereinbefore provided. The notice shall only be effective if accompanied by the
Purchase Agreement executed by the Tenant.
Time is hereby made of the essence.
(n) Tenant shall have the option to terminate the Lease at the
expiration of Lease Year 3 upon payment to Landlord the sum of $275,000.00
payable in monthly installments of $20,000.00. Tenant shall have a second option
to terminate the Lease at the expiration of Lease Year 4 upon payment to
Landlord the sum of $250,000.00 payable in monthly installment of $20,000.00.
Tenant shall have a third option to terminate the Lease at the expiration of
Lease Year 5 upon payment to Landlord the sum of $250,000.00 payable in monthly
installments of $20,000.00. The exercise of the foregoing options shall be
exercised by Tenant by written notice to Landlord not less than ninety (90) days
prior to the expiration of the respective lease year. In the event that Tenant
has exercised any of the foregoing options and Landlord subsequently sells the
Demised Premises, upon such closing all obligations of Tenant pursuant to the
exercised termination option shall lease.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed as of the day and year first above written.
Landlord:
WITNESS:
/s/ /s/Michael Zullo
-------------------- ---------------------
Michael Zullo, Sr.
/s/Bertha Zullo
---------------------
Bertha Zullo
Initial (Landlord): /s/ BZ
------------
Initial (Tenant): /s/ JD
------------
<PAGE>
ATTEST or WITNESS: DIFEO BMW INC.
/s/ By: /s/ Joseph C. DiFeo
- ------------------------- -------------------------
(Signature)
Joseph C. DiFeo
-----------------------------
President
-----------------------------
Title
Initial (Landlord): /s/ BZ
------------
Initial (Tenant): /s/ JD
------------
<PAGE>
EXHIBIT F TO SUBLEASE BETWEEN
DIFEO BMW, INC. AND DIFEO BMW PARTNERSHIP
1. Lease between Fair Realty Company, as landlord, and Fair Hyundai
Partnership, as tenant.
2. Lease between Fair Realty Company, as landlord, and Danbury-Mt. Kisco
Saturn Partnership, as tenant.
3. Lease between Fair Realty Company, as landlord, and Fair
Cadillac-Oldsmobile-Isuzu Partnership, as tenant.
4. Lease between Rockland Realty Associates, as landlord, and Rockland Motors
Partnership, as tenant.
5. Lease between Boundbrook Realty Associates, as landlord, and DiFeo
Oldsmobile Partnership, as tenant.
6. Lease between Boundbrook Realty Associates, as landlord, and Somerset
Motors Partnership, as tenant.
7. Lease between J & S Equity Urban Renewal Corp., as landlord, and Hudson
Motors Partnership, as tenant.
8. Lease between J & S Equity Associates, as landlord, and DiFeo Subaru
Partnership, as tenant.
9. Lease between J & S Equity Associates, as landlord, and J & F
Oldsmobile-Isuzu Partnership, as tenant.
10. Lease between J & S Equity Associates, as landlord, and DiFeo Jeep-Eagle
Partnership, as tenant.
11. Lease between J & S Equity Associates, as landlord, and DiFeo
Buick-Pontiac-GMC Truck Partnership, as tenant (for 315 Clendenny Avenue,
Jersey City, New Jersey).
12. Lease between J & S Equity Associates, as landlord, and DiFeo Autocenter
Partnership, as tenant.
13. Lease between J & S Equity Associates, as landlord, and DiFeo
Buick-Pontiac-GMC Truck Partnership, as tenant (for premises designated as
Block 1745, Lots 34-40, Block 1746, Lots 19A, 21A and 22A; Block 1747,
Lots 81-84, Jersey City, New Jersey).
14. Lease between J & S Equity Associates, as landlord, and DiFeo Imports
Partnership, as tenant.
15. Lease between J & S Equity Associates, as landlord, and DiFeo
Buick-Pontiac-GMC Truck Partnership, as tenant (for 919 Commnipaw Avenue,
Jersey City, New Jersey).
<PAGE>
EXHIBIT G TO SUBLEASE BETWEEN
DIFEO BMW, INC. AND DIFEO BMW PARTNERSHIP
1. Sublease between Fair Imports Corp., as sublandlord, and Fair Imports
Partnership t/a Fair Acura, as subtenant.
2. Sublease between J & S Equity Associates, as sublandlord, and DiFeo
Volkswagen Partnership, as subtenant.
3. Sublease between J & S Equity Associates, as sublandlord, and DiFeo
Hyundai Partnership, as subtenant.
4. Sublease between Fair Motors Corp., as sublandlord, and Fair Motors
Partnership t/a Fair Mitsubishi, as subtenant.
5. Sublease between DiFeo BMW, Inc., as sublandlord, and DiFeo BMW
Partnership, as subtenant (for premises commonly known as 301 County Road,
Tenafly, New Jersey).
6. Sublease between J & S Equity Associates, as sublandlord, and DiFeo
Autocenter Partnership, as subtenant.
<PAGE>
LANDLORD'S
ESTOPPEL CERTIFICATE
Landlord: Michael Zullo, Sr. and Bertha Zullo
Tenant: DiFeo BMW, Inc.
Subtenant: DiFeo BMW Partnership
Leased Property: 301 County Road, Tenafly, New Jersey
Overlease: Dated January 6, 1992
The undersigned Landlord, being the landlord pursuant to the
Overlease, certifies to Subtenant as follows:
1. The Overlease, together with all modifications or amendments
thereof, is attached hereto as Schedule A; the Overlease has not been amended,
modified or superseded since its original execution and no other agreements or
understandings exist with respect to the property demised under the Overlease
except as set forth in Schedule A; and the Overlease is in full force and
effect.
2. To Landlord's best knowledge, there are no uncured defaults on
the part of Tenant under the Overlease and there are no events that have
occurred which, with the giving of notice or passage of time or both, would
constitute a default by Tenant thereunder, and at the present time, to the best
of Landlord's knowledge, Landlord has no claims or disputes against Tenant under
the Overlease. Any improvements required by the terms of the Overlease to be
made by Tenant have been completed to the satisfaction of Landlord, and Tenant's
current use and operation complies with any use covenants or operating
requirements contained in the Overlease.
3. The current fixed rent required under the Lease is $22,000 per
month, payable on the first day of each calendar month, not including taxes,
assessments or expenses that Tenant is obligated to pay. Fixed rent has been
fully and currently paid by Tenant in advance through Sept., 1992. All other
monetary obligations due under the Overlease to date have been fully and
currently paid.
4. The term of the Overlease commenced on the 6th day of January,
1992, and expires on the 5th day of January, 2002, and there are no provisions
for, and Lessee has no rights with respect to, renewal or extension of the term,
terminating the term, or leasing additional space, except as expressly set forth
in the Lease.
5. No controversy presently exists between Landlord and Tenant,
including any litigation or arbitration, over the Lease or the performance of
the terms thereof.
IN WITNESS WHEREOF, Landlord has duly executed this Estoppel
Certificate this 23 day of Sept., 1992.
/s/
--------------------------------
Michael Zullo, Sr.
/s/
--------------------------------
Bertha Zullo
<PAGE>
LANDLORD'S CONSENT
Michael Zullo, Sr. and Bertha Zullo (collectively the
"Landlord"), the landlord under a certain lease agreement ("Lease") dated
January 6, 1992 (as the same may have been amended) entered into between the
Landlord and DiFeo BMW, Inc. ("Tenant"), hereby consents to the Tenant's
subleasing of the premises demised under the Lease to DiFeo BMW Partnership.
Landlord hereby certifies that it is the holder of the landlord's
interest under the Lease and that it has not assigned, transferred or otherwise
disposed of the landlord's interest under the Lease.
IN WITNESS WHEREOF, the Landlord has executed this Landlord's
consent on this 23 day of Sept., 1992.
/s/
--------------------------------
Michael Zullo, Sr.
/s/
--------------------------------
Bertha Zullo
<PAGE>
GENERAL CONDITIONS OF LEASE
FOR SPACE AT
301 County Road, Tenafly, New Jersey
<PAGE>
GENERAL CONDITIONS OF LEASE
The Lease to which this document is attached and made a part is
subject to the following general conditions:
ARTICLE I. DEFINITIONS. As used herein, the following words and
phrases have the following meanings:
Section 1.01. Expiration Date: Means the last day of the Term. If
the Lease is cancelled or terminated prior to the originally fixed Expiration
Date, then the Expiration Date shall be the date on which the Lease is so
cancelled or terminated. But if the Lease is cancelled or terminated prior to
the originally fixed Expiration Date by reason of Tenant's Default (as
hereinafter defined), Tenant's liability under the provisions of the Lease shall
continue until the date the Term would have expired and such cancellation or
termination not occurred.
Section 1.02. Force Majeure: Means any of the following events: Acts
of God; strikes, lock-outs, or labor difficulty; explosion, sabotage, accident,
riot or civil commotion; act of war; fire or other casualty; legal requirements;
delays caused by the other party; any causes beyond the reasonable control of a
party.
Section 1.03. Insurance Requirements: Means the applicable
provisions of the insurance policies carried by Landlord and/or Tenant covering
the demised Premises; all requirements of the issuer of any such policy; and all
orders, rules, regulations and other requirements of any insurance service
office which serves the community in which the Demised Premises is situated.
Section 1.04. Mortgage: Means any mortgage, deed to secure debt,
trust indenture, or deed of trust which may now or hereafter affect, encumber or
be a lien upon the Demised Premises, or Landlord's interest therein.
Section 1.05. Mortgagee: Means the holder of any Mortgage, at
any time.
Section 1.06. Parking Area: Means all portions of the Demised
Premises other than the Building.
Section 1.07. Person: Means an individual, fiduciary, estate,
trust, partnership, firm, association, corporation, or other organization, or
a government or governmental authority.
Section 1.08. Repair: Includes the words "replacement and
restoration", "replacement or restoration", "replace and restore", "replace
or restore", as the case may be, unless specifically indicated to the
contrary herein.
Section 1.09. Tenant's Agents: Includes Tenant's employees,
servants, licensees, tenants, subtenants, assignees, contractors, heirs,
successors, legatees and devisees.
Section 1.10. Tenant's Guarantor: Means Samuel X. DiFeo,
individually.
ARTICLE II. CONDITION OF DEMISED PREMISES.
Section 2.01. Certificate of Occupancy: If a Certificate of
Occupancy or similar instrument from any governmental authority is required in
connection with the use of the Demised Premises by Tenant, Landlord agrees to
procure same at its sole cost and expense. Tenant agrees to cooperate fully with
the procurement of such certificate.
<PAGE>
Section 2.02. Condition of Demised Premises: Landlord has made no
representations, covenants or warranties with respect to the condition of the
Demised Premises. Tenant is accepting the Demised Premises without
representations, covenants or warranties as to the value, condition or
suitability of the Demised Premises.
ARTICLE III. TERM.
Section 3.01. Term: The Term of the Lease shall be for the
period indicated in the Lease exclusive of any renewal periods.
Section 3.02. Renewals. Any option to renew this Lease for the
periods set forth in the Lease must be exercised by giving Landlord written
notice of Tenant's intention to renew at least ninety (90) days prior to the
expiration of the Term of First Renewal Period, as applicable.
ARTICLE IV. RENT, TAXES, UTILITY CHARGES, ETC.
Section 4.01. Rent: Tenant shall pay Rent to Landlord Rent
shall be payable at the rates set forth in the Lease. Rent shall be payable in
equal monthly installments. Each monthly installment shall be due in advance.
The first monthly installment shall be due on the execution of the Lease. Each
subsequent installment shall be due on the first day of each month during the
Term. If the Commencement Date is a day other than the first day of the month,
the first installment shall be one thirtieth of a normal monthly installment for
each day during the period commencing with the Commencement Date up to and
including the last day of that month. If the Expiration Date of the Term or any
Renewal Period occurs on a day other than the last day of any month, Rent for
the last month during the Term shall be pro-rated in the same manner.
Section 4.02. Taxes, Assessments:
(a) The Tenant shall promptly pay as additional rent, all real
estate taxes, assessments and water meter charges (including any expenses
incident to the installing, repairing or replacing of any water meter) and all
such other charges or payments of any kind and nature whatsoever, and whether or
not now within the contemplation of the parties, imposed by any governmental or
public authority as shall, during the Term and Renewal Periods, be imposed, or
become a lien, upon the Demised Premises or any part thereof or which may become
due and payable with respect thereto, and any and all assessments and other
similar charges imposed upon the Demised Premises in lieu of or in addition to
the foregoing, under or by virtue of any present or future laws or regulations
of any governmental or lawful authority whatsoever.
(b) For any period during the Tenant's occupancy of the Demised
Premises which constitutes less than the full period for which any one or more
of the foregoing charges are assessed, each such charge shall be pro-rated on a
daily basis and adjusted between the Landlord and the Tenant.
Section 4.03. Payment of Rent:
(a) Rent shall be paid automatically without written or oral notice,
demand, counterclaim, offset, deduction, defense, or abatement.
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<PAGE>
(b) All Rent payable under the Lease shall be payable at Landlord's
address as set forth in the Lease or at such other address as Landlord shall
designate by giving notice to Tenant.
(c) If Tenant shall fail to pay any taxes, assessments or any other
charges payable hereunder, Landlord shall have all remedies provided for in the
Lease or at law in the case of nonpayment of Rent. Tenant's obligations,
accruing during the Term, shall survive the Expiration Date of the Lease.
Section 4.04. Security Deposit:
(a) Tenant has deposited with or to be deposited with Landlord the
sum designated as Security Deposit in the Lease, as security for the full and
faithful performance by Tenant of all obligations of Tenant under the Lease or
in connection with the Lease. If Tenant is in Default under the Lease, Landlord
may use, apply or retain the whole or any part of the Security Deposit for the
payment of (i) any Rent or any other sums of money which Tenant may not have
paid or which may become due after the occurrence of a Default, (ii) any sum
expended by Landlord on Tenant's behalf in accordance with the provisions of the
Lease, or (iii) any sum which the Landlord may expend or be required to expend
by reason of such Default, including any ages or deficiency in the reletting of
the Demised Premises in connection with Article XV hereof. The use, application
retention of the Security Deposit or portion thereof by Landlord shall not
prevent Landlord from exercising any other right remedy provided for hereunder
or at law and shall not operate a limitation on any recovery to which Landlord
may otherwise be entitled.
(b) The Security Deposit shall bear no interest and Landlord shall
be entitled to commingle the Security Deposit with Landlord's other funds.
(c) If Tenant shall fully and faithfully comply with all of the
provisions of the Lease, the Security Deposit and any balance thereof shall be
returned to Tenant after the Expiration Date or upon any later date after which
Tenant has vacated the Demised Premises.
(d) Anything in this Section 4.04 to the contrary notwithstanding,
in the event any Mortgagee shall become mortgagee-in-possession or take title by
foreclosure or deed in lieu of foreclosure, then, in either of such events, such
Mortgagee obligation to return the Security Deposit under this Section 4.04
shall be limited to the amount of the Security Deposit which is actually
transferred from Landlord to such Mortgagee.
ARTICLE V. SIGNS.
Section 5.01. Signs: The location, design and conter of any signs
shall comply with all laws, regulations and ordinances. The cost to prepare,
manufacture and install any sign shall be borne by Tenant. Tenant shall be
responsible for the cost of all repairs, replacement or maintenance of signs at
the Demised Premises or any other part of the Property. Landlord agrees to,
prior to commencement of the Term and upon fifteen (15) days notice, remove at
its own cost any signs requested by Tenant.
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<PAGE>
ARTICLE VI. REPAIRS, ALTERATIONS,
COMPLIANCE WITH LAWS, SURRENDER.
Section 6.01. No Repairs by Landlord: Landlord shall not be
required to make or cause to be made any repairs, including without limitation,
any structural repairs to the roof, foundation, exterior walls and load-bearing
interior walls of the Demised Premises.
Section 6.02. Repairs and Maintenance by Tenant: Tenant shall make
all repairs to the Demised Premises necessary or desirable to keep the Demised
Premises in good order and repair and in a safe, dry and tenantable condition.
Without limiting the generality of the foregoing, Tenant shall be specifically
required to replace or repair (a) all pipes, lines, ducts, wires, or conduits
that service Tenant and are contained within the Demised Premises or which
service the Demised Premises and are located outside of the Demised Premises;
(b) the roof, foundation, exterior walls and interior walls; (c) windows, plate
glass, doors (including overhead doors), and any fixtures or appurtenances
composed of glass; (d) leaders and gutters; (e) Tenant's sign, (f) any heating
or air conditioning equipment installed in or servicing the Demised Premises;
(g) parking areas, sidewalks, and driveways; and (h) the Building or any part of
the Demised Premises when repairs to the same are necessitated by any act,
omission or negligence of Tenant or Tenant's Agents or invitees, or the failure
of Tenant to perform its obligations under the Lease. Tenant shall keep the
Demised Premises in a clean and sanitary condition, free from vermin and
escaping offensive odors.
Section 6.03. Approval by Landlord of Repairs and Alterations:
(a) Tenant may not make any major or structural alterations to
the Demised Premises, without the prior written consent of Landlord which shall
not be unreasonably withheld. If Landlord grants consent, any such alterations
shall be performed in a good and workmanlike manner in accordance with all
applicable legal and Insurance Requirements. Landlord hereby specifically
consents to any and all alterations and improvements which are required by
either BMW or the municipality.
(b) Tenant shall give Landlord prompt written notice of any major or
structural repair or alteration required or permitted to be performed by Tenant
under any provision of the Lease. Any alterations, additions and changes that
Tenant desires to make to the Demised Premises shall be at its own cost and
expense, but, before making same, Tenant shall submit to the Landlord the plans
and specifications therefor for Landlord's consent and approval, and all such
alterations, additions and changes (except Tenant's machinery or trade fixtures)
which are attached in such manner that their separation from the Demised
Premises will result in injury to the Demised Premises, are immediately to merge
and become a permanent part of the realty, and all interest of Tenant therein
shall become immediately vested in Landlord. Landlord, at its option, however,
may require that at the expiration or other termination of the Term or any
renewal thereof, the Tenant at its own cost and expense remove said alterations,
additions or changes except as to those
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<PAGE>
alterations and additions which were required by BMW or which were consented to
pursuant to the terms of this Lease or by a writing signed by Landlord provided
that such changes relate to the operation of a car dealership, and restore the
portion of the Demised Premises affected by such removal to their condition
prior to the making of such alterations, additions or changes. The Tenant agrees
to accept the alterations, additions and changes that were made previously and
at the termination of the Term, Tenant will restore the Building to its original
condition at the option of Landlord.
Section 6.04. Compliance with Laws and Regulations: Except as
otherwise provided in this Agreement, the Tenant covenants and agrees that upon
and after the Commencement Date, it shall promptly execute and comply with all
statutes, ordinances, rules, orders, regulations and requirements of the
Federal, State and Municipal Government and of any and all their departments and
bureaus hereinafter referred to as "Governmental Regulations" for the
corrections, prevention and abatement of nuisances, violations or other
grievances, in, upon or connected with said Demised Premises during said Term
and arising from the operations of the Tenant therein at the Tenant's cost and
expense; subject to the right of the Tenant to contest the decision by any such
department or bureau. In the event the Tenant contests any such governmental
decision, it shall indemnify, defend and save the Landlord harmless from any
fine, penalty, costs and liability imposed upon the Landlord as a result of
Tenant's failure so to comply, or as a result of said contest by Tenant. The
Tenant covenants and agrees, at its own cost and expense, to (i) comply with
such regulations or requests expressly caused by and in connection with the use
and occupancy of the Demised Premises by the Tenant and the conduct of its
business, as may be required by the fire or liability insurance carriers
providing insurance for the demised premises, or promulgated by the Board of
Fire Underwriters or their equivalent ("Insurance Regulations"); (ii) pay for
the costs of interior, exterior or structural changes in the Building, fixtures
or equipment, if the same are required by Governmental Regulations or Insurance
Regulations, as the same may be applicable as a matter of general application to
the Building; or (iii) pay for any changes in the Building, fixtures or
equipment that may be required by Governmental Regulations or Insurance
Regulations.
Section 6.05. Environmental Cleanup Responsibility Act:
(a) Landlord represents that it is not an Industrial
Establishment as that term is defined in the Environmental Cleanup
Responsibility Act, N.J.S.A. 13:1K-6 et seq., as same may be amended from time
to time (the "Act"), and that Landlord's primary Standard Industrial Code is
5511.
(b) In the event that Tenant now is or hereafter becomes an
Industrial Establishment, Tenant shall comply with all conditions as set forth
below.
(c) Tenant agrees that it shall, at its sole cost and expense,
fulfill, observe and comply with all of the terms and provisions of the Act and
all rules, regulations, ordinances, options, orders and directives issued or
promulgated pursuant to
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<PAGE>
or in connection with said Act by the Department of Environmental Protection
("DEP"), or any subdivision or bureau thereof or any other governmental or
quasi-governmental agency, authority or body having jurisdiction thereof. (The
Act and all said rules, regulations, ordinances, opinions, orders and directives
are hereinafter collectively referred to as "ECRA").
(d) Without limiting the foregoing, upon Landlord's request
therefor, and in all events no later than sixty (60) days prior to "closing,
terminating or transferring operations" (as said terms are defined in ECRA) out
of the Demised Premises, Tenant at its sole cost and expense, shall provide the
Landlord with a true copy of:
(i) an opinion letter from DEP (or such other agency or body
which shall then have jurisdiction over ECRA matters) in form satisfactory to
Landlord's counsel, stating that ECRA does not apply to Tenant, Tenant's use and
occupancy of the Demised Premises and to the closing, terminating or
transferring of operations of the Demised Premises; or
(ii) a Negative Declaration (as said term is defined in ECRA)
duly approved by DEP or such other agency or body then having jurisdiction over
ECRA matters; or
(iii) a Cleanup Plan (as said term is defined in ECRA) duly
approved by DEP (or such other agency or body which shall then have jurisdiction
over ECRA matters).
(e) Nothing in this Section shall be construed as limiting Tenant's
obligation to otherwise comply with ECRA.
(f) In the event Tenant complies with paragraph (d) (iii) of this
Section by obtaining an approved Cleanup Plan, Tenant agrees that it shall, at
its sole cost and expense:
(i) post any financial guarantee or other bond required
to secure implementation and completion of such Cleanup Plan; and
(ii) promptly implement and diligently prosecute to completion
said Cleanup Plan, in accordance with the schedules contained therein or as may
otherwise be ordered or directed by DEP or such other agency or body which shall
then have jurisdiction over such Cleanup Plan. Tenant expressly understands,
acknowledges and agrees that Tenant's compliance with the provisions of this
paragraph (e) may require Tenant to expend funds or do acts after the expiration
or termination of the Term and Tenant shall not be excused therefrom.
(g) Within ten (10) days after a written request by the Landlord or
any Mortgagee, Tenant shall deliver to Landlord and Mortgagee, if any, a duly
executed and acknowledged affidavit of Tenant's chief executive officer,
certifying:
(i) the proper four digit Standard Industrial Classification
number relating to Tenant's then current use of the Demised Premises (Standard
Industrial Classification Number to be obtained by reference to the then current
Standard Industrial Classification Manual prepared and published by the
Executive Office of the President, Office of Management and Budget or the
successor to such publication); and
(ii) (A) that Tenant's then current use of the Demised
Premises does not involve the generation, manufacture, refining, transportation,
treatment, storage, handling of
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<PAGE>
disposal of hazardous substances or waste (as hazardous substances and hazardous
waste are defined in ECRA) on site, above ground or below ground (all of the
foregoing are hereinafter collectively referred to as the Presence of Hazardous
Substances), or, (B) that Tenant's then current use does involve the Presence of
Hazardous Substances, in which event, said affidavit shall describe in complete
detail that portion of Tenant's operations which involves the Presence of
Hazardous Substances. Such description shall, inter alia, identify each
hazardous substance and describe the manner in which Tenant generated, handled,
manufactured, refined, transported, treated, stored and/or disposed of same.
Tenant shall supply Landlord and Landlord's mortgagee, if any, with such
additional information relating to the Presence of Hazardous Substances as
Landlord or Landlord's mortgagee requests. This provision shall not be construed
to prohibit the lawful use of any Hazardous Substances by Tenant.
(h) Without limiting the foregoing, Tenant agrees:
(i) at its sole cost and expense, to promptly discharge
and remove any lien or encumbrance against the Demised Premises, the Building,
or the Complex imposed due to Tenant's failure to comply with ECRA, and
(ii) to defend, indemnify and hold Landlord harmless from and
against any and all liability, penalty, loss, expenses, damages, costs, claims,
causes of action, judgments and/or the like, of whatever nature, including but
not limited to attorney's fees and other costs of litigation or preparation
therefor, to the extent such costs arise from or in connection with Tenant's
failure or inability, for any reasons whatsoever, to observe or comply with ECRA
and/or provisions of this Section 6.05.
(i) Tenant agrees that each and every provision of this Section 6.05
shall survive the expiration or early termination of the Term. The parties
hereto expressly acknowledge and agree that the Landlord would not enter into
the Lease but for the provisions of this Section 6.05 and the aforesaid survival
thereof.
Section 6.06. Underground Storage Tanks: Tenant agrees that it
shall, at its sole cost and expense, promptly comply with all Government
Regulations relating to underground storage tanks, including, but not limited
to, the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. ss.6991 et seq.
or New Jersey's underground storage tank law, P.L. 1986 c.102, N.J.S.A.
58:10A-21 et seq. Landlord acknowledges that prior to commencement of this Lease
all underground storage tanks and gasoline pumps were removed and that this
provision shall only apply to tanks installed by or for Tenant.
Section 6.07. Spill Act:
(a) Landlord, to its knowledge, has not violated any provisions
of the Spill Act (as hereinafter defined).
(b) Tenant agrees that it shall, at its sole cost and expense,
observe, comply and fulfill all of the terms and provisions of the Spill
Compensation and Control Act, N.J.S.A. 58:10-23.11 et. seq., as the same may be
amended from time to time (the "Act") and all rules, regulations, ordinances,
opinions, orders and directives issued or promulgated pursuant to or in
connection with said Act by DEP, any subdivision or bureau thereof or
governmental or quasi-governmental agency or body having jurisdiction thereof.
(Said Act and all said rules, regulations, ordinances,
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<PAGE>
opinions, orders and directives are hereinafter in this Section 6.07
collectively referred to as "Spill Act".)
(c) Without limiting the foregoing, the Tenant agrees:
(i) that it shall not do, omit to do or suffer the
commission or omission of any act which is prohibited by or may result in any
liability under the Spill Act including without limitation the discharge of
petroleum products or other hazardous substances (as said terms are defined in
the Spill Act); and
(ii) whenever the Spill Act requires the "owner or operator"
to do any act, Tenant shall do such act and fulfill all such obligations at its
sole cost and expense, it being the intention of the parties hereto that
Landlord shall be free of all expense and obligations arising from or in
connection with compliance with the Spill Act.
(d) Without limiting the foregoing, Tenant agrees:
(i) at its sole cost and expense, to promptly discharge
and remove any lien or any encumbrance against the Demised Premises, the
Building or the Complex imposed by Tenant's failure to comply with the Spill
Act; and
(ii) to defend, indemnify and hold Landlord harmless from and
against any and all liability, penalty, loss, expenses, damages, costs, claims,
causes of action, judgments and/or the like, of whatever nature, including but
not limited to attorneys' fees and other expenses of litigation or preparation
therefor, to the extent such costs arise from or in connection with Tenant's
failure or inability, for any reason whatsoever, to observe or comply with the
Spill Act and/or the provisions of this Section 6.07.
(e) Tenant agrees that each and every provision of this Section 6.07
shall survive the expiration or earlier termination of the Term of the Lease.
The parties hereto expressly agree and acknowledge that the Landlord would not
enter into this Lease but for the provisions of this Section 6.07 and the
aforesaid survival thereof.
(f) Tenant agrees that it shall, at its sole cost and expense,
promptly comply with all federal, state and local laws, ordinances, rules,
regulations and requirements relating to air, ground and water pollution and
protection and/or preservation of the environment.
Section 6.08. Electrical Lines: If the Tenant installs any
electrical equipment that overloads the lines in the Demised Premises, Tenant
shall make whatever changes to such lines as may be necessary to render the
lines in good order and repair and in compliance with all Insurance Requirements
and applicable legal requirements. All electrical work to the Demised Premises
shall be performed by a licensed electrician. In the event that the electrical
work to be performed by Tenant shall require the alteration, modification or
repair of electrical equipment or lines servicing the Building, then, in such
event, Tenant shall cause such electrical work to be
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<PAGE>
performed by a licensed electrical contractor acceptable to Landlord.
Section 6.09. Repairs or Alterations:
(a) If, in an emergency, it shall become necessary to make promptly
any repairs or replacements required to be made by Tenant, Landlord may re-enter
the Demised Premises and proceed to have such repairs or replacements made and
pay the cost of such repairs or replacements. Within seven (7) days after
Landlord renders a bill for such repairs or replacements, Tenant shall reimburse
Landlord for the reasonable cost of making such repairs.
(b) Any alterations, modifications, additions or repairs to be made
by Tenant to the Demised Premises shall be performed by a licensed Contractor or
a reputable contractor regularly engaged in the trade to which such work
relates. All alterations, modifications, additions or repairs to the Demised
Premises must be done in a workmanlike manner and must comply with existing
municipal and state construction codes. Tenant shall be responsible for securing
any and all permits in connection with such work.
Section 6.10. Surrender of Premises: On the Expiration Date, Tenant
shall quit and surrender the Demised Premises broom clean, and in good condition
and repair, together with all alterations, fixtures, installations, additions
and improvements which may have been made in or attached on or to the Demised
Premises, including but not limited to an aggregate of at least nine (9) lifts,
electric or hydraulic but exclusive of any furniture and equipment, other than
lifts, which replaced damaged or obsolete items (except if such items were
damaged due to the gross negligence or intentional acts of Tenant.) Landlord, at
its option, may require Tenant to restore the Demised Premises to the condition
the Demised Premises was in on the Commencement Date in accordance with Section
6.03(b). Any personal property of Tenant which shall remain in or on the Demised
Premises after the termination of the Lease and the removal of Tenant from the
Demised Premises, may, at the option of Landlord and without notice, be deemed
to have been abandoned by Tenant and may either be retained by Landlord as its
property or be disposed of, without accountability, in such manner as Landlord
may see fit, or if Landlord shall give written notice to Tenant to such effect,
such property shall be removed by Tenant, at Tenant's cost and expense; and
Landlord shall not be responsible for any loss or damage occurring to any such
property owned by Tenant. Tenant's obligation under this Section shall survive
the Expiration Date.
Section 6.11. Mechanics' Liens: If any mechanic's or materialman's
lien is filed against the Demised Premises as a result of any additions,
alterations, repairs, installations or improvements made by Tenant, or any other
work or act of Tenant, Tenant shall discharge or bond same within twenty (20)
days from the filing of the lien. If Tenant shall fail to discharge or bond the
lien, Landlord may bond or pay the lien or claim for the account of Tenant
without inquiring into the validity of the lien or claim.
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Section 6.12. Insurance Covering Repairs, Etc.: Tenant shall not
make any major or structural alterations, repairs or installations or any other
work to or on the Demised Premises unless prior to the commencement of such work
Tenant shall obtain or provide proof of (and during the performance of such work
keep in force) public liability and workmen's compensation insurance coverage.
Such policies shall be non-cancellable without ten (10) days prior written
notice to Landlord. The policies shall be in amounts and shall be issued by
companies reasonably satisfactory to Landlord. Prior to the commencement of such
work, Tenant shall deliver duplicate originals of certificates of such insurance
policies to Landlord.
ARTICLE VII. SERVICES AND UTILITIES.
Section 7.01. Electricity: Tenant shall make its own arrangements
with the utility company supplying electricity for that service and arrange to
have bills forwarded directly to Tenant. Tenant shall pay for all electrical
service and charges relating to the Demised Premises and Tenant's sign.
Section 7.02. Gas Service: Tenant shall make its arrangements with
the utility company supplying gas for service and arrange to have all bills
forwarded directly to Tenant. Tenant shall pay for all gas service and charges
relating to the Demised Premises.
Section 7.03. Water: Tenant agrees to promptly pay any sewer or
water rent, charge, tax or levy imposed against the Demised Premises.
Section 7.04. Heat, Hot Water, Air-Conditioning:
(a) Landlord shall not be required to supply heat, hot water or
air-conditioning to the Demised Premises. Tenant shall supply its own
requirements of heat, hot water and air-conditioning. If the Demised Premises
includes a main heating boiler and/or air-conditioning Unit(s), such equipment
must be maintained in serviceable condition by Tenant.
(b) Tenant agrees to maintain heat at the Demised Premises at all
times at a level reasonably estimated by Landlord to keep waterpipes and
sprinklers, if any, in the Demised Premises from freezing and to otherwise
prevent damage to the Demised Premises, but under no circumstances less than 40
degrees Fahrenheit.
Section 7.05. Disruption of Utility Services: Landlord shall not be
liable for any interruption or failure in the supply of gas, electricity, water
or any other service to the Demised Premises.
Section 7.06. Garbage Disposal: Tenant agrees to make its own
arrangements with a garbage hauler for the disposal of its garbage. Tenant shall
pay for all garbage disposal charges relating to the Demised Premises.
ARTICLE VIII. USE AND OPERATION.
Section 8.01. Use: Tenant shall use the Demised Premises for the
purposes set forth in the Lease.
Section 8.02. Demised Premises Operations:
(a) Tenant shall keep the Demised Premises, including exterior and
interior portions of all windows, doors and all other glass, in neat and clean
condition. Tenant shall also, at
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its own cost and expense, maintain and care for such portions of the Demised
Premises as have been seeded to grass.
(b) Tenant shall remove snow and ice from the Demised Premises, and
spread sand or other abrasive substances thereon as conditions require.
(c) Tenant agrees not to permit the accumulation (unless in
concealed metal containers) or burning of any rubbish or garbage in, on or about
any part of the Demised Premises. All rubbish and garbage must be stored in
covered containers so as not to permit the wind from blowing the rubbish and
garbage around the Demised Premises, and shall keep the driveways and area on
the Demised Premises free and clear of any and all obstructions and equipment.
Tenant shall keep the sidewalk(s) and curbs adjacent to the Demised Premises
free of debris.
ARTICLE IX. TRANSFER OF INTEREST, PRIORITY OF LIEN.
Section 9.01. Assignment, Subletting, etc.: Tenant may sublet
the Demised Premises or any part thereof, or assign, this Lease or any interest
therein (except that the option contained in Article X may only be exercised by
an entity owned or controlled by Joseph DiFeo and/or Samuel DiFeo or by Joseph
DiFeo or Samuel DiFeo, individually), without the prior written consent of
Landlord. Tenant shall notify Landlord immediately of any such assignment or
sublet. No assignment or sublet shall relieve Tenant of any obligations herein.
Section 9.02. Subordination: The Lease and Tenant's rights under the
Lease are subject and subordinate to the lien of any present or future mortgage,
indenture or other first lien encumbrance, together with any renewals,
extensions, modifications, consolidations and replacements of such first lien,
encumbrance, now or after the Commencement Date, affecting, placed or enforced
against the Demised Premises, or any interest of Landlord in the Demised
Premises, or Landlord's interest in the Lease and the leasehold estate created
by the Lease (except to the extent any such instrument will expressly provide
that the Lease is superior to such instrument). This provision will be
self-operative and no further instrument of subordination will be required in
order to effect it. Nevertheless, Tenant will execute, acknowledge and deliver
to Landlord, at any time and from time to time, upon demand by Landlord, such
documents as may be requested by Landlord, or any mortgagee to confirm or effect
any such subordination. If Tenant fails or refuses to execute, acknowledge and
deliver any such document within twenty(20) days after written demand, Landlord,
its successors and assigns will be entitled to execute, acknowledge and deliver
any and all such documents for and on behalf of Tenant as attorney-in-fact for
Tenant. Tenant does hereby constitute and irrevocably appoint Landlord, its
successors and assigns as Tenant's attorney-in-fact to execute, acknowledge and
deliver any and all documents described in this Section 9.02 for and on behalf
of Tenant, as provided in this Section 9.02.
Section 9.03. Attornment: If the Demised Premises is encumbered by a
Mortgage and such Mortgage is foreclosed, or if the Demised Premises is sold
pursuant to such foreclosure or by reason of a default under said Mortgage, then
notwithstanding such foreclosure, such sale, or such default (i) Tenant shall
not
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disaffirm the Lease or any of its obligations thereunder, and (ii) at the
request of the applicable Mortgagee or purchaser at such foreclosure or sale,
Tenant shall attorn to such Mortgagee or purchaser and execute a new lease for
the Demised Premises setting forth all of the provisions of the Lease except
that the term of such new lease shall be for the balance of the Term.
Section 9.04. Transfer of Landlord's Interest: The term
"Landlord" as used in this Lease means the owner or the Mortgagee in
possession.
Section 9.05. Mortgagee's Rights: If Landlord shall notify Tenant
that the Demised Premises is encumbered by a Mortgage and in such notice set
forth the name and address of the Mortgagee thereof; then, notwithstanding
anything to the contrary, no notice intended for Landlord shall be deemed
properly given unless a copy thereof is simultaneously sent to such Mortgagee by
certified or registered mail, return receipt requested. If any Mortgagee shall
perform any obligation that Landlord is required to perform hereunder, such
performance by Mortgagee, insofar as Tenant is concerned, shall be deemed
performance on behalf of Landlord and shall be accepted by Tenant as if
performed by Landlord.
ARTICLE X. OPTION.
Section 10.01. Option. (a) Provided the Tenant is not in Default,
the current principals of DiFeo BMW, Inc. being Samuel DiFeo and/or Joseph
DiFeo, individually or any entity owned or controlled by them shall have the
right to purchase the Demised Premises during the first through tenth year of
Term but not during any Renewal Period upon the terms and conditions set forth
in the Purchase Agreement attached hereto as Exhibit C.
(b) In the event that the Tenant exercises its option to purchase
the Demised Premises upon the terms set forth in the attached Purchase
Agreement, the purchase price shall be Two Million Six Hundred Thousand
($2,600,000) Dollars.
ARTICLE XI. DESTRUCTION AND FIRE INSURANCE.
Section 11.01. Insurance.
(a) During the term of this Lease, the Tenant shall procure, or
do and maintain, as appropriate, the following types of insurance in the amounts
specified, naming the Landlord as additional insured:
(i) Keep insured the Building on the Demised Premises and
building equipment against loss or damage by fire (and against such other risks
as would be covered by "ALL-RISK" insurance to the extent that such insurance is
reasonably available), in an amount not less than 100% of the then full
insurable value of said building and building equipment. The term "full
insurable value" shall mean the actual replacement value (excluding foundation
and excavation costs) and said "full insurable value" shall be reasonable
determined by Landlord's engineers, or if Landlord also desires by one of the
insurers acceptable to Landlord, at three (3) year intervals or at such other
times as Landlord may reasonably request.
(ii) Maintain flood insurance, as may be required by
Landlord's mortgagee.
(iii) Maintain such other insurance as Landlord reasonably
deems necessary.
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(b) All losses shall be adjusted with the insurance companies
jointly by Landlord and Tenant and shall be paid to Landlord and Tenant as their
interests appear.
(c) Tenant agrees, at its sole cost and expense, to promptly comply
with all of the rules and regulations of the Fire Insurance Rating Organization
having jurisdiction, or any similar body. If, at any time, as a result of or in
connection with any failure by Tenant to comply with the foregoing provision, or
as a result of any act of omission or commission by Tenant, its employees,
agents, contractors, invitees, licensees or subtenants, any insurance rate
applicable to the building and/or to the contents thereof, shall be higher than
that which would be applicable for the least hazardous types of occupancy
legally permitted therein, then and in any of such events, Landlord shall have
the right to terminate this lease upon written notice delivered to the Tenant,
or to require Tenant to pay such additional premiums for all insurance policies
in force with respect to the building. Tenant shall not use or install any
electrical equipment that overloads the lines in the Building and Tenant, at its
sole cost and expense, shall promptly make whatever changes are necessary to
prevent or remedy such condition and to comply with all requirements of
Landlord, the Board of Fire Insurance Underwriters or any similar body and any
governmental authority having jurisdiction thereof. For the purposes of this
paragraph, any finding or schedule of the Fire Insurance Rating Organization or
any similar organization having jurisdiction shall be deemed to be conclusively
binding on the parties hereto.
(d) (i) If at any time during the Term of this Lease or any Renewal
Period, the Demised Premises shall be damaged in whole or in part or wholly or
partially destroyed from fire or other casualty (including any casualty for
which insurance coverage was not obtained) of any kind or nature, regardless of
whether said damage or destruction resulted from an act of God, the fault of the
Tenant, the Landlord or from any cause whatsoever, then the Tenant shall
promptly replace, repair and rebuild the damaged or destroyed improvements and
buildings, at least to the extent of the value of the improvements and
buildings, and as nearly as practicable to the character of the buildings or
improvements, existing immediately prior to such occurrence. Such rebuilding
shall be made in accordance with plans and specifications therefor which shall
first be submitted to and approved in writing by the Landlord, which approval
shall not be unreasonably withheld.
(ii) All insurance money collected by the Landlord from any
policy of insurance on account of such destruction or damages, less the cost, if
any, incurred in connection with the adjustment of the loss and the collection
thereof (herein sometimes referred to as the "insurance proceeds"), shall be
applied to the payment of the cost of the rebuilding, and shall be paid out to
or for the account of the Tenant from time to time as such work progresses. All
sums so paid to the Tenant and any other insurance proceeds received or
collected by or for the account of the Tenant (other than by way of
reimbursement to the Tenant for sums theretofore paid by the
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Tenant) shall be held by the Tenant in trust for the purpose of paying the cost
of such reconstruction.
(iii) Upon the Landlord's receipt of evidence reasonably
satisfactory to it that the reconstruction has been completed and paid for in
full and that there are no liens on the Demised Premises as a result thereof,
the Landlord shall pay to the Tenant any remaining balance of said insurance
proceeds.
(iv) Under no circumstances shall the Landlord be obligated to
make any payment, disbursement or contribution towards the cost of the work
except to the extent of the insurance proceeds actually received by the
Landlord.
(v) In the last year of the Term of the Lease, in the event of
any such casualty damage to the Demised Premises, Tenant shall have the option
to terminate the Lease and Landlord shall be entitled to all insurance proceeds.
(e) No provision of this Article shall be construed to entitle the
Tenant to any abatement, allowance, reduction or suspension of Rent unless this
Lease is terminated by the Landlord.
ARTICLE XII. CONDEMNATION.
Section 12.01. Definitions:
Within the meaning of Article XII, the following words have the
following meaning:
(a) Taking: means the taking of or damage to the Demised Premises or
any portion thereof, as the case may be, as the result of the exercise of any
power of eminent domain, condemnation, or purchase under threat thereof in lieu
thereof.
(b) Award: means the award for or proceeds of any Taking, less
all expenses in connection therewith, including reasonable attorney's fees.
(c) Taking Date: means, with respect to any Taking, the date on
which the condemning authority shall have the right to possession of the
Demised Premises or any portion thereof, as the case may be.
Section 12.02. Total or Substantial Partial Taking of Demised
Premises: In the event of a Taking of the whole of the Demised Premises, other
than a Taking for temporary use, the Lease shall automatically terminate as of
the Taking Date. In the event of a Taking of any substantial portion of the
Demised Premises, either party may, at its option, terminate the Lease by giving
notice to the other within six (6) months of the date of such Taking.
Section 12.03. Restoration: In the event of a Taking of a portion of
the Demised Premises other than a Taking for temporary use and the Lease shall
not terminate or be terminated under the provisions of Section 12.02 hereof,
Rent shall be reduced in the proportion that the area so Taken bears to the
entire area contained within the Demised Premises. If a part of the Demised
Premises are taken, Landlord may restore or cause to be restored the remainder
to the extent practical. However, Landlord may refuse to restore the remainder.
If Landlord refuses to restore the remainder and gives notice of its refusal to
Tenant, either party may cancel the Lease by giving notice to the other within
ninety (90) days after Landlord shall have given notice of its determination not
to repair the damage.
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Section 12.04. Taking for Temporary Use: If there is a Taking of the
Demised Premises for temporary use, the Lease shall continue in full force and
effect, and Tenant shall continue to comply with all of the provisions thereof,
except as such compliance shall be rendered impossible or impracticable by
reason of such Taking and Rent shall be abate during the course of such Taking.
Section 12.05. Disposition of Awards: All awards arising from a
total or partial Taking of the Demised Premises, the Building, or of Tenant's
leasehold interest, shall belong to Landlord without any participation by Tenant
except if such Taking occurs during the period of time after Tenant has given
notice to Landlord of its intention to exercise its option under Article X, in
which case Tenant shall participate to the extent of the improvements made to
the portion of the Premises subject to the Taking. Tenant hereby assigns to
Landlord any share of such Award which may be awarded to Tenant.
ARTICLE XIII. INDEMNITY AND LIABILITY.
Section 13.01. Indemnity.
(a) Within the meaning of Article XIII, "Claims" means any
claims, suits, proceedings, actions, causes of action, responsibility,
liability, demands, judgments, and executions.
(b) Tenant hereby indemnifies and agrees to save harmless Landlord
and Mortgagee from and against any and all Claims, which either (i) arise from
or are in connection with the possession, use, occupation, management, repair,
maintenance or control of the Demised Premises, or any portion thereof; (ii)
arise from or are in connection with any act or omission of Tenant, or Tenant's
Agents'; (iii) result from any Default, breach, violation or non-performance of
the Lease or any of the conditions set forth herein; or (iv) result in injury to
person or property or loss of life sustained in or about the Demised Premises.
Tenant shall defend any actions, suits and proceedings which may be brought
against Landlord or Mortgagee with respect to the foregoing or in which they may
be impleaded. Tenant shall pay, satisfy and discharge any judgments, orders and
decrees which may be recovered against Landlord or Mortgagee in connection with
the foregoing.
Section 13.02. Liability Insurance:
Tenant shall provide on or before it enters the Demised Premise for
any reason and shall keep in force during the Term for the benefit of Landlord
and Tenant, liability insurance naming Landlord and any designee of Landlord
with an insurable interest as additional insureds. The policy shall protect
Landlord, Tenant and any designee of Landlord against any liability occasioned
by any occurrence on or about the Demised Premises or any appurtenance thereto,
or arising from any of the items indicated in Section 13.01 against which Tenant
is required to indemnify Landlord. Such policy is to be written (i) by a good
and solvent insurance company satisfactory to Landlord, and (ii) in a combined
single limit of at least the amount set forth in the Lease for injury or death
to one or more than one person arising from any one occurrence and in the amount
set forth in the Lease with respect to property damages.
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Section 13.03. General Provisions with Respect to Insurance:
(a) Upon the execution of the Lease and before any insurance
policy shall expire, Tenant shall deliver to Landlord such policy or a renewal
thereof, as the case may be, together with evidence of payment of applicable
premiums. Any insurance required to be carried hereunder may be carried under a
blanket policy covering the Demised Premises and other locations of Tenant; and,
if Tenant includes the Demised Premises in such blanket coverage, Tenant may
deliver to Landlord a duplicate original of such policy or a certificate of
insurance with a copy of the policy to be delivered as soon as practical.
(b) All insurance policies required to be carried hereunder by or on
behalf of Tenant shall provide (and any certificate evidencing the existence of
any insurance policies, shall certify that): unless Landlord shall have been
given ten (10) days' written notice of any cancellation, failure to renew, or
material change as the case may be, (i) the insurance shall not be cancelled and
shall continue in full force and effect, (ii) the insurance carrier shall not
fail to renew the insurance policies for any reason, and (iii) no material
change may be made in the insurance policy.
(c) Each insurance policy shall be issued by an insurer of
recognized responsibility reasonably satisfactory to Landlord; shall be
satisfactory to Landlord in form and substance; and shall be carried in favor of
Landlord, Tenant and all Mortgagees as their respective interests may appear.
Within the meaning hereof, the term "insurance policy" shall include any
extensions or renewals of such insurance policy.
Section 13.04. Environmental Indemnification
(a) Tenant shall indemnify and hold Landlord free and harmless
from any and all liabilities, damages, claims, penalties, fines, settlements,
causes of action, costs or expenses, including reasonable attorneys' fees,
environmental consultant and laboratory fees and the cost and expenses of
investigating and defending any claims or proceedings resulting from any of the
following: (i) the presence, disposal, release or threatened release of any
hazardous substances as defined by N.J.A.C. 7:1E ("Hazardous Substances") that
is on, from or affecting the Demised Premises including the soil, water,
vegetation, buildings, personal property, persons, animals or otherwise; (ii)
any personal injury (including wrongful death) or property damage (real or
personal) arising out of or relating to the Hazardous Substance; (c) any
lawsuits or administrative order relating to the Hazardous Substance; or any
violation of any laws applicable to the Hazardous Substance, and resulting from
the acts, errors, omissions, negligence, gross negligence or willful misconduct
of the Tenant.
(b) Landlord shall indemnify and hold tenant harmless for any and
all liabilities, damages, claims, penalties, fines, settlements causes of
action, costs or expenses, including reasonable attorney fees, environmental
consultant fees and laboratory fees resulting from (i), (ii) or (iii) as listed
above, resulting from Hazardous Substances or conditions which
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existed on the Demised Premises prior to the Commencement date of this Lease.
(c) There is a presumption that any contamination not detected
during the environmental site investigations performed by Langan Environmental
Services, Inc. resulted from the operations of the Tenant unless Tenant can
prove by clear evidence that the contamination did not result from the Tenant's
actions, errors, omissions, negligence, gross negligence or willful misconduct.
ARTICLE XIV. COVENANT OF QUIET ENJOYMENT.
Section 14.01. Quiet Enjoyment:
Landlord covenants that if Tenant pays the Rent and all other
charges provided for in the Lease and herein, performs all of its obligations
provided for under the Lease and hereunder, and observes all of the other
conditions hereof, Tenant shall at all times during the Term peaceably and
quietly have, hold and enjoy the Demised Premises, without any interruption or
disturbance from Landlord, subject to the terms of the Lease and the conditions
set forth herein.
ARTICLE XV. FAILURE TO PERFORM, DEFAULTS, REMEDIES.
Section 15.01. Defaults, Conditional Limitation:
(a) Each of the following events shall constitute a Default:
(i) If Tenant, or any Tenant's Guarantor, shall (x) make an
assignment for the benefit of creditors, (y) file or acquiesce to a petition in
any court (whether or not pursuant to any statute of the United States or of any
state) in any bankruptcy, reorganization, composition, extension, arrangement or
insolvency proceedings, (z) make an application in any such proceedings for or
acquiesce to the appointment of a trustee or receiver for it or all of any
portion of its property.
(ii) If any petition shall be filed against Tenant, or any
Tenant's Guarantor, to which neither of them acquiesce in any court (whether or
not pursuant to any statute of the United States or any state) in any
bankruptcy, reorganization, composition, extension, arrangement or insolvency
proceedings, and (x) Tenant or any Tenant's Guarantor shall thereafter be
adjudicated a bankrupt, or (y) such petition shall be approved by any such
court, or (z) such proceedings shall not be dismissed, discontinued or vacated
within thirty (30) days.
(iii) If, in any proceeding, pursuant to the application of
any person other than Tenant, or any Tenant's Guarantor to which neither of them
acquiesce, a receiver or trustee shall be appointed for Tenant, or any Tenant's
Guarantor or for all or any portion of the property of either and such
receivership or trusteeship shall not be set aside within thirty (30) days after
such appointment.
(iv) If Tenant shall refuse to take possession of the Demised
Premises upon Delivery of Possession or shall vacate the Demised Premises and
permit the same to remain unoccupied and unattended.
(v) If Tenant shall fail to pay any Rent within ten (10) days
of when due, or any other charge required to be paid by Tenant hereunder within
ten (10) days after notice of failure to pay when due.
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(vi) If Tenant shall fail to perform or observe any term,
provision or requirement of the Lease or any condition or requirement set forth
herein, and such failure shall continue for sixty (60) days after notice of
nonperformance.
(b) The Lease is subject to the following limitation: If at any
time, a Default shall occur, then upon the happening of any one or more of the
aforementioned Defaults, Landlord may give to Tenant a notice of intention to
end the Term of the Lease at the expiration of five (5) days from the date of
service of such notice of termination. At the expiration of such five days the
Lease and the Term as well as all of the right, title and interest of the Tenant
thereunder shall wholly cease and expire, and Tenant shall then quit and
surrender the Demised Premises to the Landlord. Notwithstanding such
termination, surrender, and the expiration of Tenant's right, title, and
interest, Tenant's liability under all of the provisions of the Lease shall
continue.
Section 15.02. Landlord's Re-Entry: If the Lease shall be terminated
as herein provided, Landlord, or its agents or employees, may re-enter the
Demised Premises at any time and remove therefrom Tenant, Tenant's Agents, and
subtenants, and any licensees or invitees, together with any of its or their
property, either by summary dispossess proceedings or by any suitable action or
proceeding at law or by force or otherwise. In the event of such termination,
Landlord may repossess and enjoy the Demised Premises. Landlord shall be
entitled to the benefits of all provisions of law respecting any proceedings in
forcible entry and detainer or all provisions of law respecting the recovery of
the Demised Premises held over by Tenant. Tenant waives any rights to the
service of any notice of Landlord's intention to re-enter provided for by any
present or future law. Landlord shall not be liable in any way in connection
with any action it takes pursuant to the foregoing. Notwithstanding any such
re-entry, repossession, dispossession or removal, Tenant's liability under all
of the provisions hereof and of the Lease shall continue.
Section 15.03. Deficiency:
(a) In case of re-entry, repossession or termination of the Lease,
whether the same is the result of the institution of summary or other
proceedings or not, Tenant shall remain liable (in addition to accrued
liabilities) to the extent legally permissible for (i) the (x) Rent, and all
other charges provided for herein until the date the Lease would have expired
had such termination, re-entry or repossession not occurred, and (y) expenses to
which Landlord may be put in re-entering the Demised Premises repossessing the
same; making good any Default of Tenant; painting, altering or dividing the
Demised Premises; combining or placing the same in proper repair; protecting and
preserving the same by placing therein watchmen and caretakers; reletting the
same (including attorney's fees and disbursements, marshall's fees, brokerage
fees, in so doing); and any expenses which Landlord may incur during the
occupancy of any new tenant; minus (ii) the net proceeds of any reletting. Under
no circumstances, however, shall Landlord be under any obligation whatsoever to
make any payments to Tenant on account of any
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increase in the Rent received by Landlord by virtue of such reletting. Tenant
agrees to pay to Landlord the difference between items (i) and (ii) hereinabove
with respect to each month, at the end of such month. Such payment shall be made
to Landlord at Landlord's notice address or such other address as Landlord may
designate by giving notice to Tenant. Any suit brought by Landlord to enforce
collection of such difference for any one month shall not prejudice Landlord's
right to enforce the collection of any difference for any subsequent month. In
addition to the foregoing, Tenant shall pay to Landlord such sums as the court
which has jurisdiction thereover may adjudge reasonable as attorney's fees with
respect to any successful lawsuit or action instituted by Landlord to enforce
the provisions hereof.
(b) Landlord shall use best efforts to relet the whole or any part
of said Demised Premises for the whole of unexpired period of the Lease, or
longer, or from time to time for shorter period, for any rental then obtainable,
giving such concessions of rent and making such special repairs, alterations,
decorations and paintings for any new tenant as it may in its sole and absolute
discretion deem advisable. Tenant's liability as aforesaid shall survive the
institution of summary proceedings and the issuance of any warrant thereunder.
Section 15.04. Landlord's Right to Perform for Account of Tenant: If
Tenant shall be in Default hereunder, Landlord may, at any time thereafter, cure
said Default for the account and at the expense of Tenant. Tenant shall pay,
with interest at the lesser of twelve percent (12%) or the maximum legal rate,
on demand, to Landlord, the amount so paid, expended, or incurred by the
Landlord and any expense of Landlord including attorney's reasonable fees
incurred in connection with such Default; and all of the same shall be deemed to
be Additional Rent.
Section 15.05. Additional Remedies, Waivers, Etc.: With respect to
the rights and remedies of and waivers by Landlord: (a) the rights and remedies
of Landlord set forth herein shall be in addition to any other right and remedy
now and hereafter provided by law. All such remedies shall be cumulative and not
exclusive of each other. Landlord may exercise such rights and remedies at such
times, in such order, to such extent, and as often as Landlord deems advisable
without regard to whether the exercise of one right or remedy precedes, concurs
with or succeeds the exercise of another; (b) A single or partial exercise of a
right or remedy shall not preclude (i) a further exercise of a right or remedy
shall not preclude (i) a further exercise thereof, or (ii) the exercise of
another right or remedy, from time to time; (c) No delay or omission by Landlord
in exercising a right or remedy shall exhaust or impair the same or constitute a
waiver of, or acquiescence to a Default; (d) No waiver of a Default shall extend
to or affect any other Default or impair any right or remedy with respect
thereto; (e) No action or inaction by Landlord shall constitute a waiver of a
Default; (f) No waiver of a Default shall be effective, unless it is in writing.
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<PAGE>
ARTICLE XVI. TENANT'S CERTIFICATE.
Section 16.01. Certificate:
At any time within ten (10) days after request by Landlord, by
written instrument, duly executed and acknowledged, Tenant shall certify to
Landlord, any Mortgagee, assignee of a Mortgagee, any purchaser, or any other
person, specified by Landlord, to the effect (a) whether or not Tenant is in
possession of the Demised Premises; (b) whether or not the Lease is unmodified
and in full force and effect (or if there has been modification, that the same
is in full force and effect as modified and setting forth such modification);
(c) whether or not there are then existing set-offs or defenses against the
enforcement of any right or remedy of Landlord, or any duty or obligation of
Tenant (and if so, specifying the same); and (d) the dates, if any, to which any
Rent or other charges have been paid in advance.
ARTICLE XVII. RIGHT OF ACCESS.
Section 17.01. Entry: During any reasonable time during normal
business hours before and after the Commencement Date, upon notice Landlord may
enter upon the Demised Premises, any portion thereof and any appurtenances
thereto (with men and materials, if required) for the purpose of: (a) inspecting
same; and (b) showing the Demised Premises to prospective purchasers or lessees
during the last three (3) months of the Term. Landlord reserves the right to
place a "For Sale" (or a "For Let") sign on the Demised Premises at any time
during the last three (3) months of the Term. Landlord shall use its best
efforts not to disrupt the operation of the Tenant during any such entry.
ARTICLE XVIII. INTERPRETATION, NOTICE, MISCELLANEOUS.
Section 18.01. Interpretation:
(a) Every term, condition, agreement or provision contained in
this Lease which imposes an obligation on Tenant, shall be deemed to be also a
covenant by Tenant.
(b) Any reference herein to subtenants or licensees shall not be
deemed to imply that any subtenants or licensees are permitted hereunder. Any
references herein to any extensions or renewals of the Term or any period during
which Tenant may be in possession after the Expiration Date shall not be deemed
to imply that any extension or renewal of the Term is contemplated hereby or
that Tenant shall be permitted to remain in possession after the expiration of
the Term.
(c) If any provision of the Lease, or any provision set forth
herein, or the application thereof to any person or circumstance shall to any
extent be invalid or unenforceable, the remainder of the Lease or these General
Conditions of Lease, or the application of such provision to persons or
circumstances other than those to which it is invalid or unenforceable, shall
not be affected thereby, and each provision of the Lease or these General
Conditions of Lease shall be valid and be enforced to the fullest extent
permitted by law.
(d) The captions and headings used throughout the Lease and these
General Conditions of Lease are for convenience of reference only and shall not
affect the interpretation of the Lease or these General Conditions of Lease.
(e) Anything herein to the contrary notwithstanding:
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<PAGE>
(i) Any provision which permits or requires a party to
take any particular action shall also be deemed to permit or require a party
to cause such action to be taken; and
(ii) Any provision which requires any party not to take any
particular action shall be deemed to require the party not to permit such action
to be taken by any person or by operation of law.
(f) The Lease may be executed in several counterparts; but the
counterparts shall constitute but one and the same instrument.
(g) Wherever a requirement is imposed on any party hereto, it shall
be deemed that such party shall be required to perform such requirement at its
own expense unless it is specifically otherwise provided herein.
(h) The singular includes the plural and the plural includes the
singular.
(i) The Lease and these General Conditions of Lease shall be
construed and enforced in accordance with the laws of the State of New Jersey.
(j) The obligations and liabilities of Tenant pursuant to the Lease
and these General Conditions of Lease shall be joint and several if Tenant
consists of more than one (1) entity.
Section 18.02. Construing Various Words and Phrases:
(a) Wherever it is provided herein that a party may perform an
act or do anything, it shall be construed that that party may, but shall not be
obligated to, so perform or so do.
(b) The words "reenter" and "reentry" as used herein are not
restricted to their technical legal meaning.
(c) The following words and phrases shall be construed as
follows:
(i) "At any time" shall be construed as, "at any time or
from time to time".
(ii) "Any" shall be construed as "any and all".
(iii) "Including" shall be construed as "Including but not
limited to".
Section 18.03. No Oral Changes: The Lease may not be changed or
terminated orally.
Section 18.04. Notices: No notice, request, consent, approval,
waiver or other communication under the Lease or under these General Conditions
of Lease shall be effective unless the same is in writing and is mailed by
registered or certified mail, return receipt requested, postage prepaid,
addressed:
(a) If to Landlord, to the address designated as Landlord's Notice
Address in the Lease or such other address as Landlord designates by giving
notice thereof to Tenant, with a copy thereof to the address designated as
Landlord's Notice Copy Address in the Lease or to such other person or party as
Landlord shall designate by notice to Tenant, and
(b) If to Tenant, to the address designated as Tenant's Notice
Address in the Lease or such other address as Tenant shall designate by giving
notice thereof to Landlord, with a copy of the address designated as Tenant's
Notice Copy Address in the Lease or to such other person or party as Tenant
shall designate by giving notice thereof to Landlord.
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<PAGE>
Section 18.05. Method of Payment: Except as herein otherwise
expressly provided, all amounts under the Lease shall be payable in currency
or by check.
Section 18.06. Successors and Assigns: Subject to the provisions
hereof, the Lease shall bind and inure to the benefit of the parties and their
respective successors, representatives, heirs and assigns.
Section 18.07. Responsibility of Tenant: Any restriction on or
requirement imposed upon Tenant hereunder shall be deemed to extend to Tenant's
Guarantor, Tenant's subtenants, concessionaires and licensees and it shall be
Tenant's obligation to cause the foregoing persons to comply with such
restriction of requirement.
Section 18.08. Hold Over: If Tenant shall hold-over after the end of
the Term or any Renewal Periods, such holding over shall be construed as a
tenancy from month-to-month, subject to all of the provisions, conditions and
obligations of the Lease and these General Conditions of Lease and Rent shall be
the Rent then in effect during the last month of the Term or any Renewal Period,
as applicable.
Section 18.09. Liability of Landlord. Landlord shall be personally
liable with respect to all provisions of this Lease except for any environmental
obligations or liabilities arising out of or by virtue of the Act, the Spill
Act, Governmental Regulations or otherwise ("Environmental Liabilities"). For
Environmental Liabilities, Tenant shall look only to the equity of the then
owner of the Demised Premises in the Demised Premises. If the owner of the
Demised Premises obtains mortgage financing secured by the Demised Premises, the
Tenant may recover from such owner the amount of any mortgage proceeds received
thereby.
Section 18.10. Execution: The Lease shall be of no force and
effect unless and until it is executed by both Landlord and Tenant.
Section 18.11. Short Form Lease: Landlord and Tenant shall, each on
request of the other, execute a short form lease or Memorandum of Lease, in
proper form for recording, setting forth the Commencement Date and any provision
thereof other than Rent, Taxes and Security Deposit. The cost and expense for
the preparation of such form lease shall be paid by the party requesting same.
The Lease itself shall not be recorded.
THE PARTIES ACKNOWLEDGE THAT THEY HAVE READ, UNDERSTAND AND AGREE
TO BE BOUND BY THE GENERAL CONDITIONS OF LEASE.
Landlord Tenant
DIFEO BMW, INC.
/s/ By: /s/
- -------------------------------- -------------------------------
Michael Zullo, Sr.
/s/
- --------------------------------
Bertha Zullo
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<PAGE>
(Acknowledgment for Corporate Tenant)
STATE OF )
) ss.:
COUNTY OF )
On this ____ day of __________, 19__, before me personally appeared
_______________ to me known, who, being by me duly sworn, did depose and say
that he/she is the _________________ of ________________________________, the
corporation described in and which executed the foregoing Lease; that he/she
knows the seal of said corporation, that the 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/she signed his/her name thereto by like order.
In witness whereof I hereunto set my hand and official seal.
----------------------------
Notary Public
(Notarial Seal)
<PAGE>
Exhibit A
Property Description
All that certain property situate, lying and being in block 168 lot
005 in the City of Tenafly, County of Bergen, State of New Jersey being more
commonly known as 301 County Road, Tenafly, New Jersey.
<PAGE>
STOCK PURCHASE AGREEMENT
DATED AS OF JUNE 6, 1996
AMONG
UNITED AUTO GROUP, INC.
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,
KNAPPENBERGER 6725 TRUST DATED DECEMBER 29, 1992,
STEVEN KNAPPENBERGER,
JAY P. BESKIND
AND
GEORGE W. BROCHICK
<PAGE>
This STOCK PURCHASE AGREEMENT, dated as of June 6, 1996, is by and
among United Auto Group, Inc., a Delaware corporation ("UAG"), UAG West, Inc., a
Delaware corporation ("UAG West"), Scottsdale Jaguar, Ltd., an Arizona
corporation ("Scottsdale Jaguar"), SA Automotive, Ltd., an Arizona corporation
("SA"), SL Automotive, Ltd., an Arizona corporation ("SL"), SPA Automotive,
Ltd., an Arizona corporation ("SPA"), LRP, Ltd., an Arizona corporation ("LRP"),
Sun BMW, Ltd., an Arizona corporation ("Sun BMW"), 6725 Dealership, Ltd., an
Arizona corporation ("6725"), Scottsdale Management Group, Ltd., an Arizona
corporation ("Scottsdale Management" and collectively with Scottsdale Jaguar,
SA, SL, SPA, LRP, 6725 and Sun BMW, the "Companies"), Steven Knappenberger
Revocable Trust Dated April 15, 1983, as amended ("Knappenberger Trust"),
Brochick 6725 Trust Dated December 29, 1992 ("Brochick 6725 Trust"), Beskind
6725 Trust Dated December 29, 1992 ("Beskind 6725 Trust"), Knappenberger 6725
Trust Dated December 29, 1992 ("Knappenberger 6725 Trust"), Jay P. Beskind
("Beskind"), George W. Brochick ("Brochick" and together with Brochick 6725
Trust, Beskind 6725 Trust, Knappenberger 6725 Trust, Knappenberger Trust and
Beskind, the "Stockholders"), and Steven Knappenberger ("Mr. Knappenberger").
W I T N E S S E T H:
WHEREAS, UAG West is a wholly-owned subsidiary of UAG;
WHEREAS, the Companies operate franchise automobile dealerships and
related businesses;
WHEREAS, there are 842,749 shares of common stock, no par value, of
Scottsdale Jaguar issued and outstanding (the "Scottsdale Jaguar Common Stock");
WHEREAS, there are 1,713,010 shares of common stock, no par value of
SA issued and outstanding (the "SA Common Stock");
WHEREAS, there are 625,000 shares of common stock, no par value of SL
issued and outstanding (the "SL Common Stock");
WHEREAS, there are 547,125 shares of common stock, no par value of SPA
issued and outstanding (the "SPA Common Stock");
WHEREAS, there are 500,000 shares of common stock, no par value of LRP
issued and outstanding (the "LRP Common Stock");
WHEREAS, there are 900,000 shares of common stock, no par value of Sun
BMW issued and outstanding (the "Sun BMW Common Stock" and together with the
Scottsdale Jaguar Common Stock, the SA Common Stock, the SL Common Stock, the
SPA Common Stock and the LRP Common Stock, the "Companies' Common Stock");
WHEREAS, Knappenberger Trust, Beskind and Brochick own all of the
issued and outstanding shares of the Companies' Common Stock;
<PAGE>
WHEREAS, UAG West desires to purchase 842,749 shares of Scottsdale
Jaguar Common Stock from Knappenberger Trust, Beskind and Brochick (such shares
being collectively referred to as the "Scottsdale Jaguar Shares"), and
Knappenberger Trust, Beskind and Brochick desire to sell the Scottsdale Jaguar
Shares to UAG West (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 West will own one hundred (100%) percent of the issued
and outstanding shares of Scottsdale Jaguar Common Stock, on a fully diluted
basis;
WHEREAS, UAG West desires to purchase 1,713,010 shares of SA Common
Stock from Knappenberger Trust, Beskind and Brochick (such shares being
collectively referred to as the "SA Shares"), and Knappenberger Trust, Beskind
and Brochick desire to sell the SA Shares to UAG West (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 West will own one
hundred (100%) percent of the issued and outstanding shares of SA Common Stock,
on a fully diluted basis;
WHEREAS, UAG West desires to purchase 625,000 shares of SL Common
Stock from Knappenberger Trust, Beskind and Brochick (such shares being
collectively referred to as the "SL Shares"), and Knappenberger Trust, Beskind
and Brochick desire to sell the SL Shares to UAG West (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 West will own one
hundred (100%) percent of the issued and outstanding shares of SL Common Stock,
on a fully diluted basis;
WHEREAS, UAG West desires to purchase 547,125 shares of SPA Common
Stock from Knappenberger Trust, Beskind and Brochick (such shares being
collectively referred to as the "SPA Shares"), and Knappenberger Trust, Beskind
and Brochick desire to sell the SPA Shares to UAG West (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 West will own one
hundred (100%) percent of the issued and outstanding shares of SPA Common Stock,
on a fully diluted basis;
WHEREAS, UAG West desires to purchase 500,000 shares of LRP Common
Stock from Knappenberger Trust, Beskind and Brochick (such shares being
collectively referred to as the "LRP Shares"), and Knappenberger Trust, Beskind
and Brochick desire to sell the LRP Shares to UAG West (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 West will own one
hundred (100%) percent of the issued and outstanding shares of LRP Common Stock,
on a fully diluted basis;
WHEREAS, UAG West desires to purchase 900,000 shares of Sun BMW
Common Stock from Knappenberger Trust, Beskind and Brochick (such shares being
collectively referred to as the "Sun BMW Shares" and together with the
Scottsdale Jaguar Shares, the
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<PAGE>
SA Shares, the SL Shares, the SPA Shares and the LRP Shares, the "Shares"), and
Knappenberger Trust, Beskind and Brochick desire to sell the Sun BMW Shares to
UAG West (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 West will own one hundred (100%) percent of the issued and outstanding
shares of Sun BMW Common Stock, on a fully diluted basis;
WHEREAS, there are 101,251 shares of common stock, no par value of
Scottsdale Management issued and outstanding (the "Scottsdale Management Common
Stock");
WHEREAS, Knappenberger Trust owns all of the issued and outstanding
shares of the Scottsdale Management Common Stock;
WHEREAS, UAG West desires to purchase 101,251 shares of Scottsdale
Management Common Stock from Knappenberger Trust (such shares being referred to
as the "Scottsdale Management Shares") and Knappenberger Trust desires to sell
the Scottsdale Management Shares to UAG West (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 West will own one hundred (100%) percent
of the issued and outstanding shares of Scottsdale Management Common Stock, on a
fully diluted basis;
WHEREAS, there are 1,250 shares of common stock, no par value of 6725
issued and outstanding (the "6725 Common Stock");
WHEREAS, the Brochick 6725 Trust, the Beskind 6725 Trust and the
Knappenberger 6725 Trust own one hundred percent of the issued and outstanding
shares of 6725 (the "6725 Common Stock");
WHEREAS, UAG West desires to purchase 1,250 shares of 6725 Common
Stock from the 6725 Trusts (such shares being referred to as the "6725 Shares")
and the 6725 Trusts desire to sell the 6725 Shares to UAG West (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 West will own one
hundred (100%) percent of the issued and outstanding shares of 6725 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 CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
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<PAGE>
(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) "Bank of America Note" shall mean those certain Working Capital
Term Loans, in the approximate aggregate principal amount of $5,450,000.00, by
certain of the Companies as makers in favor of Bank of America Arizona.
(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) "Maas Note" shall mean that certain Promissory Note, dated
February 27, 1995, by Sun BMW as maker in favor of Camelback Automotive, Inc. in
the principal amount of $500,000.00.
(f) "Material Adverse Effect" shall mean any change in, or effect on,
the Companies (including the businesses thereof) which is, or is reasonably
likely to be, materially adverse to the business, operations, assets, or
condition (financial or otherwise) of the Companies taken as a whole.
(g) "Max Consulting Agreement" shall mean that certain Consulting and
Non-Compete Agreement dated June 7, 1985 between Max Haechler and Scottsdale
Jaguar (by assignment from SPA Automotive, formerly known as Scottsdale Porsche
& Audi, Ltd.).
(h) "Person" shall mean and include an individual, corporation,
limited liability company, partnership, joint venture, association, trust, any
other unincorporated organization or entity and a governmental entity or any
department or agency thereto.
(i) "Purchased Real Property" shall mean the real property used in
the businesses of the Companies and known as 6725 E. McDowell Road, Scottsdale,
Arizona, 6825 E. McDowell Road, Scottsdale, Arizona and 6905 E. McDowell Road,
Scottsdale, Arizona.
(j) "Scottsdale Road Leases" shall mean (i) that certain lease dated
July 27, 1987, between Anthony A. Batarse, Jr., as Trustee under the Trustors'
Trust Established under Article 1 of the Batarse Family Trust Agreement dated
May 7, 1987, as amended (by assignment from Anthony A. Batarse, Jr. on September
30, 1987) as lessor, and SA, as lessee; and (ii) that certain lease dated July
27, 1987, between Anthony A. Batarse, Jr., as Trustee
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<PAGE>
under the Trustors' Trust Established under Article 1 of the Batarse Family
Trust Agreement dated May 7, 1987, as amended (by assignment from Esther Batarse
on August 20, 1987), as lessor, and SA, as lessee.
(k) "6925 Lease" shall mean that certain Sublease dated August 11,
1980, by and between Max of Switzerland, as Sublessor, and Scottsdale Porsche &
Audi, Ltd. (now known as SPA), as Sublessee, as amended by that certain
Amendment to Sublease dated June 7, 1985, that certain Agreement dated July 15,
1985, and that certain Third Amendment to Sublease dated November 30, 1992.
(l) "6905 Lease" shall mean that certain Sublease, dated June 7,
1985, by and between Max of Switzerland, as Sublessor, and Scottsdale Porsche &
Audi, Ltd. (now known as SPA), as Sublessee, as amended by that certain
Amendment to the Sublease, dated November 11, 1985, and that certain Second
Amendment to Sublease dated July 30, 1986.
1.2 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 West, and UAG
West shall purchase from the Stockholders, the Shares and the 6725 Shares for an
aggregate purchase price (the "Purchase Price") equal to (i) Twenty-four Million
Fifty Thousand Dollars ($24,050,000) (the "Base Price") (the Base Price shall be
allocated pro rata among the Stockholders) which Base Price is subject to
adjustment at the time of Closing as provided in SECTION 1.3 below and which
Base Price is subject to adjustment after Closing as provided in SECTION 1.4
below, and (ii) the Additional Payments (if any) made pursuant to SECTION 1.5
below. At the Closing referred to in SECTION 1.2(b) hereof:
(i) the Stockholders shall sell, assign, transfer and deliver to
UAG West the Shares and the 6725 Shares representing 100% of the Scottsdale
Jaguar Common Stock, 100% of the SA Common Stock, 100% of the SPA Common
Stock, 100% of the SL Common Stock, 100% of the LRP Common Stock, 100% of
the Sun BMW Common Stock and 100% of the 6725 Common Stock and deliver the
certificates representing such shares accompanied by stock powers duly
executed in blank; and
(ii) UAG West shall accept and purchase the Shares and the 6725
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 less the Deposits (as defined in SECTION 1.6 hereof) by wire
transfer to accounts designated in writing by the Stockholders or by
certified funds.
(b) CAPITAL CONTRIBUTION AND REPAYMENT OF LOAN. On the Closing Date,
UAG West shall make a capital contribution to the
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<PAGE>
Companies in an aggregate amount equal to the principal and accrued but unpaid
interest on the Bank of America Note as of the Closing Date ("the Payoff
Amount"), and the Companies shall pay the Payoff Amount to Bank of America
Arizona in full satisfaction of the Bank of America Note.
(c) ASSUMPTION OF INDEBTEDNESS. Except as otherwise set forth
herein, UAG and UAG West hereby acknowledge and agree that, as a result of the
transactions contemplated hereby, UAG West shall, directly or indirectly, assume
all obligations of the Companies, including without limitation, the indebtedness
listed on SCHEDULE 1.2(e)(vii) hereof. UAG and UAG West acknowledge and agree
to accept in connection with any consent to the transactions arising out of such
direct or indirect assumption, changes to the existing terms of such obligations
provided that the obligations as so revised are commercially reasonable taken as
a whole.
(d) CLOSING. Subject to the conditions set forth in this Agreement,
the purchase and sale of the Shares and the 6725 Shares pursuant to this
Agreement (the "Closing") shall take place within ten days of the Stockholders
receiving written notice from UAG stating that all conditions to closing have
been satisfied and that UAG is prepared to close (the "UAG Notice") or on
December 2, 1996, whichever occurs first (the "Closing Date") at a time and
place to be agreed upon by the parties; PROVIDED, HOWEVER, that the Stockholders
may, at their option, elect to have the Closing Date be within ten days after
the UAG Notice or within ten days after January 2, 1997, whichever occurs first,
by giving UAG written notice of such election on or before November 15, 1996.
(e) DELIVERIES AT THE CLOSING. Subject to the conditions set forth
in this Agreement, at the Closing:
(i) The Stockholders shall deliver to UAG West certificates
representing the Shares and the 6725 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 1.2(a)(i) hereof, and any other documents
that are necessary to transfer to UAG West good title to all the Shares and
the 6725 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) Knappenberger Trust shall deliver to UAG West certificates
representing the Scottsdale Management 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 1.8(a)(ii) hereof, and any other documents
that are necessary to transfer to UAG West good title to all the Scottsdale
Management Shares;
(iii) UAG West shall (a) pay to the Stockholders funds as required
by SECTION 1.2(a)(ii) hereof, (b) pay to Knappenberger Trust funds as
required by SECTION 1.8(a)(ii)
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<PAGE>
hereof, and (c) deliver to the Stockholders all opinions, certificates and
other instruments and documents required to be delivered by UAG or UAG West
at or prior to the Closing or otherwise required in connection herewith;
(iv) UAG West shall enter into an employment agreement with Mr.
Knappenberger in a form mutually acceptable to UAG, UAG West and Mr.
Knappenberger (the "Knappenberger Employment Agreement"). The
Knappenberger Employment Agreement shall provide that Mr. Knappenberger
shall be employed as President and Chief Operating Officer of UAG West and
as dealer principal for all manufacturers relating to the Companies'
current dealerships and shall be for a five-year term, which term shall
automatically be extended for one year on each anniversary of the Closing
Date unless such annual extensions are terminated by the parties.
(v) UAG West shall enter into an employment agreement with Jay
Beskind ("Beskind") in a form mutually acceptable to UAG, UAG West and
Beskind (the "Beskind Employment Agreement"). The Beskind Employment
Agreement shall provide that Beskind shall be employed as a General Manager
and as Executive Vice-President of UAG West and shall be for a five-year
term, which term shall automatically be extended for an additional year on
each anniversary of the Closing Date unless such annual extensions are
terminated by the parties.
(vi) UAG West shall enter into an employment agreement with
George Brochick ("Brochick") in a form mutually acceptable to UAG, UAG West
and Brochick (the "Brochick Employment Agreement"). The Brochick
Employment Agreement shall provide that Brochick shall be employed as a
General Manager and as Executive Vice-President of UAG West and shall be
for a five-year term, which term shall automatically be extended for an
additional year on each anniversary of the Closing Date unless such annual
extensions are terminated by the parties.
(vii) UAG and UAG West shall guaranty the obligations of the
Companies under the leases set forth on SCHEDULE 1.2(e)(vii) hereof (the
"Leases"), the debt set forth on SCHEDULE 1.2(e)(vii) hereof, the Broker's
Agreement between UAG West and KBB, Inc. (the "Broker's Agreement") and the
Knappenberger, Beskind and Brochick Employment Agreements, and shall
deliver to the creditors or lessors, and to KBB, Inc., Mr. Knappenberger,
Beskind and Brochick, as the case may be, one or more guarantees in a form
mutually acceptable to UAG and such other persons (collectively, the
"Guarantees").
(viii) Provided that there is no uncured default by sellers under
the real estate purchase agreement relating to the real property used in
the business of SL and known as 6905 E. McDowell Road, Scottsdale, Arizona
(the "6905
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Property") entered into by UAG West and the owners of the 6905 Property on
the date hereof (the "Real Estate Purchase Agreement"), UAG West (or its
assignee) shall purchase the 6905 Property on the terms and subject to the
conditions set forth in the Real Estate Purchase Agreement.
(ix) UAG West shall enter into the Broker's Agreement.
1.3 MAX CONSULTING.
In the event that the Companies, or any of them, have any liabilities
or obligations relating to the Max Consulting Agreement as of the Closing Date,
then the Base Price shall be reduced by the after tax present value of such
liabilities or obligations. For purposes of determining present value under
this SECTION 1.3, the discount rate shall be ten (10%) percent per annum, and
the assumed tax rate shall be 40%.
1.4 NET WORTH ADJUSTMENT.
(a) On the Closing Date, or as soon as practicable after the Closing
Date, the Stockholders shall deliver to UAG balance sheets of the Companies
estimated as of the Closing Date (such balance sheets so delivered are referred
to herein as the "Closing Date Balance Sheets"). The Closing Date Balance
Sheets 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 2.5 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 Sheets, the Stockholders and the
Companies shall permit the Reviewer (as defined below) and other representatives
of UAG, at UAG's expense, to conduct a physical inventory at each location where
inventory is held by the Companies. 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 such inventory.
(b) Within forty-five (45) days after delivery of the Closing Date
Balance Sheets, (i) Coopers & Lybrand or such other accounting firm selected by
UAG and reasonably approved by the Stockholders (the "Reviewer") shall audit or
otherwise review, at UAG's expense, the Closing Date Balance Sheets in such
manner as UAG and the Reviewer deem reasonably appropriate, and (ii) UAG shall
deliver such reviewed balance sheet (the "Reviewed Balance Sheets"), together
with the Reviewer's report thereon, to the Stockholders. The Reviewed Balance
Sheets (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
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the Final Net Worth (as defined in SECTION 1.4(g)(i) hereof), computed in
accordance with the definition of Net Worth set forth in SECTION 1.4(g)(iii)
hereof. UAG and the Reviewer shall have the opportunity to consult with the
Stockholders, the Companies and each of the accountants and other
representatives of the Stockholders and the Companies and examine the work
papers, schedules and other documents prepared by the Stockholders, the
Companies and each of such accountants and other representatives during the
preparation of the Closing Date Balance Sheets. 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 Sheets.
(c) The Stockholders shall have a period of forty-five (45) days
after delivery of the Reviewed Balance Sheets 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 Sheets
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 Sheets, 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 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 1.4(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 1.4(e) hereof in order that any and
all matters in dispute shall be resolved as soon as practicable.
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(g) (i) If the aggregate Net Worth as shown on the Reviewed Balance
Sheets as finally determined through the operation of SECTIONS 1.4 (a) THROUGH
(e) hereof (such amount being referred to herein as the "Final Net Worth") shall
be less than Six Million Four Hundred Thousand Seven Hundred and Thirty Dollars
($6,400,730) (the "March 31, 1996 Net Worth") (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 two (2) Business Days
prior to 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
1.4(g)(i) unless the Net Worth Deficiency exceeds One Hundred Thousand Dollars
($100,000).
(ii) If the Final Net Worth shall be more than the March 31,
1996 Net Worth (the amount of any such excess being referred to herein as the
"Net Worth Excess"), UAG West 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 two (2) Business Days prior to 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.);
(iii) "Net Worth" shall have the meaning ascribed to it in
SCHEDULE 1.4(g)(iii) delivered on the date hereof, which sets forth the
calculation of Net Worth for March 31, 1996.
1.5 ADDITIONAL PURCHASE PRICE.
(a) If the Companies, on a combined basis, achieve Pre-Tax Earnings
(as defined below) of at least $15,000,000 for the period commencing on
October 1, 1996 and ending on September 30, 1998 (the "Additional Payment
Period"), then, in consideration for the sale of the Shares by the Stockholders
to UAG West, UAG West will make an additional payment to the Stockholders (the
"Additional Purchase Price Payment") in the aggregate amount set forth below
(the "Additional Purchase Price Payment Amount"), which Additional Purchase
Price Payment shall be allocated among the Stockholders pro rata:
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If: Then:
TOTAL PRE-TAX EARNINGS (TE) ADDITIONAL PURCHASE PRICE PAYMENT
AMOUNT
$15,000,000 to $15,999,999 $[(TE - 15,000,000) x 2 DIVIDED BY 3]
$16,000,000 or over $[1,666,667 +[(TE - 16,000,000) DIVIDED BY 5]]
(b) In the event that UAG West is required to make an Additional
Purchase Price Payment, then UAG West shall pay to the Stockholders an aggregate
amount equal to eighty (80%) percent of UAG's estimate of the Additional
Purchase Price Payment Amount (the "Estimated Additional Purchase Price
Payment") within thirty (30) days after the completion of the Additional Payment
Period. Within sixty (60) days after the completion of the review by the
Companies' certified public accountants of the financial statements prepared in
accordance with SECTION 1.5(c) hereof covering the Additional Purchase Price
Payment Period (but, in no event, more than 90 days after the end of the
Additional Payment Period), (i) if the Additional Purchase Price Payment Amount
shall exceed the amount of the Estimated Additional Purchase Price Payment (the
amount of any such excess being referred to herein as the "Additional Purchase
Price Payment Deficiency"), then UAG West shall pay to the Stockholders, by wire
transfer of immediately available funds to accounts designated in writing by the
Stockholders, an aggregate amount equal to the Additional Purchase Price Payment
Deficiency, and (ii) if the Additional Purchase Price Payment Amount shall be
less than the amount of the Estimated Additional Purchase Price Payment (the
amount of any such deficiency being referred to herein as the "Additional
Purchase Price Payment Surplus"), the Stockholders shall pay to UAG West, by
wire transfer of immediately available funds to an account designated in writing
by UAG West, an aggregate amount equal to the Additional Purchase Price Payment
Surplus.
(c) For purposes of this ARTICLE I, "Pre-Tax Earnings" shall mean the
consolidated net earnings (or losses), before taxes, of the Companies, 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 Companies; PROVIDED, HOWEVER, that for
purposes of this SECTION 1.5, Pre-Tax Earnings shall be calculated giving effect
to the consolidated net earnings (or losses) of any satellites of existing
franchises and Land Rover of Tucson, shall add back any LIFO inventory
adjustments and shall be calculated without including (i) depreciation or
amortization expenses; (ii) overhead expenses of UAG or UAG West attributed to
the Companies; (iii) interest expenses relating to the Bank of America Note or
any refinancing or replacement thereof; (iv) expenses relating to the Scottsdale
Road Leases; (v) expenses relating to the Max Consulting Agreement; (vi)
interest expense on any new debt (excluding new vehicle financing); (vii) direct
expenses relating to the expansion of UAG West (through acquisitions, start-ups
or otherwise); (viii) any additional rent expense resulting from the sale of any
of the
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Companies' facilities to a third party; or (ix) any distributions on capital
stock permitted under SECTION 5.4(a)(vi) hereof.
1.6 DEPOSITS.
(a) INITIAL DEPOSIT. Upon the execution of this Agreement by all of
the parties hereto, UAG shall pay to the Stockholders, pro rata, a deposit in
the aggregate amount of Five Hundred Thousand Dollars ($500,000) (the "Initial
Deposit"). The Initial Deposit shall be non-refundable except that if this
Agreement is terminated pursuant to SECTION 8 hereof (i) within thirty (30) days
of the payment of the Initial Deposit to the Stockholders as the result of a
material misrepresentation or omission on the financial statements set forth on
SCHEDULE 2.5 hereto or (ii) within five (5) days of the delivery by the
Stockholders and the Companies of the Schedules set forth in ARTICLES 2 AND 3
hereof if the Schedules are not satisfactory to UAG, then, within five (5) days
of such termination, the Stockholders shall refund to UAG Two Hundred and Fifty
Thousand Dollars ($250,000) of the Initial Deposit. Without limitation of the
foregoing, the Stockholders shall be entitled to keep the Initial Deposit if UAG
and UAG West terminate this Agreement because of their failure to obtain the
approval of their respective Boards of Directors as provided in SECTION 6.8
hereof.
(b) SECOND DEPOSIT. Within five (5) days after the parties hereto
receive (i) the approvals set forth in SECTION 6.11, and (ii) binding consents
to the release at Closing of the 6925 Lease Guaranty, the 6905 Lease Guaranty,
the Bank of America Note Guaranty, the Bank of America Flooring Guaranty, the
Bank of America Real Property Guaranty I and the Bank of America Real Property
Guaranty II (each of which is defined in SECTION 5.12 hereto) UAG shall pay to
the Stockholders an additional deposit in the amount of Two Million Dollars
($2,000,000) (the "Second Deposit" and together with the Initial Deposit, the
"Deposits"). If, after payment of the Second Deposit, this Agreement is
terminated pursuant to SECTION 8.1 hereof, then, within five (5) days of such
termination, the Stockholders shall refund the full amount of the Second
Deposit; PROVIDED, HOWEVER, that the Stockholders shall have no obligation to
refund the Second Deposit (i) if this Agreement is terminated by the
Stockholders pursuant to SECTION 8.1(vi) or pursuant to SECTION 8.1(v) (unless
such termination results from the failure to satisfy any condition set forth in
the second sentence of SECTION 7.2(a), SECTION 7.2(b), SECTION 7.4, SECTION 7.6,
SECTION 7.7 or SECTION 7.12 and any such condition is not waived by the
Stockholders) or (ii) if all conditions to Closing have been satisfied or are
capable of being satisfied by UAG prior to the Closing Date (as determined in
accordance with SECTION 1.2(d) hereof) and the Stockholders were prepared to
transfer the Shares and the 6725 Shares to UAG West on the Closing Date and this
Agreement is terminated by the Stockholders pursuant to SECTION 8.1(ii) hereof.
If this Agreement is not terminated, then at the Closing, the Deposits shall be
credited against the Base Price as set forth in ARTICLE I hereof.
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1.7 MAAS NOTE.
On or before the Closing Date, the Stockholders shall pay the
outstanding principal and all accrued but unpaid interest on the Maas Note in
full satisfaction of the Companies' obligations arising out of or relating to
the Maas Note.
1.8 PURCHASE AND SALE OF SCOTTSDALE MANAGEMENT.
(a) PURCHASE AND SALE. Upon the terms and subject to the conditions
set forth in this Agreement, Knappenberger Trust shall sell to UAG West, and UAG
West shall purchase from Knappenberger Trust, the Scottsdale Management Shares
for an aggregate purchase price equal to Seven Hundred Fifty Thousand Dollars
($750,000) (the "Scottsdale Management Purchase Price"). At the Closing
referred to in SECTION 1.2(b) hereof:
(i) Knappenberger Trust shall sell, assign, transfer and deliver
to UAG West the Scottsdale Management Shares representing 100% of the
Scottsdale Management Common Stock and deliver the certificates
representing such Scottsdale Management Shares accompanied by stock powers
duly executed in blank; and
(ii) UAG West shall accept and purchase the Scottsdale Management
Shares from Knappenberger Trust and in payment therefor shall deliver to
Knappenberger Trust immediately available funds in an aggregate amount
equal to the Scottsdale Management Purchase Price by wire transfer to an
account designated in writing by Knappenberger Trust or by certified funds.
(b) NET WORTH. The parties acknowledge that, prior to the Closing
Date, Knappenberger Trust will transfer the assets of Scottsdale Management to
Knappenberger Trust (or to a third party) and the net worth of Scottsdale
Management on the Closing Date will be zero.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this ARTICLE 2 are to be delivered by the Companies and
the Stockholders no later than June 14, 1996, the Companies and the Stockholders
hereby jointly and severally represent and warrant to UAG and UAG West as
follows (except for representations and warranties relating to Scottsdale
Management which are made solely by Knappenberger Trust). Where any
representation or warranty is made "to the knowledge of the Stockholders" or to
"the Stockholders' knowledge", or subject to a similar knowledge limitation,
such representation or warranty is made to the knowledge of the Knappenberger
Trust, Mr. Knappenberger, Brochick, Beskind, 6725 Brochick Trust, 6725 Beskind
Trust, 6725 Knappenberger Trust, and, solely with respect to the
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6905 Property, the Steven Knappenberger Revocable Trust II, dated May 12, 1992,
or any of them, and shall include any information that any of them would or
should have known in the exercise of reasonable diligence by an owner or lessor
of commercial real property or an owner and operator of automobile and light
truck dealerships, as the case may be.
2.1 ORGANIZATION AND GOOD STANDING.
The Companies are corporations duly organized, validly existing and in
good standing under the laws of the State of Arizona and have the corporate
power and authority to own, lease and operate the properties used in their
businesses and to carry on their businesses as now being conducted. The
Companies are duly qualified to do business and are 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 Companies would not, or could not reasonably be expected to, in the
aggregate have a Material Adverse Effect. SCHEDULE 2.1 hereto lists (i) the
states and other jurisdictions where the Companies are so qualified and (ii) the
assumed names under which the Companies conduct business. Attached to SCHEDULE
2.1(b) hereto are complete and correct copies of the Companies' Articles of
Incorporation and Bylaws (including comparable governing instruments with
different names), as amended and presently in effect.
2.2 SUBSIDIARIES.
Except as set forth in SCHEDULE 2.2 and with respect to their interest
in one another, the Companies do not have any interest or investment in any
Person.
2.3 CAPITALIZATION.
The authorized stock of the Companies 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 Companies 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 Companies or any securities convertible into, or
other rights to acquire, any shares of capital stock of the Companies, or (ii)
obligates the Companies 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.
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The Companies have not agreed to register any securities under the Securities
Act of 1933, as amended (the "Securities Act").
2.4 AUTHORITY; APPROVALS AND CONSENTS.
(a) The Companies have the corporate power and authority to enter
into this Agreement and the documents referred to herein (the "Documents") to
which they are a party and to perform their 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 each of the Companies and no other corporate proceedings
on the part of the Companies 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, each of the Companies, enforceable against the Companies in accordance with
their respective terms.
(b) Except as set forth in SCHEDULE 2.4, the execution, delivery and
performance by each of the Companies 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 Articles 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 which is
material (as defined in SECTION 2.15 hereof) or require any consent or
waiver of any party to any Company Agreement that would or could reasonably
be expected to, in the aggregate, 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 Companies (other than the rights of UAG West to acquire the Shares, the
6725 Shares and the Scottsdale Management Shares pursuant to this
Agreement) that would or could reasonably be expected to, in the aggregate,
have a Material Adverse Effect;
(iv) violate or conflict with any Legal Requirements (as defined
in SECTION 2.9 hereof) applicable to the Companies or any of their
respective businesses or properties
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that would or could reasonably be expected to, in the aggregate, 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 5.3 hereof) that would or could reasonably be expected
to, in the aggregate, have a Material Adverse Effect.
Except as set forth in SCHEDULE 2.4 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 Companies to enable the
Companies to continue to conduct their respective businesses and operations and
use their respective 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.
Except as otherwise indicated below, attached as SCHEDULE 2.5 are true
and complete copies of:
(i) (A) the unaudited balance sheets of the Companies as of
December 31, 1995, 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 unaudited balance sheets of the
Companies 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 reviewed by and
accompanied by the report of independent certified public accountants;
(ii) the unaudited balance sheets of the Companies as of March
31, 1996 (the "Company Balance Sheets") and the unaudited statements of
income and stockholders' equity for the month periods ended on such date,
together with the notes thereto; and
(iii) the financial statements for and as of March 31, 1996,
provided to each franchiser of the Companies (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 (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
Companies, fairly present the financial position, results of operations,
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stockholders' equity and changes in financial position of the Companies 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 or in SCHEDULE 2.5 and except
for the absence of footnote disclosure on interim financial 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
Companies 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 or as set forth in SCHEDULE 2.5, 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 set forth in
SCHEDULE 2.5. The books and accounts of the Companies 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
Companies consistent with prior practices of the Companies.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES.
The Companies do not have any liability of any nature whatsoever
(whether known or unknown, due or to become due, accrued, absolute, contingent
or otherwise) that could exceed $50,000, 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 on the most
recent Company Financial Statements, (ii) current liabilities incurred in the
ordinary course of business and consistent with past practice after the date of
the Company Balance Sheets 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 the Schedules hereto, including SCHEDULE 2.6
hereto.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1995, the Companies have operated in the
ordinary course of business consistent with past practice, except as set forth
on SCHEDULE 2.7(a) hereto or as disclosed herein or on any Schedules hereto, and
there has not been:
(i) any material adverse change in the assets, properties,
business, operations, net income or financial condition of the Companies,
and no factor, event, condition or circumstance exists which threatens or
may threaten to have a Material Adverse Effect;
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(ii) any material loss, damage, destruction or other casualty to
the property or other assets of the Companies, whether or not covered by
insurance;
(iii) any change in any method of accounting or accounting
practice of the Companies;
(iv) any loss of the employment, services or benefits of any key
employee of the Companies.
(b) Since December 31, 1995, except as set forth in SCHEDULE 2.7(b)
hereto or as disclosed herein or on any Schedules hereto, the Companies have
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 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 other than in the ordinary course in connection
with any refinancing of indebtedness or acquisition of new inventory,
property or equipment;
(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) in any material respect, 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
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excess of $500,000 (in each case, excluding loaner cars), 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 material 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.
Since January 1, 1990, the Companies 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 Companies 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
Companies 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 income tax returns
for the fiscal years ended after December 31, 1992 have been furnished to UAG or
its representatives and such copies are accurate and complete as of the date
hereof. The Companies have also furnished to UAG correct and complete copies of
all notices and correspondence contesting any tax deficiency or asserting any
tax deficiency after December 31, 1989 by the Companies to or from any federal,
state or local tax authorities where the amount in dispute was in excess of
$50,000. The Companies have 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 Companies make
adequate provision on their books for the payment of all Taxes (including for
the current fiscal period) owed by the Companies. Except to the extent reserves
therefor are reflected on the Company Balance Sheets, the Companies are 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,
after December 31, 1989 the Companies have not been subject to a federal tax
audit of any kind or a state tax audit of any kind where the dispute was in
excess of $50,000, and no adjustment has
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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 in
taxes, penalties and interest. Neither the Companies nor any Stockholder knows
of any basis for an assertion of a deficiency for Taxes against the Companies.
The Stockholders will cooperate, and will cause their Affiliates to cooperate,
with the Companies in the filing of any returns and in any audit or refund claim
proceedings involving Taxes for which the Companies may be liable or with
respect to which the Companies 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
Stockholders, threatened against or affecting, the Companies, the Real Property,
the Improvements (both as defined in SECTION 2.10 hereof) or 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 Stockholders for any such Claims, and (ii) the Companies are not subject
to any judgment, decree, writ, injunction, ruling or order (collectively,
"Judgments") of any governmental, administrative or judicial authority, domestic
or foreign.
(b) The businesses of the Companies 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 Companies or any of their
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 Companies hold, and are in compliance with, all material 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 Companies own or hold 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 Companies are
adequate for the conduct of the respective businesses of the Companies as
presently conducted and no properties
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and assets presently used in the business of the Companies are owned by any
Affiliates of the Companies (other than one of the other Companies and except
for the leased property at 6905 E. McDowell Road, Scottsdale, Arizona, or as set
forth on SCHEDULE 2.10 hereto). Set forth on SCHEDULE 2.10 hereto is a list of
all interests in real property owned by or leased to the Companies (including
all such real property owned by the Companies or leased by the Stockholders
(directly or indirectly) and used in the businesses of the Companies) and of all
options or other contracts to acquire any such interest (collectively, the "Real
Property"). In all material respects, the improvements to the Real Property
("Improvements") and the machinery, equipment and other tangible property (the
"Tangible Property") owned or used by or leased to the Companies are in good
operating condition and in good repair and are fit for the particular purposes
for which they are used by the Companies, subject only to ordinary wear and
tear. The Real Property, Tangible Property and all Improvements owned or leased
by the Companies 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 material respect on property of others. To
the Stockholders' knowledge, 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 Companies as presently conducted, and there is no
pending or threatened application for changes in the zoning applicable to the
respective Real Property. Except as set forth in SCHEDULE 2.10 Certificates of
Occupancy have been issued with respect to the Improvements without special
conditions or restrictions that limit the Companies' ability to operate their
businesses after the Closing in a manner consistent with past practices. To the
knowledge of the Stockholders, all utilities servicing the Real Property and the
Improvements are provided by publicly-dedicated utility lines and are installed
and operational. No written or, to the knowledge of the Stockholders, oral
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
Companies or the Stockholders with respect to the Real Property. 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, or in the ordinary course will be,
paid and there are no liens against such property in connection therewith.
2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 2.11(a) hereto, (i) the
Companies, the Real Property and the Improvements are, and any property formerly
owned, occupied or leased by the Companies were, during the period of ownership,
occupancy or lease by the Companies, in compliance with all Environmental Laws
(as defined below), (ii) the Companies have obtained all Environmental Permits
(as defined below), (iii) such Environmental Permits are in full force and
effect, and (iv) the Companies are in compliance with all terms and conditions
of such Environmental Permits.
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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 Companies' businesses 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.
(b) Except as set forth in SCHEDULE 2.11(b), the Companies 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
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event has occurred with respect to the Real Property or the Improvements nor, to
the knowledge of the Stockholders, during the period of ownership, lease or
occupancy by the Companies of any property formerly owned, occupied or leased by
the Companies has an event occurred, 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 in SCHEDULE 2.11(b),
the Companies have no contingent liability under any Environmental Law; and
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
Companies, the Real Property or any portion thereof, the Improvements, or, to
the knowledge of the Stockholders, any property formerly owned, occupied or
leased by the Companies, 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 and there has
been no spill, release or migration of any Hazardous Materials on or under the
Real Property and no Hazardous Material is present on or under the Real Property
(provided, however, that certain petroleum products are stored and handled on
the Real Property in the ordinary course of the Companies' businesses in
compliance with all Environmental Laws including the existing regulations of the
United States Environmental Protection Agency requiring spill protection,
overfill protection and corrosion protection by December 22, 1998), (ii) none of
the Real Property or portion thereof, the Improvements or, during the period of
ownership, lease or occupancy by the Companies, any property formerly owned,
occupied or leased by the Companies 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) to the knowledge of the
Stockholders, none of the Real Property, the Improvements or, during the period
of ownership, lease or occupancy by the Companies, any property formerly owned,
occupied or leased by the Companies, or, to the knowledge of the Companies or
the Stockholders, any site or location where the Companies 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 con-
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tainers 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, to the knowledge of the
Stockholders, have any liens been placed upon any property formerly owned,
occupied or leased by the Companies 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, to the knowledge of the Stockholders, threatened claim, litigation,
or administrative proceeding, or known prior claim, litigation or administrative
proceeding, arising under any Environmental Law involving any of the Companies,
the Real Property, the Improvements, any property formerly owned, leased or
occupied by the Companies, any offsite contamination affecting the business of
the Companies 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 Companies have 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
Companies have 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 Companies, has any other entity whose liability
therefor, in whole or in part, may be attributed to the Companies, received such
notice, claim, demand, suit or request for information.
(f) By June 14, 1996, the Stockholders and the Companies shall have
provided to UAG all environmental studies and reports in their possession, and
shall have advised UAG of any material environmental studies and reports known
to them but not in their possession, pertaining to the Real Property, the
Improvements, the Companies and any property formerly owned, occupied or leased
by the Companies, 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, 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
Sheets and Company Factory Statements reflect the normal, LIFO inventory
valuation policies of the Companies, and, in the case of the Company Balance
Sheets, such values are in conformity with GAAP consistently applied (except as
disclosed on
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SCHEDULE 2.5 hereto). In all material respects, the inventories reflected on
the Company Balance Sheets and Company Factory Statements 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 Company Balance Sheets),
except for spare parts inventory which inventory is, in all material respects,
good and usable.
2.13 ACCOUNTS RECEIVABLE.
In all material respects, the accounts receivable reflected on the
Company Balance Sheets are, and all accounts receivable that will be or will
have been reflected on the Closing Date Balance Sheets, will be good, and 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 valid
defenses, setoffs or counterclaims other than normal cash discounts accrued in
the ordinary course of business.
2.14 INSURANCE.
All material properties and assets of the Companies 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 Companies are engaged and, to the
knowledge of the Stockholders, 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 Companies have made or will
make available to UAG true and complete copies of all such policies. All such
policies are in full force and effect are sufficient for all applicable
requirements of law and will not in any way be affected by or terminated or
lapsed by reason of the consummation of the transactions contemplated by this
Agreement. Except as described in SCHEDULE 2.14, no notice of cancellation or
non-renewal with respect to, or disallowance of any claim under, any such policy
has been received by the Companies.
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 either of the Companies is a party or by which either of the Companies
or any of their respective assets or properties (including the Real Property and
the Improvements) may be bound or affected, including all amendments,
modifications, extensions
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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 (i.e.,
involves payments over a period of twelve months or less of $100,000 or more and
is not cancelable at will without penalty) to the business, operations, assets
or condition (financial or otherwise) of the Companies. 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
Companies have 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 Companies are not, nor, to the knowledge of 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 Companies in any such case where such breach, default or
other event would have, or could reasonably be expected to have, a Material
Adverse Effect. To the knowledge of the Stockholders, there are no material
unresolved disputes involving any of the Companies under any Company Agreement.
2.16 LABOR RELATIONS.
(a) The Companies have paid or made provision for the payment of all
salaries and accrued wages and have 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 have withheld and paid to the appropriate
governmental authority, or are 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 their employees.
(b) Except as described in Sections 6.12, 6.13 AND 6.14 and as set
forth on SCHEDULE 2.16(b) hereto, the Companies are not a party to any (i)
outstanding employment agreements or contracts with officers or employees
providing for annual compensation in excess of $100,000 that are not terminable
at will, or that provide for payment of any bonus or commission expected to
exceed $100,000, (ii) agreement, policy or practice that requires any of them 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 Companies, nor do the
Stockholders know of any activities or proceedings of any labor union to
organize any such employees. The Companies have furnished to UAG complete and
correct copies of all such agreements ("Employment and Labor Agreements"). The
Companies
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have not breached or otherwise failed to comply with any provisions of any
Employment or Labor Agreement.
(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'
knowledge, threatened, against or affecting the Companies, and the Companies
have 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
Companies, (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 Companies, (iv) there are no charges
with respect to or relating to the Companies pending before the Equal Employment
Opportunity Commission or any state, local or foreign agency responsible for the
prevention of unlawful employment-practices, (v) the Companies have 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 Companies and, to the knowledge of the Stockholders, 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 Companies have 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 Companies or to which the Companies are 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 Companies or to which the Companies are
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
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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) to the knowledge of the Stockholders, no event has occurred
or 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 complied with the reporting and
disclosure requirements imposed under ERISA and the Code; 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;
(ii) has been operated, since its inception, in accordance with
its terms and, to the knowledge of the Stockholders, there exists no fact
which would materially adversely affect its qualified status; and
(iii) to the knowledge of the Stockholders, is not currently under
investigation, audit or review by the IRS and 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) None of the Companies' Pension Benefit Plans is a defined benefit
plan under Section 414(j) of the Code.
(e) None of the Companies' Pension Benefit Plans to which ERISA has
applied has been or is being terminated, nor is termination contemplated with
respect to any such plans.
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(f) The approximate aggregate of the amounts of contributions by the
Companies 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 Sheets reflect in the aggregate an accrual of all amounts of
employer contributions accrued but unpaid by the Companies under the ERISA Plans
as of the date of the Company Balance Sheets.
(g) With respect to the Welfare Benefit Plans:
(i) Except as set forth on SCHEDULE 2.17(g), there are no
material liabilities of the Companies under Welfare Benefit Plans with
respect to any condition which relates to a claim filed on or before the
Closing Date.
(ii) To the knowledge of the Stockholders, 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 Companies maintain or are 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 Companies pursuant to which
payments in excess of $100,000 per individual 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 Companies 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, $100,000. 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 Companies, 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
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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) to the knowledge of the Stockholders, is not currently under
investigation, audit or review by the IRS or any other federal or state
agency and (to the knowledge of the Companies or the Stockholders) no such
action is contemplated or under consideration;
(iii) has no material liability for any federal, state, local or
foreign Taxes;
(iv) to the knowledge of the Stockholders, has no claims subject
to dispute or litigation; and
(v) has met all applicable requirements, if any, of the Code and
ERISA.
2.19 TRANSACTIONS WITH INSIDERS.
Set forth on SCHEDULE 2.19 hereto is a complete and accurate
description of all material transactions between the Companies 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 Companies, and any Affiliate (other than the Companies),
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 (other than the Companies) 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.
To the knowledge of the Stockholders, no funds or assets of the
Companies have been used for illegal purposes; no unrecorded funds or assets of
the Companies have been established for any purpose; no accumulation or use of
the Companies' corporate funds or assets has been made without being properly
accounted for in the respective books and records of the Companies; all payments
by or on behalf of the Companies 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 Companies for any reason; no
payment has been made by or on behalf of the Companies 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 Companies have 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 Companies 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 Companies 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 4.9% 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 Companies that is engaged
in the retail sale of automobiles or light duty trucks in the United States.
2.22 BROKERS.
Neither the Companies, 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 Documents.
2.23 ACCOUNTS.
SCHEDULE 2.23 hereof correctly identifies each bank account maintained
by or on behalf or for the benefit of the Companies and the name of each person
with any power or authority to act with respect thereto.
2.24 DISCLOSURE.
Neither the Companies nor the Stockholders has made any material
misrepresentation to UAG or UAG West relating to the Companies, the Shares, the
6725 Shares or the Scottsdale Manage-
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ment Shares and neither the Companies nor the Stockholders has omitted to
state to UAG any material fact relating to the Companies or the Shares, the
6725 Shares or the Scottsdale Manage-ent Shares which is necessary in order
to make the information given by or on behalf of the Companies 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, the
6725 Shares or the Scottsdale Management Shares.
2.25 WORKING CAPITAL.
On the Closing Date, the aggregate net working capital of the Companies
(other than Scottsdale Management and 6725), as reflected on the Estimated
Closing Date Balance Sheet (as defined in Section 6.6 hereof) will be equal to
or greater than the aggregate net working capital of the Companies as of March
31, 1996 as reflected on the Company Balance Sheets, and such net working
capital will be sufficient to operate the respective businesses of the Companies
(other than Scottsdale Management and 6725) consistent with past practices.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this ARTICLE 3 are to be delivered by the Companies and
the Stockholders no later than June 14, 1996, each Stockholder hereby jointly
and severally further represents and warrants to UAG as follows (except for
representations and warranties relating to Scottsdale Management which are made
solely by Knappenberger Trust). Where any representation or warranty is made
"to the knowledge of the Stockholders" or to "the Stockholder's knowledge", or
subject to a similar knowledge limitation, such representation or warranty is
made to the knowledge of the Knappenberger Trust, Mr. Knappenberger, Brochick,
Beskind, 6725 Brochick Trust, 6725 Beskind Trust, 6725 Knappenberger Trust, and,
solely with respect to the 6905 Property, the Steven Knappenberger Revocable
Trust II, dated May 12, 1992, or any of them, and shall include any information
that any of them would or should have known in the exercise of reasonable
diligence by an owner or lessor of commercial real property or an owner and
operator of automobile and light truck dealerships, as the case may be.
3.1 OWNERSHIP OF SHARES; TITLE.
Each Stockholder is the owner of record and beneficially of the
Shares, the 6725 Shares and the Scottsdale Management Shares as set forth on
SCHEDULE 3.1 hereof and has, and shall transfer to UAG West at the Closing, good
and marketable title to the Shares, the 6725 Shares and the Scottsdale
Management Shares owned by him, free and clear of any and all security
interests, liens, encumbrances, proxies and voting or other agreements
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except restrictions on transfer imposed by applicable federal and state
securities laws.
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 or it is a party and to consummate the
transactions contemplated hereby and thereby (including the disposition of the
Shares, the 6725 Shares and the Scottsdale Management Shares to UAG West as
contemplated by this Agreement). This Agreement has been duly executed and
delivered by each Stockholder and constitutes, and the Documents to which each
Stockholder is a party 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. Except as set forth on
SCHEDULE 3.2, 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
any Stockholder is a party or to which any Stockholder or any of such
Stockholder'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.
3.3 REAL PROPERTY AND IMPROVEMENTS.
The owners of each of the Purchased Real Property (the "Owners") as
set forth on SCHEDULE 3.3(a) hereof own the Purchased Real Property and the
Improvements thereon in fee simple, free and clear of all liens, claims and
encumbrances, except the leases and options described in SCHEDULE 2.10 hereof,
those disclosed in the title insurance commitments described in SECTION 6.17
hereof and in SCHEDULE 3.3(b) hereof, none of which currently adversely affect
the use of the Purchased Real Property and the Improvements thereon for the
conduct of the respective businesses of the Companies as presently conducted.
With regard to the Purchased Real Property, the aggregate principal and
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interest on the Bank of American real estate loans relating thereto is
approximately Ten Million Six Hundred Thousand Dollars ($10,600,000), the
Purchased Real Property does not secure any other indebtedness other than
indebtedness of the Companies to Bank of America and there are no defaults under
any indebtedness secured by the Purchased Real Property. No assessments have
been made against any portion of the Real Property which are unpaid (except ad
valorem taxes and assessments for the current year that are not yet due and
payable), whether or not they have become liens. The Owners of the Purchased
Real Property are solvent and none have made a general assignment for the
benefit of creditors, nor been adjudicated bankrupt, nor has a receiver been
appointed with respect to any of their properties. To the Stockholders'
knowledge, there are no disputes concerning the location of the lines and
corners of the Real Property. Except as provided herein, no one has been
granted any right to purchase or lease the Purchased Real Property or the
Improvements thereon other than existing lessees under the leases in favor of
the Companies or Mr. Knappenberger, which are to be terminated at Closing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UAG
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this ARTICLE 4 are to be delivered by UAG no later than
June 14, 1996, UAG hereby represents and warrants to the Companies 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. Attached hereto as
SCHEDULE 4.1 are complete and correct copies of UAG's Certificate of
Incorporation and By-laws, as amended and presently in effect.
4.2 CAPITALIZATION.
The authorized stock of UAG and UAG West 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 UAG West and have been validly
autho-
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rized 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 and UAG West or any securities convertible into,
or other rights to acquire, any shares of capital stock of UAG and UAG West or
(ii) obligates UAG and UAG West 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.
(a) UAG and UAG West 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. Unless this Agreement is
terminated prior to July 10, 1996, then, on or before July 10, 1996, 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 will have been duly authorized and approved by the Board of
Directors of UAG and UAG West and no other corporate proceedings on the part of
UAG or UAG West will be 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 UAG
West, enforceable against UAG and UAG West in accordance with their respective
terms.
(b) Except as set forth on SCHEDULE 4.3 hereto, the execution,
delivery and performance by UAG and UAG West 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 Certificates of
Incorporation or Bylaws of UAG or UAG West;
(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 mortgage, indenture, note,
agreement, contract, lease, license, franchise, obligation, instrument, or
other commitment, arrangement or understanding of any kind that is material
to the business, operation or assets of UAG or its subsidiaries, taken as a
whole (each a "UAG Agreement") 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
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be expected to have a material adverse effect on the business, operation,
assets or condition (financial or otherwise) of UAG, UAG West and their
subsidiaries taken as a whole (a "UAG 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 that would or could reasonably be expected to
have a UAG Material Adverse Effect;
(iv) violate or conflict with any Legal Requirements applicable
to UAG or any UAG subsidiary or any of their respective businesses or
properties that would or could reasonably be expected to have a UAG
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 the provisions of the H-S-R Act that would or could
reasonably be expected to have a UAG Material Adverse Effect.
4.4 FINANCIAL STATEMENTS.
Attached as SCHEDULE 4.4 are true and complete copies of:
(i) the audited consolidated balance sheet of UAG and its
subsidiaries as of December 31, 1994 and the unaudited consolidated balance
sheet of UAG and its subsidiaries as of December 31, 1995 and the related
audited consolidated statements of income, stockholders' equity and cash
flows for the fiscal years ended on such dates, together with the notes
thereto, and, in the case of the December 31, 1994 statements, 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 March 31, 1996 (the "UAG Balance Sheet"), and the
unaudited consolidated statements of income, stockholders' equity and cash
flows for the month period 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 recon-
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ciled 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 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, UAG West 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 UAG West has made any material misrepresentation to
the Stockholders and neither UAG nor UAG West has omitted to state to the
Stockholders any material fact relating to UAG or UAG West which is necessary in
order to make the information given by UAG or UAG West not misleading or which
if disclosed would reasonably affect the decision of the seller of a business to
UAG.
4.7 FINANCIAL CAPACITY.
UAG and UAG West have the financial capacity to consummate the transactions
and to comply with all of their obligations on the terms set forth herein.
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholders and the
Companies will (i) provide to the officers and other authorized representatives
of UAG and UAG West full access, during normal business hours, to any and all
premises, properties, files, books, records, documents, and other information of
the Companies and will cause their officers to furnish to UAG and UAG West and
their authorized representatives any and all financial, technical and operating
data and other information
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pertaining to the businesses and properties of the Companies, and (ii) make
available for inspection and copying by UAG and UAG West true and complete
copies of any documents relating to the foregoing. UAG and UAG West 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) of the Companies 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 UAG West, provided that any such
third party is advised of and is bound by the confidentiality provisions hereof.
If this Agreement is terminated, UAG and UAG West will promptly return to the
Companies, upon the reasonable request of the Companies, all Confidential
Information furnished by the Companies and held by UAG and UAG West, including
all copies and summaries thereof. As used herein, "Confidential Information"
shall mean all information concerning a party obtained 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 Companies and not known
to the recipient to be bound by an obligation of confidentiality or (z) which is
or becomes known to the public, other than through a breach by UAG of this
Agreement. The Stockholders 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 of
UAG 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 the Stockholders. If this Agreement is
terminated, the Stockholders will promptly return to UAG, upon the reasonable
request of UAG, all Confidential Information furnished by UAG and held by the
Stockholders, including all copies and summaries thereof.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholders and the Companies, on the one hand, and UAG and UAG
West, 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 Companies or UAG and UAG West, respectively, required for inclusion in
any statement or application made by UAG or the Companies 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 Companies, on the one hand, nor UAG nor UAG West, 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 UAG West and the Stockholders and the Companies, 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. UAG shall be responsible for all expenses
(except for Stockholders' attorney's fees) incurred in the preparation of the H-
S-R Act filings and the filing fee to be paid in connection with the H-S-R Act
filings. The parties shall use their reasonable 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 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.
5.4 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, the Companies shall, and the Stockholders shall cause the Companies to,
conduct their respective businesses solely in the ordinary course consistent
with past practices and, without the prior written consent of UAG, which consent
shall not be unreasonably withheld, neither the Stockholders nor the Companies
will, except as required or permitted pursuant to the terms hereof or as set
forth in SCHEDULE 5.4, permit the Companies to:
(i) make any material change in the conduct of their respective
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 their 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 their
capital stock or alter any material term of any of their outstanding
securities or make any change in their outstanding shares of capital stock
or other ownership interests or its capitalization, whether by reason of a
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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 Companies, or (C) issue any options or other rights to
acquire from the Companies, directly or indirectly, debt securities of the
Companies or any security convertible into or exchangeable for such debt
securities;
(iv) except as permitted hereby, make any sale, assignment,
transfer, abandonment or other conveyance of any of their assets or any
part thereof, except transactions pursuant to existing contracts set forth
in SCHEDULE 2.15 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 their 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) declare, set aside or pay any dividends or other
distributions (whether in cash, stock, property or any combination thereof)
in respect of any shares of their capital stock which could reasonably be
expected to decrease the aggregate Net Worth of the Companies below the
March 31, 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
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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 $75,000, or aggregate capital expenditures in
excess of $500,000, in each case excluding loaner cars;
(x) except as permitted hereby, 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 their Affiliates except in the
ordinary course of business consistent with past practice;
(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 the Companies (or on behalf
of the Companies) on the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any person outside 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) take any other action that would cause any of the
representations and warranties made by the Companies 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
Companies will use their reasonable best efforts to, and the Stockholders will
use their reasonable best efforts to, cause the Companies to:
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(i) continue to maintain, in all material respects, their
properties in accordance with present practices in a condition suitable for
their current use;
(ii) comply in all material respects with all applicable
Environmental Laws, and, in the event the Companies shall receive notice
that there exists a violation of any Environmental Law with respect to
their operations or any Real Property, promptly (and in any event within
the time period permitted by the applicable governmental authority)
commence action to and pursue until complete any removal or remedy related
to 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 the Companies unless the validity thereof is contested in good
faith and by appropriate proceedings diligently conducted;
(iv) keep their books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve their 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 them; and
(vi) continue to conduct their business in the ordinary course
consistent with past practices.
5.5 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
Except as disclosed on SCHEDULE 5.5 hereto, at the Closing there will
be no intercompany payables or intercompany receivables due and/or owing between
the Stockholders and their Affiliates (other than the Companies) on the one
hand, and the Companies, on the other hand, other than those incurred in the
ordinary course of business generally disclosed in the Notes to the Companies'
financial statements or elsewhere herein, including any Schedule hereto.
5.6 NEGOTIATIONS.
Until the earlier of 180 days from the date hereof and the termination
of this Agreement, no Stockholder, nor the Companies, nor their officers,
directors, employees, advisors, agents, representatives, Affiliates or anyone
acting on behalf of the Stockholders, the Companies 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
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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
Companies. The Stockholders shall promptly communicate to UAG any serious
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
Companies and UAG will use their respective reasonable 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
Companies of all their material properties and (c) the conduct after the
Closing by the Companies of their respective businesses as conducted by
them 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.
5.8 ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its reasonable 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 Companies shall take all such necessary action.
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5.9 INTERIM FINANCIAL STATEMENTS.
Within thirty (30) days after the end of each calendar month after the
date of this Agreement, the Companies will deliver to UAG unaudited balance
sheets of the Companies, 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 statements of income and, with regard
to UAG, the unaudited statements of cash flow for the fiscal months then ended.
All such financial statements shall fairly present the financial position and
results of operations of the Companies and UAG, as applicable, 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 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 or 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 Companies, 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, except where
such default could not reasonably be expected to have a Material Adverse Effect.
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 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 Companies 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
Companies 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
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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, the 6725 Shares or the
Scottsdale Management Shares as contemplated hereby.
5.11 ASSURANCE BY THE STOCKHOLDERS.
The Stockholders and Mr. Knappenberger shall cause each of the
Companies to comply with their respective covenants set forth in this Agreement.
5.12 RELEASE OF GUARANTEES.
UAG and UAG West shall use their reasonable best efforts to cause the
Stockholders and their spouses as applicable, Mr. Knappenberger and his spouse
as applicable, and the Steven Knappenberger Revocable Trust II to be released
from all personal liability relating to the personal guarantees of (i) the
obligations under the Max Consulting Agreement ("Max Consulting Guaranty"); (ii)
the obligations arising out of the 6925 Lease ("6925 Lease Guaranty"); (iii) the
obligations arising out of the 6905 Lease ("6905 Lease Guaranty"); (iv) the
obligations arising out of the Bank of America Note ("Bank of America Note
Guaranty"); (v) the obligations arising out of that certain Second Amended and
Restated Automobile Flooring and Security Agreement dated November 27, 1995
between certain of the Companies and the Bank of America Arizona ("Bank of
America Flooring Guaranty"); (vi) the obligations arising out of that certain
Promissory Note Secured by Deed of Trust dated December 30, 1993 by SA as maker
in favor of Bank of America Arizona in the original principal sum of $2,593,332
("Bank of American Real Property Guaranty I"); (vii) the obligations arising out
of that certain Promissory Note Secured by Deed of Trust dated December 30, 1993
by Marion K. Bolin, as trustee of H.M. Knappenberger Trust No. 1, No. 2 and No.
3 as maker in favor of Bank of America Arizona in the principal sum of
$2,077,332 ("Bank of America Real Property Guaranty II") and (viii) the
obligations arising out of the Scottsdale Road Leases.
5.13 ACCESS TO RECORDS.
After Closing, UAG shall provide the Stockholders with reasonable
access to the books and records of the Companies.
5.14 BANK OF AMERICA NOTE.
The Stockholders shall cause the Companies to pay all principal and
interest on the Bank of America Note that becomes due and payable from the date
hereof until the Closing Date and shall not permit the principal outstanding
under the Bank of America Note to be increased between the date hereof and the
Closing Date.
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5.15 SPORTS TICKETS.
At Mr. Knappenberger's request, the Companies shall assign to Mr.
Knappenberger any and all rights that the Companies have to sports tickets and,
to the extent that the Companies assign such rights to Mr. Knappenberger, Mr.
Knappenberger shall assume any liabilities or obligations of the Companies in
connection therewith.
5.16 MANUFACTURERS' AND DISTRIBUTORS' APPROVAL.
As soon as practicable after the date hereof, Mr. Knappenberger shall
initiate and UAG shall seek the consent, authorization and approval of each of
the manufacturers and distributors whose consent is required for the
transactions contemplated hereby. Mr. Knappenberger and UAG shall use their
best efforts to obtain the consent, authorization and approval of such
manufacturers and distributors, within 90 days of the date hereof, on terms
substantially similar to those granted to the Companies immediately prior to the
execution of this Agreement; PROVIDED, HOWEVER, that UAG shall accept any
reasonable requirements of the manufacturers or distributors so long as those
requirements could not be expected to have a material adverse effect on UAG, UAG
West or the Companies. UAG acknowledges that certain manufacturer's agreements
include a right of first refusal in favor of the manufacturer in the event of a
sale such as the transaction contemplated herein and the parties acknowledge
that any manufacturer attempting to exercise such right shall be deemed to have
not consented to the transactions.
5.17 BANK OF AMERICA NOTE.
On the Closing Date, UAG West shall make a capital contribution to the
Companies in an aggregate amount equal to the principal and accrued but unpaid
interest on the Bank of America Note as of the Closing Date ("the Payoff
Amount"), and the Companies shall pay the Payoff Amount to Bank of America in
full satisfaction of the Bank of America Note.
5.18 UAG FINANCIAL STATEMENTS.
On or before June 30, 1996, UAG shall deliver to the Stockholders the
audited consolidated balance sheet of UAG and its subsidiaries as of December
31, 1995, and the related consolidated statements of income and cash flows for
the fiscal year then ended, together with the notes thereto, accompanied by the
report of Coopers & Lybrand, independent certified public accountants.
5.19 LEASE/PURCHASE OPTION.
The parties acknowledge and agree that, prior to the Closing Date, Sun
BMW may transfer or assign its rights to purchase that certain real property
known as 1144 E. Camelback
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Road, Scottsdale, Arizona to Beskind, Brochick and Knappenberger Trust, or their
mutually agreed upon assignee.
5.20 ENVIRONMENTAL STUDIES.
UAG shall obtain Phase I environmental studies of the Real Property. At
its option, UAG may also obtain Phase II environmental studies. The cost of all
Phase I studies shall be borne by UAG and the cost of all Phase II studies that
are recommended as a result of a Phase I study shall be borne one-half by UAG
and one-half by the Stockholders. UAG and UAG West shall indemnify and hold the
Stockholders and the Companies harmless from any injury, cost, liability or
expense to person or property caused by their testing of the Real Property as
permitted hereunder.
5.21 MAINTENANCE OF KNAPPENBERGER TRUST.
The Knappenberger Trust shall not, and Mr. Knappenberger both individually
and as Trustee of the Knappenberger Trust, shall not permit the Knappenberger
Trust (i) to be revoked or otherwise terminated prior to its satisfaction of all
of its obligations (including contingent obligations) hereunder (the
"Obligations") or (ii) to distribute or otherwise transfer or assign its assets
if immediately after such distribution, transfer or assignment, it would have
insufficient assets to satisfy its Obligations, unless, prior to such
revocation, transfer, distribution or assignment either (x) the persons or
entities receiving the Knappenberger Trust's assets agree in writing to assume
the Obligations or (y) Mr. Knappenberger agrees in writing to assume the
Obligations, in each case to the extent necessary to satisfy any deficiency
created by the distribution, transfer or revocation; PROVIDED, HOWEVER, that
nothing in this SECTION 5.21 shall be deemed to modify or expand such
Obligations.
5.22 SALE OF PURCHASED REAL PROPERTY TO A THIRD PARTY.
Prior to the Closing, with the consent of the Stockholders and the
Companies, which consent will not be unreasonably withheld, and subject to the
Real Estate Purchase Agreement (as defined herein), UAG and UAG West may
contract to sell all of the Purchased Real Property to a third party, provided
that such consent shall be given if (i) the sale occurs simultaneously with the
Closing hereunder, (ii) the purchaser fully assumes all obligations of the
Purchaser under the Real Estate Purchase Agreement, (iii) all loans secured by
the Purchased Real Estate are refinanced and all security arrangements are
released, or the purchaser fully assumes all such loans and security
arrangements and, in either case, all existing guarantees are released, (iv) the
Stockholders and Seller (as defined in the Real Estate Purchase Agreement)
receive proportionately with their interests as they may agree 75% of any
consideration payable by the purchaser which exceeds the approximately Ten
Million Six Hundred Thousand Dollars ($10,600,000) in real estate-related loans
which are secured by the Purchased Real Property, and (v) the sale has no
adverse effect on the Companies' other indebtedness or lending
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relationships, including their ability to obtain any necessary consents to the
transactions contemplated herein.
5.23 COMPANY INDEBTEDNESS.
The Companies shall pay all principal and interest on all indebtedness
listed on SCHEDULE 1.2(c) hereof that becomes due and payable from the date
hereof until the Closing Date.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG TO EFFECT THE CLOSING
The obligations of UAG and UAG West 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 or UAG
West 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 Companies and the
Stockholders contained in this Agreement shall be true and correct in all
material respects 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 in all material
respects as of the Closing. Each of the obligations of the Companies 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, UAG shall have received a
certificate, dated the Closing Date and duly executed by the Stockholders and
the Chairman or President of each of the Companies, 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 Companies. 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 Companies have entered into a franchise
agreement (or comparable instrument) (subject to the provisions of SECTION 5.16
hereof), the Companies' lenders (subject to the
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provisions of SECTION 1.2(c) hereof) and the lessors under the Leases) required
to consummate the transactions contemplated hereby and all consents or waivers
shall have been made or obtained.
6.3 OPINIONS OF THE COMPANIES' AND THE STOCKHOLDERS' COUNSEL.
UAG and UAG West shall have been furnished with the opinion of counsel
for the Companies and the Stockholders, dated the Closing Date, in form and
substance reasonably satisfactory to UAG, UAG West and their counsel, which
opinion shall have been rendered with respect to substantially those matters
contained in SECTIONS 2.1, 2.3, 2.4, 2.9(a), 3.1 AND 3.2 hereof. In rendering
the foregoing opinion, such counsel may rely as to factual matters upon
representations and warranties made by the Stockholders herein and upon
certificates or other documents furnished by officers, directors and
stockholders 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, that such opinions are
limited to Arizona and federal laws, and that, where appropriate, such opinions
are to the knowledge of those persons working on this transaction.
6.4 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 UAG or UAG West effectively to exercise
full rights of ownership of the Shares, the 6725 Shares and the Scottsdale
Management 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 UAG West, 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, net income or financial condition of the Companies taken
as a whole.
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6.6 WORKING CAPITAL REQUIREMENTS.
On the Closing Date, the Stockholders shall deliver to UAG balance
sheets of the Companies dated as of the most recent practicable date preceding
the Closing Date, prepared in accordance with the Accounting Principles (the
"Estimated Closing Date Balance Sheets"). The Estimated Closing Date Balance
Sheets shall show as of the date thereof aggregate net working capital for the
Companies (other than 6725 and Scottsdale Management) equal or greater than the
aggregate net working capital for the Companies (other than 6725 and Scottsdale
Management) on March 31, 1996 as reflected on the Company Balance Sheets.
6.7 COMPLETION OF DUE DILIGENCE.
UAG and UAG West shall have completed their due diligence examination
of the Companies, the Real Property and the Improvements and the results of such
examination, including any Phase I and Phase II environmental audits of the
Companies, the Real Property and the Improvements, shall be reasonably
satisfactory to UAG and UAG West; PROVIDED, HOWEVER, that, with the exception of
due diligence relating to any environmental issues as to which UAG and UAG West
shall have 90 days to complete from execution hereof, such due diligence shall
be completed, and shall be deemed completed, no later than thirty (30) days
after the execution of this Agreement. UAG and UAG West shall have five (5)
Business Days from the completion of the due diligence period to notify the
Stockholders of any objections arising out of the due diligence examination. If
the Stockholders do not cure or otherwise satisfy all such objections within ten
(10) Business Days of the receipt of such notice (the "Cure Period") and UAG and
UAG West do not terminate this Agreement pursuant to SECTION 8.1 hereof by
sending a notice of termination to the Stockholders within five (5) Business
Days after the expiration of the Cure Period, this condition shall be deemed to
be satisfied.
6.8 BOARD APPROVAL.
The Board of Directors of UAG and UAG West shall have approved the
consummation of all of the transactions contemplated by this Agreement,
PROVIDED, HOWEVER, that this condition shall be deemed waived after July 10,
1996 unless on or before July 10, 1996, UAG notifies the Stockholders that this
condition has not been met.
6.9 CERTIFICATES.
The Stockholders and the Companies shall have furnished UAG and UAG
West 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 AND 6.6 hereof and shall have furnished UAG and UAG West with such
any other certificates of its officers and others as UAG and UAG West may
reasonably request to evidence compliance with the conditions set forth in this
ARTICLE 6.
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6.10 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of the Stockholders and the
Companies 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
Companies in furtherance of the transactions contemplated hereby, shall be
reasonably satisfactory in form and substance to counsel for UAG and UAG West.
6.11 APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The Stockholders and the Companies shall have obtained the consent,
authorization and approval of the manufacturers and distributors whose consent
is required on terms substantially similar to those granted to the Companies
immediately prior to the execution of this Agreement; PROVIDED, HOWEVER, that
UAG shall accept any reasonable requirements of the manufactures or distributors
so long as these requirements could not reasonably be expected to have a
material adverse effect on UAG, or the Companies.
6.12 KNAPPENBERGER EMPLOYMENT AGREEMENT.
Mr. Knappenberger shall have entered into the Knappenberger Employment
Agreement on the terms set forth in SECTION 1.2(c).
6.13 BESKIND EMPLOYMENT AGREEMENT.
Beskind shall have entered into the Beskind Employment Agreement on
the terms set forth in SECTION 1.2(c).
6.14 BROCHICK EMPLOYMENT AGREEMENT.
Brochick shall have entered into the Brochick Employment Agreement on
the terms set forth in SECTION 1.2(c).
6.15 PURCHASE OF REAL PROPERTY.
The Stockholders shall have taken all action necessary on their part
to effect the sale of the 6905 Property pursuant to the terms and conditions of
the Real Estate Purchase Agreement and all conditions to Closing under the Real
Estate Purchase Agreement not in UAG West's control shall have been satisfied.
6.16 NONDISTURBANCE AGREEMENTS.
UAG shall have been provided with nondisturbance agreements in form
and substance reasonably satisfactory to the Companies and UAG with respect to
the properties that are the subject of the Leases; PROVIDED, HOWEVER, to the
extent the respective lessees under the Leases are not entitled to obtain
nondisturbance agreements pursuant to the terms of the Leases,
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UAG and UAG West may not cancel this Agreement as a result of the Stockholders'
or the lessees' inability to obtain such nondisturbance agreements so long as
the Stockholders and the lessees have used their reasonable best efforts to
obtain nondisturbance agreements.
6.17 TITLE INSURANCE.
(a) Promptly following execution of this Agreement, the Companies
shall arrange for First American Title Insurance Company ("Escrow Agent") to
deliver current preliminary title reports (the "Reports") on the Real Property
to UAG West and the Companies. The Reports shall show the status of title to
the Real Property as of the date of the Reports and shall be accompanied by
legible copies of all documents referred to in the Reports.
(b) Promptly following delivery of the Reports, UAG West shall cause
ALTA surveys of the Real Property (the "Surveys") to be prepared by an Arizona
licensed civil engineer or land surveyor, at UAG West's expense. The Surveys
shall be certified to be accurate, complete and correct to UAG, UAG West, the
Companies and the Escrow Agent and shall be in a form acceptable to Escrow Agent
for issuance of the title insurance required by this SECTION 6.17.
(c) UAG West shall have ten (10) Business Days (the "Review Period")
following receipt of both the Reports and the Surveys to approve or disapprove
any Survey matters and the status of title as shown by the Reports and the
Surveys; provided that such matters may be disapproved only if they, in UAG
West's reasonable judgment, have a Material Adverse Effect. If Escrow Agent
issues a supplemental or amended title report (and Escrow Agent shall issue such
report no later than ten (10) days but no earlier than fifteen (15) days prior
to Closing) showing additional exceptions to title (an "Amended Report"), UAG
West shall have a period of time equal to five (5) Business Days (a
"Supplemental Review Period") from the date of receipt of the Amended Report and
a copy of each document referred to in the Amended Report in which to give
notice of dissatisfaction as to any additional exceptions which may in UAG
West's reasonable judgment have a Material Adverse Effect. If UAG West provides
notice of dissatisfaction with any matter shown on the Surveys or with any
exception to title as shown in the Reports or in an Amended Report as permitted
herein, UAG West shall provisionally accept the title subject to the Companies'
or the owner of 6905 E. McDowell Road ("Trust"), as the case may be, removal of
any disapproved matters, exceptions or objections, or the Companies or Trust, as
the case may be, obtaining title insurance endorsements satisfactory to UAG West
against such matters, exceptions and objections before the Closing; PROVIDED,
HOWEVER, it is understood and agreed that the Companies or Trust shall have no
duty whatsoever to eliminate or secure a title insurance endorsement against any
such matter or exception. If the Companies or Trust, as the case may be, cannot
remove such matters, exceptions
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and objections to UAG West's reasonable satisfaction before the Closing, then
UAG West may terminate this Agreement pursuant to SECTION 8.1(iv), or UAG West
may waive such objections and proceed with the transaction.
(d) Notwithstanding anything herein to the contrary, it is understood
and agreed that title to the Purchased Real Property shall, at the Closing, be
free and clear of all monetary liens and encumbrances (other than liens
evidencing the assumed debt described in SCHEDULE 6.17 and the lien for current
real property taxes and assessments not yet due and payable) and that such
monetary liens and encumbrances shall be released from the Purchased Real
Property by the Companies at their sole expense on or before Closing or UAG West
may cause their release and the cost thereof shall be credited against the Base
Price.
(e) If UAG West does not object to a Survey matter or an exception to
title as disclosed by a Report or Amended Report within the applicable time
period, such matter shall be deemed to have been approved by UAG West.
(f) At Closing, UAG West shall have obtained, at UAG's expense, an
ALTA extended coverage owner's policy of title insurance issued by Escrow Agent
in the amounts with respect to each parcel of the Real Property set forth on
SCHEDULE 6.17, effective as of the Closing, insuring UAG West that good and
marketable fee simple title to the Purchased Real Property and the leasehold
estates in the leased Real Property are vested in the Companies or UAG West,
subject only to the usual printed exceptions and exclusions contained in such
title insurance policies, to the matters approved by UAG West as provided above
in this SECTION 6.17, to any other matters approved in writing by UAG West, to
liens evidencing the assumed debt described in SCHEDULE 6.17, and current taxes
and assessments not yet due and payable, and containing any endorsements
requested by UAG West. The contingency for delivery of the title insurance
policies on or before Closing called for in this SECTION 6.17 shall be satisfied
if, at the Closing, Escrow Agent has made an unconditional commitment to issue
the policies in the form required by this SECTION 6.17 and if such policies are
delivered within a reasonable time following the Closing.
6.18 TERMINATION OF SECURITY INTERESTS, LIENS, ETC..
UAG shall have received evidence reasonably satisfactory to UAG that
any and all liens, security interests or other encumbrances on the Real
Property, the Improvements or any assets of the Companies guaranteeing, securing
or otherwise arising out of or relating to the Bank of America Note, the Maas
Note or the Max Consulting Agreement have been released or terminated. UAG
shall have received evidence reasonably satisfactory to UAG that the stock
pledges set forth in SCHEDULE 2.3 hereof have been released and that the
shareholders' agreement set forth on SCHEDULE 2.3 hereof has been terminated.
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6.19 SCHEDULES.
The Companies and the Stockholders shall have delivered to UAG and UAG
West all Schedules referred to in ARTICLES 2 AND 3 and such Schedules shall be
reasonably acceptable in form and substance to UAG and UAG West. UAG and UAG
West shall have five (5) Business Days from receipt thereof to reject the
Schedules, or this condition shall be deemed satisfied; PROVIDED, HOWEVER, that
nothing in this Section shall be construed as limiting UAG and UAG West's right
to conduct due diligence pursuant to SECTION 6.7 hereof with respect to all
matters disclosed on such Schedules.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
The obligations of the Stockholders and the Companies 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 Companies and 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 and UAG West
contained in this Agreement shall be true and correct in all material respects
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 UAG West 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 UAG
West 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
and UAG West. 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
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with whom the Companies 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 UAG WEST'S COUNSEL.
The Stockholders shall have been furnished with the opinion of Rogers
& Hardin, counsel to UAG and UAG West, 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
substantially those matters contained in SECTIONS 4.1, 4.2 AND 4.3(a) hereof.
In rendering the foregoing opinions, such counsel may rely as to factual matters
upon the representations and warranties made by UAG and UAG West herein and upon
certificates or other documents furnished by officers and directors of UAG and
UAG West 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, that such opinions are limited to the General Corporate Law of the
State of Delaware and federal laws, and that, where appropriate, such opinions
are to the knowledge of those persons working on this transaction.
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 that prevents or delays the
consummation of any of the transactions contemplated hereby. 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 Stockholders, 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 CERTIFICATES.
UAG and UAG West shall have furnished the Stockholders with such
certificates of its officers and others to evidence compliance with the
conditions set forth in ARTICLE 7 as may be reasonably requested by the
Stockholders.
7.6 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG
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or UAG West under the provisions of this Agreement, and all other actions and
proceedings required to be taken by or on behalf of UAG or UAG West in
furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel for the Stockholders.
7.7 DUE DILIGENCE.
The Stockholders shall have completed their due diligence examination
of UAG and the results of such examination shall be satisfactory to the
Stockholders; PROVIDED, HOWEVER, that such due diligence shall be completed, and
shall be deemed completed, no later than thirty (30) days after the execution of
this Agreement. The Stockholders shall have five (5) Business Days from the
completion of the due diligence period to notify UAG of any objections arising
out of the due diligence examination. If UAG and UAG West do not cure or
otherwise satisfy all such objections within ten (10) Business Days of the
receipt of such notice (the "UAG Cure Period") and the Stockholders do not
terminate this Agreement pursuant to SECTION 8.1 hereof by sending a notice of
termination to UAG within five (5) Business Days after the expiration of the UAG
Cure Period, this condition shall be deemed satisfied.
7.8 KNAPPENBERGER EMPLOYMENT AGREEMENT.
UAG West shall have entered into and UAG shall have guaranteed the
Knappenberger Employment Agreement.
7.9 BESKIND EMPLOYMENT AGREEMENT.
UAG West shall have entered into and UAG shall have guaranteed the
Beskind Employment Agreement.
7.10 BROCHICK EMPLOYMENT AGREEMENT.
UAG West shall have entered into and UAG shall have guaranteed the
Brochick Employment Agreement.
7.11 PURCHASE OF REAL PROPERTY.
UAG shall have taken all actions necessary on their part to effect the
purchase of the 6905 Property pursuant to the terms and conditions of the Real
Estate Purchase Agreement.
7.12 SCHEDULES.
UAG shall have delivered to Knappenberger Trust all Schedules referred
to in ARTICLE 4 and such Schedules shall be reasonably acceptable in form and
substance to the Stockholders. The Stockholders shall have five (5) Business
Days from receipt thereof to reject the Schedules, or this condition shall be
deemed satisfied; PROVIDED, HOWEVER, that nothing in this Section shall be
construed as limiting the Stockholders' rights to con-
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duct due diligence pursuant to SECTION 7.7 hereof with respect to matters
disclosed on such Schedules.
7.13 RELEASE OF PERSONAL GUARANTEES.
The Stockholders and their spouses, as applicable, and Mr.
Knappenberger and his spouse, as applicable, and the Steven Knappenberger
Revocable Trust II shall have been released from the 6905 Lease Guaranty, the
6925 Lease Guaranty, the Bank of America Note Guaranty, the Bank of America
Flooring Guaranty, the Bank of America Real Property Guaranty I and the Bank of
America Real Property Guaranty II.
7.14 BROKER'S AGREEMENT.
UAG West shall have entered into and UAG shall have guaranteed the
Broker's Agreement.
ARTICLE 8
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG, UAG West and the Stockholders;
(ii) by either UAG or the Stockholders if the Closing shall not
have taken place on or prior to (a) December 2, 1996, or if the Closing
Date is extended by the Stockholders pursuant to SECTION 1.2(b) hereof,
January 12, 1997, (b) such later date as shall have been approved by UAG,
UAG West 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 or UAG West if any of the conditions specified in
ARTICLE 6 hereof have not been met by the Stockholders or waived by UAG or
UAG West at such time as such condition is no longer capable of
satisfaction (provided UAG and UAG West are not otherwise in material
breach of its representations, warranties, covenants or agreements under
this Agreement);
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(v) by the Stockholders if any of the conditions specified in
ARTICLE 7 hereof have not been met by UAG or UAG West or waived by the
Stockholders at such time as such condition is no longer capable of
satisfaction (provided that neither any Stockholder nor the Companies 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.
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/or the
Confidentiality Agreement dated February 26, 1996 and (iii) as set forth in
SECTIONS 9.1 AND 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 STOCKHOLDERS.
Notwithstanding the Closing or the delivery of the Shares, the 6725
Shares or the Scottsdale Management Shares, each Stockholder jointly and
severally, indemnifies and agrees to fully defend, save and hold harmless UAG,
UAG West, the Companies (after Closing), 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 Companies after the Closing Date) shall at any time or from time
to time suffer any Costs (as defined in SECTION 9.5 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 one or more of the following:
(i) any untruth or inaccuracy in any representation of the Stockholders or the
Companies or the breach of any warranty of the Stockholders or the Companies
contained in this Agreement, including, without limitation, any misrepresen-
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tation in, or omission from, any agreement, certificate, schedule, exhibit, or
similar document furnished pursuant to this Agreement by the Stockholders or the
Companies (or any representative of the Stockholders or the Companies) 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 Companies duly to perform or observe any term,
provision, covenant, agreement or condition on the part of such Stockholder or
the Companies to be performed or observed.
9.2 INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees to fully
defend, save and hold harmless the Stockholders, the Companies (prior to
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 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 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 agreement,
certificate, schedule, exhibit or other similar 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,
(ii) any failure of UAG or UAG West (or after the Closing, the Companies) duly
to perform or observe any term, provision, covenant, agreement or condition on
their part to be performed or observed, (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 any assets, properties or
operations of UAG or the conduct of the business of UAG prior to the Closing
Date or (iv) any personal guarantees referenced in SECTION 5.12 which are not
released as of and in connection with the Closing.
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 (ii) a UAG Event of Breach occurs or is alleged and a
Stockholder Indemnified Party asserts that UAG has become obligated to an
Indemnified Party pursuant to SECTION 9.2, or if a claim is begun, made or
instituted by a third party (a "Third Party Claim") as a result of which an
Indemnifying Party may become obligated to an Indemnified Party hereunder (for
purposes of this ARTICLE 9, any UAG Indemnified Party and any Stockholder
Indemnified Party is
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sometimes referred to as an "Indemnified Party" and UAG and the Stockholders are
sometimes referred to as an "Indemnifying Party," 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 except to the extent prejudiced thereby. 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 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, with the reasonable consent of the
Indemnifying Parties, 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
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 shall not be unreasonably withheld)
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 or
condition (financial or otherwise) of the Indemnified Party.
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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 Five
Hundred Thousand Dollars ($500,000); PROVIDED, HOWEVER, that notwithstanding the
preceding limitation, 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 ARTICLE 1 OR SECTIONS 2.3, 2.4(a), 3.1 AND
10.2 hereof. In the event that the aggregate Costs incurred or sustained by all
UAG Indemnified Parties exceeds Five Hundred Thousand Dollars ($500,000), then
the Stockholders shall be fully liable for all such Costs that exceed Two
Hundred Fifty Thousand Dollars ($250,000). The limitations in this SECTION
9.4(a)(i) shall not apply to SECTION 1.4(g).
(ii) The aggregate Costs for which the Stockholders shall be obligated
to indemnify the UAG Indemnified Parties shall not exceed Four Million Dollars
($4,000,000) in the case of Costs incurred or sustained by all UAG Indemnified
Parties in connection with an Event of Breach; PROVIDED, HOWEVER, that 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 ARTICLE 1 OR SECTIONS
2.3, 2.4(a) AND 3.1 hereof. The limitations in this SECTION 9.4(a)(ii) shall
not apply to SECTION 1.4(g).
(b) INDEMNIFICATION BY UAG.
(i) A Stockholder 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 Stockholder Indemnified Parties exceed Five
Hundred Thousand Dollars ($500,000); PROVIDED, HOWEVER, that, notwithstanding
the preceding limitation, a Stockholder Indemnified Party shall be entitled to
indemnification for all Costs incurred or sustained by such Stockholder
Indemnified Party as a result of (a) any failure to have the guarantees referred
to in SECTION 5.12 released as of and in connection with the Closing, (b) 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
ARTICLE 1 OR SECTIONS 4.3 OR 4.7 hereof or in the Broker's Agreement or the
Knappenberger, Beskind or Brochick Employment Agreements, or (c) any failure of
UAG West to pay money or assume debt in accordance with the terms and subject to
the conditions of the Real Estate Purchase Agreement. In the
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event the aggregate Costs incurred or sustained by all Stockholder Indemnified
Parties exceeds Five Hundred Thousand Dollars ($500,000), then UAG shall be
fully liable for all such Costs that exceed Two Hundred Fifty Thousand Dollars
($250,000).
(ii) The aggregate Costs for which UAG shall be obligated to
indemnify the Stockholder Indemnified Parties shall not exceed Four Million
Dollars ($4,000,000) in the case of Costs incurred or sustained by all
Stockholder Indemnified Parties in connection with a UAG Event of Breach;
PROVIDED, HOWEVER, that a Stockholder Indemnified Party shall be entitled to
indemnification for all Costs incurred or sustained by such Stockholder
Indemnified Party as a result of (a) any failure to have the guarantees referred
to in SECTION 5.12 released as of and in connection with the Closing, (b)
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
ARTICLE 1 OR SECTIONS 4.3 OR 4.7 hereof or in the Broker's Agreement or the
Knappenberger, Beskind or Brochick Employment Agreements, or (c) any failure of
UAG West to pay money or assume debt in accordance with the terms and subject to
the conditions of the Real Estate Purchase Agreement.
9.5 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, 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.
9.6 TAX SAVINGS AND INSURANCE PROCEEDS.
Costs arising or resulting from Events of Breach or UAG Events of
Breach shall be reduced to the extent of the amount of (i) any tax savings
resulting from the indemnified matter to which such Costs relate which are
actually realized by the Indemnified Party and (ii) any insurance proceeds
actually received by the Indemnified Party in respect of the indemnified matter
to which such Costs relate.
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
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Date) shall survive the Closing Date and the consummation of the transactions
contemplated by this Agreement, subject to SECTION 10.1(b) below.
(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 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 SECTION 2.8 AND 2.11 hereof, which shall
survive the Closing Date for a period terminating on the later of (y) the date
three years after the Closing Date and (z) with respect to any claim asserted
with respect to any breach of such representations or warranties pursuant to
SECTION 9.3 hereof before the expiration of such representations or warranties,
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 as a result of a breach of SECTION 5.6 hereof, then
the Stockholders or the Companies 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 (other than expenses relating
to UAG's review and audit of the Companies' Financial Statements) 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:
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If to the Companies before the Closing Date:
Steven W. Knappenberger
6725 E. McDowell Road
Scottsdale, Arizona 85257
with a copy to:
Snell & Wilmer, L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Attn: Steven D. Pidgeon, Esq.
If to the Companies after the Closing Date (in addition to the
foregoing addresses):
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance, Esq.,
Executive Vice President and General Counsel
with a copy to:
Rogers & Hardin
2700 Cain Tower,
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
If to the Stockholders:
Steven W. Knappenberger
6725 E. McDowell Road
Scottsdale, Arizona 85257
and
George Brochick
6242 E. Laurel Lane
Scottsdale, Arizona 85254
and
Jay Beskind
6513 E. Paradise Lane
Scottsdale, Arizona 85254
with a copy to:
Snell & Wilmer, L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Attn: Steven D. Pidgeon, Esq.
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If to UAG or UAG West:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance, Esq.,
Executive Vice President and General Counsel
with a copy to:
Rogers & Hardin
2700 Cain Tower,
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, 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.
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10.7 WAIVER AND AMENDMENTS.
Each of the Stockholders and the Companies as one Party, and UAG and
UAG West 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 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.
10.10 SCHEDULES.
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.
10.11 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
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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.
10.12 REMEDIES.
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 and specific performance as set forth in SECTION 10.15, shall be
the exclusive remedy of either party for a breach of this Agreement.
10.13 TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
10.14 GOVERNING LAW.
This Agreement shall be governed under the laws of the State of
Arizona without regard to conflict of law principles.
10.15 SPECIFIC PERFORMANCE.
The parties hereto agree that any violation of this Agreement will
result in irreparable injury to the non-breaching party and that damages at law
would not be reasonable or adequate compensation to such non-breaching party for
a violation of this Agreement, and the non-breaching party shall be entitled to
have the provisions of this Agreement specifically enforced by preliminary and
permanent injunctive relief without the necessity of proving actual damages and
without posting bond or other security.
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
----------------------------------------
Carl Spielvogel, Chief Executive Officer
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UAG WEST, INC.
By: /s/ Carl Spielvogel
-------------------------------
Its: Chief Executive Officer
-------------------------------
SCOTTSDALE JAGUAR, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
SA AUTOMOTIVE, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
SL AUTOMOTIVE, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
SPA AUTOMOTIVE, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
LRP, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
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SUN BMW, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
SCOTTSDALE MANAGEMENT GROUP, LTD.
By: /s/ Steven Knappenberger
-------------------------------
Its: Chairman
-------------------------------
6725 DEALERSHIP, LTD.
By: /s/ Illegible
-------------------------------
Its: President
-------------------------------
STEVEN KNAPPENBERGER REVOCABLE
TRUST DATED APRIL 15, 1983,
AS AMENDED
By: /s/ Steven Knappenberger
-------------------------------
Steven Knappenberger, Trustee
/s/ Steven Knappenberger
----------------------------------------------
Steven Knappenberger (with respect to Sections
5.11, 5.16 and 5.21)
/s/ Jay Beskind
-------------------------------
Jay Beskind, Individually
/s/ Diana R. Beskind
-------------------------------
Diana R. Beskind, Spouse of Jay Beskind
/s/ George Brochick
-------------------------------
George Brochick, Individually
/s/ Christine S. Brochick
-------------------------------
Christine S. Brochick, Spouse of George Brochick
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BROCHICK 6725 TRUST DATED DECEMBER 29, 1992
By: /s/ George W. Brochick
-------------------------------
George W. Brochick, Trustee
BESKIND 6725 TRUST DATED DECEMBER 29, 1992
By: /s/ Jay P. Beskind
-------------------------------
Jay P. Beskind, Trustee
KNAPPENBERGER 6725 TRUST DATED DECEMBER 29, 1992
By: /s/ Steven Knappenberger
-------------------------------
Steven Knappenberger, Trustee
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AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
This Amendment No. 1 to Stock Purchase Agreement (the "Amendment") is made
and entered into this ___ day of October, 1996 between and among United Auto
Group, Inc. ("UAG"), a Delaware corporation, UAG West, Inc. ("UAG West"), a
Delaware corporation, Scottsdale Jaguar, Ltd. ("Scottsdale Jaguar"), an Arizona
corporation, SA Automotive, Ltd. ("SA"), an Arizona corporation, SL Automotive,
Ltd. ("SL"), an Arizona corporation, SPA Automotive, Ltd. ("SPA"), an Arizona
corporation, LRP, Ltd. ("LRP"), an Arizona corporation, Sun BMW, Ltd. ("Sun
BMW"), an Arizona corporation, Scottsdale Management Group, Ltd. ("Scottsdale
Management"), an Arizona corporation, 6725 Dealership, Ltd. ("6725"), an Arizona
corporation, Steven Knappenberger Revocable Trust, dated April 15, 1983, as
amended, Brochick 6725 Trust dated December 29, 1992, Beskind 6725 Trust dated
December 29, 1992, Knappenberger 6725 Trust dated December 29, 1992, Steven
Knappenberger, Jay P. Beskind ("Beskind") and George W. Brochick ("Brochick").
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into that certain Stock Purchase
Agreement dated as of June 6, 1996 (the "Stock Purchase Agreement");
WHEREAS, the parties hereto desire to amend the terms of the Stock Purchase
Agreement as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Stock Purchase Agreement.
2. Prior to the Closing, Scottsdale Jaguar shall form a subsidiary, SK
Motors, Ltd., an Arizona corporation, d/b/a Scottsdale Porsche ("Scottsdale
Porsche"). Scottsdale Porsche shall be authorized to issue common stock, no par
value ("Porsche Stock"). Immediately prior to the transactions described in
Section 4, Scottsdale Jaguar shall transfer to Scottsdale Porsche all of the
assets of Scottsdale Jaguar relating to the sale or servicing of Porsche
vehicles, including without limitation new Porsche automobiles, related used
vehicles, Porsche special tools, and the Porsche franchise (the "Porsche
Assets"). Immediately prior to the transactions described in Section 4 hereof,
Scottsdale Jaguar shall own 100% of the issued and outstanding shares of Porsche
Stock (the "Porsche Shares").
3. The parties hereby acknowledge and agree that for all income tax
purposes, Scottsdale Jaguar and the Stockholders will report the transfer of the
Porsche Assets to Scottsdale Porsche as an "applicable asset acquisition" within
the meaning of section 1060 of the Internal Revenue Code of 1986, as amended
(the "Code"), by Scottsdale Porsche for consideration equal to the Porsche
Purchase Price (as defined below) and not as a tax-free contribution to the
capital
<PAGE>
of the transferee pursuant to section 351 of the Code. For this purpose, the
Porsche Purchase Price shall be allocated among the various Porsche Assets as
set forth in IRS Form 8594, the content of which shall be mutually agreed upon
by the parties hereto. In this regard, the parties hereby expressly agree that
(a) all items of depreciated property shall be valued at their book value for
federal income tax purposes, (b) all other transferred assets (excluding the
Porsche franchise) shall be valued at their cost to Scottsdale Jaguar, and (c)
the balance of the Porsche Purchase Price shall be allocated to the Porsche
franchise. Each of the parties shall report this transaction for all income tax
purposes in accordance with such allocation of the purchase price. Scottsdale
Jaguar shall timely file such IRS Form 8594 (or an exact replica thereof), and
UAG shall cause Scottsdale Porsche to timely file such IRS Form 8594.
4. At the Closing, in consideration for a portion of the Purchase Price
in cash (as reasonably determined by UAG) (the "Porsche Purchase Price") paid to
Scottsdale Jaguar (by which amount the Purchase Price in Section 1.2 of the
Stock Purchase Agreement will be reduced), Scottsdale Jaguar shall sell, assign,
transfer and deliver to UAG West the Porsche Shares, representing 100% of the
capital stock of Scottsdale Porsche and shall deliver the certificates
representing such shares to UAG West accompanied by stock powers duly executed
in blank. In consideration for the payment of $10 in cash by Knappenberger
Trust to UAG West, UAG West shall sell, assign, transfer and deliver nineteen
(19%) of the Porsche Shares to Knappenberger Trust and shall deliver the
certificates representing such shares accompanied by stock powers duly executed
in blank, such that immediately after the transfer, Knappenberger Trust shall
hold 19% of the issued and outstanding shares of Porsche Stock and UAG West
shall own 81% of the issued and outstanding shares of Porsche Stock. UAG West
and Knappenberger Trust shall enter into a Shareholders Agreement in the form
attached hereto, which agreement, together with the transfer of Porsche Shares
to Knappenberger Trust, has been approved by Porsche Cars of North America
("Porsche Cars").
5. Scottsdale Jaguar shall distribute to the Stockholders all amounts
paid to Scottsdale Jaguar as consideration for the sale to UAG West of 100% of
the Porsche Shares.
6. The definition of Companies in the Stock Purchase Agreement is hereby
amended to include Scottsdale Porsche.
7. The obligations of the parties hereunder including the obligations
required to be performed by them at the Closing shall be subject to the
Stockholders, the Companies, UAG and UAG West having obtained the consent,
authorization and approval of Porsche Cars.
8. The Stockholders and Scottsdale Jaguar hereby represent and warrant
that the transfer of assets pursuant to Section 2 hereof will be valid, binding
and enforceable against Scottsdale Jaguar and that, after the transfer,
Scottsdale Porsche will have good title to such assets.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: ______________________________
Its: ______________________________
UAG WEST, INC.
By: ______________________________
Its: ______________________________
SCOTTSDALE JAGUAR, LTD.
By: ______________________________
Its: ______________________________
SA AUTOMOTIVE, LTD.
By: ______________________________
Its: ______________________________
SL AUTOMOTIVE, LTD.
By: ______________________________
Its: ______________________________
SPA AUTOMOTIVE, LTD.
By: ______________________________
Its: ______________________________
LRP, LTD.
By: ______________________________
3
<PAGE>
Its: ______________________________
SUN BMW, LTD.
By: ______________________________
Its: ______________________________
SCOTTSDALE MANAGEMENT GROUP, LTD.
By: ______________________________
Its: ______________________________
6725 DEALERSHIP, LTD.
By: ______________________________
Its: ______________________________
STEVEN KNAPPENBERGER REVOCABLE
TRUST DATED APRIL 15, 1983,
AS AMENDED
By: ______________________________
Steven Knappenberger, Trustee
___________________________________
Steven Knappenberger (with respect to
Sections 5.11, 5.16 and 5.21 of the
Stock Purchase Agreement)
___________________________________
Jay P. Beskind, Individually
___________________________________
Diana R. Beskind, Spouse of Jay Beskind
4
<PAGE>
___________________________________
George W. Brochick, Individually
___________________________________
Christine S. Brochick, Spouse of
George Brochick
BROCHICK 6725 TRUST DATED
DECEMBER 29, 1992
By: ______________________________
Robert W. Wyndelts, Trustee
BESKIND 6725 TRUST DATED
DECEMBER 29, 1992
By: ______________________________
Robert W. Wyndelts, Trustee
KNAPPENBERGER 6725 TRUST DATED
DECEMBER 29, 1992
By: ______________________________
Robert W. Wyndelts, Trustee
5
<PAGE>
AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT
This Amendment No. 2 to Stock Purchase Agreement (the "Amendment") is made
and entered into this 21st day of October, 1996 between and among United Auto
Group, Inc. ("UAG"), a Delaware corporation, UAG West, Inc. ("UAG West"), a
Delaware corporation, Scottsdale Jaguar, Ltd. ("Scottsdale Jaguar"), an Arizona
corporation, SA Automotive, Ltd. ("SA"), an Arizona corporation, SL Automotive,
Ltd. ("SL"), an Arizona corporation, SPA Automotive, Ltd. ("SPA"), an Arizona
corporation, LRP, Ltd. ("LRP"), an Arizona corporation, Sun BMW, Ltd. ("Sun
BMW"), an Arizona corporation, Scottsdale Management Group, Ltd. ("Scottsdale
Management"), an Arizona corporation, 6725 Dealership, Ltd. ("6725"), an Arizona
corporation, Steven Knappenberger Revocable Trust, dated April 15, 1983, as
amended, Brochick 6725 Trust dated December 29, 1992, Beskind 6725 Trust dated
December 29, 1992, Knappenberger 6725 Trust dated December 29, 1992, Steven
Knappenberger ("Knappenberger"), Jay P. Beskind ("Beskind") and George W.
Brochick ("Brochick").
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into that certain Stock Purchase
Agreement dated as of June 6, 1996 (the "Stock Purchase Agreement");
WHEREAS, the parties hereto desire to amend the terms of the Stock Purchase
Agreement as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Stock Purchase Agreement.
2. Prior to the Closing, Scottsdale Jaguar shall form a subsidiary,
Scottsdale Audi, Ltd., an Arizona corporation ("Scottsdale Audi"). Scottsdale
Audi shall be authorized to issue common stock, no par value ("Audi Common
Stock"). Immediately prior to the transactions described in Section 4,
Scottsdale Jaguar shall contribute to Scottsdale Audi all assets owned by
Scottsdale Jaguar other than those assets exclusively and specifically related
to the sale and servicing of Porsche, Jaguar or Aston Martin vehicles, which
assets shall include but not be limited to assets relating specifically and
exclusively to the sale and servicing of Audi vehicles, as well as Scottsdale
Jaguar's partnership interest in 6725 Agent. After the transfer of the assets
to Scottsdale Audi and a concurrent transfer of Porsche-related assets to SK
Motors, Ltd., the only assets to be owned by Scottsdale Jaguar shall be those
assets specifically and exclusively related to the sale and servicing of Jaguar
or Aston Martin vehicles. Immediately prior to the transactions described in
Section 4, Scottsdale Jaguar shall own 100% of the issued and outstanding Audi
Common Stock (the "Audi Shares").
<PAGE>
3. The parties hereby acknowledge and agree that for all income tax
purposes, Scottsdale Jaguar and the Stockholders will report the transfer of the
Audi Assets to Scottsdale Audi as an "applicable asset acquisition" within the
meaning of section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code"), by Scottsdale Audi for consideration equal to the Audi Purchase Price
(as defined below) and not as a tax-free contribution to the capital of the
transferee pursuant to section 351 of the Code. For this purpose, the Audi
Purchase Price shall be allocated among the various Audi Assets as set forth in
an IRS Form 8594, the content of which shall be mutually agreed upon by the
parties hereto. In this regard, the parties hereby expressly agree that: (a)
all items of depreciated property shall be valued at their book value for
federal income tax purposes, (b) all other transferred assets (excluding
Scottsdale Jaguar's interest in 6725 Agent and the Audi franchise) shall be
valued at their cost to Scottsdale Jaguar, (c) Scottsdale Jaguar's interest in
6725 Agent shall be valued at an amount reasonably determined by UAG, and (d)
the balance of the Audi Purchase Price shall be allocated to the Audi franchise.
Each of the parties shall report this transaction for all income tax purposes in
accordance with such allocation of the Audi Purchase Price. Scottsdale Jaguar
shall timely file such Form 8594 (or an exact replica thereof), and UAG shall
cause Scottsdale Audi to timely file such IRS Form 8594.
4. At the Closing, in consideration for a portion of the Purchase Price
in cash (as reasonably determined by UAG) (the "Audi Purchase Price") paid to
Scottsdale Jaguar (by which amount the Purchase Price in Section 1.2 of the
Stock Purchase Agreement will be reduced), Scottsdale Jaguar shall sell, assign,
transfer and deliver to UAG West and UAG West shall acquire, purchase and accept
from Scottsdale Jaguar the Audi Shares, representing 100% of the capital stock
of Scottsdale Audi and shall deliver the certificates representing such shares
to UAG West accompanied by stock powers duly executed in blank. Scottsdale
Jaguar shall distribute to the Stockholders all amounts paid to Scottsdale
Jaguar as consideration for the sale to UAG West of 100% of the Audi Shares.
5. The Stockholders acknowledge that it is the parties' intent that,
immediately after the Closing, Scottsdale Jaguar's assets shall consist only of
those assets specifically and exclusively related to the sale and servicing of
Jaguar and Aston Martin vehicles and the Stockholders agree to use their best
efforts to take, or cause to be taken, all action and to do all things necessary
to effect the transfer of Scottsdale Jaguar's other assets to Scottsdale Audi or
SK Motors, as appropriate.
6. At the Closing, Scottsdale Jaguar and UAG West shall enter into a
management agreement with UAG West (the "Management Agreement") pursuant to
which Scottsdale Jaguar shall pay UAG West an annual fee in the amount of Five
Hundred Thousand Dollars which fee shall be increased annually to an amount
equal to the then current annual fee plus a percentage of the then current
annual fee equal to the percentage increase in the Consumer Price Index
published from time to time by the United States Department of Labor for the
preceding 12 months; provided that Scottsdale Jaguar may defer paying the
management fee during any period to the extent that the management fee for such
period exceeds Scottsdale Jaguar's net income
2
<PAGE>
after tax before the management fee for such period, subject in all cases to the
specific terms of the Management Agreement.
7. The parties acknowledge that after the Closing, SK Motors, Inc., an
Arizona corporation d/b/a Scottsdale Porsche ("Scottsdale Porsche"), Scottsdale
Audi and Scottsdale Jaguar will each conduct business at 6725 E. McDowell Road,
Scottsdale, Arizona (the "6725 Facility"). At the Closing, Scottsdale Jaguar
shall enter into a lease (the "Lease") with the owner of the 6725 Facility for
the non-exclusive use of the 6725 Facility by Scottsdale Jaguar. The annual
lease rate shall be Seven Hundred Fifty Thousand Dollars ($750,000), payable
monthly, and shall be adjusted as provided in the Lease. The term of the Lease
shall be for twenty (20) years; provided, however, that the landlord thereunder
shall have the right to terminate the Lease at any time until April 30, 1998.
The Lease shall provide that Scottsdale Jaguar shall be responsible for a pro-
rata share of the joint operating expenses of the Facility to be calculated as
set forth in the Lease. The Lease shall be in a form mutually acceptable to
Scottsdale Jaguar and UAG West.
8. The definition of Companies in the Stock Purchase Agreement is hereby
amended to include Scottsdale Audi. The definition of Shares in the Stock
Purchase Agreement is hereby amended to exclude the Scottsdale Jaguar Shares.
9. The obligations of the parties hereunder and the obligations required
to be performed by them at the Closing shall be subject to the Stockholders, the
Companies, UAG and UAG West having obtained the consent, authorization and
approval of Audi of America, Inc.
10. The Stockholders and Scottsdale Jaguar represent and warrant that the
transfer of assets pursuant to Section 2 hereof will be valid, binding and
enforceable against Scottsdale Jaguar and that, after the transfer, Scottsdale
Audi will have good title to such assets.
11. The parties agree that, except for the payment to Scottsdale Jaguar of
the aggregate of the Audi Purchase Price and the Porsche Purchase Price (as
defined in Amendment No. 1 to the Stock Purchase Agreement) in connection with
the sale, assignment, transfer and delivery to UAG West of 100% of the Audi
Shares and the Porsche Shares (as defined in Amendment No. 1 to the Stock
Purchase Agreement), all of the Purchase Price shall be paid by UAG West to the
Stockholders.
12. The S election of Scottsdale Jaguar shall be terminated within ten
days after the Closing, unless the parties agree otherwise.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be duly executed as of the day and year first
above written.
UNITED AUTO GROUP, INC.
By: ______________________________
Its: ______________________________
UAG WEST, INC.
By: ______________________________
Its: ______________________________
SCOTTSDALE JAGUAR, LTD.
By: ______________________________
Its: ______________________________
SA AUTOMOTIVE, LTD.
By: ______________________________
Its: ______________________________
SL AUTOMOTIVE, LTD.
By: ______________________________
Its: ______________________________
4
<PAGE>
SPA AUTOMOTIVE, LTD.
By: ______________________________
Its: ______________________________
LRP, LTD.
By: ______________________________
Its: ______________________________
SUN BMW, LTD.
By: ______________________________
Its: ______________________________
SCOTTSDALE MANAGEMENT GROUP, LTD.
By: ______________________________
Its: ______________________________
6725 DEALERSHIP, LTD.
By: ______________________________
Its: ______________________________
5
<PAGE>
STEVEN KNAPPENBERGER REVOCABLE
TRUST DATED APRIL 15, 1983,
AS AMENDED
By: ______________________________
Steven Knappenberger, Trustee
___________________________________
Steven Knappenberger (with respect to
Sections 5.11, 5.16 and 5.21)
___________________________________
Jay Beskind, Individually
___________________________________
Diana R. Beskind, Spouse of Jay Beskind
___________________________________
George Brochick, Individually
___________________________________
Christine S. Brochick, Spouse of
George Brochick
BROCHICK 6725 TRUST DATED
DECEMBER 29, 1992
By: ______________________________
Robert W. Wyndelts, Trustee
6
<PAGE>
BESKIND 6725 TRUST DATED
DECEMBER 29, 1992
By: ______________________________
Robert W. Wyndelts, Trustee
KNAPPENBERGER 6725 TRUST DATED
DECEMBER 29, 1992
By: ______________________________
Robert W. Wyndelts, Trustee
7
<PAGE>
AMENDMENT NO. 3 TO STOCK PURCHASE AGREEMENT
This Amendment No. 3 to the Stock Purchase Agreement is made and entered
into this ____ day of October 1996, between and among United Auto Group, Inc., a
Delaware corporation ("UAG"), UAG West, Inc., a Delaware corporation, Scottsdale
Jaguar, Ltd., an Arizona corporation, SA Automotive, Ltd., an Arizona
corporation, SL Automotive, Ltd., an Arizona corporation, SPA Automotive, Ltd.,
an Arizona corporation, LRP, Ltd., an Arizona corporation, Sun BMW, Ltd., an
Arizona corporation, Scottsdale Management Group, Ltd., an Arizona corporation,
6725 Dealership, Ltd., an Arizona corporation, Steven Knappenberger Revocable
Trust dated April 15, 1983, as amended, Brochick 6725 Trust dated December 29,
1992, Beskind 6725 Trust dated December 29, 1992, Knappenberger 6725 Trust dated
December 29, 1992, Steven Knappenberger, Jay P. Beskind and George W. Brochick.
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into that certain Stock Purchase
Agreement dated as of June 6, 1996 (the "Stock Purchase Agreement"); and
WHEREAS, the parties hereto desire to amend the terms of the Stock Purchase
Agreement as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. CAPITALIZED TERMS. All capitalized terms used herein shall have the
same meaning ascribed to them in the Stock Purchase Agreement.
2. ADJUSTMENTS MADE BY COOPERS & LYBRAND LLP ("C&L").
(a) Pursuant to an audit performed by C&L in connection with the
initial public offering of UAG's common stock, the Companies agreed to
make certain adjustments to the Companies' financial statements.
Notwithstanding the foregoing, the adjustments requested by C&L shall
not be included in (i) preparing the Closing Date Balance Sheets (as
defined in Section 1.4(a) of the Stock Purchase Agreement); (ii)
preparing the Reviewed Balance Sheets (as defined in Section 1.4(b) of
the Stock Purchase Agreement); (iii) calculating the Final Net Worth
(as defined in Section 1.4(g) of the Stock Purchase Agreement); (iv)
determining whether there exists a Net Worth Deficiency (as defined in
Section 1.4(g) of the Stock Purchase Agreement); (v) preparing the
Estimated Closing Date Balance Sheets (as defined in Section 6.6 of
the Stock Purchase Agreement); or (vi) determining compliance with
Sections 2.25 or 6.6 (regarding working capital) of the Agreement.
Instead, the Closing Date Balance Sheets, Reviewed Balance Sheets and
Estimated Closing Date Balance Sheets (including the determinations of
net worth and working capital) shall be
<PAGE>
prepared on the same basis as the Company Financial Statements (as defined
in Section 2.5 of the Stock Purchase Agreement) without regard to the
adjustments requested by C&L. Further, the fact that such adjustments were
made by the Companies pursuant to C&L's request does not constitute a
breach of any of the Companies' or the Stockholders' representations and
warranties contained in the Stock Purchase Agreement.
(b) Without limitation of the foregoing, for purposes of
calculating Net Worth, including the Final Net Worth, under Section
1.4 of the Stock Purchase Agreement, or working capital under Section
2.25 or 6.6 of the Agreement (x) the net worth and working capital of
Scottsdale Jaguar, Ltd. shall continue to be included in the
Companies' calculations of these items, and Scottsdale Jaguar, Ltd.
shall be deemed to include 100% of the Jaguar, Porsche, Aston Martin
and Audi operations (and separate working capital calculations of
these franchises shall not be made), notwithstanding the fact that
certain of these operations will not be transferred to UAG at Closing,
and (y) the effect of any transfer or assignment of the purchase
option referenced in Section 5.19 of the Stock Purchase Agreement
shall be disregarded.
3. CLOSING PRORATIONS. If the Closing occurs on or before the 15th day
of a given month, the Closing Date Balance Sheets, Reviewed Balance Sheets and
Estimated Closing Date Balance Sheets shall be prepared based upon the full
months' actual results, with net income for the month prorated based upon the
number of days in the month through and including the date of Closing. If the
Closing occurs after the fifteenth of a given month, the Closing Date Balance
Sheets, Reviewed Balance Sheets and Estimated Closing Date Balance Sheets shall
reflect the results of the Companies through the end of such month. As provided
in the Agreement, estimates will be made of all financial calculations on or
about Closing subject to final review as provided therein.
4. REFINANCING OF INDEBTEDNESS. UAG and UAG West acknowledge and agree
that all the indebtedness listed under the caption "2. Indebtedness:" of
Schedule 1.2(e)(vii) to the Stock Purchase Agreement (except for the
indebtedness described in Subsection C.3, which will continue as an obligation
of the Companies, and in Subsections C.4, C.5 and C.6, which have been paid off,
under the caption "2. Indebtedness:" of Schedule 1.2(e)(vii)) (the
"Indebtedness") will be paid off or refinanced by UAG and UAG West
contemporaneously with or immediately following the Closing. Without limitation
of the foregoing, pursuant to a Management Agreement with Scottsdale Jaguar,
Inc., UAG or UAG West shall arrange for new flooring financing. Accordingly,
Sections 6.2(b) and 7.2(b) of the Stock Purchase Agreement have been satisfied
to the extent Sections 6.2(b) and 7.2(b) require consents from the Companies'
lenders. Moreover, notwithstanding Section 6.17(d) of the Stock Purchase
Agreement, no adjustment shall be made to the Base Price with respect to any
monetary liens or encumbrances that are caused to be released from the Purchased
Real Property (as defined in Section 1.1(i) of the Stock Purchase Agreement) by
UAG or UAG West.
2
<PAGE>
5. TERMINATION OF SECURITY INTERESTS. UAG and UAG West acknowledge and
agree that, notwithstanding Section 6.18 of the Stock Purchase Agreement, any
and all liens, security interests and other encumbrances relating to the
Indebtedness need not be released or terminated prior to the Closing.
Accordingly, the conditions to Closing set forth in Section 6.18 of the Stock
Purchase Agreement have been satisfied to the extent Section 6.18 requires
evidence that all liens, security interests and other encumbrances on the Real
Property, the Improvements or any assets of the Companies guaranteeing, securing
or otherwise arising out of or relating to the Bank of America Note (but not the
Maas Note or Max Consulting Agreement) have been released or terminated.
6. EXPIRATION OF OBJECTION PERIODS; COMPLETION OF DUE DILIGENCE. UAG and
UAG West acknowledge and agree that the periods within which they had an
opportunity to raise any issues identified during their due diligence
examination (including issues related to real property, leases, title and
surveys and environmental matters) or any objections to the Companies' Schedules
to the Stock Purchase Agreement have expired. Similarly, the Companies and the
Stockholders acknowledge and agree that the periods within which they had an
opportunity to raise any issues identified during their due diligence
examination or any objections to the UAG's and UAG West's Schedules to the Stock
Purchase Agreement have expired. Accordingly, the conditions to Closing set
forth in Sections 6.7, 6.17, 6.19, 7.7 and 7.12 of the Stock Purchase Agreement
have been satisfied.
7. MANUFACTURER AND DISTRIBUTOR APPROVALS. UAG and UAG West acknowledge
and agree that satisfactory consents, authorizations and approvals from all
other manufacturers and distributors of the Companies have been obtained, except
for approvals from Jaguar and Aston Martin which are the subject of a prior
Amendment to the Stock Purchase Agreement. Accordingly, the conditions to
Closing set forth in Section 6.11 of the Stock Purchase Agreement have been
satisfied.
8. RELEASE OF PERSONAL GUARANTEES. Nothing contained in this Amendment
shall be construed to waive or affect in any way the closing conditions set
forth in Section 7.13 of the Stock Purchase Agreement relating to the release of
the personal guarantees of Steve Knappenberger, his spouse and the Steven
Knappenberger Revocable Trust II, including without limitation, with respect to
any indebtedness, leases or other obligations of or affecting Scottsdale Jaguar,
Ltd.
9. ENVIRONMENTAL INDEMNITY.
(a) A new subsection (iii) shall be added to Section 9.1
(Indemnification) of the Agreement as follows:
"(iii) (a) testing, remediation and costs of obtaining clearance
from appropriate governmental authorities required under the
Environmental Laws in respect of any previous leaking of underground
storage tanks at the Companies' properties located at 6725, 6825 and
6905 E. McDowell Road, Scottsdale, Arizona, (b) registering, pursuant
to Arizona law, any drywell located at 6825 and 6905 E. McDowell,
3
<PAGE>
Scottsdale, Arizona and performing any investigation and/or remediation
work required by any governmental agency pursuant to any Environmental Laws
for any condition directly related to such drywell, which condition existed
on or before the date of the Closing and (c) ensuring that any necessary
installation of secondary containment for above-ground storage tanks
located at 6825 and 6905 E. McDowell Road, and 1127 and 1144 N. Scottsdale
Road, Scottsdale, Arizona is completed to bring such tanks into compliance
with Environmental Laws, in each case as such laws are in effect as of the
date of the Closing.
(b) The indemnity provided for in subsection (iii) shall
terminate on the third anniversary of the Closing Date. However, the
indemnification obligations of subsection (iii) shall not be subject
to the limitations of Section 9.4(a).
10. ADDITIONAL PURCHASE PRICE. The "October 1, 1996" and "September 30,
1998" dates set forth in Section 1.5 of the Stock Purchase Agreement shall be
changed to the first day of the month following closing and the second
anniversary of the end of the month preceding Closing, respectively. In
addition, the term "Companies" in Section 1.5 includes Scottsdale Jaguar, SK
Motors, Ltd. d/b/a Scottsdale Porsche and Scottsdale Audi, Ltd.
11. CALCULATION OF PRE-TAX EARNINGS. In addition to the methodology for
computing Pre-Tax Earnings as set forth in Section 1.5(c) of the Stock Purchase
Agreement, UAG and UAG West acknowledge and agree that Pre-Tax Earnings shall be
computed by adding back payments by Scottsdale Jaguar of amounts in accordance
with Section 2.1 of the Management Agreement, any incremental increase in the
lease costs of the Companies over the lease costs existing as of the date of
execution of the Stock Purchase Agreement and any amounts paid pursuant to that
certain Indemnification Agreement between UAG, UAG West, Scottsdale Jaguar and
the Stockholders.
12. TAX REPRESENTATIONS AND WARRANTIES. Notwithstanding Section 9.1 of
the Stock Purchase Agreement, the Stockholders shall not have any liability
thereunder in connection with any breach or inaccuracy in any representation
relating to the reserve by the Companies for the payment of all Taxes with
respect to periods through the Closing under Section 2.8 of the Stock Purchase
Agreement if such a liability for Taxes arises by reason of any modification of
the transactions contemplated by the Stock Purchase Agreement, including
modifications necessitated by the refusal of Jaguar Cars, Inc. to consent to
such transactions.
13. ACCOUNTING AND TAX RETURN PREPARATION.
(a) With respect to each of the Companies other than Scottsdale
Jaguar, SK Motors, Ltd. d/b/a Scottsdale Porsche, and Scottsdale Audi,
Ltd. (each an "S Company" and collectively, the "S Companies"), the S
Companies' outstanding S elections will terminate by reason of the
transfers of stock of the S Companies to UAG West.
4
<PAGE>
(b) Consistent with the termination of the S Companies' S
elections, the books of each of the S Companies shall, consistent with
Section 1362(e)(6)(D) of the Internal Revenue Code of 1986, as
amended, close effective as of the day preceding the date of the
Closing and, accordingly, a separate and distinct accounting period of
each of the S Companies shall commence on the date of the Closing.
(c) Each of the S Companies shall file two tax returns for the
taxable year in which the Closing occurs, one return covering each S
Company's "S short year" (within the meaning of Section 1362(e)(1)(A)
of the Code) and a second covering each S Company's "C short year"
(within the meaning of Section 1362(e)(1)(B) of the Code). The
Stockholders shall have sole and exclusive authority for the
preparation and filing of all tax returns relating to each S Company's
S short year and UAG shall have sole and exclusive authority for the
preparation and filing of the tax returns relating to each S Company's
C short year.
(d) UAG, UAG West, each of the S Companies, and the Stockholders
shall make available to each other, as reasonably requested, all
information, records or documents necessary for the filing of all tax
returns for each S Company's S short year and C short year, and shall
preserve all such information, records or documents until the
expiration of any applicable statute of limitations.
14. REPRESENTATIONS AND WARRANTIES. UAG and UAG West hereby acknowledge
that the representations and warranties of the Companies and Stockholders are
hereby modified to reflect that it is currently anticipated that the proposed
expansion of the Companies' Lexus facility will cost on the order of $300,000.
UAG and UAG West hereby acknowledge and agree that the Companies and the
Stockholders make no representations or warranties with respect to the
compliance of Amendments No. 1, 2 and 3 to the Stock Purchase Agreement and the
documents delivered thereunder with the Dealer Agreement between Scottsdale
Jaguar, Ltd. and Jaguar Cars, Inc.
15. STOCKHOLDER PLEDGE AGREEMENTS. Jay P. Beskind and Diana R. Beskind
hereby represent and warrant that, as of the Closing Date, the Stock Pledge
Agreement, dated February 17, 1995, by and between Jay P. Beskind, Diana R.
Beskind, Knappenberger Trust, SPA, SL, SA, Scottsdale Jaguar, Scottsdale
Management and Bank One Arizona has been terminated. George W. Brochick and
Christine S. Brochick also hereby represent and warrant that, as of the Closing
Date, the Stock Pledge Agreement, dated February 17, 1995, by and between George
W. Brochick, Christine S. Brochick, Knappenberger Trust, SPA, SL, SA, Scottsdale
Jaguar, Scottsdale Management and Bank One Arizona has been terminated.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
UNITED AUTO GROUP, INC.
By:
------------------------------------
Its:
------------------------------------
UAG WEST, INC.
By:
------------------------------------
Its:
------------------------------------
SCOTTSDALE JAGUAR, LTD.
By:
------------------------------------
Its:
------------------------------------
SA AUTOMOTIVE, LTD.
By:
------------------------------------
Its:
------------------------------------
SL AUTOMOTIVE, LTD.
By:
------------------------------------
Its:
------------------------------------
SPA AUTOMOTIVE, LTD.
By:
------------------------------------
Its:
------------------------------------
LRP AUTOMOTIVE, LTD.
By:
------------------------------------
Its:
------------------------------------
6
<PAGE>
SUN BMW, LTD.
By:
------------------------------------
Its:
------------------------------------
SCOTTSDALE MANAGEMENT GROUP, LTD.
By:
------------------------------------
Its:
------------------------------------
6725 DEALERSHIP, LTD.
By:
------------------------------------
Its:
------------------------------------
STEVEN KNAPPENBERGER REVOCABLE
TRUST DATED APRIL 15, 1983,
AS AMENDED
By:
----------------------------------------
Steven Knappenberger, Trustee
--------------------------------------------
Steven Knappenberger, Individually
(Solely with respect to Sections 5.11,
5.16 & 5.21 of the Stock Purchase Agreement)
--------------------------------------------
Jay P. Beskind, Individually
--------------------------------------------
Diana R. Beskind, Spouse of Jay P. Beskind
--------------------------------------------
George W. Brochick, Individually
7
<PAGE>
--------------------------------------------
Christine Brochick,
Spouse of George W. Brochick
BROCHICK 6725 TRUST DATED DECEMBER 29, 1992
By:
----------------------------------------
Robert W. Wyndelts, Trustee
BESKIND 6725 TRUST DATED DECEMBER 29, 1992
By:
----------------------------------------
Robert W. Wyndelts, Trustee
KNAPPENBERGER 6725 TRUST DATED
DECEMBER 29, 1992
By:
----------------------------------------
Robert W. Wyndelts, Trustee
8
<PAGE>
Audi Dealer Agreement
1. Appointment. Audi of America, Inc., a division of Volkswagen of America,
Inc. ("Distributor"), having a place of business at
___________________________________________________, appoints
_____________________________________________("Dealer"), doing business under
the fictitious name ________________________ _________________, having its place
of business at ______________ _____________________________________, as an
authorized dealer in Audi brand motor vehicles and genuine parts and accessories
therefor. Accordingly, the parties agree as follows:
2. Standard Provisions. The Dealer Agreement Standard Provisions (the
"Standard Provisions") (Form No. Deal. 92AB) are part of this Agreement. Any
term not defined in this Agreement has the meaning given such term in the
Standard Provisions.
3. Ownership and Management. To induce Distributor to enter into this
Agreement, Dealer represents that the persons identified in the Statement of
Ownership and Management, which is attached as Exhibit A, are Dealer's Owners
and Executives. Distributor is entering into this Agreement in reliance upon
these representations, and upon the continued provision by such persons of their
personal services in fulfillment of Dealer's obligations under this Agreement.
Accordingly, Dealer agrees there will be no change in Dealer's Owners without
Distributor's prior written consent, and no change in Dealer's Executives
without prior notice to Distributor.
4. Minimum Financial Requirements. Dealer agrees to comply and maintain
compliance with the minimum financial requirements established for Dealer from
time to time in accordance with the Operating Standards. Throughout the term of
this Agreement those minimum financial requirements are subject to revision by
Distributor, after review with Dealer, in light of operating conditions and the
development of Dealer's business and business potential.
5. Dealer's Premises. Distributor has approved the location of Dealer's
Premises as specified in the Dealer Premises Addendum, attached as Exhibit B,
Dealer agrees that, without Distributor's prior written consent, it will not (a)
make any major structural change in any of Dealer's Premises, (b) change the
location of any of Dealer's Premises or (c) establish any additional premises
for Dealer's Operations.
6. EXCLUSION OF WARRANTIES. EXCEPT FOR DISTRIBUTOR'S WARRANTIES, AND EXCEPT
AS PROVIDED IN ARTICLE 9(1) OF THE STANDARD PROVISIONS, THERE ARE NO EXPRESS OR
IMPLIED WARRANTIES OR OBLIGATIONS OF THE MANUFACTURER OR DISTRIBUTOR AS TO THE
QUALITY OR CONDITION OF AUTHORIZED PRODUCTS, OR AS TO THEIR MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE, AND, TO
<PAGE>
THE EXTENT PERMITTED BY LAW, DEALER WILL EXCLUDE ANY AND ALL SUCH WARRANTIES AND
OBLIGATIONS IN ITS SALES OF AUTHORIZED PRODUCTS.
7. Term. The term of this Agreement begins on the date of its delivery to
Dealer or on January 1, 1992, whichever is later. This Agreement shall continue
in effect until December 31, 1996, or _____________, 199__, whichever is
earlier, unless sooner terminated by either party or superseded by a new Dealer
Agreement with Distributor.
8. Governing Law. This Agreement will be construed in accordance with the
laws of the State of ___________________. Should the performance of any
obligation under this Agreement violate any valid law of such jurisdiction, then
this Agreement shall be deemed modified to the minimum extent necessary to
comply with such law.
9. Additional Terms and Conditions. The Addenda attached hereto as Exhibits
A though _____ are part of this Agreement, and are incorporated into this
Agreement by this reference.
Dated: _______________, 19__.
Audi Of America, Inc.
By:___________________________
Zone Manager
Dealer
By:___________________________
Title:
-2-
<PAGE>
Exhibit A to
Audi Dealer Agreement
Dated _____________, 19__.
Statement Of Ownership And Management
1. Dealer firm name:___________________________________________
2. Principal place of business:________________________________
3. Dealer is a ( ) proprietorship
( ) partnership
( ) corporation, incorporated on __________
____ under the laws of the State of
____________________________________.
4. The following persons are the beneficial and record owners of Dealer:
If a Corporation, Percentage of
Name and Address of Each Number and Ownership
Record and Beneficial Class of Shares of Record
Owner of Dealer Number Class in Dealer
5. The following persons are Dealer's Officers:
Name and Address Title
A-1
<PAGE>
6. The following person functions as General Manager of Dealer. As such, he is
an agent of Dealer and is authorized, and Distributor is entitled to rely on his
authority, to make all decisions on behalf of Dealer with respect to Dealer's
Operations.
Name and Address Title
Dealer hereby certifies that the foregoing information is true and complete as
of the date below. Distributor has entered into this Agreement in reliance upon
the qualifications, and the continued provision of personal services in the
ownership and management of Dealer by, the persons identified above.
This Exhibit cancels any prior Statement of Ownership and Management.
Dated:_________________ 19___.
Audi Of America, Inc.
By:__________________________
Zone Manager
Dealer
By:___________________________
Title:
A-2
<PAGE>
Exhibit B to
Audi Dealer Agreement
Dated ___________, 19__.
Dealer Premises Addendum
1. Dealer firm name:___________________________________________
2. Distributor has approved the location of the following premises, and no
others, for Dealer's Operations:
a. Sales Facilities:
____________________________________________________________
b. Authorized Automobile Storage Facilities:
____________________________________________________________
c. Service Facilities:
____________________________________________________________
d. Genuine Parts Storage Facilities:
____________________________________________________________
e. Used Car Lot:
____________________________________________________________
Dealer hereby certifies that the foregoing information is true and complete as
of the date below.
The Exhibit cancels any prior Dealer Premises Addendum.
Dated:____________________ 19__.
Audi Of America, Inc.
By:____________________________
Zone Manager
Dealer
By:____________________________
Title
B-1
<PAGE>
Audi of America, Inc. [LOGO]
Sent Via Fax & Federal Express
September 18, 1996
United Auto Group, Inc.
375 Park Ave., 22nd Floor
New York, NY 10152
Attention of George G. Lowrance, Executive Vice President
RE: LETTER OF INTENT
Gentlemen:
We are pleased to advise you that the application of United Auto Group, Inc.
("UAG") to acquire all the outstanding shares of capital stock of Scottsdale
Jaguar, Ltd. d/b/a Scottsdale Audi ("Dealer") tentatively has been approved.
Audi of America, Inc., an unincorporated division of Volkswagen of America, Inc.
("Audi") is prepared to issue a new Statement of Ownership and Management (a
specimen copy of which is enclosed) to the Audi Dealer Agreement currently in
effect between Audi and Dealer (the "Dealer Agreement") when, in our sole
judgment, you have fulfilled our customary requirements and satisfied each of
the conditions set forth below. Each of these conditions has been discussed with
you by Audi's representatives.
1. The corporate existence of Dealer will continue unchanged, but for the
transfer of all shares of capital stock of Dealer from Steven Knappenberger
("Knappenberger") to UAG. Dealer will operate the Audi dealership referred to
herein and no other business of any kind, save and except for the other
automotive operations customarily conducted by Dealer as of the date hereof. You
will supply Audi upon request, for its review and approval, all documents
reflecting the existence, shareholdings, organization, officers and directors of
Dealer, and any agreements between or among Dealer, its affiliates and its
shareholders.
2. The officers of Dealer following the contemplated stock transfer will be as
follows:
Chairman: Carl Spielvogel
President: Steve Knappenberger
Treasurer: Craig C. Lindsay
Secretary: Craig C. Lindsay
General Manager: George W. Brochick
<PAGE>
3. All the capital stock of Dealer will be transferred to, and will continue to
be wholly owned, by UAG. UAG has 6,987,391 issued and outstanding shares of
capital stock, which are owned as follows:
Trace Auto Holdings, Inc. 40.3%
Aeneas Venture Corp. 32.2
AIF II, L.P. 20.5
Ezra Mager 2.2
Jeremy Grantham 1.1
Jules Kroll 1.1
Andrea Farace 0.57
Natio Vie Development 0.57
Carl Spielvogel 0.28
Jerome Markowitz 0.06
Philip Halperin 0.06
Natio Fonds Venture 2 0.04
Amo Venture 0.04
Frank Dunlevy 0.03
Derek lemke von Ammon 0.03
4. The total Invested Operating Capital of Dealer will at no time be lower than
$1,000,000 of which no more than one-half will be in the form of borrowed funds.
5. The total Net Working Capital of Dealer will at no time be lower than
$2,300,000. The Owner's Equity of Dealer will at no time be lower than $600,000.
("Net Working Capital" and "Owner's Equity" shall have the respective meanings
ascribed to them in the Operating Standards for Audi Dealers, a copy of which
you have received.)
6. A Wholesale Credit Line for Dealer of at least $1,300,000 will be established
and maintained with a local financial institution acceptable to Audi for the
exclusive purpose of purchasing and maintaining an inventory of Audi
automobiles.
7. You acknowledge your understanding of, and to induce Audi to approve the
contemplated transaction you agree, to the requirements of Audi as they relate
to the dedication of a completely separate sales and service facility for
Dealer's Audi operations. You agree to negotiate with Audi in good faith toward
the establishment of a timetable for the separation of Audi dealership
operations from any other business operations of Dealer or of UAG, and the
establishment of specifications for such a separate Audi dealership facility.
You understand and agree that but for the representations of Dealer and UAG as
set forth in this paragraph, Audi would not enter into this Letter of Intent or
any other agreement with you.
8. You understand and agree that neither this Letter of Intent, the transactions
contemplated by this Letter of Intent, nor any amended Statement of Ownership
and Management to the Dealer
-2-
<PAGE>
Agreement which may ultimately be entered into pursuant to the terms hereof,
shall waive, modify, cancel or amend any other agreement heretofore in effect
between Audi and Dealer.
9. You will supply us with executed and authentic copies of the following
documents:
a. A letter from your financial institution verifying the amount of the
wholesale credit available for your purchase of Audi automobiles.
b. Proof of investment satisfactory to us verifying the amount of Dealer's
total invested capital.
c. Copies of both sides of all Stock Certificates issued by Dealer.
d. A certified list of the Officers and the Directors of Dealer.
e. All documents respecting the contemplated stock transfer.
10. Notwithstanding your compliance with the foregoing, you understand this
Letter of Intent may be revoked with no further liability on our part if:
a. An order is issued by any court or administrative agency, pursuant to
any law or regulation denying you or Dealer any license needed to conduct
the dealership operations contemplated by this letter or enjoining Audi
from entering into the Audi Dealer Agreement contemplated herein; or
b. In the judgment of our counsel there is a significant possibility any
such license may be denied or such an order may be issued.
11. You further understand, acknowledge and agree that:
a. Time is of the essence of all matters set forth in this Letter of
Intent.
b. In the event you or Dealer, for any reason within your control, shall
fail to timely fulfill any of the terms and conditions set forth herein,
Audi shall not be obligated to issue a new Statement of Ownership and
Management to the Dealer Agreement or to grant you or Dealer an extension
of time in which to complete your performance thereof.
c. You and Dealer hereby voluntarily assume the entire risk of the
undertakings contemplated herein. You and Dealer, by your approval and
acceptance of this Letter of Intent, and intending to be legally bound
hereby, further
-3-
<PAGE>
agree and covenant not to sue Audi, its officers, directors, agents,
employees, parent, subsidiaries, successors or assigns with respect to any
or all damages you or Dealer may suffer by reason of taking any action in
reliance upon this Letter of Intent, in the event you fail to timely
fulfill any of the conditions set forth herein, and Audi thereafter fails
or refuses to amend its Dealer Agreement with Dealer.
d. The financial requirements set forth in this Letter of Intent are
subject to periodic review and change. You agree to comply promptly with
any such change in financial requirements. You also agree that an
additional investment may be required if any assets required to comply with
the Audi Dealer Agreement or the Operating Standards for Audi Dealers were
not included in our calculation of the aforementioned financial
requirements.
If all the conditions set forth in this Letter of Intent are satisfied on or
before October 15, 1996, Audi will issue a new Statement of Ownership and
Management to the Dealer Agreement. You agree that Audi shall have no obligation
to so amend such Agreement unless and until you have satisfied all conditions
contained in this Letter of Intent.
This Letter of Intent will not become effective unless executed by you and
received by the undersigned at the above address ten days from the date hereof.
Once this Letter of Intent becomes effective, it will remain valid until October
15, 1996, or the execution of a new Statement of Ownership and Management to the
Dealer Agreement, whichever occurs first. Please acknowledge
-4-
<PAGE>
your understanding of and agreement to the terms of this Letter of Intent by
signing it below and returning it to my attention.
My congratulations on behalf of Audi. Please call upon us for any assistance
that we may be able to provide.
Very truly yours,
VOLKSWAGEN OF AMERICA, INC.
d/b/a AUDI OF AMERICA, INC.
By:_____________________________
The undersigned acknowledge, accept and approve the terms set forth in this
Letter of Intent:
UNITED AUTO GROUP, INC. SCOTTSDALE JAGUAR, LTD.
By: s/George G. Lowrance By: s/Steve Knappenberger
-------------------------- ----------------------------
Name:_________________________ Name: Steven Knappenberger
Title: Secretary Title: Chairman
Date: 9-18-96 Date: 9-19-96
_______________________________
Steven Knappenberger,
Executed as Dealer Principal
with no individual liability
-5-
<PAGE>
UNITED AUTO GROUP, INC.
George G. Lowrance
Executive Vice President
September 18, 1996
VIA FACSIMILE MAIL - 810/340-5140
Mr. Jerry Reich
Manager, Network Development
Audi of America, Inc.
3800 Hamlin Road
Auburn Hills, Michigan 48326
Dear Jerry:
We are in receipt of your Letter of Intent, dated September 18, 1996, relative
to the proposed transfer involving Scottsdale Jaguar (on behalf of Scottsdale
Audi) and United Auto Group ("UAG") and we are in agreement with the terms
contained therein.
By this letter, we are asking your acknowledgment that, at the time of the
closing of the proposed transaction, and thereafter, UAG will be a publicly
traded company and that such is not a violation of the terms of the sales and
service agreement by and between Audi of America and the dealership. Audi
further understands that the offering for sale of some portion of its stock on
the public market will result in a change in the percentages of UAG stock owned
by the individuals as listed in paragraph 3 of your Letter. At the time of the
offering, and at all times thereafter, UAG will provide Audi with current
percentage ownerships by all individuals and entities listed in that paragraph
3.
Thank you for your attention to this request.
Sincerely,
s/ George
George Lowrance
UNDERSTOOD AND AGREED: s/________________________
JERRY REICH
Audi of America, Inc.
<PAGE>
AUDI DEALER AGREEMENT
STANDARD PROVISIONS
<PAGE>
STANDARD PROVISIONS
Article 1 . . . . . . . . . . . . . . . . . . . . . . . . 1
Basic Obligations of Distributor . . . . . . . . . . . . 1
Supply of Authorized Products . . . . . . . . . . . . 1
Assistance . . . . . . . . . . . . . . . . . . . . . 1
Compliance with Ethical Standards . . . . . . . . . . 1
Article 2 . . . . . . . . . . . . . . . . . . . . . . . . 1
Basic Obligations of Dealer . . . . . . . . . . . . . . 1
Sales, Service and Parts Supply . . . . . . . . . . . 1
Compliance with Ethical Standards . . . . . . . . . . 2
Operating Standards . . . . . . . . . . . . . . . . . 2
Disclaimer of Further Liability by Distributor . . . 2
Article 3 . . . . . . . . . . . . . . . . . . . . . . . . 2
General Requirements for Dealer's Facilities . . . . . . 2
Dealer's Premises . . . . . . . . . . . . . . . . . . 2
Business Hours . . . . . . . . . . . . . . . . . . . 2
Article 4 . . . . . . . . . . . . . . . . . . . . . . . . 2
Identification; Advertising . . . . . . . . . . . . . . 2
Use of Authorized Trademarks . . . . . . . . . . . . 2
Signs . . . . . . . . . . . . . . . . . . . . . . . . 3
Stationery . . . . . . . . . . . . . . . . . . . . . 3
Advertising . . . . . . . . . . . . . . . . . . . . . 3
Article 5 . . . . . . . . . . . . . . . . . . . . . . . . 3
Sales . . . . . . . . . . . . . . . . . . . . . . . . . 3
Sales Promotion . . . . . . . . . . . . . . . . . . 3
Sales Performance . . . . . . . . . . . . . . . . . . 4
Sales Outside Area . . . . . . . . . . . . . . . . . 4
Sales Facilities . . . . . . . . . . . . . . . . . . 4
Defective or Damaged Authorized Products . . . . . . 4
Changes by Dealer to Authorized Products . . . . . . 5
Product Changes by Dealer Neither Requested by
Distributor nor Required by Law . . . . . . . . . . 5
Used Car Operations . . . . . . . . . . . . . . . . . 5
Article 6 . . . . . . . . . . . . . . . . . . . . . . . . 6
Parts . . . . . . . . . . . . . . . . . . . . . . . . . 6
Parts Promotion . . . . . . . . . . . . . . . . . . . 6
Parts Department . . . . . . . . . . . . . . . . . . 6
<PAGE>
Sale of Non-genuine Parts . . . . . . . . . . . . . . . . . 6
Parts Inventory . . . . . . . . . . . . . . . . . . . . . . 6
Article 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Quality and Promotion of Service . . . . . . . . . . . . . 6
Use of Non-genuine Parts . . . . . . . . . . . . . . . . . 7
Owner's Documents . . . . . . . . . . . . . . . . . . . . 7
Maintenance and Other Services Without Customer Charge . . 7
Repeated Repairs . . . . . . . . . . . . . . . . . . . . . 7
Article 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Dealer's Purchases and Inventories . . . . . . . . . . . . . 8
Purchase Prices . . . . . . . . . . . . . . . . . . . . . 8
Orders and Acceptance . . . . . . . . . . . . . . . . . . 8
Inventories . . . . . . . . . . . . . . . . . . . . . . . 8
Product Allocation . . . . . . . . . . . . . . . . . . . . 8
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Payment by Dealer . . . . . . . . . . . . . . . . . . . . 9
Passing of Title; Security Interest . . . . . . . . . . . 9
Passing of Risks . . . . . . . . . . . . . . . . . . . . . 9
Responsibility for Defects and Damage . . . . . . . . . . 10
Claims for Incomplete Delivery . . . . . . . . . . . . . . 10
Changes of Specifications . . . . . . . . . . . . . . . . 10
Failure of or Delay in Delivery by Distributor . . . . . . 11
Return or Diversion on Dealer's Failure to Accept . . . . 11
Article 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Warranty to Customers . . . . . . . . . . . . . . . . . . . . 11
Distributor's Warranties . . . . . . . . . . . . . . . . . 11
Incorporation of Distributor's Warranties in Dealer's
Sales . . . . . . . . . . . . . . . . . . . . . . . . . 12
Warranty Procedures . . . . . . . . . . . . . . . . . . . 12
Article 10 . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dealer's Record Keeping and Reports; Inspection of
Dealer's Operations . . . . . . . . . . . . . . . . . . . . 12
Dealer's Forms, Business Machines, Office Equipment
and Bookkeeping . . . . . . . . . . . . . . . . . . . 12
Financial Statements to be Supplied by Dealer . . . . . 13
Reports to be Supplied by Dealer . . . . . . . . . . . . 13
Inspection of Dealer's Operations and Records . . . . . 13
Article 11 . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dealer Performance Review . . . . . . . . . . . . . . . . . . 13
Evaluation and Assistance . . . . . . . . . . . . . . . . 13
-2-
<PAGE>
Evaluation of Dealer's Vehicle Sales Performance . . . . 13
Evaluation of Dealer's New Authorized Automobile
Sales Performance . . . . . . . . . . . . . . . . 13
Other Dealers in Dealer's Area . . . . . . . . . . . 14
Market Analysis Data . . . . . . . . . . . . . . . . 14
Evaluation of Dealer's Used Car Sales Performance . . . 14
Evaluation of Dealer's Service Performance . . . . . . . 14
Evaluation of Dealer's Parts Performance . . . . . . . . 15
Evaluation of Dealer's Premises . . . . . . . . . . . . 15
Article 12 . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Succeeding Dealers . . . . . . . . . . . . . . . . . . . . . 15
Procedure . . . . . . . . . . . . . . . . . . . . . . . . 15
Approvals . . . . . . . . . . . . . . . . . . . . . . . . 15
Right of First Refusal . . . . . . . . . . . . . . . . . . 16
Successorship . . . . . . . . . . . . . . . . . . . . . . 17
Modification of Terms of Payment . . . . . . . . . . . . . 17
Article 13 . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Termination . . . . . . . . . . . . . . . . . . . . . . . . . 18
Immediate Termination by Distributor . . . . . . . . . . . 18
Termination by Distributor on 90 Days' Notice . . . . . . 19
Discussions with Dealer. . . . . . . . . . . . . . . . . . 19
Modification of Terms of Payment . . . . . . . . . . . . . 20
No Waiver by Failure to Terminate . . . . . . . . . . . . 20
Termination by Dealer . . . . . . . . . . . . . . . . . . 20
Continuation of Business Relations after Termination . . . 20
Superseding Agreements . . . . . . . . . . . . . . . . . . 20
Agreements with Affiliates of Distributor . . . . . . . . 21
Article 14 . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Rights and Liabilities upon Termination . . . . . . . . . . . 21
Distributor's Obligations . . . . . . . . . . . . . . . . 21
New Authorized Automobile Inventory . . . . . . . . . . 21
New Genuine Parts Inventory . . . . . . . . . . . . . . 21
Tools and Equipment . . . . . . . . . . . . . . . . . . 22
Authorized Signs . . . . . . . . . . . . . . . . . . . 22
Terms of Sale . . . . . . . . . . . . . . . . . . . . . . 22
Pending Orders and Dealer's Obligations . . . . . . . . . 23
Removal of Authorized Signs . . . . . . . . . . . . . . . 23
Authorized Trademarks . . . . . . . . . . . . . . . . . . 23
Orders and Files . . . . . . . . . . . . . . . . . . . . . 23
Customer Lists . . . . . . . . . . . . . . . . . . . . . . 23
Literature . . . . . . . . . . . . . . . . . . . . . . . . 23
Specific Performance . . . . . . . . . . . . . . . . . . . 24
-3-
<PAGE>
Article 15 . . . . . . . . . . . . . . . . . . . . . . . . . 24
Definitions . . . . . . . . . . . . . . . . . . . . . . . . 24
Authorized Automobiles . . . . . . . . . . . . . . . . . 24
Authorized Products . . . . . . . . . . . . . . . . . . 24
Authorized Signs . . . . . . . . . . . . . . . . . . . . 24
Authorized Trademarks . . . . . . . . . . . . . . . . . 25
Dealer's Area . . . . . . . . . . . . . . . . . . . . . 25
Dealer's Executives . . . . . . . . . . . . . . . . . . 25
Dealer's Nominee . . . . . . . . . . . . . . . . . . . . 25
Dealer's Operations . . . . . . . . . . . . . . . . . . 26
Dealer's Owners . . . . . . . . . . . . . . . . . . . . 26
Dealer's Premises . . . . . . . . . . . . . . . . . . . 26
Distributor . . . . . . . . . . . . . . . . . . . . . . 26
Distributor's Warranties . . . . . . . . . . . . . . . . 26
Genuine Parts . . . . . . . . . . . . . . . . . . . . . 26
Manufacturer . . . . . . . . . . . . . . . . . . . . . . 26
Net Working Capital, Owner's Equity and Wholesale
Credit . . . . . . . . . . . . . . . . . . . . . . . . 26
Operating Standards . . . . . . . . . . . . . . . . . . 26
Owner's Documents . . . . . . . . . . . . . . . . . . . 26
Recommendations . . . . . . . . . . . . . . . . . . . . 26
Article 16 . . . . . . . . . . . . . . . . . . . . . . . . . 27
General Provisions. . . . . . . . . . . . . . . . . . . . . 27
Dealer Not an Agent . . . . . . . . . . . . . . . . . . 27
Authority to Sign . . . . . . . . . . . . . . . . . . . 27
Variations; Modifications; Amendments . . . . . . . . . 27
Entire Agreement . . . . . . . . . . . . . . . . . . . . 27
Release of Claims under Prior Agreements . . . . . . . . 27
Agreement Non-transferable . . . . . . . . . . . . . . . 27
Defense and Indemnification . . . . . . . . . . . . . . 28
Notices . . . . . . . . . . . . . . . . . . . . . . . . 28
Waivers . . . . . . . . . . . . . . . . . . . . . . . . 28
Titles . . . . . . . . . . . . . . . . . . . . . . . . . 28
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STANDARD PROVISIONS
ARTICLE 1
BASIC OBLIGATIONS OF DISTRIBUTOR
SUPPLY OF AUTHORIZED PRODUCTS
(1) Distributor will sell and deliver Authorized Products to Dealer in
accordance with this Agreement.
ASSISTANCE
(2) Distributor will actively assist Dealer in all aspects of Dealer's
Operations through such means as Distributor considers appropriate, including:
(a) Periodic reviews of Dealer's compliance with this Agreement
and the Operating Standards;
(b) Recommendations; and
(c) Schools, special training and meetings for Dealer's personnel.
COMPLIANCE WITH ETHICAL STANDARDS
(3) In the conduct of its business, Distributor will:
(a) Safeguard and promote the reputation of Authorized Products and
the Manufacturer;
(b) Refrain from all conduct which might be harmful to the
reputation or marketing of Authorized Products or inconsistent with the
public interest; and
(c) Avoid all discourteous, deceptive, misleading or unethical
practices.
ARTICLE 2
BASIC OBLIGATIONS OF DEALER
SALES, SERVICE AND PARTS SUPPLY
(1) Dealer assumes the responsibility in Dealer's Area for the promotion
and sale of Authorized Products and for the supply of Genuine Parts and
customer service for Authorized Products. This Agreement does not give Dealer
any exclusive right to sell or service Authorized Products in any area or
territory.
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COMPLIANCE WITH ETHICAL STANDARDS
(2) In the conduct of its business, Dealer will:
(a) Safeguard and promote the reputation of Authorized Products, the
Manufacturer and Distributor;
(b) Refrain from all conduct which might be harmful to the reputation
or marketing of Authorized Products or inconsistent with the public
interest; and
(c) Avoid all discourteous, deceptive, misleading or unethical
practices.
OPERATING STANDARDS
(3) The Operating Standards are part of this Agreement and are
incorporated herein by this reference.
DISCLAIMER OF FURTHER LIABILITY BY DISTRIBUTOR
(4) Except as expressly provided in this Agreement, Distributor is not
liable for any expenditure made or liability incurred by Dealer in connection
with Dealer's performance of its obligations under this Agreement.
ARTICLE 3
GENERAL REQUIREMENTS FOR DEALER'S FACILITIES
DEALER'S PREMISES
(1) Dealer's Premises will conform to the requirements of this
Agreement, the Operating Standards and such other standards as Distributor
may prescribe from time to time.
BUSINESS HOURS
(2) Unless otherwise agreed by Distributor in writing, Dealer will operate
Dealer's Premises during the customary business hours of the trade in Dealer's
Area.
ARTICLE 4
IDENTIFICATION; ADVERTISING
USE OF AUTHORIZED TRADEMARKS
(1) Distributor will supply Dealer, from time to time, with trademark
standards to assist Dealer in the proper usage of Authorized Trademarks.
Dealer will use Authorized Trademarks only in connection with the promotion
and sale of new Authorized
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Products and customer service for Authorized Products pursuant to this
Agreement, and only in the manner and for the purposes Distributor specifies.
Dealer will not use any Authorized Trademark as part of its corporate or
business name without the prior written consent of Distributor. Dealer also
may use Authorized Trademarks in connection with the sale of used automobiles
if Dealer complies fully with Distributor's requirements relating to used car
sales under the Authorized Trademarks. If Dealer does not comply fully with
these requirements, Dealer may not use any Authorized Trademarks in
connection with its used car sales, except that Dealer may use the words
"Audi" or "Volkswagen" to describe used Authorized Automobiles, if this word
appears in characters and colors different from those usually employed by the
Manufacturer, Distributor and authorized dealers of Distributor.
SIGNS
(2) Dealer will display conspicuously at Dealer's Premises such
Authorized Signs at such locations as Distributor reasonably may require.
Dealer will use its best efforts to obtain all governmental approvals
necessary for such display. If Dealer transfers any of Dealer's Premises to
another location, Dealer immediately will remove all Authorized Signs and
other references to Authorized Products displayed at or around the prior
location.
STATIONERY
(3) All stationery and business forms used in Dealer's Operations will
be prepared in accordance with Recommendations. Dealer's use of Authorized
Trademarks on stationery and business forms will be in accordance with
trademark standards supplied by Distributor.
ADVERTISING
(4) Dealer will advertise Authorized Products and
customer service for Authorized Products only in accordance with reasonable
guidelines and policies established by Distributor. Dealer will refrain from
all false, deceptive, misleading or unlawful advertising. Dealer's
advertising will include, among other things, a listing in a principal local
classified telephone directory in Dealer's Area.
ARTICLE 5
SALES
SALES PROMOTION
(1) Dealer will use its best efforts to promote the sale of Authorized
Automobiles in Dealer's Area, in reasonable proportion to the intensity of
consumer demand, through regular contacts
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with owners, users, and prospective owners and users of Authorized Products;
through promotion, prospecting and follow-up programs; and through such means
as may be indicated from time to time by Recommendations.
SALES PERFORMANCE
(2) Dealer will achieve the best sales performance possible in Dealer's
Area for each model and type of Authorized Automobile.
SALES OUTSIDE AREA
(3) Subject to Dealer's performance of its obligations under Article
5(2), Distributor does not restrict Dealer's sale of Authorized Automobiles
within the 50 United States. Distributor hereby informs Dealer, however, that
Distributor has no authority to sell any products for distribution outside
the United States, and it is Distributor's policy not to do so. Dealer
acknowledges its understanding that this is intended to preserve the
integrity of the orderly worldwide distribution network for the products
supplied to Distributor, and to maximize customer satisfaction by ensuring
that Authorized Products meet the certification and operational standards to
which they were designed. Dealer therefore is authorized to sell new
Authorized Products only in the 50 United States, and is not authorized to,
and agrees it will not, sell any new Authorized Product for sale or use
elsewhere.
SALES FACILITIES
(4) Dealer's sales facilities will conform to the requirements of the
Operating Standards and such other reasonable standards as Distributor may
prescribe, after review with Dealer.
DEFECTIVE OR DAMAGED AUTHORIZED PRODUCTS
(5) If any Authorized Product sold by Distributor to Dealer should become
defective or damaged prior to its delivery by Dealer to a customer, Dealer
agrees to repair such defect or damage so that such Authorized Product is
placed in first-class salable condition prior to such delivery. Dealer
immediately will notify Distributor of any substantial defects or damage and
will follow such procedures for making damage claims as Distributor may
establish from time to time. Distributor shall have the option to repurchase
any Authorized Products with substantial defects or damage at the price at
which they were originally sold by Distributor, less any prior refunds or
allowances made by Distributor and less any insurance proceeds received by
Dealer in respect of such defect or damage. Distributor will make an
equitable adjustment with respect to damage which Dealer can demonstrate
occurred prior to the time of delivery to Dealer.
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CHANGES BY DEALER TO AUTHORIZED PRODUCTS
(6) Distributor may request Dealer to make changes, or not to make
changes, to Authorized Products, and Dealer agrees to comply promptly with
such requests. Dealer also agrees to take such steps as Distributor may
direct it to take to comply with any law or regulation pertaining to safety,
emissions, noise, fuel economy or vehicle labeling. Distributor will
reimburse Dealer at the then-current rate of reimbursement specified by
Distributor for Dealer for Genuine Parts and for labor which may be used by
Dealer in making such required changes on Authorized Products. Parts and
other materials necessary to make such changes may be shipped to Dealer
without Dealer's authorization and Dealer will accept them. Dealer will
receive credit for parts so shipped which prove unnecessary, provided they
are returned or disposed of in accordance with Distributor's instructions.
If the laws of the state in which Dealer is located or a vehicle is to be
registered require motor vehicles to carry equipment not installed or
supplied as standard equipment by the Manufacturer or Distributor, upon
Distributor's request Dealer will, prior to selling any Authorized
Automobiles on which such installation is required, properly install at its
own or its customers' expense equipment conforming to such laws and to
Distributor's standards. Dealer agrees to indemnify the Manufacturer and
Distributor and hold them harmless from any and all liabilities that may
arise out of Dealer's failure or alleged failure to comply with any
obligation assumed by Dealer in this paragraph.
PRODUCT CHANGES BY DEALER NEITHER REQUESTED BY DISTRIBUTOR NOR
REQUIRED BY LAW
(7) If Dealer installs on a new Authorized Automobile any equipment,
accessory or part other than a Genuine Part; sells any new Authorized
Automobile which has been modified; or sells in conjunction with a new
Authorized Automobile a service contract not offered or specifically endorsed
in writing by Distributor, then Dealer will advise the customer of the
identity of the warrantor of such modification, equipment, accessory or part,
or, in the case of a service contract, of the identity of the provider of its
coverage. Dealer will indemnify Distributor against claims that may be
asserted against Distributor in any action by reason of such modification,
equipment, accessory, part or service contract.
USED CAR OPERATIONS
(8) Dealer will use its best efforts to acquire, promote and sell at
retail used Authorized Automobiles and other used automobiles. Dealer's used
car operations will conform to the requirements of the Operating Standards
and such other reasonable standards as Distributor may prescribe, after
review with Dealer.
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ARTICLE 6
PARTS
PARTS PROMOTION
(1) Dealer will use its best efforts to promote the sale of Genuine Parts
in Dealer's Area, in reasonable proportion to the intensity of consumer
demand, through regular contacts with owners, users, and prospective owners
and users of Authorized Products; through promotion, prospecting and
follow-up programs; and through such means as may be indicated from time to
time by Recommendations.
PARTS DEPARTMENT
(2) Dealer's parts department will conform to the requirements of the
Operating Standards and such other reasonable standards as Distributor may
prescribe, after review with Dealer.
SALE OF NON-GENUINE PARTS
(3) Dealer will not sell any parts which are not equivalent in quality
and design to Genuine Parts, if such parts are necessary to the mechanical
operation of Authorized Automobiles. Dealer will not represent as new Genuine
Parts any parts which are not new Genuine Parts. If Dealer sells a part or
accessory which is not a Genuine Part, Dealer will advise the customer of the
identify of the warrantor of such part or accessory.
PARTS INVENTORY
(4) Dealer will maintain an inventory of Genuine Parts which is
sufficient to perform reasonably anticipated warranty service and which is in
proportion to the intensity of consumer demand and wholesale trade
requirements in Dealer's Area for Genuine Parts. Distributor will make
Recommendations for Dealer's inventory of Genuine Parts based on particular
conditions in Dealer's Area, and Dealer will give due consideration to such
Recommendations.
ARTICLE 7
SERVICE
QUALITY AND PROMOTION OF SERVICE
(1) Dealer will provide the best possible customer service for all
owners of Authorized Automobiles and automobiles of the same make formerly
sold by Distributor, and will use its best efforts to promote its customer
service. Dealer's service facilities, equipment and personnel will conform
to the
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requirements of the Operating Standards and other such reasonable
standards as Distributor may prescribe, after review with Dealer.
USE OF NON-GENUINE PARTS
(2) Dealer will not use in the repair or servicing of Authorized
Automobiles any parts which are not equivalent in quality and design to
Genuine Parts, if such parts are necessary to the mechanical operation of
such Authorized Automobiles. Dealer will use only Genuine Parts in performing
warranty service on Authorized Automobiles. Dealer will not represent as new
Genuine Parts any parts used by it in the repair or servicing of Authorized
Automobiles which are not new Genuine Parts.
OWNER'S DOCUMENTS
(3) Upon delivering a new Authorized Automobile to a customer, Dealer
will provide the Owner's Documents supplied by Distributor for such
Authorized Automobile, properly completed by Dealer. Dealer will take all
steps required prior to delivery of the Authorized Automobile and, in
particular, will perform properly the pre-delivery services specified by
Distributor.
MAINTENANCE AND OTHER SERVICES WITHOUT CUSTOMER CHARGE
(4) In accordance with bulletins issued form time to time by Distributor
and Distributor's Warranties, certain maintenance services and other repairs
following delivery of a new Authorized Automobile may be free of charge to
the customer. Upon presentation of an appropriate Owner's Document, Dealer
will perform properly the services required, whether or not the Authorized
Automobile to be serviced was sold by Dealer. Upon submission of appropriate
claims, Distributor will reimburse Dealer for performing such services at the
then-current rate of reimbursement specified by Distributor for Dealer.
Distributor will establish procedures for submitting and processing such
claims and transmitting reimbursements to Dealer. Dealer agrees to comply
with these procedures.
REPEATED REPAIRS
(5) Dealer will notify Distributor of repairs to Authorized Automobiles
pursuant to Distributor's Warranties under each of the following
circumstances:
(a) The Authorized Automobile has been brought to Dealer a specified
number of times for the same complaint; or
(b) The Authorized Automobile has been in Dealer's custody for all
repairs pursuant to Distributor's Warranties a specified number of days.
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<PAGE>
Such notification shall be made at the times and by the means
Distributor may have instructed in any then-current dealer warranty manual
issued by Distributor.
ARTICLE 8
DEALER'S PURCHASES AND INVENTORIES
PURCHASE PRICES
(1) Distributor will sell Authorized Products to Dealer at prices and
upon terms established by Distributor from time to time. If Distributor
increases its established prices, Dealer may cancel all orders for Authorized
Products affected by the increase which are unfilled at the time Dealer
receives notice of the increase, by giving Distributor written notice of
cancellation within ten days from the time Dealer receives notice of the
price increase.
ORDERS AND ACCEPTANCE
(2) Dealer will transmit orders for Authorized Products to Distributor
electronically, at the times and for the periods, that Distributor reasonably
requires. With each order, Dealer represents that it is solvent.
Distributor may accept orders in whole or in part. Except as otherwise
expressly provided in Article 8(1), all orders of Dealer will be binding upon
it until they are rejected in writing by Distributor; however, in the event
of a partial acceptance by Distributor, Dealer will not be bound by the
portion of the order not accepted.
INVENTORIES
(3) Dealer will maintain in inventory at all times the inventories of
Authorized Products required by the Operating Standards.
PRODUCT ALLOCATION
(4) Dealer recognizes that certain Authorized Products may not be
available in sufficient supply from time to time because of factors such as
product importation, consumer demand, component shortages, manufacturing
constraints, governmental regulations or other causes. Distributor will
endeavor to make a fair and equitable allocation and distribution of the
Authorized Products available to it.
TAXES
(5) Dealer is responsible for any and all
sales taxes, use taxes, excise taxes (including luxury taxes) and other
governmental charges imposed, levied or based upon the sale of Authorized
Products by Distributor to Dealer. Dealer represents
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<PAGE>
and warrants, as of the date of the purchase of each Authorized Product, that
all Authorized Products purchased from Distributor are purchased by Dealer
for resale in the ordinary course of Dealer's business and that Dealer has
complied with all laws relating to the collection and payment of all sales
taxes, use taxes, excise taxes (including luxury taxes) and other
governmental charges applicable to the purchase of such products and will
furnish evidence thereof upon request. If any Authorized Products are put to
taxable use by Dealer, or are purchased by Dealer for purposes other than
resale in the ordinary course of Dealer's business, Dealer will make timely
return and payment to the appropriate taxing authorities of all applicable
taxes and other governmental charges imposed, levied or based upon the sale
of such Authorized Products by Distributor to Dealer and will hold
Distributor harmless with respect thereto.
PAYMENT BY DEALER
(6) Dealer will pay for Authorized Products in the manner, at the time
and upon the conditions specified in the terms of payment established from
time to time by Distributor. Delivery of instruments of payment other than
cash will not constitute payment until Distributor has collected the full
amount in cash. Dealer will pay all collection charges, including reasonable
attorney's fees, and costs of exchange, if any, incurred in connection with
its payments.
PASSING OF TITLE; SECURITY INTEREST
(7) Title to Authorized Products will remain with Distributor until
Distributor has collected their full purchase price in cash. Dealer will
execute and deliver, and Distributor is authorized to execute and deliver on
behalf of Dealer or, to the extent permitted by law, to file without the
signature of Dealer, all financing statements and other instruments which
Distributor may deem necessary to evidence its ownership of such Authorized
Products. Dealer hereby grants Distributor a purchase money security
interest in all Authorized Products for which Distributor has not collected
in full, authorizes Distributor to take such steps as Distributor deems
necessary to perfect such security interests, and agrees to cooperate fully
with Distributor in connection therewith. Distributor may take possession at
any time of Authorized Products to which it has title.
PASSING OF RISKS
(8) Authorized Products will be at Dealer's risk and peril from the
time of their delivery to Dealer or Dealer's agent. It will be up to Dealer
to insure such risks for its benefit and at its expense.
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RESPONSIBILITY FOR DEFECTS AND DAMAGE
(9) Distributor assumes responsibility for the quality and condition of
Authorized Products, to the extent of (a) defects caused by its own
negligence and (b) damage caused during storage by Distributor or occurring
prior to delivery of the Authorized Products to Dealer or Dealer's agent.
Distributor will make any required disclosure thereof to Dealer. If
Distributor has insured against such defects in or damage to Authorized
Products, Distributor's liability to Dealer for such damage will be limited
to the amount actually paid by the insurance carrier to Distributor by reason
of such defect or damage, together with any deductible amount applicable to
such claim. Dealer may decline to accept any Authorized Products delivered
to Dealer in damaged condition; however, should Dealer accept such Authorized
Product Dealer will, subject to the provisions of Article 5(5), repair all
such defects and damage fully as required by Distributor before any defective
or damaged Authorized Product is delivered to a customer. Dealer will make
any required disclosure to Dealer's customers of damage or repairs, and will
hold Distributor harmless with respect thereto. Distributor will notify
Dealer promptly of the amount paid by the insurance carrier with respect to
any such defect or damage and will pay Dealer the full amount thereof, or any
other amount due from Distributor pursuant to this paragraph, following
Dealer's submission of such proof of repair as Distributor may require.
CLAIMS FOR INCOMPLETE DELIVERY
(10) Dealer will make all claims for incomplete delivery of Authorized
Products (including the delivery of Authorized Products with damage) in
writing not later than three business days after Dealer's receipt of
shipment; PROVIDED, HOWEVER, that Dealer will make claims as to Genuine Parts
within the period specified in policies established by Distributor from time
to time; and PROVIDED, FURTHER, that Dealer will note claims for visible
damage to Authorized Automobiles on the delivery receipt.
CHANGES OF SPECIFICATIONS
(11) Distributor will deliver Authorized Products to Dealer in
accordance with specifications applicable at the time of their manufacture.
In the event of any change or modification with respect to any Authorized
Products, Dealer will not be entitled to have such change or modification
made to any Authorized Products manufactured prior to the introduction of
such change or modification. Distributor expressly reserves, and Dealer
acknowledges, the right to make such changes and modifications, and Dealer's
only right in such event shall be the cancellation of any orders for
Authorized Products affected by the change or modification not yet accepted
by Distributor.
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FAILURE OF OR DELAY IN DELIVERY BY DISTRIBUTOR
(12) Distributor will not be liable to Dealer for failure of or delay in
delivery under orders of Dealer accepted by Distributor, other than failure
or delay resulting from willful misconduct or gross negligence of Distributor.
RETURN OR DIVERSION ON DEALER'S FAILURE TO ACCEPT
(13) If Dealer fails or refuses for any reason to accept delivery of any
Authorized Products ordered by Dealer (except as permitted under Article
8(9)), Dealer will be liable to Distributor for all expenses incurred as a
result of such failure or refusal, and will store such Authorized Products at
no charge to Distributor until Distributor can arrange for their removal.
Dealer's liability pursuant to this paragraph will be in addition to, and not
in lieu of, any other liabilities which may arise from Dealer's failure or
refusal to accept delivery.
ARTICLE 9
WARRANTY TO CUSTOMERS
DISTRIBUTOR'S WARRANTIES
(1) Distributor warrants each new Authorized Product as set forth in
Distributor's Warranties.
INCORPORATION OF DISTRIBUTOR'S WARRANTIES IN DEALER'S SALES
(2) Dealer will make all sales of Authorized Automobiles and Genuine
Parts in such a way that its customers acquire all rights in accordance with
Distributor's Warranties and, to the extent permitted by law, no other
express or implied warranties. Dealer will make the text of Distributor's
Warranties part of its contracts for the sale of Authorized Products and will
display the text of the warranties of all products it sells in customer
contact areas where Authorized Products are offered.
WARRANTY PROCEDURES
(3) Dealer agrees to comply with the provisions of the various dealer
warranty manuals which Distributor may issue from time to time, and will
follow the procedures established by Distributor for processing warranty
claims and returning and disposing of defective Genuine Parts. Dealer also
will comply with all requests of Distributor for the performance of services
pursuant to warranty claims and will maintain detailed records of time and
parts consumption and any other records used as the basis for submitting
warranty claims. Dealer will submit warranty claims to Distributor
electronically. Upon Dealer's compliance with such requests and maintenance
of such records, Distributor will reimburse Dealer within a reasonable time
for
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<PAGE>
warranty claims at the then-current rate of reimbursement specified by
Distributor for Dealer. Strict adherence to the procedures established for
processing warranty claims is necessary for Distributor to process such
claims fairly and expeditiously. Distributor will be under no obligation
with respect to warranty claims not made strictly in accordance with such
procedures.
ARTICLE 10
DEALER'S RECORD KEEPING AND REPORTS;
INSPECTION OF DEALER'S OPERATIONS
DEALER'S FORMS, BUSINESS MACHINES, OFFICE EQUIPMENT AND
BOOKKEEPING
(1) Dealer's will use accounting, sales, bookkeeping and service
workshop forms; business machines; data processing and transmission
equipment; and other office equipment which meet specifications, and which
provide information and function in the manner, prescribed by Distributor and
its affiliates in the Operating Standards and by other means. Dealer will
keep accurate and current records in accordance with Distributor's uniform
accounting system and with accounting practices and procedures reasonably
satisfactory to Distributor, in order to enable Distributor to develop
comparative data and to furnish Dealer business management assistance.
FINANCIAL STATEMENTS TO BE SUPPLIED BY DEALER
(2) Dealer will transmit to Distributor (a) on or
before the tenth day of each calendar month, in such form and by such methods
as Distributor reasonably may require, a financial and operating statement
reflecting the consolidated operations of Dealer for the preceding month and
from the beginning of the calendar year to the end of the preceding month and
(b) within three and one-half months after the close of Dealer's fiscal or
calendar year, a consolidated balance sheet and profit and loss statement of
Dealer, which documents shall be certified by a certified public accountant
if so requested by Distributor at least 30 days prior to the close of
Dealer's fiscal or calendar year.
REPORTS TO BE SUPPLIED BY DEALER
(3) Dealer will furnish to Distributor, on such forms as Distributor
reasonably may require, accurate daily reports of Dealer's sales and
transfers of new Authorized Automobiles for that day. Dealer also will
furnish to Distributor, on a timely and accurate basis, such other reports
and financial statements as Distributor reasonably may require.
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INSPECTION OF DEALER'S OPERATIONS AND RECORDS
(4) Until the expiration or termination of this Agreement, and thereafter
until consummation of all transactions referred to in Article 14, Distributor,
through its employees and other designees, at all reasonable times during
regular business hours, may inspect Dealer's Operations, Dealer's Premises and
the methods, records and accounts of Dealer relating to Dealer's Operations.
ARTICLE 11
DEALER PERFORMANCE REVIEW
EVALUATION AND ASSISTANCE
(1) Each year, Distributor will prepare objectives for Dealer and will
use them as a basis for evaluating Dealer's performance of its obligations in
each of the areas described in this Article 11. Distributor may evaluate
Dealer's performance during the year through periodic reviews. Distributor will
review its evaluations with Dealer, so that Dealer may take prompt action, if
necessary, to improve its performance to such levels as Distributor reasonably
may require. Any written comments received from Dealer on Distributor's
evaluation of Dealer will become a part of such evaluation.
EVALUATION OF DEALER'S VEHICLE SALES PERFORMANCE
(2) Distributor will evaluate the effectiveness of Dealer's vehicle sales
performance. In evaluating such performance, the following factors will be
considered:
EVALUATION OF DEALER'S NEW AUTHORIZED AUTOMOBILE SALES PERFORMANCE
(a) Distributor will evaluate Dealer's sales performance as a
whole, and separately for each model and type of new Authorized Automobile,
taking into account:
(i) Fair and reasonable sales objectives which may be
established from time to time by Distributor for Dealer, after review
with Dealer;
(ii) The ratio in Dealer's Area of sales of Authorized
Automobiles to sales of other makes of automobiles, as compared to:
(A) such ratio on a nationwide basis;
(B) the average ratio for all dealers of the same
line-make in Distributor's sales zone and district in which
Dealer is located; and
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(C) such ratios for other comparable dealers of the
same line-make in Distributor's sales zone in which Dealer is located;
(iii) The development of Dealer's sales performance over a
reasonable period of time;
(iv) Particular conditions in Dealer's Area, if any, directly
affecting actual and potential sales performance; and
(v) Measures of customer satisfaction.
OTHER DEALERS IN DEALER'S AREA
(b) If one or more other dealers of the same line-make operate
within Dealer's Area, as in a metropolitan area, the combined sales
performance of all such dealers in Dealer's Area will be evaluated in the
manner described in Article 11(2)(a) above. Dealer's individual sales
performance then will be evaluated on the basis of that proportion of the
sales and potential sales of Authorized Automobiles in Dealer's Area for
which Dealer fairly may be held responsible, according to such reasonable
criteria as Distributor may determine, including standards for Dealer's
sales participation in Dealer's Area previously determined by Distributor
and reviewed with Dealer.
MARKET ANALYSIS DATA
(c) Distributor also may measure and evaluate Dealer's sales
performance by reference to appropriate market penetration and sales
statistics and forecasts published by, or developed with the usage of data
from, organizations generally recognized by the automobile industry.
EVALUATION OF DEALER'S USED CAR SALES PERFORMANCE
(d) Distributor will evaluate Dealer's used automobile sales
performance, including the extent of Dealer's overall compliance with the
Operating Standards.
EVALUATION OF DEALER'S SERVICE PERFORMANCE
(3) Because of the importance of Dealer's service performance to the
purposes and objectives of this Agreement, Distributor will evaluate Dealer's
performance of its responsibilities for service, including the extent of
Dealer's overall compliance with the Operating Standards. Distributor also will
consider measures of customer satisfaction with the service and repair work
performed by Dealer.
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EVALUATION OF DEALER'S PARTS PERFORMANCE
(4) Distributor will evaluate Dealer's performance of Dealer's
responsibilities pertaining to Dealer's parts department, including Dealer's
actual parts sales compared to market potential and the extent of Dealer's
overall compliance with the Operating Standards.
EVALUATION OF DEALER'S PREMISES
(5) Distributor will evaluate Dealer's performance of its
responsibilities pertaining to Dealer's Premises, analyzing both separately and
collectively Dealer's sales facilities, service facilities, parts facilities,
administrative offices, storage, parking and signage. In making such
evaluation, Distributor will consider the factors set forth in the Operating
Standards.
ARTICLE 12
SUCCEEDING DEALERS
PROCEDURE
(1) If Dealer chooses to transfer its principal assets or change owners,
Distributor has the right to approve the proposed transferees, the new owners
and executives and, if different from Dealer's, their premises. Distributor
will consider in good faith any such proposal Dealer may submit to it during the
term of this Agreement. In determining whether the proposal is acceptable to
it, Distributor will take into account factors such as the personal, business
and financial qualifications of the proposed new owners and executives as well
as the proposal's effect on competition. In such evaluation, Distributor may
consult with the proposed new owners and executives on any aspect of the
transaction or their proposed dealership operations. Notwithstanding anything
set forth in this paragraph to the contrary, Distributor shall not be obligated
to consider such proposal if it previously had notified Dealer in writing that
it would not appoint a succeeding dealer in Dealer's Area; provided, however,
that such notice shall be given only if there is good cause for discontinuing
representation of Authorized Automobiles in Dealer's Area.
APPROVALS
(2) Distributor will notify Dealer in writing of the approval or
disapproval of a proposal by Dealer for transfer of principal assets or change
of owners within 45 business days, or the exercise by Distributor of its right
of first refusal under Article 12(3) within 30 calendar days, after Dealer has
furnished to Distributor all applications and information reasonably requested
by Distributor to evaluate such proposal. If Distributor approves Dealer's
proposal, Distributor shall be
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obligated to grant the proposed transferees only a Dealer Agreement in
substantially the same form as this Agreement. If Distributor had previously
notified Dealer in writing that Distributor would not appoint a succeeding
dealer in Dealer's Premises, then Distributor's approval of Dealer's proposal
may be conditioned on the proposed transferees agreeing to provide different
facilities for their dealership operations. Upon the consummation of Dealer's
approved proposal, Dealer will deliver to Distributor a voluntary termination of
this Agreement and a general release in favor of Distributor.
RIGHT OF FIRST REFUSAL
(3) Whenever Dealer proposes to transfer its principal assets or change
owners of a majority interest, Distributor shall have the right to purchase such
assets or ownership interest, as follows:
(a) Distributor may elect to exercise its purchase right by written
notice to Dealer within 30 calendar days after Dealer has furnished to
Distributor all applications and information reasonably requested by
Distributor to evaluate Dealer's proposal.
(b) If Dealer's proposed sale or transfer was to Dealer's Nominee,
to another successor approved in advance by Distributor, to any of Dealer's
Owners, to Dealer's employees as a group or to Dealer's spouse, children or
heirs, then Dealer may withdraw its proposal within 30 calendar days
following receipt of Distributor's notice of election of its purchase
right.
(c) Distributor's right under this Article 12(3) shall be a right
of first refusal, permitting Distributor to (i) assume the proposed
transferee's rights and obligations under its agreement with Dealer and
(ii) cancel this Agreement and all rights granted Dealer hereunder. Except
to the extent specifically inconsistent with the terms of this Agreement,
the price and all other terms of Distributor's purchase shall be as set
forth in any bona fide written purchase and sale agreement between Dealer
and its proposed transferee and in any related documents.
(d) Dealer shall furnish to Distributor copies of all applicable
liens, mortgages, encumbrances, leases, easements, licenses or other
documents affecting any of the property to be transferred, and shall assign
to Distributor any permits or licenses necessary for the continued conduct
of Dealer's Operations.
(e) Distributor may assign its right of first refusal to any party
it chooses, but in that event Distributor will remain primarily liable for
payment of the purchase price to Dealer.
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(f) If Distributor exercises its purchase right, Distributor will
reimburse Dealer's proposed transferee for reasonable documented actual
expenses which such proposed transferee incurred through the date of such
exercise which are directly and solely attributable to the transaction
Dealer proposed.
(g) Nothing contained in this Article 12(3) shall require
Distributor to exercise its right of first refusal in any case, nor
restrict any right Distributor may have to refuse to approve Dealer's
proposed transfer.
SUCCESSORSHIP
(4) Article 13(1)(a) notwithstanding, in the event of the death of any
of Dealer's Owners, Distributor will not terminate this Agreement by reason of
such death before the end of 12 months after the death of such owner if:
(a) His interest in Dealer passes directly to his surviving spouse
and his children, or any of them, or as specified in any Successor
Addendum to this Agreement; and
(b) Dealer's general manager remains as stated in the Statement of
Ownership and Management, or within 90 days after the death of such
owner, Dealer's Nominee becomes the general manager of the Dealer or
Dealer appoints another qualified individual as general manager. After
the expiration of this 12-month period and Distributor's evaluation of
the performance of Dealer's management during such period, Distributor
will review with Dealer the changes, if any, in the management or equity
interests of Dealer required by Distributor as a condition of extending
this Dealer Agreement with Dealer. Any new Dealer Agreement entered
into pursuant to this paragraph will be in substantially the same form
as the Dealer Agreements then currently offered by Distributor to its
dealers in Authorized Automobiles generally.
MODIFICATION OF TERMS OF PAYMENT
(5) Upon receipt of an application for a replacement dealer agreement,
Distributor may modify its terms of payment with respect to Dealer to the extent
Distributor deems appropriate, irrespective of Dealer's credit standing or
payment history.
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ARTICLE 13
TERMINATION
IMMEDIATE TERMINATION BY DISTRIBUTOR
(1) Except to the extent a greater notice period is required by
anyapplicable statute, Distributor has the right to terminate this Agreement for
cause, with immediate effect, by sending notice of termination to Dealer by
certified mail, or by personal delivery to any of Dealer's Owners or Executives,
if any of the following should occur:
(a) Death of any of Dealer's Owners or any change, whether
voluntary or by operation of law, in the record or beneficial ownership
of Dealer without Distributor's prior written consent; any change in
Dealer's Executives without prior notice to Distributor; or the failure
of Dealer's Executives to continue to manage Dealer's Operations;
(b) Dissolution or liquidation of Dealer, if a partnership or
corporation;
(c) Insolvency of Dealer or voluntary institution by Dealer of any
proceeding under the Bankruptcy Act or state insolvency law; or the
involuntary institution against Dealer of any proceeding under the
Bankruptcy Act or state insolvency law which is not vacated within ten
days from the institution thereof; or the appointment of a receiver or
other officer having similar powers for Dealer or Dealer's business who
is not removed within ten days of his appointment; or any levy under
attachment, execution or similar process which is not within ten days
vacated or removed by payment or bonding;
(d) Any attempted transfer of this Agreement by Dealer, in whole
or in part, without Distributor's prior written consent;
(e) Any change in the location of any of Dealer's Premises or the
establishment of any additional premises for Dealer's Operations without
Distributor's prior written consent;
(f) Failure of Dealer to continue to operate any of Dealer's
Premises in the usual manner for a period of five consecutive business
days, unless caused by an Act of God, war, riot, strike, lockout, fire,
explosion or similar event;
(g) Dealer's failure, for a period of ten consecutive business
days, to have any license necessary for the conduct of Dealer's
Operations;
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(h) Conviction of Dealer or any of Dealer's Owners or Executives
of a felony or any misdemeanor involving fraud, deceit or an unfair
business practice, if in Distributor's opinion such conviction may
adversely affect the conduct of Dealer's business, or be harmful to the
good will of the Manufacturer or Distributor or to the reputation and
marketing of Authorized Products;
(i) Any material misrepresentation by any of Dealer's Owners or
Executives as to any fact relied upon by Distributor in entering into
this Agreement;
(j) Submission by Dealer of a fraudulent or knowingly false report
or statement or claim for reimbursement, refund or credit; or
(k) Failure or refusal of Dealer or Dealer's owners, executives,
agents or employees to provide Distributor, upon request, with access to
and the opportunity to inspect and copy all books, papers, instruments,
certificates or other documents evidencing the record or beneficial
ownership of Dealer.
TERMINATION BY DISTRIBUTOR ON 90 DAYS' NOTICE
(2) Except to the extent a greater notice period is required by any
applicable statute, Distributor has the right to terminate this Agreement upon
90 days' notice if any of the following shall occur:
(a) Any disagreement or personal difficulties of Dealer's Owners
or Executives which in Distributor's opinion may adversely affect the
conduct of Dealer's business, or the presence in the management of
Dealer of any person who in Distributor's opinion does not have
appropriate qualifications for his position;
(b) Impairment of the reputation or financial standing of Dealer
or any of Dealer's Owners or Executives or ascertainment by Distributor
of any fact existing at or prior to the time of execution of this
Agreement which tends to impair such reputation or financial standing;
or
(c) Any breach of any obligation of Dealer pursuant to this
Agreement or any other agreement between Distributor or any of its
subsidiaries or affiliates and Dealer.
DISCUSSIONS WITH DEALER
(3) Upon learning that any event or situation which would give
Distributor grounds to terminate this Agreement has occurred, Distributor will
endeavor to discuss such event or situation with Dealer. Thereafter,
Distributor may give Dealer written notice of termination.
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MODIFICATION OF TERMS OF PAYMENT
(4) During the period a situation specified in Article 13(1) or 13(2)
continues to exist, Distributor may modify its terms of payment with respect to
Dealer to such extent as Distributor may consider appropriate, irrespective of
Dealer's credit standing or payment record.
NO WAIVER BY FAILURE TO TERMINATE
(5) Should Distributor be entitled to terminate this Agreement but fail
to do so, such failure shall not be considered a waiver of Distributor's right
to terminate this Agreement unless the situation entitling Distributor to
terminate this Agreement has ceased to exist and (a) six months have elapsed
from the time Distributor obtained knowledge of such situation or (b)
Distributor has entered into a subsequent written agreement with Dealer
superseding this Agreement. Nevertheless, any situation entitling Distributor
to terminate this Agreement may be considered at any subsequent time together
with any subsequent events in determining Distributor's right to terminate this
Agreement.
TERMINATION BY DEALER
(6) Dealer has the right to terminate this Agreement without cause by
giving 60 days' notice of such termination to Distributor by certified mail. In
the event Dealer, in connection with its termination of this Agreement, also
wishes to terminate any other agreement between Dealer and Distributor or any of
Distributor's subsidiaries or affiliates, Dealer must do so separately and
subject to the provisions of Article 13(9) below.
CONTINUATION OF BUSINESS RELATIONS AFTER TERMINATION
(7) Any business relations between Distributor and Dealer after the
termination of this Agreement without a written extension or renewal or a new
written dealer agreement will not operate as an extension or renewal of this
Agreement or as a new dealer agreement. Nevertheless, all such business
relations, so long as they are continued, will be governed by terms identical
with the provisions of this Agreement.
SUPERSEDING AGREEMENTS
(8) If any superseding form of Dealer Agreement is offered by
Distributor to its authorized dealers generally at any time, Distributor may, by
written notice to Dealer, terminate this Agreement and replace it with a Dealer
Agreement in the superseding form.
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AGREEMENTS WITH AFFILIATES OF DISTRIBUTOR
(9) The termination of this Agreement by either party does not
necessarily waive or terminate any other agreement between Dealer and
distributor or any of its subsidiaries or affiliates. Such other agreements may
be terminated only in accordance with their terms, and the parties' respective
obligations under any such other agreements will continue in accordance with
their terms until terminated.
ARTICLE 14
RIGHTS AND LIABILITIES UPON TERMINATION
DISTRIBUTOR'S OBLIGATIONS
(1) Within 90 days after the termination of this Agreement pursuant to
Article 13, Distributor will purchase from Dealer and Dealer will sell to
Distributor all the following:
NEW AUTHORIZED AUTOMOBILE INVENTORY
(a) All new, unused and undamaged current model year Authorized
Automobiles (introduced in the United States no earlier than 12 months
prior to the date of such expiration or termination and not superseded
by a later model year) in Dealer's inventory on the date of such
expiration or termination which are in first-class salable condition,
provided they were sold by Distributor and purchased by Dealer from
Distributor (or in the ordinary course of business from other dealers of
Authorized Automobiles appointed by Distributor) and have never been
sold by Dealer. The price for such Authorized Automobiles will be the
price at which they were originally sold by Distributor, less all prior
funds or allowances made by Distributor, if any.
NEW GENUINE PARTS INVENTORY
(b) All the following new, unused and undamaged articles listed in
Distributor's current Genuine Parts Price List (other than articles
listed as obsolete) in Dealer's inventory on the date of such expiration
or termination which are in first-class salable condition and complete,
provided they were purchased by Dealer from Distributor and never sold
by Dealer:
(i) new and factory remanufactured replacement parts
supplied by Distributor for Authorized Automobiles;
(ii) accessories considered by Distributor to be suitable
for installation in the current model year
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Authorized Automobiles specified in Article 14(1)(a); and
(iii) other accessories, provided that Distributor has made
sales of identical articles during six of the last twelve full
calendar months immediately preceding such expiration or
termination. The price for such articles will be the price then
last established by Distributor for the sale of identical articles,
less a handling charge equal to ten percent of such amount and less
all prior refunds or allowances made by Distributor;
TOOLS AND EQUIPMENT
(c) All special tools and equipment for servicing Authorized
Automobiles owned by Dealer on the date of expiration or termination
which are in operating condition and complete, provided they were
purchased by Dealer from Distributor or pursuant to written requests of
Distributor. The price for such tools and equipment will be the fair
market value thereof; and
AUTHORIZED SIGNS
(d) All Authorized Signs which Dealer displayed publicly or at
Dealer's Premises. The price for such Authorized Signs will be the fair
market value thereof.
TERMS OF SALE
(2) Any and all items to be sold by Dealer to Distributor pursuant to
this paragraph will be delivered by Dealer to Distributor at Dealer's place of
business suitably packed for transportation. For such periods of time as
Distributor reasonably may determine, Distributor may enter Dealer's Premises
for the purpose of taking an inventory of all or any part of Dealer's stock of
Authorized Products and special tools and equipment. At the request of
Distributor, Dealer will comply in all respects with the provisions of all
applicable bulk sales acts or similar statutes protecting a transferee of
personal property with respect to liabilities of the transferor. Promptly
following performance by Dealer of all its obligations pursuant to this Article
14, the completion by Distributor of all steps required to obtain possession of
such items and the delivery to Distributor of a bill of sale, documents of title
and a general release of Distributor and the Manufacturer from Dealer and
Dealer's Owners, all in form satisfactory to Distributor, Distributor will pay
Dealer the specified prices for the said items, less all amounts owed by Dealer
to Distributor, its subsidiaries or affiliates. Distributor will not be
required to purchase any item from Dealer pursuant to this paragraph unless
Dealer is able to convey to Distributor, within such 90-day
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period, title to such item free and clear of all liens, claims, encumbrances and
security interests.
PENDING ORDERS AND DEALER'S OBLIGATIONS
(3) Upon the expiration or termination of this Agreement, all pending
orders of Dealer for Authorized Products previously accepted by Distributor will
be canceled and Dealer immediately will:
REMOVAL OF AUTHORIZED SIGNS
(a) Remove at its own expense all Authorized Signs which it
displayed publicly or at its premises;
AUTHORIZED TRADEMARKS
(b) Cease all usage of the Authorized Trademarks, cease to hold
itself out as an authorized dealer in Authorized Automobiles, destroy
all stationery and other printed material bearing any Authorized
Trademark, and, if its corporate or business name contains any
Authorized Trademark, take all steps to remove the same therefrom;
ORDERS AND FILES
(c) Transfer to Distributor
(i) all orders for sale by Dealer of Authorized Products
then pending with Dealer;
(ii) all deposits made thereon, whether in cash or
property;
(iii) all Dealer's warranty records for Authorized Products
or complete copies of all such records and files; and
(iv) all Dealer's customer service files. Upon the written
request of Dealer, Distributor will return such customer service
files to Dealer after Distributor has made copies of such files at
Distributor's expense;
CUSTOMER LISTS
(d) Make available to Distributor in writing the names and
addresses of all its service customers and prospective customers for
Authorized Products; and
LITERATURE
(e) Deliver to Distributor at Dealer's place of business, free of
charge, all technical or service literature, advertising and other
printed material relating
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to Authorized Products, including sales instruction manuals or
promotional material, then in Dealer's possession and which were
acquired by Dealer from Distributor. None of the foregoing will result
in any liability of Distributor to Dealer for damages, commissions, loss
of profits or compensation for services, or in any other liability of
Distributor to Dealer of any kind or nature whatsoever.
SPECIFIC PERFORMANCE
(4) Since Dealer's obligations under this Article 14 are of such a
nature that it is impossible to measure in money the damages which will be
suffered by Distributor if Dealer should fail to perform any of them, Dealer
agrees that, in the event of any such failure of performance on its part,
Distributor will be entitled to maintain an action to compel the specific
performance by Dealer of these obligations and Dealer agrees not to urge in any
such action the defense that Distributor has an adequate remedy at law.
ARTICLE 15
DEFINITIONS
Throughout this Agreement various abbreviations and abbreviated phrases
have been used. Their meanings are:
AUTHORIZED AUTOMOBILES
(1) "Authorized Automobiles" means motor vehicles of such models and
types as may be supplied by Distributor during the term of this Agreement and of
the line-make designated in Paragraph 1 of the Agreement of which these Standard
Provisions are a part.
AUTHORIZED PRODUCTS
(2) "Authorized Products" means Authorized Automobiles and Genuine
Parts.
AUTHORIZED SIGNS
(3) "Authorized Signs" means displays of any Authorized Trademark, in
such material, type, presentation and colors as Distributor may prescribe from
time to time.
AUTHORIZED TRADEMARKS
(4) "Authorized Trademarks" means any trademark, service mark or trade
name now or any other time hereafter used or claimed by the Manufacturer or
Distributor.
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DEALER'S AREA
(5) "Dealer's Area" means the normal area for Dealer's Operations
corresponding to the location of Dealer's Premises.
DEALER'S EXECUTIVES
(6) "Dealer's Executives" means all the persons named in Paragraph 5
and 6 of the Statement of Ownership and Management as officers or other
executives of Dealer, as well as any other person who succeeds to any position
in Dealer referred to in such paragraphs in accordance with the provisions of
this Agreement.
DEALER'S NOMINEE
(7) "Dealer's Nominee" means an individual approved by Distributor to
become the general manager of Dealer, in the event of the death or incapacity of
a general manager who also is one of Dealer's Owners.
DEALER'S OPERATIONS
(8) "Dealers Operations" means all activities of Dealer relating to the
promotion and sale of Authorized Products, the supply of Genuine Parts, customer
service for Authorized Products and all other activities of Dealer pursuant to
this Agreement.
DEALER'S OWNERS
(9) "Dealer's Owners" means all the persons named in Paragraph 4 of the
Statement of Ownership and Management as beneficial or record owners of Dealer,
as well as any other person who acquires or succeeds to any beneficial interest
or record ownership in Dealer in accordance with the provisions of this
Agreement.
DEALER'S PREMISES
(10) "Dealer's Premises" means all premises to in the Dealer Premises
Addendum and used by Dealer for or in connection with Dealer's Operations,
including sales facilities, service workshops, offices, facilities for storage
of Authorized Automobiles and Genuine Parts, used car sales facilities and,
parking facilities.
DISTRIBUTOR
(11) "Distributor" means Volkswagen of America, Inc., a New Jersey
corporation, and includes, as appropriate, all divisions of that corporation.
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DISTRIBUTOR'S WARRANTIES
(12) "Distributor's Warranties" means with respect to each Authorized
Product, those express written warranties provided with such product or as set
forth in the Dealer Warranty Manual for Authorized Products in effect at the
time such product is first sold at retail.
GENUINE PARTS
(13) "Genuine Parts" means new and factory rebuilt replacement parts,
accessories and optional equipment for Authorized Automobiles if such parts,
accessories and optional equipment are supplied by Distributor.
MANUFACTURER
(14) "Manufacturer" means any supplier of Authorized Products to
Distributor, including as appropriate, but not limited to, Audi AG, a German
corporation, and Volkswagen AG, a German corporation.
NET WORKING CAPITAL, OWNER'S EQUITY AND WHOLESALE CREDIT
(15) "Networking Capital," "Owner's Equity" and "Wholesale Credit" shall
have the meanings set forth in the Operating Standards and in accordance with
generally accepted accounting principles.
OPERATING STANDARDS
(16) "Operating Standards" means the Dealer Operating Standards
currently issued by Distributor to its dealers of Authorized Products, as well
as any amendments thereof or additions thereto by Distributor during the term of
this Agreement.
OWNER'S DOCUMENTS
(17) "Owner's Documents" means all the documents which are supplied by
Distributor in respect of each Authorized Automobile and which are intended for
the customer, including, but not limited to, the Owner's Manual, Warranty
Booklet and Maintenance Booklet.
RECOMMENDATIONS
(18) "Recommendations" means written suggestions provided by
Distributor, as well as all currently applicable written suggestions previously
provided by Distributor.
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ARTICLE 16
GENERAL PROVISIONS
DEALER NOT AN AGENT
(1) Dealer will conduct all Dealer's Operations on its own behalf and
for its own account. Dealer has no power or authority to act for the
Manufacturer or Distributor.
AUTHORITY TO SIGN
(2) Dealer acknowledges that only the President, a Vice President or a
Zone Manager of Distributor is authorized on behalf of Distributor to execute
this Agreement or to agree to any variation, modification or amendment of any of
its provisions or to sign any notice of termination.
VARIATIONS; MODIFICATIONS; AMENDMENTS
(3) This Agreement may not be varied, modified or amended except by an
express instrument in writing to that effect signed on behalf of both
Distributor and Dealer.
ENTIRE AGREEMENT
(4) This instrument contains the entire agreement between the parties.
No representations or statements other than those expressly set forth or
referred to herein were made or relied upon in entering into this Agreement.
RELEASE OF CLAIMS UNDER PRIOR AGREEMENTS
(5) This Agreement terminates and supersedes all prior agreements with
respect to Authorized Products between the parties, if any. The parties hereby
waive, abandon and relinquish any and all claims of any kind and nature arising
out of or in connection with any such prior agreement, except for any accounts
payable by one party to the other as a result of the purchase of any Authorized
Products, audit adjustments or reimbursement for any services.
AGREEMENT NON-TRANSFERABLE
(6) No part of this Agreement nor any interest in this Agreement may be
transferred by Dealer without the prior written consent of Distributor.
DEFENSE AND INDEMNIFICATION
(7) Distributor will, upon Dealer's written request:
(a) Defend Dealer against any and all claims for breach of
Distributor's Warranties, bodily injury or death,
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or for physical damage to or destruction of property, that, during the
term of this Agreement, may be asserted against Dealer in any action
solely by reason of a manufacturing defect or design deficiency in
(i) an Authorized Product or
(ii) a product of the same line-make formerly supplied by
Distributor pursuant to a former dealer agreement; and
(b) Hold Dealer harmless from any and all settlements made and
final judgments rendered with respect to such claims,
PROVIDED Dealer promptly notifies Distributor in writing of the
commencement of such action against Dealer and cooperates fully in the defense
of such action in such manner and to such extent as Distributor may require.
However, such defense and indemnification by Distributor will not be required if
any fact indicates that any negligence, error, omission, act, failure, breach,
statement or representation of Dealer may have caused or contributed to the
claim asserted against Dealer or if Distributor determines that such action
seeks recovery for allegations other than those described in Article 16(7)(a).
NOTICES
(8) Any notices under or pursuant to the provisions of this Agreement
will be directed to the respective addresses of the parties stated herein, or,
if either party shall have specified another address by notice in writing to the
other party, to the address thus last specified. Any notice delivered
personally to any of Dealer's Owners or Executives shall have the same effect as
a notice to Dealer sent by certified mail.
WAIVERS
(9) 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. The failure or refusal of Distributor to exercise any right or
remedy shall not be deemed to be a waiver or abandonment of any such right or
remedy.
TITLES
(10) 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.
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AUDI DEALER
OPERATING STANDARDS
<PAGE>
FOREWORD
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The Audi Dealer Agreement incorporates by reference the Dealer Operating
Standards. These standards are based on sound business principles, and
reflect the high standards of professionalism that the public has come to
expect from Audi and its authorized dealers. As such, the Dealer Operating
Standards are an integral part of the Audi Dealer Agreement. Adherence to
these standards by every Audi dealer is required by the Audi Dealer Agreement
and will substantially enhance Audi's public image and its dealers' customer
satisfaction, and have a positive effect on Audi dealer operating results.
<PAGE>
GENERAL MANAGEMENT
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I. PERSONNEL
A. REQUIREMENTS
1. General Manager
A General Manager is required whenever the owner of an Audi
dealership is inactive, lacks automotive experience, or is
absent from the dealership frequently or for extended periods
of time. The General Manger must be authorized to make all
operational decisions on behalf of the dealer principal.
2. Office Manager
An Office Manager is required at all Audi dealerships. This
individual is responsible for the efficient management and
control of the dealership's financial resources as well as
compliance with the financial reporting requirements of Audi
of America, Inc. ("AoA"). In addition to the Office Manager,
at least one clerical employee is required. Additional
Bookkeepers, Title Clerks and other clerical employees are
required as experience indicates.
B. TRAINING
All dealership personnel shall attend seminars and training sessions
as required or recommended from time to time by AoA. Specific
training requirements are outlined in periodically issued minimum
training requirement directives. In-dealership training shall be
scheduled and conducted as required utilizing materials recommended
by AoA. Participation is a prerequisite to all AoA certification
programs.
II. FACILITIES
A. GENERAL
All dealership facilities must meet AoA's minimum space requirements
as detailed in Appendix A. Facilities erected and approved before the
initial application of such standards may continue to be operated, but
new dealership facilities shall conform in all respects to the
standards set forth herein.
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Dealership facilities must be of a free standing nature and provide a
paved vehicle access on all sides adjacent to the facility. Approved
facilities may modify this requirement.
All vehicle parking and storage areas must be part of the dealership
property and dedicated to the exclusive use of vehicle sales, service
and parts customers. Property considered to be "Commons Areas" will
not be considered as part of the dealership property.
Employee parking space shall be provided equal to the number of
employees.
B. APPEARANCE
A regular cleaning and maintenance schedule shall be followed to
assure overall cleanliness and appearance of the property and all
facilities. Audi approved building colors shall be used.
On-site parking, display and access areas must be properly graded,
hard-surfaced, lined and identified.
C. IDENTIFICATION/TRADEMARKS
Identification signs shall be displayed as approved and required
by AoA.
Minimum sign requirements for Audi dealerships are as follows:
- One illuminated Audi brand sign.
Audi trademarks shall only be used in connection with the promotion
of Audi products and shall be displayed and utilized in strict
accordance with any then-current Audi Trademark Standards Guide.
D. NEW VEHICLE AREA
An enclosed showroom of sufficient size to display properly at least
one of each Audi model line shall be provided. In addition, adequate
space for Sales Representatives is required.
Sufficient space shall be provided for the parking and safe unloading
of automobile carriers.
A storage area sufficient to inventory a 60-day supply of new Audi
vehicles based on new vehicle sales objective, will be provided.
-3-
<PAGE>
An office shall be provided for the New Vehicle Sales Manager.
E. USED VEHICLE AREA
Used vehicle display space adjacent to the dealership shall be
sufficient to display a 45-day supply of used vehicles based on the
dealer's used vehicle sales objective.
Outside used vehicle sales areas shall be hard-surfaced and properly
graded.
Layout, lighting, signs and offices shall be in accordance with Audi
recommendations.
An office shall be provided for the Used Vehicle Sales Manager.
F. SERVICE
The number of workstalls shall be as required by AoA. A minimum of
80% of the workstalls shall be equipped with hoists meeting Audi
standards for the proper servicing of Audi vehicles.
The number of service customer parking spaces shall equal four times
the number of available workstalls.
The number of service reception parking spaces shall at least equal
the number of workstalls and shall be convenient to the reception
area.
Customer Waiting Area - is to be clearly identified, clean and well
kept.
The Service Advisor/Customer Service Professional - Write-up area is
to be clean, organized, free of clutter, and in good repair.
An office shall be provided for the Service Manager.
G. PARTS
Parts Storage Area - The space provided for the storage of parts and
accessories inventories shall be a minimum of 200 sq. ft. of storage
area per workstall.
Separate counters for technicians and retail/wholesale customers shall
be provided.
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<PAGE>
A separate parts and accessories display area is required for
customers.
An office shall be provided for the Parts Manager.
III. CAPITALIZATION
Dealer Minimum Financial Requirements shall be determined by AoA on an
annual basis with consideration given to operating conditions and business
potential. These requirements, as enumerated in the Audi Dealer
Objectives, must be met or exceeded.
A. NET WORKING CAPITAL
Adequate net working capital (total current assets minus total current
liabilities) shall be maintained. Minimum net working capital
requirements will be established annually and will be calculated as
follows:
1. Current Assets shall comprise the total of:
Cash and Equivalent Equal to two month's Total
Operating Expenses. After
one year's operating
experience, one month's
Total Operating Expense
plus Trade Accounts
Payable (Account #2201) is
acceptable.
Cash and Equivalent shall be calculated as follows:
Cash on hand and in the bank
Finance Contracts in Transit (Account #1202)
Marketable Securities (Actually owned by the
dealership corporation)
Accounts Receivable Vehicles (Account #1302)
Accounts Receivable from Dealerships (Account #1362)
New Vehicle Equity - New Vehicle (including New
Vehicle LIFO Reserve), Demonstrator and Rental
Vehicle Inventory, less New Vehicle Notes
Payable (Account #2101)
Less Customer Deposits in Trust (Account #2401)
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<PAGE>
Accounts Receivable Established dealer
requirements shall be
based on current dealer
experience. New dealer
requirements shall be
based on 75% of an average
month's forecasted
service, parts and
accessories sales.
Used Vehicle
Inventory Existing Dealer - 45-days'
supply based on dealer's
annual used vehicle sales
objective x dealer average
unit retail cost of sale.
New Dealer - 45-days'
supply based on .5 to 1
retail used-to-new ratio x
average composite retail
cost of sale.
Parts and
Accessories Inventory 2.5 months' supply based
on the dealer's average
monthly cost of sales.
NOTE: Existing dealer capital requirements for
used vehicles, parts and accessories should be
based on dealer's actual inventory or the guide
requirements provided, WHICHEVER IS HIGHER. New
dealer capital requirements for used vehicles,
parts and accessories should be based on dealer's
acquisition costs or the guide requirements
provided, WHICHEVER IS HIGHER.
----------------------
Other Parts &
Accessories
Work in Process
- actual or forecast
Sublet average inventory value.
Miscellaneous
Inventory
----------------------
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<PAGE>
Prepaid Expenses Existing Dealer - average
balance of Total Prepaid
Expenses.
New Dealer - 20% of an
average month forecasted
Total Operating Expense.
2. Current Liabilities:
----------------------
the sum of Accounts
Accounts Payable Payable and Accrued
- Liabilities shall be
Accrued Liabilities calculated at one
month's average Total
---------------------- Operating Expense
B. OWNERS' EQUITY
Owner's Equity shall be maintained at a minimum of 50% of Total
Operating Investment plus 100% of Land, Construction-in-Progress,
Buildings and Improvements - Net (less Mortgage Payable) and
Investments and Advances.
Operating Investment shall comprise the Net total of:
Net Working Capital
Leasehold Improvements
Machinery and Equipment
Furniture and Fixtures
Company Vehicles
Other Depreciable Assets
Total Other Assets (less Investments and Advances and
Lease Vehicle Liability)
C. WHOLESALE LINE OF CREDIT
A separate wholesale line of credit for the sale of new Audi vehicles
shall be maintained with the dealer's financial institution and in an
amount determined annually by AoA. A current written letter of
commitment, in a form satisfactory to AoA, will be provided to AoA by
dealer's financial institution. The dealer's financial institution
will accommodate the vehicle drafting procedure employed by AoA.
-7-
<PAGE>
D. ACCOUNTING AND REPORTING
Accounting controls and procedures shall be established and maintained
in accordance with the current edition of the Audi Dealer Accounting
and Management Procedures Manual. This includes the development and
use of dealership objectives, a Daily Operating Control System and the
timely submission of complete and accurate dealer financial and
operating statements, retail delivery information, warranty claims and
other reports required by AoA from time to time. THE DEALER MUST
PROVIDE TO ITS AoA ZONE OFFICE, BY THE 10TH OF EACH MONTH, THE DEALER
FINANCIAL STATEMENT ON THE FORM AND BY THE METHOD REQUIRED BY AoA.
DEALER'S FAILURE TO PROVIDE A FINANCIAL STATEMENT TO THE AUDI ZONE
OFFICE WITHIN THE TIME PERIOD SET FORTH ABOVE, MAY RESULT IN THE
REVOCATION OF THE DEALER'S OPEN PARTS AND ACCESSORIES ACCOUNT.
A certified financial statement may be required in certain situations.
IV. ORGANIZATION AND STRUCTURE
To establish and maintain an effective customer responsive dealership and
to maximize its profits, the dealership organization shall be structured
according to the departmental profit center and management by objective
concepts. Annual objectives and a Daily Operating Control shall be
established for each operating department according to AoA procedures.
Regular meeting shall be held with Department Managers to review
performance against these objectives.
An organization chart and an Employee Policies and Procedures Manual should
be developed and made available to all dealership personnel.
Position descriptions should be developed and issued to all dealership
personnel, to include definitions of individual functions,
responsibilities, authority and reporting relationships.
A. CUSTOMER RELATIONS
The dealer is responsible for developing and maintaining good customer
relations by offering quality repair and maintenance services and
through regular contacts with all customers in his trading area.
Customer satisfaction is the most important measure of a dealer's
performance and is critical to the long-term success of both the
dealership and AoA. The Audi Customer Satisfaction Index (C.S.I.) is
assessed by the Audi Customer Satisfaction Telephone Follow-Up System
which provides a measurement of each dealership's new
-8-
<PAGE>
vehicle delivery and service customer satisfaction and will be
used as a basis for performance evaluation. This system requires:
1. Telephone Follow-Up (warranty repairs, new vehicle in warranty) -
The dealer will use its best efforts to provide valid customer
telephone numbers during new car sales reporting and warranty
claim submission for Customer Satisfaction Telephone follow-up.
2. Daily Customer Alerts generated from the Telephone Follow-Up
System are to be followed up within 24 hours of receipt by Dealer
Management.
3. Customer Complaint List/Call Report - The CSI Customer Complaint
List/Call Report is to be reviewed by Dealer Management or other
appointed personnel monthly to ensure that all Customer Alerts
have been or are being resolved properly and expeditiously.
B. ADVERTISING
The Audi trademark, including the distinctive Audi logo, shall be used
for identification, advertising and/or promotion of Audi products and
service exclusively.
This will include all:
- Product Advertising (New - Used - Service - Parts)
- Dealership Stationery and Forms
- Billboards
The use of Audi trademarks must be in accordance with the Trademark
Standards Guide. They will only be used by the dealer for the purpose
of dealership identification and the advertising/promotion of Audi
products and services.
It is the dealer's responsibility to place one Yellow Pages trademark
heading and bold type lettering advertisement in his primary local
telephone directory under the heading "Automobile Dealers - New Cars."
Multiple-make dealers should insure that this ad is placed under
"A" for Audi.
Sufficient quantities of all legally required brochures, as well as
all current Sales, Service and
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<PAGE>
Parts literature and promotional materials shall be prominently
displayed and readily available.
-10-
<PAGE>
SALES
- -------------------------------------------------------------------------------
I. PERSONNEL
A. REQUIREMENTS
1. New Vehicle Sales Manager
Required.
2. Used Vehicle Sales Manager
A separate Used Vehicle Sales Manager is required when the used
vehicle retail sales objective is 20 or more per month, or when
the new vehicle sales objective is 40 or more per month, or when
Used Vehicle Operation is physically separate from the main
dealership facility.
A combination Sales Manager is acceptable in dealerships with
sales volume lower than those outlined above.
3. Salespersons
One Audi Certified Salesperson for each 100 units of new and used
vehicle sales as measured by dealer's annual objective.
In dealerships selling other makes, where a separate Audi sales
facility is required, AoA reserves the option of requiring an
exclusive Audi sales force.
B. TRAINING
Annual Training objectives shall be established for each Dealer, New
Vehicle Sales Manager, Used Vehicle Sales Manager, and New and Used
Vehicle Salespersons, and they shall participate in all sales and
management training programs outlined in periodically issued minimum
training requirement directives.
The dealer will maintain the minimum number of Audi Certified
salespersons as established by AoA, in no case less than one Audi
Certified salesperson.
In-dealership training shall be scheduled and conducted utilizing
materials recommended by AoA.
-11-
<PAGE>
II. INVENTORY
A. NEW VEHICLES
Subject to AoA production and distribution capabilities, the dealer's
new vehicle inventory must be equal to a minimum of two months' retail
sales at the established annual retail objective level. Dealer's new
vehicle inventory will be representative of the full line of Audi
products.
B. DEMONSTRATORS
A clean and properly conditioned inventory of current model year
dealer demonstrators shall be maintained sufficient to represent the
full Audi model line. All prospects will be offered the opportunity
to test drive an Audi product.
All dealers are required to maintain a minimum inventory of one of
each Audi model, either in new vehicle inventory or demonstrator
service, regardless of sales objective.
C. FLEET AND LEASE
The dealer shall be responsible for developing and maintaining
adequate Audi representation in his local fleet and lease market by
insuring that regular sales and service contracts are made on these
accounts.
D. USED VEHICLES
A properly reconditioned inventory, equivalent to a forty-five days'
supply based on dealer's retail sales objective, shall be maintained
and displayed to meet the dealership's monthly used vehicle retail
sales objective. Audi products should be adequately represented in
the used vehicle inventory in order to enhance their value and promote
owner loyalty.
E. ADVERTISING AND MERCHANDISING
The dealer shall establish and maintain advertising and sales
promotion programs and should participate to the extent possible in
cooperative advertising and promotional programs developed by AoA.
F. SALES LITERATURE
Sufficient quantities of all legally required brochures, as well as
all current sales literature and promotional material shall be on
display at all times.
-12-
<PAGE>
III. CUSTOMER RELATIONS
SALES SATISFACTION
All sales personnel shall always treat customers courteously and
efficiently with sound and ethical business practices to ensure customer
satisfaction.
All customer complaints shall be investigated promptly by Dealership
Management. Justified complaints shall be resolved to the satisfaction of
the customer.
The Audi Customer Satisfaction Telephone Follow-Up System provides an
assessment of each dealership's sales satisfaction and will be utilized as
a measure of performance (see page 8).
The new car delivery process is to be performed as outlined in written Audi
procedures provided to dealers from time to time. To promote customer
satisfaction, the dealer will operate a delivery system consisting of:
- Pre-delivery certification of all new Audi vehicles by, first, the
service department and, second, the delivering salesperson.
- Maintain vehicles in inventory in salable condition by following
established stock maintenance guidelines that are in writing and
updated from time to time.
- All customers, at the time they take delivery of their new cars, are to
be introduced to the Service Department, specifically the Customer
Service Advisor/Customer Service Professional for an introduction to the
Service Department's operation, policy and procedures.
-13-
<PAGE>
SERVICE
- -------------------------------------------------------------------------------
I. PERSONNEL
A balance must be established between the number of service department
employees within your dealership and the number of customers who require
service. This balance is achieved when the number of employees is
sufficient to service your customers' needs. This means not having to wait
in excessive lines, or to have to wait for an appointment beyond what the
customer feels is reasonable.
A. REQUIREMENTS
1. Service Manager
Required.
2. Service Advisors/Customer Service Professionals
The first Service Advisor/Customer Service Professional shall be
employed when Average Daily Vehicle Attendance exceeds 10. A
second Service Advisor/Customer Service Professional shall be
employed when the average vehicle attendance exceeds 20. One
additional Service Advisor/Customer Service Professional is
required for every additional 15 daily vehicle attendance.
3. Shop Foreman
The first full-time Shop Foreman shall be employed when the
number of productive employees reaches 8. The second Shop
Foreman shall be employed when the number of productive
employees reaches 20.
4. Dispatcher
One full-time Dispatcher is required when the daily vehicle
attendance exceeds 60.
5. Productive Employees (Technicians, Trainees, Lubemen)
One productive employee is required for each monthly vehicle
attendance increment of 65 vehicles.
6. Car Washer, Porter, Etc.
Required.
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<PAGE>
7. Cashier/Service Clerk
Adequate personnel must be provided to perform these functions.
B. TRAINING
It is vital to the success of your service department's profit
potential and customer satisfaction activities that all service
training programs be utilized freely and frequently.
1. All service personnel shall attend Audi recommended training
programs.
2. The Service Department staff - is required to achieve and
maintain at the very least, minimum training levels as published
periodically by AoA.
3. Key Personnel product training - is to be attended by a minimum
of one Service Advisor/Customer Service Professional annually.
4. All customer contact personnel are to attend the Key Personnel
Training course, "Customer Service Professionals Seminar."
5. Dealer Service Training Specialist - is to be appointed to
conduct training sessions within the dealership utilizing the
Audi Interactive Tech Talk Program.
6. All video tapes, technical bulletins, service circulars,
microfiche and all other service related material, is to be
stored in an organized fashion, neatly arranged and easily
accessible by all service department employees.
C. PERSONNEL APPEARANCE
The appearance of Service Department employees conveys a message to
the service customer about the professionalism of the service
department and the dealership in general. Just as the Service Manager
is to dress as a professional, the Service Advisors/Customer Service
Professionals are to dress in a manner that reinforces the image of
Customer Service Professional.
1. Service Advisors/Customer Service Professionals - are to present
themselves as professionals, clean and neat in their appearance.
They should dress in a consistent manner that is conducive to
good
-15-
<PAGE>
business practices and can be easily identified by the customer.
2. Service Advisors/Customer Service Professionals - are to be
easily identifiable as Dealership employees. Name tags and
uniforms are to be consistent in their appearance.
3. The Service Manager - is to dress as a professional, in a manner
that identifies him or her as a department manager, clean and
neat in appearance.
4. Service Technicians - are to dress in uniforms that are
consistent in appearance and that identify them as employees of
the dealership.
II. INVENTORY
Special tools and general workshop equipment meeting Audi standards shall
be available in working condition according to then-current minimum
requirements, which will be updated from time to time.
A secure tool and equipment storage area shall be provided with all tools
and equipment properly located and identified.
Complete and up-to-date Audi recommended service literature shall be
available including microfiche and reader for both the customer write-up
area and workshop.
All In-Dealership Service Training videos and materials are to be stored,
organized and available to all service department personnel.
The service department is to have access to a working video cassette
recorder and television within the service department at all times.
A computer terminal work station is to be located within the service
department for convenient access by both Service Advisors/Customer Service
Professionals and technicians in order to access AoA service systems and
information networks such as V.D.F., campaigns, service actions, vehicle
history and the Audi Online Technical Information Systems (OTIS).
III. ORGANIZATION
Audi dealership must follow current service procedures as outlined in the
"Service Management Guide," the "Warranty Policies and Procedures Manual"
and other publications and manuals, which may be issued and revised from
time to time by AoA.
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<PAGE>
Opening and closing - times are not to restrict the flow of business.
Customers are to be able to pick up their serviced vehicles anytime the
dealership is open. The service department must be accessible throughout
the lunch hour.
Early morning, late night and weekend vehicle drop-off arrangements are to
be available for all Audi service customers. These are commonly referred
to as "Early-Bird" or "Night-Owl" drop-off.
IV. CUSTOMER RELATIONS
NEW CAR QUALITY
The Pre-Delivery inspection process is to be performed as outlined in
written Audi procedures provided to Dealer from time to time.
Pre-Delivery Quality - The Service Department is responsible for the
check-in, inspection, storage quality and preparation for delivery of all
new Audi automobiles.
SERVICE SATISFACTION
All service personnel shall always treat customers courteously and
efficiently with sound and ethical business practices to ensure customer
satisfaction.
All customer complaints shall be investigated promptly by Dealership
Management. Justified complaints shall be resolved to the satisfaction of
the customer.
The Audi Customer Satisfaction Telephone Follow-Up System provides an
assessment of each dealership's service satisfaction and will be used as a
measure of performance (see page 8).
Telephone Follow-Up (Audi customer pay repairs, not associated with
warranty repairs) - All customers who have non-warranty repairs performed
are to be contacted within three days after the vehicle is picked up to
ensure the highest level of satisfaction with the service experience.
All vehicles are to be Quality Inspected to ensure that all repairs are
performed as requested and to the customer's satisfaction.
-17-
<PAGE>
PARTS
- -------------------------------------------------------------------------------
I. PERSONNEL
A. REQUIREMENTS
1. Parts Manager
Required.
2. Parts Persons
One additional Parts Employee is required when the dealership's
monthly parts and accessories cost of sales reaches $22,000. An
additional employee is required at each $22,000 increment
thereafter. Once the dealership's monthly cost of sales reaches
$70,000, the Parts Manager will not be included in the
calculation and an additional employee is then required and
again, thereafter, at each increment of $22,000.
B. TRAINING
All parts personnel shall attend AoA recommended parts training
programs.
The Parts Department staff is required to achieve and maintain
minimum training levels as published periodically by the Parts
Division.
In-dealership training shall be scheduled and routinely conducted
utilizing materials recommended by AoA.
II. INVENTORY
A. The assortment and quantity of new parts, remanufactured parts and
accessories to be maintained will be determined in accordance with
the demand characteristics of the individual item.
B. The inventory mix of Assortment vs. Non-Assortment items should
reflect the optimum guidelines as established and published
periodically by AoA.
C. Inventory requirements are based on the dealer's average monthly cost
of sales as follows:
Combined New Parts, Small Remanufactured
Parts and Assemblies,
and Accessories . . . . . . 2.5 months' supply
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<PAGE>
D. Storage and Identification - The space provided for the storage of
parts and accessories shall be a minimum of 200 sq. ft. of storage
area per available workstall.
As the workshop expands or the market changes the relationship between
the various facets of the business, the storage area shall be modified
accordingly.
The parts and accessories inventory shall be stored in an orderly and
efficient manner. Bins shall be labeled showing the Audi part number.
The inventory in the parts storage area shall be kept neat and clean.
New parts and accessories, remanufactured items and used parts must
each be placed in separate storage areas.
E. Storage Area and Equipment - Shall be sufficient and suitable for
proper storage of parts and accessories.
III. ORGANIZATION
The inventory control system shall be maintained in a way which enables the
Parts Manager to effectively manage the flow and availability of parts and
accessories. Additionally, it must provide sufficient information on which
to base periodic reordering. It shall include proper use of AoA recommended
forms and procedures for the recording of transactions, the maintenance of
individual stock balances, as well as sales histories. A regular program
shall be followed in verifying the inventory records by comparison with
actual quantities on hand. As a minimum, a complete physical inventory
shall be taken annually and corresponding adjustment of records must be
made in accordance with the current edition of the Dealer Accounting and
Management Procedures Manual.
Ordering shall be scheduled to meet the stock order dates set by AoA.
Current parts reference material, microfiche, parts and accessory
literature shall be available to Parts Department employees and customers
as appropriate.
IV. SALES
The dealer will promote the sale of Genuine Audi parts and accessories in
volumes commensurate with market potential. The merchandising of genuine
Audi parts and accessories shall be governed by the Audi principle of
offering quality maintenance and parts service to the Audi owner. This
principle is to be applied in serving the dealer's New and Used Vehicle
Departments, own workshop and bodyshop, and the wholesale and retail
customer.
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<PAGE>
Programs for the merchandising of genuine Audi parts and accessories as
well as promotional material and literature supplied or offered by AoA
shall be used.
AoA approved parts and accessories displays shall be placed prominently.
V. CUSTOMER RELATIONS
All customers shall be attended to promptly and treated courteously. Unit
down and special parts orders will be placed in an expeditious manner to
facilitate prompt customer service and satisfaction.
-20-
<PAGE>
APPENDIX A
- -------------------------------------------------------------------------------
Adherence to Audi facility standards will improve the image of each Audi
dealership and the Audi marque in an increasingly competitive retail
environment.
FACILITY EVALUATIONS
The evaluation of dealership facilities compares the actual amount of square
footage each dealership facility occupies against Audi building and land
requirements at specific sales objective levels.
FACILITY SPACE REQUIREMENTS
Minimum facility space requirements are quantified in the accompanying Audi
Facility Requirement Tables for Building and Land. The facility requirements
are based on dealership new vehicle sales objectives (Audi and all other make
new vehicle sales objectives, individually, then totaled). Table calculations
are determined as follows:
1. TOTAL LAND. Land area is the total usable acreage occupied by
the entire dealership facility including building, used car lot,
storage areas, parking areas, driveways and landscaping. Vacant,
undeveloped land is not included in the evaluation.
2. TOTAL BUILDING. Building area is calculated in square feet and
will include only structures under a roof that are pertinent to
the dealership operation.
3. SHOWROOM UNIT DISPLAY CAPACITY. A minimum of three Audi model
cars are required in an enclosed showroom, with each model
occupying at least 400 square feet. Outside display areas should
not be included. Sufficient space to meet all showroom
requirements, including other makes, is necessary.
4. SHOWROOM DISPLAY (SQUARE FEET). The square footage of the
showroom is evaluated on display area only and should not include
any offices - Dealer, General Manager, Sales Manager or sales
personnel. Similarly, if open-partitioned sales desks are present
on the showroom floor, the space occupied will be deducted from
the overall square footage of the showroom.
5. NEW VEHICLE STORAGE CAPACITY. Storage area must be sufficient
to hold the minimum inventory requirement of new Audi vehicles,
based on annual Audi sales objective, and satisfy dealership new
car sales objective requirements of reach franchise represented.
Page 1 of 5
<PAGE>
6. NEW VEHICLE STORAGE (SQUARE FEET). A minimum of 220 square feet
per unit is required.
7. USED VEHICLE STORAGE CAPACITY. The used car sales lot must be
capable of storing and displaying a 45 days' supply of vehicles,
based on a ratio of 0.5 to 1.0 - used retail to new.
8. USED VEHICLE STORAGE (SQUARE FEET). Minimum of 220 square feet
per vehicle is required for the display of used vehicles.
9. NUMBER OF PRODUCTIVE WORK STALLS. Only productive stalls will be
considered - tool and equipment rooms or occasional work areas
such as aisles will not be included. Work stall requirements are
based on Audi vehicles in operation. A minimum of 80 percent of
the total service stalls should be equipped with AoA approved
hoists.
10. TOTAL WORK STALLS (SQUARE FEET). Minimum stall space is 330
square feet per stall, including the wash rack. Driveway lanes,
tool and equipment room and employee facilities are not included.
11. PARTS STORAGE CAPACITY (SQUARE FEET). Space for storage of parts
and accessories must be a minimum of 200 square feet for each
available work stall.
12. SERVICE PARKING AND STORAGE UNIT CAPACITY. The amount of parking
spaces required is equal to four (4) times the number of work
stalls, including wash stalls.
13. SERVICE PARKING AND STORAGE (SQUARE FEET). Space required is
equal to the number of parking spaces x 200 square feet.
14. CUSTOMER AND EMPLOYEE PARKING NUMBER OF UNITS. Based on the
total number of employees plus the number of work stalls.
15. CUSTOMER AND EMPLOYEE PARKING (SQUARE FEET). Based on 200 square
feet per vehicle.
16. TOOL AND EQUIPMENT STORAGE AREA. A secure tool and equipment
storage area shall be provided with all tools and equipment
properly located and identified.
17. ADDITIONAL SPACE REQUIREMENTS. Adequate space for a technicians'
locker room, service storage room, shop access and customer
lounge is required.
18. ADMINISTRATIVE OFFICES (SQUARE FEET). The business office,
Dealer's and General Manager's office and
Page 2 of 5
<PAGE>
conference room constitutes this square footage requirement.
19. AUDI SIGNAGE. A minimum of one approved Audi brand sign (Logo)
is required. Additional AoA approved signage may be displayed.
Page 3 of 5
<PAGE>
<TABLE>
<CAPTION>
AUDI MINIMUM SPACE REQUIREMENTS Appendix A
BUILDING
SALES SERVICE AREA PARTS AREA OTHER
--------------------- ----------------------------------------------- ---------------- -------
TOTAL SHOW SHOW NO. OF TOOL & SERVICE PARTS PARTS ADMIN.
NEW VEH BUILDING ROOM ROOM SALES PRODUCTIVE WASH STALLS EQUIP. MGR'S STORAGE MGR'S OFFICES
SLS OBJ AREA UNIT SQ.FT OFFICES WORKSTALLS STALLS SQ.FT. ROOM OFFICE SQ.FT. OFFICE SQ.FT.
- ------- -------- ---- ----- ------- ---------- ------ ------ ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 4800 3 1200 2 4 1 1320 1 1 800 1 500
100 5200 3 1200 2 5 1 1584 1 1 1000 1 500
150 5500 4 1600 2 5 1 1584 1 1 1000 1 600
200 6000 4 1600 2 6 1 1848 1 1 1200 1 600
250 6700 4 1600 3 7 1 2112 1 1 1400 1 700
300 7200 5 2000 3 7 1 2112 1 1 1400 1 700
350 7800 5 2000 4 8 1 2376 1 1 1600 1 800
400 9200 6 2400 4 10 1 2904 1 1 2000 1 800
450 9500 6 2400 5 10 1 2904 1 1 2000 1 1000
500 10000 6 2400 5 11 1 3168 1 1 2200 1 1000
550 10500 6 2400 6 12 1 3432 1 1 2400 1 1200
600 11000 6 2400 6 12 1 3432 1 1 2400 1 1200
650 11500 6 2400 7 13 1 3696 1 1 2600 1 1400
700 12000 6 2400 7 14 1 3960 1 1 2800 1 1400
750 12500 6 2400 8 15 1 4224 1 1 3000 1 1600
800 13500 6 2400 8 16 1 4488 1 1 3200 1 1600
850 14000 6 2400 9 17 1 4752 1 1 3400 1 1800
900 14600 7 2800 9 18 1 5016 1 1 3600 1 1800
950 15400 7 2800 10 19 1 5280 1 1 3800 1 2000
1000 16000 7 2800 10 20 1 5544 1 1 4000 1 2000
1100 17500 7 2800 12 22 1 6072 1 1 4400 1 2200
1200 18500 7 2800 12 24 1 6600 1 1 4800 1 2200
1300 20000 7 2800 13 26 1 7128 1 1 5200 1 2400
1400 21000 7 2800 14 28 1 7656 1 1 5600 1 2400
1500 22000 8 3200 15 30 1 8184 1 1 6000 1 2500
</TABLE>
Page 4 of 5
<PAGE>
AUDI MINIMUM SPACE REQUIREMENTS Appendix A
BUILDING
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NEW VEHICLE USED VEHICLE SERVICE PARKING CUSTOMER &
STORAGE & DISPLAY STORAGE & DISPLAY & STORAGE EMPLOYEE PARKING
-----------------------------------------------------------------------------
TOTAL TOTAL
NEW VEH LAND LAND NO. SQ. FT. NO. SQ. FT. NO. SQ. FT. NO. SQ. FT.
SLS OBJ SQ. FT. ACRES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 43560 1.0 9 1980 5 1250 20 4000 12 2400
100 43560 1.0 17 3740 6 1500 24 4800 15 3000
150 43560 1.0 25 5500 9 2250 24 4800 19 3800
200 43560 1.0 33 7260 13 3250 28 5600 24 4800
250 43560 1.0 42 9240 16 4000 32 6400 28 5600
300 43560 1.0 50 11000 19 4750 32 6400 32 6400
350 47040 1.1 58 12760 22 5500 36 7200 36 7200
400 55510 1.3 65 14300 25 6250 44 8800 41 8200
450 59900 1.4 75 16500 28 7000 44 8800 44 8800
500 64820 1.5 83 18260 31 7750 48 9600 50 10000
550 70225 1.6 92 20240 34 8500 52 10400 53 10600
600 73610 1.7 100 22000 37 9250 52 10400 57 11400
650 78760 1.8 108 23760 41 10250 56 11200 60 12000
700 84210 1.9 117 25740 44 11000 60 12000 63 12600
750 87820 2.0 125 27500 47 11750 64 12800 66 13200
800 95270 2.2 133 29260 50 12500 68 13600 69 13800
850 100950 2.3 142 31240 53 13250 72 14400 72 14400
900 104570 2.4 150 33000 56 14000 76 15200 75 15000
950 110205 2.5 158 34760 59 14750 80 16000 78 15600
1000 115620 2.7 166 36520 62 15500 84 16800 80 16000
1100 125000 2.9 183 40260 69 17250 92 18400 87 17400
1200 135000 3.1 200 44000 75 18750 100 20000 94 18800
1300 145000 3.3 217 47740 81 20250 108 21600 99 19800
1400 155000 3.6 233 51260 87 21750 116 23200 103 20600
1500 165000 3.8 250 55000 94 23500 124 24800 105 21000
- ---------------------------------------------------------------------------------------------------------
</TABLE>
[LOGO] Effective February 1992
Page 5 of 5
<PAGE>
[Audi letterhead]
February 22, 1995
Scottsdale Jaguar, Ltd. d/b/a/ Scottsdale Audi
6725 E. McDowell Rd.
Scottsdale, AZ 85257
Attention of Mr. Steven Knappenberger, President
Gentlemen:
This letter will confirm the terms under which Volkswagen of America, Inc.
("VWoA") has agreed for a period of time to forbear from appointing an
additional Audi dealer in metropolitan Phoenix, Arizona.
This letter is written with reference to the following facts. Sun-West Audi,
Inc. ("Sun-West") has informed VWoA of Sun-West's desire to terminate
voluntarily its Audi Dealer Agreement, effective as soon as practicable.
Scottsdale Jaguar, Ltd. d/b/a Scottsdale Audi ("Scottsdale") has represented to
VWoA that Scottsdale is willing and able to serve as the only Audi dealer in
metropolitan Phoenix. Scottsdale has tentatively agreed with Sun-West that
Scottsdale will purchase from Sun-West certain assets which do not qualify for
repurchase by VWoA upon termination under the terms of Sun-West's Audi Dealer
Agreement.
VWoA agrees that, upon the occurrence of the contemplated transactions, your
agreement to all terms and conditions of this letter, and your continued
compliance with its terms and with the terms of your Audi Dealer Agreement, VWoA
will not appoint an additional dealer in the Phoenix, Arizona Standard
Metropolitan Statistical Area before January 1, 1997.
Throughout such period, Scottsdale will comply with all then-current
requirements of VWoA, as set forth in the Audi Dealer Agreement and in the
Operating Standards for Audi Dealers, for facilities, capitalization,
management, personnel, and all other matters addressed therein from time to
time. Scottsdale also will participate in and comply with all then-current
terms of the Audi brand specialist program and all other programs offered by
Audi.
Further, Scottsdale must perform at least at the then-current average for all
Audi dealers nationally in sales performance as a percentage of objective;
penetration of the market as measured as a percentage of the European high group
defined by VWoA and any other relevant competitive group defined by Audi; and
customer satisfaction ratings for sales, for service, and overall. Scottsdale's
sales performance and market penetration performance will be judged in view of
the availability of new Audi automobiles to Scottsdale. In the event VWoA finds
Scottsdale
<PAGE>
out of compliance with this paragraph at any time, VWoA will give Scottsdale
written notice of the specific deficiency. Scottsdale will have one full
calendar quarter thereafter to improve its performance to a level satisfactory
to VWoA.
VWoA agrees that, also subject to availability, Scottsdale's planning volume
will be at least 150 new vehicles annually. This is subject to all terms and
conditions of Scottsdale's Audi Dealer Agreement respecting vehicle supply and
allocation.
After December 31, 1996, VWoA will have the rights in its sole discretion to
appoint an additional Audi dealer in metropolitan Phoenix, restricted only as
may be provided by any specific Arizona statute in force at such time; provided,
that in consideration of Audi's agreements memorialized in this letter and
Audi's performance of those agreements, Scottsdale agrees it will not protest
any such appointment.
In the event VWoA determines to make such an appointment and Scottsdale has
performed at a level satisfactory to VWoA, then VWoA will offer Scottsdale a
first right of refusal to open a satellite sales and service operation in the
geographic area identified by VWoA. In the event Scottsdale does not exercise
such right within 30 days after the offer by VWoA, or does not submit to VWoA
within 90 days after exercising such right detailed plans for establishing such
an operation, including the acquisition or construction of a suitable facility,
and does not in fact establish such an operation within a period of time
determined by VWoA after its approval of Scottsdale's plans, then VWoA will be
free to appoint any other dealer of its own choosing. Scottsdale's sales and
market penetration performance under the terms of this letter, for purposes of
determining whether Scottsdale will be offered the first right of refusal
contemplated in this paragraph, will be measured as though Scottsdale's primary
of area of influence were the area within a ten-mile radius of Scottsdale's
premises.
Except to the extent specifically in conflict with the terms of this letter, all
terms and conditions of the Audi Dealer
<PAGE>
Agreement between VWoA and Scottsdale remain in full force and effect and
control their relationship.
To ensure there is no misunderstanding in this matter, please execute this
letter where indicated below and return the original to me.
Very truly yours,
VOLKSWAGEN OF AMERICA, INC.
d/b/a AUDI OF AMERICA, INC.
By: /s/James R. Barton
--------------------------
James R. Barton
Area Executive
Acknowledged, agreed and accepted:
SCOTTSDALE JAGUAR, LTD. d/b/a SCOTTSDALE AUDI
By: /s/Stephen Knappenberger
--------------------------
Steven Knappenberger
Chairman
Date: 2-24-95
--------------------
<PAGE>
PARAGRAPH A
This is an agreement between the Acura Division, American Honda Motor Co.,
Inc. (American Honda) and S.A. Automotive, Ltd. (Dealer) a(n) Arizona
Corporation doing business as SCOTTSDALE ACURA. By this agreement, which is made
and entered into at Torrance, California, effective the __________ day of
__________, 19___. American Honda gives to Dealer the nonexclusive right to sell
and service Acura Products at the Dealership Location. It is the purpose of this
Agreement, including the Acura Automobile Dealer Sales and Service Agreement
Standard Provisions (Standard Provisions), which are incorporated herein by
reference, to set forth the rights and obligations which Dealer will have as a
retail seller of Acura Products. Achievement of the purposes of this Agreement
is premised upon the mutual and continuing understanding and cooperation between
American Honda and Dealer and the expressed intention of each to deal fairly
with the consuming public.
For consistency and clarity, terms which are used frequently in this
Agreement have been defined in Article 12 of the Standard Provisions.
PARAGRAPH B
American Honda grants to Dealer the nonexclusive right to buy Acura
Products and to identify itself as an Acura dealer at the Dealership Location.
Dealer assumes the obligations specified in this Agreement and agrees to sell
and service effectively Acura Products within Dealer's Primary Market Area and
to maintain premises satisfactory to American Honda.
PARAGRAPH C
Dealer covenants and agrees that this Agreement is personal to Dealer, to
the Dealer Owner, and to the Dealer Manager, and American Honda has entered into
this Agreement based upon their particular qualifications and attributes and
their continued ownership or participation in Dealership Operations. The parties
therefore recognize that the ability of Dealer to perform this Agreement
satisfactorily and the Agreement itself are both conditioned upon the continued
active involvement in or ownership of Dealer by either:
<PAGE>
(1) the following person(s) in the percentage(s) shown:
Name Address Title Percent of Ownership
- -------------------- --------------------- ---------------- --------------------
UAG West, Inc. 1209 Orange St. Holding Company 100%
Wilmington, DE 19801
Carl Spielvogel 720 Park Ave. Chief Executive
New York, NY 10021 Officer
Steven Knappenberg 5325 N. 45th Place Chairman
Phoenix, AZ 85018
George W. Brochick 6242 E. Laurel President
Scottsdale, AZ 85254
(2) an individual personally owning an interest in Dealer of at least 25% and
who has presented to American Honda a firm and binding contract giving to him
the right and obligation of acquiring an ownership interest in Dealer in excess
of 50% within five years of the commencement of Dealership Operations and being
designated in that contract as Dealer operator.
PARAGRAPH D
Dealer represents, and American Honda enters into this Agreement in
reliance upon the representations, that George W. Brochick exercises the
functions of Dealer Manager and is in complete charge of Dealership Operations
with authority to make all decisions on behalf of Dealer with respect to
Dealership Operations. Dealer agrees that there will be no change in Dealer
Manager without the prior written approval of American Honda.
PARAGRAPH E
American Honda has approved the following premise as the location(s) for
the display of Acura Trademarks and for Dealership Operations.
New Car Showroom: 6825 E. McDowell Road, Scottsdale, Arizona 85257
Used Car Display: 6825 E. McDowell Road, Scottsdale, Arizona 85257
Sales and General Offices: 6825 E. McDowell Road, Scottsdale, Arizona 85257
Parts and Service Facilities: 6825 E. McDowell Road, Scottsdale, Arizona 85257
PARAGRAPH F
There shall be no voluntary change or involuntary change, direct or
indirect, in the legal or beneficial ownership or executive power or
responsibility of Dealer for the Dealership Ownership, specified in Paragraphs C
and D hereof, without the prior written approval of American Honda.
-2-
<PAGE>
PARAGRAPH G
Dealer agrees to maintain, solely with respect to the Dealership
Operations, minimum net working capital of $451,134, minimum owner's equity of
$535,614, and a line or lines of credit in the aggregate amount of $1,132,800
with banks or financial institutions approved by American Honda for use in
connection with Dealer's purchases of and carrying of inventory of Acura
Products, all of which American Honda and Dealer agree are required to enable
Dealer to perform its obligations pursuant to this Agreement. If Dealer also
carries on another business or sells other products, Dealer's total net working
capital, owner's equity and lines of credit shall be increased by an appropriate
amount.
PARAGRAPH H
This Agreement is made for the period beginning __________________ and
ending _____________________ unless sooner terminated. Continued dealings
between American Honda and Dealer after the expiration of this Agreement shall
not constitute a renewal of this Agreement for a term, but rather shall be on a
day-to-day basis, unless a new agreement or a renewal of this Agreement is fully
executed by both parties.
PARAGRAPH I
This Agreement may not be varied, modified or amended except by an
instrument in writing, signed by duly authorized officers of the parties,
referring specifically to this Agreement and the provision being modified,
varied or amended.
PARAGRAPH J
Neither this Agreement, nor any part thereof or interest therein, may be
transferred or assigned by Dealer, directly or indirectly, voluntarily or by
operation of law, without the prior written consent of American Honda.
S.A. Automotive, Ltd.
dba SCOTTSDALE ACURA By /s/ Carl Spielvogel
- ---------------------------------- ------------------------------
(Corporate or Firm Name) (Dealer)
ACURA DIVISION
AMERICAN HONDA MOTOR CO., INC.
(Corporate Seal)
By: ____________________________
-3-
<PAGE>
ACURA AUTOMOBILE DEALER SALES AND SERVICE AGREEMENT
SCOTTSDALE ACURA, Dealer # 251188
Attachment to Paragraph C:
Percent of
Name Address Title Ownership
- -------------------- --------------------- ------------------------ ------------
Jay P. Beskind 6513 E. Paradise Lane Vice President
Scottsdale, AZ 85254
Tamara Knappenberger 5325 N. 45th Place Secretary
Phoenix, AZ 85018
Craig C. Lindsay 6223 E. Cactus Wren Treasurer
Paradise Valley, AZ 85253
Stephen A. Savage Two N. Central Ave., #2200 Assistant Secretary
Phoenix, AZ 85004
-4-
<PAGE>
ACURA
Automobile Dealer
Sales and Service
Agreement
Standard Provisions
<PAGE>
ACURA AUTOMOBILE DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
TABLE OF CONTENTS
PAGE
1. THE OBLIGATIONS OF AMERICAN HONDA.........................................1
2. SALE OF ACURA PRODUCTS TO DEALER..........................................3
3. THE OBLIGATIONS OF DEALER.................................................5
4. WARRANTY..................................................................8
5. ADVERTISING AND PROMOTIONAL PROGRAMS......................................9
6. TRADEMARKS AND SERVICE MARKS..............................................9
7. GENERAL BUSINESS REQUIREMENTS............................................10
8. APPOINTMENT OF SUCCESSOR AND REPLACEMENT DEALERS.........................12
9. TERMINATION OF AGREEMENT.................................................13
10. RIGHTS, OBLIGATIONS AND DEALINGS UPON TERMINATION........................17
11. GENERAL PROVISIONS.......................................................21
12. DEFINITIONS..............................................................23
<PAGE>
ACURA AUTOMOBILE DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
The following Standard Provisions are, by reference, incorporated in and made a
part of the Acura Automobile Dealer's Sales and Service Agreement. These
Standard Provisions accompany the Acura Dealer's Sales and Service Agreement
which has been executed on behalf of both American Honda and Dealer.
1. THE OBLIGATIONS OF AMERICAN HONDA
1.1 It is the obligation of American Honda to supply to Dealer, and to
all authorized dealers, Acura Products in a fair and reasonable
manner in order that Dealer may conduct Dealership Operations in a
businesslike manner. In fulfilling this obligation, Acura Products
may be supplied either on the basis of dealer order or on the
basis of allocation, depending on market conditions and
availability. There are numerous factors which affect the
availability of Acura Products. Among those factors are component
availability and production capacity, consumer demand, strikes and
other labor troubles, weather and transportation conditions, and
government regulations. Because such factors affect individual
dealer supply, American Honda necessarily reserves discretion in
accepting orders and allocating and distributing Acura Products,
and its judgment and decision in such matters will be final.
1.2 To assist Dealer in the fulfillment of its obligations under the
Agreement, which it has as a retail seller of Acura Products,
American Honda agrees to provide Dealer sales, service and parts
support.
1.2.A. To assist Dealer in fulfilling its sales responsibility,
American Honda agrees to offer general and specialized
product information and to provide field sales personnel to
advise and counsel Dealer's sales organization on
sales-related subjects such as merchandising, training and
sales management.
1.2.B. To assist Dealer in fulfilling its service and parts
responsibilities, American Honda agrees to offer, or cause
to be offered, general and specialized service and parts
training courses. Based on the service training needs of
Dealer's service personnel, to be determined by American
Honda with the assistance of Dealer, Dealer agrees to have
<PAGE>
members of Dealer's service organization attend such
courses. Further, American Honda agrees to make available
to Dealer field service personnel capable of advising and
counseling Dealer's service personnel on service-related
subjects, including product quality, technical adjustments,
repairs and replacement of product components, recall,
product improvement or product update campaigns which
American Honda may conduct, owner complaints, warranty
administration, service and parts merchandising, and
training and service management.
1.3 To assist Dealer in planning, establishing and maintaining the
Dealership Premises, American Honda will, at its sole option, make
available to Dealer, upon request, sample copies of building
layout plans or facility planning recommendations, including
sales, service and parts space and the placement, installation and
maintenance of recommended signs. In addition, representatives of
American Honda will be available to Dealer from time to time to
counsel and advise Dealer and its personnel.
1.4 American Honda agrees to make available to Dealer, at reasonable
cost, such sales, service and parts manuals, brochures, special
service tools and equipment and other data for Acura Products as
American Honda deems necessary for Dealership Operations.
1.5 American Honda agrees to maintain a nationwide system of
authorized dealers of Acura Products. In order that those
authorized dealers may be assured of the benefits of comprehensive
advertising of Acura Products, American Honda agrees to establish
and maintain general advertising programs in such manner and
amount as it may deem appropriate and will make sales promotion
and campaign materials available to Dealer.
1.6 American Honda agrees to compensate Dealer for the labor and parts
used by Dealer in performing its obligations under any American
Honda warranty and in connection with any recall, product
improvement or product update campaign which American Honda may
undertake and require Dealer to perform. Such compensation will be
in such reasonable amounts, and pursuant to such requirements and
instructions, as American Honda shall establish from time to time,
and such compensation shall constitute full and complete payment
by American Honda to Dealer for such work.
-2-
<PAGE>
1.7 American Honda agrees to assume the defense of Dealer and to
indemnify Dealer against any money judgment, less any offset
recovered by Dealer, in any lawsuit naming Dealer as a defendant,
where such lawsuit relates to: (a) an alleged breach of any Acura
warranty relating to Acura Products; (b) bodily injury or property
damage claimed to have been caused by a defect in the design,
manufacture or assembly of an Acura Product prior to delivery
thereof to Dealer (other than a defect which could have been
detected by Dealer in a reasonable inspection); or (c) a
misrepresentation or misleading statement of American Honda;
provided, however, that if any information discloses the
possibility of Dealer error or omission in servicing or otherwise
(including but not limited to Dealer not having performed all
recalls of which Dealer has notice on the Acura Product involved
in the lawsuit if the defect subject to the recall is alleged or
contended to be a contributing cause of the breach of warranty,
injury or damage which is the subject matter of the lawsuit), or
should it appear that the Acura Product involved in such lawsuit
had been altered by or for Dealer, or if Dealer has violated any
of the provisions of this Paragraph 1.7, then Dealer will
immediately obtain its own counsel and defend itself, and American
Honda will not be obligated to defend or indemnify Dealer further.
Dealer will promptly notify American Honda of any claim which
Dealer will assert American Honda might be obligated to defend
under this Paragraph 1.7. American Honda will have not less than
thirty (30) days to conduct a reasonable investigation to
initially determine whether or not American Honda is obligated to
defend under this Paragraph 1.7. Dealer will take the steps
necessary to protect its own interests involved in the lawsuit
until American Honda assumes the active defense of Dealer.
American Honda will, upon assuming the defense of Dealer,
reimburse Dealer for all attorneys' fees or court costs incurred
by Dealer from the date of the tender. American Honda, upon
assuming Dealer's defense, will have the right to retain and
direct counsel of its own choosing, and Dealer will cooperate in
all matters during the course of defending the lawsuit. If, upon
final judgment in a lawsuit, it is determined that American Honda
wrongfully failed or refused to defend Dealer, American Honda will
reimburse Dealer for all costs and attorneys' fees incurred by
Dealer from the date of the tender of defense.
2. SALE OF ACURA PRODUCTS TO DEALER
2.1 To the extent that Acura Products are the subject of dealer order,
such orders will be submitted and
-3-
<PAGE>
processed in accordance with procedures established by American
Honda. No order will be binding on American Honda, as evidenced by
either the issuance of an invoice or shipment of the ordered Acura
Products, and any such order may be accepted in whole or in part.
All orders by Dealer will be deemed firm orders and binding upon
the Dealer, except that at any time prior to acceptance, an order
may be canceled by Dealer by giving actual notice to American
Honda in writing of the desire by Dealer to cancel such order.
2.2 While it is the intent of American Honda to provide Acura
Automobiles to Dealer in such quantities and types as are ordered
by Dealer, American Honda and Dealer recognize that Acura
Automobiles may not always be available in desired quantities. It
is therefore understood and agreed that American Honda, at its
sole election, will have the right to allocate Acura Automobiles
among authorized dealers of Acura Products in a fair and
reasonable manner. American Honda will provide to Dealer an
explanation, in writing, of any allocation system it may adopt.
2.3 American Honda will have the right at any time and from time to
time to establish and revise prices and other terms, including
payment by Dealer, for its sales of Acura Products to Dealer.
Revised prices, terms or provisions will apply to the sale of any
Acura Products as of the effective date of the revised prices,
terms or provisions, even though a different price or different
terms may have been in effect at the time such Acura Products were
allocated to or ordered by Dealer.
2.4 American Honda will have the right to select the distribution
points and the mode of transportation and may pay carriers for all
charges in effecting delivery of Acura Products to Dealer. Dealer
agrees to pay to American Honda such charges for delivery as
American Honda may assess. Subject to the terms of sale which may
be established from time to time by American Honda, risk of loss
to Acura Products will pass to Dealer upon tender of the Acura
Products to Dealer or its authorized agent, and title will pass to
Dealer upon receipt by American Honda of payment.
2.5 If Dealer should fail or refuse or for any reason be unable to
accept delivery of any Acura Products ordered by Dealer, or if
Dealer should request diversion of a shipment from American Honda,
Dealer will be responsible for and pay to American Honda, promptly
on demand, all costs and expenses incurred by American Honda in
filling and shipping Dealer's order and by
-4-
<PAGE>
reason of such diversion, including costs of demurrage and
storage, plus restocking charges as determined by American Honda.
American Honda may direct that such returned Acura Products be
delivered to another destination, but the amount charged Dealer
for return to such other destination will not be greater than the
costs and expenses of returning such Acura Products to their
original place of shipment plus any demurrage, storage and
restocking charges.
2.6 As between American Honda and Dealer, American Honda assumes
responsibility for damage to Acura Products caused prior to
delivery to Dealer or its authorized agent.
2.7 American Honda will not be liable in any manner for delay or
failure in supplying any Acura Products where such delay or
failure is the result of any event beyond the control of American
Honda. Such event may include, but is not limited to, any law or
regulation or any acts of God, foreign or civil wars, riots,
interruptions of navigation, shipwrecks, fires, strikes, lockouts,
or other labor troubles, embargoes, blockades, demand for, or
delay or failure of any supplier to deliver or in making delivery,
of Acura Products.
2.8 American Honda reserves the right at any time to change or modify,
without notice, any specification, design or model of Acura
Products. In the event of any change or modification with respect
to any Acura Products, Dealer will not be entitled to have such or
similar change or modification made with respect to any other
Acura Products, except as may be required by applicable law.
American Honda may, however, in its sole discretion, make such
changes or modifications to all Acura Products in its inventory or
control, whether or not invoiced to Dealer. No such change will be
considered a model year change unless specified by American Honda.
2.9 American Honda may at any time discontinue, without obligation to
Dealer or Dealer's customers, the sale of any Acura Products, or
models or lines thereof or any other items, goods or services.
Further, American Honda will have no obligation, under any
circumstances, to accept orders for any Acura Products which are
not in current inventory.
3. THE OBLIGATIONS OF DEALER
3.1 It is the obligation of Dealer to promote and sell, at retail,
Acura Products, and to promote and
-5-
<PAGE>
render service, whether or not under warranty, for those products
within the Dealer's Primary Market Area.
3.2 Dealer's performance of its sales obligations for Acura Products
will be evaluated by American Honda on the basis of such
reasonable criteria as American Honda may develop from time to
time, including, but not limited to, such reasonable sales
objectives as American Honda may establish and a comparison of
Dealer's sales performance with other authorized dealers of Acura
Products.
3.3 To enable Dealer to fulfill its obligations satisfactorily, Dealer
agrees to establish and maintain an adequate and trained sales and
customer relations organization. Dealer further agrees to
establish and maintain a complete service and parts organization,
including a qualified service manager and a qualified parts
manager and a number of competent service and parts personnel
adequate to care for the service obligations to be performed by
Dealer under the Agreement.
3.4 Dealer agrees to acknowledge, investigate and resolve
satisfactorily all complaints received from owners of Acura
Products in a businesslike manner in order to secure and maintain
the goodwill of the public. Any complaint received by Dealer
which, in the opinion of Dealer, cannot be readily remedied, shall
be promptly reported to American Honda by Dealer.
3.5 Dealer agrees that it will not make any misrepresentations or
misleading statements regarding the items making up the total
selling price of Acura Products or as to the prices or charges
relating to such items. With the understanding that Dealer is the
sole judge of the price at which it sells Acura Products, dealer
recognizes that a retail customer has the right to purchase Acura
Automobiles without being required to purchase any optional
equipment or accessories which the purchaser does not want or
order unless such equipment or accessories are required under
applicable laws or regulations.
3.6 Dealer agrees to make certain that all Acura Products sold by it
have received predelivery services and inspection in accordance
with applicable procedures and directives issued by American
Honda. Dealer further agrees that all Acura Products sold by it
will be in proper operating condition prior to delivery to any
customer. To enable Dealer to fulfill its obligations in this
regard, Dealer agrees that an appropriate number of its service
personnel will be fully qualified
-6-
<PAGE>
to perform all necessary predelivery service and inspection.
3.7 Dealer agrees to comply with, and operate consistent with, all
applicable provisions of the National Traffic and Motor Vehicle
Safety Act of 1966 and the Federal Clean Air Act, as amended,
including such applicable rules and regulations as may be issued
thereunder, and all other applicable federal, state and local
motor vehicle safety and emission control requirements. In the
interests of motor vehicle safety and emission control, American
Honda agrees to provide to Dealer, and Dealer to American Honda,
such information and assistance as may reasonably be requested by
the other in connection with the performance of obligations
imposed on either party by the National Traffic and Motor Vehicle
Safety Act of 1966 and the Federal Clean Air Act, as amended, and
the rules and regulations issued thereunder, and all other
applicable federal, state and local motor vehicle safety and
emission control requirements.
3.8 Dealer agrees to conduct a used vehicle operation at or in
connection with the Dealership Premises, to the extent reasonably
required to enhance the opportunity for sales of Acura
Automobiles.
3.9 American Honda and Dealer recognize that it may be necessary for
American Honda to formulate new or different policies or
directives to meet new or changing technology, laws or
circumstances. In the operation of Dealer's business and in the
sale and promotion of Acura Products, in rendering service and in
all other activities of the Dealership Operations, Dealer will
follow all reasonable directives, suggestions and policies of
American Honda. All written directives, suggestions and policies
of American Honda contained in any of its bulletins or manuals,
which are in effect as of the date of the Agreement or are issued
thereafter, will be deemed a part of the Agreement.
3.10 Dealer agrees that it will, at all times, maintain in effect all
licenses required for Dealership Operations and for the Dealership
Premises.
3.11 Dealer agrees that it will comply with all laws, rules,
regulations and guides relating to the conduct of its business.
3.12 Dealer agrees that it will perform any and all warranty, recall,
product improvement or product update service in compliance with
instructions and directives
-7-
<PAGE>
issued by American Honda, regardless of where the Acura Product
involved was purchased. To protect and maintain the goodwill and
reputation of Acura Products and the Acura Trademarks, Dealer
agrees that it will not charge any customer for warranty service
or any work done in connection with such warranty, recall, product
improvement or update or any other service as to which Dealer is
reimbursed by American Honda.
3.13 Dealer fully understands that the success of its Dealership
Operations depends to a great extent upon the amount of net
working capital, owner's equity, flooring and lines of credit
which Dealer maintains. Accordingly, for the benefit of both
American Honda and Dealer, Dealer agrees that it will, at all
times, pay for Acura Products promptly and, to do so, maintain its
minimum net working capital, owner's equity, flooring and lines of
credit in the amounts specified in Paragraph G of the Agreement.
American Honda will have the right, reasonably, to specify an
increased amount of minimum net working capital, owner's equity,
flooring, or lines of credit to be used in Dealership Operations
and Dealer agrees promptly to establish and maintain the increased
amount. Dealer and American Honda agree to execute such new
documents as American Honda may reasonably require to evidence
revised capital requirements.
3.14 Dealer agrees to assume the defense of American Honda and to
indemnify American Honda against any money judgment, less any
offset recovered by American Honda, in any lawsuit naming American
Honda as a defendant where such lawsuit relates to: (a) an alleged
failure by Dealer to comply, in whole or in part, with any
obligation assumed by Dealer pursuant to the Agreement, (b)
Dealer's alleged negligent or improper repairing or servicing of
Acura Products, or such other motor vehicles or equipment as may
be sold or serviced by Dealer, or (c) Dealer's alleged breach of
any contract between Dealer and Dealer's customer, or (d) Dealer's
alleged misrepresentation or misleading statement, either direct
or indirect, to any customer of Dealer. American Honda may, at its
sole option and at its expense, participate in defending any such
lawsuit.
4. WARRANTY
4.1 Dealer understands and agrees that the only warranties that will
be applicable to Acura Products will be such written warranty or
warranties as may be furnished by American Honda. Except for its
express liability under such written warranties, American Honda
neither assumes nor authorizes any other person or party to assume
for
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it any other obligation or liability in connection with any Acura
Product or component thereof.
4.2 Dealer agrees that it will expressly incorporate any warranty
furnished by American Honda with an Acura Automobile as a part of
each order form or other contract for the sale of such Acura
Automobile by Dealer to any buyer. Dealer further agrees that it
will deliver to the buyer of all Acura Products, at the time of
delivery of such Acura Products, copies of such applicable
warranties as may be furnished by American Honda. Dealer agrees to
abide by and implement in all other respects American Honda's
warranty procedures in effect at the time of Dealer's sale.
5. ADVERTISING AND PROMOTIONAL PROGRAMS
5.1 Dealer agrees to develop and actively utilize programs for the
advertisement and promotion of Acura Products and its servicing of
such products. Such programs will include the prominent display
and use or demonstration of Acura Automobiles. Dealer further
agrees to cooperate with all reasonable promotional programs
developed by American Honda.
5.2 Dealer agrees that it will not advertise, promote or trade in
Acura Products or the servicing thereof in such a manner as to
injure or be detrimental to the goodwill and reputation of
American Honda and the Acura Trademarks. Dealer further agrees
that it will not publish or otherwise disseminate any
advertisement or announcement or use any form or media of
advertising which is objectionable to American Honda. Dealer
agrees to discontinue immediately any advertisement or form of
advertising deemed objectionable upon request of American Honda.
5.3 Subject to applicable federal, state or local ordinances,
regulations and statutes, Dealer agrees to erect and maintain, at
the Dealership Location, at Dealer's expense, authorized product
and service signs of types required by American Honda, as well as
such other authorized signs as are necessary to advertise the
Dealership Operations effectively and as are required by American
Honda.
6. TRADEMARKS AND SERVICE MARKS
6.1 Dealer agrees that American Honda has the exclusive right to use
and to control the use of the Acura Trademarks and but for the
right and license granted by Paragraph 6.2 hereof to use and
display the Acura Trademarks, Dealer would have no right to use
the same.
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6.2 Dealer is hereby granted the nonexclusive right and license to use
and display the Acura Trademarks at the Dealership Premises. Such
use or display is limited to that which is necessary in connection
with the sale, offering for sale and servicing of Acura Products
at retail at the Dealership Location. Dealer agrees that it will
promptly discontinue the use of any of the Acura Trademarks or
change the manner in which any of the Acura Trademarks is used
when required to do so by American Honda.
6.3 American Honda and Dealer recognize that Dealer is free to sell
Acura Products to customers wherever they may be located. However,
in order that American Honda may establish and maintain an
effective network of authorized dealers for the sale and service
of Acura Products, Dealer specifically agrees that it will not
display Acura Trademarks, or, either directly or indirectly,
establish any place or places of business for the conduct of any
of its Dealership Operations except at the locations and for the
purpose described in Paragraph E of the Agreement without the
prior written approval of American Honda. Dealer further agrees
that the rights and license granted by Paragraph 6.2 hereof will
be automatically canceled upon a change in the location of the
Dealership Location unless such change in location was previously
approved in writing by American Honda. Dealer further agrees that
such right and license terminates with the termination of the
Agreement.
6.4 If Dealer refuses or neglects to keep and perform its obligations
assumed under this Article 6 or under Paragraph 10.3 hereof,
Dealer will reimburse American Honda for all costs, attorneys'
fees and other expenses incurred by American Honda in connection
with any action to require Dealer to comply therewith.
7. GENERAL BUSINESS REQUIREMENTS
7.1 It is to the mutual benefit of Dealer and American Honda that
uniform accounting systems and practices be maintained by
authorized dealers. Accordingly, Dealer agrees to maintain such
systems and practices as are required by American Honda. In the
event Dealer engages in the sale of any other product, Dealer
agrees to maintain and keep separate records and books relating to
the sale and servicing of Acura Products.
7.2 Dealer agrees to furnish monthly to American Honda, on or before
the times designated by American Honda, on forms prescribed by
American Honda, a complete and
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accurate financial and operating statement covering the preceding
month and calendar-year-to-date operations and showing the true
and accurate condition of Dealership Operations. Financial
statements and other business information furnished to American
Honda will not be submitted to any third party unless authorized
by Dealer or required by law, or the information is pertinent to a
proceeding in which American Honda and Dealer are parties.
7.3 Dealer agrees to keep complete and current records regarding the
sale and servicing of Acura Products and to prepare for American
Honda such reports, based on those records, as American Honda may
reasonably request. In order that policies and procedures relating
to the applications for reimbursement for warranty and other
applicable work and for other credits or reimbursements may be
applied uniformly to all authorized dealers, Dealer agrees to
prepare, keep current and retain records in support of requests
for reimbursement or credit in accordance with policies and
procedures designated by American Honda.
7.4 Dealer agrees to permit, during reasonable business hours,
American Honda, or its designee, to examine, audit, reproduce and
take copies of all reports, accounts and records pertaining to the
sale, servicing and inventorying of Acura Products, including, but
not limited to, records in support of claims for reimbursement or
credit from American Honda, and with the prior approval of Dealer,
which approval will not be unreasonably withheld, to interview
Dealer employees with respect thereto.
7.5 Dealer agrees that Dealership Operations will be conducted in the
normal course of business during and for not less than the days of
the week and hours of the day customary for automobile dealerships
in the Primary Market Area.
7.6 Dealer agrees and understands that any retail price which may be
suggested by American Honda is merely a suggested price, and
Dealer has no obligation to sell any Acura Product at such price.
Dealer further understands and agrees that it is the sole judge of
the price at which it sells Acura Products and the price it
charges others for service, subject only to applicable local,
state and federal laws, rules and regulations.
7.7 Dealer understands and agrees that it will be responsible for and
will pay any and all taxes, whether sales, use or excise, and all
other governmental or municipal charges imposed upon the sale of
Acura
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Products by American Honda to Dealer and will maintain accurate
records of the same, which records will be available to American
Honda, or its designee, during regular business hours for
inspection.
7.8 Dealer understands and agrees that, while it has responsibility
for the promotion and retail sale and servicing of Acura Products
within the Primary Market Area, it has no territorial exclusivity.
Further, American Honda reserves the right, based upon reasonable
criteria, to appoint other authorized dealers of Acura Products in
the Primary Market Area.
8. APPOINTMENT OF SUCCESSOR AND REPLACEMENT DEALERS
8.1 The parties recognize that Acura Products are marketed through a
system of authorized dealers developed by American Honda and that
customers and American Honda have a vital interest in the
preservation and efficient operation of the system. American Honda
has the responsibility of continuing to administer the system and
of selecting the most suitable dealer candidate in each
circumstance. Accordingly, Dealer agrees that American Honda has
the right to select each successor and replacement dealer and to
approve its owners and principal management and the location of
dealership facilities. Further, Dealer agrees to provide written
notice to American Honda of any potential change in the
involvement, ownership or management specified in Paragraphs C and
D of the Agreement. No change affecting such involvement,
ownership or management will be made without the prior written
approval of American Honda, which approval will not be
unreasonably withheld.
8.2 Upon Dealer's request, American Honda will execute with Dealer a
Successor Addendum designating proposed Dealer operators or owners
of a successor dealer to be established if the Agreement expires
or is terminated because of death or incapacity. The request must
be executed by all persons identified in Paragraph C of the
Agreement and all proposed dealer operators or owners and be
submitted to American Honda prior to such death or incapacity;
provided that such proposed dealer operators or owners must be
acceptable to American Honda.
8.3 Dealer, but not American Honda, may cancel any executed Successor
Addendum. If American Honda notifies Dealer that it does not plan
to permit Dealership Operations to continue at the Dealership
Location, American Honda shall have no obligation to execute a new
Successor Addendum.
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8.4 If the Agreement expires or is terminated because of death or
incapacity and Dealer and American Honda have not executed a
Successor Addendum, the remaining owners, successors or heirs may
propose a successor dealer entity to continue Dealership
Operations at the Dealership Location. Such proposal must be made
within thirty days of the event causing expiration or termination
by submitting a written proposal to American Honda. Such proposal
will be accepted by American Honda if it does not introduce new
owners or if the proposed new owners are acceptable to American
Honda.
8.5 Any successor dealer entity approved by American Honda pursuant to
this Article 8 must establish that it can conduct Dealership
Operations in an efficient and businesslike manner. Such successor
dealer entity will have one year to meet reasonable performance
criteria established from time to time by American Honda. In the
event such successor dealer entity fails to meet those criteria,
such failure will be separate grounds for termination of the
Agreement.
9. TERMINATION OF AGREEMENT
9.1 The Agreement may be terminated, at any time, by mutual agreement
of American Honda and Dealer.
9.2 Dealer may terminate the Agreement, at any time, by giving
American Honda notice of such termination. Such termination shall
be effective upon the date specified by Dealer, or if no date is
specified, then upon receipt by American Honda of such notice.
9.3 American Honda may terminate the Agreement, at any time, by
serving on Dealer a written notice of such termination by
certified or registered mail to Dealer at the Dealership Premises.
Subject to other provisions of the Agreement, termination will be
effective ninety (90) days after mailing of such notice to dealer
or such longer period as American Honda may specify; provided,
however, that termination will be effective ten (10) days after
mailing if for an occurrence of any circumstance referred to in
Paragraphs 9.4.A, 9.4.B, 9.4.J or 9.4.M hereof.
9.4 It is recognized that each of the following grounds is within
control of Dealer or originates from action taken by Dealer or its
employee(s) and is contrary to the spirit and objectives of the
Agreement. Therefore, American Honda may terminate the Agreement
upon the occurrence of any of the following:
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9.4.A Failure by Dealer to secure and continuously maintain any
license necessary for the conduct by Dealer of its business
pursuant to the Agreement or the termination or expiration
without renewal, or suspension or revocation of any such
license for any reason whatsoever, whether or not license
is reinstated.
9.4.B Any change, transfer or attempted transfer by Dealer or any
Dealer Owner, voluntarily or by operation of law, of the
whole or any part of the Agreement or any interest or legal
or beneficial ownership therein or any right or obligation
thereunder, directly or indirectly, such as, for example
only, by way of a sale of an underlying ownership interest
in Dealer or the Dealership Premises or a change in the
persons having control or managerial authority, without
prior written consent of American Honda. Any purported
change, transfer or assignment shall be null and void and
not binding on American Honda.
9.4.C Any dispute, disagreement, controversy or personal
difficulty between or among Dealer Owners or in the
management of Dealer which, in American Honda's opinion,
may adversely affect the conduct of Dealer's business, or
the presence in the management of Dealer of any person who,
in American Honda's opinion, does not have or no longer has
requisite qualifications for his position.
9.4.D Impairment of the reputation or the financial standing of
Dealer or of any Dealer Owner subsequent to the execution
of the Agreement; or the ascertainment by American Honda of
any facts existing at or prior to execution of the
Agreement which tend to impair such reputation or financial
standings; or the failure of Dealer continuously to meet
American Honda's minimum requirements of net working
capital, owner's equity or line(s) of credit.
9.4.E Failure by Dealer to pay, within ten (10) days after
written demand from American Honda, any delinquent accounts
or other monies due to American Honda from Dealer.
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9.4.F Submission or participation in the submission to American
Honda of any false or fraudulent statement, application,
report for issuance of reimbursement, compensation, refund
or credit, including but not limited to any false or
fraudulent claim for warranty work, labor rate, set-up
reimbursement or warranty coverage.
9.4.G Use by Dealer of any deceptive or fraudulent practice,
whether willful, negligent or otherwise, in the sale of any
Acura Product.
9.4.H Any conviction in any court of original jurisdiction of
Dealer or any Dealer Owner or any employee of the
Dealership Operations for any crime or violation of any law
if, in the opinion of American Honda, such conviction or
violation may adversely affect the conduct of the
Dealership Operations or tend to be harmful to the goodwill
of American Honda or to the reputation of Acura Products or
the Acura Trademarks, or the violation or refusal or
neglect of Dealer to comply with the provisions of the
National Traffic and Motor Vehicle Safety Act of 1966, as
amended, or the Clean Air Act, or any rules, regulations or
standards under either of said Acts, including but not
limited to performance of any product update or recall
operation as directed by American Honda.
9.4.I Dealers entering into any agreement, combination,
understanding or contract, oral or written, with any other
corporation, person, firm or other legal entity for the
purpose of fixing prices of Acura Products or otherwise
violating any law.
9.4.J Dealer's abandonment of Dealership Premises or failure to
maintain Dealership Operations as a going business, open
during customary business hours for the days and hours as
are customary for automobile dealerships in the Primary
Market Area, provided such failure is not due to causes
beyond Dealer's control. Failure of the Dealership Premises
to remain open for seven (7) consecutive days will
constitute, without more, such abandonment.
9.4.K Death or incapacity of any Dealer Owner or Dealer Manager,
subject to the provisions of Article 8.
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9.4.L Failure of Dealer to make improvements, alterations or
modifications of its Dealership Premises which are required
to meet reasonable facility requirements of American Honda
or which Dealer has agreed or represented to American Honda
that Dealer will make or do.
9.4.M The movement of Dealership Premises to a new location or
the establishment of an additional location for the sale or
service of any Acura Products without the prior written
approval of American Honda.
9.4.N The failure of Dealer to provide adequate representation,
promotion, sales or service, including warranty work, of
any Acura Products.
9.4.O Dealer's breach of any provision of the Agreement or
Dealer's failure to comply with any contained in the
Agreement.
9.5 The Agreement will also be terminated upon written notice by
American Honda in the event:
9.5.A Of termination of American Honda's distribution agreement
as an Acura Automobile distributor.
9.5.B Of withdrawal by American Honda from the market in which
Dealer is located.
9.5.C American Honda will, for any reason, discontinue the
distribution of Acura Automobiles.
9.6 Upon the occurrence of any of the following facts or
circumstances, the Agreement will terminate automatically, without
notice or other action by American Honda or Dealer; and upon such
termination, any dealings between American Honda and Dealer will
be on a day-to-day basis at the sole option of American Honda and
may be discontinued at any time by American Honda:
9.6.A Insolvency by any definition of Dealer; or
9.6.B The existence of facts or circumstances which would allow
the voluntary commencement by Dealer, or the involuntary
commencement against Dealer, of any proceedings under any
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bankruptcy act or law or under any state insolvency law; or
9.6.C The appointment of a receiver or other officer having
similar powers for Dealer or the Dealership Premises; or
9.6.D Any levy against Dealer under attachment, garnishment or
execution or similar process which is not within ten (10)
days vacated or removed by payment or bonding.
9.7 American Honda may select any applicable provision under which it
elects to terminate the Agreement and give notice thereunder,
notwithstanding the existence of any other grounds for termination
or the failure to refer to such other grounds in the notice of
termination. The failure by American Honda to specify additional
ground(s) for cancellation in its notice will not preclude
American Honda from later establishing that termination is also
supported by such additional grounds(s).
9.8 The acceptance by American Honda of orders from Dealer or the
continued sale of Acura Products to Dealer or any other act or
course of dealing of American Honda after termination of the
Agreement will not be construed as or deemed to be a renewal of
the Agreement for any further term or a waiver of such
termination. Any dealings after termination will be on a
day-to-day basis.
9.9 In all cases, Dealer agrees to conduct itself and Dealership
Operations until the effective date of termination and after
termination or expiration of the Agreement, so as not to injure
the reputation or goodwill of the Acura Trademarks or American
Honda.
10. RIGHTS, OBLIGATIONS AND DEALINGS UPON TERMINATION
10.1 Upon the mailing of a written notice of termination or after date
of the expiration of the Agreement without renewal, American Honda
will have the right to cancel all pending orders of Dealer for
Acura Products, special tools and equipment, whether previously
accepted by American Honda or not, except as specifically
otherwise provided in this Section 10. Notwithstanding the
foregoing, if American Honda chooses to fill any orders, it will
not be obligated to fill any other orders and will not be
precluded from changing the terms of any sale.
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10.2 Not later than the effective date of the termination or expiration
of the Agreement, Dealer will cease to hold itself out as being
authorized to sell Acura Products and will discontinue selling
Acura Products or performing service as an authorized dealer.
10.3 In addition to the requirements of Section 10.2, not later than
the effective date of the termination or expiration of the
Agreement, Dealer will, at its sole expense, discontinue any and
all uses of any Acura Trademarks and any words, symbols and marks
which are confusingly similar thereto; will remove all signs
bearing any Acura Trademark and will destroy all stationery,
repair orders, advertising and solicitation materials, and all
other printed matter bearing any Acura Trademark or referring
directly or indirectly to American Honda or Acura Products in any
way which might make it appear to members of the public that
Dealer is still an authorized dealer. The foregoing will include,
but not be limited to, discontinuing the use of an Acura Trademark
as part of Dealer's business and corporate name. Dealer will also
deliver to American Honda, at American Honda's place of business,
or to a person designated by American Honda, or will destroy the
same upon request by American Honda, any and all technical or
service literature, advertising and other printed material then in
Dealer's possession which relates to Acura Products and which was
acquired or obtained by Dealer from American Honda. Dealer will
destroy any sign bearing an Acura Trademark which has not been
repurchased by American Honda.
10.4 In the event the Agreement is terminated pursuant to the
provisions of Paragraph 9.3 hereof, upon request of American Honda
for copying Dealer's records of predelivery service, warranty
service, recall or update service or other service of Acura
Products, Dealer will make such records available. In the event
the Agreement is terminated pursuant to the provisions of
Paragraphs 9.1 or 9.2 hereof, upon the request of American Honda,
Dealer will deliver to American Honda copies of such Dealer
records.
10.5 Dealer may, at any time within five (5) days after the effective
date of termination or expiration of the Agreement, notify
American Honda in writing of Dealer's desire to have American
Honda repurchase from Dealer Acura Products in Dealer's inventory
which were purchased from American Honda and which, when American
Honda accepts sole possession:
10.5.A In the case of Acura Automobiles, are new and of the then
current model year, as designated
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by American Honda, unused, undamaged and in first-class
resalable condition, regardless of whether or not American
Honda has exercised its right of inspection; and
10.5.B In the case of Acura Parts, are new, listed as current in
the Parts Price Book, unused, undamaged, in their original
package and in first-class resalable condition.
10.6 Upon termination or expiration without renewal, upon request of
Dealer given no later than five (5) days after the effective date
of termination or expiration, American Honda will repurchase all
signs which use an Acura Trademark as were authorized in advance
by American Honda and all service information and materials,
special tools and equipment designed specifically for service of
Acura Automobiles and which were purchased from American Honda and
are usable on current Acura Products, provided that such signs,
information, materials, tools and equipment are less than five (5)
years old and are in good working order.
10.7 American Honda will repurchase from Dealer Acura Products and
signs, information, materials, tools and equipment as aforesaid on
the condition that Dealer furnishes an inventory to American Honda
within thirty (30) days after the termination or expiration
without renewal of the Agreement and complies strictly with all
procedures and conditions of repurchase issued by American Honda
at the time of repurchase. American Honda will have the right and
option to assign to another person or entity the right to purchase
such Acura Products.
10.7.A The price for Acura Products, other than tools, equipment,
information, materials and signs, will be the price at
which they were originally purchased by Dealer from
American Honda or the price last established by American
Honda for the sale of identical Acura Products, whichever
may be lower, and in either case will be less all prior
refunds and allowances made by American Honda with respect
thereto, if any. The price for tools, equipment,
information, materials and signs will be the price paid by
Dealer reduced by straight-line depreciation on the basis
of a useful life of five (5) years. In all cases, the price
will be reduced by any applicable restocking charge which
may be in effect at the time of American Honda's receipt of
goods to be repurchased.
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10.7.B Dealer agrees to store Acura Products and other items which
American Honda desires or is obligated to repurchase until
receipt from American Honda of rejection of repurchase or
instructions for shipping and return to American Honda.
Dealer agrees to strictly follow and abide by all
instructions for return as may be issued from time to time
by American Honda. All Acura Products will be properly and
suitably packaged and containered for safe transportation
to American Honda. All damage, regardless of nature or
cause, will be the responsibility of Dealer until the Acura
Products are inspected and accepted by American Honda for
repurchase. Storage of such Acura Products and other items
will be at Dealer's expense for a period of ninety (90)
days after Dealer requests repurchase and provides an
inventory as provided by Paragraphs 10.6 and 10.7 hereof.
Thereafter, Dealer will be entitled to charge American
Honda a reasonable storage charge.
10.7.C American Honda, or its designee, at such reasonable time
and for such a reasonable period of time as American Honda
may determine, will have the right to enter the premises
where items for repurchase are being held for the purpose
of checking the inventory submitted by Dealer or examining,
inspecting and inventorying any and all Acura Products. If
American Honda agrees to repurchase and Dealer fails to
furnish an inventory, Dealer will reimburse American Honda
for all costs of American Honda taking an inventory.
10.7.D Only those Acura Products meeting the requirements of
Paragraphs 10.5 and 10.6 hereof are or will be eligible for
return to American Honda. American Honda will not be
obligated to give Dealer credit for any Acura Products
which do not meet those requirements.
10.7.E Dealer warrants and represents that all Acura Products
tendered to American Honda for repurchase will be free of
all liens, encumbrances, security interests or attachments
at the time repurchase is requested by Dealer. Clear title
will be vested in American Honda upon receipt of
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goods. Dealer will execute and deliver any documents
necessary to vest clear title in American Honda, and Dealer
will be responsible for complying with all applicable
procedures, including but not limited to those relating to
bulk transfers.
10.7.F Dealer will pay all freight and insurance charges from
Dealer to the place of delivery designated by American
Honda, provided that Dealer will not be liable for any
amount greater than the freight and insurance charges from
Dealer to American Honda's closest automobile warehouse or
parts center as American Honda may designate. Claims for
damage allegedly caused by any carrier will be the sole
responsibility of Dealer, and in no event will American
Honda be obligated to make a claim against a carrier or be
liable to Dealer for damage.
10.7.G As a condition of repurchase and notwithstanding any other
agreement or offer to repurchase, payment for repurchase
will first be applied against any obligations or money owed
by Dealer to American Honda. All payment due from American
Honda to Dealer pursuant to any provisions of the Agreement
or in connection with the termination of the Agreement will
be made by American Honda after receipt of the goods to be
repurchased and after all debits and credits have been
ascertained and applied to Dealer's accounts, and Dealer
has delivered to American Honda the manufacturer's
certificate of origin or other document of title for Acura
Automobiles tendered to American Honda for repurchase. In
the event it be found that a balance is due from Dealer to
American Honda, Dealer will pay such sum to American Honda
within ten (10) days of written notice of such balance.
11. GENERAL PROVISIONS
11.1 Dealer acknowledges that only the President or a designated Vice
President, Secretary or Assistant Secretary of American Honda is
authorized to execute the Agreement, agree to any variation,
modification or amendment of any of the provisions thereof,
including authorized location, or to make commitments for or on
behalf of American Honda. No other employee of American Honda may
make any promise or commitment on
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behalf of American Honda or in any way bind American Honda. Dealer
agrees that it will not rely on any statements or purported
statements except from personnel as authorized hereinabove.
11.2 The Agreement contains the entire agreement between Dealer and
American Honda. Dealer acknowledges that no representations or
statements other than those expressly set forth therein were made
by American Honda or any officer, employee, agent or
representative thereof, or were relied upon by Dealer in entering
into the Agreement. The Agreement terminates and supersedes, as of
the execution thereof, all prior agreements relating to Acura
Products, if any.
11.3 Dealer hereby waives, abandons and relinquishes any and all claims
of any kind and nature whatsoever arising from or out of or in
connection with any prior agreement entered into between Dealer
and American Honda; provided, however, that nothing herein
contained shall be deemed a release or waiver of any claim arising
out of prior sales of Acura Products by American Honda to Dealer.
11.4 The Agreement is personal to the individuals identified as
principals, owner(s), partners or shareholder(s) in Paragraph C.
Neither the Agreement, nor any part hereof or any interest
therein, may be transferred or assigned by Dealer, in whole or in
part, directly or indirectly, voluntarily or by operation of law,
without the prior written approval of American Honda. Any
attempted transfer or assignment will be void and not binding upon
American Honda.
11.5 All notices, notifications or requests under or pursuant to the
provisions of the Agreement will be directed to the address of the
principal places of business of the respective parties to the
Agreement. If either party cannot effect notice at the place of
business of the other because a party has abandoned its place of
business or refuses to accept notice, then, and only in such case,
notice may be served on American Honda through its designated
agent for service of process and upon Dealer through the
Department of Motor Vehicles (or its equivalent) in the state
where the Dealership Location is authorized by American Honda.
11.6 The waiver by either party of any breach or violation of or
default under any provision of the Agreement will not be a waiver
by such party of any other provision or of any subsequent breach
or violation thereof or default thereunder. The failure or delay
of either party to take prompt action upon any breach or
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violation of the Agreement will not be deemed a waiver of the
right to take action for such breach, default or violation at any
time in the future.
11.7 Dealer agrees to keep confidential and not disclose, directly or
indirectly, any information which American Honda designates as
confidential.
11.8 The Agreement is and shall be deemed to have been entered into in
California and shall be governed by and construed in accordance
with the laws of the State of California.
11.9 If any provision of this Agreement should be held invalid or
unenforceable for any reason whatsoever or to conflict with any
applicable law, the Agreement will be considered divisible as to
such provisions, and such provisions will be deemed amended to
comply with such law, or if it cannot be so amended without
materially altering the tenor of the Agreement, then it will be
deemed deleted from the Agreement in such jurisdiction, and in
either case, the remainder of the Agreement will be valid and
binding.
11.10 The terms of the Agreement may not be modified except in writing
signed by an authorized officer of the parties. Without limiting
the generality of the foregoing, no course of dealing will serve
to modify or alter the terms of the Agreement.
11.11 Dealer is an independent business. The Agreement does not
constitute Dealer the agent or legal representative of American
Honda for any purpose whatsoever. Dealer is not granted any
expressed or implied right or authority to assume or create any
obligation on behalf of or in the name of American Honda or to
bind American Honda in any manner or thing whatsoever. Dealer has
paid no consideration for the Agreement. Neither the Agreement nor
any right granted under it is a property right.
11.12 The expiration or termination of the Agreement will not extinguish
any claims American Honda may have for the collection of money or
the enforcement of any obligations which may be in the nature of
continuing obligations.
12. DEFINITIONS
12.1 American Honda means American Honda Motor Co., Inc., a California
corporation, and the Acura Automobile Division that markets Acura
Automobiles.
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<PAGE>
12.2 Dealer means the person, firm, corporation, partnership or other
legal entity that signs the Agreement and each of the persons
identified in Paragraph C.
12.3 Dealer Manager means the principal manager of Dealer identified in
Paragraph D upon whose personal service American Honda relies in
entering into the Agreement.
12.4 Dealer Owner means the owner(s) of Dealer identified in Paragraph
C upon whose personal service American Honda relies in entering
into the Agreement.
12.5 Dealership Location means the location approved by American Honda
for the purpose of conducting Dealership Operations.
12.6 Dealership Operations means all operations contemplated by the
Agreement. These operations include the sale and service of Acura
Products, and any other activities undertaken by Dealer related to
Acura Products, including rental and leasing operations, used car
sales and body shop operations, and finance and insurance
operations, whether conducted directly or indirectly by Dealer.
12.7 Dealership Premises means the facilities provided by Dealer at its
Dealership Location for the conduct of Dealership Operations as
approved by American Honda.
12.8 Acura Automobiles means such new passenger cars as are from time
to time offered for sale by American Honda to Dealer for resale as
part of the Acura automobile line as defined by American Honda.
12.9 Acura Parts means parts, accessories and optional equipment
marketed by American Honda for use with Acura Automobiles.
12.10 Acura Products means Acura Automobiles and Acura Parts.
12.11 Acura Trademarks means the various trademarks, service marks,
names and designs which American Honda uses or is authorized to
use in connection with Acura Products or services relating
thereto.
12.12 Primary Market Area means the geographical area designated for
Dealer by American Honda from time to time.
12.13 The Agreement means the Acura Automobile Dealer's Sales and
Service Agreement and these Standard Provisions which are
incorporated therein by reference.
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<PAGE>
Dealer agrees to maintain, solely with respect to the Dealership
Operations, minimum net working capital of $218,524.00, minimum owner's equity
of $272,968.00, and flooring and a line or lines of credit in the aggregate
amount of $753,760.00 with banks or financial institutions approved by American
Honda for use in connection with Dealer's purchases of and carrying of inventory
of Honda Products, all of which American Honda and Dealer agree are required to
enable Dealer to perform its obligations pursuant to this Agreement. If Dealer
also carries on another business or sells other products, Dealer's total net
working capital, owner's equity and lines of credit shall be increased by an
appropriate amount.
H
This Agreement is made for the period beginning January 19, 1993 and
ending January 31, 1994, unless sooner terminated. Continued dealings between
American Honda and Dealer after the expiration of this Agreement shall not
constitute a renewal of this Agreement for a term, but rather shall be on a
day-to-day basis, unless a new agreement or a renewal of this Agreement is fully
executed by both parties.
I
This Agreement may not be varied, modified or amended except by an
instrument in writing, signed by duly authorized officers of the parties,
referring specifically to this Agreement and the provision being modified,
varied or amended.
J
Neither this Agreement, nor any part thereof or interest therein,
may be transferred or assigned by Dealer, directly or indirectly, voluntarily or
by operation of law, without the prior written consent of American Honda.
Danbury Auto Partnership
Danbury Auto Partnership
t/a FAIR HONDA By___________/s/___________
- ------------------------------ (Dealer)
(Corporate or Firm Name)
AMERICAN HONDA MOTOR CO., INC. (Corporate Seal)
HONDA AUTOMOBILE DIVISION
By____________/s/_______________
Thomas G. Elliott
Executive Vice President
<PAGE>
PORSCHE
SALES AND SERVICE AGREEMENT
Parties and Date
Effective Date of Agreement ______________________, 19___
Between SK Motors, Ltd., Inc.
Doing Business as Scottsdale Porsche
located at 6725 East McDowell Rd.
Scottsdale, Arizona 85257
A corporation in the state of Arizona , partnership ____
or proprietorship ________________; and Porsche Cars North
America, Inc., a Delaware corporation with its primary place of business at 100
West Liberty Street, Reno, Nevada 89501.
THE ADDITIONAL TERMS AND CONDITIONS OF THE ADDENDUM ATTACHED HERETO AS EXHIBIT
"A" HEREBY IS MADE A PART OF THIS AGREEMENT.
<PAGE>
Section I. SPECIFIC TERMS
Porsche America enters into this Agreement relying on the following
Dealer representations:
A) The following individual(s) is the Dealer Principal:
Name Home Address %Interest Title
- ---- ------------ --------- -----
Steven Knappenberger 19% President
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
B) The following individual(s) has ownership in Dealer accounting for the entire
remaining equity ("Owner(s)").
Name Home Address %Interest
- ---- ------------ ---------
United Auto Group West, Inc. 81%
(United Auto Group, Inc. - 100% - 375 Park Avenue, New York,
NY 10022) Refer to the addendum attached hereto for ownership
restrictions
C) The following person is the General Manager of the Dealer with
managerial authority for Dealer operations and is responsible directly
to (or is) the Dealer Principal:
Name Home Address Title
- ---- ------------ -----
George W. Brochick
________________________________________________________________________________
________________________________________________________________________________
D) Dealer will conduct the sale and service of Porsche Products at the following
address ("Dealership Location"):
Sales 6725 East McDowell Road
Scottsdale, Arizona 85257
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<PAGE>
Service 6725 East McDowell Road
Scottsdale, Arizona 85257
E) Porsche America grants to Dealer the non-exclusive right to purchase Porsche
Products from Porsche America for resale to consumers. Dealer accepts such grant
and undertakes to apply its best efforts to the development of such resale. The
Dealer's Primary Area of Responsibility is:
Scottsdale, Arizona
F) Dealer acknowledges that Porsche America will periodically establish minimum
sales and service objectives based principally on the penetration of Porsche
Products in the Primary Area of Responsibility and that performance against
those objectives will be a critical feature of Sales and Service Reports. G)
Dealer acknowledges that Porsche America will periodically establish Dealer
minimum operating standards deemed necessary to provide owners and potential
owners of Porsche Products a level of total service commensurate with the
reputation of Porsche Automobiles and to attain the sales and service objectives
established.
H) This Agreement shall expire in accordance with its terms on the
close of the last business day preceding the first anniversary of the Effective
Date of Agreement unless terminated prior thereto in accordance with one or more
of the terms of Section II. If, however, as of the expiration date, Porsche Cars
North America, Inc. has not entered into a new and superseding Sales and Sevice
Agreement with Dealer and if no notice to terminate the Agreement has been given
pursuant to Section II,
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<PAGE>
then, in that event, the Agreement will be extended one additional year so that
it shall expire at the close of the last business day preceding the second
anniversary of the Effective Date of Agreement unless terminated prior thereto
in accordance with one or more of the terms of Section II.
In witness whereof, Porsche America and Dealer have executed this Sales and
Service Agreement with an effective date of Agreement as stated on the Parties
and Date page of this Agreement.
Porsche Cars North America, Inc. SK Motors Ltd., Inc.
Name Richard S. Ford Name ___________________
Title Senior Vice President Title __________________
Signature _______________________ Signature ______________
Date ____________________________ Date____________________
<PAGE>
10.8.8.2 [Reserved for future use.]
[This Exhibit has been reserved by the Company for future use.]
<PAGE>
10.8.9.1 [Reserved for future use.]
[This Exhibit has been reserved by the Company for future use.]
<PAGE>
10.8.9.2 [Reserved for future use.]
[This Exhibit has been reserved by the Company for future use.]
<PAGE>
NET LEASE
THIS LEASE, Made this 14th day of September, 1979, by and between Max &
Elizabeth Haechler 6116 E. Cactus Wren, Scottsdale, Arizona 85253 ("Lessor"),
and Max of Switzerland an Arizona Corporation ("Lessee").
W I T N E S S E T H:
1. Leased Premises. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, certain premises consisting of Automobile Dealership
facilities at 6903, 6905, 6907, 6913, 6925 E. McDowell Rd., Scottsdale, Arizona
85257 (see attached legal description of subject property & survey) (the "Leased
Premises"), the Leased Premises being more particularly described in Exhibit A
attached hereto and made a part hereof for all purposes.
2. Term. The term of this Lease shall be for Eighteen (18) years,
commencing on October 1, 1979, (the "Commencement Date"), and terminating
September 30, 1997 (11) years after the Commencement Date.
3. Basic Rent. Lessee shall pay to Lessor without demand, deduction, or
offset as rent for the Leased Premises the total sum of TWO MILLION THREE
HUNDRED SEVENTY SIX THOUSAND DOLLARS ($2,376,000.00), payable in monthly
installments of ELEVEN THOUSAND DOLLARS ($11,000,00), the first installment
payable in advance on the first day of the term of this lease and subsequent
installments payable in advance on the first day of each month thereafter during
the term of this lease.
4. Taxes. Lessee shall pay as additional rent any privilege tax, sales tax,
gross proceeds tax, rent tax, or like tax (but not including income tax), now or
hereafter levied, assessed or imposed by any federal, state, county, or
municipal governmental authority, or any, subdivision thereof, upon any rent or
other payments required to be paid under this lease.
Lessee shall also pay before delinquent as additional rent all personal
property taxes and assessments levied or assessed by any governmental authority
against any personal property or fixtures of Lessee in, on, or about the Leased
Premises.
Lessee shall pay before delinquent, as additional rent, exhibiting receipts
therefor to Lessor on demand, all real property taxes and assessments levied or
assessed against the Leased Premises and improvements thereon, both general and
special, foreseen and unforeseen, and all water charges or assessments levied in
connection with any improvements or irrigation projects, or district or other
taxes, assessments or governmental charges of any kind levied or assessed
against, the Leased Premises. Lessee shall have the right, in good faith and at
its sole and own cost and expense and in its own name or in
<PAGE>
the name of Lessor, to protest or contest or seek to have reviewed, reduced,
equalized, or abated any tax or assessment by legal proceedings in such manner
as it may deem advisable. No protest, contest, or other action, however, shall
be maintained by Lessee after the time limited for the payment without penalty
or interest of the tax or assessment unless Lessee shall have first paid the
amount of such tax or assessment under protest or shall have procured a stay of
proceedings to enforce the collection thereof, and shall have also provided for
the payment thereof together with all penalties, interest, costs, and expenses
by the deposit of a bond in form approved by Lessor if required by law to
accomplish such stay.
5. Purpose. Lessee shall use and occupy the Leased Premises or cause said
Leased Premises to be used only as Automobile Agency and for no other purpose
without Lessor's prior written consent. Lessee shall operate its business on the
Leased Premises in conformity with all applicable laws, regulations, ordinances,
and licensing requirements, if any.
6. Utilities. Lessee shall pay or cause to be paid when due all charges for
water, gas, electricity, telephone service, sewage services, garbage services,
and other utilities used in or upon the Leased Premises during the term of this
lease.
7. Maintenance. During the term of this lease, Lessee, at its own cost and
expense, shall keep and maintain the Leased Premises and all buildings and
improvements thereon, in good order, condition and repair, hereby waiving all
rights to make repairs at the expense of Lessor, and shall not cause any
nuisance or cause or permit any waste or allow any trash to accumulate on the
Leased Premises. Further, Lessee agrees to make any and all necessary
replacements to air-conditioning, cooling, heating, plumbing, lighting, and
other equipment on the Leased Premises and to any other part of the Leased
Premises in the event said replacements are necessary. Lessee shall have the
right at its sole cost and expense at any time and from time to time, to make
such alterations and improvements to the building on the Leased Premises which
do not adversely affect the value thereof as Lessee sees fit, provided, however,
that no structural alterations shall be made without first obtaining the written
consent and approval of the Lessor as to the proposed plans and specifications,
which consent and approval Lessor agrees will not be unreasonably withheld and
further provided that any alterations or improvements shall be done
expeditiously and in a good and workmanlike manner. Lessee agrees to provide
Lessor with a performance bond or other security satisfactory to Lessor to
insure the fact that there will be no mechanic's liens or materialmen's liens or
any other liens against the premises caused by Lessee's alterations or other
improvements and to indemnify and hold harmless Lessor from and against any such
liens. In the event that Lessee does not make the necessary repairs,
replacements, or maintenance as herein provided, Lessor, after giving Lessee
thirty (30) days' written notice, shall have
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<PAGE>
the right to do the same and all amounts so expended by the Lessor shall be
deemed additional rental, to be due and owing at the time the next rental
payment is due following the date that such repairs, replacements, or
maintenance have been done by the Lessor. Any and all alterations, repairs,
replacements, and additions that are made by either party shall immediately
become the property of the Lessor.
8. Insurance. During the term of this lease, Lessee, at Lessee's expense,
shall keep all improvements on the Leased Premises insured against loss or
damage by fire and the hazards covered by extended coverage insurance in an
amount equal to not less than the full replacement value of such improvements
without offset for depreciation. The policy or policies therefor shall name
Lessor as insured and shall be payable to Lessor with a waiver of subrogation
clause and a standard mortgage clause in favor of the holder of any mortgage
(the "mortgagee") on the Leased Premises and shall contain a replacement cost
endorsement. The policy or policies shall in all respects and amounts be
acceptable to Lessor and the mortgagee, and, without limiting the foregoing
general requirement, shall provide coverage for six (6) months' loss of rent and
vandalism and malicious mischief. Lessee shall not commit or permit any acts in
or about the Leased Premises which may in any way impair or invalidate such
policy or policies of insurance for the building. The full replacement value of
such improvements shall be determined from time to time (but not less often than
once every three years) by Lessee and its insurer or insurers.
Lessor and Lessee each hereby release the other and their respective
agents, servants, and employees from any and all liability or responsibility to
the other or anyone claiming through or under them by way of subrogation or
otherwise for any loss or damage to property caused by fire or any of the
extended coverage or supplementary contract casualties, even if such fire or
other casualty shall have been caused by the fault or negligence of the other
party or its agents, servants, and employees or anyone for whom such party may
be responsible, provided, however, that this release shall be applicable and in
force and effect only with respect to loss or damage occurring during such time
as Lessor's and Lessee's insurance policies, as the case may be, shall permit
that any such release shall not adversely affect or impair said policies or
prejudice the right of Lessor or Lessee, as the case may be, to recover
thereunder.
Lessee shall be solely responsible for obtaining any fire or extended
coverage insurance for personal property and improvements of Lessee and for all
goods, commodities and material stored by Lessee in or about the Leased
Premises.
9. Casualty. If the Leased Premises are wholly or partially destroyed by
fire or other casualty, Lessee shall promptly rebuild, repair or restore the
Leased Premises to their condition at the time immediately preceding the loss or
damage.
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<PAGE>
If the damage is caused by an insured casualty, Lessee shall give immediate
notice thereof in writing to Lessor, and shall fully cooperate with Lessor and
the mortgagee in filing all necessary proofs of claim with insurance companies
and the proceeds of such insurance applicable to the Leased Premises shall be
made available to Lessee for such restoration. The complete or partial
destruction of the Leased Premises shall not affect or abrogate Lessee's
obligation to make rental payments pursuant to the terms of this lease. Lessee
expressly waives any statutory right under the laws of the State of Arizona to
cease paying rent and surrender the Leased Premises in the event of injury to or
destruction of said Leased Premises.
10. Liability Insurance. During the term of this lease, Lessee, at Lessee's
expense, shall maintain comprehensive general liability insurance including
contractual liability against claims for injury, wrongful death, or property
damage occurring upon, in, or about the Leased Premises, in companies and in
form acceptable to Lessor, with minimum limits of Two Hundred Fifty Thousand
Dollars ($250,000,00) on account of bodily injuries to or death of one person,
Five Hundred Thousand Dollars ($500,000.00) on account of bodily injuries or
death of more than one person as the result of any one accident or disaster, and
property damage insurance with minimum limits of Fifty Thousand Dollars
($50,000.00).
11. Insurance Certificates. Promptly after the commencement of the term of
this lease, Lessee shall deliver to Lessor certificates of its insurers
evidencing all the insurance required to be maintained in Paragraphs 8 and 10
herein, and, within thirty (30) days prior to the expiration of any such
insurance, other certificates evidencing the renewal of such insurance, together
with receipts showing payment of the premiums therefor. Each such certificate
shall contain a clause requiring twenty (20) days' notice to Lessor and the
mortgagee before any such policy can be cancelled or nonrenewed.
If Lessee at any time fails or refuses to maintain such insurance, Lessor
may, but shall not be obligated to, obtain such insurance and Lessee shall pay
Lessor on demand, as additional rent, the premiums therefor, together with
interest thereon from the date of payment thereof at the rate of ten percent
(10%) per annum.
12. Indemnity. Lessee shall indemnify and hold Lessor harmless from and
against all liabilities, obligations, losses, damages, penalties, claims,
actions, suits, costs, charges, and expenses, including reasonable attorney's
fees, which may be imposed upon or incurred by or asserted against Lessor
arising from any use or condition of the Leased Premises by or attributable to
Lessee or Lessee's employees, customers, agents, invitees, licensees, and
guests. In the event that any action or proceeding shall be brought against
Lessor by reason of any claim above referred to, Lessee, upon written notice
from Lessor, shall
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<PAGE>
at Lessee's sole cost and expense defend the same. Lessor shall not be liable
for any damage to or theft of any personal property, goods, commodities, or
materials in or about the Leased Premises.
13. Condemnation. If the Leased Premises, or such a substantial portion
thereof as shall prevent Lessee from conducting its business under this lease,
shall be taken by proper authority for public use, Lessee may terminate this
lease by giving Lessor written notice of such termination within thirty (30)
days after such taking and the rent shall abate during the unexpired portion of
this lease, effective from the date when possession of the part so taken shall
be required. If a portion of the Leased Premises is taken and the part not taken
shall be sufficient for the reasonable use of Lessee's business under this
lease, this lease shall be reduced in proportion to which the Leased Premises so
taken bears to the Leased Premises originally leased, provided, that
consideration shall be given to the respective values of the space taken and the
space not taken. All compensation awarded for any such taking shall belong to
and be the property of the Lessor or the mortgagee (as governed by separate
agreement between them); provided, however, that Lessee shall be entitled to an
award only for Lessee's loss of business and the taking of or depreciation to,
and the cost of removal of, Lease's stock in trade, trade fixtures, equipment,
and other personal property in the Leased Premises.
14. Liens. If the Leased Premises or Lessee's leasehold interest therein,
shall at any time during the term of the lease become subject to any mechanic's,
laborer's or materialman's lien based upon the furnishing of material or labor
to Lessee on the Leased Premises and contracted for by Lessee, Lessee shall
cause the same, at Lessee's expense, to be discharged within sixty (60) days
after notice thereof, unless the lien is then being litigated in good faith by
the Lessee, and shall indemnify and hold harmless Lessor from and against any
such lien.
15. Assignment. Lessee shall not assign this lease or sublet the Leased
Premises, or any part thereof, without the prior written consent of Lessor,
which consent shall not be unreasonably withheld. Any such assignment or
subletting shall not release Lessee hereunder, and Lessee shall remain jointly
and severally liable with any assignee or subtenant, all of whom shall be
required to expressly assume Lessee's obligations hereunder.
16. Default.
A. Lessee does hereby grant to Lessor a contract lien on all property
of Lessee now, or hereafter, placed in or upon the Leased Premises (except
such part of property or merchandise as may be exchanged, replaced or sold
from time to time in the ordinary course of operations or trade), and such
property is hereby subjected to a lien in favor of
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<PAGE>
Lessor and shall be, and remain, subject to such lien for payment of all
rents and other sums agreed to be paid by Lessee, said lien to be in
addition to and cumulative of the landlord's lien provided by law.
B. If Lessee shall fail to pay any installment of rent or other sum
when it becomes due and payable as provided herein, or shall fail in the
performance of any of the covenants, agreements, terms or conditions of
this lease, or if Lessee shall desert, abandon or vacate the Leased
Premises, or if by reason of Lessee's occupancy of the Leased Premises,
Lessor shall be unable to procure or keep insurance on the Leased Premises
or the improvements thereon, then in any such event, if such default or
condition shall continue after ten (10) days' notice thereof in writing to
Lessee to make good such default or condition (provided, that, as to any
failure to pay rent or other sum occurring after Lessor has given written
notice as to any such prior failures twice in any calendar year, Lessor
shall not be required to give written notice before pursuing any remedy
provided herein), Lessee shall be deemed to be in default; and, without
further notice of any kind, Lessor may at its option:
(1) Reenter and take possession of the Leased Premises by legal
proceedings or otherwise without terminating this lease, by force if
necessary, and relet the Leased Premises in whole or in part for the
account of Lessee at such rental and upon such covenants and
conditions to such tenant or tenants as Lessor may deem proper and for
a longer or shorter period than the balance of the term of this lease.
Lessor shall receive all proceeds and rents accruing from such
reletting and shall apply such proceeds first to the payment of all
reasonable costs and expenses incurred by Lessor in obtaining
possession and in reletting the Leased Premises, including without
limitation reasonable attorneys' fees and collection fees, then to the
reasonable cost of alterations, repairs or remodeling necessary in
Lessor's opinion to enable Lessor to relet the Leased Premises, and
finally to the payment of all such amounts as may be due or may become
due under the provisions of this lease, and the balance remaining, if
any, at the expiration of the full term of this lease or upon the
sooner termination thereof shall be paid to Lessee. If the proceeds or
rentals so received by Lessor under the provisions of this paragraph
are insufficient to pay all such expenses and all amounts due and
becoming due hereunder, Lessee shall pay to Lessor upon demand by
Lessor such deficiency as may from time to time exist, and Lessor need
not wait until the termination of this lease to recover such
deficiency by legal or other action.
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<PAGE>
(2) Terminate this lease at once, including any interest of
Leases hereunder, and immediately reenter and take possession of the
Leased Premises by legal proceedings or otherwise and by force if
necessary.
(3) In the event of any reentry, Lessor may remove all persons
from the Leased Premises, and Lessor may remove all property located
in or about the Leased Premises. At Lessor's option, it may either
place such property located in a public warehouse at the cost and risk
of Lessee, or sell such property in whole or in part in the manner and
after giving the notices required by the laws of the State of Arizona
to the highest bidder for cash, with or without such property being
present at the sale. The proceeds shall be applied first to the
payment of all reasonable costs and expenses incurred by Lessor in
taking and removing such property, including without limitation
reasonable attorneys' fees, then to the payment of any rent or other
amounts owing to Lessor and finally the balance remaining, if any,
shall be paid to Lessee.
(4) No reentry or reletting of the Leased Premises shall be
construed as an election by Lessor to terminate this lease unless a
written notice of such intention is given by Lessor to Lessee; and
notwithstanding any such reletting without terminating this Lease,
Lessor may at any time thereafter elect to terminate this lease in the
event that Lessee remains in default hereunder.
(5) Lessee waives all claims or demands for damages that may be
caused by Lessor in reentering and taking possession of the Leased
Premises as hereinabove provided and all claims or demands for damages
resulting from the destruction of or injury to the Leased Premises and
all claims or demands for damage or loss of property belonging to
Lessee or any other person that may be in or about the Leased Premises
at the time of such reentry.
(6) In addition to all rights of Lessor specified herein, Lessor
shall be entitled to all other rights provided in law or equity. The
various rights, options and remedies of Lessor contained in this lease
shall be cumulative, and no one of them shall be construed as
exclusive of any of the others.
(7) Neither the acceptance of rental hereunder nor lapse of time
nor any other act or omission on the part of Lessor, its agents or
employees, shall constitute a waiver of any breach by Lessee of the
covenants or conditions of this lease; as long as any such breach
continues, Lessor shall have the right to
-7-
<PAGE>
declare the Lessee to be in default and to enforce the remedies
provided herein. The waiver by Lessor, its agents or employees, of any
breach in the performance by Lessee or any covenant contained herein
shall not be construed to be a waiver of any preceding or subsequent
breach of any other covenant contained herein. The subsequent
acceptance of rent or other sums hereunder by Lessor shall not be
deemed a waiver of any preceding breach other than the failure of
Lessee to pay the particular rental or other sum so accepted,
regardless of Lessor's knowledge of such preceding default at the time
of acceptance of such rent or other sum.
(8) If Lessor retains an attorney to enforce any of its rights
hereunder, or becomes involved in any suit connected with this lease,
Lessee shall pay Lessor's reasonable court costs and attorneys' fees.
17. Lessee's Insolvency or Bankruptcy. It is agreed by Lessee that upon the
filing of any petition by or against Lessee under any chapter of the federal
bankruptcy laws, or upon the adjudication of Lessee as a bankrupt or insolvent,
or upon the appointment of a receiver or trustee to take possession of all or
substantially all of the assets of Lessee, or upon the making of a general
assignment by Lessee for the benefit of creditors, or upon the taking of any
other action by Lessee under any state or federal insolvency or bankruptcy act
or other similar law, and upon the continuance of any of the foregoing events
for thirty (30) days, Lessor may, at its election, declare this lease in default
upon the giving of written notice thereof to Lessee; and, in such an event,
Lessor may exercise all rights and remedies herein provided to it upon default
without necessity of further notice to Lessee.
Neither this lease, or any interest herein, nor any estate created hereby,
shall pass by operation of law under any state or federal insolvency or
bankruptcy act or similar law to any trustee, receiver, assignee for the benefit
of creditors, or any other person whatsoever without the prior written consent
of Lessor. Any purported or attempted transfer in violation of the provisions of
this paragraph shall constitute a default under this lease, and Lessor, at its
option by written notice to Lessee, may exercise all rights and remedies herein
provided for upon such a default, including the termination of this lease
without the necessity of further notice.
18. Lessor May Pay Lessee's Obligations. In the event that Lessee does not
pay before delinquent any taxes, assessments, or other charges to be paid
hereunder by Lessee, Lessor shall have the right, without notice to Lessee to
make such payment and to charge Lessee therefor, together with interest thereon
from the date of such payment to the date of repayment by Lessee to Lessor at
the rate of ten percent (10%) per annum.
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<PAGE>
19. Subordination. This lease shall be subject to and subordinate to the
lien of any mortgage or deed of trust which now or hereafter may constitute a
lien on the Leased Premises, and to any agreements at any time made, modifying,
supplementing, extending, or renewing any such mortgage or deed of trust;
provided, however, that Lessor shall attempt to obtain from the mortgagee under
any such mortgage or beneficiary under any such deed of trust an agreement that
so long as Lessee shall not be in default in the terms of this lease, this lease
shall not be terminated. The provisions for the subordination of the lease shall
be self-operative and no further instrument shall be required to effect such
subordination; provided, that the Lessee shall, upon request by any mortgagee at
any time or times, execute and deliver any and all instruments that may be
reasonable, necessary or proper to affect such subordination. Lessee understands
that Lessor contemplates assigning its rights under this lease to the mortgagee
and Lessee agrees, upon request by Lessor, to execute the mortgagee's standard
acceptance of premises agreement. Lessee further agrees that, upon written
notice of the mortgagee's address, Lessee shall give to the mortgagee a copy of
all notices that Lessee is required to give to Lessor hereunder at the same time
such notices are given to Lessor.
20. Signs. No signs, advertisements or notices shall be placed by the
Lessee on the outside of the building except such as shall be first approved in
writing by Lessor. If such approval by Lessor is given, such signs,
advertisements or notices shall be installed and maintained at Lessee's expense
and shall conform to all applicable governmental laws, rules and regulations.
21. Entry Reserved by Lessor. Lessor may, during the term of this lease, at
reasonable times, enter upon the Leased Premises for the purpose of inspecting
same or to do anything required or permitted by this lease, and may at any time
during the last six (6) months of the term of this lease, show the Leased
Premises to prospective lessees or prospective purchasers.
22. Surrender. Upon the expiration of the term of this lease, or upon an
earlier termination of this lease, Lessee shall surrender up peaceable
possession of the Leased Premises in the same condition as the Leased Premises
are in at the commencement of this lease, reasonable wear and tear excepted.
23. Notices. Any notice required or permitted to be given or served by
either party to this lease shall be deemed to have been given or served when
made in writing by certified United States mail, postage prepaid, addressed as
follows:
Lessor: Max & Elizabeth Haechler
6116 E. Cactus Wren
Scottsdale, Arizona 85253
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<PAGE>
Lessee: Max of Switzerland
6925 E. McDowell Road
Scottsdale, Arizona 85257
All rental payments shall be made to the Lessor at the above address. The
addresses may be changed from time to time by either party by serving notice as
above provided.
24. Broker's Commission. Lessor and Lessee represent to the other that
there are no broker's commissions in connection with this lease.
25. Estoppel Certificates. Lessee shall, at any time, on ten (10) days'
prior written notice by Lessor or the mortgagee, execute, acknowledge, and
deliver to Lessor or the mortgagee a written statement certifying that this
lease continues unmodified and in full force and effect (or if there have been
modifications, that this lease continues in full force and effect as modified
and stating the modifications), and the dates to which the minimum and the
additional rent have been paid, and stating whether Lessor is in default in
performing any covenants to this lease, and, should Lessor be in default,
specifying each and every such default, it being intended that any such
statement delivered pursuant to this paragraph may be relied on by Lessor or any
prospective purchaser or mortgagee of the fee or any assignee of any mortgagee
on the fee of the Leased Premises.
26. Compliance with Laws. Lessee agrees, at its sole cost and expense, to
comply with all the regulations and requirements of all municipal, county, state
and federal authorities now in force or which may hereafter be in force
pertaining to the Leased Premises and shall faithfully observe in the use of the
Leased Premises all municipal ordinances and county, state and federal statutes
now in force or which may hereafter be in force. Lessee further agrees that it
will pay for any alterations or changes in the Leased Premises which may be
required during the term of this lease to comply with any regulations and
requirements of municipal, county, state or federal authorities. Lessee shall
indemnify and hold harmless the Lessor from any penalties, damages, or charges
imposed or incurred for any violation of such regulations, requirements,
ordinances or laws, whether or not occasioned by the negligence of the Lessee or
any agent, tenant, or contractor then upon or using the Leased Premises.
Lessee shall, however, have the right to contest by appropriate legal
proceedings, without cost or expense to Lessor, the validity of any of the
foregoing requirements, statutes and ordinances; and if by the terms of any such
statutes or ordinances, compliance therewith may lawfully be postponed without
subjecting Lessee or Lessor to any liability for failure to comply therewith,
Lessee may postpone such compliance until the final determination of any such
proceedings.
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<PAGE>
27. Partial Invalidity. If any term, covenant, condition or provision of
this lease is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the provisions hereof shall remain in full force
and effect and shall in no way be affected, impaired or invalidated thereby.
28. Net Lease. The Lessor and Lessee agree that this lease is an absolutely
"Net Lease", which means that the Lessee pays as additional rent, without
defense, offset, or deduction, all expenses connected with the Leased Premises,
including but not limited to real and personal property taxes and assessments,
fire and extended coverage insurance premiums, liability and damage insurance
premiums, parking lot and common area maintenance expenses, and all expenses of
maintenance, replacement, repair, and reconstruction on the Leased Premises.
29. Effect of Waiver. Any waiver by Lessor or Lessee of any breach of this
lease, or of any right of either party, shall not constitute a waiver of any
other breach or of any other right.
30. Sole Agreement. This lease contains the entire agreement between the
parties hereto and no term or provision hereof may be changed, waived,
discharged or terminated unless the same be in writing executed by Lessor and
Lessee.
31. Law. The law of Arizona shall govern the construction, performance and
enforcement of this lease.
32. Time of Essence. Time shall be of the essence in the performance of
every term, covenant and condition of this lease.
33. Captions. The Article captions are inserted for convenience of
reference and are in no way to be construed as a part of this lease or as a
limitation on the scope of the Article to which they refer.
34. Benefit. This lease shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators, legal
representatives, successors, and assigns.
35. Assignment by Lessor. The term "Lessor" as used in this lease means
only the owner for the time being in fee of the Leased Premises, or the owner of
the leasehold estate created by an underlying lease, or the mortgagee of the fee
or of such underlying lease in possession for the time being of the Leased
Premises, so that in the event of any sale of the Leased Premises or of any
transfer or assignment or other conveyance of such underlying lease and the
leasehold estate thereby created, the seller, transferor, or assignor shall be
entirely relieved of all further obligations of the Lessor herein. It shall be
deemed without further agreement between the parties or their successors in
interest, or between the parties and any such purchaser,
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<PAGE>
transferee, or assignee, that such purchaser, transferee, or assignee has agreed
to carry out all obligations of the Lessor hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this lease as of the
day and year first above written.
LESSOR /s/ Max Haechler
-------------------------------
Max Haechler
/s/ Elizabeth Haechler
-------------------------------
Elizabeth Haechler
LESSEE
Max of Switzerland BY:
/s/ Max Haechler
-------------------------------
Max Haechler, President
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<PAGE>
STATE OF ARIZONA )
) ss:
County of Maricopa )
On this the 17th day of September, 1979, before me, the undersigned
officers, personally appeared Max Haechler and Elizabeth M. Haechler, known to
me (or satisfactorily proven) to be the persons whose names are subscribed to
the within instrument and acknowledged that they executed the same for the
purpose therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Diane Berger
-------------------------------
Notary Public
My commission expires:
My Commission Expires March 8, 1982
- -----------------------------------
STATE OF ARIZONA )
) ss:
County of Maricopa )
On this the 17th day of September, 1979, before me, the undersigned
officer, personally appeared Max Haechler, who acknowledged himself to be the
Lessee, respectively, of MAX OF SWITZERLAND, an Arizona Corporation, and that
they, as such he being authorized so to do, executed the foregoing instrument
for the purposes therein contained, by signing the name of the corporation by
himself as President.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Diane Berger
-------------------------------
Notary Public
My commission expires:
My Commission Expires March 8, 1982
- -----------------------------------
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<PAGE>
/s/ Henry G. [Illegible]
-------------------------------
Registered Land Surveyor
Number: 9087
RESULT
OF
SURVEY
DESCRIPTION OF LAND IN MARICOPA COUNTY, ARIZONA:
- ------------------------------------------------
That part of FARM UNIT "B" according to the FARM UNIT Plat of Section 3,
Township 1 North, Range 4 East of the Gila and Salt River Base and Meridian,
Maricopa County, Arizona, described as follows:
BEGINNING at the Northeast corner of said FARM UNIT "B"; thence West along the
North line of said FARM UNIT a distance of 393 feet to a point; thence south and
parallel to the East line of said FARM UNIT to a point on the North line of
PAPAGO PARKWAY, according to Book 78 of Maps, page 12, records of Maricopa
County, Arizona; thence East along the North line of said PAPAGO PARKWAY to the
East line of said FARM UNIT; thence North along said East line to the point of
beginning;
EXCEPT any part lying within the property conveyed to the City of Scottsdale,
recorded in Docket 119913, PAGE 854, and in Docket 11999, page 122,
AND EXCEPT the North 65 feet of the East 180.00 feet thereof;
AND EXCEPT the East 30.00 feet thereof.
Exhibit A to Lease between Max & Elizabeth Haechler and Max of Switzerland dated
September 9, 1977
<PAGE>
6925 E. McDowell
(Land & Bldg)
SUBLEASE
DATE: August 11, 1980
LESSOR: MAX OF SWITZERLAND, an Arizona corporation
LESSEE: SCOTTSDALE PORSCHE+AUDI, LTD., an Arizona corporation
PROPERTY: See attached Schedule "A"
THIS LEASE AGREEMENT is entered into on the date set forth above, by Lessor
and Lessee, with respect to the following described property, together with all
buildings, improvements and leasehold improvements located thereon (the
"premises" or the "leased premises"), situated in Maricopa County, Arizona;
SEE ATTACHED SCHEDULE "A".
The complete agreement between the parties is as follows:
1. Term. The premises are hereby leased by Lessor to Lessee for a term
commencing on August 11, 1980 and extending for a period of twenty (20) years
thereafter to and including August 10, 2000.
2. Rental.
2.01 Base Rental. Lessee agrees to pay to Lessor, as the rent for the
premises during the term hereof, the sum of $10,000.00 per month, as adjusted as
set forth in paragraph 2.02, payable on the 11th day of each month during the
term hereof, commencing August 11, 1980.
<PAGE>
2.02 Three Year Cost of Living Adjustment. The monthly rent provided
for in paragraph 2.01 shall be subject to adjustment at the commencement of the
fourth, seventh, tenth, thirteenth, sixteenth and nineteenth years of the term
of this Lease ("the adjustment date") as set forth in this paragraph.
The base for computing the adjustment is the Consumer Price Index,
United States (All Items), published by the United States Department of Labor,
Bureau of Labor Statistics ("Index"), which is published for the month
immediately preceding the month in which the lease term commences ("Beginning
Index"). If the Index published nearest the adjustment date ("Extension Index")
has increased over the Beginning Index, the monthly rent for the following three
years (until the next rent adjustment) shall be set by multiplying the monthly
rent set forth in paragraph 2.01 by a fraction, the numerator of which is the
Extension Index and denominator of which is the Beginning Index, but in no event
shall said adjustment reduce the monthly rental below the monthly rent which
existed immediately prior to the adjustment.
The monthly rental shall not at any time be greater than that set
forth on the attached Monthly Rent Payment Schedule.
If the Index is changed so that the base differs from that used as of
the month immediately preceding the month in which the term commences, the Index
shall be converted in accordance with the conversion factor published by the
United
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<PAGE>
States Department of Labor, Bureau of Labor Statistics. If the Index is
discontinued or revised during the term, such other government index or
computation with which it is replaced (or if it is not replaced, some other
comparable index or computation) shall be used in order to obtain substantially
the same result as would be obtained if the Index had not been discontinued or
revised.
3. Taxes and Impounds.
3.01 Taxes - On Rental. Lessee agrees to pay any transaction privilege
or sales tax imposed on lease rentals by the State of Arizona and the City of
Scottsdale concurrently with, and in addition to, each monthly rental payment.
If at any time during the term hereof an additional tax or excise on rents as a
form of taxation is levied upon or assessed to Lessor by any taxing authority,
and not as a part of a general income tax, Lessee will pay the same at the time
and in the manner herein-before provided with respect to payment of rent.
3.02 Taxes - On Property. Lessee agrees to pay all ad valorem property
taxes relating to the premises during the term hereof, prorated during the
period this Lease is in effect. Lessor agrees to absorb all improvement lien
assessments for public improvements on or with respect to the leased premises
during the term hereof. Lessor shall use his best efforts promptly to cause the
leased premises to be assessed separately for property taxes from other property
owned by Lessor. Until such time as the leased premises is separately assessed,
ad
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<PAGE>
valorem property taxes will be allocated between the leased premises and any
other property covered by property tax bills on the basis of the square footage
of the leased premises to the square footage of the entire property covered by
the tax bills.
3.03 Impounds. During the term hereof while there exists any first
encumbrance against the premises in favor of an institutional lender, and which
first encumbrance requires Lessor to make impound payments to the holder of the
encumbrance for taxes or insurance, Lessee will pay such amounts to Lessor at
the times and in the manner hereinbefore provided with respect to the payment of
rent.
4. Alterations. Lessee will not, without the prior written consent of
Lessor (which Lessor will not unreasonably withhold), make or allow to be made
alterations, improvements or additions to the leased premises. Any alterations,
improvements or additions made will become a part of the leased premises,
subject to the terms hereof, and will be the property of Lessor.
5. Trade Fixtures. Lessee, at its expense and subject to other provisions
set forth or incorporated herein, may install any necessary trade fixtures,
equipment and furniture which will remain Lessee's property and will be removed
at the end of this Lease. Lessee at its expense will repair all damage caused by
such installation or removal.
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<PAGE>
6. Maintenance.
6.01 Maintenance - By Lessee. Lessee at its expense will maintain in
good order and repair all portions of the leased premises which are not the
obligation of Lessor, including without limitation: walls (painting the same as
often as necessary); partitions; floor structures; pipes and conduits; roof
utility installations; air conditioning and heating equipment, after any
warranties on such equipment have expired; asphalt and concrete floors; and all
glass and glassing. Lessee at its expense will also make all repairs of every
kind and character to the interior of the leased premises. On the last day of
the term hereof, Lessee will surrender the leased premises to Lessor in a state
of good repair, excepting only reasonable wear and tear, obsolescence, damage by
fire, act or God or the elements and damages which Lessor is required to repair
hereunder.
6.02 Maintenance - By Lessor. Lessor at its expense will cure any
structural defects in the leased premises. Lessor will have no other obligation
to maintain or repair any portion of the leased premises, except as expressly
provided herein. Lessor will not be liable to Lessee for any damage resulting
from, or caused by, Lessor's failure to make repairs unless Lessee has promptly
notified Lessor in writing of the need for such repairs and Lessor has failed to
make them in a diligent manner.
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<PAGE>
6.03 Current Condition. Lessor warrants that at the commencement of
the term of this Lease the leased premises are in good condition and repair, and
that all equipment located on the leased premises, including without limitation
plumbing, heating, air conditioning, mechanical, gas and electrical equipment is
in good operating condition. Lessee represents and warrants that it has replaced
all plate glass having bullet holes or cracks in the showroom of the premises
and has replaced the references to Max of Switzerland on all doors of the
premises with materials which match the doors and are of comparable quality.
Lessor represents and warrants that the buildings, improvements and leasehold
improvements located upon the property described in Schedule A on the date
hereof are the same buildings, improvements and leasehold improvements which
were located upon said property on March 21, 1980, plus any additions thereto
subsequent to said date.
7. Utilities. Upon commencement of the term hereof, Lessor will provide
adequate sewer, water, electric and gas lines, pipes and conduits to and for the
leased premises. Less__ will pay for all water, gas, electricity and other
utilities, including those required for the operation of air conditioning and
heating equipment used by Lessee on the leased premises. Lessor shall use his
best efforts to cause the leased premises to have utility meters separate from
other property owned by Lessor, at Lessor's expense.
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<PAGE>
8. Inspection by Lessor. Lessor may go upon the leased premises at all
reasonable times for the purposes of inspecting the same, or for the purpose of
inspecting the performance by Lessee of the terms and conditions hereof, or for
the purpose of constructing, maintaining and repairing the leased premises
pursuant to the terms hereof.
9. Liens. Except for such as it may be contesting in good faith, Lessee
will promptly pay and discharge all claims for work or labor done, supplies
furnished or services rendered at the request of Lessee and will keep the leased
premises free and clear of all mechanics' liens and materialmen's liens in
connection therewith.
10. Insurance Clause. Lessor and Lessee agree that no insurer of any
interest of either is to have any right of subrogation against the other and
that all fire and other insurance policies carried by the either on the leased
premises or the fixtures and equipment therein or other contents thereof will
contain a full waiver of subrogation by the insurer against the other and its
assigns.
11. Damage to Lessee's fixtures. Lessee agrees that it will assume the risk
of damage to any fixtures installed by or at the expense of Lessee in the leased
premises, title to which is retained by Lessee hereunder, from every source
other than damage (i) caused by the negligence or willful misconduct of Lessor,
its agents or contractors or (ii) resulting by reason of any breach of any of
Lessor's obligations under this Lease.
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<PAGE>
12. Insurance.
12.01 Public Liability - Insurance. Lessee at its expense will
maintain in full force during the term hereof public liability and property
damage insurance covering the leased premises and Lessee's activities therein
against claims for personal injury and death to limits of at least $500,000 for
each person and $1,000,000 for each occurrence and against property damage
claims to a limit of at least $100,000 or in such greater amount as may be
required by an institutional lender who holds a first encumbrance against the
premises. Lessee will furnish to Lessor a certificate evidencing the fact that
such insurance has been obtained and is in full force and effect, that Lessor
and any such institutional lender are additional insureds thereunder, and that
such insurance cannot be cancelled without ten days' prior notice to Lessor and
any such institutional lender.
12.02 Public Liability - Indemnity. Lessee will hold harmless and
indemnify Lessor from and against any and all loss, cost or damage arising by
reason of injury or death of persons or damage to property in or upon the leased
premises or caused by activities conducted thereon; provided, however, that
Lessee will not be required to indemnify Lessor against any damage or injury of
any kind arising out of the negligence of Lessor, its agents or employees.
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<PAGE>
12.03 Fire Insurance. Lessee at its expense will maintain in full
force and effect during the term hereof fire and extended coverage insurance
upon the leased premises in an amount not less than 80% of the replacement cost
thereof or such greater amount as may be required by an institutional lender who
holds a first encumbrance against the premises. Lessee will furnish to Lessor a
certificate evidencing the fact that such insurance has been obtained and is in
full force and effect, that Lessor and any such institutional lender are
additional insureds thereunder, and that such insurance cannot be cancelled
without ten days' prior notice to Lessor and any such institutional lead.
12.04 Insurance Adjustments. On approximately each fifth annual
anniversary of the commencement date hereof, Lessor shall meet with Lessee to
consider the adequacy of the required minimum limits for public liability
insurance and fire and extended coverage insurance. If such limits are not
adequate based upon changes which have occurred in the economy since the
commencement of the term hereof, such limits shall be adjusted so that the
limits are then adequate. Lessor and Lessee shall act reasonably in making such
determination.
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<PAGE>
13. Damage and Destruction of Premises. In the event of damage or
destruction to the premises which is covered by insurance, the insurance
proceeds shall be used for the repair and reconstruction of such damage and the
parties shall promptly repair and/or reconstruct the premises and the interior
improvements to their condition immediately prior to the damage or destruction.
This Lease shall continue in full force and effect in the event of such damage
and reconstruction. In the event the premises are damaged by a cause not covered
by the fire and extended coverage insurance carried on the premises, Lessor
shall reconstruct the premises to the extent of the construction at the
commencement hereof; provided however, if such uninsured loss exceeds 33% of the
then replacement cost of the building, Lessor shall have the option of
terminating this Lease by written notice to Lessee, within thirty (30) days of
such damage or destruction, in which event this Lease shall terminate as of the
date of the damage or destruction. Should Lessor not elect to so terminate the
Lease, it shall proceed with due dispatch to reconstruct the premises to the
extent of the construction at the commencement hereof, in which event this Lease
shall continue in full force and effect. In the event Lessor elects to terminate
this Lease, all rentals and other payments shall be prorated as of the date of
termination.
14. Condemnation.
14.01 Total Condemnation of Leased Premises. If the whole of the
leased premises shall be acquired or condemned
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<PAGE>
by eminent domain for any public or quasi-public use or purpose, then the term
of this Lease shall cease and terminate as of the date of title vesting in such
proceeding, and all rentals shall be paid up to date and Lessee shall have no
claim against Lessor or the condemning authority for the value of any unexpired
term of this Lease.
14.02 Partial Condemnation. If any part of the leased premises shall
be acquired or condemned as aforesaid, and in the event that such partial taking
or condemnation shall render the leased premises unsuitable for business of the
Lesssee, when the term of this Lease shall cease and terminate as of the date of
title vesting in such proceeding. Lessee shall have no claim against lessor nor
the condemning authority for the value of any unexpired term of this Lease, and
rent shall be adjusted to the date of such termination. In the event of a
partial taking or condemnation which is not extensive enough to render the
premises unsuitable for the business of the Lessee, then Lessor shall promptly
restore the leased premises to a condition comparable to its condition at the
time of such condemnation, less the portion lost in the taking, and this Lease
shall continue in full force and effect with an adjustment in rent based upon
the square footage of the leased premises taken to the square footage of the
leased premises prior to the taking.
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<PAGE>
14.03 Lessor's Damages. In the event of any condemnation or taking as
aforesaid, whether whole or partial, the Lessee shall not be entitled to any
part of the award paid for such condemnation, and Lessor shall receive the full
amount of such award, Lessee hereby expressly waiving any right to or claim to
any part thereof.
14.04 Lessee's Damages. Although all damages in the event of any
condemnation for diminution in value of the leasehold or to the fee of the
leased premises shall belong to Lessor, Lessee shall have the right to claim and
recover from the condemning authority, but not from Lessor, such compensation as
may be separately awarded or recoverable by Lessee in Lessee's own right on
account of any and all damage to Lessee's business by reason of the condemnation
and for or on account of any cost or loss to which Lessee might be put in
removing Lessee's merchandise, furniture, fixtures, leasehold improvements and
equipment.
14.05 Notice and Execution. Lessor agrees, immediately upon service of
process in connection with any appropriation or taking, to give to Lessee notice
in writing thereof. Lessee agrees to execute and deliver to the Lessor all
instruments that may be required to effectuate the provisions of this paragraph.
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<PAGE>
15. Default.
15.01 Default - Grounds, The failure to pay any monetary amount due
and payable hereunder upon the date when such payment is due, such failure
continuing for a period of fifteen days after written notice of such default,
shall constitute an event of default on the part of Lessee. The occurrence of
any of the following events will constitute an event of default by either party
hereunder: (i) default in the performance of any of such party's agreements or
obligations hereunder, such default continuing for thirty days after written
notice thereof from the non-defaulting party to the defaulting party, provided
that if such default cannot reasonably cured within such thirty day period, then
the defaulting party will not be in default hereunder if it, within such thirty
day period, commences curing of such default and diligently and in good faith
prosecutes the same; (ii) a general assignment by a party for the benefit of
creditors; (iii) the filing of a voluntary petition in bankruptcy by a party or
the filing of an involuntary petition by a party's creditors, such involuntary
petition remaining undischarged for a period of thirty days; (iv) the
appointment of a receiver to take possession of substantially all of a party's
assets or of this leasehold, such receivership remaining undissolved or
undischarged for a period of thirty days; or (v) attachment, execution or other
judicial seizure of substantially all of a party's assets or this leasehold,
such attachment, execution or other seizure remaining undismissed or
undischarged for a period of thirty days after the levy thereof.
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<PAGE>
15.02 Default - Remedies. Upon the happening of any such event of
default on the part of Lessee, Lessor, at any time thereafter, and prior to the
curing of such default, may: (i) with or without notice or demand declare the
term hereof ended and re-enter the leased premises or any part thereof (with or
without process of law) and expel or remove therefrom Lessee and all parties
occupying the ____ ___ any of them, using such force as may be necessary to do
so, and ______ repossess and enjoy the same without prejudice to any remedies
that Lessor might otherwise have by reason of such default; or (ii) re-enter the
leased premises at its option, without declaring the lease term ended, and relet
the whole or any part thereof for the account of Lessee on such terms and
conditions and at such rent as may then prevail for comparable property,
collecting such rent and applying it on the amount due from Lessee hereunder and
on the expense of reletting and on any other damage or expense so sustained by
Lessor, or on any such item or items, recovering from Lessee the difference
between the proceeds of such reletting and the amount of the rentals reserved
hereunder, which said Lessee agrees to pay upon demand. Should Lessor terminate
this Lease by reason of any such default by Lessee, Lessor may thereupon recover
from Lessee the worth, at the time of such termination, of the excess, if any,
of the amount of rent and charges equivalent to rent reserved herein for the
balance of the term over the then reasonable rental value of the leased premises
in the same period. Lessor will not, by any re-entry or other act, be deemed to
have terminated this lease, or the liability of
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<PAGE>
Lessee for the total rent hereunder or any installment thereof then due or
thereafter accruing or for damages, unless Lessor notifies Lessee in writing
that Lessor has so elected to terminate the lease. In addition to the foregoing
remedies, Lessor may rectify any defaults of Lessee and add to the rent to be
paid hereunder, and to any installment or installments thereof thereafter
becoming due. If any installment of rent or any other payment is not paid
promptly when due it will bear interest at the highest legal rate permitted by
law from the date on which it becomes due until paid, but this provision is not
intended to relieve Lessee from any default in the making of any payment at the
time and in the manner herein specified. The foregoing interest, expenses and
damages will be recoverable from Lessee by the exercise of Lessor's remedies
hereinabove set forth. The remedies of Lessor specified herein will be
cumulative as to each default to the extent allowed by law.
Upon the happening of any such event of default by Lessor, Lessee, at
any time thereafter, and prior to the curing of such default may: (i) declare
the term hereof ended; (ii) sue Lessor for damages; (iii) sue Lessor for
specific performance; or (iv) exercise any of the rights or remedies as may be
allowed by law or equity. The remedies of Lessee specified herein will be
cumulative as to each default to the extent allowed by law.
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<PAGE>
16. Holding Over. In the event of any holding over with the consent of
Lessor beyond the end of the term hereof, this Lease will be deemed a monthly
tenancy upon the agreements herein contained and Lessee will pay a monthly
rental at the rate most recently payable by it pursuant to Section _ above, in
advance at the beginning of each heldover month, plus any other charges or
payments contemplated in this lease.
17. Compliance with Laws. Leassee will comply with all governmental laws,
ordinances, rules and regulations at any time applicable to Lessee's use and
occupancy of the leased premises. Lessee will have the right, however, to
contest any such law, ordinance, rule or regulation by appropriate legal action,
provided that such contest is conducted without expense or prejudice to Lessor.
18. Statement from Lessee. Lessee will at any time and from time to time
within twenty days after written request by Lessor execute, acknowledge and
deliver to Lessor a written statement certifying that this Lease is unmodified
and in full force and effect if such is the fact (or, if there has been any
modification thereof, stating the modifications) and the dates to which the
rentals and other charges have been paid in advance, if any. It is understood
that any such statement may be relied upon by any prospective purchaser of the
estate of Lessor, or by the mortgagee or assignee of any mortgage or the trustee
or beneficiary of any deed of trust constituting a lien upon the leased
premises.
-16-
<PAGE>
19. Notices. All notices required to be given hereunder are to be in
writing. Such notices will be personally delivered or sent by United States
certified mail, postage prepaid, addressed to Lessor at 6913 East McDowell Road,
Scottsdale, Arizona 85251, and to Lessee at the leased premises, or at such
other place as respective addressee may have designated in a written notice to
the other party. Service by delivery will be deemed to occur on delivery and
service by mail will be deemed to occur on the delivery date shown on the return
receipt.
20. Waiver. No waiver of any default by either party hereunder will be
implied from any omission by either party to take action on account of such
defaults if such default persists or is repeated, and no express waiver will
affect any default other than the default specified in the waiver, and then such
waiver will be operative only for the time and to the extent therein stated. A
waiver by either party of any provision hereof will not be construed as a waiver
of any subsequent breach of the same provision, nor will the consent or approval
by either party to or of any act by the other be deemed to waive or render
unnecessary its consent or approval to or of any subsequent similar acts.
-17-
<PAGE>
21. Property Near McDowell Road and Access Parcel. For purposes of this
Lease, the leased premises shall be deemed to include all of the right, title
and interest of Lessor in the display pads and sign located on the north end of
the property near McDowell Road, in the property where said items are located
and the right to use and occupy said property. During the term hereof Lessor
(and Max of Switzerland) and Lessee shall have joint use of the Access Parcel
solely for the purpose of passage of vehicles and persons. Lessor and Lessee
shall jointly maintain the Access Parcel, and the expenses thereof shall be
borne equally by Lessor and Lessee.
22. Complete Agreement. It is expressly agreed that the provisions of this
Lease cannot be altered, changed, modified or added to except in writing signed
by the parties hereto.
23. Time. Time is of the essence hereof.
24. Short-form Lease. Upon request of either party, Lessor or Lessee will
both execute and acknowledge a short-form lease for purposes of recording, which
short-form lease will describe the premises as being subject to the rights,
agreement and restrictions contained herein and the term hereof.
-18-
<PAGE>
25. Assignment and Subletting. Lessee may not assign this Lease or any
interest herein, or sublet the leased premises or any portion thereof, without
the prior written consent of Lessor, which consent will not be unreasonably
withheld. Lessor hereby consents to an assignment by Lessee to a corporate
successor upon merger or consolidation of Lessee. Any assignment or subletting
prohibited hereunder without the consent of Lessor will be void. The assignee
under any such assignment must agree to perform all of Lessee's obligations
hereunder, but no such assignment will have the effect of relieving Lessee of
its primary liability for the performance of all of its said obligations.
26. Mortgage by Lessor. It is expressly understood that Lessor will have
the right at any time during the term of this Lease and from time to time to
mortgage its interest in the leased premises for any purpose, and that Lessee
will, if requested by the lender, subordinate its interest in the leased
premises to the lien of such mortgage provided the lender agrees to respect this
Lease and accept the performance by Lessee of its obligations hereunder in the
event such mortgage is foreclosed, and provided further that the total monthly
obligations secured by all of the encumbrances upon the property do not exceed
the monthly rental set forth in paragraph 2.
27. Applicable Law. This Lease shall be construed under the laws of the
State of Arizona.
-19-
<PAGE>
28. Attorney's Fees. In the event of any action at law or in equity between
Lessor and Lessee to enforce any of the provisions or rights hereunder, the
unsuccessful party to such litigation covenants and agrees to pay the successful
party all costs and expenses, including reasonable attorneys' fees incurred
therein by said successful party, and if said successful party shall recover
judgment in any such action or proceeding, such costs, expenses and attorneys'
fees shall be included in and made a part of such judgment. Should Lessor,
without fault, be made party to any litigation instituted by or against Lessee,
Lessee covenants and agrees to pay Lessor all costs and expenses, including
reasonable attorneys' fees incurred by Lessor in connection with such
litigation. Should Lessee, without fault, be made a party to any litigation
instituted by or against Lessor, Lessor covenants and agrees to pay Lessee all
costs and expenses, including reasonable attorneys' fees incurred by Lessee in
connection with such litigation.
29. Address, Quiet Enjoyment and Condition of Title. Lessor covenants and
warrants that the leased premises has a street address of 6925 East McDowell,
Scottsdale, Arizona 85251, that the leased premises constitutes the property
upon which the business of Scottsdale Prosche-Audi, Inc. was conducted
immediately preceding the commencement of the term hereof and that the leased
premises is all of the property lying north of the south line of the leased
premises and east of the center line of the wall and east of the center line of
the wall as extended north to McDowell Road (the wall being that certain wall
which
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<PAGE>
divided the businesses of Scottsdale Porsche-Audi, Inc. and Max of Switzerland
on March 21, 1980). Lessor covenants and agrees that Lessee, so long as it shall
not be in default hereunder, shall peacefully and quietly hold, occupy and enjoy
the premises during the term of this Lease. Lessor covenants and warrants that
the leased premises are free and clear of all liens, encumbrances and adverse
claims, except 1980 taxes and the matters set forth on Schedule "B" attached
hereto.
30. Rights of First Refusal. At any time prior to fifty-five days following
the expiration of the term of this Lease, Lessor shall not sell or contract to
sell less than all of the leased premises. At any time prior to fifty-five days
following the expiration of the term of this Lease, Lessor shall not sell or
contract to sell all of the leased premises unless the premises is first offered
to Lessee for the same price, and upon the same terms and conditions as to which
Lessor proposes to sell or transfer the premises to the third party. Lessor must
give Lessee written notice setting forth the name and address of the proposed
purchaser and the price, terms and conditions of any bona fide offer by or to
Lessor under which Lessor proposes to sell or transfer the premises. Within the
thirty day period following Lessee's receipt of such notice, or within sixty
days following the expiration of the term of the Lease, whichever first occurs,
Lessee by written notice to Lessor may elect to purchase the premises, for the
same price and upon the same terms as the offer. If Lessee does not elect to
purchase the premises, Lessor may then sell the premises to the third party
named in
-21-
<PAGE>
Lessor's notice to Lessee, for the price and upon the terms therein stated. If
the escrow is not closed for the price and upon the terms and conditions
contained in the notice, then Lessor may not thereafter, at any time prior to
fifty-five days following the expiration of the term of this Lease, sell the
premises to any party other than Lessee without first offering the premises to
Lessee in the manner set forth in this paragraph. The provisions of this
paragraph shall have no application to a transfer of the premises or any portion
thereof, by gift or in any other manner, by Lessor to his spouse, to any of his
lineal descendants or spouses of lineal descendants (through natural birth or
legal adoption), to a corporation or partnership, the majority voting interest
of which is owned by Lessor, or to a trust, all of the beneficial interest of
which is owned by one, some or all of the foregoing permitted transferees.
At any time prior to fifty-five days following the expiration of the term
of this Lease, Lessor shall not lease or contract to lease all or any portion of
the leased premises unless same is first offered to Lessee for the period
following the expiration of the term of this Lease, upon the same lease terms
and conditions as to which Lessor prepares to lease same to the third party.
Lessor must give Lessee written notice setting forth the name and address of the
proposed Lessee and the terms and conditions of any bona fide offer by or to
Lessor under which Lessor proposes to lease the premises. Within the thirty day
period following Lessee's receipt of such notice, or within sixty days following
the expiration of the term of the Lease, whichever
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<PAGE>
first occurs, Lessee by written notice to Lessor may elect to lease the
premises, upon the same terms as the offer. If Lessee does not elect to lease
the premises, Lessor may then lease the premises to the third party named in
Lessor's notice to Lessee, upon the terms therein stated. If the lease is not
executed upon the terms and conditions contained in the notice, then Lessor may
not thereafter, at any time prior to fifty-five days following the expiration of
the term of this Lease, lease the premises to any party other than Lessee
without first offering the premises to Lessee in the manner set forth in this
paragraph.
31. Other Agreement and ? Default. Max Haechler and Lessee are
simultaneously herewith executing a Consultating Agreement. An event of default
by a party under said Consulting Agreement shall also constitute an event of
default under this Lease in the same manner as if an event of default had
occurred directly under this Lease.
32. Setoff. This Lease arose as a result of an Agreement between Max
Haechler and Elizabeth M. Haechler ("Haechler") and Steven Knappenberger, or
nominee, dated June 1_, 1980. Haechler has certain obligations under ______
Agreement and the documents executed and delivered pursuant thereto. Lessee may,
but is not obligated to, set off against any obligations of Lessee to Lessor
under this Lease any claim which Steven Knappenberger, or nominee may have
against Haechler under said Agreement and the documents executed and ___________
thereto. Notwithstanding anything herein to the contrary, the
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<PAGE>
right of setoff shall not exist with respect to any claim unless Lessee gives
notice to Lessor of such claim and Lessor fails to satisfy such claim within
sixty days after such notice.
33. Possible Extension. On approximately the commencement of the 19th year
of the term hereof, Lessor shall meet with Lessee to consider extending the term
hereof beyond 20 years and establishing the provisions of such extended term.
Nothing herein shall obligate Lessor or Lessee to agree upon extending the term
or establishing the terms.
34. Benefit and Burden. The rights, duties and obligations created
hereunder shall inure to the benefit of and be binding upon the parties hereto,
their heirs, personal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
date indicated on the first page.
LESSOR: LESSEE:
MAX OF SWITZERLAND SCOTTSDALE PORSCHE+AUDI, LTD.
By /s/ Max Haechler By /s/ Steven Knappenberger
----------------------------- --------------------------------
Max Haechler, President Steven Knappenberger
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this, the 11th day of August, 1980, before me, the undersigned officer,
personally appeared MAX HAECHLER who
-24-
<PAGE>
acknowledged himself to be the President of MAX OF SWITZERLAND, and that he, as
such officer, being authorized so to do, executed the foregoing instrument for
the purposes therein contained by signing the name of the corporation by himself
as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Illegible
---------------------------------
Notary Public
My commission expires:
3/7/82
- ----------------------
-25-
<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this, the 11th day of August, 1980, before me, the undersigned officer,
personally appeared STEVEN KNAPPENBERGER who acknowledged himself to be the
President of SCOTTSDALE PORSCHE+AUDI, LTD., and that he, as such officer, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Illegible
---------------------------------
Notary Public
My commission expires:
3/7/82
- ----------------------
GUARANTY
The undersigned, jointly and severally, personally guarantee all of the
obligations of Lessee set forth on the above Sublease.
DATED this 11th day of August, 1990
/s/ Steven Knappenberger
-------------------------------------
STEVEN KNAPPENBERGER
/s/ Tamara F. Knappenberger
-------------------------------------
TAMARA F. KNAPPENBERGER
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<PAGE>
MAIN PARCEL
A portion of FARM UNIT "B", FARM UNIT Plat, of Lot 2, Section 3, TIN, R4E,
G&SRB&M, Maricopa County, Arizona, more particularly described as follows:
Beginning at the Northeast corner of said FARM UNIT "B"; thence Westerly
along the North line of said FARM UNIT "B", S 89(Degree)02'50" W, a distance of
265.81 feet; thence S 00(Degree)52'45" E, a distance of 374.66 feet to the North
line of PAPAGO PARKWAY Subdivision as recorded in Book 78 Page 12 of Maricopa
County Records; thence Easterly along the North line of said PAPAGO PARKWAY
Subdivision N 89(Degree)01'50" E, a distance of 252.50 feet to the East line of
said FARM UNIT "B"; thence along said East line N 01(Degree)09'20" E, a distance
of 374.85 feet to the Point of Beginning,
EXCEPT for previously dedicated public Right-of-Way.
ACCESS PARCEL
A portion of FARM UNIT "B", FARM UNIT Plat of Lot 2, Section 3, TIN, R4E,
G&SRB&M, Maricopa County, Arizona, more particularly described as follows:
Beginning at the Northeast corner of said FARM UNIT "B"; thence Westerly
along the North line of said FARM UNIT "B", S 89(Degree)02'50" W, a distance of
265.81 feet; thence S 00(Degree)52'45" E, a distance of 65.00 feet to the True
Point of Beginning; thence N 89(Degree)02'50" E, a distance of 18.50 feet;
thence S 00(Degree)32'45" E, a distance of 53 feet; thence S 89(Degree)02'50" W,
a distance of 32.00 feet; thence N 00(Degree)32'45" W a distance of 53.00 feet;
thence N 89(Degree)02'50" E, a distance of 13.50 feet to the True Point of
Beginning.
<PAGE>
LEASEHOLD IMPROVEMENTS
1 1,000 gallon motor oil tank (underground)
1 500 gallon waste oil tank (underground)
2 Stationary engine work stands (mounted in tool room)
All light fixtures (outdoor display, showroom, office, Parts Dept.)
Peg board for P+A tools
45 8 foot lights & bulbs (Shop)
2 Globe Twin Side by side post lifts drive over
2 Globe Twin side by side post lifts, drive thru
4 Globe single post lifts
1 Rotary Twin post drive on lift
1 Globe Side by Side post lift for Hunter Alignment Machine
2 Yale 2-Ton chain hoists
2 1 Beam rails for chain hoists
2 Champion upright air compressors, model W184T170BA, 5 HP
1 Exhaust scavanger system, model CP 1436, 3 HP
1 Refrigerator "Subzero", Owner's Office
Sofa (built-in) & 4 pillows (Owner's Office)
Mini blinds (8 sets, Office Bldg.)
All similar items located upon the Main Parcel on June 17, 1980.
SCHEDULE "A" (Continued)
<PAGE>
SCHEDULE "B"
(All recording data refer to records in the office of the County Recorder of the
County in which the land is situated.)
A. The liabilities, obligations and burdens imposed upon said land by reason
of inclusion within the Salt River Project Agricultural Improvement and
Power District and Agricultural Improvement Districts.
B. TAXES AND ASSESSMENTS collectible by the County Treasurer, not yet due and
payable for the following year;
Year 1980.
EASEMENT and rights incident thereto, as set forth in instrument;
Recorded in Docket 2790
Page 560
Purpose Electric transmission lines
Affects The centerline to extend from the North
to the South boundaries of the South 180
feet of the North 375 feet of FARM UNIT
"B" along, parallel to and 180 feet West
of the East line thereof.
EASEMENT and rights incident thereto, as set forth in instrument;
Recorded in Docket 2949
Page 226
Purpose Electric transmission lines
Affects The centerline to extend from the East to
the West boundaries of the West 356 feet
of the East 386 feet of the North 375
feet of FARM UNIT "B" along, parallel to
and 158.5 feet North of the South line
thereof.
ANY ACTION that may be taken by the Department of Transportation to acquire
right of way for State Highway, as disclosed by Resolution of Intent;
Recorded in Docket 4515
Page 203.
continued
<PAGE>
SCHEDULE B CONTINUED
FINANCING STATEMENT between;
Debtor Max Haechler and Elizabeth M. Haechler
Secured Party The Arizona Bank
Recorded November 8, 1976
Docket 11935
Page 703.
(Covers more)
EASEMENT and rights incident thereto, as set forth in instrument;
Recorded in Docket 11999
Page 122
Purpose Highway and utility purposes
Affects The South 20 feet.
FACILITIES LEASE under the terms and conditions contained herein made by;
Lessor Chevron U.S.A. Inc.
Lessee Max of Switzerland
Dated February 23, 1977
Term 5 years
Recorded April 11, 1977
Docket 12163
Page 508;
(Affects personal property attached to the within property)
LESSORS INTEREST was collaterally assigned;
To Southland Life Insurance Company, a Texas
corporation
By Assignment dated November 7, 1979
Recorded November 8, 1979
Docket 14019
Page 122
As additional security for indebtedness secured by Deed of Trust;
Recorded in Docket 14019
Page 108;
THEREAFTER AN ATTORNMENT AGREEMENT modifying said lease was executed by the
parties named below;
Lessee Max of Switzerland, an Arizona
corporation
Lender Southland Life Insurance Company
Dated November 7, 1979
Recorded November 8, 1979
Docket 14019
Page 133;
SAID ATTORNMENT AGREEMENT among other things subordinated the
continued
<PAGE>
Lessees interest to the lien of the instrument referred to below;
Instrument Deed of Trust
Recorded in Docket 14019
Page 108;
THEREAFTER THE LESSOR'S INTEREST was subordinated to the lien of the
instrument;
Recorded in Docket 14019
Page 108
by Subordination Agreement;
Recorded in Docket 14019
Page 141.
(Covers more)
FINANCING STATEMENT between;
Debtor Max Switzerland
Secured Party The Arizona Bank
Recorded October 4, 1977
Docket 12467
Page 1487;
THEREAFTER SUBORDINATED to the lien of the instrument;
Recorded in Docket 14019
Page 108;
By Subordination Agreement;
Recorded in Docket 14019
Page 148.
(Covers more)
SECURITY AGREEMENT between;
Debtor Max of Switzerland
Secured Party The Arizona Bank
Recorded October 4, 1977
Docket 12467
Page 1490;
THEREAFTER SUBORDINATED to the lien of the instrument;
Recorded in Docket 14019
Page 108;
By Subordination Agreement;
Recorded in Docket 14019
Page 152.
(Covers more)
EASEMENT and rights incident thereto, as set forth in instrument;
Recorded in Docket 13497
Page 306
Purpose Alley
Affects The South 10 feet.
continued
<PAGE>
SCHEDULE B CONTINUED
DEED OF TRUST AND ASSIGNMENT OF RENTS given to secure the original amount
shown below and any other amount payable under the terms thereof;
Original amount $175,000.00
Dated April 19, 1979
Recorded May 1, 1979
Docket 13603
Page 237
Trustor Max Haechler and Elizabeth M. Haechler,
his wife
Trustee The Arizona Bank
Beneficiary The Arizona Bank;
10. continued
SAID DEED OF TRUST WAS SUBORDINATED to the lien of instrument;
Recorded November 8, 1979
Docket 14019
Page 108
By Subordination Agreement;
Recorded November 8, 1979
Docket 14019
Page 144.
(Covers more)
DEED OF TRUST AND SECURITY AGREEMENT given to secure the original amount
shown below and any other amount payable under the terms thereof;
Original amount $757,516.13
Dated November 7, 1979
Recorded November 8, 1979
Docket 14019
Page 108
Trustor Max Haechler, an individual and Elizabeth
M. Haechler, an individual
Trustee Title Insurance Company of Minnesota, a
Minnesota corporation
Beneficiary Southland Life Insurance Company, a Texas
corporation
(Covers more)
FINANCING STATEMENT between;
Debtor Max Haechler and Elizabeth M. Haechler
Secured Party Southland Life Insurance Company
Recorded November 8, 1979
Docket 14019
Page 138.
(Covers more)
Deed of Trust and Assignment of Rents to The Arizona Bank in the original
principal sum of $200,000.00, recorded in Docket 14465, page
continued
<PAGE>
SCHEDULE B CONTINUED
145.
continued
<PAGE>
MONTHLY RENT PAYMENT SCHEDULE
(MAXIMUM MONTHLY RENT)
Year Monthly Rent Maximum
---- --------------------
1 $10,000.00
2 $10,000.00
3 $10,000.00
4 $12,000.00
5 $12,000.00
6 $12,000.00
7 $14,400.00
8 $14,400.00
9 $14,400.00
10 $17,280.00
11 $17,280.00
12 $17,280.00
13 $20,390.00
14 $20,390.00
15 $20,390.00
16 $24,060.00
17 $24,060.00
18 $24,060.00
19 $28,391.00
20 $28,391.00
continued
<PAGE>
6/6/85
EXHIBIT A
SUBLEASE
DATE: June 7, 1985
LESSOR: MAX OF SWITZERLAND, an Arizona corporation
LESSEE: SCOTTSDALE PORSCHE+AUDI, LTD.,
an Arizona corporation
PROPERTY: See attached Schedule "A"
THIS LEASE AGREEMENT is entered into on the date set forth above, by Lessor
and Lessee, with respect to the following described property, together with all
buildings, improvements and leasehold improvements located thereon (the
"premises" or the "leased premises"), situated in Maricopa County, Arizona;
See attached Schedule "A".
The complete agreement between the parties is as follows:
1. Term. The premises are hereby leased by Lessor to Lessee for a term
commencing on January 1, 1986 and extending
<PAGE>
thereafter to and including December 31, 2005, provided that if Lessee becomes a
franchisee of Jaguar Cars, Inc. for the sale of Jaguar motor vehicles at 6913
East McDowell Road, Scottsdale, Arizona prior to January 1, 1986, the term shall
commence on the next business day following such becoming a franchisee. The date
on which the term commences is herein called "Commencement Date".
2. Rental.
2.01 Base Rental. Lessee agrees to pay to Lessor, as the rent for the
premises during the term hereof, the sum of $8,000.00 per month, as adjusted as
set forth in paragraph 2.02, payable on the lst day of each month during the
term hereof, commencing on the Commencement Date, without the need for demand
except as otherwise set forth herein. Rent for the first month and the last
month of the term hereof shall equal what would otherwise be the base rental for
such month multiplied by a fraction, the numerator of which is the number of
days of the term of this Lease during such month and the denominator of which is
the number of days in such month.
2.02 Two Year Cost of Living Adjustment. The monthly rent provided for
in paragraph 2.01 shall be subject to adjustment at the commencement of each
even numbered calendar year of the term of this Lease commencing 1988 ("the
adjustment date"), as set forth in this paragraph.
-2-
<PAGE>
The base for computing the adjustment is the Consumer Price Index,
United States (All Items), published by the United States Department of Labor,
Bureau of Labor Statistics ("Index"), which is published for the month
immediately preceding the month in which the lease term commences ("Beginning
Index"). If the Index published nearest the adjustment date ("Extension Index")
has increased over the Beginning Index, the monthly rent for the following two
years (until the next rent adjustment) shall be set by multiplying the monthly
rent set forth in paragraph 2.01 by a fraction, the numerator of which is the
Extension Index and denominator of which is the Beginning Index, but in no event
shall said adjustment reduce the monthly rental below the monthly rent which
existed immediately prior to the adjustment.
The monthly rental shall not at any time be greater than that set
forth on the attached Monthly Rent Payment Schedule.
If the Index is changed so that the base differs from that used as of
the month immediately preceding the month in which the term commences, the Index
shall be converted in accordance with the conversion factor published by the
United States Department of Labor, Bureau of Labor Statistics. If the Index is
discontinued or revised during the term, such other government index or
computation with which it is replaced (or if it is not replaced, some other
comparable index or computation) shall be used in order to obtain substantially
the same result
-3-
<PAGE>
as would be obtained if the Index had not been discontinued or revised.
3. Taxes and Impounds.
3.01 Taxes - On Rental. Lessee agrees to pay any transaction privilege
or sales tax imposed on lease rentals by the State of Arizona and the City of
Scottsdale concurrently with, and in addition to, each monthly rental payment.
If at any time during the term hereof an additional tax or excise on rents as a
form of taxation is levied upon or assessed to Lessor by any taxing authority,
and not as a part of a general income tax, Lessee will pay the same at the times
and in the manner hereinbefore provided with respect to payment of rent.
3.02 Taxes - On Property. Lessee agrees timely to pay all ad valorem
property taxes relating to the premises during the term hereof, prorated during
the period this Lease is in effect and timely to provide Lessor with proof of
payment thereof. Lessee agrees to absorb all improvement lien assessments for
public improvements on or with respect to the leased premises during the term
hereof. Lessor shall use his best efforts promptly to cause the leased premises
to be assessed separately for property taxes from other property owned by
Lessor. Until such time as the leased premises is separately assessed, ad
valorem property taxes will be allocated between the leased premises and any
other property covered by property tax bills on the basis of the square footage
of the leased premises
-4-
<PAGE>
to the square footage of the entire property covered by the tax bills.
3.03 Impounds. During the term hereof while there exists any
encumbrance against the premises in favor of an institutional lender, and which
encumbrance requires Lessor to make impound payments to the holder of the
encumbrance for taxes or insurance, Lessee will pay such amounts to Lessor at
the times and in the manner hereinbefore provided with respect to the payment of
rent.
4. Alterations. Lessee will not, without the prior written consent of the
holder of any encumbrance upon the leased premises from whom consent is
required, make or allow to be made alterations, improvements or additions to the
leased premises or raze any improvements on the leased premises, provided such
improvements are made in accordance with the requirements of all applicable
governing bodies. Lessor will use its best efforts to assist in obtaining such
approvals. Any such alterations, improvements or additions made will become a
part of the leased premises, subject to the terms hereof, and will be the
property of Lessor.
5. Trade Fixtures. Lessee, at its expense and subject to other provisions
set forth or incorporated herein, may install any necessary trade fixtures,
equipment and furniture which will remain Lessee's property and will be removed
at the
-5-
<PAGE>
end of this Lease. Lessee at its expense will repair all damage caused by such
installation or removal.
6. Maintenance.
6.01 Maintenance - By Lessee. Lessee at its expense will maintain in
good order and repair all portions of the leased premises which are not the
obligation of Lessor, including without limitation: walls (painting the same as
often as necessary); partitions; floor structures; pipes and conduits; roof;
utility installations; air conditioning and heating equipment, after any
warranties on such equipment have expired; asphalt and concrete floors; and all
glass and glasing. Lessee at its expense will also make all repairs of every
kind and character to the interior of the leased premises. On the last day of
the term hereof, Lessee will surrender the leased premises to Lessor in a state
of good repair, excepting only reasonable wear and tear, obsolescence, damage by
fire, act of God or the elements and damages which Lessor is required to repair
hereunder.
6.02 Maintenance By Lessor. Lessor will have no obligation to maintain
or repair any portion of the leased premises.
6.03 Current Condition. Lessor makes no warranties with respect to the
condition, repair or operating condition of any portions of the leased premises,
and Lessee accepts the leased premises "AS IS" with respect to their
-6-
<PAGE>
quality. Lessor represents and warrants that the buildings, improvements and
leasehold improvements which will be located upon the property described in
Schedule "A" on the commencement of the term hereof are the same buildings,
improvements and leasehold improvements which are located upon said property on
the date hereof, plus any additions thereto subsequent to the date hereof.
7. Utilities. Lessee will pay for all water, gas, electricity and other
utilities, including those required for the operation of air conditioning and
heating equipment used by Lessee on the leased premises.
8. Inspection by Lessor. Lessor may go upon the leased premises at all
reasonable times for the purposes of inspecting the same, or for the purpose of
inspecting the performance by Lessee of the terms and conditions hereof, or for
the purpose of constructing, maintaining and repairing the leased premises
pursuant to the terms hereof.
9. Liens. Except for such as it may be contesting in good faith, Lessee
will promptly pay and discharge all claims for work or labor done, supplies
furnished or services rendered at the request of Lessee and will keep the leased
premises free and clear of all mechanics' liens and materialmen's liens in
connection therewith.
10. Insurance Clause. Lessor and Lessee agree that no insurer of any
interest of either is to have any right of
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subrogation against the other and that all fire and other insurance policies
carried by the other on the leased premises or the fixtures and equipment
therein or other contents thereof will contain a full waiver of subrogation by
the insurer against the other and its assigns.
11. Damage to Lessee's Fixtures. Lessee agrees that it will assume the risk
of damage to any fixtures installed by or at the expense of Lessee in the leased
premises, title to which is retained by Lessee hereunder, from every source
other than damage (i) caused by the negligence or willful misconduct of Lessor,
its agents or contractors, or (ii) resulting by reason of any breach of any of
Lessor's obligations under this Lease.
12. Insurance.
12.01 Public Liability - Insurance. Lessee at its expense will
maintain in full force during the term hereof public liability and property
damage insurance covering the leased premises and Lessee's activities' therein
against claims for personal injury and death to limits of at least $500,000 for
each person and $1,000,000 for each occurrence and against property damage
claims to a limit of at least $100,000 or in such greater amounts as may be
required by an institutional lender who holds a first encumbrance against the
premises. Lessee will furnish to Lessor a certificate evidencing the fact that
such insurance has been obtained and is in full force and effect, that Lessor
and any such institutional lender are additional insureds
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thereunder, and that such insurance cannot be cancelled without ten days' prior
notice to Lessor and any such institutional lender.
12.02 Public Liability - Indemnity. Lessee will hold harmless and
indemnify Lessor from and against any and all loss, cost or damage arising by
reason of injury or death of persons or damage to property in or upon the leased
premises or caused by activities conducted thereon; provided, however, that
Lessee will not be required to indemnify Lessor against any damage or injury of
any kind arising out of the negligence of Lessor, its agents or employees.
12.03 Fire Insurance. Lessee at its expense will maintain in full
force and effect during the term hereof fire and extended coverage insurance
upon the leased premises in an amount not less than the replacement cost thereof
or such greater amount as may be required by an institutional lender who holds
an encumbrance against the premises. Lessee will furnish to Lessor a certificate
evidencing the fact that such insurance has been obtained and is in full force
and effect, that Lessor and any such institutional lender are additional
insureds thereunder, and that such insurance cannot be cancelled without ten
days' prior notice to Lessor and any such institutional lender.
12.04 Insurance Adjustments. On approximately each fifth annual
anniversary of the commencement date hereof,
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Lessor shall meet with Lessee to consider the adequacy of the required minimum
limits for public liability insurance and fire and extended coverage insurance.
If such limits are not adequate based upon changes which have occurred in the
economy since the commencement of the term hereof, such limits shall be adjusted
so that the limits are then adequate. Lessor and Lessee shall act reasonably in
making such determination.
13. Damage and Destruction of Premises. In the event of damage or
destruction to the premises which is covered by insurance, unless required
otherwise by an institutional lender who holds an encumbrance against the
premises, the insurance proceeds shall be used for the repair and reconstruction
of such damage and the parties shall promptly repair and/or reconstruct the
premises and the interior improvements to their condition immediately prior to
the damage or destruction. This Lease shall continue in full force and effect in
the event of such damage and reconstruction. In the event the premises are
damaged by a cause not covered by the fire and extended coverage insurance
carried on the premises, Lessor shall reconstruct the premises to the extent of
the construction at the commencement hereof; provided however, if such uninsured
loss exceeds 33% of the then replacement cost of the building, Lessor shall have
the option of terminating this Lease by written notice to Lessee, within thirty
(30) days of such damage or destruction, in which event this Lease shall
terminate as of the date of the damage or destruction. Should Lessor not elect
to so terminate the Lease,
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it shall proceed with due dispatch to reconstruct the premises to the extent of
the construction at the commencement hereof, in which event this Lease shall
continue in full force and effect. In the event Lessor elects to terminate this
Lease, all rentals and other payments shall be prorated as of the date of
termination. If Lessor and Lessee are not able to agree if the uninsured loss
exceeds 33% of the then replacement cost of the building, the question shall be
resolved by the procedure set forth in paragraph 14.06.
14. Condemnation.
14.01 Total Condemnation of Leased Premises. If the whole of the
leased premises shall be acquired or condemned by eminent domain for any public
or quasi-public use or purpose, then the term of this Lease shall cease and
terminate as of the date of title vesting in such proceeding, and all rentals
shall be paid up to date and Lessee shall have no claim against Lessor or the
condemning authority for the value of any unexpired term of this Lease.
14.02 Partial Condemnation. If any part of the leased premises shall
be acquired or condemned as aforesaid, and in the event that such partial taking
or condemnation shall render the leased premises unsuitable for business of the
Lessee, then the term of this Lease shall cease and terminate as of the date of
title vesting in such proceeding. Lessee shall have no claim against Lessor nor
the condemning authority for the value
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of any unexpired term of this Lease, and rent shall be adjusted to the date of
such termination. In the event of a partial taking or condemnation which is not
extensive enough to render the premises unsuitable for the business of the
Lessee, then Lessor shall promptly restore the leased premises to a condition
comparable to its condition at the time of such condemnation, less the portion
lost in the taking, and this Lease shall continue in full force and effect with
an adjustment in rent based upon the square footage of the leased premises taken
to the square footage of the leased premises prior to the taking. If Lessor and
Lessee are not able to agree whether the partial taking or condemnation has
rendered the leased premises unsuitable for the business of Lessee, the question
shall be resolved by the procedure set forth in paragraph 14.06.
14.03 Lessor's Damages. In the event of any condemnation or taking as
aforesaid, whether whole or partial, the Lessee shall not be entitled to any
part of the award paid for such condemnation, and Lessor shall receive the full
amount of such award, Lessee hereby expressly waiving any right to or claim to
any part thereof.
14.04 Lessee's Damages. Although all damages in the event of any
condemnation for diminution in value of the leasehold or to the fee of the
leased premises shall belong to Lessor, Lessee shall have the right to claim and
recover from the condemning authority, but not from Lessor, such compensation as
may be separately awarded or recoverable by Lessee in Lessee's
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own right on account of any and all damage to Lessee's business by reason of the
condemnation and for or on account of any cost or loss to which Lessee might be
put in removing Lessee's merchandise, furniture, fixtures, leasehold
improvements and equipment.
14.05 Notice and Execution. Lessor agrees, immediately upon service of
process in connection with any appropriation or taking, to give to Lessee notice
in writing thereof. Lessee agrees to execute and deliver to the Lessor all
instruments that may be required to effectuate the provisions of this paragraph.
14.06 Resolution of Certain Disputes. In the event Lessor and Lessee
are unable to agree upon certain matters set forth in paragraphs 13, 14.02 or
34, Lessor and Lessee shall jointly appoint an arbitrator to decide the
question, or if Lessor and Lessee are unable to jointly agree upon an
arbitrator, Lessor or Lessee at any time by written notice to the other may
appoint an arbitrator, and the other party within five (5) days thereafter by
written notice to the first party may appoint an arbitrator. The arbitrator or
arbitrators so selected shall decide the question and give notice to Lessor and
Lessee thereof within five (5) business days after appointment. If there are two
arbitrators who are unable to agree, either arbitrator may request the presiding
judge of the Maricopa County Superior Court to appoint a third arbitrator and
the decision of a majority of the arbitrators, which shall be made and given to
Lessor and
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Lessee within five (5) business days after appointment of the third arbitrator,
shall be binding upon Lessor and Lessee. If Lessor or Lessee fails to timely
designate an arbitrator, the decision shall be made by the arbitrator appointed
by the other party. The decision as determined by arbitration shall be binding
upon the parties. The costs of arbitration shall be borne equally by Lessor and
Lessee.
15. Default.
15.01 Default - Grounds. The failure to pay any monetary amount due
and payable hereunder upon the date when such payment is due, such failure
continuing for a period of fifteen days after written notice of such default,
shall constitute an event of default on the part of Lessee. The occurrence of
any of the following events will constitute an event of default by either party
hereunder: (i) default in the performance of any of such party's agreements or
obligations hereunder, such default continuing for thirty days after written
notice thereof from the non-defaulting party to the defaulting party, provided
that if such default cannot reasonably be cured within such thirty day period,
then the defaulting party will not be in default hereunder if it, within such
thirty day period, commences curing of such default and diligently and in good
faith prosecutes the same; (ii) a general assignment by a party for the benefit
of creditors; (iii) the filing of a voluntary petition in bankruptcy by a party
or the filing of an involuntary petition by a party's creditors, such
involuntary petition remaining undischarged for a
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period of thirty days; (iv) the appointment of a receiver to take possession of
substantially all of a party's assets or of this leasehold, such receivership
remaining undissolved for a period of thirty days; or (v) attachment, execution
or other judicial seizure of substantially all of a party's assets or this
leasehold, such attachment, execution or other seizure remaining undismissed or
undischarged for a period of thirty days after the levy thereof.
15.02 Default - Remedies. Upon the happening of any such event of
default on the part of Lessee, Lessor, at any time thereafter, and prior to the
curing of such default, may: (i) with or without notice or demand declare the
term hereof ended and re-enter the leased premises or any part thereof (with or
without process of law) and expel or remove therefrom Lessee and all parties
occupying the same or any of them, using such force as may be necessary to do
so, and again repossess and enjoy the same without prejudice to any remedies
that Lessor might otherwise have by reason of such default; or (ii) re-enter the
leased premises at its option, without declaring the lease term ended, and relet
the whole or any part thereof for the account of Lessee on such terms and
conditions and at such rent as may then prevail for comparable property,
collecting such rent and applying it on the amount due from Lessee hereunder and
on the expense of reletting and on any other damage or expense so sustained by
Lessor, or on any such item or items, recovering from Lessee the difference
between the proceeds of such reletting
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and the amount of the rentals reserved hereunder, which sum Lessee agrees to pay
upon demand. Should Lessor terminate this lease by reason of any such default by
Lessee, Lessor may thereupon recover from Lessee the worth, at the time of such
termination, of the excess, if any, of the amount of rent and charges equivalent
to rent reserved herein for the balance of the term over the then reasonable
rental value of the leased premises for the same period. Lessor will not, by any
re-entry or other act, be deemed to have terminated this lease, or the liability
of Lessee for the total rent hereunder or any installment thereof then due or
thereafter accruing or for damages, unless Lessor notifies Lessee in writing
that Lessor has so elected to terminate the lease. In addition to the foregoing
remedies, Lessor may rectify any defaults of Lessee and add to the rent to be
paid hereunder, and to any installment or installments thereof thereafter
becoming due. If any installment of rent or any other payment is not paid
promptly when due it will bear interest at 18% per annum from the date on which
it becomes due until paid, but this provision is not intended to relieve Lessee
from any default in the making of any payment at the time and in the manner
herein specified. The foregoing interest, expenses and damages will be
recoverable from Lessee by the exercise of Lessor's remedies hereinabove set
forth. The remedies of Lessor specified herein will be cumulative as to each
default to the extent allowed by law.
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Upon the happening of any such event of default by Lessor, Lessee, at
any time thereafter, and prior to the curing of such default, may: (i) declare
the term hereof ended; (ii) sue Lessor for damages; (iii) sue Lessor for
specific performance; or (iv) exercise any of the rights or remedies as may be
allowed by law or equity. The remedies of Lessee specified herein will be
cumulative as to each default to the extent allowed by law.
16. Holding Over. In the event of any holding over with the consent of
Lessor beyond the end of the term hereof, this Lease will be deemed a monthly
tenancy upon the agreements herein contained and Lessee will pay a monthly
rental at the rate most recently payable by it pursuant to Section 2 above, in
advance at the beginning of each heldover month, plus any other charges or
payments contemplated in this lease.
17. Compliance with Laws. Lessee will comply with all governmental laws,
ordinances, rules and regulations at any time applicable to Lessee's use and
occupancy of the leased premises. Lessee will have the right, however, to
contest any such law, ordinance, rule or regulation by appropriate legal action,
provided that such contest is conducted without expense or prejudice to Lessor.
18. Statement from Lessee. Lessee will at any time and from time to time
within twenty days after written request by Lessor execute, acknowledge and
deliver to Lessor a written statement certifying that this Lease is unmodified
and in full
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force and effect if such is the fact (or, if there has been any modification
thereof, stating the modifications) and the dates to which the rentals and other
charges have been paid in advance, if any. It is understood that any such
statement may be relied upon by any prospective purchaser of the estate of
Lessor, or by the mortgage or assignee of any mortgage or the trustee or
beneficiary of any deed of trust constituting a lien upon the leased premises.
19. Notices. All notices required to be given hereunder are to be in
writing. Such notices will be personally delivered or sent by United States
certified mail, postage prepaid, addressed to Lessor at 6913 East McDowell Road,
Scottsdale, Arizona 85257, and to Lessee at 6925 East McDowell Road, Scottsdale,
Arizona 85257, or at such other place as respective addressee may have
designated in a written notice to the other party. Service by delivery will be
deemed to occur on delivery and service by mail will be deemed to occur on the
delivery date shown on the return receipt.
20. Waiver. No waiver of any default by either party hereunder will be
implied from any omission by either party to take action on account of such
default if such default persists or is repeated, and no express waiver will
affect any default other than the default specified in the waiver, and then such
waiver will be operative only for the time and to the extent therein stated. A
waiver by either party of any provision hereof will not be construed as a waiver
of any subsequent breach of the
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same provision, nor will the consent or approval by either party to or of any
act by the other be deemed to waive or render unnecessary its consent or
approval to or of any subsequent similar acts.
21. Access Parcel. During the term hereof Lessee shall have use of the
Access Parcel for the purpose of passage of vehicles and persons, and for such
other purposes as may be acceptable to the party then entitled to possession of
the property immediately east of the leased premises. During the term hereof
Lessor shall have no right to the use of the Access Parcel.
22. Complete Agreement. It is expressly agreed that the provisions of this
Lease cannot be altered, changed, modified or added to except in writing signed
by the parties hereto.
23. Time. Time is of the essence hereof.
24. Short-form Lease. Upon request of either party, Lessor or Lessee will
both execute and acknowledge a short-form lease for purposes of recording, which
short-form lease will describe the premises as being subject to the rights,
agreements and restrictions contained herein and the term hereof.
25. Assignment and Subletting. Lessee may not assign this Lease or any
interest herein, or sublet the leased premises or any portion thereof, without
the prior written consent of Lessor, which consent will not be unreasonably
withheld. Lessor
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hereby consents to an assignment by Lessee to an affiliate of or related party
to Lessee or a stockholder thereof or a spouse or lineal descendent thereof or a
trust, estate, partnership, corporation or entity with respect to which the
principal beneficiaries or beneficial owners are such stockholders, spouses or
lineal descendents, or their parents, brothers, sisters, uncles, aunts or
cousins. Any assignment or subletting prohibited hereunder without the consent
of Lessor will be void. The assignee under any such assignment must agree to
perform all of Lessee's obligations hereunder, but no such assignment will have
the effect of relieving Lessee of its primary liability for the performance of
all of its said obligations.
26. There is none.
27. Applicable Law. This Lease shall be construed under the laws of the
State of Arizona.
28. Attorney's Fees. In the event of any action at law or in equity between
Lessor and Lessee to enforce any of the provisions or rights hereunder, the
unsuccessful party to such litigation covenants and agrees to pay the successful
party all costs and expenses, including reasonable attorneys' fees incurred
therein by said successful party, and if said successful party shall recover
judgment in any such action or proceeding, such costs, expenses and attorneys'
fees shall be included in and made a part of such judgment. Should Lessor,
without fault, be made a party to any litigation instituted by or against
Lessee, Lessee
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covenants and agrees to pay Lessor all costs and expenses, including reasonable
attorneys' fees incurred by Lessor in connection with such litigation. Should
Lessee, without fault, be made a party to any litigation instituted by or
against Lessor, Lessor covenants and agrees to pay Lessee all costs and
expenses, including reasonable attorneys' fees incurred by Lessee in connection
with such litigation.
29. Address, Quiet Enjoyment and Condition of Title. Lessor covenants and
warrants that the leased premises has a street address of 6913 East McDowell,
Scottsdale, Arizona 85257, that the leased premises constitutes the property
upon which the business of Max of Switzerland is being conducted on the date
hereof and that the leased premises is all of the property lying north of the
south line of the leased premises and west of the center line of the wall and
west of the center line of the wall as extended north to McDowell Road (the wall
being that certain wall which divides the businesses of Scottsdale Porsche+Audi,
Ltd. and Max of Switzerland on the date hereof). Lessor covenants and agrees
that Lessee, so long as it shall not be in default hereunder, shall peacefully
and quietly hold, occupy and enjoy the premises during the term of this Lease.
Lessor covenants and warrants that the leased premises are free and clear of all
liens, encumbrances and adverse claims except, second half 1984 taxes, 1985
taxes and liens, encumbrances and adverse claims in favor of Southland Life
Insurance Company and The Arizona Bank.
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30. Rights of First Refusal. At any time prior to fifty-five days following
the expiration of the term of this Lease, Lessor shall not sell or contract to
sell less than all of the leased premises. At any time prior to fifty-five days
following the expiration of the term of this Lease, Lessor shall not sell or
contract to sell all of the leased premises unless the premises is first offered
to Lessee for the same price, and upon the same terms and conditions as to which
Lessor proposes to sell or transfer the premises to the third party. Lessor must
give Lessee written notice setting forth the name and address of the proposed
purchaser and the price, terms and conditions of any bona fide offer by or to
Lessor under which Lessor proposes to sell or transfer the premises. Within the
thirty day period following Lessee's receipt of such notice, or within sixty
days following the expiration of the term of the Lease, whichever first occurs,
Lessee by written notice to Lessor may elect to purchase the premises, for the
same price and upon the same terms as the offer. It Lessee does not elect to
purchase the premises, Lessor may then sell the premises to the third party
named in Lessor's notice to Lessee, for the price and upon the terms therein
stated. If the escrow is not closed for the price and upon the terms and
conditions contained in the notice, then Lessor may not thereafter, at any time
prior to fifty-five days following the expiration of the term of this Lease,
sell the premises to any party other than Lessee without first offering the
premises to Lessee in the manner set forth in this paragraph. The provisions of
this paragraph shall have no application to a
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transfer of the premises or any portion thereof, by gift or in any other manner,
by Lessor to his spouse, to any of his lineal descendants or spouses of lineal
descendants (through natural birth or legal adoption), to a corporation or
partnership, the majority voting interest of which is owned by Lessor, or to a
trust, all of the beneficial interest of which is owned by one, some or all of
the foregoing permitted transferees.
At any time prior to fifty-five days following the expiration of the term
of this Lease, Lessor shall not lease or contract to lease all or any portion of
the leased premises unless same is first offered to Lessee for the period
following the expiration of the term of this Lease, upon the same lease terms
and conditions as to which Lessor proposes to lease same to the third party.
Lessor must give Lessee written notice setting forth the name and address of the
proposed lessee and the terms and conditions of any bona fide offer by or to
Lessor under which Lessor proposes to lease the premises. Within the thirty day
period following Lessee's receipt of such notice, or within sixty days following
the expiration of the term of the Lease, whichever first occurs, Lessee by
written notice to Lessor may elect to lease the premises, upon the same terms as
the offer. If Lessee does not elect to lease the premises, Lessor may then lease
the premises to the third party named in Lessor's notice to Lessee, upon the
terms therein stated. If the lease is not executed upon the terms and conditions
contained in the notice, then Lessor may not thereafter, at any time prior to
fifty-five days following the expiration of the term of this Lease, lease the
premises to
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any party other than Lessee without first offering the premises to Lessee in the
manner set forth in this paragraph.
The name of the proposed purchaser or lessee shall be kept confidential by
Lessee, and Lessee shall not take any action which would jeopardize the proposed
sale or lease, other than to exercise Lessee's right to purchase or lease
pursuant to this paragraph 30.
31. Other Agreement and Cross Default. Max Haechler and Lessee are
simultaneously herewith executing a Consulting and Non-Compete Agreement. An
event of default by a party under said Consulting and Non-Compete Agreement
shall also constitute an event of default under this Lease in the same manner as
if an event of default had occurred directly under this Lease.
32. There is none.
33. Option to Extend. By written notice to Lessor given not later than
December 31, 2004, and provided Lessee is not then in default hereunder, Lessee
shall have the right to extend the term hereof for an additional period of five
(5) years commencing January 1, 2006. All of the terms and provisions hereof
shall be applicable during the renewal term, except that a cost of living
adjustment shall be made in accordance with paragraph 2.02 hereof at the
commencement of the two year period beginning January 1, 2006, at the
commencement of the two year period beginning January 1, 2008, and at the
commencement of the one year period beginning January 1, 2010, and provided that
the
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monthly rental shall not at any time be greater than that set forth on the
attached Monthly Rent Payment Schedule.
34. Option to Purchase. If the original term or renewal term of this Lease
is then in effect and Lessee is not then in default hereunder, Lessee shall have
the right to purchase the premises, exercisable by giving written notice to
Lessor at least one (1) year prior to the end of the original term of this Lease
or at any time during the renewal term of this Lease for a purchase price equal
to 100 times the last monthly base rental in effect prior to the close of the
escrow hereinafter described, which purchase price shall be paid in full in cash
at the close of escrow. Notwithstanding the foregoing, if the written notice is
given during the original term, the amount which the monthly base rental would
have been during January, 2006 had there been a cost of living adjustment as of
January 1, 2006 shall be calculated (with the January, 2006 figure not being
greater than 233.33% of the base rental in years 1 and 2), and the purchase
price shall equal 100 times such amount.
Within fifteen (15) days after the date of such notice, an escrow shall be
opened with the title insurance company ("Escrow Agent") designated by Lessee in
such notice. Such escrow shall close not later than sixty (60) days after the
opening of same; provided, however, if Lessee exercises such option during the
original term hereof, the close of escrow shall occur on January 31, 2006, and
if Lessee exercises such option
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during the renewal term hereof, the close of escrow shall occur not earlier than
thirty (30) days after the date of such notice. Lessee is not then in default,
Lessee shall be entitled to copy the leased premises pursuant to the terms
hereof at the rental then in effect until the close of escrow.
Escrow Agent, within ten (10) days after the opening of escrow, shall
deliver to Max Haechler and Elizabeth M. Haechler (the "Haechlers") and to
Lessee a preliminary title report or commitment for a standard owner's title
insurance policy (herein "Preliminary Report") to insure fee simple title in
Lessee as to the premises, under which the insured is Lessee and in the amount
of the purchase price. In addition to the Preliminary Report, Escrow Agent shall
simultaneously deliver to Lessee copies of all documents identified in Part 2 of
Schedule B of the Preliminary Report and in the Requirements Section of the
Preliminary Report. At any time prior to the scheduled close of escrow, Lessee
shall have the right to notify Escrow Agent and the Haechlers in writing of any
defect in the title of the premises and if the Haechlers do not cause such
defect to be eliminated or agreed to be insured over within ten (10) days of
receipt of notice of such defect, Lessee, at its option, shall be entitled to
cancel the escrow, or accept title in its then condition in which event the
expense of eliminating such defects and the amount of any such defects which are
not eliminated shall be treated as credits to Lessee and applied against the
purchase price. A defect in title
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for purposes hereof shall be any condition then customarily deemed in Maricopa
County, Arizona to render the premises unmarketable. If Lessor and Lessee are
not able to agree as to whether an item constitutes a defect in title, the
question shall be resolved by the procedure set forth in paragraph 14.06. At
close of escrow, the Haechlers shall provide to Lessee a standard coverage
owner's title insurance policy which shall show as exceptions no items other
than those permitted by Lessee according to the terms hereof, and shall be in
the form of the standard coverage owner's title insurance policy usually then
issued by the title insurer for Escrow Agent. At close of escrow, the Haechlers
shall execute a Warranty Deed to be recorded at close of escrow which shall
warrant title subject only to those exceptions permitted by Lessee pursuant to
the terms hereof.
35. Prime Lease. Max Haechler and Elizabeth M. Haechler will timely pay and
perform all obligations of the lessor under that certain Net Lease, dated
September 14, 1979, between Max Haechler and Elizabeth M. Haechler as lessor and
Lessor as lessee ("Prime Lease"), and Lessor will timely pay and perform all
obligations of the lessee under the Prime Lease. Lessor will not declare a
breach or forfeiture by the lessor under the Prime Lease, will not advise the
lessor under the Prime Lease of any default by the lessor thereunder and will
not perform any act which would give Southland Life Insurance Company the right
to declare a default under any documents relating to
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the property which is the subject of the Sublease. The Prime Lease may not be
amended without the prior written consent of Lessee.
36. Subordination. Lessee shall have the right during the original term and
renewal term of this Lease to obtain construction loans, the proceeds of which
shall be used only for alterations, improvements and additions to be built upon
the premises. For this purpose, Lessee may subject the premises to a lien and
Lessor and Max Haechler and Elizabeth M. Haechler covenant and agree to join
with Lessee in the execution and delivery of such instruments as may be
reasonably required to evidence the subordination of the premises to such lien.
Such mortgage, deed of trust or other security instrument shall constitute a
lien on the premises as well as the buildings and improvements erected thereon
by Lessee, which shall be senior and superior to the interests of Lessor and Max
Haechler and Elizabeth M. Haechler therein.
37. Benefit and Burden. The rights, duties and obligations created
hereunder shall inure to the benefit of and be binding upon the parties hereto,
their heirs, personal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
date indicated on the first page.
LESSOR: LESSEE:
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MAX OF SWITZERLAND SCOTTSDALE PORSCHE+AUDI, LTD.
By /s/ Max Haechler By /s/ Knappenberger
---------------------------- --------------------------------
Max Haechler, President Steven Knappenberger, Chairman
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STATE OF ARIZONA )
: SS.
County of Maricopa )
On this, the 7 day of June, 1985, before me, the undersigned officer,
personally appeared MAX HAECHLER who acknowledged himself to be the President of
MAX OF SWITZERLAND, and that he, as such officer, being authorized so to do,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ (Illegible)
----------------------------------
NOTARY PUBLIC
My Commission Expires:
My Commission Expires Mar. 25, 1989
- -----------------------------------
STATE OF ARIZONA )
: SS.
County of Maricopa )
On this, the 7 day of June, 1985, before me, the undersigned officer,
personally appeared STEVEN KNAPPENBERGER who acknowledged himself to be the
Chairman of SCOTTSDALE PORSCHE+AUDI, LTD., and that he, as such officer, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as such officer.
continued
<PAGE>
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ (Illegible)
----------------------------------
NOTARY PUBLIC
My Commission Expires:
My Commission Expires Mar. 25, 1989
- -----------------------------------
-2-
<PAGE>
MONTHLY RENT PAYMENT SCHEDULE
(Maximum Monthly Rent)
Monthly Rent Maximum
(the following percentage
of the base rental in
Calendar Years years 1 and 2)
- -------------- --------------
3-4 113.33%
5-6 126.67%
7-8 140.00%
9-10 153.33%
11-12 166.67%
13-14 180.00%
15-16 193.33%
17-18 206.67%
19-20 220.00%
Option years 1-2 233.33%
Option years 3-4 246.67%
-3-
<PAGE>
Option year 5 260.00%
-4-
<PAGE>
6/6/85
AMENDMENT TO SUBLEASE
DATE: June 7, 1985
LESSOR: MAX OF SWITZERLAND, an Arizona corporation
LESSEE: SCOTTSDALE PORSCHE+AUDI, LTD., an Arizona corporation
RECITALS:
Lessor and Lessee entered into a certain Sublease and various letter
amendments thereto, all dated August 11, 1980 (collectively "Sublease") and are
desirous of amending the Sublease on the terms hereinafter set forth.
The parties hereto agree as follows:
I
Paragraph 30 of the Sublease is amended by adding at the end thereof the
following: "Notwithstanding anything in this paragraph 30 to the contrary, the
rights of first refusal set forth in this paragraph 30 shall terminate on August
12, 1998 if prior to that date Lessee has not given written notice to Lessor
that Lessee elects to extend the term hereof pursuant to paragraph 33 hereof."
II
Paragraph 33 of the Sublease is amended in its entirety to read as follows:
"33. Option to Extend. By written notice to Lessor given not later
than August 11, 1998, and provided Lessee is not then in default hereunder,
<PAGE>
Lessee shall have the right to extend the term hereof for an additional
period of five (5) years commencing August 11, 2000. All of the terms and
provisions hereof shall be applicable during the renewal term, except that
a cost of living adjustment shall be made in accordance with paragraph 2.02
hereof (except at two year intervals) at the commencement of the renewal
term for the first two years of the renewal term, at the commencement of
the third year of the renewal term for years 3-4 of the renewal term and at
the commencement of the fifth year of the renewal term for year 5 of the
renewal term, and provided that the monthly rental shall not at any time be
greater than that set forth on the attached Extension Term Monthly Rent
Payment Schedule."
III
The Sublease is amended by adding thereto the following paragraph 35:
"35. Subordination.
With the prior written consent of Lessor (which Lessor will not
unreasonably withhold), Lessee shall have the right during the original
term and renewal term of this Lease to obtain construction loans, the
proceeds of which shall be used only for alterations, improvements and
additions to be built upon the premises. For this purpose, Lessee may
subject the
2
<PAGE>
premises to a lien and Lessor and Max Haechler and Elizabeth M. Haechler
covenant and agree to join with Lessee in the execution and delivery of
such instruments as may be reasonably required to evidence the
subordination of the premises to such lien. Such mortgage, deed of trust or
other security instrument shall constitute a lien on the premises as well
as the buildings and improvements erected thereon by Lessee, which shall be
senior and superior to the interests of Lessor and Max Haechler and
Elizabeth M. Haechler therein."
IV
The Sublease shall remain in full force and effect, as amended hereby.
V
The rights, duties and obligations created hereunder shall inure to the
benefit of and be binding upon the parties hereto, their heirs, personal
representatives, successors and assigns.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Sublease as of the date indicated on the first page.
LESSOR: LESSEE:
MAX OF SWITZERLAND SCOTTSDALE PORSCHE+AUDI, LTD.
By /s/ Max Haechler By /s/ Stseven Knappenberger
---------------------------- ---------------------------------
Max Haechler, President Steven Knappenberger,
Chairman
STATE OF ARIZONA )
: ss.
County of Maricopa )
On this, the 7 day of June, 1985, before me, the undersigned officer,
personally appeared MAX HAECHLER who acknowledged himself to be the President of
MAX OF SWITZERLAND, and that he, as such officer, being authorized so to do,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Linda Colquette
------------------------------------
NOTARY PUBLIC
My Commission Expires:
My Commission Expires Mar. 25, 1989
- -----------------------------------
4
<PAGE>
STATE OF ARIZONA )
: ss.
County of Maricopa )
On this, the 7 day of June, 1985, before me, the undersigned officer,
personally appeared STEVEN KNAPPENBERGER who acknowledged himself to be the
Chairman of SCOTTSDALE PORSCHE+AUDI, LTD., and that he, as such officer, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Linda Colquette
------------------------------------
NOTARY PUBLIC
My Commission Expires:
My Commission Expires Mar. 25, 1989
- -----------------------------------
CONSENT
The undersigned guarantors hereby consent to the foregoing Amendment to
Sublease.
DATED this 7 day of June, 1985
/s/ Steven Knappenberger
------------------------------------
Steven Knappenberger
/s/ Tamara F. Knappenberger
------------------------------------
Tamara F. Knappenberger
5
<PAGE>
/s/ Max Haechler
------------------------------------
Max Haechler
/s/ Elizabeth M. Haechler
------------------------------------
Elizabeth M. Haechler
6
<PAGE>
EXTENSION TERM MONTHLY
RENT PAYMENT SCHEDULE
(Maximum Monthly Rent)
Monthly Rent Maximum
(the following
percentage of the base
rental in year 1 of the
Option Years base term)
------------ -----------------------
1-2 297.24%
3-4 310.58%
5 323.91%
<PAGE>
NON-DISTURBANCE AGREEMENT
THIS AGREEMENT entered into this 7 day of June, 1985, between MAX HAECHLER
and ELIZABETH M. HAECHLER ("Lessor") and SCOTTSDALE PORSCHE+AUDI, LTD., an
Arizona corporation ('Sublessee"),
W I T N E S S E T H:
WHEREAS, Lessor is the owner of certain property described on Exhibit A
attached hereto,
WHEREAS, Lessor and MAX OF SWITZERLAND, an Arizona corporation
("Sublessor") entered into a certain Lease of the property described in Exhibit
A, dated September 14, 1979 ("Prime Lease") in which Lessor is lessor and
Sublessor is lessee, and
WHEREAS, Sublessor and Sublessee have entered into a certain Sublease with
respect to a portion of the property described on Exhibit A, dated June 7, 1985,
NOW, THEREFORE, it is mutually agreed as follows:
I
As an inducement to Sublessee to execute said Sublease, Lessor agrees that
Lessor, its successors and assigns, will not
<PAGE>
disturb the possession of Sublessee under said Sublease as a result of any
default by Sublessor under the Prime Lease and that Lessor will hold
Sublessee in quiet enjoyment of the premises described in the Sublease
under the terms of the Sublease so long as Sublessee shall not be in
default under the terms of the Sublease.
II
Lessor consents to the Sublease between Sublessor and Sublessee.
III
The rights, duties and obligations created hereunder shall inure to the
benefit of and be binding upon the parties hereto, their heirs, personal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Non-Disturbance
Agreement the day and year first above written.
LESSOR:
/s/ Max Haechler
---------------------------------
Max Haechler
-2-
<PAGE>
/s/ Elizabeth M. Haechler
---------------------------------
Elizabeth M. Haechler
SUBLESSEE:
SCOTTSDALE PORSCHE+AUDI, LTD.
By /s/ Steven Knappenberger
------------------------------
Steven Knappenberger, Chairman
-3-
<PAGE>
STATE OF ARIZONA )
: ss.
County of Maricopa )
On this, the 7 day of June, 1985, before me, the undersigned officer,
personally appeared MAX HAECHLER and ELIZABETH M. HAECHLER, known to me to be
the persons whose names are subscribed to the within instrument and acknowledged
that they executed the same for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Linda Colquette
--------------------------------
NOTARY PUBLIC
My Commission Expires:
My Commission Expires Mar. 25, 1989
- -----------------------------------
STATE OF ARIZONA )
: ss.
County of Maricopa )
-4-
<PAGE>
On this, the 7 day of June, 1985, before me, the undersigned officer,
personally appeared STEVEN KNAPPENBERGER who acknowledged himself to be the
Chairman of SCOTTSDALE PORSCHE+AUDI, LTD., and that he, as such officer, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Linda Colquette
--------------------------------
NOTARY PUBLIC
My Commission Expires:
My Commission Expires Mar. 25, 1989
- -----------------------------------
-5-
<PAGE>
AGREEMENT
THIS AGREEMENT ("Agreement") is made by and among MAX HAECHLER and
ELIZABETH M. HAECHLER, husband and wife ("Haechler"), MAX OF SWITZERLAND, an
Arizona corporation ("Max") and SCOTTSDALE PORSCHE + AUDI, LTD., an Arizona
corporation ("SPA").
R E C I T A L S:
A. Some or all of the parties hereto executed the following documents, each
dated June 7, 1985: Escrow Instructions, Sublease, Memorandum of Sublease,
Nondisturbance Agreement, Amendment to Sublease, Consulting and Non-compete
Agreement and Agreement (all collectively called "Instruments").
B. The parties now desire to modify the Instruments.
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Subordination and Amendment of Sublease. Max, as sublessor under a
sublease agreement with SPA, as sublessee, dated August 11, 1980, ("Sublease")
as amended by the Amendment to Sublease dated June 7, 1985, agreed to
subordinate its interest in the leased premises to allow SPA to obtain certain
financing. The parties now agree that this subordination provision shall be
deleted from the Sublease, and that Max or Haechler shall have no obligation
whatsoever to subordinate the property commonly known as the Scottsdale Porsche
+ Audi dealership property for any reason. The parties agree that this Agreement
shall act as a second Amendment to the Sublease.
Max and/or Haechler agree to subordinate only the property commonly known
as the Max of Switzerland Jaguar dealership property which is the subject of the
Sublease Agreement between Max and SPA dated June 7, 1985.
2. Lot Split. Max and/or Haechler own and/or lease various property which
is the subject of leases with SPA and adjacent property. The parties agree that
it is necessary to split out these properties for tax reasons and lien reasons,
among others, and the parties agree to take whatever steps are necessary to
implement this lot split.
3. Reaffirmation. In all other respects, the Instruments are hereby
reaffirmed.
IN WITNESS WHEREOF, the parties have executed this Agreement this 15th day
of July, 1985.
<PAGE>
/s/
--------------------------------
MAX HAECHLER
/s/
--------------------------------
ELIZABETH M. HAECHLER
By: Max Haechler - power of attorney
MAX OF SWITZERLAND, an Arizona
corporation
By: /s/
----------------------------
Its: President
SCOTTSDALE PORSCHE + AUDI,
LTD., an Arizona corporation
By: /s/
--------------------------------
STEVEN KNAPPENBERGER
Its: Chairman
/s/
--------------------------------
STEVEN KNAPPENBERGER
/s/
--------------------------------
TAMARA F. KNAPPENBERGER
[6.3-2]
-2-
<PAGE>
[Letterhead of Schweizerisches Konsulat]
Scottsdale, 16 April 1985
Power of Attorney
The undersigned, Elizabeth M. Haechler herewith assigns full power of attorney
to her husband Max Haechler for any and all transactions related to whatever
matter relative to the Max of Switzerland corporation or any other personal
matters concerning joint real estate holdings.
/s/
--------------------------------
ELIZABETH M. HAECHLER
April 16, 1985
[Notarial Seal]
State of Arizona
County of Maricopa
/s/
- --------------------------------
My Commission Expires Nov. 24, 1987
-3-
<PAGE>
AMENDMENT TO SUBLEASE
DATE: November 11, 1985
LESSOR: MAX OF SWITZERLAND, An Arizona corporation
LESSEE: SPA AUTOMOTIVE, LTD., an Arizona corporation (whose former name was
Scottsdale Porsche+Aud, Ltd.)
RECITALS:
A. Lessor and Lessee entered into a certain Sublease, dated June 7, 1985
("Sublease").
B. Lessor and Lessee are desirous of amending the Sublease to reflect a
different description of the leased premises.
AGREEMENTS:
IT IS MUTUALLY AGREED AS FOLLOWS:
1. Schedule "A" attached hereto is substituted for the Schedule "A"
attached to the Sublease, and the "premises" or "leased premises" as described
in the Sublease shall be the property described on Schedule "A" attached hereto.
<PAGE>
2. The Sublease shall remain in full force and effect, as amended hereby.
3. The rights, duties and obligations created hereunder shall inure to the
benefit of and be binding upon the parties hereto, their heirs, personal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Sublease as of the date indicated on the first page.
LESSOR: LESSEE:
MAX OF SWITZERLAND SPA AUTOMOTIVE, LTD.
By /s/ Max Haechler By /s/ Steven Knappenberger
- ------------------------------- ---------------------------------
Max Haechler, President Steven Knappenberger, Chairman
The undersigned hereby approve all of the terms and provisions of the
foregoing Amendment to Sublease.
/s/ Steven Knappenberger /s/ Tamara F. Knappenberger
- ------------------------------- ---------------------------------
Steven Knappenberger Tamara F. Knappenberger
-2-
<PAGE>
/s/ Max Haechler /s/ Elizabeth M. Haechler
- ------------------------------- ---------------------------------
Max Haechler Elizabeth M. Haechler
-3-
<PAGE>
SCHEDULE "A"
Main Parcel
A portion of FARM UNIT "B", FARM UNIT Plat of Lot 2, Section 3, TIN R4E,
G&SRB&M, Maricopa County, Arizona, more particularly described as follows:
Beginning at the Northeast corner of said FARM UNIT "B"; thence Westerly
along the North line of said FARM UNIT "B", S 89(degree)02'50" W, a distance of
265.81 feet to the True Point of Beginning; thence S 00(degree)52'45" E, a
distance of 374.66 feet to the North line of PAPAGO PARKWAY Subdivision as
recorded in Book 78, Page 12 of Maricopa County Records; thence Westerly along
the North line of said PAPAGO PARKWAY Subdivision S 89(0)01'50" W, a distance of
140.52 feet; thence N 01(0)09'20" E, a distance of 374.95 feet to the North line
of said FARM UNIT "B"; thence S 89(degree)02'50" E, a distance of 127.21 feet to
the True Point of Beginning.
ACCESS PARCEL
A portion of FARM UNIT "B", FARM UNIT Plat of Lot 2, Section 3, T1N,
R4E, L&SRB&M, Maricopa County, Arizona, more particularly described as follows:
Beginning at the Northeast corner of said FARM UNIT "B"; thence Westerly along
the North line of said FARM UNIT "B", S89(degree)02'50" W, a distance of 265.81
feet; thence S 00(degree)52'45" E, a distance of 65.00 feet to the True Point of
Beginning; thence N 89(degree)02'50" E, a distance of 18.50 feet; thence S
00(degree)32'45" E, a distance of 53.00 feet; thence S 89(degree)02'50" W, a
distance of 32.00 feet; thence N 00(degree)32'45" W a distance of 53.00 feet;
thence N 89(degree)02'50" E, a distance of 13.50 feet to the True Point of
Beginning.
-4-
<PAGE>
TOGETHER with all leasehold improvements and fixtures located upon the Main
Parcel on the date hereof, including without limitation all hoists, compressors
and coolers, but excluding one wheel adjustment rack head and all personal
property.
-5-
<PAGE>
8/7/86
SECOND AMENDMENT TO SUBLEASE
DATE: July 30, 1986
LESSOR: MAX OF SWITZERLAND, an Arizona corporation
LESSEE: SPA AUTOMOTIVE, LTD., an Arizona corporation
RECITALS:
A. Lessor and Lessee entered into a certain Sublease, dated June 7, 1985,
as amended by Amendment to Sublease, dated November 11, 1985 ("Sublease").
B. Lessor and Lessee are desirous of amending the Sublease on the terms set
forth herein.
AGREEMENTS:
IT IS MUTUALLY AGREED AS FOLLOWS:
1. Paragraph 36 of the Sublease is amended to read:
"36. Subordination. Lessee shall have the right to borrow from The
Arizona Bank the principal sum of $2,250,000.00 in accordance with a Note to The
Arizona Bank dated July 30, 1986 and a Deed of Trust and Assignment of Rents
securing payment of the Note likewise dated July 30, 1986. Thereafter, so long
as Lessee is not in default, Lessee shall
<PAGE>
have the right during the original term and the renewal terms of this Lease from
time to time to refinance said loan (as said loan may from time to time be
refinanced), provided that the principal amount of any such loan shall not
exceed the sum of $2,250,000.00, and that the loans shall be on such terms and
conditions as are then available in the market place for loans of like nature.
For this purpose, Lessee may subject the premises to liens to secure such loans
and Lessor and Max Haechler and Elizabeth M. Haechler (jointly "Haechlers")
covenant and agree to join with Lessee in the execution and delivery of such
instruments as may be reasonably required to evidence the subordination of the
premises to such items, provided that Lessor and Haechlers are given notice and
an opportunity to cure and a secured indemnity on substantially similar terms as
those contained in that certain Indemnification Agreement of even date herewith
by and between Marion K. Bolin, as Trustee of the H. M. Knappenberger Trusts No.
1, No. 2 and No. 3, Steven Knappenberger and Tamara F. Knappenberger, and each
of them, Max Haechler, Elizabeth M. Haechler and Max of Switzerland, an Arizona
corporation. Such mortgage, deed of trust or other security with respect to each
loan shall constitute a lien on the premises as well as the buildings and
improvements erected thereon by Lessee, which shall be senior and superior to
the interests of Lessor and Haechlers therein. Lessee shall cause the lien of
any such mortgage, deed of trust or other security to which Lessor or Haechlers
have subordinated their interest in the premises to be released from the
premises on or before the expiration of the
-2-
<PAGE>
base term (or the renewal term if the renewal option is exercised) hereof unless
Lessee shall have acquired the interest of Lessor and Haechlers in the
premises."
2. Should a default occur in any payment and/or performance required
under the terms of any loans or any documents evidencing the loan to which
Lessor and Haechlers have subordinated,* and/or should a default occur in any
performance required under the Indemnification Agreement given in connection
with such subordination, such default shall also constitute a default under this
Sublease.
3. The Sublease shall remain in full force and effect, as amended
hereby.
*and/or should any of the terms of the loan or any document evidencing the loan
to which Lessor and Haechlers have subordinated be altered or changed in any
material way, without the prior written consent of Lessor and Haechlers, which
will not be unreasonably withheld,
4. The rights, duties and obligations created hereunder shall inure to
the benefit of and be binding upon the parties hereto, their heirs, personal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to Sublease as of the date indicated on the first page.
-3-
<PAGE>
LESSOR: LESSEE:
MAX OF SWITZERLAND SPA AUTOMOTIVE, LTD.
By /s/ By /s/
----------------------------- -----------------------------------
Max Haechler, President Steven Knappenberger, Chairman
-4-
<PAGE>
The undersigned hereby approve all of the terms and provisions of the
foregoing Second Amendment to Sublease, and the undersigned Max Haechler and
Elizabeth M. Haechler further agree to timely perform those obligations imposed
upon them under the Sublease and the foregoing Amendment to Sublease.
/s/ By Steven Knappenberger,
/s/ attorney-in-fact
- ------------------------------- ---------------------------------
Steven Knappenberger Tamara F. Knappenberger
/s/ by Max Haechler,
/s/ attorney-in-fact
- ------------------------------- ---------------------------------
Max Haechler Elizabeth M. Haechler
-5-
<PAGE>
ASSIGNMENT AND ASSUMPTION OF SUBLEASE
DATE: June 7, 1989
ASSIGNOR: SPA AUTOMOTIVE LTD., an Arizona corporation
formerly known as Scottsdale Porsche+Audi, Ltd.
ASSIGNEE: SL AUTOMOTIVE, LTD., an Arizona corporation
RECITALS:
A. Max of Switzerland, an Arizona corporation, as "Lessor," and Assignor,
as "Lessee," entered into a certain Sublease dated June 7, 1985, which Sublease
was amended by a certain Amendment to Sublease dated November 11, 1985 and a
certain Second Amendment to Sublease dated July 30, 1986 (collectively, the
"Sublease").
B. Assignor desires to assign to Assignee, and Assignee desires to assume,
the rights and obligations of Assignor under the Sublease.
AGREEMENTS:
In consideration of the mutual covenants contained herein and for other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Assignor assigns to Assignee all of Assignor's right, title and interest
in, to and under the Sublease and the leasehold estate created thereby, such
assignment to be effective on the earlier of August 1, 1989 and the date upon
which Assignee
<PAGE>
opens for business to the public a motor vehicle dealership at the leased
premises as defined in the Sublease (the "Effective Date").
2. Assignor represents and warrants to Assignee that:
(a) Assignor is the sole owner and holder of the title to the entire
leasehold estate created by the Sublease.
(b) To the best of Assignor's knowledge, there are no claims pending
against Assignor with respect to the Sublease or which would affect Assignee in
any way as a result of this Assignment. Assignor is not in default under the
Sublease, and no conditions exist which with notice or lapse of time, or both,
would constitute a default or event of default by Assignor under the Sublease.
(c) This Assignment does not constitute a breach of or a default under
the Sublease.
3. Assignee agrees to perform and assumes all obligations of Assignor under
the Sublease accruing from and after the Effective Date. Assignee shall
indemnify Assignor against and hold Assignor harmless from any and all losses,
damages, debts, expenses, liabilities or claims of any kind, including, but not
limited to, reasonable attorneys' fees, resulting from or incident to the
Sublease and the leasehold estate, provided the same arise out of acts or
omissions to act from and after the Effective Date.
4. Assignor shall indemnify Assignee against and hold Assignee harmless
from any and all losses, damages, debts, expenses, liabilities or claims of any
kind, including but not limited to, reasonable attorneys' fees, resulting from
or incident to the Sublease and the leasehold estate, provided the same arise
out of acts or omissions to act prior to the Effective Date.
5. Assignor covenants that it shall forever defend Assignee's title to the
leasehold estate created by the Sublease
-2-
<PAGE>
against all persons whomsoever.
6. Assignor acknowledges that nothing herein shall relieve Assignor of its
liability to Max of Switzerland for the performance of the obligations of the
Lessee under the Sublease.
7. The rights, duties and obligations created hereunder shall inure to the
benefit of and be binding upon the parties hereto, their heirs, personal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Assignment as of the
date first above written.
ASSIGNOR:
SPA AUTOMOTIVE, LTD., an Arizona
corporation
By: /s/ Steven Knappenberger
--------------------------------
Its: Chairman
ASSIGNEE:
SPA AUTOMOTIVE, LTD., an Arizona
corporation
-3-
<PAGE>
By: /s/ Steven Knappenberger
--------------------------------
Its: Chairman
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 8th day of June,
1989, by Steven Knappenberger, the Chairman of SPA Automotive, Ltd., an Arizona
corporation, on behalf of the corporation.
/s/ Helen M. Dowell
----------------------------------
Notary Public
My Commission Expires:
My Commission Expires March 31, 1990
- ------------------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 8th day of June,
1989, by Steven Knappenberger, the Chairman of SL
-4-
<PAGE>
Automotive, Ltd., an Arizona corporation, on behalf of the corporation.
/s/ Helen M. Dowell
----------------------------------
Notary Public
My Commission Expires:
My Commission Expires March 31, 1990
- ------------------------------------
The undersigned hereby approve the foregoing Assignment and Assumption of
Lease.
/s/ Steven Knappenberger
----------------------------------
Steven Knappenberger
/s/ Tamara F. Knappenberger
----------------------------------
Tamara F. Knappenberger
THIRD AMENDMENT TO SUBLEASE
DATE: November 30, 1992
-5-
<PAGE>
LESSOR: MAX OF SWITZERLAND, an Arizona corporation
LESSEE: SPA AUTOMOTIVE, LTD., an Arizona corporation, formerly known as
Scottsdale Porsche+Audi, Ltd.
RECITALS:
A. Lessor and Lessee entered into a certain Sublease and various letter
amendments thereto, all dated August 11, 1980, which Sublease was amended by a
certain Amendment to Sublease dated June 7, 1985, and subsequently further
amended by a certain Agreement dated July 15, 1985 (collectively referred to as
the "Sublease").
B. The lessee's interest under the Sublease was previously assigned to
another party and then was reassigned to Lessee, and Lessee is the holder of the
lessee's interest under the Sublease.
C. Lessor and Lessee are desirous of amending the Sublease on the terms
hereinafter set forth.
WHEREFORE, the parties hereto agree as follows:
I.
Paragraph 1 of the Sublease is amended by inserting at the very beginning
thereof the following: "Except as may be otherwise provided for herein,"
II.
Paragraph 33 of the Sublease is amended in its entirety
-2-
<PAGE>
to read as follows:
"33. Options to Extend.
33.01 By written notice to Lessor given not later than August 11,
1998, and provided Lessee is not then in default hereunder, Lessee shall
have the right to extend the term hereof for an additional period of five
(5) years commencing August 11, 2000. All of the terms and provisions
hereof shall be applicable during the renewal term, except that a cost of
living adjustment shall be made in accordance with paragraph 2.02 hereof
(except at two year intervals) at the commencement of the renewal term for
the first two years of the renewal term, at the commencement of the third
year of the renewal term for years 3-4 of the renewal term and at the
commencement of the fifth year of the renewal term for year 5 of the
renewal term, and provided that the monthly rental shall not at any time be
greater than that set forth on the attached Extension Term Monthly Rent
Payment Schedule.
33.02 In addition to the renewal term set forth in subparagraph 33.01
hereof, by notice to Lessor given not later than one year prior to the
first day of each subsequent renewal term, and provided Lessee is not then
in default hereunder and Lessee has exercised all prior rights under this
paragraph to extend the term
-3-
<PAGE>
hereof, Lessee shall have the right to extend the term hereof for three (3)
additional periods of five (5) years each, with such subsequent renewal
terms commencing August 11, 2005, August 11, 2010, and August 11, 2015 (the
"subsequent renewal terms"). All of the terms and provisions hereof shall
be applicable during each subsequent renewal term, except that during the
subsequent renewal terms a cost of living adjustment shall be made in
accordance with subparagraph 33.03 hereof at the commencement of the
following dates:
August 11, 2007
August 11, 2009
August 11, 2011
August 11, 2013
August 11, 2015
August 11, 2017
August 11, 2019
Notwithstanding the provisions of this paragraph or any other provision of
this Sublease, the monthly rental for the first two years of the renewal
term commencing August 11, 2005, shall be the Capitalization Rate (as
hereinafter defined) multiplied by the Appraised Amount (as hereinafter
defined), as such Capitalization Rate and such Appraised Amount are
established by the first Appraisal (as hereinafter defined) to be made
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<PAGE>
hereunder, with such amount being divided by 12 (hereinafter referred to as
the "Adjusted Base Rental").
33.03 Commencing with rent due on August 11, 2007, and on August llth
of each two (2) years thereafter for the remaining term of this Lease
(including any extensions provided for herein), the Adjusted Base Rental
shall be adjusted in accordance with the change in the Consumer Price Index
(the "Index"), plus any applicable taxes (the "adjustment"). The Index
shall mean the average shown on the "U.S. City Average for Urban Wage
Earners and Clerical Workers -- All Items", as promulgated by the Bureau of
Labor Statistics of the U.S. Department of Labor. No such adjustment shall
reduce the annual rental below the monthly rental as adjusted for the
preceding twelve (12) months. The adjustment shall be increased in the same
ratio as the increase in the Index for the month of July of the year the
adjustment is being made as compared with the Index for the month of July,
2005; provided, however, that the adjustment shall not exceed the following
percentages:
August 11, 2007 adjustment shall not exceed
the Adjusted Base Rental by more than 10%;
August 11, 2009 adjustment shall not exceed
-5-
<PAGE>
the Adjusted Base Rental by more than 20%;
August 11, 2011 adjustment shall not exceed
the Adjusted Base Rental by more than 30%;
August 11, 2013 adjustment shall not exceed
the Adjusted Base Rental by more than 40%;
August 11, 2015 adjustment shall not exceed
the Adjusted Base Rental by more than 50%;
August 11, 2017 adjustment shall not exceed
the Adjusted Base Rental by more than 60%; and
August 11, 2019 adjustment shall not exceed
the Adjusted Base Rental by more than 70%.
Said adjustment shall be effective from the llth day of August of each year
in which the adjustment is to be made and shall govern the rental to be
paid during the next succeeding twenty-four (24) month period until the
next adjustment is to be made as set forth herein."
III.
The Sublease is amended by adding thereto the following paragraph 36:
"36. Appraisal and Option to Purchase. On or before April 1, 2005,
Lessee shall submit to Lessor an appraisal of the premises setting forth
the then fair
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<PAGE>
market value of the premises as determined by an independent M.A.I.
appraiser experienced in the appraisal of like properties in Maricopa
County, Arizona and designated by Lessee, which fair market value shall be
based on the then current use of the premises and which appraisal shall set
forth the appraiser's opinion of the then current capitalization rate for
comparable properties. If Lessor is dissatisfied with such appraisal, on or
before ninety (90) days after submittal of Lessee's appraisal, Lessor shall
submit to Lessee an appraisal of the premises setting forth the then fair
market value of the premises as determined by an independent M.A.I.
appraiser experienced in the appraisal of like properties in Maricopa
County, Arizona and designated by Lessor, which fair market value shall be
based on the then current use of the premises and which appraisal shall set
forth the appraiser's opinion of the then current capitalization rate for
comparable properties. "Appraisal" for purposes hereof shall be the
appraisal submitted by Lessee if Lessor does not timely submit an
appraisal, or the average (with regard to both the fair market value and
the capitalization rate) of the appraisals submitted by Lessee and Lessor
if Lessor timely submits an appraisal. "Appraised Amount" means the fair
market value determined by the Appraisal, and "Capitalization Rate" means
the
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<PAGE>
capitalization rate determined by the Appraisal.
As of any time on or after August 11, 2005, if any renewal term is
then in effect and Lessee is not then in default hereunder, Lessee shall
have the right to purchase the premises, exercisable by giving written
notice ("Election Notice") to Lessor at least ninety (90) days prior
thereto, for a purchase price equal to the Appraised Amount, which purchase
price shall be paid in full in cash at the close of escrow. If the Election
Notice is not given within six (6) months after April 1, 2005, then Lessee
shall proceed with obtaining a more current Appraisal under the procedure
set forth hereinabove. The parties hereto agree that the Appraised Amount
set forth in any Election Notice shall be established by an Appraisal(s)
performed within six (6) months immediately preceding the date of the
Election Notice.
Within fifteen (15) days after the Election Notice, an escrow shall be
opened with the title insurance company ("Escrow Agent") designated by
Lessee in the Election Notice. Such escrow shall close not later than one
hundred eighty (180) days after the Election Notice. If Lessee is not then
in default, Lessee shall be entitled to occupy the premises pursuant to the
terms hereof at the rental then in
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<PAGE>
effect until the close of escrow.
Escrow Agent, within ten (10) days after the opening of escrow, shall
deliver to Max Haechler and Elizabeth M. Haechler (the "Haechlers") and to
Lessee a preliminary title report or commitment for a standard owner's
title insurance policy (herein "Preliminary Report") to insure fee simple
title in Lessee as to the premises, under which the insured is Lessee and
in the amount of the purchase price. In addition to the Preliminary Report,
Escrow Agent shall simultaneously deliver to Lessee copies of all documents
identified in Schedule B of the Preliminary Report and in the Requirements
Section of the Preliminary Report. At any time prior to the scheduled close
of escrow, Lessee shall have the right to notify Escrow Agent and the
Haechlers in writing of any defect in the title of the premises and if the
Haechlers do not cause such defect to be eliminated or agreed to be insured
over within twenty (20) days of receipt of notice of such defect, Lessee,
at its option, shall be entitled to cancel the escrow, or accept title in
its then condition in which event the expense of eliminating such defects
and the amount of any such defects which are not eliminated shall be
treated as credits to Lessee and applied against the purchase price. A
defect in title for purposes hereof shall be any condition then customarily
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<PAGE>
deemed in Maricopa County, Arizona to render the premises unmarketable. At
close of escrow, the Haechlers shall provide to Lessee a standard coverage
owner's title insurance policy which shall show as exceptions no items
other than those permitted by Lessee according to the terms hereof, and
shall be in the form of the standard coverage owner's title insurance
policy usually then issued by the title insurer for Escrow Agent. At close
of escrow, the Haechlers shall execute a Warranty Deed to Lessee to be
recorded at close of escrow which shall warrant title subject only to those
exceptions permitted by Lessee pursuant to the terms hereof. At close of
escrow, Lessor shall execute a Quit Claim Deed to Lessee to be recorded at
close of escrow, the purpose of which shall be to terminate the master
lease on the premises between Haechlers and Lessor and to otherwise
transfer to Lessee any other interest Lessor may have in the premises.
Escrow charges, closing costs and prorations shall be borne by the parties
in accordance with the practice then prevailing in Maricopa County,
Arizona.
If Haechlers desire to effect a tax free exchange of the premises pursuant
to ss.1031 of the Internal Revenue Code or any similar section then in
effect, Lessee shall reasonably and promptly cooperate with Haechlers,
including Lessee entering into a contract for the
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<PAGE>
acquisition of real property which shall be acceptable to Haechlers which
shall subsequently be assigned and/or transferred to Haechlers, provided
however, that Lessee shall not be required to hold legal title to any other
property and Lessee shall not be required to undertake or assume any
liabilities or to incur any costs or expenses in connection therewith."
IV.
The Sublease is further amended by adding thereto the following new
paragraphs 37 and 38:
"37. Refinancing by Lessor. Lessor and Lessee acknowledge that at any
time during the term of this Sublease and any extensions thereof, Lessor
has the right to refinance the premises. Lessee hereby consents to Lessor
refinancing the premises, agrees to fully and promptly cooperate with
Lessor in Lessor seeking to perform the subject refinancing, and agrees to
provide and/or execute such documents as may be reasonably requested by
Lessor in connection therewith; provided however, that any such refinancing
documents shall contain a prepayment provision and a provision
incorporating by reference this Sublease and that any refinancing shall be
subject to Lessee's interest under this Sublease.
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<PAGE>
38. Hazardous Material Indemnification. Subject to the limitations and
other provisions contained in this Sublease, Lessee shall, and it hereby
does, indemnify and agree to pay, defend and hold harmless Lessor and
Haechlers from any and all losses, liabilities, damages, injuries,
obligations, actions, suits, administrative claims, remedial actions,
judgments, awards, fines, claims, demands or expenses (including attorneys'
fees) of any and every kind whatsoever, incurred or suffered by, or
asserted against, Lessor for, with respect to, or as a direct or indirect
result of, the presence on or under the premises of any Hazardous Material,
or the escape, seepage, leakage, spillage, discharge, emission, or release
from the premises into or upon any land, the atmosphere, or any
watercourse, body of water, or wetland of any Hazardous Material, which
presence, escape, seepage, leakage, spillage, discharge, emission, or
release first occurred during the period commencing August 11, 1980 and
terminating upon the termination of this Sublease, as may be extended from
time to time (the "Period"), including without limitation, any losses,
liabilities, damages, injuries, costs, expenses, or claims asserted or
arising under the Comprehensive Environmental Response, Compensation and
Liability Act, any so-called "Superfund" or "Superlien" law, or any other
federal, state, or local
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<PAGE>
statute, law, ordinance, code, rule, regulation, order, or decree
regulating, relating to, or imposing liability or standards of conduct
concerning any Hazardous Material or any underground storage tanks. For
purposes of this Sublease, "Hazardous Material" means and includes any
petroleum product and any hazardous substance or any pollutant or
contaminant defined as such in (or for purposes of) the Comprehensive
Environmental Response, Compensation, and Liability Act; any so-called
"Superfund" or "Superlien" law; the Toxic Substances Control Act; 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;
and asbestos or any substance or compound containing asbestos, PCB's, or
any other hazardous, toxic, or dangerous waste, substance, or material.
Notwithstanding anything in this paragraph to the contrary, if Lessee
purchases the premises pursuant to paragraph 36 hereof, then the Period
shall include the time of Lessee's ownership of the premises."
V.
Lessor and Lessee acknowledge that Lessee anticipates making alterations,
improvements and additions to the premises to
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<PAGE>
satisfy the requirements of current and future distributors of new vehicles to
be sold from the premises. Lessor hereby consents to Lessee making such
alterations, improvements and additions to the premises as may be approved or
required by such distributors and as may be approved or required by applicable
governmental authorities. Lessor further agrees to cooperate promptly with
Lessee in Lessee's seeking the approval of governmental authorities for such
alterations, improvements and additions and to execute promptly such documents
as may be reasonably requested by Lessee in connection therewith, including
filings with and submissions to the City of Scottsdale.
VI.
The Sublease shall remain in full force and effect, as amended hereby.
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<PAGE>
VII.
The rights, duties and obligations created hereunder shall inure to the
benefit of and be binding upon the parties hereto, their heirs, personal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment
to Sublease as of the date indicated on the first page.
LESSOR: LESSEE:
MAX OF SWITZERLAND, SPA AUTOMOTIVE, LTD.,
an Arizona corporation an Arizona corporation
By /s/ By /s/
Max Haechler Steven Knappenberger,
---------------------------- ----------------------------------
President Chairman
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<PAGE>
CONSENT
The undersigned guarantors hereby consent to the foregoing Third Amendment
to Sublease. The undersigned Max Haechler and Elizabeth M. Haechler further
agree to perform the obligations of Haechler under paragraph 36 of the Sublease.
DATED this 30 day of November, 1992.
/s/
-------------------------------------
Steven Knappenberger
"Guarantor"
/s/
-------------------------------------
Tamara F. Knappenberger
"Guarantor"
/s/
-------------------------------------
Max Haechler
/s/
-------------------------------------
Elizabeth M. Haechler
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this, the 30 day of November, 1992, before me, the undersigned officer,
personally appeared Max Haechler who acknowledged himself to be the President of
Max of Switzerland, and that he, as such officer, being authorized so to do,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
/s/
-------------------------------------
Notary Public
My Commission Expires:
06/30/93
- ----------------------
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<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this, the 30 day of November, 1992, before me, the undersigned officer,
personally appeared Steven Knappenberger who acknowledged himself to be the
Chairman of SPA Automotive, Ltd., and that he, as such officer, being authorized
so to do, executed the foregoing instrument for the purposes therein contained
by signing the name of the corporation by himself as such officer.
/s/
-------------------------------------
Notary Public
My Commission Expires:
- ----------------------
[Notarial Seal]
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this 30 day of November, 1992, before me, a Notary Public, personally
appeared Steven Knappenberger and Tamara F. Knappenberger, who acknowledged that
they executed the within instrument for the purposes therein stated.
/s/
-------------------------------------
Notary Public
My Commission Expires:
- ----------------------
[Notarial Seal]
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this ____ day of November, 1992, before me, a Notary Public, personally
appeared Max Haechler and Elizabeth M. Haechler, who acknowledged that they
executed the within instrument for the purposes therein stated.
/s/
-------------------------------------
Notary Public
My Commission Expires:
06/30/96
- ----------------------
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<PAGE>
EXTENSION TERM MONTHLY
RENT PAYMENT SCHEDULE
(Maximum Monthly Rent)
Monthly Rent Maximum
(the following percentage
of the base rental in year
Option Years 1 of the base term)
------------ --------------------------
1-2 297.24%
3-4 310.58%
5 323.91%
<PAGE>
10/23/90
Exhibit A
LEASE
DATE: The date of this Lease is October __, 1990.
1. Parties. This Lease, is entered into by and between Lisa B. Zelinsky and R.
J. Morgan Corporation of America, a Connecticut corporation (herein called
"Lessor") and Scottsdale Hyundai, Ltd., an Arizona corporation (herein
called "Lessee").
2. Premises and Equipment. Lessor hereby leases to Lessee and Lessee leases
from Lessor for the term, at the rental, and upon all of the conditions set
forth herein, that certain real property and improvements (the "Premises")
situated in Maricopa County, Arizona, 1111 North Miller Road, Tempe,
Arizona 85251 and more particularly described on Exhibit A attached hereto
and made a part hereof and that certain equipment (the "Equipment")
described on Exhibit B attached hereto and made a part hereof (the Premises
and the Equipment are sometimes collectively called the "Leased Property").
3. Term. The original term of this Lease shall commence on the date hereof and
end thirty-eight (38) months after the date hereof, unless sooner
terminated pursuant to any provision hereof.
4. Rent. Lessee shall pay to Lessor as rent without setoff for the Leased
Property monthly payments of $6,800.00, in advance, with the first payment
of $6,800.00 due as set forth in the immediately following sentence for the
thirty (30) day period beginning sixty (60) days from the date hereof (the
"Rent Commencement Date"), the second payment due on the first day of the
second complete calendar month after the Rent Commencement Date and being
for the remainder of the first complete calendar month after the Rent
Commencement Date and for the second complete calendar month after the Rent
Commencement Date, and subsequent payments of $6,800.00, due on the first
day of each month of the term thereafter. Lessee shall pay Lessor at the
Non-disturbance Delivery Time as defined in Paragraph 16 S6,800.00 as rent
for first month beginning with the Rent Commencement Date and $6,800.00 as
rent for last month of the term hereof. Said $6,800.00 paid as rent for the
last month of the term hereof, together with interest thereon from the date
paid by Lessee to Lessor at the rate of six percent (6%) per annum, shall
be automatically applied to rent for the last month of the term hereof, and
any amount not so applied shall be repaid by Lessor to Lessee within thirty
(30) days after the termination or expiration of the term hereof. Rent for
any period during the term hereof which is for less than one month shall be
a pro rata portion of the monthly installment. For example, if the date
hereof is October 30, 1990, and if the Non-disturbance Delivery Time is
November
Exhibit A
<PAGE>
5, 1990, $6,800.00 as rent for the first month and $6,800.00 as rent for
the last month shall be payable on November 5, 1990, $7,458.06 ($6,800.00
plus $6,800.00 x 3/31 ) shall be payable on February 1, 1991 and $6,800.00
shall be payable on the first day of each month thereafter, until the last
month for which the rent shall be a prorata portion of the monthly
installment. Rent shall be payable in lawful money of the United States to
Kennelly Mortgage & Investment, Inc., 4841 North Scottsdale Road, Suite
203, Scottsdale, Arizona 85251, or to such other persons or at such other
places as Lessor may designate in writing. No rent shall be payable for the
period prior to the Rent Commencement Date. Lessor shall timely pay any
sales tax, transaction privilege tax, education excise tax or other form of
tax levied by any state, county or municipal authority on the rent payable
hereunder, and Lessee shall have no responsibility to pay or reimburse
Lessor for any such tax. `
5. Security Deposit. Lessee shall deposit with Lessor at the Non-disturbance
Delivery Time $6,800.00 as security for Lessee's faithful performance of
Lessee's obligations hereunder. If Lessee fails to pay rent or other
charges due hereunder, or otherwise defaults with respect to any provision
of this Lease, while such default continues and after the expiration of any
applicable cure period, Lessor may use, apply or retain all or any portion
of said deposit for the payment of such rent or other charge which is the
subject of such default. If Lessor so uses or applies all or any portion of
said deposit, Lessee shall within ten (10) days after written demand
therefor deposit cash with Lessor in an amount sufficient to restore said
deposit to the full amount hereinabove stated and Lessee's failure to do so
shall be a material breach of this Lease. Said deposit, together with
interest thereon at the rate of six percent (6%) per annum from the date
deposited by Lessee with Lessor, or so much thereof as has not theretofore
been applied by Lessor, shall be returned, with the payment of said
interest for its use, to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest hereunder) within thirty (30) days
after the termination or expiration of the term hereof. No trust
relationship is created herein between Lessor and Lessee with respect to
said security deposit.
6. Use.
6.1. Use. The Premises shall be used and occupied for a motor vehicle paint
and body shop and any other use which is permitted at the Premises by
applicable law.
6.2. Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in its state existing
on the date hereof and for use as a motor
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<PAGE>
vehicle paint and body shop, does not violate any applicable statutes,
ordinances, rules, regulations, orders, covenants and restrictions of
record, and requirements in effect on such Lease term commencement date. In
the event it is determined that this warranty has been violated, then it
shall be the obligation of Lessor, after written notice from Lessee, to
promptly, at Lessor's sole cost and expense, rectify any such violation.
(b) Except as provided in Paragraph 6.2(a), Lessee shall, at Lessee's
expense, comply promptly with all applicable statutes, ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements
in effect during the term hereof, regulating the use by Lessee of the
Premises. Lessee shall not use or permit the use of the Premises in any
manner that will tend to create waste or a nuisance.
6.3. Condition of Premises.
(a) Lessor shall deliver the Leased Property to Lessee clean and free
of debris on the Lease term commencement date and Lessor warrants to Lessee
that the plumbing, lighting, air conditioning, heating and other
improvements in the Premises and the Equipment shall be in good operating
condition on the Lease term commencement date. In the event that it is
determined that this warranty has been violated, then it shall be the
obligation of Lessor, after receipt of written notice from Lessee setting
forth the nature of the violation, to promptly, at Lessor's sole cost and
expense, rectify such violation.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts
the Leased Property in their condition existing as of the Lease term
commencement date, subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of
the Premises, and any covenants or restrictions of record, and accepts this
Lease subject thereto and to all matters disclosed thereby and by any
exhibits attached hereto.
7. Maintenance, Repairs and Alterations.
7.1. Lessor 's Obligations.
(a) Subject to the provisions of Paragraphs 6, 7.2 and 9, and except
for damage caused by any negligent or intentional act or omission of
Lessee, Lessee's agents, employees or invitees in which event Lessee shall
repair the damage, Lessor, at Lessor's expense, shall keep in good order,
condition and repair the structure, foundations, exterior walls and
exterior roof (provided with respect to
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<PAGE>
the exterior roof, Lessee cleans all roof drains) of the Premises.
(b) If Lessor fails to perform Lessor's obligations under this
Paragraph 7.1 or any other paragraph of this Lease, Lessee while such
default continues and after the expiration of any applicable cure period
may at Lessee's option after 10 days' prior written notice to Lessor
(except in the case of emergency, in which case no notice shall be
required), perform such obligations on Lessor's behalf and put the Premises
in good order, condition and repair, and the reasonable cost thereof
together with interest thereon at the rate of eighteen percent (18%) per
annum from the date thirty (30) days after the date advanced until paid
shall be due and payable upon written demand by Lessee to Lessor.
7.2. Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 6, 7.1 and 9, Lessee, at
Lessee's expense, shall clean all roof drains and shall keep in good order,
condition and repair the Leased Property and every part thereof.
(b) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.2 or any other paragraph of this Lease, Lessor while such
default continues and after the expiration of any applicable cure period
may at Lessor's option enter upon the Premises after 10 days' prior written
notice to Lessee (except in the case of emergency, in which case no notice
shall be required), perform such obligations on Lessee's behalf and put the
Leased Property in good order, condition and repair, and the reasonable
cost thereof together with interest thereon at the rate of eighteen percent
(18%) per annum from the date thirty (30) days after the date advanced
until paid shall be due and payable upon written demand by Lessor to
Lessee.
(c) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Leased Property to Lessor in the same condition
as received, ordinary wear and tear and acts of God excepted, clean and
free of debris. Lessee shall repair any damage to the Premises occasioned
by the installation or removal of its trade fixtures, furnishings and
equipment.
7.3. Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent, which
shall not be unreasonably withheld or delayed, make any alterations,
improvements and additions, in, on or about the Premises, except for
alterations, improvements and additions where the cost thereof is less than
$50,000, in which event Lessor's consent is not
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<PAGE>
required. Should Lessee make any alterations, improvements and additions
for which Lessor's consent is required but without the prior consent of
Lessor, Lessor may require that Lessee remove any or all of the same.
(b) Any alterations, improvements and additions in or about the
Premises that Lessee shall desire to make and which require the consent of
Lessor shall be presented to Lessor in written form, with proposed detailed
plans. If Lessor shall give its consent, the consent shall be deemed
conditioned upon Lessee acquiring a permit to do so from appropriate
governmental agencies (if such a permit is required), the furnishing of a
copy thereof to Lessor prior to the commencement of the work and the
compliance by Lessee which all conditions of said permit in a prompt and
expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use
in the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee
shall give Lessor not less than ten (10) days' notice prior to the
commencement of any such work in the Premises, and Lessor shall have the
right to post notices of non-responsibility in or on the Premises as
provided by law. If Lessee shall, in good faith, contest the validity of
any such lien, claim or demand, then Lessee shall, at its sole expense,
defend itself and Lessor against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against Lessor or the Premises.
(d) Until Lessor requires their removal, as set forth in Paragraph
7.3(a), all alterations, improvements and additions which may be made on
the Premises shall become the property of Lessor and remain upon and be
surrendered with the Premises at the expiration of the term.
Notwithstanding the provisions of this Paragraph 7.3(d), Lessee's machinery
and equipment, other than that which is affixed to the Premises so that it
cannot be removed without material damage to the Premises, shall remain the
property of Lessee and may be removed by Lessee subject to the provisions
of Paragraph 7.2(c).
8. Insurance; Indemnity.
8.1. Liability Insurance-Lessee. Lessee shall, at Lessee's expense, obtain
and keep in force during the term of this Lease a policy of combined single
limit bodily injury and property damage insurance insuring Lessee and
Lessor against any liability arising out of the use, occupancy or
maintenance of the Premises. Such insurance shall be in an amount not less
then $1,000,000 per occurrence.
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<PAGE>
8.2. Liability Insurance-Lessor. Lessor may obtain and keep in force during
the term of this Lease a policy of combined single limit bodily injury and
property damage insurance, insuring Lessor against any liability arising
out of the use, occupancy or maintenance of the Premises.
8.3. Property Insurance. Lessor shall, at Lessor's expense, obtain and keep
in force during the term of this Lease a policy or policies of insurance
covering loss or damage to the Premises, and Lessee shall, at Lessee's
expense, obtain and keep in force during the term of this Lease a policy or
policies of insurance covering loss or damage to the Equipment, each in an
amount equal to the full replacement value thereof, as the same may exist
from time to time, providing protection against all perils included within
the classification of fire, extended coverage, vandalism, malicious
mischief, flood (in the event same is required by a lender having a lien on
the Premises) and special extended perils ("all risk", as such term is used
in the insurance industry). Such insurance shall provide for payment of
loss thereunder to Lessor and the holder of a first mortgage or deed of
trust on the Premises as their interests may appear. The policy insuring
the Premises shall have a deductible not greater than $1,000, and the
policy insuring the Equipment shall have a deductible not greater than
$500.
8.4. Insurance Policies. Insurance required hereunder shall be in companies
holding a "General Policyholders Rating" of at least B plus, or such other
rating as may be required by a lender having a lien on the Premises, as set
forth in the most current issue of "Best's Insurance Guide". Each party
shall deliver to the other copies of policies of liability and property
insurance required to be provided by the delivering party under Paragraphs
8.1 and 8.3 or certificates evidencing the existence and amounts of such
insurance. No such policy shall be cancellable or subject to reduction of
coverage or other modification except after thirty (30) days prior written
notice to the other party. The party providing the policies shall, at least
thirty (30) days prior to the expiration of such policies, furnish the
other with renewals or "binders" thereof, or the other party may order such
insurance and charge the cost thereof to the party obligated to provide
same, which amount shall be payable by that party upon demand.
8.5. Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the
other, for loss or damage arising out of or incident to the perils insured
against under Paragraphs 8.1 and 8.3, which perils occur in, on or about
the Premises, whether due to the negligence of Lessor or Lessee or their
agents, employees, contractors and/or invitees. Lessee and Lessor shall,
upon obtaining the policies of insurance required hereunder, give notice to
the
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insurance carrier or carriers that the foregoing mutual release is
contained in this Lease.
8.6. Indemnity. Except as otherwise set forth herein, Lessee shall
indemnify and hold harmless Lessor from and against any and all claims
arising from Lessee's use of the Premises, or from the conduct of Lessee's
business or from any activity, work or things done, permitted or suffered
by Lessee in or about the Premises or elsewhere and shall further indemnify
and hold harmless Lessor from and against any and all claims arising from
any breach or default in the performance of any obligation on Lessee's part
to be performed under the terms of this Lease, or arising from any
negligence of the Lessee, or any of Lessee's agents, contractors or
employees and from and against all costs, attorney's fees, expenses and
liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon, and in case any action or proceeding be brought
against Lessor by reason of any such claim, Lessee upon notice from Lessor
shall defend the same at Lessee's expense.
8.7. Exemption of Lessor from Certain Liability. Except as otherwise set
forth herein, Lessee hereby agrees that Lessor shall not be liable for
injury to Lessee's business or any loss of income therefrom or for damage
to the goods, wares, merchandise or other property of Lessee, Lessee's
employees, invitees, customers or any other person in or about the
Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or
from the breakage, leakage, obstruction other defects of pipes, sprinklers,
wires, appliances, plumbing, air conditioning or lighting fixtures, or from
another cause, whether the said damage or injury results from conditions
arising upon the Premises or from other sources or places and regardless of
whether the cause of such damage or injury or the means of repairing the
same is inaccessible to Lessee.
9. Damage or Destruction.
9.1. Definitions.
(a) "Premises Partial Damage" shall herein mean damage or destruction
to the Premises to the extent that the cost of repair is less than 50% of
the fair market value of the Premises immediately prior to such damage or
destruction.
(b) "Premises Total Destruction" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is 50% or
more of the fair market value of the Premises immediately prior to such
damage or destruction.
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(c) "Insured Loss" shall herein mean damage or destruction which was
caused by an event required to be covered by the insurance described in
Paragraph 8.
9.2. Partial Damage-Insured Loss. Subject to the provisions of Paragraphs
9.4, 9.5 and 9.6, if at any time during the term of this Lease there is
damage which is an Insured Loss and which falls into the classification of
Premises Partial Damage, then Lessor shall repair such damage as soon as
reasonably possible and this Lease shall continue in full force and effect.
9.3. Partial Damage-Uninsured Loss. Subject to the provisions of Paragraphs
9.4, 9.5 and 9.6, if at any time during the term of this Lease there is
damage which is not an Insured Loss and which falls within the
classification of Premises Partial Damage, unless caused by a negligent or
willful act of Lessee (in which event Lessee shall make the repairs at
Lessee's expense), Lessor may at Lessor's option either (i) repair such
damage as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) give written
notice to Lessee within fifteen (15) days after the date of the occurrence
of such damage of Lessor's intention to cancel and terminate this Lease as
of the date of the occurrence of such damage. In the event Lessor elects to
give such notice of Lessor's intention to cancel and terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of Lessee's intention to repair
such damage at Lessee's expense, without reimbursement from Lessor, in
which event this Lease shall continue in full force and effect, and Lessee
shall proceed to make such repairs as soon as reasonably possible. If
Lessee does not give such notice within such 10-day period, this Lease
shall be cancelled and terminated as of the date of the occurrence of such
damage.
9.4. Total Destruction. If at any time during the term of this Lease there
is damage, whether or not an Insured Loss (including destruction required
by any authorized public authority), which falls into the classification of
Premises Total Destruction, this Lease shall automatically terminate as of
the date of such total destruction.
9.5. Damage Near End of Term.
(a) If at any time during the last six months of the term of this
Lease there is damage, whether or not an Insured Loss, which falls within
the classification of Premises Partial Damage, Lessor may at Lessor's
option cancel and terminate this Lease as of the date of occurrence of such
damage by giving written notice to Lessee of
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Lessor's election to do so within 30 days after the date of occurrence of
such damage.
(b) Notwithstanding Paragraph 9.5(a), in the event that Lessee has an
option to extend or renew this Lease and the time within which said option
may be exercised has not yet expired, Lessee shall exercise such option, if
it is to be exercised at all, no later than 20 days after the occurrence of
an Insured Loss falling within the classification of Premises Partial
Damage during the last six months of the term of this Lease. If Lessee duly
exercises such option during said 20 day period, Lessor shall, at Lessor's
expense, repair such damage as soon as reasonably possible and this Lease
shall continue in full force and effect. If Lessee fails to exercise such
option during said 20-day period, then Lessor may at Lessor's option
terminate and cancel this Lease as of the expiration of said 20-day period
by giving written notice to Lessee of Lessor's election to do so within 10
days after the expiration of said 20-day period.
9.6. Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in Paragraphs 9.2 or 9.3, and
Lessor or Lessee repairs or restores the Premises pursuant to the
provisions of this Paragraph 9, the rent payable hereunder for the period
during which such damage, repair or restoration continues shall be abated
in proportion to the degree to which Lessee's use of the Leased Property is
impaired.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence such repair
or restoration within 30 days after such obligations shall accrue, in
addition to any other remedies available, Lessee may at Lessee's option
cancel and terminate this Lease by giving Lessor written notice of Lessee's
election to do so at any time prior to the commencement of such repair or
restoration.
9.7. Termination-Advance Payments. Upon termination of this Lease pursuant
to this Paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor
shall, in addition, return to Lessee so much of Lessee's security deposit
as has not theretofore been applied by Lessor.
9.8. Waiver. Lessor and Lessee waive the provisions of any statutes which
relate to termination of leases when leased property is destroyed and agree
that such event shall be governed by the terms of this Lease.
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10. Property Taxes.
10.1. Payment of Property Taxes. Lessor shall pay all property taxes levied
against the Leased Property during the term of this Lease. All such
payments shall be made at least twenty (20) days prior to the delinquency
date of such payment. Lessor shall promptly furnish Lessee with
satisfactory evidence that such taxes have been paid. if Lessor fails 'to
pay any such taxes, Lessee shall have the right but not the obligation to
pay same, in which case Lessor shall repay such amount to Lessee with
interest at the rate of eighteen percent (18%) per annum.
10.2. Definition of "Property Tax". As used herein, the term "property tax"
shall include any form of real property or personal property tax or
assessment, general, special, ordinary or extraordinary, and any license
fee, commercial rental tax, improvement bond or bonds, levy or tax (other
than inheritance, personal income or estate taxes) imposed on the Leased
Property by any authority having the direct or indirect power to tax,
including any city, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement
district thereof, as against any legal or equitable interest of Lessor in
the Leased Property, as against Lessor's right to rent or other income
therefrom, and as against Lessor's business of leasing the Leased Property.
10.3. Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures, furnishings,
equipment and all other personal property of Lessee contained in the
Premises or elsewhere. When possible, Lessee shall cause said trade
fixtures, furnishings, equipment and all other personal property to be
assessed and billed separately from the real property and personal property
of Lessor.
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises,
together with any taxes thereon.
12. Assignment and Subletting.
12.1. Assignment and Subletting Permitted. Lessee may voluntarily or by
operation of law assign, transfer, mortgage, sublet or otherwise transfer
or encumber all or any part of Lessee's interest in this Lease or in the
Premises or in the Equipment, with Lessor's consent, which will not be
unreasonably withheld or delayed.
12.2. No Release of Lessee. No subletting or assignment shall release
Lessee of Lessee's obligation or alter the primary liability of Lessee to
pay the rent and to perform all other obligations to be performed by Lessee
hereunder.
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13. Defaults; Remedies.
13.1. Default by Lessee. The occurrence of any one or more of the following
events shall constitute a material default and breach of this Lease by
Lessee:
(a) The failure by Lessee to take 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 thereof from Lessor to Lessee.
(b) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by
Lessee, other than described in Paragraph (a) above, where such failure
shall continue for a period of thirty (30) days after written notice
thereof from Lessor to Lessee; provided, however, that if the nature of
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 commences such cure within said 30-day period and thereafter
diligently prosecutes such cure to completion.
(c) (i) The making by Lessee of any general arrangement or assignment
for the benefit of creditors; (ii) Lessee becomes a "debtor" as defined in
11 U.S.C. ss. 101 or any successor statute thereto (unless, in the case of
a petition filed against Lessee, the same is dismissed within 60 days);
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within
30 days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within 30
days.
In the event of any such material default or breach by Lessee,
notwithstanding anything herein to the contrary, Lessor may at any time
thereafter and prior to the curing of such default or breach, with or
without further notice or demand, as its sole remedy, terminate Lessee's
right to possession of the Leased Property by any lawful means, in which
case this Lease shall terminate and Lessee shall immediately surrender
possession of the Leased Property to Lessor.
13.2. Default by Lessor. The occurrence of any one or more of the following
events shall constitute a material default and breach of this Lease by
Lessor:
(a) The failure by Lessor to observe or perform any of the covenants,
conditions or provisions of this Lease to be
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observed or performed by Lessor, where such failure shall continue for a
period of thirty (30) days after written notice thereof from Lessee to
Lessor; provided, however, that if the nature of Lessor's default is such
that more than thirty (30) days are reasonably required for its cure, then
Lessor shall not be deemed to be in default if Lessor commences such cure
within said thirty-day period and thereafter diligently prosecutes such
cure to completion.
(b) The breach or inaccuracy of any representation or warranty of
Lessor contained herein.
In the event of any such material default or breach by Lessor, Lessee may
at any time thereafter and prior to the curing of such default or breach,
with or without further notice or demand, pursue any remedy now or
hereafter available to Lessee under applicable law.
14. Condemnation.
(a) Taking. If the Premises or any portion thereof are taken under the
power or eminent domain, or sold under the threat of the exercise of said
power (all of which are herein called "taking"), this Lease shall terminate
as to the part so taken as of the date the condemning authority takes title
or possession, whichever first occurs. If all or a substantial portion of
the Premises shall be taken, Lessor or Lessee may terminate this Lease, at
its option, by giving the other written notice of such termination within
thirty (30) days of such taking. If neither party terminates this Lease in
accordance with the foregoing, this Lease shall remain in full force and
effect as to the portion of the Leased Property remaining, except that the
rent for the Premises shall be reduced in the proportion that the area of
the Premises taken bears to the total area of the Premises. Any award for
the taking of all or any part of the Premises or any payment made under the
threat of the exercise of such power shall be the property of Lessor,
whether such award shall be made as compensation for diminution in value of
the leasehold or for the taking of the fee, or as severance damages;
provided, however, that Lessee shall be entitled to any award for loss of
or damage to Lessee's trade fixtures and removable personal property. In
the event that this Lease is not terminated by reason of such taking,
Lessor shall, to the extent of severance damages received by Lessor in
connection with such taking, repair any damage to the Premises caused by
such taking except to the extent that Lessee has been reimbursed therefor
by the condemning authority.
(b) Temporary Taking. In the event of a temporary taking of the
Premises, this Lease shall remain in effect and Lessor shall receive any
award made for such taking. If a temporary taking remains in effect at the
expiration or
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earlier termination of this Lease, Lessee shall pay Lessor the reasonable
costs of performing any obligations required of Lessee by this Lease with
respect to the surrender of the Premises and upon such payment Lessee shall
be excused from such obligations. If a temporary taking is for a period
which extends beyond the term of the Lease, this Lease shall terminate with
respect to the Property taken as of the date of occupancy by the condemning
authority. Lessor shall be entitled to the entire award paid for such
taking, except Lessee shall have the right to recover from the condemning
authority, but not from Lessor, such compensation as may be separately
awarded to Lessee in connection with costs in removing Lessee's
merchandise, furniture, fixtures, leasehold improvements and equipment to a
new location; and subject to the foregoing, Lessee waives any claim to any
part of the award from Lessor or the condemning authority. Upon any such
temporary taking, rent shall be adjusted to the date of such occupancy.
15. Estoppel Certificate.
(a) Lessee shall at any time upon not less than thirty (30) days'
prior written notice from Lessor execute, acknowledge and deliver to 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, and (ii) acknowledging that there are not, to Lessee's
knowledge, any uncured defaults on the part of Lessor hereunder, or
specifying such defaults if any are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer of
the Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement
within such time shall be a material breach of this Lease or shall be
conclusive upon Lessee (i) that this Lease is in full force and effect,
without modification except as may be represented by Lessor, (ii) that
there are no uncured defaults in Lessor's performance, and (iii) that not
more than one month's rent has been paid in advance.
16. Agreement with Lender. The Leased Property is currently subject to
encumbrances in favor of The Midland Mutual Life Insurance Company
("Midland"). Within fifteen (15) days after the date of this Lease, Lessor
shall deliver to Lessee a recordable Subordination, Attornment and
Non-Disturbance Agreement executed by Midland in the form of Exhibit D
attached hereto and made a part hereof. The time when Lessor delivers such
instrument to Lessee is called the "Non-disturbance Delivery Time". Lessor
represents and warrants that it will timely comply with all obligations
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owing by Lessor or with respect to the Leased Property to Midland.
17. Quiet Possession. Upon Lessee paying the rent for the Leased Property and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee may peaceably
hold and enjoy the Leased Property during the entire term hereof without
any interruptions by Lessor or any person claiming by, through or under
Lessor and Lessor shall not disturb Lessee's quiet possession of the Leased
Property for the entire term hereof, all subject to all of the provisions
of this Lease. The individuals executing this Lease on behalf of Lessor
represent and warrant to Lessee that they are fully authorized and legally
capable of executing this Lease on behalf of Lessor and that such execution
is binding upon all parties holding an ownership interest in the Leased
Property.
18. Options to Renew. Lessee shall have the option of extending the term of
this Lease for four (4) additional consecutive periods of five years each,
which options may be exercised only by written notice given by Lessee to
Lessor at least ninety (90) days before the expiration of the then current
term of this Lease. All of the terms and conditions of this Lease shall be
applicable during the renewal terms except that the rent shall be adjusted
as of the first day of each renewal term (the "Adjustment Date") by a
percentage equal to the percentage change in the United States Department
of Labor, Bureau of Labor Statistics, Consumer Price Index for All Urban
Consumers, United States Average for Subgroup "All Items" (1967 = 100) (the
"Index"), or if the Index should be discontinued or modified, such
substitute index as Lessor and Lessee promptly in good faith shall select
as comparable to the Index. The Index for the calendar month in which the
Rent Commencement Date occurs shall be the "Base Index". The Index for the
calendar month ending three months prior to the applicable Adjustment Date
shall be the "Comparison Index". The adjusted monthly rent shall be
determined by multiplying the rent payable during the term of this Lease
set forth in Paragraph 4 times a fraction, the numerator of which is the
Comparison Index and the denominator of which is the Base Index.
Notwithstanding the foregoing, the rent payable during the first renewal
period shall not increase by an amount greater than fifteen percent (15%)
of the rent payable during the original lease term, the rent payable during
each subsequent renewal period shall not increase by an amount greater than
twenty-five percent (25%) of the rent payable during the immediately
preceding period, and the rent payable during any renewal period shall not
be less than $6,800.00 per month.
19. Option to Purchase. Lessor hereby grants to Lessee the option to purchase
the Leased Property by written notice
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(the "Option Notice") to Lessor at any time during the last six (6) months
of the initial term of this Lease. The purchase price shall be the greater
of (a) $675,000.00 or (b) the then fair market value of the Leased Property
as determined by the appraisal procedure hereinafter set forth. At the time
of the Option Notice, Lessee shall select and give notice to Lessor of the
name of a local appraiser, and within ten (10) days after the Option Notice
Lessor shall select and give notice to Lessee of the name of a local
appraiser. The two appraisers so selected shall within twenty (20) days
after the Option Notice select and give notice to Lessor and Lessee of the
name of a third local appraiser. In the event either party fails to timely
select an appraiser, the appraisal hereinafter described shall be conducted
by the appraiser selected by the other party. In the event Lessor and
Lessee each timely select an appraiser but the two appraisers selected are
unable to timely select a third appraiser, the third appraiser shall be
selected by the Presiding Judge of the Superior Court of the State of
Arizona in and for the County of Maricopa. Each appraiser shall be an
independent M.A.I. appraiser with experience appraising industrial
properties in Maricopa County, Arizona similar to the Premises.
The appraiser or appraisers selected shall determine the then fair market
value of the Premises and the Equipment and shall give notice thereof to
Lessor and Lessee within thirty (30) days after the notice is given of the
selection of the last appraiser. The appraiser or appraisers may seek the
assistance of a knowledgable entity or individual in connection with the
appraisal of the Equipment. If the appraisers are unable to agree as to the
then fair market value of the Premises or the Equipment, each appraiser
shall make an appraisal of the then fair market value of the Premises and
the Equipment, and the appraised value of the Premises or the Equipment, as
the case may be, shall be the average of the three appraisals for the item
in question, provided, however, if any appraisal deviates by more than 10%
from the average of the other two appraisals, the appraised value shall be
the average of the other two appraisals. The appraisers shall give written
notice to Lessor and Lessee of the then fair market value of the Premises
and of the Equipment (the "Appraisal Notice Date"). Within fifteen (15)
days after the Appraisal Notice Date Lessee shall give written notice to
Lessor as to whether the Lessee elects to purchase the Leased Property. If
Lessee fails to timely give such notice, Lessee shall be deemed to have
elected to purchase the Leased Property. If Lessee timely elects to
purchase the Leased Property, the fee and expenses of the appraiser
selected by Lessee shall be borne by Lessee, the fee and expenses of the
appraiser selected by Lessor shall be borne by Lessor and the fee and
expenses of the third appraiser shall be borne fifty percent (50%) by
Lessee and fifty percent (50%) by Lessor. If Lessee does
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not timely elect to purchase the Leased Property, the fees and expenses of
the three appraisers shall be borne by Lessee. Lessee shall have no
obligation to purchase the Leased Property as a result of having given the
Option Notice.
Within fifteen days (15) days after Lessee elects to purchase the Leased
Property, an escrow shall be opened with an office of First American Title
Insurance Company of Arizona (the "Escrow Agent"). Escrow Agent within ten
(10) days after the opening of escrow shall deliver to Lessor and Lessee a
preliminary title report or commitment for an extended coverage owner's
title insurance policy (the "Preliminary Report") to insure fee simple
title in Lessee or any nominee designated by Lessee (the "Buyer") as to the
Premises, under which the insured is the Buyer and in the amount of the
purchase price for the Premises. In addition to the Preliminary Report, the
Escrow Agent shall simultaneously deliver to Lessee copies of all recorded
documents identified in any portion of the Preliminary Report. Lessor
represents and warrants that on the date hereof it is the owner of the
Premises and title to the Premises is free and clear of liens,
encumbrances, adverse claims and all other matters except the matters set
forth on Exhibit C attached hereto and made a part hereof. Lessor
represents and warrants that at the time of closing of the escrow relating
to the option to purchase, there will be no matters affecting title to the
Premises other than then current real property taxes, a lien not yet due
and payable, and items 1 through 8 inclusive, set forth on Exhibit C, and
Lessor at its expense at the close of escrow shall cause to be satisfied,
if not previously satisfied, the matters set forth in items 9, 10, 11 and
13 set forth on Exhibit C. Lessor represents and warrants that on the date
hereof and at the closing of the option to purchase it is the owner of the
Equipment and title thereto is free and clear of any liens, encumbrances,
adverse claims and all other matters except the matters set forth on
Exhibit C, and Lessor at its expense at the close of escrow shall cause to
be satisfied, if not previously satisfied, the matters set forth in items
9, 10, 11 and 13 set forth on Exhibit C.
The Escrow Instructions shall be in the standard form then used by Escrow
Agent and shall include the applicable provisions of this paragraph. Escrow
shall close within 120 days after the Appraisal Notice Date. The purchase
price shall be payable in cash at the close of escrow. Lessor shall be
charged the premium for a standard coverage owner's policy and Lessee shall
be charged the additional premium for the issuance of an extended coverage
owner's policy. Escrow fees shall be borne fifty percent (50%) by Lessor
and fifty percent (50%) by Lessee, and all other costs, expenses and
prorations shall be charged and made in accordance with the custom then
prevailing in Maricopa County, Arizona. At
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close of Escrow, Lessor shall execute and deliver for the benefit of the
Buyer a warranty deed with respect to the Premise which shall warrant title
subject only to those matters permitted pursuant to this paragraph and a
bill of sale with respect to the Equipment which shall warrant title
without exceptions as set forth in this paragraph.
20. Rights of First Refusal. At any time prior to the expiration of the term of
this Lease, including renewal terms, Lessor shall not sell or contract to
sell all or any portion of the Leased Property unless the Leased Property
is first offered to Lessee for the same price, and upon the same terms and
conditions as to which Lessor proposes to sell or transfer the Leased
Property to a bona fide third party. Lessor must give Lessee written notice
setting forth the name and address of the proposed purchaser and the price,
terms and conditions of any bona fide offer by or to Lessor under which
Lessor proposes to sell or transfer the Leased Property. Within the thirty
day period following Lessee's receipt of such notice, Lessee by written
notice to Lessor may elect to purchase the Leased Property, for the same
price and upon the same terms as the offer. If Lessee does not elect to
purchase the Leased Property, Lessor may then sell the Leased Property to
the third party named in Lessor's notice to Lessee, for the price and upon
the terms therein stated. The sale shall be subject to all of the terms and
provisions of this Lease. If the escrow is not closed for the price and
upon the terms and conditions contained in the notice, then Lessor may not
thereafter, at any time prior to the expiration of the term of this Lease,
including renewal terms, sell the Leased Property to any party other than
Lessee without first offering the Leased Property to Lessee in the manner
set forth in this paragraph.
The name of the proposed purchaser shall be kept confidential by Lessee,
and Lessee shall not take any action which would jeopardize the proposed
sale, other than to exercise Lessee's right to purchase pursuant to this
paragraph.
21. Signs. Lessee may place any signs upon the Premises without Lessor's
consent, provided such signs comply with applicable laws.
22. Lessor's Access. Lessor and Lessor's agents shall have the right to enter
the Premises at reasonable times during Lessee's business hours for the
purpose of inspecting the same, showing the same to prospective purchasers,
lenders or lessees, and making such alterations, repairs, improvements or
additions to the Premises as required by this Lease. Lessor may at any time
place on or about the Premises any ordinary "For Sale" signs and Lessor may
at any time during the last 120 days of the term hereof place on or about
the
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Premises any ordinary "For Lease" signs, all without rebate of rent or
liability to Lessee.
23. Interest on Past-due Obligations. Except as expressly herein provided, any
amount due to either party not paid when due shall bear interest from the
date due at the rate of eighteen percent (18%) per annum. Payment of such
interest shall not excuse or cure any default under this Lease.
24. Notices. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery, by certified mail, by
overnight delivery courier or by telecopier, and if so given shall be
deemed sufficiently given if addressed to Lessee or to Lessor at the
address noted below and shall be effective upon delivery in the case of
delivery, one business day after deposit in the mails or with an overnight
delivery courier in the case of mailing or overnight delivery courier, or
upon receipt in the case of telecopy. Either party may by notice to the
other specify a different address for notice purposes. A copy of all
notices required or permitted to be given to either party hereunder shall
be concurrently transmitted to such persons at such addresses as that party
may from time to time hereafter designate by written notice to the other
party.
Lessor: Attn: Ronald J. Morgan
2556 East Denton Lane
Phoenix, Arizona 85016
with copy to: Streich, Lang
Attn: Thomas R. Canham
100 W. Washington
Suite 2100
Phoenix, Arizona 85003
and
Lisa B. Zelinsky
88 Field Point Road
Greenwich, Connecticut 06830
Lessee: Attn: George W. Brochick
6825 E. McDowell
Scottsdale, Arizona 85257
with copy to: Steven Knappenberger
6725 E. McDowell
Scottsdale, Arizona 85257
and
-18-
<PAGE>
Fennemore Craig
Attn: William T. Boutell, Jr.
Two North Central
Suite 2200
Phoenix, Arizona 85004
25. Recording. Either Lessor or Lessee shall, within ten (10) days after
written request of the other, execute, acknowledge and deliver to the other
a "short form" memorandum of this Lease for recording purposes.
26. Holding Over. If Lessee, with Lessor's consent, remains in possession of
the Leased Property or any part thereof after the expiration of the term
hereof, such occupancy shall be a tenancy from month to month upon all the
provisions of this Lease pertaining to the obligations of Lessee, but all
options granted under the terms of this Lease shall be deemed terminated
and be of no further effect during said month to month tenancy.
27. Time of Essence. Time is of the essence.
28. 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.
29. Merger. The voluntary or other surrender of the Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to
Lessor of any or all of such subtenancies.
30. Cumulative Remedies. Except as set forth herein with respect to Lessor's
remedies, which are limited only to terminating Lessee's right to
possession of the Leased Property, no remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
31. Attorney's Fees. If either party brings an action to enforce the terms
hereof or declare rights hereunder, the prevailing party in any such
action, on trial or appeal, shall be entitled to its reasonable attorney's
fees to be paid by the losing party as fixed by the court.
32. Choice of Law. This Lease shall be governed by and construed under the laws
of the State of Arizona.
33. Waivers. No waiver by either party of any provision hereof shall be deemed
a waiver of any other provision hereof or of any subsequent breach by the
other party of the same or any other provision. A party's consent to, or
approval of, any act shall not be deemed to render unnecessary the
obtaining
-19-
<PAGE>
of such party's consent to or approval of any subsequent act by the other
party. 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.
34. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such matter shall be
effective. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification.
35. 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.
36. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions and handwritten provisions shall
control over typewritten provisions.
37. Authority. The individual executing this Lease on behalf of Lessee
represents and warrants that he is duly authorized to execute and deliver
this Lease on behalf of said entity.
38. Parties Constituting Lessor. Wherever reference is made to "Lessor"
herein, it shall be deemed to include both Lisa B. Zelinsky ("Zelinsky")
and R. J. Morgan Corporation of America ("Morgan"). The rights and
obligations of Lessor shall inure to the benefit of and be binding upon
both Zelinsky and Morgan, and this Lease shall be so construed. For
example, wherever consent is required of Lessor, it shall be required of
both Zelinsky and Morgan; if Lessor is to be insured, both Zelinsky and
Morgan shall be insured; and whenever payments are to be made to Lessor,
they shall be made jointly to Zelinsky and Morgan.
39. Benefit and Burden. This Lease shall inure to the benefit of and bind
the parties, their personal representatives, successors and assigns.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
-20-
<PAGE>
The parties hereto have executed this Lease as of the date specified above.
_____________________________________
Lisa B. Zelinsky
R.J. Morgan Corporation of America
By___________________________________
Its______________________________
LESSOR
Scottsdale Hyundai, Ltd.
By___________________________________
Steven Knappenberger, Chairman
LESSEE
<PAGE>
10/23/90
PARCEL NO. 1:
That part of the Northwest quarter of the Southeast quarter of Section 11,
Township 1 North, Range 4 East of the Gila and Salt River Base and Meridian,
Maricopa County, Arizona, described as follows:
Beginning at the Southwest corner of the Northwest quarter of the Southeast
quarter; thence North 0 degrees 0 minutes 1 second, East 205 feet; thence North
89 degrees 44 minutes 33 seconds, East 33 feet to the True Point of Beginning;
thence North 89 degrees 44 minutes 33 seconds, East 50 feet; thence South 0
degrees 0 minutes 8 seconds, South West 15 feet; thence North 89 degrees 44
minutes 33 seconds, East 77.27 feet; thence North 0 degrees 4 minutes 10
seconds, East 60 feet; thence South 89 degrees 44 minutes 30 seconds, West
127.342 feet to the True Point of Beginning.
PARCEL No. 2:
That part of the Northwest quarter of the Southeast quarter of Section 11,
Township 1 North, Range 4 East of the Gila and Salt River Base and Meridian,
Maricopa County, Arizona, described as follows:
Beginning at the Southwest corner of the Northwest quarter of the Southeast
quarter; thence North 0 degrees 0 minutes 1 second, East 250 feet; thence North
89 degrees 44 minutes 33 seconds, East 33 feet to the True Point of Beginning;
thence North 89 degrees 44 minutes 30 seconds, East 127.342 feet; thence North 0
degrees 4 minutes 10 seconds, East 300 feet; thence South 89 degrees 44 minutes
33 seconds, West 127.705 feet; thence South 0 degrees 0 minutes 1 second, West
300 feet to the True Point of Beginning.
Exhibit A
<PAGE>
FRONT OFFICE
BATHROOM 2 PICTURES
FIVE FOOT CORNER SHELF
COPY ROOM 1 SHARP COPY MACHINE
1 VACUUM CLEANER
1 7'2 DOOR CABINET
OFFICE 1 OCTAGON TABLE W/4 CHAIRS
1 COFFEE POT W/TABLE
1 WALL CLOCK
1 ROUND PLANTER POT
1 9 DRAWER DRESSER
1 LAMP
1 5 DRAWER FILING CABINET
1 SMALL TABLE
1 L SHAPED WOOD DESK W/ORTHOPEDIC ROLLING
CHAIR
1 ROYAL 248 PD ADDING MACHINE
1 IBM SELECTRIC TYPEWRITER
1 PANASONIC AUTOLOGIC TELEPHONE ANSWERING
MACHINE
1 DESK CALENDAR
1 SCOTCH TAPE DISPENSER
1 STAPLER
1 MESSAGE HOLDER
CENTER OFFICE 1 ARROWHEAD HOT/COLD WATER DISPENSER
2 4 DRAWER FILE CABINETS
3 METAL OFFICE DESKS
3 ROLLING OFFICE CHAIRS
2 ROYAL 248 PD ADDING MACHINES
7 WALL MOUNT ORDER HOLDERS
5 WASTE CANS
1 ROLODEX
1 DESK CALENDAR
1 WALL CLOCK
2 PICTURES
CLOSET 1 CHAIR
1 ROYAL 248 PD ADDING MACHINE
1 CASH REGISTER
2 LAMPS
BACK OFFICE 1 ROUND BRASS PLANTER
2 CHAIRS BRASS/ CANE
1 LARGE OAK DESK
1 BRASS COAT RACK
1 PICTURE
1 DESK CALENDAR
1 DESK PAD
Exhibit B
<PAGE>
MECHANICAL
SHOP 1 5-HP POWER MAX AIR COMPRESSOR,
VERTICAL ASME TANK
2 HAND PUMP GEAR LUBE MACHINES
1 OIL DRAINER, ROLLING BEE-LINE
2 WALL MOUNT CABINETS
3 2 DOOR 6' STORAGE CABINETS
1 6" VICE
1 STEEL BENCH
1 SET HEADLIGHT AIMERS
1 SNAP-ON BATTERY CHARGER
1 ASSOCIATED BATTERY CHARGER
2 KWIK START BOOSTERS
1 BLUE POINT AUTO AIR SERVICE CENTER
1 BENCH GRINDER W/STAND
MECHANICAL
SHOP 2 SETS OF OXYGEN AND ACETYLENE
W/CUTTING TORCHES AND STANDS
1 CART W/ACETYLENE TORCH
2 METAL SHELVING UNITS
1 3 DOOR REFRIGERATOR
1 LITTON MICROWAVE
1 8 DOOR LOCKER
2 ROLLING MOP BUCKETS W/MOPS
1 TIME CLOCK
1 TRANSMISSION JACK
1 OTC HYDRAULIC LIFT
1 2 TON FLOOR JACK
11 JACK STANDS
1 AIR BUMPER JACK
2 TROUBLE LIGHTS W/RECOIL
1 10 TON PRESS
1 TRI-LIFT TAPE MACHINE
1 10 HP CHAMPION AIR COMPRESSOR
40 TDY TIE DOWNS
1 F.M.C. TIRE CHANGER
4 R.O. RACKS
1 SNAP ON WHEEL BALANCER
1 SEARS AUTO-WASHER
1 SEARS DRYER ELECTRIC
1 FICHA READER
1 UPHOLSTERY SHOP-INCLUDES SEWING & LAYOUT
PLATFORM
1 ROTARY TWIN POST AUTO AND LIGHT TRUCK LIFT,
230 VOLT, SINGLE PHASE
BODY SHOP 1 ELECTRIC WATER COOLER/DRINKING FOUNTAIN
1 RAG SAFETY CAN
1 ROLLING MOP BUCKET W/MOP
1 KANSAS JACK LASER ALIGNMENT SYSTEM
1 KANSAS JACK MAGNA RACK W/8 ROLLER PLATES
& 1 SET OF FRAME GAUGES
3 SNAP BLOCKS
<PAGE>
3 BOTTLE JACKS
1 COME ALONG
1 10 TON PORTA POWER W/PIPES
1 ELECTRIC WINCH
1 OTC (FRONT) PUMP
MISCELLANEOUS HOLDING CLAMPS
4 8' CHAINS
2 KANSAS JACK POWER POST &
ATTACHMENT KIT PK 100 W/PUMP
1 STEEL STEP
2 ROLLAWAY CARTS
4 50'AIRHOSES
1 8" VICE
1 10' BENCH
2 ARC WELDING HELMETS
1 BENCH GRINDER W/STAND
1 5 HP COMPRESSOR
BODY SHOP 2 5 TON FLOOR JACKS
1 2 TON FLOOR JACK
1 STRUT COMPRESSOR
1 2 DOOR 6' STORAGE CABINETS
1 BEE LINE ALIGNMENT STE
1 2982 CHEVROLET LUV TRUCK
3 GAS HANGING 175,000 BTU HEATERS
92 2 TUB FLORESCENT LIGHT FIXTURES
3 PUSH BROOMS 48"
2 WALL BUMPER RACKS
PAINT SHOP 1 2 DOOR 6' STORAGE CABINET
1 WALL CABINET
1 36" WALL MOUNTED MASKING MACHINE
2 20' AIR HOSES IN PAINT BOOTH
1 7.5 HP AIR COMPRESSOR
2 AIR STORAGE TANKS
1 WALL CLOCK
2 GAS HANGING HEATERS 175,000 BTU'S
2 INFRARED HEAT LAMPS
1 CAR COVER STAND
1 15 GALLON DRUM PUMP
1 3M CABINET
1 6' SHELVING UNIT
2 RUBBER TRASH CANS
1 PORTABLE CUT-IN BENCH
PAINT MIX ROOM 1 2 DOOR 6' STORAGE CABINET
1 7' SHELVING UNIT
2 MIXING TABLES
1 CLOCK
1 WALL MOUNT AIR/WATER EXTRACTOR
1 5' SHELVING UNIT
1 RAG SAFETY CAN
1 50' AIR HOSE
<PAGE>
2 3M MULTI MOBILE MASKERS
1 48" PUSH BROOM
1 CREEPER
1 WET VACUUM
2 50' WATER HOSES
1 30' AIR HOSE
1 DRILL PRESS
6 FIRE EXTINGUISHERS
<PAGE>
A. 1990 taxes, a lien not yet payable.
1. The rights or claims or title, if any, by the State of Arizona to any
portion of the property being located in the bed of any river or dry wash.
2. Reservation by ROBERT JAMES HIGHT AND HOLLIE HIGHT of an undivided one-half
interest in and to all oil, gas and mineral rights in and to this property
in Book of Agreements 95, Page 397.
3. An easement for electric transmission line and rights incident thereto as
granted in instrument recorded August 18, 1939 in Book 58 of Miscellaneous,
Page 331.
4. The effect of inclusion within the boundaries of the Lower Indian Bend Wash
as disclosed by instruments recorded August 21, 1974 in Docket 10794, Page
885; recorded March 6, 1975 in Docket 11060, Page 819; and recorded
December 31, 1975 in Docket 11480, Page 780.
5. An easement for lateral support and rights incident thereto as set forth in
instrument recorded November 1, 1977 in Docket 12519, Page 966.
6. An easemnet for drainage and rights incident thereto as set forth in
instrument recorded November 1,1977 in Docket 12519, Page 966.
7. Resolution adopting State Route Plan for the East Papago Extension Freeway
by the Arizona Department of Transportation, recorded May 9, 1985 in
85-212892, Official Records.
8. Any rights, interest or claims which may exist or arise by reason of the
following facts shown on a survey plat entitled MILLER & CURRY/KENNELLY
MORTGAGE, Job No. 891113, dated December 6, 1989, prepared by RANDY
DELBRIDGE:
a. Encroachment of block wall onto adjoining property as more
particularly set forth on said Survey as Special Notes Nos. 1, 2, 3
and 5.
9. A Deed of Trust given to secure an indebtedness in the original principal
amount of $675,000.00, together with any and all other obligations secured
thereby, dated January 3, 1990, recorded January 16, 1990, in 90-021755,
Official Records.
TRUSTOR : R. J. MORGAN CORPORATION OF AMERICA, a Connecticut corporation and
LISA B. ZELINSKY, a single woman
Exhibit C
<PAGE>
TRUSTEE : FIRST AMERICAN TITLE INSURANCE COMPANY OF ARIZONA, an Arizona
corporation
BENEFICIARY: THE MIDLAND MUTUAL LIFE INSURANCE COMPANY, an Ohio corporation
10. Security Agreement executed by R. J. MORGAN CORPORATION OF AMERICA, a
Connecticut corporation and LISA B. ZELINSKY, a single woman, Debtor, to
THE MIDLAND MUTUAL LIFE INSURANCE COMPANY, an Ohio corporation, Secured
Party, dated January 3, 1990, recorded January 16, 1990 in 90-021756,
Official Records.
11. Assignment of Leases and Rents executed by R. J. MORGAN CORPORATION OF
AMERICA, a Connecticut corporation and LISA B. ZELINSKY, a single woman,
Assignor, to THE MIDLAND MUTUAL LIFE INSURANCE COMPANY, an Ohio
corporation, Assignee, dated January 3, 1990, recorded January 16, 1990 in
90-021757, Official Records.
13. Arizona Uniform Commercial Code Financing Statement Form UCC-1 executed by
R. J. MORGAN CORPORATION OF AMERICA, a Connecticut corporation and LISA B.
ZELINKSY, a single woman, Debtor, to THE MIDLAND MUTUAL LIFE INSURANCE
COMPANY, an Ohio corporation, Secured Party, recorded January 16, 1990, in
90-021759, Office Records.
<PAGE>
WHEN RECORDED HOLD FOR:
Fennemore Craig
Suite 2200
Two North Central Avenue
Phoenix, AZ 85004 MEMORANDUM OF LEASE
ATTN: William T. Boutell, Jr.
KNOW ALL MEN BY THESE PRESENTS:
Lisa B. Zelinsky and R. J. Morgan Corporation of America, A Connecticut
corporation (collectively "Lessor"), and Scottsdale Hyundai, Ltd., an Arizona
corporation("Lessee"), have entered into a Lease, dated October 15, 1990,
pursuant to which Lessor has leased to Lessee that certain real property and
improvements having a street address of 1111 North Miller Road, Tempe, Arizona,
and more particularly described on Exhibit A attached hereto and made a part
hereof ("Premises") and certain personal property. The original term of the
Lease expires on December 15, 1993, and Lessee is granted the option to renew
the term of the Lease for four additional periods of five years each. During the
original term of the Lease and all of the renewal terms of the Lease, Lessee has
a right of first refusal to purchase the Premises and the personal property in
the event of a proposed sale by Lessor to a bona fide third party, and during
the last six months of the original term of the Lease Lessee has the option to
purchase the Premises and the personal property, all in accordance with and as
more particularly set forth in the Lease.
The Lease is available for inspection and copying at the offices of
Fennemore Craig, Suite 2200, Two North Central Avenue, Phoenix, Arizona
85004-2390.
Dated this 15th day of October, 1990.
/s/ Lisa B. Zelinsky
------------------------------------------------
Lisa B. Zelinsky
R. J. Morgan Corporation of America
By /s/
---------------------------------------------
Its__________________________________________
LESSOR
<PAGE>
Scottsdale Hyundai, Ltd.
By /s/ Steven Knappenberger
---------------------------------------------
Steven Knappenberger, Chairman
LESSEE
<PAGE>
STATE OF CONNECTICUT )
) ss.
COUNTY OF FAIRFIELD )
The foregoing instrument was acknowledged before me this 15th day of
October, 1990 by Lisa B. Zelinksy.
/s/
------------------------------------
Notary Public
My Commission Expires:
3/31/93
- ----------------------
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this 15th day of
October, 1990 by Ronald Morgan or R. J. Morgan Corporation of America, a
Connecticut corporation, on behalf of the corporation.
/s/ Helen M. Dowell
------------------------------------
Notary Public
My Commission Expires:
March 31, 1994
- ----------------------
[Notarial Seal]
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this 15th day of
October, 1990 by Steven Knappenberger, Chairman of Scottsdale Hyundai, Ltd., an
Arizona corporation, on behalf of the corporation.
/s/ Helen M. Dowell
------------------------------------
Notary Public
My Commission Expires:
March 31, 1994
- ----------------------
[Notarial Seal]
<PAGE>
PARCEL NO. 1:
That part of the Northwest quarter of the Southeast quarter of Section 11,
Township 1 North, Range 4 East of the Gila and Salt River Base and Meridian,
Maricopa County, Arizona, described as follows:
Beginning at the Southwest corner of the Northwest quarter of the Southeast
quarter; thence North 0 degrees 0 minutes 1 second, East 205 feet; thence North
89 degrees 44 minutes 33 seconds, East 33 feet to the True Point of Beginning;
thence North 89 degrees 44 minutes 33 seconds, East 50 feet; thence South 0
degrees 0 minutes 8 seconds, South West 15 feet; thence North 89 degrees 44
minutes 33 seconds, East 77.27 feet; thence North 0 degrees 4 minutes 10
seconds, East 60 feet; thence South 89 degrees 44 minutes 30 seconds, West
127.342 feet to the True Point of Beginning.
PARCEL No. 2:
That part of the Northwest quarter of the Southeast quarter of Section 11,
Township 1 North, Range 4 East of the Gila and Salt River Base and Meridian,
Maricopa County, Arizona, described as follows:
Beginning at the Southwest corner of the Northwest quarter of the Southeast
quarter; thence North 0 degrees 0 minutes 1 second, East 250 feet; thence North
89 degrees 44 minutes 33 seconds, East 33 feet to the True Point of Beginning;
thence North 89 degrees 44 minutes 30 seconds, East 127.342 feet; thence North 0
degrees 4 minutes 10 seconds, East 300 feet; thence South 89 degrees 44 minutes
33 seconds, West 300 feet to the True Point of Beginning.
Exhibit A
<PAGE>
CONSENT AND COVENANT OF MASTER LESSOR
TO: LAUREL LEASING, INC., a Texas corporation ("Laurel");
CAMELBACK AUTOMOTIVE, INC., an Arizona corporation ("Camelback
Automotive"); and
LRP, LTD., an Arizona corporation dba "Land Rover Phoenix" ("LRP")
DATED: August 18, 1995
The undersigned ("Master Lessor"), as the owner of the real property
located at 1127 East Camelback Road, Phoenix, Arizona (the "Premises"), and as
the lessor under that certain "Lease" of the Premises to Laurel dated August 11,
1989 (the "Master Lease"), hereby consents, acknowledges, covenants and agrees
with Laurel, Camelback and LRP as follows:
(A) The Master Lease has been amended so as to extend the term
thereof through August 31, 2005, with an option to further
extend the term thereof for a period of five (5) additional
years
(B) Master Lessor has previously consented to the sublease of
the Premises by Laurel to Camelback Automotive;
(C) Master Lessor hereby consents to and approves of the sublease
of the Premises by Camelback Automotive to LRP on the terms of
that certain "Sublease Agreement" to be entered into by and
between Camelback Automotive and LRP (the "Sublease"), an
unsigned copy of which is attached hereto as Exhibit "A";
(D) Master Lessor agrees that it will give LRP prompt written
notice of any breach of the Master Lease and further agrees
that it will accept any cure, in payment of money or
otherwise, offered or performed by LRP as if such cure were
offered or performed by Laurel or Camelback Automotive;
(E) Provided that LRP is not in beach of the terms and
conditions of the Sublease, Master Lessor shall not
directly or indirectly interfere with LRP's quiet enjoyment
of the Premises, regardless of whether Laurel is in default
under the Master Lease and regardless of whether the Master
Lease continues or is terminated, and, if the Master Lease
is terminated, Master Lessor will abide by the terms of the
Sublease; and
(F) Master Lessor acknowledges that Laurel, Camelback Automotive
and LRP are entering into the Sublease in reliance upon the
consents, covenants and
<PAGE>
agreements given and made herein by Master Lessor and Master
Lessor agrees that Laurel, Camelback Automotive and LRP, and
each entity's respective successors and assigns, may, in fact,
so rely on such consents, covenants and agreements.
MARYLAND INVESTMENTS, INC.,
an Arizona corporation
By /s/ Illegible
--------------------------
Its President
--------------------------
-2-
<PAGE>
EXHIBIT "A"
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT is made effective as of the 1st day of July,
1995, by and between CAMELBACK AUTOMOTIVE, INC., an Arizona corporation
("Sublessor"), whose address is 14032 North Canterbury Drive, Phoenix, Arizona
85023, and LRP, LTD., an Arizona corporation dba "Land Rover Phoenix"
("Sublessee"), whose address is 1127 East Camelback Road, Phoenix, Arizona
85014, with reference to the following facts:
RECITALS:
A. Sublessor is currently subleasing the real property located at
1127 East Camelback Road, Phoenix, Arizona, more particularly
described on Exhibit "A" attached hereto and incorporated herein
by this reference (the "Premises) from LAUREL LEASING, INC., a
Texas corporation ("Laurel"), subject to, and pursuant to the
terms and conditions of, that certain Lease (the "Master Lease)
dated August 11, 1989. by and between Laurel and MARYLAND
INVESTMENTS, INC., an Arizona corporation ("Master Lessor"). A
copy of the Master Lease is attached hereto as Exhibit "B" and by
this reference incorporated herein.
B. Sublessee desires to sublease the Premises from Sublessor, and
Sublessor desires to sublease the Premises to Sublessee, on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
covenant and agree as follows:
AGREEMENTS:
1. SUBLEASE. Subject to all the terms and conditions of this Sublease
Agreement, Sublessor hereby subleases the Premises to Sublessee and Sublessee
hereby subleases the Premises from Sublessor. As hereinafter used in this
Sublease Agreement, the term "Sublease" shall mean the tenancy of Sublessee
under this Sublease Agreement.
2. MASTER LEASE; RIGHTS AND OBLIGATIONS OF PARTIES. The Sublease shall be
subordinate and subject to all of the terms, conditions and covenants of the
Master Lease and Sublessor and Sublessee hereby incorporate and adopt such
terms, conditions and covenants as the governing terms, conditions and covenants
of this Sublease Agreement. The Master Lease shall not be amended hereafter so
as to adversely affect or limit any rights or
<PAGE>
benefits of Sublessee hereunder without the prior written consent of Sublessee.
Except as provided to the contrary herein, Sublessor shall have the same rights
and obligations as the "Landlord" under the Master Lease and Sublessee shall
have the same rights and obligations as the "Tenant" under the Master Lease.
Upon demand of Sublessee, Sublessor shall take whatever reasonable actions are
necessary under the Master Lease with respect to the Master Lessor in order to
aid Sublessee in exercising such rights. In addition to those limitations of
Sublessee's rights and obligations stated elsewhere in this Sublease Agreement,
the parties expressly agree that, notwithstanding anything to the contrary
contained herein, (i) this Sublease Agreement does not obligate Sublessee to pay
the monthly rental due to the Master Lessor under the Master Lease, (ii) this
Sublease Agreement does not entitle Sublessee to exercise any of the rights of
Sublessor as the "Tenant" under Section 3 of the Master Lease, (iii) the
Sublease Agreement does not entitle Sublessee to receive the benefits of the
application by Master Lessor of the deposit described in Section 5 of the Master
Lease, and (iv) Sublessee shall not be responsible or obligated in any way for
any breach of the Master Lease prior to the date hereof or for any event or
condition with respect to the Premises which has occurred or exists on the date
hereof. With respect to Section 3 of the Master Lease, Sublessor agrees to pass
on to Sublessee any information made known to Sublessor regarding the
availability of the "Parcels" (as defined in the Master Lease) and shall
otherwise reasonably cooperate with Sublessee in the event that Sublessee
desires to lease one or more of the Parcels directly from Master Lessor, but
Sublessor shall have no obligation to lease any Parcel for the purpose of
subleasing it to Sublessee.
3. TERM; EXTENSION; EARLY TERMINATION.
(A) The Sublease shall commence on the date set forth above (the "Sublease
Commencement Date") and shall continue for a period of ten (10) years (the
"Initial Term"), unless extended or earlier terminated as herein provided.
Provided Sublessee is not in default under the terms of this Sublease Agreement,
Sublessee may extend the term of this Sublease for one (1) period of five (5)
years (the "Extension Term") by giving written notice to that effect to
Sublessor not later than one hundred eighty (180) days prior to the expiration
of the Initial Term. As hereinafter used in this Sublease Agreement, the term
"Sublease Term" shall include both the Initial Term and the Extension Term.
(B) Notwithstanding the foregoing, Sublessee may give written notice to
Sublessor of an intent to terminate the Sublease prior to the expiration of the
Sublease Term, whereupon the Sublease shall terminate on the date which is one
hundred and eighty (180) days after Sublessor's receipt of said notice or on
such later date, if any, specified in said notice.
-2-
<PAGE>
(C) In addition to the early termination rights set forth in Paragraphs
3(B) and 3(D) hereof, Sublessee may terminate the Sublease if, after diligent
efforts, Sublessee fails to obtain the necessary approvals for the location of
Sublessee's dealership at the Premises from both Land Rover North America, Inc.,
and the Arizona State Department of Motor Vehicles. Such termination shall be
accomplished by Sublessee giving written notice to Sublessor on or before
October 1, 1995. If Sublessee terminates the Sublease after September 1,1995,
Sublessee shall not be entitled to a refund of any part of its September rent
payment and to the extent such rent payment has not yet been made by Sublessee
at the time of such termination Sublessee shall immediately make the same.
(D) In addition to early termination rights set forth in Paragraphs 3(B),
3(C) and 3(D) hereof, Sublessee may terminate the Sublease if the Master Lessor
does not give its written consent to the alterations and additions to the
Premises desired by Sublessee and approved by Land Rover North America, Inc.
within fifteen (15) days after such consent is requested in writing by
Sublessee.
(E) Upon early termination of the Sublease pursuant to either Paragraph
3(B) or 3(C) hereof, this Sublease Agreement shall be of no further force or
effect (other than those indemnification obligations set forth in Paragraphs 11
and 15 hereof) and all leasehold improvements to the Premises made by Sublessee
shall remain as part of the Premises. Sublessee shall remove all personal
property and trade fixtures of Sublessee from the Premises upon or prior to the
date of early termination.
4. USE. Sublessee may use the Premises for the operation of an automobile
dealership pursuant to which Sublessee may (i) conduct new and used vehicle
sales and leasing, (ii) perform vehicle maintenance and repairs, and (iii)
conduct and/or perform any other activities ancillary thereto and customarily
associated therewith. Sublessee at no time shall violate any use provision of
the Master Lease or any requirement or demand of any governmental agency or
official with respect to the condition, use and occupancy of the Premises,
except that Sublessee shall not be responsible for any conditions or violations
in existence prior to the date hereof.
5. MONTHLY RENTAL; LATE FEE; CPI ADJUSTMENT PERCENTAGE.
(A) On or before the first (1st) day of each and every month of the
Sublease Term, Sublessee shall pay to Sublessor the sums set forth in this
Paragraph 5(A) as monthly rental for the Premises. Sublessee shall make such
payments without deduction or offset and, except as specifically hereinafter set
forth, without the requirement of demand or notice by Sublessor. Sublessee shall
mail or hand deliver such payments to Sublessor at the address set forth on page
1 of this Sublease Agreement, or
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<PAGE>
at such other address designated in writing by Sublessor. The monthly rental
amounts are as follows:
(i) Months one (1) and two (2) of the Initial Term - $0.00;
(ii) Month three (3) of the Initial Term - $6,000.00;
(iii) Month four (4) of the Initial Term - $8,000.00;
(iv) Months five (5) through sixty (60) of the Initial Term -
$12,000.00;
(v) Months sixty-one (61) through eighty-four (84) of the Initial
Term - $12,000.00 multiplied by the CPI Adjustment Percentage (as
defined in Paragraph 5(B) hereof) for the period commencing with
the Sublease Commencement Date and ending with the end of the
sixtieth (60th) month of the Initial Term, with a maximum CPI
Adjustment Percentage of one hundred twelve percent (112%);
(vi) Months eighty-five (85) through one hundred eight (108) of the
Initial Term - the monthly rent payable during months
sixty-one (61) through eighty-four (84) of the Initial Term
multiplied by the CPI Adjustment Percentage for the period
commencing with the end of the sixtieth (60th) month of the
Initial Term and ending with the end if the eighty-fourth (84)
month of the Initial Term, with a maximum CPI Adjustment
Percentage of one hundred five percent (105%);
(vii) Months one hundred nine (109) through one hundred twenty (120)
of the Initial Term - the monthly rent payable during months
eighty-five (85) through one hundred eight (108) of the
Initial Term multiplied by the CPI Adjustment Percentage for
the period commencing with the end of the eighty-fourth (84th)
month of the Initial Term and ending with the end of the one
hundred eighth (108th) month of the Initial Term, with a
maximum CPI Adjustment Percentage of one hundred two and
one-half percent (102.5%);
(viii) Months one (1) through twelve (12) of the Extension Term - the
monthly rent payable during months one hundred eight (108)
through one hundred twenty (120) of the Initial Term;
(ix) Months thirteen (13) through thirty-six (36) of the Extension
Term - the monthly rent payable during months one (1) through
twelve (12) of the Extension Term multiplied by the CPI
Adjustment Percentage for the period commencing with the end
of the one hundred eighth (108th) month of the Initial Term
and ending with the end of the twelfth (12th) month of the
Extension Term, with a maximum CPI Adjustment Percentage of
one hundred seven and one-half percent (107.5%); and
(x) Months thirty-seven (37) through sixty (60) of the Extension
Term - the monthly rent payable during months thirteen (13)
through thirty-six (36) of the
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Extension Term multiplied by the CPI Adjustment Percentage for
the period commencing with the end of the twelfth (12th) month of
the Extension Term and ending with the end of the thirty-sixth
(36th) month of the Extension Term, with a maximum CPI Adjustment
Percentage of one hundred five percent (105%).
During any period in which the monthly rental payment is affected by the CPI
Adjustment Percentage, Sublessee shall continue making monthly rental payments
in the previous amount until Sublessor gives written notice to Sublessee of the
pertinent CPI Adjustment Percentage and the corresponding new monthly rental.
Upon receipt of said notice from Sublessor, Sublessee shall immediately pay any
increase in monthly rental due but not paid during the months prior to receiving
said notice and shall thereafter commence paying the adjusted monthly rental in
accordance with the terms hereof. Any payment of monthly rental which is not
received by Sublessor within ten (10) days of its due date shall be subject to a
five percent (5%) late fee payable upon demand by Sublessor.
(B) The term "CPI Adjustment Percentage" shall mean the CPI-U (as defined
below) at any given point in time stated as a percentage of the CPI-U at any
previous point in time and shall be a means of measuring the increase, if any,
of the CPI-U over a specified period of time. By way of example, the CPI
Adjustment Percentage for the period commencing with the Sublease Commencement
Date and ending with the end of the sixtieth (60th) month of the Sublease Term
shall be determined as follows:
CPI Adjustment % = (CPI-U @ June 1, 2000 / CPI-U @ June 1, 1995) x 100%
The term "CPI-U" shall mean the "Consumer Price Index - Seasonally Adjusted U.S.
City Average for All Items for All Urban Consumers (1982-84=100)," published
monthly in the Monthly Labor Review of the Bureau of Labor Statistics of the
United States Department of Labor. ("CPI-U") for the first calendar month of the
Extension Term, and the denominator of which is the CPI-U for the first calendar
month of the Initial Term. If the CPI-U is discontinued, the "Consumer Price
Index - Seasonally Adjusted U.S. City Average for All Items for Urban Wage
Earners and Clerical Workers (1982-84=100)" ("CPI-W"), published monthly in the
Monthly Labor Review by the Bureau of Labor Statistics of the United States
Department of Labor shall be substituted therefor. If the CPI-W is discontinued,
comparable statistics on the purchasing power of the consumer dollar published
by the Bureau of Labor Statistics of the United States Department of Labor shall
be used for making such computation. If the Bureau of Labor Statistics shall no
longer maintain statistics on the purchasing power of the consumer dollar,
comparable statistics published by a responsible financial periodical or
recognized authority selected by Sublessor shall be used for making such
computation. If the base year ("1982-84=100") or other base year
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<PAGE>
used in computing the CPI-U is changed, the figures used in making the
adjustment in this paragraph shall be changed accordingly so that all increases
in the CPI-U are taken into account notwithstanding any such change in the base
year. Notwithstanding any provision in this Sublease Agreement to the contrary,
in no event shall the monthly rental due for any period during the Sublease Term
be less than the monthly rental for any prior period.
6. PAYMENT OF MASTER LEASE RENTAL. Provided Sublessee pays the monthly
rental and other sums due under this Sublease Agreement in a timely fashion,
Sublessor shall pay the rent and other sums due under the Master Lease in
accordance with the terms thereof.
7. TAXES; UTILITIES. In addition to the monthly rental payments due
under this Sublease Agreement, during the Sublease Term Sublessee shall pay
to Sublessor, or directly to such other person or entity, as appropriate, the
following:
(i) All sales, transaction privilege or other excise taxes levied or
imposed upon or measured by any amount payable to Sublessor under
this Sublease Agreement simultaneously with the payment to which
the tax relates;
(ii) All real estate taxes and assessments payable by Sublessor as
"Tenant" under the terms of the Master Lease, prorated if the
taxes or assessments relate to periods during and before or after
the Sublease Term, provided that Sublessee shall not be obligated
to pay in full any assessments which may be paid in installments,
except to the extent the installments relate to the Sublease
Term;
(iii) All personal property taxes payable by Sublessor as "Tenant"
under the terms of the Master Lease, prorated if the taxes relate
to periods during and before or after the Sublease Term; and
(iv) All charges for utilities provided to the Premises and otherwise
payable by Sublessor as "Tenant" under the terms of the Master
Lease.
Notwithstanding the foregoing, Sublessee shall have the right to protest real
estate taxes as provided in Paragraph 8 of the Master Lease.
8. INSURANCE. Sublessee shall, at its own expense, obtain and maintain
throughout the Sublease Term those policies of property damage and public
liability insurance covering the Premises required by Sections 19 and 20 of the
Master Lease and shall further comply with each of the other requirements set
forth in the Master Lease having to do with such policies. All such policies
shall name Sublessor and Master Lessor as additional insureds.
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<PAGE>
9. LEASEHOLD IMPROVEMENTS. During the Sublease Term, Sublessee hereby
covenants, at its sole cost and expense, to significantly remodel and upgrade
the existing facility constituting part of the Premises. In furtherance thereof,
Sublessee may make such alterations and additions to the Premises as Sublessee
desires, provided that:
(i) Such alterations and additions comply with all applicable
building codes and ordinances and the necessary permits
therefor are obtained in advance of any actual construction;
(ii) Sublessee procures and maintains adequate insurance coverage
against such risks, in such amounts and with such companies as
Sublessor may reasonably require in connection therewith;
(iii) The prior written consent to each alteration or addition is
obtained from Master Lessor by Sublessor; and
(iv) Sublessee takes any and all actions, including those specified in
the Master Lease, necessary to prevent the filing of any liens
against the Premises by contractors and material suppliers
involved in the construction of any such alterations and
additions.
10. REPRESENTATIONS AND WARRANTIES OF SUBLESSOR. Except as specifically
set forth herein, Sublessor makes no representations or warranties with respect
to the Premises, and Sublessee acknowledges that the Premises are being
subleased "As Is". Sublessee further acknowledges that Sublessee has had a full
and complete opportunity to examine the condition, maintenance and operation of
the Premises. In accordance with the foregoing, Sublessor represents and
warrants as follows:
(i) The copy of the Master Lease attached hereto as Exhibit "B" is a
true and complete copy of the Master Lease (except for the
economic terms thereof which have been blacked out), including
any and all amendments thereto, and the same is currently in full
force and effect with neither party thereto being in breach
thereof;
(ii) There are no underground storage tanks on the Premises;
(iii) As of the Sublease Commencement Date, the roof and windows are
free of defects and the heating, ventilation and air
conditioning systems are in good operating condition; and
(iv) To the best of Sublessor's knowledge, the Premises are in
compliance with the current standards of environmental quality
imposed by the Arizona Department of Environmental Quality.
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<PAGE>
11. INDEMNIFICATION.
(A) Sublessee covenants that it will defend and will indemnify Sublessor
and save it harmless for, from and against any and all claims, actions,
liabilities and expenses in connection with any default under the terms and
conditions of the Master Lease caused by Sublessee and in connection with the
loss of life, personal injury, or damage to property or business arising from,
related to, or in connection with the occupancy or use by Sublessee of the
Premises or occasioned totally or in part by any act or omission of Sublessee,
its contractors, subcontractors, subtenants, licensees, or its or their
respective agents, servants or employees subject to Paragraph 11(B) hereof.
(B) Sublessor covenants that it will defend and will indemnify Sublessee
and save it harmless for, from and against any and all claims, actions,
liabilities and expenses arising out of or in any way related to the presence of
petroleum based, toxic or hazardous substances in, on, under or originating from
the Premises to the extent such condition was caused or allowed to occur by
Sublessor.
(C) The indemnification obligations contained in this Paragraph 11 shall
survive any termination or cancellation of this Sublease.
12. ROOF AND STRUCTURAL REPAIRS. Notwithstanding anything contained herein
to the contrary, Sublessor, at its expense, shall be responsible for all
structural and roof repairs and replacements reasonably required during the
Sublease Term to those improvements now existing on the Premises to the extent
such repairs or replacements are not covered by the insurance that Sublessee is
required to obtain and maintain pursuant to Paragraph 8 hereof. Sublessor shall
have no responsibility to repair or replace any roofs or structural portions of
any improvements to the extent the same have been modified or replaced by
Sublessee or if originally constructed by Sublessee.
13. NOTICES. All notices, demands or other writings required or allowed
under this Sublease Agreement shall be deemed to have been fully given when hand
delivered or two (2) days after being deposited in the United States mail,
certified or registered, postage prepaid, and addressed as set forth on page 1
of this Sublease Agreement. Either party may change its address for the receipt
of notice by giving written notice of such change to the other party in the
manner provided herein. A copy of any notice given to Sublessee shall be
simultaneously given to Sublessee's attorney, Stephen M. Savage, Fennemore
Craig, 2 North Central Avenue, Suite 2200, Phoenix, Arizona 85004, in the same
manner as required for notice to Sublessee.
14. SUBLEASE DEFAULT; REMEDIES. A "Sublease Default" shall occur
under this Sublease Agreement immediately upon the happening of any of the
following events:
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(i) the occurrence of an "Event of Default" (as that term is
defined in the Master Lease) resulting from the breach of an
obligation of the "Tenant" under the Master Lease which has
been assumed by Sublessee under this Sublease Agreement;
provided, however, that any grace and/or cure period available
to the "Tenant" under the Master Lease shall be shortened by
five (5) days for purposes of determining whether a Sublease
Default has occurred under this Sublease Agreement;
(ii) Sublessee's failure to pay the Sublease Rent within five (5)
business days after receipt of a written demand therefor; and
(iii) Sublessee's breach of any of the other terms and conditions of
this Sublease, which breach is not cured within fifteen (15)
days after written notice of such breach is received by
Sublessee; provided, however, that Sublessee shall be entitled
to such longer period of time as is reasonably necessary to
cure any breach not capable of cure within such fifteen (15)
day period if Sublessee commences to cure such breach within
said period and diligently prosecutes the cure to completion.
Upon the occurrence of a Sublease Default, Sublessor may avail itself of any
rights and remedies provided by law in addition to those rights and remedies
available to the "Landlord" under the terms of the master Lease. Should
Sublessor cure a breach by Sublessee under this Sublease Agreement so that an
Event of Default does not occur under the Master Lease, Sublessee shall
reimburse Sublessor for its reasonable costs in curing such breach within ten
(10) days after Sublessor delivers a demand for such reimbursement and
Sublessee's failure to so reimburse shall be a Sublease Default as described in
subparagraph (iii), above.
15. ASSIGNMENT AND SUBLETTING. Sublessee shall have the right to assign or
further sublet the Premises provided that (i) any such assignment or sublease is
expressly subject to this Sublease and the Master Lease, (ii) Sublessor is
provided with a copy of the proposed assignment or sub-sublease agreement at
least fifteen (15) days prior to the effective date thereof, and (iii) Sublessor
is able to obtain any necessary consents and approvals of Master Lessor under
the terms of the Master Lease.
16. BROKERAGE. Sublessor and Sublessee each warrants and represents to the
other than no real estate sales or brokerage commissions or like commissions are
or will be due from the other party in connection with this transaction.
Further, each party agrees to indemnify and hold harmless the other party from
and against any liability, loss, cost, damage or expense, including but not
limited to, court costs and reasonable attorney's fees, resulting from any
assertion of a right to a brokerage commission due to any act of the
indemnifying party.
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<PAGE>
17. SUCCESSORS AND ASSIGNS. This Sublease Agreement shall be binding on
and inure to the benefit of all parties who lawfully succeed to the rights or
interests of either Sublessee or Sublessor, including, but not limited to
assigns, heirs or other legal representatives such as any executor or
administrator.
18. ATTORNEYS' FEES. In the event legal action is required in connection
with the enforcement or construction of this Sublease Agreement or any provision
hereof, the prevailing party in such action shall be entitled to payment of its
court costs and reasonable attorneys' fees.
19. ENTIRE AGREEMENT. This Sublease Agreement constitutes the entire
agreement between Sublessor and Sublessee relative to the Premises and can be
changed or modified only by written agreement signed by the parties hereto.
20. GOVERNING LAW. This Sublease Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona.
21. COUNTERPARTS. If each of the parties signs a counterpart
original of this Sublease Agreement, those counterparts shall constitute a
valid and complete execution hereof and the counterparts so executed shall be
deemed for all purposes to be a single instrument.
22. RECORDING OF MEMORANDUM. The parties agree to execute a mutually
acceptable "Memorandum of Sublease" disclosing the existence of the Sublease,
along with any other matters reasonably requested by either party, and further
agree that either party may record the same in the real property records of
Maricopa County, Arizona.
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<PAGE>
IN WITNESS WHEREOF, Sublessor and Sublessee have executed this Sublease
for the purposes herein contained as of the date first hereinabove written.
SUBLESSOR: SUBLESSEE:
CAMELBACK AUTOMOTIVE, INC., LRP, LTD., an Arizona corporation
an Arizona corporation dba "Land Rover Phoenix"
By_____________________________ By_______________________________
Its____________________________ Its______________________________
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<PAGE>
EXHIBIT "B"
LEASE
THIS LEASE, made and entered into on the day hereinafter subscribed
by and between MARYLAND INVESTMENTS, INC., an Arizona corporation ("Landlord")
and LAUREL LEASING, INC., a Texas corporation ("Tenant").
W I T N E S S E T H:
1. USE. The Landlord hereby leases to Tenant and Tenant hereby hires
from Landlord, for the purpose of conducting thereon, a commercial usage
consistent with the legal use of the premises, those certain premises with
appurtenances, described herein.
2. PREMISES. The premises leased to Tenant, together with
appurtenances, are hereinafter referred to as the "Demised Premises" and are
situated in the State of Arizona, and are more fully described on the
attached Exhibit "A".
3. OPTION TO EXPAND DEMISED PREMISES. The Landlord owns property
adjacent to the Demised Premises as described on the attached Exhibit "B",
(hereinafter Parcel "A" and Parcel "B", respectively and "Parcels"
collectively). The Parcels are subject to leases to lessees which extend beyond
the beginning of the term of the Lease. The Landlord intends to allow the
Tenant, from time to time, the right to extend the Lease to include a portion or
all of the Parcels. Landlord shall inform Tenant from time to time and Tenant
may request from Landlord, from time to time, information concerning the status
of the leases on the Parcels, their respective termination dates and
negotiations concerning new leases of portions of the Parcels. If Tenant shall
determine that it wishes to expand this Lease to include all or a portion of the
Parcels, Tenant shall give Landlord written notice thereof (hereinafter the
"Option Notice") specifying the Parcels or portions thereof desired by Tenant
(which portions may not materially and adversely affect Landlord's ability to
lease the balance of the Parcels and which portions are hereinafter referred to
as the "Option Parcel"). Until receipt of the Option Notice, Landlord shall only
be obligated to reasonably inform Tenant as to the availability of the Parcels
for lease and related information. However, from and after deliver of the Option
Notice to Landlord, Landlord shall be obligated, in good faith, subject to its
lease obligations at the time of receipt of the Option Notice, to attempt to
obtain possession of the Option Parcel. Upon obtaining possession of the Option
Parcel, Landlord shall deliver possession of the Option Parcel to Tenant by
written notice to Tenant. Upon delivery of possession of the Option Parcel to
Tenant, the rent herein shall be increased by an amount equal to the fair market
value of the rent for the Option Parcel, (the "Option Parcel Rent"). The Option
Parcel Rent shall be established and paid by
<PAGE>
the following procedure: (1) Tenant shall include in its Option Notice its
proposed amount of Option Parcel Rent as of the date of delivery of possession;
(2) the Tenant's proposed Option Parcel Rent shall be paid by Tenant and become
rental due and owing each month under this Lease at and simultaneously with
delivery of possession of the Option Parcel by Landlord to the Tenant; (3) real
property taxes for the Option Parcel shall be prorated between Landlord and
Tenant as of the date of delivery of possession of the Option Parcel by the
Landlord; (4) Tenant shall be obligated to pay all additional expenses with
respect to the Option Parcel as of the date possession is delivered to it by the
Landlord including, utilities, maintenance repair and the like; (5) for all
other purposes, the Option Parcel shall be considered a part of the Demised
Premises as of the date of delivery of possession; (6) if Landlord determines
that the proposed Option Parcel Rent by Tenant is less than the fair market
value of the rent for the Option Parcel, Landlord shall, within thirty (30) days
of delivery of possession of the Option Parcel give written notice of its
proposed Option Parcel Rent for the Option Parcel and, the name of an arbitrator
it proposes to settle the matter in the event Tenant is unwilling to accept
Landlord's proposed Option Parcel Rent; (7) Tenant shall within thirty (30) days
of receipt of Landlord's written notice of Option Parcel Rent, respond in one of
the following three manners: (a) not respond, in which event, Landlord's
proposed Option Parcel Rent shall be the additional rent for the Option Parcel;
(b) issue its written notice of rejection of Landlord's proposed Option Parcel
Rent, but acceptance of Landlord's proposed arbitrator, in which event, the
arbitrator shall determine the Option Parcel Rent, (half of the cost of the
arbitrator shall be allocated to each party hereunder); or (c) Tenant shall
timely reject Landlord's proposed Option Parcel Rent, timely reject Landlord's
proposed arbitrator and, shall name its own arbitrator, in which event,
Landlord's arbitrator and tenant's arbitrator shall meet and agree on a third
arbitrator and the three arbitrators shall set the Option Parcel Rent; (8)
during the period when rent is not established hereunder, Tenant shall pay the
amount set forth in Tenant's notice as to the Option Parcel Rent, and upon final
determination pursuant to the procedures outlined herein of the rent due, Tenant
shall pay the shortgage, if any, together with interest at the rate of the
Valley National Bank prime, plus two percent (2%) from the respective dates that
the Option Parcel Rent was due, until paid; and (9) the Option Parcel Rent shall
increase in proportion to the rental increase for the balance of the Demised
Premises at and simultaneously with the increase in rent under Paragraph 6
herein.
In the event Tenant gives an Option Notice, Landlord shall be
obligated to use its best efforts to deliver possession of the Option Parcel to
Tenant and complete the termination of the applicable lease(s); provided,
however, that if the Lessee(s) of the applicable Option Parcel refuses to
deliver possession to Landlord, Landlord's obligation hereunder shall be to
diligently
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<PAGE>
pursue such possession and Landlord shall not be liable hereunder for any other
liability or damages with respect to the same.
This procedure may be invoked from time to time by Tenant with
respect to portions of the Parcels. The Option Notice may include time
requirements for satisfying the same provided that any such time requirements
must be reasonable and must be issued in good faith or the Option Notice shall
not be effective.
4. TERM. The term of this lease shall be for eleven (11) years. It
shall commence and Tenant's obligation to pay rent, shall commence on the 1st
day of September, 1989 and shall end on the 31st day of August, 2000. Tenant
shall be given possession of the Demised Premises on the 15th day of August,
1989 for the purpose of demolition, construction, renovation and other work to
improve the Demised Premises for Tenant's use, (subject to the provisions of
Paragraph 9 hereof).
5. DEPOSIT. Upon the execution of this lease the Tenant shall
deposit with Landlord the sum of Twenty-One Thousand Dollars ($21,000), (plus
applicable rental tax for the first and second month's rent) being the rent for
the first, second and the balance after reduction for applicable rental tax,
part payment of the rent for the last month of the lease term; provided however,
that the deposit of part payment of the rent for the last month of this lease
may be applied, in the sole and exclusive discretion of the Landlord to any
other obligation of the Tenant hereunder. Tenant shall have no right to require
the Landlord to apply such sum to any purpose other than the payment of the last
month rent hereunder. If and to the extent that Landlord shall apply such last
month rent to any purpose other than the last month rent, the Tenant shall be
obligated upon demand by Landlord to fully restore such sum by additional
deposit with Landlord.
6. RENTAL. Tenant shall pay to Landlord during the term of this
lease as monthly rental for the Demised Premises, the sums set forth on the
following schedule:
Month Monthly Rental Total
----- -------------- -----
1 - 12 inclusive $7,000 $84,000
13 - 36 inclusive 8,000 192,000
37 - 60 inclusive 10,000 240,000
61 - 108 inclusive 12,000 576,000
108 - 132 inclusive 15,000 360,000
----------------------
Total Rental to be paid 1,452,000
======================
The foregoing amounts shall be in addition to any rent due for one
or more of the Option Parcels, if and to the extent that one or more options are
exercised under Paragraph 3 above.
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<PAGE>
The monthly rental shall be paid in advance on the first day of each
calendar month. All rental to be paid by Tenant to Landlord shall be in lawful
money of the United States of America and shall be paid without deduction or
offset, prior to notice or demand at the address as hereinafter subscribed. Any
rent payment not paid within ten (10) days of its due date shall be subject to a
five percent (5%) late charge.
7. RENTAL TAX. Tenant shall pay to Landlord any and all excise,
privilege and other taxes, other than net income and estate taxes levied or
assessed by any federal, state or local authority upon the rent received by the
Landlord hereunder, and Tenant shall bear any business tax imposed upon Landlord
by any governmental authority which is based or measured in whole or in part by
amounts or benefits, charged or received by Landlord from Tenant under this
lease, provided that Tenant shall pay only the amount of such business tax that
would be payable by Landlord if the Demised Premises were the only property of
the Landlord.
8. REAL ESTATE TAXES. Tenant shall pay the annual real estate taxes
and assessments levied upon the Demised Premises, and all improvements thereto
to the Landlord. During the initial year of the lease and the year of
termination, the real estate taxes shall be prorated, based upon the term of the
lease. In the event that Tenant wishes to protest the valuation of the real
property or any other matter involving the amount of the real estate taxes, the
Landlord shall cooperate with Tenant, provided however, that such action shall
be at the sole cost and expense of the Tenant.
9. PERSONAL PROPERTY TAXES. During the term hereof, Tenant shall
pay, prior to delinquency, all taxes assessed against and levied upon the
automobiles, fixtures, furnishings, equipment and all other personal property of
Tenant contained in the demised premises.
10. USES PROHIBITED. Tenant shall not use, or permit the Demised
Premises, or any part thereof, to be used for any purpose or purposes other than
the purpose or purposes for which the Demised Premises are hereby leased; and no
use shall be made or permitted to be made on the Demised Premises, nor acts
done, which may cause a cancellation of any insurance policy covering any
buildings on the Demised Premises or any part thereof, nor shall Tenant sell or
permit to be kept, used or sold in or about the Demised Premises, any article
which may be prohibited by standard form of fire insurance policies. Tenant
shall, at his sole cost, comply with any and all requirements, pertaining to the
use of the Demised Premises, of any insurance organization or company necessary
for the maintenance of reasonable fire and public liability insurance, covering
said building and appurtenances.
11. UTILITIES. Tenant shall pay before delinquency, all utility
charges, including but not limited to, telephone,
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water, gas, heat, electricity and all other services of utilities used in, upon,
or about the Demised Premises by Tenant or any of its subtenants, licensees, or
concessionaires during the term of this lease.
12. LEASEHOLD IMPROVEMENTS. Tenant hereby agrees to demolish certain
improvements and to construct other improvements to the Demised Premises at the
cost and expense of Tenant but only in accordance with conceptual plans which
have been submitted to and approved by Landlord. The work shall be performed
only after such contractors, subcontractors and other persons engaged by or on
behalf of Tenant to construct such improvements, perform such demolition or
otherwise work on the Demised Premises shall procure and maintain adequate
insurance coverage against such risks, in such amounts and with such companies
as Landlord may require in connection with the installation of such
improvements. Upon: (i) completion of such improvements; (ii) the issuance by
the City of Phoenix of a Certificate of Occupancy and/or Certificate of
Compliance with all relevant building code requirements; (iii) delivery of lien
waivers and/or certificate of payment in full from all contractors,
subcontractors, materialmen and suppliers (involving amounts in excess of
$1,000); and (iv) delivery to Landlord of a copy of the detailed plans and
specifications for the improvements to the Demised Premises on an "as built
basis", Landlord shall pay to Tenant, its portion of the cost of such
improvements, being the sum of Twenty Thousand Dollars ($20,000.00). Landlord
has made no representations as to the conditions of the Demised Premises or the
cost to demolish, construct, remodel, maintain, repair or renovate, except as
expressly set forth herein.
13. MECHANIC'S LIENS. Tenant will not permit any mechanic's or
materialman's lien or liens to be placed upon the Demised Premises or
improvements thereon during the Lease Term caused by or resulting from any work
performed, materials furnished or obligation incurred by or at the request of
Tenant, and in the case of the filing of any such lien, Tenant, within twenty
(20) days of the filing of same (herein the "20 Day Period"), shall pay or
remove any such lien or liens by placing with Landlord a cash deposit in an
amount adequate to cover the lien(s) and all costs and interest which may accrue
with respect to such lien(s), or at Tenant's option, Tenant may, within said 20
Day Period, or if Tenant fails promptly and within said 20 Day Period to do so,
Landlord may, but is not obligated to, bond over, at Tenant's cost, any and all
such lien(s) under an applicable statutory or other bonding procedure which
causes the full release and discharge of such lien or claim from the Demised
Premises, and the improvements thereto, including, without limitation, the
right, at Tenant's cost, to bond over pursuant to Arizona Revised Statutes,
Section 33-1004, or any related, amended or superseding statute or law
pertaining to such or a similar bonding procedure. If default in payment
thereof, or in removal or bonding over of such lien(s) as required or permitted
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above, shall continue for twenty (20) days after written notice thereof from
Landlord to Tenant, Landlord shall have the right and privilege at Landlord's
option of paying the same or any portion thereof without inquiry as to the
validity thereof, and any amounts so paid, including reasonable expenses and
interest thereon at the rate of fifteen percent (15%) per annum from the date of
payment by Landlord, shall be additional indebtedness and rent hereunder due
from Tenant to Landlord and shall be repaid to Landlord immediately on rendition
by Landlord to Tenant of a bill therefor.
14. TENANT'S REPAIRS AND ALTERATIONS. Except for demolition and
modifications set forth on the plans described in 12 above, Tenant will not in
any manner deface or injure the Demised Premises, and will pay the cost of
repairing any damage or injury done to the Demised Premises or any part thereof
by Tenant or Tenant's agents, employees or invitees. Tenant shall throughout the
Lease Term take good care of the Demised Premises and keep them free from waste
and nuisance of any kind. Tenant agrees to keep the Demised Premises, including
all improvements and property installed or kept on the premises by Tenant, other
than fixtures (hereinafter "Tenant Property") in good condition and repair and
make all necessary repairs and replacements thereto, subject to reasonable
depreciation and wear from ordinary uses and passage of time, it being
understood and agreed under the terms of this Lease that such improvements and
Tenant Property and any insurance coverage therefor are solely the
responsibility of Tenant hereunder. If Tenant fails to perform maintenance,
repairs or replacements, Landlord may give Tenant written notice thereof. If
Tenant thereafter fails to cure such default within thirty (30) days after
written notice by Landlord to Tenant to perform such maintenance, repairs or
replacement, Landlord may at its option perform or cause to be performed such
maintenance, repair or replacement, and Tenant shall, upon demand therefor, pay
and reimburse Landlord for the reasonable cost thereof. Tenant will not make or
allow to be made any alterations or physical additions in or to the Demised
Premises without the prior written consent of Landlord, which consent shall not
be unreasonably withheld. All alterations, additions or improvements (whether
temporary or permanent in character) made in or upon the Demised Premises, by
Tenant, shall be Landlord's property on expiration or termination of this Lease
and shall remain on the Demised Premises without compensation to Tenant. At the
expiration or any other termination of this Lease, Tenant shall deliver up the
Demised Premises with all improvements located thereon (except as otherwise
herein provided) in good repair and condition, reasonable wear and tear only
excepted, and fire and casualty damage or loss excepted as to improvements to
the extent such loss or damage is covered by fire and casualty insurance
provided by Tenant which is recoverable and all proceeds of such insurance are
paid to Landlord to cover such loss or damage. In any event, all proceeds of any
insurance coverage for loss or damage to the Demised Premises, exclusive of
Tenant Property but inclusive of
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any improvements, are hereby assigned and shall be payable directly by the
insurer to Landlord. At such expiration or any other termination, Tenant shall
deliver to Landlord all keys to the Demised Premises. All Tenant Property may be
removed by Tenant at the termination of this Lease if Tenant so elects, and
shall be so removed if required by Landlord upon sixty (60) days written notice;
if not so removed, all such items shall, at the option of Landlord, become the
property of Landlord. Any such items and all such other improvements or property
left in the Demised Premises by Tenant upon abandonment by Tenant of the Demised
Premises, or upon any expiration or termination of this Lease, shall, at
Landlord's election, be deemed the property of Landlord free of any claim of
Tenant or anyone claiming by or through Tenant. All installations, removals and
restoration by or at the instance of Tenant shall be accomplished in a good
workmanlike manner so as not to damage the Demised Premises.
15. REGULATED SUBSTANCES. Tenant warrants that no petroleum-based,
radioactive, hazardous or toxic substances (hereinafter referred to as Regulated
Substances) which are subject to federal, state or local laws, rules,
regulations and ordinances will be used on the Demised Premises, except for
those set forth in Exhibit "C". Tenant shall not have on the Demised Premises
any Regulated Substances other than those set forth on Exhibit "C" hereto, and
the quantities on the Demised Premises at any time shall not exceed the
quantities on Exhibit "C". Regulated Substances include, but are not limited to,
any and all substances, materials or wastes regulated under the Resource
Conservation and Recovery Act, 42 U.S.C. Section 8901, et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601,
et seq., the Arizona Hazardous Waste Management Act, A.R.S. Sub-section 49-921,
et seq., the Arizona Underground Storage Tank Regulation Act, A.R.S. Sub-section
49-1001, et seq., and the Arizona Environmental Quality Act, A.R.S. Sub-section
49-201, et seq., and the rules or regulations adopted and guidelines promulgated
pursuant to these laws.
Tenant has obtained or will obtain, in a timely fashion, all
permits, licenses and other authorizations which are required under federal,
state and local laws and regulations relating to pollution or potection of the
environment or public health (hereafter referred to as the Applicable Laws),
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or industrial, hazardous or toxic substances,
materials or wastes into the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, or
Regulated Substances.
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Tenant shall be, during the term of the lease, in compliance in all
material respects with all terms and conditions of the required permits,
licenses and authorizations, and also is and will be in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Applicable Laws or contained in any regulations, code, plan,
order, decree, judgment or notice issued, entered, promulgated or approved
thereunder and applicable to the Tenant's operations, activities or business.
Tenant shall immediately notify Landlord of any events, conditions,
circumstances, activities, practices, incidents, actions or plans known to the
Tenant which may interfere with or prevent continued compliance, or which may
give rise to any common law or legal liability, or otherwise form the basis of
any claim, action, suit, proceeding, hearing or investigation, based on or
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant, contaminant or
Regulated Substance.
To the fullest extent permitted by law, Tenant agrees to indemnify,
defend and hold harmless Landlord from any and all claims, demands, actions,
suits, proceedings, hearings, investigations, responsibility, liability, orders,
injunctions, judgments, fines, damages and losses of any nature whatsoever
arising out of or relating in any way to Tenant's present or future use of, or
activities or operations on or at, the Demised Premises, or arising from or
relating to any breach of the preceding five paragraphs. Tenant also agrees to
indemnify and hold harmless Landlord for any and all costs and expenses incurred
in connection therewith, including without limitation, any and all attorneys'
and expert witness fees, investigative, removal, remedial, corrective, or
mitigating action costs, fines and penalties. These indemnities shall survive
the termination of this Lease.
Tenant shall furnish to Landlord, from time to time, copies of all
permits and information concerning compliance with these provisions, as shall be
reasonably requested by Landlord.
Nothing included in this section shall be deemed to create or
establish any responsibility or liability on the part of the Tenant for any
Regulated Substances which are or were on the Demised Premises prior to August
15, 1989; provided, however, that Tenant shall allow Landlord and its agents
reasonable access to the Demised Premises to cure any problem created thereby or
to remove any such Regulated Substance. If, and to the extent that such entry by
Landlord interferes with or diminishes Tenant's use of the Demised Premises,
there shall be a proportionate abatement in rent hereunder as the sole remedy of
Tenant for such interference or diminishment.
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16. COMPLIANCE WITH LAWS. Tenant shall, at his sole cost and
expense, comply with all of the other requirements of all municipal, state and
federal authorities now in force or which may hereafter be in force pertaining
to the use of the Demised Premises, and shall faithfully observe in said use,
all county ordinances and state and federal statutes now in force or which shall
hereinafter be in force. The judgment of any court of competent jurisdiction or
the admission of Tenant in any action or proceeding against Tenant, whether
Landlord be a party thereto or not, that Tenant has violated any such order or
statute in said use, shall be conclusive of that fact as between the Landlord
and Tenant.
Tenant shall not commit, or suffer to be committed, any waste upon
the Demised Premises.
17. ENTRY AND INSPECTION. Tenant shall permit Landlord and its
agents to enter into and upon the Demised Premises at all reasonable times
for the purpose of inspecting the same concerning Tenant's duties hereunder,
including but not limited to, maintenance and repair.
18. DAMAGE AND DESTRUCTION OF PREMISES. Tenant is leasing the
Demised Premises in a significantly unimproved condition. Therefore, the
damage or destruction to the improvements is a risk of the Tenant and there
shall be no diminution in or termination of rent in the event of damage or
destruction to the improvements on the Demised Premises.
19. INDEMNIFICATION OF LANDLORD - LIABILITY INSURANCE BY TENANT.
Tenant, as a material part of the consideration to be rendered to Landlord under
this lease, hereby waives all claims against Landlord for damage to its property
in, upon or about the Demised Premises and for injuries to persons in or about
the Demised Premises, from any cause arising at any time; and Tenant will hold
Landlord exempt and harmless from any damage or injury to any person, or
property of any person, arising from the use of the Demised Premises by Tenant,
or from the failure of Tenant to keep the premises in good condition and repair,
as herein provided.
During the entire term of this lease, the Tenant shall, at the
Tenant's sole cost and expense, but for the mutual benefit of Landlord and
Tenant, maintain general public liability insurance against claims for personal
injury, death or property damage occurring in, upon or about the Demised
Premises. The limitation of liability of such insurance shall not be less than
One Million Dollars ($1,000,000.00) in respect to injury or death of one person
and to the limit of not less than One Million Dollars ($1,000,000.00) in respect
to any one accident and to the limit of not less than One Hundred Thousand
Dollars ($100,000.00) in respect to property damage. All such policies of
insurance shall be issued in the name of Tenant and Landlord and for the mutual
and joint benefit and protection of the parties, and such
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policies of insurance or copies thereof shall be delivered to the Landlord.
20. FIRE INSURANCE. Tenant shall maintain and pay for fire and
extended coverage insurance throughout the term of this lease in an amount equal
to at least eighty percent (80%) of the replacement value of the improvements
which are or become part of the Demised Premises. Tenant hereby waives any right
of recovery from Landlord, its officers and employees, and Landlord hereby
waives any right of recovery from Tenant, its officers or employees, for any
loss or damage (including consequential loss) resulting from any of the perils
insured against the standard form fire insurance policy with extended coverage
endorsement. Landlord and Tenant agree to obtain waiver provisions in policies
obtained from insurance companies, if available.
21. CONSENT OF LANDLORD. Wherever in this lease the consent of the
Landlord must be obtained in order to do or perform a function or perform an
act, the Landlord may request reasonable information concerning such consent,
but may not thereafter unreasonably withhold consent, and if Landlord elects not
to consent to such request, Landlord must specify the reasons therefor.
22. EVENTS OF DEFAULT. The following events or any other act
or failure to act by Tenant specified elsewhere in this Lease to be a default
or an Event of Default shall be deemed to be events of default ("Events of
Default") by Tenant under this Lease:
(a) Tenant shall fail to pay when due any rental or other sums
payable by Tenant under this Lease (or under any other lease now or
hereafter executed by Tenant in connection with space in the
Building) and such failure continues for ten (10) days after written
notice of nonpayment or demand for payment from Landlord to Tenant.
(b) Tenant shall fail to comply with or observe any provision of
this Lease and fails to cure such failure within thirty (30) days,
and Tenant fails to promptly commence within ten (10) business days,
after written notice of such failure given by Landlord to Tenant, or
if diligent and timely curing of any such failure on the part of
Tenant requires a period longer than thirty (30) days, and Tenant
fails to promptly commence within three (3) business days after the
giving by Landlord to Tenant of written notice of such failure, or
Tenant fails within a reasonable time but not longer than sixty (60)
days after such notice to diligently and promptly complete, the
curing of such failure to comply with or observe such provision.
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(c) Tenant shall make an assignment for the benefit of creditors.
(d) The filing of any petition by or against Tenant under any
section or chapter of the Federal Bankruptcy Act, as amended, or
under any similar law or statute of the United States or any state
thereof, and which, if involuntary, is not dismissed within sixty
(60) days of the date of filing thereof; or Tenant shall be adjudged
bankrupt or insolvent in any proceedings filed under or pursuant to
said laws.
(e) A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant.
(f) Tenant shall abandon, desert or vacate the Demised Premises and
defaults with respect to payment of the Rent, or any other sums due
under this Lease for Tenant's use and occupancy of the Demised
Premises under this Lease.
23. REMEDIES. Upon the occurrence of any Event of Default by Tenant
specified in this Lease, Landlord, upon the giving of written notice of its
intention so to do, shall have the option to pursue any one or more of the
following rights and remedies without any further notice or demand whatsoever:
(a) Terminate this Lease, in which event Tenant shall immediately
surrender the Demised Premises to Landlord, and if Tenant fails to
do so, Landlord may, without prejudice to any other remedy which it
may have for possession or arrearage in rent, enter upon and take
possession and expel or remove Tenant and any other person who may
be occupying said Demised Premises or any part thereof, by force if
necessary, without being liable for prosecution or any claim for
damages therefor; and Tenant hereby indemnifies Landlord against and
agrees to pay to Landlord on demand the amount of all loss and
damage which Landlord may suffer by reason of such termination,
whether through efforts to obtain surrender or possession of the
Demised Premises, inability to relet the Demised Premises on terms
satisfactory to Landlord in its reasonable discretion or otherwise,
and including without limitation the loss of rental for the
remainder of the Lease Term as provided for below.
(b) Without terminating this Lease or any obligations of Tenant
hereunder, enter upon and take possession of the Demised Premises
and expel or remove Tenant and any other person who may be occupying
the Demised Premises or any part thereof, by force if necessary,
remove all property therefrom, including without limitation any
property of Tenant or any other person whose property
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is located therein at the instance, permission or by reason of
Tenant's lease, use and occupancy of the Demised Premises, such
property as may be removed shall be stored in a public warehouse or
public storage facility, or, at Landlord's election, at the Demised
Premises for a rental not greater than that customarily charged by a
public warehouse or public storage facility, all of same to be at
the cost of, and for the account of, Tenant, all without notice or
legal process and without being deemed guilty of trespass and
without being liable for prosecution or any claim for loss or
damages therefor, including without limitation any loss or damage
therefor sustained by reason of such storage in a public warehouse
or storage facility due to nonpayment of storage or other costs
thereof. If Tenant shall, after an Event of Default, voluntarily
give up possession of the Demised Premises to Landlord, deliver to
Landlord the keys to the Demised Premises, or both, such action
shall be deemed to be in compliance with Landlord's rights and the
acceptance thereof by Landlord shall not be deemed to constitute a
surrender of the Demised Premises. Should Landlord elect to
re-enter, as herein provided, or should Landlord take possession
pursuant to legal proceedings or pursuant to any notice provided for
and required by law, Landlord may either terminate this Lease or it
may from time to time without terminating this Lease make such
alterations and repairs as may be necessary in order to relet the
Demised Premises, and Landlord may relet said Demised Premises or
any part thereof for such term or terms (which may be for a term
extending beyond the term of this Lease) and at such rental or
rentals and upon such other terms and conditions satisfactory to
Landlord in its reasonable discretion; upon each such reletting, all
rentals received by the Landlord from such reletting shall be
applied, first to the payment of any indebtedness other than rent
due hereunder from Tenant to Landlord, second, to the payment of any
reasonable costs and expenses of such reletting, including brokerage
fees and attorneys' fees and costs of such necessary alterations and
repairs and/or recovery of possession, third, to the payment of rent
due and unpaid from Tenant to Landlord under this Lease and the
residue, if any, shall be held by Landlord and applied in payment of
future rent or damage as the same may become due and payable
hereunder. If such rentals received from such reletting during any
month be less than that to be paid during that month by the Tenant
hereunder, Tenant shall pay any such deficiency to Landlord, the
same to be calculated and paid monthly on demand of Landlord.
Notwithstanding any such reletting without termination, Landlord may
at any time thereafter elect to terminate the Lease for such
previous or any subsequent breach
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or Event of Default. In any event, under the foregoing
circumstances, Tenant agrees to indemnify and pay promptly upon
demand any and all deficiency that may occur or arise by reason of
such reletting for the remainder of the Lease Term. Should Landlord
at any time terminate this Lease for any breach or Event of Default,
in addition to any other rights and remedies it may have, Landlord
may recover from Tenant all damages it may incur by reason of such
breach or Event of Default, including without limitation the loss of
rental for the remainder of the Lease Term according to the terms
set forth below, the cost of recovering the Demised Premises and
reasonable attorneys' fees, all of which amounts shall be
immediately due and payable from Tenant to Landlord.
(c) Enter upon the Demised Premises by force if necessary, without
being liable for prosecution or any claim for damages therefor, and
do whatever Tenant is obligated to do under the terms of this Lease;
and Tenant agrees to reimburse Landlord on demand for any reasonable
expenses which Landlord may reasonably incur in thus effecting
compliance with Tenant's obligations under this Lease, and Tenant
further agrees that Landlord shall not be liable for any damages
resulting to the Tenant from such action.
(d) Should Landlord at any time terminate this Lease for any
default, in addition to any other remedy Landlord may have, Landlord
may recover from Tenant all damages Landlord may incur by reason of
such default, including the cost of recovering the Demised Premises,
reasonable attorneys' fees and costs, and the loss of rental for the
remainder of the Lease Term.
(e) Should Landlord elect in connection with any of its rights or
remedies herein to proceed with re-letting of the Demised Premises
on behalf of Tenant in mitigation of the sums accruing and becoming
due and payable from Tenant under this Lease, Landlord agrees to use
its best efforts to mitigate any damages due to Tenant's default and
to use reasonable efforts to relet the Demised Premises.
In the event Landlord exercises its option or right to terminate the
Lease prior to expiration of the Lease Term as permitted in this Paragraph No.
23, the damages for loss of rental for the remainder of the term after such
termination shall include the worth at the time of such termination of the
excess, if any, of the amount of rent and charges equivalent to rent reserved in
this Lease for the remainder of the stated term, which sum shall be discounted
by the discount rate of the Federal Reserve Bank located closest to the Demised
Premises plus two percent (2%), and all such damage amounts upon a termination
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shall be immediately due and payable from Tenant to Landlord on demand of
Landlord made after such termination. Notwithstanding anything to the contrary
appearing in this Lease, the foregoing determination in this paragraph of the
loss of rental after a termination of the Lease shall be applicable only upon
exercise by Landlord of its right to terminate as provided for in this Paragraph
No. 23, and Landlord, at its election, without terminating the Lease, may pursue
and enforce any other rights and/or remedies Landlord may have at law or in
equity or otherwise under this Lease.
No re-entry or taking possession of the Demised Premises by Landlord
shall be construed as an election on its part to terminate this Lease, unless a
written notice of such intention be given to Tenant. Notwithstanding any such
reletting or re-entry or taking possession, Landlord may at any time thereafter
elect to terminate this Lease for a previous Event of Default. Pursuit of any of
the foregoing rights or remedies shall not preclude pursuit of any of the other
rights or remedies herein provided or any other rights or remedies provided by
law, nor shall pursuit of any right or remedy herein provided constitute a
forfeiture or waiver of any rent due to Landlord hereunder or of any damages
accruing to Landlord by reason of the violation of any of the terms, provisions
and covenants herein contained. Landlord's acceptance of rent or payments
following an Event of Default hereunder shall not be construed as Landlord's
waiver of such Event of Default. No waiver by either party hereto of any
violation or breach of any of the terms, provisions, and covenants herein
contained shall be deemed or construed to constitute a waiver of any other
violation or default. The loss or damage that Landlord may suffer by reason of
termination of this Lease or the deficiency from any reletting as provided for
above shall include but not be limited to the reasonable expense of repossession
and any reasonable repairs or necessary remodeling undertaken by Landlord
following possession.
24. INSOLVENCY OF TENANT. Tenant agrees that in the event all or
substantially all of its assets be placed in the hands of a receiver or trustee,
and in the event such receivership or trusteeship continues for a period of ten
(10) days, or should Tenant make an assignment for the benefit of creditors, or
be adjudicated a bankrupt, or should Tenant institute any proceedings under any
state or federal bankruptcy act wherein Tenant seeks to be adjudicated a
bankrupt, or seeks to be discharged of its debts, or should any voluntary
proceeding be filed against such Tenant under such bankruptcy laws and Tenant
consents thereto or acquiesces therein by pleading or default, then this lease
or any interest in and to the Demised Premises shall not become an asset in any
of such proceedings and, in any of such events and in addition to any and all
rights or remedies of Landlord hereunder or as provided by law, it shall be
lawful for Landlord at his option to declare the term hereof ended and to
re-enter the Demised Premises and take possession
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thereof and remove all persons therefrom and Tenant shall have no further claim
therein or hereunder.
25. SURRENDER OF LEASE. The voluntary or other surrender of this
lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and
shall, at the option of Landlord, terminate all or any existing subleases or
subtenancies, or may, at the option of Landlord, terminate all or any existing
subleases or subtenancies, or may, at the option of Landlord, operate as an
assignment to him of any or all of such subleases or subtenancies.
26. ABANDONMENT. Tenant shall not abandon the Demised Premises at
any time during the term of this lease; and if Tenant shall abandon or surrender
the Demised Premises or be dispossessed by process of law, or otherwise, any
personal property belonging to Tenant and left on the Demised Premises shall be
deemed to be abandoned, at the option of Landlord, except such property as may
be mortgaged to Landlord.
27. SALE OF PREMISES BY LANDLORD. In the event of any sale of the
Demised Premises by Landlord, Landlord shall be and is hereby entirely freed and
relieved of all liability under any and all of its covenants and obligations
contained in or derived from this lease arising out of any act, occurrence or
omission occurring after the consummation of such sale; and the purchaser, at
such sale or any subsequent sale of the Demised Premises shall be deemed,
without any further agreement between the parties or their successors in
interest or between the parties and any such purchaser, to have assumed and
agreed to carry out any and all of the covenants and obligations of the Landlord
under this lease.
28. SUBORDINATION, ATTORNMENT. This lease, at Landlord's option
shall be subordinate to the lien of any first deed of trust or first mortgage
subsequently placed upon the real property of which the Demised Premises are a
part, and to any and all advances made on the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions thereof;
provided, however, that as to the lien of any such deed of trust or mortgage,
Tenant's right to quiet possession of the Demised Premises shall not be
disturbed if Tenant is not in default and so long as Tenant shall pay the rent
and observe and perform all of the provisions of this lease, unless this lease
is otherwise terminated pursuant to its terms. Landlord shall obtain from any
such Lender written confirmation of this nondisturbance clause for the benefit
of Tenant. If any mortgagee, trustee or ground lessor shall elect to have this
lease prior to the lien of its mortgage, deed of trust or ground lease, and
shall give written notice thereof to Tenant, this lease shall be deemed prior to
such mortgage, deed of trust, or ground lease, whether this lease is dated prior
or subsequent to the date of said mortgage, deed of trust or ground lease or the
date of recording thereof.
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In the event any proceedings are brought for foreclosure, or in the
event of the exercise of the power of sale under any mortgage or deed of trust
made by the Landlord covering the demised premises, the Tenant shall attorn to
the purchaser upon any such foreclosure or sale and recognize such purchaser as
the Landlord under this lease.
29. ESTOPPEL CERTIFICATES. Tenant agrees to furnish from time to
time when requested by Landlord, the holder of any deed of trust or mortgage or
the lessor under any ground lease covering all or any part of the Building or
the improvements therein or the Demised Premises or any interest of Landlord
therein, hereinafter the "Requesting Party", a certificate signed by Tenant
confirming and containing such factual certifications and representations deemed
appropriate by Landlord, and/or the Requesting Party, and Tenant shall, within
fifteen (15) business days following receipt of said proposed certificate from
such Requesting Party, return a fully executed copy of said certificate to
Landlord and the Requesting Party. In the event Tenant shall fail to return a
fully executed copy of such certificate to Landlord and the Requesting Party
within the foregoing fifteen (15) business day period, then Tenant shall be
deemed to have unconditionally approved and confirmed all of the terms,
certifications and representations contained in such certificate.
Landlord agrees to furnish from time to time when requested in
writing by Tenant, a certificate approved and signed by Landlord confirming and
containing such true factual certifications and representations deemed
appropriate by Tenant regarding this Lease, the status of performance thereunder
and the Building and affecting Tenant's rights, performance and interest under
this Lease within fifteen (15) business days following the giving of such
proposed certificate by Tenant to Landlord. In the event Landlord shall fail to
return a fully executed copy of such certificate to Tenant within the foregoing
fifteen (15) business day period, Landlord shall be deemed to have
unconditionally approved and confirmed all of the terms, certifications and
representations contained in such certificate.
30. CONDEMNATION. If in the event of a condemnation or a transfer in
lieu thereof, fifty percent (50%) or more of the Demised Premises is taken,
Landlord or Tenant may, upon written notice given thirty (30) days after such
taking or transfer in lieu thereof, terminate this lease. Tenant shall not be
entitled to share in any portion of the award. Tenant shall, however, have the
right to claim and recover from the condemning authority any amounts necessary
to reimburse Tenant for the unamortized value of its leasehold improvements.
31. ASSIGNMENT AND SUBLETTING. Tenant shall not assign this lease,
or any interest therein, and shall not sublet the Demised Premises or any part
thereof, or any right or privilege appurtenant thereto, or permit any other
person (the
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agents and servants of Tenant excepted) to occupy or use the Demised Premises,
or any portion thereof, without first obtaining the written consent of Landlord.
Consent by Landlord to one assignment, subletting, occupation or use by another
person shall not be deemed to be a consent to any subsequent assignment,
subletting, occupation or use by another person. Consent to an assignment shall
not release the original named Tenant from liability for the continued
performance of the terms and provisions on the part of Tenant to be kept and
performed, unless Landlord specifically releases the original named Tenant from
said liability. Any assignment or subletting without the prior written consent
of Landlord shall be void, and shall, at the option of Landlord terminate this
lease. Neither this lease nor any interest therein shall be assignable, as to
the interest of Tenant, by operation of law, without the prior written consent
of Landlord. Landlord shall not unreasonably withhold consent of any assignment
or subletting. Landlord hereby agrees that in the absence of an unusual
circumstance affecting its security herein (such as the lack of economic
substance of the prospective assignee) it will consent to transfers to relatives
of the present stockholders of Tenant, corporations controlled by the present
stockholders of Tenant and/or assignees of the dealership.
32. ATTORNEYS' FEES. In the event of any action or arbitration
regarding this lease, or the enforcement hereof, the losing party shall pay
to the prevailing party reasonable attorneys' fees.
33. HOLDING OVER. Any holding over after the expiration of the term
of this lease, with the consent of Landlord, shall be construed to be a tenancy
from month to month, cancellable upon thirty (30) days' written notice, and at a
rental and upon terms and conditions as existed during the last year of the term
hereof.
34. NOTICES. Wherever in this lease it shall be required or
permitted that notice and demand be given or served by either party to this
lease to or on the other, such notice or demand shall be given or served and
shall not be deemed to have been duly given or served unless in writing and
delivered personally or forwarded by certified mail, addressed as hereinafter
subscribed. Either party may change such address by written notice by certified
mail to the other. Notice is completed upon delivery or mailing.
35. SUCCESSORS IN INTEREST. The covenants herein contained shall,
subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators, and assigns of all the parties hereto;
and all of the parties hereto shall be jointly and severally liable hereunder.
-17-
<PAGE>
36. FORCE MAJEURE. If either party hereto shall be delayed or
prevented from the performance of any act required hereunder by reason of Acts
of God, strikes, lockouts, labor troubles, inability to procure materials,
restrictive governmental laws or regulations or other cause without fault and
beyond the control of the party obligated (financial inability excepted),
performance of such act shall be excused for the period of the delay and the
period for the performance of any such act shall be extended for a period
equivalent to the period of such delay; provided, however, nothing in this
Article 36 contained shall excuse Tenant from the prompt payment of any rental
or other charge required of Tenant hereunder except as may be expressly provided
elsewhere in this lease.
37. PARTIAL INVALIDITY. If any term, covenant or condition or
provision of this lease is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the provisions hereof shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated thereof.
38. MARGINAL CAPTIONS. The various headings and numbers herein
and the grouping of the provisions of this lease into separate articles and
paragraphs are for the purpose of convenience only and shall not be
considered a part hereof.
39. TIME. Time is of the essence of this lease.
IN WITNESS WHEREOF, the parties have duly executed this lease
together with the herein referred to exhibits which are attached hereto, the
11th day of August, 1989.
LANDLORD:
MARYLAND INVESTMENTS, INC., an
Arizona corporation,
BY: /s/ Patricia Plecas
-----------------------------
Its: Managing Director
-----------------------------
TENANT:
LAUREL LEASING, INC., a Texas
corporation,
BY: /s/ Karen M. Donaldson
-----------------------------
Its: Secretary
-----------------------------
-18-
<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 11th day of
August, 1989, by Patricia Plecas as Managing Director of MARYLAND INVESTMENTS,
INC., an Arizona corporation, for and on behalf of the corporation.
/s/ Laurie Kivelch
-----------------------------
Notary Public
My Commission Expires
February 18, 1992
- ----------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 11th day of
August, 1989, by Karen M. Donaldson, as Secretary of LAUREL LEASING, INC., a
Texas corporation, for and on behalf of the corporation.
/s/ Laurie Kivelch
-----------------------------
Notary Public
My Commission Expires
February 18, 1992
- ----------------------
-19-
<PAGE>
EXHIBIT "A"
-----------
PROPERTY DESCRIPTION
Assessor Parcel Nos. 155-11-030
155-11-029
155-11-031
155-011-034
<PAGE>
EXHIBIT "B"
OPTION PARCEL DESCRIPTION
Assessor Parcel No. 155-11-038-8: Office Building Multiple Tenants
Assessor Parcel No. 155-11-024F-9: Hideaway and Covey
-2-
<PAGE>
EXHIBIT "C"
HAZARDOUS SUBSTANCE DESCRIPTION
EXHIBIT "C"
CONDITIONALLY EXEMPT
SEE ATTACHED -
ARIZONA DEPARTMENT OF ENVIRONMENTAL QUALITY
GENERATOR ANNUAL HAZARDOUS WASTE REPORT FOR 1987
-3-
<PAGE>
AMENDED EXHIBIT "C"
(Regulated Substances)
THIS AMENDED EXHIBIT "C" SHALL AMEND THAT CERTAIN EXHIBIT "C" ATTACHED TO THAT
CERTAIN LEASE AGREEMENT DATED AUGUST 11, 1989, BY AND BETWEEN MARYLAND
INVESTMENTS, INC. AND LAUREL LEASING, INC., FOR THE PREMISES LOCATED AT 1127
EAST CAMELBACK ROAD, PHOENIX, ARIZONA, AND UPON EXECUTION HEREOF BY SAID PARTIES
HEREINBELOW SHALL BE AND BECOME PART OF SAID LEASE.
The Tenant may use and store those "Regulated Substances" which are
customarily used and stored by automobile dealerships engaging in the sale,
lease, service and repair of new and used automobiles, provided that Tenant uses
and stores only normal and customary quantities of such "Regulated Substances"
and at all times uses and stores such "Regulated Substances" in compliance with
any and all applicable federal, state and local laws, ordinances and
regulations.
DATED this 18th day of August, 1995.
MARYLAND INVESTMENTS, INC., LAUREL LEASING, INC.,
an Arizona corporation a Texas corporation
By /s/ illegible By /s/ Karen Donaldson
-------------------- -----------------------
Its President Its Secretary
-------------------- -----------------------
<PAGE>
CONSENT AND COVENANT OF LAUREL LEASING, INC.
TO: CAMELBACK AUTOMOTIVE, INC., an Arizona corporation ("Camelback
Automotive"); and LRP, LTD., an Arizona corporation dba "Land
Rover Phoenix" ("LRP").
DATED: August 18, 1995
The undersigned Laurel Leasing, Inc., a Texas corporation
("Sublessor"), as the lessee of the real property located at 1127 East Camelback
Road, Phoenix, Arizona (the "Premises") under that certain "Lease" dated August
11, 1989 (the "Master Lease") by and between Sublessor and Maryland Investments,
Inc., an Arizona corporation (the "Master Lessor"), and as the sublessor of the
Premises to Camelback (the "Camelback Sublease"), hereby consents, acknowledges,
covenants and agrees with Camelback and LRP as follows:
(A) The Master Lease and the Camelback Sublease have each been amended
so as to extend their respective terms through August 31, 2005, with
an option to further extend the terms thereof for a period of five
(5) additional years;
(B) Master Lessor has previously consented to the Camelback Sublease;
(C) Sublessor hereby consents to and approves of the sublease of the
Premises by Camelback Automotive to LRP on the terms of that certain
"Sublease Agreement" to be entered into by and between Camelback
Automotive and LRP (the "LRP Sublease"), an unsigned copy of which
is attached hereto as Exhibit "A";
(D) Sublessor agrees that it will give LRP prompt written notice of any
breach of the Master Lease and/or the Camelback Sublease and further
agrees that it will accept any cure, in payment of money or
otherwise, offered or performed by LRP as if such cure were offered
or performed by Camelback Automotive;
(E) Provided that LRP is not in breach of the terms and conditions of
the LRP Sublease, Sublessor shall not directly or indirectly
interfere with LRP's quiet enjoyment of the Premises, regardless
of whether Camelback Automotive is in default under the Camelback
Sublease and regardless of whether the Camelback Sublease
continues or is terminated, and, if the Camelback Sublease is
terminated, Sublessor will abide by the terms of the LRP
Sublease; and
<PAGE>
(F) Sublessor acknowledges that Camelback Automotive and LRP are
entering into the LRP Sublease in reliance upon the consents,
covenants and agreements given and made herein by Sublessor and
Sublessor agrees that Camelback Automotive and LRP, and each
entity's respective successors and assigns, may, in fact, so rely on
such consents, covenants and agreements.
LAUREL LEASING, INC.,
a Texas corporation
By:/s/ Karen Donaldson
-------------------
Its:Secretary
---------
-2-
<PAGE>
CAMELBACK
BMW
SUB-LEASE AGREEMENT PROPERTY LOCATED AT 1127 E. Camelback Road
Phoenix, Arizona, 85014
The purpose of this document is to sub-lease certain properties, currently
leased from the Maryland Investments, Inc. by Laurel Leasing, Inc. to the
Camelback Automotive Corporation. A copy of the aforementioned lease, dated
August 11, 1989, accompanies this document.
Laurel Leasing, Inc. does hereby lease this property to Camelback Automotive
Corporation on all the same terms and conditions as apply, including all
exhibits and any addendums.
Camelback Automotive Corporation agrees to accept all of the aforementioned
terms and conditions and will sub-lease this property.
Maryland Investments, Inc. acknowledges this agreement between Laurel
Leasing, Inc. and Camelback Automotive Corporation, and does hereby approve
the sub-lease.
LANDLORD: MARYLAND INVESTMENTS, INC.
An Arizona Corporation,
BY: /s/ Patricia Plecas
------------------------
IT'S Managing Director
------------------------
TENANT: LAUREL LEASING, INC.,
A Texas Corporation
BY: /s/ Karen M. Donaldson
------------------------
IT'S Secretary
------------------------
SUB-TENANT: CAMELBACK AUTOMOTIVE CORPORATION,
An Arizona Corporation
BY: /s/ James B. Donaldson
------------------------
IT'S Vice President
------------------------
STATE OF ARIZONA )
) SS:
County of Maricopa )
The foregoing instrument was acknowledged before me this 22nd day of August
1989, by Patricia Plecas as Managing Director of Maryland Investments, Inc., an
Arizona Corporation, for an on behalf of the corporation.
/s/ Laurie K. Weld
------------------------
Notary Public
<PAGE>
1144 East Camelback Road
P.O. Box 16540 Phoenix, Arizona 85011
(602) 248-0058
CAMELBACK
BMW
Page 2 PROPERTY LOCATED AT
SUB-LEASE AGREEMENT 1127 E. Camelback Road
Phoenix, Arizona 85014
My Commission Expires February 18, 1992
STATE OF ARIZONA )
) SS:
County of Maricopa)
The foregoing instrument was acknowledged before me this 22nd day of August,
1989, by Karen M. Donaldson as Secretary of LAUREL LEASING, INC., an Texas
Corporation, for an on behalf of Corporation.
/s/ Laurie K. Weld
------------------------
Notary Public
My Commission Expires February 18, 1992
STATE OF ARIZONA )
) SS:
County of Maricopa)
The foregoing instrument was acknowledged before me this 22nd day of August,
1989, by James B. Donaldson as Vice President of CAMELBACK AUTOMOTIVE
CORPORATION, an Arizona Corporation, for an on behalf of the corporation.
/s/ Laurie K. Weld
------------------------
Notary Public
My Commission Expires February 18, 1992
1144 East Camelback Road
P.O. Box 16540 Phoenix, Arizona 85011
(602) 248-0058
-2-
<PAGE>
When recorded, please return to:
Stephen M. Savage, Esq.
Fennemore Craig OFFICIAL RECORDS OF
Suite 2200 MARICOPA COUNTY RECORDER
Two North Central Avenue HELEN PURCELL
Phoenix, AZ 85004-2390 95-0505603 08/23/95 12:31
MEMORANDUM OF SUBLEASE
Camelback Automotive, Inc., an Arizona corporation ("Sublessor"), whose
address is 14032 North Canterbury Drive, Phoenix, Arizona 85023, and LRP, Ltd.,
an Arizona corporation ("Sublessee"), whose address is 1127 East Camelback Road,
Phoenix, Arizona 85014, hereby certify and agree as follows:
1. Sublessor and Sublessee have entered into a Sublease, dated as of July
1, 1995 (the "Sublease"), covering premises located at 1127 East Cambelback
Road, Phoenix, Arizona, more particularly described on Exhibit A, attached
hereto and by this reference incorporated herein (the "Premises").
2. Sublessor subleases the Premises from Laurel Leasing, Inc., a Texas
corporation, subject to and pursuant to the terms and conditions of that certain
Lease, dated August 11, 1989, by and between Laurel Leasing, Inc. and Maryland
Investments, Inc., an Arizona corporation.
3. The initial term of the Sublease commences on July 1, 1995 and expires
on June 30, 2005. Sublessee has an option to extend the term of the Sublease for
one (1) additional term of five (5) years.
4. The Sublease is filed at the offices of Sublessor and Sublessee.
5. The Sublease shall control and prevail over this Memorandum of Sublease
for all purposes. Nothing herein is intended to modify or supplement the
Sublease.
IN WITNESS WHEREOF, the undersigned have executed this Memorandum of
Sublease as of July 1, 1995.
SUBLESSOR:
CAMELBACK AUTOMOTIVE, INC.
By: Brad Donaldson
---------------------------
Its: President
--------------------------
<PAGE>
SUBLESSEE:
LRP, LTD.
By: Jay Beskind
---------------------------
Its: President
--------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 18th day of
August, 1995, by Brad Donaldson, the President of Camelback Automotive, Inc., an
Arizona corporation, on behalf of the corporation.
Linda Greenberg
--------------------------
Notary Public
My Commission Expires
10/25/95
- -----------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 18th day of
August, 1995, by Jay Beskind, the President of LRP, Ltd., an Arizona
corporation, on behalf of the corporation.
Linda Greenberg
--------------------------
Notary Public
My Commission Expires
10/24/95
- -----------------------
-2-
<PAGE>
LEGAL DESCRIPTION
(1127 E. Camelback)
Parcel No. 1
The North 150 feet of the West 150 feet of the East 400 feet of Lot 5, Lincoln
Place, according to Book 3 of Maps, Page 65, Records of Maricopa County,
Arizona:
EXCEPT the North 7 feet thereof, (aka Maricopa County Assessor's Parcel No.
155-11-029).
Parcel No. 2
The South 150 feet of the North 183 feet of Lot 5, Lincoln Place, according to
Book 3 of Maps, Page 65, Records of Maricopa County, Arizona:
EXCEPT the West 180 feet and EXCEPT the East 430 feet and EXCEPT the South 7
feet of the North 40 feet thereof for a road, (aka Maricopa County Assessor's
Parcel No. 155-11-030)
Parcel No. 3
The North 150 feet of the West 50 feet of the East 250 feet of Lot 5, Lincoln
Place, according to Book 3 of Maps, Page 65, Records of Maricopa County,
Arizona:
EXCEPT the North 7 feet thereof, (aka Maricopa County Assessor's Parcel No.
155-11-031).
Parcel No. 4
That portion of Lot 5, Lincoln Place, according to Book 3 of Maps, Page 65,
Records of Maricopa County, Arizona, described as follows:
Beginning 150 feet South of the Northeast Corner; thence West 636.5 feet; thence
South 20 feet; thence East 636.5 feet; thence North 20 feet to the point of
beginning;
EXCEPT the West 30 feet (aka Maricopa County Assessor's Parcel No. 155-11-034)
<PAGE>
LEASE
DATE: February 27, 1995
PARTIES: Lee S. Maas, a married man dealing with his sole and separate property
("Lessor")
Sun BMW, Ltd., an Arizona corporation ("Lessee")
RECITALS:
A. Lessor owns the real property described on Exhibit A, attached hereto
and by this reference incorporated herein, and the improvements thereon, located
at 1144 East Camelback Road, Phoenix, Arizona (the "Premises").
B. Lessor and Lessee have executed that certain Real Estate Option
Agreement, dated December 1, 1994 (the "Option Agreement"), whereby Lessor has
granted Lessee an option (the "Option) to purchase the Premises after the date
hereof.
C. Lessor desires to lease the Premises to Lessee, and Lessee desires to
lease the Premises from Lessor, subject to the Option Agreement.
AGREEMENT:
In consideration of the mutual covenants and promises herein contained, the
parties agree as follows:
1. Term. The term of this Lease shall commence on the date hereof and shall
expire ten (10) years after the date hereof, unless the Option is exercised, in
which case the term hereof shall expire on the date of close of escrow under the
Option Agreement.
2. Rent. Lessee shall pay to Lessor as rent for the Premises the sum of
Fifteen Thousand Dollars ($15,000) per month, subject to adjustment as set forth
in Paragraph 3 hereof, payable on or before the first day of each month of this
Lease. Should the term of this Lease commence on any day other than the first
day of a calendar month, the rent for that calendar month shall be prorated on
the assumption of a thirty (30) day month; should the term of this Lease
terminate on any day other than the last day of a calendar month, the rent for
that month shall likewise be prorated on the assumption of a thirty (30) day
month. In addition, at the time rent is payable hereunder, Lessee shall pay any
sales tax, transaction privilege tax, education excise tax or other form of tax
(other than income tax) levied by any state, county or municipal authority on
the Lease income. Rent hereunder shall be payable to Lessor at 300 North Central
<PAGE>
Expressway, Richardson, Texas 75080, or at such other address as Lessor may
designate in writing from time to time.
3. Rent Adjustment. Effective as of the first day of the sixth (6th) year
of the term hereof, the rent shall be adjusted as follows:
3.1. Lessor and Lessee shall ascertain the Consumer Price Index
(1982-84=100) published by the Bureau of Labor Statistics of the U.S. Department
of Labor, entitled Consumer Price Index for All Urban Consumers, U.S. Cities
Average, for the first month of the term of this Lease (the "Base CPI") and for
the fifty-ninth (59th) month of the term of this Lease (the "Current CPI").
3.2. The adjusted rental ("AR") shall be determined by multiplying the
minimum rent of $15,000.00 per month by a fraction, the numerator of which is
the Current CPI and the denominator of which is the Base CPI, except that, under
no circumstances shall the amount of the rent be adjusted to an amount greater
than 110% of the rent set forth in Paragraph 2 hereof or to an amount less than
$15,000.00 per month:
AR = $15,000 x Current CPI
-----------
Base CPI
3.3. If publication of the Consumer Price Index for All Urban
Consumers, U.S. Cities Average, shall be discontinued, the parties shall
thereafter accept comparable statistics on the cost of living for U.S. Cities as
they shall be computed and published by an agency or department of the United
States or by a responsible financial periodical of recognized authority then to
be selected by Lessor and Lessee, or, if Lessor and Lessee are unable to agree
upon a selection, then by arbitration in accordance with the commercial
arbitration rules then obtaining of the American Arbitration Association. In the
even of use of comparable statistics in lieu of the Consumer Price Index for All
Urban Consumers or nonpublication of the Index number for U.S. Cities, there
shall be made in the method of computation herein provided such revisions as the
circumstances may require to carry out the intent of this Paragraph and any
dispute between Lessor and Lessee as to the making of such adjustment shall be
determined by arbitration.
4. Use, Possession and Enjoyment. Lessor agrees that Lessee, while paying
the rent and performing the other terms and conditions of this Lease, may
peaceably hold and enjoy the Premises during the Lease term, without any
interruption by Lessor or any person lawfully claiming by, through or under
Lessor. Lessee may use the Premises only for the conduct of a motor vehicle
dealership or in a manner related to the automobile business.
-2-
<PAGE>
5. Public Liability Insurance. Lessee, at its expense will maintain in full
force during the term hereof public liability and property damage insurance
covering the Premises and Lessee's activities therein against claims for
personal injury and death to limits of at least $500,000 for each person and
$1,000,000 for each occurrence and against property damage claims to a limit of
at least $100,000 or in such greater amounts as may be required by an
institutional lender who holds a first encumbrance against the Premises. Lessee
will furnish to Lessor a certificate evidencing the fact that such insurance has
been obtained and is in full force and effect, that Lessor and any such
institutional lender are additional insureds thereunder, and that such insurance
cannot be cancelled without ten (10) days' prior notice to Lessor and any such
institutional lender.
6. Indemnity. Lessee will hold harmless and indemnify Lessor from and
against any and all loss, cost or damage arising by reason of injury or death of
persons or damage to property in or upon the Premises or caused by activities
conducted thereon; provided, however, that Lessee will not be required to
indemnify Lessor against any damage or injury of any kind arising out of the
negligence of Lessor, its agents or employees.
7. Fire Insurance. Lessee, at its expense, will maintain in full force and
effect during the term hereof fire and extended coverage insurance upon the
Premises in an amount not less than the replacement cost thereof or such greater
amount as may be required by an institutional lender who holds a first
encumbrance against the Premises. Lessee will furnish to Lessor a certificate
evidencing the fact that such insurance has been obtained and is in full force
and effect, that Lessor and any such institutional lender are additional
insureds thereunder, and that such insurance cannot be cancelled without ten
(10) days' prior notice to Lessor and any such institutional Lender.
Lessor and Lessee agree that no insurer of any interest of either is to
have any right of subrogation against the other and that all fire and other
insurance policies carried by either on the Premises or the fixtures and
equipment therein or other contents thereof will contain a full waiver of
subrogation by the insurer.
8. Utilities. Lessee shall promptly pay when due all water, gas,
electricity, telephone, garbage and other utility or service charges which may
be incurred in connection with Lessee's use of the Premises or furnished to or
used in or about the Premises during the term of this Lease, including any and
all connection and disconnection charges.
9. Taxes. During the term hereof, Lessee shall pay before delinquent all
license fees, rental taxes, sales taxes and ad valorem property taxes and
assessments levied and assessed against personal property of Lessee placed upon
the Premises, except to the extent that Lessee shall in good faith be
-3-
<PAGE>
contesting any such tax by appropriate proceedings. During the term hereof,
Lessee shall pay before delinquent all ad valorem and other property taxes and
assessments levied and assessed against the real property and the improvements
thereon. All such taxes for the years during which the term of this Lease shall
begin and end shall be prorated to the date of commencement and the date of
termination, as applicable.
10. Repairs and Maintenance; Alterations. Lessee shall, at its sole cost
and expense, keep and maintain any and all improvements now or hereafter located
upon the Premises, including, but not limited to, fencing, trees, shrubs,
landscaping wiring, heating, air conditioning, plumbing, roof, exterior and
interior walls, glass, appliances, fixtures and other installations, in the same
or better condition as when received, ordinary wear and tear excepted, and shall
not cause or permit any unusual objectionable noises or odors to emanate from
the Premises. It is expressly understood and agreed by Lessee that Lessor shall
have no obligation to maintain, repair or improve the Premises during the term
of this Lease. Lessee may alter and improve the Premises without Lessor's
consent. Upon the expiration or termination of the Lease term, Lessor shall
retain as Lessor's property any leasehold improvements made by Lessee to the
Premises or any leasehold improvements to the Premises purchased by Lessee from
Sun-West Imports, Inc.
11. Signs. Lessee, at Lessee's sole cost and expense, may erect, maintain
and repair upon the Premises a sign or signs pertaining to the Lessee's use of
the Premises. All signs erected upon the Premises shall in all respects conform
with all state, county and municipal laws, ordinances and regulations or validly
issued variances therefrom.
12. Damage by Fire or Elements. In case of damage by fire or other action
of the elements to the Premises or any improvements thereon, Lessee shall repair
the Premises and any improvements thereon with reasonable dispatch to their
condition immediately prior to said damage.
13. Condemnation. If all or substantially all of the Premises shall be
taken or damaged under any right of eminent domain or any transfer in lieu
thereof (a "Taking"), then, and in that event, the term of the Lease shall cease
and terminate from the date of such Taking if and only if Lessee terminates the
Option Agreement or the Escrow Instructions and Addendum referred to therein, as
the case may be, as a result of the Taking pursuant to the terms thereof. In the
event of a Taking not covered by the first sentence of this paragraph, this
Lease shall terminate as to any part of the Premises taken as of the date the
condemning authority takes title or possession, whichever occurs first, and the
rent payable hereunder shall be reduced in the proportion that the square
footage taken bears to the total square footage of the Premises. All
condemnation proceeds relating to the real property shall be paid to Lessor or
its
-4-
<PAGE>
incumbrancer, except as may otherwise be provided in the Real Estate Agreement.
14. Default. The occurrence of any of the following events will constitute
an event of default hereunder on the part of Lessee: (i) failure to pay any
installment of rent or any part thereof which is then due and payable within ten
(10) days after written notice thereof from Lessor to Lessee; or (ii) default in
the performance of any of Lessee's agreements or obligations hereunder, such
default (except default in the payment of any installment of rent) continuing
for thirty (30) days after written notice thereof from Lessor to Lessee,
provided that if such default is other than the payment of money and cannot
reasonably be cured within such thirty day period, then Lessee will not be in
default hereunder if Lessee, within such thirty (30) day period, commences
curing of such default and diligently and in good faith prosecutes the same.
Upon the Occurrence of any such event of default and during the continuance
thereof, Lessor shall be entitled to exercise all rights and remedies allowed by
law.
15. Holding Over. Any holding over by Lessee after the expiration of the
term of this Lease shall, with the consent of Lessor, be construed to be a
tenancy from month-to-month for the monthly rent herein provided plus ten
percent (10%) and upon the same terms and conditions as otherwise herein set
forth.
16. Attorney's Fees. In the event of litigation arising in connection with
this Lease, the unsuccessful party shall pay to the prevailing party all costs
of suit, including reasonable attorneys' fees.
17. Notices. In the event that any party hereto desires to serve a written
notice upon any other party, such notice shall be delivered or sent by United
States mail, certified or registered, return receipt requested, addressed to the
party to receive such notice. Such notice shall be sent to the addresses set
forth below:
To the Lessor: Mr. Lee S. Maas
300 North Central Expressway
Richardson, Texas 75080
With copy to: Jennings & Haug
Attn: John King, Esq.
2800 North Central, Suite 1800
Phoenix, AZ 85004-1049
To the Lessee: Sun BMW, Ltd.
Attn: Mr. Steven Knappenberger
6725 East McDowell
Scottsdale, AZ 85257
-5-
<PAGE>
With copy to: Fennemore Craig
Attn: Stephen M. Savage, Esq.
Two North Central, Suite 2200
Phoenix, AZ 85004-2390
or to such other addresses as may be designated from time to time and shall be
deemed to be effective when delivered or five (5) days after deposit in the
United States mail.
18. Law Governing. This Lease shall be governed by and construed in
conformity with the laws of the State of Arizona.
19. Exclusive Agreement. This Lease constitutes the exclusive agreement
between the parties hereto relating to the lease of the Premises and supersedes
any prior agreement between the parties hereto relating to the lease of the
Premises. Nothing contained herein shall be deemed to limit, modify or cancel
any representations, warranties or covenants of Lessor in the Option Agreement.
20. Paragraph Captions. The paragraph captions as to the contents of
particular paragraphs herein are inserted only for convenience, and are in no
way to be construed as a part of this Lease or as a limitation on the scope of
the paragraphs to which they refer.
21. Benefit and Burden. The rights, duties and liabilities created
hereunder shall inure to the benefit of and be binding upon the parties hereto,
their heirs, personal representatives, successors and assigns.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year first above written.
LESSOR:
/s/ Lee S. Maas
--------------------------------
Lee S. Maas
LESSEE:
SUN BMW, LTD.
By /s/ Illegible
-----------------------------
Its Chairman
STATE OF ARIZONA )
)ss.
County of MARICOPA )
The foregoing instrument was acknowledged before me this 27th day of
February, 1995, by Lee S. Maas.
/s/ Marie M. Morrell
--------------------------------
Notary Public
My Commission Expires:
My Commission Expires January 9, 1996
- -------------------------------------
-7-
<PAGE>
STATE OF ARIZONA )
)ss.
County of MARICOPA )
The foregoing instrument was acknowledged before me this 27th day of
February, 1995, by Steven Knappenberger, Chairman of Sun BMW, Ltd., an Arizona
corporation, for and on behalf thereof.
/s/ Marie M. Morrell
--------------------------------
Notary Public
My Commission Expires:
My Commission Expires January 9, 1996
- -------------------------------------
-8-
<PAGE>
EXHIBIT A TO LEASE
That part of the Southeast quarter of the Southeast quarter of the Southwest
quarter of Section 16, Township 2 North, Range 3 East of the Gila and Salt River
Base and Meridian, Maricopa County, Arizona; described as follows:
The South 250.00 feet of the following described parcel:
BEGINNING at a point on the South line of said Section 16 which bears South 89
degrees 58 minutes 4 seconds West, 322.00 feet from the Southeast corner of the
Southeast quarter of the Southeast quarter of the Southwest quarter of said
Section 16; thence North 660.20 feet, more or less, parallel to and 322.00 feet
West of the East line of the Southwest quarter of said Section 16; thence South
89 degrees 57 minutes 00 seconds West, 344.50 feet along the North line of said
Southeast quarter of the Southeast quarter of the Southwest quarter of said
Section 16, to the Northwest corner of the Southeast quarter of the Southeast
quarter of the Southwest quarter of said Section 16; thence South 0 degrees 00
minutes 26 seconds East, 660.10 feet, more or less, to a point on the South line
of said Section 16; thence East 344.41 feet, more or less, along the South line
of said Section 16, to the Point of Beginning;
EXCEPT the South 40 feet thereof; and
EXCEPT from said South 250 feet, the North 0.05 feet thereof lying Northerly of
the Southerly face of the existing wall, as said wall existed August 2, 1976.
-9-
<PAGE>
WHEN RECORDED RETURN TO:
Stephen M. Savage, Esq.
Fennemore Craig
Suite 2200
Two North Central Avenue
Phoenix, AZ 85004-2390
MEMORANDUM OF LEASE
This Memorandum of Lease is made and entered into as of the 27th day of
February, 1995, by and between Lee S. Maas, a married man dealing with his sole
and separate property ("Lessor"), and Sun BMW, Ltd., an Arizona corporation
("Lessee").
Lessor and Lessee have entered into a Lease of even date herewith (the
"Lease"), whereby Lessor leases to Lessee and Lessee leases from Lessor property
located at 1144 East Camelback Road, Phoenix, Arizona, more particularly
described on Exhibit A, attached hereto and by this reference incorporated
herein (the "Property").
The initial term of the Lease expires ten (10) years after the date hereof
or on such earlier date as set forth in the Lease.
Lessor and Lessee desire to give actual and constructive notice of the
Lease to all persons dealing with the Property.
<PAGE>
Nothing in this Memorandum shall be deemed to modify, amend or supplement
the terms and conditions set forth in the Lease.
IN WITNESS WHEREOF, the parties have executed this Memorandum of Lease as
of the date first set forth above.
LESSOR:
/s/Lee S. Maas
-------------------------------
Lee S. Maas
-2-
<PAGE>
LESSEE:
SUN BMW, LTD.
By/s/ Steven Krappenberger
-----------------------------
Its Chairman
STATE OF ARIZONA )
) ss.
County of Maricopa
The foregoing instrument was acknowledged before me this 27th day of
February, 1995, by Lee S. Maas.
/s/ Marie M. Morrell
-----------------------------
Notary Public
My Commission Expires:
My Commission Expires Jan 9, 1996
- ----------------------------------
-3-
<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 27th day of
February, 1995, by Steven Krappenberger, Chairman of Sun BMW, Ltd., an Arizona
corporation, for and on behalf thereof.
/s/ Marie M. Morrell
--------------------------------
Notary Public
My Commission Expires:
My Commission Expires Jan 9, 1996
- ---------------------------------
-4-
<PAGE>
EXHIBIT A TO MEMORANDUM OF LEASE
That part of the Southeast quarter of the Southeast quarter of the Southwest
quarter of Section 16, Township 2 North, Range 3 East of the Gila and Salt River
Base and Meridian, Maricopa County, Arizona; described as follows:
The South 250.00 feet of the following described parcel:
BEGINNING at a point on the South line of said Section 16 which bears South 89
degrees 58 minutes 4 seconds West, 322.00 feet from the Southeast corner of the
Southeast quarter of the Southeast quarter of the Southwest quarter of said
Section 16; thence North 660.20 feet, more or less, parallel to and 322.00 feet
West of the East line of the Southwest quarter of said Section 16; thence South
89 degrees 57 minutes 00 seconds West, 344.50 feet along the North line of said
Southeast quarter of the Southeast quarter of the Southwest quarter of said
Section 16, to the Northwest corner of the Southeast quarter of the Southeast
quarter of the Southwest quarter of said Section 16; thence South 0 degrees 00
minutes 26 seconds East, 660.10 feet, more or less, to a point on the South line
of said Section 16; thence East 344.41 feet, more or less, along the South line
of said Section 16, to the Point of Beginning;
EXCEPT the South 40 feet thereof; and
EXCEPT from said South 250 feet, the North 0.05 feet thereof lying Northerly of
the Southerly face of the existing wall, as said wall existed August 2, 1976.
-5-
<PAGE>
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement, dated as of October ___, 1996, is by and
among UAG West, Inc., a Delaware corporation ("UAG West"), SK Motors, Ltd., an
Arizona corporation, d/b/a Scottsdale Porsche (the "Company"), and the
Knappenberger Revocable Trust Dated April 15, 1983, as Amended ("Knappenberger
Trust"). UAG West and Knappenberger Trust and each other person or entity that
may become a party hereto as contemplated hereby, are hereinafter individually
referred to as a "Shareholder" and collectively referred to as the
"Shareholders".
W I T N E S S E T H :
WHEREAS, the parties hereto have entered into that certain Stock
Purchase Agreement dated as of June 6, 1996, as amended (the "Stock Purchase
Agreement");
WHEREAS, immediately prior to the Closing of the Stock Purchase
Agreement, Scottsdale Jaguar, Ltd., an Arizona corporation ("Scottsdale Jaguar")
shall own 100 shares (the "Shares") of no par value common stock of the Company
("Common Stock"), representing all of the issued and outstanding shares of
Common Stock;
WHEREAS, pursuant to the Stock Purchase Agreement, at the Closing,
Scottsdale Jaguar shall sell, assign, transfer and deliver the Shares to UAG
West;
WHEREAS, pursuant to the Stock Purchase Agreement, at the Closing, UAG
West shall sell, assign, transfer and deliver 19 shares of the Common Stock,
representing nineteen (19%) percent of the issued and outstanding shares of
Common Stock of the Company to Knappenberger Trust (the "Knappenberger Shares");
and
WHEREAS, the Company, UAG West, United Auto Group, Inc. and Porsche
Cars North America, Inc. ("Porsche") have entered into a Sales and Service
Agreement and an addendum thereto (the "Sales and Service Agreement");
WHEREAS, UAG West, the Company and Knappenberger Trust desire, INTER
ALIA, to provide certain rights and set certain restrictions in connection with
the transfer of the Shareholders' shares of Common Stock;
NOW, THEREFORE, in consideration of the mutual terms, conditions,
covenants and agreements made herein, the parties hereto hereby agree as
follows:
<PAGE>
ARTICLE 1
TRANSFER OF SECURITIES
SECTION 1.1. CONSENT OF UAG WEST.
(a) Subject to the rights of Knappenberger Trust contained in
Article 3 hereof and except as otherwise provided herein and for as long as UAG
West (or an affiliate thereof) shall own at least 20% of the issued and
outstanding shares of Common Stock, no Shareholder other than UAG West 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 West and Porsche Cars of
North America, Inc. ("Porsche"). Any Transfer effected, or purported or
attempted to be effected, not in accordance with the terms and conditions of
this Section 1.1, 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.
SECTION 1.2. GENERAL RESTRICTIONS.
No Shareholder (including UAG West and any other Shareholder permitted
to Transfer shares of capital stock of the Company or any interest therein in
accordance with Section 1.1 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
and the Sales and Service Agreement; and (ii) the transferee (if other than
another Shareholder) agrees to be bound by this Agreement and the Sales and
Service 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 reasonably
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.
2
<PAGE>
SECTION 1.3. 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 October ___, 1996,
as the same may be amended from time to time, by and among
UAG West, Inc., ("UAG West"), SK Motors, Inc. (the
"Company"), Steven Knappenberger, Knappenberger Revocable
Trust Dated April 15, 1983 as Amended and certain other
shareholders of the Company who may from time to time become
parties to such Shareholders' Agreement and to the
provisions of the Sales and Service Agreement between the
Company, UAG West, United Auto Group, Inc. and Porsche Cars
North America, copies of which may be obtained at the
offices of the Company.
SECTION 1.4. IMPROPER TRANSFERS INEFFECTIVE.
Any purported transfer of Common Stock by a Shareholder which is not
permitted by the foregoing provisions of this Article 1, or which is in
violation of such provisions, shall be void and of no force and effect
whatsoever.
ARTICLE 2
PURCHASE AND SALE OF SHARES
Upon the occurrence of a Dealer Termination Event (as defined in the
Sales and Service Agreement) as to Knappenberger and subject to the consent and
approval of Porsche, UAG West shall have the right (the "Call") to acquire the
Knappenberger Shares for the Share Value (as defined below) for the purpose of
transferring, selling or assigning the Knappenberger Shares to a Dealer
Principal (as defined in the Sales and Service Agreement). UAG West may
exercise the Call by notifying Knappenberger Trust in writing of such exercise.
Within five (5) days of receipt of such notice or such later date as is set
forth in the notice, Knappenberger Trust shall sell, assign, transfer and
deliver to UAG West the Knappenberger Shares and the certificates representing
such shares accompanied by stock powers duly executed in blank. For purposes of
this Agreement, the Share Value shall be an amount equal to the Subsequent Value
(as defined in the Dealer Agreement) minus the sum of the Initial Value (as
defined in the Dealer Agreement) plus an amount equal to 15% of the Initial
Value per annum from the date hereof through the date the Knappenberger Shares
are transferred.
3
<PAGE>
If, at any time, the Company ceases to operate a Porsche dealership,
Knappenberger Trust shall transfer, assign and deliver the Knappenberger Shares
to UAG West.
As to any successor Dealer Principal consented to and approved by
Porsche, upon a Dealer Termination Event as to any such successor, such Dealer
Principal shall be required to sell and UAG West shall be required to purchase
the Company shares then held by such Dealer Principal on the terms and subject
to the conditions set forth in the Sales and Service Agreement.
ARTICLE 3
MISCELLANEOUS
SECTION 3.1. TERM.
All provisions of this Agreement shall terminate upon, in respect of
any Shareholder, when such Shareholder no longer owns any capital stock of the
Company.
SECTION 3.2. AMENDMENT; WAIVER.
This Agreement may be altered or amended only with the written consent
of all of the parties hereto and Porsche. 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 3.3. 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 3.4. 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 and
the Sales and Service Agreement; PROVIDED, HOWEVER, that the rights of
Knappenberger Trust contained in Article 3 hereof cannot be assigned or
otherwise transferred in connection with any
4
<PAGE>
Transfer of shares of Common Stock by Knappenberger Trust without the prior
written consent of UAG. No assignment of this Agreement shall relieve the
assignor from any liability hereunder.
SECTION 3.5. SHARES SUBJECT TO THIS AGREEMENT.
All shares of capital stock of the Company now owned or hereafter
acquired by any of the Shareholders shall be subject to the terms of this
Agreement and the Sales and Service Agreement.
SECTION 3.6. 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 Knappenberger Trust:
Mr. Steven Knappenberger
6725 E. McDowell Road
Scottsdale, Arizona 85257
If to UAG West or the Company:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10152
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President
with a copy to:
Rogers & Hardin
229 Peachtree Street, N. E.
Suite 2700
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, 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
5
<PAGE>
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 3.7. 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 3.8. 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 3.9. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Arizona, without giving effect to the choice-of-law
provisions thereof.
SECTION 3.10. SALES AND SERVICE AGREEMENT.
This Agreement has been entered into pursuant to the terms of the
Sales and Service Agreement and should be construed in a manner that is
consistent with said agreement and to give reasonable effect to the provisions
thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
UAG WEST, INC.
By:
----------------------------------------
Name:
Title:
SK MOTORS, LTD.
By:
----------------------------------------
Name:
Title:
STEVEN KNAPPENBERGER REVOCABLE
TRUST DATED APRIL 15, 1983,
AS AMENDED
-------------------------------------------
STEVEN KNAPPENBERGER, TRUSTEE
125107.10
7
<PAGE>
MANAGEMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the ____ day of October,
1996, by and between UNITED AUTO GROUP, INC., a Delaware corporation ("UAG"),
UAG WEST, INC., a Delaware corporation ("Company"), and SCOTTSDALE JAGUAR, LTD.,
an Arizona corporation ("Dealership").
W I T N E S S E T H:
WHEREAS, Dealership operates a Jaguar automobile dealership, to service and
sell new and used Jaguar automobiles;
WHEREAS, Steven Knappenberger ("Knappenberger") is the Dealer Principal of
the Dealership;
WHEREAS, George W. Brochick ("Brochick") is the General Manager of the
Dealership and is responsible for day-to-day operating control of the
Dealership;
WHEREAS, Knappenberger has entered into a long-term employment agreement
with the Company pursuant to which Knappenberger is employed as President and
Chief Operating Officer of the Company (the "Knappenberger Employment
Agreement");
WHEREAS, Brochick has entered into a long-term employment agreement with
the Company pursuant to which Brochick is employed as Executive Vice-President
of the Company (the "Brochick Employment Agreement");
WHEREAS, Dealership and Company desire to enter into this Agreement
pursuant to which Dealership will presently maintain its current management
team;
NOW, THEREFORE, in consideration for the premises and of the promises and
agreements hereinafter set forth and for other good and valuable consideration,
the adequacy and sufficiency of which is hereby acknowledged, Dealership and
Company mutually agree as follows:
ARTICLE 1
MANAGEMENT AND OPERATION OF THE DEALERSHIP
1.1 Company shall employ Knappenberger as President and Chief Operating
Officer of the Company pursuant to the terms of the Knappenberger Employment
Agreement.
1.2 Company shall employ Brochick as Executive Vice-President of the
Company pursuant to the terms of the Brochick Employment Agreement.
<PAGE>
1.3 Knappenberger shall continue to operate as Dealer Principal of the
Dealership. Brochick shall continue to operate as President and General Manager
of the Dealership and will be responsible for day-to-day operating control of
the Dealership and will continue to be the Dealer Operator. Any changes in the
Dealer Operator or Dealer Principal will be made in compliance with the terms of
the Dealer Agreement between Jaguar Cars and the Dealership (the "Dealership
Agreement").
1.4 The Dealership will continue to be operated in accordance with the
terms of the Dealership Agreement.
1.5 During the term of this Agreement, the Company shall provide or
arrange for financing necessary to operate the Dealership and to maintain
working capital levels as the Dealership and the Company determine are
reasonably necessary and to satisfy its liability under that certain
Indemnification Agreement of even date herewith by and between Dealership and
its stockholders. UAG and the Company shall guarantee any such indebtedness, as
may be reasonably necessary. Dealership agrees to pay the Company or UAG a
commercially reasonable fee for arranging or guaranteeing any third party
financing.
ARTICLE 2
MANAGEMENT FEE
2.1 As compensation for the services to be rendered hereunder by the
Company through its employees, Dealership shall pay to Company an annual fee of
Five Hundred Thousand Dollars ($500,000), payable monthly, which fee shall be
increased on January 1, 1998 and annually thereafter to an amount equal to the
then current annual fee plus a percentage of the then current annual fee equal
to the percentage increase in the Consumer Price Index published from time to
time by the United States Department of Labor for the preceding twelve month
period. The management fee for each monthly period shall be paid no later than
fifteen (15) days after the end of such monthly period, except that Dealership
may defer payment of the management fee for any monthly period to the extent
that the management fee during such period exceeds the Dealership's net income
after tax (calculated before taking into account the management fee) for such
period, and after establishment of any reserves for working capital as the
Dealership and the Company determines are reasonably necessary or for other
taxes due or to become due or indemnities in respect thereof. If the Dealership
defers payment of any management fees and has net income after tax in any
subsequent period, Dealership shall pay such deferred management fees as
promptly as reasonably possible.
2
<PAGE>
2.2 Dealership shall be solely liable for the costs and expenses of
maintaining and operating the Dealership and shall pay all costs and expenses of
maintaining, operating, and supervising the operation of the Dealership,
including without limitation, the salaries, bonuses, and fringe benefits of all
personnel employed by or for operations at the Dealership (other than the
salaries and bonuses of Knappenberger and Brochick). The termination of
Knappenberger's or Brochick's employment with the Company shall not terminate
this Agreement and shall have no effect on the Dealership's obligations
hereunder.
ARTICLE 3
TERM
The term of this agreement shall commence as of the date first written
above and shall continue until the earlier of (i) the thirtieth (30th)
anniversary of the date of this Agreement or (ii) the loss by Dealership of its
Jaguar franchise.
ARTICLE 4
MISCELLANEOUS
4.1 INDEMNIFICATION. Dealership agrees to indemnify, fully defend, save
and hold harmless Company and any of its respective officers, directors,
employees, stockholders, advisers, representatives, agents and affiliates (each
an "Indemnified Party"), if an Indemnified Party shall at any time or from time
to time suffer any Costs (as defined below) arising, directly or indirectly, out
of or resulting from, or shall pay or become obligated to pay any sum on account
of, this Agreement or UAG West's obligations hereunder other than Costs arising
out of UAG West's breach of this Agreement, gross negligence or wilful
misconduct, as to which UAG West shall indemnify Dealership for all Costs
arising therefrom, and provided, further, that nothing herein shall be deemed to
modify or limit any other obligation of the parties to one another. For
purposes of this Agreement, Costs shall mean all liabilities, losses, costs,
damages, expenses, claims, attorneys' fees, experts' fees, consultants' fees and
disbursements of any kind or of any nature whatsoever.
4.2 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.
4.3 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:
3
<PAGE>
If to the Company:
Steven Knappenberger
6725 E. McDowell Road
Scottsdale, Arizona 85257
with a copy to:
Snell & Wilmer, L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Attn: Steven D. Pidgeon, Esq.
If to UAG West:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance, Esq.,
Executive Vice President
with a copy to:
Rogers & Hardin
2700 Cain Tower,
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, 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.
4.4 WAIVER AND AMENDMENTS. Any failure of a party to comply with any
obligation, covenant, agreement or condition herein may be expressly waived in
writing by the other party, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. This Agreement may be amended, modified or supplemented only by a
written instrument executed by the parties hereto.
4
<PAGE>
4.5 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.
4.6 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.
4.7 TIME IS OF THE ESSENCE. Time is of the essence for purposes of this
Agreement.
4.8 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Arizona, without giving effect to the
choice-of-law provisions thereof.
4.9 SPECIFIC PERFORMANCE. The parties hereto agree that any violation of
this Agreement will result in irreparable injury to the non-breaching party and
that damages at law would not be reasonable or adequate compensation to such
non-breaching party for a violation of this Agreement, and the non-breaching
party shall be entitled to have the provisions of this Agreement specifically
enforced by preliminary and permanent injunctive relief without the necessity of
proving actual damages and without posting bond or other security.
4.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of and be enforceable against the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered, as of the date and year first above written.
UNITED AUTO GROUP, INC.
By:______________________________
Its:___________________________
UAG WEST, INC.
By:______________________________
Its:___________________________
SCOTTSDALE JAGUAR, LTD.
By:______________________________
Its:___________________________
6
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") made this ____ day of October, 1996, by
and between 6725 AGENT, an Arizona general partnership ("Landlord"), and
SCOTTSDALE JAGUAR, LTD., an Arizona corporation ("Tenant").
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 real property located at 6725 East McDowell Road, Scottsdale, Arizona, being
more particularly described on the attached EXHIBIT "A" 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. Tenant's right to use the Premises is non-exclusive and shall
be held in common with Scottsdale Audi, Ltd., an Arizona corporation, its
successors and assigns ("Audi") and SK Motors, Ltd., an Arizona corporation,
d/b/a Scottsdale Porsche, its successors and assigns ("Porsche").
2. TERM. The term hereof shall begin on the date hereof and shall end at
-1-
<PAGE>
midnight December 31, 2016 ("Term"); provided however, Landlord, at Landlord's
sole option, has the right to terminate this Lease at any time until April 30,
1998, upon not less than thirty (30) days written notice to Tenant ("Landlord's
Termination Right"). Tenant shall have thirty (30) days to vacate the Premises
after Landlord's written notice.
3. RENT.
(a) From the commencement date through December 31, 1997, Tenant
agrees to pay Landlord, as rent for the Premises ("Rent") the sum of Seven
Hundred Fifty Thousand and no/100 ($750,000) Dollars per year, payable in
advance in monthly installments of Sixty-Two Thousand Five Hundred and No/100
Dollars ($62,500.00) on the first day of each month.
(b) On January 1, 1998, and on the first day of each year thereafter
during the Lease Term, the Rent shall be increased by an amount equal to four
percent (4%) of the Rent payable the prior year (the "Escalator"); provided,
however, Landlord may, at its sole option, choose not to adjust the Rent in any
particular year by the full amount of the Escalator in which event Landlord
shall have the right in the following years to adjust the Rent by the Escalator
plus any amount the Rent could have been so adjusted in prior years (the
"Cumulative Adjustment"). For example, Rent for calendar year 1999 would be
$811,200 but if Landlord were to increase the Rent to only $800,000, Rent for
calendar year 2000 would be $843,648 unless Landlord chooses to adjust the Rent
to a lower amount.
1. UTILITIES. Tenant shall pay Tenant's Pro Rata Share (as defined
herein) of all utility bills, including, but not limited to water, sewer, gas,
electricity, fuel,
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light, and heat bills, for the Premises, and all garbage collection services or
other sanitary services rendered to the Premises or used in connection therewith
("Utility Services"). Tenant's Pro Rata Share shall be equal to a fraction, the
numerator of which shall be Tenant's gross revenues and the denominator of which
shall be the total gross revenues of all occupants of the Premises, including
Porsche, Audi, Tenant and any other party to whom use rights in the Premises are
granted. Tenant shall pay as additional rent, one third of the estimated cost
(the "Percentage Estimated Cost") of the annual Utility Services. The
Percentage Estimated Cost shall be paid by Tenant in monthly installments as
additional rent on or before March 1st of each year. Provided Landlord has
received Tenant's financial statement showing gross revenues as provided herein,
Landlord shall compute Tenant's Pro Rata Share of the actual annual cost for
Utility Services and compare it to the collected Percentage Estimated Cost for
the year, whereupon Tenant shall either receive a credit towards the next
month's installment of Percentage Estimated Cost or a written statement from
Landlord for any additional amount owed by Tenant as Tenant's Pro Rata Share, in
which case Tenant shall pay such amount as additional rent the first day of the
following month.
2. USE OF THE PREMISES; ENVIRONMENTAL INDEMNITY. The Premises shall
be used for the operation of a new and used automobile dealership, service
facility and uses incidental thereto, and for any other purposes which may be
agreed to by the parties. Tenant shall not violate any federal or state
environmental law, and Tenant agrees to indemnify and hold Landlord harmless
from any and all damages, costs, fines and expenses that might arise as a result
of any such violation and from its placement
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upon the Premises of hazardous wastes and toxic substances that are placed on
the Premises.
3. REPAIRS BY LANDLORD. Landlord shall be obligated to repair and
maintain the roof, foundation and all structural portions of the Premises,
provided Tenant shall pay Tenant's Pro Rata Share of the cost for such repair
and maintenance within twenty (20) days after Landlord requests payment of
Tenant's Pro Rata Share. Landlord shall maintain the Premises in good order and
repair. Tenant shall, throughout the Term, pay Landlord Tenant's Pro Rata Share
of the cost for maintaining the Premises in good order and repair, including but
not limited to, repair and maintenance of the electrical, heating, ventilation
and air conditioning and plumbing systems, and for the cost to care for all
landscaping on the Premises, including the mowing of grass, paving, policing,
care of shrubs and general landscaping within twenty (20) days after Landlord
requests payment of Tenant's Pro Rata Share thereof.
4. 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. All repairs, replacement and maintenance required by Tenant
or necessitated by Tenant's actions, shall be Tenant's sole responsibility;
provided, however, if such repairs, replacement or maintenance are necessitated
as a result of Tenant's actions and Tenant fails to perform such repair,
replacement or maintenance, Landlord may upon two (2) days notice to Tenant make
such repair, replacement or maintenance and bill Tenant for the cost, which cost
shall be deemed and collectable as additional rent. Tenant agrees to return the
Premises to Landlord in as good condition and repair as
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when first received by Tenant, natural wear and tear, damage by storm, fire,
lightening, earthquake or other casualties and condemnation excepted.
5. TAX AND INSURANCE. Tenant shall pay Tenant's Pro Rata Share of
all charges for taxes (including, but not limited to, ad valorem taxes, special
assessments and any other governmental charges) on the Premises. Tenant shall
also pay Tenant's Pro Rata Share of the cost for insurance premiums for fire and
extended insurance coverage on the Premises in amounts equal to the full
replacement value of the Premises. Such insurance shall be obtained by
Landlord, or Landlord's agent, on policies issued by underwriters acceptable to
Landlord. All policies shall insure Landlord and Tenant as their respective
interests shall appear. Landlord, or Landlord's agent, shall also obtain
general liability insurance covering the Premises naming Tenant as an additional
insured. Tenant shall be responsible for Tenant's Pro Rata Share of the cost
for such insurance, which shall be paid monthly by Tenant as additional rent.
The dollar amount of such insurance coverage shall be reviewed annually, and
adjusted if necessary, in order to provide for adequate protection to Landlord,
Tenant, Porsche, Audi and any other party to whom use rights in the Premises
have been granted. Tenant shall promptly pay as additional rent during the
Term, the Percentage
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Estimated Cost for such taxes and insurance. Provided Landlord has received
Tenant's financial statement showing gross revenues as provided herein, Landlord
shall compute Tenant's Pro Rata Share of the actual annual cost for such taxes
and insurance and compare it to the collected Percentage Estimated Cost for the
year, whereupon Tenant shall either receive a credit towards the next month's
installment of Percentage Estimated Cost or a written statement from Landlord
for any additional amount owed by Tenant as Tenant's Pro Rata Share, in which
case Tenant shall pay such amount as additional rent the first day of the
following month.
6. 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 used by Landlord to rebuild and repair the Premises to such condition
as Landlord in its sole discretion shall determine is appropriate.
7. TENANT'S GROSS REVENUES. Tenant shall deliver to Landlord within
thirty (30) days after Tenant's fiscal year end, Tenant's financial statement
for such fiscal year which shall include Tenant's gross revenues for such year.
8. INDEMNITY; WAIVER OF SUBROGATION. Subject to Landlord's
obligations in this Lease, Tenant agrees to indemnify and hold Landlord harmless
against all claims and expenses resulting therefrom, including actual attorneys'
fees reasonably incurred and court costs, for damage to persons or property by
reason of the use or occupancy of the Premises by Tenant. 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.
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 or delayed.
Tenant may make non-
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structural changes and modifications to the Premises without Landlord's approval
provided Tenant has obtained Porsche and Audi's approval for such changes and
modifications. 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
request. Notwithstanding the foregoing, Tenant shall also be entitled to make
the following changes without necessity of Landlord's consent, but subject to
obtaining Porsche and Audi'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) those changes
recommended or required by the automobile manufacturer whose automobiles are
sold on the Premises.
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 or which may be necessary for
Tenant's occupancy to continue.
11. 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 as to the
remaining portion of the Premises in full force and effect notwithstanding any
such taking; provided Porsche,
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Audi and any other party to whom use rights in the Premises have been granted
agree the Premises are sufficient to sustain all such parties' use. 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 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,
and (ii) all condemnation awards shall be paid to Landlord to hold for payment
of repair and restoration to the Premises. 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
Landlord's reasonable judgment, the ability of Tenant, Porsche, Audi or any
other party to whom use rights in the Premises have been granted, to operate
such business in a manner consistent with the operation of such businesses prior
to such taking.
12. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord, 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
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<PAGE>
Tenant. All requests for assignment or subletting shall be made in writing and
delivered to Landlord. 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 as aforesaid. 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.
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 owns or has purchased as leasehold
improvements and placed on 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. CANCELLATION OF LEASE BY LANDLORD. It shall be an "Event of
Default" hereunder if,
(a) Tenant fails to pay rent, including but not limited to Rent
and additional rent herein reserved, when due, and fails to cure the
failure to pay within five (5) days after receipt of written notice thereof
from Landlord; provided Landlord shall not be obligated to give such
written notice and Tenant shall not receive any cure period more than twice
in any calendar year.
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<PAGE>
(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 twenty (20) days after the date of receipt
of written notice of default from Landlord;
(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 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 and such petition is not dismissed with prejudice within sixty (60)
days from the date of filing;
(f) If Tenant makes a general assignment for the benefit of
creditors, or provides for an arrangement, composition, extension or
adjustment with its creditors;
(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.
(h) If Tenant abandons or vacates the Premises; or
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<PAGE>
(i) If Tenant fails to pay any Rent or any other charges
required to be paid by Tenant under this Lease and such failure continues for
five (5) days after such payment is due and payable; or
(j) If in any proceeding or action in which Tenant is a party, a
trustee, receiver, agent or custodian is appointed to take charge of the
Premises or Tenant's Property (or has the authority to do so) for the purpose of
enforcing a lien against the Premises or Tenant's Property; or
(k) If Tenant is a partnership or consists of more than one (1)
person or entity, if any partner of the partnership or other person or entity is
involved in any of the acts or events described in subparagraphs iv through vii
above.
Upon the occurrence of an Event of Default, Landlord may pursue any right or
remedy against Tenant available at law or in equity. Any notice provided in
this section may be given by Landlord, or its attorney, or agent herein named.
Then in addition to any other rights or remedies Landlord may have under any
law, Landlord shall have the right, at Landlord's option, without further notice
or demand of any kind, to do the following:
i. Terminate this Lease and Tenant's right to possession of
the Premises and reenter the Premises and take possession thereof, and Tenant
shall have no further claim to the Premises or under this Lease; or
ii. Continue this Lease in effect, reenter and occupy the
Premises for the account of Tenant, and collect any unpaid Rent or other charges
which have or thereafter become due and payable; or
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iii. Reenter the Premises under the provisions of
subparagraph ii, and thereafter elect to terminate this Lease and Tenant's right
to possession of the Premises.
If Landlord reenters the Premises under the provisions of subparagraphs ii or
iii above, Landlord shall not be deemed to have terminated this Lease or the
obligation of Tenant to pay any Rent, additional rent or other charges
thereafter accruing, unless Landlord notifies Tenant in writing of Landlord's
election to terminate this Lease. In the event of any reentry or retaking of
possession by Landlord, Landlord shall have the right, but not the obligation,
to remove all or any part of Tenant's property from the Premises and to place
such property in storage at a public warehouse at the expense and risk of
Tenant. If Landlord elects to relet the Premises for the account of Tenant, the
rent received by Landlord from such reletting shall be applied as follows:
first, to the payment of any indebtedness other than Rent due hereunder from
Tenant to Landlord; second, to the payment of any costs of such reletting;
third, to the payment of the cost of any alterations or repairs to the Premises;
fourth to the payment of Rent due and unpaid hereunder; and the balance, if any,
shall be held by Landlord and applied in payment of future Rent as it becomes
due. If that portion of rent received from the reletting which is applied
against the Rent due hereunder is less than the amount of the Rent due, Tenant
shall pay the deficiency to Landlord promptly upon demand by Landlord. Such
deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as determined, any costs and expenses incurred by Landlord in
connection with such reletting or in making alterations and repairs to the
Premises, which are not
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covered by the rent received from the reletting.
Should Landlord elect to terminate this Lease under the provisions of
subparagraph i or iii above, Landlord may recover as damages from Tenant the
following:
1. PAST RENT. The worth at the time of the award of any unpaid Rent
which had been earned at the time of termination; plus
2. RENT PRIOR TO AWARD. The worth at the time of the award of the
amount by which the unpaid Rent which would have been earned
after termination until the time of award exceeds the amount of
such rental loss that Tenant proves could have been reasonably
avoided; plus
3. RENT AFTER AWARD. The worth at the time of the award of the
amount by which the unpaid Rent for the balance of the Term after
the time of award exceeds the amount of the rental loss that
Tenant proves could be reasonably avoided; plus
4. PROXIMATELY CAUSED DAMAGES. Any other amount necessary to
compensate Landlord for all detriment proximately caused by
Tenant's failure to perform its obligations under this Lease or
which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, any costs or expenses
(including attorneys' fees), incurred by Landlord in (a) retaking
possession of the Premises, (b) maintaining the Premises after
Tenant's default, (c)
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preparing the Premises for reletting to a new tenant, including
any repairs or alterations, and (d) reletting the Premises,
including broker's commissions.
"The worth at the time of the award" as used in subparagraphs 1 and 2 above, is
to be computed by allowing interest at the rate of ten percent (10%) per annum.
"The worth at the time of the award" as used in subparagraph 3 above, is to be
computed by discounting the amount at the discount rate of the Federal Reserve
Bank situated nearest to the Premises at the time of the award plus one percent
(1%).
The waiver by Landlord of any breach of any term, covenant or
condition of this Lease shall not be deemed a waiver of such term, covenant or
condition or of any subsequent breach of the same or any other term, covenant or
condition. Acceptance of Rent by Landlord subsequent to any breach hereof shall
not be deemed a waiver of any preceding breach other than the failure to pay the
particular Rent so accepted, regardless of Landlord's knowledge of any breach at
the time of such acceptance of Rent. Landlord shall not be deemed to have
waived any term, covenant or condition unless Landlord gives Tenant written
notice of such waiver.
1. RELETTING BY LANDLORD. If, after an Event of Default, Landlord
has not elected to terminate this Lease, Landlord, at Landlord's sole option,
may as Tenant's agent, without terminating this Lease, enter upon and rent the
Premises 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
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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".
2. 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 non-exclusive, quiet and
peaceable possession of the Premises subject to the use rights of Porsche, Audi
and any other occupant of the Premises to whom use rights have been or are
granted, during the Term so long as no Event of Default is in existence and
continuing hereunder.
3. SUBORDINATION AND 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. 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.
4. 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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5. RIGHTS CUMULATIVE. All rights hereunder shall be cumulative but
not restrictive to those given by law.
6. 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
Landlord: 6725 Agent
Attn: Steven Knappenberger
6725 E. McDowell Road
Scottsdale, AZ
with a George G. Lowrance, Esq.
copy to: c/o United Auto Group
375 Park Avenue
Suite 2201
New York, New York 10152
with a
copy to: Stephen R. Leeds, Esq.
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Tenant: Scottsdale Jaguar, Ltd.
_________________________________
_________________________________
_________________________________
with a
copy to: _________________________________
_________________________________
_________________________________
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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.
1. 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.
2. TIME OF ESSENCE. Time is of the essence under this Lease.
3. 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.
4. ENTIRE AGREEMENT; CONFLICT. This Lease, including any
attachments made a part hereof, contains the entire agreement between the
parties with respect to the lease of the Premises and no representations,
inducements, promises or agreements, oral or otherwise, between the parties, not
embodied herein shall be of any force or effect. The parties agree to execute
and record a memorandum of this Lease in the real property records of Maricopa
County.
5. SEVERABILITY. If any term, provision or clause of this Lease, or
if the
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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.
6. 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.
7. AMENDMENT. This Lease may not be altered, waived, amended or
extended except by an instrument in writing signed by Landlord and Tenant.
8. 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.
9. GOVERNING LAW. This Lease shall be construed in accordance with
the laws of the State of Arizona, and all obligations of the parties created
hereunder are performable in Maricopa County, Arizona.
10. FORCE MAJEURE. Except with respect to the payment of Rent and
additional rent hereunder, 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,
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governmental laws, regulations or restrictions or other causes which are beyond
the control of Landlord or Tenant, as the case may be.
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:
6725 AGENT, an Arizona general partnership
By: SCOTTSDALE AUDI, LTD., an Arizona
By:
----------------------------------
Print Name:
---------------------------
As:
----------------------------------
By: SK MOTORS, LTD., an Arizona
By:
----------------------------------
Print Name:
---------------------------
As:
----------------------------------
TENANT:
SCOTTSDALE JAGUAR, LTD., an Arizona corporation
By:
----------------------------------
Print Name:
---------------------------
As:
----------------------------------
[Corporate Seal]
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thereof together with interest on said amount from the date of payment by
Landlord at a rate equal to ten percent (10%) or the then prevailing prime rate
of interest charged by leading money center banks as published in "THE WALL
STREET JOURNAL", if such rate is higher than ten percent (10%) (the "Interest
Rate").
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LEASE GUARANTY
The undersigned, in order to induce Charles F. Evans, an individual
resident of the state of Georgia ("Landlord") to enter into that certain Lease
Agreement (herein so called) dated as of October ___, 1996, between Landlord and
Charles Evans BMW, Inc., a Georgia corporation (the "Company") and a subsidiary
of UAG Atlanta IV, Inc., Inc., a Delaware corporation that is wholly owned by
the undersigned, hereby irrevocably guarantees the collection of all rent and
other obligations of the Company now or hereafter existing under the terms of
the Lease Agreement.
The undersigned hereby waives presentment, protest, notice of dishonor,
extension of time of payment and notice of acceptance of this Guaranty and
hereby consents to any and all forbearances 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.
No delay or omission by Landlord in exercising any of its rights, remedies,
powers and privileges hereunder and no course of dealing between Landlord, on
the one hand, and the Company, the undersigned or any other person, on the other
hand, shall be deemed a waiver by Landlord of any of its 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 Landlord or the
exercise of any other right, remedy, power or privilege by Landlord. No notice
or demand on the Company, the undersigned or any other person in any instance
shall entitle the Company, the undersigned or any other person to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of Landlord's right to any other or further action in any circumstances
without notice or demand.
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 the Company, and notwithstanding any
modification, discharge or extension of the obligations under the Lease
Agreement, any modification or amendment of the Lease Agreement, or any stay of
the exercise by Landlord of any of its rights and remedies against the Company
with respect to any of the obligations under the Lease Agreement.
Whenever possible, each provision of the Guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of the Guaranty shall be prohibited by or be invalid under such law,
such provisions 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 Landlord 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.
<PAGE>
This instrument shall be governed by the laws of the State of Georgia.
WITNESS the undersigned's signature as of the _____ day of October, 1996.
UNITED AUTO GROUP, INC.
a Delaware Corporation
By: /S/ Charles F. Evans
-----------------------------------------
Its: CEO
-----------------------------------------
<PAGE>
REAL ESTATE LOAN AND SECURITY AGREEMENT
Mortgaged Property: 6825 E. McDowell Road, Scottsdale, Arizona
[Acura Facilities]
THIS SECURITY AGREEMENT AND REAL ESTATE LOAN AGREEMENT (hereinafter
called the "Agreement") dated this ____ day of ___________, 1996 is made by SA
AUTOMOTIVE, Ltd., an Arizona corporation, whose address is 6725 E. McDowell,
Scottsdale, Arizona (hereinafter called "Borrower"), for the benefit of CHRYSLER
FINANCIAL CORPORATION, a Michigan corporation, having offices located at 27777
Franklin Road, Southfield, Michigan 48034 (hereinafter called "Lender").
WHEREAS, Borrower is engaged in the development of automobile
dealership properties and in connection therewith owns a piece of real property
(which business hereinafter shall be called "Borrower's Business") and desires
to borrow funds in the amount of $2,417,000 (hereinafter called the "Loan") from
Lender in order to provide permanent financing for certain real estate known as
6825 E. McDowell Road, Scottsdale, Arizona [Acura facilities] and as more
particularly described in Exhibit A attached to the Deed of Trust given to
Lender on even date herewith and incorporated herein by reference (hereinafter
the "Mortgaged Premises"); and
WHEREAS, Lender is willing to lend to Borrower said capital funds on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration mutually exchanged by Borrower and Lender, the receipt
and sufficiency of which is hereby acknowledged, and intending to be legally
bound hereby, Borrower hereby agrees as follows:
SECTION 1. DEFINITIONS. When used in this Agreement, the following terms shall
have the following meanings and shall be limited to only that Collateral as
defined below which is owned or leased by Borrower and located on or used in
connection with the Mortgaged Premises:
1.1. "Affiliate" with respect to Borrower shall mean any person, entity or
business organization which, directly or indirectly, controls, is controlled by
or is under common control with the Borrower;
1.2. "Books" shall mean all books, records and correspondence relating to
the Collateral, including, but not limited to, all ledgers, computer and
automatic machinery software and programs, printouts and computer runs and other
computer prepared information;
1.3. "Collateral" shall mean all property and interests in property or
rights in which a security interest is granted by
<PAGE>
Borrower to Lender in this Agreement pursuant to Section 3 hereof;
1.4. "Commitment Letter" shall mean that certain letter, if any, between
Borrower and Lender, setting forth certain terms and conditions of the Loan;
1.5. "Event of Default" shall mean the occurrence of the event as contained
in Section 8 of this Agreement;
1.6. "Fixtures" shall mean all personal property which has become
permanently attached to the Mortgaged Premises;
1.7. "Obligations" shall mean any and all liability, obligation, or
indebtedness owed pursuant to the terms and conditions of this Agreement and any
and all other agreements, promissory notes, guaranties and contractual
arrangements of every kind and nature between Borrower and Lender with respect
to the Loan, whether now or hereafter in existence; and
1.8. "Proceeds" shall mean whatever is received upon the sale, exchange,
collection or other disposition of the Collateral or proceeds, whether cash
proceeds or non-cash proceeds.
SECTION 2. THE LOAN.
2.1. Lender hereby agrees to loan to Borrower, and Borrower hereby agrees
to borrow from Lender, an amount which shall be evidenced by a promissory note
(the "Note") to be executed by Borrower concurrently herewith, which Note shall
be in substance and form satisfactory to Lender. The amount borrowed may be
increased from time to time upon written request of Borrower approved by Lender.
The initial loan and any new advances evidencing increases to the initial loan
(hereinafter in the aggregate referred to as the "Loan") shall be subject to the
terms and conditions of this Agreement. The Loan may be prepaid at any time in
whole or in part without premium or penalty.
2.2. The Note shall evidence the terms of repayment of the Loan.
The Loan shall bear interest upon the unpaid balance thereof at that
rate of interest stated in the Note.
Principal and interest shall be due and payable on the date(s) and in
the amounts as specified in the Note.
2.3. Borrower and Lender agree that it is their respective intentions, and
they do specifically agree: (a) that this Agreement, the Note issued hereunder,
and any subsequent promissory notes issued hereunder evidencing new advances,
and any subsequent agreements between the parties, provide for cross rights to
declare a default; (b) upon the occurrence of an Event of Default, all
Obligations shall be matured, immediately due and
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<PAGE>
payable, notwithstanding any maturity date thereof, or agreements thereto, to
the contrary; and (c) that the agreements contained in this Section 2.3 shall
be, and are hereby, made a part of all agreements between Borrower and Lender,
whether now or hereafter in existence.
SECTION 3. SECURITY.
3.1. As security for the prompt and complete payment and performance when
due of all Obligations due Lender, Borrower hereby grants to Lender a continuing
security interest in all of Borrower's right, title and interest in, to and
under the following Collateral located on or used in connection with the
Mortgaged Premises, whether now owned or hereafter acquired:
(a) all of Borrower's Fixtures;
(b) all Proceeds and products of any of the foregoing.
3.2. As further and additional security, Borrower has given Lender a Deed
of Trust dated on even date herewith, which covers the Mortgage Premises
(hereinafter called "Deed of Trust").
SECTION 4. BORROWER'S WARRANTIES. To induce Lender to enter into this
Agreement to make the loan contemplated hereby, Borrower represents and warrants
as follows:
4.1. Borrower operates Borrower's Business in the form of business
organization, if any, and from the principal place of business or address as set
forth in the introductory paragraph of this Agreement, and Borrower is in good
standing, duly authorized, licensed and franchised to operate Borrower's
Business;
4.2. All balance sheets, statements of profit and loss and other financial
data which have been furnished by Borrower to Lender fairly present the
financial condition of Borrower's Business as of the dates stated therein, and
the results of its operations for the periods for which the same are furnished;
all other information, reports, papers and data furnished to Lender are accurate
and correct in all material respects and complete insofar as completeness may be
necessary to give Lender a true and accurate knowledge of the subject matter;
and there has been no change in the business, earnings, prospects, assets,
liabilities or condition (financial or otherwise) of Borrower's Business from
that set forth in the most recent financial statements furnished by Borrower to
Lender other than changes in the ordinary course of Borrower's Business, none of
which changes have been materially adverse;
4.3. None of the Collateral is, as of the date hereof, subject to any
mortgage, pledge, lien or encumbrance in favor of anyone other than Lender
except liens of the kind permitted by
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<PAGE>
Section 6.1 hereof, unless otherwise agreed to by Lender in writing;
4.4. There is not now pending against Borrower, or to the officers,
managers or principals of Borrower's Business, if any, any litigation or legal,
administrative or tax proceedings, investigations or other action or matter, the
outcome of which in the opinion of Borrower or such officers, managers or
principals could materially adversely affect the continued operation or
condition (financial or otherwise) of Borrower's Business;
4.5. Borrower warrants that there exists on the date of this Agreement no
Event of Default and no event which with the lapse of time would become an Event
of Default; and
4.6. Borrower warrants that it is and shall remain the lawful owner of the
Collateral, free of all liens and claims whatsoever, other than the security
interest created hereby or pursuant hereto, or specifically allowed by this
Agreement, and has the authority and right to subject the Collateral to the
security interest granted to Lender by this Agreement.
SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS. Borrower hereby covenants and
agrees that, for so long as there shall remain any indebtedness hereunder;
5.1. Borrower will maintain the existence in good standing of Borrower's
Business to the extent necessary under applicable law, and will continue to keep
in full force and effect any and all licenses, franchises and other
authorizations necessary to conduct Borrower's Business, if any;
5.2. Borrower will (i) keep proper Books of the operations of Borrower's
Business if Borrower is a corporation or partnership or (ii) will keep proper
personal financial statements if Borrower is an individual, all such Books and
statements to be in forms satisfactory to Lender. Borrower will furnish to
Lender balance sheets and statements of profit and loss for each year with
respect to Borrower's Business (and, upon written request of Lender, Affiliates
of Borrower), within one hundred twenty (120) days after the close of each
Borrower's fiscal years hereafter, for so long as this Agreement shall remain in
effect, and will furnish to Lender at such time a completed, executed copy of a
report of an examination of the financial affairs of Borrower's Business (and,
upon written request of Lender, Affiliates of Borrower) made by Borrower or by
independent certified public accountants selected by Borrower and acceptable to
Lender, such report of Borrower's Business and Affiliates, where applicable, to
be in such detail and with such certification as Lender reasonably may require
from time to time; and Borrower will furnish such other financial statements as
Lender reasonably may require from time to time. Borrower will permit Lender to
inspect and make copies of the Books of Borrower's Business, if any, (and, upon
written request of
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<PAGE>
Lender, Affiliates of Borrower) at all reasonable times and from time to time.
All such balance sheets, statements of profit and loss and other financial
statements as Borrower may furnish hereunder will fairly present the financial
condition of Borrower's Business and Affiliates, where applicable, as of the
dates and for the periods for which the same are furnished and shall be
certified as true and correct be an appropriate officer of Borrower or
Affiliate, as applicable;
5.3. At the time any asset of Borrower's Business is assigned, mortgaged,
pledged or otherwise hypothecated to Lender as security for any Obligation,
Borrower will be the lawful owner thereof; the same being free from all
encumbrances except as specifically stated in the instrument by which the same
shall be so assigned, mortgaged, pledged or otherwise hypothecated; and the
Borrower will warrant and defend the same against all claims and demands of any
kind or nature;
5.4. Borrower promptly will pay when due all contractual obligations
calling for the payment of money, taxes, assessments and charges imposed upon
Borrower and upon Borrower's Business and Borrower's properties, assets,
operations, products, income or securities and also promptly will pay all claims
which constitute, or, if unpaid, may become a lien, charge or encumbrance upon
Borrower's business or any of Borrower's properties, assets, operations,
products income or securities;
5.5. Borrower shall be responsible for all loss and damage to Borrower's
Business and agrees to keep Borrower's Business insured against loss or damage
by fire, theft, collision and vandalism and against such other losses as Lender
may require from time to time. Insurance policies for the said insurance shall
be with such companies and in such amounts and in such form as shall be
satisfactory to Lender. All such policies of insurance shall contain an
endorsement in form and substance satisfactory to Lender, showing loss payable
to Lender as its interest may appear, and a certificate of insurance evidencing
such coverage will be provided to Lender;
5.6. Borrower will, upon request of Lender, execute such financing
statements and other documents (and pay the cost of filing or recording the same
in all public offices deemed necessary by Lender) and do all such other acts and
things as Lender may from time to time request, to establish and maintain a
valid first perfected security interest in the Collateral (free of all other
liens and claims whatsoever except as otherwise expressly provided herein) to
secure the payment of the Obligations;
5.7. Borrower will keep, at the address designated above, all Books, if
any, concerning the Collateral, which Books will be of such character as will
enable Lender or its designees to determine at any time the status of the
Collateral;
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<PAGE>
5.8. Borrower will, upon request of Lender, stamp on its Books concerning
the Collateral, a notation or other notice(s), in form satisfactory to Lender,
or take such other action to place third parties on notice of the security
interest of Lender in the Collateral;
5.9. Borrower will not sell, assign, create or permit to exist any lien on
or security interest in any Collateral in favor of anyone other than Lender;
5.10. Borrower will, at Borrower's sole cost and expense, keep the
Collateral in as good and substantial repair and condition as the same is now or
at the time the lien and security interest granted by this Agreement shall
attach thereto, reasonable wear and tear excepted, making repairs and
replacements when and where necessary. Borrower will further take all action
necessary to insure that the real estate upon which the Borrower's Business is
located shall be free of hazardous conditions, substances and pollutants of any
kind; and
5.11. Borrower shall apply the proceeds of the Loan for the purposes set
forth in this Agreement and shall furnish such evidence thereof as Lender may
request.
SECTION 6. BORROWER'S NEGATIVE COVENANTS. Borrower hereby covenants and agrees
that, for so long as there shall remain any Obligation owing to Lender, it will
not, without the prior written consent of Lender:
6.1. Create, permit or suffer to exist any mortgage, lien or other
encumbrance to be levied upon or become a charge against the Collateral located
on or used in connection with Mortgaged Premises other than mortgages, liens or
other encumbrances in favor of Lender, those liens identified as Permitted
Encumbrances in the Deed of Trust, and liens resulting from deposits or pledges
to secure payments of worker's compensation, unemployment insurance, old age
pensions or social security;
6.2. Endorse, guarantee or become surety for the payment of any debt or
liability, of any individual, partnership or corporation, directly or
contingently which would create a lien on the Collateral located on or used in
connection with Mortgaged Premises unless such lien is in favor of Lender; and
6.3. Sell, exchange, transfer or otherwise dispose of any of its
properties, assets, operations or products except in the normal course of
Borrower's Business; consolidate Borrower's Business with or merge Borrower's
Business into any other business concern or permit any other business concern to
consolidate with or merge into Borrower's Business; or sell, exchange, transfer,
lease or otherwise dispose of all or any substantial part of its capital assets,
or make or have outstanding any loan or advance to any individual, partnership
or
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<PAGE>
corporation, purchase any security of any corporation or invest in the
obligations of any individual, partnership or corporation.
SECTION 7. OWNERSHIP AND MANAGEMENT OF BORROWER'S BUSINESS.
7.1. Lender has elected to enter into this Agreement and to make the Loan
contemplated hereby with reliance and confidence in the integrity and ability of
the Borrower, and if Borrower is a corporation or partnership, the persons
presently having an ownership interest in or being in the active management and
operation of Borrower's Business as disclosed to Lender concurrently herewith,
and in reliance that said persons are and shall continue to have the same
ownership interest in or be in the active management and operation of Borrower's
Business or both, as the case may be, and that such ownership and management
shall not change without Lender's prior consent so long as this Agreement
remains effective and the Obligations remain outstanding.
SECTION 8. EVENT OF DEFAULT AND REMEDIES.
8.1. The following shall constitute an Event of Default hereunder:
(a) the occurrence of any event of default under the Deed of
Trust given by Borrower to Lender on even date herewith; or
(b) if there is now or hereafter be any change in the ownership
interest in or active management of the operation of the
Borrower's Business.
8.2. Upon the existence of an Event of Default, all outstanding Obligations
of Borrower to Lender will (notwithstanding any provisions to the contrary)
after expiration of any applicable notice and cure period, thereupon immediately
become due and payable, and Lender may, provided Borrower is also given notice,
notify any parties obligated to Borrower on any of the Collateral to make
payment to Lender of any amounts due or to become due thereunder and enforce
collection of any of the Collateral by suit or otherwise, and surrender,
release or exchange all or any part thereof, or compromise, extend or renew for
any period (whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon request of Lender, Borrower will, at its
own expense, notify any parties obligated to Borrower on any of the Collateral
to make payment to Lender of any amounts due or to become due thereunder. In
addition, Lender may take possession of the Collateral and any Books concerning
same wherever they may be found, with or without process of law, and may dispose
of the Collateral or any portion thereof in any manner permitted by law. Unless
otherwise agreed to by the parties in writing, any notification of intended
disposition of any of the Collateral required by law shall be
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<PAGE>
deemed reasonably and properly made if given at least seven (7) days before such
disposition.
SECTION 9. APPOINTMENT OF LENDER AS ATTORNEY.
9.1. When an Event of Default shall occur and be continuing, Borrower
hereby irrevocably appoints Lender as attorney-in-fact with power of
substitution to act for Borrower in Borrower's name or in the name of Lender, or
otherwise, for the use and benefit of Lender hereunder, at the expense of
Borrower; provided that in no event shall this appointment impose any duty on
Lender to act initially or thereafter, as this appointment is made solely to
allow Lender to protect its interests in the Collateral from time to time at its
option. This special power of attorney shall include, but not be limited to,
the hereinafter enumerated acts:
(a) Upon reasonable notice to Borrower, to execute and deliver,
or otherwise take any action deemed appropriate by Lender
regarding any deed, lease, assignment, security agreement,
certificate of title, chattel mortgage, vehicle
registration, bill of sale, release and such other
instruments as may be necessary to sell, assign, transfer,
pledge or otherwise deal with the property of Borrower which
is or shall hereafter become Collateral of Lender under this
Agreement and any amendments thereto;
(b) Upon reasonable notice to Borrower, to demand, collect,
receive payment on, release and otherwise take any action
deemed appropriate by Lender regarding all claims or money
due or to become due to the Borrower in connection with the
purchase, sale, damage or destruction of any of the
Collateral, to settle and compromise any such claim, to
receive and open any mail addressed to Borrower, and to
endorse checks for collection, deposit or payment, and
execute and deliver waivers, releases, covenants not to sue,
or other legal instruments deemed necessary to effect such
collection, settlement or compromise; and
(c) Upon reasonable notice to Borrower, to prosecute or
otherwise take any action deemed appropriate by Lender in
the name of Lender or in the name of Borrower, or otherwise,
any action or proceeding to collect any such claim or to
enforce the right of Borrower for the benefit of Lender.
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<PAGE>
SECTION 10. GENERAL. Borrower and Lender further agree that:
10.1. Lender shall, at all times, have the right to setoff and apply any and
all credits, monies or properties of Borrower in Lender's possession or control
against any Obligations of Borrower to Lender. All payments by Borrower or
other funds of borrower held or received by Lender, other than regular monthly
installments of principal and interest due on the Note, shall be applied to the
first maturing installments under said Note in order of maturity.
10.2. The acceptance by Lender of any installment or payment after it
becomes due or the waiver by Lender of any other Event of Default shall not be
deemed to alter or affect Borrower's Obligations and/or Lender's rights with
respect to any subsequent payment or Event of Default.
10.3. All of the agreements, representations and warranties contained in
this agreement or in any other instrument or document delivered pursuant thereto
shall survive the delivery of the Note and any extensions, renewals or
substitutions thereof and shall continue in full force and effect as long as
there shall remain Obligations owing to Lender from Borrower.
10.4. All negotiations, correspondence and memoranda passed between the
parties hereto with regard to the transactions contemplated by this Agreement
(other than the Commitment Letter, if any), are merged hereby and this Agreement
cancels and supersedes all prior agreements between the parties with regard
thereto. This Agreement may be assigned, altered, modified or abridged only by
a written instrument duly executed by the authorized representatives of Lender
and Borrower.
10.5. It is intended that this Agreement shall not be in violation of any
valid law applicable hereto now or hereafter from time to time in effect in any
jurisdiction and in the event any provision hereof in any way contravenes any of
said laws, this Agreement shall be considered valid except as to such
provisions. This Agreement is executed in the State of Arizona and shall be
subject to and construed under the laws of the State of Arizona.
10.6. Any notice given hereunder shall be in writing and given by personal
delivery or shall be sent by U.S. registered or certified mail, postage prepaid,
addressed to the party to be charged with such notice, at the respective address
as set forth above, or such other address as may be provided in writing.
10.7. This Agreement shall be binding upon and shall inure to the benefit of
the executors, administrators, legal representatives, successors and assigns of
the parties.
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10.8. This Agreement shall be binding upon and shall inure to the benefit of
the executors, administrators, legal representatives, successors and assigns of
the parties.
SECTION 11. AUTHORITY. Borrower shall furnish to Lender upon execution of this
Agreement such proof of its authority to enter into this Agreement, to make the
Note and to deposit the said security with Lender as Lender from time to time
reasonably may request, including, without limiting the generality of the
foregoing, an opinion of Borrower's counsel and, if Borrower is a corporation,
certified copies of resolutions of Borrower's stockholders, board of directors,
or other managers.
SECTION 12. WAIVER OF JURY TRIAL. LENDER AND BORROWER ACKNOWLEDGE AND AGREE
THAT THERE MAY BE A CONSTITUTIONAL RIGHT OT A JURY TRIAL IN CONNECTION WITH ANY
CLAIM, DISPUTE OR LAWSUIT ARISING BETWEEN THEM, BUT THAT SUCH RIGHT MAY BE
WAIVED. ACCORDINGLY, THE PARTIES AGREE;
(A) NOTWITHSTANDING SUCH CONSTITUTIONAL RIGHT, IN THIS COMMERCIAL
MATTER THE PARTIES BELIEVE AND AGREE THAT IT SHALL BE IN THEIR
BEST INTEREST TO WAIVE SUCH RIGHT AND, ACCORDINGLY, HEREBY WAIVE
SUCH RIGHT TO A JURY TRIAL AND FURTHER AGREE THAT THE BEST FORUM
FOR HEARING ANY CLAIM, DISPUTE OR LAWSUIT, IF ANY, ARISING IN
CONNECTION WITH THIS AGREEMENT OR RELATIONSHIP BETWEEN LENDER AND
BORROWER, INCLUDING, BUT NOT LIMITED TO, IN CONNECTION WITH THE
COLLECTION OF THE LOAN OR OTHER OBLIGATIONS, SHALL BE A COURT OF
COMPETENT JURISDICTION SITTING WITHOUT A JURY;
(B) THIS WAIVER OF JURY TRIAL IS FREELY, KNOWINGLY AND VOLUNTARILY
GIVEN BY EACH PARTY, WITHOUT ANY DURESS OR COERCION, AFTER EACH
PARTY HAS CONSULTED WITH ITS COUNSEL AND HAS CAREFULLY AND
COMPLETELY READ ALL OF THE TERMS AND PROVISIONS OF THIS
AGREEMENT, SPECIFICALLY INCLUDING THIS WAIVER OF JURY TRIAL
PROVISION; AND
(C) NEITHER LENDER NOR BORROWER SHALL BE DEEMED TO HAVE RELINQUISHED
THIS PROVISION WAIVING JURY TRIAL EXCEPT BY A WRITING SIGNED BY
AN OFFICER OF LENDER AND BORROWER RELINQUISHING THIS WAIVER OF
JURY TRIAL PROVISION.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the date first above written.
WITNESSES: BORROWER:
SA AUTOMOTIVE, Ltd., an Arizona
corporation
By:
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Its: President
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EXHIBIT 10.9.5
CHARLES EVANS BMW PROPERTY
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") made this ____ day of October 1996, by
and between CHARLES F. EVANS, an individual resident of Georgia ("Landlord"),
and CHARLES EVANS BMW, INC., a Georgia corporation ("Tenant").
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
3.948 acres, lying and being in Land Lot 206 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. Landlord and UNITED AUTO GROUP, INC., a Georgia corporation
have entered into a Purchase and Sale Agreement Charles Evans BMW Property for
the Premises dated of even date herewith (the "Agreement"). The term hereof
shall begin on the date hereof and shall end upon the Closing as described in
the Agreement ("Term").
3. RENT.
(a) The rent for the first full six months of the Term shall be FORTY-
FIVE THOUSAND AND NO/100 DOLLARS ($45,000.00) per month with the first month
rent due and payable upon the date of this Lease. All other rent payments shall
be paid in advance on the _____________ (___) day of the month. After six full
months, subject to Section (b) below, the rent shall increase to FIFTY-FIVE
THOUSAND AND NO/100 DOLLARS ($55,000.00) per month.
(b) NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY,
<PAGE>
if Tenant was ready, willing and able to close the purchase and sale of the
Premises under the Agreement on or before six (6) months after the date hereof,
but such closing is not consummated when Tenant is ready to close thereunder and
such failure to close is not the result of Tenant's default, then so long as
this Lease is in effect, the rent for the Premises shall be Forty-Five Thousand
and No/100 Dollars ($45,000.00) per month.
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 thirty (30) days 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 for the operation of a new and used automobile dealership, service
facility, paint and body shop facility, and uses incidental thereto, and for any
other purposes which may be agreed to by the parties. The use of the Premises
by Tenant shall be in compliance with federal, state and local laws and any
applicable restrictive covenants. 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 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
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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 contained in
Sections 2.10, 2.11 and 3.3 of that certain Stock Purchase Agreement (the "BMW
SPA") dated August 5, 1996 by and among United Auto Group, Inc., a Delaware
corporation, UAG Atlanta IV, Inc., a Delaware corporation, Charles Evans BMW,
Inc., a Georgia corporation, and Charles F. Evans are hereby incorporated by
reference to the same effect as if fully set forth herein. Nothing contained in
this Lease shall in any way affect or diminish the rights of the parties under
the BMW SPA for the breach of any representation or warranty contained in the
BMW SPA.
7. REPAIRS BY LANDLORD. All repairs, replacements, and maintenance
of any kind to the Premises shall be the sole responsibility of Tenant except to
the extent the necessity therefor would constitute a breach of Landlord's
representations or warranties under the BMW SPA or the Agreement.
8. REPAIRS BY TENANT. Subject to Landlord's representations and
warranties in the BMW SPA and the Agreement, 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 of the electrical, heating, ventilation and air
conditioning and plumbing systems. 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 thirty
(30) days prior written notice to Tenant, maintain the same 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 provided in the BMW SPA for non-
payment of obligations ("Interest Rate"). Subject to Tenant's repair
obligations hereunder,
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Tenant agrees to return the Premises to Landlord in as good condition and repair
as when first received by Tenant, natural wear and tear 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 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 thirty (30) 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 during the Term, 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.
11. INDEMNITY; WAIVER OF SUBROGATION. Subject to Landlord's
obligations in this Lease and the Agreement Tenant agrees to indemnify and hold
harmless Landlord against all claims and expenses resulting therefrom, including
actual attorneys' fees reasonably incurred and court costs, for damage to
persons or property by reason of the use or occupancy of the Premises by Tenant.
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<PAGE>
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 during the Term, 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 for all wage earners for Atlanta, Georgia 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 structural alterations,
additions or improvements to the Premises without the express prior written
consent of Landlord which consent shall not be unreasonably withheld or delayed,
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
request. 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
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<PAGE>
requirements, and (ii) any changes in its signage (provided such are in
compliance with local ordinances and any restrictive covenants affecting the
Premises) or those 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.
13. GOVERNMENTAL ORDERS. Subject to Tenant's right to terminate this
Lease hereunder, 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 not cease from the
date when possession thereof is taken, and rent shall not be prorated as of that
date; and this Lease shall continue as to the remaining portion of the Premises
in full force and effect notwithstanding any such taking. All compensation and
damage caused by such condemnation shall be recovered from the condemnor and
paid to the Tenant.
15. ASSIGNMENT AND SUBLETTING. Tenant shall, without the prior
written consent of Landlord, have the right to 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. 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. Without in any way limiting the foregoing, Tenant
shall specifically be entitled to freely assign or sublet its interest in this
Lease to any parent, subsidiary or other entity under common
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<PAGE>
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 receipt of 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 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;
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<PAGE>
(e) Tenant 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 and such petition is not dismissed with prejudice 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 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. NOTWITHSTANDING ANYTHING
CONTAINED HEREIN TO THE CONTRARY, if there is an Event of Default, Landlord must
give notice to Tenant and United Auto Group, Inc. ("UAG") of its intent to
exercise any remedy therefor and UAG (or its successors or assigns) shall have
thirty (30) days thereafter in which to purchase the Premises pursuant to the
terms of the Agreement before Landlord may pursue any right or remedy against
Tenant under this Lease; provided, however, that such thirty (30) day purchase
period shall be extended one (1) day for each day of delay in closing under the
Agreement occasioned by the act or omission of Landlord
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<PAGE>
in performing its obligations under the Agreement or for any other reason the
Closing thereunder does not occur except for Tenant's default under this
Agreement ("Notice and Cure Requirement").
18. RELETTING BY LANDLORD. If, after an Event of Default, Landlord
has the right to but has not elected to terminate this Lease, Landlord may,
subject to the Notice and Cure Requirement, 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 the remainder of
the term hereof. 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".
19. 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.
20. 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 the Premises or Tenant's use thereof
without the prior written consent of Tenant, which may be withheld in Tenant's
sole discretion.
21. SUBORDINATION ATTORNMENT. Landlord represents that there is only
one Deed to Secure Debt with respect to the Premises currently in force in favor
of NationsBank dated November 16, 1984, recorded in Deed Book 2920, Page 104,
Gwinnett County, Georgia records, as modified by Modification Agreement date
August 13, 1985, recorded in Deed Book 3124, Page 509, aforesaid records.
Should Landlord ever give a Deed to Secure Debt with respect to the Premises,
Landlord
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<PAGE>
shall provide Tenant a Subordination, Non-Disturbance and Attornment Agreement
from such lender 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.
22. ATTORNEY'S FEES. 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.
23. RIGHTS CUMULATIVE. All rights hereunder shall be cumulative but
not restrictive to those given by law.
24. 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
Landlord: Charles F. Evans
3180 Zingara Road
Route 1
Conyers, Georgia 30207
with a copy to: Forrest Jack Lance, Esq.
Lance & Associates, P.C.
884 Green Street
Conyers, Georgia 30207
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<PAGE>
Tenant and
UAG: Charles Evans BMW, Inc.
c/o United Auto Group, Inc.
375 Park Avenue
New York, New York 10152
Attn: George G. Lowrance, Esq.
with a copy to: Stephen R. Leeds, Esq.
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
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.
25. 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.
26. TIME OF ESSENCE. Time is of the essence under this Lease.
27. SUCCESSORS AND ASSIGNS. This Lease shall apply to, inure to the
benefit of, and be binding upon the parties hereof and their respective
successors, assigns, and legal representatives except as otherwise expressly
provided herein.
28. ENTIRE AGREEMENT; CONFLICT. This Lease, including any
attachments made a part hereof or thereof, the BMW SPA and the Agreement,
contain the entire agreement between the parties with respect to the lease of
the Premises and no representations, inducements, promises or agreements, oral
or otherwise, between the parties, not embodied herein shall be of any force or
effect. The parties agree to execute and record a memorandum of this Lease in
the real property records of Gwinnett County in the form specified by the Title
Insurance Company.
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<PAGE>
29. 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.
30. 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.
31. AMENDMENT. This Lease may not be altered, waived, amended or
extended except by an instrument in writing signed by Landlord and Tenant.
32. 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.
33. 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.
34. 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.
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.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE>
LANDLORD:
Signed Sealed and Delivered /s/ Charles F. Evans (SEAL)
-----------------------
in the presence of: CHARLES F. EVANS
- ----------------------------
Unofficial Witness
- ----------------------------
Notary Public
[Notarial Seal]
My Commission Expires:
- ----------------------------
TENANT:
Signed Sealed and Delivered CHARLES EVANS BMW, INC.
in the presence of: a Georgia Corporation
- ----------------------------
Unofficial Witness
By: /s/ Charles F. Evans
--------------------------
Name: CHARLES F. EVANS
--------------------------
Title: CEO
--------------------------
- ----------------------------
Notary Public
Attest:
[Notarial Seal] By: /s/ Sarah Pilgrim
--------------------------
Name: SARAH PILGRIM
--------------------------
My Commission Expires: Title: TREASURER
--------------------------
- ----------------------------
[Corporate Seal]
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<PAGE>
LEASE GUARANTY
The undersigned, in order to induce Charles F. Evans, an individual
resident of the state of Georgia ("Landlord") to enter into that certain Lease
Agreement (herein so called) dated as of October ___, 1996, between Landlord and
Charles Evans BMW, Inc., a Georgia corporation (the "Company") and a subsidiary
of UAG Atlanta IV, Inc., Inc., a Delaware corporation that is wholly owned by
the undersigned, hereby irrevocably guarantees the collection of all rent and
other obligations of the Company now or hereafter existing under the terms of
the Lease Agreement.
The undersigned hereby waives presentment, protest, notice of dishonor,
extension of time of payment and notice of acceptance of this Guaranty and
hereby consents to any and all forbearances 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.
No delay or omission by Landlord in exercising any of its rights, remedies,
powers and privileges hereunder and no course of dealing between Landlord, on
the one hand, and the Company, the undersigned or any other person, on the other
hand, shall be deemed a waiver by Landlord of any of its 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 Landlord or the
exercise of any other right, remedy, power or privilege by Landlord. No notice
or demand on the Company, the undersigned or any other person in any instance
shall entitle the Company, the undersigned or any other person to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of Landlord's right to any other or further action in any circumstances
without notice or demand.
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 the Company, and notwithstanding any
modification, discharge or extension of the obligations under the Lease
Agreement, any modification or amendment of the Lease Agreement, or any stay of
the exercise by Landlord of any of its rights and remedies against the Company
with respect to any of the obligations under the Lease Agreement.
Whenever possible, each provision of the Guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of the Guaranty shall be prohibited by or be invalid under such law,
such provisions 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 Landlord 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.
<PAGE>
This instrument shall be governed by the laws of the State of Georgia.
WITNESS the undersigned's signature as of the _____ day of October, 1996.
UNITED AUTO GROUP, INC.
a Delaware Corporation
By: /S/ Charles F. Evans
-----------------------------------------
Its: CEO
-----------------------------------------
<PAGE>
CHARLES EVANS NISSAN PROPERTY
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") made this ____ day of October 1996, by
and between CHARLES F. EVANS, an individual resident of Georgia ("Landlord"),
and CHARLES EVANS NISSAN, INC., a Georgia corporation ("Tenant").
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
4.55 acres, lying and being in Land Lot 267 of the 16th
District of Rockdale 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. Landlord and UNITED AUTO GROUP, INC., a Georgia corporation
have entered into a Purchase and Sale Agreement Charles Evans Nissan Property
for the Premises dated of even date herewith (the "Agreement"). The term hereof
shall begin on the date hereof and shall end upon the Closing as described in
the Agreement ("Term").
3. RENT.
(a) The rent for the first full six months of the Term shall be TWENTY
THOUSAND AND NO/100 DOLLARS ($20,000.00) per month with the first month rent due
and payable upon the date of this Lease. All other rent payments shall be paid
in advance on the _____________ (___) day of the month. After twelve full
months, subject to Section (b) below, the rent shall increase by an amount equal
to the percentage increase in the Consumer Price Index from October, 1996 to
<PAGE>
October, 1997. Consumer Price Index for purposes hereof shall mean the Consumer
Price Index for all wage earners for Atlanta, Georgia.
(b) NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, if
Tenant was ready, willing and able to close the purchase and sale of the
Premises under the Agreement on or before twelve (12) months after the date
hereof, but such closing is not consummated when Tenant is ready to close
thereunder and such failure to close is not the result of Tenant's default, then
so long as this Lease is in effect, the rent for the Premises shall be Twenty
Thousand and No/100 Dollars ($20,000.00) per month.
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 thirty (30) days 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 for the operation of a new and used automobile dealership, service
facility and uses incidental thereto, and for any other purposes which may be
agreed to by the parties. The use of the Premises by Tenant shall be in
compliance with federal, state and local laws and any applicable restrictive
covenants. 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 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
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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 contained in
Sections 2.10, 2.11 and 3.3 of that certain Stock Purchase Agreement (the
"Nissan SPA") dated August 5, 1996 by and among United Auto Group, Inc., a
Delaware corporation, UAG Atlanta IV, Inc., a Delaware corporation, Charles
Evans Nissan, Inc., a Georgia corporation, and Charles F. Evans are hereby
incorporated by reference to the same effect as if fully set forth herein.
Nothing contained in this Lease shall in any way affect or diminish the rights
of the parties under the Nissan SPA for the breach of any representation or
warranty contained in the Nissan SPA.
7. REPAIRS BY LANDLORD. All repairs, replacements, and maintenance
of any kind to the Premises shall be the sole responsibility of Tenant except to
the extent the necessity therefor would constitute a breach of Landlord's
representations or warranties under the Nissan SPA or the Agreement.
8. REPAIRS BY TENANT. Subject to Landlord's representations and
warranties in the Nissan SPA and the Agreement, 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 of the electrical, heating, ventilation and air
conditioning and plumbing systems. 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 thirty
(30) days prior written notice to Tenant, maintain the same and Tenant shall pay
to Landlord within thirty (30) days after demand the commercially reasonable
costs thereof together with interest on said amount
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<PAGE>
from the date of payment by Landlord at a rate equal to the interest rate
provided in the Nissan SPA for non-payment of obligations ("Interest Rate").
Subject to Tenant's repair obligations hereunder, Tenant agrees to return the
Premises to Landlord in as good condition and repair as when first received by
Tenant, natural wear and tear 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 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 thirty (30) 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 during the Term, 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.
11. INDEMNITY; WAIVER OF SUBROGATION. Subject to Landlord's
obligations in this Lease and the Agreement Tenant agrees to indemnify and hold
harmless Landlord against all claims and
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<PAGE>
expenses resulting therefrom, including actual attorneys' fees reasonably
incurred 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 during the Term, 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 for all wage earners for
Atlanta, Georgia 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 structural alterations,
additions or improvements to the Premises without the express prior written
consent of Landlord which consent shall not be unreasonably withheld or delayed,
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
request. Notwithstanding the foregoing, Tenant shall also be entitled
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<PAGE>
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 (provided such are in compliance with local ordinances and any
restrictive covenants affecting the Premises) or those 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.
13. GOVERNMENTAL ORDERS. Subject to Tenant's right to terminate this
Lease hereunder, 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 not cease from the
date when possession thereof is taken, and rent shall not be prorated as of that
date; and this Lease shall continue as to the remaining portion of the Premises
in full force and effect notwithstanding any such taking. All compensation and
damage caused by such condemnation shall be recovered from the condemnor and
paid to the Tenant.
15. ASSIGNMENT AND SUBLETTING. Tenant shall, without the prior
written consent of Landlord, have the right to 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. 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
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<PAGE>
hereunder. Without in any way limiting the foregoing, Tenant shall specifically
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 receipt of 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 period, commence such cure and
thereafter diligently prosecute the same to completion;
(c) Tenant is adjudicated bankrupt;
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<PAGE>
(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 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 and such petition is not dismissed with prejudice 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 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. NOTWITHSTANDING ANYTHING
CONTAINED HEREIN TO THE CONTRARY, if there is an Event of Default, Landlord must
give notice to Tenant and United Auto Group, Inc. ("UAG") of its intent to
exercise any remedy therefor and UAG (or its successors or assigns) shall have
thirty (30) days thereafter in which to purchase the Premises pursuant to the
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<PAGE>
terms of the Agreement before Landlord may pursue any right or remedy against
Tenant under this Lease; provided, however, that such thirty (30) day purchase
period shall be extended one (1) day for each day of delay in closing under the
Agreement occasioned by the act or omission of Landlord in performing its
obligations under the Agreement or for any other reason the Closing thereunder
does not occur except for Tenant's default under this Agreement ("Notice and
Cure Requirement").
18. RELETTING BY LANDLORD. If, after an Event of Default, Landlord
has the right to but has not elected to terminate this Lease, Landlord may,
subject to the Notice and Cure Requirement, 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 the remainder of
the term hereof. 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".
19. 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.
20. 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 the Premises or Tenant's use thereof
without the prior written consent of Tenant, which may be withheld in Tenant's
sole discretion.
21. SUBORDINATION ATTORNMENT. Landlord represents that there are no
Deeds to Secure Debt with respect to the Premises currently in force. Should
Landlord ever give a Deed to Secure
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<PAGE>
Debt with respect to the Premises, Landlord shall provide Tenant a
Subordination, Non-Disturbance and Attornment Agreement from such lender 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.
22. ATTORNEY'S FEES. 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.
23. RIGHTS CUMULATIVE. All rights hereunder shall be cumulative but
not restrictive to those given by law.
24. 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
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<PAGE>
Landlord: Charles F. Evans
3180 Zingara Road
Route 1
Conyers, Georgia 30207
with a copy to: Forrest Jack Lance, Esq.
Lance & Associates, P.C.
884 Green Street
Conyers, Georgia 30207
Tenant and
UAG: Charles Evans Nissan, Inc.
c/o United Auto Group, Inc.
375 Park Avenue
New York, New York 10152
Attn: George G. Lowrance, Esq.
with a copy to: Stephen R. Leeds, Esq.
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
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.
25. 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.
26. TIME OF ESSENCE. Time is of the essence under this Lease.
27. SUCCESSORS AND ASSIGNS. This Lease shall apply to, inure to the
benefit of, and be binding upon the parties hereof and their respective
successors, assigns, and legal representatives except as otherwise expressly
provided herein.
28. ENTIRE AGREEMENT; CONFLICT. This Lease, including any
attachments made a part hereof or thereof, the Nissan SPA and the Agreement,
contain the entire agreement between the
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<PAGE>
parties with respect to the lease of the Premises and no representations,
inducements, promises or agreements, oral or otherwise, between the parties, not
embodied herein shall be of any force or effect. The parties agree to execute
and record a memorandum of this Lease in the real property records of Rockdale
County in the form specified by the Title Insurance Company.
29. 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.
30. 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.
31. AMENDMENT. This Lease may not be altered, waived, amended or
extended except by an instrument in writing signed by Landlord and Tenant.
32. 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.
33. 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 Rockdale County, Georgia.
34. 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.
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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.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE>
LANDLORD:
Signed Sealed and Delivered /S/ Charles F. Evans (SEAL)
in the presence of: -----------------------
CHARLES F. EVANS
_________________________
Unofficial Witness
_________________________
Notary Public
[Notarial Seal]
My Commission Expires:
________________________
TENANT:
Signed Sealed and Delivered CHARLES EVANS NISSAN, INC.
in the presence of: a Georgia Corporation
_________________________
Unofficial Witness
By: /S/ Charles F. Evans
-------------------------
Name: CHARLES F. EVANS
---------------------------
_________________________ Title: CEO
Notary Public ----------------------
Attest:
[Notarial Seal] By: /S/ Sarah Pilgrim
---------------------------
Name: TREASURER
-----------------------------
My Commission Expires: Title:
------------------------
_________________________
[Corporate Seal]
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<PAGE>
LEASE GUARANTY
The undersigned, in order to induce Charles F. Evans, an individual
resident of the state of Georgia ("Landlord") to enter into that certain Lease
Agreement (herein so called) dated as of October ___, 1996, between Landlord and
Charles Evans Nissan, Inc., a Georgia corporation (the "Company") and a
subsidiary of UAG Atlanta V, Inc., Inc., a Delaware corporation that is wholly
owned by the undersigned, hereby irrevocably guarantees the collection of all
rent and other obligations of the Company now or hereafter existing under the
terms of the Lease Agreement.
The undersigned hereby waives presentment, protest, notice of dishonor,
extension of time of payment and notice of acceptance of this Guaranty and
hereby consents to any and all forbearances 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.
No delay or omission by Landlord in exercising any of its rights, remedies,
powers and privileges hereunder and no course of dealing between Landlord, on
the one hand, and the Company, the undersigned or any other person, on the other
hand, shall be deemed a waiver by Landlord of any of its 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 Landlord or the
exercise of any other right, remedy, power or privilege by Landlord. No notice
or demand on the Company, the undersigned or any other person in any instance
shall entitle the Company, the undersigned or any other person to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of Landlord's right to any other or further action in any circumstances
without notice or demand.
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 the Company, and notwithstanding any
modification, discharge or extension of the obligations under the Lease
Agreement, any modification or amendment of the Lease Agreement, or any stay of
the exercise by Landlord of any of its rights and remedies against the Company
with respect to any of the obligations under the Lease Agreement.
Whenever possible, each provision of the Guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of the Guaranty shall be prohibited by or be invalid under such law,
such provisions 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 Landlord 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.
<PAGE>
This instrument shall be governed by the laws of the State of Georgia.
WITNESS the undersigned's signature as of the _____ day of October, 1996.
UNITED AUTO GROUP, INC.
a Delaware Corporation
By: /S/ Charles F. Evans
-----------------------------------
Its: CEO
-----------------------------------
<PAGE>
PURCHASE AND SALE AGREEMENT
CHARLES EVANS BMW PROPERTY
THIS PURCHASE AND SALE AGREEMENT (hereinafter called the "Agreement"),
made and entered into this ___ day of October 1996, by and between CHARLES F.
EVANS, an individual resident of Georgia ("Seller") and UNITED AUTO GROUP, INC.,
a Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller desires to sell and Purchaser desires to purchase the
Property (as hereinafter defined), subject to the terms and provisions of this
Agreement.
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt, adequacy, and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto hereby covenant and agree
as follows:
1. AGREEMENT TO SELL AND PURCHASE. Subject to and in accordance
with the terms and provisions hereof, Seller agrees to sell and Purchaser agrees
to purchase on or before the Closing Date, as hereinafter defined, all that
tract or parcel of land lying and being in Gwinnett County, Georgia and being
more particularly described on EXHIBIT "A" attached hereto and by this reference
made a part hereof (the "Land"), together with those certain buildings (the
"Buildings"), all other improvements, fixtures, equipment, structures, plants,
trees, and shrubbery located thereon (the "Improvements"), and together with all
rights, privileges, licenses, permits, members, reversions, warranties,
guarantees, water rights and easements appurtenant thereto, and all right,
title, and interest of Seller, if any, in and to any land lying in the bed of
any street, road, alley, or right-of-way, open or proposed, adjacent to or
abutting the Land (all interests in this Paragraph 1 are herein collectively
referred to as the "Property").
2. EARNEST MONEY. Upon full execution of this Agreement, Purchaser
shall deliver to Chicago Title Insurance Company ("Escrow
<PAGE>
Agent"), at the address for notices set forth in this Agreement, Purchaser's
check, payable to Escrow Agent, in the amount of SEVEN HUNDRED THOUSAND AND
NO/100 DOLLARS ($700,000.00) (the "Earnest Money"), which Earnest Money shall be
held and disbursed by Escrow Agent pursuant to the terms of this Agreement. In
the event the Closing (as hereinafter defined) shall occur, the Earnest Money
and all interest earned thereon shall be credited to the Purchase Price. If
Purchaser is entitled at any time to a return of the Earnest Money, any interest
earned thereon shall be paid to Purchaser.
3. PURCHASE PRICE. Subject to adjustment and credits as otherwise
specified in this Agreement, the purchase price (the "Purchase Price") to be
paid by Purchaser to Seller for the Property shall be:
(i) if the Closing hereunder occurs on or before six months after the date
of this Agreement, the Purchase Price shall be SIX MILLION AND NO/100
DOLLARS ($6,000,000.00);
(ii) if the Closing hereunder occurs later than six months but on or before
one (1) year after the date of this Agreement, the Purchase Price shall be
SIX MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($6,500,000.00); and
(iii) if the Closing hereunder occurs later than one year after the date
of this Agreement, until eighteen (18) months after the date of this
Agreement, the Purchase Price shall be SEVEN MILLION FIVE HUNDRED THOUSAND
AND NO/100 DOLLARS ($7,500,000.00).
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, if Purchaser is
ready to close the purchase hereunder and the Closing hereunder is delayed for a
reason other than Purchaser's default, (such as, but not limited to, the result
of force majeure or the failure of Seller to close the sale contemplated herein,
whether by act or omission of Seller; without limiting the foregoing and by way
of example only, if Seller is required to obtain a document to clear a title
objection and fails to do so, or fails to execute any document required by the
Title Company (as hereinafter defined)) the Purchase Price shall be the Purchase
Price that was to be paid
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<PAGE>
at the time that Purchaser was originally ready to close the purchase
contemplated hereunder.
4. GENERAL CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS REGARDING
THE CLOSING. The obligations and liabilities of Purchaser hereunder shall in
all respects be conditioned upon the satisfaction of each of the following
conditions precedent prior to or simultaneously with the Closing, the failure of
any of which shall entitle Purchaser to terminate this Agreement upon notice to
Seller, whereupon the Earnest Money, together with interest thereon, shall be
refunded by Escrow Agent to Purchaser:
(a) Seller has complied with and otherwise performed each of the
covenants and obligations set forth in this Agreement;
(b) All representations and warranties of Seller as set forth in
this Agreement shall be in all respects true and correct as of the date of
Closing; and
(c) Chicago Title Insurance Company ("Title Company") has issued
an owner's title insurance commitment on the Property and is prepared to
issue to Purchaser upon the Closing the Title Insurance Policy (as
hereinafter defined) with respect to the Property.
Purchaser may waive any of the foregoing conditions in Purchaser's sole
discretion on or prior to Closing.
5. TITLE REPORT; SURVEY.
(a) Attached hereto and incorporated herein by reference as
Exhibit "B" is a list of permitted title exceptions to the Property
("Permitted Exceptions"). Attached hereto and incorporated herein by
reference as Exhibit "C" is a list of title insurance exceptions which are
unacceptable to Purchaser ("Exceptions"). Seller agrees to remove the
Exceptions at or prior to Closing. Seller also agrees to comply, at or
prior to Closing, with all requirements shown on the title insurance
commitment on the Property which will be issued prior to the Closing
("Requirements"). The removal of
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<PAGE>
such Exceptions and compliance with such Requirements shall be subject to
the reasonable satisfaction of the Title Company.
(b) Also attached hereto and incorporated herein by reference as
Exhibit "D" is an ALTA survey of the Property (the "Survey"). Seller is
not obligated to remove any matters of Survey prior to Closing.
(c) Notwithstanding anything herein contained to the contrary,
it is understood and agreed that title to the Property shall be delivered
to Purchaser at the Closing free and clear of all (i) monetary liens and
encumbrances and that such monetary liens and encumbrances shall be
released from the Property by Seller at Seller's sole expense on or before
the Closing or Purchaser, at its option, may cause their release and the
cost thereof, together with Purchaser's reasonable expenses to accomplish
same, shall be credited against the Purchase Price; and (ii) matters first
arising after August 16, 1996, (which is the effective date of the title
report upon which the Permitted Exceptions were determined) which arise
other than by the action or inaction of Purchaser and that such matters
shall be released from the Property by Seller at Seller's sole expense on
or before the Closing, or Purchaser may, at its option, cause their release
and the cost thereof, together with Purchaser's reasonable expenses to
accomplish same, shall be credited against the Purchase Price (or if such
cannot be so released, or Purchaser chooses not to, Purchaser may pursue
its remedies against Seller for default).
Seller represents and warrants that it currently owns good and
marketable fee simple title to the Property subject only to the Permitted
Exceptions and the Exceptions. Title to the Property shall be conveyed from
Seller to Purchaser at the Closing by General Warranty Deed subject only to the
Permitted Exceptions.
6. TITLE POLICY. At the Closing, Purchaser shall obtain an ALTA
"extended coverage" owner's policy of title insurance ("Title Insurance Policy")
issued by the Title Company in the full amount of the Purchase Price effective
as of the Closing insuring Purchaser that good and marketable fee simple title
to the Property is vested in Purchaser, subject only to the Permitted
Exceptions,
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<PAGE>
and containing any endorsements requested by Purchaser. Seller shall execute an
owner's affidavit in form reasonably requested by the Title Company so that,
together with the Survey, the Title Policy will be issued without standard
exceptions. Attached hereto and incorporated herein by reference as Exhibit "E"
is an example of a form currently utilized by the Title Company for such
purposes.
7. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby makes
the following representations and warranties to Purchaser, each of which shall
be deemed material, with knowledge that Purchaser is relying on same in entering
into this Agreement:
(a) NO OTHER AGREEMENTS. There are no leases, service
contracts, management agreements, or other agreements or instruments in
force, either oral or written, that grant to any person whomsoever or any
entity whatsoever any right, title, interest, or benefit in or to all or
any part of the Property or any rights relating to the use, operation,
management, maintenance, or repair of all or any part of the Property,
which will survive the Closing or be binding upon Purchaser.
(b) NO LITIGATION. There are no actions, suits, or proceedings
pending, or, to the best of Seller's knowledge, threatened by any
organization, person, individual, or governmental agency against Seller
with respect to the Property or against the Property or with respect
thereto, nor does Seller know of any basis for such action. Seller also
has no knowledge of any pending or threatened application for changes in
the zoning applicable to the Property or any portion thereof.
(c) NO CONDEMNATION. No condemnation or other taking by eminent
domain of the Property or any portion thereof has been instituted and, to
the best knowledge of Seller, there are no pending or threatened
condemnation or eminent domain proceedings (or proceedings in the nature or
in lieu thereof) affecting the Property or any portion thereof or its use.
(d) NO PROCEEDINGS AFFECTING ACCESS. There are no pending or,
to the best knowledge of Seller, threatened
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<PAGE>
proceedings that could have the effect of impairing or restricting access
between the Property and adjacent public roads.
(e) NO ASSESSMENTS. No assessments other than 1996 ad valorem
taxes have been made against the Property that are unpaid whether or not
they have become liens. If the Property or any part thereof shall be or
shall have been affected by an assessment or assessments, made on or before
the date of Closing, and that are or may become payable in installments,
then for the purposes of this Agreement all of the unpaid installments of
any such assessments, including those that are to become due and payable
after the Closing, shall be deemed to be due and payable immediately and
shall be paid and discharged in full by Seller at or prior to the Closing.
(f) NO VIOLATIONS. To the best knowledge of Seller, there are
no violations of law, municipal or county ordinances, or other legal
requirements with respect to the Property.
(g) ZONING. The Property is currently zoned in a C-3
classification under the applicable zoning ordinances and a new and used
car dealership, paint and body shop, and uses incidental thereto, are
permitted thereunder.
(h) UTILITIES. To the best knowledge of Seller, all utilities
necessary for the current use of the Property including water, sanitary
sewer, storm sewer, natural gas, electricity, and telephone, are installed
and operational. Such utilities either enter the Property through
adjoining public streets, or, if they pass through adjoining private land,
do so in accordance with valid public easements or private easements which
inure to the benefit of the Property.
(i) NO FLOOD HAZARD. To the best knowledge of Seller, no
portion of the Property is located in a flood plain or an area of special
risk with respect to earth movement, rising groundwater, or other natural
hazards.
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<PAGE>
(j) NO LIENS. All contractors, subcontractors, and other
persons or entities furnishing work, labor, materials, or supplies by or at
the instance of Seller for the Property are being paid as their invoices
are submitted in the ordinary course of business, and there are no claims
against the Property or Seller in connection therewith.
(k) NO BANKRUPTCY. Seller is solvent and has not made a
general assignment for the benefit of creditors nor been adjudicated a
bankrupt or insolvent, nor has a receiver, liquidator, or trustee for any
of Seller's properties (including the Property) been appointed or a
petition filed by or against Seller for bankruptcy, reorganization, or
arrangement pursuant to the Federal Bankruptcy Act or any similar Federal
or State statute, or any proceeding instituted for the dissolution or
liquidation of Seller.
(l) NO PRE-EXISTING RIGHT TO ACQUIRE. No person or entity has
any right or option to acquire the Property or any portion thereof other
than Purchaser.
(m) TAX RETURNS. Other than the payment of 1996 ad valorem
taxes, there are no property tax returns or exemptions required to be filed
by Seller relating to the Property under any law, ordinance, rule,
regulation, order, or requirement of any governmental authority which have
not previously been filed.
(n) SELLER NOT A FOREIGN PERSON. Seller is not a "foreign
person" which would subject Purchaser to the withholding tax provisions of
Section 1445 of the Internal Revenue Code of 1986, as amended, or the
applicable Georgia statute.
(o) WARRANTIES CORRECT. All representations and warranties of
Seller contained in this Agreement are true and correct as of the date
hereof.
(p) HAZARDOUS SUBSTANCES. The representations and warranties
set forth in Section 2.11 of that certain Stock Purchase Agreement between
Seller, Purchaser and others dated
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August 5, 1996 ("SPA") are incorporated herein by referenced and constitute
a representation and warranty by Landlord hereunder; provided, however,
that any claim for a breach thereof must be asserted, if at all, on or
before five (5) years after the date of this Agreement.
(q) KNOWLEDGE. As used herein, knowledge shall mean that Seller
knows or, in the exercise of reasonable diligence by a property owner of an
improved commercial property, would or should have known of the particular
matter referred to.
At Closing, Seller shall reaffirm in writing that all such
representations and warranties in this Agreement remain true and correct as of
the date of the Closing and they shall agree to indemnify and hold harmless
Purchaser of and from all loss, cost, liability, damage, expense (including, but
not limited to, attorney's fees), action and suit arising out of any breach of
such representation or warranty. Seller agrees that if there is any Hazardous
Substance on, or under the Property as of the date of Closing, arising as a
result of Seller's actions or for which Seller has liability under any
applicable State, Federal or local law, Seller shall indemnify and hold harmless
Purchaser from all loss, cost, damage, liability, expense (including, but not
limited to, investigative costs and remediation expense and attorneys' fees and
expenses) action and proceeding arising or alleged to arise as the result
thereof; subject to the five (5) year limitation for asserting a claim with
respect thereto provided above. If there is any change in any representations
or warranties from the date of this Agreement to the Closing, Seller shall
promptly notify Purchaser and Purchaser may, at Purchaser's option, (i) close
and consummate the transaction contemplated by this Agreement, except that after
such closing and consummation Purchaser shall not have the right to bring any
claim against Seller with respect to the matter disclosed by Seller prior to the
Closing, unless such matter is the result of any action or inaction of Seller in
which event Purchaser may seek monetary damages from Seller, or (ii) terminate
this Agreement by written notice to Seller, whereupon the Earnest Money, with
interest earned thereon, shall be immediately returned to Purchaser, and
thereafter the parties hereto shall have no further rights or obligations
hereunder, except only (1) for such rights or obligations that, by the express
terms hereof, survive
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any termination of this Agreement and (2) that Purchaser shall have the right to
seek monetary damages from Seller for any representations and warranties
breached by them as a result of their actions or inactions, including, but not
limited to, Purchaser's out-of-pocket costs and expenses in connection with the
negotiation of this Agreement and all due diligence and investigations in
connection therewith ("Costs"); or (iii) if the change is as a result of
Seller's action or inaction, then Purchaser may treat such change as a Seller
default and Purchaser may pursue its rights against Seller as provided in
Paragraph 13 hereof. In addition, with respect to any representation or
warranty made to Seller's knowledge, if Seller does not have knowledge that such
representation or warranty is false, and if the factual underpinning of any such
representation or warranty changes, regardless of Seller's knowledge, Purchaser
shall also have the right to terminate this Agreement by notice to Seller on or
prior to Closing, Escrow Agent shall return the Earnest Money, with interest
earned thereon, to Purchaser and no party shall have liability to the other
hereunder except for those expressly stated herein to survive termination of
this Agreement.
8. SELLER'S ADDITIONAL COVENANTS. Seller hereby covenants and
agrees that from and after the date hereof until the Closing, Seller shall not,
without the prior written consent of Purchaser, change or alter the physical
condition of the Property, remove or alter any Improvements, or remove any
trees, or grant or otherwise create or consent to the creation of any easement,
restriction, lien, assessment, or encumbrance affecting the Property or any
portion or portions thereof. Seller covenants that, from the date of this
Agreement up to and including the date of Closing, Seller shall not negotiate
with any third party respecting the sale of the Property or any interest
therein.
9. CLOSING. Provided that all of the conditions set forth in this
Agreement are theretofore fully satisfied or performed, it being fully
understood and agreed, however, that the parties may waive expressly and in
writing, at or prior to Closing, any conditions benefitting the waiving party
that are unsatisfied or unperformed at such time, the consummation of the sale
by Seller and purchase by Purchaser of the Property (herein referred to as the
"Closing") shall be held on the date which Purchaser gives ten (10)
9
<PAGE>
days notice to Seller, or if no notice is given, then the Closing shall be April
____, 1998.
10. SELLER'S CLOSING DOCUMENTS. For and in consideration of, and as
a condition precedent to Purchaser's delivery to Seller of the Purchase Price
described in Paragraph 3 hereof, Seller shall obtain or execute, at Seller's
expense, and deliver to Escrow Agent at Closing the following documents, all of
which shall be duly executed, acknowledged and notarized where required, in form
and substance reasonably satisfactory to Purchaser and Purchaser's legal
counsel, and shall survive the Closing:
(a) WARRANTY DEED. A General Warranty Deed conveying the
Property to Purchaser in the form required by the Title Company to issue
the Title Insurance Policy;
(b) SELLER'S CERTIFICATE. A certificate evidencing the
reaffirmation of the truth and accuracy of the Seller's representations and
warranties set forth in this Agreement;
(c) AFFIDAVITS AND OTHER DOCUMENTATION. Affidavits from Seller
and other documentation and agreements reasonably required by the Title
Company to enable it to issue the Title Insurance Policy;
(d) FIRPTA CERTIFICATE. A customary FIRPTA Certificate from
Seller;
(e) GEORGIA AFFIDAVIT. Customary affidavits executed by Seller
to evidence Seller is a resident of Georgia such that withholding of a
portion of the Purchase Price is not required at Closing for tax purposes;
(f) SETTLEMENT STATEMENT. A settlement statement setting forth
the amounts paid by or on behalf of and/or credited to each of Purchaser
and Seller pursuant to this Agreement;
(g) LEASE TERMINATION. If requested by Purchaser, a termination
agreement relating to the Lease and, in any event,
10
<PAGE>
a written acknowledgement by Seller that there are no defaults under the
Lease of the Property; and
(h) OTHER DOCUMENTS. Such other documents as may be necessary
or appropriate to transfer and convey the Property to Purchaser and to
otherwise consummate this transaction in accordance with the terms of this
Agreement including but not limited to a real estate broker's lien waiver
and documentation required under Paragraph 5 hereof.
11. CLOSING COSTS.
(a) Upon the Closing, Seller agrees to pay one-half of the
escrow charges (but not to exceed $ 250.00) of the Escrow Agent, the
attorneys' fees of Seller, the Georgia real estate transfer tax with
respect to the Property, the cost of the documentation required under
Paragraph 5 hereof and all other costs and expenses incurred by Seller in
connection with this transaction.
(b) Upon the Closing, Purchaser agrees to pay the remainder of
the escrow charges, the cost of the owner's policy of title insurance
including the cost of any endorsements requested by Purchaser, the
attorneys' fees of Purchaser, and all other costs and expenses incurred by
Purchaser in connection with this transaction.
12. PURCHASER'S DEFAULT. In the event of default by Purchaser under
the terms of this Agreement, Seller shall give Purchaser written notice of each
claimed default and if not cured by Purchaser within fifteen (15) days of
receipt of such notice, the Earnest Money, together with interest thereon, shall
be paid to Seller and Seller shall be entitled to pursue against Purchaser any
remedy granted to Seller at law or in equity, including, without limitation, an
action for specific performance or damages against Purchaser and if Seller
recovers a judgment against Purchaser, the Earnest Money shall be utilized by
Seller to the extent of such judgment with the remainder, if any, returned to
Purchaser.
13. SELLER'S DEFAULT. In the event of default by Seller under the
terms of this Agreement, Purchaser shall give Seller
11
<PAGE>
written notice of each claimed default and if not cured by Seller within fifteen
(15) days of receipt of such notice, at Purchaser's option: (i) Purchaser may
terminate this Agreement by written notice to Seller, whereupon the Earnest
Money, together with interest thereon, shall be immediately returned by Escrow
Agent to Purchaser, and Purchaser may sue for damages including, but not limited
to, all out-of-pocket costs and expenses incurred by Purchaser in negotiating
this Agreement and conducting its due diligence hereunder, or (ii) Purchaser
shall be entitled to pursue against Seller any remedy granted to Purchaser at
law or in equity, including, without limitation, an action for specific
performance of this Agreement against Seller. During any cure period the Lease
between Seller and Charles Evans BMW, Inc. shall remain in full force and
effect.
14. CONDEMNATION. If, prior to the Closing, all or any part of the
Property is subjected to a bona fide threat of condemnation by a body having the
power of eminent domain or is taken by eminent domain or condemnation (or sale
in lieu thereof), or if Seller has received notice that any condemnation action
or proceeding with respect to the Property is contemplated by a body having the
power of eminent domain, Seller shall give Purchaser immediate written notice of
such threatened or contemplated condemnation or of such taking or sale. This
Agreement shall remain in full force and effect and the sale of the Property
contemplated by this Agreement, less any interest taken by eminent domain or
condemnation, or sale in lieu thereof, shall be effected with no further
adjustment and without reduction of the Purchase Price, and at the Closing,
Seller shall assign, transfer, and set over to Purchaser all of the right,
title, and interest of Seller in and to any awards that have been or that may
thereafter be made for such taking. At such time as all or a part of the
Property is subjected to a bona fide threat of condemnation, Purchaser shall be
permitted to participate in the proceedings as if Purchaser were a party to the
action. Seller shall not settle or agree to any award or payment pursuant to
condemnation, eminent domain, or sale in lieu thereof without obtaining
Purchaser's prior written consent thereto in each case.
15. DAMAGE OR DESTRUCTION. If at any time prior to Closing all or
any part of the Improvements be damaged or destroyed, from
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<PAGE>
any cause whatsoever, then Purchaser shall proceed to Closing and accept the
Property in its condition with no decrease in the Purchase Price, however, all
insurance proceeds received on account of such damage or destruction shall be
paid to Purchaser upon receipt thereof. Seller shall give immediate notice of
any damage or destruction to the Property.
16. ASSIGNMENT. This Agreement and Purchaser's rights, duties, and
obligations hereunder may be delegated, transferred, and assigned by Purchaser
without the prior written consent of Seller.
17. NO BROKER. Purchaser and Seller hereby represent each to the
other than they have not discussed this Agreement or the subject matter thereof
with any real estate broker, agent, or salesman, so as to create any legal right
in any such broker, agent, or salesman, to claim a real estate commission, fee
or other compensation with respect to the conveyance of the Property
contemplated by this Agreement. Seller hereby agrees to indemnify and hold
Purchaser harmless from and against any and all liability, loss, cost, damage,
and expense, including attorneys' fees and costs of litigation, Purchaser shall
ever suffer or incur because of any claim by any agent, salesman, or broker,
whether or not meritorious, for any fee, commission or other compensation with
regard to this Agreement or the sale and purchase of the Property contemplated
hereby, and arising out of any acts or agreements of Seller. Likewise,
Purchaser hereby agrees to indemnify and hold Seller free and harmless from and
against any and all liability, loss, cost, damage, and expense, including
attorneys' fees and costs of litigation, Seller shall ever suffer or incur
because of any claim by any agent, salesman, or broker, whether or not
meritorious, for any fee, commission or other compensation with respect to this
Agreement or the sale and purchase of the Property contemplated hereby and
arising out of the acts or agreements of Purchaser. This Paragraph 17 shall
survive the Closing or any termination of this Agreement.
18. NOTICES. Wherever any notice or other communication is required
or permitted hereunder, such notice or other communication shall be in writing
and shall be delivered, charges prepaid, by overnight courier (such as Airborne
or Federal Express) for next
13
<PAGE>
business day delivery, by hand delivery, or by U.S. registered, or certified
mail, return receipt requested, postage prepaid, to the addresses set out below
or at such other addresses as are specified by written notice delivered in
accordance herewith:
PURCHASER: United Auto Group, Inc.
375 Park Avenue
Suite 2201
New York, NY 10152
ATTN: George G. Lowrance, Esq.
with a copy to: Rogers & Hardin
2700 Cain Tower
299 Peachtree Street, NE
Atlanta, GA 30303
ATTN: Stephen R. Leeds, Esq.
SELLER: Charles F. Evans
3180 Zingara Road
Route 1
Conyers, Georgia 30207
with a copy to: Forrest Jack Lance, Esq.
Lance & Associates
884 Green Street
Conyers, Georgia 30207
TITLE COMPANY: Chicago Title Insurance Company
5775-C Peachtree Dunwoody Road, N.E.
Suite 200
Atlanta, Georgia 30342
Any notice or other communication as hereinabove provided shall be deemed
effectively given and received on the date of delivery, if delivered by hand, or
on the next business day following deposit with an overnight courier, or on the
third (3rd) business day following deposit in the U. S. mail.
19. POSSESSION. Full and exclusive possession of the Property shall
be delivered by Seller to Purchaser on the date of Closing.
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<PAGE>
20. TIME PERIODS. If the time period by which any right, option, or
election provided under this Agreement must be exercised, or by which any act
required hereunder must be performed, or by which the Closing must be held,
expires on a Saturday, Sunday, or holiday, then such time period shall be
automatically extended through the close of business on the next regularly
scheduled business day.
21. SURVIVAL OF PROVISIONS. All covenants, warranties, and
agreements set forth in this Agreement shall survive the execution or delivery
of any and all deeds and other documents at any time executed or delivered
under, pursuant to or by reason of this Agreement, and shall survive the payment
of all monies made under, pursuant to, or by reason of this Agreement.
22. SEVERABILITY. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement, or the
application thereof to any person or circumstance, shall, for any reason and to
any extent be invalid or unenforceable, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby but rather shall be enforced to the greatest extent permitted
by law.
23. GENERAL PROVISIONS. No failure of either party to exercise any
power given hereunder or to insist upon strict compliance with any obligation
specified herein, and no custom or practice at variance with the terms hereof,
shall constitute a waiver of either party's right to demand exact compliance
with the terms hereof. This Agreement contains the entire agreement of the
parties hereto with respect to Purchaser's purchase of the Property, and no
representations, inducements, promises, or agreements, oral or otherwise,
between the parties not embodied herein shall be of any force or effect.
Nothing, however, in this Agreement shall affect the rights of the parties to
the SPA to assert any claim that may exist thereunder. Any amendment to this
Agreement shall not be binding upon Seller or Purchaser unless such amendment is
in writing and executed by both Seller and Purchaser. The provisions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs,
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<PAGE>
legal representatives, successors, and assigns. Time is of the essence of this
Agreement. This Agreement may be executed in multiple counterparts, each of
which shall constitute an original, but all of which taken together shall
constitute one and the same agreement. The headings inserted at the beginning
of each paragraph are for convenience only, and do not add to or subtract from
the meaning of the contents of each paragraph. This Agreement shall be
construed and interpreted under the laws of the State of Georgia. Except as
otherwise provided herein, all rights, powers, and privileges conferred
hereunder upon the parties shall be cumulative but not restrictive to those
given by law. All personal pronouns used in this Agreement, whether used in the
masculine, feminine, or neuter gender shall include all genders, and all
references herein to the singular shall include the plural and vice versa.
16
<PAGE>
24. EFFECTIVE DATE. The "effective date" of this Agreement shall be
deemed to be the date this Agreement is fully executed by both Purchaser and
Seller and a fully executed original counterpart of this Agreement has been
received by both Purchaser and Seller.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective seals to be affixed hereunto as of the day,
month and year first above written.
SELLER:
/S/ Charles F. Evans (Seal)
----------------------------
CHARLES F. EVANS
Witness: ____________________
Date: ____________________
PURCHASER:
UNITED AUTO GROUP, INC., a Delaware
corporation
By: /S/ George G. Lowrance
---------------------------
Its: Vice President
--------------------------
Attest:______________________
Date:___________________
17
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EXHIBIT "A"
DESCRIPTION OF PROPERTY
1
<PAGE>
EXHIBIT "B"
PERMITTED EXCEPTIONS
2
<PAGE>
EXHIBIT "C"
EXCEPTIONS TO BE REMOVED BY SELLER
3
<PAGE>
EXHIBIT "D"
SURVEY
4
<PAGE>
EXHIBIT "E"
CURRENT FORM OF OWNER'S AFFIDAVIT
5
<PAGE>
EXHIBIT "F"
SURVEY EXCEPTIONS TO BE REMOVED BY LANDLORD
6
<PAGE>
[BLANK PAGE]
<PAGE>
PURCHASE AND SALE AGREEMENT
CHARLES EVANS NISSAN PROPERTY
THIS PURCHASE AND SALE AGREEMENT (hereinafter called the "Agreement"),
made and entered into this ___ day of October 1996, by and between CHARLES F.
EVANS, an individual resident of Georgia ("Seller") and UNITED AUTO GROUP,
INC., a Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller desires to sell and Purchaser desires to purchase the
Property (as hereinafter defined), subject to the terms and provisions of this
Agreement.
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt, adequacy, and sufficiency of which are hereby
acknowledged by the parties hereto, the parties hereto hereby covenant and agree
as follows:
1. AGREEMENT TO SELL AND PURCHASE. Subject to and in accordance
with the terms and provisions hereof, Seller agrees to sell and Purchaser agrees
to purchase on or before the Closing Date, as hereinafter defined, all that
tract or parcel of land lying and being in Rockdale County, Georgia and being
more particularly described on EXHIBIT "A" attached hereto and by this reference
made a part hereof (the "Land"), together with those certain buildings (the
"Buildings"), all other improvements, fixtures, equipment, structures, plants,
trees, and shrubbery located thereon (the "Improvements"), and together with all
rights, privileges, licenses, permits, members, reversions, warranties,
guarantees, water rights and easements appurtenant thereto, and all right,
title, and interest of Seller, if any, in and to any land lying in the bed of
any street, road, alley, or right-of-way, open or proposed, adjacent to or
abutting the Land (all interests in this Paragraph 1 are herein collectively
referred to as the "Property").
2. EARNEST MONEY. Upon full execution of this Agreement, Purchaser
shall deliver to Chicago Title Insurance Company ("Escrow
<PAGE>
Agent"), at the address for notices set forth in this Agreement, Purchaser's
check, payable to Escrow Agent, in the amount of ONE DOLLAR ($1.00) (the
"Earnest Money"), which Earnest Money shall be held and disbursed by Escrow
Agent pursuant to the terms of this Agreement. In the event the Closing (as
hereinafter defined) shall occur, the Earnest Money and all interest earned
thereon shall be credited to the Purchase Price. If Purchaser is entitled at
any time to a return of the Earnest Money, any interest earned thereon shall be
paid to Purchaser.
3. PURCHASE PRICE. Subject to adjustment and credits as otherwise
specified in this Agreement, the purchase price (the "Purchase Price") to be
paid by Purchaser to Seller for the Property shall be TWO MILLION NINE HUNDRED
FORTY FIVE THOUSAND AND NO/100 DOLLARS ($2,945,000.00).
4. GENERAL CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS REGARDING
THE CLOSING. The obligations and liabilities of Purchaser hereunder shall in
all respects be conditioned upon the satisfaction of each of the following
conditions precedent prior to or simultaneously with the Closing, the failure of
any of which shall entitle Purchaser to terminate this Agreement upon notice to
Seller, whereupon the Earnest Money, together with interest thereon, shall be
refunded by Escrow Agent to Purchaser:
(a) Seller has complied with and otherwise performed each of the
covenants and obligations set forth in this Agreement;
(b) All representations and warranties of Seller as set forth in
this Agreement shall be in all respects true and correct as of the date of
Closing; and
(c) Chicago Title Insurance Company ("Title Company") has issued
an owner's title insurance commitment on the Property and is prepared to
issue to Purchaser upon the Closing the Title Insurance Policy (as
hereinafter defined) with respect to the Property.
Purchaser may waive any of the foregoing conditions in Purchaser's sole
discretion on or prior to Closing.
2
<PAGE>
5. TITLE REPORT; SURVEY.
(a) Attached hereto and incorporated herein by reference as
Exhibit "B" is a list of permitted title exceptions to the Property
("Permitted Exceptions"). Attached hereto and incorporated herein by
reference as Exhibit "C" is a list of title insurance exceptions which are
unacceptable to Purchaser ("Exceptions"). Seller agrees to remove the
Exceptions at or prior to Closing. Seller also agrees to comply, at or
prior to Closing, with all requirements shown on the title insurance
commitment on the Property which will be issued prior to the Closing
("Requirements"). The removal of such Exceptions and compliance with such
Requirements shall be subject to the reasonable satisfaction of the Title
Company.
(b) Also attached hereto and incorporated herein by reference as
Exhibit "D" is an ALTA survey of the Property (the "Survey"). Seller is
not obligated to remove any matters of Survey prior to Closing.
(c) Notwithstanding anything herein contained to the contrary,
it is understood and agreed that title to the Property shall be delivered
to Purchaser at the Closing free and clear of all (i) monetary liens and
encumbrances and that such monetary liens and encumbrances shall be
released from the Property by Seller at Seller's sole expense on or before
the Closing or Purchaser, at its option, may cause their release and the
cost thereof, together with Purchaser's reasonable expenses to accomplish
same, shall be credited against the Purchase Price; and (ii) matters first
arising after September 4, 1996, (which is the effective date of the title
report upon which the Permitted Exceptions were determined) which arise
other than by the action or inaction of Purchaser and that such matters
shall be released from the Property by Seller at Seller's sole expense on
or before the Closing, or Purchaser may, at its option, cause their release
and the cost thereof, together with Purchaser's reasonable expenses to
accomplish same, shall be credited against the Purchase Price (or if such
cannot be so released, or Purchaser chooses not to, Purchaser may pursue
its remedies against Seller for default).
3
<PAGE>
Seller represents and warrants that it currently owns good and
marketable fee simple title to the Property subject only to the Permitted
Exceptions and the Exceptions. Title to the Property shall be conveyed from
Seller to Purchaser at the Closing by General Warranty Deed subject only to the
Permitted Exceptions.
6. TITLE POLICY. At the Closing, Purchaser shall obtain an ALTA
"extended coverage" owner's policy of title insurance ("Title Insurance Policy")
issued by the Title Company in the full amount of the Purchase Price effective
as of the Closing insuring Purchaser that good and marketable fee simple title
to the Property is vested in Purchaser, subject only to the Permitted
Exceptions, and containing any endorsements requested by Purchaser. Seller
shall execute an owner's affidavit in form reasonably requested by the Title
Company so that, together with the Survey, the Title Policy will be issued
without standard exceptions. Attached hereto and incorporated herein by
reference as Exhibit "E" is an example of a form currently utilized by the Title
Company for such purposes.
7. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby makes
the following representations and warranties to Purchaser, each of which shall
be deemed material, with knowledge that Purchaser is relying on same in entering
into this Agreement:
(a) NO OTHER AGREEMENTS. There are no leases, service
contracts, management agreements, or other agreements or instruments in
force, either oral or written, that grant to any person whomsoever or any
entity whatsoever any right, title, interest, or benefit in or to all or
any part of the Property or any rights relating to the use, operation,
management, maintenance, or repair of all or any part of the Property,
which will survive the Closing or be binding upon Purchaser.
(b) NO LITIGATION. There are no actions, suits, or proceedings
pending, or, to the best of Seller's knowledge, threatened by any
organization, person, individual, or governmental agency against Seller
with respect to the Property or against the Property or with respect
thereto, nor does Seller know of any basis for such action. Seller also
has no knowledge of any pending or threatened application for changes
4
<PAGE>
in the zoning applicable to the Property or any portion thereof.
(c) NO CONDEMNATION. No condemnation or other taking by eminent
domain of the Property or any portion thereof has been instituted and, to
the best knowledge of Seller, there are no pending or threatened
condemnation or eminent domain proceedings (or proceedings in the nature or
in lieu thereof) affecting the Property or any portion thereof or its use.
(d) NO PROCEEDINGS AFFECTING ACCESS. There are no pending or,
to the best knowledge of Seller, threatened proceedings that could have the
effect of impairing or restricting access between the Property and adjacent
public roads.
(e) NO ASSESSMENTS. No assessments other than 1996 ad valorem
taxes have been made against the Property that are unpaid whether or not
they have become liens. If the Property or any part thereof shall be or
shall have been affected by an assessment or assessments, made on or before
the date of Closing, and that are or may become payable in installments,
then for the purposes of this Agreement all of the unpaid installments of
any such assessments, including those that are to become due and payable
after the Closing, shall be deemed to be due and payable immediately and
shall be paid and discharged in full by Seller at or prior to the Closing.
(f) NO VIOLATIONS. To the best knowledge of Seller, there are
no violations of law, municipal or county ordinances, or other legal
requirements with respect to the Property.
(g) ZONING. The Property is currently zoned in a BG
classification under the applicable zoning ordinances and a new and used
car dealership, paint and body shop, and uses incidental thereto, are
permitted thereunder.
(h) UTILITIES. To the best knowledge of Seller, all utilities
necessary for the current use of the Property including water, sanitary
sewer, storm sewer, natural gas, electricity, and telephone, are installed
and operational.
5
<PAGE>
Such utilities either enter the Property through adjoining public streets,
or, if they pass through adjoining private land, do so in accordance with
valid public easements or private easements which inure to the benefit of
the Property.
(i) NO FLOOD HAZARD. To the best knowledge of Seller, no
portion of the Property is located in a flood plain or an area of special
risk with respect to earth movement, rising groundwater, or other natural
hazards.
(j) NO LIENS. All contractors, subcontractors, and other
persons or entities furnishing work, labor, materials, or supplies by or at
the instance of Seller for the Property are being paid as their invoices
are submitted in the ordinary course of business, and there are no claims
against the Property or Seller in connection therewith.
(k) NO BANKRUPTCY. Seller is solvent and has not made a
general assignment for the benefit of creditors nor been adjudicated a
bankrupt or insolvent, nor has a receiver, liquidator, or trustee for any
of Seller's properties (including the Property) been appointed or a
petition filed by or against Seller for bankruptcy, reorganization, or
arrangement pursuant to the Federal Bankruptcy Act or any similar Federal
or State statute, or any proceeding instituted for the dissolution or
liquidation of Seller.
(l) NO PRE-EXISTING RIGHT TO ACQUIRE. No person or entity has
any right or option to acquire the Property or any portion thereof other
than Purchaser.
(m) TAX RETURNS. Other than the payment of 1996 ad valorem
taxes, there are no property tax returns or exemptions required to be filed
by Seller relating to the Property under any law, ordinance, rule,
regulation, order, or requirement of any governmental authority which have
not previously been filed.
(n) SELLER NOT A FOREIGN PERSON. Seller is not a "foreign
person" which would subject Purchaser to the with-
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holding tax provisions of Section 1445 of the Internal Revenue Code of
1986, as amended, or the applicable Georgia statute.
(o) WARRANTIES CORRECT. All representations and warranties of
Seller contained in this Agreement are true and correct as of the date
hereof.
(p) HAZARDOUS SUBSTANCES. The representations and warranties
set forth in Section 2.11 of that certain Stock Purchase Agreement between
Seller, Purchaser and others dated August 5, 1996 ("SPA") are incorporated
herein by referenced and constitute a representation and warranty by
Landlord hereunder; provided, however, that any claim for a breach thereof
must be asserted, if at all, on or before five (5) years after the date of
this Agreement.
(q) KNOWLEDGE. As used herein, knowledge shall mean that Seller
knows or, in the exercise of reasonable diligence by a property owner of an
improved commercial property, would or should have known of the particular
matter referred to.
At Closing, Seller shall reaffirm in writing that all such
representations and warranties in this Agreement remain true and correct as of
the date of the Closing and they shall agree to indemnify and hold harmless
Purchaser of and from all loss, cost, liability, damage, expense (including, but
not limited to, attorney's fees), action and suit arising out of any breach of
such representation or warranty. Seller agrees that if there is any Hazardous
Substance on, or under the Property as of the date of Closing, arising as a
result of Seller's actions or for which Seller has liability under any
applicable State, Federal or local law, Seller shall indemnify and hold harmless
Purchaser from all loss, cost, damage, liability, expense (including, but not
limited to, investigative costs and remediation expense and attorneys' fees and
expenses) action and proceeding arising or alleged to arise as the result
thereof; subject to the five (5) year limitation for asserting a claim with
respect thereto provided above. If there is any change in any representations
or warranties from the date of this Agreement to the Closing, Seller shall
promptly notify Purchaser and Purchaser may, at Purchaser's option, (i) close
and consummate the transaction contemplated by this Agreement, except
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<PAGE>
that after such closing and consummation Purchaser shall not have the right to
bring any claim against Seller with respect to the matter disclosed by Seller
prior to the Closing, unless such matter is the result of any action or inaction
of Seller in which event Purchaser may seek monetary damages from Seller, or
(ii) terminate this Agreement by written notice to Seller, whereupon the Earnest
Money, with interest earned thereon, shall be immediately returned to Purchaser,
and thereafter the parties hereto shall have no further rights or obligations
hereunder, except only (1) for such rights or obligations that, by the express
terms hereof, survive any termination of this Agreement and (2) that Purchaser
shall have the right to seek monetary damages from Seller for any
representations and warranties breached by them as a result of their actions or
inactions, including, but not limited to, Purchaser's out-of-pocket costs and
expenses in connection with the negotiation of this Agreement and all due
diligence and investigations in connection therewith ("Costs"); or (iii) if the
change is as a result of Seller's action or inaction, then Purchaser may treat
such change as a Seller default and Purchaser may pursue its rights against
Seller as provided in Paragraph 13 hereof. In addition, with respect to any
representation or warranty made to Seller's knowledge, if Seller does not have
knowledge that such representation or warranty is false, and if the factual
underpinning of any such representation or warranty changes, regardless of
Seller's knowledge, Purchaser shall also have the right to terminate this
Agreement by notice to Seller on or prior to Closing, Escrow Agent shall return
the Earnest Money, with interest earned thereon, to Purchaser and no party shall
have liability to the other hereunder except for those expressly stated herein
to survive termination of this Agreement.
8. SELLER'S ADDITIONAL COVENANTS. Seller hereby covenants and
agrees that from and after the date hereof until the Closing, Seller shall not,
without the prior written consent of Purchaser, change or alter the physical
condition of the Property, remove or alter any Improvements, or remove any
trees, or grant or otherwise create or consent to the creation of any easement,
restriction, lien, assessment, or encumbrance affecting the Property or any
portion or portions thereof. Seller covenants that, from the date of this
Agreement up to and including the date of Closing, Seller
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<PAGE>
shall not negotiate with any third party respecting the sale of the Property or
any interest therein.
9. CLOSING. Provided that all of the conditions set forth in this
Agreement are theretofore fully satisfied or performed, it being fully
understood and agreed, however, that the parties may waive expressly and in
writing, at or prior to Closing, any conditions benefitting the waiving party
that are unsatisfied or unperformed at such time, the consummation of the sale
by Seller and purchase by Purchaser of the Property (herein referred to as the
"Closing") shall be held on the date which Purchaser gives ten (10) days notice
to Seller, or if no notice is given, then the Closing shall be April ____, 1998.
10. SELLER'S CLOSING DOCUMENTS. For and in consideration of, and as
a condition precedent to Purchaser's delivery to Seller of the Purchase Price
described in Paragraph 3 hereof, Seller shall obtain or execute, at Seller's
expense, and deliver to Escrow Agent at Closing the following documents, all of
which shall be duly executed, acknowledged and notarized where required, in form
and substance reasonably satisfactory to Purchaser and Purchaser's legal
counsel, and shall survive the Closing:
(a) WARRANTY DEED. A General Warranty Deed conveying the
Property to Purchaser in the form required by the Title Company to issue
the Title Insurance Policy;
(b) SELLER'S CERTIFICATE. A certificate evidencing the
reaffirmation of the truth and accuracy of the Seller's representations and
warranties set forth in this Agreement;
(c) AFFIDAVITS AND OTHER DOCUMENTATION. Affidavits from Seller
and other documentation and agreements reasonably required by the Title
Company to enable it to issue the Title Insurance Policy;
(d) FIRPTA CERTIFICATE. A customary FIRPTA Certificate from
Seller;
(e) GEORGIA AFFIDAVIT. Customary affidavits executed by Seller
to evidence Seller is a resident of Georgia such that
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<PAGE>
withholding of a portion of the Purchase Price is not required at Closing
for tax purposes;
(f) SETTLEMENT STATEMENT. A settlement statement setting forth
the amounts paid by or on behalf of and/or credited to each of Purchaser
and Seller pursuant to this Agreement;
(g) LEASE TERMINATION. If requested by Purchaser, a termination
agreement relating to the Lease and, in any event, a written
acknowledgement by Seller that there are no defaults under the Lease of the
Property; and
(h) OTHER DOCUMENTS. Such other documents as may be necessary
or appropriate to transfer and convey the Property to Purchaser and to
otherwise consummate this transaction in accordance with the terms of this
Agreement including but not limited to a real estate broker's lien waiver
and documentation required under Paragraph 5 hereof.
11. CLOSING COSTS.
(a) Upon the Closing, Seller agrees to pay one-half of the
escrow charges (but not to exceed $ 250.00) of the Escrow Agent, the
attorneys' fees of Seller, the Georgia real estate transfer tax with
respect to the Property, the cost of the documentation required under
Paragraph 5 hereof and all other costs and expenses incurred by Seller in
connection with this transaction.
(b) Upon the Closing, Purchaser agrees to pay the remainder of
the escrow charges, the cost of the owner's policy of title insurance
including the cost of any endorsements requested by Purchaser, the
attorneys' fees of Purchaser, and all other costs and expenses incurred by
Purchaser in connection with this transaction.
12. PURCHASER'S DEFAULT. In the event of default by Purchaser under
the terms of this Agreement, Seller shall give Purchaser written notice of each
claimed default and if not cured by Purchaser within fifteen (15) days of
receipt of such notice,
10
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the Earnest Money, together with interest thereon, shall be paid to Seller and
Seller shall be entitled to pursue against Purchaser any remedy granted to
Seller at law or in equity, including, without limitation, an action for
specific performance or damages against Purchaser and if Seller recovers a
judgment against Purchaser, the Earnest Money shall be utilized by Seller to the
extent of such judgment with the remainder, if any, returned to Purchaser.
13. SELLER'S DEFAULT. In the event of default by Seller under the
terms of this Agreement, Purchaser shall give Seller written notice of each
claimed default and if not cured by Seller within fifteen (15) days of receipt
of such notice, at Purchaser's option: (i) Purchaser may terminate this
Agreement by written notice to Seller, whereupon the Earnest Money, together
with interest thereon, shall be immediately returned by Escrow Agent to
Purchaser, and Purchaser may sue for damages including, but not limited to, all
out-of-pocket costs and expenses incurred by Purchaser in negotiating this
Agreement and conducting its due diligence hereunder, or (ii) Purchaser shall be
entitled to pursue against Seller any remedy granted to Purchaser at law or in
equity, including, without limitation, an action for specific performance of
this Agreement against Seller. During any cure period the Lease between Seller
and Charles Evans Nissan, Inc. shall remain in full force and effect.
14. CONDEMNATION. If, prior to the Closing, all or any part of the
Property is subjected to a bona fide threat of condemnation by a body having the
power of eminent domain or is taken by eminent domain or condemnation (or sale
in lieu thereof), or if Seller has received notice that any condemnation action
or proceeding with respect to the Property is contemplated by a body having the
power of eminent domain, Seller shall give Purchaser immediate written notice of
such threatened or contemplated condemnation or of such taking or sale. This
Agreement shall remain in full force and effect and the sale of the Property
contemplated by this Agreement, less any interest taken by eminent domain or
condemnation, or sale in lieu thereof, shall be effected with no further
adjustment and without reduction of the Purchase Price, and at the Closing,
Seller shall assign, transfer, and set over to Purchaser all of the right,
title, and interest of Seller in and to any awards that have been or that may
thereafter be made
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for such taking. At such time as all or a part of the Property is subjected to
a bona fide threat of condemnation, Purchaser shall be permitted to participate
in the proceedings as if Purchaser were a party to the action. Seller shall not
settle or agree to any award or payment pursuant to condemnation, eminent
domain, or sale in lieu thereof without obtaining Purchaser's prior written
consent thereto in each case.
15. DAMAGE OR DESTRUCTION. If at any time prior to Closing all or
any part of the Improvements be damaged or destroyed, from any cause whatsoever,
then Purchaser shall proceed to Closing and accept the Property in its condition
with no decrease in the Purchase Price, however, all insurance proceeds received
on account of such damage or destruction shall be paid to Purchaser upon receipt
thereof. Seller shall give immediate notice of any damage or destruction to the
Property.
16. ASSIGNMENT. This Agreement and Purchaser's rights, duties, and
obligations hereunder may be delegated, transferred, and assigned by Purchaser
without the prior written consent of Seller.
17. NO BROKER. Purchaser and Seller hereby represent each to the
other than they have not discussed this Agreement or the subject matter thereof
with any real estate broker, agent, or salesman, so as to create any legal right
in any such broker, agent, or salesman, to claim a real estate commission, fee
or other compensation with respect to the conveyance of the Property
contemplated by this Agreement. Seller hereby agrees to indemnify and hold
Purchaser harmless from and against any and all liability, loss, cost, damage,
and expense, including attorneys' fees and costs of litigation, Purchaser shall
ever suffer or incur because of any claim by any agent, salesman, or broker,
whether or not meritorious, for any fee, commission or other compensation with
regard to this Agreement or the sale and purchase of the Property contemplated
hereby, and arising out of any acts or agreements of Seller. Likewise,
Purchaser hereby agrees to indemnify and hold Seller free and harmless from and
against any and all liability, loss, cost, damage, and expense, including
attorneys' fees and costs of litigation, Seller shall ever suffer or incur
because of any claim by any agent, salesman, or broker, whether or not
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<PAGE>
meritorious, for any fee, commission or other compensation with respect to this
Agreement or the sale and purchase of the Property contemplated hereby and
arising out of the acts or agreements of Purchaser. This Paragraph 17 shall
survive the Closing or any termination of this Agreement.
18. NOTICES. Wherever any notice or other communication is required
or permitted hereunder, such notice or other communication shall be in writing
and shall be delivered, charges prepaid, by overnight courier (such as Airborne
or Federal Express) for next business day delivery, by hand delivery, or by U.S.
registered, or certified mail, return receipt requested, postage prepaid, to the
addresses set out below or at such other addresses as are specified by written
notice delivered in accordance herewith:
PURCHASER: United Auto Group, Inc.
375 Park Avenue
Suite 2201
New York, NY 10152
ATTN: George G. Lowrance, Esq.
with a copy to: Rogers & Hardin
2700 Cain Tower
299 Peachtree Street, NE
Atlanta, GA 30303
ATTN: Stephen R. Leeds, Esq.
SELLER: Charles F. Evans
3180 Zingara Road
Route 1
Conyers, Georgia 30207
with a copy to: Forrest Jack Lance, Esq.
Lance & Associates
884 Green Street
Conyers, Georgia 30207
TITLE COMPANY: Chicago Title Insurance Company
5775-C Peachtree Dunwoody Road, N.E.
Suite 200
Atlanta, Georgia 30342
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<PAGE>
Any notice or other communication as hereinabove provided shall be deemed
effectively given and received on the date of delivery, if delivered by hand, or
on the next business day following deposit with an overnight courier, or on the
third (3rd) business day following deposit in the U. S. mail.
19. POSSESSION. Full and exclusive possession of the Property shall
be delivered by Seller to Purchaser on the date of Closing.
20. TIME PERIODS. If the time period by which any right, option, or
election provided under this Agreement must be exercised, or by which any act
required hereunder must be performed, or by which the Closing must be held,
expires on a Saturday, Sunday, or holiday, then such time period shall be
automatically extended through the close of business on the next regularly
scheduled business day.
21. SURVIVAL OF PROVISIONS. All covenants, warranties, and
agreements set forth in this Agreement shall survive the execution or delivery
of any and all deeds and other documents at any time executed or delivered
under, pursuant to or by reason of this Agreement, and shall survive the payment
of all monies made under, pursuant to, or by reason of this Agreement.
22. SEVERABILITY. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement, or the
application thereof to any person or circumstance, shall, for any reason and to
any extent be invalid or unenforceable, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby but rather shall be enforced to the greatest extent permitted
by law.
23. GENERAL PROVISIONS. No failure of either party to exercise any
power given hereunder or to insist upon strict compliance with any obligation
specified herein, and no custom or practice at variance with the terms hereof,
shall constitute a waiver of either party's right to demand exact compliance
with the
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<PAGE>
terms hereof. This Agreement contains the entire agreement of the parties
hereto with respect to Purchaser's purchase of the Property, and no
representations, inducements, promises, or agreements, oral or otherwise,
between the parties not embodied herein shall be of any force or effect.
Nothing, however, in this Agreement shall affect the rights of the parties to
the SPA to assert any claim that may exist thereunder. Any amendment to this
Agreement shall not be binding upon Seller or Purchaser unless such amendment is
in writing and executed by both Seller and Purchaser. The provisions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, legal representatives, successors, and assigns.
Time is of the essence of this Agreement. This Agreement may be executed in
multiple counterparts, each of which shall constitute an original, but all of
which taken together shall constitute one and the same agreement. The headings
inserted at the beginning of each paragraph are for convenience only, and do not
add to or subtract from the meaning of the contents of each paragraph. This
Agreement shall be construed and interpreted under the laws of the State of
Georgia. Except as otherwise provided herein, all rights, powers, and
privileges conferred hereunder upon the parties shall be cumulative but not
restrictive to those given by law. All personal pronouns used in this
Agreement, whether used in the masculine, feminine, or neuter gender shall
include all genders, and all references herein to the singular shall include the
plural and vice versa.
24. EFFECTIVE DATE. The "effective date" of this Agreement shall be
deemed to be the date this Agreement is fully executed by both Purchaser and
Seller and a fully executed original counterpart of this Agreement has been
received by both Purchaser and Seller.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective seals to be affixed hereunto as of the day,
month and year first above written.
SELLER:
/S/ Charles F. Evans (Seal)
---------------------------
CHARLES F. EVANS
Witness: ____________________
Date: ____________________
PURCHASER:
UNITED AUTO GROUP, INC., a Delaware
corporation
By: /S/ George G. Lowrance
----------------------------
Its: Vice President
--------------------------
Attest:______________________
Date:___________________
16
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EXHIBIT "A"
DESCRIPTION OF PROPERTY
1
<PAGE>
EXHIBIT "B"
PERMITTED EXCEPTIONS
2
<PAGE>
EXHIBIT "C"
EXCEPTIONS TO BE REMOVED BY SELLER
3
<PAGE>
EXHIBIT "D"
SURVEY
4
<PAGE>
EXHIBIT "E"
CURRENT FORM OF OWNER'S AFFIDAVIT
5
<PAGE>
[BLANK PAGE]
<PAGE>
BMW FINANCIAL SERVICES
Inventory Financing and Security Agreement
- --------------------------------------------------------------------------------
This Agreement is entered into between BMW Financial Services NA, Inc.
("Lender") and the undersigned borrower ("Borrower") and dated as of the date
listed above the signature provision. ("Agreement Date")
A. WHEREAS, Borrower wishes to purchase motor vehicles ("Vehicle(s)")
from BMW of North America, Inc. ("BMW NA") and other manufacturers, distributors
or motor vehicle dealers from time to time; and
B. WHEREAS, Borrower requests and Lender agrees to finance the
acquisition of such Vehicles for Borrower pursuant to the terms set forth in
this Agreement, and the Lender's Inventory Finance Program. ("Program")
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the parties agree as follows:
1. Definitions.
When 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):
"ADVANCE" shall mean any amount actually disbursed by Lender by cash,
check, draft, electronic funds transfer or otherwise.
"AVERAGE DAILY BALANCE" shall mean the total of the outstanding
balances of the Advances with respect to a Loan for all days in the applicable
billing period divided by the number of days in the billing period.
"BMW" shall mean Bayerische Motoren Werke, AG.
"BUSINESS DAY" shall mean a day other than Saturdays, Sundays,
holidays or other days on which the principal office of Lender is not open for
business.
"DEALER TRADE VEHICLE" shall mean any New Motor Vehicle which Borrower
has acquired through a like-kind exchange with or purchased from another
franchised dealer.
"DEMONSTRATOR" shall mean any New Motor Vehicle owned by Borrower
which has been designated in writing by Borrower as a Demonstrator.
<PAGE>
"GUARANTORS" shall mean those parties who have executed and delivered
Guaranties.
"INDEX RATE" shall mean the base rate on corporate loans posted by at
least seventy-five percent (75%) of the nation's thirty (30) largest banks on
the last Business Day of each calendar month, which is quoted as the "Prime
Rate" in the column entitled "Money Rates" published in THE WALL STREET JOURNAL
(in the event no such rate is published in THE WALL STREET JOURNAL on such date,
the Index Rate shall be the "Prime Rate" shown in such column for the most
recent Business Day preceding the last Business Day of such month on which such
rate was published) or, in the event THE WALL STREET JOURNAL does not quote a
"Prime Rate," the rate quoted as the "Prime Rate" in a publication as Lender
may, from time to time, hereafter designate in writing.
"INTEREST RATE" shall mean the Index Rate plus an applicable
percentage.
"KELLEY BLUE BOOK VALUE" shall mean the average loan value of a Used
Motor Vehicle, excluding any equipment additions, as shown in the appropriate
regional edition of the KELLEY BLUE BOOK.
"LOANER VEHICLE" shall mean a New Motor Vehicle owned by Borrower
which has been designated by Borrower in the Borrower's loaner program.
"N.A.D.A VALUE" shall mean the average loan value of a Used Motor
Vehicle, excluding any equipment additions, as shown in the appropriate regional
edition of the N.A.D.A. OFFICIAL USED CAR GUIDE.
"NEW MOTOR VEHICLE" shall mean (a) any previously unowned, unused and
untitled motor vehicle manufactured by BMW or any other manufacturer purchased
by Borrower, (b) any previously unowned, unused and untitled motor vehicle
purchased by Borrower, or (c) any Dealer Trade Vehicle or any Loaner Vehicle.
"USED MOTOR VEHICLE" shall mean that portion of the Borrower's
inventory which consists of a previously owned and titled motor vehicle which
has a N.A.D.A. Value (Kelley Blue Book Value) of at least $5,000.00 and which
has been in Borrower's inventory for less than sixty (60) days.
All other terms contained in this Agreement shall, when the context so
indicates, have the meanings provided for by the Uniform Commercial Code.
2. Loan Terms.
Lender agrees to make the New Motor Vehicle Loan and Used Motor Vehicle
Loan as defined below (collectively referred to as
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<PAGE>
"Loans") to Borrower in the total principal aggregate amount set forth in the
New Motor Vehicle Note and Used Motor Note respectively, as defined below for
all such Loans. Borrower promises to repay such Loans on the following terms
and conditions:
(a) NEW MOTOR VEHICLE LOAN.
(1) An Advance, from time to time as necessary on or after the
Agreement Date, for the purchase of a New Motor Vehicle (the "New Motor
Vehicle Loan") in the aggregate principal amount of one hundred percent
(100%) of the manufacturer or distributor invoice price for such New Motor
Vehicle as evidenced by the master promissory note substantially in the
form of EXHIBIT A (the "New Motor Vehicle Note").
(2) Each Advance for a New Motor Vehicle Loan shall be payable in
full on the earliest of:
(i) forty-eight (48) hours from the time of sale or within
twenty-four (24) hours from the time Borrower receives
payment by or on behalf of the purchaser of such new Motor
Vehicle; or
(ii) one hundred eighty (180) days from the date of the new
model year introduction for any such New Motor Vehicle; or
(iii) the pay-off date as Lender may specify from time to time
under the terms of the Program; or
(iv) the termination of this Agreement.
(3) With respect to any Loaner Vehicle or Demonstrator, Borrower
shall pay Lender, at Lender's election, either;
(i) monthly installments of one percent (1%) of the original
amount of the Advance with respect to such Vehicle
beginning thirty (30) days from the date of the Advance
for such Vehicle until payment in full is due thereon; or
(ii) an amount equal to the total aggregate amounts received
from any manufacturer or distributor including holdback
reserves, manufacturer rebates or incentive payments
within thirty (30) days from the date of the Advance for
such Vehicle until payment in full is due thereon.
3
<PAGE>
(b) USED MOTOR VEHICLE LOAN.
(1) An advance, from time to time as necessary on or after the
Agreement Date, to finance a Used Motor Vehicle which is manufactured by
BMW in the maximum principal amount of the lesser of:
(2) An Advance, from time to time as necessary on or after the
Agreement Date, to finance a Used Motor Vehicle which is not manufactured
by BMW in the maximum principal amount of the lesser of:
(i) eighty percent (80%) of the N.A.D.A. Value of the Used
Motor Vehicle or eighty percent (80%) of the Kelley Blue
Book Value of the Used Motor Vehicle; or
(ii) the Borrower's cost for the Used Motor Vehicle; or
(iii) the maximum principal amount as set forth in the program.
(3) The Advances described in the foregoing SECTIONS 2(b)(1) AND
2(b)(2) are referred to collectively in this Agreement as the "Used Motor
Vehicle Loan" and each such Advance shall be evidenced by the master
promissory note in substantially the form of EXHIBIT A-2 hereto (the "Used
Motor Vehicle Note).
(4) Each Advance for a Used Motor Vehicle Loan shall be payable in
full upon the earliest of:
(i) forty-eight (48) hours from the time of sale or within
twenty-four (24) hours from the time Borrower receives
payment by or on behalf of the purchaser of such Used
Motor Vehicle; or
(ii) one hundred eighty (180) days from the date of the Advance
for any Used Motor Vehicle which is manufactured by BMW;
or
(iii) one hundred twenty (120) days from the date of the Advance
for any Used Motor Vehicle which is not manufactured by
BMW, or
(iv) the pay-off date as Lender may specify from time to time
under the terms of the Program; or
(v) the termination of this Agreement.
4
<PAGE>
(c) PAYMENTS RECEIVED FROM MANUFACTURERS OR DISTRIBUTORS.
At the request of the Lender, in the event that Borrower receives any
payments from holdback reserves, manufacturer rebates, incentive payments or any
other form of payment from a manufacturer or a distributor, such payments shall
be immediately forwarded to Lender and Lender shall apply such sums to the
outstanding principal balance with respect to the applicable Loans.
(d) TIME OF PAYMENTS.
Payments on the Loans received by Lender no later than 1:00 p.m. in
the time zone where Lender is located, shall be credited to the Average Daily
Balance on the date of Lender's receipt of such payments or the date the
Lender's bank records a wire transfer of such payment.
3. Interest.
(a) RATES OF INTEREST.
(1) NEW MOTOR VEHICLE LOAN. The Average Daily Balance of the New
Motor Vehicle Loan shall bear interest at a per annum rate equal to the
Index Rate plus one half of one percent (.5%) until paid in full.
(2) USED MOTOR VEHICLE LOAN. The Average Daily Balance of the Used
Motor Vehicle Loan shall bear interest at a per annum rate equal to:
(i) the Index Rate plus one half of one percent (.5%) until
paid in full for any Used Motor Vehicle manufactured by
BMW.
(ii) the Index Rate plus one and one half of one percent (1.5%)
until paid in full for any Used Motor Vehicle which is not
manufactured by BMW:
(b) INTEREST RATE. The Interest Rate shall initially be determined by
Lender as of the Business Day preceding the Agreement Date, and shall remain in
effect for the remainder of such calendar month in which the Agreement Date
occurs; thereafter, the Index Rate shall be determined by Lender on the last
Business Day of each month and the Interest Rate on said date shall be based on
the Index Rate used in calculating the rates which are payable for the following
month or as announced by Lender from time to time pursuant to the Program.
Interest shall be calculated on the basis of a 360-day year for actual days
elapsed and shall be payable on the fifteenth (15th) day of each month for the
preceding month.
5
<PAGE>
(c) INTEREST ACCRUAL ON ADVANCES. Interest on each Advance made under the
New Motor Vehicle Loan and the Used Motor Vehicle Loan shall begin to accrue on
the date of Lender's Advance for such Vehicle.
(d) CASH MANAGEMENT ACCOUNT. Lender will establish a non-interest bearing
cash management account ("Management Account") allowing the Borrower to wire
excess Borrower funds. The average daily balance in the Management Account will
offset the Average Daily Balance of the New Motor Vehicle Loan computed monthly
for billing purposes with respect to Advances, provided that the average daily
balance during any one month of the Management Account shall not exceed fifty
percent (50%) of the gross Average Daily Balance.
4. Term.
The term of this Agreement shall commence on the Agreement Date and shall
continue for three (3) years thereafter. After the initial term of three (3)
years, this Agreement shall be automatically renewed for one (1) year and from
year-to-year thereafter unless terminated by either party notifying the other in
writing no later than ninety (90) days prior to any anniversary of this
Agreement. This Agreement may be terminated at any time by Lender upon ninety
(90) days' prior written notice from Lender to Borrower; however if Borrower is
in default, the rights and remedies of Lender shall be governed by SECTION 16.
If Borrower is not in default, this Agreement may be terminated by Borrower upon
ninety (90) days' prior written notice from Borrower to Lender.
5. Collateral.
For the purpose of securing any indebtedness under this Agreement and any
other indebtedness of Borrower to Lender. Borrower hereby grants Lender a
security interest in the following property (herein after referred to as the
"Collateral"): all Vehicle inventory, parts and accessories inventory,
equipment, fixtures, accounts, holdback reserves, manufacturer rebates and
incentive payments, general intangibles of the Borrower now owned and hereafter
acquired, wherever located; all accessions to, substitutions for and all
replacements of any of the foregoing; all chattel paper, documents, instruments,
monies, residues and property of any kind related to any of the foregoing; all
books and records of Borrower related to any of the foregoing, including without
limitation, computer programs, print-outs, and other computer hardware and
software materials and records pertaining to any of the foregoing; together with
all proceeds and products of the foregoing, including, without limitation,
proceeds of insurance policies insuring any of the foregoing.
The security interest granted in this Agreement is in addition to and not
in substitution of any right of set-off or
6
<PAGE>
netting which Lender may have against Borrower pursuant to any contract or under
applicable law. Borrower agrees to execute such supplemental documents or
financing statements as Lender may require to evidence or perfect the security
interest granted in this Agreement. Lender may obtain and retain the
certificate of title in its possession until any Vehicle is sold by Borrower and
Borrower's obligation is paid in full. Lender shall have the right to inspect
the Vehicle and other Collateral and Borrower's books and records at any time
and without advance notice. Borrower agrees to retain and preserve its books
and records at its principal place of business for a period of three (3) years
from the date of final billing under this Agreement.
6. Use and Protection of Collateral.
(a) Borrower may exhibit and sell Vehicles and may use and sell other
collateral in the ordinary course of business; (b) Borrower shall protect and
secure such Vehicles and other Collateral; (c) Borrower shall maintain and
preserve the Vehicles and other physical assets in good order and condition and
shall not impair the value of such Vehicles or physical assets; (d) Borrower
will keep the Vehicles and other Collateral free of taxes, liens or encumbrances
and any sums which may be paid by Lender in its discretion, in release or
discharge thereof shall be paid by Borrower to Lender upon demand; and (e)
Vehicles and other Collateral shall not be used illegally, improperly or for
hire.
7. Insurance.
Borrower is responsible for insurance covering the Vehicles and other
Collateral against all risks, including without limitation, business
interruption insurance of such types and in such amounts as lender may
reasonably require and will provide to the Lender copies of insurance policies
and certificates properly endorsed to show Lender's interest as loss payee and
additional insured. Such endorsement shall provide that the insurance companies
will give Lender at least thirty (30) days prior written notice before any such
policy or policies of insurance shall be altered or canceled and that no act or
default of Borrower or any other party shall affect the right of Lender to
recover under such policy or policies of insurance in case of loss or damage.
Borrower hereby directs all insurers under such policies of insurance to pay all
proceeds payable thereunder directly to Lender. Proceeds payable to Lender
under any such policies shall be applied to the indebtedness due Lender under
this Agreement on such basis as Lender shall determine.
In the event Borrower, at any time or times hereafter, shall fail to obtain
or maintain any of the policies of insurance required in this Agreement or to
pay any premium in whole or in part relating thereto, then Lender, without
waiving or releasing any obligation or default by Borrower under this Agreement,
may (but shall be under no obligation to do so) at any time or times
7
<PAGE>
thereafter obtain and maintain such policies of insurance and pay such premium
and take any other action with respect thereto which Lender deems advisable.
All sums so disbursed by Lender, including, without limitation, attorneys' and
paralegals' fees, court costs, expenses and other charges relating thereto,
shall be payable, on demand, by Borrower to Lender and shall be additional
indebtedness due Lender under this Agreement and be secured by the Collateral.
8. Borrower's Financial Condition.
Borrower represents that it now has and covenants that it will have at the
time of any Advance through the date of repayment of the applicable Loan (a)
reasonably adequate cash and equity capital to conduct its business and pay its
debts as they mature, (b) capital and other financial resources reasonably
adequate to engage in the business in which it is engaged or in any business or
transaction in which it is about to engage and (c) the ability to pay its debts
and all debts it intends to incur as they mature.
9. Borrower's Financial Statements.
(a) At Lender's request, but not later than three (3) months after the
close of each fiscal year of Borrower, Borrower agrees to provide Lender with
the audited financial statements of Borrower as certified by the Borrower's
independent certified public accountant; (b) as soon as possible, but not later
than fifteen (15) days after the end of each month hereafter, Borrower's
unaudited interim financial statements, including balance sheets and statements
of income and expense as at the month-end and for the portion of Borrower's
fiscal year then elapsed, as prepared in accordance with generally accepted
accounting principles and fairly presenting the financial position at such date
and results of operations of Borrower for such period; and (c) Borrower
certifies that each monthly financial statement and each audited annual
financial statement shall be complete, accurate and current in all respects.
10. Other Agreements of Borrower.
Without Lender's prior written consent, which Lender may or may not, in its
sole discretion, give concurrently herewith or hereafter, Borrower agrees that
it shall not make:
(a) any distributions of its property or assets, except distributions of
earnings or payments of principal and interest to service indebtedness in the
ordinary course including shareholders loans, or sell, issue, or redeem, retire,
purchase or otherwise acquire, directly or indirectly any of its stock; (b) any
material change in its capital structure, or make any material change in any of
its business objectives, purposes and operations; nor (c) any loans or other
advances of money or any loans or advances of inventory or other property, to
any party,
8
<PAGE>
including, without limitation, any officer, director, stockholder, employee, or
affiliate of Borrower, other than (1) advances against commissions, and other
similar advances to employees in the ordinary course of business, and (2) loans
not exceeding an aggregate of ten percent (10%) of the outstanding balance of
the Loan at any time.
11. Environmental Matters.
(a) Borrower represents that it is currently in compliance, and covenants
and agrees that it shall continue to manage and operate its business in
compliance, with all federal, state and local laws, regulations, codes, plans,
orders, decrees, judgments, injunctions, notices or demand letters issue,
entered, or promulgated, approved or otherwise relating to pollution or
protection of the environment ("Environmental Law"). (b) Borrower shall send to
Lender within five (5) days of receipt, any citation, notice of violation or
other notice of potential liability from any governmental or quasi-governmental
authority empowered to regulate or oversee any of the foregoing activities.
(c) At Lender's request, Borrower, on or before each anniversary date of this
Agreement, shall provide Lender, at Borrower's sole cost, with written
certification by a licensed environmental engineer, acceptable to Lender, that
it is in compliance with all Environmental Laws or shall otherwise specify the
extent of Borrower's noncompliance, including Borrower's intended course of
action and time frame for effecting compliance. Borrower shall additionally
provide Lender with a duplicate copy of any emergency preparedness and response
plans which it has prepared or had prepared. Lender assumes no responsibility
for implementation of the plan by virtue of possession of said duplicate copy.
(d) Borrower agrees to indemnify, defend with counsel reasonably acceptable to
Lender, at Borrower's sole cost, and hold Lender harmless against any claim,
response or other costs, damages, liability or demand (including, without
limitation, attorneys' fees and costs incurred by Lender) arising out of any
claimed violation of Borrower or Borrower's agents of any of the foregoing laws,
regulations or ordinances or breach of any of the foregoing covenants or
agreements. The foregoing indemnity shall survive repayment of all indebtedness
due Lender under this Agreement.
12. Conditions Precedent
Lender shall have no obligation to make the Loans on the Agreement Date
unless and until the following conditions have been satisfied, all in form and
substance satisfactory to Lender and its counsel:
(a) NO PROCEEDINGS. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, or prohibit, or to
obtain substantial damages in respect of, or which is related to or arises out
of
9
<PAGE>
this Agreement, or the consummation of the transactions contemplated hereby or
thereby, or which, in Lender's sole discretion, would make it inadvisable to
consummate the transactions contemplated by this Agreement.
(b) NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the financial condition, results of operations,
businesses or prospects of the Borrower, or any event, condition or state of
facts which could materially adversely affect the financial condition, results
of operations, businesses or prospects of the Borrower, as determined by Lender
in its sole discretion; and
(c) LOAN DOCUMENTATION. Lender shall have received, on or prior to the
Agreement Date, the following documents, each duly executed and delivered to
Lender, and each to be in form and substance satisfactory to Lender and its
counsel;
(1) copies of all filing receipts or acknowledgments issued by any
governmental authority to evidence any filing or recordation necessary to
perfect the security interests of Lender in the Collateral and evidence in
a form acceptable to Lender that such security interests constitute valid
and perfected first priority interests in the Collateral;
(2) certified copies of Borrower's casualty and liability insurance
policies, together with loss payable and additional insured endorsements to
the casualty insurance policies, as required under SECTION 7;
(3) the New Motor Vehicle Note and the Used Motor Vehicle Note duly
executed and delivered to Lender;
(4) Articles of Incorporation and Bylaws from the Borrower;
(5) Certified resolutions from Borrower's Board of Directors
authorizing execution of this Agreement, the New Motor Vehicle Note, Used
Motor Vehicle Note, and related documents;
(6) an opinion from Borrower's counsel in form and substance
satisfactory to Lender which opines on the Borrower's ability to execute
the Loan Documents and perform its obligations thereunder;
(7) an incumbency certificate from the Borrower's Secretary in form
and substance satisfactory to the Lender;
(8) good standing certificates from each state where the Borrower is
incorporated;
10
<PAGE>
(9) written instructions from Borrower to Lender as to the
disbursement to any Person of the proceeds of the Loan;
(10) environmental compliance certificate;
(11) payment authorization between Lender and Borrower; and
(12) such other documents, instruments and agreements as Lender shall
reasonably request, including without limitation, any guaranty from a
Guarantor.
13. Termination or Suspension of Financing.
Lender may terminate or suspend financing under this Agreement as follows:
(a) Upon the occurrence of an Event of Default as defined in SECTION 14 of this
Agreement or in any other Agreement with Lender, or (b) if Lender, in its sole
discretion, elects to terminate the Program provided, however, that Lender shall
give Borrower ninety (90) days' prior written notice of such termination; or (c)
if Lender in its judgment believes that future financing of Vehicles for
Borrower is not justified due to changes in Borrower's financial condition or
any other material change in the Borrower's business. All debts, obligations
and remedies existent at the time of any suspension or termination shall
continue in effect until the indebtedness of Borrower under this Agreement is
paid in full.
14. Event of Default.
An "Event of Default" shall include the following: (a) a default by
Borrower in the payment or performance of any obligation under this Agreement or
any other agreement with Lender; (b) the institution of a proceeding in
bankruptcy receivership or insolvency by or against Borrower or its property or
by or against any Guarantor; (c) an assignment by Borrower or any Guarantor for
the benefit of creditors; (d) a default by any Guarantor in the payment or
performance of any obligation under a guaranty; (e) the death or incompetence of
any Guarantor; or (f) if Lender shall deem itself insecure.
15. Setoff.
As additional security for payment and performance of all indebtedness due
Lender under this Agreement and any other agreement with Lender, Borrower hereby
gives Lender a lien on and Lender shall also have right of setoff against all of
Borrower's deposits, credits and any other property now or hereafter in the
possession or control of Lender or in transit to Lender. Lender may at any time
apply any or all of the property (or the proceeds thereof) to any amounts due
under said indebtedness.
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<PAGE>
16. Rights and Remedies.
Upon the occurrence of an Event of Default as set forth in SECTION 14 or if
Vehicles and other Collateral are in danger of misuse, loss, seizure or
confiscation, Lender may, in its discretion, accelerate the entire outstanding
amount due from Borrower under this Agreement, terminate this Agreement and may
take immediate possession of Vehicles and other Collateral without demand or
further notice and without legal process. In furtherance thereof, Borrower
shall, if Lender so requests, assemble Vehicles and other Collateral and make
them available to Lender at a reasonable place designated by Lender. Lender
shall have the right, and Borrower hereby authorizes and empowers Lender to
enter upon the premises wherever Vehicles and other Collateral may be and remove
same. Borrower shall pay all expenses and reimburse Lender for any
expenditures, including reasonable attorneys' fees and legal expenses, in
connection with Lender's exercise of any of its rights and remedies under this
Agreement. In the event of such repossession by Lender, in addition to the
rights specified in this Agreement, all the rights and remedies afforded by
applicable law shall apply.
17. Indemnity.
Borrower agrees to indemnify Lender from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever (including,
without limitation, attorneys' fees and court costs incurred by Lender) which
may be imposed on, incurred by, or asserted against Lender in any litigation,
proceeding or investigation instituted or conducted by any governmental agency
or instrumentality or any other Person with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, this
Agreement, whether or not Lender is a party thereto, except to the extent that
any of the foregoing arises out of the negligence or willful misconduct of
Lender.
18. Pricing Provisions.
Pricing provisions regarding the program related to insurance protection,
flat charges and the applicable percentage over the Index Rate ("Pricing
Provisions") will be distributed by the Lender from time to time. The Program
may be modified from time to time, upon thirty (30) days prior notice to
Borrower, by Lender by means of Lender's bulletins, rate notices and other
supplemental materials. The provisions of the Program are incorporated in this
Agreement by reference. If Borrower does not agree to the change in Pricing
Provisions as announced by Lender, Borrower may elect to terminate this
Agreement and all debts, obligations and remedies existent at the time of any
suspension or termination shall continue in effect until the indebtedness of
Borrower under this Agreement is paid in full. In the event of conflict between
the provisions of this Agreement
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<PAGE>
and the provisions of the Program, the Pricing Provisions shall be controlled by
the Program and all other provisions shall be controlled by this Agreement.
19. Power of Attorney.
(a) Upon the occurrence of an Event of Default, Borrower irrevocably
appoints Lender as Borrower's lawful attorney and Lender may, without notice to
Borrower, in Borrower's or Lender's name(s);
(1) endorse the name of Borrower upon any items of payment or
proceeds of Collateral and deposit the same to the account of Lender on
account of the indebtedness due under this Agreement;
(2) endorse the name of Borrower upon any chattel paper, document,
instrument, invoice, freight bill, bill of lading or similar document or
agreement relating to the Collateral; and
(3) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Collateral to which Borrower has access.
(b) At all times this Agreement, with or without the occurrence of an
Event of Default, Borrower irrevocably appoints Lender as Borrower's lawful
attorney and Lender may without notice to Borrower, in Borrower's name or
Lender's name, (1) execute such agreements and related documentation as may be
necessary for Borrower to acquire Vehicles from BMW NA and other manufacturers
or distributors; and (2) make, settle and adjust claims under policies of
insurance, as are required under SECTION 7, and to endorse any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect to such
policies of insurance.
20. General.
This Agreement shall be binding upon the parties, successors and assigns,
provided, however, that Borrower shall have no right of assignment, without the
prior written consent of Lender. Any provision in this Agreement prohibited by
law shall be ineffective to the extent of such prohibitions without invalidating
the remaining provisions in this Agreement. This Agreement shall be governed by
the internal laws of the State where the Borrower is located. Any amendment or
modification to this Agreement must be made in writing and must be executed by
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<PAGE>
the Borrower and Lender, provided; however, that this SECTION 20 may not be
amended in any circumstance.
Executed this ___________ day of October, 1996.
BORROWER: LENDER:
Borrower Name: United Auto Group BMW Financial Services NA, Inc.
Atlanta IV Motors,
Inc.
By: By:
------------------------------ ------------------------------
Title: Title:
--------------------------- ---------------------------
Address: 3264 Commerce Avenue
Duluth, Georgia 30156
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<PAGE>
NEW MOTOR VEHICLE NOTE
$7,000,000.00 Duluth, Georgia
October _____, 1996
FOR VALUE RECEIVED, the undersigned, United Auto Group Atlanta IV
Motors, Inc., dba United BMW, a Georgia corporation ("Borrower"), promises to
pay to BMW Financial Services NA, Inc., a Delaware corporation ("Lender"), or
order, at its place of business at 300 Chestnut Ridge Road, Woodcliff Lake, New
Jersey 07675, Attention, Robert E. Devine, or at such other place as may be
designated in writing by the holder of this New Motor Vehicle Note ("Note"), so
much of the principal sum of Seven Million and no/Dollars ($7,000,000.00), which
has been advanced by Lender and remains outstanding pursuant to the terms of an
Inventory Financing and Security Agreement dated as of October, 1996 between
Borrower and Lender (the "Inventory Finance Agreement"), together with interest
on the unpaid principal balance advanced hereunder from the date of the Advance
until paid, at a fluctuating interest rate per annum equal to the Index Rate (as
hereinafter defined) plus an applicable percentage as set forth below and
provided, however, that amounts outstanding with respect to the following types
of Advances cannot exceed the limits listed below:
Applicable
Percentage Rate
Types of Advances Amount Over Index Rate
- ----------------- ------ ---------------
Advances for BMW New Motor Vehicles $7,000,000.00 0.50%
The initial Advance, all subsequent Advances and all payments made on
account of principal shall be reflected on monthly statements provided by Lender
to Borrower. From time to time, an Advance requested by the Borrower may cause
an outstanding principal balance ("Over Line Balance") in excess of the maximum
principal amount permitted under this Note; provided, however, Lender shall
notify Borrower pursuant to Lender's most recent monthly statement to Borrower
of the existence of any Over Line Balance and Borrower shall have the right to
instruct Lender in writing within ten (10) days of the date of such statement to
refuse to honor any future drafts from BMW or from any other manufacturer or
distributor of motor vehicles. Lender reserves the right to demand, and
Borrower agrees to execute and deliver upon such demand, a replacement note in a
principal amount, determined solely by Lender, sufficient to cover the then
outstanding principal balance. The aggregate unpaid principal amount shown on
any monthly statement, including any Over Line Balance, shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on this Note. The
failure to record the date and amount of any Advance on such monthly statement
shall not, however, limit or otherwise affect the
<PAGE>
obligations of the Borrower under the Inventory Finance Agreement or under this
Note to repay the principal amount of the Advances together with all interest
accruing thereon.
"Index Rate" shall mean the base rate on corporate loans posted by at
least 75% of the nation's thirty (30) largest banks on the last business day of
each calendar month, which is quoted as the "Prime Rate" in the column entitled
"Money Rates" published in THE WALL STREET JOURNAL (in the event no such rate is
published in THE WALL STREET JOURNAL on such date, the Index Rate shall be the
"Prime Rate" shown in such column for the most recent business day preceding the
last business day of such month on which such rate was published) or, in the
event THE WALL STREET JOURNAL does not quote a "Prime Rate", the rate quoted as
the "Prime Rate" in a publication as Lender may, from time to time, hereafter
designate in writing. The Index Rate shall initially be determined by Lender as
of the Business Day preceding the date of the Loan Agreement and shall remain in
effect for the remainder of such calendar month in which such date occurs;
thereafter, the Index Rate shall be determined by Lender on the last Business
Day of each month and the Interest Rate based on such Index Rate shall be in
effect for the following month. Interest shall be calculated on the basis of a
360-day year for actual days elapsed.
Principal and interest hereunder shall be due and payable by Borrower
on the dates and in the manner as follows:
(a) Subject to any payment changes resulting from changes in the Index
Rate, Borrower will pay regular monthly installments of interest only,
due as of each payment date, commencing on the fifteenth (15th) day of
November, 1996, with all subsequent payments to be due on the
fifteenth (15th) day of each month thereafter; and
(b) Any Advance for a New Motor Vehicle Loan shall be payable on the
earliest of:
(i) forty-eight (48) hours from the time of sale or within twenty-
four (24) hours from the time Borrower receives payment by or on
behalf of the purchaser of such New Motor Vehicle; or
(ii) one hundred eighty (180) days from the date of the new model year
introduction for any such New Motor Vehicle; and
(c) With respect to any Loaner Vehicle or Demonstrator, Borrower shall pay
Lender, at Lender's election, either:
(i) monthly installments of one percent (1%) of the original amount
of the Advance with respect to
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<PAGE>
such Vehicle beginning thirty (30) days from the date of the
Advance for such Vehicle until payment in full is due thereon; or
(ii) Monthly payments in an amount equal to the total aggregate
monthly amounts received from any manufacturer or distributor
including holdback reserves, manufacturer rebates or incentive
payments beginning thirty (30) days from the date of the Advance
for such Vehicle until payment in full is due thereon; and
(d) Notwithstanding the principal and interest payment provisions set
forth in Sections (a), (b) and (c) above, the unpaid principal balance
plus any unpaid accrued interest thereon, shall be payable in one lump
sum on the earliest of:
(i) October 15, 1999 (or such other due date of the indebtedness as
extended pursuant to Section 4 of the Inventory Finance
Agreement); or
(ii) the termination of the Inventory Finance Agreement; or
(iii) the pay-off date as Lender may specify from time to time under
the terms of the Program.
Borrower may prepay at any time all or part of the principal balance
under this Note without penalty.
All principal and interest, costs and expenses due hereunder are
payable in lawful money of the United States of America.
This Note has been executed and delivered pursuant to the Inventory
Finance Agreement. Terms defined in the Inventory Finance Agreement and not
otherwise defined herein are used herein with the meanings defined for those
terms in the Inventory Finance Agreement. Upon the occurrence of an Event of
Default, the entire principal balance outstanding hereunder plus accrued
interest shall, at the option of Lender, mature and be immediately due and
payable.
The obligations under this Note are secured by the Collateral pledged
by the Borrower to the Lender pursuant to the Inventory Finance Agreement.
Borrower and all others who may become liable for all or any part of
this obligation, hereby waive and renounce presentment, protest, demand and
notice of dishonor and any and all lack of diligence or delays in collection or
endorsement hereof, and expressly consent to any extension of time, release of
any party liable for this obligation or any guaranty of this
3
<PAGE>
obligation, release of any security which may have been or which may hereafter
be granted in connection herewith or any guaranty of this obligation, or any
other indulgence or forbearance which may be made without notice to said party
and without in any way affecting the liability of such party.
Nothing contained herein nor in any transaction related hereto shall
be construed or shall so operate either presently or prospectively (a) to
require the payment of interest at a rate greater than is now lawful in such
case to contract for, but shall require payment of interest only to the extent
of such lawful rate or (b) to require the payment or the doing of any act
contrary to law; but if any clause or provision herein contained shall otherwise
so operate to invalidate this Note and/or the transaction related hereto, in
whole or in part, then such clause(s) and provision(s) only shall be held for
naught as though not contained herein and the remainder of this Note shall
remain operative and in full force and effect.
If for any reason interest in excess of the amount as limited in the
foregoing paragraph shall have been paid hereunder, whether by reason of
acceleration or otherwise, then in that event any such excess interest shall
constitute and be treated as a payment of principal hereunder and shall operate
to reduce such principal by the amount of such excess, or if in excess of the
then principal indebtedness, such excess shall be refunded.
The rights and remedies of Lender as provided in this Note or any
document securing this Note shall be cumulative and concurrent, and may be
pursued singly, successively or together against Borrower, any guarantor of
these obligations or any security for the debt evidenced by this Note, at the
discretion of Lender.
The Borrower agrees that if, and as often as, this Note is placed in
the hands of an attorney for collection, to defend or enforce any of the
Lender's rights hereunder or under any document securing this Note, whether or
not litigation is commenced, Borrower shall pay to Lender its reasonable
attorneys' fees, together with all court costs and other expenses which may be
incurred or paid by Lender in connection therewith.
Failure to exercise any right or option herein given to Lender shall
not constitute a waiver of the right to exercise the same at a later time or
upon the occurrence of any subsequent event permitting such exercise.
This Note and all transactions hereunder and/or evidenced hereby shall
be governed by, construed under and enforced in accordance with the laws of the
State of Georgia.
This Note may not be changed, modified, amended or terminated orally,
but may only be changed, modified, amended or
4
<PAGE>
terminated by an agreement in writing signed by both Borrower and Lender, except
that this paragraph may not be changed, modified, amended or terminated under
any circumstance.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by
its duly authorized officer as of the date first above written.
United Auto Group Atlanta IV Motors, Inc. dba United
BMW
a Georgia corporation
By:________________________________
Name:______________________________
Title:_____________________________
Acknowledged by:
United Auto Group, Inc.
By:_____________________________
Its:____________________________
and as Guarantor of this New Motor
Vehicle Note.
5
<PAGE>
USED MOTOR VEHICLE NOTE
$1,250,000.00 Duluth, Georgia
October _____, 1996
FOR VALUE RECEIVED, the undersigned, United Auto Group Atlanta IV
Motors, Inc., dba United BMW, a Georgia corporation ("Borrower"), promises to
pay to BMW Financial Services NA, Inc., a Delaware corporation ("Lender"), or
order, at its place of business at 300 Chestnut Ridge Road, Woodcliff Lake, New
Jersey 07675, Attention: Robert E. Devine, or at such other place as may be
designated in writing by the holder of this Used Motor Vehicle Note ("Note"), so
much of the principal sum of One Million Two Hundred Fifty Thousand and
no/Dollars ($1,250,000.00), which has been advanced by Lender and remains
outstanding pursuant to the terms of an Inventory Financing and Security
Agreement dated as of October __, 1996 between Borrower and Lender (the
"Inventory Finance Agreement"), together with interest on the unpaid principal
balance advanced hereunder from the date of the Advance until paid, at a
fluctuating interest rate per annum, equal to the Index Rate (as hereinafter
defined), plus an applicable percentage as set forth below and provided,
however, that amounts outstanding with respect to the following types of
Advances cannot exceed the limits listed below:
Applicable
Percentage Rate
Types of Advances Amount Over Index Rate
- ----------------- ------ ---------------
Advances for BMW Used Motor Vehicles $1,000,000.00 0.5%
Advances for non-BMW Used Motor Vehicles $250,000.00 0.75%
The initial Advance, all subsequent Advances and all payments made on
account of principal shall be reflected on monthly statements provided by Lender
to Borrower. From time to time, an Advance requested by the Borrower may cause
an outstanding principal balance ("Over Line Balance") in excess of the maximum
principal amount permitted under this Note; provided, however, Lender shall
notify Borrower pursuant to Lender's most recent monthly statement to Borrower
of the existence of any Over Line Balance and Borrower shall have the right to
instruct Lender in writing within ten (10) days of the date of such statement to
refuse to honor any future drafts from BMW or from any other manufacturer or
distributor of motor vehicles. Lender reserves the right to demand, and
Borrower agrees to execute and deliver upon such demand, a replacement note in a
principal amount, determined solely by Lender, sufficient to cover the then
outstanding principal balance. The aggregate unpaid principal amount shown on
any monthly statement, including any Over Line Balance, shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on this Note. The
failure to record the date and amount of any Advance on such monthly statement
shall not, however, limit or otherwise affect the
6
<PAGE>
obligations of the Borrower under the Inventory Finance Agreement or under this
Note to repay the principal amount of the Advances together with all interest
accruing thereon.
"Index Rate" shall mean the base rate on corporate loans posted by at
least 75% of the nation's thirty (30) largest banks on the last business day of
each calendar month, which is quoted as the "Prime Rate" in the column entitled
"Money Rates" published in THE WALL STREET JOURNAL (in the event no such rate is
published in THE WALL STREET JOURNAL on such date, the Index Rate shall be the
"Prime Rate" shown in such column for the most recent business day preceding the
last business day of such month on which such rate was published) or, in the
event THE WALL STREET JOURNAL does not quote a "Prime Rate", the rate quoted as
the "Prime Rate" in a publication as Lender may, from time to time, hereafter
designate in writing. The Index Rate shall initially be determined by Lender as
of the Business Day preceding the date of the Loan Agreement and shall remain in
effect for the remainder of such calendar month in which such date occurs;
thereafter, the Index Rate shall be determined by Lender on the last Business
Day of each month and the Interest Rate based on such Index Rate shall be in
effect for the following month. Interest shall be calculated on the basis of a
360-day year for actual days elapsed.
Principal and interest hereunder shall be due and payable by Borrower
on the dates and in the manner as follows:
(a) Subject to any payment changes resulting from changes in the Index
Rate, Borrower will pay regular monthly installments of interest only,
due as of each payment date, commencing on the fifteenth (15th) day of
November, 1996, with all subsequent payments to be due on the
fifteenth (15th) day of each month thereafter, and
(b) Any Advance for a Used Motor Vehicle shall be payable on the earliest
of:
(i) forty-eight (48) hours from the time of sale or within twenty
four (24) hours from the time Borrower receives payment by or on
behalf of the purchaser of such Used Motor Vehicle; or
(ii) one hundred eighty (180) days subsequent to the date of an
Advance for a Used Motor Vehicle which is manufactured by BMW;
or
(iii) one hundred twenty (120) days subsequent to the date of an
Advance for a Used Motor Vehicle which is not manufactured by
BMW; and
7
<PAGE>
(c) Unpaid principal balance plus any unpaid accrued interest thereon,
shall be payable in one lump sum on the earliest of:
(i) October 15, 1999 (or such other due date of the indebtedness as
extended pursuant to Section 4 of the Inventory Finance
Agreement); or
(ii) the payoff date as Lender may specify from time to time under
the terms of the Program; or
(iii) the termination of the Inventory Finance Agreement.
Borrower may prepay at any time all or part of the principal balance
under this Note without penalty.
All principal and interest, costs and expenses due hereunder are
payable in lawful money of the United States of America.
This Note has been executed and delivered pursuant to the Inventory
Finance Agreement. Terms defined in the Inventory Finance Agreement and not
otherwise defined herein are used herein with the meanings defined for those
terms in the Inventory Finance Agreement. Upon the occurrence of an Event of
Default, the entire principal balance outstanding hereunder plus accrued
interest shall at the option of Lender, mature and be immediately due and
payable.
The obligations under this Note are secured by the Collateral pledged
by the Borrower to the Lender pursuant to the Inventory Finance Agreement.
Borrower and all others who may become liable for all or any part of
this obligation, hereby agree to be jointly and severally bound, and jointly and
severally waive and renounce presentment, protest, demand and notice of dishonor
and any and all lack of diligence or delays in collection or endorsement hereof,
and expressly consent to any extension of time, release of any party liable for
this obligation or any guaranty of this obligation, release of any security
which may have been or which may hereafter be granted in connection herewith or
any guaranty of this obligation, or any other indulgence or forbearance which
may be made without notice to said party and without in any way affecting the
liability of such party.
Nothing contained herein nor in any transaction related hereto shall
be construed or shall so operate either presently or prospectively (a) to
require the payment of interest at a rate greater than is now lawful in such
case to contract for, but shall require payment of interest only to the extent
of such lawful rate or (b) to require the payment or the doing of any act
contrary to law; but if any clause or provision herein contained
8
<PAGE>
shall otherwise so operate to invalidate this Note and/or the transaction
related hereto, in whole or in part, then such clause(s) and provision(s) only
shall be held for naught as though not contained herein and the remainder of
this Note shall remain operative and in full force and effect.
If for any reason interest in excess of the amount as limited in the
foregoing paragraph shall have been paid hereunder, whether by reason of
acceleration or otherwise, then in that event any such excess interest shall
constitute and be treated as a payment of principal hereunder and shall operate
to reduce such principal by the amount of such excess, or if in excess of the
then principal indebtedness, such excess shall be refunded.
The rights and remedies of Lender as provided in this Note or any
document securing this Note shall be cumulative and concurrent, and may be
pursued singly, successively or together against Borrower, any guarantor of
these obligations or any security for the debt evidenced by this Note, at the
discretion of Lender.
The Borrower agrees that if, and as often as, this Note is placed in
the hands of an attorney for collection to defend or enforce any of the Lender's
rights hereunder or under any document securing this Note, whether or not
litigation is commenced, Borrower shall pay to Lender its reasonable attorneys'
fees, together with all court costs and other expenses which may be incurred or
paid by Lender in connection therewith.
Failure to exercise any right or option herein given to Lender shall
not constitute a waiver of the right to exercise the same at a later time or
upon the occurrence of any subsequent event permitting such exercise.
This Note and all transactions hereunder and/or evidenced hereby shall
be governed by, construed under and enforced in accordance with the laws of the
State of Georgia.
This Note may not be changed, modified, amended or terminated orally,
but may only be changed, modified, amended or terminated by an agreement in
writing signed by both Borrower and Lender, except that this paragraph may not
be changed, modified, amended or terminated under any circumstance.
9
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by
its duly authorized officer as of the date first above written.
United Auto Group Atlanta IV Motors,
Inc., dba United BMW
a Georgia corporation
By:________________________________
Name:______________________________
Title:_____________________________
Acknowledged by:
United Auto Group, Inc.
By:_____________________________
Its:____________________________
and as Guarantor of this Used Motor
Vehicle Note.
10
<PAGE>
GUARANTY
This GUARANTY is made and entered as of October __, 1996 (the "Effective
Date") from United Auto Group, Inc., a New York corporation, (the "Guarantor")
to BMW FINANCIAL SERVICES NA, INC. (together with such party's successors and
assigns, referred to as "Secured Party").
WITNESSETH:
In consideration of any loan or other financial accommodation heretofore or
hereafter at any time made or granted to any Dealer (as defined below), the
Guarantor agrees as follows:
1. DEFINITIONS
a. "DEALER" shall mean any one of the following entities listed below,
including any subsidiaries or affiliates of such entities, whether now in
existence or hereinafter established or acquired:
United Auto Group Atlanta IV Motors, Inc., a Georgia corporation
b. "INDEBTEDNESS" shall mean any obligation or indebtedness of any kind of
any Dealer to Secured Party, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, renewed or extended, or now or
hereafter existing or due to become due.
2. GUARANTY
a. GUARANTY OBLIGATIONS. The Guarantor hereby unconditionally and
absolutely guarantees (i) the full and prompt payment when due, whether by
acceleration or otherwise, and at all times hereafter, of all Indebtedness and
(ii) the full and prompt performance of all the terms, covenants, conditions and
agreements related to the Indebtedness. The Guarantor further agrees to pay all
expenses, including without limitation, attorneys' fees and court costs, paid or
incurred by Secured Party in endeavoring to collect the Indebtedness, or any
part thereof, and in enforcing the Guaranty, plus interest on such amounts at
the lesser of 12% per annum or the maximum rate permitted by law. Interest on
such amounts paid or incurred by Secured Party shall be computed from the date
of payment made by Secured Party and shall be payable on demand.
b. ABSOLUTE AND UNCONDITIONAL NATURE OF THE GUARANTY. The Guarantor
acknowledges that this Guaranty is a guaranty of payment and not of collection,
and that its obligations hereunder shall be absolute, unconditional and
unaffected by:
<PAGE>
(i) the waiver of the performance or observance by any Dealer of any
agreement, covenant, term or condition to be performed or observed by such
Dealer;
(ii) the extension of time for the payment of any sums owing or
payable with respect to the Indebtedness or the time for performance of any
other obligation arising out of the Indebtedness;
(iii) the modification, alteration or amendment of any obligation
arising out of the Indebtedness;
(iv) the failure, delay or omission by Secured Party to enforce,
assert or exercise any right, power or remedy in connection with the
Indebtedness;
(v) the genuineness, validity, or enforceability of the Indebtedness
or any document related thereto;
(vi) the existence, value or condition of, or failure of Secured Party
to perfect its lien against, any security pledged in connection with the
Indebtedness;
(vii) the release of any security pledged in connection with the
Indebtedness or the release, modification, waiver or failure to enforce any
other guaranty, pledge or security agreement;
(viii) the voluntary or involuntary liquidation, dissolution, sale of
all or substantially all of the property, marshaling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment or other similar
application or proceeding affecting any Dealer or any assets of any Dealer; or
(ix) the release or discharge of any Dealer from the performance or
observance of any agreements, covenants, terms or conditions in connection with
the Indebtedness by operation of law or otherwise.
c. CONTINUING AND UNLIMITED NATURE OF THE GUARANTY. The obligations of
the Guarantor under this Guaranty shall be continuing and shall cover all
Indebtedness existing as of the Effective Date of this Guaranty and Indebtedness
existing at the time of termination of this Guaranty. This Guaranty shall be
unlimited in amount and shall continue in effect until the Guaranty is
terminated pursuant to SECTION 3 hereof.
d. WAIVERS BY GUARANTOR. The Guarantor hereby expressly waives: (i)
notice of the acceptance by Secured Party of this Guaranty; (ii) notice of the
existence or creation or non-payment of all or any of the Indebtedness; (iii)
presentment, demand, notice of dishonor, protest, and all other notices
whatsoever,
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<PAGE>
and (iv) diligence in collection or protection of or realization upon the
Indebtedness, or any part thereof, any obligation under this Guaranty or any
security for or guaranty of any of the foregoing.
e. AUTHORIZATION. If the Guarantor is a corporation, this Guaranty has
been expressly authorized by Guarantor's Board of Directors pursuant to a Board
of Director's resolution in form and substance satisfactory to Secured Party.
f. ENFORCEMENT. In no event shall Secured Party have any obligation to
proceed against any Dealer, any other entity or any security pledged in
connection with the Indebtedness before seeking satisfaction from the Guarantor.
Secured Party may, at its option, proceed, prior or subsequent to, or
simultaneously with, the enforcement of its rights hereunder, to exercise any
right or remedy it may have against any Dealer, any other entity or any security
pledged in connection with the Indebtedness.
g. REINSTATEMENT. The Guarantor agrees that if at any time all or any
part of any payment theretofore applied by Secured Party to any of the
Indebtedness is or must be rescinded or returned by Secured Party for any reason
whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of any Dealer), such Indebtedness shall, for purposes of this
Guaranty, to the extent that such payment is or must be rescinded or returned,
be deemed to have continued in existence, notwithstanding such application by
Secured Party, and this Guaranty shall continue to be effective or reinstated,
as applicable, as to such Indebtedness, all as though such application by
Secured Party had not been made.
3. TERMINATION
a. PAYMENT OF INDEBTEDNESS. This Guaranty shall be terminated upon: (i)
the payment by Dealer or the Guarantor, either jointly or severally, of the
aggregate amount of Indebtedness outstanding, and (ii) the payment of all
obligations by the Guarantor which may be due to Secured Party under this
Guaranty.
b. REVOCATION. This Guaranty may be revoked by the Guarantor upon ninety
(90) days' written notice to Secured Party, by certified mail, to the address
set forth below in SECTION 5(c), or at such other address as Secured Party may
from time to time specify. Such revocation shall in no way terminate or
otherwise affect: (i) any obligations of the Guarantor existing on or prior to
the effective date of such revocation or (ii) any obligations of the Guarantor
arising after the effective date of such revocation with respect to any
Indebtedness incurred by any Dealer to Secured Party on or before the effective
date of such revocation.
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<PAGE>
4. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default hereunder:
a. If Guarantor fails to make any payment hereunder and such failure
shall continue for five (5) days after written notice from Secured Party;
b. If Guarantor fails to perform or observe any agreement, covenant, term
or condition contained in this Guaranty (other than the monetary obligations
described in SECTION 4(a) above) and such failure shall continue for thirty (30)
days after written notice from Secured Party;
c. If Guarantor makes an assignment for the benefit of creditors or fails
to pay its debts as the same become due and payable;
d. If Guarantor petitions or applies to any tribunal for the appointment
of a trustee or receiver of the business, estate or assets or of any substantial
portion of the business, estate or assets of Guarantor, or commences any
proceedings relating to Guarantor under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect;
e. If any such petition or application is filed or any such proceedings
are commenced against Guarantor and Guarantor by any act indicates its approval
thereof, consent thereto or acquiescence therein, or any order is entered
appointing any such trustee or receiver, or declaring Guarantor bankrupt or
insolvent, or approving the petition in any such proceedings; or
f. Any suit or proceeding shall be filed against any Dealer or Guarantor,
which, if adversely determined could, substantially impair the ability of the
Guarantor or such Dealer to perform any of their obligations with respect to
this Guaranty or the Indebtedness, as determined by Secured Party in its sole
and absolute discretion.
If an Event of Default under this Guaranty shall have occurred, in addition
to pursuing any remedies which may be available to Secured Party with respect to
the Indebtedness, Secured Party, at its option, may take whatever action at law
or in equity Secured Party may deem necessary, regardless of whether Secured
Party shall have exercised any of its rights or remedies with respect to any of
the Indebtedness, and Secured Party may demand, at its option, that the
Guarantor pay forthwith the full amount which would be due and payable hereunder
as if all Indebtedness were then due and payable.
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<PAGE>
5. GENERAL
a. ENTIRE AGREEMENT. This Guaranty contains the entire and only
agreement between the Guarantor and Secured Party with respect to the guaranty
of Indebtedness and any representation, promise, condition or understanding in
connection therewith which is not expressed in this Guaranty shall not be
binding upon the Guarantor or Secured Party. All prior understandings and
agreements related to the guaranty of the Indebtedness shall be superseded by
this Guaranty as of the Effective Date.
b. APPLICATION OF PAYMENTS; SUBROGATION. Any amounts received by Secured
Party from any source on account of the Indebtedness may be applied by it toward
the payment of such of the Indebtedness, and in such order of application, as
Secured Party may from time to time elect. Notwithstanding any payments made by
or for the account of the Guarantor, the Guarantor shall not be subrogated to
any rights of Secured Party until such time as this Guaranty has been terminated
in accordance with SECTION 3(a) above.
c. NOTICES. All notices to the Guarantor shall be forwarded by express
mail for overnight delivery to the address set forth below the Guarantor's
signature, or such other address as the Guarantor may from time to time specify
in writing to Secured Party. All notices to Secured Party shall be forwarded by
express mail for overnight delivery (except for the notice given pursuant to
SECTION 3(b))to the following address: BMW Financial Services NA, Inc., 300
Chestnut Ridge Road, Woodcliff Lake, New Jersey 07675, Attention: Robert E.
Devine, or such other address as Secured Party may specify to the Guarantor in
writing.
d. GOVERNING LAW; SEVERABILITY. This Guaranty shall be governed by the
laws of the State of Georgia. Wherever possible, each provision of this
Guaranty shall be interpreted in such manner to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, the remaining provisions of this Guaranty shall remain
in full force and effect.
e. SUCCESSORS AND ASSIGNS. All guaranties and agreements contained in
this Guaranty shall bind the legal representatives, heirs, successors and
assigns of the Guarantor.
f. REFERENCES TO GUARANTOR. Each reference to Guarantor herein shall be
deemed to include the legal representatives, heirs, officers, employees and
agents of the Guarantor and their respective successors and assigns.
g. RIGHTS AND REMEDIES OF SECURED PARTY. No delays 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 power or right
hereunder or the failure
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<PAGE>
to exercise same in any instance preclude other or further exercise of any other
power or right, nor shall Secured Party be liable for exercising or failing to
exercise any such power or right. The rights and remedies hereunder are
cumulative and not exclusive of any rights or remedies which Secured Party may
or will otherwise have.
h. FINANCIAL STATEMENTS. Upon Lender's request, Guarantor will provide
Lender with Guarantor's audited financial statements as certified by Guarantor's
independent certified public accountant or such other financial statements and
information as Lender may request from time to time.
i. AMENDMENTS. This Guaranty may not be modified or amended except by a
writing duly executed by the Guarantor. Any such modification or amendment must
be expressly consented to in writing by Secured Party.
WHEREAS, this Guaranty has been executed and delivered by the Guarantor to
Secured Party as of the Effective Date.
GUARANTOR:
-------------------------
a corporation
---------------------
By:
--------------------------------
Address:
---------------------------
---------------------------
ATTEST:
- --------------------
Secretary
State of Georgia )
) SS.
County of )
On the __ day of October, in the year 1996, before me personally came
_______ personally known to me to be the President and ____________ personally
known to me to be the Secretary of United Auto Group, Inc., a Georgia
corporation; that such persons are the same persons described in and who
executed the above Guaranty; that such persons acknowledged that as such
__________President and _______________Secretary, they signed, sealed and
delivered the above Guaranty pursuant to authority given by the Board of
Directors of said Corporation and as their free and voluntary act and as the
free and voluntary act of said Corporation, for the uses and purposes therein
set forth.
------------------------------
Notary Public
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<PAGE>
10.10.2 [Reserved for future use.]
[This Exhibit has been reserved by the Company for future use.]
<PAGE>
Exhibit 10.10.3
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") made this ____ day of October, 1996, by
and between STANDEFER INVESTMENT COMPANY, a Tennessee limited partnership
("Landlord"), and STANDEFER MOTOR SALES, INC., a Tennessee corporation
("Tenant").
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
7.52 acres, lying and being in Hamilton County, City of
Chattanooga, Tennessee and being more particularly described
on EXHIBIT A, attached hereto and incorporated by reference
herein, and being known as 2121 Chapman Road, Chattanooga,
Tennessee 37421,
together with all improvements, fixtures and equipment 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 October 31, 2016 ("Term").
3. RENT.
(a) From the commencement date through October 31, 2001, Tenant
agrees to pay Landlord, as rent for the Premises ("Rent") the sum of Twenty
Seven Thousand Five Hundred and no/100 ($27,500) Dollars per month.
(b) On November 1, 2001, the monthly Rent shall be adjusted to an
amount equal to nine-tenths of one percent (0.9%) of the then Appraised Value
(as hereinafter defined and determined)
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<PAGE>
and such adjusted Rent shall be payable monthly through October 31, 2006.
(c) On November 1, 2006, the monthly Rent shall be adjusted to an
amount equal to one percent (1%) of the then Appraised Value and such adjusted
Rent shall be payable monthly through October 31, 2011.
(d) On November 1, 2011, the monthly Rent shall be adjusted to an
amount equal to one percent (1%) of the then Appraised Value and such adjusted
Rent shall be payable monthly through October 31, 2016.
(e)(i) For purposes of this Lease, the Appraised Value shall be the
fair market value, in fee simple, unencumbered by this Lease, of the Premises
assuming, however, that the Premises is used and will be used as a car
dealership (and not necessarily for the highest and best use of the Premises)
and if any income analysis is utilized in determining such fair market value,
the fact that Landlord will not be obligated to pay taxes, insurance or
operating expenses of such car dealership shall be taken into account.
(ii) In determining the Appraised Value, no later than six (6) months
prior to each adjustment date provided above, Landlord shall give notice to
Tenant of five independent MAI appraisers from either Chattanooga, Tennessee or
Atlanta, Georgia certifying in such submittal to Tenant that Landlord has not
discussed the appraisal called for hereunder with any such appraisers and that
such appraisers are independent of Landlord. Within thirty (30) days after
receipt of such submittal from Landlord, Tenant shall either chose one (1)
appraiser that is acceptable to Tenant or reject them all and, if Tenant rejects
all such proposed appraisers, Tenant shall submit the names of five (5)
appraisers to Landlord having the same qualifications and with Tenant's
certification as provided above and Landlord shall pick one (1) such appraiser
to conduct the appraisal called for hereunder.
(iii) The appraiser so chosen shall conduct its appraisal and issue
its written report to
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<PAGE>
Landlord and Tenant within thirty (30) days after being so chosen.
(iv) If Landlord fails to timely provide its list of appraisers to
Tenant, Tenant shall have the right to provide its list to Landlord within
thirty (30) days after Landlord was to have submitted its list to Tenant and
Landlord shall then have the right to chose one (1) appraiser within thirty (30)
days after Tenant's list is submitted to Landlord.
(v) Any dispute concerning the qualifications of the appraisers or
whether the appraiser utilized the proper standard for appraisal as provided
above, shall be resolved by the American Arbitration Association utilizing its
commercial arbitration rules as soon as possible ("Arbitration") and, until any
such dispute is resolved, the Tenant shall continue paying Rent at the previous
amount. After the resolution of such dispute, if any additional amounts of Rent
are due in excess of the amounts previously paid by Tenant, Tenant shall pay
such excess within thirty (30) days after the Arbitration decision. The cost of
the Arbitration shall be paid by the non-prevailing party in the Arbitration and
the arbitrators shall decide which is the prevailing party.
(vi) Notwithstanding the foregoing, at any Rent adjustment, Rent shall
not be reduced below the adjusted Rent for the immediately preceding period.
(vii) The cost of the appraisal shall be borne equally by Landlord and
Tenant.
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 thirty (30) days 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 for the
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<PAGE>
operation of a new and used automobile dealership, service facility, paint and
body shop facility, and uses incidental thereto, and for any other purposes
which may be agreed to by the parties. 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 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. By its execution hereof, Tenant does not waive whatever rights it may
have in law or equity against any person or entity in the event such existing
contaminants or such future contamination affects the Premises.
6. REPRESENTATION. Landlord hereby represents and warrants that:
(1) The Premises are adequate for the conduct of the respective
businesses of the Tenant as presently conducted;
(2) To the knowledge of the Landlord, the Premises conform in all material
respects with all applicable laws, ordinances, rules and regulations and other
Legal Requirements (as hereinafter defined) and no improvements thereon encroach
in any respect on property of others. For purposes hereof, Legal Requirements
shall mean all laws, ordinances, codes, rules, regulations, standards, judgments
and other requirements of all governmental, administrative or judicial entities;
(3) To the knowledge of the Landlord, there are no latent defects with
respect to the Premises;
(4) The Premises is currently zoned to permit the conduct of the
respective businesses of the
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<PAGE>
Tenant as presently conducted;
(5) To the knowledge of the Landlord, no Certificate of Occupancy is
required with respect to the Premises;
(6) To the knowledge of the Landlord, all utilities servicing the Premises
are provided by publicly-dedicated utility lines and are located within public
rights-of-way and do not cross or encumber any private land;
(7) 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 Landlord with respect to the Premises;
(8) (i) Except as set forth in Schedule 2.11(a) of that certain Stock
Purchase Agreement (the "SPA") dated September 5, 1996 by and among United Auto
Group, Inc., Charles A. Standefer, Tenant and others, the Premises and any
property formerly owned, occupied or leased by the Landlord are in compliance
with all Environmental Laws (as defined below), (ii) the Landlord has obtained
all Environmental Permits (as defined below), (iii) such Environmental Permits
are in full force and effect, and (iv) the Landlord is in 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)
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<PAGE>
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 Landlord's business or the Premises including, but
not limited to, underground storage tanks. As used herein, "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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(9) To the knowledge of the Landlord, the Landlord has not violated, done
or suffered any act which could give rise to liability under, and neither it nor
the Premises are otherwise exposed to liability under, any Environmental Law.
To the knowledge of the Landlord, no event has occurred with respect to the
Premises or any property formerly owned, occupied or leased by the Landlord,
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. To the knowledge of the Landlord, the Landlord has no contingent liability
under any Environmental Law. There are no liens under any Environmental Law on
the Premises;
(10) (i) Except as set forth on Schedule 2.11(c) of the SPA, neither the
Landlord, the Premises or any portion thereof, or any property formerly owned,
occupied or leased by the Landlord, nor, to the knowledge of the Landlord, any
property adjacent to the Premises 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 and there has been no spill, release or migration of any Hazardous
Materials on or under the Premises and no Hazardous Material is present on or
under the Premises (provided, however, that certain petroleum products are
stored and handled on the Premises in the ordinary course of the Tenant's
business but such are in compliance with all Environmental Laws including the
existing regulations of the United States Environmental Protection Agency and
the State of Tennessee requiring spill protection, overfill protection and
corrosion protection by December 22, 1998), (ii) to the knowledge of the
Landlord, none of the Premises or portion thereof or any property formerly
owned, occupied or leased by the Landlord 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) to the knowledge
of the Landlord, none of the Premises or any property formerly owned, occupied
or leased by the Landlord or any site or location
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where the Landlord 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.
(11) Except as set forth on Schedule 2.11(d) of the SPA, to the knowledge
of the Landlord, 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 Premises, nor have any liens been placed upon any portion of the Premises or
any property formerly owned, occupied or leased by the Landlord in connection
with any actual or alleged liability under any Environmental Law.
(12) Except as set forth on Schedule 2.11(e) of the SPA, (i) there is
no pending or, to the knowledge of Landlord, threatened claim, litigation, or
administrative proceeding or known prior claim, litigation or administrative
proceeding arising under any Environmental Law involving the Premises, any
property formerly owned, leased or occupied by Tenant or Landlord, any offsite
contamination affecting the Premises or any operations conducted thereat, (ii)
there are no ongoing negotiations with or agreements with any governmental
authority relating to any Remedial Action or other
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environmentally related claim, (iii) Landlord has not submitted a 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) Landlord 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 Landlord's knowledge, has any other entity whose liability therefore, in
whole or in part, may be attributed to Landlord, received such notice, claim,
demand, suit or request for information.
(13) Landlord owns the Premises in fee simple, free and clear of all Liens
(as hereinafter defined) claims and encumbrances, except those disclosed in
Exhibit "B" attached hereto and incorporated herein by reference, none of which
currently or, to Landlord's knowledge, in the future will affect the use of the
Premises for the conduct of the respective businesses of the Tenant as presently
conducted. For purposes hereof, 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. 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 Premises. No one has
been granted any right to purchase or lease the Premises.
(14) Landlord is a Tennessee limited partnership in good standing and the
only general partners thereof are Charles A. Standefer and Charles B. Standefer.
Landlord shall indemnify and agrees to fully defend, save and hold harmless
on an after-tax basis Tenant and any of its officers, directors, employees,
stockholders, advisors, representatives, agents and Affiliates (as defined in
the SPA)(each a "UAG Indemnified Party"), if a UAG Indemnified Party shall at
any time or from time to time suffer any Costs (as hereinafter defined) arising,
directly or indirectly,
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out of or resulting from, or shall pay or become obligated to pay any sum on
account of any untruth or inaccuracy in any representation or warranty of
Landlord provided herein and upon notice from a UAG Indemnified Party, Landlord
agrees to defend, contest or otherwise protect such UAG Indemnified Party
against third party claims at its sole cost and expense and otherwise pay all
Costs. Each UAG Indemnified Party shall have the right, but not the obligation,
to participate at its own expense in the defense thereof by counsel of its
choice. If Landlord fails timely to defend, contest or otherwise protect
against any third party claim, the UAG Indemnified Party shall have the right to
do so including, without limitation, the right to make any compromise or
settlement thereof and each UAG Indemnified Party shall be entitled to recover
the entire Costs thereof from Landlord including, without limitation, attorney's
fees, disbursements and amounts paid (or of which the UAG Indemnified Party has
become obligated to pay) as the result of any third party claim. Failure by
Landlord to notify the UAG Indemnified Party of its election to defend any third
party claim within fifteen (15) days after notice thereof shall have been given
to Landlord, shall be deemed a waiver by Landlord of its right to defend the
third party claim. If Landlord assumes the defense of the particular third
party claim, Landlord shall not consent to entry of any judgment or enter into
any settlement, except with the written consent of the affected UAG Indemnified
Party. In addition, Landlord shall not enter into any settlement of any third
party claim which does not include as an unconditional term thereof the giving
by the claimant to the UAG Indemnified Party a full release from all liability
in respect of such third party claim. Notwithstanding the foregoing, Landlord
shall not be entitled to control, and the UAG 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 UAG Indemnified Party which, if successful, could
materially interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the UAG Indemnified Party. In
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addition to and not in limitation of all rights of offset that a UAG Indemnified
Party may have under applicable law, Landlord and Tenant agree that, at Tenant's
option, any or all amounts owing to Tenant as a result of Landlord's
indemnification and hold harmless hereunder, may be recovered by Tenant as an
offset against any or all amounts due to Landlord. The rights of a UAG
Indemnified Party hereunder are in addition to such other rights and remedies
which such UAG Indemnified Party may have under this Lease, applicable law or
otherwise. Landlord and Tenant agree that notwithstanding anything herein to
the contrary, no UAG Indemnified Party shall be entitled to indemnification for
any Costs hereunder unless the aggregate amount of Costs incurred by all UAG
Indemnified Parties under the SPA and hereunder exceeds $200,000, in which event
each UAG Indemnified Party shall be entitled to indemnification for all Costs
thereafter. For purposes hereof, "Costs" shall mean all liabilities, losses,
costs and actual damages (not including consequential damages) and reasonable
expenses, reasonable attorney's fees, reasonable experts fees, reasonable
consultant's fees and reasonable disbursements of any kind or of any nature
whatsoever. The amount of any Costs arising from the breach of any
representation, warranty, covenant or agreement shall be the entire amount of
any Costs suffered, paid or required to be paid by the respective UAG
Indemnified Party as a result of such breach. Costs arising or resulting
hereunder shall be reduced to the extent of the amount of any tax savings
resulting from the indemnified matter to which such Costs relate which are
actually realized (or can be reasonably be expected to be realized in future
years) by the UAG Indemnified Party.
7. REPAIRS BY LANDLORD. Landlord shall be obligated to repair and
maintain the roof, foundation and all structural portions of the Premises. All
other repairs, replacements, and maintenance of any kind shall be the sole
responsibility of Tenant except to the extent the necessity therefor arose as a
result of a breach of the representations or warranties contained in Section 6
above.
8. REPAIRS BY TENANT. Subject to the representations and warranties of
Landlord provided in
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Section 6 above, Tenant accepts the condition of the Premises as of the date
hereof and agrees that the Premises are suited for the uses specified herein and
Tenant shall, throughout the Term, at its expense, maintain the Premises in good
order and repair, including but not limited to repair and maintenance of the
electrical, heating, ventilation and air conditioning and plumbing systems.
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 thirty (30) days prior written notice to
Tenant, maintain the same 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
ten percent (10%) per annum ("Interest Rate"). Subject to Landlord's repair
obligations hereunder, 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 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
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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 to greater than seventy-five percent (75%) of the value
of the improvements upon the Premises; 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 ninety (90) days after the date of such damage or
destruction. If this Lease is terminated by Tenant, insurance proceeds with
respect to the building, structure and fixtures 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 and shall resume upon
recompletion to substantially the condition in which the Premises existed prior
to such damage or destruction; provided, however, that the rental abatement
shall be proportional to the extent to which the Premises are not useable (with
greater weight given to Tenant's inability to use the improved portions of the
Premises and its impact on revenues to Tenant) by Tenant and if the parties are
unable to agree upon the appropriate rental abatement either party may demand
Arbitration and Tenant shall pay Rent on the basis of the average of its
estimate of the abated Rent and Landlord's estimate of the abated Rent, with any
additional amount due to be paid within thirty (30) days after the arbitrator's
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determination and any excess to be either, at Tenant's option, credited against
the next due installment(s) of Rent or paid by Landlord to Tenant within thirty
(30) days of the arbitrator's decision.
11. INDEMNITY; WAIVER OF SUBROGATION. Subject to Landlord's obligations,
representations and warranties in this Lease, Tenant agrees to indemnify and
hold harmless Landlord against all claims and expenses, including actual
attorneys' fees reasonably incurred 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 $5,000,000 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 for all
wage earners for Chattanooga, Tennessee 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 structural alterations, additions
or improvements to the Premises without the express prior written consent of
Landlord which consent shall not be unreasonably withheld or delayed, except
that Tenant may alter any wall that is not of a load-bearing nature without the
consent of Landlord so long as Tenant gives notice to Landlord of its intent to
do so no less than twenty (20) days prior to such alteration. Alterations,
additions and improvements shall be Tenant's property during the Term of this
Lease. Tenant may make non-structural changes and
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modifications to the Premises without Landlord's approval. In the event
Landlord has not responded to Tenant's written request for alterations within
twenty (20) 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
request. 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, (iii) those changes 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. In the event Tenant grants a Deed of Trust
or other security interest with respect to its leasehold estate hereunder,
Landlord agrees to give the holder of such interest notice of any default by
Tenant and allow such holder thirty (30) days to cure such default or exercise
rights to acquire Tenant's interest in this Lease or cause another to acquire
Tenant's interest in this Lease before Landlord exercises its rights upon
default of Tenant under Sections 17 or 18 hereof and Landlord will not treat the
transfer of Tenant's rights hereunder as a result of such action as a transfer
or assignment requiring Landlord's consent under Section 15 of the Lease.
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
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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 as to the
remaining portion of the Premises 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 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) all condemnation awards shall be paid to Tenant to hold for
payment of repair and restoration to the 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
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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 twenty (20) days after receipt of Tenant's
written request with specific 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 as aforesaid. 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, 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 at the end of the Term of this Lease.
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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 receipt of 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
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 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 and such
petition is not dismissed with prejudice 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
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
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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".
19. 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.
20. 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 the Premises or Tenant's use thereof without
the prior written
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consent of Tenant, which may be withheld in Tenant's sole discretion.
21. SUBORDINATION ATTORNMENT. Landlord represents that there is no Deed
of Trust or Mortgage with respect to the Premises currently in force. Should
Landlord ever give a Deed of Trust or Mortgage with respect to the Premises,
Landlord shall provide Tenant a Subordination, Non-Disturbance and Attornment
Agreement from such lender in the form attached hereto and incorporated herein
by reference as EXHIBIT "C" ("SNDA"). 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
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.
22. 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.
23. RIGHTS CUMULATIVE. All rights hereunder shall be cumulative but not
restrictive to those given by law.
24. 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
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recognized overnight courier (e.g. Federal Express or DHL), next business day
delivery, charges prepaid, addressed to the parties at
Landlord: Standefer Investment Company
3175 Kings Road
Chattanooga, Tennessee 37416
with a Ralph E. Tallant, Jr., Esq.
copy to: Gearhiser, Peters, Lockaby & Tallant
320 McCallie Avenue
Chattanooga, TN 37402
Tenant: Standefer Motor Sales, Inc.
c/o United Auto Group, Inc.
375 Park Avenue
Suite 2201
New York, New York 10152
Attn: George G. Lowrance, Esq.
with a
copy to: Stephen R. Leeds, Esq.
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
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 deposit in the U.S. mail, or on the next business day if delivered by
overnight courier, or immediately upon delivery in person.
25. 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.
26. TIME OF ESSENCE. Time is of the essence under this Lease.
27. SUCCESSORS AND ASSIGNS. This Lease shall apply to, inure to the
benefit of, and be binding
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<PAGE>
upon the parties hereof and their respective successors, permitted assigns, and
legal representatives except as otherwise expressly provided herein.
28. ENTIRE AGREEMENT; CONFLICT. This Lease, including any attachments
made a part hereof or thereof, contains the entire agreement between the parties
with respect to the lease of the Premises and no representations, inducements,
promises or agreements, oral or otherwise, between the parties, not embodied
herein shall be of any force or effect. The parties agree to execute and record
a memorandum of this Lease in the real property records of Hamilton County,
Tennessee. Notwithstanding the foregoing, however, nothing in this Lease shall
affect any rights of United Auto Group, Inc. or UAG Tennessee, Inc. under the
SPA.
29. 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.
30. 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.
31. AMENDMENT. This Lease may not be altered, waived, amended or extended
except by an instrument in writing signed by Landlord and Tenant.
32. 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.
33. GOVERNING LAW. This Lease shall be construed in accordance with the
laws of the State
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<PAGE>
of Tennessee, and all obligations of the parties created hereunder are
performable in Hamilton County, Tennessee.
34. 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.
35. EXTENSION OPTIONS. (a) Tenant shall have the option to extend the
term of this Lease for an additional five (5) years commencing on November 1,
2016 and ending at midnight October 31, 2021. To exercise such option, Tenant
shall give Landlord notice of its exercise of such option on or before April 30,
2016. If Tenant exercises such option the monthly Rent shall be adjusted to one
and five one-hundredths (1.05%) percent of the then Appraised Value during such
extended term as determined in accordance with the provisions of Section 3(e)
above; provided however, Landlord shall provide the list of five (5) appraisers
within thirty (30) days after Tenant's notice of its exercise of the option
provided herein.
(b) Tenant shall also have the option to extend the term of this Lease for
an additional five (5) years commencing on November 1, 2021 and ending at
midnight October 31, 2026. To exercise such option Tenant shall give Landlord
notice of its exercise of such option on or before April 30, 2021. If Tenant
exercises such option the monthly Rent shall be adjusted to one and five one-
hundredths (1.05%) percent of the then Appraised Value during such extended term
as determined in accordance with the provisions of Section 3(e) above; provided
however, Landlord shall provide the list of five (5) appraisers within thirty
(30) days after Tenant's notice of its exercise of the option provided herein.
IN WITNESS WHEREOF, the parties herein have hereunto caused their duly
authorized
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<PAGE>
representatives to set their hands and seals the day and year first above
written.
LANDLORD:
STANDEFER INVESTMENT COMPANY,
a Tennessee limited partnership
By: /S/ Charles A. Standefer
---------------------------
Name: Charles A. Standefer
Title: General Partner
By: /S/ Charles B. Standefer
---------------------------
Name: Charles B. Standefer
Title: General Partner
TENANT:
STANDEFER MOTOR SALES, INC.
a Tennessee Corporation
By: /S/
---------------------------
Name:
------------------------
Title:
------------------------
[Corporate Seal]
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<PAGE>
STATE OF _________________)
COUNTY OF ________________)
Personally appeared before me, ___________________, Notary Public,
_______________________________, with whom I am personally acquainted, and who
acknowledged that he/she executed the within instrument for the purposes therein
contained, and who further acknowledged that he/she is the
_______________________ of Standefer Motor Sales, Inc. and is authorized by
Standefer Motor Sales, Inc. to execute this instrument on behalf of Standefer
Motor Sales, Inc.
WITNESS my hand, at office, this _____ day of October, 1996.
_________________________________
Notary Public
My Commission Expires:
-25-
<PAGE>
STATE OF _________________)
COUNTY OF ________________)
Personally appeared before me, ___________________, Notary Public,
_______________________________, with whom I am personally acquainted, and who
acknowledged that he executed the within instrument for the purposes therein
contained, and who further acknowledged that he is one of the General Partners
of Standefer Investment Company and is authorized by Standefer Investment
Company to execute this instrument on behalf of Standefer Investment Company.
WITNESS my hand, at office, this _____ day of _______________, 1996.
_________________________________
Notary Public
My Commission Expires:
-26-
<PAGE>
STATE OF _________________)
COUNTY OF ________________)
Personally appeared before me, ___________________, Notary Public,
_______________________________, with whom I am personally acquainted, and who
acknowledged that he executed the within instrument for the purposes therein
contained, and who further acknowledged that he is one of the General Partners
of Standefer Investment Company and is authorized by Standefer Investment
Company to execute this instrument on behalf of Standefer Investment Company.
WITNESS my hand, at office, this _____ day of _______________, 1996.
_________________________________
Notary Public
My Commission Expires:
-27-
<PAGE>
LEASE GUARANTY
The undersigned, in order to induce Standefer Investment Company, a
Tennessee Limited Partnership ("SIC") to enter into that certain Lease Agreement
(herein so called) dated as of October ___, 1996, between SIC and Standefer
Motor Sales, Inc., a Tennessee corporation d/b/a Standefer Nissan (the
"Company"), a Tennessee corporation and a subsidiary of UAG Tennessee, Inc., a
Delaware corporation that is wholly owned by the undersigned, hereby
unconditionally and irrevocably guarantees the payment of any amounts required
to be paid by the Company and the performance of all other obligations of the
Company under the Lease Agreement.
The undersigned hereby waives presentment, protest, notice of dishonor,
extension of time of payment and notice of acceptance of this Guaranty and
hereby consents to any and all forbearances 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.
No delay or omission by SIC in exercising any of its rights, remedies,
powers and privileges hereunder and no course of dealing between SIC, on the one
hand, and the Company, the undersigned or any other person, on the other hand,
shall be deemed a waiver by SIC of any of its 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 SIC or the exercise of any other right,
remedy, power or privilege by SIC. No notice or demand on the Company, the
undersigned or any other person in any instance shall entitle the Company, the
undersigned or any other person to any other or further notice or demand in
similar or other circumstances or constitute a waiver of SIC's right to any
other or further action in any circumstances without notice or demand.
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 the Company, and notwithstanding any
modification, discharge or extension of the obligations under the Lease
Agreement, any modification or amendment of the Lease Agreement, or any stay of
the exercise by SIC of any of its rights and remedies against the Company with
respect to any of the obligations under the Lease Agreement.
Whenever possible, each provision of the Guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of the Guaranty shall be prohibited by or be invalid under such law,
such provisions 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.
<PAGE>
This Guaranty shall inure to the benefit of SIC and its 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.
This instrument shall be governed by the laws of the State of Tennessee.
WITNESS the undersigned's signature as of the _____ day of October, 1996.
UNITED AUTO GROUP, INC.
a Delaware Corporation
By:/S/ George G. Lowrance
-------------------------------------
Its: Vice President
-------------------------------------
2
<PAGE>
Exhibit 11
United Auto Group
Statement re computation of per share earnings
<TABLE>
<CAPTION>
Years Ended Six Months Ended
December 31, June 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Net income (loss).......................... $ 96,000 ($ 1,691,000) ($ 3,466,000) ($ 4,902,000) $ 3,898,000
----------- ------------ ------------ ------------ -----------
----------- ------------ ------------ ------------ -----------
Weighted Average shares outstanding........ 1,317,000 3,296,000 4,905,000 4,105,000 7,923,000
Effect of options issued within one year of
the IPO date not included in the above
share amount based on the treasury stock
method at the assumed IPO price........... 577,000 577,000 577,000 577,000 577,000
----------- ------------ ------------ ------------ -----------
Shares used in computing net income (loss)
per common share.......................... 1,894,000 3,873,000 5,482,000 4,682,000 8,500,000
----------- ------------ ------------ ------------ -----------
Net income (loss) per common share......... $0.05 ($0.44) ($0.63) ($1.05) $0.46
----------- ------------ ------------ ------------ -----------
----------- ------------ ------------ ------------ -----------
</TABLE>
<PAGE>
United Auto Group, Inc.
(formerly named EMCO Motor Holdings, Inc.)
List of Subsidiaries
State of Incorporation
DiFeo Group or Organization
- -------------- ----------------------
DiFeo Partnership, Inc. Delaware
DiFeo Partnership RCT, Inc. Delaware
DiFeo Partnership RCM, Inc. Delaware
DiFeo Partnership HCT, Inc. Delaware
DiFeo Partnership SCT, Inc. Delaware
DiFeo Partnership VIII, Inc. Delaware
DiFeo Partnership IX, Inc. Delaware
DiFeo Partnership X, Inc. Delaware
Hudson Partners of Jersey City, Inc. New Jersey
UAG Northeast, Inc. Delaware
UAG Northeast (NY), Inc. New York
Hudson Motors, Inc. New Jersey
Fair Hyundai Partnership New Jersey
Fair Chevrolet-Geo Partnership New Jersey
Danbury Auto Partnership New Jersey
Danbury Chrysler Plymouth Partnership New Jersey
Hudson Motors Partnership New Jersey
DiFeo Hyundai Partnership New Jersey
J&F Oldsmobile Partnership New Jersey
DiFeo Nissan Partnership New Jersey
DiFeo Chevrolet-Geo Partnership New Jersey
DiFeo Chrysler Plymouth Jeep Eagle Partnership New Jersey
OCT Partnership New Jersey
OCM Partnership New Jersey
Somerset Motors Partnership New Jersey
DiFeo BMW Partnership New Jersey
County Auto Group Partnership New Jersey
Rockland Motors Partnership New Jersey
United-DiFeo Management Partnership New Jersey
Arizona
- -------
UAG West, Inc. Delaware
SA Automotive, Ltd. Arizona
SL Automotive, Ltd. Arizona
SPA Automotive, Ltd. Arizona
LRP, Ltd. Arizona
Sun BMW, Ltd. Arizona
6725 Dealership, Ltd. Arizona
Scottsdale Management Group, Ltd. Arizona
SK Motors, Ltd. Arizona
Scottsdale Audi, Ltd. Arizona
Arkansas
- --------
United Landers, Inc. Delaware
Landers Auto Sales, Inc. Arkansas
Landers United Auto Group, Inc. Arkansas
<PAGE>
Landers United Auto Group No. 2, Inc. Arkansas
Landers United Auto Group No. 3, Inc. Arkansas
Landers-UAG Reinsurance Co., LTD California
Georgia
- -------
UAG Atlanta, Inc. Delaware
Atlanta Toyota, Inc. Texas
UAG Atlanta II, Inc. Delaware
United Nissan, Inc. Georgia
(formerly named Steve Rayman Nissan. Inc.)
UAG Atlanta III, Inc. Delaware
Peachtree Nissan, Inc. Georgia
(formerly named Hickman Nissan, Inc.)
UAG Atlanta IV, Inc. Delaware
UAG Atlanta IV Motors, Inc. Georgia
(formerly named Charles Evans BMW, Inc.)
UAG Atlanta V, Inc. Delaware
Conyers Nissan, Inc. Georgia
(formerly named Charles Evans Nissan, Inc.)
Tennessee
- ---------
UAG Tennessee, Inc. Delaware
United Nissan, Inc. Tennessee
(formerly named Standefer Nissan, Inc.)
Auto Finance
- ------------
Atlantic Auto Finance Corporation Delaware
Atlantic Auto Funding Corporation Delaware
Atlantic Auto Second Funding Corporation Delaware
Atlantic Auto Third Funding Corporation Delaware
-2-
<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
October 21, 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
October 21, 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
October 21, 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
October 21, 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
October 21, 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
October 21, 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
October 21, 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
October 21, 1996
